Could India’s reality soon match its promise?

It’s home to the world’s largest democracy, produces many of the world’s outstanding engineers and chemists, and its GDP growth rate, about 9% for 2005-2008, still should be at or above 5% in this unsettling year.

On the flipside, its infrastructure is a mess, about 25% of its 1.2 billion people live below the poverty line, and development is very gradual; little on the surface has changed in the 15 years MPW has been visiting the country, although for all those years we’ve heard that the time for its ascent has arrived.

Still, India may be the swiftest of the BRIC (Brazil, Russia, India and China) countries to get its groove back. It is no hare, but neither is it the tortoise; one analogy MPW heard was that of an elephant, plodding steadily forward. Brazil and Russia’s commodity sales-driven economies have been hammered in the past nine months, as has China’s export-driven one. India enjoys solid-to-swift growth in its domestic industries. “Every major end-use market (in India) is on a growth curve,” said Kamal Nanavaty, president of cracker/polymers/chemicals at Reliance Industries Ltd. (Mumbai), the undisputed leader in India’s plastics supply market. “We saw the dip in October-November 2008, but now everybody’s plants are running flat out,” he added. Vipul Babu, sales director, plastics, in South Asia at Dow Chemical, concurred, saying, “We’re fortunate; the recession hit and left. Already we see growth again,” with January automotive sales setting a domestic record, and specialty packaging also growing steadily, he said.

Can you make it there?

Western processors are discovering the country, though very gradually. Germany’s Weener in 2008 bought a 25% interest in (now named) Weener Empire Plastics Ltd., which has four facilities in India, performing injection and extrusion blowmolding of bottles, plus injection molding of closures and limited extrusion/conversion of film for labels. Bericap, another German company but already globally active as a closure molder, also has a facility in India. Last summer Rosti (Ballerup, Denmark), an injection molder of technical parts for a variety of industries, opened its own facility in Pune, India. Packaging blowmolder Graham Packaging Company (York, PA) in March acquired a minority stake in India’s PPI Blowpack Pvt. Ltd. (Mumbai) for an as-yet undisclosed amount, with Kapil Gami, business development manager for Graham Packaging, noting that the rigid plastic container sector in India is growing at a 15-20%/yr pace.

A grain of salt

Some longtime observers of the Indian processing market recommended MPW take a grain of salt with all of the optimistic talk during the trade show. “What you see (here at the show) is not always what the reality is,” advised Phulla Shah, business development leader at Consultek (Brea, CA and Ahmedabad, India). Indian by birth, he studied in the U.S. and has lived there much of his adult life, though he maintains close family and business ties in India. New technology is of interest and coming to the country’s industry, he said, but not necessarily as rapidly as sometimes suggested. “But there are people here with lots and lots of money, and they are looking for good investment opportunities,” he noted, to include acquisitions of foreign-based processors. “Processors here used to only buy other Indian companies,” he continued, “but now look at Jain (the Mumbai-based irrigation systems processor). They’ve bought all over the U.S. and Europe.” The automotive industry in India is growing rapidly, he added, and helping drive standards higher throughout the manufacturing industries. According to Nanavaty, Reliance’s top plastics official, the top 25 Indian processors have an EBITDA of about 17%, up from 10% five years ago. They have grown wealthier and more efficient.

OK Play (New Delhi), which started as an Indian rotomolder of toys, has progressed via alliances with processors from around the globe. It formed a cooperation with Solar Plastics (Delano, MN) to help it get into rotomolding of technical products such as fuel tanks for farm equipment. “We met (Solar Plastics) at an ARM (Association of Rotational Molders) meeting,” recalled Rajan Handa, OK’s managing director. He says the company now is processing about 4.5-5 million tonnes of plastics annually, and he expects that number to hit 12 million tonnes by 2012. “There’s no recession here,” he told MPW. “All of our sectors are doing well.” The company’s products are almost exclusively processed for the domestic market, with the exception of its plastic mannequins, made via a license with New Zealand’s Purform and shipped around the world. New to the processor is injection molding of construction toys, via a license from Belgium’s Toykimo.

Recycling is a huge issue in India’ plastics processing industry, as it is in many other countries, with a ban on thin-gauge T-shirt bags there drawing tremendous political and citizen support. One man hoping to capitalize on the surging interest in plastics recycling is Randeep Gampa, who last June started a business, Spearepet (Hyderabad), with commercial operations beginning last November.

Gamopa told MPW during the Plastindia show in early February that he’d acquired a polyethylene terephthalate (PET) recycling unit from Austrian machinery manufacturer Erema (Ansfelden, Austria). “People are very keen to know about recycled PET (R-PET),” he said during the trade show, the first event for his company.

His firm supplies the domestic processing market with pellets suitable for blowmolding, as well as with sheet extruded from R-PET. Because, he said, interest in R-PET is high but questions about the material’s suitability (with regard to appearance of products made from it, as well as food contact approval), his company even has done some thermoforming of sheet made from the R-PET, “so customers can see the quality of the R-PET products,” he said.

Dow Chemical’s Babu says one trend is for global brand owners such as Unilever and P&G to turn there sourcing eyes to India’s well-established processor base. “In developing markets (such as India), processors are very quickly leapfrogging to the latest technology,” added Luiz Stortini, Dow’s global business director, specialty packaging & films. Barrier films are seeing a massive demand surge as India’s agrarian society, and tradition of shopping at local markets, makes way for dual-income families, with little time for farmers’ markets, who pick up groceries at newly-established food stores at the end of their workdays. Dow’s own growth in the country helps mark its growth: from 10 employees in 1995, to 100 in 2005, to about 1000 now. “People here are very open to innovation,” says Stortini. Added Babu, “Ideas can be implemented here much more quickly (than in other countries).” With that in mind, the country seems certain to remain an interesting one for plastics processing. —[email protected]

See more alliances announced at Plastindia here on our website, like this one involving Lohia Starlinger Ltd.