The domestic automotive industry, which was already passing through challenging times due to unprecedented demand woes, is expected to be further impacted, thereby pushing recovery timelines.
JK Tyre & Industries is managing liquidity by focussing on timely collection of receivables, speaking to vendors for rescheduling the payments, and conserving cash to combat the uncertain situation, Raghupati Singhania, chairman and managing director of the company, tells Vikas Srivastava in an interview. Edited excerpts:
With complete lockdown in India, what is the situation of your manufacturing plants in India and Mexico as far as production is concerned?
We all are faced with an unprecedented situation currently, where the entire nation is under lockdown mode. Despite severe disruptions, we are taking all necessary measures to ensure that our colleagues stay safe and business continuity is maintained. Under the right guidance of the government bodies, we have halted production at all our manufacturing facilities in India, and we will soon be taking necessary actions across our Mexico plants as well.
The auto industry was already reeling under severe economic slowdown. Tyres being a major component in the auto industry, how has Covid-19 further impacted the tyre industry and companies like yours? How do you plan to get out of this situation?
The Covid-19 pandemic has greatly impacted the economies and businesses across the world. The domestic automotive industry, which was already passing through challenging times due to unprecedented demand woes, is expected to be further impacted, thereby pushing recovery timelines. Tyre is a critical allied industry and the sales and profitability will be affected. We are working on our medium-term plans currently to ensure minimum impact on the business. Liquidity is the biggest challenge today. We are managing liquidity through different ways. Firstly, by focusing on early and timely collection of receivables. Secondly, we are seeking some additional credit lines from our bankers and the RBI’s latest liquidity infusion will help. Thirdly, we are speaking to our vendors for rescheduling the payments and conserve cash to combat this uncertain situation.
Many companies in the auto sector have already started working on cutting their allied workforce. What kind of workforce reduction can we see in the coming months at JK Tyre and the tyre industry, as the overall demand and economic turnaround may take at least a year?
As an organisation, we are committed to our stakeholders, be it the employees, dealers or channel partners. We are taking this opportunity to right size the organisation and will take necessary steps in due course.
Cost-cutting is the most likely alternative in such emergencies; which are the segments where you are likely to cut the overheads in the current situation? What is the inventory situation at present in terms of number of days?
We are revisiting all cost centres and working out possible savings. No doubt, inventories have gone up due to lockdown, but we are working towards its reduction going forward.