Effective from July 1, 1999, two group companies of SIL Akar Laminators and Vishnu Vijay Packaging - have been merged with the flagship. Like SIL, the other two companies were also into the same business of packaging and lamination. Though reduced cost is a by-product of this merger, the consolidated and restructured SIL also stands to benefit from the elimination of competition from the other two group companies which happened very often in the past. Other synergistic benefits will also accrue to the merged entity.

Post-merger, the company has emerged as an integrated packaging company, manufacturing and marketing hygienic, moisture proof flexible packaging materials. These products are used in packaging eatables, wafers, noodles, biscuits, tea, coffee and a number of other consumables.

According to a research report by Khandwala Finances, the consolidated entity is poised to see its share price increase in value substantially in the next few months. Khandwala Securities expects, even by the most conservative estimate of using the price-to-book-value method, the SIL scrip to touch Rs 189 within a 52-week period, a substantial increase over the current market price of Rs 55 on November 18. On the other extreme, by the discounted cash flow method, the target price is put at Rs 306 and by the price-to-earnings method Rs 204.

In the domestic market, the growth of flexible packaging sector depends on the fortunes of the FMCG sector. At present, more than 60 per cent of SIL's turnover comes from multinational and big domestic FMCG companies. SIL's client list includes companies like HLL, Proctor & Gamble, Tata Tea, Britannia, Tata Chemical, Smithkline Beecham, Castrol, Dabur and Marico Industries.

For fiscal 2000, SIL's projected turnover is pegged at Rs 323.16 crore and 60 per cent of this is the current order book position. Also, orders worth another Rs 50 crore is in the pipeline.

With the flexible packaging fast replacing the conventional metal packaging in the country, the former sector has shown a growth of around 30 per cent per annum.

Though some competition from the unorganised sector might emerge in the packaging industry as a whole, the high entry costs and the quality consciousness of the organised players in the FMCG sector is likely to see the companies in the organised flexible packaging sector remain almost unscathed.

After the consolidation, SIL has emerged as one of the largest players in the domestic flexible packaging sector with an installed capacity in excess of 12,000 tonnes per annum. Given that the exports offer better margin, SIL is currently implementing two projects to cater to the company's export needs. At present, its peers in the sector are Paper Products, Flex Industries and Orient Press Ltd.

SIL has seven state of the art manufacturing facilities- five in Aurangabad, and one each in Vasai and New Jersey, USA. By March 2000, the company will be implementing an ERP system and will also start the process of achieving ISO 9002 certification.