CCL Products Maps Strong Growth Trajectory For Next Five Years
CCL Products raises its revenue growth guidance from 15-20% to 20-25% for FY23 owing to better offtake, MD Challa Srishant says.
CCL Products (India) Ltd. has charted a strong growth trajectory for the next five years betting on multiple expansions to drive earnings growth.
“As things stand, we are confident. We are talking about almost a 20% growth year-on-year [in fiscal 2023],” Challa Srishant, managing director at CCL Products (India), told BQ Prime’s Niraj Shah.
“The guidance that we have given in the market also was that we will be doubling our topline and bottom line within four years, assuming a CAGR of about 18%,” Srishant said.
The company raised its guidance from 15-20% to 20-25% for fiscal 2023, owing to better offtake.
CCL Products with its footprint spread across the southern states of India has planned capacity expansions at its facilities in India and Vietnam.
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CCL Products plans to add a combined capacity of 71,000 tons by the end of next fiscal, Srishant said.
Last year, the company, in line with its objective to double the capacity from its existing levels, started off with a 3,500 ton capacity expansion at its Vietnam plant. It will further expand the facility by 16,500 tons, Srishant said. While in India, the coffee producer plans to enhance the capacity by another 16,500 tons by next year.
With this, CCL Products steps in line to put on stream the 85% capacity addition, including both India and Vietnam, by the end of fiscal 2024.
The company will see 50% of the capacity utilised by fiscal 2025, Srishant said.
Capex Requirement And Debt
The capital expenditure for Vietnam's brownfield project's capacity enhancement will be around $27-30 million (Rs 214.82-238.69 crore), according to Srishant, while India's greenfield capacity expansion will cost around $40 million (Rs 318.15 crore).
The Vietnam expansion will be funded through internal accruals and long-term debt, Srishant said. A similar funding process will take place for capacity enhancement in India, he said.
These investments won't have any adverse impact on the debt/equity ratio, said Srishant, while pointing out that the existing business is consistently growing along with regular cash flow and a 30% dividend policy.
The company is majorly debt-free. "In India, we just have a very very small amount of debt for a packing facility that we have set up," the MD said. "In next year we will be debt-free," he said, adding that the company has been debt free in Vietnam since several years.
CCL Products is committed to utilising 100% of its existing capacity for the next one year and thereafter almost 90% for another six months, said Srishant, indicating that its customers are big brands with good visibility who rarely change suppliers.
According to the MD, this level of visibility has given the company the confidence to proceed with the expansion. Instant coffee is one of the few products which, according to him, has stood the "test of time".
"We have seen it go through recession, go through pandemic, and war situation," Srishant said. "The one consistent thing there is that the coffee consumption has not reduced as such across the world."