The demand for construction materials, such as plywood, saw a dip in the first quarter of the financial year, but has since shown signs of a revival, said Keshav Bhajanka, Executive Director, Century Plyboards Ltd.
Bhajanka, who is in charge of the plywood maker’s decorative business, ascribed the weakness to the prevailing high-interest rates.
“The demand was robust post-Covid,” Bhajanka said in an interaction with The New Indian Express, “but in the last quarter, the impact of higher interest rates caught up with the disposable incomes of the consumers, which led to a decline in demand.”
"Many people who purchased homes at high prices and good rates are now facing a higher EMI cost. This has led some individuals to postpone their plans to buy a house in the short term," he added.
Unlike many other consumer products, including consumer durables like ACs and automobiles, demand for construction materials has remained firm throughout the post-Covid period, until very recently. This has been ascribed to the once-in-a-lifetime nature of such investments.
Interestingly, the strength in demand was visible in both the urban and rural markets, according to the official.
BEST YET TO COME
Bhajanka remains optimistic about demand in the medium term, and describes the current dip as a “temporary situation”.
“This is a short-term phenomenon but the overall demand will be higher than the Covid period in the second half of the year,” he added. “The potential is tremendous and takeoff is yet to happen.”
He believes that the government cannot keep interest rates at the current, high levels for much longer, and expects the rates to come down in coming quarters.
For his part, Bhajanka said the company will aim to capture both the rural and urban markets. The company witnessed strong demand from semi-rural and urban areas initially, followed by the recovery of rural markets since 2022, he said.
However, he said that the company has no plans to spur demand by inducing price cuts. On a positive note, raw material prices remain stable, he added.
INVESTING FOR GROWTH
To meet this demand, Century Plyboards is planning to invest Rs 2,000 crores in the next three years in both brownfield and greenfield projects.
The company is working on putting up three new plants at present.
While the Andhra Pradesh plant is expected to start its operations by the end of 2023, the Hoshiarpur plant in Punjab is likely to be opened next year and the plant in Tamil Nadu will be up for operations before FY2025.
FASHIONABLE BEGINNINGS
The company intends to fight competition from the unorganized plywood sector by introducing features and characteristics, such as fire-proofing and advanced designs, which cannot be emulated by smaller competitors.
Indeed, as part of the company’s strategy to ‘elevate the product to something an unorganized player cannot offer’, Century Plyboards announced a collaboration with Indian fashion designer Manish Malhotra.
"The idea is to cater to the needs of the Indian customers while keeping in mind global trends," he added.
Bhajanka claimed that the consumers have widely welcomed the collaboration but it was still early to comment on the direct impact on sales and demand.
"I am sure that it is only a matter of time, maybe within the next couple of months, once the product is available throughout the country at every single retail store that we will see a massive upstream in overall demand," he commented.
SUSTAINABILITY GOALS
Being a voracious consumer of wood, the company is also conscious of the need to offset its environment impact through routes like agro-forestry. However, many laws – ranging from those related to agriculture to those on forests – stand in the way of companies engaging directly in agro-forestry in India.
Even for farmers, it is not easy to cultivate trees as they would cultivate crops like rice and wheat.
Hence, a lot of the company’s efforts in this regard are directed towards achieving policy changes.
Nevertheless, the company is investing in farmers, including supplying them with eucalyptus saplings, which benefits the company with easy access to raw materials while assuring farmers of guaranteed returns for their plantations.