polyplex corporation ltd share price Management discussions

Rs.. Corporate Overview

In this document, the terms ‘Company, ‘Polyplex and ‘Group refer to the consolidated operations of Polyplex Corporation Ltd.

Polyplex is a leading Biaxially Oriented Polyethylene Terephthalate Film (BOPET) film producer with a global footprint in an attractive Industry. It offers a wide range of polymeric films across various substrates including BOPET (thin & thick), Biaxially Oriented Polypropylene Film (BOPP), Cast Polypropylene (CPP) and Blown Polypropylene/Polyethylene (Blown PP/PE). Its portfolio of specialty, innovative and differentiated products are used across packaging, electrical & electronic and other industrial applications. The Company has a unique value proposition of on-shoring, off-shoring and near-shoring for a global customer base, while maintaining cost leadership. Polyplex will have the second largest global capacity ex-China (post its ongoing expansion in the US) in its core business of thin polyester (BOPET) films.

Polyplex is the only global player with resin plants at all manufacturing locations. Backward integration enables it to develop resins required for specialty products, apart from enhancing cost competitiveness and ensuring supply security. Forward integration provides an ability to undertake one or more downstream processes on the base film in a cost-efficient manner leading to higher innovation, value addition and reduced volatility. The downstream businesses like metallizing, silicone coating, extrusion coating, holography, TMP/DMP and offline chemical coating have enabled the Company to offer products for a variety of applications.

The Company believes that its differentiated position in combination with its other strengths like integrated manufacturing operations, global sales & distribution network, customer access & intimacy and wide offering of specialty products shall continue to be the key enablers for outperformance and earnings stability.

BOPET film, also known as polyester film, was invented in mid 1950s. It is a flexible, clear or translucent material produced from PET polymer, a linear, thermoplastic

polyester resin. BOPET film is a high-performance film with a unique combination of qualities like high tensile strength, durability, high heat resistance, excellent gas-barrier properties, dimensional stability, chemical inertness, clarity and recyclability. BOPET film is known for its versatility with a wide and growing range of applications. These diverse applications and intrinsic product characteristics lead to a constant pipeline of new product variations and applications thus reducing dependence on any one application or product.

BOPET film is available commercially in varying thicknesses, widths and properties depending upon the needs of end users. It can be produced as a single layer (mono) or can be coextruded with other copolymers into a multilayer film with various functional properties encompassing the desired characteristics of each material.

The polymeric films business is quite different from a pure play commodity business like its precursor inputs - PTA, MEG, PP/PET resins, due to a combination of several factors:

a) The product is almost always "made to order" as contrasted with "made to stock"

b) Multiplicity of SKUs (based on unique combinations of length, width, thickness, surface treatment during process as well as downstream treatments and Core ID)

c) Fragmented customer base

d) Quality and customer service also form important differentiators

e) Differing buyer behavior across markets

f) Pricing is influenced by a host of factors as stated above besides import parity i.e. Logistics cost differentials and varying customs duties - both normal and trade defense measures like antidumping, countervailing and safeguard duties.

The above factors can create significant differences in regional price levels as well as between standard products and value added / specialty products.

There is an increasing concern by all stakeholders & environmental groups on usage of plastics in general with the focus being primarily on single-use plastics. Flexible packaging is mostly multi-layered and it results in a number of sustainability benefits when compared with rigid forms of packaging. These include resource efficiency, reduced material to landfill, high product to package ratio, cost competitiveness, lower carbon

footprint throughout the life cycle of packaging etc. The Company continuously strives to work on providing sustainable solutions (products and processes) as a commitment towards a sustainable environment. The expansion of recycling operation in Thailand provides sustainable solutions for film-based process waste as well as post-consumer plastic waste.

BOPET film is made from Polyester resin (chips), which in turn is produced from Purified Terephthalic Acid (PTA) and Mono-Ethylene Glycol (MEG). The Company produces its own film grade PET resin.

The value chain for the Companys main businesses is depicted below:

II. Global Operations

Polyplex is the first Indian producer to set up manufacturing facilities in multiple countries with market share of ~10% (ex. China) in thin BOPET Films globally. The Company has a global manufacturing footprint across 7 locations in five countries - India, Thailand, Indonesia, Turkey, and the US supplemented with an extensive sales & distribution network in key demand centers. The Company also has additional warehouses in Poland, Germany & Netherlands and liaison offices in South Korea & Japan in order to enhance its sales capability. This ensures a reliable supply chain and helps capitalize on the increasing preference of customers to source locally. Polyplex has the ability to supply customers from its global supply network, offering a built-in resilience to any disruption.

Polyplex Group Structure (as on March 31, 2023)

Global Sales Force

Polyplex has a direct presence primarily through its own sales team (many of local origin) in all the key regional markets complemented by an extensive global agent network, which helps develop strong customer relationships. Within each key market, presence in multiple locations maximizes customer coverage efforts. Relationship with most key customers is deep-rooted and spanning over 10+ years.

India Other Asia Europe2 North America
Sales and Marketing Team Size 29 22 29 13
# of Location 4 9 9 6

including major distributors

Global Customer Base

The Company has a well-diversified customer base with an even distribution of sales globally across Americas, Europe, South Asia and Other Asia. The Company is a Tier Rs. supplier to leading global and regional converters who cater to global Consumer Product Group Companies (CPGs)/ Original Equipment Manufacturers (OEMs).

Integrated Manufacturing Capacities across Geographies

Resin Base Films Value Added Films
Location PET Film Resin (MT) Recycled



PET Thin (MT) PET Thick (MT) BOPP




Blown PP (MT) Metallizer




Coating (Mn Sqm) TMP

(Mn Sqm)

India 77,600 - 55,000 - 35,000 - - 32,500 4,080 257 83
Thailand 1,06,050 43,000 42,000 28,800 - 10,000 13,645 21,700 960 985 -
Turkey 75,850 - 58,000 - - - 4,392 20,700 480 320 -
USA 86,000 - 81,000 - - - - 9,250 - 120 -
Indonesia 90,000 - 48,000 - 60,000 - - 18,000 - - -


4,35,500 43,000 2,84,000 28,800 95,000 10,000 18,037 1,02,150 5,520 1,682 83


1. Capacity of all product lines is in MT per annum except Coated Films and Transfer Metallized Paper where the capacity is in million SQM per annum.

2. Includes projects under implementation viz new BOPET Film Line, Offline Coater & Debottlenecking of Resin Plant in USA.

III. BOPET Film Industry Overview

BOPET film is an attractive, vibrant and growing $10.5bn industry, growing at ~ 2.5x of global GDP growth rates since the turn of the millennium. The traditional segmentation of BOPET films has been thin and thick films based on distinct applications and lack of supply side substitutability. Thick films generally refer to films with a thickness range of 50-350 micron whereas films below 50 micron are characterized as thin film. In recent years, several intermediate thickness lines (with thickness ranging between 8-150 micron) have also been installed. The BOPET film industry has seen various structural changes over the last seven decades with an inexorable move from West to the East with Asia accounting for ~80% of both demand and capacity. Film producers from Asia (mostly headquartered in India) have become major global players. There has also been a dispersion of technology with progressive orientation towards higher productivity assets for standard films.

BOPET film growth has been driven by the shift away from rigid packaging formats (e.g. stand-up and retort pouches for cans and blow molded bottles), as well as a continuous move from loose to packaged product in developing countries.

Polyplex has traditionally operated predominately in the area of thin BOPET films, which accounts for ~80% of the overall global PET film demand. Higher growth in flexible packaging relative to other applications has gradually shifted the production and usage patterns of thin BOPET films. Packaging & Industrial (including electrical) segments constitute almost 100% of the Companys thin film sales.

Thin BOPET Film Market

The largest application of thin BOPET films is flexible packaging, which accounts for 76% of the total thin film used. Flexible packaging plays a key role in source

reduction based on the principle of ‘use less packaging material in the first place.

Advantages of flexible packaging versus conventional alternatives are overwhelming, including:

• Lowest carbon footprint

• Low resource intensity

• Consumer convenience

• Highest product to package ratio

• Cost competitiveness, ease of transportation, storage and use

• Design, structure flexibility, customization and shelf appeal

• Safety and product protection (freshness and extended shelf life)

• Prevention of food waste and contamination

This has resulted in higher-than-GDP growth in the global flexible packaging industry. BOPET film, being a higher- end preferred substrate within packaging, has grown more rapidly than other substrates, averaging around 5-6% per annum. Packaging demand is resilient as it is driven by the consumption of food products and consumer staples, usage of which are non-discretionary in nature. This packaging segment characteristic along with its attributes on safety, hygiene and integrity has resulted in steady demand growth. However, due to the ongoing recessionary/inflationary conditions across the globe, there has been some short-term impact on demand for industrial segments and even some packaging end uses.

An increase in purchasing power in developing countries has been accompanied by a rise in per capita packaging material consumption. However, when compared

with mature markets, per capita packaging material consumption in developing countries is still low.

Asia is the largest market for thin BOPET films, accounting for more than three-fourths of global consumption.

Faster growing Asian demand is the main driving force in the global markets. Within Asia, India and China are the largest and fastest growing consumers.

A similar trend is also evident on the supply-side with most of the new capacities being installed in low-cost developing countries (mainly in China & India). Chinese players primarily cater to the domestic market with some limited presence in Southeast Asia, and have negligible presence in the US and Europe on account of factors like limited presence of front-end / post sales or technical service team, narrow product range, trade barriers, lesser ability to offer credit, language and cultural differences etc.

A large proportion of the new capacity has emphasis on productivity and cost management. This has impacted traditional large producers of PET film operating with high cost structures, who have chosen to concentrate on niche technology-oriented segments like films for optical applications, high end release liners, solar panels and specific applications within packaging and industrial segments. The high speed and productivity of the latest 10 meter+ wide lines (same as Indonesia line & new US line of Polyplex) will bring more cost competitiveness and may result in closure of some old and inefficient lines. While trade defense measures like anti-dumping and countervailing duties were invoked in the past, they were unable to address the problems of inefficient assets in developed countries producing standard films.

Global thin BOPET film growth is expected at about 5-6% for the next few years, with demand in India expected to continue growing at ~10%. Demand growth is expected to remain resilient on account of factors including de-globalization and preference for shorter supply chains, acceleration of move from loose to packaged sales of a range of products, importance of hygiene, higher home consumption etc. Companies with global footprint, consistent quality products, diversified product portfolio, access to international customers and stronger supply chains stand a better chance of participating in market growth and delivering margins above the industry average.

The trend in global capacity utilization (CUF) for thin PET film is as under:

Since 2019, ~ 1.9 MMT of additional capacities have been added especially in Asia with China accounting for 58% and India 23% of total additions thus leading to an oversupply situation. Additional ~1.9 MMT of global capacity is expected to be added in Thin BOPET segment by 2026; with 70% of the new capacity being installed in China. With demand being impacted in the short run due to recessionary pressures and monetary tightening, the CUF levels are expected to remain muted for a while before it starts improving.

CUF levels between 80-85% can be considered high and close to the full producible capacity for the industry as a whole based on past experience. In practice, some producers produce lower than the nameplate capacity as the assets are older and inefficient while some produce with capacity utilization even higher than 100% using new and modern machinery and based on their expertise and experience.

Thick BOPET Film market

Thick BOPET films demand is expected to demonstrate a steady CAGR of 4-5% going forward. The growth comes despite significant losses in volume in the Imaging & Graphics sector due to its replacement by new digital technologies. Growth has mainly come from new applications in electronics and electrical applications e.g. photovoltaic (PV) and flat panel display (FPD) applications. Typically, demand for electrical & electronics and other industrial applications grows

steadily and provides stability to earnings. As the growth of thick film is mainly linked to macro-economic indicators, the growth momentum has been affected by the monetary tightening and slowdown. China has emerged as the largest market for thick BOPET films with a market share of 49%; Japan, Korea and Taiwan contribute to another 28% of global demand.

Global Thick PET Film Demand by Region

Similar to the thin BOPET film business, the capacity addition for thick BOPET film in China has also been significant. China has become the global leader in the manufacture of PV modules accounting for roughly three-quarters of all global PV module manufacturing and also remains a key global supplier of other electrical and electronics products. Producers in Japan, Europe and USA constitute only around 17% of world capacity in 2022.

Global Thick PET Film Capacity by Region

Due to high quality standards required by optical thick film customers, manufacturers targeting this sector face higher levels of wastage due to defects, and therefore the saleable output of thick film lines is often poor relative to thin film lines. As a result, thick film lines often operate at ~ 70% utilization levels.

The Thick Film line in Thailand has enabled Polyplex to straddle the entire spectrum of end-uses for BOPET films by accessing the traditional industrial and electrical applications for thick films, along with significant progress in catering to several new applications including sophisticated release liners for electronics and other industrial segments. The first film line in India which was revamped in 2011 and further upgraded in 2014 to produce intermediate thicknesses/specialties, also contributes to the Companys growth/margins.

IV. BOPP Film Industry Overview

The global demand for BOPP is ~9.5 MMT and is expected to grow at ~4%. Food packaging accounted for ~65% and non-food packaging for 19% of the total BOPP demand in 2022. International trade in BOPP relative to production is much lower in comparison to BOPET, as BOPP capacity is dispersed geographically. Regional demand-supply dynamics plays a more important role in this industry than global demand supply balance.

Feedstock of BOPP film is polypropylene (PP) resin which is a downstream product from crude oil and/or gas and is widely traded across the globe. BOPP may be preferred over BOPET in certain applications due to its high moisture resistance feature, sealing and other properties. Though BOPET and BOPP are sometimes considered as substitutes of each other, the two films have distinct individual features & are more often complimentary in a typical laminate structure.

The trend for global capacity utilisation for BOPP films is as under:

The industry does not run on 100% utilization on account of product mix and CUF between 75-80% is typically described as ‘full.

Just like BOPET film, there have been capacity additions in BOPP film too with China and India together constituting ~60% of the additions. However, the incremental capacity at global level has been almost equivalent to the incremental demand keeping the CUF of BOPP Film less volatile across the period.

The BOPP line in Indonesia has helped diversify the product offering and derive cost economies. The Company is well positioned due to the highly fragmented nature of the local market consisting of several players with small and inefficient lines besides significant duty protection on imports. Growth in demand, commonality of customers with BOPET films in flexible packaging, low cost of operations due to co-location and benefits of a high productivity line besides a global sales and distribution network provides further substance to this investment.

V. CPP and Blown PP/PE Films Business

CPP films are transparent cast polypropylene films designed to offer good optical properties and high sealing performance and easy converting for flexible packaging and other applications.

CPP films are produced from a combination of various grades of PP polymer resin. Various types of CPP film are available (multi-layer options) which are used to cater

to several applications in general packaging. It is used as a sealant layer in conjunction with other polymeric substrates for packaging of food products including snack foods like chips and biscuits, retort laminates for ready to eat food besides usage in sterilizable pouches in medical segment like packaging of surgical equipments, etc. Given the relatively modest investment required for CPP lines, regional demand supply balances are more relevant.

Another variant of PP based film is Blown PP. PTL had commissioned the first Blown PP line in October 2013. This base film (PP) enabled better use of the silicone coating facility with a broadening of the product range (including the ‘Peel & Stick liner segment for the roofing market in North America). The second Blown line in Thailand was commissioned in June 2018 with a view to develop merchant markets and also produces Polyethylene (PE) based blown films. With continuous growth in these segments, the third Blown line was commissioned in Thailand in January 2021 which has helped the Company cater to new segments/new customers. The applications serviced include agriculture usage (mulch films), labels, liner in the manufacturing of safety air bag films, preferred sealing substrates for flexible laminates (Polyplex core business segment) and many more. Moreover, Blown PE/ PP films are being considered for monolayer packaging to improve recyclability of used plastic pouches. Another Blown Film line has been added in Turkey in March 22 to diversify product portfolio and market share in this high value add/ specialty film segment.

VI. Polyplex Performance

Even while industry wide CUF for PET films has ranged between 71%-82% over the past 5-6 years, Polyplex has displayed an industry leading capacity utilization record as depicted above due to unmatched market access and higher productivity. Though CUF for thin BOPET film has been close to 100% since the last 3-4 years, the ramp- up factor on account of startup of new BOPP line in Indonesia as well as market forces have impacted the CUF of all base Films taken together Higher productivity is usually a function of ability to run at higher average / peak speeds, optimal downtime and better deckle (width) utilization besides other factors.

VII. Industry Outlook

Over the next few years, many new lines for BOPET film are expected to be added (mostly in China, followed by India), thus. extending the current oversupply status in the Industry. This impact may be significant in China with moderate influence in other regions, as Chinese players have typically focused only on the domestic market and select SEA markets due to variety of reasons. Hence, anticipated weaker global GDP growth along with the supply overhang is expected to impact the Industry CUF and the margins for some time before it gradually starts to improve.

The Company believes that its well-distributed manufacturing operations, diversified and increasing value-added product portfolio, quality consistency, international customer base, customer relationships, efficient supply chain and a conservative Balance Sheet will allow it to grow profitably and withstand industry volatilities much better.

VIII. Indian Flexible Packaging Market Thin BOPET Market

The industry in India comprises of 14 players with no one having a dominant market share. Several entrants post 2010 from allied/converting business have backward integrated into BOPET films. The domestic market is competitive and volatile in nature with limited differentiation around standard films. During FY 202223, eight new BOPET lines have been commissioned impacting the CUF and margins. It may take time to absorb the incremental capacity, especially as six new players are expected to add capacity in the next 1-2 years. The industry has grown at >10% CAGR over the last decade and is expected to continue to do so in the foreseeable future. Double digit demand growth is driven by demographics, urbanization, increasing income levels & consumerism.

Demand for BOPET film in India is currently estimated to be around 6,71,000 tons per annum. The total installed capacity for thin BOPET films in India by end of FY 202324 will be about 12,00,000 tons per annum with a significant portion of the surplus being exported.

BOPP Market

The industry in India comprises of 14 players with two players accounting for ~43% of capacity. The industry has grown at ~12% CAGR over the last decade aided by a new application in Textile bags and is expected to continue to grow. Industry CUF has been 75%+ over the past 5 years - which represents close to full utilization given the product mix. Around 15% of production is exported, primarily to Asia, North America, Europe &

Africa. Some of the existing and two new players have added capacity during the year under review. There are some further capacity additions expected which would lead to reduction in CUF levels before gradual recovery.

The Indian BOPP market is currently estimated at about7,15,000 tons per annum and the capacity is expected to be about 11,00,000 tons by end of FY 2023-2024. Demand is expected to grow at around 10% annually.

This supply overhang in both PET and BOPP Films due to large capacity addition is expected to continue for the next 1~2 years.

IX. Other Businesses

Silicone coating and extrusion coating businesses

The silicone coating business produces release liner, which is used for carrying adhesive labels until these are removed from the release liner and are applied to the final surface. Other applications of siliconized films include release liner for adhesive tapes, cast polymer materials, electronic applications, medical, hygiene products, roofing and other industrial uses. The Company has three offline siliconized coating lines - one in India and two in Thailand. Polyplex also produces in-line coated silicone release liner during film extrusion process at its Thailand, Turkey and USA plants.

The extrusion coating business involves a combination of PET/BOPP/Nylon film with an extruded adhesive layer to produce thermal lamination film. Thermal lamination film is used for laminating offset/digital printed documents on one/both sides to improve durability and aesthetics of the printed documents. The principal uses comprise teaching aids, maps, certificates, posters, menu cards, ID security cards, book covers, carton board boxes, food packaging and reflective insulation. There is a shift in the global markets from offset print to digital print lamination using special films for enhancing products appearance. Carton box packing segments are also growing due to change of food eating habits of customers. Overall, thermal films are estimated to grow at a rate of 3-5%, mainly in BOPP and its specialty thermal films segments.

Offline coating business

Polyplex has successfully commercialized various specialty offline coated products for both packaging and industrial segments. These include specialties like transparent barrier films, lidding films, digital print media, matt coated films, heat transfer film, transfer metallized film/paper, UV printable metallized film etc.

Digitization is rapidly growing in various application segments like photo book, labels, shrink sleeves, flexible packaging, graphics, promotional & customized

digital printing, commercial printing etc. Polyplex has developed various digital print media film products to provide solutions for graphics, display, label and packaging segments.

The Company has several offline coating lines across India, Thailand & Turkey to meet market demand and broaden the product portfolio. A new offline coater is under implementation in USA to service domestic demand and increase the share of specialty sales.

Metallized paper business

Polyplex has a laminating machine which was commissioned in FY 2019-20 to facilitate Transfer Metallized Paper (TMP) business. TMP is Metallic Paper where the metal is deposited on it by transfer from release coated metallized PET film.

Polyplex also has the capability of Direct Metallized Paper (DMP) wherein a very thin layer of aluminum is vacuum deposited onto a varnish lacquer coated paper and further print receptive lacquering is done on metal surface.

Metallized Paper is bio-degradable, has a brand appeal and perceived to be recyclable. Major segments for metallized paper are:

1) Label face stock

2) Wet glue label

3) Gift Wrap

4) Cigarette wrap

5) Flexible packaging

6) Carton packing

7) Barrier Paper

The market potential for Transfer Metallized Paper in India is approximately 8,500 tons with some of the SKUs of carton packing removed by the Brand Owners. Direct Metallized Paper (DMP) has a market size of around 3,000 tons in India.

Holography business

Holography is the process of making holograms which are usually intended for displaying three dimensional images, security text, different unique features and images. It is a physical structure embossed on polymeric film that diffracts light into an image, text or patterns.

Holography is widely used in various flexible packaging applications that provide better aesthetics, protection from counterfeiting, fraud and brand protection besides hot stamping foil, security label, holography transfer paper and other packaging applications.

Holography is produced on a thin flexible polymeric film (PET, BOPP, CPP or Nylon) which has been microembossed with patterns or even images. Patterns or

an image are created by way of an embossing process which can provide a 3D effect and/or spectral (rainbow) coloring. In order to enhance holography effect & its suitability in packaging application, embossed film is metallized on the holographic side.

The market potential for Holographic Film in India is approximately 8500 tons and is expected to grow at around 8% - 10%

Polyplex has successfully commissioned six holography machines in India, one in Turkey and two in Thailand for flexible packaging applications, gift wrap, label face stock and Carton lamination. Polyplex has installed both seamless and shim line Holo technology to cater wider segment of market applications.

Recycling of plastic waste

The Company through its subsidiary in Thailand, Ecoblue Limited, which started operations in 2013, provides

X. Demand Drivers for Polymeric Films

sustainable solutions for film-based process waste as well as post-consumer plastic waste for varied applications. Over the years, EcoBlue has been working with different post-consumer and industrial wastes (both PET and Polyolefin based) to develop and produce high quality recycled materials which can replace virgin resin in high end applications like Bottles, PET Film, Filament Yarn etc. The rPET, rPP and rHDPE range are FDA approved and Global Recycled Standard (GRS) certified. The expansion with a new state of the art recycling facility for post-consumer waste, for these applications demonstrates the Companys commitment towards sustainability. The Company is also working with Ocean bound plastics marketplace platform and developing supply chain for ocean bound plastics. Ecoblue is now positioned amongst the leading recycling companies in the region.

Population growth: The demand growth for polymeric films is expected to be linear and directly proportional to population growth. The worlds population has tripled since the mid-20th century. It reached 8.0 billion in November 2022. Rising life expectancy is expected to lead to an ageing of the population especially in high income countries that will increase demand for healthcare and pharmaceutical products.

Urbanization: Growth in the urban population is driven by overall population increase and by the upward shift in the percentage living in urban areas. Today, around 56% of the worlds population - 4.4 billion inhabitants - live in cities. This trend is expected to continue, with the urban population more than doubling its current size by 2050, at which point nearly 70% will live in cities. This translates into increased disposal incomes and an aspiration among a burgeoning middle class to adopt global brands and modern shopping habits. With more than 80% of global GDP generated in cities, urbanization can contribute

to sustainable growth through increased productivity and innovation.

Improved quality of life: With growing life expectancy and quest for quality, consumers are expected to move towards packaged product consumption. As people adopt healthier lifestyles and consume more convenience foods, the demand for these items will continue to increase.

Increasing environmental awareness: Owing to increasing global environmental awareness, polymeric films are gaining popularity owing to lower environmental impact (lower resource intensity, emitting lower greenhouse gases and lighter in weight). Flexible packaging offers a number of sustainability benefits throughout the entire cycle of the package when compared to other packaging options, especially rigids.

Increasing consumerism: Income growth has led to an

increase in global consumer spends, influencing in turn the

Polymeric film industry. The world economy could more than double in size by 2050, far outstripping population growth, due to continued technology-driven productivity improvements. Technological developments are leading to accelerated demand in electrical, electronics and other industrial applications, along with new applications like LiB for EVs, which is expected to further increase demand. The Asia Pacific region is expected to witness the fastest growth because of the presence of two highly populated countries, i.e., China and India. In these two countries, the increase in disposable income will supplement the growth of industries such as food and beverages, pharmaceuticals, pet food, and cosmetics, which will help the polymeric film market to flourish.

E-Commerce: The global e-commerce packaging market share is projected to grow from USD 45.21 billion in 2022 to USD 66.51 billion by 2029, exhibiting a CAGR of 5.7% during the 2022-2029 period. There is an increasing number of people dependent on online shopping. Packaging plays an important role in case of E-commerce from aesthetics perspective as well as to ensure durability and quality of the product. In the era of social media marketing, many FMCG players are moving towards specialized, innovative and sophisticated packaging. Asia Pacific is likely to hold the dominant e-commerce packaging market share in the coming years owing to the expansion of the e-commerce industry in the region. As per the Associated Chambers for Commerce and Industry in India, the Indian e-commerce industry was evaluated at USD 41.34 billion in 2021 and is projected to reach USD 50 billion by 2025.

Retail Formats: Modern Trade has created a plethora of opportunities for the packaging sector as it increases the demand for retail ready packaging solutions which is space efficient and also helps in reducing supply chain cost. These formats lead to impulsive buying behavior through their visual merchandising strategies, efficient sales personnel, in-store sampling and promotions with discount offers.

XI. Key Differentiating Factors for Polyplex

• Onshore presence through integrated manufacturing and distribution in all major demand centers except China

• Inherent flexibility embedded in a range of upstream & downstream assets and organizational focus ensuring expeditious as well as economic product and application development

• An appropriate combination of integrated operations, contemporary assets, repurposed older lines, consistent improvement in productivity and cost structure securing long term cost competitiveness on a delivered basis

• Focused downstream and side-stream investments to meet customized needs of packaging and industrial markets

• Continuous investment in assets and capabilities to meet future requirements aligned to emerging trends

• Ahead of the industry in recycling initiatives and the only Company to offer mechanically and chemically recycled rPET films at scale

• A comprehensive suite of products for flexible packaging industry

• Tier 1 supplier for BOPET films to the global converters across both standard and specialty films

• Collaborative product and application development with customers

• An expanding portfolio in Thin and Thick Industrial BOPETfilms

• A proven management team with 20+ years at Polyplex and an in-depth understanding of the business

• A common value system across the organization, "SCORE" (Seamlessness, Care, Ownership & Responsibility and Excellence) secures the global mindset of a committed and empowered work force sensitive to all stakeholders

XII. Strategy & Positioning

Polyplex seeks to maximize long-term returns following a differentiated approach that responds proactively to business and environmental changes. As it seeks sustained and profitable growth i.e. a judicious balance between revenue enhancement and benchmark return on capital employed, Polyplex has often been an industry trend setter with respect to the strategy choices made in the past. The key elements of this strategy are as under:

• Globally Seen by Customers as a "Local Manufacturer" - Seven state-of-the-art manufacturing facilities across the globe help focus on their respective domestic and regional markets

• Integrated manufacturing capacities across geographies enables the Company to provide a comprehensive suite of products in each manufacturing location. It also ensures supply chain efficiency, cost optimization & lower time to access and market new products and applications

• Backward integration into resin at all our film manufacturing locations is unique to Polyplex among the large global producers as others either do not have any captive resin facility or even if they do have, it may be at one location only and may not cover their entire requirement.

• The Company has the widest product portfolio in the industry across several polymeric film substrates; further enhanced due to multifarious downstream processing capabilities

• There is an increasing composition of innovative, highly customised and unique products to meet wide ranging requirements of customers

• Unique value proposition of differentiated products, applications and customers (D-PAC) has led to a healthy growth in specialty portfolio. It is a competitive advantage developed over time

• Polyplex has created a portfolio of value added and D-PAC sales to act as a twin-layer moat for preserving profitability.

Polyplex offers

• Seamless and reliable supply chain through a judicious mix of onshore, nearshore manufacturing and imports

• Customer specific stocking programs - make-and- hold, consignment and local warehousing

• Direct sales presence through employees of local origin in key geographies in Asia, Europe and North America

- Local presence in China, Japan, Korea, Malaysia, Vietnam, Philippines, Singapore besides Thailand and Indonesia

- Physical presence of European sales team comprising of more than 8 nationalities in many countries of the EU

- North America sales team physically located in different US cities

- Customers in African and South American markets are catered directly or through agents/network

• Intricate knowledge of customer requirements and global trends - local language, cultural affinity and physical presence play an important role in developing strong customer relationships

• Strong and real time feedback loop established through the salesforce leading to prompt on-shore technical support

• Comprehensive product portfolio including high-value differentiated products in different lot sizes

• New product development and innovation

• Built-in resilience to any disruption - Polyplex has the ability to supply customers from its global supply network.

• Investment in vertical integration (both backward and forward) complemented with versatile and high productivity assets would continue to protect cost competitiveness, drive innovation & value addition

• Continuous improvements in productivity and cost optimization to maintain global cost leadership

• In order to increase the sales of specialty film and enable economic usage of the older & less productive film lines, Polyplex has been consistently repurposing its older assets to meet the growing space and demand for D-PAC products in a cost-effective manner

• Other technological improvements like direct melt casting lines, upgrades and debottlenecking have helped Polyplex to remain cost competitive

• Efficient logistics cost due to proximity of manufacturing to customers and mostly local raw material sources have contributed towards operational efficiency.

• Focus on innovation and collaborative application development helps the Company become a preferred supplier/partner with several large multinational customers and ensures sustained differentiation

• A well-staffed R&D centre in India supported by satellite on-shore teams ensures multiple levels of customer engagement for product and application development

• Better technical services and new products are being facilitated by leveraging in-house R&D capabilities and experience

• Collaborative Research with Government labs and educational institutions to drive innovation and new sustainability positive products

• Systems have been created and strengthened to enhance cross-learning and sharing best practices/ benchmarking across various units and businesses of the Group to enhance efficiency and synergy.

• The Company has developed many products in the last few years and for relevant markets has filed patent applications. Currently, it has 26 patents across various products/ processes/ countries and has filed application for 14 more patents. Further, the Company also has registered nine trademarks.

• The Company continually strives to develop sustainable products & processes and deliver more sustainable solutions for customers. There is a commitment towards sustainability with minimal environmental impact.

• Developed and optimized "chemical recycling" process for manufacturing Sarafil rPET Polyester film with Post-Consumer Recycled content upto 100%.

• Increasing presence in high potential sustainability related applications (Solar PV, Lithium-Ion Batteries, Transfer Metallized film/paper)

• Promoted use of bio-based renewable raw materials and energy sources for the manufacture of polyester films

• The Company has been following best practices relating to the environment and health & safety of its employees and the society.

• Large facility in Thailand for recycling in-house and sourced polymeric waste further adds impetus to the sustainability agenda.

• Working in close collaboration with industry associations, brand owners, converters, recyclers and research organizations on recycling of post-consumer flexible packaging waste.

• A liquid and strong balance sheet enhances flexibility to address growth opportunities.

• Strong cashflow generation with prudent capital structure:

This strategy has resulted in continuous growth (CAGR of 8% in capacity addition).


i. Coater capacities and capacity for Transfer Paper Metallized has been converted into MT based on current product mix.

ii. Figures include the investments which are under implementation - new PET film line, offline coater and debottlenecking of Resin plant in US

iii. Figures have been restated & revised, wherever necessary for previous years.

Despite the challenging environment, the Company continues to identify further growth avenues and is poised to enhance long-term shareholder value.

XIII. Business Process Excellence

To enhance our competitive advantage and differentiation, the Company has been continuously investing in Business Process Improvement and Excellence programs. A BPE (Business Process Excellence) team is continuously working to undertake several Group-Level initiatives to improve our business processes and optimizing cost through continuous improvement in the areas of freight, packing, inventory management, electrical and thermal energy consumption, indigenization of spares, waste reduction & reuse of waste material, CRM and customer complaint handling. The benefits from these BPE programs have been continuously accruing over the last several years and incremental benefits are expected in the future as well.

XIV. Projects Under Implementation

Brownfield BOPET Film line & Offline Coater Project at Polyplex USA LLC, USA

The investment in a BOPET film project and in Offline Coater is under implementation in USA, co-located with its existing facilities on the available surplus land.

Project Details

1. Total Capital investment is about 128 million USD

2. BOPET Thin Film Line of 10.6 meters width & design speed of 650 meters / minute with an annual installed capacity of 50,000 TPA

3. De-bottleneck the capacity of existing PET Resin line from 58,000 TPA to 86,000 TPA

4. Investment in Offline Coater to curtail lead time and to increase the market share

5. Project start up expected by Q2 of FY 2024-25. There has been deferment in the project start up vis-a-vis original schedule primarily on account of delay in Building Construction.

Funding of the Project proposed through internal accruals

and Bank borrowings

Project Rationale:

1. North America has a large domestic PET Film market which is highly dependent on imports.

2. There have been no major investments made in this industry in the US over the last few years and no known upcoming capacities. Hence, there is an attractive opportunity to capture the demand growth by being an on-shore supplier and increase

our market share by leveraging on Polyplexs existing marketing capabilities, customer relationships and long-term experience of servicing this market

3. Develop a competitive cost structure with an optimum combination of 2 BOPET lines along with matching captive PET resin capacity. The proposed new line being worlds highest output PET film line will significantly enhance the overall cost competitiveness as compared to other domestic suppliers as well as off-shore suppliers.

Post this investment, Polyplex will be the most cost competitive producer of Thin BOPET films in the US.

XV. Performance During the Year

All discussion here is in the context of the consolidated performance of the Company.

Sales and Operations

The Company has a large international presence with active sales in all major regional markets/countries

Operating company-wise breakup of sales (%)

(supplies to more than 90 countries) with an extensive base of about 2,660 customers and low customer concentration. The customer base is fragmented consisting of both small players and large corporates across geographies, with top 10 customers contributing about 25% of revenues in FY 2022-23. Majority of the customers have an average offtake <10TPM and prefer local manufacturer / distributor for ease of business, even if the domestic pricing is at a premium. With a diverse product portfolio, Polyplex can cross-sell different products to the same customers.

Polyplex has established long term relationships (15-20 years on an average) with key customers globally. The Company has been able to maintain strong customer loyalty with a high rate of repeat customers over the years.

The breakup of the Companys revenues from various regions, operating companies, business segments and applications are given below:

Business segment-wise breakup of sales (%)

Financial performance

A snapshot of the income statement for the last two years is given below:

Particulars 2022-23 2021-22 Change


(K in Lakh) % of Total Expenses (K in Lakh) % of Total Expenses
Sales & Other Income 7,74,746 100% 6,75,238 100% 15%
Manufacturing Expenses 5,55,421 72% 79% 4,14,649 61% 75%
Operating and other Expenses 1,15,088 15% 16% 1,17,000 17% 21%
EBITDA 1,04,237 13% 1,43,589 21% -27%
Foreign exchange fluctuation loss / (gain) # 1,732 0% 0% (5,388) -1% -1%
Normalized EBITDA * 1,05,969 14% 1,38,201 20% -23%
Interest & Finance Charges 3,527 0% 1% 1,650 0% 0%
Depreciation and Amortization 29,628 4% 4% 27,252 4% 5%
Income Before Income Tax 71,082 9% 1,14,687 17% -38%
Exceptional Gain/(Loss) - 0% - 0%
Provision for Income Tax 9,528 1% 18,204 3%
Net Income (Before Minority Interest) 61,554 8% 96,483 14% -36%
Minority Interest 26,719 3% 39,603 6%
Net Income (After Minority Interest) 34,835 4% 56,880 8% -39%

# Unrealized portion of foreign exchange loss / (gain) on foreign currency long term loan

* Normalized EBITDA excludes impact of unrealized FX (gain)/ loss on long term loans

During the year under review, the sales and other income have increased by 15% due to overall increase in sales volume of BOPP films (on account of ramp up of BOPP line in Indonesia, which started up in Dec21) partly offset by fall in volume of some downstream businesses. Further, this was supported by increase in sales price of BOPET films due to higher raw material prices partially offset by fall in BOPP prices.

Normalized EBITDA is lower by 23% mainly on account of softer market conditions and higher fixed costs. Several new lines have started up, mainly in China and India, which coupled with likely deteriorating macroeconomic conditions across the globe, has impacted margins on standard films. Reported EBITDA, before adjustment for unrealized foreign exchange fluctuation gain/loss on reinstatement of long-term foreign currency loans charged to the statement of Profit and Loss as per applicable accounting regulations, is lower by 27% during the year. There was an unrealized foreign exchange fluctuation loss amounting to Rs. 1,732 Lakh during the current year, in comparison to unrealized foreign exchange fluctuation gain of Rs. 5,388 Lakh during the previous year.

The provision for income tax is lower during the current year due to lower profit in the year under review.

Sales and other income

(Rs. In Lakh)

Particulars 2022-23 2021-22 Change(YoY)
Sales 7,64,029 6,60,716 16%
Other Income 10,717 14,522 -26%
Total 7,74,746 6,75,238 15%

An increase in topline during the year under review was mainly due to increase in sales volume of BOPP Film partially

offset by fall in prices. For BOPET film, the selling price has increased resulting from higher crude oil prices.

Other incomes during the current year were lower on account of below reasons:

a) Lower foreign exchange fluctuation gains during the year - Foreign exchange fluctuation gain of Rs. 1,452 Lakh in the current year as compared to Rs. 8,761 Lakh in previous year

b) Lower - Export incentive of Rs. 1,199 Lakh during the year as compared to Rs. 1,724 Lakh in previous year.

The above has been partially offset by the following:

a) Insurance claims - Insurance claims during the year was Rs. 3,809 Lakh as compared to Rs. 640 Lakh in the previous year

b) Interest income - Higher interest income during the year due to monetary tightening across the globe resulting in high fixed deposit income and higher yields on bonds generated from deployment of surplus cash in low-risk market instruments.

Manufacturing expenses

(Rs. In Lakh)

Particulars 2022-23 2021-22 Change (YoY)
Raw Materials Consumed (Incl. Stock Accretion/Decretion) 4,52,504 3,39,037 33%
Power & Fuel 52,230 34,527 51%
Packing Material Consumed 26,793 23,323 15%
Stores & Spares Consumed 17,463 12,618 38%
Repairs and Maintenance 6,431 5,143 25%
Total Manufacturing Expenses 5,55,421 4,14,649 34%
as a % of Sales and Other Income 72% 61%

Raw material expenses increased by 33% in absolute terms mainly due to increase in raw material prices and increase in volumes. Increase in power and fuel cost is due to sharp increase in prices of natural gas resulting from the Russia / Ukraine war and also the impact of inflationary pressures across the globe. Higher stores & spares cost is due to scheduled major maintenance in Indonesia, USA and India. Packing cost and repair & maintenance cost have increased due to higher sales volume and ramp up of new plant at Indonesia. This has resulted in overall increase of manufacturing expenses by 34% in absolute terms.

Operating and other expenses

(Rs. In Lakh)

Particulars 2022-23 2021-22 Change(YoY)
Personnel Expenses 49,049 48,244 2%
Administrative Expenses 16,349 12,866 27%
Selling Expenses 48,048 54,699 -12%
Other Expenses 1,642 1,191 38%
Total Operating and other Expenses 1,15,088 1,17,000 -2%
as a % of Sales and Other Income 15% 17%

During the year operating and other expenses in absolute term have declined by 2%. Important factor contributing to this is lower selling expenses resulting from normalization of freight rates in the current year in comparison to previous year. Increase in personal expenses, administrative expenses and other expenses reflects the impact of inflation and ramp-up of BOPP line at Indonesia.

Interest and finance charges

(Rs. In Lakh)

Particulars 2022-23 2021-22 Change (YoY)
Interest Expense 3,205 1,475 117%
Bank & Other Financial Charges 322 175 83%
Total Interest and Finance Charges 3,527 1,650 114%
as a % of Sales and Other Income 0.5% 0.2%

Financial expenses are higher due to increase in interest rates globally resulting from higher USD Libor and Euro Libor. The impact was partially offset by decrease in long term borrowings due to repayment of loans and lower working capital utilization during the year.

Liquidity and capital resources

The Company ensures access to sufficient funding at acceptable costs to meet its business needs and financial obligations through business cycles. The Company relies on cash from operations and short-term/long-term debt for meeting its requirements. It continues to maintain adequate liquidity for its operations with a close watch on the debt service and leveraging ratios. Cash and equivalents together with undrawn credit lines (excluding project financing) and liquid investments aggregated to around Rs. 2,49,601 Lakh (including unutilized working capital limits of Rs. 1,24,038 Lakh) as at the end of the reporting period.

Particulars FY (2019-20) FY (2020-21) FY (2021-22) FY (2022-23)
Net Cash flow from operating activities 73,110 1,08,455 56,002 80,150
Net Cash flow from investing activities -40,496 -43,231 106 -11,493
Net Cash flow from financing activities -29,767 -65,885 -23,223 -65,696
Exchange difference on translation of Foreign Operation 8,172 -144 3,970 13,055
Total Cash & Cash and Equivalents 44,389 43,583 80,438 96,455
Total Cash & Bank Balance including investment 1,25,652 1,24,215 1,22,782 1,25,563

Cash flows

(Rs. In Lakh)

Particulars As at

March 31, 2023

As at

March 31, 2022

Cash & Bank Balances 47,265 51,406
Fixed Deposit with Banks (less than 3 Months) 49,190 29,033
Cash & Cash Equivalent (A) 96,455 80,438
Fixed Deposit with Banks (3 - 12 Months) 1 9,578
Other Balances with Bank 1,548 621
Bank Balances other than Cash & Cash Equivalent (B) 1,548 10,199
Fixed Deposit with Banks (More than 12 Months) 15 4,593
Investment in Bonds 27,545 24,051
Liquid Investment - 3,500
Other Cash & Bank Balances (C) 27,560 32,145
Total Cash & Bank Balance including investment (A + B + C) 1,25,563 1,22,782

Cash flow from operations

For the year under review, cash-flow from operating activities (before change in working capital) has been lower at Rs. 1,04,705 Lakh as compared to Rs. 1,36,765 Lakh in previous year mainly due to lower profitability. This was partially offset by increase in net working capital by Rs. 5,572 Lakh invested in business and Income Tax paid of Rs. 18,982 Lakh which resulted in net cash-flow from operating activities (after change in working capital) at Rs. 80,150 Lakh.

Cash flow from investing activities

Factors impacting cashflows are:

• Investment in fixed assets of Rs. 27,283 Lakh in FY 2022-23 (Rs. 40,178 Lakh in FY 2021-22), mainly towards capital advance payments for new PET Film line at USA as well as multiple smaller investments in various locations

• Around Rs. 13,034 Lakh of fixed income securities and bank term deposits were redeemed (net of investment) during the FY 2022-23 (as compared to net redemption of Rs. 37,482 Lakh in FY 2021-22)

• Interest income received during the year is Rs. 2,259 Lakh (Rs. 2,669 Lakh in FY 2021-22) on account of lower investment maturities during the year, the impact of which was partly offset by higher interest rates.

Cash flow from financing activities

Factors impacting cashflows are:

• There was a net decline in total debt (short term + long term) by Rs. 19,832 Lakh. This includes decrease in net term debt by Rs. 14,893 Lakh due to repayments and balance on account of lower working capital borrowings

• Interest paid during the year is Rs. 3,528 Lakh (Rs. 1,836 Lakh in FY 2021-22) due to higher interest rates

• The Company paid dividend of Rs. 42,025 Lakh in FY 2022-23 (Rs. 47,870 Lakh in FY 2021-22)

Exchange Difference on translation of foreign operations

This is the exchange rate difference arising out of translation of assets & liabilities of overseas subsidiaries which are denominated in different currencies into INR on consolidation.

Debt profile

Total debt as on March 31, 2023 is Rs. 78,683 Lakh (Rs. 93,961 Lakh on March 31, 2022), an decrease of Rs. 15,278 Lakh over the previous year. This is mainly due to repayments and balance on account of lower working capital borrowings.

XVI. Sustainability

There is concern from all stakeholders and environmental groups on the usage of plastics.

The perceptions on plastics usage at a macro level are driven by images of plastic litter in oceans, impact on marine life and prevalence of microplastics in the food chain, etc. This is exacerbated by usage of certain Single Use Plastic (SU P) items which contribute to the increasing amount of plastic waste reaching the landfills in absence of a comprehensive recycling ecosystem.

Governments are becoming an active participant in setting out the expectations and defining rules. Industry is focusing on developing economical models for collection, sorting and reuse/ recycling of post-consumer plastic waste. The urgency and sensitivity on the sustainability agenda varies significantly across regions with Europe taking the lead followed by US and South East Asia. Regulatory measures / guidance across the world have focused on reducing / eliminating the usage of certain SUPs and imposing special taxes. The European Union has implemented a plastic tax €800/ton levy on non-recycled plastic waste in Jan 2021. Effective April 2022, UK has imposed a ?200/ton tax rate for packaging with less than 30% recycled plastic and effective January 2023, Spain has imposed €450/ton on non-recyclable plastic packaging. EU is in advance stage to implement Packaging & Packaging Waste Regulation (PPWR) or other measures to promote recycling and usage of recycled content, implementation of Extended Producer Responsibility (EPR) obligations, etc. Regulatory objective of PPWR is to ensure that all packaging is reusable or recyclable in an economically feasible way. The aim is to reinforce the essential requirements for packaging to ensure its reuse and recycling, boost the uptake of recycled content, and improve the requirements enforceability

To put into perspective, out of a global plastics consumption of more than 390 million tons, consumer flexible packaging accounts for ~10% and BOPET films are under 1% of the total tonnage. Due to its superior performance, economics as well as benefits on the sustainability front, flexible plastic packaging has been gradually replacing rigid forms of packaging over the last several decades. The myriad benefits include lower environmental impact and carbon footprint, resource efficiency in terms of high product to package ratio, lower energy usage, water, transport costs and landfill requirements, better performance - barrier, retort and other features besides flexibility and versatility to cater to various needs and convenience requirements. As a result, regulators and governments across the world have not come out with any measures to restrict the usage of Multi-Layer Plastics (MLPs) in packaging. It is important to note that these bans do not extend to MLPs in recognition of intrinsic benefits and the lack of viable alternatives in

terms of environmental impact and cost. The focus is to encourage development of the recycling infrastructure and usage of recycled content infrastructure, design for recycling, use of mono-materials for improved circularity with a primary obligation on Brand owners.

The Ellen MacArthur Foundation (EMF) in collaboration with the UN Environment has come up with a New Plastics Economy Global Commitment vision document wherein one of six key pillars is that all plastic packaging is 100% reusable, recyclable, or compostable. Various national and regional plastic pacts have been constituted under plastic pacts network of EMF. Plastic pacts bring together Governments and frontrunners from across the whole value chain to accelerate the transition towards circular plastics economy. Signatories include national governments, packaging manufactures, waste management businesses, plastic manufacturers, brand owners and retailers

In light of the above, each industry participant is challenged with both threats as well as opportunities. The Company strives to partner with all stakeholders in the value chain on sustainability developments. It represents the polyester industry at various national and International Industry Associations, the details of which are as below:

Industry associations Objective
PETCORE - Europe PET Sustainability & Recycling
CEFLEX _Europe Flexible packaging circular economy
BOPET FILM - Europe PET film
SPC - USA Sustainable Packaging
IFCA -India Flexible packaging and folding carton

The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. Polyplex is aligning with the UNs Sustainable Development Goals (SDGs) to better understand global challenges that need to be solved. We set a goal to align our innovation portfolio to meaningfully advance the UN SDGs and create value for our customers with minimal environmental impact and providing the highest standards of health and safety to the workforce.

Global consumer product companies have come out with their sustainability pledges which with regard to plastics, are centered around making their packaging recyclable, reusable or compostable, usage of recycled content, reduction in usage of unnecessary plastics and drive projects around circularity besides other objectives like reduction in water / fossil fuel-based energy usage, etc.

In the above context, it may be added that "recycle ready" has no relevance unless recycled and at scale. Plastic tax imposed in EU recognizes only what is recycled. Everything else is taxed. While all substrates can be theoretically recycled, economic and technical limitations of mechanical recycling including contamination from inks and adhesives lead to multicolored, low spec recycled resin with limited use.

There is an ongoing debate as to whether all mono polyolefin structures could be a solution to the need for recycling. MLP Laminates (mono material or multi material) can be down-cycled into low end products like pots, pans, chairs etc. besides some end-of-life applications such as usage in road construction and waste to energy (cement kiln and incineration). Now focus is on full circularity through chemical recycling/ pyrolysis of MLP waste. Even if mono materials are used in flexible packaging, issues will largely remain the same with only very limited incremental applications as well as issues of collection, segregation/sorting, etc.

There is no existing stream to collect, sort and recycle mono-olefin MLP laminates for flexible packaging. Existing streams are only for rigid PE/PP and single layer unprinted PE / PP films for agriculture and secondary packaging applications such as shrink wrap. Unlike Olefins where mechanical recycling leads to deterioration of properties and degraded components making it unsuitable for food grade flexible packaging and pharma applications, PET resin produced through mechanical recycling process can be used to produce BOPET films for such applications.

Given the inherent limitations of mechanical recycling, industry and governments are increasing acknowledging the necessity of chemical recycling to achieve true circularity. Further, LCA studies have established that chemical recycling has a significantly lower carbon footprint in comparison with fossil fuel-based polymer production for polymer like PET.

In conclusion, the entire issue of Sustainability w.r.t. flexible packaging can be encapsulated as under:

Rigid vs Flexible Packaging • The compelling benefits of flexible packaging would discourage the conversion back to rigids (glass/tin/foil/cardboard) in any material manner.

• The ongoing shift from rigids to flexibles is expected to continue, particularly in the developing world

PCR Content • BOPET films are the only available commercial option currently

• There is increasing visible momentum in the last few years for usage of rPET films

• This will also improve recovery rates for post-consumer PET bottles and likely initiate recycling of APET trays

Chemical Recycling • Chemical recycling is integral to any sustainable solution for post-consumer flexible packaging waste to ensure true circularity.
Mono Structure • Within the limitations on functionality, costs and likelihood of increased material usage, some formats may be shifted to Olefin based structure and some to PET based

• However, there is no established collection, sorting and recycling streams for flexible packaging laminates

• Given contaminations of inks and adhesives only down cycling is possible with limited end use. However upcoming chemical recycling/pyrolysis can ensure full recyclability

Other considerations • An effective collection and sorting infrastructure coupled with chemical-based recycling to recover feedstocks / monomer from MLP would provide a true "circular" solution.

• Pledges by brand owners, technological developments and government actions would be an important consideration

Sustainable products and solutions

Polyplex has successfully adopted the 5R (reduce, reuse, recycle, remove and renewable) concept while coming up with new-age packaging substrate solutions. It has taken various initiatives to recycle waste, save energy and use clean technology to reassert its environmental commitment and continually strives to manufacture sustainable products which can gain global acceptance.

As an organization, the Company continually strives to develop sustainable products and deliver more sustainable solutions to our customers. Polyplex has undertaken the following decisive initiatives in the realm of environmental conservation:

• Developed and optimized "chemical recycling" process for manufacturing Sarafil rPET Polyester film with post-consumer recyclate content of upto 100% for packaging applications. The film has been made available commercially using post-consumer PET bottle flakes as input material. The rPET resin has properties same as that of virgin PET resin and the resultant PET film is compliant with regulatory requirements including EC and US FDA compliances.

- Our Thai subsidiary has got the Recycled Claim standard (RCS) certification and Recycled Content Verification certification for film

- Our Turkish subsidiary has got Recycled Content Verification (RCV) certification and sustainability certification from Intertek Testing Services and ISCC Plus respectively

- Additionally, India and US entities have also got Recycled Content Verification certification for film

• Developed Monomeric PET film with high sealability for use in mono and multilayer packaging and other industrial applications. These monomeric range of PET films are recyclable and conform to the definition of circularity

• Developed various biodegradable films (PET, Blown PP/PE, CPP) which meet the requirements of anaerobic biodegradation either in accelerated landfill or high solids anaerobic conditions complying to ASTM D5511 & D5526 standards. These films are also compliant to current PWMR regulations of India

• Transfer metallized films & paper and direct metallized paper for plastic free cartons which is 100% recyclable. Paper is considered a more environment friendly substrate being bio-degradable and recyclable solution for many packaging applications. Metallized paper offers dramatic benefits over the use of foils and

metallic inks on reduction of carbon foot print and is easily recyclable along with conventional paper or board. It is qualified as mono-material, so considered as environmentally sound compared to other available substrates for these applications

• Increasing focus on high potential sustainability related applications including Solar PV, Lithium-Ion Batteries etc.

• Thermoformable Films developed by Polyplex are safer and environment friendly solution for replacement of PVC films

• Polyplex has promoted the use of bio-based renewable raw materials for the manufacture of polyester films

• Successfully developed antimony free (heavy metal free) films

• Developed high barrier metallized film for aluminum foil replacement suitable for milk, coffee segments

• Chlorine free transparent barrier PET film for see through and convenience packages

• Recycling of Silicone Liners, a step towards true circularity

• Dedicated recycling unit in Thailand which provides sustainable solutions (mechanical recycling) for both post-industrial film waste (difficult to recycle materials like silicone coated, printed, metallized etc.) and post-consumer waste polyester fiber waste, bottles as well as olefinic waste. A CircuLiner program for PET filmic liner waste has also been launched with some global companies to provide desired circular recycling solutions. EcoBlue rPET film is in compliant with US FDA 21, Regulation (EU) 10/2011, EU REACH Regulation (EC) No 197/2006 Article 33 (1), RoHS Annex II of 2011/65/EU and meet the requirements of Japan Regulations (JHOSPA) and GRS

• Digital printing offers high-quality graphics without the usage of solvents unlike conventional printing techniques such as Flexo and Rotogravure. With a lot of technologies available for digital printing itself, Polyplex has been able to develop products for most segments suitable for different digital technologies such as inkjet, dry toner, liquid electrophotography, etc.

• Conversion of general packaging laminate structures from 3 layers to 2 layers, which basically contributes to both source reduction as well as CO2 footprint reduction. With this idea in mind, Company now has a high barrier PE which is successfully being used in

shampoo and detergent packaging where it essentially converted a 3-layer structure to 2 layers

• Down-gauging of PET film has resulted in immediate environmental benefits through reduction of packaging weight

Sustainable Processes

• Operationalized latest technologies like Direct Melt Extrusion, Twin screw extrusion systems etc. to save power across plant locations which resulted in substantial improvements in terms of energy efficiency

• Reduced greenhouse gas generation by using husk- fired heaters at its Indian facilities

• Switched to LED lighting across plants

• Improve production and operational efficiencies to ensure optimal consumption of resources like electricity, water and raw materials

• Shifting to solar power for cost optimization - starting from Thailand and then to other locations based on cost benefit analysis

• Limiting the impact on the environment by reducing emission levels, industrial waste and effluents coupled with measures for waste treatment and water conservation

• Improve safety and health standards by continuously improving working conditions, minimizing workplace hazards and raising awareness through involvement, participation and continuous training of the shop floor workforce

• Engaged with stakeholders to promote sustainable business practices

• Measure & monitor carbon footprint through LCA studies

The Company has been following best practices relating to the environment, health and safety and has been diligently following the guidelines that have been set out as per the following certifications:

Management System International Standards India (Khatima) India (Bazpur) Thailand Turkey USA Indonesia
Quality Management System Certified since 1996 Certified since 2010 Certified since 2003 Certified since 2006 Certified since 2018 Certified since 2020
Environment Management system Certified since 2002 Certified since 2010 Certified since 2004 Certified since 2009 Certified since 2018 Certified since 2020
Occupational health & safety management system Certified since 2004 Certified since 2012 Certified since 2008 Certified since 2009 Certified since 2020
Food Safety Management System Certified since 2008 Certified since 2012 Certified since 2009 Certified since 2006 Certified since 2021 Certified since 2021
Energy Management System Certified since 2013 Certified since 2013 Certified since 2013 Certified since 2014 Certified since 2021
Greenhouse Gas Emissions Certified since 2021

The Companys Sustainability report for the year 2018-20 as per the Global Reporting Initiative (GRI) standards is available on Companys website. The report for year 202123 is under preparation. The objective of the Sustainability Report is to disclose its Environmental, Social and Governance (ESG) performance to the stakeholders and to set benchmarks for each sustainability indicator with improvement and intervention areas.

In recognition of its efforts, Polyplex Thailand has been awarded for the following awards:

• Esteemed title of "Green Innovation Award" at the prestigious Asia Corporate Excellence & Sustainability Awards 2021

• Prime Ministers Award for Innovation - Chemical Recycling in Thailand

• Best Public Company of 2021 - Industrial Group at Money & Banking Awards

• Thailand Greenhouse Gas Management Organization for complying with the standard requirements of GHG emissions

• Green Industry Level 3 (Green System) for systematic environment management with continuous monitoring respectively

Additionally, our locations in Turkey, Thailand and India are awarded Eco Vadis CSR Awards for environment, labour & human rights, ethics and sustainable procurement

XVII. Corporate Social Responsibility

Corporate social responsibility has been an important part of the mission of the Company. The Company has been undertaking various initiatives to help communities in areas adjoining to its plants and improve the quality of life of its employees.

The Company across all its locations make monetary as well as contributions in kind to NGOs, Hospitals and Government relief funds. Significant contributions have been done in Turkey towards Earthquake relief. At our plant locations in Khatima & Bazpur, contributions have been made to Govt. Hospitals.

The Company has been running a school at its Khatima plant for the past almost three decades. The school provides over 2,025 students with best-in-class educational facilities. Under a PPP model at Bazpur and Khatima, Polyplex has adopted two local schools and provides them with the necessary infrastructure. Polyplex also offers a slew of sports and educational sponsorships as well as full scholarships to the school-going children of deceased employees and have made contributions to various other schools/educational institutes in order to promote education and help contributing to a better society. Polyplex promotes religious harmony through its even-handed support to local religious activities and celebrations. Polyplex has also contributed to the Rekhta Foundation, which is a non-profit organisation established to promote and disseminate literature and culture. In line with the requirements of Companies Act, 2013, the Company has also constituted a CSR Committee with a keen emphasis on delivering a positive impact across social, economic and environmental parameters. A detailed report on CSR expenditure is provided in the Directors Report section.

XVIII. Innovation

Polyplex leverages the concept of co-creation while working on various innovation and sustainability programs with its stakeholders - converters and brand owners from the value chain.

The Company owns 26 granted Patents spread across various products, processes and countries and additional 12 applications have been filed. Additionally, nine trademarks have been registered .

Consumers have become highly demanding and are looking for more and more convenience features in packaging formats. "Reclosability", "Easy to tear" "Ready to Eat" and "Higher shelf life" have become regular concepts in the packaging market.

Sustainability Focused Innovative Products:

• rPET range of Sarafil Polyester film suitable for direct food contact packaging applications with PCR content upto 100%

• Cold and Hot thermo-formable films for replacement of Nylon and PVC in certain flexible and pharmaceutical segments

• Monomeric range of PET films with high heat seal strength for construction of monomeric flexible

packaging material which are recyclable and conforms to the definition of circularity

• Digital printing films for variable printing applications

• Eco Friendly PET (Heavy Metal Free)

• Bio-degradable PET film

• Specialized papers like Holographic and silver metallized paper for labels and flexible packaging

• Barrier paper with Heat sealable property for flexible packaging

• Metalized PE Films for mono PE structures

Other innovative products and solutions for convenience, aesthetic, shelf life & high performance:

• Holographic films for specialized applications for Brand protection, Security & Tamper evidence

• Inline siliconized films for liner applications

• Specialty coated products for aesthetically pleasing packaging structures. They are targeted to impart a more natural and paper-like look for a soft and subtle appearance.

• High barrier AlOx PET film for enhanced shelf life and see-through packaging

• High barrier metallized PET film for replacement of aluminum foil in coffee, milk powder packaging

• High performance thermo-formable films for shallow draw lidding applications

• High performance blown PP films for retort applications

• Label face film for label applications

• Synthetic Paper for commercial segments

• Specialized back-sheet films for solar panels

• Anti-fog films for face shield application

• Films for Lithium Ion Battery (LIB) in EV applications

• Specialty-coated PET/OPP thermal films

• VIF/TIF embossed PE films for agricultural applications

• CPP Films for medical applications

XIX. Human Resources

Polyplex Group employs over ~2700 people across the globe. The Company closely monitors employee performance and accordingly creates career progression paths. Greater emphasis has been given to the following initiatives:

• Management of Human Resources during Pandemic:

During the crisis, a robust health monitoring

mechanism has been put in place including handling of emergency situations. Proactive communication and prevention have been the hallmark of these initiatives. All our operations continued without any disruption during these difficult times

• Internal Growth and Development: Expansion in multiple geographies / product categories has resulted in the team stepping into leadership roles organically

• Retention of Key Employees: The leadership retention scheme has been broad based to include many future leaders. Over the last few years, there is zero attrition at the leadership level. The Company strongly believes in managing operations through a stable management team

• Localization: There is greater emphasis on developing and promoting local leaders having potential to deliver by providing more opportunities of learning and growth. This has positively impacted the morale and participation of local employees in improvement initiatives and programs. Attrition rate at managerial level at all the units is also minimal

• Performance Management System: Special emphasis has been given to improve the robustness of performance feedback across the hierarchy

• Employee Welfare and engagement: The Company believes in having strong institutionalized employee engagement schemes/programs specially designed to meet the aspiration of local environment, culture and social practices. The attempt is to promote health of all employees holistically. Physical, mental, emotional and spiritual health of employees is monitored to ensure higher engagement. Employee engagement and employee welfare schemes continue to play its pivotal role in improving employee bonding. Polyplex has more than 50 structured and institutionalized employee engagement/welfare schemes covering employees at all plants and head office

• Diversity and inclusiveness: The Company promotes diversity and in order to ensure inclusiveness, conscious efforts are made through participative management.

• Employee related insurance cover: The Company has well established medical insurance policies for employees and their families. Company also takes accidental insurance and term life insurance for its employees. This has helped the family of many employees in case of unforeseen situations.

• Healthy IR situation: Overall IR situation in all the plants are healthy. Employees participate in decision making process through employee welfare committees. Polyplex has not lost a single day of production since inception due to labor strike

• Employee Rationalization: Employee rationalization related initiatives continued to operate at all the units. The emphasis is to use each opportunity of employee rationalization with minimal emotional distress to employees. The leadership team in our new operation in Indonesia consists of employees from all the units without any additional hiring. Business growth opportunities provided additional space for manpower rationalization. Rationalization also involves lowering the grade at which a specific job is performed, integration of functions to reduce managers/supervisors, delayering of structuring. Positions opening up from employees leaving at senior level have been filled by growing people from within. This has helped provide opportunities on one hand and rationalization of cost on the other hand. In order to fill the positions emerging out of resignation, a pool of resources is hired at the entry level and developed through the structured development programs.

• Systems and Process Institutionalizations: Polyplex believes in institutionalized mechanism of managing all the benefits related to human resources. Employees have full access to these documents in HR portal (HRIS) for their ready reference

• Hiring of Future Leaders: The Company continues to employ graduates from various premier institutions of the country. This initiative, over the last five years, has helped young engineers and management professionals take up middle level leadership positions. Under this program, they are given direct exposure through structured role change for faster and all-round growth. This has helped in improving the available talent pipeline and employee retention

• Training & Skill Development: People Development Cell set up to identify function-specific classroom / on the job training needs of the employees

• Caring Culture: Care is one of the four core values of Polyplexs value system. Polyplex believes in holistic development of our employees. Focus is on developing a culture to Attract, Develop and Retain Employees

• Long serving employees: In order to appreciate the contribution of long serving employees, following initiatives have been taken during last financial year:

- Direct family members of employees are given opportunity of employment

- Employees at operating level are given growth to play larger role at the plants

XX. Information Technology

During the year under review, the Company continued

to implement IT enablement initiatives for improving

and optimizing business processes. The new application

platform has been successfully running in three locations. The roll out is under progress at another unit.

The Company is working on improvement programs in the IT applications and communication infrastructure supporting the business operations. The Company continues to invest in upgradation of older networks and infrastructure components to contemporary standards with secured infrastructure.

XXI. Internal Control Systems

The Company has established a robust Internal Financial Control (IFC) system, which is in line with requirement of the Companies Act 2013. Risk and Control Matrix (RCM) has been prepared for all the key processes and business transactions. The Design and operating effectiveness of control matrix is tested by Corporate Internal Audit Team every year to ensure compliance with IFC framework of the Company

The Company places great importance on designing and maintaining a strong internal control system comprising various levels of authorization, supervision, checks and balances through standard operating procedures (SOPs), delegation of authority (DOA) matrix, policy guidelines, and manuals. The Companys internal controls system is commensurate with the size of its business and designed to provide assurance regarding the accurate recording of all transactions, safeguarding of assets, effective and efficient use of the Companys resources, and compliance with applicable laws and regulations.

The Company has a dedicated Internal Audit department that operates independently. To further strengthen the Internal Audit function, the Company has engaged an external firm to conduct comprehensive reviews alongside the internal audit team of the Company. The Internal audit team develops a comprehensive risk- based annual audit programme which is approved by the Audit Committee. The Audit Committee also reviews compliance to the said plan.

Internal Audit function prepares a report for each audit undertaken and submits it to the management for discussion. The Corporate Internal Audit team ensures regular follow-up with the concerned process owners to ensure the timely implementation of agreed-upon action plans and further strengthening of controls. Significant audit observations & corrective action suggested are presented to the Audit Committee.

The Company has a robust ERP system with in-built IT controls for all major business processes. The transactions are executed through ERP setups to ensure reliable and timely financial reporting. IT controls are also tested by internal and external audit team during audits. The Company regularly updates its ERP system.

The Company remains committed in ensuring an effective internal control environment that provides assurance to the Board of Directors, Audit Committee, Management and protects the interest of all stakeholders.

XXII. Risk Management

Risk management is a central part of the Companys strategic management. It is the process whereby the Company addresses the risks attached to its activities with the goal of achieving sustained benefit within each activity and across the portfolio of all activities. The focus of good risk management is the identification and treatment of these risks and to add maximum sustainable value to all the activities of the organization, thus optimizing operational efficiency. Effective risk management ensures continuity of the Companys operations and protection of the interests of its stakeholders.

The Company has a Board approved "Risk Management Policy" in compliance with Regulation 21 and Schedule II of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations") and provisions of the Companies Act, 2013 ("the Act"), which requires the Company to lay down procedures about risk assessment and risk minimization.

Objective of the Policy

• To enable visibility and oversight of Board on risk management system and material risk exposure of the Company

• To define and document the risk management methodology

• To improve decision making, planning & prioritization by comprehensive and structured understanding of risks faced by the Company

The Companys risk management program comprises of a series of processes, structures and guidelines which assist the Company to identify, assess, monitor and manage its business risk, including any material changes to its risk profile. To achieve this, the Company has clearly defined the responsibility and authority of the Companys Risk Management Committee, to oversee and manage the risk management program, while conferring responsibility and authority on the Companys Chief Risk Officer and senior management/business managers to develop and maintain the risk management program in light of the day-to-day needs of the Company. Regular communication and review of risk management practice provides the Company with important checks and balances to ensure the efficacy of its risk management program and to promote a strong risk culture. The risk management program is regularly reviewed by the Committee and their recommendations are incorporated by the Company.

Competition and business cycle risk

The industry margins in standard thin PET films hinge on Value Addition "VA" i.e. the difference between PET film prices and raw material (PTA and MEG) prices. Whenever the demand-supply balance favors the suppliers, VA usually widens and thereby encourages manufacturers to increase production by expanding capacities. On the contrary, if PET film supply exceeds market demand, prices drop, thereby narrowing the gap. This inevitably affects every producers revenues and profits, though the impact varies considerably depending upon the product mix, market positioning and other factors. Similar factors are at play for the BOPP and CPP films business also.

Risk mitigation

Polyplex is well placed to counter the adverse effect of any exposure we may have to business volatility risk due to our inherent strengths:

• Capability to diversify the risk given its fragmented and well spread customer base, diversified product portfolio and applications, evenly distributed sales mix and fully integrated operations

• Downstream businesses like Saralam, Saracote, OLC, Holography, TMP etc. usually help in stabilizing the

overall margins as for many products, the end pricing remains largely stable

• Another key point is the significant and consistently higher material margins in Europe and North America markets as compared to Asia for the standard product, which the operations in Turkey and USA are able to leverage upon. The European and North American markets have high dependency on imports and logistics / duty differentials play a large role in the pricing differences besides premium for local players, faster deliveries, smaller delivery lots, etc. The European market has become more balanced now given new capacities added in the region

• Judicious share of raw material linked sales helps in generating stable margins

• Strengthening of D-PAC (Differentiated Product, Application and Customer) portfolio drives Polyplexs rights to win in a competitive Industry. It helps the Company de-risk earnings. Focus is on constant addition of new products to the differentiated portfolio, effectively "replacing" older and standard products

Increasing contribution of D-PAC sales over the period:

The below graph demonstrates the superior and relatively more stable VA of Polyplex on a consistent basis, as compared with the Industry benchmark margin (China) for standard Thin BOPET films.

Diversification across geography, business lines, products and customers Focus on D-PAC offerings which are less volatile to changes in raw material prices Raw material cost advantage due to backward integration Contractual raw material linked pricing arrangements with key customers

It may also be observed that the variability in VA across quarters is much more than the yearly averages due to many other factors like:

a) Seasonality impact (Chinese New Year holidays for Asia, July/Aug due to vacation period for European operations, Christmas / New Year for US operations etc)

b) Sharp Raw material price movements whereby selling prices for standard products take between 1-3 months to adjust

c) Start-up of new capacity can impact the regional pricing for the first couple of quarters before stabilizing

d) Additionally, sharp movement in FX rates and/ or freight rates can also impact the short-term VA given the existing order book and lag in pricing adjustments.

Price volatility risk

The basic raw material for production of PET film is PET resin, which in turn is produced from PTA and MEG. Being components of the petro-chemical chain, the prices of

PTA & MEG are impacted by Global crude oil prices, apart from demand-supply within its own industry.

The cost of resin is the single-largest component of the total production costs. Hence, any adverse fluctuations in the cost of PET resin can impact the Companys operating margins depending upon the Companys ability to pass on cost increases to its customers. As selling prices are usually negotiated on a monthly/quarterly basis, in a balanced demand supply situation, the Company is able to adjust the selling prices following any changes in PET resin costs and other operating costs, although this happens usually with a time lag varying between one to three months depending on the region and prevailing demand supply conditions. The margins on the D-PAC products tend to be more stable and even countercyclical.

Risk mitigation

The following graph illustrates the influence of crude oil prices on the raw material costs and consequently the selling prices of BOPET film, and also establishes the low co-relation between Crude Oil and Industry benchmark (China) value additions.

As can be seen above, crude oil prices have an important bearing on PTA & MEG melt cost and is directly proportional. Raw material movements tend to be ‘pass through in film prices. However, the value addition of the PET film industry (12-micron standard film) is more influenced by the industry demand-supply scenario rather than the crude or melt cost. As can be seen from the chart above, the impact of capacity additions is significant in China, as Chinese players have typically focused only on the domestic market and select SEA markets with standard products only.

The Companys geographical and product diversification helps in sustaining pricing / margins much better than other participants. The prices of downstream products like silicone-coating, extrusion-coating, holography and other specialty / D-PAC films are less susceptible to changes in raw material prices and thus reduce the Companys vulnerability in the face of volatile resin costs.

Further, Asia is a dominant player in PTA as well as MEG thus affecting prices of these key raw materials globally. Having raw material prices aligned to Asia is important from two reasons - 1) these affect raw material prices (including resin) for players in different regions and 2) raw material cost of Asian film producers would be linked to Asian indices. Polyplex has followed a strategy whereby the raw material sourced by different units have some sort of linkage to Asian prices to be aligned to other competitors.

The Company monitors global and local input price trends carefully and determines its procurement plans accordingly. Moreover, unpredictable price movements of raw materials affect all industry participants and thus

does not put Polyplex in a materially advantageous or disadvantageous position vis-a-vis its competitors.

Trade defense risk

Trade defense measures (Anti-dumping duties, countervailing duties, safeguard measures etc.) are imposed to protect local producers against unfairly traded or subsidized imports. Anti-dumping duties are imposed on imports if the ex-factory prices of such imported products are proved to be lower than the local selling prices of similar products in the respective exporting country. Countervailing duties are tariffs levied on imported products to offset the impact of subsidies applicable for exporters in those nations. Such tariff measures increase prices of imported products, usually rendering exporters uncompetitive and thus protecting the domestic industry.

PET Film: International trade in PET film has been subject to trade defense measures for more than three decades through the imposition of anti-dumping duties and countervailing duties. The important markets adopting this measure are the EU, the US, Korea, Indonesia, Turkey and Brazil. Since the occurrence of Covid 19, Turkey has imposed additional custom duty (40% till 31st Dec 2020 and thereafter 10%) on all countries excluding those with FTAs and Custom Union. Since May23, the additional custom duty has been decreased to zero for Pakistan.

Risk mitigation

Polyplex has an advantage in key target markets. Owing to its global manufacturing presence, it can minimize duty incidence thereby achieving most competitive delivered cost for customers.

Polyplexs relative advantage in key markets for select BOPET films



Lower Duty Countries (0%-5%) Medium Duty



Higher Duty Countries (10%+) Polyplex Advantage
Indonesia Thailand/ 1 supplier of China Rest of China, India - Local Producer


Indonesia, Thailand, China (Select producers) Pakistan India, China, UAE - No duty from Indonesia

- Lowest duty from Thailand

Turkey Egypt, Poland, Hungary, Pakistan India, Bahrain, Peru, China - Local Producer
USA GSP## (0%)- Indonesia, Pakistan, Nigeria FTA - Bahrain, Peru, Columbia, South Korea

Normal (4.2%) - Thailand, Turkey

India (Select producers) India, China - Onshore

- GSP from Indonesia##

Brazil* Peru, Columbia Thailand,



India, ChinaA, EgyptA, UAE, Bahrain, Turkey - Thailand and Indonesia with no ADD
EU 0% - Turkey, Pakistan, Egypt GSP (3%) - Indonesia China, Thailand, Columbia, India** - Duty free access from Turkey, GSP from Indonesia
Thailand Indonesia, China India, UAE - Local producer

- No duty from Indonesia

Japan Indonesia, Thailand, India, Pakistan China - Multiple Locations with zero duty

- Incumbent supplier position


* Since ADD rate is in US$/Kg, categorization has been done considering relative duty rates A Currently Suspended ## Suspended since Jan 2021

** Suspension of GSP concessions for India covering Chapter 39 products entirely (PET, BOPP and PET Resins) effective 01st Jan 2023

The Company undertakes required steps to insulate itself against risks arising out of any such anti-dumping actions and other trade barriers imposed by importing countries. A well-diversified manufacturing presence and an end- to-end product portfolio also helps mitigate fallout from such actions. As a local producer in many countries, it is also evaluating actions for protection against unfairly traded or subsidized imports from other countries.

BOPP Film: The key markets imposing trade defense measures on imports of BOPP films are Indonesia, Thailand, Vietnam and Korea. Our existing operations in India for BOPP film are not subject to these trade defense measures. The brownfield expansion in Indonesia for BOPP film which was started in FY 2021-22 is subject to Anti-Dumping duties on exports to Korea & Thailand. On the other hand, the Indonesian market is protected against imports from other key exporting countries like Thailand, Malaysia, China & Vietnam.

PET Film Resin: In case of PET film resin, there are not many trade defense measures across the globe except the safeguard duties imposed by Turkey on imports from all countries which is in force for three years effective Dec 2020 and the safeguard extension investigation is in process.

PTA: Earlier there were AD duties on imports of PTA in India from countries like Thailand, Korea, China,

Indonesia, Malaysia, Taiwan & Iran but effective Feb20, these duties have been revoked as PTA has been designated as a critical input for textile fibers & yarn.

MEG: Effective June 2021, anti-dumping duties have been imposed on USA and Saudi Arabia origin MEG by the EU for five years. In June 2021, a new AD investigation was initiated by India on imports of MEG from Kuwait, Saudi Arabia & USA but the same was terminated as the injury to the domestic industry could not be established.

Cyber Risk

Cyber risk refers to the losses related to phishing attacks, malware, social engineering, data breach, cyber extortion, ransomware, business interruption resulting from cyber event etc. As Polyplex has operations in multiple countries with global customer base, there is a need to contain the impact of potential cyber-security events & losses through criminal activities. Also, with increasing dependence on digitization, the probability of cyber/crime event increases.

Risk mitigation

The Company has a comprehensive Corporate IT policy and procedures in place which are continuously updated. IT Reviews are generally done with the help of external agency. There is a shift in the focus towards proactive security monitoring from reactive monitoring. We ensure

that firewalls of contemporary standards are upgraded at all external connectivity points with additional security components. Repeat communications, one-on-one user awareness sessions, global / focused password reset exercises are held regularly.

In case of Data Privacy matters, the policies and procedures have been updated in line with respective regulations. We continue to monitor regulatory changes and comply with the requirements. We also have Cyber & Crime Insurance in place to take care of any extreme losses.

Liquidity and solvency risk

Liquidity implies the ability to meet debt obligations and finance future investments. Generally, if the cost of debt is lower than the return on investments, by increasing the financial leverage, a corporate can enhance return on equity. However, since there is an obligation to make fixed interest and principal repayments, volatile cash flows could strain the liquidity of a corporate. Also, higher debts could limit the ability to finance further investments.

Risk mitigation

The Company has sufficient cash reserves significantly exceeding the level of debt. Cash and equivalents together with undrawn credit lines (excluding project financing) and liquid investments (current and noncurrent) aggregated to more than Rs. 249,601 Lakh. The Company has been able to maintain healthy cash balances inspite of special dividend payments and Capex Free cash flows along with large unutilized credit lines available at Polyplexs disposal are expected to be quite adequate to manage various ongoing expansions and to deal with any unforeseen contingences. Accelerating cashflow generation with low gearing showcases potential for exponential self-sustaining growth.

Exchange rate and interest rate risk

FX risks arise on account of unanticipated changes in exchange rates. As the Company deals in multiple currencies due to its operations across different locations, the Company is exposed to risks on account of currency mismatches. Interest rate risk is the risk borne by interest bearing debt and investments due to variability in interest rates. In case of financing done at floating rates, as the interest rates change, cost of borrowing also changes, thus impacting the cash flows. The year under review has seen significant increase in interest rates globally arising from inflationary pressures thus impacting the cost of borrowings as well as the Investment income.

Risk mitigation

Since the currency markets are highly volatile, the Company minimizes such risks by adopting a consistent hedging strategy. A natural hedge is created by choosing the right currencies for taking loans. Thus, the Company

fixes the currency of the liability in order to match with the currency of operational surplus. The remaining mismatched exposures are optimized by the Company by carefully identifying, measuring, monitoring and hedging the net exposures by using simple instruments like forwards with a 3-month rolling time horizon. This ensures that the maximum potential loss remains within defined limits. As there is a natural hedge available for most of the long-term borrowings, the Company does not cover the exchange rate risk on these liabilities. Therefore, the foreign exchange translation gain/ loss on these liabilities, as reported in the financial statements, may not have a corresponding impact on the cash flows of the Company as the payments for these loans are met via future receivables in the same currency. The forex risk is managed on a standalone basis as cash flows are not freely transferable between Group entities.

The currencies used for external borrowing by the Company are US Dollar, Euro, INR & THB. Depending on the net FX surplus on standalone basis, the currency for external borrowings is chosen. As of March 31, 2023, majority of the long-term external borrowings were in Polyplex Indonesia which is in Euro & USD. Any spike in EUR & USD value against the local currency (IDR) has a negative impact on loan liabilities. But, as the impact of USD & EUR are offsetting in nature, the net MTM impact is minimal. Also, as majority of the Companys exports are denominated in USD and EUR, the impact on the Companys cash flow is minimized.

Apart from this, there are related party borrowings in Thailand, Indonesia and the US which are in Euros. Hence, there is a significant impact of Euro movement in terms of foreign exchange reinstatement gain/loss as reported in the financial statements, which is partially hedged through Euro-denominated exports.

The structural currency for the business is USD, even where the invoicing is done in local currencies (EUR, THB, INR, IDR). Given USD forms the basis for raw material costs (the key cost component) as well as sales (more than 50%), cash flows are not exposed to any significant currency risk.

During the year, Turkish Lira (YTL) has seen its value losing significantly against USD and EUR. However, as the exposure of Polyplex Turkey in YTL is minimal, the impact of currency depreciation is low.

There are various reasons for interest rate changes like economic growth, inflation expectations and unemployment, among others. All these factors are external and uncontrollable. In order to have a more balanced loan portfolio and considering the cost benefit analysis, the Company continuously evaluates shifting some of its floating rate debt to fixed rate. Depending on the cash surplus available, the Company may also evaluate prepaying some of the long-term loans in order

to minimize the impact of higher interest cost. Moreover, as the Company is net cash positive, the impact of recent interest rate hike across the globe is minimal.

Credit risk

Credit risk refers to the risk of non-payment by debtors. This risk increases in case of unsecured or open payment terms. As the Company caters to the customers globally spanning across ~90 countries, managing the credit risk becomes essential. In the current scenario whereby, many countries are facing political crisis, the risk of defaults are high.

Risk mitigation

The Company has a well-defined and robust internal credit management system to monitor unsecured sales. The Company also has a global credit insurance cover to secure non-payment risks of customers. During FY 202223, the Company had 2,660 customers (including the customers serviced by a large distributor) and 25% of the total revenues were contributed by the top-10 customers. A strong internal credit risk management framework and credit insurance policy has enabled Polyplex to manage credit risk prudently. The average credit period during FY 2022-23 stood at 44 days as compared to 61 days in FY 2021-22. With strong credit risk management system and strong relationship with customers, Company has been able to mitigate the risk of default and is confident of doing so in the future as well.

Project implementation risk

Any delay in implementation, cost overrun, inability to stabilize production from the new investment and failure to meet the target investment objectives may significantly affect future profitability. Although the Company takes into consideration various regulatory aspects at the project feasibility stage, subsequent changes during the implementation phase may lead to project delays.

Risk mitigation

The risks are mitigated by forming a dedicated project management team, corporate management oversight, management commitment and suitable protection clauses in contractual arrangements and appropriate insurance products. The Company remains confident of successful implementation of new projects on time and within budgeted costs except for un-foreseen circumstances. There have been some minor delays in the startup of some of the smaller projects due to a variety of factors including Covid related.

The ongoing Brownfield Thin BOPET Film project at the USA subsidiary is currently the only project under implementation. Due to the ongoing inflationary pressures, there has been an increase in the project cost and also some delays in the startup but on account of the strong financial profile, the Company is able to

retain the cost increase with minimal impact on the project feasibility.

Geopolitical risk

Geopolitical risk is about relations between nations - at the political, economic, military, and cultural/ ideological level. Risk conventionally occurs when status quos are threatened. Russias invasion of Ukraine is the largest, most dangerous military mobilization in Europe since WWII.

Risk mitigation

Sanctions have been imposed by various countries on Russia and Belarus but the commercial import/export activities of Polyplex with Russia and Belarus is not within the scope of the prohibited transactions. Though Polyplex has stopped all sales to Russia since the start of the war the impact on our overall sales is marginal as most of the sales are to multinational companies who have developed alternate sourcing options. In case of Ukraine, risk is minimized through sales on advance basis.

The installed capacity of base films as well as downstream units is quite evenly spread out among the five manufacturing country locations of India, Thailand, Turkey, Indonesia and the US. Though some political and economic problems have been faced in Thailand and Turkey from time to time, there has not been any significant effect on business activities. The Turkey operations are well placed to sustain any impact in the short term arising from its location in a Free Trade Zone, high export orientation, and other mitigating steps undertaken. No adverse long-term impact is envisaged.

Supply Chain Disruption

The pandemic has resulted in increasing sea freight rates and global container and vessel shortages. This led to risk aversion towards concentrated supply chains and trend towards de-globalization, thus, bringing out the advantages of local sourcing both for costs and supply security

Risk mitigation

Our geographically diversified manufacturing presence and business model has helped us mitigate the supply chain risks and navigate relatively smoothly through the challenge. Leveraging on our local presence in all the key demand centers, we have been able to establish ourselves as a dependable partner to all our key customers, even in the time of uncertainty. Based on a clear shift in customer preference to local supplies over imports, we have been able to demonstrate the effectiveness of our strategy. In the last few months, the freight rates have started softening and we expect to move it closer to the pre- Covid levels. The Company shall continue to reap the benefit of seamless and reliable supply chain through

a judicious mix of onshore, nearshore manufacturing and imports.

RM is mostly procuring from local suppliers and there has been no major impact of the supply chain disruption.

Regulatory risk

Regulatory compliance is a key consideration for the BOPET industry. In order to ensure the safety of food that is packaged and consumed, extensive regulations have been put in place by various regulatory bodies like the USFDA, the EC, among others.

Risk mitigation

The Company stringently conforms to the relevant USFDA and EC directives for food packaging applications.

Environmental and sustainability risk (please see section on Sustainability also)

The Indian flexible packaging industry (like the global industry) is also exposed to certain environmental and sustainability related risks. The Plastic Waste Management Rules (PWMR), 2016 and Solid Waste Management Rules, 2016 define responsibilities and actions required by municipal authorities, manufacturers, producers, importers and brand owners. Amendments to these Rules made in March, 2018 have relaxed the regulations on usage of MLPs, factoring in lack of alternatives. While further amendments made in 2021 specify ban on certain SUPs these are not applicable to MLPs for flexible packaging. Real emphasis has come out on effective collection, recycling and sustainable waste management system.

The current legislative framework has clarified that every producer, importer or brand owner (PIBO) will have primary responsibility for plastic waste and will have to register themselves with concerned authorities like SPCB/CPCB. They need to establish a system for collecting back the plastic waste generated due to their products and this plan of collection to be submitted to CPCB while applying for Consent to Establish or Operate or Renewal. It is important to note here that Polyplex as on March 31, 2023 was registered under the PWMR Rules as a "manufacturer". As a manufacturer, Polyplex was also required to get registered at Pollution Control Board (UPCB) which has been done. But, as per the recent clarifications sought from CPCB, Polyplex is to be defined as a producer where the "producer" is defined as a person engaged in manufacture or import of carry

bags or multilayered packaging or plastic sheets or like, and includes industries or individuals using plastic sheets or like or covers made of plastic sheets or multilayered packaging for packaging or wrapping the commodity. The registration as an Importer and Recycler has already been received and other registrations are in process.

The Ministry of Environment, Forest & Climate Change (MOEFCC) has also come out with Guidelines for a uniform framework for EPR implementation as per which the primary responsibility for collection of postconsumer waste and creating a recycling ecosystem with producers, importers and brand owners. Recently, guidelines have been issued in India mandating Extended Producer Responsibility (EPR) obligations, recycling, and use of recycled content with a defined timeline.

• EPR Targets Clause 7.2 (a) of EPR guidelines for plastic packaging issued on February 16, 2022

Extended Producer Responsibility target

Year Extended Producer Responsibility Target (as a Percentage of Q1-Category Wise)
Rs. 2021-22 25%
II 2022-23 70%
III 2023-24 100%

The Extended Producer Responsibility target in MT category-wise, as applicable, shall be provided by Producer, as part of Action Plan on the centralized portal developed by Central Pollution Control Board.

• Coverage of Extended Producer Responsibility: Clause 5 of EPR guidelines. "The following plastic packaging categories are covered under Extended Producer Responsibility:

Category Rs. - Rigid plastic packaging

Category II - Flexible plastic packaging of single layer or multilayer (more than one layer with different types of plastic), plastic sheets or like and covers made of plastic sheet, carry bags, plastic sachet or pouches

Category III - Multilayered plastic packaging (at least one layer of plastic and at least one layer of material other than plastic)

Category IV - Plastic sheet or like used for packaging as well as carry bags made of compostable plastics

• Minimum level of recycling (excluding end of life disposal) of plastic packaging waste (% of EPR Target): Clause 7.2 (b) of EPR guidelines

Plastic Packaging Category 2024-25 2025-26 2026-27 202728 and Onwards
Category Rs. 50 60 70 80
Category II 30 40 50 60
Category III 30 40 50 60
Category IV 50 60 70 80

• Mandatory use of recycled content in plastic packaging (percentage of plastic manufactured for the year): Clause 7.2 (d) of EPR guidelines

Plastic Packaging Category 2025-26 2026-27 2027-28 202829 and Onwards
Category Rs. 30 40 50 60
Category II 10 10 20 20
Category III 5 5 10 10

In Jan 2022, Food Safety and Standards Authority of India (FSSAI), issued a directive permitting use of rPET for food contact applications in both flexible and rigid packaging application. These changes will accelerate the usage of PET films with rPET content in flexible packaging

In July 2022, amendments were made to the PWM Rules to granting exemption for plastics meeting certain standards of bio-degradability from obligations relating to EPR. In case, the obligated entity utilizes plastic packaging made from biodegradable plastics, the Extended Producer Responsibility target shall not be applicable.

At Global level also, there are increasing concerns on the usage of plastics in general due to low rates of recycling of post-consumer waste and lack of efficient collection and sorting systems. There is growing recognition globally, on the need to impose EPR obligations on Brand Owners to set up an effective collection, sorting and recycling infrastructure. The Covid-19 crises has resulted in a re-think on the benefits of plastics in general and may re-orient thinking on recycling strategies and solutions.

Risk mitigation

Flexible packaging is environment friendly compared to traditional rigid forms of packaging owing to its lower carbon footprint, light weight and lower requirement of landfill. The amendment to the PWMR in India has significantly diluted the threat to MLP as it provides for an exemption for material which is recyclable or provides for energy recovery or an alternative use. There is increasing recognition among policy makers and other stakeholders that the functional properties of flexible packaging are unmatched and alternative options are not suitable. Governments and Industry are focusing on developing economic models for collection, sorting and reuse/ recycling of post-consumer plastic waste. There is an increasing trend towards identifying EPR measures to fund such initiatives and more emphasis is on alternate use of multilayer packaging waste

The Industry is also working on multiple fronts to provide sustainable solutions such as:

• Higher rPET content in packaging

• Single substrate packaging solutions

• Higher Bio content or Bio sourced solutions

• Several alternative usages of plastic waste are being pursued like conversion to fuel oil, incineration, road construction etc.

Cautionary statement

This report contains forward-looking statements which may be identified by their use of words like ‘plans, ‘expects, ‘will, ‘anticipates, ‘intends, ‘projects, ‘estimates or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the Companys strategy for growth, market position, expenditures and financial results are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized.