‘Demand may come back to normal by third quarter’

Some behaviour changes in the light of COVID-19 are here to stay, says Danfoss India president

July 04, 2020 10:22 pm | Updated 10:22 pm IST

Vellore, Tamil Nadu: 12/10/2018: Ravichandran Purshothaman, President, Danfoss, at the inaugural function of graVITas 2018 at Vellore on October 12, 2018. 
Photo:C. Venkatachalapathy

Vellore, Tamil Nadu: 12/10/2018: Ravichandran Purshothaman, President, Danfoss, at the inaugural function of graVITas 2018 at Vellore on October 12, 2018. Photo:C. Venkatachalapathy

Operations at the Oragadam plant of the Indian subsidiary of Denmark-based Danfoss are back on track due to the green shoots seen in agriculture, medical / pharmaceutical, food processing, hospital infrastructure, IT services and other essential sectors, said its president Ravichandran Purushothaman in an interview. Edited excerpts:

Can you describe your plant operations under the new normal?

All the three plants of Danfoss at Oragadam, near Chennai and Pune and Vadodara are operating as per the standard operating procedures (SOP) laid down by the respective State governments. At the Oragadam campus, we are operating at 40% of the total campus headcount and have prioritised 100% of the permitted headcount to keep the plant at full capacity. Sixty per cent are working from home.

All our suppliers, located in different parts of the country, have responded very well and are supporting us at close to pre-COVID-19 levels.

How did COVID-19 impact you?

We were into lockdown since March 24. April sales was almost nil but we have started to see recovery in May that became even stronger in June. Our factory production has been continuous even during the lockdown as about 70% of our production is being exported to our customers directly, including to those in medical and food processing [sectors].

So, the government permitted us to operate with due adherence to all safety guidelines.

We have been building a stronger ecosystem of local supplier base since the last six years and this has helped us to manage the crisis well.

Our suppliers rose to the situation well; we provided all necessary support to them to restart and recover fast. Our suppliers, who were exporting to global plants, were initially interrupted in April, and are now back stronger. Chennai campus is a critical global factory for medical, pharmaceutical and food industries and we got very good support from all stakeholders.

Can we assume that recovery has started?

We have added close to 200 new colleagues in H1 2020 (January – June 2020) for our various expansion projects and most of the new hiring is for the Chennai campus. It was a great experience to use digital/virtual technology for hiring and onboarding new colleagues.

Overall, the recovery of demand has been mixed. We see green shoots in agriculture, farm machinery, food processing, pharmaceuticals, vaccine storage and IT service sectors. There is a recovery in demand in these sectors and we are now back close to pre-COVID-19 levels.

However, when it comes to core sectors /traditional industries such as engineering and heavy machinery and road construction, the market is still down as infrastructure spending has not taken off in a big way.

It is a mixed bag for the customers of our customers i.e medium, small and micro enterprises (MSMEs). About 40% have restarted on the road to recovery, another 40% is in the process of restarting and 20% is suffering due to intensive lockdown. Cash flow in tier 2 and 3 segments is still a major challenge but its slowly easing up.

What is the outlook for Danfoss India?

Our financial year is January–December, and we just completed our half year. It is really hard to predict the outlook for the remaining six months as there is no clear visibility now. If the R of COVID-19 index (a key factor in gauging the pandemic) drops below one, we can confidently predict a little bit into, may be, the next two quarters.

As we follow the government guidelines, which are dynamic, it’s very hard to predict.

We now take on things day by day and no two days are the same. In fact, as we speak, we have housed our critical resources close to the campus since June third week as inter-district movement was restricted during the intense lockdown in Greater Chennai. Our company buses were not allowed to pick up employees from neighbouring districts and it has added to our cost of production. We hope things stabilise soon and settle down to a new normal.

Inventory had piled up in April. But, the improvement in May and June eased it up a little bit.

Demand has picked up and hope it will come back to normalcy by the third quarter. We are staying optimistic to see if we can at least get back to last year’s levels, which looks tough but we are staying confident about the next two quarters.

Tell us more about the operations.

Travel has reduced. Plant is fully operational. Technology adoption of IoT and robotics on the automation side is tremendous. Webinars and online training were extensively used as engagement tools during the lockdown, with our customers and partners across India very effectively.

As we are a young organisation, initially there was a lot of anxiety. We kept the workforce posted about COVID-19 and Danfoss’s responsiveness.

We had our colleagues commissioning equipment online across India and also trouble-shooting virtually, especially in late May when Unlock 1.0 happened. Some of these changes in behaviour will stay in the new normal.

People have learnt to use MS Teams for more work effectiveness. About 60% will still continue to work from home, of which 20% will travel only basis work to the campus. We are flexible to extend WFH up to 60% basis business needs and our investments in digital in the last three years has paid off to steer ahead well virtually in this crisis.

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