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TCPL Packaging Ltd
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Ladies and gentlemen, good day, and welcome to the earnings conference call of TCPL Packaging Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Jenny Rose from CDR India. Thank you, and over to you, ma'am.
Good morning, everyone, and thank you for joining us on TCPL Packaging Q1 FY '23 Earnings Conference Call. We have with us today Mr. Saket Kanoria, Managing Director; Mr. Akshay Kanoria, Executive Director; Mr. Vivek Dave, GM Finance of the company. We would like to begin the call with brief opening remarks from the management, following which we will have the forum open for an interactive question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now like to invite Mr. Saket Kanoria to make his opening remarks. Over to you, sir.
Thank you. We are extremely pleased to report -- firstly, good morning, everyone, and thanking you for joining us on this conference call for the first quarter ended June 30, 2022. We are extremely pleased to report that we have commenced the fiscal year '23 on a very strong note despite a continuously challenging macroeconomic environment. On a stand-alone basis, revenues have grown by almost 50% to INR 335 crores, led by better realizations and volumes. EBITDA has also improved by 76% to INR 53 crores, translating into a margin of around 16%. So while we continue to witness volatility in raw material prices, we have been able to mitigate the impact by our strong focus on innovation and improvement in productivity and maintain our margins. Profit after tax and cash profit stood at INR 23 crore and INR 47 crore, respectively, during the quarter. On a consolidated basis, also the revenues have grown almost 52% to INR 342 crore and with corresponding increases in EBITDA and PAT.
In key development, TCPL Innofilms Private Limited, the company's wholly-owned subsidiary, commenced its commercial production in July last month. As we have shared in the past, this film is based on machine direction orientation technology, which will be environment-friendly, enabling the production of recyclable packaging. At present, mostly flexible packaging is made of multiple polymers making it nonrecyclable. However, TCPL by using the films produced at TCPL, aims to convert some of the current packaging to single polymer-based packaging while still satisfies all barrier and functional requirements of customers, aiding in the transition to recyclable packaging. Furthermore, with India's ban on single-use plastic, we are clearly moving towards ecofriendly policies to accelerate the green transition in our country. We believe we are fully equipped and will proactively drive the development of this sustainable flexible packaging solution. Overall, TCPL is well positioned to cater to the growing demand for sustainable packaging solutions from leading brands and continue to support effort towards facilitating a waste-free world. To conclude, we have always been a growth-oriented company and our strategy of expanding our presence to multiple sectors has enabled us to consistently outperform our underlying industries over the years. And I take pride in saying that we have one of the few listed companies in India to have grown each year, every year for the past 30 years with a revenue and PAT CAGR of 20% and 27%, respectively. Similarly, we remain committed to sustainably growing the company in the future as well, which should help create value for all stakeholders.
On that note, I would now request the moderator to open the forum for any questions or suggestions that you may.
[Operator Instructions] The first question is from the line of Gunjan Kabra from Niveshaay.
Congratulations for a good set of results. Sir, there has been a lot of saying that plastic packaging being replaced by paper packaging. And have you recently in our business segment, there has been a change in here? Like if you can provide any quantum or any segments where it's really happening. Like how big is the single-use plastic ban for our business segment. Like for instance, we can see paper stores being replaced by plastic, but how big is it in numbers that we are seeing that right now in India, at least where plastic packaging is being replaced by paper packaging?
So plastic ban is on single-use plastics, like, for example, cups and straws and paper plates, plastic plates, et cetera. It is not part of the general industrial packaging yet. So I will not be able to quantify the value how it affects our business. But what we are talking about is the move towards recyclable plastic packaging, which is a very big area of growth because currently, as I mentioned, that it is most of the packaging is nonrecyclable and that is very challenging to sustain. So there's a big opportunity to move towards recyclable and some plastic packaging is currently under development to move to paper-based packaging for things like wrappers and chocolate products, et cetera, but these are not yet fully, let's say, technically approved, and they are in various stages of development.
So If I can come in here just to clarify it further. Basically, there's a barrier requirement that plastic fulfills, which paper in some cases, cannot. So in those areas, like, let's say, your chips packets or shampoo packets and those kind of sachets, over there, the effort is rather than switching from plastic to paper is on how to make the plastic itself more ecofriendly or recyclable, right? So that's what we're addressing with TCPL Innofilms. Secondly, where one can replace plastic with paper, while still maintaining the good quality of barrier and protection and everything that the product needs, there that shift is very much happening -- but a little bit of it is also going to be pushed by government regulation and stuff because moving from plastic to paper involves the cost. So in India, the shift is happening but slowly. And then there's items where like in disposables and takeaways and delivery packaging, those kind of things where people are moving from plastic to paper: one, because of government regulation; and two, because of consumer preference. So over there to quantify it, it's very difficult. But I mean, if you look at the kind of volume growth in the paper industry in the last couple of years is quite substantial. So that is mostly coming out of this kind of secular shift from plastic to paper.
Okay. Okay. And also, sir, regarding our flexible packaging, I think we just commenced in July. So what's the plan for the ramp-up this year maybe in this division, this quarter and this year?
So the flexible packaging was expanded, the conversion part of it in March, and that is now ramping up. And we see that this year, we will have a very high rate of growth in that line because it's -- we have doubled the capacity. So already month-on-month, we are seeing a big jump in revenue.
Okay. And sir, what about the creative offset plant? Is it what capacity utilization is that plant to it right now? And what is the plan for the current year to ramp up?
Yes. So here to give a capacity utilization number is a little difficult because it's very subjective based on the quality of product and retail, like the same box can go for INR 100 or INR 50. I mean, it's the same capacity at the end of the day on the machine. So we don't have a capacity utilization figure as such. But as of now, it's not ramped up to desirable extent because the mobile market in India has been a bit rocky in the last 6 months. However, we are seeing some improvement in the current quarter and subsequent quarters. And we've also broken into new customers in the electronics space.
Overall, I would say that it is only at 50% of its potential.
Yes.
Okay. Okay. And what can we expect, like what levels can improve this year maybe?
I mean, by the end of the year, I think it will be definitely much higher, but it also depends on how the market evolves for the electronic business because of the inflation and the demand, and there's a shortage of components as well. So this mobile phone itself is not doing that well. I'm talking as a business as a whole. So things will -- are expected to improve now. I think the worst is behind us.
[Operator Instructions] the next question is from the line of Pavan Kumar from RatnaTraya.
Sir, what would be your capacity utilization on the paper packaging facility, excluding creative as of now? And what would be the capacity utilization on the flexible packaging side?
So capacity utilization in the carton is around 80% in the [ first ] quarter.
How much sir?
8-0, 80 -- 80%.
For the carton, it is 80%.
Yes. And in the flexible, we have recently doubled the capacity. So it is in the 50% to 60% range.
Okay. This is including the new capacity you are saying it is in the [ 52% ] range.
So new capacity was commercialized in March this year.
Right. Right. I got it. And what would be the broad breakup of revenue between the 2 segments as of now?
We have mentioned in our presentation that the Flexible is contributing between 10% and 15% of the overall pie.
Okay. Okay. And what would be our CapEx pathway going forward since in cartons, we have already reached 80% utilization?
So currently, we have already ordered 1 new line, which will be coming in January. So that will add capacity. And we also debottlenecking in existing. So we expect to effectively grow our capacity by almost 10% to 15% for next financial year.
Okay. Okay. And what would be the CapEx from this whole debottlenecking exercise and increase in capacity, sir, as of now?
So right now, the CapEx plans are not very aggressive this year and going next year. So I wouldn't be able to give you a specific figure, but the point is that right now, there is no major plan apart from this one line, which will come later in the year. And for next year, we are still evaluating...
And this new line, you are saying can, add around 10% to 15% of extra capacity on the carton side?
On the overall basis.
Regarding the carton side, the CapEx plan for us, the thing is that we don't have to be very rigid or anything under plan because we mostly have to do just brownfield CapEx. So it's very much opportunistic sort of take that whenever we need, we can plug in a new line without too much hassle or a very long sort of lead time. So over there, we are a bit more flexible right now. Even now on the flexible packaging, by the way, because we've added so much room in our plants [indiscernible] dynamic. So it depends on the market situation. If we are doing well, and we are consistently at a good level of utilization for a reasonable couple of quarters, then we can immediately increase the capacity quickly. And that will also be a bit better on the return because brownfield is inherently much more remunerated.
Okay. And on the new line broadly, how much would we spent, any indication?
So as a total, the CapEx plan for this year is about INR 80 crore odd, but that can go up or down slightly, but that includes the new line and some other finishing equipment as well as few finishing CapEx of the last year's spillover, so all that put together.
Okay. And this is a much more broader question. But -- so on the carton side of the business, what is the natural growth rate that we should expect in the industry and for the TCPL, I mean, in the sense, what are your expectations of what can be the growth?
Currently, you must be tracking FMCG company volume growth is single digit. With that -- I mean, they have gone through a harrowing time with this big price led inflation. The natural growth of the industry as a whole is only single digit in volume terms. But in value, they are definitely adding value. They are premiumizing. They are bringing new products. So the value opportunity is double digit. So this is -- so when we look at our sales, our underline is early low double-digit, and then we are adding new segments to customers, et cetera. So our expectation is of maintaining our historical growth rate, and that is the kind of targets that we take.
And the historical growth rates would be around 15%.
17%, 18% on -- over many years.
Basically, if you see the last 4, 5 years, the FMCG industrial volume growth has been very low single digits. And there's been one headwind after another for the last several years, which is hurting the industrial growth. Despite that, we have maintained a high double-digit sort of average growth of between 15% and 20% a year. So considering the last 2 years, though the industry underperformed, we have still performed. We expect that once the industry performance picks up then our performance should easily be able to be maintained at this level.
Okay. Great. And one last bookkeeping question. Since Innofilms has been commercialized this particular quarter, what is the extra amount of depreciation that might come in?
Depreciation of Innofilms. I would say annualize will not be more than INR 2 crores to INR 2.2 crores a year.
Oh, that's it.
Yes, because the investment is about INR 35 crores.
Okay. So Innofilms depreciation -- so that is the incremental depreciation apart from whatever is the current depreciation that is going to come into the books.
No. But this is in Innofilms, not in TCPL.
The next question is from the line of Ashutosh Garud from Ambit PMS.
I couldn't hear your name. Can you please introduce...
This is Ashutosh Garud from Ambit PMS. So I just wanted to understand the nature of the borrowings, the data on your balance sheet? And what is the path ahead for this? Are there any plans to reduce this debt on your balance sheet? And what is the nature of this borrowing because it has been consistently slightly on a higher side, although the debt equity has been reducing. So if you can share some insights?
So your answer -- your question has the answer, that the debt equity has been reducing. And I mean, we have to compare it in ratio only. We cannot look at absolute amounts. And the nature of borrowing means we have 2 types of borrowing. One is working capital debt, which is directly proportionate to the revenue and working capital requirement. And the second is the term debt, which is mainly used for financing CapEx plan. And our CapEx plans over the past 5 years has been very moderate. So the term debt has been enough percentage form has reduced and hence the debt equity has reduced. Working capital is pretty linear, so that has been growing with the growth in the revenue. But having said that, with this big growth in the current quarter, the debt hasn't gone up anywhere near that same proportion. So in fact, we have improved our ratios at the end of this first quarter further from what it was earlier.
So what would be the debt-equity target -- years down the line for us? And how you see [indiscernible] let's say, 3 to 4 years kind of a target?
Our debt equity -- if you talk of term debt-to-equity, it is less than 0.7. And if you look at total debt-to-equity, it's about 1.2. So I think the target is -- I think we are comfortably placed. And in fact, this will improve to probably 1:1 from 1.2.
The next question is from the line of Sanjay Manyal from ICICI Direct.
I have just a few questions. One is on the margin side. Despite there have been quite a bit headwinds in the commodity inflation, your margins have moved up. Now I believe this is largely due to the operating leverage. But how we should see the next few quarters where the base effect will not be that -- means the base effect will not be there? And will we get that operating leverage benefit next few quarters also? Or do you think that this commodity inflation is going to hurt us some or the other way in the next few quarters?
So last 2 quarters, in fact, we have seen the worst of the commodity inflation. In fact, now it is kind of flattening out, I would say. Also some commodities are still -- broadly, they are declining, but some raw materials are still going up. So there is this volatility continue, which is not like pre-COVID level. And if you look at our margin, there has been a significant improvement from the previous time. This is also partly led by much higher utilization of capacity. That also has contributed to a higher margin. It's mostly that. And actually, the raw material pricing increase or decrease is largely being passed on to customers. So if we are operating at a higher level capacity, then I do feel that we should be able to maintain this level of margin.
Okay. Okay. And sir, is there any seasonality in our business in the sense, any 1 particular quarter is heavier or where we get more of volumes and any particular quarter as lean. Is there any seasonality in our business?
So normally, this quarter, current, July to September is the highest volume quarter because of the festive season, which is around -- in this time because we are starting with August, Raksha Bandhan, going up to Diwali. And Q1 is normally the weakest quarter. But this time, the Q1 was very positive for us, and Q2 is looking fine. So yes, I mean there is seasonality, but there's not very massive swing. If you look at our past also, you know that this second quarter helps us achieve a level and then we grow from that level.
Okay. Okay. And thirdly, sir, as you have already mentioned that the FMCG companies are looking at only a single-digit kind of a volume growth, they have experienced single-digit volume growth. So where exactly that growth is coming? Is it the new -- these new customers are we adding or any particular names, if you can mention which customers we have added in the last few quarters? And how much is this new customer addition has contributed to the quarter?
Now the industry is changing very rapidly, and we see that these large FMCG companies, which are largely the state, whose results we track and we see volume growth. But there's so many start-ups, so many smaller companies on the back of e-commerce and newer ways of selling, they are creating space for themselves. There are many regional companies which have come. So the overall market segment is very hard to track, like you take our FMCG, traditionally, you would track a Unilever or Nestle or something like that. But now there are so many different products and companies making highly fantastic quality output. So there's a lot of opportunity because they all want to differentiate themselves with better-quality packaging. So there's a lot of such opportunity, I would say. And because we are multi-locational and have the development and innovation capability, we are able to cash in to many of these opportunities.
Also within the same set of customers, we're seeing an increase in our share of business, and that is due to operational strength and quality and capability difference. And also, I think this sort of raw material volatility and everything, availability issues, et cetera, help the stronger and more established than better-managed players who are able to manage their working capital and the vendor and everything better, that translates into better quality and better service. So that translates into more business. So it's a sort of a virtual cycle for us. So a mix of the 2 things is sort of helping us. Specific naming of customers, we are publicly listed, so we answer a lot of questions, but our competition is entirely in the private sector. So we don't like to give too much information on these kind of things, although, I know, as a analyst you would require it, but, yes.
Okay. No problem on that, sir. Then just last one question on the mobile packing business of yours, which you have acquired. What exactly is your plan over the next say, 3 to 5 years' period, how you see this business growing? What exactly is our internal target for this business?
Right now, though we are at a very low revenue threshold there. And we see that we can quadruple our revenue from where we are today. And so we see a very big growth opportunity in that segment, and we are just scratching the surface currently.
The next question is from the line of [ Vikas Joseph ] from [indiscernible] Capital.
I have 2 questions basically. So your Folding Cartons business is currently 85% to 90%, while the Flexible Packaging is around 10%, 15%. So what is the -- I want to know what is the EBITDA margins across these 2 segments? And what is the vision to grow the Flexible Packaging over the next 2 to 3 years? And also, you recently started with Innofilms as well as the Creative Offset, and what kind of opportunity do you see? And currently, what is the contribution to the company's revenue? And what is the opportunity you see from these 2 segments over the next 2 to 3 years?
Thank you. So the EBITDA margin specific figure, we don't share between segments. But traditionally, the Carton business is higher margin. However, in Flexible, we do a lot of innovation and specialized products. So there's a scope for improvement of EBITDA margin there. And now with the recyclable packaging as well, those are value-added products. Apart from that, the asset turnover in the Flexible business is much higher than in Carton. So it kind of mix with that. And the plan is that right now, we have expanded it, we have doubled the capacity. So there's obviously a bigger growth opportunity there. And going forward, once this stabilizes, we will look at for the growth. But our Carton business is more mature and hence, there has been a very strong growth as well. So while the Flexible will grow, the Carton is anyway growing and focus is more on fiber-based packaging. So it's far more sustainable. So there's a big opportunity on the carton side.
Sure. And on Innofilms as well as the Creative Offset, currently, what is the contribution, sir? And what do you pursue...
I already answered opportunity -- Innofilms as well, I just, I mean -- I don't understand what your question on Innofilms is.
So yes, I mean, currently, I want to understand what is the contribution of this new division to your overall sales and what it can be...
[indiscernible] July, so there is almost no contribution. Now this will start -- only been commercial production is 1 month.
No, I wanted to understand what it can grow into in the next 2 to 3 years, considering that it is recyclable packaging, so?
Basically, in this Innofilms, the capacity of this full plant, what we have put, if you say as a percentage of the overall flexible packaging market, it's not even I think [ 1% of 1% ], maybe it won't be. So that way, even 1 of our FMCG customer switches to this recyclable packaging for even 1 of their brands, this line can get booked out. So we have a long way to go and we're just scratching the surface. And there's a huge scope because basically this entire FMCG industry or food industry, the entire packaging, at least the primary packaging is flexible packaging. And almost all of that is not recyclable. So obviously, we aren't looking to change the entire industry, but because that just a long way to go. So we are experimenting with various different products and brands, and we'll see what we're successful with. But basically, we don't need to transform the face of the industry business with this. I think there's a long runway for growth here.
The next question is from the line of [ Nirav Savai ] from [ Abacus Investments ].
I have just a couple of questions now. We have already doubled our Flexible Packaging capacity. So what is the plan for next 2 to 3 years on the expansion side? Would we continue to expand on the flexible packaging side or in the folding cartons side? How do we see the expansion going on over the next 2 to 3 years?
I touched upon this a little bit before. But basically, in the carton segment, we don't really need to do any much greenfield unless there's a huge sort of volume growth, and we're not able to sustain it from the existing plant. But we have a reasonable amount of footprint. And for us to add capacity is not very challenging in the carton side. In the flexible packaging side as well, it's a similar story now with the new addition to the plant area and everything that we've done for us to add capacity, incremental is not too challenging. And we can -- we are good for a while in terms of capacity -- in terms of space. In terms of actual adding of capacity, that will be very much dependent on the utilization level, how quickly we can ramp up and how satisfied we are with the quality of the margins and everything that we're getting. So we don't really have a firm plan, but it's an opportunistic CapEx.
Okay. Right. Right. So any CapEx which we outlined for this year and the next year?
So that also I had answered a little earlier, that's about INR 80 crore odd we have budgeted for this year. Next year, we have not -- as I said, we've not planned yet because we don't really need to until later in the year.
Right. And sir, on the margin side, this quarter margins were about [ 15%, 15.9% ]. And as you rightly said that you were able to pass it on prices. And despite the inflationary concerns, we have been reporting consistent margins. So is there any inventory gain which has come in picture maybe in the last couple of quarters, which was not there before? How do read this? Are these sustainable margins?
The inventory gain is nothing significant. So I don't -- that is not like a onetime kind of thing.
Right. Right. So would it be right to assume that...
Normalized margin only.
Okay. So this is something which is sustainable 15.5% to about 16% kind of margins. But this higher utilizations, which will continue on the Folding Cartons side. And sir, lastly, on this Innofilms business, is this purely for a backward integration? Or do we would be selling it directly on the export side. So how is the plan? I mean, it's still at a very early stage, but how do we look at this part of the business over the next 2 to 3 years?
So this is a very good question. And this Innofilms is a technologically challenging material, and which we have been able to kind of overcome. So it is also a backward integration as well as an opportunity. And also, we will look to sell the films, particularly for export. So we -- that is why it is a separate profit center because it's a distinct company. And therefore, we would like to track the company's progress and performance independent of TCPL. So I mean I would say that while TCPL would be a customer for Innofilms, but we are open to sell in the market as well.
So open to both the things. And sir, any number which you can let us help us out with this new business which we had acquired in terms of the potential revenue with the current capacity, the rigid packaging one -- rigid packaging business, yes.
I think I already mentioned earlier in the call that is a very big strong growth potential there. Currently -- it is in a very low revenue, but we can -- we are looking at a 3-digit revenue over the next few years.
The next question is from the line of Vipul Shah from RW Equity.
Firstly, sir, congratulations on a very solid and sustainable set of numbers. Looking at your opening remarks where you mentioned about the general inflationary trends being high and volatility being high, I think it is more than credible the way the management has managed the business. So hearty, hearty congratulations to you.
Thank you so much.
Sir, most of my questions have been answered. So you mentioned that the gross margins are probably sustainable at these levels. You also, I believe, mentioned that the current level of sales is the -- aspiration is always to grow, which we've done for the last 30 years. So also, there is no challenge. So the only surprise to me was that from March to June, I believe our debt has come off by INR 50 crores, INR 60 crores despite the sales being a little high, higher than March. So is that due to shrinkage of working capital, sir?
How you get this figure that the debt has come off?
Sir, in your presentation, you mentioned for March, it is INR 400 crores net debt. And for June, it is INR 350 crores sort of net debt. So that's why I'm mentioning. It's your presentation. Slide 23 of June, sir, and Slide 21 of March presentation.
This is more to do with the working capital. Sometimes there's bill acceptances, LCs, and sometimes it is through cash credit. So our overall position doesn't change so dramatically.
And earlier, sir, we used to mention that the Innofilms subsidiary was primarily looked at as a captive sort of plant for our flexible business. Right now, I heard you mention that we are open to actually looking at outside customers as well. So just 1 question, sir. The margins on Flexible, if we use the Innofilms, obviously, the idea would be to tap into the premium sort of segment of the market customers who can pay for these recyclable films. So will it be fair to assume that the margins will be substantially higher than our normal margins in this current business?
Innofilms -- I mean, obviously, the focus will be to sell in-house only. Not that we will sell outside and suffer in-house. That is not the question. Our internal requirement is obviously prime priority. But having said that, if we have opportunity outside and we have capacity, and as I mentioned earlier in the call that it will be focused on export where we can hope to get better realization, then we don't see any reason why we shouldn't sell that, because for selling the laminate to export, it's not possible in all geographies. It depends on the type of product because of the lead time, because when you print when you need the artwork and you need to synchronize it. Where is when you are selling film, then somebody can print on it in that country to shorten the lead time. So that would be the strategy.
Got it, sir. Got it. Again, so phenomenal set of numbers and congratulations to you and wish you all the best for the future.
Thank you so much.
The next question is from the line of [ Dharma Venkateshan ], an individual Investor.
And congratulations on a very good -- very, very good set of numbers actually in the first place. Most of my questions have been answered. I have just 1 question. Are you looking at any inorganic acquisitions in the coming years? Or any plans for it?
Inorganic -- if I get you right, you are talking about whether we have any plans for any inorganic opportunities?
Yes, sir. Yes. Yes. Yes.
Yes. Inorganic opportunities are always there. But currently, we have a handful, and we are already invested in this Creative and Innofilms. And we have recently expanded capacity in the Flexible. So we have very focused first to make sure that these initiatives live up to their potential. But of course, it's some other good -- very good inorganic opportunity comes at a good valuation and it fits in to our strategy, we're always open to that. But as of now, there is nothing which is ongoing or being studied in too much detail.
Okay, sir. Okay. Got it. And 1 more question, sir. Like if look at manufacture presence, we are present on almost like spread across India like Guwahati, Delhi and on the West Coast. We don't have any manufacturing facilities set up on the East Coast of India? So is there any reason we are not going there? Or what exactly is the thought process, sir?
We are using the Eastern belt from Guwahati. And East Coast of India, yes, we don't have anything yet. But we have to see where the market is and then accordingly decide. But there is an opportunity down south in the future, we would look at it.
Okay, sir. So as I understand right now, the opportunities are not massive enough to put up a separate plant there, and we are servicing it through our Guwahati plant.
Not massive enough. But I mean, okay, it's opportunities everywhere, but we are -- the kind of customers and the segments we are servicing, we have not seen any reason to look at some other geographic location yet.
The next question is from the line of Pulkit Singhal from Dalmus Capital Management.
Hello. Am I audible?
Yes.
Congrats on an excellent set of numbers. My first question is on the margin band. If I see historically back between 2010 to '15 or '16, you used to operate in a 15% to 17% kind of margin band. Then obviously, that came down, and in between we were at 13% to 15% odd. Now given the situation that you see in the market where you might be gaining market share from some smaller unorganized players, you're seeing certain growth aspects in exports and various other things. I mean, you've already delivered now 16% kind of margins, which is despite your flexible new line not having been optimally utilized and despite the mobile packaging also not at its optimal level. So do you think that you can operate at a higher band of margins now versus closer to what you were in the past?
So right now -- thank you, firstly, for your observation. And yes, I mean, this margin hasn't been due to some any other income or some nonstandard revenue. And so therefore, we feel confident that we should be able to maintain this elevated issuance. As I mentioned earlier in the call, it's also the higher capacity utilization. And you're absolutely right that the Creative and the Flexible utilization is lower and therefore, is a drag. And as that improves, the overall margin should, in fact, further increase only. So I don't see any reason why we should say, it's a declining margin, and we are hopeful that we can maintain.
Understood. And secondly, I think 1 of the things which is probably less appreciated is how well you have done in exports as a driver over the last 5, 7 years. It has clearly kind of grown more than 25% CAGR over the last 3, 4 years. And now it's at a substantial 1 quarter, I mean, almost 25% of your business. So if you could just -- because it's less attract, it's lesser known about. I mean if you can talk about what kind of growth prospects 1 can expect from this vertical over the next 2, 3 years? And what are the -- some of these underlying drivers, if you could talk about any new customers you've added? And what was the reason for them to shift to TCPL is there? I mean if there's a China Plus One or lower costing, whatever be the underlying trends? I'm not entirely sure, but if you could discuss some of those?
Yes, I think your observation is again spot on. Exports has been a very big silver lining in our performance, and that has led us to, in fact, open another subsidiary in the Middle East. We have now got a marketing office there. And the focus is to look at Middle East and Africa. We have strengthened our export marketing in -- out of our Bombay office, which is focused on U.S. and Europe. So all these areas, we feel that there is still a lot of untapped potential, and there is a big scope further to continue this growth because the Western world is, after COVID, looking at opportunities outside China, and certainly, we are not yet anywhere close to where China is in terms of the whole ecosystem. But everyone is very of being too dependent. But I wouldn't say that we have got benefit of a China Plus One yet, but we feel that we should be able to get going forward. But a lot of potential is there. So there's a big focus, and I think we can grow and this is across segments, both carton and flexible has an equal opportunity to cash in on this.
Right. So let's say, even if you talk about just the growth in the last 6 months, let's say, in exports, is it more from existing customers just growing on new customer addition and why would a new customer wanted to come to TCPL? I mean what drove them to kind of work with you?
No, we have a new customer as well and existing customer also. So it's a bit of both. But a lot of new customer has, in fact, been added. And I mean, it's also to do with our reach why they are looking at us and we are focusing there. So we are contacting and meeting many potential customers on a daily basis and then something transforms into actual business. And plus, there's innovation also in certain areas where we have -- there is a replacement for plastics when it comes to fiber-based packaging, and that has also given us some additional business.
One more thing is there's a lot of focus now on India as a geography because when our customers abroad look at the world where they can source from and where they can rely on a supplier from, earlier it was always China, China, China, and people didn't really look apart from China. And otherwise, local suppliers. Now I think people are really focusing and seeing India as a potential opportunity. And there's an increase in the respect for our quality and service, where earlier there was a lot of skepticism whether Indian companies can deliver. And today, there's no such apprehension, I think, from most customers. And then if you look at the political stability, you look at sort of price stability, the supply stability, all of these things we, as a country, win out not only against China, but also against local competitors in the regions where our customers are based because they are not able to get their supply. And to some extent, even our lead time from India is beating their local lead times. So yes, there's a big availability crisis, and it's not just in India, it's all over the world. So we are benefiting from that as well, and that will only continue and accelerate, I feel. So overall, there is a very good potential and this India story is just beginning. So we are just 1 small subset of that whole story of Indian manufacturing and export.
We lost his line. So we'll move to the next question, which is from the line of [ Vaibhav ], an individual investor.
Yes. Am I audible?
Yes, you are audible.
Congratulations on a good set of numbers. I wanted your view. So now with the entire inflation of raw materials -- and everything happening in the cartons business. So you see going forward, there'll be a consolidation in this space where a lot of small offset pressures that will start closing down? Is there this consolidation theme that will happen in this space?
If a smaller packaging company service customers close to them, they are focused on those, so consolidation will happen, but it's a gradual process. I don't think any very big -- I mean, let's say, in the last 5 years, very limited acquisition and M&A has happened in this field. But, yes, the smaller players continue to have a lot of pressure to maintain their growth opportunity.
Okay. And what sort of asset turns you are looking out for in the rigid packaging business that we acquired from Creative Offset?
There I feel that we can do...
Will it be higher than the current business asset turns that we are having?
So basically to increase the revenue substantially from here, we don't really do any CapEx further than what we've done so far. So I think once we -- like over the next 2 or 3 years, that asset turn will certainly translate and it should be better only than what we have currently. But it's not going to happen in the -- very quickly or something because it's a relatively new investment and the market is steadily picking up. So long term, the future we see to be good over there, but it will take a little time.
Okay. But the asset turns would be better than the current business scenario, current business that we are...
[indiscernible] acquisition, so we come in with depreciation...
Higher utilization. So for the rigid packaging business, have we tapped out all the [indiscernible] clients or the process is ongoing? How would that be panning out?
Yes. Yes. That is an ongoing effort.
Okay. Okay. So how is the situation looking at right now? So over a 3-, 4-year perspective, where could the utilization of this unit pickup? Will it take a year's time or...
I don't think...
We've already answered this question. But basically, the Indian electronics manufacturing story is just getting going. And as this production-linked incentive schemes of the government as well as the general Indian competitiveness, all of that is the reason why we've gotten into the segment because we were seeing this kind of growth happening. And we are very confident that, that will translate. Now this 1 year, 2 years, okay, there's a little bit of disruption, there's no new chips, there's no components, inflation, all of that. But as that normalizes, the general market is growing and manufacturing from India is growing. So there's a huge scope and more and more brands are now setting up in India to manufacture, whereas earlier, they were importing from China. So that will just increase over time. So that's what we're targeting and banking on.
Okay. Okay. And lastly, on the raw material front, these paperboard prices that have almost doubled from the pre-COVID levels. So are these contracts with our client quarterly base or we pass it on as and when...
It depends customer to customer. But basically, there is a pass-through mechanism everywhere. And it's a macro time before we pass through the increase or the decrease. So more or less our sort of contribution of margin or whatever, it's fairly consistent. And there may be lags here and there; 1, 2 months', 3 months' lag. But in general, we have a pass-through mechanism with all customers.
The next question is from the line of Pavan Kumar from RatnaTraya.
Sir, can you just give me the volume -- what is the volume growth on a quarter-on-quarter basis?
Volume growth number, we don't share in specific detail, but it is a high -- given that we've grown 50%, it's a very high figure.
Okay. Okay. And since your carton business has grown pretty fantastically, is there a particular segment that is driving the growth in FMCG or is it much more broad-based?
No, I would say it's quite broad-based. Because you must remember that last year first quarter was hit by second wave of COVID, so the base effect is quite significant.
Okay. And did I hear it right that in Creative, if suppose the mobile demand is weak, can we use that for any other packaging kind of facility or no?
Yes, we are, in fact, supplementing our -- we have, as you know, a carton plant in Haridwar. So we supplement that plan by the additional capacity in Creative. So that is an effort, but...
Generally, this rigid box can be used in any luxury premium packaging. And that is what we are targeting as well, and there is a good scope there as well. So whether it's Mithai or [indiscernible], perfume, all of these things, there is a scope for...
And electronics apart from mobiles.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
So thank you so much, everybody, for joining on the call and sparing your valuable time. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please do feel free to contact our team or -- CDR India. Thank you once again for taking him to join us on this call.
Thank you. On behalf of TCPL Packaging Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.