Greenply Industries, one of the largest plywood makers in India, will invest ₹548 crore as it plans an entry into the medium density fibre (MDF) boards business.

The Greenfield manufacturing plant, with a capacity of 800 CBM per day, will come-up at Vadodara in Gujarat. It is likely to be operational by the Q4 of FY23. Once operational at its peak, the unit is expected to add ₹600-650 crore annually to the company’s topline.

With accessibility to sea port and easy procurement of raw materials, the proposed unit can be leveraged for exports.

Acquisition

Greenply’s entry into the MDF segment will be through the acquisition of a Kolkata-based company, Baahu Panels Pvt Ltd, for a consideration of “not more than ₹50 lakh”.

According to Manoj Tulsian, CEO & Joint Managing Director, Greenply Industries, the acquisition of Baahu Panels was done primarily as the latter had some of the requisite clearances for a unit in Gujarat. The company, with an authorised share capital of ₹1 crore and a paid-up share capital of ₹1 lakh, had “nil” turnover.

Western Indian markets are under-serviced in terms of MDF supplies, he said, adding most of the demand is being serviced from nearby North or South Indian locations. Moreover, an anti-China stand is expected to be beneficial for Indian players in the short-to-medium term.

“We do see a change in consumer demand patterns and the MDF industry is likely to see rapid growth. The Gujarat unit will help us tap into underserviced Western Indian markets. Moreover, acquisition of Baahu, primarily for clearances and approvals it already has, will help us fast-track project execution,” Tulsian told BusinessLine .

“Baahu Panels faced some roadblocks. We bought out the equity shares at face value of ₹1 apart from paying some service charge for the clearances they obtained. So the acquisition cost will be not more than ₹50 lakh,” he added.

Funding

Unlike its plywood business, where the company explored JVs and an asset-light model, it went on its own in the high-capex MDF business. According to Tulsian, the company was looking at a 30-70 or 35-65 equity-to-debt funding. It is likely to approach banks soon. Greenply Industries already has a free cash of ₹100 crore in its balance sheet.

This apart it has a debt of approximately ₹170 crore (for Indian and African ops) and repayments “continue to be on schedule”.

Greenply Industries reported a 96 per cent rise in consolidated sales YoY to ₹260 crore for the June quarter FY22 (April to June) and net profit of ₹4 crore (against a YoY loss of over ₹11 crore). On a sequential basis, sales and profit dipped 34 per cent and 86 per cent, respectively.

Capacity utilisation of plywood stood at 69 per cent in Q1FY22, the company said in its investor presentation.

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