Will Demand Exceed Capacities? If Not, Supply to Those Who Can Pay Back!

person access_time   3 Min Read

There could be around only a dozen companies in Plywood, Panels, Decorative surfaces among approx 3000 firms, which are LARGE enterprises with tax of the slab at 30%. The MSME sector, which is under pressure after ‘DeMo, GST and Market slowdown’ shall feel motivated to become organised taking benefit of this. Now different states have different announcement about E-way bill implementation date. Clarity is desperately required to keep a check on rising irregularities and unorganised practices.

 

Budget, E-way bill and ‘Better Demand’ are the key changes that are under way. FY 2018-19 Budget offers big support to SME’s where tax has been brought down from 30 to 25% for firms doing turnover up to 250 crores. It is a big boost to entire plywood, laminate and furniture manufacturing industry that are in the process of becoming organised. Earlier 25 pc slab had been announced in the last budget for companies below 50 crore turnover. There is a clarification in criteria of classification that defines Micro, Small and Medium Enterprises (MSME) recently. A unit which annual turnover is less than 5 cr is termed as ‘MICRO’, turnover ranging Rs 5-75cr is SMALL and those which are between Rs 75-250 cr are MEDIUM enterprises. It has nothing to do with captive investment any more.

So there could be around only a dozen companies in Plywood, Panels, Decorative surfaces among approx 3000 firms, which are LARGE enterprises with tax of the slab at 30%. The MSME sector, which is under pressure after ‘DeMo, GST and Market slowdown’ shall feel motivated to become organised taking benefit of this. The matter of E-way bill has caused further confusion among industry as it is postponed again for undefined period. Now different states have different announcement about E-way bill implementation date. Clarity is desperately required to keep a check on rising irregularities and unorganised practices.

The demands of Ply, Laminate, MDF/PB & Doors have improved, thanks to activities/ happenings in real estate (builders) and corporate sector. Projects have begun and sentiments are better, the retail market is also echoing ‘demand and sentiments getting positive’ during our last month state surveys. Though, there is a big warning coming regarding ‘Payments’and this is the area you need to be cautious about. Reports emerging from Ply-Lam manufacturing clusters indicate ‘Crisis building up on payment collection’ front. The average ‘credit period’ that use to be 30-45 days in case of Plywood/laminates is a distant dream because of over capacity build-up across wood-panel-décor segments and desperate selling activities.

Payments are getting delayed from dealers which in many cases now running beyond 180 days thus creating a big risk and nervousness among suppliers. We are coming across incidences of ‘Returning of material’ from stockist due to payment issues, Noresponse, Disputes etc from trading firms based in metros and bigger cities. It’s not just about Payment delays any more instead it is going to be about habit of not working on own capital and bad intent where people are shutting their shops and running with money. Incidents where trading firms deserted the market and disappeared over night as reported by trade personal, are also growing. A recap on trade history three years ago point out that list of defaulter parties is crossing 5-6% mark which used to be around 2% in any city. I suggest this concern to be discussed seriously during the Ply-Lam Association meetings.

Another noticeable change is small buyers trying to reach directly to manufacturers bypassing old distribution channel or vice versa where the risk of payments are too high. All I can see is 2018 & 2019 will be the trickiest phase I have ever seen because too many changes have occurred in a very short span of time.

With a hope that market demand will grow bigger than capacities building up, my suggestion is to witness the situation with calmness and act of wisdom. See you all at Indiawood, Ply Reporter stall, Hall No- 4.

 

Pragat Dvivedi
Founder Editor
Mail to “dpragat@gmail.com”, ( M) 9310612991.

shareShare article

Post Your Comment