MANAGEMENT DISCUSSION AND ANALYSIS

Mr. Ramneek Jain

Chief Executive Officer

Mr. Amit Jain

Chief Financial Officer

Mr. Anil Kant Yadav

Head - National Sales

Mr. Anil Kumar Bamby

Head - Quality

Mr. Avinash Kumar Singh

Operations Lead - Line 5

Mr. K Manohar

Chief Technical Officer

Mr. Navneet Narayan Malhotra

Head - Operations

Mr. Rishabh Taksali

Head - Human Resources & IR

Mr. Rishi Pathak

Head - Materials

Mr. Ritesh Trikha

Head - International Sales (BOPP Films)

MSFL’s new Line 5 has increased its production capacity ~75% to 80.85 KTPA

MSFL’s new Line 5 has increased its production capacity ~75% to 80.85 KTPA

Max Speciality Films Limited (MSFL), the pioneer of BOPP films in India is now a niche player in the field of specialty films. Speciality films play a crucial role in flexible packaging of processed foods, confectionery, fast moving consumer goods (FMCG) and industrial goods.

MSFL is also one of the country’s leading producers of graphic lamination films for print finishing and luxury packaging and labeling films. The Company will break new ground in the complex areas of packaging and labeling post commissioning of the state-ofthe- art BOPP line in Q1 FY2019. The investment of ₹ 250 crores will not only strengthen the company’s speciality portfolio, but will also raise capacity by as much as 34,500 tonnes a year.

As one of the oldest and most innovative BOPP specialists in India, Max Speciality Films has both the expertise and the experience to exploit the enormous potential that India has to offer in the coming years.

Known for innovation, quality of output and customer service, MSFL has a growing roster of both Indian and international clients.

The ultramodern facility in Railmajra, near Chandigarh has four BOPP lines (one additional line commissioned in Q1 FY2019), three extrusion-coated lines, three cheseal-coated lines and four metallizer lines.

The facility follows stringent global standards and has the following accreditations:

  • ISO 9001-2008 Quality Management System

  • ISO 14001-2004 Environmental Management System

  • OHSAS 18001-2007 Occupational Health & Safety Management System

  • BRC / IOP (Food Safety) - British Retail Consortium

  • HACCP - Hazard Analysis Critical Control Point

In addition, the MSFL Quality lab is the first in this industry in India to have won the coveted NABL accreditation and a DSIR certified R&D Lab.

Max Speciality Films is recognized as a producer of quality speciality packaging films and for partnering with convertors and brands to develop cutting-edge packaging, labeling and graphic lamination solutions. Max Speciality Films works closely with convertors and brands to develop new packaging solutions covering a range of attributes: Barrier, Sealing Reliability, Special Surfaces, Haptics and Optics, Sustainability and so on.

Industry Structure and Development

The global market for BOPP films is 8,200 KTA and that of India is 380 KTA. While the BOPP industry continues to expand at 4% globally, growth in India is about 8%. With a penetration of just 4.2 kg per capita in India, the scope for growth in the polymer films market is immense.

Max Speciality Films is recognized as a producer of quality speciality packaging films and for partnering with convertors and brands to develop unique packaging, labeling and graphic lamination solutions.

Food companies have come to realize the value of flexible packaging. It plays a critical role in post-harvest conservation, nutrient preservation, and damagefree distribution. Packaging is now seen as a vital technology-based input as well as a communication link in the value chain. Max Speciality Films supplies films to convertors who laminate, print and process these into ready-to-fill flexible packages for the food companies and national and international brands.

Further, the mushrooming of retail malls across the country – fuelled by rising consumer spends and acceleration in demand for convenience and quality products – has sparked a revolution in the packaging business. Demographic and lifestyle changes and the ever-increasing share of women in the workplace are the main drivers of growth. The expansion of modern retail has also seen the proliferation of high profile packaged foods and luxury brands that focus on four key areas: pack size, aesthetics, preservation, and labeling.

Market Position

The company’s strategy is to focus on innovation, building long-term customer relationships, ensuring excellence in operations as well as service delivery and talent development. The company’s customer-centric focus has yielded long-term dividends. Customers consistently rate Max Speciality Films very high on customer satisfaction surveys and a major portion of the Company’s domestic revenues continues to flow in from customers who have been associated with MSFL for more than a decade. The company continues to develop and reach out to new customers to widen its spread.

MSFL is recognized as a producer of quality speciality packaging films and for partnering with convertors and brands to develop unique packaging, labeling and graphic lamination solutions.

Recyclability

With state of the art technology, MSFL is all set to offer multiple solutions for high barrier requirements with sustainability in its core, focusing on thick mono layer films to support recyclability. Aligned to FMCG majors, with the help of its unique in line coater, MSFL is working towards using 100% recyclable films by 2025.

Max Speciality Films exports approximately 25% of its output. While Europe continues to be the largest overseas market, the company’s presence in demanding markets such as Japan and the Americas is on the rise. The fast growing food industry alone accounts for 66% of sales and output.

Though MSFL has only 8% share of India’s installed capacity, its market share in the specialty films segment is an impressive 30%. To sustain its strong market position, the Company strives to meet the customer requirements through innovative customized solutions and through Customer engagement initiatives like Technology Day celebration with customer groups.

Though MSFL has only 8% share of India’s installed capacity, its market share in the specialty films segment is an impressive 30%

Performance Highlights

The total revenue earned by the company at the end of FY2018 was ₹ 693 crore, with an EBIDTA (Earnings Before Interest, Depreciation, Tax, and Amortization) of ₹ 45 crore.

While the overall outlook remains positive in the long run, it was a challenging year for the company for these reasons:

  • Demonetization: Liquidity constraints disrupted end-use demand and cash cycle across the value chain. Demand growth dropped to 8% p.a. instead of the projected 10% p.a.

  • Temporary oversupply in the market due to increased capacities.

Customer Engagement

Customer satisfaction is the responsibility of every employee in the company. ‘Customer comes first’ is the mantra followed by everyone without exception. Customer-centric initiatives undertaken during the year included:

  • Stage gate innovation process and well-equipped innovation center

  • An advanced CRM system to further strengthen customer engagement

  • Investments in order and material tracking to improve customer service

  • Review of all processes to improve responsiveness

  • Comprehensive complaint-handling process that expedites resolutions

Human Capital

On 31st March 2018, the company had a workforce of approximately 700 employees.

Culture of Compliance and Ethical Behaviour

The Company’s Ethical Committee promotes and monitors the highest standards of professional and personal behaviour.

Health, Safety and Environment

Max Speciality Films is acutely aware of its responsibilities in the ecosystem – as a producer of polymer films, an employer, and a corporate citizen.

In collaboration with Max India Foundation, Max Speciality Films contributes generously to local communities in the areas of Healthcare, Nutrition, Education, and Environment. The company has taken steps to improve the sanitation and poor drainage system in the Railmajra neighbourhood.

The Company follows a strict Green Policy and has signed the code for Ecologically Sustainable Business Growth formulated by the Confederation of Indian Industry (CII).

The safety of our employees and visitors is of paramount importance and the company continues to systematically identify and eliminate risks and hazards. In fact, the Punjab Government has presented Max Speciality Films with the Kirti Veer Award 2017 for its exceptional safety record.

Internal Control System and Adequacy

Max Speciality Films has institutionalized robust internal controls as well as management systems and processes through ERP as well as manual safeguards. These are periodically audited by accrediting agencies. The performance is also reviewed with reference to the company’s budget, year-on-year variances and competition. The statutory and internal auditors also review the internal controls every year. Their reports reach the Audit Committee for further evaluation.

MSFL Quality Lab is the first in this industry in India to have won the NABL accreditation

MSFL Quality Lab is the first in this industry in India to have won the NABL accreditation

Risks and Outlook

The Indian economy continues to grow from strength to strength, spurred on by widespread access to banking, technology adoption, structural reforms and key government initiatives such as “Make in India”.

Equally encouraging are the market indicators. Advances in food packaging and changing consumer demographics and psychographics have led pundits to believe that both the flexible packaging industry and the BOPP industry will see growth at twice the pace of the Indian economy.

The possible speed-breakers could be the expected increase in domestic capacity as well as the volatility of input costs and imports both of which could adversely impact margins.

Despite these concerns, Max Speciality Films remains on solid ground supported by ongoing investments and a sharper focus on cost optimization, the growing specialty portfolio, strong customer base and service ethos. The ‘Toppan Partnership’ with Max Speciality Films, wide access to international customers, technical knowhow and deeper market understanding, the company will continue to drive efficiencies and benchmark its operations against the best in the world.

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