Siegwork, a Germany-based manufacturer of printing ink, will go ahead with its planned investment in Bangladesh and India for capacity enhancement despite the Covid-19 pandemic.
This is expected to impact its growth here by around 10 percent, says a senior company official, reports Outlook.
Siegwerk India, which is a major supplier of printing ink to most of the major packaging companies including Tetra Pak, also said it is looking to increase sourcing of raw materials from India in order to reduce imports from China, which currently accounts for around 30-40 per cent of total imported ingredients.
"We had two major projects going on. One was in India and the other one in Bangladesh. We established a presence in Bangladesh last year and started building a factory there. The other project is in Bhiwadi where we were investing to increase our capacity by about 50 per cent," Siegwerk India President Ashish Pradhan told PTI.
He further said, "Both projects are going ahead. We are still quite positive about the future. There is absolutely no pullback from our side."
In terms of investments, Pradhan said, "These both put together would be around 3-4 million euros (close to Rs 35 crore)."
The company''s existing manufacturing unit in Bhiwadi in Rajasthan has an annual capacity of 20,000 tonnes of ink per annum. In the past five years, the company has been growing at double digits in India. In terms of turnover in India, it is less than USD 100 million per annum.
When asked about the impact of the pandemic, Pradhan said, "We will take a hit for sure. How big a hit is depends on how quickly the business recovers. For us, one ray of hope is that we support the FMCG (fast-moving consumer goods) and the food chain and if that really picks up, it is showing some signs of picking up, then we could still cover up some of our losses."
Stressing that the company is not expecting to have results like what it had last year, he said, "But, we will still be profitable and healthy. We would be around 10 per cent lower than last year."
Pradhan said when the lockdown was announced, its operations were impacted initially but it resumed quickly.
"Today, we would be back to about 80 per cent of what we were in pre-COVID-19 level. To reach 80-85 per cent today is quite an achievement," he said adding that the company took several initiatives, including rent-out apartments for workers to stay near factory to continue work and outreach programmes to local transporters to continue operations.
He said the company has also offered bonus and salary hikes to its employees despite the impact on business due to the health crisis.
Commenting on sourcing of raw materials and the anti-Chinese sentiments, Pradhan said, "We have a lot of raw materials coming from China because China is the stocking basket for the chemical industry. So far, we have had some delays at the ports but nothing major as of now."
He said already 50 per cent of the company''s raw materials are locally sourced from India and 50 per cent are imported with around "30-40 per cent of total imports" from China.
Asked if the company is looking for alternative sources for raw materials, he said, "The way it is going, every business has to be sensible and start putting some risk-mitigation plans in place. We will do it. We have started (looking for alternative sources). We don''t want to be in a situation if tomorrow something happens and our whole operations come under jeopardy."
On alternative sources, Pradhan said, "One of the biggest opportunities would be India. I would expect the chemical industry footprint in India to have a big filip because of the availability of labour and low cost of production. It offers a big opportunity for India."
He further said, "If it makes commercial sense, I would localise 100 per cent but 60-70 per cent would be a good number to aim for."
Reiterating that it is not about quality of Indian suppliers, Pradhan said 15-20 years ago, it was a big issue but "today, manufacturers here understand that without quality, you don''t stand a chance, and now, we are at a stage where that fact has been really understood by the industry".
"I don''t expect quality to be a big topic, I would expect scale of operations, infrastructure and how quickly we can scale up to a level that offers economies of scale, that is going to be critical," Pradhan said.
He said that while the company would be looking to source as much as possible from India but to make up for what is not available here, it will have to look at countries like South Korea, Japan and Taiwan.