XPRO India

 

Xpro India Limited is a diversified, multi-divisional, multi location company focused on polymer processing with strong governance standards. The company is family-led and professionally managed, an arm of India's largest and most reputed industrial house, the Birla family. 

They currently have manufacturing facilities in Greater Noida - UP, Ranjangaon - Maharashtra,  Barjora -   West Bengal.

The operating units have built up special skills and competencies in the specialised field of co-exclusion with application in the manufacture of oriented films, multi layer plastic sheets, and multi layer cast plastic films. Thermoforming supports downstream operations for sheets.

Biax Division (enjoys a leadership position in Dielectric/capacitor films)

• Only manufacturer in India and meets about 33% of domestic needs and rest is imported thus provide natural market.
• Capacitors essential to electricity distribution and consumption; A growing market with added thrust on infrastructure.
• Huge new opportunities in sunrise applications particularly in EV segment,  with multi-fold capacitor application in e-mobility, convenience and safety system including power control unit inverter circuits, DC link power capacitors, start stop system, high intensity discharge xenon lamps etc.
• Further impetus from PLI scheme  and import restrictions for the component ecosystem.

Dielectric grade BOPP films

1. Xpro Biax Dielectric Films are specially designed polypropylene films manufactured by the stenter process on highly specialized equipment in controlled environment.
2. Speciality Biaxially Oriented BOPP Film – very different from packaging grade and other types of BOPP Films.
3. Films are available in thickness range of 3µ to 15µ (lower thickness down to 2µ underdevelopment ).
4. These are ideally suited for high performance capacitors, both for normal and high temperature applications, high temp super grade for AC aging and ripple current condition at elevated temperature.

Films type offered includes:

1. Oil impregnation film

• Hazy film

2. Metallisable film

• Standard film
• High Temp film
• High temp super grade
• Semi rough film

• BOPP films produced with main equipment from Bruckner,Germany and film technology originally sourced from UK.
• Dielectric film technology developed in-house is constantly updated

Coex Division ( leadership position in supplies of sheets/liners to refrigeration industry )

1. Xpro offers a wide range of mono-layers and co-extruded plastic sheets, produced on highly sophisticated equipment based on various thermoplastic resins specially designed to meet specific customer needs, specifications and colour choice.

Sheet and Thermo-formed components

• XPRO COEX have several fully automatic specialized lines for  continuous vacuum forming for thick wall applications at the Greater Noida and Ranjangaon units.
• Primary application is for refrigerator inner and door liners
• Thermoforming capabilities extend to include Automotive interior and exterior trims (e.g.dashboards, door panels, floor panels,etc.); Furniture; Luggage Shells; Sanitary Products (e.g.Bath-tubs, Cabinets); Electrical/electronic housings (Light panels, street lamps and other light fittings); Industrial trays for material handling etc.

Cast Coextruded Films

• Xpro Cast Films are produced on the most sophisticated multi layer co-extrusion film lines.

Wide range of speciality cast films are offered:

• Release films
• Polyethylene based embossed or plain films tailor-made for use in rubber, tyre & tread and  conveyor belting industry.

• Hygiene films
• Specially formulated cast co-extruded film based on Polyethylene for use as diaper backing film, in under pads, in sanitary napkins, adult in continence products and in surgical drapes.

• Stretch wrap films
• Cast co-extruded LLDPE based film designed for use in pallet stretch wrap and food bundle over wraps.

    

• Soft blister films
• Specially formulated co-extruded film for medical disposables packaging.

Marquee Clientele

Credit Rating Aug,2022

• India Ratings and Research (Ind-Ra) has upgraded Xpro India Limited (XIL)’s Long-Term Issuer Rating to ‘IND BBB+’ from ‘IND BBB’. The Outlook is Stable.
• The upgrade reflects a growth in XIL’s scale of operations in FY22, driven by an increase in sales volumes and realisations resulting from improved demand for Biax di-electric films. The upgrade also factors in an improvement in the company’s operating profitability and credit metrics, along with an improvement in its liquidity position in FY22.

Key rating driver

1. Healthy revenue growth
2. Increase in operating profitability
3. Improvement in credit metrics
4. Presence in niche industry with limited competition
5. Reputed clientele; lower customer concentration ( No single client accounts for more than 20% of the revenue).
6. Exposed to volatility in raw material - XIL’s profitability is susceptible to adverse movements in the prices of polypropylene, a by-product of crude oil, which is its key raw material and one of the major components of the cost structure. In both Biax and Coex divisions, XIL works essentially on a pass-through pricing model, providing for any volatility in polymer raw material prices, with a minor lag

Q4FY23 earning calls 

Management commentary

• The dielectric film line at Biax division delivered a healthy performance with near full capacity utilization.
• Continuing shift towards thinner films, balancing the product mix with market opportunities.
• remains most significant Indian manufacturer of high quality dielectric BOPP films.
• Growth in the EV segment and non-conventional energy segments augur well for the range of the company’s competencies and products. 
• With own development capabilities, company continue to compete with the import from China, Japan, S.Korea & EU.
• Consumer durable for Coex division continue to face the headwinds but management expect renewed demand in coming periods
• Revenue down by 13% YoY but EBITDA and PAT was up by 11.8% & 16.2% respectively on the back of passing of raw material cost to customer and improved product mix.
• However, Biax division reported over 25% growth YoY

Bad summer season indirectly impact the company revenue as the refrigerator sales gets impacted thereby impacting the demand for the Coex inner liner of refrigerator.

• Company, at the consolidated level surpassed the revenue of 500 Cr milestone.
• Srilanka is one of the major export market for the company for coex products.

• EBITDA margin improved YOY from 13.5% (FY22) to 14.6%(FY23) - shows company is trying to dictate the price in its product and also working on value added product 

• All long term loans, other than working capital application was paid at the year-end ahead of the scheduled time - shows good cash flow from operation and also company's product are in demand and this will now help improve bottom line directly.

• Net debt to equity stood at 0.04 and delivered healthy return on equity of  22.4% and ROCE of 27%

• Promoter group have exercised their option of convertible debenture before due date and have been allotted equity share and reserved bonus share - showing management has confidence in the company.

Capex:

• Management intention is to expand capacity of dielectric and other superior grade of BOPP films.
• First phase aim to double capacity at the existing location at Barjora, WB.
• This may take around 2 to 4 years, taking into account long key equipment delivery period, the critical part of this investment.
• Management secured supply of 2 state-of-the-art manufacturing lines for reputable supplier and these 2 lines are largest investment taken by company in its history
• First line to installed in Barjora and will start contributing in Fy24-25
• Second line to start contributing from FY25-26

• This investment will give company first mover advantage and greater credibility as a supplier of state-of-the-art dielectric film products and intelligent solutions.

• Company is investing 2Cr for 26% equity in SP with TATA power for sourcing solar energy for the Ranjangaon, for 4.5 MW facility .

QnA sessions synopsis

• There has been no import duty as of now in import for the dielectric films and also the price of import is lower than the company's product - Shows company is very well competing with all the influx from import and still able to maintain there market share which means there is a niche technology underneath which is making company compete fiercely and maintain quality of product.
• No major player setting up any capacitor plant in India as of now
• The more thinner the film is more value added and there fore better price for the films

If there is any entry barrier in dielectric as in India only XPRO and globally also very few players?

• High capital cost
• Relatively lower turnover to capex ratio
• long gestation period before going to market ( tech complexity, process parameters, handling capabilities)
• Very long lead time for equipment delivery (typically in range of 3 to 4 years)
• There is no standard off-the shelf line i.e. machine has to be designed for the way customer wants the product.

Total demand for capacitor films in India in terms of volume?

• Considering only the base film, total volume demand is around 15,000 tons p.a.
• And the lines that produces the film can only produce 4000-5000 tons a year at max utilization thus inherently provides the entry barrier

Realisation of biaxial division - Avg. realisation INR450 per kilo without any tax included.

Polypropylene is key raw material for the biaxial films.

• As per management, they are expecting growth of 8-10% annually going forward once the PLI scheme is implemented by the government on conservative side.
• India needs 4 lines of what capacity today it have and there is good runway for growth from hereon as well. Company is looking to capture domestic and export market by reduce import dependence.

In Biaxial division, company is fully choked with the capacity utilization at the peak for last three years, so until new lines comes in FY25, company tweaked the line to produce more of the value added product meanwhile to maximize the return. - Product Mix change

For upcoming quarters and further, in Coex division management sees uptick in volume as last year Q4Fy22 & Q1FY23 there was huge demand due to opening of the curb after COVID which impacted FY23 further quarter, but now the inventory has been over and new demand may start picking up.

Total volume product for the entire year?

• Total production for this year, COEX was about 28,000 tons, 27,857 tons. And BIAX was 3,635 tons. 

Thickness of the film varies from 13 micron or 2.5 micron 

If there is any new competitor coming up in the films?

Do provide your valuable feedback on this blog and also like, share and subscribe the blog for more such updates :)

You can explore more such blogs.

Follow me on twitter @Agarwal2Rishabh