The global pulp and paper business is a significant economic sector,
marked by applications in writing, printing and packaging. The global pulp and paper
market was valued at around USD 387.6 billion in 2022 and is expected to surpass USD 477.7
billion by 2028 growing at a compounded annual growth rate (CAGR) of 3.5% during the
forecast period. China, the United States and Japan remained the three largest
paper-producing countries, accounting for over 50% of the global output. North America
held the largest share of the worlds pulp and paper market, catalyzed by increasing
demand for packaging and consumer goods. India was the 15th largest global paper producer,
marked by growing paper board consumption at a time when the North American and Europe
markets are slowing. The one emerging trend is the growing gravitation towards ecofriendly
production methods and the use of recycled materials. (source: researchandmarket.com)
Additionally, during this post pandemic period, the worldwide ocean
freight prices were abnormally high; as a result, imported wastepaper prices were almost
doubled. Consequently, the wastepaper based industries either slowed down their production
or stopped paper production facilities. Apart from wastepaper prices, all other imported
inputs like chemicals, imported spares parts, price were also high. Profit margins also
shrink for export due to high ocean freight. This has resulted in increased cost of all
inputs, raw material and fuel.
Newsprint
Demand for newsprint is expected to de-grow sharply by 30-35% on
account of severe contraction of newspaper circulation and reduction in no of pages.
Demand for newsprint is expected to de-grow at 4-5% CAGR between fiscals 2020 and 2025 on
account of decrease in circulation of both vernacular as well as English newspapers due to
increased Smartphone and internet penetration and shift in preference towards e-newspaper.
Writing & Printing
Quality printing and writing paper addresses the needs of modern print
houses and the education sector (60%). This market segment is growing nominally following
digitalisation even as the countrys share of the global writing & printing paper
segment is expected to increase from 7% to 11% by 2024. (source: technavio. com).
Packaging Grades
The global paper packaging market size reached US$ 416.5 Billion in
2022 and is expected to reach US$ 503.1 billion by 2028. More than 49% of the paper
produced in India is used for packaging. (source: businesswire.com, care ratings)
DOMESTIC
The Indian Paper industry is expected to see increased demand coming
from manufacturing sector, requirement of better quality packaging of FMCG products
marketed through organised retail and the demand for the upstream market of paper
products, such as copier paper, cup stock paper board, base paper for making straws &
paper bags and other single use paper (SUP) products are expected to drive the paper &
paper products market in India in coming years.
Paper consumption in India is approximately 22.05 MT and expected to
reach 23.5 MT by 2025 (Source: Ministry of Commerce & Industry, Govt. of India), of
which carton boards and container boards (corrugated boards) constitute the largest share
of 55%, followed by writing and printing paper by 25%, specialty paper 10% and newsprint
by 10%. Paper industry in India is expected to derive an annual average growth rate of
8-9% (Source: Money control) over the next 5 years led by a robust growth in packaging
grade. Within consumer packaging segment it is expected to clock 9.5% CAGR in the same
period driven by increased volumes in end-user segments such as household appliances, FMCG
products, ready-made garments, pharmaceuticals and e-commerce. Further, the ban on
single-use plastics is expected to fuel the demand for paper based alternatives.
India is arguably the fastest-growing paper market. The countrys
paper industry is projected to experience a sustained demand surge on account of a need
for quality packaging boards in addition to a growing demand for valueadded paper (copier,
cup stock, base paper for making straws and paper bags and other single-use paper
products). Indias paper and pulp domestic market size of $10.6 Bn. Paper consumption
in India was approximately 22.05 MT in FY23. Carton boards and container boards
(corrugated boards) account for 55%, followed by writing and printing paper at 25%,
specialty paper at 10% and newsprint at 10%. The country is expected to grow 6-7% a year
to reach 30 million tonnes by FY 2026-27, catalysed by robust growth in the packaging
board. The consumer packaging segment is expected to grow by 9.5% CAGR, driven by
increased volumes of household appliances, FMCG products, ready-made garments,
pharmaceuticals and e-commerce. The ban on single-use plastics is likely to increase the
demand for paper-based alternatives. There has been a steady capacity increase in the
packaging paper segment from FY2017 to FY2023; 2.4 lakh tonnes per annum has been added
and another 4.0 lakh tonnes per annum is anticipated to be added by FY24. (Source:
researchandmarkets.com)
STRENGTH & OPPORTUNITIES
The competitive strengths and the opportunities that are available to
the Indian Paper Industry are:
? After the initial shocks of Covid-19 followed by subsequent
lockdowns, the Indian paper industrys slow and steady growth has been accompanied by
robust demand for paper especially in the packaging and writing & printing paper.
? While the Newsprint segment is facing challenges in the short term,
we believe once normalcy returns; we shall see a V shaped recovery due to emergence of the
demand.
? The impending changes in the education policy and curriculum are
bound to create a huge demand for Newsprint and Writing & printing papers to meet the
needs of new books etc.
? The Indian paper packaging industry is growing due to the rise in
demand for better quality of paper packaging products, evolving consumer choices as well
as shift towards eco-friendly & recyclable materials. Robust growth in e-commerce,
FMCG, Consumer Goods & Pharma to drive paper board demand.
? With a number of countries replacing plastic bags with paper
equivalents, paper industry opportunities are growing.
WEAKNESS & THREATS
The following competitive weaknesses and threats confront the Industry:
? The Indian paper industry is currently being crushed by a plenty of
problems including the non-availability of waste paper, high prices for pulp, fibres and
newsprint, container problems, including rising freight rates, increasing coal, chemicals
and other inputs rates.
? Poor collection of used paper resulting in low recovery rate and
undue dependence on imports to meet domestic needs.
? The domestic paper manufacturer woes, US and Europe which are the
main sources of waste paper have increased the waste paper rates. In addition, the
Russia-Ukraine crisis has added fuel to the fire, while the Indian government has imposed
2.5% basic customs duty on waste paper imports. The raw material shortage has resulted in
domestic waste paper prices rising (Source: Business line).
? Freight charges to bring waste papers in 40 feet container has seen a
sharp increase from $2,800 to $3,600. Prior to Covid-19 pandemic, it was below
$1,600-1,800. Added, the delivery of imported pulp and waste paper is also taking 4-6
months resulting in raw material scarcity (Source: Business line).
? In fiscal 2021, demand for newsprint is expected to de-grow sharply
by 30-35% on account of severe contraction of newspaper circulation and reduction in no of
pages. Demand for newsprint is expected to de-grow at 4-5% CAGR between fiscals 2020 and
2025 on account of decrease in circulation of both vernacular as well as English
newspapers due to increased Smartphone and internet penetration and shift in preference
towards e-newspaper.
? Cyclical: Prices of paper are linked to global prevailing raw
material prices and price of finished product. This industry is also highly cyclical in
nature. Unchecked imports can prevent companies from passing on the increase in raw
material prices.
? Increasing imports consequent on numerous Regional Trade Agreements
(RTAs) / Free Trade Agreements (FTAs) entered into by the Govt without adequate
safeguards.
Paper Industry is capital intensive and yields poor returns on
investments. To enhance the competitiveness of the Industry, Govt must address the issues
of creation of robust raw material base as well as extending fiscal incentives for
assimilation of eco-friendly technologies, etc. International Competitiveness is the key
issue that is confronting the Indian Paper Industry, today especially in the context of
Governments resolve to bring down import tariff every year and RTAs/ FTAs entered
into with ASEAN / SAARC countries. The major players, alive to the emerging international
threats, have been aggressively pursuing quality improvement programmers, coupled with
cost rationalisation and capacity additions. Increasingly, more up-to-date technologies
are sought to be implemented, with added focus on environmental compliance.
SEGMENT WISE PERFORMANCE
The company is a single product company and hence, segment wise or
product wise performance is not provided.
RISKS AND CONCERNS
? Digitalization: As the world shifts towards digital platforms, paper
demand could decline.
? Volatility: Wastepaper and pulp are critical paper raw materials,
around 57% of the cost of sales. These costs are subject to fluctuations, affecting
profits.
FUTURE OUTLOOK
The demand for paper in India is growing at 6-7% per annum, making it
one of the fastest growing markets in the world. Indias Paper Industry has made
substantial investments over time to increase production capacities, and as a result, in
almost all paper grades, India has enough domestic capacity to meet the growing domestic
demand and also for exporting to other countries.
Sustainability is at the core of Indias Paper Industry. Paper is
one of the most environmentally sustainable products as it is biodegradable, recyclable
and is produced from sources which are renewable and sustainable.
INTERNAL CONTROL SYSTEM & THEIR ADEQUACY
The Company has laid down adequate systems and well drawn procedures
for ensuring internal financial controls. It has appointed an external audit firm as
Internal Auditors for periodically checking and monitoring the internal control measures.
The Board of Directors have adopted various policies for ensuring the orderly and
efficient conduct of the business of the Company, the safeguarding of its assets, the
prevention and detection of frauds and errors, the accuracy and completeness of the
accounting records and the timely preparation of reliable financial information. The
Statutory Auditors have also expressed satisfaction with the existing system in their
Audit Report to the Shareholders.
COMPANY FINANCIAL PERFORMANCE & SIGNIFICANT RATIOS
| Particulars |
2022-23 |
2021-22 |
| 01. Total Income |
23454.73 |
21299.21 |
| 02. EBITDA |
(32.62) |
468.26 |
| 03. Less: Finance Cost |
863.69 |
790.42 |
| 04. Profit Before Depreciation & Tax |
(896.31) |
(322.16) |
| 05. Less: Depreciation |
502.66 |
506.59 |
| 06. Profit Before Tax |
(1398.97) |
(828.75) |
| 07. Less: Deferred/Current Tax |
(353.60) |
(202.53) |
| 08. Profit After Tax |
(1045.37) |
(626.22) |
| 09. Add: Other Comprehensive Income(Net of Tax) |
9.96 |
9.58 |
| 10. Net Profit for the Year |
(1035.41) |
(616.64) |
| 11. Debtors Turnover Ratio |
8.98 |
7.34 |
| 12. Inventory Turnover Ratio |
5.64 |
6.04 |
| 13. Current Ratio |
1.56 |
1.30 |
| 14. Debt Equity Ratio |
5.16 |
1.40 |
| 15. Interest Coverage Ratio* |
0.00 |
0.00 |
| 16. Operating Profit Margin* |
0.00 |
0.00 |
| 17. Net Profit Margin* |
0.00 |
0.00 |
| 18. Return on Net Worth* |
0.00 |
0.00 |
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
PERFORMANCE
This has been dealt with in the Boards Report.
HUMAN RESOURCE & INDUSTRIAL RELATIONS
The Company employs 217persons in all ranks in its two units as on 31st
March, 2023. The employees of the company are considered as its most valuable resource and
the company recognizes the importance of aligning human resource practices with business
priorities and objectives. The workforce is the key strategic pillar that drives the
business processes to attain the companys vision. The company has maintained a
healthy and cordial industrial relationship with its employees, who have been equal
partners in implementing company policies and achieving stretched operational targets.
CAUTIONARY STATEMENT
Statements in this report on Management Discussion and Analysis
describing the Companys objectives, projections, estimates, expectations or
predictions may be "forward looking statements" within the meaning of applicable
securities laws or regulations. These statements are based on certain assumptions and
expectations of future events. Actual results could differ materially from those expressed
or implied. Important factors that could make a difference to the Companys
operations include global and domestic demand supply conditions, finished goods prices,
raw material cost and availability, changes in Government regulations, tax regimes,
economic developments within India and other factors such as litigation and industrial
relations. The Company assumes no responsibility to publicly amend, modify or revise any
forward-looking statements on the basis of any subsequent developments, information or
events.
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