MDF To Replace Large Part Of Unorganized Plywood Segment, Says Greenpanel CFO
Greenpanel, India’s largest producer of MDF has state-of-the-art manufacturing plants.
Greenpanel is synonymous with MDF since 2010 when the industry woke up to its benefits. Medium Density Fibre Board (MDF) is a composite wood product formed by breaking down wood into wood fibres, combining it with wax and a synthetic resin binder, and forming panels by applying high temperature and pressure, for stability and strength. Many MDF qualities make it an ideal replacement for wood, plywood and particle boards.
Greenpanel, India’s largest producer of MDF has state-of-the-art manufacturing plants in Uttarakhand and Andhra Pradesh, with a combined annual production capacity of more than 5,00,000 cubic meters of MDF and produce MDF, Plywood, Block Boards, Veneers, Flooring and Doors.
Mr Vishwanathan Venkatramani joined Greenply Industries in 1990 as Vice President, Accounts and moved through various roles before the demerger of the company, after which he donned the role of CFO at Greenpanel. In a recent interview, Mr Venkatramani, tells us more about how they have dealt with the pandemic at Greenpanel and their future plans. Excerpts from the interview
How is Greenpanel coping in the new normal?
All necessary precautions have been taken to ensure that we are not impacted by the pandemic. As working from home does not really work in a manufacturing organisation, we started working from offices as soon as lockdown was lifted, while following all necessary precautions.
How did the brand originate and how is it moving forward currently?
We demerged from Greenply during 2019. Post the demerger, we created a new brand with a new logo as part of the transformative strategy. It reflects our renewed vigour and commitment to take on new challenges, while building on our strengths as a pioneer and an industry builder. We are now known as Greenpanel Industries Limited. Our new identity stems from the letters ‘G’ and ‘P’ merging together to form an infinity logo symbolising infinite future possibilities in wood panelling and the use of the colour green embodies growth, prosperity, sustainability and harmony.
The reason, we wanted to build on the MDF vertical, substantially over the next few years. Although MDF had been in existence for more than 25 years, it started getting recognition only between 2010 and 2015. In 2010, the market was very small approximately 1,50,000 cubic metres. At Greenpanel we set up an initial capacity of 1,80,000 cubic metres, which was more than the industry size at that point of time! That gave us the pioneer status in the industry and now we are looking forward to sustainable growth in the future.
What does Greenpanel’s product line look like?
Our product line can be divided into two broad segments. We are present in MDF and Plywood. MDF can be further subdivided into MDF and wooden floors. And within MDF, there are various categories like the plain MDF, pre-laminated MDF, and veneered MDF. Whereas in plywood, we are present in the premium plywood category, decorative veneers and doors.
Is the domestic market for MDF indicating steady growth?
Currently, MDF is growing at a CAGR of about 15%, though growth was much higher in the past, because of the low base. Between 2010 to 2020, the industry grew from about 0.15 million cubic metres to about 12.5 million cubic metres which is very fast. We look forward to the future with optimism, primarily because we expect major changes to happen in the furniture industry. MDF is replacing the cheap local/ unorganized plywood segment, which is about 35% of the total plywood industry. Over the next five to seven years, we expect that a large part of the mid segment plywood, which is about 50% of the plywood industry, would also get converted into MDF.
What are your existing strong markets?
We have a strong distribution network across north and south India. We started with the first plant at Uttarakhand and during 2018 we started Andhra Pradesh plant. We are in the process of building our network in the western and eastern geographies as well as North East where we are seeing an encouraging trend as far as MDF consumption is concerned. We currently have about 1400+ direct dealers pan India and we are targeting addition of another 600 dealers in the next two years.
Is there any strategic plan to improve the brand visibility?
Things got a bit disturbed during the pandemic and some of our plans got postponed. Currently we are concentrating on improving the brand presence through in-shop presence using glow signboards, wall paintings, various advertisements, and digital marketing. We’ll continue to build on those activities during FY 22 and FY 23. Post that, when we reach optimum capacity utilizations and the required financial strength, we’ll focus more on ATL activities to build the Greenpanel brand and make it a household name.
Can you share details about MDF plants in Uttarakhand and Andhra Pradesh in terms of the infrastructure and also touch upon the annual production capacity?
We have 5,40,000 cubic metres of MDF capacity spread across Uttarakhand with 1,80,000 cubic metres and Andhra Pradesh with 3,60,000 cubic metres. Both the plants have been imported from Germany and have the latest technology. German plants have lower power consumption, are more stable and have better quality. They can also surpass levels of capacity utilisation by 110%.
What was Greenpanel’s experience like during the past year?
The years from 2018 to 2020 have been difficult for the wood panelling sector primarily because of the slump in the real estate, in particular the residential sector. We are primarily raw material suppliers for the furniture industry and when there was stagnancy in the real estate sector, it affected us too. During 2020 we did reasonably well. We saw a top line growth of about 35% for the company, although margins and realisations were hit by intense competition. A pricing war started since the country’s capacity went up by 2.5x during a short period of 8 months. Pandemic hit the world last year and it did affect us too. However, we were able to resume normal operations from August 2020.
What plans do you have in store for the year ahead?
We are already looking at the expansion of our MDF capacity across both plants. We will improve our production capacity by about 20% taking it from 5,40,000 CBM to 6,60,000 CBM. That will give us the required levels for growth in FY22 and FY23. We are targeting 40% growth in topline during FY22, a significant improvement across operating margins and post-tax profits.
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