I had a chat with my contact with one of the TCPL competitor, Borkar Packaging. You might find it useful:
Size of opportunity – INR 6,000crs
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Organized – 15%/20% (ITC does mostly for internal consumption)
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Unorganized – 85%/80% (Mostly jobbing work, no big player doing everything under one roof)
Revenue break-up: Borkars: 320crs and Top-3 (Borkars+Parksons+TCPL: INR 1,000crs)
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Last year grew by 20%, can comfortably grow at this rate.
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They have diversified into Food and Liquor
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Innovation helps companies to gain market share but in some time other companies catch up and becomes a level playing field
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Not much demand from E-commerce companies.
Cost & margins:
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65-70% RM, hence Gross margin of 30-35% ; Break up of rest; 50% fixed and 50% variable
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Margins are difficult to improve as big FMCG companies continues to squeeze margins
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Have EBITDA margins of 12-15%
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Efficiencies can come only If a production line is running for longer time (say 5 hours for one type of product). This generally don’t happen as every companies (HUL etc.) gives orders to at least 3-4 players.
Capacity:
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One plant in Goa, Daman and Himachal Pradesh. Goa currently has 3 lines, has capacity of 4 lines.
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Additional line set-up costs 35-40crs, Machine is imported from Europe, Asset turnover of 1x. Takes 2 months to import the machinery
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Mostly runs at 80-90% capacity
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Uses Refurbished machines. Spends on machine maintenance/trainings and hence margins are similar to other companies
How to improve margins
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Gross margins are difficult to improve. Giant FMCG companies squeeze margins.
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Automation can improve margins. For eg: they are trying to automate final sorting of cartons where they need lot of manpower.
Aseptic beverages
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Cost is very high @ 150crs. Tetra Pak has patented the technology
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Parksons acquired a company in the same segment but has not got any break through
Competition
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TCPL is a good company. 2 years back he himself was thinking that TCPL is highly undervalued.
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TCPL does a lot of jobbing work for Godfrey Philips. Promoter has some connection with GP. ~20-25% of revenue must be coming from Cigarettes business.
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He will get back if Parksons or TCPL has expansion plans. He thinks that TCPL has made orders for 2/3 machines.
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TCPL has lot of flexible packaging business and hence their margins are better.
Discl: Holding TCPL from lower levels. Added more ~2months back.
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