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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 Mr. Anoop Poojari from CDR India. Thank you, and over to you Mr. Poojari.
Thank you. Good evening, everyone, and thank you for joining us on TCPL Packaging's Q2 and H1 FY '25 Earnings Conference Call. We have with us today, Mr. Akshay and Vidur Kanoria, Executive Directors; 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'll 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 Akshay to make his opening remarks.
Good evening, everyone, and thank you all for joining us on our earnings call. I will initiate the call by taking you through our business highlights for the period under review, after which we will open the forum to have a Q&A session.
We are pleased to report a strong performance this quarter with healthy double-digit growth in both revenue and profit. This quarter marks the best performance in the company's history as we surpassed INR 450 crores in revenue for the first time. In Q2, consolidated revenues reached INR 463 crores, reflecting a 14% year-on-year growth. Our EBITDA also grew by 18%, reaching INR 77 crores, with solid margins of 17%. Additionally, PBT increased by 22% to INR 45 crores. Both PAT and cash profit showed strong growth reaching INR 36 crores and INR 64 crores, respectively. The strong performance reflects our commitment to innovation, sustainable solutions and operational excellence. These key pillars have enabled us to deepen our presence in major our markets, expand market share and steadily grow our customer base.
Looking ahead, we remain focused on enhancing our footprint in high potential markets to drive sustained growth. Our greenfield facility in Southern India is progressing well with commissioning expected in the coming months. Strategically located near Chennai, this facility is the latest addition to our manufacturing network, further strengthening our extensive presence across India. This customer-centric infrastructure has been instrumental in our ability to consistently outperform our underlying industries, enabling us to meet demand efficiently and maintain a competitive edge nationwide.
In conclusion, we are committed to building on the strong foundation we've established over the years. Our focus remains on expanding our reach, enhancing our capabilities and continuing to deliver value across markets. Overall, we remain confident in our ability to navigate an evolving landscape and believe we are well positioned to drive sustainable growth for the benefit of all our stakeholders. Thank you.
[Operator Instructions]
The first question is from the line of Pavan Kumar from RatnaTraya Capital.
First of all, congratulations for the great set of numbers. I wanted to understand on the subsidiary side, we seem to have done a pretty decent job in terms of revenues. But that EBITDA seems to have actually compressed. So first of all, how sustainable is the revenue run rate? And also what kind of EBITDA growth can we see at the subsidiary level going forward?
Yes. And secondly, my second question would be regarding the Chennai facility. When is it expected to commence? And what kind of revenue potential does it have as of now?
Yes. Thank you very much, Pavan. So on the first question, the subsidiaries have grown in high double-digit rate this year, to date. If you just -- I mean, if we talk about 6 months to 6 months or so and even for the quarter, yes, the EBITDA margin is a bit tight. But that's, I think, a function of the overall scale is still not up to the expectation in terms of the total turnover that we are doing and that drives the profitability. So it's not yet margin accretive as we would like. So certainly, we have a lot of work yet to do on the subsidiary front. But it is certainly sustainable. I mean, there's no problem in the sustainability. And I think we can continue to sustain a high double-digit growth rate and eventually grow into our profitability.
On the second question of Chennai. So we are expecting to commence in the next maybe 1.5 months. So we've not given a firm date yet. So we'll -- that we will -- once we are getting closer to the final commissioning date, then we will have a firm date. But in the coming month to 2 months' time, that's our expectation. And after that, it will take a few months really to stabilize and slowly, slowly start supplying to our customers. Typically, these guys have to audit your plant, then they start with smaller volumes and then it starts ramping up.
So eventually, it can add about 750 tonnes a month of capacity on the conversion of board, and that translates into a revenue of maybe INR 70 crores to INR 80 crores a year to begin with. And then after that, we have a very large expansion stage, so we can keep adding incremental capacity over time.
Okay. Okay. One small follow-up. So on the subsidiary level, do we -- can we see some potential to get realized at least in the next year in terms of profitability levels? Or would that even it is very difficult to say even now?
Yes. I mean the scale is very small. So like a very -- like when you're at INR 4 crores, INR 5 crores kind of run rate to add INR 2 crore more doesn't sound like much. And that can happen very quickly also. So I wouldn't -- I don't want to guide for any particular time period. But yes, certainly, I mean, we are putting all our efforts. And we do see the business growing for sure. So we're quite optimistic.
Next question is from the line of Rohan from [indiscernible].
Congrats on a good set of numbers. I have largely 2 questions. One is on our domestic business as per my estimate, we have grown about 6%, 7% in the first half. So how...
Rohan, you're not audible. Can you please speak through the handset?
Just a second. Is this better?
Yes.
Yes. Okay. So in the first half, as per my estimate, we would have grown about 6%, 7% in the domestic business. Just wanted to get your sense of how you expect the second half to be? And on the second part, how are the utilization levels right now in the folding carton and the flexible packaging segments?
Yes. So on the -- we don't give the split between what we are doing domestic versus export. However, the domestic has grown. It's not that it's not growing. But yes, certainly, market conditions are a little bit challenging for sure. So overall, volume growth in FMCG and related industries in India, as you must be seeing from the numbers that have been released by our customers so far has been fairly weak compared to the expectation.
And as far as the capacity and the utilization is concerned, in the flexible packaging plant, as you know, we had added substantial capacity last year -- at the end of last year. So there is still substantial capacity left underutilized. I mean, at least 30%, 40% extra capacity that we do have.
In the folding carton segment, we are fairly well utilized. We have 80-plus percent utilization rate. But Chennai is coming up soon. And then we added a new line just this month in Goa. So there is some further capacity that's just kind of coming on stream now. So that number will change. Thank you.
Thank you very much. Next question is from the line of [indiscernible] from Goodwill.
I just wanted to ask about this quarter and H1. How much of the margin improvement would be attributed to the fall in packaging board pricing? Or is it largely pass-through?
So you can pass through the numbers a little bit, but basically, there has been a positive impact on margin, thanks to raw material price decline, which has started like 6 to 9 months ago and continued till now. But now, I mean, it's not -- there's not a significant improvement or worsening or anything in raw material prices now. It's just like very marginally up or down this last few months. So there's no significant drop in -- or increase in raw material price.
So has it benefited our margins?
Yes. Generally, a benign raw material environment does benefit. And it has helped, but there is a pass-through effect as well for most of the business.
Next question is from the line of [ Jeevan Garg ], Individual Investor.
Am I audible?
Yes, sir. Go ahead.
Sir, congratulations on great set of numbers. First of all, as you are saying that you have achieved a very good revenue, historical revenue. So what contributes it? Is it domestic or is it export has contributed since you have just told that, that domestic numbers of many of your customers have grew.
Yes. So we don't give our share of wallet of domestic versus export but both segments have grown. There is a growth in the domestic market. That's what my point was that despite the market being slightly weak, we are still growing and we hope that as the market improves, that can further improve.
So can we say that we are taking the market share of our competitors.
Yes.
Okay, okay.
[Operator Instructions]
Next question is from the line of Vedant Bhasin from Minerva India.
Hello, am I audible?
Vedant, if you speak a little louder, please?
Hello, am I audible now?
Yes, thank you.
Congratulations on a good set of numbers. I just had one question. I know you don't share the split of export versus domestic. But if you could just shed some light on what countries the export is really going to?
Yes. So we export to Western and Northern Europe. We export to the Middle East. We export to Africa. We export to Southeast Asia. We export to several of our neighboring countries and a little bit to North and South America.
Sir, the line for the participant dropped. We move on to the next question. Next follow-up question is from the line of Pavan Kumar from RatnaTraya Capital.
Just on the flexible packaging side, I understand that current utilization is somewhere around 60%, 70%. So by what time can we expect to hit full utilization and any plans for further CapEx going forward on that side?
Yes. So the flexible packaging is performing quite well in terms of growth, and it's steadily ramping up revenues. We are constantly penetrating into new customers as well as new markets for export as well. So it's growing, and it's more or less satisfactory, I'd say. We're not dissatisfied. And once this capacity is fully utilized, then we will look at further expansion. We have space for further expansion. So there's no problem in terms of adding further capacity. The plant has the room for it.
By when can we hit peak utilization, Akshay, any kind of understanding on that?
Yes. So as I said, when we did the CapEx in the first place, it takes typically 6 months to 1 year to really come to a good level of utilization. So we are like halfway through that process.
And 1 thing on the recyclable film side, is the facility totally functional? What kind -- what would be the utilization on that side?
Yes. So it is fully functional. But as you are aware, it's only been a few months. So the utilization for the specialty films is still low right now, but we've penetrated a couple of good customers as we updated in the last con call and we are seeing increasing traction, but certainly, there's a long way to go.
Okay. And the understanding would be of the -- whatever utilization that is taking place, most would be the recyclable film itself right now. Is that right? Or are we selling normal film?
We are making a lot of normal film.
Okay. But the conversion will happen. Is that what you're seeing?
Yes.
Next question is from the line of Abhisar Jain from Monarch AIF.
Congrats for good performance. Sir, the question is on COPPL. Your subsidiary, which is into the packaging for the electronics and mobile phone particularly. Can you talk about how the business traction is moving there? And what kind of scale up, if at all, we can have in the next few years there?
Yes. Thank you. So as I've said in the earlier question, we have a good growth in terms of top line. But yet the bottom line has not come up to our expectation because we're still some way away from getting an optimal level of turnover over there. And there is a substantial scale up that we have to do and that there is a space or capacity for that. So, yes, we have a long way to go, but it's improving sequentially year-on-year. So we are growing, and we hope we can continue this or improve further this rate of growth. Thank you.
So sir, any indication that you can give in terms of the new clients that you may have acquired like recently, we did go towards full 100% ownership here also. And in that release, we had mentioned that large number of manufacturers are expanding in the mobile phone production. So -- is there a case here or there where we would have got, say, some new clients and hence from the INR 40 crores annualized top line that you have in FY '24, can we expect decent scale up, if not in FY '25, but over the next 3 years?
Yes. So we have entered into many clients. And right now, we have stabilized well in a couple of big clients and we've performed well. The main season is typically in this mobile business is this pre-Diwali, they really start ramping up their requirements. So this is where they really test you. So you may enter in Jan or Feb, but they won't really trust you with larger volumes and share until you perform reasonably well in this season. So I think we've done a good job. So hopefully, we'll have a few anchor customers now who will grow with us.
And then in this rigid box space, where the high value and the better margin is, you have to sort of develop a lot of smaller customers who will give you that margin. So that's an ongoing process which we are constantly doing, and we're constantly cracking some of the other new clients. So it's in process.
Understood. Understood. Very helpful. The other question while I agree that you don't provide the breakup on the domestic and export. But just wanted directionally versus whatever growth we used to have in exports in the past, like, say, last 3 years, 5 years, have we at least started growing faster in the exports, can that statement you make? Or is it difficult to call that...
I mean we've had a fairly high growth in our export over the last several years, and we are continuing to grow at a very comfortable pace. So we are quite happy with our performance. And if we can manage this level of growth in the coming years, it would be very, very positive.
Sure. That's great. Just a last question. What's the CapEx plan for FY '25 as a whole? And whatever would be the surplus cash flow that you generate going ahead, is there some initiatives planned for that? Or would that then go in reducing the net debt on the books?
So we have many plans like larger plans and then typically very few of them work out. So we keep looking at new opportunities some M&A or some new lines of business, and we are very bullish and growth oriented. So our ambition is always to invest more and grow. But one has to be very judicious about the choice of investment and where to put the money. So we have a lot of balls up in the air, but typically only 1 or 2 will land in a 2-year time period. So that, I think, hopefully, kind of in a roundabout way answers your second question.
On the first question, CapEx plan, we have over INR 100 crores of CapEx plan per year because typically, we have to add some incremental capacity in our carton business, then flexible packaging also there will be some incremental CapEx. We are constantly looking to acquire neighboring lands around our plants we have grown like say our older plants where we're running out of space. So that activity keeps going on. And then we're just adding this Chennai this year. So that will be over. So maybe hopefully, it gets a good utilization then end of next year, that will require maybe some money.
So there's a lot of land and building and acquisition work. And then there's some incremental brownfield. Then there's a couple of larger projects which we are working on. Post all that, whatever is left over, certainly will go into debt reduction. And if you see our track record last couple of years, we've really substantially reduced the ratio of debt to equity and brought it into line. So we hope to cement that over coming years. And hopefully, we can improve it. But ideally, no, I think we should have some good investment opportunity to come up and then we can put the capital there and grow further.
Next follow-up question is from the line of Vedant Bhasin from Minerva India.
Sorry, I think my line got disconnected. But my question was really regarding what's driving export growth? Like what geographies are really driving that growth? If you can just shed some light on that.
So in terms of secular factors that are in our favor, I think overall, the India supply chain -- supply base has improved over the last many years. The scale of operations, I'm talking about suppliers has improved. We get most of our raw materials locally, lead times are manageable as compared to the rest of the world. Quality is good enough and pricing is also competitive. And our scale has also improved and our scale as a manufacturing has improved.
And we have many clients who we are dealing with for many years who we have -- with whom we have performed well over a period of time, and those people trust you then with more and more business and your name and reputation gets cemented, and then that leads to further growth. So I think it's a confluence of many positive factors that have helped us.
Understood. Just a small follow-up question then. So would you be able to shed some light on this export growth or even domestic growth for that matter? Has it come from the additional new customers? Or is it existing partnerships that have really like we've gone deeper in?
Yes. So this is a bit of a tricky one to answer because when you enter into a new customer, they don't typically allocate a lot of business. And it's a very slow process to grow with customers. So usually, by the second, third year, something, then you're doing some better numbers with any customer. So typically, it takes a few years to really ramp up with any customer, wherever it is. So it's a long-term process, and we are adding new customers all the time, whether your or abroad. So yes, that's how we're going.
Ladies and gentlemen, we'll take that as the last question. I'll now hand the conference over to the management for closing comments.
Thank you. I hope we've been able to answer all your questions. And should you need any further clarification or if you'd 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 the call. We look forward to interacting with you next quarter. Thanks.
Thank you very much. On behalf of TCPL Packaging Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.