Hit by the pandemic, print seeks new elixir - The Noel D'Cunha Sunday Column

Pragati has installed a DGM folder-gluer?
We invested in a DGM SmartFold 1100SL folder gluer, with the sole purpose of building extra capacity. I am happy that we purchased it because the capacity got filled. We are working happily with it.

Any other reason you opted for a DGM - in terms of its features?
We have three other folder-gluers, a BobstExpertFold with Accubraille and a VisionFold 110 A-2, which was installed in 2015 and a Brausse 550.

As I said, our focus was capacity building and we were not looking for a very expensive kit. There were Robus and DGM. Since we knew Puneet Aggarwal of DGM India, we went ahead with the DGM SmartFold folder-gluer. We bought it for a purpose and it is doing its job.

Every year has a couple of defining moments, but 2020 has changed everything. It’s perhaps no different for Pragati?
Hmm... As far as we are concerned, the packaging division is okay. But the commercial printing division is not in a good condition. We may end up at two-thirds of our last year’s turnover. That’s where we are.

That’s not very good news. There is a sentiment that commercial printing will become irrelevant soon...
No, actually I wouldn’t think so. The reason why commercial printing has diminished in value is: there are no launches, no direct mail. In fact none of the activity that requires commercial printing.

You are still hanging on...
Yes. 

How so?
In Hyderabad, the real estate sector has picked up. Print from that industry sector has returned to us.

What about normalcy?
It will take some time for the market to come back to normalcy. Yes, there will be some part of commercial printing which will go away. That has always been the case. When you first bought your DOS computer, you’d get a bag full of books – How to use DOS, how to use Excel, and such. Nowadays you download the guide books, print if you want or read it on the screen.

Quite true…
The point is, we have weathered all these challenges – some components of print vanished, but some components of print were also added.

Let me rephrase this question. Do you think commercial printing is a growth market? 
I don’t think so. However, as far as Pragati is concerned, I think we still have some steam left in the commercial printing segment. This is because, in our packaging printing business, we have added technologies which can add a lot of value to high-end coffee-table books. So, if a buyer wants to add an embellishment to a book or brochure or catalogue, we’d be able to provide those solutions. That's the Pragati advantage.

We have gone through such tough times in 2001, 2008...
Yes... At that time, we thought some of the print businesses would fold up. But luckily, they were able to recoup and recover. However, 2020 has been an unprecedented calamity. There may be some print companies which may struggle to cope up with the situation.

What is your assessment?
My assessment is: there will be a reduction in the capacity of commercial printing. That will be filled up by some other companies, though things should look up as we move out of this difficult period.

Are we talking about consolidation here?
It will be nice. Right now that could be one of the ways to get out of the crisis. The point is, if someone wants to invest in new technology, say a foiling machine, which is not occupied for 100% of the time. If it is to be utilised for 20% then consolidation helps. A machine bought by one company can also be used by another and vice-versa. I think it would be very nice if there’s a consolidation and it is manageable. The management gets some time off, you get people to do your work.

How well will consolidation work?
It’s in the mind, and the mind has to be crystal clear. Certain fundamentals have to be sorted out. Where your business is heading towards, what’s the next step, and how you plan to take the next step.

Commercial printers moving to packaging – is that an option?
The learning curve in packaging is very steep.

In what way?
The only thing common between commercial printing and packaging is platemaking and printing. Post platemaking and printing, there are many operations within converting, which not only needs capital intensive equipment but also skilled people. That is one. The second is, with most commercial printers, the volumes are much lower than the packaging printers. Suddenly there’s an order for printing 50,000 cartons, and you get a truckload of material, which you don’t know where to store. There are logistical issues, plus planning is needed.

Tough…
Yes, the thing is, these are traits a packaging printer can develop over a period of time.

 When it comes to pricing, printers still seem to be at war even in these times…
It is unfortunate that today printers are competing so fiercely that they all end up earning zero profits. Quotes for print jobs are ridiculously low and done without any calculations. All they want are print jobs at whatever prices just to keep them floating for some more time and in the process, they are postponing the inevitable.

The argument is that if they don’t engage in price war they won’t survive…
I am not saying, everybody has to shut down, but everybody has to work hard and see what best they can do to survive, not struggle to survive by underquoting. As I said, these are unprecedented times, and we have to look at things from a different perspective to come out of the situation. However, there is no one answer or a mantra which can sort out these issues.

When you invest in equipment it should have a decent rate of return. This can’t happen if you start resorting to one of the most common unhealthy business tactics—matching a competitor's price. 

On the other hand, we have someone like Mudrica Quality Offset Printers in Vijayawada who has battled alarmist messaging with work ethics?
I sincerely think what Krupakar Rao of Mudrica in Vijayawada has accomplished is noteworthy. If you give him an ordinary type old book in Telugu, Marathi or any other language, he can scan it and change to ASCI fonts and change it to the type of font you want.

There are so many typed documents which can be turned into books. We are doing it from our CSR funds. A tenth-century author, Bhaskar Bhattacharya wrote about astronomy and provided a detailed mathematical analysis of how to calculate the position of planets, based on which the astrological charts are prepared. A retired IAS officer learned Sanskrit, wrote the book and typed it. It was 1,100 pages. We took the typed pages, gave it to Mudrica, to scan it. We produced the book – a 14point, 1,000 pages beautiful book. I am happy we could do something like this.

Coming back to unhealthy business tactics like beating a competitor at pricing; such practices are not good for the industry…
Also, it's a lopsided way of looking at things. If I look at Dr. Reddy's Laboratories, it was USD 2,116 million last year. This year it is USD 2,320 million. Zydus and Aurobindo are growing at 10%, 15%, or 20% and they need packaging. So who's going to supply the packaging. We - the printers - are going to do it. Why are we buying additional capacity? To increase the capacity. So the point is – buying a new machine should not be to cannibalise someone else’s job. It should be to serve one’s customers who are growing. We should be piggybacking on our customer’s growth. That’s the way to grow profitably.

DGM at Pragati - Hanumanth Rao (r) and team member with DGM

Let’s discuss some ideas that can bring traction into the print business. One, is understanding what the status is of your key customers, get clarity on the new business which will enable you to refill the basket. Your thoughts?
As far as commercial printing is concerned, what’s lost is lost. We will now have to wait for our clients to launch a product for us to print its posters, or launch a new campaign to do their direct mailers, or launch a coffee-table book for us to print it. Maybe some jobs would have been postponed by a year or two or whatever, but some jobs are lost forever.

In the current business scenario, has Pragati run a steady ship?
For Pragati, it came down to two things. One was, paying the salaries of our staff and two, paying the power bills. If we have these two things covered, I think we can float through the next year.

Will you?
Luckily, and by God’s grace, since we are a debt-free company, we are able to float through this tamasha. And most importantly, which is very important, we have not fired a single person from work. We have carried every one of our staff along. Except for April and May, where we were able to pay the lower rung of people around 75%, medium rung 60% and top rung 50% of their salary. For the rest of the time, since June, we have been paying full salaries.

You spoke about your staff and showed how you care for them. 
One of the most important parts of the company is its team of people. Everybody can buy a machine, everybody can buy technology. But what is important to know what your people think about it, take it forward; how many people think that Pragati is their surname and put it on their shoulder and carry it. I am very happy that we have people who think that the Pragati identity belongs to them, and they carry it forward.

What’s the importance of the leadership team in inducting optimism into your business?
When a company grows, expands into three-four locations, it’s the people who run it. It is not possible for me, or Harsha, Hemanth or Mahendra to go and look at every location every day. For example, none of us from Hyderabad could go to Noida during the lockdown, but Ananth Kumar (director, Pragati Pack) is handling it very well. So, essentially, it is the people who will make the company, not the other way around. That’s what we are very happy about.

What about operational excellence and standard operating procedures (SOPs)...
In 2003, we wrote our first SOP when we opted for ISO 9001. The point is: that SOP is good for that day. It does not hold good as time goes by. It has to keep constantly improving, which is called Kaizen.

Please explain the Kaizen concept with an example.
For example, we make one-million cartons every month for a client. We have sold it at Rs 1.45, and we have been selling it for that price for ages. But the fact is that the price of the paperboard is increasing, the labour cost is rising, plus the general inflation is spiralling. So, am I doing this job at a loss? No. I will never do a business at a loss. I will make money. So how do I make money? I have to keep on improving efficiency – make sure that the speeds are better, the time wasted on changeover is improved, and cutting on wastages. All these small, incremental things which can add up to your cost can make a difference to your bottomline. That means, even if I did not increase the price, because of the efficiency, I am able to make money. It’s all about constant improvement.

According to the AIFMP president Kamal Chopra, there are 2.50-lakh printers in India, many of them doing commercial print jobs. Where should they go looking for opportunities?
During the pandemic lockdown, the Prime Minister in his four or five addresses to the nation did not mention industry or industries. I am of the opinion that the government should say – Jai jawan, jai kisan, jai industrialist, not just jai jawan, jai kisan.

Good point.
The service industry is also feeding the majority of the people. While agriculture is 15% of India’s GDP where 60% of people engaged in work, a whopping 55% of the GDP comes from the service industry. If this aspect of the country’s eco-system is not considered as an integral part of the growth engine, then the government is making a mistake.

What is the solution?
Many years ago, when I returned after my first visit to China, I had said in an interview with a print trade magazine that the industries in China survive because of the government. Fifteen years later, I reaffirm that statement.

There have been announcements and stimulus packages...
I am not sure how many industries really benefited from the government. How many industries can say, yes, this has been the tangible benefit. But I am happy that recently, for the first time, the government has given an incentive for a production-linked incentive scheme of several thousand crores. This I expect will give manufacturing a fillip in this country.

That said, there are no printing jobs, because nobody is launching any product, and on top of it the government has banned the printing of calendars and diaries. That’s a major blow.
It’s a misplaced ban. There are so many other freebies being doled out. Printing of calendar and diaries is not a freebie. 

Lack of industry status, is that the reason we have no voice?
See, the issue is whether you like it or not – ours is a careless industry. All my friends in the industry have been trying. When my father (Hanumantha Rao) was the president of AIFMP, I told him, I want an industry status for our industry, he couldn’t do it. The point is, as you said, there are 2.5-lakh printers in India. Imagine the number of people work in these printing firms, the combined turnover. It’s huge.

Your point being...
Look at the government system. They were charging excise for commercial printing of diaries, wedding cards and calendars as a manufactured product. When it was time to implement GST, it became a service item. How on earth did you charge excise for these items under manufacturing? But who am I to tell this to the government? Who will listen to us? To answer your question, in China, the industry survives because of their government. In India, we have survived despite the government support.