Essel Propack, a world leader in laminated and toothpaste tubes, is re-fashioning its global operations to de-leverage its Indian balance sheet and bring down the rupee debt on its books.

It has brought down the rupee debt from Rs 1,000 crore to Rs 850 crore this fiscal, and is expected to bring it further down by Rs 125 crore next fiscal, mostly repaying through internal generation.

“We are now in the process of putting in place a strategy envisaging our overseas subsidiaries borrowing from their respective geographies to fund their fresh investments plans and repaying to our Indian company. This way, our overall interests costs will come down and, in the process, de-leverage our Indian balance sheet,” Mr Ashok Goel, the company's vice-chairman and managing director,” told Business Line on the sidelines of a function to mark the South India launch of PlastIndia Foundation.

Till now, the company has been funding the expansion of its overseas subsidiaries through Indian borrowings. The company has 11 overseas subsidiaries feeding markets in different geographies.

Global operations strategy

As part of its new global operations strategy, Essel is also in the process of re-organising and re-locating its existing 13 overseas plants to expand its global footprint. “For instance, we had two plants in the US within five miles of each other — we re-located one of the plants to give us a broader geographical access. Similarly, in Egypt, we closed down our existing two plants and re-located to another location as a single plant with larger capacity. The dual objective is to cater to the same geography without expansion and gain new markets with existing capacity,” Mr Goel said. Essel will be looking at new geographies such as the African market, where it has no presence. “We will be looking at entering two or three new markets in the African, Far East and Americas regions,” he said.

The company is also expanding its global production capacity from the estimated five billion tubes this fiscal to six billion next fiscal. This will be done mostly through a combination of de-bottlenecking and expansion of existing facilities. We expect to touch global revenues of Rs 1,600 crore next fiscal, about 12 per cent more than the current fiscal,” Mr Goel said.

India, which has a share of 28 per cent of Essel's global production, is home to a growing plastics market, with a 15 per cent growth in the last five years.

“We expect this growth to continue, as India's per capita plastic consumption, which doubled to 7.5 kgs in the last four years, is set to touch 10 kgs by 2012, as against the global average of about 27 kgs,” he said.

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