POLYPLEX'S
THAI UNIT TO SET UP $45-M FILM FACILITY IN TURKEY
Domestic companies with a global footprint are finding better
valuations overseas than on home turf. Polyplex Corp, the fifth-largest
manufacturer of metalised polyester packaging film in the world,
is learnt to be investing about $45 million on a third 24,000
MT film line, which is to be located in Turkey. More importantly,
the expansion will be carried out by Polyplex Thailand, which
will raise funds through a listing on the Thailand Stock Exchange
in Bangkok.
According to sources,
the company intends to offload about 20% of the equity held
by Polyplex Corp in Polyplex Thailand (PTL), which is expected
to raise roughly $25 million. This translates into a valuation
of over $100 million for the Thai entity against a valuation
of roughly $40 million for Polyplex India.
Polyplex's long-term
plans involve the setting up of a second line alongside the
proposed unit in Turkey, integrating backwards into chips
to create a facility similar to that in Thailand. Polyplex
began commercial operations in its 15,000-MT Thailand facility
in April 2003 and, in November same year, it doubled capacity
through a second PET film line.
The company has
also invested in a PET chips plant in order to be self-reliant
for its raw material requirement. The PET chips plant is expected
to go commercial by October 2004.
When contacted,
the company management declined to comment.
With this expansion,
Polyplex is set to become the fourth-largest thin polyester
film producer in the world. The location is strategic as it
provides ready access to a large market in Europe, Russia
and the countries of the Commonwealth of Independent States
(CIS), where no new capacity is being built despite growing
demand. The company also has its sight on the countries around
the Mediterranean rim as a destination for its products.
Savings in freight
and duty as well as likely better pricing is expected to offset
the higher operating costs of locating the manufacturing unit
in Europe. Government support in the form of land, infrastructure
and fiscal incentives is another draw.
Polyplex produces
15,000 MT of thin metalised polyester film at its Kashipur
unit. Through Polyplex Thailand, its wholly-owned subsidiary,
it produces another 30,000 MT, bringing total existing capacity
to 45,000 MT.
The expansion into
Turkey - where commercial operations are expected to begin
by the third quarter of 2005 - will bring the company's revenue
contribution from its domestic operations further down to
20% from the current 36% level. This means that overseas operations
will contribute as much as 80% or more to revenues. Interestingly,
even of the current 36% share from domestic operations, exports
contribute about 50%.
Sources say that
in fiscal 2004-05, Polyplex expects to achieve nearly 60,000
tonnes of production at both the facilities together on the
back of a 8-10% annual growth rate in the packaging and industrial
applications segment, which is its main customer. The growth
in the Asean region is even higher.
PET film-makers
expect a demand/supply balance to continue in favour of thin
film manufacturers for at least next 2-3 years. Polyplex also
carries the advantage of being one of the lowest-cost producers
of the film in the world, with leading global players like
Mitsubishi and Torey getting out of the thin films segment
because of their inability to match the cost structure of
Indian players.
Polyplex reported
a consolidated turnover of Rs 138 crore (Rs 70 crore) in the
first quarter of 2004 and after-tax profits of Rs 22.9 crore
(Rs 7.7 crore).
