Indian flexible packaging industry has been growing at the rate 15-17 per cent annually over the past five years, RK Jain, Group President (Corp. F & A), Uflex Limited tells in an exclusive interview to Financial Express online.
Indian flexible packaging industry has been growing at the rate 15-17 per cent annually over the past five years, RK Jain, Group President (Corp. F & A), Uflex Limited tells in an exclusive interview to Financial Express online. He further added that the third quarter results of Uflex are expected to be in line with the previous trend. Excerpts from the interview:
Q. How has the flexible packaging industry grown in the past five years? How do you see the industry growth in the next five years?
A. The Indian flexible packaging industry has been growing at the rate 15-17 per cent annually over the past five years or so. Globally, the industry is growing at 4.5-5% annually. Consumer Goods industry is the biggest user of flexible packaging which we believe is still quite under penetrated in India as compared to developed countries. If you look into the trends, perhaps only 15-20 per cent consumer goods are sold in packaged form. With the improving economic environment and demand from consumer goods industry, the domestic packaging industry has a potential to grow at 20 per cent annually from here onwards. Flexible packaging is among the most promising and fastest growing sectors in India.
Q. What are the biggest challenges for the industry?
A. I think broadly there are four common challenges for any industry right now and these are sustained value-added innovation, bridging the talent deficit, driving leadership seamlessly and continuous deployment of latest technologies in each field.
Q. Coming to Uflex, how the company grew in the past few years? How do you see the coming 10 years for the company?
A. Uflex’s top line has been growing in double digits while the bottom line has been growing at a CAGR of 20-25 per cent over the past five years. We expect this trend will continue for the next five years due to our recent developments on account of newer product development, continued innovation to create differentiation and our capability to provide end to end flexible solutions to clients in over 140 countries across the globe.
Q. Could you elaborate more on the ‘Recent developments’?
A.We at Uflex Limited currently pack solids, semi solids, paste, gels, viscous fluids, powders and granular materials. The only category that is missing right now is liquids As on date we have the capabilities to offer flexible packaging solutions for solids/granular/ powder materials as little as 10 grams to as much as 40 kilograms. We can pack semi-liquids/ viscous fluids, gels, paste etc starting from 20 ml right up to 200 ml. By early 2017 when our aseptic packaging plant goes commercially operational at Sanand, Gujarat we will complete our entire bouquet of product offerings i.e. packaging solutions for Solids, Semi-Solids and Liquids. At our upcoming plant in Sanand we will have the capacity to pack non-aerated liquids with volumes ranging from 90 ml to 1000 ml. This completion of entire range of product bouquet will give us yet better competitive edge.
Q. By when the Sanand plant will be fully commissioned? How it will be beneficial for Uflex?
A. Sanand Plant will be commissioned by October-November 2016 but will be commercially operational by March/ April 2017. The plant will add to both top line and bottom line of Uflex and will bring better margins.
Q. How much revenue Uflex generates from domestic and international markets? Which is the strongest overseas market?
A. Currently, we generate around 52% revenue from the international markets and 48% from the domestic market. Going forward it is expected to be 50-50. North America and Europe are strongest international markets for us. Around sixty percent demand comes from these two regions and rest from other countries. At present, Uflex’s packaging export revenue from India is 18-20 per cent which may grow to 30 per cent in the next 2-3 years.
Q. What industry expects from government this budget? How the GST will benefit flexible packaging industry?
A. I think Industry as a whole expects simplification of the tax regime. GST will surely benefit flexible packaging industry much as any other industry for that matter. GST may result into efficient supply chains and that in turn may bring down overall costs. The industry hopes that GST will be passed sooner than later.
Q. At present, how do you see the debt-to-equity ratio of Uflex?
A. Uflex consolidated debt-to-equity is currently 0.7:1. We ensure that the D/E ratio does not cross 1:1 and we take timely and corrective actions towards this.
Q. Crude oil prices have fallen below $30. How it is beneficial for the bottom line in coming future?
A. The fall in crude oil does not have impact on our profits as any changes in raw material prices are passed on to our clients.
Q. What is your expectation from Q3 results? How do you see your balance sheet by the end of 2016-17?
A. We believe our third quarter results are expected to be in line with the previous trend. We are optimistic about FY16-17 and believe that during FY2016-17 our top line may grow at around 15-17% while the bottom line may grow anywhere between 25-30%.