Time Technoplast Limited (TIMETECHNO.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Time Technoplast Q2 FY '26 Earnings Conference Call hosted by Motilal Oswal Financial Services. [Operator Instructions] I now hand the conference over to Mr. Ashish Poddar from Motilal Oswal Institutional Equities. Thank you, and over to you, sir.

Yes. Thank you, Sam. Good afternoon, everyone, for joining this conference call of Time Technoplast fourth year Q2 FY '26 results. From the management, we have Mr. Bharat Kumar Vageria, the Managing Director; Mr. Raghupathy Thyagarajan, the Whole-Time Director; Mr. Sandip Modi, Senior Vice President, Accounts and Corporate Planning; and Mr. Hemant Soni, Vice President, Legal and Corporate Affairs. I hand over the call to Bharat sir, for his opening remarks, post which we can open the floor for Q&A session. Over to you, sir.

Yes. Good afternoon, our esteemed investors, respected colleagues, and thank you to team of the Motilal and Ashish Poddar, who is organizing this call. For the kind introduction, it is both an honor and pleasure to address you today as we present our financial and operational performance for Q2 and half year H1 FY '26, along with our outlook for the remainder of the fiscal year. Our momentum remained strong in H1 FY '26 with 14% volume growth and 10% rise in the revenue growth. That gap of 4% is on account of the reduction of the raw material prices. Despite this, we had delivered solid operational performance, balancing volume strength with the effective revenue management. The CNG Composite Cascades segment stood out with a robust 22% growth, materially boosting our overall performance with strong contribution from other composite products. Composite volumes increased 18.3%. Profit after tax rose 18% year-on-year, underscoring our focus on capacity utilization and disciplined financial management, particularly around the finance cost. We are encouraged by the sustained demand of Type IV composite cylinder reflected in the healthy order book of around INR 195 crores. This momentum is further supported by using interest in our value-added product -- in our value-added offering through our composite products, which includes LPG, CNG, oxygen and other composite products for automotive sectors. Our Industrial Packaging division also continued to perform steady with a confirmed order pipeline of approximately INR 450 crores for the current calendar year across both domestic and international market. Our results reaffirm the resilience of our diversified business model and the strong platform we have built for the future. Moving forward, we will continue to pursue new opportunities and accelerate our transition towards a sustainable, environmentally responsible growth that delivers long-term value for the agri stakeholders. Now let's take a closer look at the key highlights of our financial performance presented in the result. The key figures are during the Q2 FY '26 compared to Q2 FY '25. Overall net sales stood at INR 1,512 crores as against INR 1,372 crores. EBITDA INR 224 crores as against INR 197 crores. Profit after tax, INR 115 crores as against INR 98 crores. This is compared with the corresponding quarter previous year, sales grew by 10%, which includes India 9%, overseas 13%. Volume increased by 14%, India 13%, overseas 16%. EBITDA increased by 14% and PAT increased by 17%. During the H1 FY '26, on a consolidated basis, net sales stood at INR 2,866 crores as against INR 2,602 crores last year. EBITDA INR 420 crores as against INR 372 crores last year. Profit after tax, INR 211 crores as against INR 178 crores last year. In terms of the percentage, net sales increased by 10.1%, India 8.5%, overseas 13.2%. Volume increased by 14%, India 12.2%, overseas 16.4%. EBITDA increased by 13%, PAT increased by 18%. In percentage terms, you must have find that EBITDA has increased as the volume growth is increasing. It's almost as the volume increase, EBITDA further is going to be increased. In H1 FY '21, EBITDA margin 14.6% as against 14.3% increase of 30 basis points. That's in every my conference call I said, you will find yearly improvement of 20 to 30 basis points in the EBITDA margin. Now share of the business, established product versus value-added product. Value-added product grew 17% in H1 FY '26 as compared to H1 FY '26 (sic) [ H1 FY '25 ], while established product grew by 8%. The share of the value-added product is 28% of the total sales in H1 FY '26 as against 27%. This percentage year-on-year is going to be increased. And that will help us in the improvement in the other as far as margins, PAT, EBITDA and ROCE. Now share of the India and overseas business in FY '26 was 64.36% as against 65.35%. EBITDA margin in India and overseas, India is 14.8%, overseas is 14.3%, respectively. Net cash from operating activity H1 FY '26 stood at INR 226 crores. Total debt net of the cash H1 FY '26 reduced to INR 56.4 crores. And that company focus will continue for reduction in the debt. Total CapEx incurred in H1 FY '26 was INR 170 crores, which includes INR 42 crores towards the regular maintenance, capacity expansion, brownfield for the established product, and INR 75 crores towards the value-added product, mainly called IBC and composite cylinder -- composite product expansion, which is on the way only. I would like to now draw your attention to a couple of the interesting developments, which we have seen in the quarter and which we have seen till now, especially after the QIP. Now as far as bonus share is concerned, the Board allotted 22.69 lakh -- crores fully paid up equity shares of face value of INR 1 each on 24th September, that's reflected in every of the -- my investors. And that has been issued out of the premium available with the company. Then recent development, which we have seen and closed on the 11th of this November, in the November month, the company successfully completed INR 800 crores QIP, issuing 397.77 lakh equity shares at the price of INR 201.12 per share, which is face value of 1, including premium of INR 201.12 pursuant to allotment on 11th November '25, paid-up share capital increased from INR 45.38 crores to INR 49.36 crores. List of the allottees who have been allotted more than 5% of the equity share offered pursuant to the qualified institution placement. The major names, I will just tell you, the 3P India, which is managed by Prashant Jain, who was earlier managing HDFC Fund. Then the international company like Aberdeen Group, Axis Mutual Fund, Edelweiss Mutual Fund and Edelweiss Life. These are some big names who are -- who bought this equity. Resulting, you will see the equity, which was there on the 30th September and equity which was on 11th November after the allotment of QIP. Promoters and promoter group equity reduced 47.46% from 51.62% resulting 4.16% dilution. There is no any offer for sale from promoter. All the funds have gone in the company's account only. DII mutual funds is percentage terms from the total equity after the bonus, after the QIP increased to 16.63% as against 13.26%. So in a nutshell, I can say the domestic mutual fund investment is increased by 3.37%. [Technical Difficulty]

I believe we have lost the line for the management. Please continue to stay on hold. I request the participants to continue to stay on hold while we connect the management online. Ladies and gentlemen, we have the line for the management connected. Please go ahead, sir.

Dear friends, sorry for interruption because some connectivity issue was there, technical problem. But again, I'm continuing from my -- the financial, what I have explained to you. And I'm continuing from now the highlights, which is especially started from the bonus shares. Company has issued the bonus shares of 22.69 crores, which is 1:1. And on 24th September, which is capitalized INR 22.69 crores, which is from the security premium account. Now after that, in the month of November, company launched QIP and company successfully completed INR 800 crores QIP issuing 397.77 crores. I am pleased to tell you company has received a bid for INR 931 crores, but accepted considering the long-term investor, the value of INR 800 crores, and share issue price is INR 201.12, which is after 5% discount from the NSE advice, NSE regulations, INR 211.70 price was there as per the NSE formula. Pursuant to this allotment, equity shares increased from INR 45.38 crores to INR 49.36 crores. List of the allottees who is allotted more than 5% equity share offered are mainly 3P, which is managed by Prashant Jain, who was earlier managing largest fund in India, that was HDFC Fund. Then Aberdeen Group, this is a new entry from the international is a very large fund. And Axis Mutual Fund, Edelweiss Mutual Fund and Edelweiss Life. And I'm great to tell you now the domestic institution and foreign institution equity have increased. Like promoter and promoter group because of this QIP issue, reduced to 47.46% from 51.62%. There is a reduction of 4.16%. I would like to clarify you, company has not -- promoter has not offered any offer for sale. It is entire subscription, entire paid equity INR 800 crores have been own in the company account only. Domestic institution mutual fund increased to 16.60% as against 13.26%, an increase of 3.37%. FIIs, which includes NT assets and Aberdeen, 11.05% as against 8.42%. There's an increase of 2.63%. Public equity reduced by 1.84%. Currently, as of 11th November 24.86% as against 26.7%. And I'm glad to tell you today, the number of the shareholders in our company, investors are around 150,000 numbers as against, I remember the March '20, it was around 25,000 shareholders. Now sale of the noncore assets, one point of time, 2 years back, company management decided to sell off, realize the value of -- INR 125 crores value of the assets, which is not in use, including the small, small project, land building, et cetera, machineries, is now reduced to INR 41 crores as of 30th September. [Technical Difficulty] ROCE improvement is definitely year-on-year improvement is there because 3 years back, company management has given the guidance [Technical Difficulty] 12% to 14%, then 14% to 16%, 16% to 18. So 18% is already achieved by March 2025, and now [Technical Difficulty] consolidated of the products and the manufacturing units, which is the continuous process and is going to be [Technical Difficulty] considering the logistic cost comparison. Our International Center for Automotive Technology is government authorized agency approved E-Rickshaw batteries, which is to our one of the subsidiary company, Power Build Batteries Private Limited has a very good potential in the period ahead. Market size based on the current operational -- current rickshaw, which are in the market is around INR 6,400 crores, and -- but very small LPG company has taken adapting business of at least -- after getting this report in annual business, we can get around INR 40 crores to INR 50 crores. But currently, we have considered the only secondary market, and the OEM will approve. Then after the expansion we will complete, which is going to be complete by March 2025 -- '26. Another thing, green energy conversion of the electricity unit consumed to the solar power, the process is on. I had mentioned in my all the calls and meeting [Technical Difficulty] currently based on the March '25 is around 15 crores units, which currently we are buying from the government nominated company like in Maharashtra, Maharashtra Electricity Board; Gujarat, Gujarat Electricity Board; hotels. Some of the states have cleared, we can buy by signing a purchase power agreement. So we did for our consumption of 4.5 crore units from the certain governments who has agreed and we have signed the agreement. So this benefit will come from next year. In terms of the value, I can say 4.5 crore units. If you multiply it by INR 2.50 units, then INR 10 crores to INR 12 crores EBITDA will increase by way of this 4.5 crores. But certainly, if at all, the entire government -- entire, all the states cleared this policy of the purchase power through solar, then my requirement is 12 crore units. So we can get a substantial benefit of maybe around INR 30 crores for this power itself. Then another sustainable -- this new sustainability focused subsidiary company, recycled material and company has formed Time Ecotech Private Limited company, which is 100% subsidiary of our listed company, Time Technoplast Limited, an overall plan to invest around INR 120 crores across the India. But first plant will be set up in Western region, which is going to be start from January 2026. All the equipment will be installed in December month only. So company can comply all the statutory requirements by using the 30% recycled material for the packaging products. Second plant will come up next year. And that is also included in the object of the QIP, will come in the North region. Then another like high-density polyethylene pipe company has developed, HDPE Pipe for gas line application because company is already in PE product where we are doing business of around INR 350 crores of pipe business. So it is another additional product in the pipe segment to enhance the utilization capacity. And recently, I'm glad to tell you which after that September we have submitted, that awarded order of INR 190 crores for supply of the HDPE Pipe for power duct applications, especially this is for Southern region: Amaravathi Development Corporation Limited and Andhra Pradesh Capital Region Development Authority. So this -- but again, I'm glad to tell you the Amaravathi Smart City for the water requirement, they are estimating total in terms of the revenue pipe of INR 1,250 crores, maybe 1 lakh tonne pipes will be required by them. It's a 2-year project. This project was there 2 years back, but was abandoned, but this is ready, has again taken up this present government and now targeting to complete in 2 years' time. Out of that, one EPC contract -- from one contractor, we get INR 190 crores order. Other contractor also, we are in touch with them. And we are going to award the order from the Abu Dhabi EPC contractor who has got under -- who was participating in this program. Then I'm glad to tell you some of the other products companies in development and that will be added the company's growth plan further. One of the products is like composite fire extinguisher, which is also product -- company is ready, 6 kg is ready, 9 kg we are waiting. So both products we can launch together, and that we are going to do in Q4 of this financial year. The requirement is very large because it's a lightweight composite fire extinguisher compared to the metal fire extinguisher, which is currently presently available. And I'm glad to tell you, railway department has made compulsory if composite fire extinguisher available, that must be used by the railway department in all the rail coaches and the stations. And power sector OP-Z batteries, which we are going to get approval in the Q4. Sample is under testing. In the time period testing, samples already submitted 6 months back. We are going to get approval in the Q4 of this year, very large market for power projects. Another composite CNG cylinders company already having approval for 60 liters for automotive, 156 liters for the gas transportation companies because supplying is a complete cascade. And another company expansion plan because current capacity is only 30,000 cylinders, which -- from which we can make 480 cascades only because each cascade needs 60 cylinders, capacity of 1.56 liters. But company got to have a product more competitive is developing more about 200 liters capacity, maybe around 25 or 250. So number of the cylinders will reduce. And the expansion plan, which is on the way, is going to be complete in the Q4, commercial production is there, land and buildings are ready. Our material, our machines and everything is already tried, tested and is in the transit. And we are going to receive [Technical Difficulty] installation will complete. Q4, this product will be made available in the expansion capacity. So this expansion will have 636,000 cylinders per annum. So there is the addition of approximately, I can say, the 600 cascade can be increased. The total will become 480 cascade in terms of the cylinder, 66,000 cylinders. In terms of the revenue, company can generate INR 8 crores [indiscernible] INR 700 crores present. And another development for hydrogen cylinders for the higher capacity. Small capacity, already developed. And a special application for drone company has made. A strategic alliance with the Drone Stark, who is currently a manufacturer of drone. But company is not going to manufacture [Technical Difficulty]. Company objective is very clear to sell hydrogen cylinders, which must be -- which should be used in the drone application. So first pilot project of company to have our own drone, which is [ estimated ] to be completed, and we will be able to see this drone operation by hydrogen cylinder next month only. It's 30 days away from today. And it has a very big market as hydrogen cylinders in the drone application because drone application market in agri sector, surveillance, government departments, even most of the industries also would like to use the drones. So it is going to be a very big market as far as drones are concerned. And drone cost, what I can say, available in the market from INR 5 lakhs to INR 50 lakhs depending on the size of drone. Now the another product, which is composite LPG cylinder, 14.2 kg is under development because this is the necessary requirement. We have been advised by IOCL -- HPCL. Current, we are supplying 10 kg to them, but they would like to have an equivalent to the metal cylinder, which is for a number of the years is there. So that products are on the line. And designs, it is on -- the approvals of the designs have been done, and we are in the discussion with the HPCL, BPCL for the approvements. Now I would like to open the floor to answer specific questions. Thank you. Thank you very much.

[Operator Instructions] The first question is from the line of Prakash Kapadia from Kapadia Financial Services.

A couple of questions from my end. Generally, H2, Bharat ji is better for us. So how is that expected to pan out? And if I look at H1, we had a debt of around INR 600 crores and interest cost of INR 43 crores. So what kind of savings can we expect? Is it fair to say interest cost will not be more than INR 70-odd crores this year? And with further cash flows, will debt maybe reduce further in the next coming quarters? And lastly, Bharat ji, one more question, if I may just add. We were very sure we'll raise the QIP money if we get visibility on scaling the composite cylinder business. So what is the status from the OMCs, if you can highlight for the 14.2 kg cylinders, anything on CNG higher capacity cylinders, 200-liter cylinders and hydrogen cylinders. So if you can give some outlook on that, that will really be helpful.

That's all, right? Kapadia ji, number one, you have told me that first one always. You will see my trend of the last 10, 15 years. In always first half, we do business of 45% of our guidelines -- annual guidelines. Balance, we do 55% in the second half, right? Now you ask me the interest. You are right. As far as this current year is concerned, initially interest cost, it was estimated around INR 80 crores, INR 85 crores something, right? Now it is definitely going to be reduced. In the first half, we have reduced [Technical Difficulty] identified reduction for debt of INR 400 crores, which easily can be benefit around INR 30 crores. So if you ask me the next year, definitely, as QIP we've received just now, which is lying in the H2 account. So whatever the direct payment, the reduction of the debt to be done, state will go for that. So simply INR 400 crores, 8.5% interest rate, that will be the saving of INR 34 crores, INR 4 crores yearly saving [Technical Difficulty]. So this benefit will come in this year as far as INR 9 crores plus December. Maybe around INR 10 crores, INR 11 crores benefit will come. But certainly, I can ask you the next year, the internal accruals will add for the debt reduction. So definitely, next year, we can expect interest cost -- because I tell you one thing also, interest is not only the fund-based. Finance cost includes non-fund-based facilities also, because non-fund-based facilities, [indiscernible] is required. Wherever the government orders are there, tenders are there, and we have to give the performance guarantee for composite product, LPG, CNG. So I conclude the financial -- from next year onwards, the financial cost will be in the range of again INR 35 crores to INR 40 crores only, overall. Now QIP money is especially raised INR 800 crores...

Yes. On the QIP money, what I was trying to understand...

QIP, again INR 400 crores I tell you that we have given [Technical Difficulty] INR company is planning some operation to reducing the [indiscernible] margin, automation and re-engineered products, and just [Technical Difficulty] something because we have more than 350 machines are there, including the injection, low-molding extrusion. So we have decided now to do some automation, reengineering of the moulds so that capacity -- production capacity can be increased. So we would like to mainly do the use of the robot technology with the software technology. So I have [Technical Difficulty] 3 years. So INR 20 crores to INR 30 crores payback period means when I'm investing INR 90 crores, I should get benefit, INR 30 crores of EBITDA in the first year, which may arrive in after the 6 months' time because it will take 6 months' time to invest this. So if you ask me the post tax, maybe the around -- from INR 30 crores post tax, 30%, around INR 21 crores benefit will be there. Post tax, EBITDA of maybe 5 years. But EBITDA margin, both period is a 3-year payback period. Another company is investing, as I mentioned to you that the time it could take for the recycling plant. First, I have taken in my QIP, two plants only I have taken where we are investing INR 30 crores for each plant in the Western region, Northern region. [Technical Difficulty] around investment, but that will come only next year only. So capital expenditure, then we have included, including this inorganic growth, we have identified one company. But currently, we are required to include in the general corporate purpose because the agreement was not signed. It is under the due diligence loan, the company which is identified. I call the name of the company, Ebullient Packaging Private Limited, where we have identified to investment of INR 150 crores for buying of the 74% equity, right? So if you ask me, you can speculate. We have taken the 15% volume growth and revenue growth in the range of 11% to 12%. 3% to 4% difference is there on account of the prices is down by the polymer prices, which is [Technical Difficulty] supply. But we have seen compared to last year, there's a price reduction of 3% to 4% which is already exist. Therefore, there is a gap between the volume growth and revenue growth. But I'm very happy when the prices are down, I can do the rotation more. If for example, prices are down [Technical Difficulty] INR 100. If 4% prices are down, now [Technical Difficulty] INR 96 toward the same kind of the [Technical Difficulty] increased, which we are targeting to see 30 to 40 basis point improvement you will see year-on-year. And in conclusion, my target is 20% for this year, where later on also 2% minimum should increase in the subsequent period. Kapadia ji, I have covered you all the points.

Yes. Just one more thing on that cylinder part. We were very gung-ho and confident we'll do the QIP once we get visibility. Sir, any visibility on the 14.2 kg cylinder from the PSUs or the larger CNG cylinders of 200 liters. Any sense we have...

Yes, yes, it will come. It's a question of time only. But as far as this year, 10 kg cylinders is continuous supply. And it is very clear by gas distribution company, till we developed in commercial -- you speculate a 14.2 kg cylinders because it's the time of the tool development. We have submitted our design, approved by ICOL. [Technical Difficulty] BPCL, HPCL. And I'm ready to tell you, till last year, the buying was only IOCL. Now HPCL also started buying. Then BPCL, we are under discussion. So I'm quite hopeful as far as next year is concerned, we will definitely need -- will need for the expansion because by next year, we will have another product also, which is going to manufacture on the same LPG line, that is fire exchanger which I told you. The requirement is very large. Very large, I can say, because the export market is there in local, refinery company, many industries, every office is using this fire extinguishers made from metal. And the lightweight will be available very much. We will estimate market on the fire extinguisher also next year. So definitely -- therefore I mentioned in certain products, development and R&D and approval process. We will revise our guidelines. [Technical Difficulty]. But looking to present product, looking to present demand, looking to present contract, we can say 15% guideline. We are not changing as far as volume growth is concerned because the international, we are very clear. Presently, we are in [Technical Difficulty] the company is supplying right quality of product at the right price. So we are going to be [Technical Difficulty]. So I'm changing my guidance of 15%. This percentage will increase after developing this product. In internally, we are thinking to grow 20%. And further, as I mentioned to you, if my volume growth is 15%, 17%, and the growth more than 20%.

Understood, sir. Look forward to seeing a better H2.

Yes, my point is very clear. I have a value investor, I have a good value of the investor. They have given me the money with the full confidence, and we should fulfill our promise. Only stuff I want 6 months' time to use of this fund 6 months' time. After that, you will come to know from April [ 2026 ].

Absolutely, sir. Absolutely. Look forward. All the best.

The next question is from the line of Saransh Gupta from SVAN Investments.

Am I audible?

Yes.

Yes. So sir, I guess there was some disturbance in my line during starting. Yes, there was some technical problem. If I heard it right, then out of the INR 241 crores that we have mentioned for the QIP utilization, INR 120 crores is for the cylinders expansion and the rest you said that you will be buying -- you were into an agreement for buying 74% stake for a packaging company, right?

Yes. The FIBC, the flexible IBC, jumbo bags it's called. [Technical Difficulty] cylinder expansion INR 120 crores, it is not there anything. It is the INR 400 crores for repayment -- prepayment of the debt. Then capital expenditure of around INR 90 crores for automation, reengineering product, which have a payback period less than 3 years. We are going to use more robotic and conveying and material mixing, we are going to change it. Another INR 55 crores for the recycled sustainability, which is required because recycled material companies need to use for the packaging products. Excluding the product which has gone in the exports, excluding the product which has gone in the food packaging. It is a statutory compliant. So we are going to put our own plant in the Western region there. Another capital -- then another is the fund inorganic growth which includes around INR 150 crores, then the INR 100 crores for general corporate purpose. So these are the total amount. You know that we have an approval for INR 1,000 crores, but company decided INR 800 crores is okay, so we reduced the size of the QIP.

Yes, sir. Sir, if you can give a bifurcation of the inorganic growth, like if we have something in our mind or into what segment other than FIBC we are getting into?