Economic Times- Greenply Industries NSE -1.39 % Limited, the Kolkata-headquartered plywood maker, has embraced an ‘assetlight’ business model to grow at an accelerated pace with minimal capital investment. The company has decided to enter into multiple joint ventures (JVs) with regional manufacturers across India for an assured supply of finished products.
These JVs with small to mid-sized plywood manufacturers, based out of abundant raw material supply zones, will ensure that the company gets assured supply of finished products at a competitive price, without getting involved in day-to-day management of the entities. “The asset-light strategy will help Greenply Industries meet the growing market demand and augment our business by 8-10 % annually in the coming years,” said Rajesh Mittal, chairman and managing director of Greenply Industries.
Additionally, the asset-light model is also expected to reduce the company’s capital expenditure, including overhead costs, thus allowing it to focus on marketing and branding exercise.
The company recently entered into two separate JVs with Bareilly-based plywood entrepreneurs. “As per the agreement, we will pick up 30 % equity in each JV, which will set up new units. The balance 70 % will be held by the JV partners,” Mittal added. The partners are existing plywood manufacturers and will have the management control of the JV.
While one of these units will begin plywood production in October-November 2019, the second JV entity is expected to commence production of door and film-faced plywood sometime in April-June of FY 2021.
“Going forward, Greenply Industries is looking to enter into similar partnerships across India. Over the next two years, we intend to consolidate our existing plywood business,” Mittal said. The company, which commands 26% of the organised plywood market, has five manufacturing facilities including one each in Myanmar and Gabon.
“Consumer’s preference for branded plywood, inclusion of GST and e-way bill implementation narrowing down the price difference between products offered by organised and unorganised players to 10-15 % from 25-30%, is expected to spur growth of organised plywood business,” said Sanidhya Mittal, joint managing director of Greenply Industries.
For the quarter ended June 30, 2019, the company’s consolidated total income, net sales and net profit stood at Rs 349.9 crore, Rs 348.2 crore and Rs 21 crore respectively.
While the organised plywood industry in India is pegged at Rs 4,500 crore, the total market size is estimated to be around Rs 20,000 crore. The industry is growing at a CAGR of 3-5%, backed by a surge in demand for interior infrastructure and a steady growth of Indian real estate, coupled with increased disposable income of consumers and high lifestyle aspirations.