JCB India Ltd has projected that its revenue growth is likely to slow down to 15% in 2011-12 financial year after showing record sales growth last fiscal.
Mr Vipin Sondhi MD of JCB India Limited explained to Mahesh Kulkarni the reasons for slowing sales this fiscal and the prospects ahead for the construction equipment industry.
Q - The year 2010 was a record one for JCB in terms of sales. How has been 2011 and what is the outlook for 2012?
A - The year 2011 is also going well for us. Let me talk about 2012 first. I think there are very clear headwinds ahead. The high commodity prices are not showing signs of coming down, and the continuous increase in interest rates has had great impact on sales.
But, the positive part is liquidity is there in the system. I think as long as liquidity remains, there will always be demand and sales will take place. What we expect is for growth to slow down to about 15 per cent in 2011 and 2012. However, it does not mean that new projects should not be cleared. New projects need to be cleared. Because there is this gap of policy logjam, whether it is land acquisition or environmental issues, new projects were not moving. The area we see some movement is in road projects and we expect some momentum next year.
Q - India is set to see an investment of USD 1 trillion on infrastructure in the 12th Plan. What are the prospects for the industry?
A - If the USD 500 billion were targeted in the 11th Plan, the understanding is that about 85% of that is being spent by March 2012, which has given us a compounded growth of 18%, between 2005 and 2010. But, remember that 2009 was a downturn year. It had never happened before. Suddenly, Lehman Brothers went down and the liquidity got affected.
In the vision 2020 document Accenture has projected a CAGR of 21 per cent. Now there will be ups and downs. It could be 30 per cent in one year and 10 per cent in one year depending on projects.
All of this is triggered by the fact that there will be an investment of $1 trillion for five years. And hopefully for the next five years, it will be at that rate or more sequentially. This augurs well for the industry, because inherently there is a demand.
Q - How much of this you think could be spent in the next five years given the expenditure on infrastructure in 11th plan?
A - Whether it takes place in five or six years, it depends on the projects. These are large projects driven by the government. It depends on how projects are done on the ground.
We are confident that citizens are demanding better roads, airports and seaports and better railway stations. It is cutting across party lines, the policy may be a little different from each. But the fact that India has to be built. I don’t think anybody is arguing against it.
Q - What is the mood currently among the stakeholders of the construction equipment industry given the slowing pace of economic growth?
A - Cautious optimisim. There will be growth but there is caution because of the headwinds that I mentioned earlier and of course the external uncertainties as well that certainly affects certain part of our economy. Those are dependent on exports like software or physical exports so that certainly lends a bit of caution.
Source - Business Standard
