Captains Speak

Published: Apr 30, 2022
Updated: Apr 30, 2022

Time Technoplast

Will be on growth path from next year

Giving an insight on the current scenario and business outlook for TTL, Bharat Vageria, Managing Director, says, "We are going to achieve the targeted performance for FY22, and from FY23 onwards the company will be on a growth path. During the last two years (Covid-19 pandemic), the company has developed many new products which have a very high revenue potential. Besides, some of value-added products, though developed in the past, will now start bearing fruits. It is going to have a large business potential, due to a couple of recent developments."

Comparing the consolidated financial performance during the nine months ended December 2021 vis-àvis the previous year, Mr Vageria says,"The net sales was Rs 2,612 crore against Rs 2,055 crore (27% up), EBITDA was Rs 369 crore against Rs 260 crore (up 42%) and profit after tax was Rs 133 crore against Rs 51 crore (up 159%). During the same period, the EBITDA and net profit margins have also improved from 12.6% to 14.1% and 2.5% to 5.1% respectively."

He adds, "Similarly the share of value-added products (VAPs) grew by 31% during the nine months compared to the previous year's same period, while established products grew by 26%. VAPs include intermediate bulk containers, MOX films and composite cylinders, and LPG and CNG cylinders which have a large potential. As of December 2021, we had an order book of more than Rs 250 crore for the CNG cascades and cylinder business."

The company has spent Rs 126.9 crore during the first nine months of the current fiscal on capex for brownfield expansion, maintenance, re-engineering and automation. Of this, Rs 58.3 crore has been spent towards its established products and the remaining Rs 68.6 crore towards value-added products.

GLOBAL FOOTPRINT

TTL is a 35-year-old company with footprints in 11 countries and with over 3,000 employees. The company's product portfolio consists of technically- driven innovative products catering to growing industry segments like industrial packaging solutions, lifestyle products, automotive components, healthcare products, infrastructure & construction-related products, material handling solutions and composite cylinders. TTL operates more than 34 production facilities across the globe and has earned a good name in innovative plastic products.

Mr Vageria is quite optimistic about the bright prospects of LPG composite cylinders. He explains that "currently, we can manufacture 1 million cylinders even though our installed capacity is for 1.4 million cylinders. Mainly because of their different sizes, we consider only 1 million cylinders and we could generate revenue of around Rs 220-240 crore.

He adds, "The new type of oxygen application-composite cylinder is under development. This particular product will have a large and exciting potential for use amongst defence personnel, fire brigade authorities, scuba diving and other recreational requirements."

Outlining the demand for LPG composite cylinders, Mr Vageria notes that "every year two crore cylinders are required as replacements and new demand will further add to the numbers. Most of these cylinders are being filled in by the metal cylinders. A big size tender of 1.5 million composite cylinders to be supplied in 24 months' time has come for the first time from one of the largest gas distribution companies in the country. The tender is already finalized in our favour and TTL is awaiting the LoI. The two other companies in the field will also come up with their orders."

'SAFE,LIGHT CYLINDERS'

He further informs, "After undertaking various trial and testings, these companies have realised the multiple advantages of composite cylinders like explosion-proof, light in weight, safe and easy to handle. I would therefore say that looking at the order book position, next year we will have a composite product business itself of over Rs 500 crore against the estimated Rs. 250 crore in FY22; i.e., 100% growth."

Explaining the necessity to expand the capacity of composite LPG cylinders, Mr Vageria says, "We will do the expansion of composite LPG cylinders in the period ahead to executing the current order of 1.5 million cylinders, because this order from one company itself will consume two years. However, we are also expecting orders from two other government companies. Hence, we will definitely go for expansion in the next year. Our cylinders are accepted in more than 4

TTL has launched the type-IV, technologically advanced cylinders. The company has an edge in this model and have been able to convince CGD companies of its gold performance; hence, all the tenders are coming their way. Mr Vageria opines that "type-III model of cylinders has remained with residual markets, which is basically historical in nature. I say, going forward, they should be history."

Explaining the promising prospects being offered by CNG vehicles, Mr Vageria notes that "we address the CNG markets in two steps. First, we have gone in for the requirement of CNG cylinders which are basically used for cascades and that is an area of high growth which is taking place. We are booked for the same as of now. We are expanding some capacity. We are also working with OEMs and even with retro fitters for development of the onboard cylinder. We've got the cylinder approved by PESO for onboard applications. There is a very good demand and we will definitely launch onboard cylinders also for use of conversion among passenger cars, buses, etc. That is an area which will come up in the coming year itself."

SPECIAL BATTERIES

TTL's subsidiary NED Energy Ltd (NEL) is into development and manufacturing of special application batteries, including lithium ion batteries for the solar sector. Earlier, Tesla, a pioneer and leader in energy storage industry globally, had placed a Rs 7-crore initial order with NEL. Very recently, the company has signed a memorandum of understanding (MoU) with Tesla Power USA Inc for orders worth Rs 100 crore for supply of VRLA batteries of different sizes for applications covering power, solar, UPS, etc. This supply will be for India and overseas markets. The MoU has been signed for FY2022- 23 and the agreed pricing is variable based, linked to the major exchange.

Clarifying on the capex plan vis-a-vis debt, Mr Vageria says, "We have a very clear policy. Our debt should not increase more than two times of the then EBITDA. So we've worked out a capex plan within that range only. Secondly, the working capital cycle time also should come back to 85 to 90 days and thirdly RoCE should improve. We would like to have a 20% RoCE by 2025. We also have an internal plan to reach the Rs 5,000-crore revenue mark by then from Rs 3,600 crore currently, with an EBITDA margin in the range of 14.5% to 15.5%."

During the last few days, US bond yields have touched the highs of 2018 and the dollar index has reached a 20-year high following robust US job data for April 2022, fuelling expectations of further rate hikes by the Federal Reserve. Many experts now expect the rupee to trade in the range of Rs 78-79 to a dollar in the coming months. While some analysts believe that the RBI may intervene to arrest volatility, others believe that it might not do it as frequently as before. It is feared that the bias will now stay negative and the rupee will see further deprecation towards Rs77-80 to a dollar levels.

The sharp fall in value of the rupee against the dollar adversely affected stock market sentiment, and on the day of the announcement the Nifty and the Sensex closed with a fall of 0.67%. The pressure on the broader markets was also intense. The S&P BSE Midcap index and S&P Large-Small index were down 1.89% and 1.67%, while the S&P BSE Large-Cap index was down 0.88%. The broader markets are expected to remain under pressure. Overall, the risk-off sentiment in the equity market is being led by rising crude oil prices, sustained selling by foreign portfolio investors, a hike in interest rates in major economies, and the nowrecord low of the rupee. Says an expert at Ambit Capital, "We expect this trend to continue, with large caps expected to outperform mid caps and small caps." Adds another expert, "The tough stance by the US Fed and the rate hike by the RBI, the Bank of England and the Australian central bank have reduced the risk appetite of investors."

CPI SOARS

The market has been further hit by the raging inflationary price spiral. During April 2022, the price index reflecting retail inflation soared to an 8-year high of 7.79 per cent against 6.95 per cent in March 2022 and 4.21 per cent in April 2021.

Given the runaway rise in inflation and widespread fears of it going broad-based going ahead, the RBI has taken a major turn in its policy stance and adopted a dear money policy in place of an easy money policy by sharply hiking the repo rate. The RBI has preferred a slowdown on the growth path as costlier credit would dampen the excitement of entrepreneurs to go for expansion and development. This phenomenon, in turn, adversely affected the stock market sentiment as market behaviour is directly related to corporate development.

The raging inflation and the sharp fall in the rupee's value against the US dollar have pushed up the cost of raw materials, which in turn will eat into the margins of the companies, adversely affected their profitability. This in turn will depress market sentiment further.

Another factor that has proved detriment for the bull phase in the stock market is the heavy and widespread selling by FII and FPIs. Foreign outflows have hit market sentiment very badly and a weak rupee has led to a faster outflow of funds from the market

FPI EXODUS

Maintains a market expert, "The weakening rupee and rich valuations do not bode well as far as foreign flows are concerned. Data shows that foreign portfolio investors have already pulled out Rs 1,50,000 crore in 2022 so far. A weak rupee eats into FPI equity returns and very rich valuations are not helping either. Even after the correction, Nifty is trading at around 19 times FY2023 earnings. This is higher than the long-term average of 16 times and certainly not a buyable valuation, particularly when equity markets globally are facing many headwinds like a growth slowdown, the Ukraine-Russia war and supply chain disruptions caused by stringent lockdowns in China.

Market sentiment has also been adversely influenced by global headlines which are focusing more on high inflation, as well as the recent US Fed rate increase. The Fed has raised interest rates by half a percentage point, an expected move according to FED Chairman Jerome Powell.

IT'S GLOBAL: CHOKSEY

Deven Choksey, financial wizard, renowned market expert and managing director of KR Choksey Investment Managers, opines that on account of the geo-political disturbances, the worldwide trend is to disinvest in equity, crypto currencies and commodities. In line with this global trend, DIIs and HNIs are also reported to have emerged sellers.

Mr Choksey adds that market sentiment is certainly nervous and a further fall in prices cannot be ruled out. However, this is not a sartorial bearish trend. There is no need to panic and genuine long-term investors should see a good opportunity in this downward drift to pick up fundamentally strong and growth-oriented stocks in order to rebalance their portfolio

According to Sandeep Tandon, CIO, Quant Mutual Fund, in the last two quarters, when one sits down and analyses the FII holding data, one will see that their ownership has declined in growth stocks and increased in value stocks. "That is trend we are seeing globally. I will not look in isolation that FPIs are just sellers. It is a selling of the growth stocks, not the value stocks. One has to balance one's portfolio and optimize this opportunity," he says.

Mr Tandon is confident that "we are at the cusp of an inflation point -- sometimes it gets extended by a few days or weeks here and there."

SELECTIVE HEADWINDS

Some experts believe that a sharp uptrend may not be around the corner. Frontline stocks sold by FPIs - which were stable and strong hands -- have been shifted partly to DIIs and largely to individuals, which are weak hands. So, for sometime frontline stocks will continue to face headwinds in terms of the supply coming from individual investors. As a result, going forward the market will have to spend some time moving sideways. Hence there could be volatility for some more time. Besides, there are still a lot of uncertainties in the market, as well as in the economy and on the political scene. That is what will hurt market sentiment in the coming days.

However, going ahead, market sentiment is bound to get better and accumulations will start. Many fundamentally strong growth as well as value stocks have met with a sizeable beating and hence are ripe for picking up. We have given a list of such shares which discerning investors can pick up at attractive prices in the coming days.

Watch list of best buys

Day by day, the market is going down on continued selling pressure. Shares of all hues and colours have lost substantial ground. Even fundamentally strong and growth-oriented stocks are no exception. However, this does not mean the end of the road for retail investors. Intelligent investors should slowly start accumulating valuable stocks which can yield excellent returns once the current bearish phase is over. The Ukraine-Russia war, the rupee’s depreciation and rising inflation, which have sent the markets into a tailspin, also have some bullish elements which will give a big boost to certain categories of shares. For example, the IT segment, speciality chemicals and textiles will be in fine form very soon. Here is a list of such stocks which are capable of yielding excellent returns going ahead.

Caution: Invest slowly and gradually in instalments. Don’t invest in large amounts at any single time.

Dark clouds over LIC IPO

The stock market crash has spread dark clouds on the valuation of the LIC IPO, the largest public offerings in the history of the Indian, capital market. Thanks to the sustained fall in stock markets the government was forced to cut the size of the IPO. Now that the IPO has been oversubscribed around three times and it is going to be listed in a few days, distributing news is coming from the grey market. When the IPO was announced, the issue was quoted at a premium of Rs. 105 in the grey market. With sustained downtrend in the market started declining and reached Rs. 60 on May 20, Rs. 50 on May 12 and alas! It has gone into negative zone on May 12 with a negative premium of Rs. 20., which increased to Rs. 30 on May 13 the day LIC issue opened.

Experts suggest that discernible investors should not keep large holding in LIC stocks as the returns on the issue will not be that remunerative going ahead! In line with this 872 against the issue price of Rs. 949, suggesting a discount of 8 per cent.