Essel Propack focuses on emerging marts as US, Europe growth slows

Essel Propack, the world’s largest maker of laminated tubes, would now focus more on emerging markets such as Mexico, Egypt, Indonesia and also Africa as both US and Europe continue to struggle, vice chairman & managing director Ashok Goel told DNA Money.

“We would now be increasingly focusing on emerging markets. There are emerging markets like Mexico, Egypt, Indonesia and also Africa where were plan to scale up our operations. We have put the building blocks in place,” Goel, who was in Kolkata recently for a road show to promote Plastindia 2012, said.

When asked which route would be used to strengthen presence in these markets, Goel said it would be a combination of acquisition, capacity expansion and greenfield projects. “We have never stuck to one particular way of growth.”

Essel Propack, which gets about 80% of its business from overseas, has 23 manufacturing facilities in 11 countries, including eight in India.

Goel, however, clarified that the packaging market in developed markets, though has slowed down, is not troubling Essel Propack. “Emerging markets have become more relevant. Does it mean that we are disheartened with the European and US markets? No. They may not be growing but that’s a comparative statement. These markets are not into dumps as far as our products are concerned. It’s only that they are not growing as fast as emerging markets.”

Essel is not specifically looking at picking up stressed and troubled capacities now put up for sale in several European nations which are yet to come out of the global economic slowdown.

“We have been doing this for years, acquiring companies, merging them with us and also going for greenfield projects and expansion. What is more important for us to know is what does it brings on the table for us. Does it give you a new technology, a new set of customers, economy of scale, a new geography to expand, and also, can the unit be run profitably? These are the five aspects that we weigh before any merger and acquisition. If any target can fit into three of these criteria, then we go for it,” Goel said.

In India, Essel Propack has just decided to merge two sick packaging companies, Raas Extrusions and Raas Propack Lamipack, with itself.

“Fortunately they use the same technology that we use. Their size were so small that standalone they wouldn’t be profitable. On the other hand, Essel Propack is constantly growing. So it was a good business sense to join hands with them and file with BIFR (Board of Industrial and Financial Reconstruction) as co-promoters.

“In doing so, it started to pay off its regular expenses. But it was still not sufficient to wipe off previous losses. Also, the sizes of the units were not economically viable. So it made perfect sense to merge them with Essel Propack. Which is what we had argued before the BIFR,” Goel said.

Disclaimer: Essel Propack is part of the Zee Group, which
is a co-promoter of Diligent Media Corporation that publishes the DNA.