TCPL Packaging Ltd Management Discussions.


The Indian packaging industry continues to grow on the back of rising consumption in India. However, the past few years have been quite challenging for the industry as a whole. Demonetisation and GST seem to have blunted consumption growth. The weak growth of previous years carried on into the current year, with volume growth of the major FMCG firms remaining tepid. This has resulted in a substantial increase in competitive pressure felt by the packaging industry.

Since last couple of years the paperboard packaging industry was impacted by rising paperboard prices. Paper and board prices shot up by over 10% in most grades in a very short period of time. This sudden increase was mainly on account of actions by the Chinese government restricting the import of waste paper, as well as a large number of recycled paper mill shutdowns in China due to new anti-pollution measures. The result of these actions was two fold: one was a sudden shortage in recycled paperboard in China, driving up prices in the rest of the world; the second was a spike in the prices of virgin pulp, as consumers in China switched to a new source of raw material, namely virgin pulp in place of waste paper. The global increase in virgin pulp prices were immediately felt by most Indian paper mills and passed on to the paperboard packaging industry. Passing this increase by companies such as ours in full was very difficult in light of the new industry dynamic.

Owing to slower growth and the high cost pressure from raw material price increases, as well as rising overheads from past expansions, your company naturally had a challenging few years. Your company experienced margin contraction for the past few years, as the burden of capacity expansions in Guwahati and Silvassa plants, as well as the relatively new greenfield flexible packaging venture in Silvassa weighed on overheads and resulted in higher debt and interest costs. This was not offset by the kind of growth your company has consistently achieved in past years. However together with higher raw material prices and increasing competition in the market, the result was a fall in EBITDA margins.

However your company is fortunate to be one of the leaders in the industry, with plants at multiple locations, as well as a very strong customer profile. Your company is at the forefront of technology in the industry, and has a substantial scale advantage over smaller competitors.

Your company, whilst continuing to expand its capacity is focused on consolidation and capacity utilisation, leading to a positive correction in the debt:equity ratio as well as an improvement in EBITDA margins over the past year. We believe that your company will continue to maintain good ratios and steadily improve EBITDA margins as the new capacity gets fully utilized, on an overall higher scale of operations. We believe that the outlook is quite positive and thank the shareholders for their patience and support.


During the year the company has managed to grow at 16.62% and crossed the threshold of Rs. 800 crores in revenues. As mentioned above there has also been a slight improvement in EBITDA margin which is 13.28% as against 12.90% in the previous year, translating into a higher PBT.


The overall macro-economic conditions in India are expected to improve considering the completion of the General elections in May 2019 and continuing of a stable Government at the Centre. With the diverse geographical presence of the company across India and the Companies supplies to both the carton and flexible packaging requirements of its customers, TCPL has a definite edge over its competitors.


There continues to be increase in capacity of packaging manufacturers resulting in over supply and coupled with inflation led increases in costs of not only raw materials but also operating expenses, puts a significant pressure on margins. Whilst the company tries to pass this on to customers and absorb some of it by improving productivity, this still is a cause for margin pressure on an ongoing basis.

Further the company does significant quantity of its business with the Tobacco industry which is under constant threat due to increase in taxes levied by the Government which impact the overall volume besides, also we need to print graphical health warning on the packs which do deter many from its consumption.


The Company is having only one segment of business i.e. Printing and Packaging.


The Board of Directors of the Company has adopted the policy of paying out 20% of Net Profit after Tax, as Dividend each year. Accordingly, a dividend amount of Rs. 5.25 per equity share is recommended by your Board of Directors to be adopted in the ensuing AGM.


The Company has adequate internal control system and a defined organizational structure besides, internal rules and regulations for conducting the business. The Management reviews actual performance with reference to budgets periodically. The Company has an Independent Audit Committee. The Independent Statutory Auditors and also Internal Auditors submit reports periodically which are reviewed and acted upon.


Industrial relations continue to remain cordial during the year and total 1724 employees are on the Companys payroll as on 31st March, 2019 as compared to 1632 employees on the Companys payroll as on 31st March, 2018.


In preparation of financial statements, the Company has not followed a treatment different from that prescribed in the Accounting Standards.