Knowledge and skill upgradation are vital and that is where Quippo plays an important role. We continuously devote time to upgrading knowledge; training is a continuous activity in our organisation. It has given very good results in improved productivity and machine management. All in all, I think we have weathered the storm, and it is now time for us to get a share of the sunshine, says HS Bhattacharjya, CEO & Executive Director, Quippo. Excerpts of the interview.
Quippo was an early entrant in the rental space. How do you view the scenario now? Yes, we started off in rentals when the rental mindset was not yet developed in the country. But over the years, Quippo has been instrumental in developing the rental mindset in the country, and more importantly, we have been instrumental in professionalising the rental services as you see it today. The rental business will occupy a good place in the infrastructure segment in the days to come. I would say that we are ready for the take-off now; it's up to the market.
Are CE market sentiments on the rise? In my opinion, it has not worsened, that itself is a silver lining. The CE industry has bottomed out and all movements should be upwards. There are faint signs of optimism both in the rental and in the infrastructure scenario. We hope that some EPC contracts will be announced by the government and that will bring some positivity back into the market. From the rentals perspective, I can say that the prospects will be better as the rental mode is being preferred to owning equipment since contractors are sceptical about capital investment.
Is the political scenario becoming hostile? We have to wait and watch. I won't go to the extent of saying that there is hostility but there is a political helplessness; political compulsions have moved the development agenda to the back of the shelf. But for a country's economic growth, mining industry has to grow. There has been so much of investment in the mining sector over the years. Maybe after the elections, the scenario will change for the better. Globally, too, if you look at mining, the situation is the same except in Africa. I am confident that the mining sector will get back to the growth trajectory, sooner or later. Yes, there are issues of environment clearances and investment but things will change for the better.
In these troubled times, what are your financing options? Srei has come out with some financing schemes. As far as Quippo is concerned, we are not into financing, purely into renting. But yes, we have come out with a lot of renting options; we are offering alternative solutions on our operating channels; we are trying to acquire franchises across the country to expand our footprint; we are promoting equipment schemes whereby the surplus equipment can be banked with us and rented out. We would like to basically confine ourselves to our core competencies.
You sound very optimistic... Tell me, if I am a pessimist, how am I going to lead the business? More than 700 families are dependent on Quippo, therefore the leader's role becomes more of a mix and match kind. He has optimism and at the same time, he has to be realistic, too. I think optimism helps you keep your chin up and a realistic outlook keeps your feet firm on the ground.
On a positive note, yes there will be investment pouring into the market and definitely many of the projects which were declared will soon be at execution levels. I am hopeful that in six months' time, the situation will improve. A successful leader survives on his skill during difficult times; as an organisation, we have kept the family intact. We have been very cautious about the cost approach, but have not sized down our business nor have we scaled up; we have not lost our customer loyalty and we continue to have a deeper penetration in the market compared to others.
Has the slowdown given you more time to focus on the servicing part? It has given us a lot of time to consolidate the various pillars of a business; we have managed to develop a far stronger partnership with customers; we have improved the processes and systems to manage stocks, inventory and receivables in a much better way; we have consolidated our knowledge of machines. So I think many good things have happened and these are important for the future as well.
Which are the major steps you have initiated to increase your footprint through channel partners? We are getting into the franchise model of renting whereby we are trying to tie up with some manufacturers and some small players who will offer their machines on rent with Quippo branding. Quippo systems and processes will operate and for all practical purposes, the customer will have machines from Quippo and continue to get state-of-the-art professional services from Quippo while the machines come through a franchise partner.
Secondly, as you know, Quippo has been the pioneer in setting up an equipment bank in the country. We are revamping that model so this will see a lot of machines coming to the rental mode.
Thirdly, we are into asset and fleet management activity, and we have been quite successful in that. Through that channel, we are trying to get machines to the rental ready line. As I said earlier, I am quite confident that rentals will be the solution for future.
Is the concept of channel partners region-specific? Yes, it will be region-specific but eventually it will be throughout the country, to help us enhance our pan-India presence.
Which are the regions where Quippo has a strong presence? Currently, we have strong presence in the east and the south.
Is there any specific reason for that geographical spread? The concentration of machines is more in those areas.
What has happened to your efforts to bring standardisation to contracting, renting, documents, etc? That still remains a dream. We tried to form an association of rental players but it didn't work out. We will continue with our endeavour to form an association because unless the rental industry has a strong platform to discuss and represent its issues with concerned authorities, nothing will happen. We need a lot of support from the government for rental legislation, rental tax structures, etc. I think once the industry looks up, they will come to a common platform out of their own compulsion.
To what extent has the continuing slowdown impacted your performance? It didn't actually impact our performance, rather it has impacted our growth. Because of our knowledge of machines and leadership qualities, we stepped into different verticals of fleet management, equipment banking, training people, all of which ultimately kept us afloat and healthy. I am happy to say that while we did not grow, we did not climb down either. There are many rental companies which have had severe setbacks but we can proudly say that we were able to stick to our budget.
What did Quippo focus on during this period? As far as Quippo is concerned, these years have been years of consolidation, years of learning, and years of de-risking the business. We are trying to partner with everybody. I think many hands together create a strong support system. We are trying to do that.
There was a move from the global players to get into Indian market. What is the scene now? That was the mood in the year 2009-10 but now it has taken a back seat. Now, I am sure once infrastructure growth happens and the rental industry looks up, overseas players will step in.
Now even rental pricing has gone flat. Yes, that is because of the influx of machinery in the market; because projects are suspended, there is an influx of machinery in the market despite the fact that there has been a slowdown in equipment sales. But this is a temporary phenomenon.
Will the import of used equipment have any impact on your business? I don't think so. Because in rentals, what is most important is the service a customer gets from the rental agency. Since the guarantee of performance of imported equipment is not there, the end-user will not opt for imports. So I don't think that the import of used equipment will have any negative impact on the rental space.
Say, for example, one can import three different models of used cranes and assemble it into one, and use. Is that happening in India? Yes, in the crane market, I agree there is a demand for second-hand machinery purely because of the high cost of machinery and delivery issues. But apart from that, I don't see any other used equipment being imported into India mainly because of technology. All the OEMs are manufacturing India-specific models.
Which are the verticals that will drive demand? I think sooner or later, it is infrastructure including roads, power plants and railways; these are going to drive the action because India needs it, and you can't avoid it. Mining will also open up, it's a question of time, but yes, infrastructure will lead the way.
What are the major requirements you are looking at for the growth of the rental industry? I think one of the major requirements for the rental industry to grow is to have a standardised tax structure. The introduction of GST will highly facilitate it. Today, the unfriendly and diverse tax structure in the country poses a huge problem for the rental industry. The other important thing is the mindset of people which needs to change.
Credit risks are very high in the rental industry. Do you agree? True, the credit risks are very high. You get your payment only after you have serviced the customer. So therefore, it becomes very important to choose the right kind of customer. Rentals as of now are not a retail product, it's a corporate product; it's a corporate service and therefore, credit management plays a very important role.
How important is skills upgradation in the rental segment? Knowledge and skill upgradation is very important and that is where Quippo plays an important role. We continuously devote time in upgrading knowledge; training is a continuous activity in our organisation. It has given very good results in improving productivity and machine management. All in all, I think we have weathered the storm; it is time for us to get a share of the sunshine.