Economic Overview:

• According to the most recent IMF projections, the world economy would expand by 3.6% in 2022 and 2023. The Indian economy expanded by a robust 8.7% in the financial year 2021–2022, as opposed to a decrease of 6.6% in the financial year 2020–2021, according to the Central Statistical Office (CSO), indicating that pre-pandemic levels of economic activity have been surpassed in India. 
• However, in the latter half of the FY 2021-2022, India’s growth prediction for 2022–23 (FY23) was reduced by 140 basis points to 6.8% by the International Monetary Fund (IMF), which cited less favourable external conditions and the central bank’s quickening of policy tightening. 2022 Projected Consumer Prices remained at 6.9%.
• The Repo rate was hiked in a phased manner to 6.25% (December 2022) by the RBI adapting to the hawkish needs of the market and to counter rising inflation which cooled off to 5.88% (retail CPI) by November. An impending revival in demand, positive consumption pattern and rising disposable income makes India the most sought-after investment destination.
• Already the fifth largest economy in the world, India is reasonably expected to take its place among the world’s top three economic powers in the next 10-15 years. It is also a global supplier, with India’s polymer exports totalling some 1.5 million metric tons in 2021.

Industry Overview:

• Woven fabric is a textile formed by weaving. It is produced on a loom and made of many threads woven on a warp and a weft. Woven High-density polyethylene/HDPE bags or simply woven PP (Polypropylene)/HDPE bags are considered to be the toughest packaging bags, widely used to pack materials for grain, milling and sugar industries.
• HDPE/PP-oriented strips are becoming increasingly popular in India & have caught the eye of many end users for their requirement for packing materials. PP/HDPE woven sacks laminated with LDPE/PP liner have wider applications. HDPE woven sacks are much stronger & can withstand much higher impact loads because of HDPE strip's elongation at break is about 15- 25% as compared to 30% of Jute. These sacks are much cleaner & resist fungal attacks. Jute prices are very unstable in the market since Jute is an agricultural product. These sacks have many advantages over other conventional sacks materials & are quite competitive in price.
• By product type, The polypropylene woven bags and sacks market is segmented into laminated polypropylene woven bags and non-laminated polypropylene woven bags. The laminated polypropylene woven bags and sacks market is further sub-segmented into Kraft paper laminate and BOPP Laminate. On the basis of end users, the polypropylene woven bags and sacks market is segmented into building & construction, agriculture & allied industries, food, retail and shopping and others

Classification of Industry:

• Polyethylene is a petroleum-based synthetic fibre widely used to make fabrics and materials in various industries, including fashion, similar to other plastic fabrics such as polyester, nylon, acrylic, and polypropylene. Polyethylene fibre is a common ingredient found in ropes, carpeting, upholstery, bags, packaging, apparel, textiles, wallpapers, draperies, curtains, and cosmetics. 

The various types of polyethylene fiber include:

• In the financial year 2021-2022, the total demand for major plastics (excluding engineering plastics and thermosets) across India was approximately 15 million tons, out of which polyethene types accounted for roughly six million metric tons.
• The Indian Packaging market was valued at 323,417.8 million units in 2018. Polyethylene makes up 60% on an average of the total demand from the Indian plastic market. Packaging was the main application for polyethylene (PE) use in India in the financial year 2022.
• Thermoplastic demand in India totalled 19.3 million tons in the financial year 2022.
• Polypropylene (PP) had the largest share of demand that year at 24% or 6.1 million tons. High-density polyethylene (HDPE) and Linear low-density polyethylene (LLDPE) followed, with a combined share of 38%.

  
  

  
  

  The industry is dependent on the performance of core sectors like agriculture, fertilizer, cement and exports, hence it becomes imperative to understand the performance of these industries. The policy changes in infrastructure and good monsoons during the year have generally been an added contributing factor for the industry.
  

  
  

  Performance of the Cement industry:

  • India is the second largest cement producer in the world and accounted for over 7% of the global installed capacity. At present, the Installed capacity of cement in India is 500 MTPA with a production of 298 MTPA, which is expected to increase at a CAGR of 5.65% between FY16-22, driven by demands in roads, urban infrastructure and commercial real estate.
  • The consumption of cement in India is expected to grow at a CAGR of 5.68% from FY16 to FY22. As per Crisil Ratings, the Indian cement industry is likely to add ~80 million tonnes (MT) capacity by FY24, the highest in the last 10 years, driven by increasing spending on housing and infrastructure activities.

  
  

  

  
  

  Performance of the Fertilizer industry:

  • The Indian fertilizer market size reached ₹ 898.5 Billion in 2022. Looking forward, IMARC Group expects the market to reach ₹ 1,188.3 Billion by 2028, exhibiting a growth rate (CAGR) of 4.85% during 2023-2028.
  • In the financial year 2022, over 42 million metric tons of fertilizers were produced in India. Fertilizer production in India peaked in the financial year 2020 at over 46 million metric tons. During the last few years, there has been a favourable policy environment facilitating investments in the public, cooperative and private sectors. 

  
  

  

  Performance of the Agriculture industry:

  • India has the world's largest cattle herd (buffaloes), the largest area planted for wheat, rice, and cotton, and is the largest producer of milk, pulses, and spices in the world. It is the second-largest producer of fruit, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice, cotton, and sugar.
  • The production of rice was the highest with over 127 million metric tons in the fiscal year 2022 across India among the other food grains.
  • The production of wheat saw the second-highest volume after rice. Further, as per industry body ISMA (Indian Sugar Mills Association), the country's sugar production is projected to be 36.5 million tonnes in the 2022-23 marketing season, an increase of 2 per cent compared to the year-ago period(Source: ET)

  
  

  

  
  

  Key Drivers:

  • Resource procurement: Among the industry’s major strengths is the availability of raw materials in the country. Thus, plastic processors do not have to depend on imports. These raw materials, including polypropylene, high-density polyethylene, low-density polyethylene and PVC, are manufactured domestically.
  • Pro-Industry Climate: India is ready to have 18 plastic parks and Government will be investing Rs 40 crore (US$ 6.2 million) to increase the domestic production of plastics. This will achieve environmentally sustainable growth and increase employment. 
  • Emerging Possibilities: The country is emerging as the most favoured destination for organized retail destination in the world. And also the presence of E-commerce is expanding rapidly and is bringing about a revolution in the retail industry. Retailers are now leveraging digital retail channels thereby enabling a wider reach out to customers with less amount of money spent on real estate.
  • Tailwinds: The technical textile sector will open up new growth opportunities. The Indian technical textiles market is expected to expand to US$ 23.3 billion by 2027, driven by increased awareness of goods and higher disposable incomes. Production-linked Incentive (PLI) Scheme for technical textiles and manufactured fibres worth ₹ 10,683 crores (US$ 1.44 billion) during a five-year period. The program’s incentives will be accessible for five years, from 2025–2026 to 2029–2030, based on the additional turnover reached between the year 2024–2025 and 2028–2029 The programme aims to promote MMF (manmade fibre) clothing, MMF fabrics, and ten categories of technological textile items. The overall budget for the textile industry for the Union Budget 2022–23 was ₹ 12,382 crore ($1.62 billion). Out of this,  ₹ 133.83 crores (US$ 17.5 million) is designated for the “Textile Cluster Development Scheme,” ₹ 100 crores (US$ 13.07 million) is designated for the “National Technical Textiles Mission,” and ₹ 15 crores (US$ 1.96 million) is designated for the “PM Mega Integrated Textile Region and Apparel Parks Scheme.”

  • Macro Weather Forecast: One of the biggest industries in India is the plastics market. More than 2,000 exporters work in the sector, which is widespread across the nation. In 4-5 years, the Indian government hopes to increase the economic activity in the plastic industry from its current level of  ₹3 lakh crores (US$ 37.8 billion) to ₹10 lakh crores (US$ 126 billion). India saw a significant increase in exports over 2020–21 in terms of value. Overall, the overall exports of plastics in 2021–22 saw a high increase and rose by 35.4% from the previous year. In comparison to 2020–21, the exports of FRP and composites, pipes and fittings, and human hair all climbed by 100%, 67%, and 48%, respectively. India’s Ministry of Commerce & Industry wants to double its plastic exports to $25 billion by 2025. To increase the nation’s output of plastic production, numerous plastic parks are being established in it gradually. 

  
  

  Hindrances: Jute is the chief competitor of HDPE/PP/other MMT(Man-made Textile) used in bulk packaging.

  
  

  JUTE	PPIHDPE WOVEN SACKS
  Heavier as compared to PP and HDPE	Light in weight
  Susceptible to insect infestation	Not susceptible to insect infestation
  Mote cost as against PIVHDPE	Cost-effective
  U.V degradation	U.V resistant

  
  

  6. Peers: Following is a comparison of the company with respect to some of the listed players using widely used KPIs:

  
  

  Scrip	Market Cap (₹ Cr.)	2022 Sales (₹ Cr.)	5yr Sales CAGR	5yr NPM CAGR	Average yearly EBIT margin	PE	DE	ROE
  Jumbo Bag	20	201.54	6%	9%	6%	17	1.3	14%
  Gujarat Craft Industries Ltd	45.7	170.8	12%	44%	8%	9.5	0.68	16%
  Dalmia Laminators	134.8	207.73	8%	15%	13%	13.3	1.24	6%
  Shree Tirupati Balajee FIBC Ltd	171	197.76	23%	18%	7%	10.46	0.88	14%