jk paper ltd Management discussions

Global economy

Overview: The global economic growth was estimated at a slower 3.4% in 2022, compared to 6.3% in 2021 (which was on a smaller base of 2020 on account of the pandemic effect). The relatively slow global growth of 2022 was marked by the Russian invasion of Ukraine, unprecedented inflation, pandemic- induced slowdown in China, higher interest rates, global liquidity squeeze and quantitative tightening by the US Federal Reserve.

The challenges of 2022 translated into moderated spending, disrupted trade and increased energy costs. Global inflation was 8.7% in 2022, among the highest in decades. US consumer prices decreased about 6.5% in 2022, the highest in four decades. This prompted the Federal Reserve to raise its benchmark interest rate to its highest in 15 years. The result is that the world ended in 2022 concerned that the following year would be slower. The global equities, bonds, and crypto assets reported an aggregated value drawdown of US$ 26 trillion from peak, equivalent to 26% of the global gross domestic product (GDP). In 2022, there was a concurrently unique decline in bond and equity markets; 2022 was the only year when the S&P 500 and 10-year US treasuries delivered negative returns of more than 10%. Gross FDI inflows - equity, reinvested earnings and other capital - declined 8.4% to $55.3 billion in April-December.

The decline was even sharper in the case of FDI inflows as equity: these fell 15% to $36.75 billion between April and December 2022. Global trade expanded by 2.7% in 2022 (expected to slow to 1.7% in 2023).

The S&P GSCI TR (Global benchmark for commodity performance) fell from a peak of 4,319.55 in June 2022 to 3495.76 in December 2022. There was a decline in crude oil, natural gas, coal, lithium, lumber, cobalt, nickel and urea realisations. Brent crude oil dropped from a peak of around US$ 120 per barrel in June 2022 to US$ 80 per barrel at the end of the calendar year following the enhanced availability of low- cost Russian oil.

Regional growth (%)	2022	2021
World output	3.4	6.3
Advanced economies	2.5	5
Emerging and developing economies	3.8	6.3

Outlook: The global economy is expected to grow 2.8% in 2023, influenced by the ongoing Russia-Ukraine conflict. Concurrently, global inflation is projected to fall marginally to 7%. Despite these challenges, there are positive elements within the global economic landscape.

The largest economies like China, the

US, India, Japan and South Korea are not in a recession. Approximately 70% of the global economy demonstrates resilience, with no major financial distress observed in large emerging economies. Despite high inflation, the US economy demonstrated robust consumer demand in 2022. Driven by these positive factors, global inflation is likely to be still relatively high at 4.9% in 2024. Interestingly, even as the global economy is projected to grow less than 3% for the next five years, India and China are projected to account for half the global growth.

Indian economy

Overview: Even as the global conflict remained geographically distant from India, ripples comprised increased oil import bills, inflation which is gradually coming down. Indias economic growth is estimated at 7.2% in 2022-23. India overtook UK to become the fifth-largest global economy. India surpassed China to become the worlds most populous nation.

Growth of the Indian economy

	FY 20	FY 21	FY 22	FY 23
Real GDP growth(%)	3.7	-6.6%	9.1	7.2

Growth of the Indian economy quarter by quarter, 2022-23

	FY 20	FY21	FY 22	FY 23
Real GDP growth (%)	13.1	6.2	4.5	6.1

(Source: Budget 2023-24; Economy Projections, RBI projections)

Despite global headwinds, consumer sentiments in India remain upbeat. Indias auto industry grew 21% in 2022-23; passenger vehicle (UVs, cars and vans) retail sales touched a record 3.9 million units in 2022-23, surpassing 3.2 million units in 2018-19. The commercial vehicles segment grew 33%. Two-wheeler sales fell to a seven-year low reflecting the subdued demand in the rural economy.

Till the end of Q3FY23, total gross non performing assets (NPAs) of the banking system fell to 4.5% from 6.5% a year ago. Gross NPA for 2022-23 was expected to be 4.2% and a further drop is predicted to 3.8% in 2023-24.

As Indias domestic demand remained steady amidst a global slowdown, import growth in 2022-23 was estimated at 16.5% to $714 billion as against $613 billion in 2021-22. Indias merchandise exports were up 6% to $447 billion in 2022-23. Indias total exports (merchandise and services) in 2022-23 grew 14% to a record of $775 billion in 2022-23 and is expected to touch $900 billion in 2023-24. Till Q3 2022-23, Indias current account deficit, a crucial indicator of the countrys balance of payments position, decreased to $18.2 billion, or 2.2% of GDP. Indias fiscal deficit was estimated in nominal terms at Rs 17.55 Lac crores and 6.4% of GDP for the year ending March 31,2023.

Indias headline foreign direct investment (FDI) numbers rose to a record $84.8 billion in 2021-22, However, during the fiscal year 2022-23, the country experienced a 16% decrease in foreign direct investment (FDI) inflows, amounting to $71 billion on a gross basis. This decline can be attributed to the unfavourable global economic conditions and stands as the first contraction in FDI in the past ten years. In 2022-23, the government was estimated to have addressed 77% of its disinvestment target (Rs 50,000 crores against a target of H65,000 crores).

Indias foreign exchange reserves, which had witnessed three consecutive years of growth, experienced a decline of approximately $70 billion in 2022, primarily influenced by rising inflation and interest rates. Starting from $606.47 billion on April 1,2022, reserves decreased to $578.44 billion by March 31,2023. The Indian currency also weakened during this period, with the exchange rate weakening from Rs 75.91 to a US dollar to Rs 82.34 by March 31,2023, driven by a stronger dollar and increasing current account deficit. Despite these factors, India continued to attract investable capital.

The countrys CPI inflation eased to 5.66% in March 2023. WPI (calculates the overall price of goods before retail) eased to 1.3% during the period.

In 2022-23, total receipts (other than borrowings) were estimated at 6.5% higher than the Budget estimates.

Tax-GDP ratio was estimated to have improved by 11.1% Y-o-Y in RE 2022-23.

The total gross collection for 2022-23 was Rs 18.10 Lac crores, an average of Rs 1.51 Lac a month and up 22% from 2021-22, Indias monthly goods and services tax (GST) collections hit the second highest ever in March 2023 to Rs 1.6 Lac crores.

For 2022-23, the government collected Rs16.61 Lac crores in direct taxes, according to data from the Finance Ministry. This amount was 17.6% more than what was collected in the previous fiscal.

Per capita income almost doubled in nine years to Rs1,72,000 during the year under review, a rise of 15.8% over the previous year. Indias GDP per capita was US$ 2,320 (March 2023), close to the magic figure of $2500 when consumption spikes across countries. Despite headline inflation, private consumption in India witnessed continued momentum and was estimated to have grown 7.3% in 2022-23.

Outlook: There are green shoots of economic revival, marked by an increase in rural growth during the last quarter and appreciable decline in consumer price index inflation to less than 5% in April 2023. India is expected to grow around 6-6.5% (as per various sources) in 2023-24, catalysed in no small measure by Governments 35% capital expenditure growth. The growth could also be driven by broad-based credit expansion, better capacity utilisation and improving trade deficit. Headline and core inflation could trend down. Private sector investments could revive. What provides optimism is that even as the global structural shifts are creating opportunities for India it is complimented by Governments emphasis on large infrastructure investment. This unprecedented investment is expected to translate into a robust building block that, going ahead, moderates logistics costs, facilitates a quicker transfer of products and empowers the country to become increasingly competitive. This can benefit Indias exports in general, benefiting several sectors. The construction of national highways in 2022-23 was 10,993 km with awarded highway contracts of 12,375 km in the last financial year.

Union Budget 2023-24 provisions

The Budget 2022-23 sought to lay the foundation for the future of the Indian economy by raising capital investment outlay by 33% to Rs 10 Lac crores, equivalent to 3.3% of GDP and almost three times the 2019-20 outlay, through various projects like PM Gatishakti, Inclusive Development, Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition and Climate Action, as well as Financing of Investments. An outlay of Rs 5.94 Lac crores was made to the Ministry of Defence (13.18% of the total Budget outlay). An announcement of nearly Rs 20,000 crores was made for the PM Gati Shakti National Master Plan to catalyse the infrastructure sector. An outlay of Rs 1.97 Lac crores was announced for Production Linked Incentive schemes across 13 sectors. The Indian government intends to accelerate road construction in 2023-24 by 16-21% to 12,000-12,500 km. The overall road construction project pipeline remains robust at 55,000 km across various execution stages. These realities indicate that a structural shift is underway that could strengthen Indias positioning as a long-term provider of manufactured products and its emergence as a credible global supplier of goods and services

Global paper and packaging industry overview

The global paper and packaging board market size was estimated at US$ 195 billion in 2022 and is forecasted to reach US$ 232.8 Billion by 2028, growing at 3% CAGR.

In volume terms, the global paper and paper board packaging market is expected to have contracted by about 0.5% in 2022 compared to a growth of 4.5% in 2021. The printing and writing paper segment is expected to have declined by 2% in 2022 compared to a growth of 3% in 2021. The packaging paper segment is expected to have declined by 1% in 2022 compared to 8% growth in 2021. Decline in packaging paper segment was mainly due to normalisation in consumption patterns (particularly in e-commerce), inflation pressure of household budgets and zero COVID tolerance policy in China. The tissue paper segment is expected to have grown by 3% in 2022 compared to 1-2% growth in 2021.

Packaging products play a vital role in every sector. The growing environmental consciousness among consumers, coupled with stringent regulations imposed against plastic use by various environmental regulations is expected to catalyse the paper packaging market. The growth in the paper and packaging industry is largely driven by the demand of the end-user industries it serves. The food and beverage industry is a major end-user of paper packaging.

The global food and beverages market grew from $6,729.54 billion in 2022 to $7,221.73 billion in 2023 at a CAGR of 7.3%. Due to its convenience and environment-friendliness, there is growing demand for paper packaging in the food and beverage market as various kinds of packaging products like wrapping paper, bags, pouches, cups, trays, cartons and boxes are used in this industry. The growth of the online delivery vertical has played a major role in the overall rise of the food and beverages industry.

A number of developed and emerging economies are adopting paper-based products as an alternative to plastic. Food manufacturing organisations are using food-grade paper packaging products to preserve nutrient content and food quality. Other factors, such as product innovation to improve product functionality and produce visually appealing variants is further expected to drive paper-based packaging growth.

Paper and pulp prices

Global pulp prices reached a record high level in 2022-23 as the demand increased sharply post Covid period. This was further aggravated by higher energy cost in Europe triggered by Russia- Ukraine war. The low inventory of pulp led to panic buying which also pushed the prices further higher. Consequent

to this paper prices also moved up significantly. Opening up of China post Covid restrictions was expected to keep demand buoyant. However, Q4 of 2022-2; witnessed demand slowdown as China buying did not pick up as expected resulting in inventory of pulp producers shooting up from normal level of 30 days to 60 days. This triggered a price correction in pulp prices and may hit their lowest level in coming months.

Indian paper and packaging industry overview

The Indian paper and paperboard packaging market was pegged at US$ 10.77 Billion (Rs 88,314 crores) in 2022 and is expected to reach US$ 15.69 Billion (Rs 1,25,520 crores) by 2027, growing at a CAGR of 6.63%. Packaging-grade paper makes up for 55% of the major kinds of paper produced.

The printing and writing paper market is expected to grow at a CAGR of 1.8% during 2022-2026. This segment is expected to witness a demand growth due to factors such as rising population, re-opening of offices, growing traction in the pharmaceutical and e-commerce industry among others.

Packaging is a fast-growing industry catalysed by rising disposable income, growing consumer awareness and rise in processed food offtake. There are surplus capacities in China and Indonesia, may cause dumping at cheaper rates. This mar result into negative sentiments.

The Indian packaging industry is largely fragmented, with a large number of small and medium-sized enterprises present with few large-scale dominant players. The industry is heavily reliant on imports for high-end packaging machinery and technology.

The Indian government has launched several initiatives to promote the growth of the packaging industry, including the Make in India campaign and the establishment of packaging parks.

These initiatives are expected to boost domestic production, create employment opportunities and drive innovation and technological development in the sector.

SWOT analysis of the Indian paper and packaging industry

? Growing traction of the packaging board segment

? Different kinds of paper produced

? Rising income of plantation farmers

? State-of-the-art manufacturing plants

? Writing & Printing segment is still growing

? A number of economically unviable plants

? Use of large debt to fund a number of plants

? There is a growing requirement of scale to survive

? Inflationary pressure on raw material costs

? Increasing competition from cheaper imports creating pricing pressure

? Hampering of paper demand by digitalisation and digitisation

? Increase in energy cost cannibalising competitiveness

? Considerable demand headroom due to lower per capita consumption

? Rising demand of packaging paper/board in food and pharma sector

? Greater hygiene awareness due to the pandemic

? Increasing demand from downstream sectors (kraft, corrugation, duplex)

? Innovative product creation possibilities

? Ban on single-use plastic to generate demand

Demand drivers

Growing literacy: In 2021, Indias literacy rate was pegged at 77.7%, catalyzing the demand for writing and printing paper as well as packaging paper owing to product offtake.

Re-opening of offices: Companies are gradually opening their offices full-time and expanding into newer cities, fostering a demand for corporate activity and paper consumption.

Population growth: In the year 2023, India is set to overtake China as the worlds most populous country, creating a wide market base.

Demographic shift: In 2022, the average age of an Indian was 28.7 years. More that half of Indias population is under 25 years of age. The consumer market is largely driven by the millennial (15-34 years) population, who are either students or young professionals.

Growing middle class income: India is expected to form 23% of the global middle class, leading to an increase in households earning between US$ 10,000 and US$ 50,000 per year till 2028, widening their wallet share for discretionary spending.

Urbanisation: By 2030, India will have more than 70 cities compared to only 55 cities in the USA, fostering demand for sectors such as health, education, retail, e-commerce among others.

E-commerce growth:

Indian e-commerce market is expected to reach 350 billion by 2050, on account of greater internet penetration, rising incomes and growing population.

Company review

The company is engaged in the manufacture of the following products

Uncoated writing-printing and specialty papers:

JK Paper leads the office paper vertical due to its quality and superior brand presence. The Company has a wide- ranging portfolio in the uncoated writing and printing segments of specialty paper, catering to the demand of publishers, print houses and corporates.

Highlights, 2022-23

Uncoated W&P and Speciality paper (including exports) sale grew by 46% in 2022-23 over 2021-22. It widened and deepened its distribution footprint while increasing its market presence.

Packaging boards: There is a growing demand for packaging board due to the traction in end-user industries such as FMCG, food and beverage, pharmaceutical and textile sectors. JK Paper provides a variety of high-end coated packaging boards, producing packaging board at its Unit CPM in Gujarat, near vital consumption markets. The Company developed varieties following R&D outlay and investments in advanced technologies. There was pricing pressure in second half and coming year is going to be challenging year on apprehension of cheaper import of Packaging board from Indonesia and China.

Highlights, 2022-23 The Company doubled the sale of packaging boards (including exports) in 2022-23 over 2021-22.

Coated paper:

The coated paper industry is a specialised market where more than 60% of the demand is met by international players. Only two companies in India produce coated paper, with JK Paper being one of them. JK Paper offers tailor-made products that are used in a variety of applications such as magazines, books, brochures, posters, wedding invitations and more. It is anticipated that the worldwide market for poly coated kraft paper will experience growth from $4.04 billion in 2022 to $4.25 billion in 2023, with a compound annual growth rate (CAGR) of 5.3%.

Highlights, 2022-23

Coated paper sale grew by 23% in 2022-23 over 2021-22.

Corrugated Boxes

During the year under review, the companys first Greenfield project in Ludhiana started trial production. The Company also acquired 85% stake in Horizon Packs Pvt. Ltd. and Securipax Packaging Ltd. By acquiring these two companies your company has become the market leader in Corrugated Boxes.

Demand for the Companys products and market prices

The demand for writing & printing paper segment (18% of the Companys 2022-23 revenues) was high.

There is higher sales realisation in livewith global trends. This increase can be attributed to several factors. The prices of pulp in the global market had gone up to a record high and also the demand for printing and writing papers, both domestically and for export has been good.

The office paper segment (48% of the Companys 2022-23 revenues) comprised value-added products. The re-opening of private and Government offices, popularity of co-working space and the opening of offices in new locations have primarily contributed to the demand growth in this segment. Additionally, the increasing adoption of products such as computers, printers and photocopying machines in the evolving global corporate sector is also contributing to the rise in demand for office paper. Moreover, the need for high-quality yet affordable paper for making documents, magazines, letters and other printed items is fueling the demand for office paper. The expanding education sector and the growing number of students enrolling in schools and tuition centers are also positively impacting the market for office paper worldwide. Furthermore, the rising demand for environmentally friendly and sustainable alternatives, including office paper, is expected to further boost the growth of the global office paper market in the foreseeable future.

The coated paper segment (15% of the Companys 2022-23 revenues) was largely dependent on commercial printing.

The Russia-Ukraine war has resulted in economic sanctions on several nations,

an upsurge in commodity prices and disruptions in the supply chain, leading to inflation across goods and services and impacting various markets globally.

Developments at Sirpur Paper Mills Ltd

Production: During the year under review, production grew from 97,401 MT to 1,21,898 MT. This was possible due to the focus on (i) quality (which helped the Company gain customers confidence and, as a result, good order book), (ii) equipment uptime through a structured preventive maintenance schedule and (iii) improving customer service levels.

Raw materials: Integrated pulp and paper mills rely heavily on wood as a primary raw material. Sirpur, recognising the importance of sustainable fiber supply, has implemented large-scale farm forestry plantation activities in its catchment areas. To achieve this, the company established a state-of-the-art clonal production nursery capable of producing 100 Lac clones per annum. In order to ensure a stable supply of quality raw materials, the Sirpur unit provides farmers with high-quality planting materials at cost, as free technical expertise.

During 2022-23, the Sirpur unit covered more than 12000 acres under farm forestry plantations with 2035 farmers within 200 Km radius of the mill. A sustained plantation thrust will provide the Company with secured raw material and strengthen the ecological balance.

Functional review

Raw material management -

JK paper Ltd has a designated plan of action to address various challenges in procurement of Wood. Company has started specifically focusing on developing a core region within a radius of 200 Kms of manufacturing units to ensure a sustainable supply of wood from local farmers. JK paper is actively engaging with local farmers under its extension program to create awareness about the cultivation of Pulp wood species (Eucalyptus, Subabul and Casuarina). Under this program, farmers are encouraged for a guided visit to our manufacturing facilities, Clonal production centers, Test plots and get briefed about the economic viability and crop economics when compared to other commercial crops. This overall program helps to invoke interest in farmers to shift to Pulpwood cultivation.

Cumulatively, the plantation done by the company on around 6 Lac acres across Gujarat, Maharashtra, Chhattisgarh,

Odisha, Andhra Pradesh and Madhya Pradesh. Plantation during the year was done on over 55000 Acres (including

SPML). JK paper farm forestry initiatives not only increased sustainable livelihoods across rural areas, provided farmers an assured income and developed the prospect of equitable realisation, but also it created a sustainable source of raw material for the Company.

Over the last 10 years, around 84,000 farmers benefited through the Companys farm forestry. Besides these, it improved green cover in the area and made the Company wood and carbon positive.

The Company increased its infrastructural facilities to produce more genetically advanced short-rotation clones by focusing on R&D, to increase yield and overall farm productivity. The Company developed high yielding site specific clones of Subabul, Casuarina & Eucalyptus which can grow significantly faster and yield much higher yield under 3 years of rotational cycle. However, sourcing of raw material from our area by other wood based industry put pressure on pricing.

Human resources: JK Paper believes that its people are the best assets and

their skills and capabilities are our biggest strength. Therefore, a lot of emphasis is given to hiring the right talent. At JK Paper, employees are encouraged to discover their true potential. With new business acquisition and diversification in portfolio, a lot of emphasis is given to building a strong talent pipeline, upskilling them, providing career development & progression opportunities to employees and retaining them. There is also a lot of focus on Digitisation and HR supports the Digitisation journey of the organisation by training the employees on the required skills and by hiring the people with right skillset. Employee wellness and Health is also of utmost importance for the company and JK Paper ensures that there are plenty of opportunities for employee connects and engagement for the employees.

Procurement: 2022-23 witnessed the spurt in the demand for Paper & Board globally in the post Covid growth scenario. The disruptions in one or other part of the world supported the high international price of Paper & Board and Russia &

Ukraine war fueled the energy prices which further pushed all commodity prices including Paper to the ever-highest level. The JK Paper being integrated Paper mill got the pricing advantage over the others and maintained its cost leadership position. The higher input cost was absorbed without impacting the profit margins.

Product development: JK Paper has a diverse portfolio which includes premium office paper, packaging board, security paper and functional grades speciality paper & Board. In response to the growing sentiment against plastic-based food packaging solutions, the company has developed plastic-free alternatives such as JK EcoGreen Purefil Cupstock Board for paper cups and JK EcoGreen Tuff Freeze boards to replace PE coated Board. With the rise in food delivery and e-commerce, JK Paper is focusing on optimising its portfolio by providing more options such as JK Pac Fresh food wrapping in various sizes. The company also offers sustainable packaging solutions for the pharma and FMCG sector and works closely with customers to customise products to their needs.

JK Paper is committed to responsible procurement, social responsibility, environmental sustainability and manufacturing eco-friendly products. With the FSSAI mandates on food grade and food safety packaging, there has been a major shift from plastic to paper in the food packaging industry. JK Paper is well- positioned to benefit from this shift with new product launches that offer oil and water resistance, moisture and oxygen barrier and heat sealable capabilities.

During the year under review, the Company has developed & introduced following new products -

• JK Eco green Purefil (Aqueous barrier coated Cupstock)

• JK Eco green Tuff freeze (Aqueous barrier coated OGR Board)

• JK Purefil P2P (2 PE Coated Cupstock Board)

• Cigarette Board

Financial overview

Analysis of the profit and loss statement

Revenues: Revenue increased by 57% from Rs 4165.76 crores in 2021-22 to Rs 6,543.68 crores in 2022-23.

Expenses: Total expenses increased by 51% from 3299.30 crores in 2021-22 to Rs 4,995.60 crores in 2021-22, which includes 40% depreciation increase due to enhanced asset capitalisation. The substantial increase in input costs, coupled with additional volumes impacted an increase.

Analysis of the Balance Sheet Sources of funds: The capital employed by the Company increased by 33% from Rs 3,375 crores as on March 31,2022

to Rs 4,480 crores as on March 31,2023 due to enhanced asset base for new packaging board plant. Return on capital employed stood at 21.1% in 2022-23 compared to 15.5% in 2021-22 due to better performance. The net worth of the Company increased by 24% from H3,045 crores as on March 31,2022 to Rs 3,774 crores as on March 31,2023. Total debt decreased 11.4% to Rs 307.69 crores as on March 31,2023 mainly due to scheduled repayment of debt and Rs 72.69 crores of prepayment. The Companys interest cove stood at a comfortable 9.34x in 2022-23 (11.04x in 2021-22).

Applications of funds

Property, Plant and Equipment (PPE)

PPE (gross) decreased 3% from Rs 4,429 crores as on March 31,2022 to Rs 4,310 crores as on March 31,2023

Working capital management

Current assets of the Company increased by 15.3% from Rs 1,808.94 crores as on March 31,2022 to Rs 2,085.53 crores as on March 31,2023 due to increase in cash and Inventory. The current and quick ratios of the Company stood at 1.47 and 0.99 respectively in 2022-23 compared to 1.50 and 1.11 respectively in 2021-22. The finished goods inventory days stood at 9 in 2022-23 compared to 10 in 2021- 22. Gross cash and cash equivalents of the Company stood at Rs 809.38 crores as on March 31, 2023.

Regional growth (%)	2022-23	2021-22
Gross sales	6543.68	4165.76
Net sales	6208.32	3889.99
Profit before interest and depreciation and Tax (EBITDA)	1759.38	1023.09
Profit before depreciation and tax (PBDT)	1548.37	930.44
Profit before tax (PBT)	1311.53	761.40
Profit after tax (PAT)	885.53	511.09

Details of significant changes

(i.e. change of 25% or more compared to the immediate previous financial year) Financial Ratios

Regional growth (%)	UOM	2022-23	2021-22	% Change	Defination	Remark for variation
Debt Equity Ratio	Times	0.63	0.89	28.52%	Total debt/ shareholders equity	1) Decrease in debts 2) Increase in Retained earnings i.e., part of Equity
Trade Payable Turnover Ratio	Times	6.72	5.09	32.12%	Purchases/ Average Trade Payables	Primarily on account of decrease in Trade Payables in comparison to increase in purchase
Return On investment - quoted equity shares	%	64.74	17.34	47.39%		Impact of market dynamics

Risk management

Demand risk

Preferential shift of consumers towards digitisation could hinder demand.

Mitigation

The Company has ventured into Packaging Boards and Corrugated packaging that helps in deleveraging its dependence on writing & printing paper. The proportion of revenues from packaging paper and board could increase from 38% in 2022-23 to an estimated 40% when the expansion is fully on stream.

Regulatory risk

Non-compliance with statutory norms could attract penalties and impact the Companys credit rating.

Mitigation

The company has implemented a robust compliance assurance system and mechanism to monitor various compliances. Its certifications, including ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018, demonstrate its adherence to modern standards of quality, environmental responsibility and safety.

Resource risk

Overuse of water along with a substandard water discharge can harm resource security and respect.

Mitigation

The company has taken steps to reduce water consumption and has invested in improved technologies for more efficient effluent recycling and treatment.

Raw material risk

Scarcity in essential raw materials like wood, pulp, coal and chemicals could bring down output with profitability

Mitigation

The company has implemented robust farm forestry measures in the vicinity of its manufacturing units, thereby improving local wood sourcing and reducing logistics costs. Its strong R&D function has enabled it to develop high-yielding clones (saplings) with shorter gestation periods. The company provides these high- yielding saplings to farmers with secure buyback options, thereby contributing to both their prosperity and raw material security.

Internal control systems and their adequacy

JK Paper has a robust internal control framework, which has been instituted considering the nature, size and risks in the business. The Companys internal control environment ensures efficient conduct of operations, security of assets, prevention and detection of frauds/ errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information. The Company uses SAP—an Enterprise Resource Planning (ERP) software—as its core IT system. The Company has a well-established independent internal audit function is responsible for providing assurance on compliance with operating systems, internal policies and legal requirements, as well as suggesting improvements to systems and processes. The Companys operating management closely monitors the internal control environment and ensures that the recommendations from audits are effectively implemented. The Audit Committee of the Board monitors performance of the Internal.

Audit Function, reviews key findings and provides strategic guidance.

Cautionary statement

This statement made in this section describes the Companys objectives, projections, expectation and estimations which may be forward-looking statements within the meaning of applicable securities laws and regulations.

Actual results could differ materially from those either expressed or implied. Important factors that could make a difference to the Companys operation include among others, economic conditions affecting demand/ supply and price conditions, variation in prices of raw materials, changes in Government regulations, tax regimes, economic developments and other incidental factors.