The industry is talking about MDF very interestingly. We can see in MDF, several new value-added products have emerged in the Indian market. Ten years ago, the industry was small, but in this period of ten years, the industry has grown a lot with the emergence of large as well as small manufacturers in the country. Greenpanel had started the drive for MDF, and today it has reached new heights. They have two manufacturing plants in the country, one in the south and one in the north. What is the industry's current situation and future prospects, and what role would Greenpanel play in this journey? All have been answered in Ply Reporter Brand Buzz program, where Mr. Shekhar Chandra Sati talked with The Ply Reporter along with their Channel partners. Here is a brief on the conversation.
Q. The market has been rapidly expanding over the last two years, but how is the current situation?
The market is always good for MDF, and it is growing at a minimum of 35 to 40%, and 15 to 20% growth is still expected. The market has grown from 75000 cbm per month to 210000 cbm now, and the overall market size has gone from around Rs 1200 crore just three years ago, to around Rs 7000 crore now. This itself is a very big, evident documentary proof that this industry is doing very well.
This market is still growing and will continue to grow in the future. However, compared to earlier days, there would be slightly more competition. At the moment, demand is slightly stagnant, or we can say growing, but not at the same rate as supply has suddenly increased from within India with the growing number of players, and imports have begun. So, it is slightly tough, but still, the market is growing with the right product and the right strategy. We are optimistic that MDF will continue to perform well in the coming days also.
Q. In coming three years the industry would be at which level from the current Rs 7000 crore?
The last three years saw slightly abnormal growth, and the industry grew very quickly, but there is still a good chance that next year will stand, and the market will more than double in size in three years, approaching Rs 15,000 crore. The market is empty, and there is good acceptance of MDF because it has many advantages over other products. This is intended to reassure our channel partners and customers that there is no need to panic in this situation.
Q. The traders are in fear that the industry's growth will slow down after a spike in the last three years. What is your take on this perspective?
The Indian market is having a fear that a slowdown is coming, but I think it would not be very justified for the Indian market because there is a lot of scope as people are still having a lot of houses constructed, which will continue for many years. So, the demand is not going to be impacted in the near future in India. However, all of a sudden, the domestic supply as well as the imports have started happening, which is putting a temporary pressure on the entire value chain and the system.
That pressure is being felt by everyone, whether they are trade partners, dealers, distributors, or even manufacturers, because of that, the smaller companies are getting panic. I have heard that some of them are trying to take shortcuts also. This is the right time to have trust, faith, and strategy capabilities, do proper R&D on products, and do something or bring something innovative.
It is much needed in the market, and if you continuously keep this in mind, I think this will not impact the Indian market much. The growth now would be organic, at 20 to 25%. I am sure that it will remain there; however, the share will be split because there are nearly 15 players and imports are also there. So, having the fear that MDF will not sell is not a wise fear, I believe, and we should not have that fear. The Indian market and economy will do well, and the growth will always remain there.
Q. Do you think that this is the right time for FR-grade MDF?
The companies that launched that product in the name of fire retardant, we have to see, whether that product is fire retardant or not? Certain parameters can be used to claim that a product is fire resistant. There are certain agencies that certify the product. We got that test certification done from the lab in Warrington, United Kingdom (UK), one of the well-known test labs that certify the FR properties of any product. We have a class one certificate, which is considered to be the best one worldwide. Our product is certified by CBRI (Central Building, Research Institute), which is again considered a very strong reference by all government departments. The Central Institute of Road Transport (CIRT) has also approved our product.
It gives us a chance to get approved, specified, and applied to the entire vehicle manufacturing companies, bus manufacturing companies, and state transport companies like DTC in Delhi, Bangalore Transport in Karnataka, BEST, Punjab Roadways, UP Roadways, etc. So, the actual problem was that the actual fire retardant product was missing from the companies’ basket. That is why we could have waited; otherwise, we would have released the product a year or two years ago.
Only densities do not render a product fire resistant. To make fire retardant, certain chemicals must be added that are far more important than density. We have two ranges: one is club-grade HDWR, which has a density of around 850 kg. We have also made efforts to bring this product to the masses for interior use. We wanted to develop a product that targets not only the high-end market but also the residential market. That is the reason we have developed this in the interior as well. The interior FR-grade MDF density is 750/kg.
To promote these products, we have created a team of business development managers. We are creating a team for government verticals bearing all India head. There will be 15 to 20 members on the Government BDM teams. Their role would be to visit the department, demonstrate the product, and get it approved. And privately, we will go to all the architects, interior designers, and hoteliers.
Q. What are the recommended applications of FR-grade MDF?
At all places where normal MDF is being used, the FR grade can be used. It is far better for preventive interiors like offices, hotels, and residential, high-rise buildings, commercial places, etc. It will help to limit the spread of fire if a fire emergency occurs in the future in the area where it has been applied.
Q. Is fire-rated MDF effective with Pre-lam?
Yes, because laminate is a melamine-based product, and what we are giving is FR-grade MDF, which is equally fire retardant. However, the duration will be reduced because melamine-based coatings and paper-based materials are not fire retardant. However, the base board is fire resistant. Due to the base board being fire retardant and having melamine properties, compared to the rest of the product, like Prelam done on a plain board and Prelam done on FR MDF, the latter will have better fire retardant features. Although, the product will burn, it will delay the burning times, much like FR-grade MDF will give time to save people from the incident site.
Q. What is the company's take on future supply, given that supply is overstated in the market due to imports and domestic manufacturing? (Question by Mr Kunal Agarwal, Kunal Enterprises, Hyderabad )
Mr. Shekhar Sati (Answer) - In the last three- four years, a lot of capacity addition has happened. The current fear in the market is due to imports and the kind of pricing they are offering. But I tell you, this is not going to be a long-term thing. I think having a greater inclination towards importers just because of the price factor would not be logical or strategically right for the Indian trade partners. Rather, I would advise them to be with the Indian companies and trust them because now the Indian companies are making world class products.
We are closely watching the imports and all, but all of a sudden there can’t be a policy change in terms of imports. If something is required to be done, those steps would definitely be taken up. At the same time, we are committed to creating some brand pull in the market for the product. We would be spending a good amount of money making and creating a brand.
So, the kinds of efforts that are required to be done at our level best as a company to help our channel partners will be done. We are equally concerned about the concerns of our channel partners. So, you should not have to be worried. Have trust in us and in our strategies. We will make every effort to keep things running smoothly throughout the channel.
Q. What will you do for the price factor in terms of sustainability to counter imports as happening now? (Question by Mr Anil Kumar, Sapthagiri Panel Board Pvt Ltd, Bangalore)
Mr Shekhar Sati (Answer) - Its answer lies in your journey so far! This is not the first time you have seen this type of competition. You have seen a much tougher situation in the past as imports were happening and your business was there at that time. Now, you have a sizable business, and that requires scaling up. This is a good thing, and you earned it through your own hard work. But one thing is certain: the challenges existed in the past and continue to exist in the present. We should not panic because, based on the trend and blockage of large-scale imports into India over the last two to three years, many people are now importing.
The more important aspect is developing market brand pull and identity. If you see the practises worldwide, it is very difficult to stop the imports that the entire trade has become open now. If we approach the government collectively to counter the imports, one option is to levy duties on them. So, once the government starts talking about promoting the furniture industry more, and when they put some restrictions on raw materials, their own statements become contradictory. So, while going to government, we have to think about all the things that go beyond the understanding of a common man.
But, as I told you, imports are a very temporary phase, say for three to four months. Again, in this period, the supply may increase rather or remain at the same level. But, again, my advice is not to get affected and have that kind of fear. This market will recover, and people will understand the advantages of trusting Indian brands because of the services, product profiles, and various offerings, as well as the belongingness and care, even taking care of the product before selling it to you and end users.
What we can do as a domestic player, I believe importers cannot do. The overseas companies are not coming to take care of your concerns if something happens to the product tomorrow. So, in the long run, I am requesting that the entire trade, including importers (the importers from the south are importing massive quantities and simply doing opportunistic buying to make a quick profit), be logical and return to Indian companies. At our level, we are very much geared up and very strongly determined to bring world-class products, which the imported companies are not giving. So, be with us, and we are always there to take care of your concerns, and the margin will also be taken care of.
There are two ways to do things: I can give you the discount, and you can pass it on to the customer. Ultimately, you will retain the same margin you have now. Second, if as a company we do a lot of those activities where we can increase the demand or I can create a brand pull, we will be able to retain a better margin, which is the position you will like to be in. Probably, that could be a brand pull. Your advice to work on brand building rather than taking immediate shortcuts to get immediate impact shows that you have trust in us and in our capabilities and strategies. We are even more concerned as our capex, margin, and entire organisation depend on MDF.
Q. How will the distributor grow with Greenpanel in the face of pressure from unorganised sources? ( Question by Mr Dinesh Gupta, Shanti Plywood Co., New Delhi)
Mr Shekhar Sati (Answer) - The distributors are a very important part of us, and we are here with a new product. I would like to say that those who remain associated with us have grown with us. As such, Anil from Saptagiri also started the journey with us, and today, when Greenpanel is a brand, Saptagiri is also a big turnover company. Similarly, Mr Kunal in Hyderabad, who is a new entrant
Take aways:
- The market will grow rapidly in the next two to three years, as it has in the previous three, because the industry base has increased from Rs 3000 crore to Rs 7000 crore.
- In coming times, MDF will grow, but companies will focus more on its valueadded products. The organised sector will take care of increasing its applications.
- Imports are a temporary threat to the industry and the opportunistic buyers should be careful because the companies are noticing it and helping the loyal customers.
- Greenpanels' newly launched fire retardant product MDF opens the door to new applications and provides excellent support for preventive life-saving interiors. This is very much suitable for the Indian market, which is necessary for high-rise buildings.
has crossed Rs. 24 crore annually in just one and a half years. In just two years, you have nearly reached your target of Rs 25 crore all by yourself. So, you also grew with us while you were not in MDF. So, in just two years, a new business is giving 25 crore in addition. Similarly, Mr. Manish Behal, who has been long associated with us, has done wel.
Channel Partners View
Mr Munish Behl, Shiva Glass House, Ludhiana: We started with sales of less than Rs 10,000 per month because we were not working properly for MDF. But, when we started with Greenpanel, both the Greenpanel team and the Shiva Glass team worked hand in hand, and where we faced challenges, both companies resolved the issues together and grew. For example, our first year's sales were one crore, followed by three crores, five crores, and seven crores, and we hope to cross 20 crores this year. So, I'd like to say that Shiva Glass has grown alongside the company's growth, which is also in sync with the company's growth.
As we were in interior, we came to exterior, the club, and now FR grade. So, following the same trend, as soon as possible we should come up with more new products and expand our offerings, because with a wide range of value-added products, our sales will increase.
Mr. Dinesh Gupta, Shanti Plywood Co., New Delhi: We have to move carefully, taking concern for the expanding unorganised industry, and the market is offering very poor quality materials. I fear that people can lose trust in HDWR's quality products. What is the industry thinking about? We have to be cautious about that.
Mr. Kunal Agarwal, Kunal Enterprises, Hyderabad: MDF is a product for the future, and it has a very bright future. India is a very conventional market where users prefer using plywood to make their furniture because of the advantages it brings to the table like durability, stability, and density. However, we have recently noticed good quality MDF infiltrating the plywood markets, particularly for OEMs and projects where they have eliminated undulation issues with MDF for high gloss laminate and extra matt laminate. We are definitely benefiting from it, and now that HDWR is an upgraded range with its water-proof capabilities and high density, OEMs and end users are also benefiting from it. However, the final consumers' acceptance of MDF is very low. We have to educate them beyond the advantages of MDF. If we can solve this problem, we will undoubtedly be able to increase sales.
Mr. Anil Kumar, Sapthagiri Panel Board Pvt Ltd, Bangalore: MDF has grown steadily since its inception, and I anticipate that it will continue to do so in the future as well. We will make efforts to make it true. The growth of MDF will happen with value added products like FRgrade MDF. For example, when it comes to HDWR, we saw growth; when it comes to exterior, we saw growth; and now we will see growth with FR. However, if we move quickly enough in terms of visibility and marketing, we can achieve much faster growth.
Concluding remarks
Mr. Shekhar Chandra Sati: We will reach out to more people through seminars and meetings. Have faith in us, we are watching everything and are very concerned about your growth as well as the growth of the company itself. The company is made from you, so it is the team, the dealers, the distributors, the market, the OEMs, and everyone else who is a stakeholder in the industry. We always recognise and appreciate your efforts, and we are always concerned about your best interests. You will see a lot of changes happening in the coming days in terms of brand pull and the ease of selling and buying the product. You will definitely enjoy working with Greenpanel.