Long-term outlook of Indian market remains positive: JCB India MD & CEO

Despite witnessing demand compression in 2019, JCB India has decided to go ahead with its Rs 650-crore new facility

Despite witnessing demand compression in 2019, heavy construction machine maker JCB India has decided to go ahead with its Rs 650-crore new facility.

Subir Kumar Chowdhury, who was appointed as MD & CEO, JCB India in August 2019, told T E Narasimhan that long-term outlook of the Indian market continues to remain positive. Edited excerpts:

How you are planning to handle the slowdown?

JCB has completed four decades of innovation-driven operations in India. In the last 14-15 years, we have experienced a few down cycles, but each time, the market has come back stronger. We will continue to focus on indigenisation, manufacturing, skills and innovation. We will continue to align ourselves towards manufacturing products that deliver a combination of value, new digital technology and superior quality.

Will it affect JCB's investment plans?

The Rs 650-crore new factory in Gujarat will be ready this year, and it will manufacture parts for global production lines. It can process 85,000 tonnes of steel annually. It will be the fifth factory for JCB in India. The new export-focused unit will manufacture engineered components and sub-assemblies for JCB’s factories around the globe. Products made in India are exported to more than 100 countries currently.

How is the slowdown in economy and in various sectors impacting JCB operations?

Owing to the thrust on developing infrastructure in the past few years, especially roads and highways, 2018 was a record year for the industry and for JCB India. It presented a glimpse of what the opportunities for the construction equipment industry could be for us in the future. Compared to 2018, which was the best year for the industry, 2019 witnessed demand compression.

2018 was a strong year for JCB India with about 40 per cent growth in terms of equipment sales over 2017. 2019 on the other hand, is seeing a bit of decline, the industry is down by about 15 to 17 per cent, but we feel that it should improve towards the mid of this year. Hence, due to the slowdown, we re-calibrated our business to adjust to the market demand.

However, our long-term outlook of the Indian market continues to remain positive. Furthermore, with government committed to building infrastructure, importantly in the rural economy, there will be more opportunities for growth in near future.

There is a slowdown in infrastructure activity which affects our business. However, infrastructure development is critical to India becoming a $5-trillion economy by 2024 and we are thus, hopeful that things will improve.

We are already seeing some green shoots. Given the investments earmarked by the government for the infrastructure development, especially in the Roads and Highways sector, we continue to see potential in the industry.

The Rural Economy is getting a significant focus through many programmes. As rural further integrates, we are hopeful of seeing more activity in terms of building infrastructure in this sector. With concerted efforts, the long-term prospects look positive for the Construction Equipment industry in the coming years.

Has there been a cascading impact of a liquidity freeze, or of the IL&FS credit default playing out in the market?

There has been a disruption to the cash cycle along with stress in the NBFC sector, which is adding to the slowdown for us. IL&FS is a major player in the segment. Therefore, it is only natural that it will impact the overall sentiment of the sector. Due to the cascading impact and credit squeeze, stress was witnessed in the market as has been with most NBFCs.

That said, the government is taking several steps to lift economic growth, resolve liquidity issues and bring positive sentiment back to the economy. We feel that we should only improve from here on.