Reasonable Capacity Utilisation May Take A Quarter: ITC's Sanjiv Puri

Achieving reasonable capacity utilisation in manufacturing units may take a quarter, ITC chairman and managing director, Sanjiv Puri, said on Thursday.

ITC has about 120 manufacturing locations including third-party owned. Of these, 70-80 are currently operational, but at capacity utilisation ranging between 20 per cent and 50 per cent.

Not just ITC, FCMG companies have been grappling with multiple challenges in the wake of lockdown measures, manufacturing, supply chain and manpower availability being primary among them.

ITC is currently operating product lines that have an immediate consumer demand. The pandemic led to a massive surge in demand for hygiene items, sanitisers, and hand wash. A new product, disinfectant spray under Savlon, was also launched during this time.

ALSO READ: Covid-19 impact: Demand, pricing pressures to weigh on Coal India

From the chatter on social media, we realised consumers wanted some products to disinfect the surface, said Puri. "In about four weeks' time the Savlon disinfectant spray was launched in the market with even scientists working from home," he added. Approvals were given digitally.

However, product launches this year may go awry due to the Covid-19 outbreak. Typically, a slew of launches are made in the first two quarters of the year.

"Product launches will be limited now. We will do absolutely what is essential and where there is critical consumer need," said Puri.

Launches will be made once things normalise. "It will get pushed back and some may not happen this year. We have to adapt to the situation and reimagine the future," he said.

Incidentally, ITC has put together teams to look at revival strategy and reimagining the future."We believe that the current crisis will pass, so how do we bounce back well and take advantage of opportunities going forward. We had our teams working in this area," he said. The idea is to take advantage of emerging opportunities.

ALSO READ: Sebi eases default valuation for MFs, allows valuers to make exceptions

As part of the growth plans, ITC is not averse to looking at acquisitions, though the focusis on conserving cash.

"There will be recalibration of investment as ultimately it is linked to demand. At the moment there is no activity at the project sites, we will recommence once situation normalises," said Puri.

While FMCG is operating at lower utilisation, there are other business segments that are virtually non-operational. Production of cigarettes which is a money spinner for ITC is shut; they are either in hotspots or in areas where lockdown has been extended. In the hotels segment too, five are operational. That too for stranded guests or as quarantine facilities.

Puri said that sectors like aviation and hospitality may take a couple of years to revive.

The long-term fundamentals of India hasn't changed, he pointed out. While welcoming the proactive steps taken by the government in dealing with the pandemic, Puri, said that revival of manufacturing and agri-value chains outside containment zones would be important for economic activity to revive.

"The longer it takes, the more challenging it would be for the economy and livelihoods," Puri said.

Though manufacturing and agriculture activity had been eased in-principle, some clarifications were required, he explained.

Most manufacturing locations are within the perimeters of urban centres. Those need to be allowed, Puri said.

On support from the government, Puri said that the extent of support that is required is indexed to the length of the shutdown. "The longer industry operates at a feeble capacity, there will be more stress in the industry and more support will be required. It is co-related."

However, ITC is already working on a bounce back plan. Puri said that methods of dealing with immediate requirements were being worked out when things open up.

For instance, when hotels open up, there will be lot more concern about safety, he pointed out. "How do we create non-contact service or provide service with social distancing. More avenues for check-in could be worked on," he said.

He added that it was mostly likely outbound tourism would come down so an element of redesign was required in offerings.

"We are going through a difficult patch. But we can handle this," he said.