Montage Group, a leading flexible packaging company in South Asia, makes intelligent packaging solutions for food, beverages, healthcare, personal care, agro products, pet care and home care industry. The company is based out of Noida and has got five state-of-the-art production units in Silvassa (near Gujarat), Noida, Haridwar, Malanpur (near Gwalior), and Jammu. With a production capacity of 100,000 tonnes across its five factories, the company employs 4,500 people – 2,400 are on its payrolls while the remaining on contract basis. The Packman recently talked with Atit Gandhi, director of Montage Group regarding the current lock-down situation. Here is an excerpt from the interview.
Mahan Hazarika: What is the impact of lock-down on the Indian packaging industry?
Atit Gandhi: Just like any other sector, the packaging industry has also been impacted by the present COVID-19 crisis. Today, the capacities are being utilized just to meet the essential needs of the common man i.e. day-to-day groceries such as dal, rice, atta, oil, salt, sugar etc. Due to the lock-down, it has become difficult in moving people to factories for work. Even moving limited number of people for meeting the restricted production of essentials has become difficult. Lock-down has severely affected transportation, dispatch and logistics. Packaging related to the essential sectors are the only ones which are operational. The industry is currently operating at just 20% of its existing capacity.
At Montage, we are ensuring safe work environment for the existing workers at all our plants. We ensure the essential packaging reach our FMCG clients on time, so that common man receives his essentials on time. Within the existing limitations, we are managing the show quite well.
Mahan Hazarika: How long will it take for the industry to get back to normal after the lock-down ends ?
Atit Gandhi: As it is, the country was already reeling under the pressure of bank and NBFC scams. And to top it, supply chain disruptions due to the COVID-19 crisis will have a negative impact on the country’s economy. For the next 3-4 quarters, at least, the industry is bound to show negative numbers amid margin pressures.
The ongoing crisis is going to disrupt the purchasing behavior of a consumer for a long time to come. Amid factory closures, job losses and a gloomy uncertain immediate future, there is going to be a huge demand contraction with consumers delaying their important decisions such as buying a house. The expenditure towards entertainment, travel and transport, fashion and retail are also going to be hit as the consumer would think it to be judicial in saving for the future rather than spending it at the moment.
When the sales of consumer goods fall, it is likely to severely affect the packaging industry.
It remains to be seen how far the situation goes. However, once it fades, the companies should come together and take joint decisions to bring the industry back to its feet.
Mahan Hazarika: What major steps according to you should the government and packaging companies take to come out of this situation fast?
Atit Gandhi: As the industry is surrounded by heavy competition, the profitability (EBITDA & Net) margins are already wafer thin, when compared to other industries. The cash flow is seriously affected. We need complete support from the government here.
The government needs to come up with relief package for the economy, without which it will be difficult to survive. It needs to come up with actions that will pump enough liquidity in the economy, provide employment and increase consumption. The industry should be allowed to raise working capital without collateral and security. The banks need to come up with a moratorium period for term loans.
All the packaging players need to think about ways to collectively increasing margins. There is no point if the industry is not united here. Otherwise it will be difficult to manage the operations on ground. At Montage, we are positive. We believe in the strength of the country. We will definitely bounce back.