See export recovery in two-years; US most stable: Thermax

With exports at multi-year low, pointed by the trade deficit data yesterday, MS Unnikrishnan ,MD, Thermax confirmed that exports were slowing considerably and it would take at least two  years for the exports to recover.For their company in particular to order wins from markets like Indonesia had decelerated, he said in an interview to CNBC-TV18.The trade deficit for the month of August has come in almost flat at USD 12.48 billion against USD 12.81 billion month-on-month (MoM), even as imports dipped 9.95 percent to USD 33.74 billion versus USD 35.95 billion MoM. However, the big setback comes on the exports front, which stood at USD 21.27 billion versus USD 23.14 billion MoM. According to him, exports would only bounce back when global investors were confident of stability in economies world over. Currently, US was the only economy that is stable and India would come in second, said Unnikrishnan.However, the company would continue setting up export oriented units in Indonesia although that economy too was slowing down because by the time the units were up and running, it would be 18-24 months and by global economies would not remain same, felt Unnikrishnan. Moreover, even if global economy receded, being present as a local manufacturer, would be good for the company, he added.Below is the transcript of MS Unnikrishnan’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Latha: Those export numbers looked very troubling. This is the lowest tally we have seen in five years. What is the sense you are getting? Are global buyers simply not putting out anymore bids? A: One month or maybe a consistent number that we have been seeing on a declining level should not be taken as a global indicator. It is an indicator for India. Latha: I am putting a large amount of data together. For the last nine months, we have been getting lower and lower, year-on-year (Y-o-Y) export data and then China reported, two weeks ago a 14 percent fall in its imports. Putting all this in context, I am asking you as a person who speaks to a lot of global buyers, is interest declining? Is our growth pains so severe? A: Absolutely. In the global market, especially for the area that we represent, engineering and capital goods, the foreign exchange (Forex) are in shortcoming even in continents where we expected things to be moving like Africa, like South-East Asia. In any case, we were not expecting anything substantial to happen. It is only in the developing world where Indian companies were exporting their wares, goods and even commodities.

The predominant markets for India, for exports are South-east Asia, Middle-east, Africa, South America and maybe Eastern Europe - in each of those markets, if you look Indonesia per se was rated to be a fast growing economy. But there seems to be a loosening grip in that economy, especially the kind of returns that they are managing. There has been a deceleration which happened  there. In the African continent, we could be seeing that tougher competition for the limited number of orders. And the new phenomena which has taken shape there, in all those markets is Japanese yen has substantially depreciated, so is the case of European currency. Who were unapproachable for most of these markets due to their currency stand and the product costing have become very attractive and closer to Indian and Chinese pricing in all these markets we just talked about. So, competition is toughening now. And it is a tough time for India. Sonia: To de-risk your own business from the domestic slowdown you had decided to put up some export oriented units in some of the markets like Indonesia. Given that we are facing a slowdown in those markets as well will you still go ahead with those export plans? A: 100 percent, on account of the fact that by the time you would see your entire interface up and running 18-24 months down the line, global economy won’t remain the same. If global economy will recede any further, certainly our domestic market in India will also be getting impacted. So, in those cases being present locally as a local manufacturer you will get many preferences so certainly we are going ahead with that. There is no rethinking on that at all. Sonia: How long do you think it will take for some of these markets to come back to double digit growth? As you were pointing out not just in markets like Indonesia but even in Africa many other domestic manufactures indicate that in places like Nigeria etc things have just gone from bad to worse because of the way the currency has depreciated. How long do you think it will take for the exports to bounce back? A: The global investing people have to feel confident about the market - the money is going to come from Europe, America and Japan and partially from China. It is not the governments of these countries. The individual companies and the investors on the equity fronts from those parts of the word will have to feel confident about the stability of the global economy which is not being felt by anybody. Barring the American economy there is no stable economy at all in the entire world. I would say India would be the second. I don’t think we are expecting it to happen immediately. However, I think there is surplus money available in the global market to be parked and invested and has to find its own way. Those may go into preferred markets where political and economic stability is there. So on those counts some of the countries will come back, I am certain about that. But your question on how long will it take – may be a two year period not something like within a quarter. Don’t expect change in a quarter.