Schwing Stetter, a leading manufacturer and supplier of construction equipment, is planning to move some of its European operations to India. The Indian subsidiary of the German firm is investing ₹350 crore in phases in its new unit and will start exporting products back to European countries, managing director V.G. Sakthikumar said in an interview. Edited excerpts:
What are your plans in India?
We are constructing a new factory at Sipcot, Cheyyar. It is in the final stages of completion. Civil works will be through by October; installation of machines will take two more months and it will be ready for operations by January 2021.
What products are to be made there?
We are moving out certain product range (fabrications from Austria) and assembly (new product range) from Germany to India.
Some of the key products are concrete boom pumps, separate placing booms, shotcrete pumps, self loading mixers and other concrete trailer pumps.
Apart from these products, the group company will also manufacture three models of hydraulic excavators.
It is 25% more competitive to make these products in India and we have the workforce to make these products and an efficient Chennai Port for transportation. Initially, the new unit will add 10-15% of export turnover.
As we move forward, one-third of the turnover will come from this factory. We also got a major breakthrough by moving certain products to eastern Europe. Our traditional markets are from New Zealand to Africa. We also got some orders from Germany and U.S. The new unit will cater to the needs of domestic and export markets.
What is the investment
At the moment, we have incurred ₹200 crore. We plan to spend another ₹100 crore. Some of the machinery have started coming. Starting January, the products to be shifted will move from batch production to assembly line.
What is your turnover and backlog?
In the year 2018 (January to December), we made ₹2,050 crore. This came down to ₹1,730 crore in 2019. We are expecting ₹1,450 crore-₹1,500 crore for 2020, of which exports will be ₹150 crore (₹100 crore). Our orders dried up during COVID-19 to ₹100 crore and it now stands at ₹250 crore.
Have you reached pre-COVID-19 levels?
If you compare our performance in August 2020 vs 2019, we have done better. During August, our turnover was more than that of 2019 and we did 80%-85% of pre-COVID-19 levels. But in September 2020, we crossed last September’s volumes and also pre-COVID-19 levels. Going forward, October also looks good with strong order book position.
How do you compare the year 2020 with 2019?
The first two months of 2020 were better than the previous year due to more projects. 2018 was a better year and 2019 was one of slowdown. The industry witnessed a decline of 30% in 2019, whereas we reported a 15% drop. The current year has only three more months left. The industry will achieve 75% of 2019’s production, while we will be ahead of the industry at 80%.
Right now, we are slowing down and expanding our capacity in tune with market conditions. During 2021, we will be adding machinery and de-bottlenecking our facility.
What is the forecast for the following two years?
The next two years will be the best period for infrastructure sector with lots of projects in the pipeline. Orders are expected from roads, railways, real estate, windmill and solar. We expect the industry to grow by 10-15% for next two years.
What is your product localisation level?
Whatever we are doing has 90% local content. For the new unit, the import content will be high and it will be slowly brought down.