THE MACRO VIEW: PACKAGING INDUSTRY

The Indian packaging industry stands at Rs.650 bn and will grow at 5-20% depending on the type of packaging. Growth rate of the domestic packaging industry is more than the developed countries' growth rate of around 3%. The fastest ,growing segments are laminates and flexible packaging, especially PET and woven sacks. The food processing industry is likely to double its capacity over the next 3-4 years, leading to huge demand for packaging material. Moreover, the shift from loose packs to branded packs will drive growth for the industry.

Domestic demand for polyester film grew at 90% CAGR from 80,000 tpa in 2002 to 20,00,000 tpa in 2007. With this sigh growth rate, India is likely to become the second largest market for polyester films after the US in the years to come.

Huge expansion of the retail segment is likely to enhance packaging material requirement, as all major retail giants are likely to start their private label for food items like cereals, apparel, tea, coffee, pickle, fast food, etc. The retail sector is likely to grow over 30% in India, which in turn will result in huge requirement for packaging material.

Most of the basic raw material (apper, board, plastic, glass and metal) required for packaging industry is available in abundance in India. Paper & board packaging predominates the domestic market, accounting for 37% and plastic around 18% of the packaging market.

Domestic laminates market, where Glory Polyfilms Ltd (GPL) has strong presence, is placed at Rs.60.0 bn and is growing around 20% per annum. There are more than 200 flexible packaging converters in India, of which 50 are in the organised sector and constitute 40% of sales.

Flexible packaging consists of multi-layer laminated sheets of plastics (PVC, LDPE, HDPE, BOPP, BOPET), paper, cloth or metal foils that are used separately or in combination of various packaging applications. Flexible packaging has a unique set of properties to ensure toughness, moisture, aroma retention, low odour, taste etc. Flexible packaging laminates are used for packaging of processed food e.g. Biscuits, snacks, confectionery, spices, wheat flour, rice, pulses etc., personal products e.g. shampoo, soaps, detergents, hair dye etc., beverages e.g. tea, coffee, milk products, baby food etc., other items like lubricants, pesticides, pharmaceuticals etc.

According to the Indian Institute of Packaging (IIP), the organized sector of the industry is less than 5% but it controls over 70% of the market by volume. Currently total market size of packaging industry in the country is about $6.50 billion, out of which flexible packaging commands 22%, that is $1.32 billion and flexible packaging is expected to grow at the rate of 20%.

Flexible packaging materials were the most commonly and vastly used means of packing in India, Flexible packaging dominates the food packaging and is one of the main end-use applications for flexible packaging. Flexible packaging will continue to develop new applications while also supplanting rigid containers, supported by a favorable environmental profile and improvements in barrier properties and convenience.

The raw material for flexible packaging include Aluminium foil and 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. Globally 70 percent Plastic films and BOPP are used in food packaging; in India it is just 40 percent. But as and when the organized retail market will grow in size, Indian consumption will catch up with the world average and will continue to grow over other expensive packaging materials like metal, paper glass and aluminum foil.

BUSINESS REVIEW of Glory Polyfilms Ltd: The Company manufactures extruded multi layer barrier film, flexible laminates printed/ unprinted. Co-extruded film has multiple/diverse applications as a packaging material for food, Liquids like Milk and Edible Oil and non-food items. The company's presence in both multi layer barrier film and flexible laminated packaging make its integrated player with ability to supply timely quality material at a competitive price. The Company is also engaged in Rotogravure printing of flexible laminated packaging material.

The Company's Multilayer barrier film and flexible laminate business with its highly cost effective and functionally efficient product is growing at an impressive rate annually. The technologically superior and highly dependable plastic films produced by the Company in its state-of-the-art ISO 9001-2000 certified plants can be structured in up to seven layers and tailored for almost any machining requirements and are capable of meeting both Flexographic and Rotogravure printing standards. The product can be used in a wide range of industry/business such as packaging, industrial coating, holography, metalising, printing & lamination etc.

The Company has the facility to provide Multilayer barrier Film upto 7 layers with high barrier Films This advanced film technology offers customers a combined barrier and sealant film that can reduce the number of lamination passes required in the converting process, saving the converter time and money without sacrificing package performance while allowing to remain competitive in the changing marketplace, while affordably expand into additional markets. These films are especially useful for packaging products that need high barrier.

The Company also is producing flexible packaging materials based on the requirement and need of the customers by laminating different substrates such as plastic films, paper and metal foils. Polyester and BOPP films are the principal plastic films used as raw materials for producing packaging materials. Each has different qualities suiting it to a particular type of application. Multilayer barrier Film enables superior print quality, high transparency, high tensile strength, good machinability, effective gas barrier properties facilitating aroma retention, exceptional features & strength to be achieved. It has very effective moisture barrier and heat sealable properties.

Flexible package, due to its convenience in handling and disposal, lower raw material cost and barrier against moisture and gases, find application in the packaging toothpastes, soaps, shampoos, detergents, processed foods, beverages, confectionary, snacks food and pan masala. To a lesser extent, it is also used in automobile and healthcare products. The revenue growth of converters depends on the fortunes of the fast moving consumer goods industry.

The Company has successfully developed several new packaging for various applications suitable for Food Industry, the Bakery-and Confectionery Industry, Beverage Industry and the Personal Care Products Industry. The Company's strategy for product innovation together with enhanced quality and low cost has led to the significant growth in sales.

The company also has 8 colour Rotogravure printing facilities which enable it to supply value added laminated printed material to its customer. Thus company is present in complete value chain in Flexible packaging segment, which gives it benefit to supply timely Quality material to its customers at a competitive price. The company is committed to provide food-packaging material for food products without any hazards and contamination and has implemented HACCP based Food Safety System.

Positives:

• There have not been any discernible known negative trends or uncertainties, which could adversely impact the income or revenue from continuing operations.
• The business in which company is engaged is not seasonal.
• The Customer base of the company is strong, as it doesn't deal with single customer or single supplier, The Company has very good customer base with whom the company is dealing for quite a long time. And the company has very cordial relationship with all customers and suppliers.

Negatives:

• The competition is increasing with the addition of new capacities and emergence of new global players.
• Rising crude oil prices may alter the cost structure of the Company and affect its profitability.
• In the packaging market, the supply currently outstrips the demand and this is unlikely to change which could create pressure on the Company's margin.