Indians are back to driving seats it seems as the demand for helmets is back to pre-Covid levels according to the CFO of helmet manufacturer Studds, Manish Mehta. In an interaction with ETCFO, he says that the two-wheeler segment is attracting attention as people are wary of public transport in the times of pandemic. Studds aims to sell more helmets in this financial year than the previous year.
Studds has a market share of about 27% in the helmet market. As much as 55% of its sales come from the Northern and Western regions. It is present in more than 40 countries mainly Europe, Latin America, Africa, the USA, and southeast Asia. Edited excerpts.
Q: How much of the Pre-Covid demand is back now?
Manish Mehta: Two wheeler segment is buzzing with action in India. This segment has attracted attention as people are wary of public transport fearing spread of coronavirus. Sales of pre-owned vehicles is also going up. We are almost back to pre-corona demand levels.
Q: What is your capacity utilisation? What is the status of your upcoming plant?
Manish Mehta: We restarted manufacturing operations of Helmets and motorcycle accessories in June. We have also started a new plant (which is an expansion project) in July 2020.
Currently all our four manufacturing plants are operational. Our Capacity utilization in terms of Motorcycle Helmets and Accessories is about 80 per cent at the moment.
Q: Do you foresee any challenges on the supply chain side?
Manish Mehta: We don’t foresee any major challenge pertaining to the supply chain. All our vendors are fully aligned and maintain sufficient stocks.
Q: Are you facing any challenges with labour? Are labours returing?
Manish Mehta: We have 1850 labour at present. We don’t have big labour challenges as we are not dependent on Migrant labour. We have a mix of local as well as migrant labour.
Q: How is the industry adapting to the new BS VI-norms?
Manish Mehta: BS-VI norms are a big challenge to the automotive industry. The challenge will be more towards convincing customers to shell out more money for vehicles with just an upgraded engine.
Nonetheless, the general economic slowdown will make the task even tougher as high tax rate and lower rise in average wage growth will deter many from making a purchase.
Q. Are you seeking any additional credit lines in the times of pandemic?
Manish Mehta: We have a mix of debt in form of term loan from Bank and Equity. We had taken debt of Rs 48 crore in 2018 out of which Rs 12 crore has already been repaid on time as per the schedule. We are not looking for further loans.
We expect that our capex and working capital requirement shall be met out of internal accruals which shall also be sufficient to meet all our obligations including Employee Cost, Finance cost and other expenses. We have not taken any additional credit lines for COVID.
Q: What is your outlook for the rest of the year?
Manish Mehta: For the rest of the year we are quite optimistic and expect overwhelming response. As the demand for two-wheelers is growing, both for new as well as used vehicles, we expect demand for helmets to also go up. We expect to surpass our last year sales in the current financial year.
SMK, which is the premium brand, has received an overwhelming response in Indian and Foreign Markets and will boost our sales. As already said we expect to surpass our last year sales in the current financial year. There was a shortage of supply last year and with the new plant coming up we will be able to bridge this gap. We shall be launching new products and also increase our presence in segments where we are not present today.
This year we intend to launch 12 new Exclusive Brand Outlets (EBOs) across the country. The capex for the EBOs would be about Rs 3 crores. For our industry, we feel sales will increase post COVID due to apprehensions of using ride sharing and public transport.