BUSINESS OVERVIEW

2. BUSINESS OVERVIEW 2

3. Packaging Industry • The size of the global packaging industry is $563.8 billion and is expected to grow at an annual rate of 3.1% till 2014. • The Indian packaging industry is estimated to be $14 billion in size and is expected to grow at an annual rate of 15% till 2014. • Due to lower manufacturing costs, India is emerging as a preferred hub for plastic packaging material. • In India 20% of the population consumes 80% of the packaged production, remaining 80% of the population consumes only 20%. Hence, the Indian packaging industry is poised for a good growth in years to come. Global Packaging Industry Indian Packaging Industry • The size of the global packaging industry is about $563.8 billion in 2009 and is expected to grow to 739.9 billion by 2014, at an annual rate of 3.1%. • Europe and North America account for 30% and 28% of the global share whereas Asia accounts for 27% of the global share India’s Cost Advantage India’s Cost Advantage: A Comparison • India is rapidly emerging as the production center for plastic packaging material for the global market • This is because India has cost advantages such as lower wage and operating costs and a large labor pool • Exports constitute nearly 15% of the total capacity of thin films in India Vacmet India Limited • The size of the Indian Packaging Industry is estimated at $14 billion and has been growing at more than 14% p.a. • The growth rate is expected to accelerate to 16-17% over the next five years • This is mainly on account of the increasing urbanization, changing food habits, economic growth etc.

4. Packaging Industry Urbanization Economic Growth • India is expected to add 75 million new consumers to its urbanized population by 2015 • A young population coupled with higher disposal incomes are likely to contribute to the growth of the consumer goods market • People are becoming more health conscious and are moving towards well packed branded products rather than loose and unpackaged products • The consumption per capita of packaging in India is very low as compared to developed economies • India has 70% of its population living in rural areas • However due to globalization and increased influx of multi nationals, consumerism is rising • As a result rural India is gradually transitioning to an urban society • By 2015, an additional 75 million consumers will have moved into cities Changing Food Habits Marketing Trends • There is a growing trend towards well-packed, branded products rather than the loose and unpacked formats due to hygienic concerns • The demand for ready to eat packaged food products is rising due to changing lifestyles, dual income households, rising number of working women etc. • Marketing trends are placing increasing emphasis on the look, sales appeal and quality of retail packaging • The continuously changing demands of consumers will require higher quality graphics and promotional links between graphics and advertising to support brand identities Vacmet India Limited Robust economic growth in the country has proved to be beneficial for the consumer goods market Younger consumers are benefiting from higher disposable incomes and therefore more power over their purchasing decisions

5. Packaging Industry Classification of Packaging Industry Bottle, Metal Can, Wooden Box, Metal Box etc. Rigid Packaging Packging Industry Semi Rigid Packaging Carton Box, Plastic Bottle Flexible Packaging Paper, Plastic, Film, Alu Coil etc. It is estimated that more than 80% of the total packaging in India constitutes rigid packaging, which is the oldest and the most conventional form of packaging. The remaining 20% comprises flexible packaging. Increasingly, rigid packaging is being replaced by flexible packaging. The traditional benefits of rigid packaging can now be achieved with flexible packaging with the added advantages of lower cost and greater flexibility. Stand-up pouches and re-closable packs offer merchandizing advantages and other marketing benefits to fast-moving consumer goods (FMCG) manufacturers, similar to other rigid forms of packaging. Growth is likely to be driven by the rise in demand for packaged food from the affluent, urban middle-class as well as the intensifying need to meet the changing lifestyles of customers. The growth in demand for exports is another factor enhancing the food industry, consequently driving the food packaging industry. Changes in technology and the replacement of rigid packaging with flexible packaging also act as catalysts for market expansion. Vacmet India Limited

6. Demand Drivers Massive Growth Prospects • Current Installed Production Capacity of PET Films in India is 300,000 MTPA • Current Demand for PET Film 450,000 MTPA • Expects growth of 14-15% p.a. of current demand for next 5 years which requires at least capacity expansion of 67,500 MTPA • In next 2 years it requires 135,000 MT additional capacity but in current scenario there is only 4 Lines of PET Films with a capacity of 27,000 each is in pipe line which will be commenced between Dec’2010 to Dec’2012 • This means no pressure on margins will be faced by the BOPET Manufacturing Companies Vacmet India Limited

7. Demand Drivers The demand in packaging industry depends on the major end-use industries like FMCG, consumer durables, textiles and packaged foods. • Growth in consumption of western-style snack products, confectionery and baked goods resulting in traditional food manufacturers using paper packaging; • Packaging of branded commodities: With the increasing hygiene consciousness and the consumer’s inclination to consume quality products, a sharp preference for branded commodities like oil, mineral water, spices, condoms and lubricants is being observed; • Entry of multinational food and retailing companies are expected to increase demand for packaging products; • Packaging solutions for improved logistics • Barrier materials developed for longer shelf life • Temper evident solutions for enhanced safety • Improved differentiations, e.g. by the decoration • Active & Intelligent packaging for tractability and guaranteed freshness Key consumer packaging trends and development drivers with growth in organized retailing • Increasing use of small flex pack pouches i.e. shampoo, tea etc, • Increasing industrialization and expected emergence of the organized retail industry with entry of big industrial houses slated in near future; • Urban population skewing towards nuclear families with both parents working giving rise to a need for convenience in pack sizes and usage. Vacmet India Limited

8. FMCG Sector Indian FMCG Indian FMCG Growth • The Indian FMCG sector is expected to reach a size of $320 billion by 2013 • The sector has grown at an annual growth rate of 14% since 2005 • Vacmet is adequately placed to capitalize the growth in the FMCG industry due to its existing customer base both in India and abroad • The company has been providing end to end customer solutions to some of the biggest FMCG giants in the country like ITC, Unilever, P&G etc. • The Indian FMCG sector is expected to grow at a CAGR of 12% to reach a size of $320 billion by 2013 • This is due to a favorable demographic profile, improving household wealth and the advent of organized retail. The Growth Story- ITC Advantage Vacmet • Vacmet is adequately placed to capitalize on the projected growth in the Indian FMCG industry as it is already servicing the packaging needs of FMCG majors such as ITC, Unilever, Cadbury, Colgate • Moreover, the company plans to expand its combined installed capacity from 38,000 MTPA to over 108,000 MTPA by 2012 • It also plans to go in for forward integration and move up the supply chain CAGR- 14% Vacmet India Limited

9. Fastest Changing Indian Retail Landscape Vacmet India Limited

10. Products : Flexibles, Specialized pouches, labels and cartons Vacmet India Limited

11. Background and Growth Story • The Company was incorporated in the year 1993 as Vacmet Packagings (India) Private Limited. VPIPL. • The Company has grown from 1,200 MTPA capacity in 1993 to 38,000 MTPA in 2007 • Total Converting Capacity of Company is 18000 MTPA • Production Capacity of Plain Polyester Film is 20000 MTPA The company was established in 1993 by Mr. Dinesh Chand Agarwal, a graduate in plastic & polymer engineering from UK. The company initially started as a manufacturer of converted products with a capacity of 1,200 tonnes per annum and has gradually moved on to high value added products. Vacmet went into backward integration by setting up a polyester films plant for its captive consumption. Currently, it is one of the few companies in the Southeast Asia to manufacture products as diverse as Hot Stamping Foil, Selective Metallized Film , Holographic Films, Metallized Paper and other Metallized & Coated Products. 2012 New BOPP Line with Capacity of 41,000 MTPA to get installed by FY 2012 Another BOPET line with capacity of 27,500 MTPA installed Commenced operations of one polyester film line Installed Capacity of 20,000 MTPA by setting up another unit at Chatta ( Unit 4). This was a backward integration 2011 Expanded its processing capacity by setting up another unit at Kosi ( Unit 3) to 18000 MTPA by 2006. 2007 Expanded its processing capacity to 2400 MTPA by setting up another unit at Kosi ( Unit 2) 2003 1997 Company Incorporated with initial capacity of 1,200 MTPA at Agra ( Unit 1) 1993 Vacmet India Limited

12. Global Presence Besides extensively catering to the domestic market, Vacmet exports to more than 35 countries globally. With development of new products, Vacmet domestic as well export markets are growing at very rapid pace. We take pride in meeting requirements of many Fortune 500 companies today. Vacmet India Limited

13. Business Operation Kosi Plant Unit IV (Chhata Plant) • Operates four manufacturing plants located within Ten km of each other in District Mathura, U.P. • These facilities are strategically located and have easy access to almost 50% of the Indian flexible packaging industry. • Most of the manufacturing units of food processing companies are located in North India, giving Vacmet a significant advantage over its competitors like Jindal Poly Films and Garware. • All units are well equipped with state-of-arts production facilities. Current Land area owned by the company is 85,400 Sqmeter in all 4 units. Vacmet India Limited

14. Polyester & Metallised Films Biggest Application for Polyester Films are Flexible Laminates • Vacmet manufactures a diversified assortment of converted films and plastic products used by Food, packaging, agri and beverages industries. • Metalised films are used in a wide variety of products such as snack food packets, cosmetics sachets, soap wrappers, confectionery products, air conditioning ducts etc POLYESTER FILMS METALLISED POLYSTER FILM FLEXIBLE LAMINATES Vacmet India Limited

15. Holographic Films One of the Fastest growing Applications for Holographic Films • Holographic paper and Metalised Paper find its application in products such as High end labels, Chocolate wrappers, food product packaging,. • Vacmet Manufactures a wide range of holographic films that are used in segments such as are used for flexible packaging, metallic yarns, decoration and labeling. Vacmet India Limited 15

16. Metallised Paper • Holographic paper and Metalised Paper find its application in products such as High end labels, Chocolate wrappers, food product packaging. • New applications have been in decorative segments including gift wraps Vacmet India Limited 16

17. Coated Films for Textiles &Hot Stamping Foil • Vacmet also Manufactures a large variety of films used for Textile yarns. With growth in textile segment, metallic yarns is finding multiple usages. • Hot Stamping Finds usage in several segments like Labels, Greeting card, Boxes, flexible packaging. Coated Films for Textiles Hot Stamping for Labels Vacmet India Limited 17

18. PROCESS BACKGROUND

19. Process Background • Procurement • For procurement of material respective material using department issue material requisition note. • Respective Production head check and verifies requisition slip and send it to Director Operation for approval • Director operation either approved or reject the requisition slip and for approved one he sent to stores for raising its purchase indent. • Purchase Department raise a purchase order on behalf of Purchase Indent to supplier. • At the time of receiving of Material at plant, quality controller (QC) check the material and issue QC slip. Thereafter store department booked the material in to the store ledger and assigned a unique GRN generated by the software. Vacmet India Limited 19

20. Process Background • Inventory Management • Company maintain the inventory as per the changing material requirement. • For Maintaining enough inventory at plants stores person are instructed with reorder level of major raw material and they order accordingly. • Company maintain inventory under 4 broad head of inventories which are as follow: • Raw Material & Other • Work – in – Progress • Finished Goods • Stores and Spares, Packing Material & Fuel and Lubricants • Despatch & Delivery • Sale Representative punch Sale Order in System • Sale Order approved by Finance Department ( By DGM Finance) • After Confirmation form finance department production department planned for the production of that material and produce the material accordingly. • After Production, Production Department inform to Finance Department for final approval for dispatching the material after obtaining that from finance department production person inform to plant people to arrange logistic and dispatch the material to customer. Vacmet India Limited 20

21. Process Background • Billing • After receiving approvals from Finance Department and Production Department, store person create roll wise packing list for the material. • After Packing List Plant Office Person generate sale invoice taking reference of sale order and dispatch the material to customer. • Collection • Customers make their payment as per their payment term set at the time of generating sale order. • Customers normally make payment by way of RTGS, NEFT, Direct Cheque Deposit in Bank or sending chequesdiretly to Head Office and Company marketing Office situated at Agra and Delhi respectively. • After making Packing List Plant Office Person generate sale invoice taking reference of sale order and dispatch the material to customer. • Vendor Payment • Payment to Vendors made according to the payment term set at the time of placing order to them vide Purchase Order. • In some cases company make advance payment to new parties for supplies because those parties supplies their material only on advance payment to the company. Vacmet India Limited 21

22. Process Background • Billing • After receiving approvals from Finance Department and Production Department, store person create roll wise packing list for the material • After Packing List Plant Office Person generate sale invoice taking reference of sale order and dispatch the material to customer. • Collection • Customers make their payment as per their payment term set at the time of generating sale order. Customers normally make payment by way of RTGS, NEFT, Direct Cheque Deposit in Bank or sending cheques to Head Office and Company marketing Office situated at Agra and Delhi respectively. • After Packing List Plant Office Person generate sale invoice taking reference of sale order and dispatch the material to customer. • Vendor Payment • Payment to Vendors made according to the payment term set at the time of placing order to them vide Purchase Order. • In some cases company make advance payment to new parties for supplies because those parties supplies their material only on advance payment to the company. Vacmet India Limited 22

23. Process Background • Accounting • Accounting support documents received from Plants and entered into accounting system at Head office Level. • Sales bills are prepared and entered into the system at plant level by the plant accounting personnel. Head Office check the same with the supporting documents and make correction if any. • In case of Purchase – Plant stores person generate GRN (Goods Received Number) to each invoice on receiving the material from suppliers and sent invoices for approval to respective department head. After receiving their approval stores sent those bills to plant office for Excise entries and after that plant office sent them to Head Office for passing financial entries. • After passing financial entry, the bill goes to payment department for making payment to the suppliers as per payment term set at the time of purchase order. • After payment it goes to filing of the document to book keeping department. Vacmet India Limited 23

24. Current ERP System

25. ERP System • Company using ERP System running on Visual Basic and it uses SQL Server’2008 for Database • Currently company has installed 3 servers at Plant and head Office which has 20 GB Ram and 1 TB hard Disk running on Microsoft Server 2003 and company upgrade them time to time as per up gradation in IT industry or company requirement. • Current ERP system is a single window system it has all feature as per each department requirement and management requirement. ERP Developer also provide time to time new up gradation to the system as per management requirement and department requirement. • User management handled by Head Office, any permission and rights given to any user given by Head Office after receiving e-mail from Head of the Department. Vacmet India Limited 25

26. ERP Functionality • Order Management • Purchase Order – Company raise purchase order to each and every supplier which consist all detail in respect of price, quantity, delivery period and other delivery term. • Sale Order – Company marketing representative generate sale order in system as per order received from customer with details of Price, Quantity and delivery Period and other information available with them at the time of generating Sale Order. • Procurement • At reorder level store person generate Indent of the material and on behalf of that Indent Purchase Department Issue purchase order to supplier. Vacmet India Limited 26

27. Procurement • Asset Management • Assets are recorded in the books of account by passing financial entry under the specified head of accounts. • Asset register is created by assigning each financial entry to particular asset I.D. ( In a separate interface). • We have created a item master comprising detail of asset I.D. , asset name, date Of acquisition, dep. Rate ,location etc. • System generates asset register comprising asset detail, gross block, purchase of asset, sale, dep. Block, net block. • There is no quantitative record of all the assets (only assets register is maintained through financial entry.) Vacmet India Limited 27

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