70-80% of input material in the print process is produced using imported raw material. How will this affect your business, plus the pricing negotiations with your customers?
Fluctuations in exchange rates affect different stakeholders differently, in general. If the rupee appreciates, importers benefit while at the same time exporters will get adversity affected. When rupee depreciates its opposite. In the last few months, the rupee has continued to weaken against the USD and experts say that it will hit the Rs 70 mark. There's no doubt it will help the traditional export sector, but India is more of an importing country. Unfortunately, both crude and USD's simultaneous rise is adversely affecting import dependent printing sector. Even in advertising-related printing, 90% if its input requirements are dependent on imports.
Unfortunately, we don’t have domestic alternatives to turn to.
As you are aware, all large companies work with yearly contracts and it’s next to impossible to get any negotiations for upward price request. The year 2017-18 saw GST disruptions, and 2018-19 started off with downward slide of rupee against the USD. I just read that TN state industrial data shows that 49,329 SMEs closed their units and Sivakasi is second largest volume printing town in the world, after Gutenberg.
How will your company absorb this price increase? What is your strategy?
The rising crude prices will accept FMCG good like shampoos, deodorants, soaps, detergents. Manufacturers usually close their production cost much in advance as they need to print MRP on the final product before it reaches the retail counters. Since they do not have control on raw material cost, they would obviously re-negotiate with the last mile contractor, which are the print-packagers. Now as suppliers to the manufacturers, print-packagers have to face the heat on both sides. So you can imagine the plight of the advertising printed material supplier like us, who comes at the extreme end of the chain.
Will this raw material inflation temper your company’s outlook for the year? What is the percentage you are looking at?
We are at the end of first quarter of the financial year 2018-19. It’s too premature to say anything on our balance sheets right now. I would say, it’s going to be a difficult year and very challenging. The only option left for small units is: downsizing their operational expenses to float in anticipation of better days in days to come.
From an export point of view, a strong dollar will boost turnover. Your comments?
A weak rupee is naturally good for traditional sectors like textiles and software. The outlook is good for those who are printing for exported goods but its size is very small when compared to domestic consumption.
When the top-level delegation met the GoI representatives, they were asked what is the revenue the print and packaging industry contributes to the Exchequer? Can you hazard a guess?
I don’t have the latest numbers. The fact is India has the country with largest number of printing presses with approximately 30-lakh persons being directly employed and another 25-lakh in indirect employment with a growth of 18% year-on-year. We have 36 printing institutions where close to 4,000 printing engineers graduate every year. I think in 2017-18, Indian print-packaging’s turnover would be close to Rs
350-billion and by 2020 we are sure to cross the Rs 400-billion mark. There are close to 70,000 news papers. Currently the advertising industry contributes 0.5% of the GDP. FICCI report says, the total adverting spends across media in the year 2017 was Rs 5,6100-crore and our OOH contribution was close to Rs 3,500-crore.