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DSIJ Interview with,Neeraj Jain CFO, Cosmo Films


Neeraj Jain 
CFO, Cosmo Films 

"Restrictions on use of plastic should benefit BOPP industry due to better recyclability"

As CFO of Cosmo Films, what are your top three strategic priorities? 

The top three priorities are: 1. To facilitate company's medium to long term strategy by enhancing share of specialised films, i.e., working towards de-commoditising the business model. 2. Working towards close to zero net working capital deployment in the business (i.e. shorten the working capital cycle). 3. To facilitate company's growth by ensuring cost effective finance is available at all times. 

Your EBITDA margin over the past few fiscals has been deteriorating. Can you tell us what factors caused this margin deterioration? Your view on the same for FY19E? 

During FY18, sales volume grew by 25% with 20% growth in speciality films. While BOPP film margin continues to be volatile and has wiped out gains of volume increase and better product mix, our continuous focus on improving operational efficiencies helped in maintaining EBIDTA level in absolute value. BOPP film margin has been running low due to temporary demand and supply gap in the domestic industry. As very minimal new capacity is expected in domestic industry in the next two years, we expect BOPP margins to improve towards normal level sooner rather than later. Further, the company is working towards expanding speciality and improving internal efficiencies, which will de-commoditise and strengthen the business model in the medium to long term. 

What kind of opportunities or risk do you see due to plastic ban in many states? 

The Government of India has recently issued revised guidelines in which provisions related to restriction on multilayer packaging has been broadly taken out and substituted by provisions related to further utilisation, collection and recyclability of plastic. In the new guidelines, the focus is on alternate usage of plastic rather restricting production or consumption. Some state governments indicated restriction on specific plastic products (such as PET based bottles, polythene based carry bags). None of these products uses BOPP, hence from Cosmo Films perspective, it will not have any impact. The provisions around restricted use of plastic in the long term should benefit BOPP industry as the same is better placed from recyclability perspective compared to other options. 

How would be the coming fiscal different from the previous one? 

The company continues to focus on improving speciality films sale. In this direction, the company is increasing capacity of speciality products and has also recently launched several speciality products such as 

1. Cosmo Synthetic Papers (CSP)- Enhanced features such as quick drying (labels, tags, maps, ID cards, tickets for adventure parks, etc.) 
2. Metalised label film- Mirror finish glossy film which can be printed with high speed flexo printing machine. 
3. BOPP films for soap wrapping- Enhances moisture barrier which helps to maintain consistent soap weight for longer time. 
4. Metalised velvet films- It is engineered to provide brilliant metallic look with velvet touch to the laminated paper/paperboard or package. 
5. Conduction sealing films- These are one side corona treated and other side heat sealable, clear, laminated films for retortable lidding applications. The major application segments for these films include dairy products, medicine and pharmaceutical industry. 
6. Digital printable label films- These films are designed for digital printing on HP Indigo machine. It provides excellent ink adhesion and high quality printing results on finished products like wrap around label applications. 
7. Solid white PSA label films- It is a solid white film with high opacity and excellent stiffness properties. Further, BOPP films margins are also expected to move towards normal level. These factors, along with better internal efficiencies, should facilitate better margins and ROCE in coming years.

In FY18, you were running on 90 per cent-plus capacity utilisation. Can you share your capex guidance for FY19E?

The company will focus on improving financials in FY19, hence it would be conservative in capital expenditure during the year. Besides the already committed capex for buying adjoining factory land and building, the company will enhance capacity in speciality vertical which is running close to full capacity utilisation. However, the overall capex size would not be high in this fiscal. 

What is your outlook on packaging industry for the next 2-3 years and what will be Cosmo Films' strategy to grow faster than the industry? 

India as well as global flexible packaging industry is expected to grow close to the twice the respective GDP growth rate as has been the trend during the last one decade. As BOPP flexible packaging industry's growth is largely linked with India's consumption, which is running at low penetration (particularly packaged food with low penetration in India), the industry should witness consumption-based growth, particularly for food packaging. The consumer sector will be looking more for product differentiation and value-addition. 

We will be working towards twin strategic objectives of enhanced focus on speciality films and lower production cost for BOPP commodity products. These twin strategic goals shall always differentiate Cosmo Films from the competition.

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