Ballarpur Industries Ltd Management Discussions.


BILT (or the Company) is one of Indias leading writing and printing paper manufacturer. It continues to implement a well-structured plan which focuses on maintaining its leadership position across carefully selected sub-segments of the writing and printing paper industry. BILTs knowledge-driven emphasis towards value creation has helped to change the positioning of paper from a commodity to a branded product.

BILTs businesses operate through two separate blocks: one under the standalone entity BILT, and the other under its step- down subsidiary Bilt Paper.

Under the standalone entity, BILT, the businesses target the industrial and FMCG markets and include:

• Speciality paper business operating from the Shree Gopal facility in Haryana.

• Rayon grade pulp business operating from Kamalapuram in Telangana.

• Tissue paper business operated through its subsidiary, Premier Tissues (India) Limited.

The other block of businesses comes under Bilt Paper BV, which focuses on the wood- free printing and writing paper, coated and uncoated. This is the Companys primary business portfolio. Here, the focus is on the commercial printing business (both reel and sheet) and the desktop printing business through copier paper. There is also the production of high value bio-degradable high-end packaging. Bilt Paper B.V. operates through its step down subsidiary, namely BILT Graphic Paper Products Limited (BGPPL), which is an asset heavy entity, and has four plants in India: Ballarpur, Bhigwan and Ashti (all in Maharashtra) and Sewa (in Orissa).

Through this structure, BILT addresses the following portfolio:

• Writing and Printing Paper - India.

• Specialty Paper.

• Tissue Paper.

• Rayon Grade Pulp.

Over the years, the Company has developed a range of quality products supported by wide reaching and efficient distribution to build a strong market position. A key element of BILTs business has been continuous efforts on innovation and introduction of new products across applications. This wide range of diversified offerings has provided it with competitive impetus in the markets. Across the product spectrum, BILT has set a very high standard in quality, which has emerged as a key differentiator in the competitive markets where it operates.

The product range is well supported by a strong distribution mechanism. In its core market, India, BILT has a multi-tiered distribution network with a balanced mix of exclusive and multi-brand distributors. In addition, the Company enjoys a good market presence in many countries across Middle East, Africa, Europe and South America.


Paper consumption in India has been below its potential. While India hosts 17% of the worlds population, it accounts for only about 3% of global production of paper and paperboard. This gap between potential and actual demand is best seen in the per capita numbers. Indias per capita consumption of paper is estimated at barely 13 kg compared to 78 kg in China, 158 kg each in the European Union, Korea, Taiwan, Hong Kong, Singapore and Malaysia, 218 kg in Japan, and 224 kg in North America. The global average itself is 56 kg.

This gap between potential and actual demand in India has led to significant pent up demand over the last decade — driven by rising levels of literacy, improving well-being of the people and surging aspiration levels. Thus, despite its low base, India is the fastest growing market for paper.

Demand for paper has been growing at around 8% per year for some time. According to industry estimates, the domestic market for consumption of paper is over 17 million

metric tons per annum (MTPA), with over 2 million MTPA being imported. By 202425, under the baseline scenario, domestic consumption is projected to rise to 23.5 million MTPA; and in the optimistic scenario, consumption is expected to rise to 36.9 million MTPA. What this means is that about 1 million MTPA of integrated pulp, paper and paperboard capacity has to be created in India on an annual basis over the current capacity to domestically meet the growing demand.

While the industry has made significant capital investments to ramp-up capacities, the gestation period is long. Moreover, the economic viability of such investments is impacted significantly by availability and cost of raw materials and other inputs. In addition, with competitive global paper prices, global players have targeted the Indian market. Consequently, imports have increased at lower prices.

India is a wood-fibre deficient country. Inadequate domestic supply of raw material is a major constraint for the Indian pulp and paper industry, especially in a milieu where there is no dedicated enabling policy for industrial plantation. The present demand for wood by the paper industry is about 11 million MTPA versus domestic availability of 9 million MTPA, and the demand is projected to rise to 15 million MTPA by 2024-25. Consequently, wood prices have gone up steeply, more than doubling in the last three to four years which, in turn, has seriously affected competitiveness of the Indian paper industry.

Increasing cost of raw material and energy have resulted in a substantial increase in the cost of domestic manufacture of paper and paperboard. Such input price pressures, coupled with relatively high cost of capital, have opened the Indian market to growing imports — leading to under-utilisation of the existing domestic production capacity. Imports of paper, paperboard and newsprint into India have been steadily increasing. Imports have risen in terms of volume, from 1.8 million MT in 2010-11 to 3.08 million MT in 2017-18.

Even as the industry is grappling with the issue of producing paper and paperboard at competitive costs, the problem has been exacerbated by the Government of Indias policy of extending preferential tariff treatment to paper and paperboard under the free trade agreements (FTAs) and other bilateral and multilateral trade

agreements. Thus, while domestic industry is operating under extremely challenging conditions, substantial quantities of paper and paperboard is imported into the country at significantly lower costs under the aegis of these FTAs.

Under such conditions, there is a very serious threat of unviability — with several large scale investments in capacities in the recent past turning economically unviable. The domestic industry has invested huge amounts to upgrade and implement initiatives like clean technology, product quality and farm forestry. The inability to scale up production and supply as per plan has considerably affected the industry.

During FY2018, BILT was no exception to this difficult industrial condition. Given the long gestation lag between large scale investments made in the recent past and the ability to scale up revenues — made worse by international competition — there have been major capital and fund constraints faced by the Company, which have adversely affected its operations.

BILTS Writing and Printing Paper Business

BILTs writing and printing paper business can be divided into four categories: coated wood-free, uncoated wood-free, copier paper and creamwove.

Coated Wood-Free

In India, demand for this category of paper outstrips supply. However, much of the gap continues to be met by imports. Coated wood-free consumption in India increased by around 7% to 870,000 MTPA in FY2018. In terms of value addition, the segment has three categories: blade coated, air knife and cast coated products, ranked in decreasing order of technology. Growth has been higher in the premium end of the market with the blade coated products growing by 8%. This is BILTs primary focus area.

The coated market can be segregated in two ways. First, in terms of one-side coated (C1S) and both-sides coated (C2S). Second, in terms of paper and board products. Within the blade coated products segment, the C2S paper market grew by over 9.5% to 487,000 MTPA and the C2S board market grew by over 9% to 226,000 MTPA in FY2018.

Being a value-added product, coated wood-free paper traditionally enjoyed a price and quality premium. However, with rapid market expansion and rise in import

volumes, especially from the ASEAN, China and South Korea, the segment is rapidly getting transformed into a competitive, commodity-like product where price is becoming the critical factor.

BILT continued to enhance customer service through a multi-format distribution network, with a focus on reducing product costs through higher scale of operations and better efficiencies in production.

Uncoated wood-Free

During FY2018, the Indian uncoated market — comprising Low Bright and Hi Bright segments — grew by 3% to 13,30,000 MTPA, and the competition was intense. The market remains largely restricted to domestic players and is highly fragmented with a multitude of products and manufacturers. Moreover, in the last couple of years, imports from Indonesia and China have started making an impact in this market.

BILT maintains its strong position as an organised player in this space by offering a wide range of products. The Company has laid greater importance on optimising its product mix for greater profitability. With this objective, BILT has focused on the higher value Hi Bright paper, which accounts for around 74% of the entire uncoated maplitho segment. Hi Bright paper grew by 5.7% in FY2018.

BILTs major brands in this segment include Magna and Wisdom Print, which are used for the notebook and publishing segment; Sunshine Super Printing Paper, which is used for offset printing and Three Aces Natural Shade Deluxe (T.A.NSD), which is used for commercial printing.


Essentially, copier paper is a forward integration of the uncoated wood-free paper segment. It comprises maplitho paper cut in sizes with product characteristics that are best suited for desktop printing and copying.

Over the last few years, with rapid computer penetration in India, copier has been a fast growing segment. The mill-packed copier market in India grew by 12% during FY2018 to 10,70,000 MTPA. In this segment too, there is increased supply due to imports from ASEAN countries. This has led to more intense competition among the major players in the Indian paper industry, with multiple brands at various price points. With four major brands in the market — Copy

Power, Image Copier, Ten on Ten and BILT Matrix — BILT continues to maintain a strong presence in this segment.


This is a high volume, low value segment. In volume terms, it is by far the largest segment in India. It is characterised by several producers, each with sub-optimal capacities operating in a highly price sensitive market which has been stagnant and estimated at 1.6 million MTPA in FY2018. BILT has strategically maintained a minimal presence in this segment.

BILTs Operations in India

BILTs writing and printing paper manufacturing operations under its step- down subsidiary Bilt Paper B.V. has four production units across India. These are: Ballarpur (Maharashtra), Bhigwan

(Maharashtra), Sewa (Odisha) and Ashti (Maharashtra). Details of operational developments across the different units are given below:

Unit: Ballarpur

At Ballarpur, total paper production was 245,351 MT in FY2018 against 147,321 MT in FY2017. The new pulp mill produced highest ever pulp production i.e. 228,453 ADMT (Air Dry Metric Ton) of bleached pulp during the year to meet the captive pulp requirements and to supply pulp to Bhigwan and Ashti. This highest pulp production was possible through continuous de-bottlenecking initiatives taken by the Ballarpur team inspite of fund constraints leading to low levels of inventories and critical spares. Some of the actions taken for increased pulp production are:

• Reduction in down time by providing emergency by-pass arrangements for major equipment in the bleach plant process.

• Use of cooking aid to enhance productivity and reduction in chemicals consumptions.

• In-house repair of the oxygen delignification (ODL) press, which prevented an extended pulp mill shut.

• Improved preventive maintenance practices in mill wide operations.

The surplus bleached pulp was supplied to Bhigwan to partially meet their requirement of purchased pulp. This has given a significant economic advantage to Bhigwan in view of

the high prevailing prices of market pulp.

The mill also continued with its focus on cost reduction and achieved the lowest production cost in last five years. Pulp and paper cost reduced by 7.3% and 7.2%, respectively, over FY2017. Reduction in the variable cost of paper was mainly on account of:

• Complete elimination of purchased pulp consumption on paper machines.

• Reduction of high cost bamboo in raw material mix from 18.6% to 10.5%.

• Innovative modifications in the

evaporator plant for reduced steam consumption.

• Reduction in bleaching chemicals

consumption by using cooking aid in the pulp mill.

• Significant reduction in water

consumption across the mill.

• Use of indigenous starch in place of the imported varieties.

• Installation of new radial reel wrapping in place of manual wrapping.

In line with the Companys focus on product quality and servicing, the mill developed new grades of paper. Some of these were:

1. MG Poster 50 GSM with low paper acidity for glass wrapping.

2. MG Poster for thermal coating base in 45 GSM.

3. High bulk (1.65+cc/g) variant paper for export in 90 GSM and high smoothness variant in NSD Premium in 80, 100 and 120 GSM.

4. Significant improvement in quality of packing of paper reels with the installation of the new radial reel wrapping machine.

Ballarpur: Environment Management and Resource Conservation

During FY2018, Ballarpur undertook several energy conservation initiatives which enabled the mill to successfully achieve and surpass the Perform, Achieve, Trade (PAT-I) cycle targets for energy reduction set by the Bureau of Energy Efficiency (BEE), Government of India. Consequently, it has received 16,587 E-Certificates from the BEE out of which 11,000 E-Certificates were sold in the energy exchange during FY2018.

Ballarpur has also implemented several initiatives for reducing fresh water consumption. In FY2018, its water consumption level was 44 m3/T of product — down from 54 m3/T. This is well below the national norm notified by Central Pollution Control Board (CPCB). The mills effluent treatment plant is equipped with the state- of-the-art systems like the Moving Bed Biofilm Reactor and the Dissolved Air Floatation effluent treatment process technologies. These have enabled the mill to significantly improve the quality of final treated effluent. Online Continuous Emission Monitoring System (CEMS) and effluent quality monitoring system have been provided, which are connected to the Maharashtra Pollution Control Board and the CPCB server for the transmission of real time data.

Ballarpur: Awards and Achievements

• SEEM Platinum Award 2017-18 Rs. in National Energy Management — awarded on 25 May 2018 at Delhi.

• First Award for Excellence in Energy Conservation Rs. by MEDA, Government of Maharashtra, Pune in September 2017 for 2016-17.

• Transition to ISO 9001:2015 and IS014001:2015 certificates in June 2017.

Unit: Bhigwan

At Bhigwan, total paper production was 135,283 MT in FY2018 versus 102,605 MT in FY2017. In pursuing continuous cost reduction, new indigenous vendors were developed for (i) nano-particle size acrylic latex booster for binder cost optimization, and (ii) delaminated clay to substitute the imported variety. These initiatives resulted in reduction in production cost. On the product development front, the mill successfully developed clay coated kraft paper for label stock and high strength C1S 55 GSM for flexible packaging.

Bhigwan: Environment Management and Resource Conservation

With its state-of-the-art effluent treatment plant, the mill consistently met the treated effluent norms notified by the Government authorities. It also undertook several key initiatives in FY2018 to reduce energy consumption such as replacement of conventional lights with LED lights in the plant. The following key initiatives were taken to improve the reliability of plant operations:

• Upgraded old obsolete ACV 700 drives of PM1 wet end to ACS 800.

• Installed New ABB Unitrol 1020 AVR at TG1 turbine.

• Installed cooling water circuit interconnection system to operate TG1 or TG2 from single cooling tower.

Bhigwan: Awards and Achievements

• Transition to ISO 9001:2015 and ISO14001:2015 certificates in February 2018.

• State Level Energy Conservation Award (Second Prize) by MEDA for 2016-17, received in September 2017.

Unit: Sewa

Sewa had significantly lower production during FY2018 due to shortage of working capital. Working capital was infused in January 2018. The mill utilised the opportunity to bring about a significant reduction in fixed costs and the plant is being now being managed with a reduced level of manpower. There was particular focus on other fixed costs which were brought down to the minimum.

Unit: Ashti

Ashti, too, produced significantly less during most of FY2018 due to shortage of working capital and high prevailing prices of market pulp. Total production was 2,679 MT of paper in FY2018 against 5,974 MT in FY2017. However, the mill utilised the opportunity to focus on cutting down fixed costs and carrying out preventive maintenance activities in the plant. An additional 4,247 MT of copier paper produced at Ballarpur was converted at Ashti to service the customers.

Operations In Malaysia

Sabah Forest Industries Sdn.Bhd. (SFI)

During FY2018, the mill produced 9,429 MT of paper compared to 22,498 MT in FY2017. Total bleached pulp production was 8,609 ADMT in FY2018 compared to 20,279 ADMT in FY2017.The mill also produced 535 MT of market pulp sheets in FY2018. Production was affected by shortage of both raw material supply and working capital.

specialty Paper Business

The specialty paper business focuses on specialised product categories such as water marked Bond paper, Ledger paper, Cartridge paper, Envelope paper, Super Printing paper and Matrix multipurpose paper. The assets

of this business are directly under BILT at Unit Shree Gopal (Haryana).

Unit: shree Gopal

The mill ran at lower capacity during the first half of the year due to shortage of funds. After receiving funding in November 2017, the plant ran consistently for the balance period of the year. Paper production stood at 46,990 MT in FY2018 versus 27,026 MT in FY2017. Shree Gopal undertook the following initiatives to improve paper quality along with cost reduction:

• Paper Machine No.4s Head Box slice was changed for better flow control.

• Usage of ground grade calcium carbonate filler in all paper grades in place of the conventional soap stone filler to improve paper quality along with cost reduction.

• Introduced latest microbiological techniques and Deposit Control Program on Paper Machine No.4.

To enrich the product mix, the mill developed the following grades of paper;

• BILT Copy Power 75 gsm.

• Water mark TA Ledger 70-90 gsm for legal register and documents.

• BILT Classic Ultra 54-90 gsm for stationery market.

Shree Gopal: Environment Management and Resource Conservation

At Shree Gopal, treated effluent Rs. and boiler stacks emissions Rs. complied with the norms laid down by Haryana State Pollution Control Board (HSPCB) as well as the Ganga River Basin Water Recycling and Pollution Prevention norms. It successfully installed continuous on-line real time monitoring of stacks emission and treated effluent. The following initiatives were also implemented during the year to improve environmental performance:

• To enhance treated effluent quality, it increased the well height of secondary clarifier to improve settling of Bio Mass Bed, as well as modified the Launder of the primary clarifier and the underflow line of secondary clarifier.

• Reduced energy consumption in the plant.

• The mill sold 11,950 Renewable Energy Credit (RECs) in FY2018 out of 34,830 RECs that it earned in FY2016.

Shree Gopal: Achievement

Successfully upgraded ISO 9001 and ISO 14001 to the 2015 version, along with surveillance audits of EMS (ISO 14001), OHSAS 18001 and EnMS (ISO 50001).


Unit: Mysore

In the FY2018, Premier Tissues (India) Limited {PTIL} continued to maintain its dominant position in the retail segment and operates across all the key states in the Indian market. With introduction of new product categories in the three-ply segment (face tissues and toilet roll), PTIL has launched three-ply products in face tissues during the financial year. It has now tied up with large cash and carry formats to launch their private labels in the toilet roll segment.

During FY2018, PTIL recast its go-to-market strategy by building a sales organisation to actively pitch for the away-from-home institutional business. With this, PTIL should be able to leverage on its growth aspiration. With this, and its focus on retail expansion and penetration into modern trade and online grocery segment, PTIL expects to achieve its targeted growth rate for FY2019.

PTIL also cleared its term loan liabilities during the year and is expecting to see improved cash flows in FY2019. The additional cash flows generated will be utilised towards developing relevant product lines and improving efficiencies at the Mysore unit.


The India-based pulp business operates out of the facility at Kamalapuram, in the district of Warangal in Telangana. It mainly produces rayon grade pulp for manufacture of Viscose Staple Fibre (VSF) and Viscose Staple Yarn (VSY).

Over the last four years, this market has been under severe pressure — which made this unit unviable. Hence, the mill had to be temporarily shut down from 2014. A representation was made to the State Government for granting subsidies on inputs and power to enable manufacturing activities to be restarted. This has been considered favourably by the Government of Telangana. The Company is currently working on a proposal to convert this mill to manufacture paper grade pulp.

Financial Performance

BILTs Consolidated financial performance for the financial year ended 31 March, 2018 is given below:

(in Rs. crore)



2017-18 2016-17
Revenue from Operations (Net of Excise duty) 2,519 2,059
EBIDTA 352 (247)
Less: Finance Cost 915 899
Less: Depreciation 277 264
Profit/(Loss) before Exceptional Items and Taxes (840) (1,410)
Exceptional Items 190 306
Profit / (Loss) before Tax (1,030) (1,716)
Less: Tax (166) (135)
Profit/(Loss) After Tax (864) (1,581)
Profit/ (loss) from discontinued operation before tax (1,171) (317)
Less: Tax expense on discontinued operation - 173
Net profit/ (loss) from discontinued operation after tax (1,171) (490)
Net profit/ (loss) after tax (2,035) (2,071)

Human Resource (HR)

FY2018 was a watershed year in the history of the Company. From relatively low level of operations in the previous year, the current fiscal year saw all units, barring Kamalapuram, gradually coming to full scale operations. HR played a crucial role in this transition process by deploying proactive employee engagement practices and maintaining a peaceful industrial scenario in all locations.

There are registered trade unions in all manufacturing locations and a cordial relationship was maintained during the year. The Company received support and cooperation from the trade unions and workmen during a difficult year of transition in all aspects.

In the course of the year, no complaints were received relating to child labour, forced labour or sexual harassment at workplace.

While the business situation remained tough, talent retention remained a key focus area. During the year, management staff attrition remained near normal attrition when compared with the industry. More importantly, leadership talent remained more or less intact and stable, ensuring focus, continuity and drive.

Talent acquisition remained another focus area to support the operations in a seamless manner by focusing on critical replacements. Despite many challenges, the Company could attract the critical talent required to support operations.

Information Technology (IT)

The Companys IT team continued its thrust on cost management, adherence to compliance and digital alignment. By using the right mix of digital technologies and IT management, the team was able to reduce the annual spend by approximately 40%. The team handled the Companys GST initiative with perfection: the project achieved all its objectives in terms of timelines and adherence with statutory compliances.

We moved our communication and collaboration tools to Google Suite. This not only helped reduce operating costs by more than 50% and save on some potential investments, but has also opened up host of opportunities to build and create a more collaborative work place.

We intend to be a 100 percent cloud company by end of calendar year 2019. Our cloud strategy for entire Oracle suite is now ready. It is giving us a return on investment in the first full year of operations itself and should bring about 45% cost reduction in Oracle operations from the second year onwards. In addition, it has given an opportunity to the management to think of ERP 2.0. We are equally focused on non-ERP applications and adopting cloud technologies for more robust, agile and inexpensive solutions.

Farm Forestry

Through its subsidiary, Avantha Agritech Limited (AAL, formerly Bilt Tree Tech Limited), BILT continues to work with the

farming community to plant tree species that are suitable for pulpwood.

With activities spanning over a decade, there are thousands of farmers today who are associated with AALs farm forestry programme. AAL has a strong network of qualified forestry staff to motivate the farmers and provide service support at their doorstep. It is currently operating its farm forestry programme in the states of Odisha, Madhya Pradesh, Chhattisgarh and Maharashtra.

To strengthen the programme and increase its acceptability among farmers, especially among tribal communities in the catchment areas of its mills, AAL supplies high quality, fast growing, site-specific planting stock with technical know-how. It has environmentally controlled global standard nurseries in Maharashtra and Odisha with a capacity to produce 20 million clonal plants of eucalyptus and casuarinas.

The production programme is supported by strong R&D to improve the genetic stock of planting material to yield more productivity.

The main objective of AALs farm forestry programme is to grow wood on a sustainable basis in the catchment area of the paper mills. To achieve this and to generate awareness, a series of exposure visits of farmers are conducted to the production nurseries and well established plantations. Regular training programmes are also conducted for farmers to educate and update them on the techniques of raising pulpwood plantations

to yield maximum productivity from their land.

In FY2018, AAL raised pulpwood plantations in 7,600 hectares of farmland, which benefited approximately 8,000 small and marginal farmers in the catchment area of BILTs paper mill units.

Internal Controls and their Adequacy

The Company has a wide-ranging system of internal controls to safeguard and protect all assets against loss from unauthorised use or disposition, and to ensure accurate recording and reporting of all transactions. This framework is supported by a robust process of internal audits, review by the Management and the Audit Committee of the Board of Directors.

Annual internal audit plans are prepared at the beginning of the year, specifying areas to be covered and timing of the execution of the plan. This is reviewed and approved by the Audit Committee. Quarterly internal audit reports on observations and progress on the annual audit plan are submitted to the management and the Audit Committee of the Board.

The internal controls are designed to ensure that financial and other records are reliable for preparing financial information, ensuring adequacy of backup and relevant approvals based on the formal Delegation of Authority matrix which is approved by the Board. For all

critical processes, there exists documented policies, procedures and guidelines.

The Company has adopted preventive as well as risk and control matrix based audits to assess processes, validate effectiveness of controls and implement requisite corrective actions, which are reported to and reviewed by Management and the Audit Committee of the Board of Directors. It has also adopted the group risk management policy. Accordingly, all operational processes are covered to assess the risk level. Enterprise risks are tracked and reviewed by the operational management team and steps are taken to reduce or mitigate the impact.

Risks and Concerns

Apart from regular business risks inherent in any business, there are some that are specific to the paper industry.

• Capital adequacy: Due to the highly capital intensive nature of investments and volatility in global raw material and target markets, the Company is undergoing financial restructuring while continuing to service customers in both domestic and overseas markets. This strains capital and creates risks.

• Competition and pricing: There is an increasing risk of having to face market pressures in an industry already characterised by zero customs duty on imports from all ASEAN countries. The

Company mitigates these risks with dynamic pricing models and ensuring efficient utilisation of capacity through optimising domestic and exports market mix.


Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements Rs. within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downward trend in the paper industry, rise in input costs, exchange rate fluctuations, and significant changes in the political and economic environment in India, environment standards, tax laws, litigation and labour relations.

For and on behalf of the Board of Directors


Chairman DIN 00012289


Group Director (Finance)

DIN 00012432

Date 22 May, 2018 Place New Delhi