Century Plyboards India Ltd. has announced "aggressive" expansion plans worth over Rs 1,000 crore, a record for the company, as it remains optimistic of a real estate upcycle.
The plywood and laminate maker has been "very conservative" till now and the time's opportune to expand, Keshav Bhajanka, executive director at Century Plyboards, told BQ Prime's Niraj Shah.
The confidence in announcing the plans stems from two reasons, Bhajanka said. "We're starting to see the benefits of the capex we have done in the past. They have really started to generate value. Second, the opportunity to reinvest cash flows getting generated is there."
Century Plyboards remains "hopeful and bullish" on the real estate upcycle.
There is also tremendous scope within their segment of the building material industry, Bhajanka said. "Post-Covid, demand has increased due to changes in the real estate cycle. The new cycle should last at least 5-6 years," he said.
According to him, India is at a nascent stage in wood panel consumption, compared to other countries. "The per capita consumption in India is probably 1/10th of China's and 1/100th of the U.S."
Majority of the capital expenditure will be funded internally. "We're debt-free and we have surplus cash," he said.
Need For Expansion
The company is approaching peak capacity utilisation in three major segments, which necessitates the expansion.
"In plywood, we're at 75-80% capacity utilisation. In laminates—where we have commissioned a new line—we're at 75-80% utilisation. In medium density fiberboards and particle boards, we're at over 100% utilisation, which is where most of our capex is taking place."
The plywood segment remains largely unorganised which could offer a potential opportunity, he said.
"In one of our segments—plywood—70% of the market is unorganised. When the market consolidates, you will see the organised players start to gain market share. We are already seeing that and see it happen in the future as well."
The company's Rs 250 crore expansion in MDF in Hoshiarpur, Punjab, is likely to come onstream in October-November this year. The new laminate expansion in Andhra Pradesh will commence by Q3 next year, and MDF expansion in Andhra Pradesh by the second half of next year.
From 2023 onwards, the company will be adding new capacity every six months, he said.
"Our objective has been to grow at over 20% and we're well-poised to do that. In plywood and laminates, we are looking at 15-20% growth, while in MDF, we are targeting over 20%," Bhajanka said.
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