Covid-19 has displaced India’s print economy

By 20 Aug 2021

It is said that it takes 21 days to change habits. Now with 21 months of the new normal – such as work from home, plus use of digital platforms, we are seeing disruption in our buying behaviours.

Atre: The focus has shifted to packaging in the last few years as a growing sector of our industry.

This will change the print pattern forever. It is being said the year 2021 will be tougher than 2020. Sadly, it is proving to be true. The second wave has been deathly. This led to a second lockdown, impacting business and their P&Ls. This year, there was no panic buying for groceries and medical essentials. There was no pent-up demand as seen last year. After the first lockdown, it was expected that some of the businesses would regain the business they lost, but the second wave thwarted many plans and blueprints. Having said that. It’s worth our while to look at the numbers of three majors.

  • Huhtamaki India which has a market cap of Rs 2,277-cr and an ROE of 12.8 %. had reported sales of Rs 2,46-cr - and an operating profit of Rs 235-cr for 2020.
  • EPL (formerly Essel) had reported sales of Rs 3,092-cr and an operating profit of Rs 610-cr for the year ended Mar 2021. EPL has a market cap of Rs 7,780-cr and an ROE of 15.5 %.
  • Uflex reported sales of Rs 8,891-cr and an operating profit of Rs 1,803-cr for the year ended March 2021. The Noida headquartered company has a market cap of Rs 3,987-cr and an ROE of 16.4%.

At the other end of the spectrum, the printing industry has seen an unprecedented crisis from all sides. Key raw materials like paper, paperboard, craft paper, films, foils, inks, coatings, and adhesives – most of them have suffered an acute to medium shortage coupled with a sharp increase in prices. Reduced demands in the market have further worsened the crisis to overcome the burden of fixed cost. This led to price competition, and a rush to capture a share of the shrunk pie.

Covid-19 protocols have meant restricted visits to customers. Based on telephonic discussion with industry peers, my assessment is, commercial printing has reduced to 10-15% of the pre-Covid period. Publications, which include newspapers are almost at 50% (number of pages have shrunk along with reduced circulation). The education sector for print – schools to colleges to teachers and students are e-learning and training online. This has impacted the education sector, which could witness a 25% decline in print businesses engaged with the education sector.

The focus has shifted to packaging in the last few years as a growing sector of our industry. But, after the second wave and lockdown, the demand for both carton and flexible packaging has seen a dip. Carton packaging is estimated to be operating at 65%-70%, while for the first time since Covid, flexible packaging has seen a dip of about 20-25% and it is estimated to be operating at 75-80% of its normal. Here, it is important to note that during the first lockdown, flexible packaging was reported to be up by 10-15% of its normal.

So, the net negative impact this year will be about 35-40% from the same period as of last year. The only silver lining is the label industry. The festival season is around the corner but there is no buzz in the market. The big brands fear that if a third wave hits the sub continent (predicted by September 2021), then the entire festival season will be wiped out and sales of gift packs and luxury products will be decimated. This could damage the bottomline of many in the entire supply chain. Hence, everyone is erring on the side of caution about their procurement decisions. After discussions with a few print firms in Western India, I have jotted a few survival points:

  1. MSME loan (Additional 20% given on facility customer has used from the bank) which has to be returned in the next four years should be extended to eight years.
  2. There should be a subsidy provided in electricity bills for the next couple of years.
  3. The GST should be reduced from 18% to 12% and 12% to 6% on consumables.
  4. 4. ESIC payment from the employees and employers should be scrapped for the next couple of years.


We hope that our brothers and sisters behave more responsibly for the next few months. If yes, we can dodge the third wave. It is our best bet for business revival.


Prashant Atre is the managing director at Toyo Inks Arets India

Events

Oct
07
Oct
23
Nov
09

PackPlus South 2021 NEW!

Oct 07 - 09 Oct 2021
Hitex, Hyderabad

IndiaCorr Expo & India Fo... NEW!

Oct 23 - 25 Oct 2021
India Expo Mart, Greater Noida...

Labelexpo India 2022 NEW!

Nov 09 - 12 Nov 2022
India Expo Centre, Greater Noi...

Latest Poll

Counterfeiting in India is big business. Which factor perpetuates this menace?