Indian packaging industry, poised to grow more

With 95% of items still being exchanged unpacked, the packaging industry is doing all the right things to make a positive rub-off. Consumer goods and retailing are driving the larger packaging players to rotate the wheels while the smaller ones are gaining momentum.

16 Oct 2015 | By Noel D'Cunha

This Sunday Column looks at the M&As, expansions and a forecast that augurs well for all segments in packaging.

Last month, Essel Propack, the largest manufacturer of plastic laminated tubes in the FMCG and pharma space, has announced to divest the entire stake in its flexible packaging subsidiary, Packaging India (PIPL), to Amcor Flexibles India. The deal signed is for full cash consideration and amounts to Rs 165 crore (USD 26.1mn).

Ashok Goel, vice chairman and managing director, said, "We have an annual capex of Rs 150 crore ($22.6 million) on new projects and expansions."

Mumbai-based Essel has annual sales of about $380 million, with 21 factories in 11 countries, and is part of the $2.4 billion Essel Group.

Uflex, one of the country’s largest flexible packaging companies, has initiated the process of setting up a first of its kind aseptic packaging plant for liquid packaging in Sanand, Gujarat with a capex of Rs 550 crores in the first phase.

Amit Ray, group president for packaging business at Uflex, says, “Liquid packaging is the first but just one part of the entire set-up. The facility is ultimately going to be an industrial park – with aseptic packaging and the machinery to support, a building material unit, and a packaging unit. It is for both domestic and export. We have three plants in North India and this will be our first in Western India.”

In 2013, Constantia Flexibles Group headquartered in Vienna acquired 60% stake in Ahmedabad-based Parikh Packaging, to form Constantia Parikh, as a joint venture. Early this year, the company invested Rs 50-crore, to expand its Moraiya facility, to up its production capacity to 1,600 tonnes per month. Constantia Flexible in a statement had said, “We are open to taking over some local companies in the future as well”.

Huthamaki marches on after Rs 794 crore deal

In January this year, Huhtamaki Oyj, which already had a 68.8% ownership of The Paper Products, renamed as Huhtamaki Paper Products, acquired 100% of Positive Packaging Industries Ltd, India (PPIL) – through a 100% equity buyout at an enterprise value of Rs 794 crores.

Today, HPPL is a pioneer in technology and market leader in flexible packaging in India.

HPPL has four plants at Thane, Silvassa, Hyderabad and Rudrapur, from it produces custom designed film, foil and paper based laminate structures for primary packaging of products in solid, powder or liquid form, in consumer pack sizes. Plus there are labeling options, which have got certified from global agencies.

HPPL has international business division across four continents and over 50 customers.

Further, Webtech Labels in Navi Mumbai which became a Huhtamaki Oyj subsidiary in 2012 is a specialised manufacturer of high-end pressure sensitive labels, and especially to pharmaceutical customers.

As per a CD Equisearch report, the flexible packaging business in India is highly fragmented. The total market size in India is Rs 240bn (this translates into 1.2mt-1.4mt). In real terms, this means, the topmost players (in the organised sector) account for less than 16% of the industry.

This means, as much as 50% of the industry is still unorganised.

Corrugation: Rs 18500 crore industry

MeadWestVaco (MWV) acquired Gujarat’s Ruby Macons, a leading player in corrugated packaging materials, based in Vapi and Morbi, Gujarat in 2013. MWV’s aim was to ensure greater traction for the company in the global packaging industry and strengthens the company’s presence in India.

During the recently concluded IndiaCorr show in New Delhi, ICCMA, the paper converted by the corrugated box industry in 2014-15 was 4.5-million metric tonnes, which is around 40% of the total paper output in India. ICCMA also claimed that approximately 6.5-billion sq/metres of corrugated board and boxes were produced in 2014-15 with about 15,000 units, in both organised and unorganised sectors, turn out an output of Rs 18,500-crore.

Consider the past two years: Bengaluru-based Pyramid Packaging’s (a part of corrugation major Horizon Packs Group headed by Kirit Modi) investment in a Bobst FFG 618 Quatro flexo folder-gluer in 2013 is the first in India.

In January this year, Ahmedabad-based CanPac Trends inaugurated a brand new corrugation box plant in Tirupur, Tamil Nadu. The investment included a four-colour flexo press and a raft of flute lamination and finishing types of machinery. The company’s total investment amounted to Rs 40-crore. By converting about 25,000 metric tonnes, CanPac’s projected revenue is Rs 125-crore in the next three years, i.e. from the new plant alone.

Delhi’s Meghdoot added capacity to its existing production capability of 5000 metric tonnes per month, with investment in India’s first HP Scitex FB10000 industrial printing press, in addition to the HP Latex 3000 and Kongsberg XP cutting table.

Ahmedabad-based corrugation and label specialist, Astron Packaging, ordered a highly configured six-colour FFG 1228 NT RS flexo folder-gluer line a few months ago. With this heavy-duty investment, which is estimated to be close to Rs 26-crore, Astron’s senior vice president, Niraj Darji is ready for what it’s worth and hopes to better it. The machine will be commissioned in December 2015 and company is confident to close the financial year 2015-16 with a jump of Rs 50-crore, by clocking a turnover of Rs 150-crore.

Blow molder in recent times

Meanwhile, Alpla-Werke Alwin Lehner GmbH is set to operate its sixth packaging plant in India in Hosur. The new facility will manufacture PET bottles, caps and closures. The global packaging blow molder has three factories in Baddi. Plus one each in Hyderabad and Sitarganj.

The basic numbers are: a total network of 160 across 40 countries. In 2014, the Austrian extrusion, stretch and injection blow molder and injection molder recorded annual sales of more than 3.13 billion euros and employs 16,000 people across the world.

In Ahmedabad in the first week of September, Milacron supplied more than 200 molding machines to Cello factories in India and Africa. This is the 10,001st injection molding machine made by The Cincinnati, Ohio-based company.

The global packaging blow molder packaging market, according to a report, consumed nearly 61.2 billion pounds of plastic materials. And at a CAGR of 4.7%, the market should reach 77 billion by 2019.

According to FICCI, the plastic industry has expanded at 11% CAGR over the last five years to reach 12.2mtpa in FY14.

Plastic pundits say, by 2020, India will be second biggest market as compared to China in the global polymer processing market.

Industrial labels for automobiles

Last week, Everstone Capital, the private equity player, has acquired a controlling stake of over 51% in Bengaluru-based SJS Enterprises, the domestic auto components maker, for USD 54 million (Rs 350 crore), said a report in a leading business daily.

The infusion of capital will boost SJS Enterprises set up its next plant near Bengaluru and finance its expansion plans. The company can now enhance production of industrial graphics for refrigerators and washing machines, and for auto component makers in India and overseas. TVS Motor Company, Bajaj Auto, Maruti Suzuki, Tata Motors, LG, Samsung and Whirlpool are its key clients.

A PE firm, Everstone has been founded by Sameer Sain and Atul Kapur (both former Goldman investment bankers), acquired 26% stake owned by American specialty printing company Serigraph and another 25% stake from the three owners of the Bengaluru-based auto components maker.

The three entrepreneurs - S Sivakumar, KA Joseph and V Srinivasan - who started the company in 1987 will manage the day-to-day operations of the company.

The auto components industry in India is on a growth path. As per a recent report in PrintWeek India's sister B2B publication Autocar Professional India, the sector is expected to grow to $115 billion by 2021 from $66 billion at the present.

Everstone is an India and Southeast Asia focused private equity and real estate investment firm with assets under management of $3.3 billion.

Last month, Everstone raised USD 730 million for its third fund, most of which will be used to back entrepreneurs in India and South East Asia. To-date, the investments in India include Modern Foods, Ritu Kumar, VLCC Healthcare, Burger King India, Capital Foods and Sula Vineyards.

The packaging forecast

The major takeaway, from the recently concluded World Packaging Conference held in Mumbai on 10-11 October was: Today India's packaging market is growing at 14% a year and accounts for 24% of the consumer packaging market.

Indian packaging industry is expected to become the fourth largest packaging market in the world with revenue of USD 43.7bn in 2016. This year (2015) it will grow to USD 32.5bn.

The total market for flexible packaging is USD 6.71-bn with consumption of polyolefins for film and sheet projected to increase from 2.5 million metric tons in 2014 to 4.2 million tons in 2020, an average annual growth rate of 9.4 percent. The two fastest growing areas are in lamination for food packaging and shrink film.

The growth drivers are robust economic growth and more than 350 million people between the ages of 10 and 24 plus a booming urban population.

The global glass market share is 3.9% and is expected to reach a whooping figure of USD 60-bn by 2019. Asia Pacific (India and China) dominates the total market share and contributes to 33% of it. Alcoholic beverages alone makes up to 58.3% market share. Other than beverages, the pharma industry has shown the highest growth rate of 4.2% pa.

Even today, packaging the India sees basic household items like flour, rice, sugar and tea being sold, unpackaged.

The simple fact is: organised retailing has yet to make an impact. The Uflex statistics state: About 5% percent of items are packed and a majority — that is 95 % — is unpackaged.

SUPPLIERS
Name	Last Price	Market Capital (Rs.Cr.)	Sales Turnover	Net Profit	Total Assets
Max India	547.65	14, 620.79	581.78	390.94	3, 453.64
Jindal PolyFilm	479.75	2, 017.24	2, 504.47	153.26	1, 933.88
Balmer Lawrie	570.30	1, 625.39	2, 740.37	147.44	903.06
Uflex	167.75	1, 211.35	3, 327.17	141.98	2, 328.17
Polyplex Corp	241.95	773.87	1, 052.03	19.94	661.77
Ester Ind	66.95	626.76	896.27	3.84	605.32
Xpro India	59.95	69.90	257.98	-13.92	294.33
Parekh Aluminex	24.55	31.77	1, 095.48	-384.48	1, 440.19
Shri Rama Multi	4.10	26.02	108.11	-13.31	154.02
Glory Polyfilms	0.50	2.97	77.23	-25.48	198.87
DIC India	702.20	644.55	722.20	-30.96	295.67
Sundaram Multi	2.05	44.20	83.50	-16.75	196.07

CONVERTERS
Name	Last Price	Market Capital (Rs.Cr.)	Sales Turnover	Net Profit	Total Assets
Essel Propack	162.05	2, 545.83	754.61	56.53	795.77
Huhtamaki PPL	274.25	1, 994.12	1, 135.22	64.62	580.76
Time Techno	55.15	1, 158.80	1, 343.08	70.07	1, 240.54
ESS DEE	358.25	1, 148.11	772.80	30.38	1, 260.91
Oricon Ent	65.60	1, 030.23	64.77	6.64	569.85
Flexituff Intl	226.20	562.85	1, 052.86	19.76	912.13
Radha Madhav	26.95	169.36	111.91	118.35	-128.62
Neo Corp	36.75	139.73	743.91	30.21	523.88
Emmbi Ind	48.60	85.97	183.82	5.97	140.06
Karur KCP	64.75	72.84	589.20	3.30	434.86
AMD Industries	26.85	51.46	171.71	5.37	184.44
Jumbo Bag	4.35	3.64	93.65	-1.35	60.84
Paramount Print	0.50	1.34	1.28	-2.82	28.18
Orient Press	59.10	47.72	196.45	1.92	117.47
Antarctica	0.10	1.55	3.23	0.21	17.91
TCPL Packaging	612.00	532.44	497.84	32.19	270.23