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Every Business Will Have to Re-define Itself: Uday Kotak, CII President
In an exclusive interaction with BW Businessworld, seasoned banker Uday Kotak, who is now the new President of the Confederation of Indian Industry (CII) for 2020-21 in its 125th year, says every business will need to redefine itself in the Covid times and that it is the right time to ‘reset India’.
Photo Credit : Umesh Goswami
After taking charge as the President of CII, the apex industry body, banker Uday Kotak says he is confident that businesses in India will need to redefine themselves and their business models in order to survive in the present times. "I have great confidence in many Indian businesses to re-imagine and redefine themselves and their business models. Company after company that have to survive for the future will have to redefine themselves," says Kotak in an exclusive interview with BW Businessworld.
Kotak says for him and for the CII the word AtmaNirbhar Bharat does not mean a 'Protective Bharat'. It represents the India which is 'competitive and ready to engage' with the world.
Expanding on his argument for redefining businesses Kotak says: "One very clear example is Digital versus Physical. A lot of physical world businesses will have to change their business model. Some will succeed and some will not and that inevitably will lead to some level of consolidation. That's the rule of life. Survival of the fittest."
Kotak, who loves the classic Raj Kapoor film 'Mera Naam Joker' and its famous song 'Jeena Yahan, Marna Yahan', says going forward the industries will have to recast their cost structures in order to survive. "Fixing healthcare and education, if my view, should be the key priority areas for the industry going forward," he says. Kotak adds that any business that is unsustainable cannot seek bail-out package from the government. "A bailout from the government for non-sustainable business at the cost of healthcare and education is a horrible trade off businesses or people of India can make," says Kotak.
He gives an example. "Corporate will ask for money to save their businesses. As CII is a responsible institution, we will first ask the most important question - what is the consumer saying about this business? If a consumer makes a choice by saying that 'I am going to do my shopping online and not at the mall', it's a decision made by the consumer. And for that, would it be fair for such businesses to ask for a bailout from the state which should be investing in healthcare, rather?" asks Kotak.
Reset India & Migrant Labour
Batting for the need to have a 'social security net' for Indians and for the companies to find 'ways of creating new jobs', Kotak firmly believes that the time is right to 'reset India'. "This is the right time: let's reset India," he says. "I think we are at a crucial point in history where we need to reset. Of course businesses would have to redefine their job and then there will be potential job losses. But we have to find ways of creating new jobs and opportunities for people. And in the interim, we need to have social security. And that is where, I think, the importance of livelihood and support are important," he adds.
On the key issue of reverse migration of labour - from bigger cities to home states - Kotak says the industries will need to make it attractive, safe and secure the working conditions for bringing back the large labour work-force that has now gone back. "For getting that person back to work, we will have to make it attractive (job for the migrant labour). This will be based on demand and supply. And in my opinion, this is a classic market dynamics at its best - if you want me back take care of my conditions and pay me well. And then I will decide the trade-off whether I come back or not," says Kotak while commenting upon what it will take for the labour force to return back to the big cities.
On Real Estate and Auto Sector Revival
Kotak says the real estate sector will need to ‘re-imagine itself’ for sure. In order to see the revival of demand in the housing sector, Kotak say the developers would need to lower the clearing prices. "Don't assume that somebody's going to write a cheque for you just because you purchased the land at a higher price and now expect the consumer to pay for it," says Kotak having dealt with this sector in the capacity of a banker for decades. "My message to this sector is: please come down to a price where you can clear the inventory. Instead of expecting the government to fill the gap for projects where you bought the land at a higher rate, my suggestion to them is to lower the prices, it will spur the demand as many Indians are still dreaming of owning their own homes. But they can't as the prices are beyond their reach," says Kotak.
"Very clearly price for real estate could be the single biggest opportunity for the revival. This is where I say 'let's live in the real world' as it has changed. Having purchased land at a higher price from a bank or a NBFC who might have valued that asset at hundred, when the pay back was maybe 70. Face the reality guys...at 70, if somebody is buying, that is the clearing price in today's bank. Grab it. Move on. If the bank has to take some hit, it should. If the developer has to take the hit, they should. But let us clear the inventory," says Kotak.
Speaking about the revival of the automotive sector, Kotak has a straight message to the dealership network. "I have some insight in this sector. Historically, car-dealers have made money from selling cars and then have diverted it towards building mansions, buying real estate etc. For heaven's sake, keep your money in your business. Don't play around with things which will not be easy to sell when you need it back," says Kotak.
Kotak says in the automobile industry, the stress is not on the OEMs rather it is on the suppliers, which are basically covered under MSME sector. Then there are the dealers. "Most OEMs have the ability to withstand this crisis. My message to them is - don't be focused on pricing and margins. Get your sales moving by covering the variable cost and some part of the fixed cost because this is now a different world," he adds.