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Century Plyboards to focus on expanding India operations, await GST roll-out

Updated on: Jan 17, 2018

BL26_BB_SAJJAN_BHAJANKA | Photo Credit: PTI

Chairman Sajjan Bhajanka says roll-out of GST will help the company save about 10 percentage points in taxes

Century Plyboards India is divesting its 51 per cent stake in Singapore subsidiary Innovation Pacific. The deal is expected to be completed in three months. Speaking to BTVI , Chairman Sajjan Bhajanka says the hefty anti-dumping duty imposed by India on medium-density fibreboards (MDFs) made the proposed venture in Vietnam unviable. . Excerpts:

Can you take us through the contours of the divestment deal?

A partner in our Singapore subsidiary has a massive interest in a Vietnamese company. They came up with a proposal to develop a wood-based industrial park on a plot of land they have in Vietnam. Our idea was that acquiring that company will pave the way for putting up a MDF plant in Vietnam. They wanted to sell the excess land to other intending industrialists promoting wood-based industries.

But in July, the Indian government imposed an anti-dumping duty on MDF imported from Vietnam. For any unspecified party, the duty was almost $64 per cubic metre, which is equivalent to 25 per cent of the CIF (cost, insurance and freight) price. That was rendering the project totally unviable; in putting up a MDF plant in Vietnam with a target on Indian market.

So we requested our partner if they would be interested in taking over the stake since our basic interest is over and since we are no longer interested in putting up a MDF plant in Vietnam. They have agreed. And accordingly, we have divested our equity shares in Innovation Pacific.

How much money will you get from the divestment? And what is the timeline?

Whatever we have invested, we will get it back — about 200,000 Singapore dollars — because the main benefit of the investment was supposed to come in the future. So far, we had acquired 51 per cent of the equity. So we will transfer that equity after receiving that money.

Now that you are exiting the venture, will you be interested in expanding you capacity in India?

In India, we are already putting up a MDF plant in Hoshiarpur, Punjab. That will be equivalent to the current largest plant in India. Now we foresee — as and when the market expands for MDF — ample scope (for setting up units) in different parts of the country, too. Because MDF needs local raw materials — either waste wood or even bamboo — it is possible to manufacture particle board also. And a MDF plant requires an investment of hardly ₹1-1.5 crore, which is insignificant. It would have cost us much more in future if we had gone ahead with the (Vietnam) project. As we are not foreseeing much future in the Vietnam project, we backed out.

You also plan to expand your global footprint. What’s the update on your facility in Myanmar?

We have big investments and facilities in Myanmar and Laos. In Myanmar, we are already manufacturing veneer, and we have established factories also. In Laos, we have tied up with three local manufacturers. We are providing them with machines and buying back the entire produce. With three type of units, we got the government’s permission for 100 per cent FDI, and for another we have tied up with some of the local employees in a 50:50 venture; and in another case, we have tied up for supplying machines and get back the finished material. So we have tied up with six units in Laos. Myanmar and Laos were a major source for timber in India. That has been affected after the two countries banned timber exports. So that is being replaced by veneer now.

How will the GST help in improving you operations?

We are very eagerly waiting for the GST to be implemented because duty implication is now at 30 per cent and that will straight away come down to 20 per cent. That will give us an edge over our competitors. And if the SSI (Small Scale Industry) exemption will be over, the companies in the unorganised sector will have to pay more and we will have to pay less.

Published on August 25, 2016
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