Uflex is a flexible state-of-the-art flexible packaging material manufacturing company. The company has facilities at multiple locations in India with an installed capacity of around 100,000 TPA. The company has polymeric film manufacturing facilities in India, UAE, Mexico Egypt, Poland and USA with cumulative installed capacity in excess of 337,000 TPA. Integrated within its core business profile are allied businesses like engineering, cylinders, holography and chemicals that further give Uflex an edge above the competition, besides making it a fully-integrated end-to-end flexible packaging materials and solution company.
The company has commissioned its state-of-the-art Aseptic Packaging Plant in Sanand, Gujarat for packing liquid products with an initial Capex of approximately Rs 580 crore in the first phase. This new facility has been designed for a maximum capacity of 7 billion aseptic packs per annum offering packaging solution for non-aerated drinks, liquid dairy products, juices and other beverages.
In an interaction with IIFL, R K Jain said, “With rural penetration by the FMCG sector intensifying by the days, the times ahead are quite promising for the packaging industry in the country.”
Excerpts of the interview:
What steps are you taking to improve your margins?
If you look at our revenues, higher margin products are increasing in the total revenue mix. So that is leading to an improvement in margins on the EBITDA level. Seeing our history for the last 2 to 3 years, we were something around 13%, then it went up to 14% and now it is 15%. So we are targeting these EBITDA margins to go up to 17 to 18% in next 2 to 3 years period. There are many reasons for the same. One, we are focusing on productivity improvement, better utilisation of resources. Two, we will bring in or sell more products which are more value-added and have better margins. So on a whole, this will result in better EBITDA margins in times to come.
Are you looking for any inorganic expansion plan?
We are open to inorganic growth from suitable acquisitions if we come across any suitable opportunity of that sort. We have been in talks and people have been sending us many queries, but we find they are not worthwhile. So instead of waiting for inorganic growth or acquisition, we will continue to focus on organic growth. That’s why we keep expending Capex as there is no guarantee for inorganic growth. But the chances of organic growth are always there.
What is your capital expenditure plan?
Normal Capex that we have to incur every year is in the range of around of Rs 225-250 crore. We are going to incur this year around Rs 175 crore for some value-added operations: new technologies in hologram, molding capacities, etc. That will make the Capex plan for this year Rs 425 crore which is the broad plan of the company.
How is the response for your anti-counterfeiting products?
We have a mastery in anti-counterfeiting solutions. We have very advanced technologies in hologram. We are building plants as well. There is great demand for holograms. We don’t have enough capacity to take care of the increased demand. So Rs 125 crore approximately is being incurred to build additional capacity for hologram technology.
Do you see any impact of GST on company’s business?
Not really! The overall tax incidence in our category of goods and services is more or less same as that in the pre-GST era. GST is a concrete and definitive step in streamlining the way business is carried out in the country which will benefit all stakeholders.
What is your view on packaging industry going forward?
Flexible Packaging in India owing to its obvious merits of being lightweight, better functionality, higher product to pack ratio is growing anywhere between 15-17% annually with much of its revenue coming from the FMCG sector.
Many economists believe that the Flexible Packaging industry in India will begin to grow by 20% or more annually in the near future. The increasing standard of living and changing quality of life translates into people wanting more and more ready-made goods, as well as more hygienic foods at affordable price coordinates. As shopping habits evolve and big retailers expand, packaging penetration would also increase rapidly. Also, with rural penetration by the FMCG sector intensifying by the days, the times ahead are quite promising for the flexible packaging industry in the country.
Further we are of the view that Uflex would be able to raise the bar of the packaging industry from the current level to the next level through its product innovations, newer technology deployment and by creating more value added products for the benefit of its customers which in turn will create clear distinction among the packaging players in terms of its capabilities and profiling in the industry and will filter out the unorganised and inefficient entities from the market.
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