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Plywood and laminate-maker Century Plyboards is looking at a ₹300-crore capex as it plans to expand manufacturing capacities across medium density fibre-board (MDF) and particle board segments.
While ₹150 crore is expected to be invested for a greenfield particle board factory at Sitapur in Uttar Pradesh, an equal amount will be spent towards expansion of capacities at its MDF unit in Hosiarpur, Punjab.
According to Keshav Bhajanka, Executive Director, the company has a strong cash flow of around ₹175-180 crore which will be used for expansion plans.
“Expansion plans through a mix of internal accruals and debt,” he told BusinessLine . The company has a debt equity ratio of 0.54 per cent.
The Sitapur particle board unit will have a capacity of 500 cubic meters per day; nearly three times the size of its present particle board manufacturing capacity. Century Ply’s existing particle board manufacturing capacity stands at 180 cubic meters per day. Work on the factory is expected to start soon.
Demand for MDF
According to Bhajanka, the brownfield expansion of the MDF unit (at Hosiarpur) is because of increased demand. The existing unit has seen a capacity utilisation of around 85 per cent. “We have to ramp up capacity in order to cater to the rising demand. Unless we do so, we lose market share,” he told BusinessLine.
Century Ply will enhance capacity by another 75 per cent or by 450 cubic meters per day. Its present capacity stands at 600 cubic meters per day. So far, ₹350 crore has been previously invested in the Hosiarpur unit.
Margin pressure
On an overall basis, Century Ply did see EBITDA and gross profit margins (to total income) decline this fiscal.
In FY19, EBITDA stood at 13.5 per cent as against 15.9 per cent in FY18. Gross margin during the period stood at 32.5 per cent (33.5 per cent).
Century Ply reported a near flat net profit for FY19 at ₹159 core; while its revenue from operations stood at ₹2,264 crore — a 15 per cent increase.
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