The world is passing through its most uncertain phase in decades. The Indian economicslowdown of 2019 was complemented by the outbreak of the Covid-19 pandemic the effects ofthe latter becoming visible from January 2020 and deepening as subsequent months passed.During the last week of the financial year under review a national lockdown was imposedto stagger the spread of the Covid-19 pandemic. This is affecting consumer demanddiscretionary spending and capital expenditure. The result is that India might be staringat an economic de-growth during the current financial year the first such phenomenon inliving memory for most.
Impact of Covid-19 pandemic
The spread of the pandemic in 2020-21 represents a seminal moment in our lives. Thepandemic is not just affecting the way companies conduct business but also how humankindwill live. This will affect every part of our lives including decisions related tospending on interiors influencing prospects for companies like ours.
The response of the market will be largely dependent on the discovery of the vaccineand the success of humankind in addressing the pandemic. The outlook is uncertain andthere is an advantage in the ability of companies like ours to manage their way throughthe downturn while protecting their fundamentals. An unpredictable environment as the onethat we are passing through puts a benefit on strategic transformation and reinforcing ourleadership. At Greenply we believe that companies in existence to address a specificpurpose in our case plywood manufacture and marketing - could find it relativelyeasier to protect their brand during this challenging period. Besides companies like oursthat have extended beyond a generic positioning and address focused market segments like Greenply is positioned - stand a better chance of competitiveness across marketcycles.
At Greenply we believe that a usual response to the prevailing circumstances will notwork. The Company will need to address this unprecedented reality with a completereinvention no less. The time is right to question every paradigm we held dear in anormalised business environment; the time is right to initiate proactive change ratherthan wait for the market to revive; the time is right to see opportunities in this crisis;the time is right to strengthen our business model. At Greenply we have charted broadinitiatives to enhance our opportunity-preparedness. A reinventing Greenply will reinforceits established culture for innovation. As an industry leader the Company made a decisiveportfolio extension when it introduced zero-emission plywood during the year under reviewreinforcing its commitment towards the health of its consumers. The Company did not justlaunch a new product; it pioneered the category through proprietary technology that willhelp in providing a new direction towards healthier interiors in India. A reinventingGreenply is being built around an even stronger governance foundation. We are investingdeeper in the elements of good governance with the objective of enhancing businesssustainability. The governance momentum was established some years ago when the Companydemerged its laminates and MDF businesses into separate companies under completelydifferent ownership and management teams with the objective to enhance focusaccountability and value. During the year under review the management took this momentuma decisive step ahead when it appointed a professional Chief Executive Officer to manageoperations within just eight months of the demerger. This is not one of routineinitiatives; it represents a decisive watershed in our existence from a family-drivenCompany towards a more professionalised management. We believe that a professional CEOwill enable the management to see business realities not just with a new pair of glassesbut with completely different eyes.
A reinventing Greenply will be built around tighter financial discipline that comprisesthe use of moderated working capital shrinking the receivables cycle and pluggingsystemic financial leaks. The objective will be to moderate the cost structure to a pointthat makes us competitive across market cycles.
A reinventing Greenply will penetrate its markets deeper. Even though we are one of themost extensively distributed plywood brands in India we see considerable rural headroom.A reinventing Greenply will increasingly graduate from the sale of products to thedelivery of solutions. The objective will not be as much This is what I have to sellto you' as much as What do you need that I could possibly develop for you?' Thiscustomer-first approach is expected to help seed new opportunities better widen ourportfolio spread our risks across a larger number of products and strengthen our recallas a trusted one-stop shop for everything plywood. A reinventing Greenply will enhancebrand visibility through the use of diverse media. It will enhance its appeal acrossyounger consumers; it will position itself around a consumer's peace of mind; it willreinforce its recall around solutions; it will deepen its brand around a wide productportfolio addressing every consumer's needs; it will reach its message across a widershare of the country's population. A reinventing Greenply will protect its knowledgecapital. The Company will strengthen its culture of delegation and accountability. TheCompany will enhance ownership not just in an emotional way but also through ESOPsstrengthening its rewards and recognition framework.
At Greenply we believe that our managerial breadth and depth will translate into alarger and longer staying capacity during the prevailing slowdown.
By the virtue of reinventing our organisation top-down we believe we are entering anexciting phase where we expect to increase our outperformance of the markets and ourretrospective growth average. Through enhanced resilience and agility we are confident ofbeing among the last players standing through this crisis and among the first to reboundwhen the market normalises.
Chairman cum Managing Director
Joint Managing Director & CEO review
Greenply ended FY2019-20 with 1.27% de-growth in revenues 6% increase in EBITDA and46.8% decline in profit after tax owing to write off for an exceptional item of H 49.97crore in FY2019-20. . These numbers were creditable given the slowdown in the Indianeconomy resistance by home and office owners to engage in fresh capital expenditure and ageneral tendency to downtrade. The outbreak of the Covid-19 pandemic towards the laterpart of the last quarter of FY2019-20 resulted in a shutdown of the Indian economy; themost productive phase of the last quarter coincided with a time when the Company reportedvirtually no offtake.
At Greenply we perceive the unfolding reality as an opportunity for some good reasons.
One the slowdown has provided an otherwise growth-driven Company like ours theopportunity to re-orient strategically for the medium-term as opposed to chasing numbersfor the next quarter. Two we believe that the lockdown-induced slowdown willtranslate into a sectorial shakeout and industry consolidation where there is apossibility of the established brands getting larger. Three with restrictions onsocial engagement the offtake of plywood for home or office construction could be replacedby branded furniture widening the role of the organised plywood sector.
Four consumers may spend less during the course of the slowdown but when theyeventually do there is every possibility that they will trust credible organised brandslike Greenply.
Five large and liquid plywood companies like Greenply possess the resources toinvest continuously in the business deepening their consumer engagement and strengtheningtheir brand even as consumer sentiment remains depressed; when spending power returnsbrands like Greenply could carve away a disproportionately larger market share.
Six the unorganised sector has suffered in the last few months with low access toorganised bank capital in the absence of credible documentation; these companies have alsosuffered labour attrition which presents organised brands like Greenply with theopportunity to capitalise through adequate liquidity and automation.
However even as a Company like Greenply is attractively placed to capitalise on theslowdown it will need to look within raise its game and emerge stronger.
Principally Greenply is engaged in the process of reinventing itself. The Company isquestioning every paradigm that it held dear across the years. This is translating into adeeper cost scrutiny process audit and investment appraisal.
At Greenply there was always a fine understanding of time and resource spendingeffectiveness; this payback understanding has been sharpened in the last few months. Theunderstanding of costs from a conventional financial perspective has been extended toadditional parameters like time taken' and missed opportunity'. At Greenplythere is now a deeper focus on Return on Capital Employed not just at the corporate levelbut across every function which is making us leaner and more productive. At Greenplyfocus on the word profit' is being progressively replaced by cash flow'emphasising that liquidity will be our biggest buffer during the slowdown and after.
At Greenply there is a deeper focus on extending the efficiency frontier across allinterventions strengthening our organisational outperformance.
At Greenply there is a greater focus on digitalisation that does not just enhanceoperational seamlessness but also the consumer experience. At Greenply we will moveincreasingly towards an asset-light approach where we outsource the manufacture of selectplywood varieties and focus deeper on marketing and branding instead. We believe that thecomplement of these initiatives will deepen our trust across our stakeholder ecosystemstrengthening business sustainability.
Joint Managing Director and CEO