Our global operations allow us to derisk our business model: Ashok Goel

Interview with vice-chairman and MD, Essel Propack

The Rs 2,293-crore Essel Propack, part of the Subhash-Chandra-promoted Essel Group, is among the  largest  manufacturers of laminated and extruded plastic tubes in the world, supplying to most multinationals including  the top two —  Procter & Gamble and Unilever. A leading supplier of oral-care tubes with a 33-34% share of the market,  Essel Propack  has in recent years forayed into making tubes for the non-oral care market, targeting areas such as beauty and cosmetics, healthcare, foods and homecare. In this  interview with Viveat Susan Pinto, company vice-chairman and MD, Ashok Goel, younger brother of  Subhash Chandra, explains the progress made so far in non-oral care and whether acquisitions are on its radar. Edited Excerpts:

What is the scorecard as far as your foray into non-oral care categories are concerned?
Our revenues from non-oral care is now about 41% of our total turnover. Oral care revenues  would be the balance 59%. We have set a target of  having a 50:50 revenue split from oral and non-oral care. I see this happening in the next few years. We have a gameplan of how we intend to make this possible. One is to increase our capabilities and capacities in different geographies to cater to the non-oral care segment. While our core strengths in oral care will remain, it is non-oral care where we need to ramp up our skill-sets, both in terms of manufacturing, research & development as well as design. For instance, in December last year, we opened a new facility in China to cater to the non-oral care market.  We have expanded capacity in Germany, Poland and Egypt and we are also doing some changes in US, Mexico and Colombia to cater to the non-oral care market. So our building blocks our in place to meet our targets for the future.

Will you consider acquisitions in your quest for growth?

We do not intend to do acquisitions because we believe we can achieve our objectives organically. The last  meaningful acquisition that we did was in 2006/07 when he bought two UK-based companies. Post that  we acquired a US-based company that manufactured medical devices. But we divested our stake in that company. So acquisitions was something we did a while ago. It is not something we intend to do now. I think there is enormous potential for us to grow organically. Our investments into non-oral care should give us good growth as we go forward. On an average, our capital expenditure every year is in the region of Rs 150 crore and I don't think we should be putting our money into making acquisitions when our organic strategy is giving us results.

Geographically, India gives you 40% of your revenue, while the rest comes from international operations. Do you see this split changing in favour of India? Will India's contribution to total turnover increase in the coming years?
While India has been growing in double digits, our global operations have also done well at the same  time. Markets such as Europe, the US, Mexico, Colombia and Egypt have all done well for us. So I don't see the split changing anytime soon. In fact, the Indian market could face challenges if the monsoon predictions for this year turn out to be true. I am hoping that will not be the case, which will mean that the demand scenario will be stable. In any case, our global  operations allow us to derisk our business model. We are not dependent on one market alone.

A number of Indian consumer goods companies have expanded into international markets. And most  of  them have robust plans on that front. Doesn't that not open doors for you in terms of being able to service them. Will you then count on multinational clients alone for business?
The international plans of domestic consumer goods companies does open up a number of prospects for us. In fact, we are working with quite a few of them in markets such as Egypt. Companies such as Marico, Dabur, Emami and Godrej Consumer have set up base there. They have also done so in markets located in Latin America, Asia, Africa and the West Asia. So yes, growing international presence of local companies helps. But we do not intend to move away from our multinational clients. Our aim is to have a healthy mix of local and international clients.

You have debt of about Rs 960 crore on your books. Is there any plan to bring that down?
If we repay Rs 100 crore every year in the normal course of business then that should improve our debt-equity ratio substantially.  We have no cross-currency loans. So our exposure to forex is nil. We also do not  have  any  short-term loans.  The debt on our books is long-term in nature. So there is no tearing hurry that we have to pay up now. However, I would  like our debt levels to come down to Rs 700 crore in about 2-3 years. That is the ideal scenario for us.