Cosmo Films to invest Rs 300 crore on capacity expansion; stock shines

Cosmo Films informed the bourses on Tuesday that its board of directors has approved resuming further investment into the new line for specialised biaxially-oriented polyethylene terephthalate (BOPET) films at Aurangabad (Maharashtra), which was on hold since November 2018.

The revised project cost will be Rs 300 crore and is set to be financed through a mix of internal accruals and loans. The commercial production will commence by the second quarter of the fiscal year 2022-23.

To address the growing demand, the company targets to increase its speciality capacity by 2/3 of volume in the next two to three years. The company believes that this will help to de-commoditise its business model.

At present, the company's capacity as on June 2020 stood at 1,96,000 MT (BOPP films), 40,000 MT (thermal films), 20,000 MT (coated speciality films), 22,000 MT (metalised films) and 10,000 MT (CPP films). 

In the recently concluded quarter (Q1FY21), the company reported net revenue of Rs 481 as against Rs 541 crore in Q1FY20. However, EBITDA for the period jumped to Rs 93 crore from Rs 61 crore in Q1FY20 on the back of margin improvement and a higher share of speciality segment. Consequently, PAT surged to Rs 47 crore from Rs 28 crore.

Cosmo Films is involved in speciality films for packaging, lamination, labelling, and synthetic paper. The company’s film offerings include biaxially oriented polypropylene films (BOPP) and cast polypropylene (CPP) films. The company generated nearly 57 per cent of the revenue from export while the rest from domestic business.

The stock of Cosmo Films in today's trading session responded positively to this development and surged nearly 6 per cent to touch an intraday high of Rs 401.75 apiece.