MANAGEMENT DISCUSSION & ANALYSIS REPORT
INDUSTRY STRUCTURE & DEVELOPMENTS
Paper Industry is a significant indicator of the direction in which the World Economy
has been moving. It is an important and essential industry for any country, and per capita
paper consumption of a country is often used to track the growth and advancement in areas
such as its economic progress and focus on education.
Paper Industry in India is not a forest-based industry, but an agro-based industry,
providing jobs and income to lakhs of farmers involved in cultivating trees. The paper
industry seeks to maintain and contribute to society, foster the well-being of our
communities, and utilizes sustainable manufacturing practices and fiber procurement
measures that protect the environment and ensure that our resources will be as available
for future generations as they are today. Paper addresses growing humankind needs in areas
like education, sanitation, packaging and communication.
The Indian paper industry is highly fragmented, with varying sizes ranging from 10 TPD
to 1500 TPD. 75-80% of paper production is from medium and small category mills. The CO2
emission from the Indian Pulp & Paper sector was around 30.5 million MT in 2019
contributing just 1.09% of total CO2 emissions. The average emission intensity for the
Indian Pulp & Paper industry is 1.58 MTCO2 e/MT paper. The per capita consumption of
paper in India is 15.75 Kg which is significantly low compared to global per capita paper
consumption of 57 Kg. The paper sector advanced rapidly during the period of planned
development since independence and occupies an important position in Indian economy for
its extended role in development.
The Indian paper industry consists of four basic segments of product category: Writing
& Printing, Board & Packaging, Tissues, & Speciality papers. Owing to
increased adoption of paper-based packaging products in India, the wrapping &
packaging segment is projected to lead the market in the near future. The rapid
penetration of e-commerce and retail sector across the world has created huge demand for
both wrapping & packing papers. New innovations and trends are constantly emerging in
the paper industry. The novel coronavirus has brought a focus on cleanliness creating new
opportunities for tissue and toilet papers. During past few years, e-commerce boom has
created a structural change in consumer habits. With the increase in online shopping,
there has been a significant surge in corrugated and container board demand. The
impressive growth of paper industry is also contributed by the education sector as the
paper products have been and always will be an important component of the education
market. Schools of all levels, from elementary to college use a lot of paper, and hence
become the biggest consumers of paper.
Pulp & paper are considered as the most recyclable and sustainable material
available in the world today. Owing to rising environmental concerns, both manufacturers
and consumers are shifting their preference towards more sustainable paper packaging
solutions. The aggregate demand of paper is increasing, owing to strong customer base and
growth in the sector. In recent times, leading FMCG companies have started adopting
paper-based packaging solutions to meet sustainable goals in terms of reducing the
dependence on plastic and by way of promoting recyclability. Such initiatives are
projected to positively impact the paper industry. Nowadays, the environmental concerns
are also an area of focus by every nation, and this is further compelling the
manufacturers to shift towards more eco-friendly paper packaging solutions. Leading food,
cosmetics and FMCG companies are continuously engaging with paper manufacturers to develop
advanced paper packaging solutions to meet their commitments towards sustainability.
OUR STRENGTHS
The Paper industry plays an important role in socio-economic, as well as sustainable
and environmental, development. It not only serves as a public utility but also fulfils a
critical national requirement. Being an established participant in the industry with a
satisfied customer base and with the strong support of Voith Group, the company is better
placed than its competitors to command a formidable position in the industry.
Besides this, with the support of a strong R&D facility of the Voith Group, the
company can also provide novel and customized solutions to the problems of its customers.
Further, the enthusiasm and untiring efforts of employees at all levels has enabled your
company to constantly progress over its existence of more than 50 years under varying
economic conditions. The availability of seasoned and young talent-pool gives the
confidence that company would continue to grow in coming years also.
OUR WEAKNESSES
Paper industry consumes a considerable amount of wood and water and since these
resources are scarce in nature, it remains under the policy constraints by the
Central/State government. The pulp and paper manufacturing sector are also energy and raw
materials intensive, with high capital costs and long investment cycle.
The products of the company are majorly consumed by the paper mills and hence, the
future prospects of the company are directly related with the growth of Paper industry in
India. High cost of production, fiber scarcity and capital intensive nature of the
industry are some of its weaknesses.
THE OPPORTUNITIES
Paper is very important commodity and part and parcel of our everyday life. The paper
industry is diversifying and responding to an increased globalized marketplace. The
industry has an excellent track record in resource utilization and innovation.
The demand of paper in India is consistently increasing and Indian paper companies have
been able to profit from a tight supply scenario. The paper industry occupies an important
place in the overall growth and development - economic as well as cultural - of the
economy. The spread of education and literacy is bound to increase demand for paper.
Furthermore, the growing concern about plastic packaging and the recent plastic ban also
serves as an indicator of growing paper industry.
Paper packaging is lightweight & convenient for logistics. Also, the increasing
need for sustainability in retail packaging to reduce the adverse effect of plastic
packaging waste pushes demand for paper based packaging products, With expanding online
retailing, demand for corrugated boxes and paper bags is expected to increase in future.
The wrapping and packing segment generated major of pulp and paper market share and is
likely to continue in coming years also. This growth is attributable to the rising usage
of paper based packaging products. Additionally, the increasing penetration of the retail
sector and e-commerce is continuing the surge in demand for wrapping & packing papers.
There are ongoing efforts to reduce or eliminate the use of plastic for packaging. This
anti-plastic sentiment is beneficial to the pulp and paper industry. In that, it
encourages biodegradable alternatives. In fact, the use of plant based raw materials is
being explored. This is being driven by governmental agencies and by consumers that are
health conscious and committed to finding eco-friendly options.
Apart from that, the prominent FMCG, cosmetics and food companies are joining hands
with pulp and paper manufacturers to develop novel paper packaging solutions. Another
encouraging aspect is that Indian paper industry has trained manpower whose skill can be
gainfully used to adapt with modern technology for manufacturing paper and paper board of
international standard at relatively lower manpower cost inputs.
Also, lower per capita consumption of paper in India, rising awareness in consumers and
growth of the organized food sector, increased usage of packaging paper and improved
logistical capabilities are the factors providing ample scope for long term growth of the
paper industry.
THE THREATS
Major issues confronting Indias pulp and paper industry are high cost of production
caused by inadequate availability and high cost of raw materials, power cost and
concentration of mills in one particular area, non-availability of good-quality fiber,
uneconomical plant size, technological obsolescence and environmental challenges.
In 2017 alone, more than 125 factories in Gujarat and Maharashtra have closed due to
35% increase in raw material cost. The industry uses a lot of water, it also releases
greenhouse gases and hazardous substances into the atmosphere. Also, the conversion of
indigenous tropical and subtropical forests for the paper industry resulted in a massive
loss of biodiversity.
The paper industry in India may also suffer due to use of old technology, as adoption
of new technology would require significant capital investments by paper manufacturing
companies to effectively tackle competition from global players.
Also, the policies of government relating to environment protection may create
additional threat for the paper industry in future. Anyhow, we are prepared to face any
challenge and expect to come out of it successfully.
SEGMENT WISE REPORTING
As per Ind AS 108, the operating segment of the Company is identified to be as
"manufacturing and selling of paper machine clothing", as the ‘Chief
Operating Decision Maker ("CODM") reviews business performance at an overall
Company level as one segment. Hence, there is no separate reportable segment.
OUTLOOK
Paper is an important commodity which invariably touches upon our everyday life and
there are broadly three identified reasons for the strengthening of the industry. These
are, increasing e-commerce demand for container board as a packaging material, new market
outlet for the middle class in emerging markets, and increasing demand for hygiene
products. Also, digital technology in paper and pulp production is changing the way
manufacturing processes are being automated. Manual processes can be digitized to increase
production and precision. High levels of manufacturing uniformity at lower energy
production are attainable.
Paper plays a key role in communication and as a packaging material. Demand for paper
is closely linked to the prevalent economic conditions. Paper industry continues to have a
reasonably moderate prospect in India during next few years as the demand of paper
products grow in line with the GDP growth. Paper continues to enjoy a relatively healthy
demand on account of (i) lifecycle of a paper product from manufacture to consumption and
disposal is short, as paper is used more in the nature of a consumable and not as a
durable (ii) Wide usage, right from an individual to a corporate entity and (iii) no real
low cost substitutes for paper.
The long-term demand outlook for Indian paper industry remains favorable, driven by
increasing literacy levels, growth in print media, higher government spending on education
sector, changing urban lifestyle as well as continuing economic growth. Given that these
factors are likely to be sustained, the paper industry is likely to continue growing at
the rate of 6-8% per annum in the medium to long term, assuming 5-6% CAGR, the per capita
paper consumption in India will be 55% and 63% of the world average by 2035 and 2040
respectively.
The growing retail and e-commerce industries, along with the growing demand for
environment friendly packaging products, currently represents as the key factors driving
the growth of the market. Furthermore, increasing consciousness among consumers regarding
sustainable packaging and the implementation of favorable government policies are
providing a boost to the market growth. Government of various developed and emerging
nations are promoting the usage of paper based products as an alternative to plastic for
minimizing pollution and toxin levels in the environment.
Additionally, the rapid growing food and beverages industry across the globe is acting
as another growth inducing factor. Food manufacturing organizations are adopting food
grade paper packaging products to retain the nutrient content and maintain the quality of
the food contents. Other factors, including various product innovations to enhance the
efficiency of the product and to produce visually appealing variants are projected to
drive the paper packaging market growth in the coming years.
The long-term outlook of the Indian paper and packaging board market remains positive
with growth primarily expected to be driven by the packaging segment. However, continuous
technical upgrading is necessary for the paper sector to improve.
RISKS & CONCERNS
The paper industry is labour intensive as well as capital intensive and is exposed to
several risks i.e. changes in government policies, environmental policies, duties and
taxes, technological obsolescence and external economic factors.
The Company has a Management Team that meets periodically to analyze and minimize the
potential risks to the Company, which are an inherent part of every business.
INTERNAL CONTROL SYSTEMS & ADEQUACY
The Company has adequate internal control systems commensurate with its size. All
operating parameters are monitored and controlled. The Audit Committee of its Board of
Directors, comprising of Independent Directors, also reviews the systems on regular
intervals. Moreover, the Company has appointed M/s Lodha & Co., Chartered Accountants,
as its internal auditors and they periodically test the efficacy of the internal control
systems.
Also, the statutory auditors, M/s B S R & Co. LLP, Chartered Accountants, have
evaluated and given their opinion on the Internal Financial Control, as per the provisions
of the Companies Act, 2013.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
During the year under review, the company had been able to enhance its sales &
profits due to its operational efficiency brought about through better utilisation of
available resources and proper execution of business strategies. The Company continued the
implementation of ‘Operational Excellence (OPEX) Programme which also contributed to
the bottom line.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT
Your Company views its human capital as a key source of competitive advantage. A blend
of youth and seasoned experience has created a multi-skilled team that has imparted
flexibility to the organization to capitalize on the opportunities and deliver value to
all stakeholders. The industrial relations in the Company continue to remain healthy,
cordial and harmonious.
There were 128 permanent employees on the rolls of the Company as on 31st
March, 2023.
SIGNIFICANT CHANGES (25% OR MORE) IN KEY FINANCIAL RATIOS AND CHANGE IN RETURN ON NET
WORTH
In all specified key financial ratios, the change over previous year is less than 25%
and not significant.
Further, as compared to previous year (10.24%), the change in ‘Return on Net
Worth in the current year (10.07%) amounts to decrease of 0.17%. This is primarily due to
increase in net-worth for the year under review.
CERTIFICATIONS
The Company is conscious of protecting the environment and has initiated various
eco-friendly practices including rainwater-harvesting system. It is our continuous effort
to keep the premises and surroundings clean and green. The Company is continuing with the
ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications by TUV.
CAUTIONARY STATEMENT
Statements in the foregoing paragraphs of this report describing the current industry
structure, outlook, opportunities etc. reflect the estimation and opinion of the Company.
The same are based on certain assumptions and expectations of future events. The actual
results may substantially diverge from the same as they depend upon the global political,
economic and social situation. Further, change in Government regulations, environmental
laws, tax structure, cyclical demand, demand & supply conditions, cost of raw
materials & their availability and other related factors such as litigation,
Industrial relations and other unforeseen events can also have a bearing on the above
statements.
The Company assumes no responsibility in respect of forward looking statement made
herein which may undergo changes in future on the basis of subsequent developments,
information or events.
+91-9892691696
