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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).

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