The Hindu Business Line : `Make unorganised players pay taxes'

PLYWOOD is an industry, which is hardly discussed on any national forum but the sector has tremendous potential and growing at a phenomenal pace. Moreover, with the recent spurt in the housing sector, plywood and laminates are likely to play a more prominent role in the future.

The city-based Greenply Industry Ltd, promoted by the Mittals, is a leader in the plywood and laminate industry. In the last decade, the company recorded a compounded annual growth rate of 1200 per cent.

Mr S.P. Mittal, Chairman of Greenply, discussed several aspects of the plywood industry and company too.

How big is the plywood industry in India and what is its growth rate? Who are major players and what is the break-up of your market share?

Indian plywood industry is as big as Rs 5,000 crore and the laminate industry is almost Rs 3,000 crore. The industry is growing at a rapid pace of 10-20 per cent per annum. Approximately 600 units are currently functioning all over the country. There is tremendous growth potential as the players are yet to penetrate majority of the market.

The worst aspect of the industry is that the organised players hold only 10 per cent market share and the rest is with the unorganised players. Among the organised players, we have Century Plywood and our company. Similarly in laminates, there are about four major players holding a similar amount of market share.

What are the problems of the organised players in this industry?

We comply with all the rules and regulations of the Union Government. For example, we pay an excise duty of 16 per cent, followed by sales tax of four per cent. Moreover, we are regularly paying provident fund, ESI, bonus and wages to our workers. Due to these factors our cost of production is actually 25 per cent more than that of an unorganised player. We are urging the Union Government to see that the unorganised players also pay excise, sales tax and take care of their workers.

Moreover, the market is not appreciating good quality. People are only opting for cheaper but inferior varieties. So, we have started training the carpenters and also trying to educate the architects the advantage of using better quality plywood. The market is huge and it will be difficult to cover everyone. Still, we are trying.

The Union Budget is to be placed next month. Are the plywood manufacturers making any pre-budget recommendation?

Yes, the Federation of Indian Plywood & Panel Industry has requested the Union Finance Ministry to reduce the excise duty from 16 per cent to eight per cent. This would help even the smaller players to pay their excise regularly. We have also found that if the rate of the excise duty is reduced, the total earning of the Union Government from this sector would increase.

Coming to Greenply Industries, what is the company's turnover and net profit during the last financial year, 2003-04 and what are your targets for the current fiscal, 2004-05?

During 2003-04, we have recorded a net profit of approximately Rs 7.5 crore on total sales of Rs 254 crore. For the current fiscal, we have targeted a turnover of around Rs 320 crore. Profitability is likely to increase by more than 20 per cent. I must also say that in the last 10 years we have grown by 1,200 per cent. In 2002-03, we recorded a net profit of Rs 4 crore on a turnover of Rs 239 crore.

Are you exporting your products?

Yes, we are exporting laminates to the US, Europe, Hong Kong, Singapore and Taiwan among others. We will soon reach out to markets in Syria and Vietnam. For the current fiscal our export target is Rs 35 crore. However, we are not exporting plywood as it is not financially feasible.

What are the expansion plans of Greenply Industries?

The company is currently expanding the laminates factory, which is located at Behror in Rajasthan from 2.40 lakh sheets per month to 3.20 lakh sheets per month.

The cost of the project was Rs 16.5 crore and it was funded through loans from banks. The expanded plant will be operational from July 1, this year. Our plywood factories are located at Nagaland and Kolkata. The total capacity is 25,000 sq metre per day. We have no plans of expanding the plywood capacity.

As you are already into plywood and laminates, the natural forward integration of your business would be into furniture. Do you have any such plans?

Yes, we are contemplating entering the furniture business but it is too early to make any comments about it. We have already appointed a consultant to work out detailed report on this sector. At present, there are two major branded players in this industry.

Greenply Industries recently delisted from Calcutta and Guwahati stock exchanges but it is listed at the BSE. However, the stock is hardly available to the investors. Are you taking any step to dilute your holding in the company?

The promoters are currently holding 85 per cent in the company. At present, we have no plans for dilution but if we go in for the furniture project we may dilute stake. However, this dilution will be for different reasons. Funds are easily available nowadays and banks are most eager to lend us money. We wish to dilute our stake as it will increase the company's visibility in the stock market and among investors. It will increase the brand value of Greenply.

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