Saket Kanoria hails from the industrial family of Kanoria’s from Kolkata. He joined the family business in 1984 and has experience in many businesses, particularly Textiles and Chemicals. TCPL Packaging Ltd. (erstwhile Twenty-First Century Printers Limited) was set up in 1989 with a sophisticated printing and packaging unit at Silvassa. Kanoria has been associated with this company right from the beginning and he later took over as the Managing Director of the Company. Today, TCPL Packaging Ltd. operates out of several manufacturing units, three at Silvassa, one at Goa, and one at Haridwar. TCPL is one of India’s largest manufacturers of folding cartons. TCPL Packaging Ltd. is an ISO 9001:2008, ISO 22000:2005, BRC/IoP certified and SEDEX Compliant packaging company. For the financial year ended 31st March 2011, TCPL's revenues were Rs 251 crores, registering a CAGR in excess of 20% over the past five years.
TCPL Packaging Ltd is one of the largest manufacturer of printed cartons and converters of paperboard in India. The Company, promoted by the Kanoria family, manufactures products like printed blanks & outers, folding cartons and plastic cartons. It caters to sectors like FMCG, Liquor, Cigarettes and Food. TCPL has leading foreign and domestic players like HUL, Nestle, Colgate, UB, ITC, Godfrey Philips, Philip Morris, Cadbury and Britannia as its clients. In order to cater to the growing demand from the food segment, the company has recently augmented its capacity and also introduced the latest high-tech machinery. TCPL is one of the few packaging solution companies to have its own design centre. The design centre based in Mumbai works closely with leading FMCG companies and has come out with some award-winning innovative products. TCPL has strong presence in the overseas markets as well, accounting for about 20% of its total annual revenues.
In an exclusive interview with Hemant P. Maradia of IIFL, Saket Kanoria says, "We are enthused about the demand growth of the packaging industry on the back of aggressive plans envisaged by our clientele."
In Q3 FY12 you showed strong revenue and operating performance. What led to the improvement in EBIDTA margin during Q3 FY12? What is the outlook on margins going forward?
During quarter ended December 2011, our gross sales have gone up to Rs 81.43 cr from Rs. 64.28 cr as against the same quarter of the previous year, showing an increase of 27%. At the same time EBIDTA has increased from Rs 9.40 cr to Rs 12.65 cr, representing 35% growth.
The EBIDTA margin improved substantially to 16.42% as against 14.62% in the previous year. The increase in EBIDTA level is due to high value orders, spurred by new product designs and better export realization.
For the nine months ended December 2011, gross sales were Rs 214.2 cr, up 17.2% and EBIDTA of Rs 31.8 cr against Rs 25.4 cr. PAT was Rs 4.68 cr against Rs 4.71 cr.
But it did not get translated into the bottomline. What is the reason?
Higher provision for depreciation at Rs. 4.70 cr, Interest at Rs. 3.43 cr and Exchange Rate differences of Rs 2.21 cr had an impact on PBT, which was Rs 2.31 cr (against Rs 2.80 cr during the similar quarter in the previous year). The PAT was Rs 1.63 cr against Rs1.83 cr.
You suffered forex loss in Q3 due to Rupee depreciation. With the rupee rebounding this year, will you be able to reverse the forex loss?
The Company has provided loss on account of exchange rate difference Rs 333.25 Lakhs for the period ended December 2011. Out of which, for the 3rdquarter an amount provided was Rs 220.58 Lakhs. The loss was due to two factors– one arising out of Cash Credit Facility converted into Working Capital Loans (exchange loss Rs 267.8 Lakhs) and two on account of Forward Contract booked for export receivables during the period April 2012 to June 2012. The Mark to Market loss was Rs 65.45 Lakhs.
Currently, the company is borrowing working capital limits in Rupee only and hence there will not be any reversal of forex losses incurred. However, for the export receivable contracts there will be reversal of the loss if Rupee gets stronger against USD. Since we are now borrowing only in rupees there will be no impact in the near future.
What measures do you usually take to hedge your currency risks?
Export for the year 2011-12 is expected to be Rs 45 cr, majority of the exports will be in USD currency. In September 2011, we had booked Forward Exchange Contract for export receivables of USD 30.00 lakh, covering the period of export realization between Jan’12 to June’12. Except these we do not have any other Forward Exchange Contracts.
What is the guidance on revenue and PAT for FY12?
Gross sales are expected to increase at 20% p.a. in FY12 while the bottom line should improve correspondingly.
How do you see the demand for packaging products in the coming years?
We are enthused about the demand growth of the packaging industry on the back of aggressive plans envisaged by our clientele. FMCG and Food sectors offer tremendous opportunity for our packaging products. In recent years, we have installed latest printing machines of upto 10 colour in Silvassa and Haridwar besides upgrading older 6 colours to 10 colour high speed machines.
As a result, we are uniquely positioned to provide innovative packaging solutions to existing clientele and confidant of adding new clientele.
TCPL is a regular and approved vendor to leading food manufacturing companies in India such as Nestle, General Mills, Ferero, GSK, Kellogg India, Heinz, Amul, and Hindustan Unilever.
Besides, TCPL is a regular exporter to the food and bakery industry in the Netherlands and the UK.
TCPL is currently one of the largest manufacturers of liquor cartons in India, catering to all liquor majors in the industry. Our clientele includes liquor majors such as Pernod Ricard, Radico Khaitan, Jagatjit Industries, Khoday’s, USL etc.
TCPL is also catering to the Phillip Morris and BAT associate companies in India and other leading cigarette manufacturers in the region.
Are you planning expansion at any of your facilities? What will be the investment outlay?
During the year 2011-12, the Company added a third printing machine at Haridwar. Besides, the company has also added a new facility for manufacturing of corrugated cartons at Goa. We are planning to add a factory for manufacturing of corrugated cartons at Haridwar also.
The total capex planned at various locations is to the tune of Rs 50 cr for the year 2011-12.
Give us details about the Goa corrugated cartons facility? What is the capacity, how much was the investment into the plant?
The Company has set up a corrugated cartons manufacturing unit in Goa. The unit has capacity to manufacture 300 MT per month of corrugated cartons on conversion. As of now there is no printing facility available at the unit. The company will be supplying corrugated cartons to several customers situated in Goa and nearby area. We have invested around Rs 4.5 cr for the machinery and the unit is set up in a rented premises.
What benefits will accrue to the company from the Goa plant?
The Company will be able to execute orders of its customers in the vicinity of Goa much faster by keeping inventory of printed sheets at Goa and converting the same into Corrugated Cartons as per their requirements. We expect larger volume from the existing customers.
What is the trend in paperboard costs? Are you planning any backward integration?
The paperboard costs are quite steady. Any major variation in the cost is passed on to the customers.
At present we do not have any backward integration plan.
Brief us about your product range?
TCPL is one of the two largest converters of paperboard in India. We print Shells and Hinge Lid Blanks required by cigarette manufacturing companies and Cartons, Boxes & other packaging material for various companies in liquor, FMCG, Food & Beverages segment and others.
TCPL won several awards for excellence in printing from Paper, Film & Foil Converters Association for cartons manufactured for various customers.
What are your growth plans and are you looking at inorganic growth?
In the last few years, we have added new capacities at Silvassa and Haridwar. We are presently consolidating our operations and working on new product offerings. These activities, we are confident, will deliver robust growth in next few years.
Currently we do not have any plan for inorganic growth, but we may consider if suitable opportunity is available.
What is the message to the shareholders?
The Company has core manufacturing business and enjoys reputation of a reliable packaging company for supply of various types of packaging materials to large foreign and domestic companies. The company has a very stable track record of dividend payment for more than 15 years.