Lockdown international case study: Indian manufacturing
1 May 2020: ICAEW Insights speaks with Suketu Shah, senior manager at an Indian electrical goods company, about meeting the challenges of communication, cashflow and sales during the country’s lockdown.
Anticipating government restrictions and an imminent lockdown, the electrical goods company where Suketu Shah works as a senior manager bought laptops in bulk. With more than 3,000 employees, Shah says the company wanted to ensure staff could continue to work from home when the lockdown took effect.
“Although it has been a bit challenging, people have adjusted to the pattern of working from home,” says Shah, who is responsible for working on capital raising, mergers and acquisitions and financial reporting at the Mumbai-based consumer electrical equipment manufacturing company.
Shah says they have structured the day into two equal parts, with the first part of the day focused on conferences calls and discussions, while staff use the second half of the day to execute plans. This, he says, “is the most suitable way of managing work from home”.
“All our employees have been actively working from home,” continues Shah. “We have scheduled routine calls to know who’s doing what and when. We’re using the Microsoft Teams platform to communicate internally. It just helps to stay connected.”
Although sales activity has come to an abrupt halt due to the COVID-19 pandemic, the sales teams and supply chain teams are in continuous touch with their respective counterparts to ensure that “as soon as the lockdown ends, we are ready for business,” says Shah.
Currently one of the major challenges Shah and his team face is poor internet connectivity. “There is way too much traffic on the internet currently.”
Cashflow, like most businesses around the world, is another challenge to overcome for the company. Many businesses won’t be able to pay, due to the shutdown of economic activity. However, Shah says that measures taken by India’s central bank, ‘Reserve Bank of India’, to grant a three-month moratorium on all term loans will help in that regard.
“We do not see any major risk of default for the next three months at least. However, if the lockdown continues beyond April, until May or mid-June, a lot of companies will run out of cash and land in insolvency.”
He adds: “Most companies have stopped all discretionary spend such as advertising, and are saving cash. Normal business payments are made on the basis of their urgency. It is fair to assume that annual bonuses will be affected drastically – most employees do not anticipate any hike beyond 5%. Most companies will pay salaries for April, even May too, but going beyond the first quarter, with no activity, it may become difficult for many companies to cope.”
For now though, his company is in a good place due to a recent rights issue, Shah explains.
“Since there won’t be any business activity for most of April, there will be a big challenge to manage cashflows. But one good point for our company is that we have just a completed rights issue and are now in a comfortable balance sheet position.”
Shah doesn’t underestimate the difficulties that lie ahead once the lockdown is over either. “For business activity to pick up, the entire supply chain must begin again. It will take at least a month or so for business activity to come back to its normal scale.”
He adds: “While the number of cases is still on the rise, the government is doing all that it can. Indians have been brave and mature enough to do what the government wants us to do. And largely, it is more of an individual task to ensure that one stays home and safe.”
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