Boost To Housing Sector In Budget Will Push Plywood Sector Growth: CPIL
There is a direct business linkage between the housing sector and the plywood industry. Greater the demand for housing will directly lead to increased demand for wood-work, plywood, MDF (Medium Density Fibreboard), and other products essential for the home. Therefore, the plywood industry is hoping for certain specific relief from the finance minister Nirmala Sitharaman in her upcoming Union Budget to be presented on February 1, 2023.
“Rebate on stamp duty (pan India) would lead to lower cost of stamp duty and would thus drive higher kitty for making interiors for the homeowner. This in turn would drive higher demand for plywood and other allied products," Keshav Bhajanka, Executive Director, Centuryply India (CPIL).
There is an express need for more tax sops for homebuyers, he added. "The INR 2 lakh tax rebate on housing loan interest under Section 24 of the Income Tax Act needs to be hiked to at least INR 5 lakh. This will add momentum to housing demand, particularly in the affordable segment, and hence higher demand for the wood panel segment in particular," said Bhajanka.
A recent sector report by ICICI Securities stated that continuous momentum in the residential market and higher spending on home improvement, after the pandemic, were contributing to the robust demand for wood-panels, MDF and ready made furniture. Therefore, one of the industry leaders Centuryply is hoping for a further boost to the housing sector would go a long way in keeping up the growth momentum in the plywood-affiliated industry. In the report, the brokerage house had suggested that Century Plyboards had strong growth prospects, high return ratios and healthy balance sheet. It stated that the company will be a major beneficiary of the uptick in housing demand and higher spending on home improvement.
"We are expecting 20-25 per cent growth this fiscal in our annual turnover," he said. Asked about the expansion plan, Bhajanka said a greenfield unit for the MDF board is being set up in Andhra Pradesh with an annual capacity of 3.2 lakh cubic meter per annum and an investment of around Rs 700 crore.
Bhajanka said he hoped that the Budget would offer a degree of personal tax relief, either by ways of lower tax rates or by readjusting tax slabs. "Doing so would also help boost the disposable income in the hands of the consumer," he said. Government spending on infrastructure has been exemplary and may get a further boost in the forthcoming budget, he added. The positive correlations of infrastructure development with all real estate asset classes is well established, he said.
But perhaps the most important request is for revising the price bandwidths for homes to qualify as affordable housing to align with the market dynamics of different cities. For instance, a price band of INR 45 lakh or below is far too low in a city like Mumbai, where it should be increased to INR 85 lakh or more, various experts have suggested. Why? Explains Bhajanka: "The growth traction in affordable segment would driver higher demand for the commercial grade plywood category if this is done.”
In FY22, CPIL had set up an integrated wood panel manufacturing factory in Gopavaram, Kadapa district of Andhra Pradesh at an initial investment of Rs 800 crore, including MDF for Rs 600 crore and laminates for Rs 200 crore in the first-phase. The company's MDF capacity has also been trippled to 1,900 cubic metre per day through brownfield and greenfield projects entailing an investment of Rs 820 crore. The company has also flagged off its EV delivery van to champion the cause of sustainability.It is the first company among its industry peers to do so, Bhajanka had told BW Businessworld in a recent interaction. The company is also the pioneer in borer proof plywood and boiling water resistant (BWR) decorative veneers and laminates in the country thereby successfully creating a niche in a highly competitive lifestyle segment.
