Indian pressmaking giant Manugraph's chairman Sanat Shah discusses the future of print, the resurgence in the publishing industry and what the future portends for the Indian manufacturer with Anand Limaye and Ramu Ramanathan
What's the outlook for Manugraph?
I can tell you that in my 60 years of business in the printing industry, I have not seen a period like 2008-09. It started with 2007. The period between 2004-2007, the rise was phenomenal; there was so much of boom that we did not have time to develop machines. Then all of a sudden the economy plummeted like nine pins, and we all know that it was triggered because of the American sub-prime crisis. And to add fuel to the fire, we acquired DGM in 2006 wherein we pumped Rs 100-crore in a bid to double our turnover. It was a time when we had to gather our resources to wriggle out of the crisis. It was because of our huge cash reserves and liquidity that we could sustain ourselves for almost 18 months - and if you count DGM, almost two and a half years. Luckily for us, the market picked up from September-October 2009.
Is the market picking up?
Yes, but I must admit that the newspaper and even publishing industry may not see that boom which we witnessed between 2004-2007.
We saw some pickup during IFRA in Chennai with orders for Malayala Manorama. Is this going to sustain?
As we are all aware, due to sub-prime financial crisis in America and Europe there was a drastic fall in business in all sectors. Multinationals and large corporates were compelled to cut down their advertisements in newspapers and magazines. This severely affected the revenue of newspapers and publishers in all countries. India was no exception and there was considerable fall in advertising revenue as well. This was the period approximately from September 2008 to July-September 2009. The business scenario has steadily improved during the last eight months and demand has picked up well at least in India, and Middle East countries.
What about the emerging markets?
Yes, in fact the whole of Africa has potential. Then there is Brazil, Columbia, part of South East Asia like Indonesia and Malaysia. Hopefully, CIS countries like Russia which is now developing will be good for the print manufacturing industry. All said and done, these avenues, in my opinion, still will not match the boom which we saw between 2004-07. I reiterate that there will be quantity, but it will not fetch the value.
Due to overall drop in demand, manufacturers of 2x1 presses i.e. 4 page machines are cutting down the prices substantially. As a result there will be a greater quantity of machines and not value to that extent. Manugraph by virtue of producing high tech machines and with the introduction of 4x1 machine will be able to sustain the competition. Response for 4x1 machine is over-whelming. We have secured an important order from Malayala Manorama.
What about the Manugraph plant in America?
We have put in a lot of hard work. Very frankly, the last three years has seen a lot of money spent on the project. But over the last three years we have also consolidated our position. The US subsidiary will look after sales of spare parts and warranty services for DGM machines sold by them. It will also take care of requirement for add-on towers for their most popular machine DGM 430, DGM 440 and Advantage. However, the sales of complete presslines will be from India. We expect that when the conditions improve Manugraph will earn good dividend by virtue of the dominant position of its subsidiary in US market.
Has there been a shift in brand, the Indian brand?
The acquisition of DGM has given us a big edge in the international market - Europe, America and South America, where they know that the Indo-American company provides top technology, equivalent to the best on offer. DGM is the best in folders, because of which we could secure some orders from Saudi Arabia, which is very conscious about quality and rely either on America, Japan or German companies. We have secured an order worth Rs 65-crore from Saudi Arabia, because it was backed by DGM's American technology. Once the economy improves in the developed countries, Manugraph will be a leading player in these countries.
What is the status for the sale of towers?
Although there are many inquiries, due to the fall in advertising revenue in USA and closure of large newspapers, the banks are not willing to finance medium and small-sized newspaper organisations. Earlier, the banks were financing this industry by offering term loans up to 10 years with nominal interest. No sooner does the American economy improves, I am sure finance will be available to these medium and small newspaper organisations.
While Manugraph has been a success in India, we also see, Ballarpur, ITC Bhadrachalam, JK Papers, TechNova, TPH, Micro Inks, Welbound, Autoprint, Proteck playing a crucial role in the print space. Where is the Indian manufactured brand headed in 2010?
Indian industry by and large has been in the limelight and is progressing extremely well. In education, it has established top class management schools across the country. Similarly they have made tremendous progress in hospitality and the automobile industry. In media and entertainment they are almost number one in the world. Printing industry too will flourish, both in printing and production. However, this should be projected across the globe if various events organised are done under one umbrella by all concerned.
Are newspaper manufacturers like Manugraph, TPH, KK Printing still worried about the newspaper market?
While demand in developing countries such as continent of Africa, part of Middle East and Gulf countries and India will continue to remain stable I see no improvement in America and Europe.
Is it just the impact of the severity of the financial crisis or the decline in revenue for newspapers? How worrisome is it?
Manugraph by virtue of having wide range of high-tech machines ranging from 35,000 to 70,000 copies per hour will be able to maintain its share of market and also expect to receive good response from established and leading newspapers from India and overseas.
What is your outlook going forward? Do you think the FrontLines and SmartLines are going to be your star thoroughbreds in the stable for this year?
I am happy to say that we have received overwhelming response for our 4x1 machines and this will play a significant role in revenue generation in the coming years. However, I would be quite honest to say that the manufacturers will not be able to see that type of growth which was witnessed in the earlier years.
Why? Do you think that there'll be no new development?
No, the boom of that time. Growth will be there, but in terms of quantity, not in value. When I say value, I mean high-tech, high-speed big machines, which will be divided into six smaller machines. There will be growth in small cities and towns, I may have ten small machines in ten cities, rather than one big press. And I will be serving ten cities. I am also referring to Europe and America, the newspaper market will disintegrate into smaller centres.
Are you worried about the jitters that we are seeing in Europe, especially in Greece? Do you think this could become contagious and, therefore, your balance sheet performance in Russia and Ukraine could be under pressure?
Business in Europe is down and is likely to remain very weak for sometime. As Manugraph's concentration is in India, Africa, Asia, we are not worried. However, Russia i.e. CIS countries economy is of worry and we hope that the economy will improve soon so that Indian manufacturers could enjoy the benefit of that market once more.
How is Manugraph doing in India?
As indicated earlier we have come back on track, order book is quite full but not to the level of the production we had in the year 2007-08. Our focus will be more on introducing innovations in our machines, concentrate more on niche markets and customers by offering high-tech machines tailor-made to their requirements.
What about the DGM-Manugraph tie up?
Yes, Manugraph having acquired Dauphin Graphic Machines of SA, this combination has become formidable as a Market leader across the entire globe in the four-page web offset category.
You've announced the sale of your first UV web offset press order to the Middle East. This is great news. How did this product evolve?
Yes, we have announced sale of first UV web offset press order in the Middle East. This is great news. The UV curing method for printing on glazed news print will be an attractive tool in the hands of newspapers for the years to come as it has become cost effective compared to gas drier etc, which defies the pollution norms. Now that greenhouse emission norms are becoming stricter day by day, UV printing is the future of the printing. With the developments in rubber rollers and blankets, I see that even dedicated towers can be used both for coldset and heatset. Also, there is a distinct trend of cost of UV ink going down. Therefore I see very good growth opportunity in this sector.
Do you think UV will become popular?
I think it should become popular and I don't know why people are shy. There are number of printers doing 16-page commercial work. Now tell me why should a printer do so? His secondhand machine will cost Rs 3- to Rs 4-crore or a brand new machine would cost Rs 15-crore. Instead use a machine that would cost Rs 2-crore. Now I am not talking about those printers who are doing top-end magazine, but those who magazine work below the top-end level. These machines with a UV deck would give the same result. I think people are a bit afraid and we need to get rid of that scare. We are planning to keep a machine on demo at a print plant and print magazine, and show its working. I have seen in America such type of work being done using UV.
What is the competitive landscape today in the print business. You mentioned in 1995 competition is very cutthroat. Now, it's even more. What are your views?
Yes, competitive competition was always there in the past and with present scenario severity of the competition will increase, more so because the large manufacturers like MAN Roland, KBA, Mitsubishi are also under heavy financial strains for lack of orders, so when you talk about selling very high-tech machines fully loaded with all optionals, they will be now in line to offer rock bottom prices. Manugraph will have to maintain its high level of quality and effective after sales service in respect of parts and engineers. This will be a key factor in winning prestigious orders from key publishers, both from India and overseas countries.
I travel around the country and inevitably, the name of PrintMagic comes up. Do you regret shelving the project, because there seems to be a huge demand for sheetfed ....
To make sheetfed machines, you have to have volumes. You have to produce nothing less than 200 presses to be manufactured. I had a capacity to produce 400 presses in 1992. But there was a glut of secondhand machines coming; so how could I compete with those machines? Servicing is the other important factor in sheetfed.
So what you're suggesting is, there was no market for a new sheetfed machine in India?
Yes, things are different now. But in those days, I had to look for a market outside India. I succeeded to a certain extent, because when I introduced Solna Shiva there was a prohibition on imports of single-colour to multi-colour. Then when I bought the technology the imports opened up for secondhand machines. By that time I was knee-deep into production of Shiva presses. With the opening up of imports for secondhand machines, the demand for my machines dropped.
Is that why you targetted Europe?
Yes, I had to sell 95% of my machines to customers outside India, to countries like Germany, France and America. I sold hundreds of machines. It was like carrying coal to a coalmine. I could sustain the Shiva business because I could get a price for the presses. These customers did not want to go in for a secondhand machine, but preferred the second-level of brand new machine.
Is it possible to succeed with only one size?
It was a tough task. Others have 30x40in or 28x40in or 24x36in. To compete with international names like Heidelberg, Manroland, KBA, Komori, Mitsubishi is daunting. Moreover, I had started out to serve the Indian market, which opted for secondhand machines. Selling Shiva outside India, happened by compulsion.
Also, today, sheetfed has to have features like inline coating, automatic plate changing ...
Yes, and you can't sell a sheetfed machine if you don't have all the high-end features, even if they are optional. Printers go for fully loaded machines. If I had to incorporate all these features, I would have to go into the process of searching for a market. And so, on the one hand there was the sheetfed division; and on the other the web division, which was growing leaps and bounds. And it's a fact that from 1997 to 2004, for seven years, the sheetfed division suffered multiple loss every year. This loss was covered up by the good showing in the web division. So the losses were going upto Rs 50- to 80-crore and was not becoming sustainable.
So what you're saying is, the decision of acquiring Solna technology at that time was good, when there was nothing available. But the timing of the opening of import for secondhand machines affected Manugraph?
But the thing is, when I visit a printing company with a Shiva, I see it running quite well.
I agree. I still have customers enquiring about Shiva and PrintMagic from countries in Africa. In Nairobi alone, there are at least 17-20 of our sheetfed machines (Commander, Pure 36, Pure 25). People are also asking why don't you give us PrintMagic, particularly for printing on boards. But I don't think I'd be able to sustain sheetfed.
Earlier you mentioned about secondhand machines. Is there a problem within our industry where we have disparate voices, lack of comprehensive policy ...
Now by and large, the policies have been streamlined except one item, which I think will be corrected. It about the 4x1 machines, where the duty is very low, and excise is similar. But the component parts which go into machines, for example, shaftless drives, three-raceway bearings, autopasters, the duty structure is double. We are addressing this anomaly with the government.
Does this affect pricing?
No, in 4x1 category, the foreign players cannot compete. Due to recession some players are dropping the prices by 20% to 30%. I feel, Manugraph will be able to face the competition comfortably.
What is happening with the training institute? I know it was one of your dreams ...
It's true that we need a top class training and learning colleges. And to do this we need funds. It's not possible for IPAMA to do it. Unfortunately, unless all those involved in printing including those centres in packaging come together and make a consolidated effort, set up a corpus for the purpose, this dearth in trained manpower will continue. A training college needs good faculty members to teach and infrastructure for practicals. It's a very expensive affair. The little training happening at local level is fine, but we need top level manpower and for that we need top level colleges for running printing courses. Besides, it has many other advantages, like, these colleges could bring out good designers, technologists.
And you feel efforts taken in isolation will not help the cause ...
I think the All India Federation of Master Printers can play a big role. They have over 10,000 important printers as their members. The printers also have to give due respect to every section of the printing industry, including the manufacturers, because these manufacturers are the back-bones of the operation. These manufacturers bring engineers and mechanics to pressrooms. And ultimately these manufacturers are going to develop products. Germany and Japan have done it. And now China is following in their footsteps.
Do you think that your vision or thoughts will be taken up by your successors at IPAMA. We find there's no scope of what you are saying as far as AIFMP is concerned.
It's a honest question. And I don't know whether my vision or thoughts will be taken forward by those at IPAMA. But I would suggest that someone from the Federation prepare a masterplan, keeping interest of all concerned equal, as senior members of the manufacturing fraternity, we can have a dialogue at an appropriate level and taken the proposal forward.
The government has committed a budget outlay of Rs 3,500-crore per annum for literacy - and we find there are not enough machines to school books.
That's what I am telling. Sheetfed is not the answer for magazine or book printing. Magazine and book printers have to adopt web presses; install post-press machines like binders and stitching machines. Their work will be completed faster and would also work out cheaper and make more money. This is a high growth area even for us.
Yes, but some printers are worried about the cut-off for web offset.
True. That's why we are taking a look at this aspect of cut-off. Manugraph is considering developing new technology for variable cut-offs. We are exploring the possibility of going into production of converting and packaging machines.
Other Q&A sessions with:
Ashok Nerker of Unique Photo Offset
Pratap Kamat of Uma Offset
Ashwani Bharadwaj of Micro Inks
Pranav Parikh of TechNova
K C Sanjeev of Welbound Worldwide