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G. Madhan

We are trying to expand our customer base to include smaller customers, who also demand innovation and good quality, though a significant part of our business still comes from large companies.

Paper Products is a flexible packaging manufacturer whose clientele reads likes a who's who of the India's consumer products industry. It meets the demanding requirements of Hindustan Lever, Nestle, Cadbury, Dabur, GSK Consumer Healthcare and Coca-Cola, to name a few. Huhtamaki Finland, the global packaging major, holds 59 per cent of its equity. Mr Suresh Gupta, Managing Director, Paper Products, spoke to Business Line, on a range of issues.

On revenue growth: Our principal customers are not growing. It is only the small companies that are growing at 30-40 per cent. So, we are trying to include smaller customers, who also demand innovation and good quality.

A significant part of our business, however, still comes from large companies. We are deliberately taking a step back from businesses that are becoming unprofitable and where the standards have fallen too low for us to address. But the margins have improved.

We could have easily grown by at least 17 per cent, but we have given away at least 10 per cent of business. This year, we hope to attain a double-digit growth rate.

On revenue profile: Personal-care products account for 30-33 per cent of our business. The beverages segment, which includes soft drinks, infant foods and others such as Horlicks, Bournvita, Complan, accounts for about 30 per cent. Food segment and others constitute the rest. The top 10 customers contribute almost 60 per cent of the revenue.

On pricing end-products: We have our disagreements with customers who resist the price hikes we need. Sometimes, they try and bid. This is a counter-productive fad; a fad because we are not in a commodity business. We are into custom design. In Europe, for custom-designed packaging, reverse auction went out two years ago. India always tends to learn these things a little late.

On FMCG price wars and margins: Price-cuts in the FMCG sector have obviously made an impact. Everybody is talking only about cost. Three years ago, Indian packaging had reached almost the same level as Europe. There is no change in the quality of packaging over the past three years as the big customers no longer want quality; they only want to reduce the cost.

On input price trends: The outlook on price trends is bleak. Right now, the entire petrochemical supply chain is seeing a rapid price escalation. Ethylene prices have doubled and polyethylene prices are going through the roof. The Finance Minister did not think it was necessary to control inflation in polymers. The polymer majors have certain degree of planned supply, which is not good. I think some of the anti-dumping duties are unjustified, which has allowed cartels and monopolies.

On expansion plans: This year, we are investing Rs 45 crore and expanding our Hyderabad plant's capacity, where production is increasing by 50 per cent. We have invested in the de-bottlenecking of the Silvassa plant and switching to a new technology. These will be commissioned by October. We are a debt-free company and the outlay will be funded through internal accruals

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