GREENPLY INDUSTRIES LIMITED

Ratings
Facilities/Instruments

Amount (Rs. crore)

Ratings1

Remarks

Long-term Bank Facilities

600.45
(enhanced from 478.4)
565
(enhanced from 490)
1.165.45

CARE A
(Single A)
CARE A1 (A One)

Revised from CARE A(Single A Minus)

Reaffirmed

45

CARE A1 (A One)

Reaffirmed

Short-term Bank Facilities

Total Bank Facilities
Short-term Debt (including
Commercial Paper)*

*by earmarking fund-based working capital limit

Rating rationale
The revision in rating of the long-term facilities of Greenply Industries Ltd (GIL) takes into account the improvement in the
financial risk profile of the company in FY13 (refers to the period April 1 to March 31), on the back of stabilization of operations
of the Medium Density Fiber (MDF) division.
The above ratings also continue to derive strength from the experienced promoters, long track record of GIL, leadership position
in the interior infrastructure sector and improving capacity utilization across the three divisions plywood, laminates and MDF.
Furthermore, Forest Stewardship Council (FSC) Certification, empanelment with Military Engineers Services (MES) for supply
of MDF products, extensive distribution network & marketing support, strategic location of all the manufacturing units leading
to cost advantages and increasing presence in export market also support the ratings. The ratings also factor in the dominance of
unorganised sector players in the domestic plywood sector, leading to intense competition, exposure to foreign exchange
fluctuation risk, risk associated with implementation of the ongoing projects and significant dependence on the prospects of the
real estate sector. The ability of GIL to improve its profitability as envisaged, while maintaining its capital structure, complete the
projects within the envisaged timelines & cost and sustainability of selling prices of its products in future vis--vis the prospect in
the domestic and global real estate sector scenario would remain the key rating sensitivities.
Background
GIL was incorporated in August 1984, to manufacture veneer (ply) at Tizit, Nagaland. It is currently engaged in the
manufacturing of plywood, laminates, decorative veneers, MDF and allied products with manufacturing units located in six states
(Nagaland, West Bengal, Uttarakhand, Rajasthan, Himachal Pradesh and Gujarat).
GIL is the leader in the domestic plywood, laminate, decorative veneers & MDF industry and is the only integrated manufacturer
in India.
Credit Risk Assessment
Long track record of operation and experienced promoters
GIL incorporated in 1984, has a long track record of operation of about three decades in the plywood industry. The promoters,
Mr Shiv Prakash Mittal and Mr Rajesh Mittal, are well-known in the interior infrastructure sector with experience of more than
two decades in the industry. Moreover, the senior management team of GIL has extensive experience in the industry.
Leadership position in interior infrastructure sector
GIL, the market leader in the interior infrastructure sector, is well-positioned to reap the benefits from the increasing
urbanization, lower renovation cycle and growing real estate sector. Due to its superior product quality and continuous brand
awareness initiatives, GIL enjoys healthy market share across its three divisions. GILs brands like Greenply & Green Club, in
the plywood segment, Greenlam & Green Decowood in the laminate segment and Green Panel Max in the MDF segment
are the leading brands in their respective product categories.

Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications

Improving capacity utilisation across all divisions

Capacity Utilization (CU) for all the product divisions has generally been comfortable over the years and witnessed further
improvements in FY13 primarily driven by higher demand supported by higher marketing support. CU of the MDF division (unit
commissioned in November 2010), which was low (31.86%) in FY11 in view of teething trouble, improved to 66.7% in FY12
and further improved to 87.8% in FY13 with gradual stabilization of operation. In the laminates division, both the Behror and
Nalagarh units witnessed a considerable improvement in CU, aiding the growth in the overall CU of the laminate division. CU of
the plywood division continued to remain highly satisfactory and was high at more than 100% during the period.
Improvement in the financial risk profile over the last three years especially in FY13 on the back of
stabilization of operations of MDF unit
The net sales have grown at a CAGR of about 28.2% over the last three years on the back of continuous product development
initiatives and wider marketing & distribution network. In FY13, the net sales increased by about 22% in FY13 over FY12 in line
with greater penetration in new territories in domestic and export market, coupled with increase in realizations. Apart from
increasing penetration in the existing product portfolio, the stabilization of operations of the MDF unit in FY13 led to notable
increase in y-o-y sales of MDF. Accordingly, improved performance of the MDF division was the main diver for growth in sales
for GIL in FY13. The PBILDT margin improved by about 184 bps in FY13 over FY12 in view of higher sales price realization for
all its product categories coupled with increased CU at all its product facilities (especially MDF division) leading to higher
absorption of fixed overhead expenses. PAT (after defd tax), more or less, doubled during the even period in view of higher
PBILDT level, coupled with stable capital charge.
Both, debt-equity and overall gearing ratios, improved as on March 31, 2013, over the previous account closing date due to
scheduled repayment of term loans for the recently completed projects, coupled with accretion of higher levels of profits to
reserves. Furthermore, the debt coverage indicators like term debt/GCA and total debt/GCA also witnessed improvements as
on March 31, 2013, due to higher level of profits.
Forest Stewardship Council (FSC) Certification and empanelment with MES for supply of MDF products
GIL has received the FSC chain of custody certification for its units at Kriparampur and Rajkot. This translates into an easy access
for the company to highly environmentally sensitive markets (European countries) and also strengthens its brand value.
Currently, the governments and other organizations in European countries are insisting on FSC-certified products in their
purchasing policies.
GIL has received the approval from Military Engineers Services (MES) for use of Green Panel Max MDF in defence works.
Extensive distribution network and marketing support
GIL has a pan-India marketing network with 46 branch offices and more than 14,000 distributors, dealers, sub-dealers and
retailers across 21 states. It has one of the largest distribution networks in the interior infrastructure industry of the country. It
has two subsidiary companies in Singapore and the USA to explore the market opportunities for laminates in south-east Asia and
the USA, respectively. Further, the company has set-up another subsidiary in the UK for marketing of its products in Europe.
GILs extensive distribution network is supported by various marketing and branding exercises across the three product divisions.
The company engages in several brand building initiatives through a mix of Above the Line (ATL) and Below the Line (BTL)
marketing initiatives. While the company primarily focuses on ATL activities like television commercials for plywood and
laminates division, branding in the MDF division is focused on product education through BTL activities like carpenters,
architects, interior designers, real estate and construction industry meets. The company is targeting the key B2B influencer
groups through advertisements in trade journals and carpenter magazines as well as carpenter education programmes. On an
average, the company spends about 2.5-3% of its net sales towards marketing and branding activities across the three divisions.
Increasing presence in the export market
GIL has an extensive presence in the quality stringent export market and the same has increased over the last three years. GILs
export stood at Rs.255.6 crore (about 11% of total sales) in FY13 as against Rs.183.8 crore in FY12 GIL primarily exports
laminates to countries like Thailand, Indonesia, Taiwan, Hong Kong, Malaysia, Singapore, Russia, the USA, Australia, Mexico,
China, etc. Over the last few years, the company is continuously focussing on increasing its export presence in line with higher
demand for its various premium laminate brands. Accordingly, to cater to the growing demand in south-east Asian countries and
America, GIL has set up two subsidiaries (Greenlam Asia Pacific Pte Ltd & Greenlam America, Inc.) as foreign marketing outfits.
In FY13, the company has set-up another subsidiary in the UK for marketing of its products in Europe.

Cost-efficient sourcing and locational advantage

GIL has strategic advantage vis--vis its competitors as most of its units are located adjacent to the ports or market or source of
major raw materials. This enables it to save cost on transportation, as both raw materials & finished goods are bulk products.
Moreover, most of its units enjoy various fiscal benefits.
Foreign exchange fluctuation risk
GIL sources about 42% of its raw material requirement (decorative paper, top veneer wood, phenol, etc Rs.462.8 crore in
FY13) through import, for which, the company uses buyers credit facility. However, as the company exports about 11% of its
gross sales (Rs.255.6 crore in FY13), it is partially insulated against foreign exchange fluctuation by way of natural hedging. In
FY13, GIL booked foreign exchange loss to the tune of Rs.7 crore. GIL also takes forward cover to hedge its forex payables for
minimising the exchange fluctuation risk. At any given point of time, the company is generally hedged to the extent of 85-90% of
its total exposure.
Moreover, to part fund its recently completed capex programme GIL had availed ECBs, the principal and interest payments of
which remain partially hedged (in some cases interest payments remain hedged while in some cases the principal remains hedged
upto a certain rupee dollar rate and in some cases both interest and principal remain un-hedged). This exposes the company to
foreign exchange fluctuation risk to a certain extent.
Risk associated with extension into value-added product segment and increase in manufacturing capacity of
MDF
In order to cater to the growing demand for value added product segments (HDF flooring, UV coated panels, Veneered MDF) in
MDF division and to tap the huge market potential for such products in urban and semi urban markets, GIL is in the process of
setting up a unit for the manufacturing of such products at its existing plant at Pantnagar (Uttarakhand). The aggregate cost of the
aforesaid project of Rs.41.3 crore was financed at a debt-equity ratio of 3.98:1. The debt has been availed as envisaged and the
project is near completion. It is expected to commence commercial operation from Q3FY14 onwards.
Furthermore, in order to cater to the growing demand for veneered wooden flooring and Pre-laminated particle board, the
company is setting up a Engineered Veneered Wooden Flooring (capacity of 8 lakh square metres p.a) and Pre-laminated
Particle Board (capacity of 7.5 lacs CBM) unit at its manufacturing unit at Behror, Rajasthan. The aggregate project cost of
Rs.119.3 crore is expected to be financed at a debt-equity ratio of 2.3:1 (internal accruals of Rs.36.3 crore and term loans of
Rs.83 crore). The company has already received a sanction of 6 million USD from Standard Chartered Bank for the project. For
the balance amount, the proposal is in advanced stage and the sanction is expected to be received soon. The commercial
production from the unit is expected to commence from July 2014.
Given the fact that all the three divisions of the company are operating at satisfactory CU levels, the demand for MDF has been
growing and GILs MDF has been well-accepted in the market, the company is planning to set up a new MDF plant in Andhra
Pradesh. However, the project is in nascent stage and, thus, the capacity and the cost is yet to be firmed up. Any additional debt
availed for the project is expected to result in deterioration in the capital structure of GIL.
Initiatives taken to ensure availability of raw materials
The company also plans to float a local subsidiary in Myanmar for setting up a veneer-cum-plywood unit. The Government of
Myanmar has been discouraging exports of wood and is likely to ban exports of wood from 2014. The company plans to procure
wood from the local markets in Myanmar and make some value addition to the product, which would then by transported to
India, thus, ensuring steady supply of raw materials. The company is yet to finalise on the total project cost.
Prospects
GIL enjoys good brand recognition in the organised plywood as well as laminates segment. However, the prospects of the
company will be primarily driven by the demand from sectors like hospitality, healthcare, commercial office space and retail
space. Furthermore, going forward, the ability of the company to complete its ongoing projects on time and without any cost
overruns and maintain its capital structure shall be crucial.

Financial Results
Y.E/As on Mar.31,
Working Results
Net Sales
Total income
PBILDT
Depreciation
Interest & finance charges
Profit before tax
PAT - after defd. tax
Gross Cash Accruals
Financial Position
Equity share capital
Tangible networth
Total capital employed
Ratios
Growth
Growth in total income (%)
Growth in PBILDT (%)
Growth in PAT (after defd tax) (%)
Profitability
PBILDT margin (%)
PAT margin - after defd tax (%)
ROCE (%)
RONW (%)
Leverage
Debt equity ratio
Overall gearing ratio
Interest coverage
Long term debt/GCA
Total debt/ GCA
Liquidity
Current ratio
Quick Ratio
Turnover
Average collection period (days)
Average creditors period (days)
Average inventory period (days)
Working capital cycle (days)

(Rs. Cr)
2013
(12m, A)

2011
(12m, A)

2012
(12m, A)

1,216.10
1,217.9
123.7
41.0
42.5
30.9
25.1
74.5

1,642.3
1,643.7
195.3
46.8
64.0
64.9
53.4
98.7

1,997.7
2,007.3
275.4
52.0
63.7
151.4
114.2
173.1

12.1
346.7
866.5

12.1
404.7
1,116.4

12.1
517.5
1,200.5

38.31
26.16
(49.38)

34.96
57.92
112.88

22.12
41.01
113.75

10.17
2.06
10.8
10.52

11.89
3.79
14.60
18.62

13.73
5.69
20.21
26.21

1.19
2.05
2.91
5.55
9.55

0.99
1.99
3.05
4.05
8.14

0.67
1.63
4.32
2.12
4.88

1.23
0.70

1.20
0.72

1.06
0.63

51
40
77
88

57
33
68
93

61
43
69
87

DISCLAIMER
CAREs ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy,
sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not,
however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained
from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and
type of bank facilities/instruments.

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CREDIT ANALYSIS & RESEARCH LTD.

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