The e-conclave on DECORATIVE LAMINATE BUSINESS - Riding beyond the second wave organized by Ply Reporter in 6 June, 2021 was live broadcast at Ply Reporter facebook page. The conclave was powered by 'MBEE PRINTS – the company with the legacy of the director’s over 30 years of industry experience is bringing a change to their value for money and quality offerings of décor paper solutions. The panellist were included: Mr Rakesh Agarwal, MD, Amulya Mica; Mr Vikas Agarwal, President, ILMA; Mr Surinder Arora, MD, Virgo Group; Mr JL Ahuja, Director, Aica Laminate India Pvt Ltd; Mr Vishal Dokania, Director, Cedar Decor Pvt Ltd; Mr Sundeep Ahuja, Ahuja and Company, Mumbai; Mr Navin Gupta, Reliance Plywood Corporation, Bangalore and Mr R K Chotia, Jai Shree Industries, Jaipur. It was moderated by Mr PRAGATH DVIVEDI, Editor-in-Chief, Ply Reporter.
After the introduction of the panellists Mr Dvivedi begun the discussion and said that after second wave the road ahead looks difficult, but we will change it to opportunity with our thought, commitment and winning spirit in which our industry leaders will guide us.
ON THE SITUATION POST SECOND WAVE
Mr Vikas Agarwal: There is no matter of fear in the industry. Market was slow initially due to rising covid cases in different regions at different times. During the second wave the fear was more than the first wave because people were forced to stay at home during fist wave. But, this time the rules were not much strict, but people themselves were not willing to come out from homes due to high motility rate. On the other hand they were seeking to work somehow. After opening the market the demand will be raising high this time also as the works were on hold for last three months.
With opening and closing the markets after covid the only issue is raw material price fluctuation due to limited supply and constraint availability. It is affecting the industry activity and sales, because at a certain point where people find a chance to have profit making situation and they are doing it. The situation is worsening day by day. People do not ask for material and those who have in stock quote unreasonable price. Today we are trying to demotivate China but they are getting stronger day by day because when Europe was under lockdown, China was producing much more.
The profit making attitude of Chinese is difficult times for Indians. That may sustain for six months until the production does not resume globally. Besides, there is no issue in the market so we have to work being associated maintaining our health and safety. We need to have a very active eye on market inflow and outflow and align the sourcing, production and planning your sales.
Don’t expect that the prices of raw material is coming down quickly because the supplies are still limited and demand is high, and only China is supplying in a big way. There is demand from the entire globe and production has not yet started everywhere. People should go for plan sales instead of panic sales. Focus on payment recovery and be calm facing the constraint situation.
Mr Surinder Arora: Post second wave in India, the prices are going high despite low demand of raw materials. So, it is an international phenomenon. If we talk about the capacity, if the raw material cost goes high the prices of finished product in the market also increase and there is no issue. We are more dependent on international market for raw materials like phenol, Kraft paper, etc.
Mr JL Ahuja: The stock started moving from the second week of June. From July and August I feel the recovery will be at 70 to 80 % because the monsoon is going to start. Normally June and July are not very comfortable because the labor remain out for crop season.
ON SCENARIO ORGANIZED VS UNORGANISED
Mr Sundeep Ahuja: Last year the organized sector definitely outplayed the unorganized sector. They had more patience and withstand the market variations which have managed the company and the distributors’ matrices. I hope the demand from the organized sector would be better because they withstand with the variations and they having the stock holding capacity and continuing production verses the unorganized sector. So, if we place an order we are sure the order would be dispatched as per our schedule.
Definitely, with finance there were own stocking and no worry about paper inventory. The distributors at the same were not worried about stocking. I hope the manufacturers and distributors have learned from last year to be able to segregate the customers; who are the good pay master and who are not? So, the supplies to good parties will continue.
Mr Rajendra Chotia: The branded players are getting much more support from lockdown. After second wave also there will be no supply and availability issue for them.
Mr Navin Kumar Gupta: Payment and sales are two wheels of a vehicle and the payment follow the sales schedule. I think the segments either branded or nonbranded both will be at strong position slowly. There may be a bit difference and to maintain that gap the unorganized will have to improve their quality. In my opinion with quality improvement the importance of thickness will reduce.
ON PAYMENT SCENARIO
Mr Sundeep Ahuja: I think the payment will be normalized by July onwards. Many of the shops were closed not because of deaths due to covid but those who were not able to manage the finance to run it due to rentals, regarding interest payments and others. On the other hand other shops are doing bigger and better in sales and looking for showrooms, etc.
Mr Vishal Donakina: Finance is business and business is finance. If you put out of the box of the finance then you put yourself into risk. Lots of small businesses, companies don’t take it very seriously. If you work by understanding the basic concept of finance and cash flow the business will not go down. Ups and downs would be there but it will not be in very haphazard situation.
Mr Surinder Arora: If those who have to do business will have to be fair in terms of payment, because who look for discrepancies and act ill-minded are not very much successful in business. In constraint situation generally we turns panic for payment but the situation does not remain like that. This time also payment is slow but I am sure it will come. There may be one or two percent difficulties but it is a normal phenomenon. So, those who have to do business do not stop payment.
Mr Rakesh Agarwal: Last time people as well as banks and the government also supported the industry. But, these supports could not reach to us. Despite that there is no issue of distrust among us. I would like to request the channels partners to not stop the flow of liquidity. At present the industry, society as well as the country need money to be functional. If required invest in the business and not let the cycle to stop.
Mr JL Ahuja: I would like to say that the payment or the attitude towards payment there is a difference in last year and this year. It is just one month now, the transactions happened in the month of April will also follow as normally the cycle runs for 45 day to 60 days. So, I don’t think there is a big issue for the concern of payment till date. And I don’t think those who are doing business will be having any issue of payment. There may be some 2 to 5% ups and downs due to constraint situation like deaths or any other tragedy at their end. The payment delay will not affect any industry or brand, what I observe.
But, I think we got to learn in covid 1 and covid 2 that carelessness always pays in losses. So, we have to keep check on us and will not leave the guard at any cost. We should be careful at health as well as businesses. Don’t sell at through away price in fear of loss of business and margin. Nothing will happen; the industry is so good that everything will be recovered sooner or later. We are fortunate that we are in this industry. In last 20 years the industry has grown five times and the prices have increased marginally.
ON PRICES OF LAMINATES
Mr Vikas Agarwal: I don’t think so, the condition will be same as of today because for three or four months the prices of raw material is not going to decrease after that it will be average out, because when the global production will resume the availability of raw material will be more then the prices can come down.
ON SCOPE FOR LAMINATE TODAY
Mr Surinder Arora: Particle Board or MDF is not new industry. This is since 1990s. That time also we were listening that in Europe or other countries 90% panels in use are particle boards. Still India is number one in laminate exports. Any arriving industry does not change everything all of sudden. Our laminate is a genuine product which is genuinely priced.
If any product comes to the market, the market also expands, no doubt there is machine work and have advantages with these panels likes pre-lam particle board. It is generally used in corporate houses due to fast execution of work and they need it. But, the maximum population does not have its uses up to now. Laminate production is so huge and to change that is not possible. For coming up production capacity we have to look for government forest policy also. Indian players are already having 8 to 10% growth so, that is not going to affect us. To change it at least 15 to 20 more years will be taken up.
Mr Vikas Agarwal: The industry has grown 5 times in 15 to 20 years. We are also in particle board and in this segment also we have obtained such growth. Laminate did not get affected. So, the market is such that every segment is growing.
Mr Rajendra Chotia: We are seeing a slight change in the scenario that will definitely capture some market, but laminate will not be affected.
ON VIABILITY OF LINER LAMINATES AND ITS USES
Mr Vishal Dokania: Liner is highly engineered optimized product because laminate itself is the same. If one sheet is required for surface area of furniture the inside area definitely requires its four times because inside surface is significantly higher. Technically it does not make sense to put the dark colours and design inside the cupboard. This is the reason white liner sells the most, because its application area is three to four times higher.
So which is being produced four times the other, naturally there will be optimization and cost effectiveness. Its pricing will also be optimized. So, the entire chain for the raw material get into the liner is optimized and payments are also typically faster than the catalogue material. So, if anyone has efficiency to make liner and grow the industry there is no harm in it.
Mr JL Ahuja: Basically, every thickness has a segment and there is a need also. The international market is for 0.8 mm universally and below this does not require approval of fire retardency. So, the market shifted to 0.8mm and with Particle Board and MDF has gone to replace 1mm gradually. And I would also like to add one thing on the MDF, that some of the market has started going to pre-lam. Every product category has a certain role, but as far as laminate is concerned that we have grown so much now so volume of laminate will also be very sufficient. There is already overcrowding in the laminate. Anyone with 25 cr can come into the business.
Liner is itself a product having its own market segment. I make liner of a segment and it has its dealers’ base that I give them on order at a volume of minimum sheets of 500 at the cost of not below Rs 350 to Rs 400 and that is sold. So, with that segment there is a demand in the market for economical interiors. I think liner is going to have its market and survive.
Mr Vishal Dokania: When we ventured into laminate, the market said we should have been in veneer that is premium. In laminate started from 1mm then gone to 0.8 mm and now liner. In this segment also we are growing and have two factories. My 1mm, 0.8mm, liner as well as furniture segment also has grown highest in the last year. So, I thing negative notations has been attached to this product. People make salt and rice also. It does not make sense that they should make biryani and sell it.
Mr Rajendra Chotia: Liner is basically the substitute of paint, what I think. Its sales will increase to the double fold from today’s sales. There is no comparison of 1mm and liner as both are different segments.
WHAT A DISTRIBUTOR SHOULD NOT DO?
Mr Navin Kumar Gupta: Unhealthy competition should not be there among distributors. One should work according to its capacity, network and infrastructure. He should set his target and push sell should not be there. Move ahead with caution observing the party, so that loss does not occur.
Mr Sundeep Ahuja: He should not jump from one manufacturer to the other. Maintain patience and stick to one company only. It will pay in the long run. If one is loyal with a brand, the market accepts the distributor and the brand to be the same and its benefit goes to the distributor. In Mumbai anybody thinks for Greenlam they think of Ahuja only.
Mr Rajendra Chotia: Work with one company with loyalty. The company will be supporting, and the customers will also be loyal that will be pushing your business forward in good manner. We are working with Century laminates only for 18 years that helped us a lot.
Mr Surinder Arora: Many times the manufacturers blame on distributor for small things. That should not be done and a balance must be there understanding their problems also. The selfish approach will never work.
Mr Vishal Donakina: The distributors are our partners and this two way relationship can survive in the long run if it is a win-win situation for both. As a manufacturer our focus always remain that our distributors win, because if the distributors are winning, I will win - there is no question about it! And same thing applies to the distributors and their dealers. Round the chain ensure they win, you will definitely win.
Mr JL Ahuja: We feel very privileged to be in this industry. Difficulties whatever have happened; this industry is going to grow. The reason being it’s a part of infrastructure. We are actually trying to bring this whole laminate, plywood and MDF into one industry as a furniture industry. At the level of the government we want to be created a department of furniture under the ministry of industry. We have no guardian and the government of India is now recognizing this furniture industry as a priority sector. So, all raw material, component etc will become one. This is our effort and this industry is part of our infrastructure. So there is going to be next 10 – 15 years I don’t find any difficulty in the laminate industry. The next generation will feel very confident of a definite growth.
CONCLUDING REMARKS
Mr Vikas Agarwal: I would like to say that the unorganized one is not inferior because the difference in organized and being organized lies in our mentality that how we can manage and plan out our sales, marketing, production, pricing and quality. And how we portray in the market maintaining the quality and supply one is organized. So, this is the time to become organized.
In terms of liner, earlier there was polish and paint only and no existence of liner was there. It came into the market as an option to paint and polish and not eating up the market of decorative laminate.
Mr Rakesh Agarwal: In our industry the cost of folder is huge, as in competition the investment goes high in it. So, for the benefit of the industry, the distributors should take initiative to work on it and have small or mix of small and big, or calculation of the ratio of the folder, because in profit and loss account the investment in folder and sampling is one of the biggest expenses and is a burning topic for the industry to discuss. If its misuse is reduced the industry will benefit from it.
Mr JL Ahuja: the different segments in laminate like 0.72mm, 0.92 mm, 0.8 mm, this needs to be deliberated in detail sometimes, because the customer has to go cheated with this. Now, there should have discussions and stick to some standard in terms of thicknesses, otherwise our sales will be down falling in terms of thicknesses. With having different thicknesses in between the standards we are destroying the quality of the product. As manufacturers we have to decide for that the customers not get cheated.
Mr Surinder Arora: For running our industry I have simple formula that to make a balance sheet every month and check the cost as a product and your customer segment and its realization. Calculate the profitability then no one will make a mistake. Work with genuine price, product and service and move ahead.
Mr Vishal Dokania: There is a simple way to come out of these issues, get vaccinated and wear masks. If everybody does it we will not hit a third wave. But, you do whatever you can do the third wave is definitely come and every way this would be worse than before. So, let us spread the message to bear mask and vaccine.
CONCLUSION
The manufacturers and distributors are on the same note that the business will again bounce back from July onwards or a month later due to monsoon, and we will at the level where we were earlier. Secondly, it is clear in the discussion that organized players have strengthened their stocking and delivery in this covid period. While the unorganized sector somehow trapped into the financial ill planning. Whether the supply is more or less the right businessman definitely have grown by five times. The true businessmen will not be in default situation. This is the time to use the contingency fund because the government is not in a position or taking initiative of such kind what activeness they had shown last year. There is a shortage of liquidity for some time, because the money generated remains in the market that will definitely come back after the fear factor goes away from the minds of people.
TAKE AWAYS
- Market and payment is going to be stable in a month or two.
- If you are confident of keep investing your money in the business your survival will be higher, because, if you are holding it the suppliers are rating you that may be going down. So, without being insecure make a flow and maintain your rating at the time of revival of business.
- Prelam is not going to hit the laminate market at larger context.
- The distributors are at a point that payment recovery is slow but there is no doubt that it will improve.
- Parties are supporting one another from all sides. There may be late but the payment will definitely come.
- Supplying to the fading away non-committed players will be termed as farsightedness.