EPL Ltd, formerly Essel Propack, has successfully transformed from a toothpaste tube manufacturer to a premium beauty packaging company. According to reports from The Financial Express, beauty and cosmetics now contribute 40% of tube revenue, while personal care and beyond has risen to 54% of sales. The company supplies more than 9 billion tubes annually from 21 manufacturing facilities across 11 countries, serving major customers including Colgate, Procter & Gamble, Unilever, L'Oréal, Dabur and Cipla. Management has raised its growth outlook from early double digits to high-teen growth over the next few quarters, supported by beauty and cosmetics momentum. The company has created a dedicated Beauty and Cosmetics Centre of Excellence in India, built specialised sales teams, invested in premium embellishment technologies and expanded manufacturing capabilities for differentiated products. As reported by The Economic Times, management has become much better at handling inflation than previous cycles, recovering the full increase in raw material, freight and foreign exchange costs from customers through pricing, even though some contracts experienced temporary timing lags. This capability has been deliberately built over multiple inflation cycles, allowing the company to protect absolute EBITDA even during periods of commodity volatility.
The June quarter demonstrated strong revenue growth with 25.3% year-on-year increase in revenue from operations, while operating EBITDA rose 15.2%. However, profit after tax fell 1.4% due to an unusually low effective tax rate in the previous year. As reported by The Financial Express, management argued that underlying EBITDA margin remained at 19.6% despite reported EBITDA margin of 18.8%, with commodity price pass-through temporarily inflating reported revenue. This marked the fifth consecutive quarter of double-digit underlying growth, with management maintaining confidence in maintaining around 20% underlying EBITDA margins. The company has become much better at handling inflation than previous cycles, recovering the full increase in raw material, freight and foreign exchange costs from customers through pricing, even though some contracts experienced temporary timing lags. According to The Economic Times, management highlighted that this was the fifth consecutive quarter of double-digit underlying growth, with the investments made over the past few years finally beginning to reflect in the numbers. Management expects EBITDA growth to be faster than revenue growth on a steady-state basis, with benefits of operating leverage coming through as capabilities scale and volumes increase.
The company delivered broad-based growth across all regions, with EAP emerging as the fastest-growing at 34.3%, followed by Americas at 29.4% and India at 19.9%. As reported by The Economic Times, each region has different market environments, customer bases and category mixes, so growth rates naturally vary. What is encouraging is that momentum was broad-based, with every geography delivering double-digit growth. Key drivers include strong momentum in Beauty & Cosmetics, which has added 80+ new customers globally in recent quarters while continuing to deepen engagement with existing customers. The company's investments in extruded tubes, differentiated applicators, premium decoration capabilities and product innovation are helping expand portfolio and enter adjacent categories. Thailand operations are expected to ramp up meaningfully, providing an additional growth driver as a large B&C market. Oral Care has started recovering strongly after several quarters of softer demand, with the company maintaining uninterrupted supply during challenging periods to strengthen customer confidence and capture incremental business.
The proposed Indovida merger is expected to create a $1 billion revenue entity with a combined valuation of $2 billion, bringing together EPL's leadership in flexible packaging with Indovida's scale in rigid PET packaging. As reported by The Economic Times, the merger expands addressable market significantly, as tubes represent only around 4% of the overall packaging market while rigid packaging represents around 26%. The combination creates a stronger presence across Southeast Asia and Africa, with complementary footprints and portfolios creating opportunities for growth synergies, procurement and supply-chain efficiencies. Management expects $35-50 million of synergies over the next five years. Importantly, Indovida is net-cash positive, which strengthens the balance sheet and reduces EPL's Debt/EBITDA ratio from around 0.5x currently to approximately 0.25x post-transaction. The merged entity will have stronger cash position and greater financial flexibility to invest in growth and pursue M&A opportunities more aggressively.
One concerning trend emerged in working capital management. As reported by The Financial Express, inventory days increased from 151 to 177, while the cash conversion cycle widened from 87 to 97 days. Management explained this reflects higher polymer prices inflating inventory values and additional safety stock for uninterrupted customer supply during geopolitical disruptions. The company's borrowings increased from ₹802 crore in FY25 to ₹962 crore in FY26, though debt-to-equity remains manageable at around 0.34. Interest coverage remains comfortable, suggesting the balance sheet still has room to absorb current investments. The increase came primarily from capital expenditure and higher inventories built during Middle East supply disruptions rather than weakening customer collections. According to The Economic Times, one ratio quietly moved in the wrong direction with inventory days increasing from 151 to 177 and the cash conversion cycle widening from 87 to 97 days, though management argues this reflects temporary factors.
At approximately ₹266, EPL trades at around 20.8 times earnings, below its five-year average price-to-earnings multiple of around 25 times. According to The Financial Express, the company continues to generate respectable returns with return on capital employed around 18% and return on equity close to 16%. The proposed Indovinya merger remains on track after receiving Competition Commission of India approval, with completion expected around Q4 FY27. Management has set an ambitious target to reach 25% ROCE over the next three to four years as the business scales and investments begin delivering returns. Investors are effectively paying for a business in transition rather than a fully proven growth story, with the biggest risk being whether current momentum can sustain itself once inflation-led pricing fades. As reported by The Economic Times, the market is acknowledging improving growth while still assigning a discount for Europe's profitability concerns and uncertainty around whether current momentum can sustain itself once inflation-led pricing fades. The biggest risk is not governance, unlike many companies associated with the old Essel Group, EPL itself has not faced major fraud allegations, regulatory action or promoter pledge issues, making the concerns largely operational rather than structural.
