Forbes India 15th Anniversary Special

'We're seeing green shoots for our business'

Deepak Shetty, deputy chief executive officer and managing director of the Indian arm of UK-based construction equipment maker JCB, is optimistic of a strong recovery on the back of government's infrastructure push

Rajiv Singh
Published: Oct 13, 2020 03:50:47 PM IST
Updated: Oct 14, 2020 02:45:44 PM IST

'We're seeing green shoots for our business'

If you thought that machine learning, artificial intelligence and deep learning are confined to information technology (IT), or at best make sense for the flavour-of-the-season coding business, you’ve got it completely wrong. “Newer concepts like telematics, Internet of Things (IoT), big data and machine learning will play a major role in increasing the efficiency of the sector,” contends Deepak Shetty, who was appointed deputy chief executive officer and managing director of the Indian arm of the UK-based construction equipment maker JCB this August. 

There is a significant scope of digitisation and automation, Shetty underlines, in the construction equipment segment. Take, for instance, LiveLink, an advanced telematics technology that connects the machines with customers and JCB on a real-time, 24x7 basis for better asset management. “It helps users increase productivity, control costs and ensure asset safety,” he says, claiming that over 1.5 lakh LiveLink-enabled JCB machines have been sold so far. These machines, Shetty explains, can be monitored for security, operations and service (SOS) on mobile devices. “Machines can be geo-fenced, time-fenced and can be located anywhere,” he says. Customers, he adds, get to know about the machine’s health, fuel level and battery conditions—all critical parameters of the machine—on their mobile. For JCB Group, which entered India in 1979, India is one of the largest markets worldwide. “Despite the current stress, we believe that as a nation, there is significant opportunity for us to become a part of the global supply chain,” Shetty tells Forbes India in an interview. Edited excerpts:  

You have been quite bullish about the ‘Make in India’ initiative. How do you see it shaping up for the construction equipment (CE) industry?

Our machines have been contributing to the building of world-class infrastructure in the country for over 40 years. We have five state-of-the-art factories in Delhi-NCR, Pune and Jaipur—all of which operate on the principle of ‘One Global Quality’. Our Jaipur factory is also a significantly gender diverse facility, with over 30 percent of the workforce on the shop floor being women. Our sixth factory at Vadodara is currently underway. Innovation has been the cornerstone of JCB’s operations around the world. In India we have a full design and innovation centre at Pune which is our largest outside the UK. This facility develops exciting and new technologies of the future for global and domestic projects. We thus, innovate, design, manufacture, sell and export from India. We have exported our ‘Made in India’ products to over 110 countries from India. 

The recent reforms are aimed at improving demand consumption and liquidity. With the government’s ambition of making India ‘Atmanirbhar’ (self-reliant), it is critical to invest in building world-class infrastructure in the country with greater adoption of technologies like telematics, IoT, big data and machine learning. We need to invest, innovate, create, scale-up and export for growth. India will need to be competitive and strong-willed to be able to compete with global players in all aspects of the value chain, including demand and supply. The shift to local manufacturing has already begun. 

JCB has always believed in localisation. Our flagship product, JCB backhoe loader, is indigenised to almost 97 percent (by value). The same ‘Made in India’ machine is exported to countries around the world. And, we are further committed to increasing the localisation levels across all our product lines and are working relentlessly to reduce imports.  

How has Covid impacted the CE industry? Has it started to rebound?

Covid-19 has had an unprecedented effect on several industries, including ours. All infrastructure projects came to a standstill in April and May. However, we are seeing some green shoots in the sector, and June, July and August have seen some revival. The supply chain has shown good resilience. Additionally, measures and reforms announced by the government, including stimulus packages helped stabilise the impact on the economy. 

However, there are still some liquidity-related challenges. Transmission of loans needs to be strengthened further—NBFCs (non-banking financial corporations) and banks should not become totally risk-averse with regard to funding. Release of payments to major infrastructure companies is a positive move, and will certainly help all stakeholders. Having said that, it is very early to say anything. The situation can change quickly… it is uncertain and everything depends on how the pandemic plays out. For instance, if one part of the country goes under a lockdown, it can have a cascading effect on the supply chain. Hence, it is important to see how the second half of the year goes by. It is critical that the momentum continuous. 

Despite the global economic breakdown, we remain positive and hopeful for the future. As the thrust on infrastructure creation continues to be a priority for the government, we are optimistic of a strong recovery. Rural India, where we have a significant presence, is also set to emerge as the new growth driver for us in the coming days. 

Sales of CE is directly linked to the health of the economy. Can you spot the green shoots?

With businesses gradually coming back to normal, we are seeing a revival of construction activity in the country. Infrastructure projects are restarting which is leading to green shoots in the construction equipment industry. A strong focus, along with a sustained spend on infrastructure development, would result in multiple long-term benefits. The construction of roads and highways has always played a pivotal role in the growth of the sector and that must continue. Infrastructure creation also opens up opportunities for allied industries like raw material, quarrying, equipment manufacturing etc while also creating jobs and livelihoods. 

Two key sectors are set to emerge in the coming years—infrastructure development in rural India and a world-class health care sector across the country. Rural India is set to emerge as a strong growth driver, especially with the recent push by the government through schemes such as MNREGA and better connectivity due to PMGSY projects. 

Additionally, the movement of migrant workers will allow creating a better rural-urban re-balance. Schools, colleges and industries will need to be created and segments like municipal waste, village roads, rural infra are set to grow. The government has committed an investment of Rs111 lakh crore in the National Infrastructure Pipeline. This proposed plan must continue as the growth of the infrastructure sector will create demand with a multiplier effect in manufacturing. 

At a national level, railways, irrigation and large projects like Sagarmala should also be given the impetus. This will strengthen logistics and develop requisite infrastructure, enhancing capacity at ports and improving operational efficiency and connectivity. The proposal to make 100 new airports will also significantly increase the momentum for our sector. 

How do you see the demand over the next few months? Will the festive season see a spike?

With the gradual and precautious unlocking of the economy, we are witnessing recovery in the demand of construction equipment. Together with our regional teams and the extensive dealership network, we are formulating new and revised plans for the remaining part of the year. Our advanced telematics technology also indicates a recovery in equipment utilisation in both, backhoes and excavators. Despite the uncertainty, these are the much-needed green shoots for our business. Traditionally, we see customer sentiment going up during the second half of the year, which is considered to be a festive season in India. While this year has been quite challenging, we are hopeful with the revival witnessed in the months of June, July and August. However, we will calibrate our business continually depending on the customer sentiment. We are hopeful that the upcoming festive season will further improve the sentiment. 

Our factories in India are currently working above the 85 percent capacity mark and improving. Thus, there is a positive pressure and responsibility on us to ensure that we cater to the demand, while maintaining a safe and healthy working environment. The industry can get extremely challenged if multiple cities get into a lockdown stage once again. Our supply chain is spread across India and any disruption in one part of the country can affect operations.