The rental industry in India can only survive if it starts providing a basket of services like dry rentals, wet rentals, rentals of construction machineries, mining machineries, rentals in industrial undertakings, industrial products and finally, packaging the rental portfolio to suit various verticals and different requirements of the customer. Above all our pan-India presence helps us to cater customers' equipment requirement anywhere in the country, says HS Bhattacharjya, CEO, Quippo Construction Equipment & Quippo Valuers & Auctioneers. Excerpts from the interview.
Could you brief us on the major parameters that help the equipment rental industry chart a healthy growth?
Renting business depends on four golden principles and that is what we follow at Quippo. One: stay connected to the ground; two: stay connected with the customer; three: stay connected with the operator; and four: take care of the machine. These are very important. Just providing rental service is not a viable proposition anymore. The rental industry in India can only survive if it starts providing a basket of services like dry rentals, wet rentals, rentals of construction machineries, mining machineries, rentals in industrial undertakings, industrial products and finally, packaging the rental portfolio to suit various verticals and different requirements of the customer. Above all our pan-India presence helps us to cater customers' equipment requirement anywhere in the country.
Rental operations also largely depend upon the crew who runs the machines, and it is of paramount importance that we devote our time and energy in training and development of their skills.
Being a leader in the industry we have put ample emphasis on the training aspect and have already invested in a training academy. Further, we have been imparting training to our crew on a regular basis.
From a pure rental perspective, we have also taken an initiative of offering 'rent-to-buy concept,' where a customer who initially uses the machine on rent can buy the machine later at a residual value. This has to run hand-in-hand with the finance packages.
How has Quippo been able to weather the storms?
Quippo has been able to sustain itself in these stormy days and retain its position on the revenue front as well. This is because we have optimised our deployment factors and arrested breakdowns at site. The on-rent breakdown has been pegged at five per cent and below, due to the technical competence of our team, which is almost at par with international levels. We have also retained the operation and maintenance cost within adequate limits as per international standards. We have introduced a system of productivity-linked wages scheme for the crew who manage the fleet, which help them perform better. And to top it all, we also intensified the collection force, and as a result, we have been able to see better collection results. The rental industry can only survive if you continuously innovate, and I think that's very important to innovate, stay close to the customer, and take care of the machine.
How do you factor in the latest technological developments?
That's another major aspect of a successful rental industry. You need to continuously stay updated on what is going on around, study the latest technological innovation that is taking place and constantly upgrade your fleet. It is important to understand the customer's requirement with regards to the fleet and advice the customer on the applications as well. Merely dumping the machine will not suffice, you need to understand why the customer needs a particular machine and you should be in a position to guide him.
Apart from that, you need to continuously upgrade the knowledge of your people, you have to improve your operational ability. Over the last three to four months, our equipment and machinery have become more technologically advanced. For example, we have fitted our machines with the latest GPS monitors and other advanced systems. Thereby we are doing continuous equipment tracking which helps both the customer and the hirer.
Quippo has been the leader for a long time. Being a leader is one thing, continuing to be the leader is more challenging. What do you say?
We are leaders because of the value proposition that we bring on to the table. Today in India, we are probably the only rental company that has invested so much in people and on resources. So, we will continue to upgrade our people and knowledge base, and enlarge our horizon of activities, thereby retaining our leadership position. I think this is a service sector and more than renting, you need to know the value of servicing. When you offer the proper services to the customer, the loyalty factor will always come into play. That has been one of our core competence areas, where our services have been matchless. We will continue to do that. It is a simple business and we will try to keep it simple. We will not compromise with our basic ethics and principles and that will help us to retain the position where we are today.
Do you have any issue with double taxation?
The rentals of today are service-taxed in the hands of the contractor. The contracting community does not get a benefit out of this service tax, so there is a hitch and the cost of rentals goes up. If it all becomes GST, the situation will change. Further, there are entry taxes in various parts of the country. There is no uniform structure of taxes, so logistics continue to be a huge challenge in the country - moving machinery from one state to another. We need government support and understanding to address these issues. We tried to form an association of rental players, thereby trying to standardise and rationalise the business process, but it is not active today. Unless any industry rationalises or unites itself, there is not going to be much of government support. I am hopeful that we should be able to do something a few years down the line.
There was a move to form an association specifically for access equipment. Your comments.
I am not aware of the developments in the access equipment segment as we are not into access equipment. But we did try to form a rental association three years ago, which did not materialise for many reasons. We will try again to form an association which is not based just on equipment, as I don't think that will help. There needs to be a common platform where different stakeholders can get together and address certain common issues that blunt the rental industry growth.
For example, an issue like the tax structure. Whether you rent out the access equipment or excavation equipment, you have to handle issues related to multiple taxes and logistics. Anywhere you move the material, you have common logistics issues. I think the formation of an association is important to discipline the industry, to bring about awareness in the minds of people, to standardise the documents and procedures and last but not the least, have a body which can represent to the government or other policy makers in the common interest of the rental industry.
Which will be the best mode of rental, dry or wet leasing, or operating lease? Which is the model Quippo is known for?
There is no best mode that can be defined for all sets of customers. This varies from customer to customer, tenure of the requirement, funding situation in the market, and other associated requirements of the customer. We leave this decision to the customer. We never force any customer for a solution; rather, we give options to the customer with the respective pros and cons and let the customer decide upon the best suited option as per his requirements. We as a rental player, are open to all kinds of options, wet, dry or operating lease, and we try to partner with the customer in whatever option he chooses.