In conversation with Sandeep Sikka, CFO, AGI Greenpac

Indian packaging sector is poised for robust growth, driven by expanding consumer markets like processed food, personal care, and pharmaceuticals, voices Sandeep Sikka, CFO, AGI Greenpac

In Q1FY24, the total income of the company surged by 8.3 per cent on a YoY basis, while the net profit dipped by 3.5 per cent. What were the contributing factors to the company’s performance?

The company's revenue from operations increased by 7 per cent on a Y-o-Y basis, increasing from Rs 522 crore in Q1FY23 to Rs 558 crore in Q1FY24, despite a scheduled furnace shutdown for relining.

The company recorded an EBITDA of Rs 140 crore, achieving an impressive 52 per cent year-on-year growth, with stable margins of 25 per cent. EBIT for the period amounted to Rs 103 crore, a 63 per cent year-on-year growth, with margins of 18 per cent.

Our performance can be attributed to various factors, including our strategic emphasis on high-value-added products, a favourable product mix, and heightened market demand.

Could you provide insights into the performance of the glass containers business, which achieved a revenue of Rs 2281 crore in FY23? Additionally, what growth prospects do we anticipate for FY24?

In FY23, our glass containers business witnessed growth, driven by an improved product mix, and increased demand from the beer, liquor, and non-alcoholic segments. In spite of the challenging economic environment, we maintained EBITDA margins, a testament to the resilience of our business model.

We commenced commercial production of our speciality glass facility at Bhongir in the state of Telangana with an installed capacity of 154 tonnes per day from January 2023. In this plant, we manufacture high-quality speciality glass packaging products catering to industries such as pharmaceuticals including vials, perfumery, cosmetics, and high-end liquor for customers across the USA, Australia, and select European countries.

As we move into FY24, our growth prospects remain positive. We hope to sustain our growth trajectory into FY24, with a growth rate of 15-20 per cent on the back of our integrated business model, strategic product offerings and efficient capacity utilization bolstered by the commercial production of the new Bhongir plant.

What is the current competitive landscape for your company, and what are your plans for enhancing your competitive position?

The Indian packaging sector is poised for robust growth, driven by expanding consumer markets like processed food, personal care, and pharmaceuticals. The rise in alcohol consumption and contributions from sectors like pharmaceuticals, FMCG, and cosmetics are further propelling this trend.

However, competition from alternatives like aluminium cans and plastic containers poses challenges. The glass containers market must strategically adapt to maintain its competitive edge.

The recent NCLAT's judgment has brought AGI Greenpac's acquisition of Hindustan National Glass one step closer. Can you provide an analysis of how this development might influence the company's performance in the upcoming quarters?

The recent NCLAT's judgment has progressed AGI Greenpac's acquisition of Hindustan National Glass, marking a significant milestone.

AGI Greenpac's strategic vision for this acquisition is aligned with its long-term objectives, which encompass the utilisation of synergies, expansion of market reach, and the harnessing of complementary strengths.

With the current inflation levels, what is your outlook for the Indian packaging industry for the next few years?

The Indian packaging industry's trajectory could be influenced by inflation's potential impact on raw material costs, transportation expenses, and manufacturing processes. Such factors could create upward pressure on prices throughout the packaging value chain, prompting industry participants to implement strategic cost management strategies and enhance operational efficiency.

However, despite potential inflationary pressures, the Indian packaging industry is positioned for substantial growth. This is evident from the projected Compound Annual Growth Rate (CAGR) of 26.7 per cent anticipated between 2022 and 2027. The driving force behind this growth is the expanding consumer markets, notably within sectors like processed food, personal care, and pharmaceuticals. These markets are expected to provide a certain level of resilience against inflation's impact. Moreover, innovations in packaging materials and design innovations could also contribute to mitigating the effects of rising costs.