Both the commercial printing as well as packaging printing and converting industry were adversely affected by both the demonetization of November 2016 and the GST implementation of July 2017. Optimistic government supporters-turned-economists and many printers and major packaging converters, by and large, predicted an economic recovery in the second half of 2018. There were some signs of recovery in the third quarter of 2018-19 (the October to December 2018 quarter) when volumes for flexible packaging rose significantly at what seemed like a sign of FMCG restocking coming back. However, as industry experts have pointed out, presses and machines had been bought and installed and excess capacity put pressure on margins.
However, in the first two quarters of FY 2019-20, the economy has been rocked first of all by the confusion created by the government and its former chief economic adviser Arvind Subramanian questioning India’s GDP growth over the last 8 years. It must be kept in mind that it was while Subramanian was still in the Modi government, the GDP growth numbers had been fudged and boosted by anywhere from 1.7% to 2% upward to show high growth that was not borne out on the ground – especially in the printing and packaging industry.
The second problem is that there seems to be a structural economic slowdown – what some observers and writers call ‘a perfect storm’ caused by the confluence of the US-China trade war, Brexit and the collapse in India of the banking industry with high exposure to rogue and escapee borrowers scams and their non-performing assets. Among the scams that have recently come to light are in real estate and infrastructure companies and one that involves the promoters of India’s largest paper company. The increase in unemployment and recession in agricultural incomes has further depressed economic growth, which has rocked the automobile industry together with the impending implementation of Bharat VI emission standards as of 1 April 2020.
Sheetfed offset press imports are affected by all these factors but printers are still optimistic. They continue to create capacity even when margins are thin and hypercompetition looms larger than ever. However, there are some broad trends that the research team at IppStar www.ippstar.org has shared with us.
This has led to a marked increase in imports of used multicolor presses of 7 colors plus coaters and more, in the last year and continuing into this financial year. According to IppStar’s data, as many as six 8-color sheetfed offset presses and three 10-color presses were imported to India in 2017-18. In 2018-19, one 7-color press, fifteen 8-color presses, and one 10-color press were imported by Indian printers from countries including Germany, Japan, the US, Canada, and the UK.
The corollary of this trend is that Q1 of FY 2019-20 has been fairly slow for the import of new multicolor offset presses. Although presses have come in from Heidelberg, K&B, Komori, and RMGT, with the largest number being Komori presses, the outlook for the coming quarters is not overly optimistic. In recent months, although the highly configured packaging presses keep coming including three Koenig & Bauer presses in North India, the majority of new sheetfed offset presses imported are commercial presses. In the commercial segment, the leading book printing exporters have bought a number of new presses including three Heidelberg presses, which include Parksons Graphics in Mumbai and two Heidelberg 4 colors at an unnamed book printing exporter. In the previous year, major book exporter Multivista installed an 8-color RMGT press in its plant near Chennai. In the current year, an RMGT 4-color will be installed at Nutech Print Services in its Faridabad book exporting plant this September.
Talking about the greater influx of used machinery in the printing space, Ravi Shroff, managing director of Nutech Print Services says, “There is an overcapacity. The demand and supply gap has increased. There is a lot of supply now but the demand isn’t there at all. If the supply and demand go hand-in-hand, there will be stability in the market but since it is not so, there is a crisis in the market. Printers are investing in equipment irrespective of the need to invest. Moreover, since the used machines come at a cheaper cost, compared to the brand new ones, printers are investing in these in anticipation that there will be work for the machine in the future. The only way you can get that work is by price undercutting.
“I’ve just bought a machine and there is a cost to it and hence I can’t undercut beyond a point. If a second-hand press is coming at a much lower cost, it won’t have the same print quality, but customers are sometimes willing to make that compromise because they’re always under pressure to reduce costs. Cost-cutting in printing has become a global phenomenon. We’re following a strategy of replacing machines; we’re not adding more machines. We usually buy refurbished presses or pretty young used presses ensuring we don’t compromise on quality. Second-hand is a very broad term and I don’t have anything against second-hand. I have a mix of both to balance my ROI, but the main factor to emphasize is the productivity and quality of a second-hand press. If the current trend continues and second-hand presses irrespective of productivity and quality keep coming only because they are cheaper and cheaper, I don’t see any respite for the industry anytime soon.”
Akshay Kaushal, executive director of Provin Technos which distributes RMGT presses in India, says, “There has been a slowdown in the market, which is pretty evident to all. Q1 FY-2019-20 has not been that great for us. Although we are managing, the demand and supply gap has increased while at the same time currency is fluctuating. All these factors over a prolonged period of time have affected the print demand. People are afraid of investing. We were expecting some respite after the elections but the lack of economic stability has not helped at all. There is a lot of uncertainty in the mind of the customer and the end-user as well.” Kaushal adds that of the 6 or 7 presses that cleared Indian customs in Q1 of FY 2019-20, several were ordered in the previous financial year.
Sangam Khanna, deputy managing director of Komori India, claims a much higher number for the first quarter and says, “The commercial print market, according to me, is in a corrective mode. The ones who are fighting on price are struggling to survive, let alone grow. On the other hand, those who are doing value addition to the print work they supply are growing. They are adding capacity and they alone are the ones who will continue to grow and reap the benefits of this industry in the future.”
Khanna adds, “As far as the business is concerned, it will continue to be there. People who move with time and add capacity with the growing demand for value-added print will continue to grow. I feel that the decline in commercial print doesn’t have much to do with the second-hand presses coming to India in huge numbers. Newly configured presses with high productivity have their own space in the market and that will never cease to exist. All in all, I still see a rosy picture and am pretty optimistic.”