Bajrang Bothra, Chairman and Whole-time Director, EPACK Durable

18 Jan 2024 , 11:45 AM

Help us understand the company’s journey so far and the achievements thereof.

EPACK Durable is a collaborative journey spanning over 47 years, involving two closely-knit families. Our association extends across generations, with the preceding one engaged in a trading venture. Our commitment to growth is evident in our partnerships—with the best customers, suppliers, auditors, bankers, and merchant bankers across all our businesses. Market leadership, we believe, cannot be achieved without cost-effectiveness. We maintain a strong focus on state-of-the-art infrastructure, research and development, and so on.

This approach has earned us a significant position across multiple businesses. In the durable business, we hold the second position in the Original Design Manufacturer (ODM) nationally, with two manufacturing plants and an integrated setup. We are also in the process of commissioning a new manufacturing facility at Sri City, Andhra Pradesh.

In current IPO flurry, why should retail investors consider investing in EPACK Durable IPO?

By taking our company public, we aim to expedite our growth, expand our reach, and continually push the boundaries. The IPO will enable us to invest more in research and development, fostering innovation in our mission to expand our business. The room AC segment is growing at about 12%+ every year. Currently, with an approximately 8% penetration per household, the potential for air conditioning expansion is substantial, considering the global average is 42% per household. Even when compared to other household appliances like TVs, washing machines, or refrigerators, air conditioners have the lowest penetration. This hints at significant room for growth, and we have so far just scratched the surface.

As the economy and per capita income continue to grow, air conditioning have transitioned from a luxury product to a necessity. With 8% penetration per household, it is crucial to note that multiple air conditioners may be required per household. With government initiatives like ‘Make in India’ initiative becoming a reality and government push to domestic companies, manufacturing capacities are on track to grow significantly. Secondly, the potential in the export market is substantial.

Help us understand, which are your listed peers in India and how do the valuations stack up vis-à-vis them?

We currently identify Amber Enterprises and PG Electroplast as our two comparable peers, particularly within the appliances domain. Additionally, there is another player, Elin Electronics, focusing on small domestic appliances, with whom we have already drawn comparisons in our RHP.

Our BRLMs have done a thorough due diligence process, in collaboration with legal counsels and market stakeholders, including institutional investors to arrive at the IPO valuations. In comparison to our listed players, we consider this offering to be fairly priced.

What are the growth strategies of the company?

The primary focus is on new product development. Given that approximately 80% of the company’s revenue comes from air conditioners, there is a strategic initiative to diversify into other domestic appliances, thereby reducing the seasonality factor associated with air conditioners. We are developing smaller appliances, including induction cooktops, mixers, and bottled water dispensers. Additionally, the company is exploring the development of various appliances such as coolers, room heaters, and water heaters to further leverage its assets and improve the asset turn.

The second priority is to enhance the company’s research and development (R&D) capabilities. Over the past 2 years, we have almost doubled our R&D manpower to reach approximately 60 people. This represents approximately 10% of the total manpower expense.

The third priority centers around improving the working capital cycle and cash flow. Analyzing the three-year data reveals a noteworthy enhancement in the working capital cycle. This improvement underscores the company’s commitment to optimizing operational efficiency and will continue to be a focal point in the future.

Run us through the ESG strategy of the company.

We have always been very conscious of the environmental and social footprint of our manufacturing facilities. Air conditioner manufacturing has environmental implications, given the generation of hydrochlorofluorocarbons (HCFCs) and ozone-depleting substances. We were the first ODM to introduce window air conditioners with R32, an environmentally friendly refrigerant with lower global warming potential (GWP).

The company has made conscious efforts to ensure that all its facilities incorporate solar power generation, adhering to regulatory norms and striving for environmental sustainability. This includes practices such as recycling water and maintaining nearly zero discharge.

These initiatives go beyond mere regulatory compliance; they reflect the company’s deliberate commitment to environmental stewardship and social responsibility.