Recovery in crucial urban market will take longer: Havells India CMD

The CMD of Havells India says impact of lockdown was quite profound for companies that are dependent on domestic consumption.
From consumer behaviour to its long-term plans, Havells has witnessed sea change in its business since March. ANIL RAI GUPTA, chairman and managing director of Havells India, tells Arnab Dutta how managing costs, shedding bureaucratic shackles, and improving productivity at every level will be crucial to weathering a storm. Edited excerpts:

What was the impact of the lockdown? Do you see a silver lining yet?

The impact was quite profound for companies that are dependent on domestic consumption. April was practically a washout. While the share of consumer versus industrial business is 70:30, nothing really moved. In May, we witnessed little recovery. In June, the rate of recovery was much better, with smaller towns and semi-urban geographies showing quicker recovery. But metros like Delhi, Mumbai, Chennai, and Kolkata are still not fully functional. Semi-urban and rural is almost back to normal, while urban will take a while.

How’s the recovery in consumer and industrial sides of the business?

The retail consumer is back. But it is the larger consumers — the industrial buyers — that are lagging. I think the industrial side of the business will take more time to recover. Industrial spending is still down 30-50 per cent. Overall, the trends show recovery so far is better than what was expected initially, especially on the consumer side of the business. May be the expectation was low and thus, it is recovering faster than anticipated. At the various plants, we are operating at 50-95 per cent of pre-Covid levels.

With poor sales, what are the measures you plan to take to reduce cost?

This is an unprecedented crisis we are facing and finances will suffer in the short run. We have to take a hit, and developing the balance sheet over the period comes in handy. But the lessons we learnt from this crisis are a key takeaway.

This gave us an opportunity to go back to the drawing board and come up with future-ready plans. Re-evaluation of existing costs and the cost structure to determine which are the ‘good costs’ and which ones are ‘bad’ are crucial. Some infrastructure-related costs might be required to be brought down, given the new nature of technology adoption now required. Also, higher productivity at the plants and sales activity are important.

Are you planning to cut employee cost through layoffs or salary cuts?

Since we have already survived the lockdown, we are not going for any salary cuts or retrenchments. Our appraisal process, due in April, was deferred, but we are not counting that out yet.  

Are you sticking to your plans for the year or have they been revised?

One lesson we have learned from the crisis is how long-term planning is a thing of the past. It will be extremely important to remain flexible as an organisation. How one’s operations, supply chain, and working capital requirements can be adapted to the fast-changing business environment are now more crucial than ever. Larger organisations tend to become bureaucratic in nature. It’s time to become agile and flexible — that’s the future. 

Nobody could have imagined a month of zero sales, but now we have to remain prepared for exigencies. All our plans have to be re-drawn. Instead of planning for the long-haul, we now have to be focused on short-haul goals.

How does Havells plan to address changing consumer behaviour?

Consumers will react to brands differently; their buying pattern is undergoing considerable change. Even without a lockdown, consumers might not be willing to visit physical infrastructures like service centres or stores. Thus, we are gearing up to digitise our offerings and ramping up a hyper-delivery model — online-to-offline. We are already catering to consumers through local outlets, based on their online orders.

Even during the lockdown, more than half the service issues were solved digitally, through solutions like Internet of Things, video calls, or by do-it-yourself methods. Overall, our relationship with the physical channels will take a major digital overhaul, and technology will play a key role.

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