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Repro India: Research meet - Views on News from Equitymaster
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Repro India: Research meet
Nov 17, 2008

We recently visited the plant of Repro India to understand the printing industry in general and the company in particular. Following are the extracts from the visit.

Printing value chain
Repro is in the business of end to end printing jobs.

  1. Content::Repro has separate in-house teams of script writers, illustrators and graphic designers. Sometimes they take the help of authors from local schools for script writing. The team of illustrators has 50 members in 3 shifts. While the content stage cannot typically be time bound, it takes around 8 to 15 days to process one job. At the end of the content stage, approval is sought from the client.

  2. Pre-press: At this stage, technical specifications of the output such as shades, resolutions etc. are frozen. The final approval is sought from the client. The company’s time commitment for a job begins after this stage.

  3. Plating: The master print is transferred to 4 aluminum plates through laser printing and baking. Offset printing requires 4 colours, hence the 4 plates.

  4. Print: Repro has 3 printing streams. Web technology is for high volume printing -7,000 to 1 m copies. The input is rolled uncut paper and output is folded forms having 16 pages printed on both sides. Web machines can handle 25,000 to 45,000 forms per hour. Sheet-fed technology is for 1,500 to 7,000 copies. It is suitable for non-standard paper size and thickness. Sheet-fed machines can handle 10,000 to 14,000 sheets per hour. The quality can be controlled better on sheet feds. Print on Demand (PoD) technology is for 1 to 1,500 copies. PoD machines are high end computerised printers.

  5. Post press: Print outs are collated, folded or cut as required and bound. Binding involves gluing, stitching or center-pinning. Covers are laminated using plastic films or UV technology. The stitching unit can handle about 12,000 forms per hour. The binding unit currently handles 2,500 books per hour and will achieve 8,000 books per hour with a new machine.

Quality checks are done at each stage. The company is trying to improve the plant layout in the next 2 months to facilitate better materials movement.

Technology obsolescence
The leading vendors for Web and sheet fed machines are Heidelberg, Germany and Mitsubishi, Japan. Xerox and Kodak are the leading PoD vendors. A Heidelberg heat set web machine costs around Rs 150 m to Rs 200 m. Printing technology is undergoing changes. However, the changes are not as rapid as in IT or consumer electronics. Repro tries to adapt evolving technologies proactively by visiting printing equipment exhibitions such as Drupa in Germany.

Repro’s Vashi facility has 4 web machines, 3 sheet fed machines and 2 PoD machines. Its new facility at Surat will have 3 web machines and 1 sheet fed machine. Repro’s Vashi facility processed 66 m books in FY08 and has a target of 100 m books in FY09. The new facility at Surat will process another 100 m books. Going forward, the Surat facility will basically handle only simple export oriented jobs (80% will be for Africa) on uncoated paper, while the Vashi facility will handle the valued-added jobs.

Working capital
The printing industry is working capital intensive. The bay areas of the printing presses stock nearly 8 to 10 day’s requirement for paper. Repro maintains an inventory of 15 to 20 days of standard stock keeping units (SKUs). In case of non-standard SKUs, the company negotiates the lead time with suppliers. The company has a long term relation with all the major paper mills in India. The company imports about 20% to 25% of its paper requirements, but has the capacity to import 100% of its requirements. Imports provide duty drawback benefits as the company is steadily moving towards exports. The leading foreign sources of paper are Holland, Finland and Indonesia. The company‘s debtors days are in the region of 90 to 100 days. It has a target of bringing it down to 80 to 90 days.

Paper comes in 3 types – Coated on one side (C1), coated on both sides (C2) and uncoated paper. Coated paper requires oxidation drying after printing, while uncoated paper dries by absorption. Paper is classified in terms of weight (grams per square meter or gsm). Paper of 70 to 100 gsm is typically used for printing. Covers are in the region of 130 gsm, while cards are 250 gsm. The cost of paper is denoted in Rs / Kg. Rolled paper costs about Rs 44/ Kg, lower than cut sheets which cost Rs 46/Kg.

The sector is highly fragmented. There are around 5 to 6 lakh printers in India. Publishers also have their own printers. However, publishers generate intellectual property unlike printers. Repro pitches to publishers in terms of concentrating on their core operations.

Sources of competitive advantage

  • Scale: The ability to handle 1 copy to 1 m copies at the same cost and efficiency. It is achieved through technology and continuous upgradation.

  • Agility: Ability to respond to mid-course changes due to internal and external factors. It is achieved through setting up adequate capacities. The company operates at 70% to 75% capacity utilisation. When the company attains utlisation levels of 80%, it initiates new capital expenditure.

  • Servicing: Repro offers valuable pre-press activities, which adds value to its pure-play printing operations.

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