Plywood and packaging stocks see upward movement on hopes that GST bill will be passed

MUMBAI: Stocks of plywood manufacturers and packaging companies saw hectic activity and a sharp upward movement in share prices on hopes that the GST bill will be passed in the winter session of Parliament.

Century Plywoods shot up 6% to close at Rs 192, Greenply rose 1.5% to close at Rs 922, while Uflex climbed 4% to end at Rs 196, Ester Industries was up 10% at Rs 90, while TCPL Packaging jumped 2% to close at Rs 666. “Companies that face competition from the unorganised sector would benefit,” said Alok Ranjan, portfolio manager, Way2Wealth.
The plywood and packaging industry faces huge competition from the unorganised sector. The Indian plywood and panel industry size is estimated at nearly Rs 18,000 crore with the organised sector contributing nearly 25%, while the rest comes from the unorganised sector.

Similarly, analysts estimate a large chunk of sales for the packaging industry coming from the unorganised segment, and if GST is implemented, it could well be a game changer.

“It is expected that the large indirect tax differential between the unorganised and organised sectors will narrow, thereby providing a level playing field. This is also likely to give plywood manufacturers an opportunity to tap into the unorganised market,” said Dipen Shah, head of private client group research, Kotak Securities.

Dipen Shah reckons that after GST is implemented, carrying out clandestine business will be very difficult which will eventually help organised players.

The government is looking to roll out GST from April 1, next year. GST will not only replace central and state levies such as excise, valueadded tax and octroi with a single unified tax but also remove double taxation. Experts believe GST could boost GDP by 100-150 bps.