EPL Ltd Management Discussions

Your directors are pleased to present the Management Discussion and Analysis for the year ended 31 March 2023.

BUSINESS OVERVIEW

Business Review 2022-2023

The external environment continued to be challenging and volatile in FY23 due to factors like Covid lockdowns in China, energy crisis in Europe due to Russia-Ukraine war, volatile commodity and freight prices, inflation, rising interest rates and volatile forex. However, the second half of the year witnessed a little respite in commodity prices and freight. During the year, Chinas economy was severely impacted by Covid lockdowns and impacting demand for our products and consequently our business. China lifted the lockdown at the end of the year and we are hopeful that the economy will revive in the coming year.

Energy prices in Europe peaked during the first half of the year and settled in the second half, but below its previous level. Increase in minimum wages was a global challenge affecting different geographies. The financial year saw volatile foreign exchange movements in general and the Egyptian currencys substantial devaluation in particular.

Despite these challenges, your Company delivered revenue growth of 7.6%. The revenues would have been higher but for the lockdowns in China. The revenue growth excluding EAP was 12.2%. Continued increase in raw material and freight costs during the first half of the year and increase in energy costs and lag effect of price recovery led to EBITDA margin (excl. Brazil) of 16.4% for the full year against 16.8% previous year. The margin started improving due to material and inflation related price recovery from second half of the year with EBITDA margin increasing to 17.2% in the last quarter of the year. EBITDA (excl. Brazil) grew by 4.4% and PAT (excl. exceptional items and Brazil) grew by 9.4%. Our business development pipelines continue to be strong to deliver the future growth. Brazil greenfield investment is for future business growth, and hence we have presented the numbers above excluding Brazil.

AMESA delivered a strong performance, contributed by both Oral and Non-Oral categories. The recovery in the Beauty & Cosmetics segment, wallet share gain in key customers and strong business development pipeline helped the region deliver a strong revenue growth of 11.7% and a good bottom line (PBIT) growth of 13.6%.

AMERICAS region (excl. Brazil) delivered a strong revenue growth of 19.0% backed by continued demand and new contract ramp up in Latin America. However, commodity inflation, high freight costs during major part of the year and lag effect of price recovery impacted the bottomline. Consequently, the PBIT declined by 17.0%. The numbers given in the paragraph are excluding Brazil for the purpose of comparison.

Brazil greenfield project (which will be part of AMERICAS region) is on track and production started. Several local and global players are evincing interest in our Brazil supply base.

Despite Covid lockdown challenges, EAP regions revenue de-growth was limited to 1.5% driven by innovation, opening up new categories and servicing emerging brands in China. PBIT declined by 3.1%.

Despite the demand volatility due to inflationary conditions in Europe, the region was able to effectively manage the category mix and price recovery, delivering 12.7% revenue growth. Our margins were impacted by lag in price increases, increased minimum wages and energy prices resulting in PBIT declining by 21.1%.

Key Corporate Initiatives

Our vision is to be the most sustainable packaging company in the world. We have made sustainability the #1 priority and are dedicated to stay true to our vision.

We continued our engagement on sustainability with various customers and more than doubled the supply of sustainable tube supplies during the year. Going forward, our plan is to more than double the volume of our sustainable tubes supplies next year. We published our third Sustainability Report this year and remain committed to contributing towards a circular economy by collaborating with Ellen MacArthur Foundation.

Our Carbon Disclosure Project (CDP) ratings improved to A- on climate change, was maintained at B on water security and A on supplier engagement rating, which is among the best in the packaging industry showing our focus on sustainability. We also received positive accreditations on all standards by the Ellen MacArthur Foundation. We continue to be a signatory to UN Global Compact and India Plastics Pact. We were certified with five ISO certifications in the areas of Environment Management System (ISO 14001:2015), Occupational Health and safety (ISO 45001:2018), Energy Management system (ISO 50001:2018), Information Security Management (ISO 27001:2013) and Sustainable Procurement (ISO 20400:2017) during the year.

Digital transformation continues to be a focus area for the defined four pillars namely, Enterprise Initiatives, Stakeholders Engagement & Collaboration, Operational Excellence and Telescopic Insight - #Data Analytics.

We increased our global footprint with the setting up of operations at Brazil. The project is on track and production started.

We believe that employees are our most important asset and work towards making EPL an employee-friendly organisation. Our efforts toward this have been recognised and we have been acknowledged as the "Best Company To Work For" in the Manufacturing sector at The Iconic Platinum Awards by Feather Touch and "National Best Employer Brands of 2022" by Times Ascent. We have 1358 employees as on 31 March 2023. The relations with industrial workers on the Industrial Relations front has been cordial during the year.

Our people-centric initiatives are expanded through our Corporate Social Responsibility journey where we focus on sustainability, skill development, and community welfare in addition to many other programmes for the communities around us.

LONG TERM STRATEGY

"People dont buy what you do. They buy WHY you do it" - Simon Sinek

We have defined our purpose "to be the most sustainable packaging company in the world".

This purpose will be driven by a 4X4 mantra for growth that aims to deliver industry-leading profitable growth

4 Cs - Where we will win

• Category - Drive growth in Beauty & Cosmetics and Pharma

• Customer - Go for Global and Regional customers

• Country - Build wallet share in key countries

• Cost - Harness fuel for growth

Our 4 Enablers - How we will win consist of:

• An ambition driven innovation program

• Bold sales and marketing to hunt down new growth opportunities

• Digital transformation to make EPL future-ready

• Build a one EPL culture to foster cross-fertilization of ideas and promote horizontal collaboration across regions

SUSTAINABILITY

Your company considers ESG as an essential aspect in the functioning of the organisation and therefore, we have incorporated sustainability in every aspect of our business by focusing on the 3Ps of business i.e. Product, Process, and People. These 3Ps of business are aligned with global Sustainable Development Goals (SDG) and United Nations Global Compact (UNGC) principles.

Your company has a 360? approach to sustainability and encompasses social, environmental, health and safety obligations. Our vision on sustainability is not limited to only our products, we also strive to reduce waste, conserve our natural resources, make our products sustainable, and fostering a safe and inclusive workplace environment for our employees.

EPL constantly strives to reinforce its commitment to sustainability and has engaged with external organisations like Ecovadis, Ellen MacArthur Foundation (EMF), and UNGC etc. We also report our Environmental, Social, and Governance performance initiatives, and sustainability roadmap through our Annual Sustainability Report which is aligned to global standards of GRI reporting.

To ensure that your companys actions are both profitable and sustainable, we are developing a sustainability roadmap that integrates People, Product, and Process sustainability.

Product sustainability

Sustainability in our Products is reflected through our range of Platina tubes which are 100% recyclable. Our product integrates the 3Rs (Reuse, Reduce and Recycle) and we are on the path to achieving 100% recycle- ready products. EPL achieved Green (Aligned) rating on all the Global commitments towards Ellen MacArthur Foundation plastic circular economy.

Process Sustainability

EPL has been consistently pushing towards integrating sustainability in its strategy, processes, and all operations by incorporating Harmonized Manufacturing Policy into our operations. We are committed to reducing the environmental impact of our operations like eliminating waste, reducing emissions and conserving natural resources. To enhance our Environmental Performance, all our manufacturing plants are certified with an Environmental Management system (ISO 14001:2015) & Energy Management System (ISO 50001:2018) from TUV Nord.

Your company has made a clear set of goals and created a roadmap to achieve Net Zero emissions globally by 2050 as per the Science based targets initiative (SBTi).

It is a matter of pride that your company maintained its CDP rating "A" for supplier engagement Leadership for the second consecutive year. EPL also progressed towards climate change rating "A-" (Leadership band) for CDP 2022 rating.

People Sustainability

EPL fosters a culture that values diversity, inclusion and champions employees development. Our policies are aligned with UNGC principles and incorporate peoples practices on ethics, labour, and human rights. All our plants across the world are certified ISO 45000:2018 that confirms to creating a safe workplace and minimise workplace fatalities.

Your company encourages its stakeholders, suppliers, and vendors to adhere to our policies and codes of conduct that outline the best practices. We conducted several sensitisation programmes throughout the year to ensure that our supply chain aligns with our sustainability philosophy. A significant portion of our social outreach efforts are directed towards the communities around us through our CSR initiatives. The focus is on promoting the Sustainability Development Goals (SDGs) by engaging in community development, skill development, and plastic waste management.

All our plants across the globe are certified ISO 45000:2018 that conforms to creating a safe workplace and to minimise workplace fatalities.

To achieve a diverse and gender-equal workplace, EPL aims to achieve 30% women workforce globally. Currently, 24% of our global workforce comprises of women.

Your company has been recognised for its efforts to create a harmonious workplace and motivate employees and acknowledged as one of the "National Brands of 2022" by World HRD Congress and "Best Company to Work for" award in the Manufacturing sector at the Iconic Platinum Awards by Feather Touch.

We place a strong emphasis on sustainable procurement practices in addition to producing high-quality products. All our plants are accredited ISO 20400:2017 (Sustainable Procurement) that align our procurement practices to our sustainable goals.

At EPL, we always strive to aim higher and surpass our previous accomplishments. We lead by example and will continue to do so by putting in more efforts in areas of the environment, people and profits.

OPERATIONAL PERFORMANCE REVIEW

The year began with numerous challenges that continued in the first half of the year, some of which eased towards the end of the year. However, the impact on business due to inflation-related costs in the western markets and the Covid-related lockdowns in China continued through the year. Your companys operational performance in a yet another volatile year reflects its strong fundamentals and resilience. Consolidated revenue was Rs 36941 mn, a growth of 7.6% over the previous year. This growth was led by price increases to cover for the inflation-related costs and improvement in our market share through a robust sales pipelines across categories.

Your company delivered improved margins quarter over quarter in this year reversing the trend of declining EBITDA. Our EBIDTA (excluding Brazil) for the year at Rs 6040 mn grew by 4.4%, with a margin of 16.4%. Operating profit before interest and tax (EBIT excluding Brazil) declined by 0.7% to Rs 3246 mn with the EBIT margin at 8.8%. Brazil greenfield investment is for future business growth and hence the numbers in the paragraph are excluding Brazil.

• AMESA, AMERICAS and Europe delivered double digit revenue growth of 11.7%, 19.0% and 12.7% respectively. EAP revenue declined by 1.5% due to impact of Covid related challenges

• Strong growth in both categories - Oral Care grew by 9.5%, and Personal Care (including Pharma) by 11.6%

• The Business development pipeline across regions has been significantly strengthened

• Finance cost (excluding Brazil) increased by Rs 262 mn (65.0%) due to increase in benchmark interest rates across the geographies. Forex loss during the year was mainly due to depreciation of Egyptian pound.

The operational performance has been analysed by the business segments as below.

SEGMENT-WISE PERFORMANCE REVIEW

The business is managed as four geographical segments viz.

1. Americas (with operations in the USA, Mexico, Colombia, Brazil)

2. Europe (with operations in Germany and Poland)

3. AMESA - Africa, Middle East & South Asia (with operations in Egypt and India)

4. EAP - East Asia Pacific (with operations in China and the Philippines)

SEGMENT FINANCIAL HIGHLIGHTS

The table below sets out the segment financial highlights for the year:

(Rs in million)

Particulars	FY ended 31 March 2023	FY ended 31 March 2022	Growth
Revenue:
AMESA	13692	12260	11.7%
EAP	8498	8626	-1.5%
Americas	8758	7362	19.0%
Europe	8435	7484	12.7%
Profit Before Interest and Tax (PBIT)
AMESA	1469	1293	13.6%
EAP	1237	1277	-3.1%
Americas (excluding Brazil)	439	529	-17.0%
Americas (including Brazil)	379	529	-28.4%
Europe	202	256	-21.1%

Financial performance excluding Brazil has been given for comparison purpose.

Developments in each of the regions are set out below:

AMERICAS

Your company has a strong market presence in both North and South America through its wholly owned subsidiaries in USA, Mexico, Colombia and Brazil. Financial performance given below is excluding Brazil operations to make it comparable.

Backed by continued demand and new contract ramp up in Latin America, the region delivered 19.0% revenue growth. Oral Care grew by 15.7% and Non-Oral Care by 25.3%. However, high inflation, tight labour market conditions, rising interest rates impacted bottom-line delivery. AMERICAS is expanding into new country Brazil and the greenfield project execution has been in progress during the year with volumes expected to ramp up from the first quarter of FY24.

EUROPE

Your company has units in Poland and Germany which manufactures and sells laminated tubes and extruded plastic tubes.

While the market demand was volatile during the year, Europe revenue grew by 12.7% aided by mix improvement and price recovery. The Oral Care and Non-Oral Care category grew at 9.0% and 8.4% respectively. The margins for this region were impacted by lag effect of price increases, inflation in minimum wages and energy prices combined with reverse operating leverage.

AMESA (Africa, Middle East and South Asia)

We service this region through our seven units across India, and our subsidiary in Egypt.

AMESA revenue grew strongly by 11.7% contributed by both Oral and Non-Oral categories. The Oral Care and Non-Oral Care category grew at 17.3% and 13.4% respectively. Continued recovery of Beauty & Cosmetics segment, wallet share gain in key customers and strong business development pipeline.

Despite input cost increases, the EBIT grew by 13.6%.

EAP (East Asia Pacific)

Your company operates out of 5 units in China and 1 unit in the Philippines.

EAP revenue declined by 1.5% as China continued to be impacted by Covid related challenges through the year, with the situation easing out as the year ended. Personal Care grew by 5.9%, whereas Oral Care declined by 6.8%. Despite the decline in business, the region exercised tight control on operating expenses, thus restricting the EBIT decline to 3.1%.

CONSOLIDATED FINANCIAL PERFORMANCE OVERVIEW

The strength of your companys fundamentals and resilience is reflected in revenue growth of 7.6%. Your Company saw a 2.5% decline in EBIT for the year due to the impact of Covid related challenges in China, unprecedented volatility in material prices, operating expenses inflation and lag in price increases. PAT (excluding exceptional items) grew by 6.3% (PAT excl Brazil grew by 9.4%) despite drop in EBIT mainly due to tax credit received during the year pertaining to previous years.

(Rs in million)

Particulars	FY ended 31 March 2023	FY ended 31 March 2022	Increase/ (Decrease)
Net Sales/Income from operations	36941	34328	+7.6%
Profit from Operations before Other Income, Interest and Exceptional items	3186	3269	-2.5%
Finance Cost	674	403	+67.2%
Profit before tax and exceptional item	2691	2888	-6.8%
Net Profit for the year to equity holders	2267	2144	+5.7%
Net Profit for the year to equity holders (excl. Exceptional Item)	2278	2144	+6.3%

CREATIVITY AND INNOVATION (C&I)

R&D (a.k.a. Creativity & Innovation within the Company) has been a key driver of your companys growth. Our deep knowledge of polymer science and the polymer conversion process enables differentiation and helps us in collaborating with resin suppliers and machinery manufacturers in getting custom designed products for your company. This year, we have added state of the art blown film line to improve our laminate production capabilities.

Your company continues leading on new sustainable offerings by focusing on the 3Rs of sustainability, delivering both growth and competitive advantage. This will continue to remain a key focus for us going forward.

Recycle: We have developed highly transparent tubes that can be recycled in HDPE code 2 recycle streams. We also got the recognition on recyclability for these tubes from Association of Plastic Recyclers - USA (APR).

Our APR recognized Platina series of Sustainable laminated tubes is commercialised and used by all the major brands across the world. We are proud that we are enabling and participating in the sustainability journey of our esteemed clients.

Reduce: In line with our customers commitment on plastic usage reduction, we have developed thinner gauge tube sleeves without compromising on the flavour retention properties of the tube. We also have developed several new dispensers and applicators options that enables down-gauging and weight reduction of tubes helping in reducing the carbon footprint in the packaging.

Reuse: Your Company has developed laminated tubes with up to 50% Post Consumer Recycled (PCR) resin content, creating an avenue for using the recycled resins and also reducing the demand for fresh virgin plastic.

The R&D facility of your company is recognised and certified by the Department of Scientific & Industrial Research, Government of India. This year our lab has also added accreditation of the National Accreditation Board for Testing and Calibration Laboratories (NABL).

Your company continues to protect its enormous intellectual property. This year we have filed for 31 new global patents related to sustainability. Your company now has an IP portfolio of 89 granted active patents and 65 filings pending grant. Your companys R&D efforts continue to win accolades at several forums and across customers and we continue to collaborate with customers and stakeholders to roll out new products. Needless to add, our structured C&I development process ensures a healthy innovation pipeline and fuels the sales and profitability of the company.

TECHNOLOGY

Building on the momentum from previous years investment, your company is increasing its Technological Quotient by strategically investing in acquiring / developing futuristic technologies. The results are visible in the newly established Brazil plant.

Your company is continuing to focus on developing and adding SMART (better connected, MORE- efficient, interactive and safer) and highspeed technology in tube producing assets.

Helped by experience gained over the years and through long-term technological partnerships, your company is running various programs:

1. for new product inclusions

2. to make complete tube more sustainable

3. for investments in preparing machines to address higher cost per tube ratios

4. to demonstrate defect free supplies to our customers

Your company is working on various programs to use Artificial Intelligence and Machine Learning by modelling and simulating various machine processes to attain stable and effective product outputs. Algorithms that can accelerate feedback loops to get actions rolling faster increases the reliability of earlier installed Vision systems to provide quality control on the production line, capturing data from sensors and imaging to replace manual/off-line quality testing, increasing equipment efficiency and manage resources.

Your companys investments and upgradations to fulfil the market demands continue, with a focus on sustainability, high quality, zero wastage in value chain, and speed to market. Hence, majority of the investments address three key areas -

a. Aluminium Barrier Laminate to Plastic Barrier Laminate conversion to maintain and grow sustainable offerings.

b. Zero defect to ensure highest quality delivered.

c. Upgradations (Machine and Process) to ensure on time delivery with increased productivity.

In Printing, your company strategically is moving towards acquiring/ upgrading the latest technology to address the evolving needs of its customers. While we continue shifting from Letterpress printing to Flexo Printing in Laminated Tube business, the demand in Plastic Tube business made us invest in the state-of-the-art 14 station/colour machine. This not only enhances the capacity, but helps your company acquire more high-value customers in the market, adding to bottom line growth as a result of better mix.

In our last annual report, we mentioned that your company invested in Flexo because it is the preferred process for printing on lamitubes and delivers:

• higher print quality

• quick job changeovers

• ease of use, for value adding decorations (like cold/hot foil & rotary screen)

• ability to easily convert PBL material

• higher production speeds

Due to Flexos USPs, we are using the printing process in our new location in Brazil, and have added a new Flexo line in our Plastic tube business in India.

Embellishments (FLEXO Printing):

Your company has successfully validated the investments in Embellishments and our new innovations (LENS FOIL, 3D FOIL, etc.) are commercially ready now. This will add to shelf shout to make your customers product more attractive and visible. We are proud to claim that Your company is the FIRST in the tube business to offer such futuristic embellishments.

Your companys success rate is higher as compared to its peers:

• in the aesthetics of the packaging and its value-added properties (Carton Less Tube)

• in its ability to impact the supply chain and make efficiency savings (Reuse of LENS Foil roll up to 3 times)

• in the continual improvement in recyclability and contribution to the global food security problem (Less foil consumption)

• in finding disruptive technologies to drastically cut down emissions and landfills that are caused due to metallised prints.

• in producing a tube that is the MOST SUSTAINABLE and best-inclass DECORATION.

Your company has collaborated with a partner to install disruptive metallisation technology for Laminated tubes next year.

Digital Printing

We had mentioned in our last year report that your company raised the bar on personalisation by installing digital printers across all regions. We have added a 6th machine to our fleet in India and the proportion of overall digital tubes produced last year has increased to 6%.

Printing on packaging poses several challenges and there is no single technology that fits all. The considerations are based on accuracy management, colour quality, and high labour costs. The introduction of digital printing has created opportunities to innovate in the process and becoming one of the top trends in the packaging industry. Unlike traditional offset or flexo printing techniques, digital printing does not require separate plates for different prints. Instead, all the content can be printed in a single pass, reducing labour requirements. Additionally, modern digital printing has a limited impact on the environment since it eliminates the need for prepress procedures and additional labelling, reducing waste and inventory requirements. With less turnaround time and greater flexibility, digital printing enables customized packaging for our customers to cater to different subgroups of consumers.

We are happy to share that your company has not only improved productivity (Impressions / tubes) in digital printing in the last one year, and our plant in Assam (EPL-Assam) maintains the lowest printing Scrap (%) amongst all printing machines at EPL.

We are now on the verge of adding a high-speed digital printing machine to our fleet of digital printing machines.

Continued upgradation (Machine and Process)

Investments to achieve Zero Defect continues across all our plants. While EUROPE and AMERICA have more or less completed their investments and established ZERO DEFECT workflow, our focus is to now on investing in ASIA to achieve our goal. In addition to adopting lean manufacturing, your company has taken a significant step towards implementing a fully controlled quality control process in both printing and tubing areas of operations. As a result, your company has moved closer to achieving its vision of delivering defect-free tubes to customers. By effectively managing raw material yield and optimising assets usage, EPL has been successful in reducing wastages (SCRAP%), resulting in cost savings and gaining customer confidence in EPL.

Going forward, EPL will focus on innovating products and processes to bring down the carbon footprint and generate more customer attention (wow experience).

Our latest innovation is in the area of Plate making. Your company has invested in the THERMAL PLATE PROCESSING system for making FLEXO plates across all regions. This will bring Quality, Speed, Cost benefits apart from addressing all SUSTAINABILITY needs.

FINANCE

We are happy to share that CARE Ratings has upgraded your company rating from CARE AA to CARE AA+; Stable (Double A Plus; Outlook: Stable) for NCDs, long-term bank facilities/ short-term bank facilities. India Rating and Research (Fitch) has reaffirmed the Issuer Rating of the Company at IND AA+ this year. The Company continues to enjoy CARE A1+ and IND A1+ rating in respect of short term bank facilities and commercial papers respectively.

The consolidated net debt at end of FY23 was Rs 5,064 mn, including Rs 1,545 mn for setting up greenfield project in Brazil. Adjusted for that, the net debt reduced by Rs 1,007 mn as compared to FY22 due to focus on capital allocation and reduction in working capital. We continue to have a healthy debt to equity ratio of 0.39 (0.36 PY) and a DSCR of 3.00 (4.64 PY). The consolidated ROE and ROCE are at 11.9% and 13.2% respectively as compared to 12.2% and 15% in March 2022.

HUMAN CAPITAL

Although COVID-19 restrictions eased for most part of this financial year, your company has continued to maintain adequate safety and health protocols across all units globally to ensure safe working conditions and environment for the employees at the units and offices.

Based on the results of engagement survey conducted last year - your company focused on three areas this year - Reward and Recognition, Post Survey Action Communication and Employer Brand. To address these areas, a series of workshops were conducted, to facilitate post survey communication and allow participants to share their views and action plans. This was followed by Focused Group Discussions (FGDs) to ensure the effective implementation of the action points. Your company also launched a user-friendly digital platform to facilitate peer-to-peer as well as cross-level appreciation and recognition - "CLAP - Come Lets Appreciate People" and encouraged employees to appreciate freely. Our employee-related initiatives won us the National Best Employer Brand - 2022 award from Times Ascent World HRD Congress and Best Company to work for in Manufacturing award by Feather Touch at The Iconic Platinum Awards.

Your company embarked on a very important Cultural initiative called Speak Up with the tagline, Express-Suggest-Inform. Workshops and sensitisation sessions were conducted globally to establish a consistent understanding of the programs purpose and online application. Through Speak Up, your company reaffirmed its intent to create a work environment that is conducive for all and encourages employees to express without fear.

Digital learning initiatives provided flexible learning opportunities to employees who accessed over 1700 online training courses on the Learning Management System during the year. Your company also conducted interactive global instructor led sessions on Code of Conduct, Whistle-blower Policy, Anti-Corruption and Human Rights, Non-discrimination, Diversity and Inclusion.

We increased our focus on succession & leadership pipeline development. 94% of Career development interventions were successfully completed for the identified talent. We also completed 91% of all Planned Individual Development Plans (IDPs) for all staff through trainings, action learning projects, on-the-job training and e-learnings.

On the Compensation front, your company took key steps towards ensuring Employee compensation parity across the board, particularly at operator levels, considering market benchmarks and prevalent salary levels in the external Job market. This proactive measure will address parity issues and ensure stronger employee engagement.

Highlighting our progress on the selected Sustainability Development Goals (SDGs), your company made strides in three key areas. Under the plastic waste management, 500 Benches made by recycling plastic waste from EPL units were donated to schools in India and community awareness sessions were conducted on effective plastic waste management in partnership with NGOs. In the Skill Development area, we continued with our Apprenticeship program. In Community Welfare, we constructed classrooms, undertook drinking water projects and conducted health camps.

INFORMATION TECHNOLOGY (IT)

EPL has always been the front runner in adopting technology and staying true to its vision "Leading the Pack - Sustainably" which has now become our DNA and is ingrained in all our actions.

The recent global pandemic, supply & logistic disruptions, soaring inflation and crude & forex volatility have taught us the importance of being prepared for uncertainties and significance of swift decision making. These can be achieved by being future-ready by adopting technology transformation and data mining.

EPL?s IT Function strives to be growth enablers and catalyse operational excellence through digital transformation. Its focus revolves around the following 4 Pillars:

• Enterprise Initiatives

• Stakeholders Engagement & Collaboration

• Operational Excellence

• Telescopic Insight - #Data Analytics

We are one of the first packaging company which has migrated to latest version of SAP S4HANA system. We have been growing both organically and inorganically, but our aim is to have a single standardised system across all our units with local flavours. During the year, EPL completed the merger of the newly acquired company Creative Stylo Packs Private Limited. Our IT team was ready to implement the system integration of the newly acquired company and was successful in rolling out the S4HANA system.

Our next challenge is to tackle Brazil, known as one of the most complex localization in the world, followed by Germany which has the most automated process. The system consolidation of these two countries is in progress.

Gartner defines data analytics as the management of data for all uses (operational and analytical) and the analysis of data to drive business processes and improve business outcomes through more effective decision making and enhanced customer experiences.

The future of manufacturing revolves around a connected factory where all devices and elements can communicate, facilitating enhanced visibility into each process. The Industrial Internet of Things (IIoT) makes this vision possible through sensors and devices interconnected with machine software and applications.

EPL adopted the connected factory concept in 2019, and also integrated with central ERP system through the shop floor automation project (ePAD), which is now live in all Indian plants. The target is to implement the same in Europe region this year. This project has improved the operator efficiency by 10%, in addition to capturing data in real-time and ensuring data sanctity.

The implementation of data analytics is a vital element of the connected factory. Connected equipment produces vast amounts of data, and with edge connectivity and computing, such data can be analysed and understood in transformative ways. Real-time information allows for enhanced decision-making and process improvements.

At EPL, we use Manufacturing, Functional and Operational Dashboards which analyse data and provides meaningful insights data to improve efficiency.

The next important activity is #Cyber Security to ensure protection of our eco system from unethical hackers. Cyber security is best dealt with by creating awareness and security readiness. EPL has unleashed a series of mandatory cyber security training programmes for its employees. This will enhance the user awareness regarding Dos & DONT for cyber security. In combination with user awareness, EPL has strengthened its system security at different levels i.e. network, application etc.

Your company has been awarded the Information Security Management System - ISMS ISO 27001:2013 certification by an independent certification body Quality Austria (QA)

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your company has put in place robust internal control systems and a structured internal audit process for financial controls of systems and processes. This ensures adequate internal controls over business & accounting processes, compliances with relevant laws, and also helps safeguard the companys assets.

The Audit Committee discussed and approved the appointment of internal auditors, as well as the scope and coverage of internal audits. We conducted internal audits of systems and processes, as we do every year in all the units across the globe. We also conducted specific reviews of application controls across key processes. The Audit Committee, statutory auditors, and top management are apprised of internal audit findings, and updates of action taken on the internal audit observations are also given to the Audit Committee.

The Audit Committee of the Board, comprising of two non-executive independent directors reviews the quarterly, half yearly, and the annual financial statements of your company. A detailed note on the functioning of the Audit Committee and the other committees of the Board forms part of the section on Corporate Governance in the Annual Report.

Your Company has a process of monthly business reviews, separately for each of the regions, as key operational control. Your Company also has a capital expenditure control system for authorizing investments in new assets and projects. Accountability is established for meeting timelines and achieving deliverables promised with the investment.

Your company further deploys IT-supported workflows as a way to standardise the processes globally as well as to ensure control and safety of our data. We use IT extensively to analyse customised business information, which we use to facilitate analysis and take corrective action.

During the year, your company carried out a detailed review of internal financial controls to ensure the adequacy of internal controls over financial reporting in its India units. This review covered the testing of both the design and operating effectiveness of internal controls. Further, the Risk and Control Matrices (RCMs) were also reviewed and updated.

The findings of such reviews were satisfactory.

RISK MANAGEMENT

The Board of Directors and the Risk Management Committee of the Board review the business risks to which your company is exposed, along with mitigation measures, at periodic intervals. The senior management team led by CEO and Managing Director is responsible for managing risks proactively and developing and implementing appropriate mitigation measures.

Key risks to which your Company is exposed include:

• Escalation in raw material prices and impact on long term contracts

Your company has incorporated raw material cost escalation passthrough clauses in its long-term customer contracts which enable product prices to be revised periodically to reflect any variation in material costs. Wherever possible, your company continues to identify and establish alternate supply sources and alternative materials to effectively manage material costs as well as supply continuity.

• Currency volatility

The global nature of operations exposes the company to several currencies. Also, fluctuations in exchange rates could affect performance. Appropriate pass-through clauses have been built into long-term customer contracts to offset the impact on material costs due to exchange rate fluctuations. Prices get reviewed and revised in the event of significant currency movements. Your company also has the policy of systematically hedging its trade and capital exposures using forward contracts. Wherever possible, transactional currencies are aligned to the reporting currency to obviate exchange fluctuation impact.

• Economic downturn

This could impact your Companys markets, suppliers, customers, and finances leading to business slow down, disruptions, etc. Proactive supplier and customer engagement are one of the ways that your company has adopted to minimise risk to business continuity. Since your companys products are related to the daily necessities of consumers, their demand is not much impacted by the downturn. Your company proactively monitors emerging trends in consumption and offers relevant solutions to its customers to stay ahead of the curve. There is also a strong business development pipeline to increase market share further. Your company is also focused on containing costs and improving efficiencies. The company is already working on a few margin improvement initiatives to achieve this goal.

• Competition

Your company focuses on superior quality, shorter lead time, and high service levels to keep customer satisfaction high. It also invests in technology-driven innovation, and in particular, sustainable products/processes to sustain its competitive edge. Besides, its ability to support its customers across the globe and focus on efficiency and value management has helped to sustain its position as a world-class provider of packaging solutions.

• Wage increases

Your company is proactively using automation and asset productivity improvement to contain headcount and manage employee costs, particularly due to the increase in minimum wages in several countries.

• Information Security Risk

In the recent times, remote working models and accelerated adoption of digital technologies have significantly increased our vulnerability to cyber-attacks. You company has adopted a systematic approach integrating processes, technology and people facets that help protect and manage its information through effective risk management. Adequate steps like training all staff members, building multi-layered controls, ensuring regular back-ups, etc have been taken to ensure that we are able to support business and technology initiatives while protecting our organisation, our customers, and our third-party vendors from information security risk.

In FY 23, EPL has successfully completed the ISO 27001 certification which demonstrates our compliance with global best practices regarding information security and data privacy.

We continue to be vigilant and remain focussed on compliance, continuous improvement and creating a cybersecurity culture within the organization.

• Attracting and retaining talent

As with any other business, high demand for talent globally impacts employee turnover. Your company mitigates this by fostering an empowered organizational culture that is lean and professional. Contemporary HR practices such as career planning, competitive remuneration, performance management systems, performance linked pay, stock options, and skills & competency training are now well established across the company and its subsidiaries. Top talent is given the opportunity to move across functions and geographies. Employee engagement surveys are carried out annually and the findings are used to further improve employee satisfaction.

OUTLOOK

Your company is sharply focused on delivering market leading growth coupled with capital efficient and consistent earnings improvement.

We have a 4 X 4 mantra for growth that aims to deliver industryleading profitable growth 4 Cs - Where we will win

• Category - Drive growth in Beauty & Cosmetics and Pharma

• Customer - Go for Global and Regional customers

• Country - Build wallet share in key countries

• Cost - Harness fuel for growth

4 Enablers - How we will win

• An ambition driven innovation program

• Bold sales and marketing to hunt down new growth opportunities

• Digital transformation to make EPL future-ready

• Build a one EPL culture to foster cross-fertilization of ideas and promote horizontal collaboration across regions

We faced challenges over the last couple of years and are clearly coming out of all this stronger. We remain committed to continuous improvement so as to deliver sustained and profitable growth. India, a key part of our business, has performed strongly thus far, and this is expected to sustain. Our focus is to deliver a double-digit revenue growth as China recovers and price increase actions to cover inflation- related costs in the western geographies. We will continue to focus on margin improvement through product optimisation and cost efficiency. With supply chain easing, we aim to optimise capital allocation by sharply reducing inventory and further spreading our assets. And we will continue our focus on customer conversion to sustainable solutions, making EPL even more sustainable.

SIGNIFICANT CHANGE IN KEY FINANCIAL RATIOS:

There is no significant change in key financial ratios as compared to the previous financial year except for Debt Service Coverage ratio (DSCR) and Interest Service Coverage ratio (ISCR).

¦ DSCR remains strong at current level. It is lower as compared to previous year due to higher repayment of borrowings as per the repayment schedule during current year as compared to previous year.

¦ ISCR remains strong at current level. It is lower as compared to previous year due to higher finance cost on account of increase in benchmark interest rates across geographies during current year as compared to previous year.

CHANGE IN RETURN ON NET WORTH

The return on Net worth for the financial year has gone down to 11.9% as compared to the preceding financial years return of 12.2% on account of new investment in greenfield project in Brazil which will ramp up in the coming year.

CAUTIONARY STATEMENT

Statements in this Annual report, particularly those which relate to management discussion and analysis, describing your companys objectives, projections, estimates, and expectations may constitute "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may materially differ from those expressed or implied.