Essel Propack sees FY17 revenue growing 11% on JV buyout

Essel Propack has acquired 100 percent stake in its European joint venture Essel Deutschland Germany. This will be done with Lamitube Technologies, a wholly owned subsidiary of the company in Mauritius, acquiring 75.1 percent stake in the European firm. The enterprise value of the acquired company is USD 32 million.
The acquisition will boost Essel Propack’s revenue by 11 percent in the current fiscal, Ashok Goel, VC & MD of the company said. The European revenue will also improve by 63 percent post the acquisition.

"The acquisition will help Essel unlock synergies such as enhanced cross selling opportunity in the German markets, sourcing flexibility and better capacity utilization at all of its Europe plants," the company said in a press release.The acquisition will also add Rs 101 crore to the company’s debt, Goel added. Essel Propack is into the packaging business catering to the FMCG and pharmaceutical companies. Below is the verbatim transcript of Ashok Goel’s interview to Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: If you can just take us through what the monetary benefits could be how much could your revenues grow by and in the non oral market what kind of market share would you be looking at say over the next one year?A: This will help us in segment revenue growth of that means European revenue growth of 63 percent on annual basis. On a global consolidated basis this acquisition will help us 11 percent boost in revenues and profit after tax (PAT) boost of 4.1 percent over last year. Non-oral care as you asked, this business does 76 percent of its revenue is in non oral care. So, therefore on the global basis it will improve the share of non oral care by 2.85 percent. Latha: What money does this unit make and how much did you pay for it?A: The enterprise value for this unit is 32 million that means the 100 percent of equity plus debt it has. We obviously had acquired 75.1 percent, as a result it will increase my net debt of Rs 121 crore. Anuj: Is it loss making, I mean is it going to be earning per share (EPS) dilutive or EPS accretive?A: It does make profit, but Europe as a whole is still at a lower level of earnings before interest, tax, depreciation and amortization (EBITDA) margins or PAT margins as compared to rest of Essel Propack globally. So, while it will improve the absolute amount in terms of percent it will have a negative impact to 1 percent. Sonia: You told us that European revenues will go up by about 63 percent odd but can you just tell us what exactly would this do to your consolidated numbers? In FY16 you ended with revenues of around Rs 2,200 crore or so what is the expectation for FY17?A: It will increase the annual revenue by 11 percent. Sonia: On the margins, on the operating line?A: On the PAT, it will improve by 4.1 percent and EBITDA absolute amount of course will also go up, but as a percentage consolidated it will have a negative impact of 1 percent.