Leading flexible packaging company Uflex is investing Rs 1,800 crore (about $284 million) to grow its output and add new products as demand for packaging material rises in India amid changing retail patterns.
The Noida-headquartered company Uflex founded by Ashok Chaturvedi will invest Rs 550 crore in setting up a plant in Sanand, Gujarat, to make packaging materials for liquid products.
R.K. Jain, Uflex Ltd’s group president for corporate finance and accounts, said land has been acquired for the facility, which will be operational in April 2017 and employ about 800 people.
“We are now entering the liquid market,” he said.
The Gujarat factory will produce seven billion packs per year for liquid products such as energy drinks, milk and juices, and about 90 per cent of the output will be used for the domestic market, Jain told BW Businessworld in an interview.
Uflex manufactures both packaging materials and equipment and is a market leader in India in the segment. A big chunk of its supplies goes to the food and beverage industry.
Uflex has manufacturing facilities in Noida in Uttar Pradesh, Malanpur in Madhya Pradesh and in Jammu. Overseas facilities are located in Dubai, Egypt, Mexico, Poland and North America.
Jain said the company is growing its overseas business as well.
“We are becoming an emerging player in the international market. We have a sales network in 140 countries,” he said, adding that the company’s revenues are evenly divided between domestic and overseas markets.
The company employs 7,500 people, of whom 6,300 work in India.
Growing Domestic Demand
The Indian packaging industry has been growing at 15-17 per cent annually, but this growth rate is expected to rise significantly with organised retail expanding and changes happening in Indian consumption patterns.
“Now changes are taking place (in the economy). Demographics is changing, lifestyle is changing, more organised retail is coming,” Jain said.
He expects the packaging industry to achieve an annual growth rate of 20 to 25 per cent per over the next several years.
Traditional retail in India is conducted through kirana shops with many goods being sold loose, but the trend of shopping malls and an expansion of modern organised retail are expected to create huge demand for packaging products.
Jain said as packaging penetration is low at present, the industry would continue to see strong growth “for at least the next 10 years.”
Uflex will spend Rs 1,800 crores, including the investment in Gujarat, over the next three years to achieve its growth plans. The company plans to raise its capacity for making plastic film and other products from 425,000 tonnes to 575,000 tonnes by 2018.
Target For Profit Growth
“As business grows, we will require more capacity,” Jain said.
He said Uflex aims to grow its net profit for the current financial year by 30-35 per cent. The company’s net profit grew 26 per cent to Rs 255 crore in the financial year 2014-15.
The revenue target for 2015-16 is 7,500 crore compared with Rs 6,180 crore achieved in the previous financial year.
Uflex, which supplies packing material to Nestle, does not see any negative impact on its revenue growth due to the sales ban on the Maggi instant noodles brand.
“Our packaging portfolio is evenly spread out among several top notch brands and Maggi as part of our portfolio does not add significantly to our bottom line” Said, Ashok chaturvedi.
He also said, that the recent banning of Maggi noodles will have no negative impact on Uflex’s turnover as the company is on a higher growth trajectory both in India and overseas market.