Are we seeing the return of good times? Or is it just a blip? Srivats Ram does not have much to complain about at the moment. The MD of Wheels India, a TVS group company, is busy chalking out strategies to satiate requirements of customers. Focussed firmly on the present, he is confident that things will turn out better in the months ahead. He exudes a sense of guarded optimism on the progress of the economy. Excerpts from an interview:
What is the scene like on the demand and investment fronts?
Right now, the demand seems to be reasonably good. Will it go up? At what point will it go up? These are different issues. A lot of core sectors seem to be firing. The thrust on infrastructure development has been a big plus. Road development is happening at a fast pace. There is increased investment in the railways. There is activity on the mining front ... related to road construction ... and that is feeding into the commercial vehicle industry. GST (goods and services tax) should result in ICV(intermediate commercial vehicles) and LCV (light commercial vehicle) deployment in the hub and spoke model. That should help the CV industry. The commitment of the government to making LPG available to all households ... that will have an impact on tanker movement. There is enough happening.
Are things happening on the ground?
I see things happening on the infrastructure and road development fronts. I see the intent in other areas. There are enough positive developments on the ground. We have moved from a power shortage state to a situation of surplus. We do have outages, though. The government needs to take care of the distribution part. I think the government seems to be working in the right areas, and is clearly trying its best to tackle problems.
The improvements in road, crackdown on overloading and pickup in higher tonnage vehicles ... how will these play out on the numbers front?
I will be very hesitant to comment on the next year. But with Bharat Stage-VI emission standard coming in 2020, there could be a pre-buy. There may be a pause on the way ... that is the worst-case [scenario] I would look at. But the bigger concern is about investment by companies. A lot of people have stopped making greenfield investment...
Is it because of surplus capacity or lack of land availability?
Land is an issue. I see it as an irritant only. Capacity use is a fact. At some point ... may be in the third or fourth quarter... people may start thinking of making investments.
What about stressed assets?
For the system to digest the enormity of the problems that were created a decade or a decade-and-a-half ago, it will take time. The government is making big investments in infrastructure development. I hope they continue to do that. Public spending is happening. But there is a need to trigger private spending.
While companies had stopped making investments in greenfield projects in the past, I [believe] they will start thinking about making these investments again in some segments. I see that coming soon. Established players could invest afresh and [consider] mergers and acquisitions. But for new players to come, it could take time. With the banking sector having taken a big hit and having recapitalised, I can’t see them becoming gung-ho and lending big time once again in the near-term.
How would geo-political happenings impact Indian industry?
India [acts as] a de-risking option vis-a-vis China, which has taken a bulk of manufacturing and trading revenues that the western world had. There is an opportunity to increase our country’s stake in that.
Again, it depends on the capability and maturity of the respective industry segments. There are segments where India has some kind of global scale. Auto, wind... may be railways and defence ... they are potentially good segments to build scale and capability and take a part of the pie from China.
For Indian industry, what could be a threat?
If there is going to be any distribution in sourcing ... If India can’t take on the burden, many others will. There will be redistribution. Though India has improved in the ‘ease of doing’ business index, there are many others such as Thailand and Saudi, that are way ahead of us. We have a long way to go in terms of reforms and ease of doing business. There is clearly an opportunity.
We have a closeness to Japan. We are trying to build on our closeness to the U.S. These are two powerful trading partners. We can position ourselves to be a part of the global supply chain. Our domestic industry already has scale, and we have established systems in the country in some of these business segments. It would be relevant to propagate trade in those sectors. That, probably, will be the model to follow. This is a new trend that I am seeing. This has emerged over the last 12 months. It would be interesting to watch how it pans out.
There has also been a move in recent years towards regional sourcing as against global sourcing. The political agenda may be towards nationalistic sourcing. As far as the commercial agenda goes, ... we see a shift from ‘anywhere’ to ‘regional sourcing’. Nationalistic sourcing... beyond rhetoric ...nothing is happening.
How painful is the reform process for corporate India?
Nothing changes drastically. People are governed by their experience, and the experience of people around them. That is how you see a business environment changing. Reform processes will be slow in the context of India being a democratic country. One should not look for immediate results and should ideally look at a five-year window to see the impact of the reforms.
Yes, a lot of changes have been initiated by the government in the areas of accounting standards, compliance regulations and corporate governance. Changes do happen, and, in today’s world, they happen more often than in the past. Some of them are necessitated by bad experiences that people have had. The tendency is to over regulate based on those bad experiences. These are part and parcel of doing business. However, Indian businesses are not necessarily more stressed than what businesses elsewhere are going through.
How does Wheels India look at China?
It is an opportunity that we have not capitalised on. That is a market we haven’t serviced. We do not have a presence there but it is a big business opportunity.
What is your learning in the evolving business environment?
One of the big learnings is that there are always opportunities in the market place. Of late, things are happening very fast. There may be scenarios where one would have planned for an event to happen in five years but those could actually happen in three years. One has to keep up with the pace of change and uncertainty in the market place. Faster on the feet and the need for being responsive is the call of the hour. One has to be willing to act swiftly and take quick decisions. The windows of opportunity are opening and closing very fast these days. One has also to be willing to be disruptive even in the middle of a particular year if the requirement is such. Nothing is permanent.
How do you manage risk?
While we are risk averse, it does not mean that we do not take advantage of opportunities. We have taken some very measured decisions in recent times. Wheels India now has a very diversified portfolio as part of a conscious long-term growth strategy. When we enter a new business segment, we always have a 20-year horizon in terms of the business prospects and the potential it holds.
Are there challenges due to value systems being different in different generations?
I do not think that there is a big disconnect in terms of inter-generational value system. By and large, people are hard working and committed to the sustainability of business though the ability to take risks could vary. We are very aware of the fact that there is already a legacy and that you need to sustain the legacy and grow the company along with that. As part of our strategy, we look at the last three years, the current scenario, and the next three years. There is a continuous review with this ‘seven-year window’ all the time, and we look at opportunities based on this.
How is the current business environment?
When I look back at the last six years, I would say that we are experiencing the best of times in business. Demand is really looking up. The sectors that we service seem to be doing reasonably good. I am not seeing a slowdown in any of the businesses that we are in (except wind). Customers are giving us business, and it is up to us to meet their requirement. We are quite positive on the outlook. On the exports front, the U.S. market is strong. Europe is showing signs of picking up. I don’t have much to complain.
