Dive into our exclusive interview with Mr. Chandresh Saraswat, Managing Director at Yug Decor Limited, a company that manufactures adhesives for wood products, as he discusses their product range, key clientele, and competition. Discover the impact of crude volatility on costs, how the real estate boom has fuelled sales, the company’s expansion plans, and beyond.
Mubina Kapasi: Hi there, I’m Mubina Kapasi and today on SmallCap Spotlight we’re throwing the spotlight on Yug Decor Limited, an Ahmedabad based company that essentially manufactures adhesives for wood products. I have with me the managing director, Mr. Chandresh Saraswat. Thank you so much for joining us.
Let’s start off by giving all of our viewers an introduction into the company – the kind of products you have. Who would be your key clientele?
Chandresh Saraswat: The idea of starting a company came in 2003 and we started off this company in practically late 2005. We manufacture adhesives. Now there is a lot of adhesives in the market. We were focusing more on the furniture, furnishing and footwear industry. So in that segment we normally make two kinds of adhesives – one is water based, mainly used for furniture industry and other is solvent based, used in Furnishing industry and Footwear industry. So we manufacture both. So we have two manufacturing plants – one for water based and another for solvent based. We make all kind of water based white adhesive. Europeans call it white adhesive, in Gulf it is known as wood glue. Fevicol is the main brand in this particular category and as far as solvent is concerned, we make for Furnishing industry that is sprayable for the chairs and sofa sets. Footwear industry, in that again the two segments can be done one is SR based which is used for leather and another is PU based which normally used in ladies footwear or flip-flops. So we are covering almost all kind adhesives, primarily known for non-industrial products.
Mubina Kapasi: Let’s understand a little bit more about the industry. Who would be your key competitors and you know compared to the levels at which they operate, what sort of manufacturing capacity do you have?
Chandresh Saraswat: The main adhesive company is Pidilite. All of us come after that and as far as Pidilite is concerned they are more or less like Amitabh Bachchan from 1 to 10 goes to them and every other people come from 11th onwards. so that is how it functions. When it comes to National brand or so called Regional Brands, Pidilite has a market share of somewhere around 80% and the rest of us which can be divided is there are another six to seven players. That segment can be divided into 20% mark.
Mubina Kapasi: Currently what kind of manufacturing capacity do you have and are there any plans to sort of increase it?
Chandresh Saraswat: We can manufacture as of now around 300 tons of water base and 200 tons of solvent base and both put together works out to be somewhere around 500 tons per month oblique liters because solvent based adhesive unit, it has been measured in litre.
Mubina Kapasi: As far as I understand for adhesives for the the industry, crude and its derivatives rather are a key raw material, you know you can correct me of course if I’m wrong but if I’m not you can of course acknowledge the fact that investors will look at how crude prices move because that can directly impact your cost and there’s a lot of volatility in that commodity. so how do you manage that?
Chandresh Saraswat: It has been driven through crude only. All of us are dependent on, all raw materials are dependent on the Crude and even if it is not dependent on crude, again the manufacturers say is going up so that’s why the prices are going up. Paint industry and adhesives, both Industries are very much dependent on crude pricing and it is pretty volatile. And we have to bear with I mean we have to take, if Pidilite doesn’t increase prices immediately then all of us suffer and in case they increase the price and once the price is increased normally in consumer industry the advantage is if you increase your prices and the raw material cost goes down then you get a benefit also because you do not have to bring down your price immediately. So it’s a cycle part of game.
Mubina Kapasi: As I understand the adhesives industry has a lot of unorganized players but we are seeing a shift across several sectors in India from unorganized to organized so are you seeing that as well and if you could share with us what percentage of the market right now is dominated by unorganized players and how do you see that move to players like yourself?
Chandresh Saraswat: Yes but unorganized sector especially in at in which we are dealing in doesn’t play a very crucial role because most of the customers are brand conscious. Adhesive of unorganized sector plays an important role in textile industry and paint innovation industry not in where the consumer are the boss. We are B2C where customer also like to have a branded product or at least the brand which you have heard of. It can be from one one brand to another brand but normally customer believe that they should have whatever is being used at their home is once been heard by them or seen somewhere among their friend circle. I mean that is what it really matters but it will not be very correct in our aspect that unorganized sector plays a role.
Mubina Kapasi: You know a large part like you mentioned of your products cater to the furniture market which in turn is something that’s very real estate dependent. Now in the last few years we’ve seen this massive real estate boom so would you say that you’ve also seen that growth in sales for yourself, this boom in realty market that we have seen?
Chandresh Saraswat: Certainly yes
Mubina Kapasi: Are you looking to expand your product portfolio in any way because right now you’re primarily into adhesives. would you perhaps look at adding more premium products.
Chandresh Saraswat: We are into two kind of adhesive – one is water based adhesive and another is solent based. so earlier it was around 60% was water Based and 40% was solvent. But now it is 50-50, approximately 50% in both the sets. Now to answer your question, in case if you are going I mean if you’re looking for how we want to expand or add on something you probably ask that uh we have enough scope of growing our revenue in the category in which we are already in because frankly Speaking we are into a lot of categories in adhesive right now which apart from Pidilite no other person even if they are bigger than us in Revenue they do not have that kind of a range. We are the only person after Pidilite who have the wide range. So we will not be increasing any of our range whatever we have we would with the same range and we will expand geographically and we will go to other states where we are not present and we will try to grow in the places where we are already there so there is lot of scope in our present category, that is one part of your question. In case I want to take your question to a next level, the question was like are you adding any more category into it then the answer is it is not organic. We would be expanding into two other product lines, one is plywood manufacturing and other is laminate manufacturing. We are in constant touch with players who are in and around, I mean who are around Ahmedabad periphery for Plywood and for laminate industry, and we are in talk with three plywood industries and one laminate industry. Whichever is feasible the rate is already been conveyed to them. Our negotiations are on I mean after your meeting, gentleman is visiting us and as soon as we are in a position to finalize it we will take over one company of plywood and one company of laminate as in when it comes on our price because I have to justify to my investors. So we will we will be operating into a different segment all together, although it is connected to Decor industry.
Mubina Kapasi: So we’ll definitely be looking forward to that. you know that acquisition rather as in when it comes by. Let’s talk about the rights issue. I know you’re proposing one very soon. What is the purpose of the rights issue? What is the fund going to be utilized for?
Chandresh Saraswat: It is expansion, working capital is the main criteria because we want to expand our existing network in different parts of India. We need money and this will be used for that purpose.
Mubina Kapasi: Okay just long-term Vision then. let’s say in the next 3 to five years and I know you’ve already given me a glimpse of it but just to summarize it for the sake of our viewers. In the next three to five years where do you see Yug Decor? what’s the vision that you have for the company?
Chandresh Saraswat: On a lighter tone when it came to my uh mind that I had enough of service in my life. This idea came to me in the year 2003 and I called Yug Adhesive Pvt Ltd. I operated a company called Yug Adhesive Pvt Ltd and one of my friends now who is an independent director in my company. He told me what do you really want to do out of I mean why are you leaving a good job and want to start your own business and that too in adhesive. I told him that capital investment in adhesive industry. I have small money so I want to start it gradually then I come to plywood because I know plywood the best. So he told me that you are doing the same mistake. I mean now same mistake in the sense he told me and it stuck to me that Asian Paint is a big organization but they will in entire of their life they’ll be known as paint company. Century ply is a big name they will be known as a Ply industry only. So if you are looking for a Decor industry then you change your name and then we changed our name from Yug Adhesive to Yug Decor Pvt Ltd and that was an idea in 2005 that we will play an important role in Decor industry. So that was the main idea and now since I would be supported with my son, we have professionals working with us and now my son is also is about to complete his PhD, so he will also help me in growing the organization. Let’s see what best can we do. And, coming to your answer I see this company at 100 CR by March 2026.
Mubina Kapasi: All the very best Mr. Saraswat, and thank you so much for speaking with us.