Good evening everybody for joining the call on such a short notice. My name is Amit Dixit, and I'm with Blackstone, and I'm here with Ashok Goel, Chairman and Managing Director of Essel Propack on this call. I will introduce the transaction, and then I'll pass it on to Ashok, and after that, we can have some Q&A. As you may have seen in the press release, Blackstone is committing up to $460 million to acquire a majority stake in Essel Propack. This is a publicly listed company, which is owned 57% by the Ashok Goel Trust. We are acquiring 51% at INR 134 per share. Ashok will be retaining the 6% stake, and then we'll be making a mandatory open offer at INR 139.19 is the exact amount at which we are making the mandatory open offer.
Overall, the transaction amount comes to about INR 3,211 crores or about $462 million. In terms of why is Blackstone doing this transaction? I think I have five key messages. Number 1, Essel Propack is a global leader in flexible tube packaging and is a very high-quality business. It's the world's largest manufacturer of laminated tubes. These are the tubes which you use in your toothpaste. If you use a Colgate toothpaste or a Patanjali toothpaste or let's say you use Fair & Lovely cream, whatever you use, the packaging around it is made by Essel, and it's the world leader in this market. It's a global company. It has manufacturing plants in 10 countries, 20 state-of-the-art manufacturing facilities, and long-standing global customers, some of them for over multiple decades. Who's who of global consumer companies and pharmaceutical companies is a customer of Essel Propack.
Also, Essel Propack is vertically integrated, so it also makes its own laminates. That's why it has a very strong competitive position in the industry. I think that's point 1, the core global leadership position for many decades of Essel Propack. Point 2 is that there are strong tailwinds in the laminated tubes market and the consumption in emerging markets. What's happening in the market is laminated tubes are taking large share away from extruded plastic and aluminum tubes. More and more you will see, and you all know from using your own creams or any other pharmaceutical products you have or toothpaste, that how everything is becoming more flexible, although it has a plastic laminated tube inside. There's a very broad shift happening across categories. We believe Essel will be a big beneficiary of that in two areas. The growth will come from newer end markets, which is beauty, cosmetics, pharmaceuticals, and the growth in emerging markets, which is India, China, South Asia, Latin America.
Emerging market consumption growth for consumer goods is very high, and Essel will benefit from that. In addition, the move to the newer segment. That's the point 2. Point 3 or our message is, we believe a partnership between Blackstone and Essel Propack can unlock significant value because Blackstone is very familiar with this sector. We have made multiple investments over the last two decades globally in this sector. We have very strong conviction in this sector and the consumer sector overall. As you know, in India, we have a consumer packaging company called FHK. In China, we have a similar plastic packaging company called Shya Hsin Packagin g.
We have very experienced people like Harish Manwani, who's the former chairman of Hindustan Unilever, also the chief operating officer of Unilever globally. He's a senior operating partner for Blackstone and available to provide his network and his expertise to companies in India, especially companies in the consumer sector. That's point number three. Point number four is the core tenet of our investment thesis is continuity. We are backing continuity because I talked about growth, what excites us. What's equally important is the continuity and stability. That's why we are very happy that Ashok will remain as a shareholder. The management team will continue to take this company going forward, and we can add the management capabilities with Blackstone's capabilities to take the company to the next level. My last point is a little bit just about Blackstone.
That's my last message is, as you know, Blackstone has committed now $10.5 billion in India, roughly half and half in private equity and real estate. We are the largest owner of commercial real estate in India. Part of that portfolio went public on April 1st through the REIT platform. In private equity, we are large investors in many companies. We executed India's largest buyout, which was Mphasis in 2016. The point is, we have made a very strong commitment to India over the last decade. As you heard from Blackstone's leadership, both Steve Schwarzman and Jon Gray were in India in the last six months, that India continues to be a focus market for Blackstone and a well-performing market for Blackstone. We'll continue to make sizable investments.
Like you have seen, we are committing close to $500 million to Essel Propack, and you saw in February, we again committed close to half a billion dollars to Aadhar, which was an affordable housing finance company. Just in private equity, in the first four or five months of this year, we have committed close to a billion dollars to two sizable transactions in the country. With that, I will just stop here, and I will pass the microphone to Ashok Goel.
Thank you so much, Amit. Ladies and gentlemen, greatly appreciate you joining the call. A bit of preempting some of the questions you might have, is that I have been looking for EPL Limited and the position that EPL Limited, as Amit explained very well, a global leader. As the managing director of the company, I have always been looking at the succession, the continuity of the business, and not just the continuity, but even the growth of the company. That's the kind of partner that I was looking at. What we take pride in is that EPL Limited is very well-governed company. That is not just a regulatory requirement, but also a business requirement, because for us to deal with global customers, we had to be absolutely above board, and not just internally, but also in our actions.
Therefore, we were looking for a suitable partner, I'm delighted that we found Blackstone as that partner who can continue the legacy, can maintain continuity of the management and the customers relationship, and stakeholder relationships, of course. That will catapult the growth of the company even further, creating even better value for the stakeholders. With that, I leave the floor open for question and answers.
Sure, sir. Thank you very much. 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 the attached phone. Please note that this call is for media only, and questions will be taken from media. There will be a separate investor call that will be happening. The first question is from the line of Nisha from CNBC. Please go ahead.
Hi. Thanks for taking my question. Of course, this transaction had been on and had been under deliberation for a long time. My one question to Mr. Goel. Mr. Goel, what was the prime reason for this transaction? You have agreed upon a price that is lower than the open offer price. What was the reason for that?
Yeah. Hi, Nisha. Thanks for your question. Let me take the later part of your question first. That INR 134 that I'm getting and INR 139.19 is the open offer. I did not want to take any penny more than what my minority shareholders would have received. There is another element that I will get about INR 16 crore per year for five years.
Yes
as an advisor to the company and to Blackstone. That amount is part of the open offer. Therefore, you see a difference because I'm getting INR 80 crore by way of a transition service agreement.
Okay. This is just as an advisory fee that you will be getting. It's not non-compete or anything else in nature.
The transition service, that includes advisory and everything. Competition is not part of it. Whatever I am getting, I will get over a period of five years, whereas the minority shareholders will get it upfront.
All right. Management continuity. Who all would be sitting around with the company at the moment, if you can share a little more detail on that?
All of the senior management stays, that's what also enshrined in the word continuity, is that Ramasamy, Ram Ramasamy, who's the Chief Operating Officer, and all of the leadership team we have at the corporate and also in the regions stays intact.
All right. My question to Amit would be why packaging company, which is EPL Limited and not others, which were also up for sale and some of the other private equity players had bought recently. What differentiates this company from the others?
I think one big differentiator for this company, is that this is a global company. More than two-thirds of the revenue of the company is outside of India, it's denominated in U.S. dollars or euros or foreign currency. This is not a local packaging company which is providing packaging for FMCG companies in India. This is supplying to companies in U.S., Europe, India, China, Mexico, Colombia. It's a very global platform which requires a very different capability, both in R&D, product innovation, and importantly, management. Because the management which sells to such a large global customer base has very different attributes than management which sells to a largely local customer base. I think that's a very big distinction between EPL Limited and some of the other companies. That's point number one.
Point number two, as Ashok mentioned, I think the corporate governance of this company and the way the company has been managed is just fantastic. It's just a delight as an investor to do diligence on EPL Limited and everything check out. We did many customer calls yesterday, and you could have heard them on how well the customers regard the company, which was very refreshing. The last point I would make on a differentiation, which is what we are focusing on, is this is a combination of stability and growth. Because the company is the world's number one company in oral care for laminated packaging. They have a 40% global market share. However, it's very fast-growing in beauty, cosmetics, and pharmaceuticals.
What we really like here is you have the stability of a leadership position in a segment, you have a growth vector in a new segment, which is aided by the company's global footprint. You are seeing emerging markets growing much faster than the developed markets. I think all those reasons in our view differentiate EPL Limited.
Right. One more question on whether you're going to use this platform to increase your bandwidth in the similar sector because it's present in many other countries as well, it is global in nature. Will it be used as a platform in India or elsewhere?
Absolutely, Nisha. I think that always is our approach. We always are constrained, not by capital, but by platform and management talent. If there are relevant sort of opportunities globally or in India in our strategic focus areas, where we are going to focus on emerging markets and newer segments. If those opportunities help us accelerate the plans, we will definitely evaluate that.
All right. Any growth projection, Amit?
As you know, this is a publicly listed company. We cannot make any sort of projections. We are putting our money where our mouth is.
All right. I'm hoping to meet you separately on an interaction as well. Thanks so much.
Thank you. The next question is from the line of Jagadish R from VCCircle. Please go ahead.
Hi, Mr. Amit. This is a question for you. Any kind of a fresh capital infusion also is expected for the company post your acquisitions?
Hi, Jagadish. This is not the current plan. I think the current plan is to make this investment, and as I answered in the previous question, if there are right opportunities, let's say if you have to fund an R&D project for a customer program or there is an acquisition opportunity, then we will infuse further capital.
Also, you mentioned that globally you have similar portfolio companies across geographies, considering EPL Limited has a global market that way. How do you create an alignment with your portfolio companies on other geographies?
I think the alignment is more from the customer angle, not with the other companies, because we have very deep relationships with all global consumer companies, whether it's Unilever or Colgate or P&G or L'Oréal or GSK, whichever one you pick. Blackstone has deep connects, and we think some of those relationships can be quite helpful to Essel Propack. I think that's the primary angle. In this space of flexible plastic manufacturing with laminated tubes, Essel Propack will be Blackstone's only investment globally. This is the horse we are backing, and we put all our eggs behind this basket.
Excellent. Yeah, that's it.
Thank you. A reminder to the participants, anyone who wishes to ask a question, please press star and one at this time. The next question is from the line of Ranju Sarkar from Business Standard. Please go ahead.
Hello, Mr. Goel. This is for you. Mr. Goel, can you give us a sense of what will this particular deal do to the group-level debt? By how much will it come down or something?
Well, I'm not very clear about the question, simply because I have no debt. I'm not leveraged. Therefore, I don't know what does that mean.
No, what I wanted to ask you is that would the proceeds of the transaction, would it be used to kind of reduce the debt for the group companies?
Well, Mr. Sarkar, EPL Limited, Ashok Goel Trust is not financially, commercially a part of the Essel Group that you are referring to.
Okay. Amit, my question is for you. You talked about how you have invested about $10.5 billion in India. Could you give us a sense of how India has done for you in terms of returns and exits? How much of the money you have returned to your investors?
Yeah. Ranju, we cannot explicitly, due to compliance, talk about sort of returns. Overall, I think I can repeat what our President and Chief Operating Officer, Jon Gray, when he was here, he said. He made a public statement that Blackstone private equity is the best performing country for Blackstone globally. That's what the statement he made.
Things have been quite good, and you may have seen some of our exits recently, where last year we were able to sell Intelenet to Teleperformance, which was a business process outsourcing company.
Before that, we were able to sell Trans Maldivian Airways. Before that, our company, Agile Electric, which we sold to Eicher Motors. We sold Sonalika Tractors to Yanmar.
Okay.
It's been multiple company after others that we have exited over the last two or three years.
Long story short, it's been a very good run. On the $10.5 billion, you saw a very large monetization platform getting created on the Blackstone REIT. I just talked about the private equity side.
On the real estate side, we took a massive vehicle, India's largest REIT, and India's fourth REIT to the market, where Blackstone is the largest shareholder, and that's already in the public domain. Long story short, it's been a good run, both in terms of investments and profitable exits.
Right. In the last two, three years, we have seen several VC private equity firms betting on consumer plays. Do you see this as an extension of the same, or is it a more of a related consumer play?
Yeah. Ranju, what we call this theme is B2B2C. In other words, let's say a company like Hindustan Unilever is a B2C company because their products are consumed by all of us.
Yes.
A B2B2C company is a supplier to Hindustan Unilever.
Yes.
We have followed this theme of B2B2C globally, and we really like this theme. Several years back, we made an investment in S H Kelkar, which also supplies to FMCG company, and it provides fragrance and flavors.
Right.
Again, every deodorant or shampoo or agarbatti will have fragrance in it.
We like the B2B2C theme because it's never to be same domestic end consumption, number one. Number two, you are actually dealing, your customer is another business. You're not dealing with consumers.
In the case of EPL Limited, these are the world's best companies. These are Fortune 500 companies, household names.
Your customer contracts are denominated in foreign currency with the world's best customers.
You have the stability from that. Like some of the customers with EPL Limited have been with the company for over 20 years. One customer has been with the company for over 30 years.
B2B provides the stability, the B2C provides the growth. We like this theme of B2B2C.
Right. Thank you so much, Amit. Hope to catch up with you offline sometime.
Sure.
Thanks.
Thank you. The next question is from the line of Bhavik Nair from Financial Express. Please go ahead.
Hi, Mr. Dixit. This is Bhavik Nair from the Financial Express.
Hi, Bhavik.
Hi. Congratulations to you, sir, on this deal. One question to you is, I read in one of the reports that a French major and an Indonesian major were also vying for the stake, but Blackstone came in as a winner. Would you like to tell us something more about some of the final bids and how Blackstone kind of emerged as the final player for this?
Bhavik, probably best not to go into the details of the process, but maybe Ashok can comment on why he chose Blackstone.
Well, Bhavik, I obviously can't talk about other names. As I mentioned in my opening remarks, that we really look for somebody where the minds meet or met. The ethos and the culture and the values that one would strengthen the existing ethos and values and culture of EPL Limited. We found that completely matching with each other. That was one of the major factorBlackstone emerged.
Mr. Dixit, I would like to ask you, when did the deal talks commence with Essel Propack?
I think we've been in discussion for a few months. That, I think, has been in the public domain.
Okay. Any more plans? I heard you said that you'll only do a capital infusion further in case you would be doing some acquisitions. Do you see that there's a potential to do an acquisition in this particular sector, in this country going ahead?
Absolutely. I think it's not just this country, but outside also. I think this is actually one of the reasons why I think it's a good partnership between Blackstone and Essel Propack, because we have a very large global network. Because Blackstone is present in all countries globally, and we think there could be synergistic opportunities in those countries which we can evaluate for an acquisition.
All right. Thank you. Thanks a lot for this chat.
Thank you. A reminder to the participants, anyone who wishes to ask a question, please press star and one at this time. The next question is from the line of Nisha from CNBC. Please go ahead.
Just one clarity that I require with Goyal from you. You've categorically mentioned that you have no debt and your trust has no debt, and you are not part of the Essel Group that you're referring to, which is leveraged. Just one understanding, Essel Infra is also like a group company which is not in the listed space. Would you have any equity in that or any presence in that? Could some of this money be used for de-leveraging that company at all? If you can give that clarity.
Nisha, I guess I've already gone public with this comment. If you talk as a family, yes, we are one single family. We are a strong family, and we care about each other. There is no financial or commercial relationship with each other, and there's no cross-holding whatsoever. Therefore, I'm not sure how to respond to this question at all.
All right. Thanks for your clarity. Thanks.
Thank you. A reminder to the participants, anyone who wishes to ask a question, press star and one at this time. Next question is from the line of Ranju Sarkar from Business Standard. Please go ahead.
Amit, if I may ask you, in terms of all the deals that you have done till date, especially in the consumer space or so, where would you put this particular deal? If I may also ask, going forward, what is the kind of overall focus for you?
Sure. Ranju, to answer your first question, the size of the deal speaks for itself.
Right.
This is the largest commitment we have made in the consumer sector in India, half a billion dollars close to it. What we are committing. That speaks to our excitement about the company which we have. In terms of our focus areas, our investment strategy is focused on five sectors. Consumer is one of them, and in addition to Essel Propack, we made an investment in Trans Himalayan Airways, which is also a B2B2C company. S.H. Kelkar, a B2B2C company. Second sector for us is financial services, where Aadhar is an investment we have made recently. IT, information technology, is our biggest sector. There we have investments in Mphasis, in TaskUs, in IBS Software, until very recently, in Intelenet.
The fourth sector for us is auto components, where we used to own Agile Electric, and now currently we have a platform called Comstar, which we are using that as a buy and build platform. Through Comstar, we have already merged with another company to create a larger auto component platform. The last sector for us, number 5, is healthcare, where we used to own or be an investor in Emcure Pharmaceuticals. Currently, we don't have a company in our portfolio in that sector. I think these are the five sectors we focus on, there is a new theme which is going on in India, where we are putting a lot of resources into, which is distress. Because as you hear, a lot of non-performing loans, a lot of distress in the corporate sector in India.
Through our tactical opportunities fund, we have taken a controlling stake in IARC, which is an asset restructuring company. Through that, the strategy is to buy underperforming loans, and we have committed about $200 million to that project. Anyway, that's our focus areas in our investment strategy.
Right. Now, you have invested in some other companies like S H Kelkar. Do you see some clear synergies between them or in terms of their common customers and others?
I would say it's more, not direct expertise between two suppliers, but more understanding of the business and the dynamics around it and what's required to succeed. I think that's the core commonality. Not necessarily that customer A will become you do cross-sell or not. That is very opportunistic. May or may not happen, but the more is our understanding of the sector from 360 degrees, customer, supplier, raw material, management. That's what's helpful.
Okay. Amit, you mentioned that India has been one of your best performing markets. Have allocations to India increased because of that?
I think so. I don't think we'll be getting two commitments in three months for half a billion dollar piece if we didn't have the performance to show for it.
Right. Thank you so much.
Thank you. The next question is from the line of Shriram from Mint newspaper. Please go ahead.
Yeah, hi. My question was for Ashok. I wanted to ask, why haven't you sold your entire stake? If you plan to sell it, is there a timeline for that?
Hi, Shriram. Obviously, I wanted to partner with Blackstone, and that's what drove the decision, not sell the entire stake, and hopefully create better value for the future.
Anything on sale sort of a timeline, if you want to dilute your stake further? Now you're on an advisor for five years. Beyond that, any thoughts?
Well, there's no restriction from Blackstone's point of view except that I can't be part of the open offer. I've not thought about it that long, Shriram, to be absolutely honest.
Right. All right. Thank you.
Thank you. Participants who ask a question, please press star and one at this time. The next question is from the line of Madhav Chanchani from Times of India. Please go ahead.
My question is for Mr. Goyal. Mr. Goyal, I wanted to understand, what do you plan to do with this capital? I understand you also sold ItzC ash a few years ago. Just wanted a bit more clarity. Are you trying to start something, some new business or what's the idea?
Well, Madhav, because of my life is take as it comes.
Honestly, I have no plan that I made any very specific.
I will strengthen the business of Essel World and through Essel World, whatever the other leisure assets that we intend to build. The investments will go in that, and obviously I will do some philanthropic work, which has been very close to my heart.
That I will allocate some resources for that.
Okay.
I think so.
Okay. Thank you.
Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one. Participants who ask a question, please press star and one. As there are no further questions, I now hand the conference over to the management for their closing comments.
Thank you everybody for listening to the call and for all the Q&A. I think the questions asked were very thoughtful, so really appreciate that, and I hope you felt that the answers were the same. Just to summarize, I think the key takeaways from this call are that Blackstone is committing $460 million to acquire a majority stake in EPL Limited. Continuity is an important theme where we are entering into a partnership with Ashok Goel and the management team to take the company to the next level. The reason we are in this company is that this is the number 1 company in the entire world in laminated tubes with global marquee customers, with a very broad manufacturing footprint. We think jointly, we can take this company in a growth mode in 2 areas.
One is the fast-growing end segments like beauty, cosmetics, pharmaceuticals, and second, fast-growing geographies like India, China, Latin America, the emerging markets. We are very excited about this partnership and looking forward to working with the company and Ashok going forward.
Thank you, Amit. Same here. I'm delighted to be partnering with Blackstone today, and that's with the belief that we will strengthen our service levels and deliveries to our customers and build stakeholders' value together. Thank you very much.
Thank you.