What is the global and domestic dynamics of the BOPP industry? Kindly share the capacity, demand, supply, and foreign trade in BOPP on global and domestic note.
Ans. Global BOPP demand is around 7 Mn Tonnes per annum which is around 80-85% of the production capacity worldwide. Around 60% of the demand is from the Asia region including Middle East. Europe constitutes around 20% of the global demand. Around 15% comes from North and South America. Rest 5% comes from Africa and other regions. As far as domestic market is concerned, demand in India is estimated to be around 2.5 lac Tonnes per annum which is roughly 3.5% of the global demand. The capacity is around 150% of the demand. Hence, Indian producers continue to look at export market as well. China consumes around one-third of the global consumption and it has at least 1.5 times capacity of the demand.

What is the user industry wise demand in India and globally for BOPP Films? Which of these segments are growing at a faster pace?
Ans. Worldwide, Majority of the BOPP film demand comes from the food segment like packing of Biscuits, Pasta/Noodles, Bakery and Confectionaries, Raw meat packaging etc. Around 20% of the global demand comes from Tape & Textile Industry. Tobacco also adds a small percentage to global demand.

In India, tape & textile contributes around 45% to the total demand. Demand from Tape & Textile is higher in Indian context owing to less usage of packed food in India compared to overseas. The food sector is growing at fast pace in India and contribute to growth in BOPP consumption. The food sector (especially fast food, chips & snacks) have an extensive usage of metalized films.

The bane of the global BOPP film sector was that players add capacities ahead of time, leading to oversupply too often. How is the situation currently in China, India and rest of the World?
It is true that players added capacities rapidly and outpaced the demand around 5 years back resulting in only 70% capacity utilization. However, the situation is better in recent times. Both India and China have 1.5 times capacity in terms of the demand. Hence, export plays a big role in the sales of the companies from these regions. Higher capacity in these regions is mainly due to lower cost structure.

What is the total capacity, demand and demand growth of thermal laminated films in India? What is your company's capacity and market share thereof? What is the conversion margin from BOPP films to thermal lamination films?
Ans. The demand of Thermal laminated films in India is roughly around 4000 MT per annum. The market is growing fast and expected to grow at around 10%-12% per annum. The capacities are in excess of the demand. Major player is Cosmo with end to end facilities though Max and Garware are also into Thermal production. Our annual capacity in Thermal is around 24,000 MT and our current share in domestic market is around 30%. We are targeting to take it to 40%. The conversion margin from BOPP films to Thermal lamination films is in a range of 20-25 per kg.

What is your outlook on demand for BOPP films in India and the global markets? What were the global capacity and demand growth in 2009 and 2010 and 2011 so far?
Ans. Demand in India, China and rest of Asia is outpacing the world demand. While the growth in Asian countries was around 9% and expected to continue likewise the growth in Europe and American market was only 5%. In the last few years, the emerging economies like India, China etc have witnessed an improved standard of living, urbanization and per capita income and this has led to an increase in demand for BOPP films. Both India and China are adding capacities at fast pace to cater to domestic as well as global demand and taking advantage of their low cost structure.

Most of the Indian companies in BOPP have been able to sell their complete capacity. Cosmo has an advantage as it is one of the largest exporters of BOPP film from India.

Most of the European suppliers have old equipment and offlate have been discarding their equipment reducing the demand and supply gap.

What were the expansions completed in FY 2010--11 and in the current fiscal? As a result, what is the current capacity of the company, and its standing in terms of capacity, domestic sales, exports in the Indian BOPP sector?
Ans. Last year we have installed a new metalizer in our Vadodara Plant to cater to the growing demand of the metalized products. It provided us the additional capacity of 6,000 MT of the metalized products along with the 3,000 MT in Aurangabad Plant. Currently, we are the leader as far as Thermal lamination films are concerned. The total capacity of Cosmo in BOPP alone is around 85,000 MT. Cosmo is one of the largest exporters of BOPP films from India.

What is the current status of US$ 49 million capex program to expand capacity by 40000 tonne and to set up a facility in another developing nation? What will be the debt and equity portion of this capex, and whether the company has attained financial closure? IFC, Washington has approved US$ 20 million and what % of this will be debt, quasi debt (FCCBs etc) and equity, and give full particulars thereof. Whether the company has drawn the above amounts from IFC, and if not, when does it plan to do so? What will be the buyer's credit, and terms thereof?

The total debt is around $35m (including $20m debt from IFC) while the balance is funded by internal accruals. The financial closure has been attained for all the loans. We have not withdrawn any amount until now from IFC as all the capex incurred until now has been funded from internal accruals. The buyer's credit is for $15m for a period of 8 years at an interest rate of Libor + 1.35%.

Are there plans to diversify into other flexible packaging products like BOPET, pet films etc to become one stop shop for the user industries for all their flexible packaging requirements?
Ans. Currently we are focusing on BOPP, Metallized, Coated & Thermal films as this has been our strength and core competency for so many years. We have constantly increasing our market share in specialized films. But in future we may like to enhance our portfolio which will depend more on market situations & raw material pricing.

Kindly share with us the synergy of GBC commercial print finish business and Cosmo film's thermal lamination film segment. How effectively is this synergy being converted into sustainable growth in revenues, margins and profits?
Ans. The synergy between GBC and Cosmo is tremendous. Prior to GBC acquisition, GBC was the largest thermal manufacturer in the world while Cosmo was the second largest. Post GBC acquisition, Cosmo has become undisputed leader in Thermal films. GBC had a strong presence in Asia & US, where Cosmo had limited presence. GBC had exclusive patents, which Cosmo has been able to use in other markets. GBC was also selling Thermal lamination equipment unlike Cosmo. GBC had a high cost structure in overseas and Cosmo has gradually been able to reduce the high fixed cost of GBC.

GBC had already proved as benchmarks for quality & service standards which now has been hailed by Cosmo and retaining the leadership

When we had acquired GBC, it was making substantial losses. In last 2 years, Cosmo has been able to turnaround them to bring to break-even at EBIDTA level. By next year, we expect to start making profits in GBC operations

Considering the sluggish demand for thermal laminated films in European Union and United States, whether the company has been able to scale up revenues from rest of the World including India?
Ans. Yes, the demand has been sluggish for thermal laminated films in Europe and United states owing to the recession fears. We are trying to compensate it by introducing more specialized & innovative products and increasing our revenues in rest of the world. Asia, Africa & middle east regions are showing good potential for the thermal films and we are hopeful that we will be able to compensate the fall in western markets with these developing economies in the near future. Also we are trying to Increase our market share in US.

The company's consolidated profits (before EO) tumbled down by 45% to Rs 34.76 crore in FY 2010-11, and the fall continues with about 15% fall to Rs 15.44 crore in the six months ended September 2011. From when do you expect the overseas entities to be EPS accretive on a sustainable basis?
Ans. The net profit after tax for the financial year 2009-10 included an extra-ordinary profit of Rs.29.28 crore mainly arising from acquisition of GBC business. Excluding the extra-ordinary item, the results were broadly flat due to losses made in subsidiaries in 2010-11.

We had taken initiatives to restructure and consolidate our overseas entities in last 2 years and have now achieved break-even at EBIDTA level in the current year.

What is the debt on stand alone and consolidated basis? What are the company's initiatives to bring down its debt and interest costs? what is you hedging policy?
Ans. We have a consolidated debt of around 350 crore (net of cash) and equity of 388 crore (including deferred tax). The company policy is to maintain a debt equity ratio of 1:1. Our interest cost is around 6% of loan outstanding. Given our debt equity ratio, we are optimally leveraged.

We are generally not hedging our long term loans, unless we find them reasonable to do for near-term installments. At times, we do hedge our interest exposures.

What are the company's initiatives to step up the share of exports in total turnover? What are the top five countries, and their share in the company's total exports? Which are the key new regions identified to step up exports.
Ans. Around 70% of our exports from India are to Europe, Africa & middle east region. The other regions including USA & Asia Pacific are serviced by their local manufacturing set-ups. The top 4 countries contribute around 30% of our export sales. We are continuously making an effort to increase our sales across all regions.

The key region identified is Russia, China, Africa & south east Asia.

Any other message to your shareholders / our readers?
Ans. Going forward, we would like to increase the awareness about the industry and being the leader in specialized and innovate solutions to our customers. We stand committed to our shareholders to constantly increase their wealth and return.

We stand committed to be an environment friendly, socially responsible company focusing on employee engagement, training and upliftment. We also continue to be one of the major exporters for the country.