EPL Ltd:Annual Report 2023-24 Analysis

EPL Ltd.: A Comprehensive Overview #

About the Company #

• Year of Establishment and Founding History: Established in 1982 as Essel Packaging, part of the Essel Group.
• Headquarters Location and Global Presence: Headquarters are located in Mumbai, India. EPL has a significant global presence with manufacturing facilities across multiple countries including India, China, USA, Colombia, Germany, Poland, and Egypt.
• Company Vision and Mission:
  • Vision: To be the world’s leading specialty packaging company, creating value for customers, employees, and shareholders.
  • Mission: To deliver innovative and sustainable packaging solutions that enhance the consumer experience and protect brands.
• Key Milestones in Their Growth Journey:
  • Early 1980s: Established as Essel Packaging, pioneering laminate tubes in India.
  • 1990s: Expansion into international markets.
  • 2000s: Increased focus on specialty packaging and strategic acquisitions.
  • 2019: Blackstone acquired a majority stake in Essel Propack, renaming it EPL Limited.
• Stock Exchange Listing Details and Market Capitalization: Listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
• Recent Financial Performance Highlights: Recent financial performance includes revenue growth and strategic focus on increasing EBITDA margins.
• Management Team and Leadership Structure: Key members of the management team include the CEO, CFO, and heads of various business units.
• Notable Awards or Recognitions: EPL has received awards for its sustainable packaging solutions and manufacturing excellence.

Their Products #

• Complete Product Portfolio with Categories:
  • Laminate Tubes: ABL (Aluminum Barrier Laminate), PBL (Plastic Barrier Laminate), Eco-Friendly Laminates
  • Extruded Plastic Tubes
  • Caps and Closures
• Flagship or Signature Product Lines: Laminate tubes for oral care, beauty & cosmetics, and pharmaceutical products.
• Key Technological Innovations or Patents:
  • Egnite: Enhanced decoration technology for tubes.
  • Platina: Mono-material HDPE tube offering recyclability.
• Manufacturing Facilities and Production Capacity: EPL has a substantial global production capacity across its manufacturing facilities.
• Quality Certifications and Standards: Holds certifications such as ISO 9001, ISO 14001, and BRC.
• Unique Selling Propositions or Technological Advantages: Focus on sustainable packaging solutions, advanced decoration technologies, and customized product offerings.
• Recent Product Launches or R&D Initiatives: Focus on developing and launching recyclable and bio-based laminate tubes.

Primary Customers #

• Target Industries and Sectors:
  • Oral Care
  • Beauty & Cosmetics
  • Pharmaceuticals
  • Food
• Geographic Markets (Domestic vs. International): Has a significant presence in both domestic and international markets, with a strong footprint in Asia, the Americas, and Europe.
• Major Client Segments: Primarily serves multinational and regional brands in the oral care, beauty, pharmaceutical, and food industries.
• Distribution Network and Sales Channels: Global sales and marketing network with direct sales teams and strategic partnerships.

Major Competitors #

• Direct Competitors in India and Globally:
  • Amcor
  • Berry Global
  • Albea
• How they differentiate from competitors: Differentiated through its focus on sustainable packaging, innovative technologies, and customer-centric approach.
• Industry Challenges and Opportunities: Challenges include fluctuating raw material prices and increasing demand for sustainable packaging. Opportunities lie in the growing demand for innovative and eco-friendly packaging solutions.
• Market Positioning Strategy: Positions itself as a leader in the specialty packaging market, offering high-quality, innovative, and sustainable solutions.

Future Outlook #

• Expansion Plans or Growth Strategy: Focus on expanding its presence in emerging markets and investing in R&D to develop new and sustainable packaging solutions.
• Upcoming Products or Innovations: Continued development of recyclable and bio-based packaging materials.
• Sustainability Initiatives or ESG Commitments: EPL is committed to reducing its environmental impact through sustainable manufacturing practices and the development of eco-friendly packaging solutions.
• Industry Trends Affecting Their Business: Key industry trends include the growing demand for sustainable packaging, increasing regulatory scrutiny on packaging materials, and the rise of e-commerce.
• Long-term Vision and Strategic Goals: To be the global leader in specialty packaging, driving innovation and sustainability in the industry.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Consolidated revenue increased from ₹36,372 million (FY 2022-23) to ₹39,161 million (FY 2023-24), marking a growth of approximately 6%. The Standalone revenue for India operations saw an increase of ~6%.
• EBITDA margins on a consolidated basis improved, reaching 18.2% in FY 2023-24, up from 16.2% in the previous year. Absolute EBITDA on a consolidated basis experienced a growth of approximately 19.2%, reaching ₹7,143 million in FY 2023-24 from ₹6,092 Million in Previous Year.
• Net Profit After Tax (excluding exceptional items) on consolidated basis grew by approximately 20.1%.
• ROCE improved, standing at 14.7% in FY 2023-24, up from 13.2% the prior year.
• Net Debt (Consolidated) increased to ₹6,026 million at the end of FY 2023-24, including ₹2,314 million for Brazil operations. Excluding Brazil, net debt saw an increase of ₹193 million compared to the previous year.
• Return on Net Worth (excluding exceptional items) saw an increase from 11.9% to 13.4%.

Business Segment Performance #

• AMESA (Africa, Middle East, and South Asia): Revenue growth of 3.6%, with a 9.7% growth in EBITDA.
• EAP (East Asia Pacific): Revenue grew by 10.1%, EBITDA increased by 14.9%. The Personal care segment grew by ~20.9%.
• Americas: Revenue growth of 12.9%, with EBITDA up by 42.8%. Oral care grew by ~10.5%, and personal care grew by ~17.8%.
• Europe: Revenue increased by 5.8% and EBITDA by 20.7%. The Oral Care category grew by ~12%. Structural interventions are being implemented to improve margins.

Major Strategic Initiatives and their Progress #

• Sustainability: Increased contribution of sustainable tube volumes to 21% in FY 2023-24, up from 10% in the previous year. 85% of production capacity is now ready for sustainable tubes.
• Category Growth: The Non-Oral category, experienced a growth of 8.1% surpassing the 5% growth in the Oral Care category.
• Geographic Expansion: New greenfield plant in Brazil became operational and stabilized, achieving 100% of anchor customer demand and expanding the order book.
• Neo Seam technology has entered the market.

Risk Landscape Changes #

• Raw Material Price Escalation: Mitigated through raw material cost escalation pass-through clauses in long-term contracts and by establishing alternate supply sources.
• Currency Volatility: Addressed through pass-through clauses and hedging with forward contracts.
• Information Security Risk: Addressed through comprehensive measures including training, multi-layered controls, and regular backups. EPL’s ISO 27001 certification demonstrates compliance.

ESG Initiatives and Metrics #

• Product Sustainability: 21% of tube volumes were sustainable, doubling from 10% in the previous year. Tubes incorporate up to 50% PCR content.
• Process Sustainability: 100% of hazardous waste is recycled, and 21% of total energy used globally is renewable.
• People Sustainability: 29% female representation in the global workforce, with 59 specially-abled individuals employed across six locations in India.
• CSR Initiatives: Recycled 21,977 Kgs of plastic waste through the Plastic Waste Management program. Other CSR activities impacted 5,330 Students, 31 Schools and 10,231 Families.
• ESG Ratings: Achieved a Green rating from the Ellen MacArthur Foundation for the second consecutive year and an ‘A’ leadership rating in the CDP 2023 Supplier Engagement rating.

Management Outlook #

• The Company aims for double-digit revenue growth with margins exceeding 20%.
• Aggressive expansion is planned in the ‘Personal Care & Beyond’ segment, supported by innovations like Neo Seam technology.
• Brazil Greenfield Plant Provides an avenue for expansion.
• Margin improvement is a continuous focus, with ongoing initiatives to optimize operational efficiencies.

Detailed Analysis #

Financial Analysis of EPL Limited #

Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (Consolidated) #

(₹ in million)

Significant Changes in Major Line Items (>10% YoY) #

• Europe Assets (FY23-24): Increased by ~14.8%, from ₹6,531 million to ₹7,497 million.
• **Unallocated Liabilities (FY23-24):**Increased by ~4.05% YOY.
• Americas Assets: Increased from FY22 to FY24.
• Europe Assets: Increased from FY22 to FY24.

Working Capital Trends #

The Consolidated Balance Sheet provides Current Assets and Current Liabilities, allowing for a high-level analysis:

(₹ in million)

• Net working capital has decreased from 6598 million to 5624 million.

Asset Quality Metrics #

Specific metrics like Non-Performing Assets (NPAs) are not applicable as EPL is not a financial institution. However, it’s noteworthy that:

• Expected credit loss provision are at 36 Million, which is very low.

Debt Structure and Maturity Profile #

(₹ in million)

• A substantial portion of borrowings are long-term, primarily secured.
• The Company uses various currencies. Maturity dates for long-term borrowing are mentioned.

Off-Balance Sheet Items #

The primary off-balance sheet items disclosed are:

• Contingent Liabilities:
  • Disputed indirect and direct taxes.
  • Other claims not acknowledged as debts.
• Guarantees: Bank guarantees given by the Company.
• Capital Commitments: Contracts remaining to be executed.
• Corporate guarantees, standby letter of credit and letter of comfort given for loans taken by subsidiaries: 5,350 Million.

Operating Performance Analysis of EPL Limited (FY 2023-24) #

Revenue Breakdown by Segment/Geography #

• AMESA (Africa, Middle East, and South Asia): Revenue increased by 3.6%, from ₹13,981 million to ₹14,483 million.
• EAP (East Asia Pacific): Revenue increased by 10.1%, from ₹8,498 million to ₹9,356 million.
• Americas: Revenue Increased by 12.9%, from ₹8,758 million to ₹9,889 million.
• Europe: Revenue increased by 5.8%, from ₹8,435 million to ₹8,927 million.
• Consolidated Revenue: Increased by 6%.

Key Highlights: All four regions delivered revenue growth, with EAP and Americas achieving double-digit growth.

Margin Analysis (Consolidated) #

• EBITDA Margin: Increased by 202 basis points, from 16.6% to 18.2%, driven by cost-saving and asset utilisation initiatives.
• EBIT Margin: Improved from 8.6% to 9.7%.
• Net Profit Margin (excluding exceptional items): Increased from 11.9% to 13.4%, showcasing improved profitability.
• Net profit margin (including exceptional items): Decreased from 6.1% to 5.4%.

Non-Recurring Items (Exceptional Items - Consolidated) #

• Foreign exchange loss (net) of ₹465 million in EPL MISR (Egypt) due to currency devaluation.
• Restructuring costs in Europe of ₹140 million.
• Exceptional loss of ₹11 million related to the dissolution of Tubopack de Colombia S.A.S in FY 23.

GAAP vs. Non-GAAP Reconciliation #

The report provides a reconciliation in the segment analysis. The primary difference stems from “Exceptional Items.” Reported net profit was impacted, but excluding these items shows a clearer picture of core operational profitability.

Quarterly Trends #

The report states there was an improved margin “quarter-over-quarter over the last seven quarters,” indicating a consistent upward trend in profitability.

Cash Management #

Cash Flow and Liquidity Analysis #

OCF, ICF Components (Consolidated) #

• OCF: Increased to ₹5,531 million in FY24 from ₹6,196 million in FY23.
• ICF: Remained negative at ₹(3,229) million in FY24, a slight improvement from ₹(3,411) million in FY23.
• FCF: Can be inferred as the sum of OCF and ICF.

Capex Analysis by Segment (FY24) #

• AMESA: ₹1,083 million.
• EAP: ₹795 million.
• Americas: ₹1,010 million.
• Europe: ₹872 million.
• Unallocated CAPEX: Zero.

Dividend and Share Buyback Trends #

• Dividends: Interim dividend of ₹2.15 per share paid in FY24, same as FY23. Final dividend of ₹2.30 per share proposed for FY24, up from ₹2.15 in FY23. Total dividend for FY24 would be ₹4.45 per share, subject to shareholder approval.
• Share Buybacks: No share buybacks occurred during FY24 or FY23.

Debt Service Coverage (Consolidated) #

• DSCR remains strong but is lower compared to the previous year due to interest costs in Brazil.

Liquidity Position #

• The company shows current ratios above unity, but changes indicate only minor improvement.
• Cash and cash equivalents, combined with other bank balances, provide a liquidity buffer.

Segment Performance Analysis #

AMESA (Africa, Middle East, and South Asia) #

Revenue and Profitability #

Revenue: ₹14,643 million, a 3.6% growth. EBITDA: grew by 9.7%. PBIT: ₹1,964 million, a 10.1% growth. Personal Care category grew by 1.2%.

Market Share and Competitive Position #

Operates seven units in India and one in Egypt.

Geographic Distribution and Market Penetration #

Operations in India and Egypt.

Operational Efficiency Metrics #

Focused on cost management and operational efficiency.

Growth Initiatives and Challenges #

Strategic focus on cost management and operational efficiency.

EAP (East Asia Pacific) #

Revenue and Profitability #

Revenue: ₹9,665 million, a 10.1% growth. EBITDA: grew by 14.9%. PBIT: ₹1,563 million, a 18.3% growth. Personal Care segment grew by 20.9%.

Market Share and Competitive Position #

Significant presence with five units in China and one in the Philippines.

Geographic Distribution and Market Penetration #

Operations primarily in China and the Philippines.

Operational Efficiency Metrics #

Achieved through leveraging regional strengths.

Growth Initiatives and Challenges #

Recovery driven by growth in the Personal Care segment, tailored solutions for smaller clients.

Americas (USA, Mexico, Colombia, and Brazil) #

Revenue and Profitability #

Revenue: ₹9,764 million, a 12.9% growth. EBITDA: increased by 42.8%. The Oral Care segment grew by 10.5%. The Personal Care segment grew by 17.8%.

Market Share and Competitive Position #

Strong market presence across North and South America.

Key Products/Services Performance #

Strong sales pipeline and contribution from the stabilized Brazil facility.

Geographic Distribution and Market Penetration #

Operations in the USA, Mexico, Colombia, and Brazil.

Operational Efficiency Metrics #

Operational efficiency driven by market expansion.

Growth Initiatives and Challenges #

Stabilization of the new Brazil facility, capitalizing on emerging opportunities in the Latin American market.

Europe (Germany and Poland) #

Revenue and Profitability #

Revenue: ₹8,174 million, a 5.8% growth. EBITDA: Increased by 20.7%. The Oral Care category grew by 12.0%.

Market Share and Competitive Position #

Resilience to economic challenges, including inflationary pressures.

Geographic Distribution and Market Penetration #

Operations focused in Poland and Germany.

Operational Efficiency Metrics #

Cost optimization to enhance profitability.

Growth Initiatives and Challenges #

Structural interventions are being implemented to achieve higher margins. Active restructuring to improve margins.

Risk Assessment: Financial Analysis by Region #

AMESA (Africa, Middle East, and South Asia) #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable. Negative pricing in the second half of FY24, with only 3.6% revenue growth.
• Mitigation Strategies: Building a robust sales pipeline, focus on cost management, and operational efficiency.
• Control Effectiveness: Partially effective, as evidenced by 9.7% EBITDA growth.
• Potential Financial Impact: Reduced revenue growth, potential market share loss.

Operational Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Improving.
• Mitigation Strategies: Raw material substitution, supplier consolidation, SKU reductions.
• Control Effectiveness: Moderate, demonstrated by the EBITDA growth.
• Potential Financial Impact: Reduced Profit margins.

Financial Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable.
• Mitigation Strategies: Active price management, borrowing for greenfield capex.
• Control Effectiveness: Effective. Maintained healthy Debt/Equity Ratio, and good credit ratings (CARE AA+; Stable and IND AA+).
• Potential Financial Impact: Increased interest costs due to borrowings.

Compliance/Regulatory Risks #

• Severity: Low
• Likelihood: Low
• Trend: Stable.
• Mitigation Strategies: Adherence to local labor laws and environmental regulations, ISO certifications (ISO 14001:2015, ISO 50001:2018, ISO 45001:2018, ISO 20400:2017).
• Control Effectiveness: High, as indicated by ISO certifications and ESG commitments.
• Potential Financial Impact: Minimal.

Emerging Risks #

• Geopolitical Tensions.

EAP (East Asia Pacific) #

Strategic Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Improving.
• Mitigation Strategies: Focus on Personal Care segment, tailoring solutions for smaller clients, Neo Seam technology.
• Control Effectiveness: Effective, with 10.1% revenue growth and 20.9% growth in the Personal Care segment.
• Potential Financial Impact: Moderate.

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Improving
• Mitigation Strategies: Enhanced flexibility for smaller batch sizes.
• Control Effectiveness: Positive, with 14.9% EBITDA growth.
• Potential Financial Impact: Lower operational costs, improved efficiency.

Financial Risks #

• Severity: Low
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Strong sales and EBITDA growth.
• Control Effectiveness: High.
• Potential Financial Impact: Minimal.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable.
• Mitigation Strategies: Digitization using SAP HANA
• Control Effectiveness: High, reflected in zero reported cases of human rights violations.
• Potential Financial Impact: Minimal.

Emerging Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Economic slowdown in China.

Americas (USA, Mexico, Colombia, and Brazil) #

Strategic Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Improving.
• Mitigation Strategies: Stabilization of Brazil facility, strong sales pipeline, expansion in the oral and personal care segments.
• Control Effectiveness: High, evidenced by 12.9% revenue growth, 10.5% growth in oral care, and 17.8% growth in personal care.
• Potential Financial Impact: Minimal.

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable.
• Mitigation Strategies: Brazil plant operational, SMART high-speed tube production.
• Control Effectiveness: High, demonstrated by 42.8% increase in EBITDA.
• Potential Financial Impact: Reduced costs, improved efficiency.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend Increasing
• Mitigation Strategies: Managing increased interest rates, borrowing for Brazil greenfield capex.
• Control Effectiveness: Moderate, as indicated by increased interest costs. DSCR is lower compared to previous year.
• Potential Financial Impact: Higher interest costs, potential impact on net profit.

Compliance/Regulatory Risks #

• Severity: Low
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Compliance with regulations, APR certification for Platina tubes.
• Control Effectiveness: High, reflected in certifications and sustainability initiatives.
• Potential Financial Impact: Minimal.

Emerging Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Increasing
• Mitigation Strategies: Changes in Consumer Demand

Europe (Germany, Poland, Russia, United Kingdom) #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Structural interventions to improve margins.
• Control Effectiveness: Moderate, with 5.8% revenue growth and 12.0% growth in Oral Care.
• Potential Financial Impact: Lower EBITDA margins compared to other regions.

Operational Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Improving.
• Mitigation Strategies: Restructuring of operations.
• Control Effectiveness: Partially effective, as reflected by 20.7% EBITDA growth, but lower absolute EBITDA margins.
• Potential Financial Impact: Costs related to operation optimization.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing.
• Mitigation Strategies: Managing inflationary pressures.
• Control Effectiveness: Moderate, as evidenced by positive revenue and EBITDA growth.
• Potential Financial Impact: Increased operational costs.

Compliance/Regulatory Risks #

• Severity: Low
• Likelihood: Low
• Trend: Stable.
• Mitigation Strategies: Zero-defect production and sustainability.
• Control Effectiveness: High.
• Potential Financial Impact: Minimal.

Emerging Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Geopolitical Instability and Economic Instability.

EPL Limited Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• All Regions: EPL aims to achieve double-digit revenue growth while maintaining EBITDA margins exceeding 20%. Progress has been made with consistent margin improvement over the last seven quarters. The company is focused on organic sales growth and long-term profitability.
• Sustainability: EPL’s vision is to be the most sustainable packaging company globally. Sustainable tube volumes doubled from 10% to 21%. 85% of capacity is ready for sustainable tubes, and strategic customer partnerships are in place. It received a green rating from Ellen MacArthur Foundation for the second time, along with leadership band in CDP.
• Category Growth: EPL aims for significant growth in Beauty & Cosmetics and Pharma, while maintaining leadership in Oral Care. Non-Oral category grew 8.1%, outpacing Oral Care’s 5% growth.
• Geographic Expansion: A new greenfield plant in Brazil has been stabilized and is operational. This is a core part of its expansion in Latin America.

Competitive Advantages and Market Positioning #

• All Regions: EPL is the world’s largest specialty packaging company, manufacturing one of every three tubes used globally in oral care. Strong customer partnerships (average tenure of 20 years) across various categories (Beauty & Cosmetics, Food, Pharma & Healthcare, and Home Care).
• Product Sustainability: 43% of EPL’s packaging is recyclable, and tubes incorporate up to 50% PCR content. The Platina range of tubes is 100% recyclable and certificated by the Association of Plastic Recyclers.
• Technology: NEOSeam technology is gaining traction, providing a seamless side seam for improved aesthetics and functionality.
• Innovation: The are 24 new patents granted to EPL.

Innovation Initiatives and R&D Effectiveness #

• All Regions: EPL’s Creativity and Innovation (C&I) team focuses on sustainable product development, utilizing expertise in polymer science, conversion processes, and engineering. Focus areas include recyclability, reusability, reduction, and features like soft touch, high clarity, and UV barriers.
• Product Portfolio: EPL has commercialized almost 20 new laminated tube structures, which have sustainable versions.
• R&D expenditure was 1.38% of total turnover in FY 2023-24.

Management’s Track Record in Execution #

• Revenue Growth: Consolidated revenue grew by 6% to ₹39,161 million in FY 2023-24, despite negative pricing impacts. All four regions delivered revenue growth.
• Margin Improvement: EBITDA margins improved by 202 basis points to 18.2%, and absolute EBITDA grew by 19.2%. This was driven by cost-reduction initiatives, price management, raw material substitution, supplier consolidation, and manufacturing efficiency.
• New Plant Stabilization: Successful establishment and stabilization of the greenfield plant in Brazil, achieving 100% of the anchor customer’s demand.

Capital Allocation Strategy #

• R&D Investment: Continuous investment in R&D, with 24 new patents granted in 2023-24, indicates a focus on innovation.
• CAPEX: CAPEX for FY 2023-24, was ₹3,673 million, was a down by -3.2%.
• Debt Management: Net debt at the end of FY 2023-24 was ₹6,026 million, with a debt-to-equity ratio of 0.30. Interest Service Coverage Ratio is lower due to increased interest cost.
• Dividends: Total dividend payment, interm plus final, equals 222.5% of paid up equity share capital.

Organizational Changes and Their Impact #

• Europe Restructuring: EPL undertook restructuring in Europe to improve margins to the mid-teens. A cost of ₹140 million related to this was reported as an exceptional item.
• Key Managerial Personnel Changes: During the Financial Year, there were changes with CFO and Company Secretary roles.
• Global Workforce: 5343 employees from 25 different nationalities, 29% female representation.

EPL Limited ESG Analysis (FY 2023-24) #

Environmental Metrics and Targets #

• EPL aims to reduce GHG emissions (Scope 1 + Scope 2) by 55% by 2030 against a 2017 baseline and achieve Net Zero by 2050 across the value chain, with targets under approval by SBTi.
• 21% of tube volumes were sustainable, doubling from 10% in the previous year.
• 85% of EPL’s production capacity is ready for sustainable tubes.
• 100% of hazardous waste is recycled.
• 21% of Total renewable energy used globally.
• Sewage treatment plants installed at most plants.

Social Responsibility Programs #

• CSR initiatives impacted over 10,000 families, 5,000 students across 30+ schools, and 4,000 women, with over 20,000 kgs of community plastic waste collected and recycled.
• Women constitute 29% of the global workforce, with a goal of 30% by 2025.
• Hired 59 specially-abled people across six locations in India.
• FY24 total training hours are 66499, total number of employees trained 4035.
• Provided on-the-job technical training to 286 trainees in India, with 21% being women.
• Global Initiatives: Technical School in Mexico, Apprentice Program in Germany, Community Engagement in Poland, Community engagement in China.

Governance Structure and Effectiveness #

• The Board comprises 8 directors, with 87.5% being Non-Executive and 37.5% being Independent Directors.
• The Audit Committee, Nomination and Remuneration Committee (NRC), Risk Management Committee (RMC), and Stakeholders’ Relationship Committee (SRC) met multiple times, with all recommendations accepted by the Board.
• The Company has a Whistle Blower Policy and a mechanism to address instances of unethical behavior.
• No cases of human rights violations reported.

Sustainability Investments and ROI #

• Significant investments were made in backend capabilities, making 85% of capacity ready for sustainable tubes.
• Invested ~₹3.8 million in energy conservation equipment at the Vasind plant.
• 24 new patents were granted in 2023-24.
• CAPEX was Rs 3,130 million

ESG Ratings and Peer Comparison #

• EPL achieved a Green rating from the Ellen MacArthur Foundation for the second consecutive year.
• Received an ‘A’ leadership rating in the CDP 2023 Supplier Engagement rating.
• Awarded EcoVadis Gold rating.
• EPL has obtained independent third party assurance from SGS India (for FY 23) & FY 24.

Regulatory Compliance and Future Preparations #

• The Company is compliant with the Corporate Governance requirements stipulated under the Act and provisions of Regulations 17-27 of the SEBI LODR Regulations.
• All manufacturing plants are certified with ISO 14001:2015, ISO 50001: 2018, ISO 45001:2018, and ISO 20400:2017.
• Adheres to local labor laws and environmental regulations, and follows energy-efficient practices.
• The Company has not received any penalties or strictures from Stock Exchanges/SEBI or other appropriate authorities for the last 3 years.
• The company is complaint with the requirements of the SEBI LODR Regulations for material subsidiaries and Corporate Governance.

Future Projections and Guidance #

Segment-Wise Financial Analysis #

AMESA (Africa, Middle East, and South Asia) #

• Management Guidance and Assumptions: Revenue growth of ~3.6% driven mainly by volume, with slight growth in personal care. India operations saw ~6% standalone revenue growth.
• Planned Strategic Initiatives: Focus on cost management and operational efficiency.
• Capital Expenditure Plans: Invested ~₹ 3.8 Million on energy conservation equipment at Vasind plant.
• Efficiency Improvement Targets: EBITDA for AMESA grew by ~9.7%.
• Potential Challenges and Opportunities: Optimized water flow design, installed air washer for slitting hall (129,600 Kwh annual power saving), and implemented a trim winder (172,800 kWh per annum projected power saving).

EAP (East Asia Pacific) #

• Management Guidance and Assumptions: Driven by ~20.9% growth in the Personal Care segment.
• Market Growth Forecasts: Achieved double-digit revenue growth of ~10.1%.
• Planned Strategic Initiatives: Focus on leveraging regional strengths, targeting smaller clients.
• Capital Expenditure Plans: Acquired a 9-layer Blown film line in China, with 6400 tons annual production capacity globally.
• Efficiency Improvement Targets: EBITDA grew by ~14.9%.
• Potential Challenges and Opportunities: Successfully installed a 9-layer blown film line, strengthening in-house competency.

Americas #

• Management Guidance and Assumptions: Stabilization of the Brazil facility.
• Market Growth Forecasts: Achieved double-digit revenue growth of ~12.9% overall; with ~10.5% growth in oral care and ~17.8% in personal care.
• Planned Strategic Initiatives: Focus on market expansion and operational efficiency, leveraging new greenfield plant.
• Capital Expenditure Plans: Added a new greenfield plant in Brazil and invested in new Flexo presses in Brazil and India. Tubing capacities for Brazil is 330 million units per annum, India 120 million units per annum.
• Efficiency Improvement Targets: EBITDA increased by ~42.8%.
• Potential Challenges and Opportunities: Brazil plant stabilization is a key opportunity. Risk exposure to hardening of interest rates.

Europe #

• Management Guidance and Assumptions: Resilience to economic challenges, including inflationary pressures.
• Market Growth Forecasts: Revenue growth of ~5.8% with oral care category growing by 12.0%.
• Planned Strategic Initiatives: Implementing structural interventions to achieve higher margins. Active restructuring to improve margins.
• Capital Expenditure Plans: Tubing capacities for Poland is 120 million units per annum. Investment in new Flexo presses in Poland.
• Efficiency Improvement Targets: EBITDA increased by ~20.7%, though absolute EBITDA margins remained lower than other regions.
• Potential Challenges and Opportunities: Lower absolute EBITDA margin compared to other geographies.

Company-Wide #

• Management Guidance and Assumptions: Aim to be the most sustainable packaging company globally, targeting the top 1% globally for sustainability.
• Market Growth Forecasts: Laminate tube packaging industry projected CAGR of 7.6%.
• Planned Strategic Initiatives: 4x4 mantra (growth across Categories, Customers, Countries, and Costs). Aim for double-digit revenue growth with 20% EBITDA margin. Aggressive expansion in “Personal Care & Beyond” segment.
• Capital Expenditure Plans: 85% of capacity ready for sustainable tubes. Exploring Renewable Energy options through Open Access power supply.
• Efficiency Improvement Targets:
  • Targeting 20%+ EBITDA margin consistently. Company-wide initiatives for cost reduction and asset utilization (price management, raw material substitution, supplier consolidation, and SKU reduction).
  • Aim to reduce 50% of GHG emissions by 2030.
• Potential Challenges and Opportunities: Growing global demand for sustainable packaging with the production of 100% recyclable platina tubes. Currently 43% of company’s packaging is recyclable.

Scenario Analysis and Sensitivity #

• Interest Rate Sensitivity: Interest cost increased due to the hardening of interest rates, particularly in the Americas and Europe.
• Currency Volatility Sensitivity: Using forward contracts to hedge exposures. Fluctuations in raw material prices are managed through pass-through clauses in long-term contracts.
• Economic Downturn Sensitivity: Monitoring consumption trends and has a strong business development pipeline.
• Supply Chain Disruption Sensitivity: Supply chain disruptions are present as potential risks.
• Geopolitical conflict Sensitivity: Geopolitical tensions in Ukraine and Iran and maritime disruptions in Red sea create uncertainty.
• Sustainability Goals: Significant milestones were achieved with tubes having up to 50% PCR content and doubling sustainable tube volumes to 21%. Plans to transition all tubes to sustainable formats by 2025.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• Standalone Financial Statements: Walker Chandiok & Co LLP issued an unmodified opinion, stating the standalone financial statements give a true and fair view in conformity with Ind AS.
• Consolidated Financial Statements: Walker Chandiok & Co LLP issued an unmodified opinion. The audit opinion relies, in part, on the reports of other auditors for fifteen subsidiaries located outside India and on management of one associate. No qualification based on material uncertainty has been provided.
• Key Audit Matter: Revenue recognition has been identified as a key audit matter.

Key Accounting Policies and Changes #

• Consistency: The financial statements are prepared using uniform accounting policies across the Group, with adjustments made where necessary to ensure conformity.
• Revenue Recognition: Revenue from the sale of goods is recognized when control transfers to the customer, generally upon delivery.
• Goodwill: is not amortized, subjected to annual impairment test.
• Property, Plant and Equipment: are depreciated using straight line method.
• Right-of-Use Assets: are depreciated using straight line method.
• Intangible Assets: amortised using straight line method.
• Impairment: carrying values are reviewed annually.
• No New Standards: No new accounting standards or amendments impacting the reporting period were issued by the Ministry of Corporate Affairs.

Internal Control Effectiveness #

• Standalone: The auditor’s report states that the Company’s internal financial controls were adequate and effective as of March 31, 2024, based on their audit.
• Consolidated: The auditors expressed an unmodified opinion on the adequacy and operating effectiveness of internal financial controls with reference to the consolidated financial statements for the Holding Company.
• Audit Trail: All required software used by the holding Company has audit log enabled except at database level where there is direct change in data or for third party hosted consolidation application.

Regulatory Compliance Status #

• Corporate Governance: The Company is compliant with the Corporate Governance requirements under the Act and SEBI LODR Regulations.
• Secretarial Audit: The Secretarial Audit Report for FY 2023-24 did not contain any qualification, reservation, or adverse remark.
• Statutory Dues: The Company has generally been regular in depositing undisputed statutory dues, with some slight delays in a few cases.
• SEBI: No penalties or strictures were imposed on the Company.
• ESG: EPL achieved a Green rating from the Ellen MacArthur Foundation for the second consecutive year and an ‘A’ leadership rating in the CDP 2023 Supplier Engagement rating.

Legal Proceedings and Potential Impact #

• Pending Litigations: The Company has disclosed pending litigations, including disputed indirect and direct taxes, and their potential impact on its financial position in Note 46(A)(i) and Note 47 of the standalone financial statements.
• No Material Impact: The financial statements do not indicate any legal proceedings that significantly impact the Company’s going concern status.

Related Party Transactions #

• Arm’s Length Basis: All related party transactions during FY 2023-24 were conducted at arm’s length and in the ordinary course of business.
• Transactions: All RPT’s complied with relevant provisions.
• No Material Transactions: There were no ‘material’ related party transactions requiring disclosure under Form AOC-2.

Subsequent Events #

• No Material Changes: There were no material changes or commitments affecting the Company’s financial position between the end of the financial year (March 31, 2024) and the date of the Auditors’ Report (May 28, 2024).

Analysis of Accounting Quality and Regulatory Risk #

Accounting Quality #

• Transparency: The Company’s financial reporting appears transparent, supported by the unmodified audit opinions and detailed disclosures.
• Consistency: The application of uniform accounting policies across the Group enhances comparability and consistency.
• Conservative Approach: Recognition of costs are in accordance with Ind AS.
• Prudence: The audit report confirms management has considered reasonable and supportable information.

Regulatory Risk #

• The Company has generally been regular in depositing statutory due with delays in few cases.
• The company has fully complied with all the mandatory provisions of relevant acts and regulations.