Industry ready to strengthen capacity, back-end infra despite second wave

Several industries have shown confidence in the economy's recovery prospects and said the capex cycle is reviving

Several industry captains have shown confidence in the economy's recovery prospects and said the capex cycle is reviving and companies are investing to augment their capacity as well as back-end infrastructure.

The business leaders, including Sunil Kant Munjal, Harsh Pati Singhania and Sanjay Kirloskar, participating in an AIMA event here, unanimously said the industry is better prepared for the second wave of COVID-19 than it was at the onset of the pandemic last year.

Hero Enterprise Chairman Sunil Kant Munjal said there is a tremendous opportunity to invest, both for the financial investors and industrial companies, according to a statement by the All India Management Association (AIMA).

"The Capex cycle, which was slow for 12-14 quarters, is reviving and companies are making serious Capex commitments for the next few quarters," he said.

According to Munjal, the domestic investors are getting more adventurous during the crisis while money is flowing in from overseas in search of returns.

"There is a belief that this is a start of a long-term investment cycle that will go on for a decade or more," he said.

JK Paper Vice Chairman and Managing Director Harsh Pati Singhania said where capacity utilisation is nearly full, there it is time to invest.

However, he added that many sectors and companies are still in difficulty and will not invest.

A lot of investment will go not into producing more of the same but into digitalisation and enabling better customer experience, said Singhania, who is also president of AIMA.

Kirloskar Brothers Chairman and Managing Director Sanjay Kirloskar said the business models are changing and his companies' investments have been targeted more at the back-end than at capacity.

"I have to ask myself if my manufacturing business is going to turn into a subscription business. I have to prepare for that," he remarked.

Kirloskar also said his group has invested in areas like 3D printing, augmented reality and virtual reality.

On the second wave of the pandemic, Singhania said last year, companies did not know how the lockdowns would affect them.

Last year, the manufacturing facilities continued to produce till they ran out of raw materials and supplies, whereas this time they are tracking consumption in different states and working backwards on the supply chain, he said.

He further said the bigger challenge is the expansion work, which cannot be stopped overnight. A lot of people working there are migrant labourers and companies need to ensure that they do not panic and run away en masse.

Manufacturing plants are mostly in the rural areas and companies are working with the local administrations to help the local community while keeping the operations going, he added.

Munjal said stress testing businesses is essential.

"We invest in many companies and we have asked them to show us cash flows and not business plans. We have asked them how long can you last with 50 per cent of the revenues and how long with 0 per cent revenue," he said.

Munjal also observed that digitalisation and automation are becoming essential to keep a business running and planning for the unimaginable.

"One should take advantage of the downturn to do things that one could not do otherwise," he added.

Kirloskar said with the second wave of COVID-19, his company has brought back the protocols of the initial phase of the pandemic.