Essel Propack (ESSELPRO), earlier known as Essel Packaging, was incorporated in 1982. It is the second largest manufacturer of laminated tubes in the world. It commands over 70% of the domestic market for laminated tubes. It is part of the Essel Group, whose other interests include satellite communication and amusement parks. The company was started in 1984 in technical collaboration with American National Can Company of US, Karl Magerle Kusnacht of Switzerland, and Kaito Chemicals of Japan.
The company supplies tubes for toothpaste, cosmetics, pharmaceutical products, grease and adhesives. The oral care segment constitutes 70% of the company`s revenue. Essel supplies the basic laminate or the web to its operations in Nepal, Egypt and China. Apart from this export revenue, the parent company also get royalty between 5% to 8% of the sales and dividend from its overseas ventures.
The company`s current capacity is about 3,000,000,000 tubes per annum of which the Indian market accounts for 1,200,000,000 tubes, the Chinese market around 1,000,000,000, and the remaining is supplied to the rest of the world. The company, however, is not targeting markets of Australia and New Zealand. It enjoys a 70% market share in India and China while it commands a 25% market share globally.
| Portfolio | Scheme | Date | No. of Shares | Value | %* |
| DSP Merrill Lynch Small and Mid Cap Fund | 31-JUL-07 | 4454369 | 266.59 | 1.90 | |
| Baroda Global Fund | 31-JUL-07 | 24363 | 1.46 | 2.04 | |
| UTI Mid Cap Fund | 31-JUL-07 | 223627 | 13.38 | 0.33 | |
| SBI Magnum Sector Funds Umbrella - FMCG Fund | 31-JUL-07 | 99979 | 5.98 | 6.59 | |
| UTI Balanced Fund | 31-JUL-07 | 515198 | 30.84 | 0.27 | |
| UTI Childrens Career Plan Balanced | 31-JUL-07 | 4176380 | 249.96 | 0.95 | |
| UTI Dividend Yield Fund | 31-JUL-07 | 1853023 | 110.90 | 1.68 | |
| UTI Master Value Unit Plan | 31-JUL-07 | 3271283 | 195.79 | 3.35 |
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Announcing these developments, Ashok Goel, Vice Chairman & Managing Director said, "The Rehabilitation Proposal has already been worked out jointly with the Management of the RAS Group. This proposal is in the process of being filed with BIFR. Subject to the approval of our proposal by BIFR, we will announce the details as we go forward", Regarding Ras Propack Lamipack and RAS Extrusions, Ashok Goel added, "The Technology platform adopted by RPL and REL is the same as that adopted by Essel Propack. This will be a great advantage while integrating the organization and will further enhance our capabilities at the market place."
RPL and REL are in the same line of business as the Company manufacturing Laminated Tubes Laminates respectively. This move will give the Company access to further capacities for tubes and laminate other than consolidation of capacities in the India market in due course of time, the operation of RAS Propack Lamipack & RAS Extrusions may be integrated with the operations of the Company.
REL manufactures multilayered laminates used for the manufacturing of Laminated Tubes. REL has its manufacturing facility at Chakan in Pune District. The Company's customers include multinationals operating in India. REL has entered into long term arrangements for supply of laminates with RPL. Besides REL also exports Laminates to Iran, Srilanka etc.
RPL is engaged in manufacturing and supply of soft squeeze laminates tubes. RPL has its manufacturing facility at Chakan, in Pune District.
RPL's Laminated Tubes are used in industries such as Oral care (dentifrice tooth paste), Pharmaceutical, Cosmetics, Adhesive etc. RPL's key customers are Hindustan Lever Ltd, Dabur, Choice Laboratories, Himalaya Drug Company, Personna Cosmetics and other private labels in the Indian Market RPL's tubes are also exported to Iran, Unilever Srilanka etc.
PRL has a modern state-of-the-art production facility including the latest Laboratory & Testing facilities. Besides RPL adopts the best processes practices and systems for manufacturing, and quality standards such as:
- TPM (Total Product Maintenance) for manufacturing activity
- GMP (Good Manufacturing Practices) at the shop floor for manufacturing activity
- HACCP (Hazard Analysis and Critical Control Point) during manufacturing process
- BIS (Bureau of Indian Standard) for product testing and certification
- FIFO (First in First Out) system for raw material utilization.
During the quarter, the extruded tubes plant of Arista Tubes in Danville, USA, has streamlined its production and is in a ramp-up mode. In the coming months this plant will be servicing and increasing customer profile. The laminated tube operations in the UK and Mexican operations have stabilized and has begun to contribute to this bottom line.
The loss making unit of Arista, UK, has stabilized and is expected to further add to the bottom line in the coming quarters.
Arista Tubes plant in Poland which is in the process of being set up will be commissioned in August 2007. This plant will cater the needs of European market during the time to come.
Avalon Medical Services, Singapore, manufacturing medical devices, has completed its expansion program and is in a capacity stabilization and ramp-up mode.
Packaging India Pvt Ltd manufacturing Specialty Packaging Material has performed steadily. The plans for a green-field unit to manufacture Specialty Packaging focussed on pharmaceuticals industry is on the anvil.
In near term, the Company's focus is on improving the efficiency of operations to realize higher output while controlling the costs. At the same time, the impetus is on shuffle products and customer base to improve margins. The efforts are also along the direction to increase penetration of tubes into pharmaceuticals sector.
In medium term, the efforts are along the expansion of tube business into higher value segments. At the same time the business is being broad by adding higher value segments into the current portfolio. Simultaneously, the impetus is on reducing the capital intensity of the business.
The role of packaging has changed from that of a carrier and protector to that of a marketing tool, performing a vital role in brand communication and on-shelf differentiation. Technological advancement has been one of the key drivers of growth in this industry. This industry is largely dependent on the fast moving consumer goods sector.
The Indian packaging industry holds a lot of potential. The industry is still at a very nascent stage. The importance of packaging has still not been fully realised in the Indian market.
The Indian packaging Industry has faltered in the past two years after registering a high growth rate of 25-30% p.a between FY92 and FY97. Lower growth in industrial production has been adversely affecting the demand for quite some time now. Capacity expansions by the large producers, as well as the entry of new companies have compounded matters. Most of the companies registered marginal growth in sales in FY99 though realisations suffered.
The packaging Industry is witnessing several changes on the technology front. The industry is poised to grab the opportunity being thrown open by increasing sophistication in packaging consumer products. Adoption of sophisticated technologies such as lamination and development of modern products such as lami tubes and FFS pouches are the recent developments in this sector. New concepts such as convenience packaging and shrinkage packaging are being introduced thereby giving a new dimension to the industry.
Types of packages
Packages can broadly be classified as rigid and flexible. Rigid packaging represents the oldest and most conventional form of packaging in India with a share of nearly 80% of the total packaging used in the industry. Although, plastic is increasingly replacing conventional rigid materials, rigid packaging would continue to dominate certain segments of the industries such as pharmaceuticals and food processing on account of their excellent qualities of product preservation and longer shelf life.
| Packaging | Polymers used | Conventional Material Replaced |
| Milk | LDPE film pouches | Coated paper, metals |
| Beverages | PET | Glass |
| Beverage Crates | HDPE, PP, PPCP | Wood |
| Pharmaceuticals | PVC, HDPE, PP | Glass, paper |
| Squeeze tubes | HDPE, LLDPE, PP | Metal |
| Soaps | Polyester film, LLDPE | Paper |
| Retail carrier bag | LDPE, HDPE, HM | Paper, jute bag |
| Pallet wrap | LDPE, LLDPE | Heavy duty paper |
| Fertilizer | HDPE/PP woven sacks | Jute |
| Cement | HDPE/PP woven sacks | Jute |
| Mineral | LDPE heavy duty sacks | jute |
Flexible packaging consists of multi-layer laminated sheets that allow printability and ensure moisture resistance, aroma retention and gloss. The market for flexible packaging is estimated to be around Rs 24 bn and includes products such as overwraps, multi-layered/co-extruded films, laminated products and polysacks. On account of recent changes in consumption trends and spurt in branded products, flexible packaging is emerging as a major marketing tool. This has led to a shift in the converter profile from the unorganized to the organised sector in certain segments of the market, which use superior technology and cater to high value added products. However, in FY99, the flexible packaging industry continued to suffer from 40%-45% of unutilised capacity and this has seen drastic lowering of prices for most of the players. The capacity utilisation decline is mainly a result of fall in demand for consumer goods and sharp increases in capacities in 1995-96. The overall growth rates in this industry have tapered down to 10-15%. Leading players in this industry are Paper Products (over 50% market share) Ltd., Flex Industries and Akar Group.
The demand for flexible packaging typically can be classified as follows- for premium brands from MNCs and other leading players in the FMCG market and the quality of packing is very good, demand from lesser known brands especially pan masalas, soaps and finally from the unorganised sector.
Industry Structure
Raw material manufacturers (RMM) and converters are the two major sets of companies in this sector (barring the glass bottle-manufacturing sector, which does not have the RMM stage).
Raw Material Manufacturers (RMM)
Aluminium foil manufacturers and manufacturers of plastic films such as Polyester films, Low density polyethylene (LDPE) films, High density Polyethylene (HDPE) films and biaxially oriented polypropylene (BOPP) films cater to the flexible packaging segment. The rigid packaging includes the manufacture of tinplate, rolled aluminium products, steel sheets, paperboards and PET chips. Many of the raw material manufacturing companies are present in the organised sector on account of high capital costs required for setting up a unit.
Converters
Converters are engaged in the processing of packaging material into packaging products and they act as the link between the customer and the raw material manufacturer as nearly 60% of BOPP films and around 100% of polyester films are used only after conversion. In the flexible packaging sector, conversion involves the coating, lamination, metallising and printing of films, while in the rigid packaging sector it mainly involves the injection moulding, labeling etc. In the flexible packaging sector, conversion provides a value addition of around 35%-40% on the basic raw materials. The total production of printed laminates using films such as PET, BOPP or CPP in the country is estimated to be around 120,000 tons, out of which almost 50% is produced by seven units in the organised sector.
According to industry estimates, there are around 16,000 converters, largely in the SSI sector, scattered all over the country. The profusion of players in this segment is due to low entry barriers, a fragmented end user profile and restrictive government policies. Also, most of the raw material manufacturers have not ventured into conversion because of this being a highly personalised business requiring close interaction with the end users. However, an increasing need for sophisticated packaging has led to the emergence of a few large players in the organised sector. Most of the demand for converters is expected to be generated from the food-processing segment.
Market Scenario
The per capita consumption of the packaging industry is only 3 kgs as compared to 100 kgs in developed countries. This is an indication of the market potential of the packaging industry. In the flexible packaging segment, laminated products is the fastest growing segment, which was growing at a rate of 25%-30% p.a till FY97, before faltering to nearly 15% in FY98. The flexible packaging sector is highly dependent on the FMCG and pharmaceutical sectors. Robust growth in these industries would augur well for the packaging industry.
Laminated Packaging
Laminated packaging has caught on a big way in India . There are three categories of laminated products- FFS pouches, tubes and tetrapacks.
FFS pouches has a market size of nearly Rs 10 bn with the organised sector accounting for 50% of the total capacity and 50% -60% of the total market in value terms. The market is divided into three segments-premium, medium quality and low priced segments. Since these are aesthetically appealing products, printing technology plays an important role. This market is also characterised by low entry barriers and investment costs and intense competition ( in terms of quality and costs of production). The main companies in this segment are Flex Industries, Paper Products and the Akar group.
Laminated Tubes
The laminated tube market is still a nascent one but however experiencing very high rates of growth. Essel Packaging is a leader in this market with over 80% of the market share. Laminated tubes are replacing aluminum tubes in various sectors like pharmaceuticals, cosmetics on account of their better aesthetic appeal and convenience in usage. In India, the laminated tube market is 52% and aluminium tube market is 48%. Currently toothpaste market is the largest end user. Cosmetics is a growing market in this segment. This segment recorded a growth of over 20% in the past two years and is expected to have a future growth rate of around 15% over the next four or five years.
Tetrapacks
Tetrapacks were first used in India for packaging of fruit drinks. Even today they are predominantly used for packaging of fruit drinks and oil. Materials used for the manufacture of tetrapacks include paperboards, LDPE/LLDPE films and aluminium foil.
Inputs in Flexible Packaging
Over the years, developments in packaging technologies and products have led to the use of increasingly sophisticated polymers in India. From cellophane and PVC, the market has now progressed to the usage of modern plastics such as Polyethylene Terephthalate (PET) and Polypropylene.
| Polymer Film | Usage in flex. Packaging | Application |
| LDPE/LLDPE | Sealant layer in laminations, co-ext. films, lami tubes | Carrier bags, milk, edible oils, vanaspati |
| HDPE | Polysacks, barrier film in co-extrusion | Cement, jute, edible oil, vanaspati |
| Polyester | Outer reverse printed layer in laminations, metallising lami tubes | Food processing, pan masala, confectionary |
| BOPP | Sealant and non sealant layer in laminations | Cigarette, food processing, adhesive tapes |
LDPE/LLDPE film
Features such as heat salability and flexibility have led to its wide use in flexible packaging applications. It is normally used as an extruded film in food packaging (baked goods, meat produce and carrier bags) and non-food packaging (industrial liners, shrink wraps, shipping sacks) and as a co-extruding film in flexible laminations, edible oil packaging etc.
Polyester Film
In India, 76% of polyester film is consumed in flexible packaging sector. It is normally used as an outer layer on which reverse printing is done (film is either in plain or metallised lacquered form). At present there are five players in the industry, Garware Polyester being the largest. This segment is also facing excess capacity inspite of a reported increase in consumption to the extent of 30%. The demand for polyester film is expected to grow at a rate of 10%-15% p.a.
Biaxially oriented Polypropylene (BOPP film)
BOPP finds use mainly as overwraps in products such as cigarettes, textiles and broad lamination. It is widely used in food processing segment as an overwrap or an innerwrap in biscuits, bread and other confectionery products. BOPP film due to its superior moisture prevention properties is used as one of the substrates in flexible packaging. The contribution by value added products of BOPP such as synthetic paper, capacitor grade film are quite low. The usage of BOPP is low due to early introduction of polyester film in the Indian market. However BOPP is expected to play a major role in the field of flexible packaging as a printed laminate or a metallised laminate.
The total installed capacity in the BOPP industry is around 51,050 tpa with Flex Industries having the largest capacity of 15,000 mt. This industry has also been facing the problem of excess capacity as several players added on to the existing capacities in 1995-96 and this market has become more of a buyers market than a sellers market. This industry is growing at the rate of 20% p.a.
Prospects
Technological developments play a very important role in this industry. In India there has been a slow progress in the technology adoption and upgradation.
The FMCG sector is the largest customer for the packaging industry. Several innovations are sweeping across this industry thus placing larger demands on the packaging industry. Leading players like HLL, Marico are not only resorting to smaller packs but also different methods of packaging for the same product. Several players are now using packaging as a means of differentiating their product in the market. For instance oils are sold in bottles and tetrapacks too. Increasing competitiveness in this industry will again call for continuous developments and innovations in the packaging industry. Another growing sector is the pharmaceutical industry (largely untapped) where several innovations in packaging have taken place, especially in the OTC segment. Gujarat Glass is a leading player catering largely to the pharmaceutical industry.
The future shall see a fall in operating margins along with volume growth for the players. Even this industry shall witness consolidation, like its global partners. This consolidation might get accelerated with the entry of several multinationals into the country. As growth in established markets (American, European and Japanese) slows, suppliers will increasingly look for growth in emerging international markets and for this companies are likely to look at acquisitions to geographically complement their existing business. Several players in the packaging industry (raw material manufacturers & converters) are facing losses and are likely to be targets for takeovers and acquisitions. Also several domestic players might strike an alliance with MNCs. Leading players like HLL and Procter & Gamble might also enter into a tie-up with international firms for meeting their needs. Already requirements of several leading players in the FMCG and food processing sectors are met through just one or two players. Recent developments have been ITC buying out the stake of Rollatainers and the Flex Industries Limited spinning off their polyester film business to merge with Polyplex's capacity (creating the largest capacity for polyester film in India). On the other hand, the international packaging major, Van Leer has increased its stake in Paper Products Limited to 51%. However inspite of the consolidation, excess capacity shall remain over the next few years.
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