 "Alan Blake, JCB Group")
JCB Group, the $4.1-billion UK-based construction equipment company, has been battling a huge demand slowdown globally. JCB Chief Executive Officer Alan Blake, in an interview with Sudheer Pal Singh, explains why the company refuses to be demotivated by the current fall in sales and prescribes a way for the government to come out of the policy paralysis. Edited excerpts:
JCB has just announced an investment of Rs 500 crore for a factory in Jaipur, its fourth in India. This is despite the fact that JCB India’s revenues fell 15 per cent to Rs 5,500 crore last year. What gives you the confidence your returns would be secure in a subdued market?
We have always had great belief in India’s growth story. If you look back, we expanded our Ballabgarh facility at an investment of Rs 300 crore in 2008-09, a time when the economy was down globally. We did not put our investment plans on hold, as India had no choice but to build a lot of infrastructure through the next few decades. Every government would have this among its priorities. The young Indian population is well-travelled and demands world-class infrastructure. Similarly, the de-growth last year does not discount the medium- to long-term growth the sector would see. This is our firm belief; this is what has driven our investments in the past, and would continue to do so. Opportunities are always available, whether the market is subdued or buoyant. It is for us to recognise the opportunities and make the most of those.
In your business, the pace of infrastructure creation is a key determinant, in any market. According to you, which recent steps by the government would help boost infrastructure activity in India?
Setting up the Cabinet Committee on Investment under the chairmanship of the prime minister is a positive step to ensure key projects do not face hindrances in receiving clearances. More recently, the Supreme Court ruled environment approvals might be de-linked from forest clearances. This would definitely help kick-start several roads and highways projects that have been struggling with inter-ministerial clearances for many months. Earlier this year, the finance minister rolled out a well-balanced Union Budget, in the context of where we are. Emphasis on the infrastructure sector, including credit enhancement by India Infrastructure Finance Company, the Pradhan Mantri Gram Sadak Yojana, the award of 3,000-km road projects and the introduction of investment allowance, should help revive the investment cycle in the country and add to growth.
There have been significant delays in commissioning large projects in the Indian infrastructure space, including the dedicated freight corridor project (DFCC) and the Delhi Mumbai Industrial Corridor (DMIC). Aren’t such delays a concern for JCB? What policy changes do you recommend to bring growth back on track?
DFCC and DMIC are very exciting projects. We need to understand India is a difficult country to manage, given its huge geographical area, political boundaries, cultural and social challenges and different governments functioning at the state and central levels. The good thing is the intent is very much there. In fact, it is getting stronger. What we need is the government to take up 100 projects of national importance and fast-track their implementation. These projects should receive all approvals in a decided timeline. Once we start project execution on the ground, growth is bound to return. It is a cycle that would bring back growth. However, it has to start on the ground.
India is the single-largest market for JCB globally, accounting for about 30 per cent of the company’s global sales. Do you plan to make India an export hub for foreign supplies or would manufacturing in India be confined to domestic consumption?
Indian manufacturing is world-class. India is a very important market for JCB globally, and we’re sure this would only be reinforced further in the future. Currently, we do export machines made in India to other markets, including African nations, West Asia and Southeast Asia. These exports have been growing exponentially and would continue to grow, as we expand our base of ‘made in India’ machines to different parts of the world. Our manufacturing facilities in India are on a par with any world-class construction equipment manufacturing facility, and we are proud of that. State-of-the-art technology, coupled with passionate and talented manpower, ensures world-class machines roll out from our plants in India.
Also, our fabrication plant in Pune is export-oriented---it exports about 40 per cent of its production to the parent company in the UK. From the UK, machines fitted with these parts are sent to all parts of the world.
How soon do you see demand in the European market reviving? Is there any strategy in place in case the slowdown in Europe is stretched further? What part of your business comes from Europe and did it fare last year?
Europe has been a very important market for us. Last year, though the global construction equipment market declined, JCB maintained its performance. With the European governments taking key steps to revive their economies, we hope there would be a revival towards the end of the year.
What key trends emerged from JCB’s global financial results for 2012? What was the percentage growth or decline in global sales? What are the expectations on revenues for this year, both globally and in India?
We take pride in having a very low response time to market. Last year was the best in our 67-year history, with earnings at a record. In a global market that contracted 10 per cent, JCB’s machine retails rose from 69,100 in 2011 to 69,250, which means once again, JCB outperformed the market. Last year, JCB’s business in Africa doubled; in the Americas, it increased 20 per cent. The company saw growth of 12 per cent in West Asia. In 2012, JCB retained its position as the number one construction equipment manufacturer in the UK, Europe and in India, and it remains the number one manufacturer of backhoe loaders and telescopic handlers in the world. These numbers reflect the resilience of the business.
JCB has been present in India since the past three and a half decades. It has been the largest supplier of construction equipment in the country. How do you rate your experience of doing business in India? Which were the turning points in JCB’s journey here?
Our chairman, Anthony Bamford, loves the vibrancy of India and is delighted with his decision to expand into India in 1979. At first, progress was slow, as our research and development teams worked tirelessly to suit our product designs to Indian conditions. Today, we have an entire range of India-specific products. Our growth has been in line with the growth in India’s infrastructure. Since 1979, it has been an exciting journey for us. It would be difficult for me to single out few turning points. There were challenges along the way, as you would expect in a rapidly developing economy. However, our team had un-deterring passion and attitude to get things done, and that drove us to where we are today. The decisions we took---to invest in India and expand our manufacturing footprints---ensured we were able to meet the market’s requirements all along the way.
