AGI Greenpac Ltd Management Discussions

Glass Containers Market

The global market is anticipated to exhibit a compound annual growth rate (CAGR) of 3.7% between 2021 and 2028, owing to the rising worldwide demand for fast-moving consumer goods (FMCG) and alcoholic beverages. According to recent statistics, beer was ranked as the 246th most-traded commodity in the world in 2021, with a total trade value of US$16.8 billion. Moreover, there was an 8.21% increase in beer exports from US$15.5 billion in 2020 to US$16.8 billion in 2021. This bodes well for the glass packing market since beer as a commodity will boost the sale of the same.

Furthermore, the fine mist spray bottle segment is an incremental opportunity for the glass packaging industry since it is projected to reach a value of US$447.7 million during 2022-2032. The push pump bottle is also expected to dominate the global glass cosmetic bottle market and exhibit a CAGR growth of 5% during the forecasted period.

The glass cosmetic bottle market in India is projected to accelerate at a CAGR of_5.5% during 2022-2032. Manufacturers are focusing on developing stylish and unique bottles to cater to the demand for innovative packaging. Additionally, the increasing trend of online shopping is likely to encourage manufacturers to develop creative glass packaging to boost sales. The market is predicted to witness steady growth in the coming years due to rapid urbanisation and the rising purchasing power of consumers.

PET Bottles and Products

The PET bottle market attained a size of US$41.8 billion in 2022 and is projected to expand to US$54.3 billion by 2028, exhibiting a CAGR of 4.29% during 2023-2028, according to IMARC Group.

Factors fuelling the growth include the beverage industrys increased use of PET bottles and their widespread adoption in personal care products. In addition, its transparency and ^{inherent CO}2 resistance make it an ideal material for moulding into various shapes and bottles. PET can also be modified with colourants, UV blockers, oxygen barriers, and other additives to customise bottles based on brand requirements.

As the demand for bottled water, soft drinks, and energy drinks continues to rise, so does the need for PET bottles in the beverage industry. The PET bottle market for packaging bottled water is also expanding due to consumers growing preference for high-quality drinking water, concerns about contaminated tap water, and the convenience of portability. The market is further fuelled by new players in the carbonated beverage industry opting for PET products. These factors are driving the growth of the PET bottle industry, as it offers high shelf life and can meet the evolving needs of the industry with its customisable properties.

Security Caps and Closures

The global market for caps and closures is expected to experience significant growth in the coming years, with a projected valuation of US$89.9 billion in 2023 and an anticipated CAGR of 5.7% between 2023 and 2033, reaching a value of US$157.0 billion by 2033. This growth is primarily driven by increasing demand from industries such as pharmaceuticals and food and beverages.

The screw closures segment is expected to grow by 1.8x the current market value during the said period, driven by its strength and durability in preventing oxidation through proper bottle sealing.

The Asia-Pacific region stands out as the top consumer market for plastic bottle caps, mainly due to its vast food and beverage industry. Plastic caps and closures offer several advantages over their counterparts made from materials such as metal or rubber. Plastic is a cost-effective, adaptable, robust, lightweight, and corrosion-resistant option.

Stimulating the Demand for Indias Packaging Sector

1 Burgeoning Beer Market	2 Powerful Pharmaceutical Market	3 Accelerating Alcohol Market Accelerating Alcohol Market
In 2022, the size of the beer market in India was 383.6 billion. The market is expected to grow at a CAGR of 8.1% between 2023 and 2028, reaching 622.4 billion by 2028.	India ranks 3rd globally by volume and 14th by value in the global pharmaceutical market. India is the primary provider of generic medicines worldwide, accounting for 20% of global supply by volume, and is the leading vaccine manufacturer, with a 60% market share. Furthermore, FDI in the pharma sector has exceeded US$20 billion as of September 2022. (Economic Survey of India, 2022-2023)	It is expected that the Indian alcohol market will experience a CAGR of 7.4%, resulting in a total value of approximately US$68 billion by the end of 2026. The rise in popularity of pub and cocktail culture in metros has boosted the demand for alcoholic beverages in India, thereby driving the growth of the market.
(Source : https://www.imarcgroup.com/ india-beer-market)
4 FMCG Market at Full Throttle	5 Growing Online Grocery Market	6 Cruising Cosmetic Market
Indian FMCG market size was valued at US$110 billion in 2020, and it is expected to reach US$615.87 billion by 2027 with a CAGR of 27.9% during the forecast period. The Indian FMCG sector is growing due to the increasing disposable income in rural India and the low penetration level in rural markets. The focus on agriculture, MSMEs, education, healthcare, infrastructure, and tax rebate under the Union Budget 2019-2027 is also expected to impact the FMCG sector positively.	Indias online grocery market is expected to experience significant growth, with projections estimating an increase from US$4,540 million in 2022 to US$76,761 million by 2032, growing at a CAGR of 32.7% through 2032. This growth can be attributed to several factors such as changing consumer lifestyles, increasing urbanisation, and a tech-savvy generation that prefers online shopping. People are increasingly turning to convenient online platforms for grocery shopping instead of traditional local vendors as now they have higher disposable incomes.	According to IMARC Group, the size of the beauty and personal care market in India reached US$26.3 billion in 2022, and is predicted to grow at a compound annual growth rate (CAGR) of 6.45% during 2023- 2028, reaching US$38 billion by 2028. The market is expected to be driven by factors such as rising disposable income and purchasing power, the increasing popularity of online retail, and the younger generations growing interest in skincare and other grooming products.

Business Review

Our Packaging Products businesses comprise Glass containers (including specialty glass and B2C brand Sandunes), PET bottles and products, and counterfeit resistant security caps and closures.

We delivered earnings growth while also increasing our investments in R&D, systems, and field technology. We possess a remarkable competitive advantage across all our businesses, characterised by unparalleled customer relationships, a profound understanding of their needs, and exceptional product offerings. Thus, we could perform well despite facing significant challenges, such as volatile raw material prices.

Costs were managed through efficiencies such as the right investments in financial and talent management systems to expand production capacity and support innovation capabilities. We have been working on ongoing initiatives in both shop floor and non-shop floor digitalisation, including a visitor management system. We have made consequential progress in fuel efficiency, wherein we have deployed a multi-fuel option system, particularly when fuel prices are volatile. Additionally, costs were contracted through a digital planning system called Optimisation Tool, which helped eliminate waste and integrate our planning process with customers to achieve optimised planning.

In the post-pandemic world, we have witnessed a shift in consumer behaviour. They are now more cautious about hygiene and are paying attention to superior packaging while shopping. Urbanisation and changing lifestyles have led to a rise in demand for packaged food and beverages. In addition to this, the rising demand for sustainable packaging material continues to propel the growth of the alcohol packaging market. These external factors, combined with internal initiatives undertaken, such as the right product mix, efficient capacity utilisation, and our strong relationship with our customers, helped us register robust growth for all our packaging product segments for the financial year.

Our state-of-the-art manufacturing plant in Bhongir, with an installed capacity of 154 tonnes per day, commenced commercial production in January 2023 to manufacture high-quality speciality glass_for high-margin cosmetics, perfumery, water bottles, candle jars, food and beverages, and premium spirits segments. We also established a state-of-the-art technology-integrated decoration facility for hot-foil stamping, coating, lacquering, and colouring, enabling us to decorate high-quality specialty glass products. The plants production lines are flexible and can be adapted based on customer needs which makes us aptly equipped to meet a customers need during a stipulated time frame.

Sustainability is a key focus for the Company. Hence, we are making continuous efforts to improve operational efficiencies, minimise consumption of natural resources and reduce water, energy and CO2 emissions while maximising production volumes across our businesses.

Outlook

We have been on a positive growth trajectory and will continue to do so by focusing on increasing our internal efficiencies through automation and well-structured initiatives for our employees. As we move ahead, we will continue to leverage new technologies that will enable us to deliver world-class products with the lowest environmental and economic impact while we continue to deepen long-standing relationships with our customers.

With our new Greenfield Specialty Glass plant based out of Bhongir, Telangana, we are moving up the value chain as we foray into the high-margin specialty glass segment.

The demand for packaging products has been rising, and we believe we are attractively placed to capitalise on this boom.

For us, sustainability is a prerequisite for being successful in the future, and thus has been included as a key aspect in the Companys strategy. We will continue to pursue sustainable business models to keep improving our environmental credentials and reduce energy consumption and CO2 emissions. Alongside, we are committed to improving water stewardship, developing better packaging with improved circularity, creating opportunities for young people and building a diverse and inclusive workforce.

For the acquisition of a 100% stake in Hindustan National Glass and Industries Limited, we submitted a resolution plan in the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code 2016.

A Letter of Intent (LOI) dated 28_October 2022 was issued to AGI Greenpac Limited declaring the Company as a successful resolution applicant under CIRP with due authorisation of the committee of creditors of the Corporate Debtor. The Company had given its acceptance of the LOI and issued underlying performance bank guarantees as per the requirement of the LOI. The Honble Competition Commission of India approved the above-mentioned transaction vide its order dated 15 March 2023, as published on its website. The closure of the aforesaid transaction is subject to obtaining necessary regulatory approvals from the Honble NCLT Kolkata and other customary approvals, filings, and processes.

People-centricity

We have launched new company values to shape our organisations culture and drive our success. These values encompass ownership, collaboration, respect, trust, recognition, attentive listening, continuous learning, and talent nurturing. Through workshops and interactive activities, we ensured that employees comprehend and embrace these values.

Comprehensive leadership development programmes helped us to enhance our leadership capabilities, and the launch of Saksham is helping us empower young talent from campuses across India.

Recognising the significance of digital skills, we implemented comprehensive training programmes, including seminars and expert-led sessions. The launch of an AI-based chatbot and exclusive MBA partnerships contribute to employee support and continuous growth. Our commitment to continuous improvement is reflected in our 360-degree feedback and training programme. Additionally, we launched initiatives to enhance employee engagement, promote a safe work environment, and prioritise sustainability.

Risk Management

Our business utilises a comprehensive risk management process to identify, treat, and alleviate risks arising from both internal and external factors. Our top management regularly monitors our risk management framework, enabling us to remain proactive in anticipating and addressing potential risks. This was particularly evident in the past year, as the pandemic posed significant challenges throughout our value chain. Nonetheless, our risk management framework enabled us to effectively navigate these difficulties.

Risk Appetite

We regularly assess and confirm our level of tolerance for risk and incorporate it into our overall framework for managing risks, which facilitates sound decision-making.

Growth Ambition	Compliance	Brand	Efficiency
Given the constantly changing conditions of the business environment, it is important to engage in both strategic risk-taking and risk mitigation efforts in a thoughtful and deliberate manner.	Our business culture and strategy are built upon the essential foundations of adhering to both legislative requirements and sound business principles.	We are dedicated to safeguarding our brand, securing our interests, and ensuring the safety of our employees, while also striving for sustainable growth.	Our competitiveness is driven by making operational safety our top priority and continually improving it.

The Risk Management Committee, consisting of senior members of the Board, is responsible for regularly overseeing the risk management process. The identified risks are categorised into strategic, business, and operational risks. The Committee is accountable for monitoring the key risks within each of the three categories and providing measures to mitigate them.

Culture and Values		Learning and Development Trainings
Our Culture and Values are essential in guiding our approach to Risk Management.		Learning and development trainings provide support for interal controls, ethics, anti-fraud measures, authority limits, crisis and business continuity management, as well as compliance.
	Risk Management Pillars
Strategy & Objectives		Risk Policies and Control Standards
Strategy & Objectives have been reflected in such a way that it reflects our risk appetite.		We conduct all of our operations in compliance with our risk policies and control standards.

Business Risks

Risk	Impact	Mitigation Measure
Low Inventory Movement	Inventory is overburdened by inappropriate sales planning.	We set up a strong inventory management system that helps with precise SKU mapping for phased induction and elimination. To schedule the replacement of SKUs at the appropriate time, we use big data analytics.
Currency Risk	Foreign currency price fluctuations have an impact on our profitability.	To hedge our foreign exchange position and reduce our exposure to fluctuation as needed, we invest in derivative instruments after deliberation.
Interest Rate and Commodity Price Volatility	Any increase in interest rate movement or commodity price slump could have a negative impact on business.	To ensure the affordability of raw materials, we carefully arrange the quantities of our inventory. We frequently track short-term and long-term interest rates to retain our competitive advantage.
Lack of Innovation	A lack of awareness of new advances and innovative technology can hamper our ability to stay competitive in the market	By conducting in-depth market analyses and routinely seeking feedback from institutional clients, we stay abreast of emerging trends. Our R&D team is always trying to use new technology and produce inventive solutions that meet the needs of our clients.
Inadequate Distribution Channel	Sales and business growth can be hampered by ineffective marketing and distribution.	At present, were developing a business-to- business (B2B) model. Our institutional clients have benefitted from our constant innovation and reinforcement since we can guarantee them better product quality and faster turnaround times.
Substitutional Risk	PET and glass containers can be interchanged, which could have an impact on the success of either of these business segments.	We are well-positioned to provide our clients a one-stop shop, giving them the option of PET or glass packaging, enabling us to focus on packaging while maintaining our revenue streams.
Employee Skill Development	A team with insufficient experience and low personnel competencies could stifle progress.	We have a strong employee engagement framework and a good hiring process in place, which has led to a higher retention rate. Our objective is to increase organisational effectiveness by honing personnel skills through carefully thought-out training initiatives.
Unorganised Sector	Low-cost offerings from unorganised competitors have the potential to erode our market share.	The threat posed by the unorganised sector is gradually being reduced as a result of the industry consolidation with the implementation of the GST. Additionally, a broad range of discriminating customers with a variety of objectives are served by our unique products.
Working Capital Management	Short-term liquidity requirements can impact growth and profitability.	We have strong working capital management in place, which aids in inventory optimisation, shortens our accounts receivable cycle, and improves our cash flow.

Operation Risk

Risk	Impact	Mitigation Measure
Availability of Raw Material	Inability to obtain a consistent supply of raw materials at a reasonable price might have a negative impact on operations.	To prevent becoming dependent on a small group of merchants, we have developed our relationships with a range of different providers. We have used several vendor engagement strategies and have always kept a planned inventory.
Cost Control	Profitability would be harmed if costs could not be controlled.	We employ a range of cost-cutting tactics to improve our control over production expenses. Throughout the year under review, we used alternative materials, different fuels, and automation to reduce expenses
Operational Limitations	Production could be hampered if operations are constantly disrupted.	By consistently reducing operating bottlenecks and enhancing automation across various units, we have been able to minimise this operational risk.
Quality-Related Concerns	Lowering or altering product quality might hurt revenue and cause customer turnover.	We do numerous rounds of quality tests at different stages of our value-creation process to guarantee a low rejection rate and great product quality.
Health and Safety Risk	Any mishap or loss of life can put a halt to activities.	EHS training is provided to workers in our factories to ensure their security and complete adherence to employee health and safety laws.
Loss of Key Managerial Personnel (KMP)	Any loss of KMP could have a negative impact on the Company.	Our system of rewards, recognition, and compensation ensures that the important members of our management team are paid competitively, which keeps them engaged.
Loss of Suppliers	Any loss of suppliers could cause the Companys usual business environment to be disrupted.	All of our suppliers have positive, lasting connections with us, and our vendors help us keep these alliances going. In addition, we keep in touch with a range of suppliers to prevent relying too heavily on any one of them.
Product Failure and Lack of Differentiations	If we are unable to elicit a favourable market response to our items, we may lose money.	We provide a variety of industries with a variety of products. Due to the variety of our product offerings, the failure of a single item or line may not have a substantial effect on overall sales. We have a consumer-focused R&D facility that is continually developing fresh, pertinent items.

Strategic Risks

Risk	Impact	Mitigation Measure
Pandemic Risk	The social and economic disruption produced by the pandemics onset may have an impact on corporate processes.	Given the nations rapid vaccination strategy, it is anticipated that the population will soon be immune, allowing for the restoration of normalcy.
Geo-Political Risks	Geopolitical concerns may have an impact on how well firms perform.	We are able to avoid becoming unduly dependent on any one product or market because to our diverse product offerings across industries and our market penetration.
Economic Unpredictability	A slowing Indian economy could result in a drop in demand for our products.	India has suffered because of the pandemic. However, the de-growth forecasts have been tempered, and the economy has recovered well in FY 2021-22.
Inability to Understand Customer Preferences	Our potential to produce profit may be harmed if we are unable to stay relevant and serve customers through design and product innovation.	To meet a wide range of customer needs, we consistently widen our product offerings by introducing new product ranges and SKU categories in response to regular feedback from our institutional customers. We also conduct a great deal of R&D, which helps with the ongoing release of new items.
Customer Concentration	Excessive reliance on a small number of clients can have a negative influence on profitability.	We collaborate with a variety of clients. However, due to the complexity of our product offering and our client-centric philosophy, we also prioritise maintaining long-term relationships with our institutional clients.
Inability to Adhere to the Regulatory Requirements	Any change in the law could have an impact on our activities.	As part of our commitment to continue being people-centric and accountable, we abide by all regulatory norms that are applicable to us, from those linked to the welfare of our people to those related to environmental protection.
Tariff Wars	Any disruption in trade relationships between exporting partner countries may adversely impact our businesses.	To lessen the risk associated with tariff conflicts, we have forged friendly relationships with our export partners and diversified our export portfolio.

Internal Control

The internal control systems are commensurate with the size, scale, and complexity of the operations of the Company. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with the applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation, and ensuring compliance with corporate policies. We use SAP, a well-accepted Enterprise Resource Planning (ERP) system, to record data for accounting, consolidation, and management of information and connect to different locations for efficient exchange of information. The Audit Committee of the Board of Directors, comprising Independent Directors review the effectiveness of the internal control system across the Company, including the annual plan, significant audit findings and recommendations, adequacy of internal controls, and compliance with accounting policies and regulations.

Internal Financial Control

We follow a proper Internal financial control as policies and procedures for ensuring orderly and efficient conduct of business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information. We also have documented Risk and Control Matrices (RACM) covering all activities, and all controls are tested for design and operating effectiveness as part of our Internal Financial Control Reporting framework. The financial controls are evaluated for both design and operating effectiveness by an external consulting firm of repute. In our view, the Internal Financial Controls are adequate and are in line with best practices applicable to organisations of a similar size, nature, and complexity.