Excess Capacities to Hit Near-term Profitability of Greenply, Century and Others: Report
Overcapacity in the medium density fibreboard (MDF) industry will persist till FY21-22 at least. Due to the overcapacity, MDF prices to remain suppressed for the rest of current financial year, says a research report.
 
In the report, India Ratings and Research (Ind-Ra), says the MDF sector has witnessed capacity growth of around 200% through a greenfield and brownfield project in the last couple of years. The total capacities in India, which stood at about 0.5 million cubic meters (CBM) in FY16-17, are likely to cross 1.5 million CBM by the end of FY18-19 and 1.8 million CBM by FY21-22.
 
In FY18-19, the industry witnessed capacity addition from Greenply Industries, while FY20-21 will see Rushil Décor Ltd (RDL)'s greenfield capacity become operational. 
 
"Given the overcapacities, the sector has witnessed a price correction 10%-12% in the first two quarters for FY18-19. The agency expects prices to remain suppressed for the rest of the year because of overcapacity. Known brands, however, are likely to fetch a premium of around 10%-15% in line with historic trends," it added.              
 
The government has supported the MDF industry by levying an anti-dumping duty (ADD) up to $64.35 per CBM on imports of thick MDF till July 2021 from China, Indonesia, Sri Lanka, Malaysia, Thailand and Vietnam, which have together accounted for a major proportion of India's thick MDF imports historically. This measure has provided some respite to the industry. 
 
However, Ind-Ra says post-July 2021 the ability of manufacturers to convince the ministry to extend the duty further will be critical. Imports of thin MDF are duty-free and do pose a threat to domestic producers. 
 
From its interactions with industry players Ind-Ra says that the volume of thin MDF business in India is relatively low. Hence, the absence of ADD does not have a major impact on domestic players.
 
Based on discussions with industry players, the ratings agency says it understands that the average cost of raw material (agro wood) is Rs1.4-1.5 per kg for global players and over Rs2/kg for Indian producers. "There is abundant availability of agro-wood globally. However, restrictions on exports agro wood in some countries and high freight cost have adversely affected the ability of Indian players to import the product," it added.
 
The MDF industry is dominated by a few players such as Greenply Industries, Balaji Action Buildwell, RDL. In addition, Century Plyboards India Ltd (CPIL) has set up a new unit. 
 
These players, along with some other smaller capacities and imports about 30%, made up the entire MDF industry in India in FY17-18. "Historically, the total fixed cost (excluding interest expense) for established players in the MDF segment has accounted for 15-20% of their revenues. Barring RDL, which has raised large debt for its upcoming facilities, all these players have low debt on their books," Ind-Ra says.
 
According to the ratings agency, given the low fixed costs and debt, at an average capacity utilisation of around 70%-75%, these players will be able to cover their fixed costs as well as scheduled debt payments, including interest and instalments. 
 
"Players with higher debt levels will need higher-than-average capacity utilisation. Capacity utilisation in this industry was more than 95% in FY17-18, indicating a cushion of 20-25% decline. The agency expects MDF oversupply of 35%-40% till FY21-22, as the anticipated annual industry growth of 11%-12% will be much lower than the rate of new capacity growth," Ind-Ra added.
 
Ind-Ra says it expects players to record deterioration in their credit profiles as they would have to resort to cuts in prices and margins to survive.  This could result in rating downgrades/changes in the outlook to Negative.
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Ramesh Poapt

1 week ago

Good one!

Flawed telecom spectrum management caused losses: CAG
The Comptroller and Auditor General (CAG) has found several shortcomings in the Department of Telecommunication's (DoT) spectrum management policy which has resulted in losses to the Union government's exchequer.
 
According to the report submitted to the Parliament on Tuesday noted that allocation of a set of spectrum in 2015 was done on a first-cum-first-served (FCFS) basis, in contradiction to the recommendations of a committee, even as 101 applications for microwave (MW) spectrum were pending with the government.
 
"In contravention of the Committee's recommendations, allocation of 'MW Access' (microwave access) spectrum had been done on 'First Come First Serve' (FCFS) basis to date as was being done for 2G license or 'Access Spectrum' till 2009. This was despite the fact that it was used for providing public commercial services and 'MW Access' spectrum was allotted for the entire service area (first carrier) and or at least for some cities, as being done in case of access services spectrum (2G/3G/4G spectrum). 
 
It was also found that allotment of MWA to Access Service providers was withheld by DoT since June 2010 and allotment against only one application was made in December 2015. There were 101 applications pending till November 2016 for allotment of MWA," the 125-page report said. 
 
The MW access is provided to telecom service providers for mobile services.
 
The Telecom Department had constituted a committee in December 2012 to look into the allotment of spectrum in various categories of spectrum users and proposed that the spectrum allotment in microwave band to all the operators should be done through auctions.
 
The report also found that allotment of "MWA to Access Service" providers was withheld by DoT since June 2010 and allotment against only one application was made in December 2015. The report, however did not name the applicant.
 
"Thus by non-allotment of MWA spectrum to Access Service Providers despite availability resulted in loss of revenue to the government," said the report.
 
It further said the financial impact due to delay in withdrawal of excess spectrum held by Bharat Sanchar Nigam Ltd (BSNL) is Rs 520.79 crore.
 
Further, the audit report found that while putting up spectrum in 1800 MHz (megaheartz) band for auction, this portion of additional guard band spectrum was not considered for sale, rendering 4.4 MHz spectrum (0.2 MHz spectrum in each 22 LSAs) in 1800 MHz, unutilised. 
 
The report has estimated the annual loss on account of non-utilisation of the 4.4 MHz spectrum was Rs 30.92 crore.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

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121 entities including IL&FS, Kingfisher, Helios & Matheson, United India Insurance, Sahara Q Shop, Ruchi Soya, Sterling Biotech, Heera Gold, Religare, Fortis and DS Kulkarni under SFIO scanner for Frauds and Illegal Transactions
The Serious Fraud Investigation Office (SFIO) is investigating as many as 97 entities including Infrastructure Leasing and Financial Services Ltd (IL&FS), Kingfisher Airlines Ltd, Helios & Matheson Information Technology Ltd, Sahara Q Shop Unique Products Range Ltd, Delhi and District Cricket Association (DDCA) among others, reveals a reply in the Lok Sabha.
 
"The ministry of corporate affairs (MCA) has ordered investigation against such companies where they are allegedly involved in fraudulent activities including through illegal accounts or transactions," says PP Choudhary, minister of state for law and justice and corporate affairs, in a written reply. 
 
According to the minister, in case of 24 companies, the SFIO has completed investigation and had filed prosecution against the company and its directors and promoters. Three members of parliament (MPs), Rajesh Pandey, Ravindra Kumar Pandey and Nishikant Dubey had asked the question on illegal accounts and transactions carried out by companies and action taken by the government. 
 
Mr Choudhary said, during FY15-16, the ministry ordered investigation against 25 companies, out of which it has filed prosecution on four cases. SFIO was handed over probe of about 30 companies in FY16-17. During the next year, SFIO investigated 33 cases out of which in two cases the investigation has been completed and action has been taken. In current financial year (FY18-19), prosecution has been filed against seven companies and their directors under various provisions of the Companies Act. These companies include, Unity Infra Projects Ltd, Zen Shaving Ltd, Birla Pacific Medspa Ltd, Usha Martin Telematics Ltd, Usha Mutual Benefit Society Ltd, Woodland Retail Pvt Ltd, Nava Diganta Capital Services Ltd and Nava Diganta Agro Industries Ltd. In the current fiscal year, filing of prosecution against RTC Properties India Ltd and Anatnath Vincom Pvt Ltd is under process.
 
Here is the list of companies under the SFIO scanner...
 
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COMMENTS

Mahesh S Bhatt

2 days ago

Better late then never Mahesh Bhatt

Dayananda Kamath

1 week ago

There are other ways also of concealing NPA. Nationalised banks issue guarantees to PSUs for the limits availed by them with other financiers and enhance the guarantee limit including unserviced interest periodically since long time. Will they investigate.

R Balakrishnan

1 week ago

Doubt if the SFIO has the headcount and head contents to investigate. Most of the cases will go unsolved in to perpetuity

mahesh

1 week ago

all HAVE CHEATED INNOCENT PUBLIC, GOVT. DOES NOT PUNISH THEM, PUBLIC NEVER GETS MONEY BACK, DIRECTORS START SOME OTHER BUSINESS AND KEEP ON CHEATING, PROCESS IS SLOW AND IN-EFFECTIVE, JUSTICE DELAYED IS DENIED. GOVT. MUST TAKE FINANCIAL FRAUDS SERIOUSLY PL.

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