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TCPL Packaging Ltd
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Ladies and gentlemen, good day, and welcome to TCPL Packaging Limited Earnings Conference Call. [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's Q2 and H1 FY '23 Earnings Conference Call.
We have with us today Mr. Saket Kanoria, Managing Director; Mr. Akshay Kanoria, Executive Director; Mr. Vidur Kanoria, Associate Director; and 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 now like to invite Mr. Akshay Kanoria to make his opening remarks. Thank you, and over to you, sir.
Good morning, everyone, and thank you all for joining us on our earnings call for the period ended September 30, 2022. I trust all of you had the opportunity to go through our results document shared with you earlier. I will initiate the call by taking you through our business highlights for the period under review, after which we will open the forum for Q&A.
I'm pleased to share that we have reported a strong operation and financial performance despite our underlying industry witnessing headwinds during the quarter. In Q2 '23, our consolidated revenues increased by 43% year-on-year to INR 361.7 crore. The performance was driven by both higher volumes and better realization registered in the domestic and export markets. Additionally, we witnessed stability in our key raw materials, which enabled us to record strong profitability during the quarter. In Q2, EBITDA increased by 60% year-on-year to INR 57.5 crores, resulting in strong margins of 16%. PBT grew by 120% to INR 32.7 crores, while our PAT and cash profit grew to INR 39.5 crore and INR 65.8 crore, respectively, during the quarter. The PAT and cash profit include an exceptional one-off income of INR 17.3 crore. This pertains to an insurance claim for loss of fixed assets damaged by fire and loss of profit in the previous year.
As you may be aware, with the acquisition of COPPL, we have entered the high-potential rigid box segment that serves multiple fast-growing end user electronics industry. This acquisition is in line with our growth through diversification strategy and strengthens our long-term growth prospects. Since the acquisition, we have been able to expand our product portfolio by onboarding a number of well-known brands in the electronics industry, including smartphones, smartwatches, headphones, et cetera. In the coming quarters, it will be our endeavor to steadily increase our wallet share with them by leveraging our scale and institutional capabilities.
Coming to our Flexible Packaging segment. We are progressively ramping up utilization levels at the recently commissioned line at Silvassa. I'm pleased to share that our team has done an excellent job, and we are on track to achieve optimal volumes over the next few quarters. In addition, TCPL Innofilms, the company's wholly owned subsidiary, is witnessing healthy inquiries from global players for single polymer-based packaging fill that is a truly recyclable and environment-friendly product.
To conclude, while TCPL grows through customer and sector diversification, some of our key underlying industries are witnessing a muted demand environment, so we remain cautiously optimistic about our near-term outlook. However, the longer-term trends for the packaging industry remain very buoyant. The industry is expected to witness huge growth as India continues to move towards self-reliance in manufacturing across various industries. Given our prudent investments in augmenting our capacities over the years, we believe that TCPL is well positioned to capitalize on this opportunity.
On that note, I would request the moderator to open the forum for any questions or suggestions that you may have. Thank you very much.
[Operator Instructions] The first question is from the line of Gunjan Kabra from Niveshaay.
Congratulations for a good set of numbers. My first question, sir, [indiscernible] has said that it has phased out 183 million cardboard disburse packaging. Dabur, a few years back mentioned it'll remove cardboard packaging from toothpaste as a pilot project. In some articles, Amazon is also phasing that -- in some part maybe they'll phase out the cardboard packaging. So what's your take on this? And how do you see this panning out?
Thank you very much. So we have -- we can't comment on specific companies. However, in general, there is a increase in the uptake for our products. Paperboard packaging is widely perceived and correctly perceived to be environment friendly. Now certain customers and certain companies for certain products may from time to time, change their product mix. However, we believe that the long-term potential for this segment is still very much positive. Globally, if you look at it, actually, the paperboard consumption and demand is growing, and sustainability trends are actually driving a significant part of this growth. So I hope that answers your question.
The sustainability is not the issue I think. It is sustainable, and the folding carton that we manufacture is also sustainable. That I understand. But the thing that they guide is that they won't -- they think it is an extra form of packaging and which if we do away with it, it will save resources. So it's on that side of the business that they are targeting. It's not on the sustainability use or something. So if such big companies are guiding something, so I wanted to understand from you because how is the trend panning out.
So if you look sector-wise in the FMCG, there is no trend in this respect. In fact, people are moving more towards paperboard packaging. And recently, there is some commentary from the liquor companies about wanting to move out because of this extra form of packaging and to save resources and money. What we find is that the saving is not going to be very significant because, ultimately, the company will have to invest a little bit in augmenting the secondary packaging, the bottle, the label, and those kind of things. So we're not really sure how much it will save them. So with that in mind, I mean we are not too -- we are not unduly concerned, I would say.
I'd just like to step in here. I'm Saket Kanoria. The thing is that we can't call it yet a trend. It's 1 or 2 companies have expressed this sentiment, and it's too early right now. But okay, there could be certain products which will look at doing things like this, but ultimately, packaging is a integral part of the product, and we don't see this happening across the board. In fact, it's physically not possible to do it across the board. And as Akshay mentioned earlier, there are lot of other items which are plastic-based which are moving to paperboard-based. So overall, consumption of paperboard in the world is growing very rapidly. And obviously, nobody likes the fact that this segment can move out of it or partly out of it which remains to be seen how successful that will be.
And 1 more point I would like to add is that, if you look at India's per capita consumption of paperboard, now I don't have that number with me, but it is completely insignificant when you compare to global averages. So 1 or 2 segments or 1 or 2 customers for a few products moving out, so it's more like a short-term thing. But long term, there's still enough scope for volume growth.
Okay. Okay. Got it. Got it. Sir, also, can you bifurcate the current capacity in cartons, printing and flexible packaging, like if you can give the number of the current capacity?
So as we guide in our presentation, et cetera, the paperboard is the largest segment by far and is almost 90% of the total turnover of the company, and the balance is flexible packaging. In flexible packaging, we, of course, greatly expanded our capacity in March, April this year. And therefore, the utilization has been on the lower side, although it is picking up now. So I hope that answers the question.
Sir, revenue segment, I understand. I wanted to know in terms of volumes, I mean, in terms of unit capacity, like how many tonnes we have in carton and how many tonnes we have in this thing.
It's very difficult to give you a correct answer because the tonnage of flexible packaging is not the same thing as tonnage of paperboard, and the values are extremely variable. So if I tell you like 1,000 tonnes here and versus 100,000 tonnes there, it's not equivalent. Yes, so that's why we don't give these kind of numbers because it's very dependent on what product mix you are going to run. And yes, like what is your input raw material and what is the output, that really increases or decreases the value per tonne.
Okay. Okay. And sir, what is the price difference between...
One second. Let's move on to -- we have other people lined up for questions. I think we should move on to the next question.
[Operator Instructions] The next question is from the line of Sanjay Manyal from ICICIdirect.
So if you can give some update about the newly acquired company, what exactly is the kind of sales we are looking in next 1 or 2 years in this segment. And what -- you mentioned that you have sort of gained some clients over there. If you can name some of them and what kind of opportunity actually you are looking in this space over the period of time.
Yes. So this is, if I guess, you're referring to Creative Offset. This is a company based out of Noida which we acquired in December last year. They are mostly concentrating on the electronics industry. We were attracted to this industry because of the kind of growth story we see coming in India this year and over the coming few years, buoyed by this China Plus One strategy as well as the Indian government's incentives and generally India's rising competitiveness in this segment. So we see a big opportunity for India here in terms of the export potential. Just to -- I'll talk a little generally first before coming to specifics. If you see about 10 years back, India's exports of electronics items was amounting to about $4 billion. Today, that's between $10 billion and $20 billion. At the same time, Vietnam had a sale of $3.5 billion. Today, that is in excess of $90 billion. And China exports over $800 billion of electronics items. So the kind of opportunity for India in this electronics manufacturing and export for global markets, forget the India market, is just vast.
And then, of course, there's the India market where primarily most of these Indian brands that you would see advertising in your IPLs and on TV today, they are mostly importing their materials directly from China. And for the most part, they've been historically just trading companies. They've been importing the finished product and selling in India. Now thanks to all these taxes, government pressure, Zero Covid policy in China, et cetera, all of them are steadily switching their manufacturing to India.
So this we see as a very big potential. And therefore, we acquired this company because Noida and the NCR region in general is going to be one of the major hubs for manufacturing of such products. And therefore, in Creative Offset, we find a very good scope, and we hope that in coming years, we take it to triple-digit revenue.
Now exactly when we get there, I can't sort of guide for that, but our target is to make this a very critical part of our overall growth in the coming years. As far as the exact companies and all which we have entered into, I think it's a bit nascent still, so I don't want to guide for the -- I don't want to get into the details because we're the only publicly listed player in our segment. So you would appreciate that we'd rather keep such things little bit to ourselves.
Sure, sure. Just one more thing on the margin front. What kind of margin this company commands versus our overall margin? And if I also add to it, over the last 10 years, our -- the blended margins have been in a range of, say, 13% to 16%, 17-odd percent, so this current quarter's margins looks at an higher end of that range. So are we sure or confident about this fact that we will be able to maintain this kind of margin? Or what exactly is your guidance on that?
Yes. So as far as this company is concerned, currently, the margin is quite low because of the utilization or rather the sales revenue being low. As it picks up, we see this being a higher-margin business than our existing business, and it certainly has the potential. But obviously, we have to get the top line up first. As far as the overall company is concerned, yes, I mean we have sort of operated in this range of about 14%, 15% EBITDA. And on a better year, we go up 2%, 3%. And on a worst possible year, we go down 2%, 3%. So broadly, we are quite stable as a company in our margin structure. And we see ourselves continuing along that trend. And as long as the utilization level stays decent and there's enough -- we manage our investment prudently, we don't see why we can't manage this sort of level of margin.
Sure, sir. My last question is on -- basically on the working capital, if you can guide what exactly kind of working capital requirement we would require sort of at the end of every year and if you can guide something on that.
Yes. So the last few -- 2 years have seen significant volatility in terms of raw material pricing as well as availability. This has led to increase in working capital requirement for the company in terms of the stock level that we maintain. So generally speaking, we have about 60 days of working capital requirement as a company, and that's what we sort of see as a good level or a maintainable level.
The next question is from the line of Pulkit Singhal from Dalmus Capital Management.
Congrats on an excellent set of numbers. Just the first question is just to understand the trend in exports. I understand that Europe is also facing certain kind of challenges in manufacturing, and they have really big paper packaging companies out there planned. So is that something that is providing us an opportunity now to invest because of these issues?
Thank you, Pulkit. Yes, Europe, there is a huge problem there, thanks to the natural gas prices, the oil price, whatever, energy cost, everything is going up like crazy over there. So there are 2 things happening at the same time. One is there is some amount of demand destruction, which is not good, right, because obviously, people's energy bills are going up, so consumption is taking a knock. However, from our perspective, one positive is, of course, that the local industry is under a lot of pressure. And to that extent, the rest of the world is more competitive relative to those companies. So we see a opportunity, actually, and we will be sure to capitalize.
Right. But this you think can be a pretty long-term trend. I was looking at this company Graphic Packaging, which is there in U.S. and [indiscernible] like millions of dollars of revenue. So I'm just wondering whether, we are nowhere there. So even a small shift from one customer of theirs to us can mean a big -- of course, revenue. So are there any such discussions for some big kind of requirement from any of these people? Anyone you're engaging with closely?
Pulkit, I am Saket Kanoria here. I'd like to add here on Graphic Packaging, in fact, we are their strategic partner, and we know them very well. And obviously, if there's any such possibility we will be talking to them. But there's no such things that right away. But this energy crisis in Europe is very, very nascent, and obviously, this is going to be a major problem for the Europeans going forward. And they are all trying to realign their supply chain, but it's not so easy. So ultimately, there are people to be employed and all that. So there's going to be a very big social upheaval, but it's a very new thing, so we are yet to see how this can pan out. But certainly, Asia will benefit, thanks to the situation.
Yes. Sorry, I didn't know that you were strategic partners. In what way are we engaged with them, I mean?
Just like a technology collaboration and to service global corporates.
Okay. Okay. So the export trend which we have been seeing last 4, 5 years and has been growing at anywhere between 20% to 30% for our company, you believe that, that trend is here to stay and can even get stronger? Or are you -- I mean -- or do you think that we already reached some base and it may just kind of start trending down?
No. So far, export is still growing well. Currently, the domestic has outgrown export, but export trend is very positive.
Okay. Okay. And Creative Offset seems to have suddenly -- I mean the commentary of ours has some changed in just last 3 months, right? I mean, we always were positive on the potential, but if I see consol minus stand-alone, we are probably already doing INR 13 crores this quarter, which I presume is entirely COPPL and suggest a INR 50 crores annual run rate. Is my understanding correct, we're already at that level and things are picking up quite rapidly?
Pulkit, we don't want to get into the specific number. I don't want to give you an answer to that question. But it's improving, and it will continue to improve, and there's a good potential. So short term, there's lot of these supply issues and all, thanks to earlier the chip shortage and component shortage from China. General inflation has hurt the demand for electronic cycles, but there's a big shift happening. So on the one hand is that. But on the other hand, there's a good potential, and there's a good scope, so we're quite positive. And we've always been positive. I don't agree that there's a shift in the commentary.
Right, right. And utilization levels, if you can just give us some sense how much is that flexible paper packaging for the last quarter.
So the flexible packaging has picked up. We are still far from 100%, but earlier, obviously, we were at a little less than 50 because we had just doubled, so it's much better than that. But we still have some good scope for further growth. In the paperboard packaging, we've been at a much higher level of utilization this last, I think, 3 quarters or so, and you can see that probably in the overall numbers. That continues to some extent, but there's still, again, further scope for growth here.
Okay. Okay. I think the opening commentary seemed to mention some kind of slowdown of growth. I mean I'm just trying to -- I don't want to misinterpret it, but I mean, are we talking from a 40%, 50% kind of growth rate which we are seeing? Or are there some concerns which we should be aware of for the next few quarters?
I think as far as our run rate is concerned, we are quite comfortable in maintaining that. And generally though, the domestic market this last 3 years has been slow and this last 4, 5 months particularly has been slow. If you see the results and the numbers of most of our customers, if you forget the top line number but if you look at their volume numbers, they have been quite slow, and that's largely due to the inflation impact. So we have to see how it pans out. Hopefully, this will moderate coming months, but there's really too many unknowns in the global economy, which are out of everyone's control. So we'll see. But I don't think we have any problem maintaining our run rate for now.
The next question is from the line of Nirav Savai from Abakkus Investment.
Question is regarding this Flexible Packaging business now with BOPET prices and even BOPP prices have corrected. Do we see some improvement in margins in this segment?
So basically, this business, we have a lag effect, and we have a pass-through mechanism with most of our customers. So as the price goes up or as the price goes down, there's a pass-through to the customers. And the pricing is quite well known to everyone and quite transparent. So therefore, it's not like you get some very significant boost. But there is a short-term sort of positive impact that one experiences. And of course, generally speaking, if the prices go down, then that much pressure from the customer end is going to reduce.
Okay. So this will be only temporary, you are seeing them?
Yes. Short-term and short-lived sort of margin boost comes. But generally, in a declining raw material price environment, it's always better because the pressure from your customer is less. So it is better to have a benign raw material price environment, of course that goes without saying.
Right, right. And what would be the sustainable margins if you were to understand for the Flexible Packaging business?
So the Flexible Packaging is a lower-margin business. It's typically like a 10% sort of EBITDA business as -- and we do a lot of specialty material, so we try to get a better margin. However, in general, the return on our capital, return on investment, those are along the similar lines. As a company, we sort of target 20% plus ROC. So that's what we look for either way. So whether the EBITDA margin is higher or lower, it doesn't really affect that formula.
All right. And the core Folding Carton business, how do we see CapEx going forward? Is there an expansion plan for the next year?
Yes. So in the Folding Carton business, we are expanding our capacity in one of our plants at the end of this year. And for the coming years, we will see. We have enough space in our existing plants to quickly add any capacity as and when required. So we don't really have any concrete plan as such. But as and when the utilization is at an optimal level or we really need to invest, we will invest.
In Creative Offset, we will be continuing to invest a little bit in additional capacity, additional space, et cetera. And in the Flexible Packaging, we'll see once we are at a higher level of utilization, maybe sometime next year, we will review. So basically now, we have a fairly well-spread geographic footprint. And our plants are quite spacious enough to accommodate for the brownfield investment, so that gives us a little flexibility. Like, we don't have to have some long gestation projects.
Right, right. So what is the capacity we're adding in the current financial year in this Folding Carton business?
So we are -- how to put it? We are adding about 5,000 tonnes of capacity in the carton unit. We're adding a new machine. Yes. Yes, about 8% maybe on the overall.
The next question is from the line of Resham Jain from DSP Investment Managers.
Yes. Congratulations, sir, on very good set of numbers. So my question is basically on the -- for the earlier participant did ask about the capacity enhancement across different lines of business. But if you can just help with the existing capacities and with the optimal utilization levels being -- considering seasonality into the business, what kind of throughput or a top line we can do from existing plant itself across all the lines of business? And also, if you can just explain the cash flow utilization, let's say, in the next 2 years' time because now with good top line, good margins and all, our cash generation has also improved. So from that perspective, how are we going to deploy this incremental cash flows into various businesses?
Thank you, Resham. So I think we can -- without getting into tonnage and all because that's like a rabbit hole, we don't want to get into. But generally, we can do maybe 15% to 20% more on our current run rate without any major issues and perhaps a little bit more if we stretch it. But that doesn't always happen because somewhere in some plant, you're not always fully utilized everywhere. And then of course, once you had a good utilization, then you can focus on either adding capacity or improving your margin, so it depends.
As far as the cash flow in the next 2 years, yes, I mean, for sure, if the capacity expansion is going to be moderate, then your -- all the ratios and interest burden and depreciation burden, all these things improve, and the cash flows improve for sure. And we have seen that also in the last couple of years. Our debt-equity ratios, et cetera, have improved. And in line with that, the others have improved as well. So that will continue.
But of course, if we want to grow at a high double-digit rate like what we have been growing, that will require capacity expansion. And the only difference is that now since we have a good footprint, we don't have to really plan very far in advance our capacity expansion. So that's why we don't have a solid sort of written down plan for next year. But certainly, if it continues like this, we will have to incrementally add capacity.
So Akshay, just from the ROCE perspective, till now we have been able to maintain like a good amount of CapEx, 20% kind of ROCE. And as you mentioned, now you'll have more of a brownfield CapExes. So the ROCE for the incremental CapEx, should one assume to be much better than the 20% run rate which we have done on an average in the past?
So I don't want to guide for anything, but generally speaking, we target about 20% plus return on capital. And as long as we can maintain more than 20%, we are quite satisfied.
[Operator Instructions] The next question is from the line of Shivam Saxena from ICICI Bank.
Just a question on this paper and paperboard business. So I think that has been used in the e-commerce, if I am correct. Am I correct, paper and paperboard business?
Okay. So you see when you order a packet from Amazon, that comes in that shipper brown box. That's not our business. .
Okay. So what do you caters to in that? So as a e-commerce, you are not getting benefits from e-commerce. I wanted to understand this point.
I mean marginal because there's all these larger offer packs and gift packs and all which are increasing with e-commerce. So to that extent, we are getting a benefit. And generally, as far as e-commerce is driving greater penetration and uptake and all of that, we get that benefit. But yes, okay, I mean the volume, the packaging requirement is not really going to be affected that much by e-commerce. .
So which segment do you cater to your paperboard business? Just wanted to understand which business, line of business.
So I would -- for more information, you can go through our investor PPT and our website. But just to quickly answer your question, our biggest segment of industry is the FMCG business. So that is all your listed or unlisted, multinational, big Indian companies like Unilever, et cetera, who are our customers. And then there's the food and beverage segment, pharmaceutical, electronics, liquor, tobacco, all of these players who require printed packaging material, which is pretty much what you see on a shelf today. Those are the things that we supply.
[Operator Instructions] The next question is from the line of Jayesh from CASK Capital.
Congrats on a very good set of numbers in challenging times. My question is finally on our Innofilms business. So can you just throw some light on what is the status? Because I think we've been running trial batches since quite some time. So has there been any customer approvals or have we started commercial supply?
Yes, so thank you very much for your question. Yes, so Innofilms has a long gestation sort of development process because this is a primary packaging material. So major customers, the big customers, they take lot of time, and their testing and stability trials are very extensive. Minimum, of course they take runability trial, which can take a few months. Then they take stability and shelf life studies, which can take anywhere up to 6 months. They take transit trials. This can take a couple of months more. So it's a very long gestation process. So that is in process.
In general, though, we have got a few customers on board for this. And we are -- that process is underway. And there is a good scope in India and for export in this. So generally, it's looking positive only, but it's very early days.
Okay. So when do you think we can start commercial supplies? I mean any rough time line in terms of when we can actually start the business?
Commercial supplies, not in a very extensive way but we are doing commercial supplies already. And we are already manufacturing for our regular own film in-house consumption as well. So that is going on. So it's not that the plant is idle or anything, but it's going on. So that will -- but obviously, the point of this was not to only cater to our in-house consumption, it was to add something new in the market. So that's taking time, but the trend is positive.
Sure. Just 1 more question. I mean, if you -- on our mainstream business of paperboard packaging, generally, the commentary from the FMCG or even the discretionary consumption side is that the premium part of the market is doing well, and the lower end of the market or the basic segment which is actually struggling for volume. So -- and I think usually we would actually be beneficiary of such a time. So is that beneficial, I mean, both in terms of the way market is behaving and margin trends for us?
So generally speaking, look, those volumes are catered by the market, right, whether it's paperboard packaging or any other type of packaging. So when your bread-and-butter business is not growing, then obviously nobody is happy. Even if the premium portfolio is still growing, but that's a very small part of overall volume, so obviously, you want that virtuous cycle of bottom-up growth to be there. But yes, the general commentary I would say is something we can agree with, that's the trend we are seeing as well from our customers. And yes, that is true. That is happening. But -- and this is mostly thanks to inflation. Now we hope that the inflation can normalize or stabilize and...
Think we may see some volume compression or [indiscernible]?
I didn't get it very clearly, but I think you are asking if you think we can see some volume compression happening?
Right. Right. Right.
I don't know. I mean I think there's a volume growth has come off, but is there a degrowth, I don't think there's any degrowth as such. But the growth has come up. And what happens with us is it's very hard for us to understand what's going on at the consumer end of the supply chain because we are right at the end on one end of the supply chain. So there's a sort of bullwhip effect where our customer may be stocking up or destocking that may not have anything to do with the actual demand at the end of the chain.
Okay. Okay. All right. So it's more or less, as of now, a stable volume scenario. Maybe going ahead, if there is some destocking cycle going, we may see some pressure. Is that what you're indicating?
Yes. So -- and also it's very seasonally linked. People stock up before Diwali, then they -- if they can't push that much material into the market, then they end up crashing the uptake during the subsequent months. So that's how it generally happens in our industry. So it's not easy for us to estimate on a month or a quarter basis what's actually going on at the customer end. But if you look at over the course of several quarters or 1 year or 2 years, then we can give a better picture.
[Operator Instructions] The next question is from the line of Shrinath from Motilal Oswal Asset Management.
Just wanted to check our overall strategy in the Flexible Packaging business because we are now largely into wrap-around labels and tipping papers and so on. So is there a larger strategy in the Plastic Packaging business and in the Flexible Packaging business including one...?
Sorry, what was your name? I missed that.
Shrinath from Motilal Oswal.
Okay. Yes. So our strategy in flexible packaging is, when we started in this business, we started in a very small way with a highly specialized line doing some specialty products like the tipping paper and a few other things. And that took a couple of years. We stabilized, we grew, and we got to optimal level of utilization, and then it came to what's next and how to grow further in this business. So the strategy from our side was very clear that we want to invest in long-term growth potential businesses. People who are in this Flexible Packaging business, a big trend towards sustainability and of course recyclability of packaging. So that was the logic of the TCPL Innofilms and the investment we made there. At the same time, we also augmented the flexible packaging capacity, and we now -- earlier we could only do a certain segment of the industry or certain segment of products. And now with the new expansion that we've done and various offline equipment that we put, we can pretty much service anything that the customer requires in flexible packaging.
So the idea was twofold. One is to have a leg up in the sustainability venture of most of our customers. And the second was to increase our offering. So we've done both with the recent capacity. So now our strategy is to build on that, sweat the existing capacity, and then we can keep incrementally adding new capacity basis the demand that we see at the time.
Right. You were also considering, for example, putting up a metallizer and stuff, so that, that significantly increases the addressable market. So is that plan still on? Or is there a change?
Yes, yes, absolutely, we will look at everything. So that is also there for future, and we have phased, that's a good thing. So it depends on the uptake and the specific products where we see some success. So it's a vast market and there's a huge volume overall. So if 1 customer for 1 product can also fill up your entire line. So it really depends on where we strike with this Innofilms and other products. There's also a good export potential, and this is a higher per kg value product. So the freight costs and all are not as cumbersome, and it's a little more volume you can stuff into a container. So flexible packaging in general is easier to export. More export friendly, so that is also there.
What I was trying to arrive at is that, eventually, do we see ourselves competing with the likes of, say, Huhtamaki and UFlex and in that league? They're very large, but we are small, but still, will we end up competing with them?
We are already competing with them. Yes, they are larger, but in the carton business, we are already servicing most of the same customers. We have that customer relationships. We already have that credibility. And hopefully, with this Innofilms and all of that, we have a good technological basis on which to compete. Yeah. I think that is certainly long term where we would like to see ourselves.
Right. So cross-selling and share of wallet is possible, right, from the segment, from the existing customers?
Yes.
And my second question was on CapEx. So should we budget about INR 80 crores to INR 100 crores every year for the next 3 years? Is that a fair estimate?
Yes, I think broadly, it's okay.
About INR 80 crores?
Yes, I think that's okay.
Okay. And one final question was on the cost of debt, cost of working capital debt. So there has been some rise in interest rates. So is it affecting us as well? What cost of debt should we kind of bake into our numbers?
They're not really affecting us, actually. And if you look at our interest as a percent of the turnover, that has come down. Generally, debt service cost is not really going up.
Okay. Last 3, 4 years, it's been hovering around 10%, I mean, interest as a cost of debt. So is that a fair number?
Slightly.
Sorry?
Come down from there.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you very much. I hope we have been able to answer all of your questions. Should you need any further clarifications or if you would like to know more about the company, please feel free to contact us or CDR India. Thank you again for taking the time to join us on this call. We look forward to interacting with you in the next quarter.
Thank you. On behalf of TCPL Packaging Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.