Manjushree Tech

MANJUSHREE TECHNOPACK LTD
Established in 1984, Manjushree has built expertise in all kinds of rigid plastic
packaging solution, including – PET, PP, Multilayer-barrier containers and
PET Preforms that utilize best in class technology from Europe, Japan and
Canada. Recently it has commissioned four more state-of-art Preform
manufacturing systems from Canada and four blow-moulding machines from
ASB of Japan to manufacture PET bottles for the beverage and bottled water
industry.

A. Product Base
Manjushree Technopack Ltd is an integrated packaging solution provider, delivering their customers with innovative cutting edge plastic packaging solutions. The company is engaged in the manufacture and sale (both Domestic & Exports) of PET/ Plastics Preforms & Containers. They manufacture specialty plastic packaging products for domestic/ export markets and cater to the needs of leading companies in FMCG, Pharma and Food Processing sectors.
• PET - Jars and Bottles
• PP - Jars and Bottles
• Co-extruded Multilayer Containers
• Hot-Fillable PET Bottles
• Injection Molded Products.

B. Customer Base
The company is engaged in producing customized blow and injection molded containers (bottles and jars ranging from 30 milliliter to 15 liters in various sizes and designs) in polyethylene terephthalate (PET), multilayer, high density polyethylene (HDPE), polypropylene (PP) and other variety of polymers. They manufacture packaging materials for special applications in food products, beverages, pharmaceuticals, cosmetics, agro-chemicals, and allied sectors. They cater to various companies, such as Unilever, Tata Tea, Nestle, PandG, Glaxo SmithKline, Heinz, Cadburys, Britannia, Wrigley's, Lotte, Coca Cola, PepsiCo, Perfetti and others.
Manjushree gets 80% of its sales from the FMCG sector, which has been riding on a rapidly increasing middle-class population. Manjushree has forayed into new segments to diversify like liquor, personal care, dairy and edible oils. Companies such as United Spirits, Reckitt Benckiser, Bacardi, Diageo and Big cola for PET bottles and PET Preforms business have been added to the company’s portfolio in the past few quarters.

Industries Served
• Tea & Coffee
• Pharmaceuticals
• Confectionery
• Fruit juices
• Aerated Beverages
• Liquor
• Sauces & Ketchups
• Household cleaners
• Pickles
• Health Supplements

C. Economic Moat
Strong Business Practices:
Manjushree get benefit mainly because south India makes up 60% of the beverages market and nearly half of India’s bottled water manufacturers are located there. For packaging companies, business is feasible only if they’re close to their clients to save on high transportation costs. Given its capacity and proximity to manufacturers, Manjushree is a large player in the southern market. In fact, despite not having any long-term supply contracts, its relationship with most of its clients has been sticky. Food safety is a major concern for every multinational in the country. Vendors need to follow good manufacturing practices and ensure that hygiene is maintained in the storage of goods so that there is no contamination. Hence long-term partners always trust on Manjushree business standards. So they don’t usually change vendors in a hurry.
Asset Light Model:
Manjushree works on a conversion price model with Coca-Cola and Pepsi,to insulate itself from raw material price fluctuations.

D. Financial brief and Balance sheet analysis

Figures in Rs crore	2014	2013	2012
Net Sales	437.69	361.22	309.78
Operating Profit	104.35	82.95	61.18
Other Income	6.55	2.92	1.66
Interest	22.01	13.21	11.46
Depreciation	43.04	31.93	19.4
Profit Before Tax	39.30	37.81	30.32
Tax	12.91	13.67	9.82
Profit After Tax	26.39	24.14	20.5
Share Capital	13.72	13.72	13.72
Reserves	134.22	109.44	86.87
Net Worth	147.94	123.16	100.59
Loans	275.34	224.72	131.32
Gross Block	373.55	344.29	229.84
Investments	0.00	0.00	0
Cash	5.24	24.98	6.26
Debtors	78.86	65.56	45.76
Net Working Capital	182.30	107.15	78.39
Operating Profit Margin (%)	23.84	22.96	19.75
Net Profit Margin (%)	6.03	6.68	6.62
Earning Per Share (Rs)	19.06	17.44	14.78
Dividend (%)	10.00	10.00	10
Dividend Payout	1.35	1.35	1.35

E. Near term and Long term Growth
Growing Strategically:
While PET contribute to the largest portion of the business in terms of tonnage, the company has an equally large contribution to the turnover, from PET containers and bottles. Last year, Manjushree has entered the liquor and personal care segments. Some of the clients that the company has started work is Diageo, Bacardi, United Spirits Ltd, and Radico Khaitan. From the personal care segment, majors such as Himalaya Drugs Company have been signed on. Company has also started exports to Africa, Thailand, Middle East and some of the European countries. Manjushree is recognised for its expertise in packaging technology, state-of-the-art facilities and the capabilities of research & design arm. All this has helped it to grow in terms of capabilities and capacity and make an impact on client businesses.
• Manjushree holds largest facility in South Asia. Setting up of 3rd facility at Bidadi could boost profitability. Manjushree is also looking at setting up its fourth facility at Harohalli in Karnataka.
• Manjushree benefits from proximity to customers, which leads to save more on higher freight costs.
• Manjushree Technopack has won three India Star Awards for their FMCG brands Nestle for its Nestea Sipper bottle, Govardhan India for Go Nacho Cheese Sauce bottle and GlaxoSmithKline for the Viva Drink jar. Emphasis on R&D helps to attract and retain customers.
• Exports climbed to Rs.30.25 crore, a growth of 55% for the year FY13.
• Rising incomes and the growing middle class has definitely fuelled growth in retail and thereby influenced packaging; it is the continued consumption demand that primarily keeps the market bullish.
• Manjushree supplies to clients in the confectionery, tea and food supplements segments such as Tata Tea, Mondelēz India (Cadbury Bournvita), GSK Healthcare (Horlicks), Perfetti and P&G, among others.
• Manjushree has forayed into new segments to diversify like liquor, personal care, dairy and edible oils. Companies such as United Spirits, Reckitt Benckiser, Bacardi, Diageo and Big cola for PET bottles and PET Preforms business have been added to the company’s portfolio in the past few quarters.

F. Sustainability

 Superior Packaging intrend:
With the spending power of especially the middle-class rising, the retail boom will continue in the country. With popular international retail brands making in-roads to the country, FMCG and F&B brands will only see greater scope to reach out to customers and will seek to out-do competition in many ways. A significant touch point for any brand is the packaging, and brands try and ensure they are not lagging behind from competition in this area. With the advent of better packaging technology and solutions being available for all formats, brands are also moving to options that will help in making the supply chain process and storage simpler. This will help the Manjushree to grow in next three years.

Latest Technological Equipments:
Manjushree is equipped with the latest state-of-the-art machines and technology with expansion plans underway and have invested into machines that are processes automated. They are partnered with Nissei ASB, Japan for their blown containers and bottles; Husky, Canada for preform manufacturing systems and other technology from Europe and America. With recent expansion at Bidadi facility, they are equipped with the best technology in the industry.

Largest Facility:
Manjushree holds largest facility in South Asia. Setting up of 3rd facility at Bidadi could boost profitability. Manjushree is also looking at setting up its fourth facility at Harohalli in Karnataka. Also Manjushree benefits from proximity to customers, which leads to save more on higher freight costs.

G. Risk
Competition from unorganized players - Manjushree faces competition from unorganised and International players. It competes with domestic players such as Pearl Polymers, Sunrise Containers and Chemco Group and international names such as Amcor and Rexam. But the advantage Manjushree has over its peers is the fact that its large capacity is now nearly double that of the 50,000 MT capacity of its immediate competitor, Sunrise Containers. This gives it a significant advantage in the form of a sizeable market share in a highly fragmented industry.
Rising cost of Capital Equipment - The Company has been facing challenges of rising costs of capital equipment.
Weak rupee (forex fluctuation) – Manjushree faces adverse impact of weakening rupee on imports of raw materials and equipments. Further most of the Rs.127 cr of long term borrowing by Manjushree is Forex loan. It could take a hit (partly taken to balance sheet) on these loans for Rupee weakening.
Regulatory/ policy changes - The new packaging norms laid down by Legal Metrology (Packaged Commodities) Rules, 2012 will definitely increase the financial burden on the Food Processing and FMCG Industries. The current manufacturing standards include various machineries and equipment, which were designed to cater to certain sizes of packs. However, with the new rules coming in, everything needs to be re-aligned right from filling machine, testing procedures, primary
packaging material and secondary packaging material. Primary packaging materials include items like rigid PET Jars and Bottles or laminates, pouches, can, etc. Secondary packaging materials include mono-cartons, corrugated boxes, etc.
 Power costs and availability – Continues challenges of lack of availably of power and rising power cost have adverse impact on company’s financials, However to insulate from rising power cost, the company has windmill project of 3.4MW (at a cost of  Rs.20 cr) which generated 52.0 lacs units of “green power” as a part of its CSR along with the advantage of insulating itself
from rising power costs.
RM price fluctuation: Rising input price is a major challenge for the company.
Seasonality - Seasonality affects the company during June to September period, which is a dull quarter due to monsoons. In Q2FY13 Manjushree posted net revenues of Rs.75 crore - lowest out of total four quarters. However its peak season is from March to June.
Tech development and economy slow down - Packaging companies need to be innovative in developing cost-effective quality packaging solutions. Their ability to innovate will not only help companies differentiate but demand for newer products will ensure that the growth momentum in the packaging industry will sustain.
Increased D/E level - The company’s capacity addition has come with rising debt levels from Rs 13.25 crore in FY08 to Rs 224 crore in FY13 and debt-equity ratio stood at 1.8 times (including working capital loans) with interest coverage ratio at 3.9 times.