Time Technoplast Limited

 History of the company:

Time Technoplast is engaged in the business of Industrial packaging, PE pipe
Manufacturing and Manufacturing of Type IV composite cylinders over the years
the company has achieved market leadership in both domestic as well as in global
markets. The company manufactures diverse products in the industrial packaging
segment like IBC containers, MOX films, Plastic Drums, Jerry cans, Fuel Tanks,
Urea tanks, LPG, CNG & Oxygen composite cylinders and more.

 Brief History
The company has not performed well in the past due to poor capital allocation
decisions, aggressive debt and capex expansion, volatility in raw material prices and
decreased management bandwidth. The company expanded heavily into different
products like battery management, home plastic furniture etc. which diverted
managements focus.

 Our Rationale for the pick

1. The company has made Mr. Bharat Vageria as there chairman and MD and this
has changed many things for the company and also improved the companies
focus towards value added products and focus on better return ratios for the
company.
2. The company in the past used to over promise and under deliver in terms of
numbers and return ration but now that had significant impact on the market
perception of the company.
3. Technologically sound company with strong R&D team which is evident from
products of the company and the company is the world’s fourth largest
industrial packaging company in the world and commands 70-80% market
share in the Indian market, the companies is market leader in 9 out 11 countries
in which it does business and the company’s composite cylinder is accepted
and approved in 48 countries of the world.
4. The company has changed its focus towards value added composite product
from the traditional industrial packaging business which is evident from the
change in it revenue mix the new composite products are high margin business
which enjoys margin of 18-22% as compared to 10-12% margin traditional
business.
5. The company is the first company in India to manufacture CNG composite
cylinder which is the latest technology available for CNG composite cylinder. There
are several benefits of the product such as it blast free, 70% less heavy then the
traditional steel cylinders. The market size for CNG composite cylinder is of 11,453
crores and the company has the highest installed capacity of 480 cascades (600
cascaded will be added by Nov 2024) making total installed capacity to 1080
cascades.
6. The gas distribution companies has also shown interest in type 4 cylinders which
is evident from the recent tenders rolled out but the CGD companies and the
company is also poised to gain business from the government vision of establishing
10,000 CNG gas stations by 2027 as every CNG gas station requires minimum 2
cascades and there are 60 Cylinders in one cascade taking total requirement to
6,00,000 cylinders and cost of one cascade is 33 to 45 lakhs taking total demand of
up to 9000 crores.
7. Improved focus of the company is evident from the latest announcement of
divesting 50% of its MENA region subsidiary and raising 25 Million USD of
funding and divesting 125 crores worth Non – core assets and closing down of home
hard plastic furniture division and from the proceeds company want to use the sum
for debt repayment and for benefit of the shareholders (possibly buyback or
dividend)
8. Capacity utilization levels of the company has also significantly improved over
the last two years to 82% and the companies LPG type 4 Cascade capacity is 90%
booked and CNG cascade capacity is also operating at 85-90% capacity.
9. The company is expanding slowly into becoming a composite product company as
the new expansion is coming in the composite product category and the company is
also expanding itself to make hydrogen cylinders and retro fitting as well as OEM
CNG type 4 Cylinders (the size of the opportunity can be gauged by looking at the
CNG cars registration per month has risen to 75,000 cars from 30,000 to 45,000 in
pre covid times)

 Analysis of retrofitting market

The company is looking to expand itself into retrofitting as well as OEM compressed
CNG cylinder market. The cost to convert an existing petrol / diesel vehicle into
CNG is estimated to be around 3,00,000 per vehicle and the estimated savings in
running cost is 2.64 per kilometer so if as the By 2026 it is estimated that there will
be 85,000 CNG buses in India so the opportunity size comes close to 3,330 crores.
 LPG Cascade Business
The company is also engaged into manufacturing type 4 LPG cascade and is one of
the largest producer in the country. The company has an installed capacity of 1.4
million cylinders but effectively on 1 million cylinders can be made due to different
sizes of cylinders are manufactured, the company has received order from IOCL to
supply 7,50,000 type 4 composite cylinders and IOCL has also extended the order
for one more time this order consumes 70% of total installed capacity of the
company and company has plans to expand LPG business but it will expand when
other two OMC also roll out there tenders.
The segment is operating at 90%+ capacity and the remaining is exported and
company has received approval from more than 48 countries in the world.

 Bharat Ji’s outlook for international business consolidation

 Pricing Structure of the company and how they control raw material
prices.
 Opportunity in CNG cascade Business
 Shift in managements intent becomes more clear
 Risk Concerns for the company
1. The company historically suffered from poor capital allocation decisions which
includes aggressive capital expansion and aggressive debt increase that lead to
mishap in the balance sheet and when the there was slump in the market
demand the debt burden lead to margin pressure on the company.
2. The company did not manage to watch the talk and walk the guidance provided
which lead to decreased investor confidence.
3. The company tried to do many things in past like tried to venture into real
estate, Battery manufacturing, home furniture molding which lead to decrease in
management bandwidth leading to decreased focus and in turn the whole
business suffered.
4. The company uses High density polymer as its raw material which exposes it to
further raw material volatility and secondly it is imported by the company it
further exposes it to currency volatility and due to which company is in need to
carry high inventory which leads to stretched working capital cycle
5. The company’s PE pipe business has turned around but has to look out because
of volatility in its revenue generation capability.

 Guidance of the management

1. Revenue mix to be 40% value added products and 60% established products
2. Revenue of 500 crores by FY24 from CNG business and 800 crores by FY 25
3. ROCE target of 19%+ by FY 25-26 and margins in the range of 18%
4. Estimated revenue of 2000 crores plus from composite cylinders in five years
time
5. 600 cascade capacity will be commercialized by Q1FY25
6. To reduce working capital cycle to 90 to 100 days by FY25
7. To divest all non core assets by FY25 and in CY the company will repay 100
crores in debt and target to half the debt from the proceeds of restructuring
activity

 Key performance indicator identified

1. Business mix between value added and established products and see whether it
is increasing or not?
2. Volume and revenue contribution from cascade product to look out for
3. Divestment and restructuring progress should be closely tracked along with
margin improvement plus, debt reduction programme.
 ANNEXURE
Yearly Segmental Performance and key metrics

 Quarterly Segmental Performance and key metrics

 Revenue Mix of the company & Capital Expenditure of the Company
Share FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23
Established Products 88% 87% N.A. 71% 71% 70% 69% 67%
Composite Products 12% 13% N.A. 29% 29% 30% 31% 33%

2023-24
CAPEX 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Till now
Established Products 118.9 171.3 94.4 67 78.5 86.6 62.6
Value Added Products 122.7 58.4 51 36.5 107.2 136.9 81.6
% Capex in Established Products 49% 75% 65% 65% 42% 39% 43%
% Capex in Value Added Products 51% 25% 35% 35% 58% 61% 57%
Total 241.6 229.7 145.4 103.5 185.7 223.5 144.2

It is clearly visible that the new leadership is walking the talk and if focused to
increase the mix of value added composite product in the total revenue mix which
will in turn improve margin and will lead to shift in time techno being recognized as
traditional plastic company to value added composite player will lead to rerating of
the company.

 Poor Capital Allocation Problem can be highlighted by the following table:

Change in Dividend
Particulars
Borrowings Paid
2012 - 14
2013 56 11
2014 36 12
2015 -57 12
2016 -58 13
2017 -24 14
2018 55 18
2019 63 23
2020 50 25
2021 -27 22
2022 43 17
2023 -15 23
Sep-24 -26
Total 96 204