Essel Propack caught the imagination of the market in morning trades on Friday on reports that the company was close to buying stake in a Chinese company involved in making plastic tubes.
The scrip of the packaging company advanced 2.52% to Rs 148.30 by 11:25 IST. But volumes were low on the counter at 1,376 by that time.
Reports have emerged that Essel Propack is close to acquiring a Chinese plastic tubes maker. The size of the deal is estimated at $10 million (Rs 48 crore).
The stock is also being pursued because of its relatively low valuation, having been badly beaten down over the last few months. Essel Propack lost 38.79% to its 52-week low of Rs 143.10 on 12 February 2003 from Rs 233.80 11 October 2002 .
The weakness on the EPL counter has been partly attributed to the sluggish trend in the fast moving consumer goods industry, which is the biggest consumer of the company's products. Most FMCG companies have posted negative to flat growth in the last couple of quarters.
As a result, for the quarter ended 30 September 2002, EPL posted a net profit of Rs 7.80 crore on total income of Rs 58.30 crore. For the nine months ended 31 December 2002, the company's net profit stood at 38.20 crore on total income of Rs 189.60 crore. Its equity capital is Rs 31.20 crore and book value is Rs 169.30 per share as on 31 December 2001. The company paid 73% dividend in FY 2001.
EPL, earlier known as Essel Packaging, has a virtual monopoly in the Indian laminated tubes segment of the packaging industry. It became the world's largest lamitubes producer in November 2000, from its earlier second position, through the takeover of Propack, the fourth largest lamitubes producer globally then, in a $50 million stock-cum-cash deal. The Propack takeover has made EPL a global player with a presence in other relatively high growth regions of the world S-E Asia, Latin America and East Europe.
The company's Vision 2005 plan envisages 80% market share each in China and India and an overall 50% share of the global lamitubes market. This, though a challenge in itself, appears to be achievable going by the management's past track record of implementation of the Vision 2000 plan, formulated in 1995 - to get globalised.
EPL is exploring the possibility of an aggressive $120-million expansion plan in the international markets by setting up new units in the US, Africa and China. Its production capacity of 2.8 billion tubes per annum is expected to reach 7 billion by 2005.
EPL's Vision 2005 plan is also to become an admired global speciality packaging company. Last year, it bagged a five-year contract from P&G to supply laminated tubes for its North American operations. To meet the requirements of P&G, the company set up a new manufacturing facility in the city of Danville. Full capacity utilisation is likely to be achieved by April 2002.
Lamitubes is a high growth potential business, especially in the emerging markets where EPL has already established strategic presence. EPL expects significant developments in terms of new opportunities in 2003. The company's strategic alliance with American FMCG giant P&G is expected to contribute around 15-18% increase in revenues. It will also increase EPL's world market share from 25% to more than 30%.
EPL has 17 manufacturing facilities spread across 11 countries in developed and emerging economies including Venezuela, Mexico, Egypt, Germany, China, Nepal, Indonesia and Philippines besides India. The company is also in the process of negotiating merger and acquisition deals in Europe and India.
As on 31 December 2002, promoters held 37.15% stake in EPL, while the public, institutions and foreign bodies held 15.72%, 11.81% and 30.11%, respectively.
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