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Mithun K Chittilappilly, MD, V-Guard Industries In Conversation With Hiral Dadia — Transcript

by Nirmal Bang · 2,942 words · 436 segments · language en · Watch on YouTube

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0:02[Music]
0:26now how is it going so the so the so I
1:20mean destructions that we saw with
1:22regards to the migrant labor so as far
1:27as we are concerned wherever we have
1:29opened the factories the labor is there
1:32we have not scarce salaries or we are
1:35not stock payments to labor and even the
1:39also slave you know indirectly or as I
1:43call it
1:44so even for contractors we penny sure
1:51that we have faith in fully on time and
1:54we have ensured that the contractors
1:56have beneficiary during the lockdown day
2:02so we are not forcing a big issue but we
2:07don't know because it's a herd mentality
2:08so even if the companies are paying the
2:11labor depending upon what is the mood
2:13only my
2:17I think that you're fortunate enough
2:52right now at least you're still being in
2:54the manufacturing side of businesses
2:55well well you know because this is one
2:57of the biggest issues that manufacturing
2:59companies are going to face right now
3:01once you know everyone's restarting
3:03operations but with this you know when
3:06it means to shut down you know I don't
3:08need the people to know he had anything
3:09to worry as to what's going on but the
3:11biggest challenge that everyone is faced
3:13right now with on is with regards to
3:15restarting because it's not that you
3:18switch on a button and everything moon
3:19is you know up and about what happens
3:22the challenges and do you think that's
3:24something which has led to an increase
3:26in costs as well which we got to
3:28restarting so I think the biggest
3:32challenges our suppliers so although we
3:37don't have any factories in the more
3:42affected areas in India a bulk of raw
3:45material comes from NCR gen these are
3:51all big big sources of raw materials so
3:56definitely when we are doing a sense
3:58check with our suppliers we understand
4:01that many of those places only 25 to 35
4:03percent of the labor is because although
4:06we have not envy mnsure that I don't
4:11think you know this has been the case in
4:13many places so I do expect that from the
4:17raw material side there could be
4:20challenges we don't expect issues with
4:22large supplies like you know let's take
4:25it down
4:27like the crews but there are other
4:31suppliers these are not that large where
4:34we could have potential issues this is
4:36one second this there are also suppliers
4:38in Bombay
4:39there are suppliers in the Greater
4:41Bombay region there are suppliers in the
4:43NCR region which are falling in
4:46containment zones
4:46we also has in Chennai especially
4:49packaging materials and all that again
4:51falling in containment zones so our milk
4:54has been to constantly engage with
4:56suppliers and suppliers in terms of cost
5:07yes because whichever is open we are
5:13operating capacity so in that sense
5:17wherever you know the conversion cost
5:22raw material costs are high in the plant
5:25they're the cause and effect price
5:31increases in the market but today we are
5:33not doing that because today I would
5:36this restock on mostly you know
5:41receiving operation but I think after
5:43one or two months once companies start
5:45watching a steady state and the social
5:49distancing as a procedure in any one
5:53definitely the cost of production that
5:55plant now the quantum of increase can be
5:59very low I the conversion costs labor
6:04component in a particular product is not
6:06high but if the labor component is I and
6:07we have social distancing possible so
6:13what's the time range that we could
6:15expect you know in terms of high end low
6:18that this could be the range on an
6:20average prices good co-op if required
6:23okay so to put in perspective we have
6:25our products where the conversion causes
6:27one person and we have products where
6:31it's 8 percent so there is one person we
6:34increase even if it's benefit person it
6:37will be only point of a person where
6:39eight person and
6:50[Music]
6:59if you have all these you know do you
7:58think it's a double whammy situation not
8:00only for me but across consumables I
8:04mean especially and your business face
8:06because again a lot of it when she is
8:08something which will hold on as well now
8:11if you have to offload the inventory do
8:15you think there will be a discounted
8:16trend that will also emerge under this
8:18we are already talking about that
8:21possibly could come in so how do you
8:24manage this kind of a situation there so
8:27I think one thing we can say is that you
8:29know the country was not in a very great
8:31shape so the twelve months leading to
8:35corona also saw the consumption in India
8:38a lot of this discounting was already so
8:48I have not seen further
8:50[Music]
9:05[Music]
9:09this further
9:11you know discounting so we are
9:16maintaining rights in early stage we
9:22learn latency we also are feeling that
9:26the cases are especially sad and that's
9:37admitted I think Austin q4 earnings
9:39mentioned that the log counted notes in
9:45the month March 20 2000 and if you put
9:50yourself and understand how is the
9:52situation me and so far because last I
9:56remember it really no comment saying
9:57that May you've seen a total sales of
9:59around 70 percent and that you would
10:02already achieve to the previous year in
10:04the month of May so are you seeing that
10:06stability that normalization and I
10:08started to commit or do you think even
10:10the second quarter will be minted so I
10:14think wheeler wait and see I am NOT able
10:16to make a comment on you know what's
10:19going to happen because we are we can
10:24say is that the name month has been
10:27pretty decent it has been better than
10:30our expectation and not even sales but
10:33even collections have been strong so
10:35what it tells us is that we whatever we
10:38have sold into the play as in fact being
10:45sold of not other products where many of
10:48the products has in fact its holder and
10:50there is a recurring in demand for those
10:53products now some products that are
10:56these get affected is that you know
10:59certain summer based products where the
11:02window has been missed for example in
11:04South India you can effectively say that
11:06the air conditioners season has been
11:09effectively missed so to that extent our
11:12sales of products along with places
11:16could be packaged for South India
11:18whereas the summer and non-south is
11:21still going on
11:22it is expected to go on until middle of
11:24July or end of June so we could see
11:26sales we are seeing sales for those
11:28products - so it's a mixed bag we'll
11:31have to wait and see how tunis and how
11:33to light I'm sorry what I can say is
11:39that we explain each one to be muted
11:42overall because we are we don't expect
11:56to be we are expected to be strong
12:07because products like fans certain
12:10products like certain products like
12:13building videos like wires these are in
12:15some effect not discretionary because if
12:19there is we are not expecting a ticket
12:28item on this again if you don't have a
12:31pump in your house especially if you mod
12:34of large cities
12:37[Music]
12:40these are having some effect seen as
12:43essential and we have seen that the
12:46buying for these products have been not
12:48that effective but it is high priced
12:51products good get impacted like air
12:54coolers we are seeing you know some
12:57delay in product maybe it requires
13:03financing and those you know activities
13:06are not in stock we are also seeing
13:09[Music]
13:37[Music]
13:57because I think naturally you know the
14:36mom-and-pop stores have an advantage
14:42understand two things
14:45now one thing you already know that
14:49could be from your on there is a
14:51possibility before to my knowledge we
14:56are still concentrate lot in terms of
14:58the mid-segment category goes so that's
15:01something which probably work in our
15:03favor and secondly it's a contribution
15:06which regards to the low and southern
15:07markets is also increasing for the
15:09company how how do you think you could
15:13be able to play on that strength I think
15:16if you look at us we have production
15:18both made and premium segment
15:21you know we also have in certain
15:22categories where we are new entrants and
15:25by forces of market we are forced to be
15:28present even in the economic segment but
15:30as a brand you know the economic segment
15:32the problem is that merchants are
15:34extremely low and not viable so over
15:37time many brands of these are getting
15:39getting strong in a category and to exit
15:41from the you know standard segments
15:48there will be significant downgrading
15:51but yes there are certain luxury
15:53products we have which could get
15:57impacted because it comes with bells and
15:59whistles you know so that we would see a
16:07significant downgrading from that
16:08segment to problem mixing but this is
16:12also creating opportunities for example
16:14we have a big business coming from
16:16inverters and battery business we were
16:18expecting that because everyone is
16:21sitting at room offices and factories
16:24are not working our demand is muted
16:28these sales of this product will be
16:30effective but this product has been
16:31selling a lot so what has happened is
16:33because people are working from home
16:42so what I am saying is that some of
16:46these things are as a company we should
16:52we will lose some either win some and
16:54overall we should be broadly okay it
16:57doesn't mean that each one will be
17:00extremely tough but I think it's to
17:05students my question to you regards to
17:09bed inventory course we were talking
17:12about you know in when three days of
17:13almost 100 days for the expectation was
17:15that it is where are we all that
17:18inventory cycle now so Emily and it's
17:23like
17:28in fact so what is the retailers have
18:52also seen sellout so I think went along
18:55wherever the lockdown was removed and
18:57even during certain dealers like selling
19:01fans and some states selling because
19:06these two were considered essential by
19:08government so sellout has been pretty
19:10decent so definitely like I said
19:12collections have been strong so it looks
19:15like the credit cycle is getting better
19:19definitely when we have to also keep in
19:21mind we are not operating at full
19:24capacity so to that extent you know
19:27sales are also you know slightly
19:33whatever it is correct at least for us
19:36the collections have been
19:41and yes so we are not we you know looks
20:57like that will probably not happen this
20:59year you know travel restrictions put in
21:02place we also have lot of discretionary
21:06spends like you know discretionary
21:09promotional spends which happens
21:11typically achievement certain volume
21:13definitely as the volumes are going to
21:16be the main nutrients for x1 those
21:17expenditures also may not happen so in
21:20an industry like us we do have a lot of
21:23counter balancing actions so I don't
21:27want to put a person this but definitely
21:29you know definitely some of these pens
21:33will only happen when we see definite
21:36visibility of women having so that means
21:40that then we start having revenue we
21:42will activate those pens again
21:45[Music]
21:49right and overall with regards to where
21:52the water heaters and fans is concerned
21:55both the plants are coming up now I
21:57think most of the capex is already done
22:00for the same that is going to aid the
22:03margin profile spell by how much do you
22:05think that relate well when do we start
22:08seeing that typically when we have moved
22:11from outsourcing to in sourcing as a cat
22:14as a product we have seen between four
22:18to seven percent you know four percent
22:22maybe initially and experience so if you
22:33look at this we are hoping to produce
22:3530% of water heater and maybe 40% of
22:39friends so to that extent you know that
22:42much percentage of increase margin is
22:44expected for the category so in science
22:45maybe improvement is expected him f3 so
22:55that means you probably not see that
22:57this year right so okay so this is going
23:05to be more for long term play and
23:12operation in fact the plant will
23:14actually spend here to maybe you know
23:20zero and year three onwards but having
23:24said that if you look at the water
23:26heater plan suppose we did not put up
23:28that line our cost would have one about
23:3010% because there is an additional input
23:33duty of 10% you know what it is and we
23:39got was importing roughly sixty rose
23:42water heaters every year from China
23:49maybe 90% of the what's very clear so
23:52that extend close to six seven here that
23:56is different
24:12and you know but definitely you know so
25:32large items yes so fans you know
25:36definitely we have set up one plant we
25:38could set up more kitchen appliances
25:43already mixer grinder tsar-maiden in
25:45here maybe food processors are imported
25:48maybe we look at making them outside
25:50India but I think we are not a company
25:52that is largely dependent on inputs
25:55already if you look at this since 2012
25:58we have consciously moved from imports
26:01to old manufacturing so we have crossed
26:04done that journey you know seven
26:06different person the balance will define
26:08whatever makes sense
26:11definitely raw materials like electronic
26:14items as a big one we would like the
26:17government to push for these companies
26:20to move their bases from Korea Japan
26:23Taiwan and China and I think definitely
26:33and they have shown that do you think
26:39anything on the stimulus side that the
26:41government needs to do for this sector
26:43of business see I think if you ask any
26:48businessman or any entrepreneur they
26:50will only ask for you know more can be
26:52done for the successful I will also be
26:55inclined to answer like that but I think
26:57I think even if they don't do anything
27:01specifically for our sector if they can
27:04do something to propagate month I don't
27:07know we can be consumer financing it can
27:10be forcing people to invest in booms
27:13rather than renting them interest rate
27:17is a big no project no buying of real
27:24estate
27:24nothing makes sense I don't know I mean
27:28we the entire country is paying for the
27:31sins of a few people who have you know
27:33created so I don't know how that is fair
27:37[Music]
27:38in India we have people have found a way
27:42to defraud pants so I think it's sad but
27:46I think without the propagating demand
27:48and the key to that is lowering interest
27:50rates although the RBA is lowering
27:53interest rates the transmission is not
27:55happening so I think propagating demand
27:58is something that I would like to ask I
28:00mean
28:02forcing people to buy products creating
28:06a sense of security in the minds of
28:09citizens so that they are able to go and
28:11spend money these two things have to be
28:14done otherwise you know we will
28:16definitely have huge issues going
28:30you know so I think GST is very good
29:47[Music]
29:51including I would like to see stronger
30:03enforcement adding GST is neither being
30:06enforced where states not by the sender
30:09so I think somewhere in the governance
30:11of GST the enforcement part has been you
30:14know grossly Minister and that is why
30:17the government is not so I think that
30:28has to change because it is putting
30:30companies like us
30:35I would say there are number of new
32:05cases coming in you can anything that
32:22you'd plan for fi 21 that you think you
32:25will have to push that so I think we
32:29have deferred non-essential capex which
32:33means that all the product related
32:35Catholics like factories
32:39design those kind of changes in behavior
33:46yes
34:20so and by taking a loan and all that so
34:23looking at the looking at the landlord
34:26financial managed to squeeze reduction
34:32in rent
34:35you know so for example in some cases it
34:39has been significant in some cases it is
34:43significant for a quarter
34:47[Music]
34:57[Music]
35:08[Music]
35:12we have to also watch out for all of us
35:55and I know T so anyone will be surprised
35:57with it at least if not make profits via
36:00at least one a break even in this year
36:02taking these statements into
36:04consideration what you see for omigod as
36:08for lists for the section as a whole
36:10what's the kind of growth that you are
36:12in deciding okay like I said it's gonna
36:17be very difficult for me to put a you
36:19know number but we can say you know we
36:24can say that I think it's to city better
36:42so let's see I think my all my answers
36:46depend on the fact that status quo is
36:48maintained so for example if more places
36:51are going for second and third and
36:53fourth locks this is an area will be
36:56very different all I can say is that we
36:59got is very strong
37:01position financially gas position is
37:05fairly high we don't have any vegan has
37:20a flexibility to take a call everyone's
37:30betting big on the second half of the
37:32financial year now if things have to
37:35improve and hopefully things have to
37:36improve and there are no further long
37:38terms there are no further cases that
37:40come in as well but thank you Mithun for
37:42joining us on the side of having
37:45conversation I hope you've enjoyed the
37:47conversation too and people back to you
37:49when everything normalizes all-father
37:51100% working capacity ourselves as well
37:54thank you very much for being on the
37:56show
38:03[Music]

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