Sameer Malhotra, Chief Executive Officer, Shriram Automall India.
We are growing close to 30 per cent year-on-year, and we feel we will continue to do that in spite of the slowdown. For us, this is a niche market and also an untapped one, says Sameer Malhotra, Chief Executive Officer, Shriram Automall India. Excerpts of the interview.
How do you view the overall market for used equipment?
Used equipment market is pretty large and it is going to grow. For us, we are not only restricting ourselves to construction, we have also gone into commercial vehicles, as also agricultural equipment, such as tractors and harvesters, etc. We have also gone into passenger cars recently. So, all of it put together, it is a very huge market and totally unorganised at this stage. We are the only organised player providing a bouquet of services in our country.
Logically if the demand for new equipment is down, it should benefit the used equipment market.
I would not say that. What I will say is that we will definitely grow, because in good times, there is much more demand than supply. The supply is met by used equipment but the market is still there. We are still surviving because people are still operating in that market.
Are things looking up?
If we take 2012 as a referral, the market is not going up, it is not going down either, since the last three to six months; things have definitely slowed down but the industry still hopes things will improve at the earliest.
Is the case the same in the used equipment market?
We are basically into used equipment; and for us, the market is still good. For us, there is good growth; month-on-month business is growing. We find a lot of people are interested in used equipment. More transactions are happening because people are looking at liquidation; those customers are coming to us, we are selling for those customers. Customers who are small-time construction companies or contractors do not want to invest in new equipment. They see us as an opportunity to buy used equipments and save capital.
Does the import of used equipment impact your business?
There is an open competition. Every asset has its own price. So if you are talking about used equipment or new equipment or Chinese or Korean equipment, each has a different value proposition.
Yes, Chinese equipment definitely makes an impact on but again, it all about perception. So if the quality is good, whether it is Chinese or European or American or Japanese, if people have used them and are happy with the quality, they will pay a premium for it.
On the other hand, if the imported asset is much cheaper than what we are making in India, then definitely we have to improve on the price levels, we have to improve on our efficiency. So ultimately, we have to compete with whatever is available. We have to work on much better cost-efficiencies so that we can compete with anyone. The majority of the assets are now made in India. When volumes grow, everything will be made in India and then these questions will not be there.
As far as used assets are concerned, there are very few being imported now; so, used assets are not disturbing the new asset market presently. The used equipment market within India, that is the big market we have to look into, because the stronger the used equipment market, the better the new equipment market. If a customer knows that the asset value will not go down much and he can sell it anytime, he will buy new equipment.
Are you dependent on imports?
Not at all. Our business is constructed based on the Indian market. Whatever is available which is already imported by someone, if they want to sell, we will work with them. We are not importing anything in India and we are only working for all the assets available in India.
What is your customer base today?
We have almost 50,000 customers in India now, which is far bigger than anybody else.
What are the major advantages of the Automall concept you have initiated?
Our business model brings a lot of transparency into operations. For example, a construction company or a finance company who has a lot of stock which has come back due to payment defaults, they have to look for a one-on-one trade model which is time-consuming and cumbersome. Whereas a meet-a-customer company like ours provides a single window system with a wide gamut of services: parking facility for equipment, repair, and disposal methods best suitable for the customer, etc. We arrange for customers who can buy, and we also have a funding arm to take care of the financing needs of the customers. The buyer gets the right equipment at the right price. The seller also is benefitted as he doesn't have to get involved at all, we take care of all his transactions. We are a facilitator and they are much happier for the transparent and faster transaction.
Do you have a pan-India presence?
We have our Automalls spread across almost a hundred locations in the country where we provide services including parking facility. We aim to open 60 Automalls in the next one year; out of that, 27 are already functional.
What is the investment gone into it so far?
Presently we have a different strategy; we do not buy land. We find a local partner who has land and who can invest in infrastructure and we go into a long-term arrangement with them, to pay the monthly lease/rent to them for using their facility. There is no heavy capex investment on this from our side.
Do you provide a refurbishment service for equipment?
In each of our Automalls, we have the refurbishment facility, which we call Shriram Newlook. Depending upon the client's need, we can see to the basic aesthetics. If major repairs need to be done, we generally take the help of the dealer or the manufacturer.
What has been your growth story?
We are growing close to 30 per cent year-on-year, and we feel we will continue to do that in spite of the slowdown. For us, this is a niche market and also an untapped one. We started with commercial vehicles, then we have gone into construction equipment, then agricultural equipment, now we have gone into passenger cars; the market is improving, our activity in the market is improving.
So, diversification of this kind helps you balance?
Absolutely, even if one industry goes in a tight position, we still have other segments which work and we can thus take care of the volumes.
Have you set any target for this fiscal?
There is no target as such; our core focus is to strengthen every segment and improve business. For Automalls, we will have 60 Automall in this year. As far as our staff strength is concerned, we already have 730 employees now, and we should be reaching the 850 mark soon. We are in the process of consolidation; we are the market leaders in commercial vehicles, construction equipment, and we are improving on an everyday basis. On the agri-equipment front, we are getting stronger, and we have to strengthen ourselves in the passenger car segment that we recently forayed into.