CCL Products India : Transcript of Results Conference Call – Q1 FY 2022-23

"CCL Products India Limited

Q1 FY 23 Earnings Conference Call"

August 05, 2022

MANAGEMENT: MR. CHALLA SRISHANT - MANAGING DIRECTOR,

CCL PRODUCTS (INDIA) LIMITED

MR. B. MOHAN KRISHNA - EXECUTIVE DIRECTOR,

CCL PRODUCTS (INDIA) LIMITED

MR. PRAVEEN JAIPURIAR - CEO, CCL PRODUCTS

(INDIA) LIMITED

MR. V. LAKSHMI NARAYANA - CFO, CCL

PRODUCTS (INDIA) LIMITED

MS. SRIDEVI DASARI - COMPANY SECRETARY,

CCL PRODUCTS (INDIA) LIMITED

MR. P. S. RAO - CONSULTANT COMPANY

SECRETARY, CCL PRODUCTS (INDIA) LIMITED

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	CCL Products India Limited
	August 05, 2022
MODERATOR:	MR. ABHISHEK NAVALGUND - NIRMAL BANG
	EQUITIES PRIVATE LIMITED
Moderator:	Ladies and gentlemen, good day and welcome to the CCL Products India Limited, Q1
	FY'23 results conference call, hosted by Nirmal Bang Equities Private limited. As a
	reminder, all participant lines will be in the listen only mode, and there will be an
	opportunity for you to ask questions after the presentation concludes. Should you need
	assistance during the conference call, please signal an operator by pressing '*' and '0' on
	your touchtone telephone. Please note that this conference is being recorded. I now hand
	the conference over to Mr. Abhishek Navalgund from Nirmal Bang Equities. Thank you
	and over to you, sir.
Abhishek Navalgund:	Thank you, Cathy. Good evening, everyone. On behalf of Nirmal Bang Institutional
	Equities I welcome all the participants to CCL Products India Limited 1Q FY'23
	earnings conference call. Management is represented by Mr. Challa Srishant, Managing
	Director, Mr. Praveen Jaipuriar, CEO, Mr. V. Lakshmi Narayanan, CFO, Ms. Sridevi
	Dasari, Company Secretary, and Mr. P. S. Rao, Consultant Company Secretary on the
	call. Without further ado I would like to hand over the call to Mr. Praveen for his opening
	comments and we'll open the floor for question and answers post that. Thank you and
	over to you, sir.
Praveen Jaipuriar:	Thank you, Abhishek. And welcome all to this conference call. The group has achieved a
	turnover of INR 509.51 Crore for the first quarter of '22 - '23, as compared to INR
	326.22 Crore for the corresponding quarter of the previous year. And the net profit stands
	at INR 52.74 Crore as against INR 43.85 Crore for the corresponding quarter of the
	previous year. The EBITDA is at INR 88.77 Crore and the profit before tax is INR 66.64
	Crore. I welcome you all for the question and answer session. Please feel free to ask any
	questions you feel like.
Moderator:	Thank you very much, sir. Ladies and gentlemen, we will now begin the question and
	answer session. The first question is from the line of Faisal Hawa from H.G Hawa and
	Co. Please go ahead.
Faisal Hawa:	So, sir, what is the ROC and ROE of our company in this quarter? And can you give
	some guidance on the volume as well as the revenue growth in for FY'23 ended.
V. Lakshmi Narayana:	This is Lakshmi Narayana here, for RO, return on capital employed it is 16% for this
	quarter. Hello?
Faisal Hawa:	Yes, I can hear you, sir.
V. Lakshmi Narayana:	Return on capital employed it was 16% and return on equity is at 17%.
Faisal Hawa:	Any guidance you can give for FY'23 ended on volume as well as value growth?
Praveen Jaipuriar:	So the volume growths that we got this quarter was approximately 25% and that's the
	guidance for the full year as well. We are looking to end the year at somewhere between
	20 to 25% volume growth, and there will be approximately 10 to 15% upside on the
	price, which means that we will end up the year at close to 40%, value growth.
Faisal Hawa:	Thank you, sir.

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	CCL Products India Limited
	August 05, 2022
Moderator:	Thank you. The next question is from the line of Ankush Agarwal from Surge Capital.
	Please go ahead.
Ankush Agarwal:	Yes. Hi, sir. Thank you for taking my question. A couple of things, firstly, just
	confirming our capacity numbers, so as of FY'22 we were at 38,500 tons and by FY'23
	and given to the sum capital extension, we are expecting 55,000 tons. Is that right?
Praveen Jaipuriar:	Yeah, absolutely right.
Ankush Agarwal:	Yes. And this additional 16,000 tons that we have seen, got approval for, when do we
	expect this to commission?
Praveen Jaipuriar:	So we are looking to commission it in the last quarter of this year.
Ankush Agarwal:	Okay.
Praveen Jaipuriar:	Vietnam capacity, yes.
Ankush Agarwal:	Broadly at the same time Vietnam capacity will come on stream.
Praveen Jaipuriar:	No. Okay. So this I was talking about Vietnam capacity.
Ankush Agarwal:	No, no. I'm talking about new capacity announced
Praveen Jaipuriar:	The new capacity will be one year later, which is FY'24.
Ankush Agarwal:	Got it. So, a question caution on similar line. So, what I wanted to understand is if I look
	at CCL history over last 5 - 7 years, so broadly till FY'21, we were broadly around 30 -
	35,000 tons capacity or for last 4 - 5 years, previous to that. But if I see it from FY'20 to
	onwards, we are now increasing a capacity to more than 70,000 tons, so it is like
	doubling up capacity after a period of wherein we can expanded capacity. So what is
	giving us the confidence of increasing such a large step up increasing the capacity?
Praveen Jaipuriar:	So this is actually the confidence is coming from 3 - 4 fronts. One is that, constantly our
	domestic market has been growing in a very steady space. And 3 - 4 years, if you see, we
	had started to see growth in the domestic market. We were not very sure in what direction
	the growth will go to and what kind of capacities we'll require. But now we are confident
	that we have achieved a certain turnover, we have achieved a certain volume and this
	volume is expected to grow by 30 to 40% in the next 3 - 4 years. So that is giving
	confidence that we will require new capacity. Also in the international market we have
	been able to secure a lot of new businesses across the geographies.
	And that has again given us a lot of confidence that we will be able to or we will be
	requiring these kind of enhanced capacity in the future. And as we are growing, what is
	happening is that our ability to offer or be competitive in the international market also is
	becoming very, very strong and that is helping us gain new businesses. So all of them put
	together we are very confident that we will be requiring these kind of capacities going
	forward.
Ankush Agarwal:	So how much of our capacity currently would be being utilized for the domestic branded
	business and what kind of number that should be on the expanded capacity couple of
	years down the line? A broad idea would suffice, 5%, 10%, whatever.

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	CCL Products India Limited
	August 05, 2022
Praveen Jaipuriar:	So currently we are at 10%, but going forward the 10% capacity is likely to double in
	three years, yes, for domestic market. So if it is going to double in 3 years, let's say I'm
	just giving you a ballpark number. Approximately 4,000 metric tons we are looking right
	now, which is kind of double in 2 to 3 years, which means that with the new capacity that
	we have announced, half of that will be immediately taken up by the domestic market
	itself. So that is the kind of numbers that we are looking on and therefore, we are very
	keen to expand the capacity.
Ankush Agarwal:	Just to get, so what you're saying at the moment 10% of the capacity is being used for
	domestic.
Praveen Jaipuriar:	Yes.
Ankush Agarwal:	But going ahead also you are saying on the expanded, say 70,000 capacity, it would be
	roughly around 10% volume is what you are saying?
Praveen Jaipuriar:	Yes, because we are almost doubling it the next 2, 2 and a half years. So the volumes also
	will double, so it'll be in the same percentage, maybe 10 it'll move up to 12 or 13%, but
	as I was telling you that's not the only reason, the other reason is that we are also getting
	new export orders, new clients, and therefore we are looking to fill up the rest of the
	capacity with the export business.
Ankush Agarwal:	Sir, lastly, just to clarification, so when you say we have grown a volume by 25% this
	quarter, but if I see our profits have only gone by about 20%. So the remaining 5% deficit
	is largely because of the domestic volume growth, which obviously don't contribute a lot
	to the profit or this 20,000 volume growth is of entire export business.
Praveen Jaipuriar:	No, couple of points are there. One is, of course, the domestic market, which right now
	we are investing back to promote the brand and all, and second is that couple of
	percentage points here and there probably will be because of other input cost increase.
	But if you look at from volume of 25, and if you look EBITDA, EBIDTA is at 23, so
	they're like very close to each other. So a lot of price increases we have been able to
	mitigate efficiencies in the system and therefore, that difference is not much actually 25
	versus 23.
Ankush Agarwal:	Okay. So this 20 - 25% volume growth is for balance FY
Moderator:	Excuse me, this is the operator, Mr. Agarwal, may we request you to please rejoin the
	queue for follow up. We have other participants waiting in the queue.
Ankush Agarwal:	Okay. Thank you.
Moderator:	The next question is from the line of Richard D'Souza from SBI Mutual Fund. Please go
	ahead. Richard D'souza, your line is unmuted. Please go ahead with your question. As
	there is no response from the current participant, we move to the next question from the
	line of Kashyap Javeri from Emkay Investment Managers. Please go ahead.
Kashyap Javeri:	Two questions from my side, one, when you mentioned that this year the value growth
	could be significantly higher because of the price increase, can it lead to ROC dilution
	because we will have higher working capital requirement, that's one. And second is
	clarification on your working, on the domestic side, you mentioned that today domestic is
	about 10% of the volume, and next 3 years you expect it to double to about 4,000 tons,
	but at 10% today itself it should be about slightly more than 3000 tons already. So
	doubling would mean about 6,000 tons. Is that math correct?

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	CCL Products India Limited
	August 05, 2022
V. Lakshmi Narayana:	I said, today it is at approximately 4,000 tons, doubling would mean 8,000 tons.
Kashyap Javeri:	Okay. Sorry. So you, that 4,000 tons was number as of today?
V. Lakshmi Narayana:	As of today, yes.
Kashyap Javeri:	Okay. And on the ROE side, because of working capital, any comments over there?
V. Lakshmi Narayana:	That the sufficient working capital is in place
Kashyap Javeri:	Let's say about to 40, 45%, then it means that the working capital requirement will also
	be slightly larger.
V. Lakshmi Narayana:	Yeah. The working capital requirement is likely to enhance almost by 50%, which we
	have taken the precautions to enhance the requirement.
Kashyap Javeri:	So then it could be slightly sort of detrimental to our ROE number, unless we are going
	to reduce the number of days of working capital?
V. Lakshmi Narayana:	No, actually if you look at it on ROE basis my thoughts of funds are approximately
	around the INR 1.5 per share. It will not have a major impact on our profitability, even
	despite our increase in working capital requirement.
Kashyap Javeri:	But sir, what I'm saying is that say your EBIDTA growth because of the volume growth
	is because we look at usually EBIDTA per ton or EBITDA per kg, EBIDTA growth
	would be roughly about anywhere between 20 to 25% or slightly higher. But in terms of
	working capital like you said, the expansion would be almost about 50%, I mean, it's just
	a mathematical equation, but it could be ROE dilutive.
V. Lakshmi Narayana:	It'll not be because we will work it out on the credit period which we are offering to our
	buyer. So it will take care of my working capital requirements, if any additional burden is
	going to be there, with increase in the volume of working capital.
Kashyap Javeri:	So, versus sales growth, can we expect working capital growth to be lower than the sales
	growth? Is that possible?
V. Lakshmi Narayana:	It is not exactly, if you look at it, our revenue growth which we are expecting around the
	20 to 25% and we on a real utilization basis it is going to be somewhere around the 15 to,
	in between 15 to 20%, definitely it will be less than the sales growth.
Kashyap Javeri:	Okay. Okay. Yes, that's it from my side. I'll come back in the queue. I have a few more
	questions, while I'll come back in the queue. Thank you.
Moderator:	Thank you. The next question is from the line of Richard D'Souza from SBI Mutual
	Fund. Please go ahead.
Richard D'Souza:	Yeah, good evening. Am I audible now?
Moderator:	Yes, you are. Yes.
Richard D'Souza:	Thank you. So sir, just wanted to understand one is on the green bean cost, I mean, how
	much would it have gone up by and how much have we passed it onto the consumers?

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