The extended lockdown and zero sales for nearly two months have impacted the finances of Vivo, the country’s second-largest smartphone firm by market share volume, which is now struggling to pay salaries to its employees.
For instance, Joinmay Electronics — a Vivo group entity that operates in western India — informed its employees, through an internal letter, that the lockdown extension had severely impaired its ability to pay salaries. Director Ding Zhijie said the firm was forced to implement “pay cuts for all employees beginning May 2020.
Accordingly, for the month, employees will draw a salary equivalent to 50 per cent of their gross monthly salary”.
“With the announcement to continue the lockdown in May and a probability of further extension, means there will be no sales or collection in May too. Under these extreme circumstances, the [survival] of the company is critical because, if the company survives, our jobs survive,” Zhijie told employees through the letter.
When contacted, a Vivo India spokesperson said the letter was prepared as an internal memo and was not intended for circulation. “There is no final decision that has been taken yet,” he said, quoting Zhijie.
The firm managed to tide over the challenges in March and April, when despite “negligible sales and collections”, it paid 100 per cent salary to employees. Now, “it is impossible for our company to survive this crisis without sacrifices from each and every one of us,” he said.
In 2018-19, Joinmay – the Vivo group firm – raked in Rs 2,609 crore in sales, while its net income stood at Rs 47 crore. Unlike now, better business environment had helped it post a whopping 49 percent jump in sales, year-on-year, filings at Registrar of Companies show. It contributes some 16 percent towards Vivo India’s Rs 17,000 crore revenue.
Joinmay is not alone. With the end of ongoing a country-wide lockdown not in sight, several other subsidiaries and group firms are now forced to cut costs. Sources said, apart from salary cut, many firms have postponed incentives by months and delayed appraisals indefinitely.
Gfk data, sourced from the industry suggest, smartphone market lost nearly Rs 5,000 crore in sales in March, while it was a complete washout for all players in April. Last year, smartphones worth Rs 10,700 crore were sold during the month. And with lockdown continuing at least 17 May, another Rs 7,000 crore of losses are estimated. Analysts suggest, loss of business for any leading player like Vivo will be in line with their respective market share.
Despite a partial lifting of the lockdown in green and orange zones, it failed to benefit most consumer electronic players like Vivo. Estimates suggest, since all major metro markets continue to remain inside red zone category, only about 20 percent of the total market now open for retail activities – including e-commerce deliveries of electronics items.