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Emmbi Industries Limited

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Emmbi Industries Limited is a well established brand in the field of woven polyethylene and polypropylene product manufacturing. Emmbi’s product profile can be classified into four main segments, i.e. speciality packaging (FIBC), advance composites (FIBC+ embedded property), water conservation products and agri products. In 2010, Emmbi got listed on NSE and BSE. In FY15, Emmbi clocked export sales of over Rs100 crore and never looked back. In 2015, it launched the agri business for the crop protection system (one of the major import substitutes). Emmbi exports to over 60 countries.

Besides farmers Emmbihas prominent clients like Hindustan Unilever (HUL), Godrej, Tata Chemicals, ecommerce players like Flipkart, Amazon and eBay. Company is promoted by first-generation entrepreneurs, Mr Makrand Appalwar and Mrs Rinku Appalwar.

Face to Face

“Our philosophy is not Emmbi Industries Limited 1
to grow in spurts, we like to grow consistently”

Mr Makarand Appalwar, Chairman & Managing Director of Emmbi Industries Ltd.

How has been the journey so far?
We startedthe company in 1994 and the IPO came in 2010. In the prospectus that time whatever outline was projected, we completed exactly like that in the same record time.

We’ve four verticals. Advanced Composite and Speciality Packaging are the conventional businesses; Agro Polymer and Water Conservation are the next generation businesses. First we started with Speciality Packaging which is mostly a domestic focused business still contributing 30 percent. It is basically engaged in industrial bulk packaging. We are selling a range of products across industries as diverse as chemicals, e-commerce, food, pharma and more.The largest contributor to our topline as well as bottomline is the second verticalAdvanced Composites – withhighly technically sophisticated products. That is basically plastic which is chemically treated; so we’ve anti-corrosion, anti-fungal, anti-bacterial, and electronically conducive plastic. All these variants are industrial use polymers and all are for specialized applications. This is our largest exporting product, contributing almost 40 percent. We export to Western and European countries. On the conventional sidethe well established businesses, that we started with, have been recording a growth rate of 12 percent per year and they will continue to grow somewhere on the same line.

Howthe next generation businesses are faring?
Really well. The two new businesses, started just two years back, are growing much faster like the water conservation grew actually more than 100 percent last year. Now the focus of the company is in the field of water conservation and crop protection or yield management. Two years back we planned an expansion of around Rs 25 crore which we successfully completed in March. Now it’s under implementation and usage. We firmly believe that this way whatever value creation on the infrastructure was done would certainly help us to take the company’s topline in the range of Rs400 crore within 18-24 months.

The above mentioned facility we created is now helping the company to construct almost 5-6 ponds every day somewhere in India and our target is to make one pond per hour by year end. The target may look highly ambitious but we can do it since we got now all the required resources.We’ve strong multiple teams of highly competent people and associates. We believe the next level of company’s growth will come from the water conservation business.

So the conscious shifting towards higher Emmbi Industries Limited 2
margin businesses has been successful?
Yes. Our conscious shifting began five years ago and it has been rewarding. In the coming year you will see the company has a different face. Right now 90 percent of our sale is B2Bbut in next three years we are expecting 25 percent B2C and the rest B2B. That would make the company move towards more Brand based sale which is considered more lucrative and profitable, so the profitability will get a boost. The company had been already consistently growing and improving the EBITDA margin since last 10 quarters.

Can you tell in detail about this water conservation business?
First, it is necessary to properly understand exactly what we’re doing when we make a pond. Due to ecological imbalance, created by various reasons most prominently global warming, we know the rain patterns are continuously getting disturbed. Earlier we used to have a 120 days Monsoon season and 90-100 days there was actual rain. Now due to sudden downpour phenomenon active rainy days have shrunk to almost 60 days and that too is spread – like 7 days heavy rain and then another 10 days a dry spell. Recently Kerala saw massive sudden downpour phenomenon in its four districts. This phenomenon has changed the traditional natural water conservation system when the water used to seep through the earth and people used to have borewells and open wells for different uses. Now rain water actually flows through rivers and Nullahs back to the sea, making the net usable water supply less.

So in a way, our product is designed to counter the greenhouse and global warming effect. Just imagine storing water in a massive size bucket, having a capacity from 40 lakh to 6 crorelitre. We create ponds of those sizes to store the rain water which can be used throughout the year.The product is an outcome of a lot of research and development. Secondly, the cost of the product is very low – just one paisa per litre per year. So even a poor farmer can afford to have one. The government is also supporting them with subsidies which are almost half of the product cost. We’ve also tied up with major banks that provide loan to farmers for this purpose.The Maharashtra government has launched a water conservation scheme named JalyuktShivarAbhiyan to bring water empowerment to 25,000 villages within next five years. We’re very much into it with our brand JalSanchay.

We have also created ponds in neighbouring states just for the sake of demonstration purpose so the local farmers can see for themselves and we also take farmers in buses to show them how with this the farming is improving. At present we are active in Maharashtra and Rajasthan. In another six months we’ll enter in a third state since in Maharashtra we have almost settled and resources and manpower could be moved. We’re deliberately doing it step by step. Our philosophy is not to grow in spurts. We like to grow consistently and peacefully.

Emmbi Industries Limited 3

And what about the second one – the Agro Polymers?
India is still a predominantly agrarian economy. Most of the farmers use a lot of conventional chemicals like weedicide, fungicides, and pesticides to protect and grow the crops and enhance yields. We’ve deloped such a product branded as EmmbiKrishirakshak,designed with lot of care and knowledge, which protects the crops physically rather than chemically. We provide prop cover so mangoes, pineapples, apples, grapes etc are protected. Now the consumers are demanding more organic or less contaminated or chemically less treated products. Our ultra-modern products help farmers to produce their crop in same geological and environmental condition while using minimalistic chemical supplements.Thus both our new age products are very eco friendly, ecologically connected, managed very responsibly, and 100 percent recyclable. These two contribute 30 percent. Our in-house R&D facility Emmbi Innovation Centre situated in Silvasa, is working hard to create new products for the customers, and has registered 14 patents.

Has competition from the unorganised sector impacted your business?
These are well established and highly research driven and specialized products so we’ve no competition from any unorganized domestic player as the entry barriers are very high. Whatever competitionwe’ve is global largely from Turkey, Vietnam, and Mexico.For Advanced Composites we have competition from big companies in USA and Germany.We’re exporting to around 60 countries and the export contribution is almost half. We’ll maintain this ratio in the coming year also. We also hope to export the two new products in the coming year, as the USA could be a big market.

Emmbi Industries Limited 4

Both the new segments are particularly inclined towards farmers.
Yes. Government hasa very ambitious target to double the farmer’s income in next three years which is not possible without easy availability of water for irrigation purpose. Equally necessary is the crop protection. So our products could prove the best vehicle for the government to achieve its target and realize its dream.

Do you think GST has been good for the sector?
I think the decision to implement GST was a good and bold step. There were hiccups and everybody was facing problems initially. We also had our share of difficulties as being exporter we found credit getting blocked etc. Now things have fallen in place and even small businesses have accepted,accoustomed and settled. I feel the system is going to work wonderfullyand in a year we would see a much more developed GSTin India. Now the system has become simplifiedand itwill prove a big support to the entire business community.When the systems change and new things happen you have to retreat some steps. But even with that we maintained 13 percent growth in our topline and around 20 percent growth in bottomline. So we were never affected badly, we were affected positively. Only those who had multiple bogus companiesto evade taxes are feeling the heat.

Do you have any expansion plan?
In terms of water conservation segment we’ve already built the capacity for next two years and with this we’re capable of taking this business via B2C upto Rs100 crore. Only after reaching that level we’ll take up the next level of expansion and create better and larger facility with the immense practical knowledge gained over the time. At present there is no such plan but we do have a plan to have our warehouses and distribution centres.

 

What are the challenges before the sector you’re operating in?
I don’t find any major challenges before the sector for next three years because plans are announced, budget is allocatedand now work is to be done. The present government has formulated very bold and innovative schemes in last four years, including so many reform measures. We might complain some implementation issues but schemes and programmes are well structured and the government is clear what needs to be done. I would especially like to mention NanajiDeshmukhYojna, a Maharashtra government and World Bank combined initiative. Rs 6000 crore has been allocated to it. Under this,areas which have seen disproportionate growth, are identified, clusters are created and focus is on its development. Like in Maharashtra Ahmadnagar, Aurangabad, Pune, Palghar and Thane are well developed but if you go down towards JalnauptoVidarbha, development is not so visible.

Emmbi Industries Limited 5

What makes Emmbi Industries different?
Not many companies can claim to have enjoyed continuously uninterrupted growth that Emmbi has enjoyed in the last 20 years. In all these years we’ve improved our profit and product offerings. Another difference Emmbiundoubtedly presents is that all its products are eco-friendlythough the company is into polymer processingbusiness. The company has never created any products which are not fully recyclable. Our team takes great care while designing the productsso that there is no contamination, and no problem created to ecology. Responsible manufacturing is one of our key motto. Personally we’ve been able to create around 1000 direct and an equal number of indirect jobs. Wherever we’re having our footprints we’re creating substantial number of jobs. Our company is women friendly and office has fifty percent female employees.

How you feel being a successful first generation entrepreneure?
I don’t think I could have done anything better in my life than this. I feel I was instrumental in the creation of job opportunities and contributed to exchequer in form of taxes. In my time also my batchmateengineers’ first choice was to go to USA, but I stayed in India, did whatever I could and it’s rewarding and very satisfying. I must say in turn the country has paid back more to us. We started with just Rs 5 lakh capital and created this huge group.

What message you wish to give to your investors?
Even a look at the performance of last 20-30 quarters reveals that between all ups and downs the company had always a consistent growth and in each quarter recorded substantial profit. The company management is quiet focused on creating value through the launch of new products. The focus also remains strong on the products which are generating more than 20 percent of ROE and ROCE.We want to make the company in a league where everybody will find value for their money.

What is your growth projection for the current fiscal?
We are expecting around 18 percent growth for the next two years.

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