“Escorts products are well accepted in SAARC & other emerging economies”

Ajay Mandahr

CEO, Escorts Construction Limited.

Ajay Mandahr, CEO, Escorts Construction Limited., gives an insight about its revival strategies, challenges faced and puts forth the benefits of digitization to Equipment Times. Excerpts…              

Escorts experienced a low phase in 2010. What were the challenges you faced after becoming the CEO of Escorts in 2017. Tell us about the product lines you are planning to make stronger, investments and future plans?

Historically Agri, Construction and Railways has been the core strength of Escorts. These three sectors have a pivotal role to play for the realization of US$ 5 trillion economy by 2025. We feel our strengths are very much in alignment with the National Building objective.

As far as Escorts-CE is concerned, our strategic journey is treading on 3xLevers (1) Operation Excellence, (2) Portfolio Expansion & (3) Improved customer value.To put it in simple words – Improving the product quality, lean organization & enhanced after sales- drives us on a daily basis.

We have identified focused markets and factors needed to win in these markets. This is helping us to develop & evolve our Product portfolio based on specific customer needs. We believe by committing to these identified markets & products we will be able to leverage our 3xLever strategy for sustaining and securing the future. Going forward, we will continue with this strategy and keep improvising.        

Tell us about the impact of the budget on the construction equipment industry?

The budget looks futuristic & exciting. The government is focusing on infrastructure, roads, rail expansion and airports on a large scale. With lots of investment coming in, the future of the construction equipment industry looks bright. To realize our objective of US$ 5 Trillion by 2025, India needs to spend about Rs.20 trillion per year as against Rs.5 trillion per year now. If you look at the last 5-7years, 70% of the CE demand is directly or indirectly linked to government spending. I feel this trend will continue for some more years.

We would like to know if you were able to achieve the set targets.

FY’20 had been a tough year for CE and we had our share of challenges, we expect the CE demand to contract by about 20% (YoY). In the next year, we expect the recovery to be slow given the disruption caused by Covid-19 & BS-IV transition from 1st Oct’20.

We have grown in our areas of interest basically high value segments. The performance parameters & ratios of the company are expected to be better than last inspite of the industry contraction. This is thanks to the initiatives on cost efficiency and product revamp under our 3X Levers strategy.    

What is your percentage of market share gain?

Market share is something we are not chasing, but we have overall improved our market penetrations by 2-3% is the focused markets.            

What are the initiatives being taken to upgrade technology in products and training imparted to enhance employee skills?

All our machines are built with the best of technology and are at par with any other contemporary technology available in the respective product segments. Effective 1st Oct’20 as we move to new BS-IV emission norms, the ECU would be mandatory, and this gives us the leverage for having a fully connected product. We are already starting to integrate & test the newly developed software & hardware and the results are exciting.

With regards to the skilling of operators, Escorts has been instrumental is imparting the driving skills through a very elaborate CSR program. Further, ECE has institutionalized CTP Programs, will have till date imparted training to about 500nos. local mechanics. This CTP program is being done with the objective of skilling the youth & is encouraging.

Are you part of ICEMA’s program?

Discussions are on between ICEMA and our CSR team. We have actively participated in this initiative and will continue to do so in the future.

Tell us about the manufacturing capacity and how much are you aiming for exports and which countries?

Our current manufacturing capacity is 10,000 units/annum. The industry is currently running at about 50 – 55 percent of capacity utilization and there is sufficient capacity available for growth. Pick N Carry is an Indian phenomenon. As far as exports are concerned, we export Pick N Carry cranes to SAARC countries and other emerging countries.

Global market for backhoe loader (BHL) is around 90,000 units and India is about 50% of the same. By virtue of having large BHL manufacturing capacities in India, the related Ancillaries are well developed, which makes India very competitive manufacturing base for this product. Most of the international brands, who are manufacturing in India are exported BHL. Product differentiation being minimal, Escorts is also seeing some good opportunity in international markets.   

We shall continue to develop & grow our footprints internationally in backhoe loaders. The response so far is very good.               

Our aim is to have 25-30% of our total business coming from exports. Currently, exports are about 10% in volume terms.               

Tell us about your investments in R&D and what is the R&D you are planning.

We are investing about 3- 5 per cent of annual turnover in R & D.             

Escorts has always been an innovation-driven engineering company; we have introduced many global products to our customers in India, such as Backhoe, Vibratory Compactors, high performing counterbalance trucks (Forklifts), Rough Terrain Cranes, Pick-n-Carry cranes etc.to name a few. 

We will continue with this legacy. Our in-house product development capabilities undergo constant upgrade. Thanks to the efforts of our engineers, we shall continue this journey of innovation on both our existing product portfolio & keep the new product evolution pipeline healthy.

We would be launching our new ‘White line’ range of Premium Products so on. This range would encapsulate our intent to offer safer & more productive offerings for our esteemed customers.  

How many dealers have you recruited from the time you have joined? How many touch points?

At present, we have 65 dealers (3S & 2S) with 120 touch points. For even better availability of parts & enhanced aftersales penetration, we have appointed about 25 distributors & 500 Authorized Service Centres (ASC). We will continue with this network expansion with the intent to offer the best after sales service to our customers.

To expand our foot prints,we will also be appointing 17-20 White Line dealers (3S) in identified territories for specially crafted products.            

As BS IV is slated to roll out soon is the backhoe market going to be affected. Is the shift being experienced towards excavators because of the cost factor?

I don’t think so. The backhoe is a multi-utility equipment and is delivering unmatched value to the customer. Mobility is an important factor for this customer segment. Mini excavators though, is more efficient & productive, having mobility constraints. In my opinion, the backhoe will survive and there will be certain improvisations that can take place. Selective Hybrid or < 50hp machine that complies with the emission norms looks very much in the offering. With low HP engines, loader performance is expected to be compromised. Anyway, we are still to see what impact these changes will have on the overall product lifecycle.      

Looking at the customer base and capacity in India, the major demand is concentrated around the retail customers who own, operate and maintain the machine. For this segment, backhoe will still deliver the value. BS-IV complied machine would be about 10 – 15 per cent dearer than the current pricing. With the majority of the Equipments being funded, the impact should be incremental & in instalments.

Will inter-market gain momentum post BS–IV norms as you already have machines that don’t comply with the government norms?

The Government is serious & we have no doubt that the adherence to the emission norms will be mandatory. It is also clear that effective 1st Apr’21, no BS-III machines will be registered by the RTOs. We will start to produce BS-IV complied machines from 1st Oct’20 onwards. Escorts is ready for this transition.   

The industry is bracing for tougher road ahead with demand under pressure due to Covid-19 lockdown & we sincerely hope that containment efforts deliver the expected results.      

How has digitization affected your product line and how is it benefiting customers?

India is on its way to becoming a digitally advanced nation, our customers are going digital & so are we.

As per the recent statistics issued by McKinsey, Indian mobile data users consume 8.5 gigabytes (GB) of data each month on an average. India has 1.2 billion mobile phone subscribers. With data costs falling by more than 90 per cent since 2013, India will see internet users rise to about 40 per cent by 2025. Further, as per the inputs available, 35-40% of the mobile phones will have enhanced and updated features by 2025. Government push has helped in digitizing the economy and we expect the consumption through digital means will grow at an exponential rate going forward. 

Digitally connected product & services are the future and Escorts started this digital journey a few years back. Today, we are working on various technologies to make ourself digitally smart organization. From HR management to manufacturing to dealer management and customer service, either we have already adopted or are very close to go-live.         

In Escorts CE, we have converted our customer after sales interface to digital. Now by using an app, our customer can get all the after sales services with the click of a button. We are further improvising and adding self-diagnostic & quick fix procedures for our customers on this App. This will be over & above the geofencing and machine performance monitoring.               

Which is the application area that will have more demand in the next year?

As mentioned, more than 70% of the demand for CE is directly or indirectly related to government initiatives on Infrastructure expenditure. Historically, Rs. 100/- of infrastructure spend translates to Rs.15/- of Equipment business, this correlation is based on 6-7% equipment penetration at construction sites. In the future, I assume this trend will continue and government will remain the prime mover for this sector’s growth. 

Which are your areas of focus in India (East, West, North, or South) with Northeast gaining momentum?

FY’20 has been tough for CE, the industry is expected to be down by approximately +20% YoY. This quantum of contraction in demand is similar in all regions. FY’21 looks to be challenging due to the impact of Covid-19 which will impact both the demand & supply chain side. Further BSIV transition can also play spoilsport with expected price escalation of 10-15% on the cost of the equipment.        

I have a firm belief that long-term growth story remains intact and the industry needs to find ways to adjust with these frequent disruptions. We are learning and adopting to this changing paradigm and will surely play our part in the National Building objective.

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