The Hindu Business Line : Essel Propack enters medical devices biz

MR ASHOK GOEL (right), Vice-Chairman & Managing Director, Essel Propack, and Mr R. Chandrasekhar, Chief Operating Officer-Global at a press conference in Mumbai on Wednesday. — Shashi Ashiwal

Mumbai , March 29

Essel Propack Ltd (EPL), announced on Wednesday its entry into the medical devices business with a $10.71-million acquisition of two companies abroad.

It is taking 85 per cent equity stake in Tacpro Inc USA and Avalon Medical Services Pte Ltd, Singapore, both unlisted entities under the same ownership and management. EPL may borrow to fund the acquisition, and is expected to add $9-10 million to its top line in 2006.

The takeover was deemed synergic given EPL's polymer-based packaging business and higher grades of the same raw material being core to the catheters (for non-invasive surgery) it now wants to make. The global market for catheters was worth $5.7 billion in 2002, with the US market biggest at $2.3 billion. The industry is growing at 7-10 per cent.

While market shares were not disclosed, Tacpro and Avalon mainly service US and Europe. As OEM suppliers — which they would continue to be under EPL ownership — the companies design and manufacture medical devices for sale under the brands of large companies in the retail space. They do not own intellectual property rights (IPR) on their designs or products. But the approval from relevant authorities in the medical devices field is such that manufacturing stays with the OEM supplier even as IPR vests with the customer.

"The customer can't go anywhere else, the OEM is wedded to the customer," Mr Ashok Goel, Vice-Chairman and Managing Director, EPL, said at a press briefing.

Under the earlier dispensation, Tacpro contributed design, engineering services and prototyping; Avalon functioned as a high-quality manufacturing base. EPL would continue to keep designing in the US, but migrate more manufacturing-related activity to Singapore, where labour cost may be lower than in the US and the manufacturing quality levels, as good.

For EPL, diversification into medical devices accompanies the onset of tougher margins in its core packaging business. "It was a buyers' world," Mr R. Chandrasekhar, Chief Operating Officer, said. Besides the polymer-driven synergies, medical devices also bring to EPL a recession-proof, high-growth market opportunity.

Shares of Essel Propack moved down by Rs 3.55 to Rs 412.40 in Wednesday's trade on the Bombay Stock Exchange.

More Stories on : Diversification | Packaging | Medical & Surgical Equipments

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