On a concrete footing

Anand Sundaresan, Vice Chairman & Managing Director of SCHWING Stetter talks to us about the construction equipment sector, how the company has grown amidst tough operating environments and his future plans for the company

POORNIMA KAVLEKAR

“SCHWING Stetter was started and run by Indians, despite it being a subsidiary of a German company,” declares a proud Anand Sundaresan, Vice Chairman & Managing Director of the company. Sundaresan has led many industry bodies associated with the construction and manufacturing industry.  He was the chairman of CII, Chennai zone, and is currently the Vice-President of the Indian Construction Equipment Manufacturers’ Association (ICEMA) and the President of The Employers’ Federation of Southern India (EFSI). He played an instrumental role in setting up SCHWING Stetter, a 100 per cent subsidiary of German Multinational SCHWING GmbH, in India, in the year 2000. The aim then, was to provide the Indian construction industry with state-of-the-art concreting equipments to suit the local market needs. Today, the company is a prominent player in the industry and contributes around 20 to 25 per cent of the group’s overall turnover.  It is currently participating in high-rise construction projects, metro rail projects and dam construction projects.

Sundaresan talks to Poornima Kavlekar of The Smart CEO about the current state of the construction sector, how the company has grown amidst a tough operating environment and the future growth that he expects will take place.

How has the company grown in the last five years? What are the main triggers for growth? 

In the year 2009, when global recession hit us, the infrastructure and capital goods sector was badly hit and we went down by 33 per cent. Fortunately, the then Finance Minister had given a lot of sops to boost the capital equipment industry, like reducing the excise duty. This helped us bounce back in 2010, when we grew by 65 per cent. While 2011 was good, after September of that year, with the scams and corruption cases, things started going down again. 2013 and 2014 have been bad. So if you compare our peak time of 2011 with the status today, we are down by almost 25 per cent.  But, the market is down by more than 50 per cent.  What helped us was our presence in the global market and the fact that many of our competitors shut down operations. They did so because they were not able to sustain the cost pressure. For us, concrete equipment is the only business and we were able to negotiate a better price from our suppliers. We have been able to control costs as we implemented efficient production systems.  For those who closed down, this business was one of their subsidiaries and it was draining their profitability.  So, this helped us increase our market share.

How do you expect your current fiscal to be and the years to come by? 

Market sentiments are positive. The industry has faith in the current government, more so because it is a single party government. People have seen a lot of positive things happening in Gujarat and have confidence in Mr. Narendra Modi’s leadership. We believe that they are working towards reviving a lot of projects to give an immediate boost to the industry, but, unfortunately, the real big push is yet to come.  Perhaps, it will take a couple of months more.

Another point of consideration is that, while the order book has gone up as compared to what it was six months ago, the contractors are finding it difficult to get finance for buying the equipment and fulfilling the orders. Usually, more than 70 per cent of the capital equipment is financed by NBFCs.

I believe that from the second half of the 2015 calendar year, things should really start looking up for this sector.

Do talk to us about the various types of projects you are handling currently? 

High-rise construction is the order of the day in most metro cities like Mumbai, Bengaluru and New Delhi. And, we work very closely with most of these projects; we help them select the right equipment to concrete at that height, which requires special skills and equipment.   We also work with dam construction teams.

Besides this, what we are really concentrating on is setting up new service and training centers. We own land in Ahmedabad and Pune and want to replicate what we have in Chennai there. If the market bounces back in the second half of 2015, these centers will become functional and will hold significant value.

What are some challenges that you see in the sector? 

From the manufacturing side, we have to fulfill the aspirations of the blue collared employees. It is not like the old times, where the welder retires as a welder and their children take up the same profession. Now, they have different aspirations and want to grow in their position and give good education to their children. So, our challenge is to satisfy them and fulfil their aspirations, and create a system in which they are taken care of.

Apart from this, there are certain Government stipulations and regulations which were not industry-friendly. These were unnecessary irritants, which made us do a lot of unproductive work.  (With the new steps taken by the new government, we hope these problems will be positively addressed).

What are some major trends that are seen in your sector? 

There are a lot of changes happening in the concrete equipment business space, with the emergence of projects like high-rise buildings, dam constructions and nuclear power projects. Due to the size of the building and specialty of construction, this calls for special concrete, unlike the old times, when standard concrete was used. When you have such special requirements, it calls for special accessories for handling large quantity of cement, micro silica and special additives. This calls for some changes in the equipments and we are geared to provide all the necessary changes in the equipments.

On the mechanisation front, in concreting, boom pumps and separate placing booms are being used and we are manufacturing these products in India so that we can widen the user base for such requirements.

You have been elected as the President of The Employers’ Federation of Southern India (EFSI). Do share with us your experience in this role and your agenda? 

EFSI is the only body, which addresses the problems, of employers and blue collared employees especially with respect to the Factories Act, labour related issues and policies.  We aim to improve the employer employee relationship to bring in a harmonious working environment. We also work on skills development with a view to creating a system wherein a person who joins as a helper, for example, can, over a period of time, upgrade his skills and become a supervisor. I am taking it as a challenge in my own company and if I am successful, it can be implemented and popularized amongst others in the sector.

Secondly, EFSI is a 94-year-old organisation without its own office. So, one of the items of my agenda is to enable EFSI to own its office space in Chennai.

We are also in the process of streamlining our activities in the organisation. After I took over, we have been having seminars on special topics at least once a month with more than 150 people participating in it.

Most of the entrepreneurship that is happening in India (at least it seems like that) are in the IT, Internet and so called new economy segments. Do you foresee a ‘manufacturing entrepreneurship’ movement coming in through the Make In India campaign? 

In the last year and a half that I have been visiting China, I noticed that the developments that have taken place there is unbelievable.  If we want to develop India to the same level, we have to give lots of thrust for manufacturing. Today, even in the housing and real estate sector, which is still very small, we are importing small things like pipes and fittings from countries like China. If we have to grow like China, we have to manufacture 100 per cent in India and the Government should develop industry-friendly policies.

Over the next five years, what are your top five responsibilities at SCHWING Stetter? 

One is to create an occupational standard for workmen and bring them to the mainstream.  Two, is to grow this company substantially. We have a good market reputation and I would like to improve our reputation further. We are also looking at adding some new products, with our new Chinese partner, XCMG, who is one of the largest construction equipment companies in China.

I would also like to build SCHWING Stetter into a billion dollar company, in the next five years.  If you look at it, the current market size for construction equipment in the US is $3.2 billion, and ten years from now, it is expected to reach US $22 billion. We are looking at taking a reasonable share of this pie.

Make in India Manufacturing Schwing Stetter India

Poornima Kavlekar has been associated with The Smart CEO since the time of launch and is the Consulting Editor of the magazine. She has been writing for almost 20 years on a cross section of topics including stocks and personal finance and now, on entrepreneurship and growth enterprises. She is a trained Yoga Teacher, an avid endurance Cyclist and a Veena player.

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