Shobhan Mittal Interview
What have been the key factors in Greenply’s success?
One of the key factors that have led us to be the market leader has, of course, been our obsession with quality in the products that we offer in the market. We have always opted to invest in the best technologies. We invested into the largest plywood manufacturing facility in the country with the highest investment ever made. We were also the first people to install a continuous press for the manufacture of Medium Density Fiberboards (MDF) in the country. We truly believe in economies of scale and this is why we opted to invest into such a large MDF plant with 600 m3/day capacity at a point when no one could imagine, that kind of quantity could be sold in the country. We had the confidence on our distribution network, on our product quality and on our brand, that we would be able to achieve those figures and we are actually achieving those figures today.
Also the ability to take risks – we took the decision to invest into an MDF plant when the world economy was absolutely at a low point and most industries were backing out of new investments. We actually thought of it as the perfect time to make an investment. We assumed that the market economy would pick up in the coming years. It was also an opportunity to get very competitive rates in terms of our capital expenditure and our loans. It worked out beautifully for us.
These factors, our obsession with quality, willingness to take risks, our confidence in our brand, and, of course, the fact that we also command one of the strongest distribution and retail networks in the country are all key factors that have contributed to Greenply’s position today. There is a customer faith involved as well; do we stand behind our products?? Do we service them properly?? We were the first people in the country to offer lifetime-guaranteed plywood. This has resulted in a lot of goodwill for our company in the Indian market.
Can you tell me about the company’s beginnings?
Greenply was started with a small sawmill almost a quarter century ago. Our Chairman is a very competent man with regards to this industry. In fact, earlier he used to work with the top plywood company in the country, which was Kitply. He progressed on to become the Vice Chairman of that company, so he gained a lot of experience and expertise at that time. He is also the driver of a lot of the innovations in the plywood industry that India has seen. That experience and his dedication towards his work led him to form this company and he has driven that ever since. Slowly but steadily, we have progressed to come to this position that we are in at the moment. We’ve done a lot of horizontal integration: we started off with plywood then we got into the manufacturing of laminates. We decided to offer an entire basket of products that go to this particular sector of users.
You talked about the investments you‘ve made in India. What have been the difficulties in those projects?
The biggest difficulty in India to set up new wood-based panel plants is of course the barriers set by the government. There is a lot of red tape, a lot of licenses required, and a lot of restrictions because of certain rulings of the Supreme Court which prevent industries being installed in certain areas close to natural forests. Then you need to have licenses from the Central Government as well as licenses from the State Government and various other government bodies. There are very stringent pollution policies, raw material policies.
Getting more specific to the installation of plants, one of the big obstacles for Indian industry is a lack of technology and expertise within the country. There are not a lot of indigenous machine manufacturers, technology providers or for that matter, even consultants. We are still running very conventional and outdated technology. If you want to be innovative in your product offering and if you want to increase efficiency and reduce your costs to be competitive with foreign products easily available in the market, you still have to go abroad to find that technology.
Another very big difficulty is the finance cost in India is very high. We pay 13 or 14 % per annum which results in a very high interest cost and reduces our operating efficiency. One of the biggest obstacles is securing raw material. Due to the blanket ban by the government in using natural forest timber, we are completely dependent on agro-forestry as well as imported raw materials. This makes our industry very inefficient compared to foreign producers who have abundant raw material resources available to them due to existing sustainable forest management policies being practiced by their governments. For instance, most European countries permit the usage of natural forest timber to their industries, yet, at the same time, the forest cover growth has been increasing year on year. It’s a win-win situation as the industries get the resources, and the Government’s objectives towards the environment are fulfilled. We, in India, need such policies and practices. Also, in capital-intensive industries like MDF power is a very big cost apart from being very critical to the optimal running of the plant. Unfortunately, the Indian infrastructure is not up to the mark where it can provide consistent, good quality electrical power at a good price. Power, being about 8 or 9 % of the product cost, if not consistent and of good quality, you have a lot of losses. If the plant keeps tripping, with every trip in the MDF plant, let’s say two hours of production is gone because the moment one thing stops, the entire line stops. These are infrastructural issues that we face when thinking of new investment.We don’t have options of cheap freight. We are always using trucks. We don’t have the option of efficient rail freight, which the government is not very active or friendly about, whereas if you look at factories in Europe or America, they just transport everything by train and it is extremely cheap to do so. As a result of using small trucks to transport our goods, there are a lot of damages, a lot of accidents and a lot of losses.
Have you found satisfactory solutions to these problems?
We are always innovating, improvising. We have found some solutions but there is never a perfect solution because there are new problems that pop up all the time. Electricity: of course we take our own precautions with regard to stabilizing it, cleaning the power, avoiding fluctuations by installing the necessary capacitors and things like that. Many industries may consider the option of installing captive power plants for their own requirements but then again you need to consider the investment costs, which are very high in India. Number two, you need a consistent fuel supply for that. We know India is currently a hot turf with regards to power plants, but are we really sure about the consistent supply of natural gas, or coal, or biomass, for that matter, to run these power plants? No one’s sure how long these will last. A lot of people have invested into power plants based on the promise of natural gas only to later realize the same to be in insufficient supply. And many of these plants are not versatile; they are specifically designed to use a particular type of fuel.So, we cannot address all the issues, but at the same time, such inefficiencies are also there with other manufacturers and they factor that in with regards to how competitive they can be. We always try to address issues in such a way that we are competitive as per the market scenario. The fundamental infrastructure issues will always be there in our country, until the government addresses them. And the industries run, adapting to those fundamental issues which cannot be overcome 10O%. Another way of dealing with such issues is investing into technology that can actually overcome these issues. If you have power issues, you invest into machinery that consumes less power so you try and nullify the inefficiency by reduction in the cost. Of course, that means a higher investment but you calculate your payback periods accordingly.
How about in terms of raw material?
Raw material is definitely an issue in our country. I think the prices are higher than what you would pay, let’s say in China, or in the Southeast Asian countries. The government is not very active in that and private industry has also not become very above in that. But unless we do something, eventually the day will come when we realize that our plants will not be able to run due to lack of raw materials or due to the raw material being too expensive. In the south of India there has been a lot of good development in that area by ways of social forestry, by ways of own plantations by industries and things like that. We have started doing that in our Northeast facility in Nagaland, where we are promoting the distribution of hybrid saplings to tribal people, as well as managing land area to plant trees. We plan to do this in our other facilities as well, especially for MDF. The species we use for MDF are eucalyptus and poplar and they have a very fast growth cycle. The trees are ready to be consumed in three or four year’s time. If we can encourage the farmers to plant these by giving the right saplings at a subsidized cost or free of cost, then they might be encouraged to plant because such trees do not actually affect their primary crops or the yield of their primary crop, and result in additional income for them.
I think the government either needs to create a body that can give them ideas on what needs to be done or even employ foreign agencies what is going on in European or North American countries where the industry is free to use the resources of the forest, at the same time following a policy that will ensure that the resources are sustainable. In European countries people are using the forests resources but at the same time the forest cover is actually growing, same as in North America. That means they have a successful policy in place. The economy does not need to depend on foreign import of raw materials and increase the cost to the consumers. Apart from the other issues like power, better roadways and better transportation facilities which is basically applicable to all industries, this is something very specific to our industry, and imports of raw materials are also becoming more and more difficult by the day. Countries like Indonesia have completely banned exports of logs – you need to process the logs within the country. Malaysia is planning on restrictions. A lot of raw material comes from Burma, Cambodia and Vietnam; even they are debating, “Why should we let our resources simply be exported? We should have a policy where we ask investments to be made in our country.” It happened with Russia as well. Eventually we will come to a point where we can’t use our own resources while we have them, and we can’t buy resources from outside. So eventually we will end up having to import finished products – and wood based panels are basic infrastructure products. They’re core product; we can’t live without them. The government needs to realize the importance of this industry as well and see what they should do to secure our future.
Does all the raw material come from India?
Yes. In fact, most of the materials come from Uttarakhand and UP. We have now, because of substantial cost increases in those states, started looking at options from other states like West Bengal and Andhra Pradesh and transporting them by train so that the cost of freight is low. We are always looking for alternate sources of raw material, whatever can be worked out cheaper, basically.
In your opinion what steps can the government take to benefit the plywood and panel manufacturers?
The government follows a very stringent policy where there is a complete ban on usage of natural forest resources. I don’t think that’s a very good policy. What we need to have in place is a sustainable forest policy. Our country has its resources for industries and economy to use but the government is the organization that needs to make sure they last and are sustainable, yet can be utilized towards the gain of the society.
The plywood industry, consisting of so many small-unorganized players, has always been seen as a negative industry. But now as we grow and larger players become more visible, our industry too will move towards an organized industry status. I think in the long term it will consolidate quite a bit where larger players start controlling a bigger chunk of the market. Because people are becoming more quality conscious, more brand conscious, they want to deal with reputed companies. The government needs to actively work with such companies to formulate policies for our industry.
Can you tell me about the environmental qualities of the product and the company’s policies?
At the moment the majority of our products are produced out of agro forestry, so basically that is a 100% sustainable resource with a lifecycle of 3-4 years. We are also FSC-certified and we try and ensure that we get FSC-certified material, to make sure that the chain of materials is legitimate and coming from sustainable resources. Apart from that, we are always trying to invest in new technology to reduce raw material consumption. Of course, the point behind that is to reduce cost but at the same time reduce the requirement of raw material or the strain of raw material on the environment.
With regards to the end consumers, we actually have some of the best resins that we use to produce plywood that have low emissions. In fact, we have a very specialized plywood range which has very little emissions as compared to the general market products and resin technology for that is extremely important as formaldehyde emissions adversely affect the health of people.We have also taken up a lot of projects at our factories’ level where we’ve hired consultants like KPMG, who are guiding us on how we can reduce our carbon footprint and become a more environmentally friendly company as a whole. They have done audits of all the manufacturing facilities and given us guidance on where there’s wastage of energy, wastage of resources or wastage of raw materials, pollution, etc. They have given us suggestions that also involve substantial capital expenditure to address that. The government does not statutorily require these compliances but we want to be more forthcoming than just complying with statutory requirements. Even at the cost of making further investments, we would like to achieve levels where we can claim to be reducing our carbon footprint, to being kinder to the planet.We have also in the past years made a strong effort to be more efficient in our heat production. In our MDF plant, we have installed the first of its kind in India an energy plant which gives us a heat utilization efficiency of 90-95% as opposed to what you would normally get, about 60-65%. With MDF, we are planning to get into El category of products and also get CARB-certified so we are able to offer more environmentally friendly products.
Do you think the market has to some extent changed recently?
Would say the more educated segments where the MNC’s or the more educated architects are concerned, they have a certain amount of interest towards superior quality and eco friendly products, but for the mass markets the consumers it’s always about the price. I don’t think they are really concerned about things such as quality, or environment friendliness of the products they use. I think the end consumer needs to be more aware. But if I go tell a retailer, “Buy El! It’s a better product,” for him it doesn’t matter. It’s a more expensive product for him to sell. So it’s the end consumer who is actually getting affected by the product, and they need to be educated and realize the benefits of products that are accepted internationally or of low emissions or low carcinogens”.
Can you tell me about the new things on the horizon for Greenply?
There are so many options. We’re always thinking about which the best one is. We are always looking at possibilities of value additions in plywood with regards to how we can get better realizations from the market and products poised to stay ahead of the competition. With laminates, we’ve done some innovation with regards to larger sizes which are not available in the country. Toilet cubicles was something which we came up with in the last couple of years and we intend on taking that forward quite strongly. MDF, being the newest industry in our group, is very exciting for us and there is a lot of scope for value addition in that. We have presently decided to install a much higher capacity short cycle line and are in the process of signing a contract with a European supplier.
At the same facility ?
Yes, the short cycle will be installed at the MDF facility. Short cycle laminating opens up opportunities for various further values added products. Although we currently have 2 short cycle lines, we don’t have the capacity to enhance them further.This will be the largest and the most high capacity short cycle line in the country when we install it. That way we have the options of going into things like door skins,Veneered MDF which we recently launched, laminated flooring, high abrasion panels, lacquered MDF and we also intend producing on some interesting acrylic covered MDF. We always want to have an edge over competition. People have looked at us as always being an innovative company.
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Author’s Bio:-
Ricky Martin is a web specialist associated with Atechnocrat Solution written a quality based articles on MDF, MDF Manufacturer, MDF Panels, MDF Board, Fiberboard, MDF in India, Modular Kitchen, MDF Suppliers, MDF Furniture, Veneered MDF, Veneered MDF Boards, MDF with Veneers, Pre Laminated MDF, Prelam MDF and Medium Density Board..
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