-says Mr. Rajesh Mittal,
MD, Greenply Industries Ltd
Mr. Rajesh Mittal sees a significant traction in plywood growth led by market share gains from unorganized segment after implementation of E- way bill, hence to cater the needs, Greenply Industries Ltd (GIL) is coming up with new incremental capacities for plywood, setting up huge manufacturing facility in Uttar Pradesh, which will start production by next financial year. He expects higher growth for branded plywood segment of 15 to 18% in FY 2021- 23. The Ply Reporter talked to Mr Rajesh Mittal, on recent market developments and activities after GST and his future plan for the growth of GIL. Excerpts.
Q. How do you see Green ply benefiting from the reduction of GST rates from 28% to 18%?
A. As the GST rates has been reduced from 28% to 18% we foresee a huge opportunity coming up for Greenply in coming days. Demand will further increase as the price gap between the branded and unbranded products will get further narrowed down and being an organized player, we are passing on the benefit of lower tax rate to the consumers. We expect a considerable growth of 10 % –12 % in next 2 years followed by higher growth of 15% - 18% in FY 21 to FY 23 in plywood category which would be largely led by market share gains from the unorganized sector and gradual recovery in real estate sector.
Q. What will be the impact of GST reduction on furniture industry in India?
A. I clearly see that furniture industry as a whole will continue to grow and along with reduction of GST rate other factors like governmental initiatives such as affordable housing for all by 2022 , make in India , development of smart cities , focus on ease of doing business will also play a vital role in driving its growth.
Q. How do you see e-billing coming and how will it impact the whole system? What are the changes being you expecting?
A. E-Way billing forms an important part of GST implementation and its introduction from 1st Feb’18 will enforce stricter compliance on the unorganized sector. Overall I can say that its implementation will be positive for organized players as this will enable them to compete on a more level playing field.
Q. What do you think a dealer chooses ‘a brand or margin’? What is his priority?
A. I strongly feel that no dealer wants to sell something where quality of the products and its after sales service are not certain. Dealer will any day choose a brand provided they get good margin in the same. In today’s market environment consumers have become more aware about the quality features of different products and they are getting more and more inclined towards buying the right quality product at the right price. Hence from growth perspective dealer’s priority will always be to sell branded products.
Self-branding has become a trend but survival will always be for the fittest and one who can deliver right quality at right price along with good after sales service only will be able to sustain.
Consumers at the bottom of the pyramid mostly purchase unbranded and local products where quality and getting right value of money is not certain. Hence seeing the need of the hour we launched “Jansathi” at a very competitive price point which will not only offer the consumers a quality product from the house of Greenply but will also give opportunity to consumers to use branded plywood at the same price range.
Q. GIL has become very proactive in other product categories of ‘Ecotec, Optima Red’ etc. You have launched a new brand ‘Jansathi’ recently in a category that is highly crowded and too much competition from unorganized category, so what is your view on it?
A. GIL have always been very proactive across all product categories including Ecotec, Optima red etc and we offer products across all price range basis high-end, mid-market and economical segments requirement. If we assume the market size of plywood industry in terms of a Pyramid then you will observe that the bottom of the pyramid is a category which is always highly crowded and catered by local brands, consumers at the bottom of the pyramid mostly purchase unbranded and local products where quality and getting right value of money is not certain. Hence seeing the need of the hour we launched “Jansathi” at a very competitive price point which will not only offer the consumers a quality product from the house of Greenply but will also give opportunity to consumers to use branded plywood at the same price range which they paid while buying local products.
Q. Will not the cheaper products eat up the share of your high value offerings, that actually erode the top quality or brand market share a bit? Will it not lead to slowing the growth of top value aided product of a lead branded company?
A. It is true that cheaper and local products eat up the share and actually erode the top quality or brand market share but this is common across all industry where presence of local and unorganized players are into existence. However I have a different view when you talk about the slowness of product growth due to cheaper products available in the market and the reason behind saying the same is because nowadays consumers awareness about buying right quality products have increased and in long run I only see a growth and shift of consumers towards using branded and quality product only rather than preferring cheap plywood.
Sooner or later every plywood manufacturer has to shift from Gurjan face veneers to other color face veneers like PQ, Okume, Reckon , Makai etc.
Q. There has been growth in decorative products category and a sharp rise in self branding by showrooms is witnesses across country. What is your view on this?
A. Branded company decorative products are largely driven by approvals. Off late we have observed that the opening of showrooms and then self-branding has become a trend but survival will always be for the fittest and one who can deliver right quality at right price along with good after sales service only will be able to sustain.
Q. How do you see plywood market getting impacted of so many colors of different face veneers like PQ, Okume, Reckon, Makai etc. Will it any way impact the branded plywood face veneer priority?
A. In coming years due to many external factors Gurjan timber will probably become obsolete and it will be hard to find the same, hence sooner or later every plywood manufacturer has to shift from Gurjan face veneers to other color face veneers like PQ, Okume, Reckon, Makai etc. Our preference will always be to use Okume face veneers due to its quality and sustainability and in years to come smooth availability of other face veneers like PQ, Makai in will remain questionable.
Hence shift to different face veneer will never impact the branded plywood because any day the required technical specification of plywood will not change.
Q. So can we accept that in the future Greenply coming with the reckon face?
A. In future also we do not think we will come up with recon face because if we compare reconstituted face with Okume then Okume has better strength and naturality compared to Reckon, also the price gap between them is quite lucrative and Okume is economical from cost perspective. I believe Okume has great potential for Indian market hence our preference will always be to use Okume in place of Recon face.
Q. Can you brief us about the infrastructure and capacity Green ply has established for face veneer manufacturing in Gabon, Africa?
A. We have recently set up a backward integrated unit in Gabon (West Africa) for production of face veneers with capacity to peel 35,000 CBM logs annually. First phase of Gabon unit commenced commercial production in Jul’17 while the second phase is expected to be operational soon. Optimum revenue potential for the Gabon unit pegged at Rs 1 bn.
We are focusing to sell Okume face veneer in India as well as few other selected markets. Currently we have 3 operational peeling unit from which we will be providing 0.5, 0.4 & 0.3 mm (For Indian market thickness of 0.3 is majorly required) face veneer to different markets. We are currently running at 100 percent capacity in face veneer production.
Q. We have seen plenty of birch ply being imported and sold in the country lately. What is your view upon supply of plywood from Gabon to India?
A. Okume plywood from Gabon does not seems to be a great choice both from price and technical perspective because plywood from Gabon will be lighter in weight which is not preferred by Indian market. On the other hand birch ply is being imported in plenty because in birch, the advantage is its edge side appearance, its surface finish, calibrated type, no gaps, which generally matches some of the quality specification as needed by consumers in India.
Q. Three years back, Green Ply switched from conventional plywood manufacturing to the calibrated process. How has it helped your market?
A. In conventional plywood manufacturing process one can never be sure of uniformity in thickness of the plywood, hence seeing the need of hour we tried to innovate ourselves and implemented calibrated process, as by adopting calibrated process we were able to maintain uniform thickness variation of +- 0.20 mm across all end of plywood.
Furniture makers always prefer usage of calibrated plywood and it was a much needed requirement from market point of view.
GST and e-way bill will enable them to take input credits which they were not able to claim before ( in case of Excise related product) and will also encourage them to sell branded products like Greenply at vastly improved margins.
Q. Lot of manufacturers are now preparing all fresh with calibrated manufacturing process but we don’t yet see that much demand What is your view?
A. There is no doubt that switching to calibrated process will any day give an edge to plywood quality , If you see in China, they all produce and use calibrated plywood and in majority of places it is same. The same point will count in India as well and consumers will eventually shift to calibrated ply and demand for calibrated plywood will surely rise in coming days.
Q. When do we expect the new factory that Green Ply is coming up with in UP will start?
A. We will witness a significant traction in plywood growth led by market share gains from unorganized and gradual recovery in real estate sector, hence to cater the needs new incremental capacities coming on stream for GIL plywood plant in UP by next financial year. We expect the same to be operational by FY 2019-2020.
Q. Any suggestion for distributor/ dealers specially when GST is applicable and e-bill on its way?
A. My only suggestions to my distributor and dealers is that GST is a good step taken by government and it will give new direction to Indian plywood industry , they should take it as an opportunity to execute work in a much more systematic and organized manner. GST and e-way bill will enable them to take input credits which they were not able to claim before ( in case of Excise related product) and will also encourage them to sell branded products like Greenply at vastly improved margins.
Q. What is the most important USP of plywood (as a product) that is making it as an irreplaceable panel product in the country even during whole next decade?
A. To answer this question, first you have to understand the perspective of Indian consumers, Indian consumers do not believe in frequent change or making of new furniture for their home hence they always want to use plywood because plywood’s are termite or borer resistant, high on durability and longevity.
I strongly feel that is the main USP of plywood that is making it as an irreplaceable panel product and the same will continue even in coming decades.
Q. What is the present size of the plywood industry and share of organized players as of now? How much change in market share can be anticipated by March 2019?
A. Present size of Panel & plywood industry is mostly around 20000 Cr - 25000 Cr out of which only 25% is contributed by organized players. Change in market share will depend on several factors like recovery in real estate sector, smooth implementation of GST, governmental reforms etc and I see a major shift from 25% to 30% by March 2019.
Q. Your message to Green ply Dealers and Green Ply Team members;
A. GIL dealers and team members have always been the two strongest pillars of Greenply growth, they have always given their desired support and contribution whenever required and I would always request them to keep up the good work in coming years.
Mr Sanidhya Mittal, son of Mr. Rajesh Mittal has completed around five years in Plywood and panel industry after graduated from Calcutta University. His father is his inspiration and mentor and he admires Asian Paints because of various reasons such as firstly the leadership position it holds in the category, secondly, the way they have worked on their brand and taken it to another level and thirdly, their consumer touch points whether in store or their team at door step. Sanidhya replied some questions during interaction with his father.
In Plywood, as a branded category, I see Greenply growth multiply. The demand for any branded product in India will continue to grow with rise in consumer awareness for brands. With younger people making decisions for tomorrow purchases, the growth on branded plywood category is bound to go on because they will opt for a better product quality and a reliable brand. Now it is on the branded players that how hard we work and how well we plan our strategy that can maximize our market share.
Q. You have seen this industry during last 4-5 years from different perspective like a new comer or an outsider and now as an experienced observer. How do you see plywood growing as material for buildings?
A. In Plywood, as a branded category, I see Greenply growth multiply. The demand for any branded product in India will continue to grow with rise in consumer awareness for brands. With younger people making decisions for tomorrow purchases, the growth on branded plywood category is bound to go on because they will opt for a better product quality and a reliable brand. Now it is on the branded players that how hard we work and how well we plan our strategy that can maximize our market share.
Q. How do you see impact of new furniture players coming up like on line brands and arrival of stores like IKEA?
A. Making furniture is a very specialized business and whoever does that the best will always take a share of that. As an organized manufacturer of large scale we shall have to supply the best material at the best cost to the upcoming Furniture makers. Eventually demand for panel products are going to grow.
Q. What is your view on MDF emergence and corresponding plywood demand in future. Will MDF take some plywood market?
A. MDF is the product that is impacting lower segment of plywood market and it will continue to rise as an economical panel for many mass application. There will always be demand for the quality segment of plywood and if you see our domain we are only focusing on quality segment of plywood.
Q. Which will be the fastest growing product category in plywood segment?
A. I assume there will be faster growth in sub-brand category like ECOTEC and others as compared to flagship brand, though GST at 18% will impact positively on all brands.
Q. How do you see the scope in Solid Surface and Wall Paper segment in coming time?
A. Both these product categories are very new and different from our existing portfolio. There is definitely a good future for both these product categories in the coming years.
Q. How do you See WPC as a product category and its growth in India?
A. WPC is a fast growing category and in the years to come it will replace plywood to some extent. At Greenply we have launched our WPC / PVC Board under the name of Green Endure. We are happy with the market response of this product.
Q. Please share your plans on marketing activities that Green Ply is set to unveil in coming time?
A. At Greenply we will be taking a 360 degree approach to marketing like how we have done in the past and would further strengthen our brand equity.
Q. Where do you see Green ply by March 2022 in terms of sales, product presence and plant establishments?
A. The demand in India for interior infrastructure products is going to grow exponentially in the years to come, so to serve the market we will definitely set up new state of the art plants. In line with our vision statement India’s largest interior infrastructure company we are introducing new products in our portfolio year after year.