'Backward integration combined with capacity expansion will allow us to increase market share', CEO Roshan Packages Ltd

BR Research recently sat down with Mr. Tayyab Aijaz Qureshi, CEO of Roshan Packages Ltd. A business graduate who started his professional career with Roshan Group. Tayyab is also a founding director of PAMCO, a Punjab agri-marketing company for three years. He has participated and represented Pakistan's horticulture sector packaging industry on many international Platforms. Tayyab is also the Chief Executive Officer and Director of Roshan Sun Tao Paper Mills, a joint venture between Roshan Packages Limited and Shandong Yongtai Paper Mills, a Chinese corrugated paper producer. We discussed with him the impressive growth of Roshan Packages and the firm's upcoming initial public offering (IPO).

Below are edited excerpts from the interview.

<B>BR Research: Let's start off with a brief introduction of the Roshan Group and how Roshan Packages Ltd. came into the picture.</B>

<B>Tayyab Aijaz Qureshi:</B> The Roshan Group that was started by my father in 1959 with the publication, Urdu Digest, eventually became a publication house. In 1989 Roshan Enterprises was established for the purpose of exporting fruits and vegetables. In a short span, it was able to become one of the largest fruit exporters of Pakistan which included setting up a citrus processing plant in Sargodha and a mango processing plant in Karachi. As our export volumes picked up we faced problems in procurement of corrugated boxes for packaging our products. This led to Roshan Packages being set up in 2002 with the plant starting operations in 2003 to ensure an uninterrupted supply of packaging for our exports.

<B>BRR: Please tell us more about Roshan Packages for which you are also conducting an initial public offering (IPO) in the coming weeks.</B>

<B>TAQ:</B> Roshan Packages has two principle product categories. One of them is the corrugated segment that produces box cartons for packing consumer goods, fruits, textiles etc. The other is flexible packaging which caters to the packaging requirements for confectionery, food, cosmetics and FMCG firms. The company has two primary manufacturing plants that cover more than 16 acres of land, 680 employees and utilises state of the art machinery imported from Germany.

By 2012 our association with FMCGs had increased to such an extent that we set up a flexible packaging unit to cater to the growing demand of the sector. Apart from Packages Ltd. there was no other supplier that provided diverse packaging solutions under one umbrella. As our product line expanded, we started facing capacity constraints because of our phenomenal sales growth. In 2015, we decided to expand our production facilities and by last year the majority of expansion already been achieved. The previous corrugated box capacity of 30,000 metric tons is being doubled to 60,000 tons per annum.

Similarly, flexible packaging capacity of 3,600 tons per annum has been tripled to 10,800 tons by the fourth quarter of 2016. It is being further expanded to 12,240 tons by the end of this year. In our flexible division, we have set up an extrusion line, which has allowed us to backward-integrate the flexible plant and internally produce polyethylene film, which is used for products such as oil, ghee and pasteurised milk.

In the global packaging industry, it is extremely important to continuously innovate because your clients are competing against international players. Therefore, at Roshan Packages innovation is a priority and we have ensured that during our expansion phase as well.

The proceeds from the IPO will mostly be utilised in expansion, while the remaining amount will be used for debt servicing and working capital requirements. We also feel that getting publicly listed will allow us to continue our impressive growth trajectory and achieve our desired scalability. The book building will be held from January 17-18, 2017 and a total of 32.5 million ordinary shares will be offered at a floor price of Rs35 per share. The book building portion will be 24.375 million ordinary shares ie 75 percent of total, while 8.125 million ordinary shares will be offered to the general public.

<B>BRR: How do you see the future growth trajectory of Roshan Packages? Which factors do you see as having the most impact?</B>

<B>TAQ:</B> Almost 64 percent of our sales mix comprises of the FMCG sector, which is experiencing rapid growth. Many corporations are setting up plants to increase capacity to cater to the growing demand because of rising incomes.

Moreover, the unorganised package sector has faced setbacks in terms of quality assurance and reputation concerns. This has led to FMCGs looking for a vendor that provides all their packaging solutions according to international standards. We believe Roshan Packaging is in a perfect position to take that market share because of our expansion and backward integration.