PDF

Thematic
India Strategy | Get |

on June 2018!
track please
The Big Leap

to a formal economy
Volume 2.3
Volume 1 Ground Reality
Plastics
Sandeep Gupta (S.Gupta@MotilalOswal.com); +91 22 3982 5544
Somil Shah (Somil.Shah@MotilalOswal.com); +91 22 3312 4975
Mohit Baheti (Mohit.Baheti@MotilalOswal.com); +91 22 3010 2492
The Big Leap | Plastics
Contents: The Big Leap | Plastics

Summary .............................................................................................................................. 3
Huge opportunity for shift of trade to organized players ...................................................... 4
E-way bill/formalization of user industry to coax gradual shift ............................................. 7
Companies .......................................................................................................................... 13
Supreme Industries – a plastic conglomerate...................................................................... 14
Astral Polytechnik – capacity expanison to drive growth ................................................... 16
Nilkamal – leader in molded plastic furniture ..................................................................... 18
Finolex – key player in branded PVC pipes and fittings ....................................................... 19
Mold-Tek Packaging – leader in rigid plastic packaging ....................................................... 21
Wimplast: a strong brand in injection moulded furniture ................................................... 23
Essel Propack – One of the leaders in plastic tubes ............................................................. 24
Annexure-1: Industries affecting plastic demand ................................................................ 26
Annexure-2: Challenges faced by plastic indusltry .............................................................. 27
Annexure-3: Value chain in India ........................................................................................ 28
June 2018 2
The Big Leap: Plastics

Shift towards organized segment to be gradual
E-way bill and technology platform the key catalysts
India is set to see a major overhaul in the trade structure in favor of the organized
sector (refer our inaugural edition of “The Big Leap” series). Though the
government’s initiatives (such as demonetization and GST, among others) are in
the right direction, we continue believing that the shift will be prompt for some
sectors, gradual for others, and might remain challenging for a few.
In this edition, we focus on the INR1.8t Indian Plastics industry. We have chosen to
look at the industry from the trade shift perspective, given that it is highly
fragmented – numerous unorganized players account for 44% of the industry. Our
ground research and channel checks suggest that changes in administrative
procedures under GST using technology platform and effective implementation of
e-way bill are likely to help hasten the shift towards formal trade.
Big Leap Report – Huge opportunity for shift of trade to organized players
Volume 2.2
 The Plastics industry remains fragmented. High indirect tax incidence, liberal tax
administration/monitoring and a short supply chain have thus far supported the
dominance of unorganized players that account for 44% of the industry.
 However, we note that the market share (in value terms) of organized players
has increased from 45% in FY12 to 56% in FY17, driven by (a) growing brand
awareness, (b) growth of organized retail, and (c) the formal segment’s ability to
offer better quality and greater convenience.
 The industry primarily comprises of four components: Packaging, Pipes,
Industrial Products, and Consumer Products. Of these, Consumer Products,
Pipes, and Packaging have significant presence of unorganized players.
E-way bill and change in administrative procedures to bring a gradual shift

 The Indian government has taken various initiatives (such as demonetization
and GST) to shift trade to the formal economy.
 We believe that for the Plastics industry, effective implementation of GST and e-
Big Leap Report – way bill will plug loopholes like bill-to-ship-to, geography-based exemptions
Volume 2.1
(that existed during the erstwhile regime), and un-recorded purchases in the
near term. Data analytics will gradually address the loophole of managing the
input-output ratio over the medium term.
 However, few challenges in the form of plastic recycling and under-invoicing
may remain and managing of threshold still remains to be addressed for the
formalization of the industry.
Pipes and Packaging companies preferred plays

 We believe that due to the formalization of the end-user industry, the shift in
the B2B Plastics industry (primarily comprising of Packaging and Pipes) will be
faster than in the B2C Consumer Products segment.
 Supreme Industries, Astral Polytechnik, Finolex Industries, MoldTek Packaging,
and Essel Propack are likely to be early beneficiaries of the shift of trade from
the unorganized to the organized segment in the Plastics industry.
June 2018 3
Huge opportunity for shift of trade to organized players
 India’s Plastics industry is one of the largest in the world at an estimated

market size of INR1.8t. However, due low capital intensity and low
technological barriers, the industry has remained highly fragmented.
 Unorganized players enjoy ~44% market share, though the organized players
have gained ground in the last five years on rising brand consciousness, better
quality, and growth in the organized retail sector.
 The industry primarily comprises of four components: Packaging, Pipes,
Industrial Products, and Consumer Products. Of these, Consumer Products,
Pipes, and Packaging have significant presence of unorganized players.
India – one of the largest markets for Plastics, globally…

 India’s Plastics industry is one of the biggest in the world. Industry volumes are
estimated at 16MMTPA (in FY17), with market size at INR1.8t.
 In volume terms, the industry has grown at a CAGR of 10% over FY10-17 and is
expected to grow at a CAGR of 10.5% to 22MMTPA by FY20. (Refer Annexure-1
and 2 for industries affecting plastic demand and challenges faced by the
industry.)
 However, in value terms, the Plastics industry has grown at a CAGR of 11% over
FY10-17, with increase in proportion of value-added products.
 The rapid growth can be ascribed to (a) substitution of other materials, (b) low
cost and high product-to-package ratio, (c) shifting consumer lifestyles, (d)
higher middle-class population and rising per capita income, and (e) growth of
the organized retail market.
 In FY15, per capita consumption of plastic in India was one of the lowest in the
world – 11kg against 100kg in developed markets. Even compared to emerging
markets like China (38kg) and Brazil (32kg), the per capita consumption of
plastic in India has a long way to go.
Exhibit 1: Indian Plastics industry volume growth healthy

The plastics processing Plastic Processing in India (MMTPA) Growth
industry has grown at a
CAGR of 10.1% in volume 15.0%
terms and is expected to
10.0% 10.5%
grow at a CAGR of 10.5%
8.3 16.3 22.0
FY10 FY17 FY20
Source: FICCI, MOSL
June 2018 4
Exhibit 2: Per capita plastic products consumption remains low in India (kg) – FY15
109
65
38
32 28
11
USA Europe China Brazil India World
Source: AIPMA and Plastindia, MOSL
…significant proportion of which is unorganized

 The Indian Plastics industry is highly fragmented. Entry barriers are low, with
low capital intensity, no technological barriers, and supportive government
schemes. The industry comprises of ~30,000 processing units, 85-90% of which
are small and medium enterprises, employing ~4m people.
Volume market share of  Our discussions with market participants suggest that this has led to the market
organized players has share of unorganized players remaining high at ~44%.
increased to 56%  The share of organized players has increased from ~45% five years ago to ~56%
in FY17, led by (a) increasing brand consciousness, (b) the organized segment’s
ability to offer better quality and greater convenience, (c) increasing disposable
income leading to enhanced purchasing power, and (d) growth of organized
retail.
Exhibit 3: Share of organized segment up from 45% in FY12… Exhibit 4: …to 46% in FY17
Unorganized Unorganized
45% 44%
FY12 Organized FY17 Organized
55% 56%
Source: Crisil, MOSL Source: Crisil, MOSL
Unorganized players present in both B2C and B2B segments

 There are four main components of the Plastics industry: Pipes, Consumer
Products, Packaging, and Industrial Products.
 Packaging, Industrial Products, and Pipes (partially) are B2B businesses, whereas
Consumer Products and Pipes (partially) are B2C businesses. The unorganized
players have a presence in both B2B and B2C segments.
 The INR31b B2C Consumer Products business has 80% unorganized presence.
The larger INR1.5t Packaging business has 45% unorganized presence, and the
INR300b Pipes segment has 40% presence of the unorganized sector. The
Industrial Products segment (~INR18b) is largely organized, with a mere 10%
market share of unorganized players.
June 2018 5
FOUR COMPONENTS OF INDIAN PLASTIC INDUSTRY
CONSUMER INDUSTRIAL
PLASTIC PRODUCTS PACKAGING PRODUCTS
PIPES PRODUCTS
 PVC Pipes, CPVC Pipes  Furniture, Housewares  Flexible packaging film  For automobiles:
Systems, Injection products Moulded parts, such as
Moulded PVC fittings  Protective Packaging dashboards and other
Polypropylene Random Products interior and exterior parts
Copolymer pipes and  Cross Laminated Film  Plastic body for
fittings products consumer-durable
 HDPE Pipe Systems, products
Inspection Chambers and  Material handling
manholes. products, such as pallets,
 Bath fittings, Roto crates and bins.
moulded Tanks and
Fittings
Exhibit 6: Consumer Products – share of organized segment

Exhibit 5: Plastic Pipes – share of organized segment at 60% just 20%
20%
40% Unorganized
Unorganized
INR300b INR31b
Organized Organized
60%
80%
Source: Industry, MOSL Source: Industry, MOSL

Exhibit 7: Packaging industry – share of organized segment Exhibit 8: Industrial Products – share of organized segment
at 55% at 90%
10%
45% Unorganized Unorganized

INR1489b INR18b
55% Organized Organized
90%
Source: Industry, MOSL Source: Industry, MOSL
June 2018 6
E-way bill/formalization of user industry to coax gradual shift
 The Indian government has taken various initiatives (such as demonetization and GST)
to shift trade to the formal economy.
 We believe that for the Plastics industry, effective implementation of GST and e-way
bill will plug loopholes like bill-to-ship-to, geography-based exemptions (that existed
during the erstwhile regime), and un-recorded purchases in the near term. Data
analytics will gradually address the loophole of managing the input-output ratio over
the medium term.
 Also, due to formalization of the end-user industry, the shift in the B2B segment
(primarily Packaging and Pipes) will be faster than in the B2C Consumer Products
segment.
 However, few challenges in the form of plastic recycling and under-invoicing may still
remain to be addressed for the formalization of the industry.
GST and demonetization – big drivers of shift towards formal economy

 India is set to see a shift in favor of the organized (formal) segment, with the
government taking a number of initiatives to curb the shadow economy.
With GST at the backdrop,  Demonetization of high-value currency notes has created fear among
our discussions with experts unorganized players, as transactions in this space were mostly cash-based and
and sector participants unaccounted.
highlight that the shift to
 Also, with GST being implemented, the organized segment is well poised to
formal trade will be prompt
confront the high presence of unorganized (informal) players.
for some sectors, gradual
for others and challenging  The impending shift could present attractive investment opportunities. Yet, our
for a few discussions with experts and sector participants highlight that the shift will be
prompt for some sectors, gradual for others, and challenging for a few.
Will the drivers be effective for the Plastics industry too?

 As discussed in our previous report, to analyze the pace of the shift (to the
organized segment) for each sector, one has to carefully consider the
administrative/procedural changes and the new tax rates under GST.
 To estimate the pace of shift to a formal economy for each sector, one needs to
look at (a) how unorganized players operated in the erstwhile regime, (b) how
government initiatives will change the way in which unorganized players
operate, and (c) the supply chain that the sector works with.
Multiple modalities of tax evasion in the erstwhile regime

 Our discussions with various sector participants and experts highlight that there
are numerous ways in which tax evasion happened in the Plastics industry.
Some of the prominent ways in which unorganized players evaded tax in the
erstwhile regime are discussed below.
June 2018 7
MODALITIES OF TAX EVASION
UTILIZING BILL TO SHIP

THRESHOLDS
UNDER- MODALITIES MANAGING

INPUT-
INVOICING OF TAX EVASION OUTPUT
RATIO
GEOGRAPHY
RECYCLING BASED
EXEMPTIONS
Source: MOSL
 Players under-reported sales and distributed their turnover over multiple firms
such that they were not covered by the thresholds for applicability of excise.
 In the procurement of raw material, dealers utilized geography-based
exemption / mechanisms like bill-to-ship-to (where goods are sent to one
person and the bill is sent to another). This resulted in the chain of goods getting
unorganized though the starting point of the value chain is organized.
 Manufacturers (i) purchased polymers directly from unorganized players (by
paying a premium but saving on indirect taxes), or (ii) used recycled polymers
along with virgin polymers. These mechanisms along with understating of
productivity would lead to underreporting of output, which was sold in the
unorganized chain.
 Another prominent mechanism used for selling finished products was under-
invoicing of output, especially where value addition was high.
E-way bill and technology platform two key drivers to formalize trade
 Under GST, the government intends to employ technology to track end-to-end
credit flow in the value chain. Bilateral validation of invoices, online integration
of data and big data analytics will go a long way in addressing the loopholes in
tax administration.
 The IT portal can capture data even if at least one participant in the value chain
sells goods through the organized chain (and hence, is a part of the GSTN).
June 2018 8
 Interstate e-way bill was introduced from April 1, 2018 to track the movement
of goods on a technology platform. Our channel checks suggest that
transporters are now hesitant to transport goods without an invoice, given
increased fears of getting caught. Further, various states have gradually
introduced e-way bill for intra-state transportation of goods. This should ensure
better compliance and gradually increase GST collections.
 E-way bill being implemented on a technology-based platform plugs certain
loopholes in the earlier regime (Click here to refer to note) – like unrecorded
purchases/sales, using an invoice multiple times, and bill-to-ship-to mechanism.
 However, since the e-way bill is applicable to consignments of more than
INR50,000 or above, consignors can split their consignments into small tranches
and transport these using different transporters.
 Data analytics will gradually play its part when there is adequate data and help
plug loopholes where participants ‘manage’ their input-output ratio. However,
this is still some time away, as adequate data needs to be collected.
Expect gradual shift for Plastics industry

We believe the shift from the unorganized to the organized segment in the Plastics
industry will be gradual. We discuss below how each of the modalities currently
used by the unorganized players is likely to be impacted under the GST regime.
 ‘Bill-to ship-to’ can be impacted by e-way bill: This mechanism was used for
procurement of polymers – bills were sold to business participants requiring a
bill to reduce profit while actual raw material was sold to unorganized players.
Under GST, this mechanism will be hampered – with the introduction of the e-
way bill, before transporting goods, one needs to upload data of origin,
destination and parties involved. Also, e-way bills have specific validity. This
added with RFID (if implemented) will ensure accurate tracking of goods from
origin to destination, making the misuse of bill-to-ship-to difficult. While bill-to-
ship-to will still be possible where the parties involved are located in the same
city/locality, we believe such instances will be low.
 Geography-based exemptions no more available: Entities were given indirect
tax holiday for establishing units in specific/backward areas. These geography-
based exemptions have been withdrawn with GST, plugging this loophole.
 Unrecorded purchases/sales will be curbed by bilateral validation: In many
cases, the purchaser did not record the invoices issued by suppliers in the
financial books. This broke the chain and goods moved to unorganized players.
This is not possible in the GST regime – e-way bill is a technology-based
platform, tracking invoices real-time along with the movement of goods and
ensuring bilateral validation of invoices.
 Utilizing of thresholds will be reduced: In the previous regime, the regulations
allowed a threshold of INR15m for levy of excise duty. This was primarily
provided to protect small-scale industries. However, in many instances,
companies split their revenues in multiple entities to remain within the
threshold limit. In some cases, the turnover above the threshold limit was not
reported to avoid excise. With GST, the threshold has been reduced to INR2m,
which has helped to curb the practice in the manufacturing entities but may still
continue at the retail levels.
June 2018 9
Some challenges remain, however

 Plastic recycling – one of the main sources for unorganized market may
continue: Plastic recycling is done primarily by unorganized players in India.
Recycling of plastics produces 35-40% of polymers in India. We believe recycled
plastic can remain unorganized, as the recycling centers and end use industries
are fragmented and present across regions.
Exhibit 9: Major plastic recycling clusters spread across the country
Source: Plast India, MOSL
 ‘Managing’ input-output ratio may continue over the medium term: To

manage their inventory and skirt administrative hurdles, unorganized players
‘manage’ their input-output ratio. They show lower output, which becomes the
industry norm. Unorganized players use a certain combination of methods like
(i) using recycled plastic as an input, (ii) showing some of their output as scrap,
and (iii) showing lower productivity. We believe that data analytics under the
GST regime will be able to gradually standardize the input-output ratio, thereby
reducing variability. However, this is still sometime away, as this can happen
only after availability of some years of data.
June 2018 10
 Under-invoicing in terms of value may continue: In manufacturing of plastic

products, value addition is 30-40% of the RM cost. Selling price of goods is
subjective and none of the administrative procedures of GST can put a value on
the goods. This may lead to a portion of the goods being sold in the unorganized
market as was done in the previous regime.
Tax rate reduction won’t be a reason for the shift

 Indirect tax incidence on plastic Consumer Products has reduced from 26-28%
to 18%. This will result in price differential narrowing between organized and
unorganized players. However, our interactions with industry participants
suggest that significant price difference exists between the organized and
unorganized players due to quality (as recycled proportion is higher for
unorganized players).
 GST rates on plastic Pipes and Packaging at 18% is not materially different from
the rates in the earlier regime (17-18%). These verticals will not benefit from
change in tax rates.
B2B business likely to witness faster shift than B2C business

 To determine the probability of shift in trade from unorganized to organized, it
is imperative to understand the supply chain in which the entity operates. We
note that any break in the organized chain leads to the beginning of
unorganized trade.
SHORT SUPPLY CHAIN OF PLASTIC INDUSTRY
HIGH
POLYMER Dominated by ~15 large

MANUFACTURERS industrial groups
END- USER INDUSTRIES
EQUIPMENT Dominated by ~4,000

MANUFACTURERS ~200 players unorganized
RECYCLING
PLAYERS
units ~3,500
organized
units
Fragmented with ~30,000 units

PLASTICS mostly operated by small players
PROCESSORS
LOW
Flow of equipment Flow of processed plastics

Flow of virgin polymers Flow of recycled plastics
Source: Industry, MOSL
June 2018 11
 The value chain for plastic includes refining of crude oil, which is the main
feedstock for manufacturing polymers. The product manufacturers blend
polymers with additives to mold them into final plastic products like pipes,
furniture, houseware, packaging products, and industrial plastic products.
Plastics are also recycled and can be used to manufacture low-grade plastic
products. (Refer to Annexure-3 for the value chain of the plastic industry).
 Furniture, houseware, and pipes (partially) are sold in the B2C chain, whereas
packaging, industrial products, and pipes (partially) are sold in the B2B chain.
 In a short B2C chain, consumers are indifferent between organized and
unorganized players, as the focus is on pricing. This is primarily due to the fact
that end consumers do not get input credit for taxes paid. Other things being
equal, unorganized players have lower cost, as taxes are not levied. Plastic
processors ‘manage’ their purchases in the unorganized chain to meet with the
demand of the consumers.
 In the B2B chain, corporates get input credit of taxes paid; so, GST is a pass-
through. If their output is sold in the organized chain, we believe they will need
to procure their raw material in the organized chain.
 For the plastic industry to be organized, we believe the push has to be from end
consumers. If demand is organized, the whole chain gets organized. Hence, we
believe that the B2B conversion will be easier than B2C conversion.
 Some instances of shift for the B2B supply chain will be due to:
 Formalization of end-use sectors like FMCG (paints, adhesives, biscuits, hair
oil, beverages, dairy, detergents, chips, tea and coffee) will help in
formalization of the plastic packaging industry.
 Regulations like RERA will formalize the real estate sector, which will
demand pipes from organized players.
 Supreme Industries, Astral Polytechnik, Finolex Industries, MoldTek Packaging,
and Essel Propack are likely to be early beneficiaries of the shift of trade from
the unorganized to the organized segment in the Plastics industry.
June 2018 12
Companies
BSE Sensex: 35,490 S&P CNX: 10,769 June 2018
Supreme Industries
Astral Polytechnik
Nilkamal
Finolex
Mold-Tek Packaging
Wimplast
Essel Propack
June 2018 13
Supreme Industries – a plastic conglomerate
 Supreme Industries (SI), founded in 1942, is one of the largest plastic processors
in India, processing over 340kMT annually. It offers the widest and most
comprehensive range of plastic products in India. Its portfolio includes plastic
piping systems, storage and material handling products, molded furniture, XF
films and products (agriculture, industrial), performance films (industrials),
protective packaging products, composite plastic products, and petrochemicals.
 In the six decades under the current management, SI has created a place and
brand for itself in a business dominated by unorganized players through regular
innovation and introduction of cost-effective solutions. It has over 25 plants
distributed across India and a strong distribution network of 2,800 channel
partners. SI boasts of strong market presence across all five verticals.
 Apart from piping products used in the housing segment, it produces
automobile parts, crates/boxes for material handling, furniture (tables/chairs),
doors/panels for refrigerators, and packaging for edible and hydrogenated oils.
 It enjoys sizable market share across each of its four verticals. Plastic piping,
packaging, industrial products, and consumer products contribute ~55%, 22%,
14%, and 7% of its total plastic products revenue, respectively.
 Over FY08-18, SI posted 14.6% revenue CAGR and 22% PAT CAGR.
Exhibit 10: Presence in various business verticals Exhibit 11: Revenue mix – 55% from piping
Business Market Share Targeted Customer
Vertical Segment
Plastic Piping 8.4% Potable Water Supply, 7% 2%
System Irrigation, Drainage & Plastic Piping
Sanitation, Housing 14%
Packaging Products
Consumer 10.5% House Hold, Office,
Products Establishments, Institutions Industrial Products
Industrial 13.5% Auto Sector, Electronic 55%
Consumer products
Products Household Appliances, Water 22%
Purification - filters, Soft Drink Others
Companies, Agriculture &
Fisheries
Packaging 25% of protective Industrial Users, Electronics,
Products packaging industry Food Industry, Sports Goods, Source: Company, MOSL
Insulation, Construction,
Agriculture, Floriculture,
Horticulture, Grain Storage,
Tarpaulin, Pond lining
Composite NA Retail / Household
Products
Source: Company, MOSL
June 2018 14
Exhibit 12: Financial snapshot (INR m)

Supreme Inds. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Financials
Sales 13,104 16,549 20,070 24,695 32,232 37,919 44,007 47,276 33,278 49,995 51,052
YoY Change (%) 12.7 26.3 21.3 23.0 30.5 17.6 16.1 7.4 -29.6 50.2 2.1
10YR CAGR (%) 14.6
EBITDA 1,438 2,378 2,895 3,574 4,719 5,356 5,888 6,662 4,533 7,619 7,865
Margin (%) 11.0 14.4 14.4 14.5 14.6 14.1 13.4 14.1 13.6 15.2 15.4
10YR CAGR (%) 18.5
PAT 538 909 1,560 1,958 2,417 2,901 2,834 3,224 2,214 4,304 4,096
YoY Change (%) 4.3 69.0 71.7 25.6 23.4 20.0 -2.3 13.7 -31.3 94.4 -4.8
10YR CAGR (%) 22.5
ROE 21.2 33.2 39.8 35.4 37.4 34.1 28.6 27.7 21.6 25.0 24.9
ROCE 22.5 35.0 37.3 32.2 38.0 37.8 34.2 33.9 28.1 33.0 33.4
D/E 1.1 1.0 0.9 0.9 0.7 0.5 0.5 0.4 0.3 0.2 0.2
Capital Employed 5,358 4,886 7,316 9,825 9,646 12,582 13,950 15,148 16,223 18,584 18,674
Cash Flow - FCO 1,059 1,885 1,457 1,698 3,519 4,058 3,252 6,008 2,964 4,650 5,072
Cash Flow - FCF -374 595 724 -771 2,757 360 1,807 4,073 645 2,551 2,216
Valuations
EPS 3.6 6.7 11.7 14.7 18.1 21.6 21.0 23.6 21.2 33.3 32.2
36.9
Source: Capital line, MOSL
June 2018 15
Astral Polytechnik – capacity expanison to drive growth
 Astral PolyTechnik (ASTRA) is one of India’s leading plastic pipe companies, with
leadership in CPVC pipes. It was incorporated by Mr Sandeep Engineer, a
chemical engineer in 1996. It first entered into a relationship with a leading
CPVC player and patent holder in CPVC resin technology, BF Goodrich, which
later became Lubrizol. Later, it entered into a JV (for manufacturing knowhow)
with US-based Specialty Processes LLC, which remains a shareholder until today.
 ASTRA has production facilities at Santej and Dholka in Gujarat, and Hosur in
Tamil Nadu for plumbing/drainage systems finding application in agriculture,
industry and fire protection, and electrical conduit pipes, with all necessary
fittings. With its acquisition of Resinova in the UK and Seal It in the US in 2014,
ASTRA has now become a pipes, adhesives and construction chemical company,
with a larger home building materials brand.
 It is also augmenting capacity at Ghiloth (Rajasthan) and Hosur (Tamil Nadu)
from 137,708MT to 175,000MT by FY20, which is likely to drive growth.
 ASTRA has a strong distribution focus, with 750+ distributors and 25,000+
dealers across India.
 ASTRA is a prominent branded player in the CPVC pipes market, with 25%
market share. It is also the fifth-largest player in plastic pipes, with 6% market
share. Over FY08-17, it has clocked 35% revenue CAGR and 32% PAT CAGR.
Exhibit 13: Capacity expansion driver of growth Exhibit 14: Revenue mix – 75% from piping
Installed capacity (MT)

137,708
127,762
102,371 25%
97,164
77,212 Plastic Products
Adhesives
75%
FY13 FY14 FY15 FY16 FY17
Source: Company, MOSL Source: Company, MOSL
June 2018 16

Astral Poly 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Financials
Sales 1,017 1,445 2,047 3,047 4,372 6,257 9,036 11,786 15,569 18,745 21,235
YoY Change (%) na 42.1 41.6 48.9 43.5 43.1 44.4 30.4 32.1 20.4 13.3
10YR CAGR (%) 35.5
EBITDA 136 207 219 417 553 827 1,153 1,551 1,683 2,068 2,628
Margin (%) 13.4 14.3 10.7 13.7 12.6 13.2 12.8 13.2 10.8 11.0 12.4
10YR CAGR (%) 34.5
PAT 91 171 140 277 328 395 606 789 759 1,010 1,447
YoY Change (%) na 87.4 -18.0 98.0 18.5 20.2 53.5 30.2 -3.8 33.0 43.3
10YR CAGR (%) 31.9
ROE 23.1 23.5 15.3 26.7 25.0 24.0 28.8 28.6 16.8 15.4 18.6
ROCE 21.5 22.3 16.4 26.6 26.0 30.9 32.5 34.4 21.1 18.7 22.1
D/E 0.5 0.4 0.4 0.4 0.3 0.4 0.4 0.4 0.4 0.3 0.3
Capital Employed 903 1,103 1,299 1,572 1,939 2,764 3,258 4,462 8,203 8,974 10,602
Cash Flow - FCO 10 0 167 245 483 851 648 674 1,170 2,258 1,142
Cash Flow - FCF -108 0 -207 67 103 156 -33 676 1,173 2,269 1,148
Valuations
EPS 0.8 1.5 1.2 2.4 2.9 3.5 5.4 7.0 6.3 8.4 12.1
PE 45.3
June 2018 17
Nilkamal – leader in molded plastic furniture
 Nilkamal (NILK) is the industry leader in molded furniture and material handling
products. Its product portfolio caters to different industries and a diversified
base of customers, including households, industries, and retail buyers. It also
has presence in the retail business of lifestyle furniture, furnishings and
accessories under its brands, @home and Nilkamal.
 NILK has two major business verticals – Plastic (89% of revenue), and Lifestyle
Furniture, Furnishings and Accessories (11% of revenue). The Plastic division
includes verticals like material handling, molded furniture and mattresses.
 NILK has ~32% share in the molded furniture segment. Its product portfolio
includes a range of chairs, chair shells, dining tables, center tables, stools, racks,
trolleys, school benches, and planters among others. It sells ~1.4m molded
plastic chairs. It has consistently grown its business on the back of new
products, designs and innovation (hybrid chairs combining metal and plastic).
 The ready furniture vertical (offering a range of 450 different products) catering
to homes and offices offers a huge opportunity.
 Over FY07-17, NILK reported revenue CAGR of 13.8% and PAT CAGR of 37.7%.
Exhibit 16: Revenue mix – 89% from plastic division
11% Plastic Lifestyle

Furniture,
Furnishings &
Accessories
89%

Nilkamal Ltd 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Financials
Sales 5,914 9,556 10,993 12,350 14,997 17,310 19,400 18,435 20,235 20,600 21,622
YoY Change (%) na 61.6 15.0 12.3 21.4 15.4 12.1 -5.0 9.8 1.8 5.0
10YR CAGR (%) 13.8
EBITDA 352 852 1,052 1,320 1,363 1,603 1,373 1,571 1,561 2,326 2,344
Margin (%) 6.0 8.9 9.6 10.7 9.1 9.3 7.1 8.5 7.7 11.3 10.8
10R CAGR (%) 20.9
PAT 50 542 107 515 534 611 371 471 505 1,141 1,225
YoY Change (%) na 985.4 -80.3 382.2 3.7 14.4 -39.2 26.7 7.3 126.0 7.4
10YR CAGR (%) 37.7
ROE 4.1 11.8 5.3 22.2 17.5 15.9 8.7 10.2 10.1 20.2 18.3
ROCE 7.6 15.3 12.6 17.4 17.2 15.9 10.8 12.4 12.7 24.2 23.3
D/E 1.0 1.5 1.7 1.4 1.0 0.9 0.9 0.8 0.5 0.3 0.1
Cash Flow - FCO -263 153 467 733 487 649 740 1,663 1,671 1,826 1,142
Cash Flow - FCF -682 -915 70 532 -655 -253 168 1,325 1,511 1,432 354
Valuations
EPS 5.3 41.3 8.0 39.5 35.2 40.3 24.2 30.9 33.1 75.1 81.8
PE 23.9
June 2018 18
Finolex – key player in branded PVC pipes and fittings
 Finolex Industries (FNXP), founded in 1981, is India’s largest integrated rigid PVC
pipes and fittings manufacturer and third-largest PVC resin manufacturer. Its
plants are located at Ratnagiri, Pune and Goa. It has a combined capacity of
280ktpa for PVC pipes and fittings, a capacity of 272ktpa for PVC resin, and a
43MW captive power plant in Ratnagiri.
 FNXP is an established branded player in the domestic PVC pipes market, with
~20% volume share. Over FY08-17, it has clocked 9.5% revenue CAGR and 17.6%
PAT CAGR.
 FNXP also enjoys backward integration into PVC resin, giving it a competitive
edge and reducing earnings volatility. It has established strong brand equity and
leadership in the agri segment, which contributes 70% to revenue. 55-60% of
the PVC resin manufactured by the company is for captive consumption.
 FNXP is well placed to cash in on growth opportunities, as the government
sharpens focus on enhancing land under irrigation and on improving rural water
and sanitation infrastructure.
 It has also ventured into the fast-growing CPVC pipes market (24-25% CAGR)
under the Finolex Flow Guard Plus brand post tie-up with Lubrizol in February
2017. Industry pegs the segment’s growth at 24-25% versus PVC pipes’ 10-11%.
Entry to this high-growth segment should boost the company’s growth.
Exhibit 18: Declining share of PVC resin in revenue
PVC Resins (External Sales) PVC pipes and fittings Power

2% 2% 1% 0% 0% 0%
52% 64%
64% 68% 71% 74%
46%
33% 36% 31% 29% 26%
FY12 FY13 FY14 FY15 FY16 FY17

June 2018 19

Finolex Inds. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Financials
Sales 12,081 16,350 16,988 15,925 21,917 23,219 24,334 27,867 28,271 28,431 29,876
YoY Change (%) 35.3 3.9 -6.3 37.6 5.9 4.8 14.5 1.5 0.6 5.1
10YR CAGR (%) 9.5
EBITDA 1,256 1,491 100 2,628 2,197 2,168 2,627 3,268 1,896 4,044 5,630
Margin (%) 10.4 9.1 0.6 16.5 10.0 9.3 10.8 11.7 6.7 14.2 18.8
10YR CAGR (%) 16.2
PAT 699 712 -379 1,323 762 752 1,361 1,702 478 2,578 3,549
YoY Change (%) 1.9 -153.2 -449.2 -42.4 -1.3 81.2 25.0 -71.9 439.5 37.7
10YR CAGR (%) 17.6
ROE 11.6 13.2 27.7 31.1 12.6 9.6 27.0 26.2 7.1 16.2 18.2
ROCE 9.9 11.7 13.5 19.7 12.5 9.9 19.2 22.5 11.2 22.9 24.9
D/E 1.0 1.1 1.4 1.5 1.3 1.4 1.4 1.0 0.9 0.1 0.1
Cash Flow - FCO 919 282 3,101 3,110 -942 1,545 2,744 2,455 2,122 5,690 2,342
Cash Flow - FCF -170 -1,360 1,530 2,110 -1,358 869 2,870 1,780 1,815 5,377 1,405
Valuations
EPS 5.1 5.2 0.0 10.2 5.6 5.6 10.1 12.5 3.5 20.8 28.6
PE 20.2
June 2018 20
Mold-Tek Packaging – leader in rigid plastic packaging
 Mold-Tek Packaging (MTEP) was established in 1986 by two technocrats, J

Lakshmana Rao and A Subramanyam. The company is the market leader in rigid
plastic packaging in India and has more than 20 years of experience. It is
involved in manufacturing injection-molded packaging containers, primarily
pails (cylindrical containers) for paints, lubricants, food and other products.
 MTEPL has a world-class integrated facility – from product inception to mold
designing, processing and decorating products. It has seven processing plants in
India, three stock points and ~70 molding machines. MTEP has capacity of
~27,000tpa in India and 3,000tpa in the UAE. In 2011, it imported two robots
and labels from Taiwan for decorative packaging. It is the sole player in India to
use IML technology for labeling.
 MTPEL did backward integration and started in-house manufacturing of robots
(currently 45) to reduce cost and improve quality. It is the only completely
backward integrated player in IML technology globally, as per the management.
 MTEPL is in the process of setting up two more plants at Vizag and Mysore, with
total capacity of 6,000tpa, taking overall capacity to 36,000tpa by FY19.
 Over FY08-17, it reported revenue CAGR of 15% and PAT CAGR of 24.7%.
Exhibit 20: Key clients – Major organized players
June 2018 21

Mold-Tek Pack. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Financials
Sales 973 1,128 1,309 1,643 1,917 2,147 2,839 3,187 3,087 3,460
YoY Change (%) na 15.9 16.1 25.5 16.7 12.0 32.3 12.2 -3.1 12.1
9YR CAGR (%) 15.1
EBITDA 80 101 165 187 211 200 290 405 456 496
Margin (%) 8.2 8.9 12.6 11.4 11.0 9.3 10.2 12.7 14.8 14.3
9YR CAGR (%) 22.6
PAT 33 37 74 80 93 58 91 169 241 243
YoY Change (%) -2,052.9 10.8 100.0 8.7 16.6 -38.0 56.9 86.0 42.9 0.7
9YR CAGR (%) 24.7
ROE 29.5 16.1 29.3 26.8 23.6 12.1 17.9 20.1 18.7 18.0
ROCE 20.4 13.8 24.3 22.8 19.3 13.3 18.1 25.2 23.6 22.6
D/E 1.6 1.5 1.3 1.2 1.2 1.3 1.4 0.5 0.2 0.3
Capital Employed 500 508 578 743 1,000 1,204 1,209 1,296 1,527 1,892
Cash Flow - FCO -30 94 146 153 136 143 257 324 380 388
Cash Flow - FCF -66 72 44 15 -85 -66 169 233 141 30
Valuations
EPS 1.9 2.1 4.4 4.6 3.8 2.4 3.8 5.7 8.0 8.0
PE 28.8
June 2018 22
Wimplast: a strong brand in injection moulded furniture
 Wimplast (WPL) is a Cello Group company. The Cello brand was established in
1974 under the leadership of Mr G. D. Rathod.
 WPL is engaged in the manufacture of plastic moulded furniture, plastic
extrusion sheets, moulds and air coolers. It has manufacturing units in Daman,
Baddi, Chennai, Haridwar and Kolkata, and a corporate office in Mumbai.
 WPL pays 1% of its total sales as royalty to Cello. WPL is the third largest player
after Nilkamal and Supreme Industries with a market share of ~15%. WPL
furniture is sold through 15,000 retail outlets.
 The company derives 35% of its sales from the western region (with Rajasthan
and Gujarat being key states), 30% from the northern region and the balance
35% from the southern and eastern regions. WPL has a relatively weak presence
in the eastern region.
 Chairs, stools, trolleys and tables are sold under WPL’s plastic furniture business.
Chair is its key product. Under its premium chair category, WPL sells gas
injection-moulded chairs, which are sold at 3x the price of normal chairs. ASP for
these premium chairs is around INR1,500, while that for the normal chairs is
around INR410.
 WPL has been able to consistently record high operating margins compared to
peers, helped by lower other expenses, higher promotional activity, better
technology, and high strength and better aesthetics of its products.
 The company incurs average annual advertising & promotion spends of around
INR50m.
 Over FY07-17, it reported revenue CAGR of 21.5% and PAT CAGR of 30.2%.

Wim Plast 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Financials
Sales 611 800 1,019 1,420 1,798 2,268 2,860 3,408 4,233 4,275 4,284
YoY Change (%) na 31.1 27.3 39.4 26.6 26.1 26.1 19.2 24.2 1.0 0.2
10YR CAGR (%) 21.5
EBITDA 59 72 144 253 293 366 444 536 614 749 823
Margin (%) 9.6 9.0 14.1 17.8 16.3 16.1 15.5 15.7 14.5 17.5 19.2
10YR CAGR (%) 30.2
PAT 17 31 80 170 183 228 283 325 384 452 486
YoY Change (%) na 83.7 162.3 112.6 7.3 24.7 24.2 15.1 18.0 17.7 7.6
9YR CAGR (%) 40.2
ROE 3.1 6.3 15.6 27.7 24.0 24.5 24.9 23.6 23.4 23.1 20.4
ROCE 5.7 9.6 21.5 36.9 34.6 34.6 34.1 32.5 32.7 33.2 30.5
D/E 0.3 0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Capital Employed 582 545 544 684 837 1,023 1,250 1,512 1,778 2,145 2,631
Cash Flow - FCO 61 76 136 100 69 312 235 181 436 371 491
Cash Flow - FCF 48 56 110 18 -14 24 36 75 150 255 107
Valuations
EPS 1.1 2.3 6.4 13.9 14.8 18.5 22.9 26.3 30.9 36.4 40.5
PE 37.5
June 2018 23
Essel Propack – One of the leaders in plastic tubes
 Established in 1982, Essel Propack is a specialty packaging company engaged in

the manufacture of laminated and plastic tubes, which are best suited to pack
viscous products (such as pastes, gels, creams and ointments) that find
application in various FMCG and pharmaceutical segments.
 The market size for tubes in countries where ESEL operates is huge at about
INR36b. Of this, Oral Care tubes account for 14b, followed by Beauty &
Cosmetics (12b) and Pharma & Others (10b).
 Beauty and Cosmetics, Foods, Home and Oral care constitute a multi-trillion-
dollar packaging market globally and continue to grow in different ways.
Extruded plastic tubes and bottles are widely used in Beauty & Cosmetics
packaging. However, products are now increasing going the organic, natural and
herbal way. This bodes well for companies like Essel that have trend-right
products.
 In the case of Pharmaceuticals, the use of aluminum tubes for packaging is going
out of favor due to concerns about product safety and supply security. Thus,
high-barrier, safe laminated tubes offered by ESEL – with features such as
tamper evidence, anti-counterfeit and innovative dispensing – are finding
increasing acceptance as a superior packaging format for OTC and prescription
drugs.
 Moreover, categories such as foods and home care are now seeing tubes as an
attractive packaging format and a value enhancer (compared to bottles and
other traditional packaging) for a range of products such as condensed milk,
wasabi sauce, cheese spread and glue/adhesives.
 Over FY08-18, it reported revenue CAGR of 7.9% and PAT CAGR of 12.2%.
Exhibit 23: AMESA – a major revenue contributor
Europe
21%
AMESA
37%
Americas
20%
EAP
22%
June 2018 24

Essel Propack 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Financials
Sales 12,374 13,200 17,083 14,404 16,294 18,834 21,905 23,946 22,056 23,879 24,464
YoY Change (%) 17.4 6.7 29.4 -15.7 13.1 15.6 16.3 9.3 -7.9 8.3 2.4
10YR CAGR (%) 7.9
EBITDA 1,779 1,258 2,841 2,440 2,552 3,131 3,472 3,908 4,009 4,219 4,598
Margin (%) 14.4 9.5 16.6 16.9 15.7 16.6 15.9 16.3 18.2 17.7 18.8
10YR CAGR (%) 11.1
PAT 608 -883 599 473 514 810 1,078 1,406 1,701 1,903 1,716
YoY Change (%) -38.3 -245.2 -167.9 -21.1 8.6 57.7 33.2 30.4 21.0 11.9 -9.8
10YR CAGR (%) 12.2
ROE 8.0 -10.8 4.6 6.0 6.0 8.9 13.5 19.5 19.8 17.4 15.2
ROCE 11.0 2.7 9.5 10.3 9.1 11.5 13.6 16.3 18.1 17.0 16.4
D/E 0.8 1.1 1.3 1.0 1.0 1.0 1.2 1.3 1.0 0.8 0.7
Cash Flow - FCO 845 -303 2,337 1,731 1,952 1,688 2,571 3,130 3,608 3,687 3,437
Cash Flow - FCF -1,061 -1,144 1,490 855 386 615 812 1,136 1,650 1,618 2,062
Valuations
EPS 3.7 Loss 2.9 2.8 3.0 4.7 6.3 8.2 10.8 12.1 10.9
PE 21.0 NA 15.0 18.5 9.4 6.5 9.2 15.2 14.9 19.6 22.0
June 2018 25
Annexure-1: Industries affecting plastic demand
 Automotive: India is one of the fastest growing consumer markets for

automobiles in the world and the one of the largest automobile producers as
well. Several components of automobiles are made of plastic. With the
automobile market expanding, demand for plastics too remains high.
 Packaging: Packaging currently accounts for the largest consumption of plastics
in India (at 24%). Plastic packaging helps to preserve food items. Currently ~40%
of the food items in India perish before reaching the market. This issue presents
a huge opportunity for plastic packaging manufacturers.
 Rigid pipes and agriculture: Plastic pipes are being preferred over metal and
cement pipes in water management due to advantages like light weight,
durability, rust-free nature, and smoother surface. The Indian agricultural pipes
industry is highly fragmented. Because of the presence of a large number of
players, competition is tough both in terms of product offerings and pricing.
Also, yields/margins are low in this segment, as the use of fittings is much lower
than in the plumbing segment. A few organized players with wide distribution
are operating in the segment, offering superior quality products.
 Electronics: The main drivers of demand for Indian electronic products are
technological improvements and cost competitiveness. The demand for
electronics has grown at an estimated 16% in the past five years. In FY15,
demand was at USD136b, up from USD65b in FY10. However, supply has been
lagging – at USD44b in FY15, up from USD41b in FY10. The growing customer
base and rising penetration of electronic products provides ample scope for the
growth of plastics in the Indian electronics sector.
 Infrastructure: India's focus on infrastructure over the last decade has made it
the second-fastest growing economy in the world. As per the 12th five-year
plan, India had committed USD1t to upgrading its ageing infrastructure (power,
telecom, roads, irrigation, railways, oil & gas and others). Large investments
continue to be made in sectors such as water and sanitation management,
irrigation, building & construction, power, transport, retail, etc. PVC and CPVC
play an important role in the sustainable management of these sectors through
various products like pipes, wires & cables, waterproofing membranes, wood
PVC composites, and food/medicinal packaging. These huge investments in
infrastructure will result in India becoming a hub for PVC and CPVC product
manufacturing, leading to growth in plastic processing.
June 2018 26
Annexure-2: Challenges faced by plastic indusltry
 Currency fluctuation: Volatility in exchange rates caused by major global

developments has an impact on Indian companies.
 Volatility in crude oil prices: Volatility in the prices of crude oil and its
derivatives is another cause for concern. The industry imports its main raw
materials – EDC, ethylene, VCM, and coal.
 Highly functional unorganized sector: Non-adherence to statutes by
unorganized players that offer low-quality products and compete mainly on the
strength of benefits derived by evading taxes and other levies poses a concern
for organized players.
 Environmental hazards: While the usage and benefits of plastics are plenty, it is
also a polluting material. Plastics take virtually forever to decompose and their
improper disposal leads to ground water pollution, disturbance in soil microbial
activity and release of carcinogenic chemicals in the atmosphere, leading to
health issues among people.
June 2018 27
Annexure-3: Value chain in India
 The value chain for plastic includes refining of crude oil, which is the main
feedstock for manufacturing polymers. Manufacturers blend polymers with
additives to mold them into final products. Plastics are also recycled and the
recycled material can be used to manufacture low-grade plastic products.
 Sourcing of polymers: It is estimated that 75-80% of polypropylene demand in
India is met by Reliance Industries, with around 20% coming from four
government-run companies – IOCL, Haldia Petrochemicals, BPCL, and GAIL.
 Plastic production: It is estimated that about 58% of plastic production is done
using injection molding technology in India. While extrusion technology is used
by 30% of industries, 10% use the blow molding process.
PLASTICS VALUE CHAIN IN INDIA
PARAMETER DETAILS
FOSSIL BASED OR
RENEWABLY SOURCED
FEEDSTOCK
 Fossil based: Petrochemical companies distill crude oil in different fractions, of which the naphtha
fraction is the main feedstock for plastic production. This fraction is cracked into monomer building
REFINING blocks (e.g.-ethylene, propylene). Renewably sourced: Different chemical (e.g.- bio refineries) are
used to convert biomass or greenhouse gases into the same or different monomers as the ones
derived fro fossil feedstock.
MONOMERS
 Plastic producers combine a large number of monomers to form polymer chains in a chemical
POLYMERISATION process, called polymerisation. The type of monomers and the structure of the resulting polymer
define the polymer's characteristics.
POLYMERS
 Compounders prepare plastic formulations by mixing and/or blending polymers and additives into
COMPOUNDING
process-ready pellets
PLASTICS
PACKAGING
 Packaging manufacturers design and manufacture packaging items.
MANUFACTURING
PACKAGING
BRAND OWNER/
 Brand owners and consumer good companies package their products or goods
CPG COMPANY
PACKAGED GOOD
RETAILER  Retailers put packaged goods onto the market
PACKAGED GOOD
 The user most often unpacks the product or good and most often discards the packaging. Often
USER
collection bins combine plastic packaging with other, plastic and non-plastic after use material
MIXED AFTER USE
PACKAGING
 Resource management companies collect (often mixed) consumer as well as commercial after use
COLLECTION
materials.
MIXED AFTER USE
PACKAGING
 After use materials collected for recycling go to Material Recovery facilities(MRFs) or sorting facilities
where they are sorted in various fractions(plastics by type, paper, glass, ferrous metals, nonferrous
SORTING
metals, organics, rest fraction).The after use plastic types that have been separated out are bladed
for recycling.
BALED AFTER USE
PACKAGING
 Reprocessors/recyclers conduct some additional sorting steps. Afterwards (in the case of mechanical
REPROCESSING recycling) the material is shredded, cleaned, dried, sometimes sorted by color and compounded to be
eventually re-granulated into process ready pellets again.
June 2018 28
Exhibit 25: Major polymer manufacturing facilities in India
Source: Plast India, MOSL
Exhibit 26: Primary plastic processing technologies used in India
Injection
Moulding, 58%
Others,
2%
Blow Extrusion, 30%

Moulding, 10%
Source: British Plastic Federation, MOSL
June 2018 29
NOTES
June 2018 30
THEMATIC/STRATEGY RESEARCH GALLERY
Explanation of Investment Rating
Investment Rating Expected return (over 12-month)
BUY >=15% The Big Leap | Plastics
SELL < - 10%
NEUTRAL > - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of
which are available on www.motilaloswal.com. MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited
Chapter Title
(BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of
Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject
company at the end of the month immediately preceding the date of publication of the Research Report. MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short
position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in
the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and
opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though
there might exist an inherent conflict of interest in some of the stocks mentioned in the research report. Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may
have received any compensation from the subject company in the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a) managed or co-managed public offering of securities from subject company of this research report,
b) received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c) received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d) Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in
this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result,
the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part
or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report
is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied,
is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to
buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by
virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the
specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement Companies where there is interest
Analyst ownership of the stock No
A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or
its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have
expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong)
Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only
available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from
registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption
under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional
Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional
investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,
MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of
this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject
to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore.
Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of
whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such
Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced
in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in
this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of
independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document
(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including
those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy,
completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.
MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform
investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this
into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and
the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees
to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm
Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id: na@motilaloswal.com, Contact No.:022-38281085.
Registration details of group entities.: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100.IRDA Corporate Agent-CA0541. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS
(Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers
Commodities Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
June 2018 32

PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PDF

Uploaded by

Copyright:

Available Formats

Thematic

India Strategy | Get |

The Big Leap

Volume 1 Ground Reality

Contents: The Big Leap | Plastics

Huge opportunity for shift of trade to organized players ...................................................... 4

E-way bill/formalization of user industry to coax gradual shift ............................................. 7

Supreme Industries – a plastic conglomerate...................................................................... 14

Astral Polytechnik – capacity expanison to drive growth ................................................... 16

Nilkamal – leader in molded plastic furniture ..................................................................... 18

Finolex – key player in branded PVC pipes and fittings ....................................................... 19

Mold-Tek Packaging – leader in rigid plastic packaging ....................................................... 21

Wimplast: a strong brand in injection moulded furniture ................................................... 23

Essel Propack – One of the leaders in plastic tubes ............................................................. 24

Annexure-1: Industries affecting plastic demand ................................................................ 26

Annexure-2: Challenges faced by plastic indusltry .............................................................. 27

Annexure-3: Value chain in India ........................................................................................ 28

The Big Leap: Plastics

E-way bill and change in administrative procedures to bring a gradual shift

Pipes and Packaging companies preferred plays

Huge opportunity for shift of trade to organized players

 India’s Plastics industry is one of the largest in the world at an estimated

India – one of the largest markets for Plastics, globally…

Exhibit 1: Indian Plastics industry volume growth healthy

8.3 16.3 22.0

FY10 FY17 FY20

Source: FICCI, MOSL

USA Europe China Brazil India World

Source: AIPMA and Plastindia, MOSL

…significant proportion of which is unorganized

Source: Crisil, MOSL Source: Crisil, MOSL

Unorganized players present in both B2C and B2B segments

FOUR COMPONENTS OF INDIAN PLASTIC INDUSTRY

Exhibit 6: Consumer Products – share of organized segment

Source: Industry, MOSL Source: Industry, MOSL

45% Unorganized Unorganized

Source: Industry, MOSL Source: Industry, MOSL

E-way bill/formalization of user industry to coax gradual shift

GST and demonetization – big drivers of shift towards formal economy

Will the drivers be effective for the Plastics industry too?

Multiple modalities of tax evasion in the erstwhile regime

MODALITIES OF TAX EVASION

UTILIZING BILL TO SHIP

UNDER- MODALITIES MANAGING

Expect gradual shift for Plastics industry

Some challenges remain, however

Exhibit 9: Major plastic recycling clusters spread across the country

Source: Plast India, MOSL

 ‘Managing’ input-output ratio may continue over the medium term: To

 Under-invoicing in terms of value may continue: In manufacturing of plastic

Tax rate reduction won’t be a reason for the shift

B2B business likely to witness faster shift than B2C business

POLYMER Dominated by ~15 large

END- USER INDUSTRIES

EQUIPMENT Dominated by ~4,000

Fragmented with ~30,000 units

Flow of equipment Flow of processed plastics

Source: Industry, MOSL

Supreme Industries – a plastic conglomerate

Source: Company, MOSL

Exhibit 12: Financial snapshot (INR m)

Astral Polytechnik – capacity expanison to drive growth

Installed capacity (MT)