While the pandemic has not gone away, the world is opening up and overseas visitors keen to interact with Indian publishers, printers, and label and packaging converters are arriving. India is the first place they visit when released from their confinement – it could be our low Covid-19 numbers or the high growth projections and investment pipeline, especially in the flexible packaging industry. 

The interest is not merely confined to equipment salespersons. Investors are also coming. Japan’s Toppan bought out the Max Films plant in Punjab a couple of months ago, and Canada-based Brookfield has invested Rs 2,000 crore (approximately US$ 266 million) for a 25% stake in India’s largest film producer Jindal Poly Films. Private equity interest means that structured investment is looking for stakes in the Indian flexible packaging, carton, and label industry.

Numerous label converters have been sized up by several potential acquirers and investors but they haven’t bitten for a variety of reasons. Nevertheless, structured investment capital will likely keep looking at our industry – and this will likely lead to both money coming and consolidation to create more professionally managed and viable companies. 

The entry cost is relatively low for label production, tempting new entrants to jump into the industry every week – especially with the local manufacture of narrow web flexo and digital label presses. However, while raw material prices have risen, the brand owners are not easy to convince to pay more. The label converters who have been able to get price increases are the mid-segment technically sound converters with several presses and robust infrastructure. In many cases, they are specialists in some product segments. Their track records and reliability have built bridges in the pandemic years to brand owners no longer keen to visit plants to monitor or interfere with production.

Thus the supply chains from raw materials to design, approval, and finished product have improved during the pandemic. An overseas visitor that we met recently had an insight into the resilience of Indian label converters. “It’s great to see – all the label printers seem to be busy. They are active and many of them seem to have a second business that has made them more resilient in these two years of the pandemic.”

SMI acquired by Jindal Poly Films

On the morning of 29 April 2022, as we finalize the pages for the May issue of Packaging South Asia comes the news that the aforementioned Jindal Poly Films has acquired Mumbai-headquartered SMI Coated Products which is the largest homegrown Indian labelstock manufacturer. The company, a sterling advocate and support of the rapidly growing Indian label industry has in the past decade become an organized exporter of pressure sensitive labelstock with an office and distribution center in Dubai for the Middle East and African markets. From reports received thus far, SMI’s turnover for the financial year 2020-21 was Rs 273 crore (approximately US$ 37 million) and the acquisition cost to Jindal Polyfilms is Rs 195 crore (approximately US$ 26 million). Jindal Poly Films’ turnover for the 2020-21 financial year was Rs. 4082 crore (approximately US$ 544 million). This is considerably lower than its highest turnover on record in the 2016-17 financial year in which it achieved Rs. 7,014 crore (approximately US$ 935 at current exchange rates).

While it has not taken long for Jindal Poly Films to put the capital it recently raised from Brookfield to work, our view is that the deal is very positive for helping SMI grow in an industry where strong local suppliers for labelstocks are needed. It is a logical horizontal diversification for Jindal as well, since it is a global supplier of filmic face-stocks as are other Indian film manufacturers such as Garware, Cosmos, and Uflex. The Mehta family is pleased by the Jindalacquisition and to have helped the Indian label industry grow and for the benefits it has been able to bring to the country's brand owners and the economy. Ajay Mehta, SMI’s managing director says, “We have always wanted the industry and country to prosper – that has been our only aim.”

Note – This is the editorial article from the May 2022 issue of Packaging South Asia to be printed and distributed on 6 May 2022.