Saket Kanoria, the managing director of TCPL Packaging, talks to Naresh Khanna, editor of Packaging South Asia about the company’s expansion of four new cartons lines and a significant investment in its flexible packaging plant in the coming year.
Naresh Khanna, Packaging South Asia – What do you make of the currently highly competitive carton market and the wafer thin margins in flexible packaging?
Saket Kanoria, TCPL Packaging – The last three years have been very challenging. Demonetization and the GST implementation came back to back. This was followed by the ban on alcohol sales in establishments near highways; pulp and paper prices shot up. The economy has slowed down and with the volatility in raw material pricing, this has been an unprecedented period of adversity for the packaging industry.
PSA – What is the investment plan on the carton side? We noticed at Printpack not only that the K&B Rapida was being installed at Goa but that you were cutting the ribbon on the Masterwork hot foil stamping machine and at the Bobst stand signing up for your second Expertfold with Speedwave. How can TCPL continue to keep investing in machinery, infrastructure and resources given the margin pressures in the current packaging economy?
Saket Kanoria – Apart from the K&B Rapida line just installed in Goa, we have three more K&B Rapida lines on, which we are committed to. The next Rapida carton press will come to the Haridwar plant, which will be the first major investment there after 4 years, so it is really due. Another carton line will come to Goa although it is difficult to say exactly when. The fourth press in this expansion plan, which will be our tenth KBA Rapida line, will also come in the next two years or so but we are not sure exactly in which of our plants it will be placed.
The reason for expansion are both to improve customer service and for productive growth. We have noticed that the festive season brings in a huge surge in demand and we have to plan for this peak period even though at first it will be challenging to load the machines in the non-peak periods. To some extent the industry has become seasonal and apart from improving customer service we believe that better growth in the economy and the packaging will return.
PSA – How about the major flexible packaging investment that you made three years ago? Where is this going?
Saket Kanoria – We have gained some learning and also some traction in flexible packaging. The plan is to build on this opportunity. We will make investments in not only printing but ancillary converting equipment to take us to the next level in this area. Keeping in mind the competitive nature of the industry and the increasing level of environmental compliances, we will have to add much more value and be highly productive to differentiate ourselves and this is what we are planning. The next phase of our flexible packaging expansion plan should see implementation in 2020.
PSA – TCPL Packaging is the only major carton packaging company that is listed on the stock exchange. What are the good governance and accountability issues that come with this territory?
Saket Kanoria – As a matter of course, we have to follow the norms and regulations of being a public limited company that is listed on the stock exchange. From having managed bigger companies, and beyond what is laid down by these structures, we have a culture of governance and transparency. TCPL Packaging is used to CEDEX audits and customer audits where we score well. We learn a great deal from these practices and from our customers’ suggestions. Additionally, even in hard times we try to adhere to our formally declared policy of distributing 20% of our profits as dividend to shareholders.
PSA – What is TCPL Packaging’s and your overall outlook on investment in the packaging industry?
Saket Kanoria – We are actually quite conservative in our investment strategy. First, there must be financial discipline. Along with very hard work and increases in productivity we have to establish continued profitability and then talk about growth. From our experience in the past three very challenging years, harder and harder work has become a way of life.
Although we have several plans for expansion and growth, we do not want to talk about any target. Investment-led growth cannot be at the cost of financial discipline, which is most important to maintain long term health and the viability of the business. Our stakeholders and even our suppliers understand this.