Why India's biggest laminate makers are losing money on wood

Walk into any modular kitchen showroom in India and look closely at a cabinet shutter.

There are two things going on. There's the thick board inside, the part nobody sees. And there's the thin decorative sheet glued on top, the part everyone pays for.

Merino Industries has spent six decades owning the second one.

The Lohia family started the business in 1965 out of Hapur in Uttar Pradesh. Today Merino is one of India's largest makers of high-pressure laminates. They sell to 80-odd countries. Exports alone are ₹735 crore, or 29% of revenue. They make restroom cubicles, lab worktops, facade cladding, compact panels. And in a genuinely odd side-quest, they're also India's largest producer of potato flakes.

The laminates business is lovely. In FY26 it did ₹1,859 crore of revenue and threw off ₹219 crore of operating profit. That's an 11.8% margin on a product where architects specify you by name and dealers stock you because customers ask for you.

So Merino did what every successful component supplier eventually does. It looked at the board underneath the laminate and thought: why are we giving that away to someone else?

That's where the trouble starts.

Merino built an integrated panel and furniture complex at Halol in Gujarat. Chipboard, prelaminated panels, modular furniture, and a new flagship product called Marine Board. The particle board plant was commissioned during FY26.

Here's what that business looks like today.

Read the assets column again.

The panel business now carries more capital than the laminate business that funds it. ₹1,046 crore against ₹892 crore. It generates a third of the revenue. And it loses ₹120 crore a year before interest.

The laminate business earns ₹219 crore. Everything else burns ₹163 crore of it. Add ₹55 crore of interest and Merino ends FY26 with a profit before tax of ₹1.72 crore on ₹2,521 crore of sales.

Net profit: ₹32.89 lakh. Not crore. Lakh.

Earnings per share went from ₹117.52 in FY22 to ₹0.29 in FY26.

Before you conclude the Lohias made a uniquely bad bet, look at what happened to everyone else who walked into engineered panels at the same time.

Greenpanel Industries, India's largest wood panel maker, posted a net loss of ₹29 crore in FY26. Its MDF volumes grew 27.8% in Q4. Its profit fell 95%.

Rushil Decor's FY26 profit fell 86.7% to ₹6.4 crore. It has since pushed through a ~15% price hike on MDF and ~10% on laminates.

Greenlam, which we'll come to properly in a minute, saw its return on capital collapse from 14% to 7%.

Four companies. Same year. Same shape of damage. That's not four bad managements. That's an industry.

So what broke?

One, everybody built at once. India Ratings estimates MDF capacity grew 15–20% year-on-year in FY26 on the back of greenfield and brownfield expansions. Demand is growing at a healthy clip, roughly 12% a year over the medium term. But capacity ran ahead of it. When a capital-intensive plant with high fixed costs can't fill itself, the only lever left is price. Everybody pulled it at the same time.

Two, imports. Thailand, Vietnam, Indonesia and China have been shipping cheap board into India for years, capping what domestic players could charge. A Quality Control Order on MDF imports finally kicked in on 11 February 2025, which should help. But it's a slow-acting medicine.

Three, input costs went the wrong way. Resin, methanol, formaldehyde and freight all inflated hard through FY26. Timber prices stayed volatile.

Greenpanel's September 2025 quarter shows what that does. Sales grew 17.5% year-on-year to ₹396 crore. Operating margin fell from 8.86% to 6.26%. And the company still reported a net loss of ₹6.12 crore, against an ₹18.50 crore profit a year earlier. The quarter before that was worse: a ₹34.62 crore loss.

Note what's happening there. The operating margin is still positive. It's depreciation and interest that drag the quarter below zero. That's not a trading problem, it's a balance sheet problem, and it's the same one Merino has.

Four, and this is the real killer, the capex cycle is brutal. You spend the money, you commission the plant, and depreciation plus interest start immediately at full rate. Volumes arrive over four or five years. Those middle years are where companies go to die, and FY25–FY26 is exactly where the Indian panel industry sits.

Analysts don't expect meaningful pricing power to return until industry operating rates cross roughly 80%. That's an FY28 story.

The annual report calls FY26 "a turnaround" and "a significant improvement."

Let's check.

Technically, yes, they flipped from red to black.

Practically, three things deserve a closer look.

First, the profit isn't operational. Merino's own notes disclose it plainly: the company received a government grant in the form of an interest subsidy for commercialising the Halol plant, and that is what produced the marginal profit at company level. ₹8.2 crore of grant income flowed through the P&L. Current tax was nil. Strip the subsidy and FY26 is still a loss-making year.

Second, the panel losses barely moved. Panel revenue jumped from ₹471 crore to ₹608 crore, up 29%. The segment loss went from −₹121.6 crore to −₹119.8 crore. An improvement of ₹1.8 crore on ₹137 crore of extra sales.

That's the number that should worry you most. When a plant is ramping, incremental volume is supposed to come at very high contribution margin because the fixed costs are already sunk. Merino added a third more revenue and got almost nothing for it. Either pricing is being given away to buy volume, or costs are running harder than expected. Probably both.

Third, potato flakes flipped. It made ₹3.8 crore in FY25 and lost ₹13.6 crore in FY26 on ₹83 crore of sales. Small, but it's now a second cash drain rather than a hedge.

The one genuinely encouraging line: laminates held. Revenue up 6%, profit up 7%, margin intact at 11.8%. Capacity utilisation at 83%. The core franchise didn't crack while the diversification was blowing up. That matters a lot.

Here's the twist. Merino's P&L is ugly and its balance sheet is quietly getting healthier.

Three good things happened.

Operating cash flow more than doubled to ₹237 crore, helped by ₹46 crore released from receivables and ₹26 crore from payables. Capex fell by more than half to ₹55 crore, because the building phase is over. And they used the gap to knock ₹119 crore off debt, most of it expensive short-term borrowing.

Capital work-in-progress is down to ₹31 crore. Gross block is ₹1,181 crore. The money has been spent. There is no second Halol coming.

Two things still hurt.

Inventory sits at 181 days, which is roughly ₹666 crore of working capital parked in a warehouse. And debt service coverage is 0.69x, meaning earnings available for debt service don't cover interest plus repayment. They're bridging that with the balance sheet, not with profits.

Also worth flagging: Merino is unlisted. Paid-up capital is ₹11.3 crore across about 1.13 crore shares. There's no equity market to tap if this goes wrong. And the board still declared a ₹1 per share dividend on ₹32.89 lakh of profit.

You asked for the comparison, and it's an uncomfortably close mirror.

Greenlam Industries is the Jindal family's laminate business, spun out of Greenply in 2015. Listed, ₹6,023 crore market cap, 51% promoter-held. Same starting point as Merino: a world-class, export-heavy, brand-led laminates franchise.

And it made the same decision. Between FY23 and FY25 it poured money into plywood at Sandila, a laminate plant in Naidupeta, and it now lists particle board as an upcoming product category.

The single most revealing line is the one you have to compute yourself.

Depreciation plus interest as a share of operating profit:

• Merino: ₹182 crore of ₹184 crore. 99%.

• Greenlam: ₹238 crore of ₹325 crore. 73%.

Both companies are being eaten alive by the cost of assets they've already built. Merino is simply further down the same road.

The differences that matter:

Greenlam is growing faster. 18.6% revenue growth against Merino's 9.5%, and 20% on a trailing basis. Its plants are filling up quicker.

Greenlam is more leveraged. ₹1,160 crore of debt against a ₹1,180 crore net worth. Nearly 1:1. Merino's 0.45x is far more comfortable. Greenlam's interest bill alone is ₹96 crore, and it nearly doubled in two years.

Greenlam is already past the inflection. Free cash flow was −₹440 crore in FY24 and −₹56 crore in FY25. In FY26 it was +₹204 crore. Cash conversion is back above 100%. Merino's capex ended a year later, so it's roughly a year behind on the same curve.

Greenlam has already started recovering. Look at the quarters. Q1 FY26 was a ₹16 crore loss. Q4 FY26 was ₹41 crore of profit. Trailing twelve-month profit is ₹93 crore against ₹56 crore for the full year. Profit growth on a TTM basis is +171%.

But the market has already paid for that. Greenlam trades at 65x earnings and 5.1x book with a 5% ROE. The recovery is in the price. Merino, being unlisted, has no price at all.

Four levers, in order of how much they matter.

1. Filling Halol. This is 80% of the story.

Depreciation of ₹127 crore is now a fixed cost. It doesn't rise if Merino sells more board. Neither does most of the plant overhead. Which means every incremental rupee of gross margin from here drops close to straight down to profit before tax.

Run the arithmetic. If the panel segment closes even half its ₹120 crore loss, Merino's PBT goes from ₹1.7 crore to ₹62 crore. Close all of it and you're at ₹122 crore, which is roughly where the company was in FY22. Nothing else has to change. No new capex, no new market, no new product.

Operating leverage is what destroyed this P&L. It's also the only thing that can rebuild it.

2. Deleveraging, which is already working.

₹237 crore of operating cash flow against ₹55 crore of maintenance capex leaves roughly ₹180 crore a year for debt repayment. At an ~8–9% cost of debt, every ₹100 crore retired adds ₹8–9 crore to PBT. Three years of this and the interest line halves.

3. Escaping commodity pricing.

Marine Board is the interesting bet. Boiling-water resistant, termite resistant, ultra-low formaldehyde, 100% agroforestry wood, launched in Indian and export markets simultaneously. If it lands, Merino sells a branded panel at a premium instead of a tonne of chipboard at spot. That's the difference between the laminate economics and the board economics, and it's the only durable way out.

The Harmony coordinated surfaces idea is the same thought. Sell the panel, the laminate, the compact and the edge band as one matched system, and the customer stops price-shopping the board.

4. The cycle turning.

The QCO on MDF imports is in force. Peers are pushing through 10–15% price hikes. Capacity additions are slowing because nobody can fund new lines at these returns. If industry operating rates get to ~80% by FY28, pricing power comes back to everyone at once, Merino included.

And the thing nobody should ignore: laminates at 83% utilisation, growing 6–7% a year at a stable 11.8% margin, is a genuinely good business that keeps paying the bills while all of this plays out.

Merino is not a broken company. It's a very good laminate business carrying a very expensive, not-yet-profitable board business on its back.

The capex is done. The debt is falling. The cash flow has doubled. The core franchise is intact. What's missing is one thing: volume through Halol at a price that doesn't give the margin away.

The uncomfortable fact is that FY26's ₹608 crore of panel revenue, up 29%, moved the loss by ₹1.8 crore. Until that number starts moving properly, everything else is just a well-managed wait.

Greenlam is running the same experiment with more debt, more speed and a stock price that's already assumed it works. Merino is running it quietly, with a stronger balance sheet, and nobody watching.

One of them is going to be right about engineered panels. Possibly both. Just not this year.

Until next time.

Sources: Merino Industries Limited Annual Report FY2025-26 (standalone, audited by Walker Chandiok & Co. LLP); Screener.in consolidated data for Greenlam Industries; India Ratings & Research MDF sector commentary; Greenpanel Industries standalone quarterly filings as reported via Capital Market; Rushil Decor FY26 results release. All Merino figures are standalone; the company has no subsidiaries. Greenlam figures are consolidated; Greenpanel quarterly figures are standalone. This is analysis, not investment advice.