LACK OF LIQ­UID­ITY

MD, Mody Group, Hy­der­abad, deal­ers for Volk­swa­gen, Honda, Ford and Hero

India Today - - CASE STUDIES - -Amar­nath K. Menon

What?

Down­sized staff by 8 per cent as sales dropped 25 per cent, froze staff wages as a lack of liq­uid­ity hit busi­ness. “Banks are tight­en­ing in­ven­tory fund­ing and ask­ing for col­lat­eral, un­like ear­lier. There is also a lack of de­mand due to shared mobility, high GST rates and lower in­fra­struc­ture growth.” In­ven­tory days, which were at 30 ear­lier, have now in­creased to 60 days. Com­pared to a mar­ket like Mum­bai, Tier 2 and Tier 3 deal­ers are less af­fected be­cause they typ­i­cally own land and there is no com­pe­ti­tion from the same brand, says Mody. “So this does not put pres­sure on mar­gins and keeps fixed costs low”

What next?

“Deal­ers with low debt will pre­vail. Man­u­fac­tur­ers have to bring in­ven­tory days down to 21 from 30-45”

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