Essel Propack doubles capacity of Goa unit

Essel Propack, the world's largest laminated tubes manufacturer, has more than doubled its capacity at Kundain in Goa to 1.5 billion tubes per year at an investment of Rs 40 crore.

The company's facility in Goa makes laminated tubes for FMCG clients including Colgate, Hindustan Unilever, Cosme Pharma, Ranbaxy, ITC, Zandu Pharma and Encube Ethicals.

Mr Ashok Goel, Managing Director, Essel Propack, said the demand for lamination tubes has risen substantially in the last few months given the buoyancy in the FMCG and pharmaceutical sectors, and there is scope for a further expansion up to 2 billion tubes in Goa.

The company has six units for laminated tubes at Murbad, Vasind and Wada in Maharashtra, Baddi in Himachal Pradesh, Kundain in Goa, Silvassa in Gujarat, and three for speciality tubes in Pondicherry, Cuddalore in Tamil Nadu and Uttarakhand.

Besides India, Essel Propack has manufacturing bases in the US, Mexico, Colombia, the UK, Poland, Germany, Egypt, Russia, China, the Philippines and Indonesia, said Mr R Ramaswamy, President, Essel Propack.

The company has the capacity to produce 2.5 billion tubes a year in India and 6 billion tubes globally. Of the domestic capacity, 70 per cent is accounted for by oral care, while the pharmaceutical and cosmetic sectors chip in with the rest.

Essel Propack recently acquired Ras Propack Lamipack and Ras Extrusions after its proposal was approved by the BIFR. “We have approached the BIFR for approval to merge these companies with ours for better operational efficiency. We expect it to happen in the next six months,” said Mr Goel.

Globally, the sector saw a consolidation with the merger of the world's second and third largest tube manufacturers, with the UK-based Betts and Alcan Packaging Beauty merging to become Albea, following the acquisition of a majority stake by the private equity firm Sun Capital, said Mr Goel. Albea has 31 plants in 13 countries.

Essel Propack is also in the process of consolidating its units and venturing into new markets with growing opportunities. On the rising raw material cost, Mr Goel said though long-term contracts have been signed with the FMC companies, there is a provision to reset every three months. In the last one year, polymer prices have increased by 10-15 per cent, he said.

With the recent expansion and growing demand, the company expects its EBITDA margins to increase by two per cent this fiscal. It had registered a global EBITDA of 17 per cent and domestic EBITDA of 22 per cent last fiscal.

Kundain: Despite expansion and strong growth, the company's shares have underperformed in the stock market in the last few months. Mr Goel said the company was at a loss to explain the stock's dismal performance in the market.

“With the markets not seeing value, we want to enhance investors' return by considering various options, including a buyback and delisting, if need be,” he said.

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