An over 40-day nationwide lockdown due to the coronavirus (COVID-19) outbreak has caused sales across various sectors plunging to nil. With some relaxations expected even if the lockdown extends beyond May 3, electronic goods firms like Blaupunkt Audio are keeping fingers crossed that non-essentials' deliveries by e-commerce is now allowed.
In an interaction with Moneycontrol, Sukhesh Madaan, CEO Blaupunkt Audio India said if delivery of products through e-commerce is allowed, 50 percent of the company’s business will be back. Blaupunkt Audio India had Rs 100 crore in revenue in FY20.
Right now, only the delivery of essential goods like grocery, food and medicines is permitted through online platforms.
Blaupunkt Audio India is part of the German-headquartered appliance and audio accessories firm. Blaupunkt Audio sells personal accessories like headphones, earphones and Bluetooth ear devices as well as home audio systems like soundbars and speakers.
For the company, 50 percent of sales are through online platforms, 35 percent comes through organised retail or large electronic chains like Croma and Vijay Sales while the rest of the business is through corporates sales and other distributors.
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Madaan said that even though the lockdown began in mid-March, the year has been challenging since the beginning.
“2020 has not been good for us. We had placed an order in December 2019 to get goods from China that was to come in February 2020. But COVID-19 outbreak there led to the factories struggling to fulfil orders. By March, when China was ready with the order, India had entered into a lockdown,” he added.
About 90 percent of audio products sold in India are imported. Of this, China contributes a large portion (50-60 percent) of the imported goods, he said.
Madaan said the only silver lining amidst COVID-19 is that March/April is not the peak sales season for the company.
“We are at least better off. Our products are not perishable and can last longer. But products with inbuilt batteries risk leakage due to the prevalent weather conditions. There could also be a scenario where the battery gets completely discharged. But hopefully, the COVID-19 situation wouldn’t last that long,” he explained.
Festive season accounts for 50 percent of the business. Blaupunkt Audio revenue was at Rs 100 crore in FY20 and it includes home audio and personal audio.
The company management and senior executives have taken a salary cut, said Madaan without mentioning the exact quantum. Madaan himself has let go of a couple of months' salary.
“We are taking cost conservation measures through pay cuts at the top level because it is not fair to cut the salaries of the junior staff working with the company. We are also negotiating with warehouses to see if they can let go of the rent for a month or allow a 25 percent rent cut for the next three to four months,” he added.
The audio industry that is estimated to be Rs 8,000-10,000 crore in India has been seeing a 30 percent year-on-year growth due to cheap data and a boom in OTT platforms driving personal audio device sales. On the other hand, Madaan added that the rise in LED television is boosting home audio.
What happens after the lockdown lifts?
When it comes to COVID-19 lockdown, Madaan said even if rules are relaxed, the organised retail players will take time to get back on their feet.
“Maybe online deliveries will help cater to the pent up demand for device purchase. But then again, hotspots would be out of bounds,” he said.
From a supply perspective, he said at present China is stable since factories are holding stock and ready with the inventory.
“We need to get clarity about shipping. We get most of the products by air. There are very few cargo flights now and the ones flying are primarily carrying personal protective equipment. Both demand and supply-side challenges will have to be resolved,” said Madaan.
What can the government do?
While the Reserve Bank of India (RBI) has offered a three-month moratorium for repayment of EMIs, Madaan said banks should not charge interest for this period.
“It is not that the EMI is being forgiven for these three months. Banks should have completely cancelled the payments for these three months,” he added.
On the other hand, Madaan said the government should also be open to flexibilities in payment of salaries.
“I understand that the government sentiment where they said we should pay all salaries. But we also have limited pockets so some innovation could be done in areas like Employee State Insurance contribution or maybe forego collecting income tax for one month. This can help businesses sustain,” he said.
Like all his peers, Madaan is hopeful that the COVID-19 situation subsides before the peak festive season sale period. Festive sale begins from mid-August and continues until the end of the year.Follow our full coverage of the coronavirus pandemic here.