"Wide-format can only be sustained with a good financial back-up," says B Prasad of Printech Digital Imaging
Printech Digital Imaging won a silver for the best innovation in print at the OAC Awards 2011 on 17 June. B Prasad provides a perspective into wide-format printing in India.
25 Jun 2011 | By Samir Lukka
"Wide-format can only be sustained with a good financial back-up," says B Prasad of Printech Digital Imaging
What is the break even time for an investment in wide-format equipment?
An investment in wide-format equipment takes a long time to recover. Large-format printing machines are expensive and hence the longer time to break even. On the other hand, it is becoming imperative for printers to keep investing in new technology and equipment. The cost of maintenance for these equipments is also very high due to the electronic components. This makes the machine value to depreciate faster.
How does one counter this?
The only way to sustain in OOH business is to have a good financial backup. After receiving the order, the payment period of the job is anywhere between three months to one year. Brand managers have unpredictable schedules and usually give short notice orders. It becomes necessary to maintain huge inventory of consumables to ensure timely execution of orders that come most of the time in the eleventh hour and to continue the operations 24x7.
What retail sectors are driving the growth of OOH wide-format printing?
50% of billboard printing and advertising of brands at shop fronts comes from telecom companies and the other 50% from FMCG, financial institutions, cinema and apparel industries.
Although wide-format printing is growing at 20%, the growth period of a wide-format printer is out of sync with that of the retail sector. What is hindering this growth?
There is a catch. Telecom companies are squeezing vendors extremely with low margin or almost no margin procurement methods, due to fierce competition in dropping call rates. This is followed by all others. The yearly contracts negotiated by telecom giants with the vendors have clever terms and conditions. This leaves no scope for a printer to cushion the impact in the event of cost escalations.
Typically, they want an "all Inclusive’ unit price that cannot be changed under any circumstances for the next one year. If government revises the tax rates or the cost of fuel goes up, the vendor has to bear it. Delayed payments by corporates and agencies are putting pressure on working capital management and repayment of loans taken from banks. While the pressure on rates, terms and delayed payments remain unresolved, tax charged on goods sold is being promptly paid every month on 20th, thereby, adding additional burden of prepaid taxes (paid before collecting from customers) to the working capital requirements. The banks do not extend working capital limits unless the vendor shows the annual contracts and satisfactory profitability.
Without sufficient working capital, the printer cannot execute orders. No execution of orders, no growth. Today, it is increasingly becoming difficult to run the business profitably, which is eroding the confidence of owners and material suppliers. Crippled by tax issues and bad debts, many printers are stretched beyond limits and they have no option but to close their operations. But post closure issues are even more frightening, as huge loans taken for machines and pending supplier payments could wipe out the net worth completely. Hence, they are clinging to the sinking boats trying to stay afloat.
What support does a wide-format printer get from suppliers ?
Delayed payments from clients affect the payment to the raw material suppliers. It affects the relationship. At times, printers end up begging for supply of raw materials like media and ink. The erratic supply of OEM inks also causes unpredictable delays in printing schedules unless the printer is ready to maintain huge inventory to meet the exigencies.
What are the tax related issues for wide-format?
The perennial dispute on the rate of tax for prints and fabricated items continues to cause problems for printers every now and then with tax authorities conducting raids, seizing books of accounts and freezing bank transactions. The printers have to spend considerable time and money to resolve these issues which again affect the day to day operations at large.
Click here to download:
Entry Form for PrintWeek India Awards 2011
An investment in wide-format equipment takes a long time to recover. Large-format printing machines are expensive and hence the longer time to break even. On the other hand, it is becoming imperative for printers to keep investing in new technology and equipment. The cost of maintenance for these equipments is also very high due to the electronic components. This makes the machine value to depreciate faster.
How does one counter this?
The only way to sustain in OOH business is to have a good financial backup. After receiving the order, the payment period of the job is anywhere between three months to one year. Brand managers have unpredictable schedules and usually give short notice orders. It becomes necessary to maintain huge inventory of consumables to ensure timely execution of orders that come most of the time in the eleventh hour and to continue the operations 24x7.
What retail sectors are driving the growth of OOH wide-format printing?
50% of billboard printing and advertising of brands at shop fronts comes from telecom companies and the other 50% from FMCG, financial institutions, cinema and apparel industries.
Although wide-format printing is growing at 20%, the growth period of a wide-format printer is out of sync with that of the retail sector. What is hindering this growth?
There is a catch. Telecom companies are squeezing vendors extremely with low margin or almost no margin procurement methods, due to fierce competition in dropping call rates. This is followed by all others. The yearly contracts negotiated by telecom giants with the vendors have clever terms and conditions. This leaves no scope for a printer to cushion the impact in the event of cost escalations.
Typically, they want an "all Inclusive’ unit price that cannot be changed under any circumstances for the next one year. If government revises the tax rates or the cost of fuel goes up, the vendor has to bear it. Delayed payments by corporates and agencies are putting pressure on working capital management and repayment of loans taken from banks. While the pressure on rates, terms and delayed payments remain unresolved, tax charged on goods sold is being promptly paid every month on 20th, thereby, adding additional burden of prepaid taxes (paid before collecting from customers) to the working capital requirements. The banks do not extend working capital limits unless the vendor shows the annual contracts and satisfactory profitability.
Without sufficient working capital, the printer cannot execute orders. No execution of orders, no growth. Today, it is increasingly becoming difficult to run the business profitably, which is eroding the confidence of owners and material suppliers. Crippled by tax issues and bad debts, many printers are stretched beyond limits and they have no option but to close their operations. But post closure issues are even more frightening, as huge loans taken for machines and pending supplier payments could wipe out the net worth completely. Hence, they are clinging to the sinking boats trying to stay afloat.
What support does a wide-format printer get from suppliers ?
Delayed payments from clients affect the payment to the raw material suppliers. It affects the relationship. At times, printers end up begging for supply of raw materials like media and ink. The erratic supply of OEM inks also causes unpredictable delays in printing schedules unless the printer is ready to maintain huge inventory to meet the exigencies.
What are the tax related issues for wide-format?
The perennial dispute on the rate of tax for prints and fabricated items continues to cause problems for printers every now and then with tax authorities conducting raids, seizing books of accounts and freezing bank transactions. The printers have to spend considerable time and money to resolve these issues which again affect the day to day operations at large.
Click here to download:
Entry Form for PrintWeek India Awards 2011
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