Ladies and gentlemen, good day and welcome to EPL Limited, formerly known as Essel Propack Limited, Q2 FY 2021 results conference call hosted by Systematix Institutional Equities. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note this conference is being recorded. I now hand the conference over to Mr. Ankit Gor from Systematix Institutional Equities. Thank you, and over to you, sir.
Thank you, Bikram. Good evening, everyone. On behalf of Systematix, I would like to welcome all to Q2 FY 2021 and one-month FY 2021 earnings call of EPL Limited. From the management side, we are joined by Mr. Sudhanshu Vats, who is CEO; Mr. M.R. Ramasamy, who is the COO; and Mr. Parag Shah, who is the CFO. Along with it, we are also joined by Mr. Amit Jain, who is our Head of Corporate Finance; Mr. Suresh Savaliya, Head Legal and Company Secretary; and Mr. Deepak Ganjoo, who is Regional Vice President, AMESA region. Without taking much time, I would like to hand over call to Mr. Sudhanshu for opening remarks, follow to which we can have Q&A session. Thank you, and over to you, Sudhanshu.
Thank you, Ankit. Good evening, everyone. On behalf of my colleagues at EPL Limited, first of all, a very happy Dhanteras to all of you. It's a special day. It's an auspicious day for all of us in India, and it is also a very special day for us at EPL. It is, as I was saying, a very special investor call because today I have the privilege, on behalf of my colleagues, to share with you three important pieces of news. I think, let me, without further ado, start with what we have to share with you. The first and foremost is, as you already know, but I think I thought I will spend a couple of minutes on this, is we are now EPL.
The new name, EPL, is a simple, crisp, and global name that is an effortless shorthand for what we always stood for our customers, for our clients, for all our stakeholders. EPL. It is also our vehicle for a new purpose-driven journey ahead. You will continue to hear from us from time to time. It reflects a transition from high to higher. It's a company which is nearly four decades old, which has done very well, but has a desire to do even better. This is our desire to shift gears on new way of growth, a growth that is suited for today, but more importantly, suited for tomorrow.
Built in EPL, as you will see with our new sign and with our logo, which is identical, but our colors now are deep blue and green, is our commitment to sustainability, is our commitment to the future, is our commitment to the world that we would like all of us to live, and we would like to play our small role in building that world. It is about shaping the future of packaging as we celebrate everything that has made us what we are today. In that, we've summarized our tagline now, which is we call Leading the Pack. Our humble effort to understand packaging, lead packaging, and hopefully, do well as we move forward with that. That, ladies and gentlemen, is the first announcement, and I'm delighted to share it with you today. We are now EPL.
I think the second, and arguably an equally important announcement on the auspicious day today, is our acquisition of Creative Stylo Packs. Creative, as you know, is a young organization, about a decade old, but has made a mark for itself in India. I think they have rapidly grown. They were founded by two young entrepreneurs, Bhavik Shah and Darshan Shah. Very dynamic young individuals, full of energy and enthusiasm. We have decided to acquire Creative. Let me first give you a quick overview of Creative for some of you, and then talk to you about how we are structuring this deal. This company founded in 2012 by these two young entrepreneurs I talked about, in FY 2020, delivered a revenue of INR 1,031 million, so INR 1 billion, with an adjusted EBITDA of INR 305 million, giving them an EBITDA margin of 29.5%.
They have a manufacturing facility in Madhya Pradesh with an annual production of close to about 200 million tubes. They do a lot of tubes in plastic. I think their specialty is more plastic and decoration, and to that extent, is a very complementary fit to what we do. The second interesting thing about this acquisition is that actually most of their business comes from beauty and cosmetics, and the remaining part comes from pharma. It would not be incorrect for me to say that their entire business comprises of beauty and cosmetics, about 85%-90%, and the balance 10%-15% of pharma. From our point of view, it is a perfect fit in our journey towards personal care, and therefore, further strengthening our portfolio. They also have a marquee clientele of customers, L'Oréal, Marico, Zydus, Himalaya, just to name a few.
I think it's a list which goes on. Many of them common to us, but quite a few complementary. With their listing, we are confident of taking our offering to these customers in a way that will delight the customers even more as we go forward. On to the transaction. The transaction is basically, we've acquired them at an enterprise value of INR 2,539 million. INR 2.539 billion. That's the transaction value at the enterprise value for Creative. The deal structure is we will be purchasing 72.5%, approximately 72.5% of their stake through cash, and the balance, 27.5%, will be a share merger. Therefore, 72.5% stake through cash and 27.5% stake through EPL shares to Creative founders pursuant to the merger of Creative into EPL. We've signed the SPA today.
We've informed the markets and the authorities. It is indeed my pleasure to share with all of you that EPL 2.0 is now gearing to grow faster, both organically, but also through strategic and right acquisitions. I think Creative, in that context, is the first step in that direction. I'm also happy to share with you that Creative founders, which is Bhavik Shah and Darshan Shah, will become part of EPL's senior management team after transition and will play a very important role in the expansion of EPL's global business. Closing of the transaction, as you know, is conditional upon satisfaction of customary conditions, and we expect the transaction to close early calendar 2021, but the merger to go through in about a year from now. With that is about our transaction.
Lastly, let me once again sign off with the strategic rationale for the transaction. Five key features. Revenue growth, if you were to look at, revenue growth for Creative in the last three years has been 8.3. Revenue growth for EPL in the same period has been 6.2. It is revenue growth accretive. EBITDA margin for Creative is, as I shared with you, about 29.6%. Our margin in FY 2020 was 20.3%, so it is EBITDA margin accretive. We are confident of operational improvements as we go forward. We can already see synergies to the extent of INR 35 million, but I'm confident, along with my colleagues, we should be able to do even better than that.
It will continue to drive our personal care and therefore continue to balance our portfolio, something that I've spoken to many of you in my one-on-one conversations and also on this investor call. Already with these numbers, if I were to assimilate and aggregate these numbers and share with you our contribution of personal care categories from 45% in FY 2020 will shift to about 47%. We also add plastic tube capacity in North India, and as many of you would know, who follow our company and this sector, that a lot of our customers are based in North India. Therefore, for us, it is also a strategically important geographic location.
Very strong strategic rationale, fit with our beauty and cosmetics and personal care ambitions, revenue and EBITDA growth accretive, operational improvements which we can immediately see, and finally, it will allow us to drive India with our AND strategy, where we continue our laser sharp focus on lamitubes, but we also have better and futuristic capacity for plastics as we build a double engine growth driver for our customers and are able to do and accelerate our growth in beauty and cosmetics. That indeed, ladies and gentlemen, was our second announcement. Finally, to the one which we talk about every time, but indeed it is great news. As we've closed first half, let me share with you our numbers for first half and thereafter with the quarter.
For H1 FY 2021, we've delivered 11.1% growth from revenue from operations, delivering INR 15.118 million in revenue, which is 11.1% growth on a similar period this year. This, in our judgment, in the times we are living in COVID pandemic, is a performance we are all very proud of. In the same period, we've also delivered EBITDA growth of 20.1%. We've delivered EBITDA of INR 3,136 million in H1 FY 2021, which is a 20.1% growth. Equally and more importantly, it is that our EBITDA margin has also expanded to 20.7% from 19.2% in the previous period. This is about 150 basis points margin improvement in EBITDA. All of this translates to our PAT growth of 18.2%.
We've delivered a PAT in first half, profit after tax at consolidated EPL level at INR 1.275 billion, which is a growth of 18.2%, and more importantly, our earnings per share now is at 4.44. We've crossed the INR 4 mark on our earnings per share. While doing all of this, with our ability to basically generate cash, our net debt continues to come down. Our net debt in H1 FY 2021 is INR 2,332 million, so INR 2.3 billion which is almost half of where we were in H1 FY 2020. All of this is leading to our return on capital employed at above 20%, well above 20%, actually 21.4% in H1 of 2021. This is a 506 BPS improvement over the same period last year. We are very proud and happy to share these numbers with you today.
If I was to continue with our mission, we've said we want to deliver market-leading revenue growth while we deliver capital-efficient, consistent earnings growth. If you were to look at our revenue growth, which I told you already, 11.1%, clearly tells us that we are leading the market in this space. More importantly, our adjusted EBITDA has grown even better, which is at 23% growth and INR 3 million to INR 4, million INR 5 million. Our adjusted EPS is better than what I just shared with you at 4.24. That, ladies and gentlemen, is our performance for the first half of the year. This performance basically has come with our robust and continued good performance in quarter two.
If you were to look at our quarter two numbers, despite all the issues, both on the growing pandemic as you know, I think it is now going deeper into India. It has started affecting people in our plants. It's also across the world, there is also talk of second wave. There is a lot of headwind which we are battling as we go forward. We've delivered revenue growth in quarter two of 5.4%, with a number of INR 7.7 billion, INR 7,703 million, which is a 5.4% growth in this quarter which has just concluded. This has translated into an EBITDA growth of 9.5%, with an EBITDA delivery of INR 1.67 billion and an EBITDA margin of 21.7%. Once again, our EBITDA margin has expanded by about 80 basis points over the previous period last year.
It was a healthy 20.9 last year, but our number is better this year at about 21.7. This is the performance of this quarter. As I shared with you, our return on capital employed at the end of this quarter is at about 21.4%. Our tax number on the face of it looks a little down over last year, but that is because of certain exceptional items and tax repayments and adjustments across the globe which were there. It suffices to say that our period-to-period growth impact, apple to apple, if we were to take out all of these, would again be in double digits. I think it would be in mid-teens. That is our performance on this piece.
Moving forward, if you were to look at how are we being able to deliver this, it is about basically our approach, which I have always emphasized and will continue to remain. We are a disciplined, determined bunch of people. Basically, it is our discipline, determination, and creativity, which is helping us deliver this. When I say discipline and determination, all 20 plants are operational. Despite all the hiccups, our plants are working to near capacity and being able to service customers and delight customers, if I may say, day in, day out. At the same time, we continue to look at demand generation and look at newer avenues. You would remember I had talked about hand sanitizers last time. What we are very convinced of is that health and hygiene as a phenomena is a sticky phenomena during COVID and post-COVID.
Health and hygiene as a consumer habit, and dialed-up health and hygiene is sticky and is here to stay. Therefore, we are also now building additional categories of hand wash, tubes available in hand wash. Moving forward, hand creams. Hand sanitizers, hand creams, and hand wash in some way go hand in hand, if I could say. We are quite confident of continuing to grow this is a new category. While we do this, we continue to service our customers, gain share of wallet wherever possible, and also make new pipeline wins and competitive gains, which is what we have been working for over the past 12-18 months. It's a culmination of our effort of 12-18 months. In some cases, it is our ability to service the customers today and therefore be able to gain competitive share.
Finally, indeed, our ability to build and launch new categories, which comes into four, and that has been responsible. At the same time, we are committed to basically employee wellness, and this is one area which we continuously look at. A very senior team from our company constantly monitors this. We are committed to people's health, their safety, and we will continue to remain steadfast on this journey. We believe with our employees' wellness and with their safety and their growth, comes the growth of the company. Lastly, but equally and more importantly is that we continue to have war on costs, if I could use the word. We are basically managing costs and looking at every cost item. We want to manage it across each cost item, across functions, across regions, so that we basically progress on this journey.
Our Project Phoenix, there's phase II of that, but in general, our war on costs is something which will continue to happen, and that is one of the area, one of the reasons why you continue to see margin expansion in these tough times. This is something which we remain committed to because we need this fuel. We need this fuel for stakeholders, for return to stakeholders, but equally and more importantly, we need this fuel for our growth, and we are committed to growth as we go forward. Very quickly, as I spoke to you already, I think health and hygiene is a trend which we think will stick, and we are continuing to do work in this space, both on hand sanitizers, but more importantly now on hand soaps and hand creams moving forward.
Our focus on capital efficiency will remain. We will be prudent on CapEx spends. This is a year in which, in any case, it's very difficult to deploy at the pace at which we would like to. All I want to assure you is that we will put adequate capital where it is needed and for growth, and that is something which we will continue to drive towards. Basically our growth expansion in EBITDA and growth in PAT leads to cash generation and leads to debt reduction in net debt. I talked about that it has already come to almost half of the period at this point in time and it now stands at INR 2,332 million. I think that is something which we will continue to do.
Our return on capital employed will continue to grow, as you can see, over a period of last four odd years, we've expanded the return on capital employed by over 400 basis points, so on an average at about 100 basis points. I think this is a journey which has got accelerated in the last 12-18 months. We are confident of being able to steadily build on this as we go forward. Finally, I want to talk about our ability, because of all this, to be able to deliver higher dividends to our shareholders. If you look at in the last year, we had delivered a full year dividend of INR 3.30 per share, which was part of our interim and final dividend. Last year in the second half or at the end of FY 2020, we had declared INR 2.05 per share as our final dividend last year.
We think that this is a rhythm we can sustain with the profit we are generating. Therefore, I'm happy to announce that even for actually for first half of FY 2021, we are declaring an interim dividend. The board has approved the dividend of INR 2.45 per share. This is to let you know that this is the kind of rhythm you can expect as we go forward. In last second half of FY 2020, which is the final dividend of FY 2020 was INR 2.05, interim dividend of FY 2021 is INR 2.05, this is a number for you to keep at the back of your mind as a steady number, which we shall try and work on. On our fundamental levers, in the interest of time, let me quickly glance through that. It is there with the investor presentation which has been put.
Let me very quickly glance through that. We continue to progress on personal care. That progress remains, and you can see that. H1 FY 2021 is now at 47% versus 45% of FY 2020. There is continued growth across our regions. I think that is good progress. At the same time, we remain focused on continuing to build our leadership on oral care, and there we continue to deliver growth H1 FY 2021. We've already delivered a growth of 8.4% on our oral care business, and this is something which we will continue to do. I'm very happy to announce to you that our focus on Europe is yielding results. Our performance in Europe is indeed very heartening, both on top line growth, but equally and more importantly on our margins.
What we've basically been indicating, our ability to now take these margins to mid-teens is something which we are demonstrating in first half of 2021 already. We are at about 14.8%. We are confident of being able to deliver that through the year and therefore continue to build on it as we go forward. This, let me remind you, is a very, very sharp progress from where we were almost about two years back. From about a 10% share, we are already into mid-teens. Lastly, I think I just wanted to touch upon our industry leadership in eco-friendly solutions. Sustainability, as I started out, is indeed at the heart of what we will do as we go into the future. We've been developing a whole range of laminates and commensurate tubes.
We are basically focusing, now we have, as you would know, we basically called our original laminate Platina. We now have a portfolio being developed around it. As I speak to you, we've already developed Platina Pro, which has also got qualified and is in testing, and in some places commercialization as well. Platina is already happening. We are also going to look at Platina Clear. As we go forward, we will continue to build a portfolio of sustainable solutions. No surprise, we are getting a lot of traction and acceptability to our sustainable offerings by leading global customers and even leading local players. I think overall, the acceptance of this offering is very encouraging. Our customers are as committed to sustainability as we are. It is in one way, a marriage of like-minded organizations, and that is really good news for us.
We will continue to build on this. We will continue to deliver on all three pillars, on recycle, reduce, reuse. There is work happening on circular economy and PCR tubes as well. We will continue to do that. There is work happening on biomaterials. There is a lot of work happening in this space, and we will continue to drive that. Let me finally sign off with our focus on corporate social responsibility. We are basically defining our vision for corporate social responsibility. We are calling it Greening Lives. Our focus area will be, as I said, our EPL strategy will focus on sustainability and sustainable development.
It will be built around four pillars of facilitating collaboration, meaningful impact in a microcosm, and you will see this around some of our plants, forging strong stakeholder relations in order to be able to get better multiplier effect of all our work which we do, and catalyzing impact, especially from the point of view of skilling and job creation. I'm happy to share with you that we are partnering with Samhita, a known social impact firm. Basically, they are working with us, and they work with market companies in India. We should be able to join them, and with their help, be able to join hands with others to build our corporate social responsibility agenda. It will be governed by the CSR Board Committee, but more importantly, it will also be managed by the CSR Governing Council with five ethics members, senior members of our company.
In our vision of Greening Lives, we look at green communities, working on waste management programs in order to build and encourage communities to manage waste better, in moving forward, facilitate circular economy. We are equally committed to self-sustaining communities, and we are therefore will work on skill development and entrepreneurship programs with local communities and financing them with a rather innovative returnable grant scheme. Finally, in time of COVID, we are also committed to all our health workers or people who've been helping us, all our COVID warriors, so to say. We have already committed ourselves to donate about INR 1 crore or INR 10 million towards PPE equipment through India Protectors Alliance. Again, dedicated to the cause of healthcare and sanitation workers.
India Protectors Alliance is an alliance of like-minded organizations who are committed to this cause who've come together, and we are very much part of India Protectors Alliance. With our commitment to Greening Lives, but at the same time, continuing to deliver sustained capital efficient, consistent growth, and market-leading revenue growth, I would like to sign off. Thank you very much. I would also like to take this opportunity before we take the questions to wish all of you a very happy Diwali and a big festive season ahead. Stay safe, stay healthy. Thank you very much.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone now. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask a question, please press star one. We have our first question from the line of Harit Kapoor from Investec. Please go ahead.
Yeah. Hi, good evening team. Just had a few questions. The first question was on the acquisition, congratulations for the same. Just wanted to get your sense on what attracted you to this asset the most. Is it the fact that you acquired new customers? Is it the people who've led this organization, or it's the capacity that you inherit on the plastic tubing side?
If I could answer this question, it's a combination of all. As I was telling you, first and foremost, it fits into our strategic direction of building beauty and cosmetics and maybe wider personal care category, continuing to drive that faster. As I told you, this is a company that its entire business is in beauty and cosmetics and pharma. Therefore, I think from that point of view, it is a great fit and a strategic fit. The second thing is, you are right, it has an important strategic location in North India with capability in plastics, best-in-class modern decoration and tube building capability, especially.
With the customers based in North, it gives us that strategic advantage also and will allow us in future to reorganize and basically strengthen our place in plastic tubes even more with our own operations in the West and this operation now in the North. We will hopefully be able to build a stronger portfolio in plastics as well. I think that is indeed the case. As you rightly pointed out, we've got two young entrepreneurs, educated, capable, hungry, and I think they will bring their energy and enterprise and will work with us closely and then therefore they're going to be part of the EPL team now and will be able to drive our EPL 2.0 agenda as we go forward.
Understood, Sir. Just another one on the margin side for Creative, I am just wondering how a plastic tubing business actually achieves such high margins. Is it the product category? My assumption was that lamitubes would be a higher margin business than plastic. Can you just help me understand that?
I think it depends a lot on the category, therefore you are right. I think the category also depending on the capability which you derive. I think, which you or the kind of tubes that you make. First of all, as I told you, we've spoken about that ad nauseam, that beauty and cosmetics as a category has a higher ASP, the average selling price per thousand tubes. We've talked about that several times to the investors. It plays out in this as well. Average selling price per thousand tubes is independent of the type of tube in that category. Therefore that is very simple. You can see we've talked about 2.5x, 3x. That translates into better margins. Also the value which you add. I think this is what has attracted us.
I think, as Ram was doing due diligence on them, I think the capability which we are also acquiring is best in class, very modern facilities, and therefore it's a combination of what you deliver to the customer, the quality of decoration, the quality of printing, the quality of tubes, and also the category which they operate in, which helps them achieve this margin.
Got it. My last question is on the Americas business. Will you just take us through what's really happened this quarter leading to the decline? Is it more led by some level of downstocking, et cetera?
Americas business, first of all, it is a temporary phenomena, I want to tell you. I think, yes, the number you are saying this quarter are the numbers in this quarter. I must tell you, Americas as our business got very hard hit by what we call travel tubes or sampler tubes. Just to put in perspective, roughly 25% of our business in that geography comes from travel tubes or sampler tubes. With the COVID phenomena, this is a category which got very adversely affected as you would understand.
Therefore that is an area while the drop has been substantial, we've been able to cover it up through improvement in share of wallet with some customers, through more premium tubes, which we've done, and we will continue to do with some of our leading global customers, and through pipeline wins in some beauty customers and pharma customers. The net impact is still adverse in this quarter. We are confident moving ahead in Americas, we will be able to deliver growth, and you will see that quarter three onwards. I think so, we are confident of that. This is a very strong COVID headwind, if I could call, especially because of their overdependence as a geography, particularly on travel and sampler tubes.
Siraj, a follow-up is that would oral care also have been impacted on account of the same reason in Americas, the sampler tubes?
Yes, of course. Most of the travel tubes are oral care tubes.
Got it. That's it for me. I'll come back for more. Wish you guys a very happy Diwali.
Yeah. Thank you. All I wanted to assure you is that it is a blip. It's a one-time thing. We are very confident. We are already seeing it. We are very confident of a good Americas performance in quarter three and thereafter.
Thank you, sir. We have next question from the line of Sameer Gupta from India Infoline. Please go ahead.
Hi, sir. Thanks for taking my question. Just a kind of a follow-up only from the previous questions. Regarding the acquisition, sir, just wanted to understand. We already have manufacturing capabilities in plastic tubes. Is it the geography we are getting and we weren't there? Can you also elaborate on the synergies as to how we are going to derive INR 35 million of synergies through this acquisition? Was it a case of it was available at 8x EV/EBITDA and the valuation seemed pretty reasonable to acquire rather than go on an organic build in this category?
I will answer a little bit of this, and I will ask Ram to also talk you through this, and maybe give you a bit of historic context and for the future. Let me first again reiterate a few points, because I think it's an important thing. First of all, for us, it is a strategic fit from the point of view of the category they operate in, the customers they bring, the capability. Therefore these are best-in-class modern plants, both from tube making, but more importantly from decoration capability point of view. It has also got a strategic location in north, which is important. That is very, very clear.
Also, as we continue to drive our beauty and cosmetic agenda, what we are beginning to debate and also work on is that beauty and cosmetics, in order to accelerate our beauty and cosmetics growth, it may be a good idea to drive it through twin engine, which is our lamitubes, which of course we are continuing to do great work on, 360-degree printing, all the work which we will do, but also and equally through plastics.
Because customers and certain brands have requirements which are very independent and unique, and it is our ability to be able to offer solutions on both of them, which will help us do that. I think in that context, this helps us. Finally, it also augments our capacity. While the capacity is there, but it will further augment our capacity, and also in a strategically important location in North. I'll hand over to Ram to talk you through this a little bit more.
Sameer, good evening.
Good evening, sir.
Simply, you know, we operate plastic tubes out of West. The North plant really helps us to meet North demands. We currently send it from this. This is one. As you know, we are heavily concentrated towards lamitubes in India as well as globally. The capabilities over a period of time we built in lamitubes to meet personal care markets and pharma markets is substantial. Many times we have explained to you our capability in terms of decoration, our capabilities in terms of pre-presses, zero defect programs. There are lots of capabilities we've built in India and globally on lamitube. Over a period of time, because our efforts was trying to convert from bottles, from plastic tubes into lamitube, that we did that correctly. There will always be a market which will continue to remain in plastics.
We thought this is an opportunity that we could have a relook at our strategy so that we could also concentrate on plastics in India. Even though we have plastic operations in India, this fits really well. That is one of the reasons that we acquired this. As Sudhanshu was explaining, they have a good asset base, which complements our asset bases. They have a good people, and they have a very good in terms of decoration capabilities on plastic tubes, which will actually help us to further add. I think it's a good fit, and we also have two energetic entrepreneurs with us as employees going forward. I think with our ability to optimize resources, bring in better productivity and things like that, will help that business to improve further margin. That INR 3.5 crore, what you are saying as a synergy benefits, probably will flow through quickly, yeah.
Got it, sir. Just two follow-ups on that, sir. One is that the capacity that you are acquiring, what kind of sales can it do on a full capacity level? What is our current plastic tube sales in India, excluding the acquisitions?
We don't actually segregate plastics and lami. For us, it's a personal care business. That's what that you will probably will be seeing. What you are seeing is our personal care business also has grown. T his year that we are already almost about 200 basis points higher than the last year, even in the H1 of this year. We'll continue to grow that. This business Creative is purely on beauty and cosmetics and pharma. That will add up further.
Sir, the capacity question. Full capacity, what kind of revenues can this plant generate, the North India that you have just acquired?
Currently, they are doing I think the report you might have seen it, they are doing about INR 103 crore-INR 105 crore business currently. They have a good plan to grow and our objective is to always grow in double digit. I'm sure that we will be able to do that.
Let me rephrase the question, sir, then. What is the current capacity utilization of this plant, which is touching INR 100 crore revenue?
I think, thank you for asking this question in three, four different ways. Suffice to say, there is enough headroom. Unfortunately, we don't want to share the exact numbers at the moment with you.
Fair enough. Thank you. You could have said that.
Enough headroom.
Finally said. Hello?
There's a lot of headroom. To just build on Ram's point, I think they currently do about basically INR 103 crores, as he said, 103 some, INR 3 million-INR 5 million. There is a lot of headroom. There is a lot of headroom.
Sir, can I squeeze in a sec?
Sir, I'm sorry to interrupt. Would request you to please come back into question queue. Thank you. Ladies and gentlemen, in the interest of time and fairness to all participants, please restrict questions to two per participant. If you still have more questions, please join the queue afresh. We have next question from the line of Chirag Sureka from DSP Mutual Fund. Please go ahead.
Sir, good evening. I just wanted to ask your debt trajectory. I just have one question. Your CapEx, so a lot of data around that. Your CapEx is about INR 130 crores a year. Is that the kind of CapEx that will be expected for the next two years? Given this acquisition, your net debt has come down from, let's say, INR 430 crores to INR 233 crores. How will it move over the next one, two years? As a company, when you look at net debt to EBITDA or any net debt number, what is the ratio that you look at? Thank you.
Very quickly, I will hand it over to Parag to talk to you in some detail. First of all, I do want to tell you, I don't know where you got this INR 130 crore number. I think there was only one year in which the number was that much, and I think it's incorrect to make one year as a trend. I think we've always maintained that our CapEx will be more in the vicinity of, if I could use a number, close to about INR 200 or maybe a little bit more than that. We've said that depreciated value or our depreciation gives a clear indication of how much we may be deploying year on year. I think that is a number to sort of look at. With that, let me hand it over to Parag to more specifically address.
You know, first let me just reiterate what Sudhanshu said in his opening comments. He said that CapEx for growth is never going to be a barrier or a reason not to invest. I think your reference to INR 129 or INR 130 crores is with respect to last year. Perhaps you are further sort of influenced by the fact that the CapEx so far is INR 64 crores and therefore you are arriving at a conclusion that the CapEx level is INR 130. We have said this several times before to various investors in investor calls that our CapEx can be and would be up to our annual depreciation, which is there in our consolidated financials of around INR 230 crores. Again, to reiterate, there is absolutely no reason to believe or think that CapEx is being controlled.
CaPex would be provided amply for our growth. Therefore, I would suggest not to assume that number of INR 130. As Anshu already said, the number is more towards INR 200 or thereabouts. Can I repeat your second question, please?
Sir, thank you for clarifying that. The second question is, the net debt has come down from about INR 430 crores to about INR 233 crores.
Right.
With this acquisition and CapEx, as a financial policy, how do you look at net debt? What is the number that you strive for? Because you are improving the numbers sequentially. How do you look at net debt to EBITDA? Is there a certain ratio that you will get to guide us with?
Look, at the end of the day, the use of cash, the number one reason for cash is to plow back and grow the business. That will never, ever change. It's keeping that in mind, which will actually determine what level of net debt we need to maintain. That's the best guidance that I can give you.
Yeah. Without sharing a number, I do want to let you know, just to build on what Parag said, as a board and as management, we clearly have markers on net debt to EBITDA ratio. You are aware of it, actually. You know what are healthy financial ratios. The good news is we are very well under it, and therefore, there is enough room for us to be able to grow, and if need be, borrow to grow. I think you know that's where we are.
Absolutely. Thank you. Happy Diwali to you and the families.
Thank you, and same to you.
Thank you, sir. We have next question from the line of Trilok Agarwal from Birla Sun Life Insurance. Please go ahead.
Hi, good evening. Thanks for the opportunity. I have two questions. One on the, I'm not sure whether you have covered this, the reason for subdued AMESA performance. Second, with regards to the acquisition, obviously, I heard on the previous participant when he was alluding to, you said it's a combination of A, growth, the margins as well as, market share that they bring too. I just was wondering, given that you guys have enough presence and enough bandwidth. I was wondering, couldn't you yourself have built this business? I'm not saying it's overnight INR 100 crore business, just very curious to know, what kind of thought process led to this acquisition?
Yeah. It's a good question, and let me address both of them. I think Americas, we've talked about, but let me first quickly talk about Americas once more. See, the point is that you are seeing a subdued performance in Americas in Q2, about 7.4% decline in this quarter, period to period. I must tell you, one, this is a one-off. It's a blip. Also it's a blip because our Americas portfolio has a very large component of travel and sample tubes for one or two marquee customers in U.S. As you know, that has got very badly hit by COVID. If I was to share that their contribution of that component is close to about almost 20 %+. Therefore that has got really badly hit.
Despite that, I think because of our nimbleness and agility, our ability to have share gain, wallet share gain with some of our beauty customers, our ability to do pipeline work and build the pipeline, we've delivered these numbers. We are confident that in quarter three, we should be able to deliver growth, and then hopefully build it from there. I think that is the question. It's a very peculiar thing there. They have a very large component of travel, and as you know, travel has got really badly affected, at least in the last couple of quarters during COVID. The second thing, which is basically on the rationale for Creative. I think the Creative rationale, I've explained this in quite some detail, but I want to just again bring it. I think it's a good question.
The very simple question to ask is build versus buy. The question you are asking is why couldn't you build it yourselves? I think the point here is that in terms of the portfolio and strategic fit of this portfolio, it's extremely high. I think it is exactly in the area of beauty and cosmetics, and therefore dials up our personal care and personal care ambition, which you've heard us talk about subsequently. It's kept us that. Second thing is also in terms of capability in plastic, and therefore within plastic decoration and tube making, and the strategic location in North are very powerful drivers for us to look at that. In our due diligence, basically all we've done, I think that has really helped us.
Finally, because the kind of customers they have. The kind of capabilities that they have built, they are able to get much more from a revenue per tube and revenue growth perspective, and also margin per tube and EBITDA margin. For our business, it is EBITDA margin accretive, it is revenue growth accretive, it's got a strategic fit to our beauty and cosmetics. It's got a very well-located, strategically located plant in the north with best-in-class modern facility. We think we've got it at a good sweet deal for both the players. The entrepreneurs are keen to work and drive with their EPL, and that's why it's a cash plus share merger. Therefore, basically, they will be owners of EPL in that sense through the shares they will own. They are keen to participate in our journey as we grow this forward.
The fit we thought was very good. Conceptually speaking, I've always said this. See, when you look at any new acquisition, what is it that you look at? You look at new customer, new category, new geography, and new technology. Technology is a little rare in our business. If you look at the other three, this clearly brings new category, as in strengthens the beauty and cosmetic categories. It brings in a few new customers or strengthens our position in many others. It clearly ticks two boxes, and it is in the existing geography. It further strengthens our position in India.
Understood. Thank you very much. Lastly, obviously, this could be in the future, are you guys still open to any inorganic acquisitions going ahead as well? I believe most of the portfolio fit, you already have it. That's what I was trying to understand. Even in the past you had it, I just thought I'll squeeze in this one.
This is an ongoing process. We never give any guidance, but we continuously explore opportunities. We are doing well by God's grace, so therefore, with a strong balance sheet and a good commitment. Whenever there is a good strategic fit and at the right price, we will be absolutely open to acquisition. Our growth, we are committed to growth, organic growth, and if need be, and at some time to time could be inorganic growth as well.
Thank you very much.
Thank you, sir. We have next question from the line of Varshit Shah from Emkay Global. Please go ahead.
Hi. Thanks for the opportunity and I think good performance as always expected. My question is slightly on the Creative again, sorry for the cost of repetition. What I understand from the conversation so far is that EPL is more pioneer in terms of a suite of offerings in laminated, but maybe probably we had some offering gaps, but in the plastic tubes and especially on the decorative side, which can give you a higher margin portfolio and specifically inroads into your customer, and which is something basically you're acquiring from this acquisition. I mean, all other obviously are plus points, but probably it seems to me that this is a key pillar in the acquisition. Which probably then you can, since EPL is a global company, you'll be able to replicate it across the globe. Is that understanding correct? That's point number one.
Yes, your understanding is correct. You're absolutely right. We get best-in-class modern plastic facility. It allows us to play this segment even more powerfully as we go forward. You're absolutely right, they bring that to table. Moving forward, you're absolutely right. It may also become a launchpad for us to do things globally.
Sure. Two things. I'll just put these two questions in one. If you exclude the hand sanitizer or the hygiene segment, which are probably not there in the base quarter, that means that last year the business would have maybe declined because of the headwinds related to COVID, which you are facing, and probably doesn't come back maybe in Q3 or Q4 onwards. Is that correct? Secondly, on margin. Whatever year-over-year margin improvement we are seeing, is that largely because of Phoenix one and Phoenix two is yet to flow into it?
Let me answer both the questions. I think, first of all, it's wrong to assume. See, let me tell you, I think hand sanitizers tube, last time also I told you that our growth independent of hand sanitizers tubes in quarter one was a double-digit growth. Our growth this time also, which you are seeing 5.4% growth, our growth net of hand sanitizers, there is still a growth. It is incorrect for you to say because there was a lot of pipeline filling in quarter one on hand sanitizers. Therefore the sales on hand sanitizers in quarter two is very different from the sales of hand sanitizers in quarter one. That's point number one. Point number two is that having said that, are we going to build the entire health and hygiene? Yes. We talked about that. We will look at hand soaps.
There's work happening on that, and we will start seeing that. First answer to your question, despite COVID headwinds, have we delivered on growth on our business as usual without this hand sanitizers? The answer is yes. We have delivered that because hand sanitizers numbers are much lower in quarter two compared to quarter one because of the pipeline filling which had happened there. That is the first question. The second question, which you had, if you can just sort of bridging my memory, this was the first one was this, and the second one was on?
Yeah. On margin improvement. Whatever improvement you're seeing.
Margin improvement, basically I've said this many times. Consciousness is an intrinsic part of EPL's DNA. A strategic, well-planned program, Project Phoenix, which at phase I, phase II, is continuously on. That gives fuel for growth. At the same time, we continue to look at every line. We continue to look at multiple programs. Project Phoenix is one of the big programs which we talk about. It is good to bring you around that. We look at multiple programs, all line items.
All line items, I want to say that, across regions, to be able to work on costs. As I was saying, our war on cost will continue in times like this and in general, because we need that ammunition to grow. Basically, we need that. That becomes an arsenal for our growth intrinsically in the business, and also to give better returns to stakeholders and shareholders.
Sir, no. Actually, my question was very different. My question was more like the improvement has largely been on account of Phoenix one, Phoenix two is yet to flow in. That's my only question in the margin.
Phoenix one, Phoenix two, I'll also ask Ram to explain on that. I think my request to all of you is not to get too carried away by this. I think what we are committed to is actually a continuous steady improvement in our EBITDA. That is what we are committed to. Now, if how that comes through are different things, Phoenix one, Phoenix two, in future, some other program. There will be programs which will help that. Some programs are not named, but they also help. I think the point is that journey will continue. To very specifically answer your question on Phoenix two, I think the programs on Phoenix two have already started.
I will also ask Ram to elaborate a little bit more. Some of them may be built in, some more will come. From a point of view, I think what we are committed to is to continuously look at the EBITDA margins we have and how do we deliver good EBITDA margins and inch up our EBITDA margins as we go forward. Ram, over to you.
Since we are a global company, there are some natural opportunities comes in. There are some things we do better in one region, we could benchmark, we could adapt. Phoenix is all about best practices in terms of production efficiencies, in terms of material usages, in terms of materials itself. All that we continue to look for and benchmark against our own units, against the market competitiveness also. All these programs are ongoing programs. There will be enough opportunities. The COVID also has helped us in another term. That in the first quarter, you all know that we never get enough number of people. Naturally, with the existing staff, since we were running all our plants, we have efficiently run and delivered the first quarter results. That has given us different kind of a learning.
That we could do further optimization of our processes, which will better the outputs. Now that we are seeing it in Q2, and we'll see it going forward. See, all in all, manufacturing is about look for every opportunity where you could improve. Improve in terms of cost, improve in terms of customer delivery, improve in terms of product quality. All the three we are continuing to look into. Product quality will give product recognition in the market, higher growth. Cost will give us better benefit in terms of improvement in margins. I think we are well set, and it is partly becoming a culture of an organization. Is it answers your question, right?
That's really helpful, and thank you and all the best.
Thank you.
Thank you, sir. Ladies and gentlemen, please restrict questions to two per participant. We have next question from the line of Ashwini Agarwal from Ashmore Investment Management. Please go ahead.
Hi. Congratulations. Pretty good set of numbers in a very difficult operating environment. A couple of questions relating to the acquisition. How much debt are you acquiring, and could you share the pro forma number of shares that will be issued as a result of this transaction?
I think the acquisition would largely be funded through internal accruals. That's all I can share with you at this point in time. On the number of shares, I think, basically, to give you an indicated number, it will be about 23 million. This is not an exact number, but that will be the number of shares approximately.
No, Sudhanshu, my question was that how much debt is Creative carrying, which needs to be taken on?
First of all, number of shares, let me correct on the call, it is 2.3 million, not 23 million. I'm sorry, 2.3 million. Your question was on how much debt is Creative carrying. What is the net debt in this? I think it may not be appropriate for me to share that at this moment. We will be able to share it with you at an appropriate time.
You expect to close this by the end of fourth quarter?
Yes. In the best case scenario, we want to close it by fourth quarter, early fourth quarter. Basically, we are signing today, and we should hopefully be closing in about 45 - 60 days.
The other question I had was a broader business outlook. We've seen a steady improvement in India over the last three months, with September being quite strong based on other parameters that we're looking at. But your business tends to be a little bit more defensive because it's essentials, it's oral care and so on. But are you also seeing an acceleration on a month-on-month basis, and how should we think about the quarters ahead in the four regions that you broadly break your business out into from a revenue perspective.
I tell you, in this year now, again, a very good question, in a year like this, a COVID year, my request to all of you and good you ask this question, is actually it is not business as usual. Therefore, to look at quarter on quarter, both for our business and for the regions, is of course we look because we report quarterly, you will look at it like that. I think as we keep growing the year, as the year goes by, we have to look at both cumulative and quarter on quarter. If you look at that is the reason when I talked of our numbers this time, I first told you where we are on H1. There is a lot of dynamics happening in different regions, quarter one, quarter two, in quarter three, quarter four.
First, the headline. We remain committed to delivering good growth even in these tough times, in this year. That is a given at a global level. That is the headline I want to first leave you with. How does this vary from geography to geography, quarter to quarter? Let me just give you an example of India. You talked a bit about India as well. I mean, you talked about India when you talked about September. India in quarter one, we had a very hard lockdown in April. Therefore, April almost everything was shut. May, it started oponening up. June came to normal. India was depressed, AMESA was depressed in quarter one. India has delivered very good quarter two, I think, with about a 7%+ growth in revenue and a 28% growth in EBITDA. I think that has happened in quarter two.
Really good, yeah.
Yeah. Sequential growth of 20% as well. I think, AMESA, which is largely India, I think, delivered a very good performance. Now, the thing which we are seeing is, and with few customers, but I'm taking the liberty of sharing with you, is that the demand for tubes peaked in last two, three months. You're absolutely right in September. We suffered in India from a supply side in quarter one. We are seeing headwinds from demand side in quarter three, basically in India. When I say I'm seeing headwinds, what I mean is that some of our key customers, the demand is not there now. Therefore, basically, there is a reverse pressure at least on our category. Now, is that because the demand is not there in the market? Is that there is a bit of overstocking, understocking?
That phenomena, it needs to be peeled. We delivered, actually indeed some of those customers delivered a fantastic August, September, July, August, September. Did they peak there? There is also a change which is happening in India in pack sizes, especially in our category. What is happening is because of this stocking up tendency, everybody is stocking up. Partly because of the supply constraints in quarter one, a lot of our customers tended to go for bigger size tubes, if I could say, in the respective category. Therefore, their volumes may be better, but our volumes are just tube volumes. Right? Therefore, our large pack sizes have done slightly better, but our small pack sizes may be different. Suffice to say that this dynamic is playing out differently in different regions at different times.
COVID is also playing out very differently in different regions at different times. Europe second wave is very strong as we speak. America numbers are still going up. India seems to be in a reasonably good position. I think let's see Diwali and the festivals. Our reading is that some demand headwinds will remain, at least from what we've seen in India. Our confidence is that we'll be able to navigate it through wallet share gains, through new pipeline wins, and also with existing customers as much as possible. We are seeing a mix of everything, is what I could share with you.
Okay. Thank you so much. All the best.
Thank you.
Thank you, sir. We have next question from the line of Vicky Punjabi from JM Financial. Please go ahead.
Hi, sir. Thanks for taking my question. Just quickly on the acquisition again on the plastic tubes. My understanding was that globally we were pursuing a growth opportunity, which was conversion of plastic tubes to laminated tubes. Now we are possibly looking at building a business which has also stronger capabilities in the plastic tubes as well. Is there a change in that thought process earlier, or is there something that I was missing in terms of my understanding?
Let me tell you one thing. We will continue to remain laser-focused on our laminated tube agenda. I think that is what we know really well that we will continue to drive. If you look at our growth opportunities as we go forward, we've also said that our ambition in the next five years is to deliver double-digit growth. We've also said that a lot of our growth have to come in beauty and cosmetics because that is where we need to do share expansion. In light of all this, if we then look at the market, and I think, Vicky, maybe you are aware, but maybe I'll take a minute to again look at the global market on tubes, it's about INR 40 billion or maybe INR 42 billion. Of that, laminated tubes is half of the market.
There is half of the market which is between plastic tubes and some aluminum tubes. Even if we run very fast, we cannot convert that 50% of that market in a hurry. Our conversion agenda will continue. I think if you look at, especially again if you look at beauty and cosmetics as a category, which is about 14 billion tubes globally, I think a majority of that is in plastic, globally at least. That is a phenomenon which we have to recognize. There is laminate and plastic there. There is of course aluminum conversion opportunity in pharma a lot more and a bit in beauty and cosmetics. I think our conversion opportunities will continue, especially aluminum to laminates and moving forward from aluminum to plastics as well.
In order to play beauty and cosmetics comprehensively, in order to win this market rapidly, we believe that we've got to play with a twin engine. We'll basically be able to do both, which is tube, laminated tubes and laminated tube conversion. At the same time, for certain brands and certain customers on their very specific requirements, we should be able to deliver on plastic tubes as well. I think that's our thinking. India is a good market where we have a very strong share in laminates. We have a share in plastics, but could be better. It is a good opportunity for us to test this hypothesis and to double down on this one.
Sure. Would this also mean that you would look at international opportunities in plastic tubes and would that require a different set of capabilities? Because internationally, we will be competing with different players who could be well-entrenched.
See, you know about this industry and this business, I think scale is very important. Wherever we play, we need to play with scale. I think in India, we are confident that we'll be able to get scale with what we've done. Between us and Creative, it gives us sufficient scale and helps to be able to play plastics really well in India. We'll have to review this and weigh this as we go forward and evolve. Absolutely cannot comment on that.
Sure, sir. Thanks for that. Just last thing, this is just a minor clarification. You said that there will be 2.3 million shares. Is that 2.3 million shares, are we acquiring 2.3 million shares or are we issuing 2.3 million shares for the balance sheet?
We are issuing 2.3 million shares for the balance sheet.
Oh, okay. Sure. Thanks a lot, sir.
Approximately 2.3 million shares. Not exactly 2.3 million, but the number will be sort of known to you.
Sure. Thanks a lot, sir.
Thank you, sir. We have next question from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Thank you and good evening. A couple of questions from my side. First, on the acquisition, I was just doing a simple math. If I take a full capacity and divide it by that revenue, it says INR 5 at your kind of a realization, we have a INR 3 viewpoint of a realization ballpark there. We also said that we have a significant headroom in terms of expanding capacity. Are we talking of existing capacity or are we talking about optimizing and debottlenecking? How should we see the capacity for this 200 million tube company which you are acquiring? That's first. Second question again on the acquisition. What is the customer overlap we have for the two companies, that is EPL and the Creative which we are buying? Is this adding significantly in terms of new customer to us?
How are we looking at it in terms of expanding the plastic? We will try to convince some of the customer to get into laminate or how should we see you leveraging this new customer base to expand your laminate business as well? The third question, over next few year, where do you see your personal care contribution as an overall company? Earlier, we were talking of 50/50. We are already at 47% . I think that guidance doesn't remain any valid now. Just some thought there. Thank you.
Yeah. Let me talk a bit to it, and then I'll ask Ram to build on it also. First of all, to your first question. To answer to your first question without giving you numbers is that there is enough headroom in the capacity available with them. Having said that, and maybe Ram may talk a bit more to it as well, there is room for us to rationalize and reorganize in the way as we go in the fullness of time, and therefore be able to extract a little bit more out of it. I think it's both. It is available headroom as is, and there is, of course, further room for reorganizing and therefore being able to do that. That's from the first part on the capacity part.
On the third question, if I remember right, the second question was between plastics and laminates. See, my point is that there are certain customers who require certain type of tubes. Now, I think we will continue to convince them where we want to convince them, and we think it's a win-win for us and the customer and hopefully consumer. We will convince them on what is right, and if that right is laminate, it will be laminate. If there are places where they need, especially on decoration, sometimes on shapes, imagery, and maybe slightly more premiumness or smaller quantities, I think it will allow us to play that better through our play in plastics as well. I think third question, if you were to just rejig my this thing, what was the third part you said to this one?
What's your target for your personal care?
That's a good question. I want to also say this. See, the business we are in, and I've said this to many of whom I have had a chance to interact one on one. The business we are in is to continue to diversify our portfolio and make it richer. By diversification of portfolio, it is diversification of our category portfolio, which is what we call here slightly more simply personal care and oral care. It's also diversification of our geographic portfolio. Why are we winning in this year? We are winning because of our portfolio, geographic portfolio and category portfolio.
Our journey is to continue to diversify this portfolio to grow it further. In which we will continue to drive leadership in oral care, we will continue to strengthen beauty and cosmetics, we will continue to drive pharma, and we will build food and home as we go forward. We have to build a very diversified portfolio. That's what we are committed to. How the numbers stack up, will in the way you are looking at it'll cross 50? Maybe it'll cross 50.
I'm saying the point I'm making is, we will continue to drive this portfolio to continue to diversify it, and we will strengthen some of these other categories, and that is the purpose. Simply put, that was said as 50/50 in the past. As we drive this portfolio, if that number will change, it will change. What we are committed to is to drive that portfolio, diversify it, make it more premium, make it more ASP and margin accretive. I think those are the journey we are on. I'll ask Ram to add on a bit more on these, on all, especially your first point and other points as well.
Sanjesh, it's a very interesting way of saying revenue divided by capacity to get an average sales price. There are two fundamental differences. Creative does only beauty and cosmetics. As we were always explaining to you, beauty and cosmetics are slightly higher priced, more higher priced in terms of an average sale price. In plastics, it's still higher. Okay. There are two fundamental differences. Whereas we as EPL, too, as you rightly know, 47% of personal care and 53% of oral care. We have a large portfolio of oral care. That makes a difference in terms of an average sale price. This is the first question. In terms of a headroom, we'll always, as we say, we are a leader, we have enough capacities, they have enough capacities. We will see and optimize, we'll bring in our efficiencies to that plant.
Whatever we could do to improve their utilization, we will continue to work on it. In terms of new customers, there are some customers will be an overlap, there will be some customers who will be new. Both will add value to our businesses because almost we being a market leader in India, we deal with most customers. Some of the customers are buying from them, too. There will be an overlap to that extent. There are some of them are exclusive to them, which will add new customers to us. In terms of personal care, see, it's a very dynamic measurement, right? We continue to grow in oral care. If you get into a geographical area like Europe, we already have a very high amount of personal care. We are putting lot of efforts to grow in oral care in that region.
Likewise, this also will change the dynamics. In net, what we need to see is, as we continue to grow in personal care, it improves our margin. That's our stated objective. We stated 50%, it could go to 52%, it could go to 53%. It is not by keeping stagnant oral care. We will continue to grow oral care. There are some market, higher amount of focus, some market is only an organic growth. We will see all that, how it goes. Thereby, it's a moving average. 50% is not static. Oral is not going to be static also. That also you have to keep. Our focus is on both areas.
No, well said, Ram. Well said. I think especially the Europe example is a great example. It's about diversifying our portfolio. Therefore, and basically being able to diversify, because each segment brings something to table, and when I've had one-on-one conversations with you, in the interest of time, I won't get into that. I think the point is there's a role to be played by each segment, and we believe it's diverse portfolio which is important.
That's right. Thank you, and best wishes.
Thank you.
Thank you. We have the last question from the line of Sumant Kumar from Motilal Oswal Financial Services. Please go ahead.
Yeah. Hi, sir. We have seen our Europe business has shown a double-digit growth since 10 quarters. Double-digit growth, I'm talking about. Can you talk about how things are going to happen? What is the growth outlook for the Europe business?
Just repeat the question once more, please. I missed out the first.
It's regarding Europe business continue to show a double-digit growth over 10 quarters.
Yes.
Can you discuss more about the Europe business going forward? Is it going to maintain the momentum of double-digit growth?
Yeah. Europe business, we are very excited about, as I just shared with you when I was talking about that. You are right. In the last three quarters, we've delivered double-digit growth. Even in the immediate two quarters, we've delivered strong double-digit growth in Europe. Just to build on what Ram just mentioned, the point is, we see Europe opportunity slightly differently. We see the Europe opportunity from two points of view. One, we can and should be able to get more steady oral business in Europe. There is potential, and those conversations are on. That is one opportunity. That gives us a big leg up in Europe, and that will bring in more growth as well. Some of it is already in pipeline as I speak to you.
I think, that gives us confidence that we will continue to grow in double digits. At the same time, we believe that there is continuous share gain opportunity in Europe. Therefore, we are also excited by that share gain opportunity in beauty and cosmetics and pharma to some extent. I think that is the second area which is interesting. Third area which is very interesting, and I tell you where share gain we are very excited with is on our sustainability journey. I think therefore our ability to give robust, sustainable solutions, because Europe will be at the forefront of that journey. Hopefully, we will partner with customers and be able to deliver on that. Third thing we are excited about Europe is basically there is also a conversion opportunity.
Conversion from rigid to plastic tubes and very classic example being on shampoos, on hair care, hair shampoo, and hair conditioners. I think that is also an opportunity, and West is a little bit ahead on that, and Europe, to that extent, is a little bit ahead on that. Therefore, that is another opportunity. There are clear opportunities in Europe which we have a very well-detailed and planned out pipeline, which gives us confidence that our Europe growth journey will continue.
You said for the acquisition, you will use internal accruals, but we are raising INR 150 crore of non-convertible debenture. What is the purpose of this?
I'll ask Parag to respond on that. I think the point is that this is Yeah. Parag will take that one.
Yeah. We already have an NCD of INR 50 crores on our books. Therefore, that's something that we may think of refinancing. At any point in time, we always seek approval from Board, looking at the overall requirement of cash, that requirement is global with respect to so many other purposes. Your linking that to acquisition, I don't think would be appropriate at all.
Yes, absolutely. Therefore, there are several things happening in different geographies, and we are looking at different things. I think it's a part of our ongoing business.
Okay. Last question. Can you discuss about the key drivers of EAP?
Key drivers of?
EAP.
EAP. Okay. China.
Yeah.
EAP. East Asia Pacific. Key drivers of EAP is, I think what we are really proud of our EAP business is their innovation, their agility, and their ability to look at particularly, caps and closures and, basically to look at innovative designs in that space. I think what the team has done in this year especially, is they have also adapted brilliantly to what they call in their own terminology, new emerging brands. What is happening in China is a phenomena of two twin phenomenas. One phenomena is a shift between what is physical retail to e-commerce or digital retail. I think because of COVID, digital retail has actually grown there like it has grown in many parts of the world, including India. Therefore, that has spawned new brands as well with it. Therefore, they use the term new emerging brands.
The second thing which is there for new emerging brands is like in many parts of the world, particularly in beauty and cosmetics, there are now more specialized niche, new emerging brands that are coming up, and that is true in China. It's partly true in U.S., Europe, including India, actually, if you look at a little bit. I think that is another place where they are playing well.
Basically, it's our agility and our ability to do this, which gives us confidence in China as we build our portfolio with multinational customers, which was our original stronghold. We also will continue to drive with local customers and local kings, as my Chinese colleagues calls them. Now basically, these new emerging brands, many of them going through a new channel of e-commerce. We are confident of being able to drive EAP and more specifically China, through some of these innovations.
Yeah. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to Mr. Ankit Gor from Systematix Institutional Equities for closing comments. Over to you, sir.
Hi. Thank you. Thank you, Sudhanshu and colleague for taking out time. I would like to wish a happy Diwali to everyone at EPL. Sudhanshu, I would like to hand over call to you for any closing remarks. Thank you.
No, thank you very much for your interest. It's actually been a long call already. I know we are in the festive season, so, thank you for your support and as you heard from us, we continue to remain committed to delivering superior results. Delighted to have shared all the news and the results with you. Thank you, and once again, happy Diwali and a happy festive season to all of you. Stay safe and stay healthy.
Thank you very much, sir. Ladies and gentlemen, on behalf of Systematix Institutional Equities, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.