Lockdown 2.0: India Inc lends help to dealers amid coronavirus crisis

Incentive hikes, credit period extension among steps taken to support them during corona crisis

A cross-spectrum of companies in the fast-moving consumer goods (FMCG), automotive and durables sectors are helping dealers and distributors tide over the crisis triggered by the Covid-19 pandemic and the subsequent nationwide lockdown.

As the movement of people and goods remains limited, most in distribution trade in these sectors have been saddled with inventories at their warehouses and retail points. While sales in the food and hygiene categories are on, auto and durables sales have come to a grinding halt. Estimates are that auto dealers have inventory worth Rs 6,000-7,000 crore lying with them owing to retail stores being shut. Even within FMCG, the home, and personal care categories are not seeing significant sales, as consumers do not perceive them to be essential. 

Companies are, therefore, stepping in to help partners by extending their credit period, and increasing incentives.

Providing insurance cover, and funding the interest cost of loans and dealer stock, among other measures are being taken.

Mohit Malhotra, chief executive officer, Dabur India, said the credit period (of a week) for nearly a quarter of its stockists and super stockists had been doubled to give them breathing space when making payouts. "Insurance cover has been extended to salesmen of stockists and employees of carrying and forwarding agents, who are pushing our essential products. This is because they are on the field and at risk of catching the virus," Malhotra said. 

 

 

A Nestle India spokesperson said the company had paid 100 per cent of its sales incentive to distributors for the month of March. "For our front-line sales force, which works for our distribution partners, we are rolling out a 'Nestle Suraksha' programme' to cover each one of them with a Covid-19 protection for a period of three months," the spokesperson said.

An ITC spokesperson said the company was working closely with its distributors to ensure they were serviced frequently. "We are also lending support to help them supply products to retailers," the spokesperson added.

Companies are also informally talking to banks to extend finance to cash-strapped distributors, paying up salaries and rent of franchisee partners and dealerships for the April-June period, and even providing transportation for those wanting to move goods from one place to another. 

Estimates by the Federation of Automobile Dealers’ Association suggest that salaries and rent account for 85 per cent of a dealership’s operating cost. Since the lockdown began in March, auto companies have been announcing a slew of measures to extend support to their channel partners.

Veejay Nakra, chief executive officer, automotive, Mahindra & Mahindra, said, "We have taken steps to help dealers from settling all claims to supporting interest cost on stock to waiver of many Q1 expenses. We have also given advances to dealers to manage Q1 costs."

Kia Motors India on Wednesday said it had evaluated the current situation and had looked at various areas of the business where it could support its dealers. This included supporting interest cost of dealerships, including vehicles in physical and transit stock.

The company has also remitted the unutilised dealer funding lying with it back into the dealers’ account. All the accepted service claims for warranty too have been credited to the dealer’s account. Additionally, Kia has credited warranty payments to dealers and announced priority clearance within 15 days following the lockdown for all dealer invoices.

Car market leader Maruti Suzuki India has been in talks with leading commercial banks for an extension of the moratorium to its dealers.The company is also said to be seeking a reduced rate of interest for its dealers. It has also fast-tracked payments on account of warranties and incentives to ease the financial burden of partners. Similarly, Toyota Kirloskar Motor has approached banks to reduce rate on inventory funding.