Paperwork raises printer demand

If value-added tax as some sections of the trader and retail community grimacing, it seems to be having the opposite effect on printer manufacturers, as they grin and gear up to meet an anticipated 10-15 per cent increase in dot matrix printer sales in 2005-06, primarily driven by its implementation.

Since DMP printers contribute to nearly half the revenues for printer companies, a 10-15 per cent increase in DMP sales can have a significant effect on their revenue growth.

Printer majors -- Epson, TVS Electronics and WeP Peripherals -- seem to be best prepared to take advantage of the post-VAT printer market scenario. The total printer market in India is estimated to be around Rs 750-800 crore (Rs 7.5-8 billion), with the DMP market pegged between Rs 320 and Rs 330 crore (Rs 3.2 and Rs 3.3 billion).

The Crisis Over VAT: Complete Coverage

"The DMP market is expected to grow at over 15 per cent this year, up from last years 13 per cent. To implement VAT, we expect all states to automate revenue collection. Similarly, small businesses, including retail, will benefit from automation," S Shreenivasa Rao, director, TVS-E, said in response to a questionnaire.

TVS-E plans to offer a range of customised solutions, including language printers, to both government and businesses. It also intends to offer a full VAT package in association with software solution providers and system integrators.

The impact of VAT is already obvious. Orders are pouring in from state governments and the demand has increased for entry-level printers through channel partners from small enterprises across the country.

IDC India predicts a 10 per cent overall volume growth in the DMP market in 2005.  "There are various other drivers for growth. These include demand from the government because of e-governance projects and BFSI segments," said Sahaja Sarathy, senior analyst, peripherals research group, IDC India.

Epson, a company that made steady gains in 2004, is also viewing the post-VAT scenario positively but finds it hard to predict its impact.

"Since there is a lot of confusion over implementation of VAT, it would be difficult to forecast anything. Most customers use systems for their overall operations. While backend process is better set and implementation in the front-end system is gaining momentum, VAT will fuel this area mainly. Our estimate to value and quantity could be 7-12 per cent," said N Sambamoorthy, general manager-business products, Epson.

About half of Epsons revenues come from DMP sales. To tap the full potential of VAT, it is planning advertising and promotional activities to target the trade and retail segments.

WeP Peripherals, the third major player in the printer market, anticipates a 10-15 per cent spurt in the post-VAT environment. An exponential growth is expected mainly in the 80-column and 40-column segment due to its low base.

WeP has already seen a surge in 80-column sales with a growth of about 40 per cent in the fourth quarter in 2004 and expects it to grow further this fiscal. At present, about 40 per cent of WePs revenues are derived from DMP sales.

"VAT will increase sales in the retail market and there will be requirements for multi-copy printing. We are doing promotions and creating awareness by distributing CDs on VAT," said Raghavendra Prakash, chief marketing officer, WeP.

The company's flagship models will have state specific customised CDs, which will have VAT declaration forms. The company will also hold awareness seminars on VAT in atleast 6-8 cities.