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B & A Packaging India Ltd Management Discussions

Jul 18, 2024|03:40:00 PM

B & A Packaging India Ltd Share Price Management Discussions



Your Company manufactures precision paper sacks and flexible laminates in its two manufacturing divisions. The sacks division serves the packaging needs of business units like tea, food, agricultural and industrial products. The flexible unit has made its own niche and forayed into sectors like fresh and frozen food, beverages, dairy products, pharmaceuticals, snacks and confectioneries.

FY 2023 was yet another challenging year. Business was disrupted due to unprecedented volatility and shortage of input materials, supply chain disruption due to unrelenting war in Ukraine and continued wage inflation.

Despite these challenges your company delivered revenue growth. We could continue to navigate the mitigations plans and prioritized service to the customers over the cost, to long term benefit to our customers. However, continued increase in material and freight cost in post COVID-19 Pandemic environment with knock-on effect of Ukraine war led to a drop-in margin.

Your company recorded an increase in the overall turnover during the year under review. While paper sacks division recorded a reduced turnover, flexi division could achieve the highest turnover. Due to effective cost control total expenditure was lower compared to previous year inspite of increase in turnover on Y-o-Y basis. PBT was marginally reduced as an effect of product mix in as much as margin in Paper sacks is comparatively higher than Flexi. Effective price revision of the products while remaining competitive helped the Company to maintain its margin during the year after absorbing additional input cost due to frequent increase in bought out material price particularly in paper.

Segment wise Performance Review

Focused approach on the growing flexible laminate business continue to pay good dividends. Flexible laminate business accounted for 47 % of the total revenue for the year under review and which reflects improvement on 708 basis points in the share of total revenue. Growth in the paper sack business impacted due to effect of Pandemic coupled with higher competition in Industrial sector especially S.E.Z units. Revenue dipped by 7.37% on Y-o-Y basis in this division. The summarised divisional results are set out below:


Paper Sacks

Flexible Laminates

FY 2022-23 FY 2021-22 FY 2022-23 FY 2021-22

Revenue from Operations

7027.42 7586.87 6124.48 5211.15

Profit before tax

982.28 1236.09 519.43 293.51

The dip in the volume of sales in mancozeb solutions and skimmed milk powder segment had a denting effect on the revenue stream of Paper Sacks division. The mancozeb sector was affected by the decrease in export orders from South American market. Milk powder segment was effected due to higher competition in this segment. Lower export intake of packaging solutions due to slump in the demand from EU counties as well as Middle East posed challenges before Indian sacks manufacturers. After effects of lockdown and container shortage affected paper availability at the beginning of the year. As a result prices of paper increased substantially.

The situation further worsened due to outbreak of war as a significant portion of Kraft paper pulp is supplied by European manufacturers. The rising paper price affected our sale of paper sacks in some industrial segments as they shifted to alternate packaging. However, we achieved significant growth in the tea sector and spur in the growth in carbon black sector provided welcome relief. Carbon black is a huge market for paper sack industry and it is expected that growth in this sector will fillip the revenue of the paper sack division in the years to come. After installation of new tuber and bottomer machine your company has developed new product lines with multicolour and attractive printing which will help differentiating our products significantly from existing products available in the market.

The revenue growth in the flexible packaging division was augmented catering the surge in the demand from food sector particularly confectioneries and dairy segment and some other consumer durable products. Your company could sustain its growth in the highly competitive market by offering end-to-end solutions across flexible packaging spectrum. Your company has continuously rejigged its product portfolio to cater to the needs across various industrial sectors. Irrespective of multiple escalations in prices of Polymer being the main consumption material of this division and lower export offtake of marine products this division could sustain its budgeted growth by offering value added products to its customers. Viable pricing of the products to absorb the increase in consumption cost has reaped its benefit and the division could increase its profitability margin on Y-o-Y basis.

Corporate Initiatives and Works

R&D activity took a key driver to your Companys growth. The R&D team alongwith divisional heads successfully blended their knowledge in paper technology, polymer science, conversion processes and engineering solutions into creativity and innovations which has led to superior product offerings. This creativity and innovation has been our key focus and driving force for our competitive advantage and growth over the years.

We have taken up a series of modernization programme in our plants at Balasore during the last couple of years like installation of new poly plant with accessories in flexi unit, new dyer unit in paper sacks division, which has led to superior product offering. During the year under review new Tuber and Bottomer machines were installed in the paper sacks division to gear up with the value added product differentiation. One polyliner machine was also installed in the paper sacks division.

Installation of these machines have resulted in significant reduction in cost. Your company is continuously strengthening its distribution channels to execute higher quantum of orders at minimum lead time delivery.


The Company has been accredited with British Retail Consortium (BRC: lop) which is acknowledged as a global benchmark for food safety, for its facilities at Balasore factory besides ISO accreditations (DNV) in environmental, food safety and quality systems.


Despite increase in turnover and disruptions in supply chain, strict control over receivables restricted the CC utilization during the year under review by less than 27% of the borrowing power of the Company. Margin impact on interest cost arising out of investment in CAPEX was controlled by sourcing repayment through internal accruals. Average rate of interest was kept minimum by using appropriate mix of debt through better negotiations. Financial parameters like, Debt Service Coverage Ratio, Interest Coverage Ratio, Debt Equity Ratio were all at healthy levels during the year under discussion. Faster realization from customers and better inventory management ensured stable cash flow during the year. Directors are pleased to inform you that the Company continues to enjoy CRISIL BBB/Stable rating for its long term bank borrowings.


Even at a time when packaging industry is shying away from making additional investment due to margin pressure your company continued to invest in new and improved machineries while upgrading its existing facility with new tools to ensure best-inclass product is delivered. Your company has taken a ‘Mantra to sustain to an error free workflow with a vision to deliver ‘Zero-defect-products to its customers in time to come. The new machineries are preferred processes due to high print quality, quick job changeovers, ease in use and higher production speed.

Information Technology

Digital transformation is a major driver for growth and performance. We continue to invest in new technologies to create an intelligent workplace. Due to exceptional length of the Pandemic and physical distancing guidelines dependency on IT has further increased during the last couple of years. At B & A Packaging, nurturing a digital culture has become a key focus area of the management. To make our company more cost-efficient, nimble footed, cloud- based and green, management has been able to instill a digital mindset across the Company. The digitization journey so far has penetrated several key functions of the Company like, sales and service network, supply chain, human resources and finance. This initiative is helping the Company immensely to create data dashboards for real time decision making. Data security continues to be paramount importance and your company continuously evaluates its cyber security solutions keeping in mind increased cyber risks. Our efforts are directed towards ensuring business continuity in case of any unforeseen event.


The packaging industry in India is one of the fastest growing sectors and it is expected to register a CAGR of 12.60% during 2022 - 2027 as per available reports. The demand for packaging in India has expanded drastically, spurred by the rapid growth in consumer markets, especially in processed food, personal care, and pharmaceutical end-user industries.

Over the last few years, packaging industry has been a key driver of technology and innovation, contributing to various manufacturing sectors, including agriculture and the fast-moving consumer goods sectors. The packaging industry is driven by the factors such as rising population, increasing income levels, and changing lifestyles and it is anticipated that each of these factors will drive consumption across various industries leading to higher demand for packaging products. Moreover, demand from the rural sector for packaged products is fueled by the growing media penetration through the internet and television.


Your company steadily progressed over the years by engaging technical ability, creativity and innovative skills to engineer packaging solutions across its product spectrum which has resulted increase in its market share. As the packaging industry is increasingly becoming technology oriented with innovations driving the market the efforts of the Company has been directed towards investing in technology to increase shelf life and reducing cost of its products to the extent practicable. Three-point key strategy that will drive the Company forward are:

• Accelerate growth in the food segment business

• Building wallet share in paper based packaging

• Reducing offtake in low contributory sectors and sustain to multi-year projects

The following enablers will help us achieving our long term strategy:

• Segmented play: Strengthen niche portfolio

• Sustainability: Lead the vertical with product, process and people

• Cost saving: Drive a multiyear program for sustained savings

• Innovation: Introducing innovative product portfolio based on customer demand


According to the Indian Institute of Packaging (IIP), packaging consumption in India has increased by nearly 200% in the last decade, from 4.3 kilograms per person per annum in 2010 to 8.6 kilograms in 2020. Despite the sharp growth over the last decade, this industry remains a large space for growth compared to other developed countries worldwide. Furthermore, India is emerging as an organized retail destination globally. The presence of e-commerce is increasing rapidly and is bringing around a revolution in the retail sector, driving the need for quality packaging.

Retailers are now leveraging digital retail channels, thus enabling wider reach out to customers with fewer amounts of money spent on real estate. Thus, organized retail services and the boom in e-commerce offer enormous potential for the future growth of retailing in India, which in turn is promoting the growth of the packaging sector.

However, the market is expected to be significantly challenged due to fluctuation in raw materials pricing, dynamic changes in regulatory standards, growing environmental concerns, limited effective recycling of mixed plastic waste, ineffective plastic recovery, and a lack of modern and advanced machinery in India for the packaging sector. The volatile trend in crude oil and demand for polymers in competing applications has an increasing pressure on input costs that fluctuate raw materials prices. Recent disruptions due to Russias invasion of Ukraine and Chinas stringent Zero Covid policy caused substantial supply chain disruption and aggravated the challenges for the packaging sector in India.


The Board of Directors of the Company ("the Board") and the Risk Cell constituted with the senior management team led by the Managing Director review the business risks to which the Company is exposed alongwith mitigation measures at periodic intervals. The Risk Management Policy and the constitution of risk cell are available in the companys website at https://www.bampl.com/ policy/risk-management-policy.pdf.

Key risk areas to which your company is exposed include:

Frequent escalation in raw material prices

To mitigate this risk the Company continues to identify and establish alternative sources of supply and alternative materials to maintain uninterrupted supply and control over material cost. Effective negotiations while procuring the materials kept a continuous watch on the price movements barring enough stocks to execute orders.

Economic downturn-This could impact companys markets leading to business slowdown; however, majority of companys products are linked with daily necessity of the consumers and their demand generally are not much impacted with downturn.

Currency volatility-The paper based packaging mostly depends on imported paper supplies which is exposed to currency rate fluctuations. Your company has the policy of hedging the trade exposures through forward contract.

Competition-Your Company operates in a highly competitive market where retaining long-term customer is a challenge. Your company always focuses on quality, shorter lead time and after sales service to maintain high customer satisfaction.

Progressive wage increase-Your company has deployed asset productivity improvement initiatives to manage accelerating employee cost.

Product pricing: Revision of pricing from time to time is required to absorb additional cost to the extent practicable while remaining competitive.

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