India has just 1 million CBM of MDF capacity, compared to China’s 40 million CBM MDF consumption, yet China consumes around 60 million CBM of plywood. plywood being replaced is too early to think for a country like India huge populatIon where carpentry is leading the segment.
Mr. Sajjan Bhajjanka, Chairman, Century Plyboards
Century Plyboards India ltd is India’s largest company with complete bucket of wood panel products like Plywood, Laminate, MDF, Particle Boards, decorative veneers and strong hold in manufacturing face veneer for the plywood industry. Century Plywood has come a long way since its inception in 1984 where it started from scratch to the present status of a large successful corporate company referred in India’s top 250 companies. With an annual turnover of approx Rs. 2000 cr during FY 2017-18, Century Ply has emerged as the Top most company in the country. People say that Brand ‘Century Ply’ is built on the basis of Honesty, Consistency and visionary leadership of Mr Sajjan Bhajanka. The Ply Reporter met with the
most successful, experienced and visionary person, Mr Sajjan Bhajjanka to know his views on the present state of the wood panel industry and future changes anticipated by him.
This “One 2 One” interview of Mr Bhajjanka, Chairman of Century Ply boards is of great use for those who are hesitant and confused on the future of plywood and panel industry and fear, that emerging substitute will replace plywood in Indian market sooner than expected.
Q. How do you see the growth in wood panel Industry from this financial year onwards?
A. I think that, with GST in place, this is just the right beginning for our industry. Earlier it was tough to get all the products, and the way companies were operating on one scale. Until now, the growth has been haphazard, and the industry was not growing in the right direction. However, once 75-80% compliance is done, people will start working in a more organised manner. With new norms and systems that are under formation and shaping up, the unorganised industry of plywood panels will transform into an organised segment. I am confident to see some significant shifts in the next one-one and a half year now. The industry is not lagging behind anymore due to gap in norms.
TAKE AWAYS FROM THE LEADER’s PERSPECTIVE
1. In another year and a half, there would be 75 - 80% of transparency in work culture in wood panel trade.
2. With new norms & systems shaping up, then unorganised industry of plywood panels will transform into an organised segment.
3. Rise in demand of cement, steel gives positive indication on the “about to come” demand for wood panels & plywood.
4. There is too much time left for shrinking, Plywood demand is going to be better and growing further.
5. MDF will have higher growth rate compared to plywood because it is comparatively newer product category.
6. MDF will grow at around 20% where as plywood growth shall be around 8 to 10% YoY.
7. We hope to cross Rs. 2000 crore turnover this year where Rs 500 crore is expected from decorative Laminate segment.
8. “India’s present MDF capacity is just 1 million cbm where as China has 40 million cbm of MDF consumption, yet China consumes around 60 million cbm of plywood. Plywood being replaced is too early for a country like India with huge population where carpentry is leading the segment.”
9. Timber availability is not very optimistic in the long term hence Industry people shall contribute and aware on plantation and its benefits.
Q. Can we hope that with many changes, such as the formation of right norms and the industry will turn into an organised sector?
A. Earlier, it was believed, if a product is offered on zero duty then only a few, say 10% people would cheat but if the duty is converted to 100% then very few or say 10% people will comply to it and rest of the 80% are those who get influenced by govt policies, taxes and grants. Thankfully after GST, the implication of duty is less as it is down to 18%. On that around 10% duty is returned in grants to people on veneer, timber and others, which is reasonable. Moreover, there is a value chain formation in GST law. So, if someone is not paying GST, he will not be eligible for any GST refund too. Instead he will have to pay extra. So, this type of value chain will bring a balance in the industry and reduce the un-billed, no taxed or informal work culture. Another year and a half and I believe there would be 75% to 80% of transparency in work culture.
Q. Looking at the demand and supply scenario when do you see the rise in demand? Will the demand grow after the Lok Sabha elections now?
A. The plywood is completely in co-relation with housing commodities like cement, iron and other construction materials. When construction starts in large scale then demand for cement and steel grows. At present, the demand for cement, steel etc has increased across the country. There is a lot of work happening around the affordable housing projects in the country. Currently, the construction is in full swing. The prices of iron have risen to around Rs 50/kg and the demand in cement is high too, which is a positive indication about the “about to come” demand for panels. So, when the units get ready, furniture and furnishing will be the next gainers.
Q. Do you think India market will move to other wood based panels more like MDF/PB?
A. I think they will use both. Plywood would be the predominant product since India has a huge carpenter base who mostly prefer plywood. Though it depends on the cost and usage as well. They will begin to use MDF like table top, shutters, or cabinet, or the partition, or ceiling in the times to come.
Q. Do you think China is using more of Plywood in such applications?
A. Yes, China is using huge volumes of plywood and MDF both. In fact usage of plywood has been increasing as compared to MDF lately. I believe, both are needed in countries like ours, where the population is huge, and the requirements are diverse. In fact, not only in China but even in Europe, the demand for plywood has increased. There are some usages which are of structural importance and impact resistance needs, such as shutters and many others.
Q. How do you see the demand of Laminates, if plywood usage shrinks?
A. Currently, the total consumption in China is estimated to be around 120 million cubic meters. Of this, 60 million cubic meters is plywood, 40 million cubic meters is of MDF, and 20 million cubic meters is particle board. In India, the present capacity of MDF is just 1 million cbm. There are many years left to discuss and think about shrinking of markets. In China too, some day it started from 1 million cbm from where it has today grown to 40 million cbm of market today. There in China too, people and practices are same as it is in India. So, decorative laminate category too will witness growth because plywood demand is going to be better and growing.
Q. How do you see MDF growth vis-a-vis other products?
A. In readymade furniture, the uses of MDF and Particle Boards are high. So, the MDF is used more in those places. I think that in future, the growth rate of panel products will be around 20%, where every product will see some growth. MDF will be growing around 20 % because it is comparatively newer category, whereas Plywood growth will be around 8-10%. MDF will grow at a faster rate among other panels because of its versatile applications.
In readymade furniture, the uses of MDF and Particle Boards are high so, the MDF is used more in those places. I think that in future, the growth rate of panel products will be around 20%, where every product will see a marginal growth.
Q. What is your opinion on decorative veneer and laminates?
A. Different class of people prefer different environment and feel. The finest customers will use veneers because of different feel and impact on surroundings, despite of its high maintenance and polishing costs. The lower middle and office segment will opt for laminate because it does not have any maintenance cost. Once you have applied the laminate, it can go on for next 30-40 years. In India the quality of decorative laminate is very good and is being produced adequately irrespective of thickness of the sheets. I feel the markets of both products are different according to buyers and suits to their needs perfectly.
Q. Which are the areas you believe MDF will take over plywood?
A. When a product is available on retail then its sales begin to pick up. Right now, MDF is slowly catching the retailer place thus in coming years it will have a rise in market. Those who work with plywood or manufacture furniture will use MDF as per their suitability and applications. There are many areas where plywood is substituted by MDF specially in sports such as table tennis, tennis etc. The kid’s slate, clip fileboard, artefacts, handicrafts etc. are the diverse applications of MDF where plywood was used long ago. The cheap products will substitute the costlier ones, if strength or any other important factor is not that important. MDF is by and large 40% cheaper than good quality plywood.
Q. In your opinion, how is the availability of wood, considering plantations and other factors?
A. I think timber availability is not very optimistic in the long term. The demand and supply scenario does not look too bright, although in present times plantation timber supply is higher than the demand. The industry and people shall contribute and aware on plantation and its benefits and it shall help everyone in the line.
There were many plyboards companies, who were promising and with good brand image, but could not maintain the momentum and vanished or are struggling.
Q. Why do such things happen?
A. For a successful enterprise, you need a good marketing strategy and a good sales team under an efficient leadership with a crystal clear vision. With a good dealer distribution network, you also require good branding. Consistency in quality is equally required along with a stable financial condition which enables an able fund allocation management. All these combined together make a successful enterprise. Even a single weak section can pull down an enterprise. There are many in building material domain, who have fallen after a certain period of the successful run because they lacked on one or two or many fronts.
Q. Can you please share your growth during FY 2017-18 and the revenue share of each product category in the total turnover?
A. Plywood is around 1400 Cr apart from MDF which is in tune to Rs 120-125 Cr approx. as we have started MDF in second half of the financial year. In decorative laminate, we will be reaching around 400 crore. Rest of the related product will be around 100 crores. I believe the total turnover shall cross Rs 2000 Cr this year. I think, in the next financial year we will have 25% growth in MDF and laminate will cross Rs. 500 crores.
Q. What are the new plans for the century group?
A. We are entering in Gabon for face veneer manufacturing as it offers some long term prospects for face veneer and timber related business. We are still operating in Laos and will strengthen operations in all our national and international plants. We are currently manufacturing in Kolkata, Guwahati, Gandhidham, Chennai, Karnal, Hoshiarpur and Roorkee. I think we are ready with decent manufacturing capacity on our own and the next few years will be the time to spread and rise.
Q. What is your view and suggestion on “The Ply Reporter” magazine?
A. You have done a good work in educating the panel industry and a lot more is expected. You can create an information platform where people can have data and information by paying an annual subscription. With industry getting organised, the facts, data’s and information could be of great use for the trade. In readymade furniture, the uses of MDF and Particle Boards are high so, the MDF is used more in those places. I think that in future, the growth rate of panel products will be around 20%, where every product will see a marginal growth.