Bandaram Pharma Packtech Ltd Management Discussions

1. Industry Structure and Developments Summary Global outlook:

Recycled Paper Market Size, Trends and Industry Analysis -2028 The recycled paper market is expected to grow from US$ 32,558.44 million in 2021 to US$ 42,395.79 million by 2028; it is estimated to grow at a CAGR of 3.8% from 2021 to 2028. There is a significant increase in demand for recycled paper due to the growing initiatives of governments of various nations to encourage waste paper recycling. The recycled paper is limited to the paper used in industrial applications, but it also includes household waste paper such as newspapers, magazines, and packaging papers. The generation of paper waste from these sources is very high, and this waste needs to be recycled rather than dumping it over or burning it. With the implementation of government regulations and the formation of new associations related to recycled paper, the market for recycled paper is estimated to expand rapidly in the coming year. The Global Paper Recycling Market is estimated to be USD 50.75 Bn in 2023 and is expected to reach USD 61.09 Bn by 2028, growing at a CAGR of 3.78%. (Source: https://www.theinsightpartners.com/reports/waste-paper-recycling-market)

Indias share in the demand for paper across the globe were analysed is growing, as the domestic demand is increasing at a steady pace, while the demand in western nations is shrinking. Notably, the demand for domestic paper in India rose from 9.4 million tonnes in FY08 to 15.4 million tonnes in FY16. Despite the continuous growth in the industry, per capita paper consumption in the country stands at a little over 14 kg, which is still well below the global average of 57 kg and considerably below 200 kg in North America. The Indian paper & paper products market is projected to grow from $ 8.6 billion in 2018 to $ 13.4 billion by 2024, exhibiting a CAGR of 7.8% during 2019-2024. Growing manufacturing sector, requirement of better quality packaging of FMCG products marketed through organized retail and the demand for the upstream market of paper products, such as tissue paper, filter paper, tea bags, light weight online coated paper and medical grade coated paper are expected to drive the paper & paper products market in India in coming years. Ballarpur Industries Limited (BILT) and ITC are among the largest producers of paper in the country. Moreover, many of the existing players are increasing their capacity to meet the growing demand. However, high cost of production as a result of unavailability and high cost of raw materials, high cost of power, concentration of mills in specific areas only, technological obsolescence as well as environmental challenges are some of the factors hampering the market growth.

The Indian paper & paper products market has been segmented into raw material, application and region. Based on raw material, the market has been categorized into waste & recycled paper, wood and agro residue. The waste & recycled paper segment is expected to dominate the market during forecast period, owing to growing concerns about the cutting down of trees for producing pulp. Further, based on application, the market has been bifurcated into writing & printing paper, paperboard & packaging, newsprint and specialty paper. Among the application segments, the demand for paperboard & packaging is growing at the fastest pace, as paperboard & packaging caters to industries including FMCG, food & beverages, textiles and pharmaceutical. The segment is also expected to dominate the market, owing to factors such as rising urbanization, increasing preference for ready-to-eat foods and requirement of better-quality packaging of FMCG products marketed through organized retail.

The paper & paper products market in India has been segmented into North, South, East and West. Western region is the lead consumer of paper & paper products across the country, on account of increasing paper consumption, especially FMCG products. Paper mills are concentrated in the states of Tamil Nadu, Andhra Pradesh, Maharashtra, Punjab, Madhya Pradesh and Gujarat. The paper mills use a variety of raw materials such as wood, bamboo, bagasse, recycled fiber, wheat straw, rice and husk. The geographical location of the mill often determines the type of raw material used. Most mills in the northern and western regions of India depend heavily on agricultural residues and wastepaper as their raw material. While pulp & paper production in southern and eastern regions use wood and bamboo as raw material.

Recovered Paper Market Analysis

The Recovered Paper Market is expected to grow at a CAGR of 2.7% over the forecast period 2021 to 2026. As corrugated containers and boxes are extensively used as packaging products for transportation and shipping, there is an excellent demand for recovered paper derived from old corrugated containers that can be recycled and reused for packaging purposes. The burgeoning demand for corrugated boxes for packaging is encouraging the growth of the recovered paper market. The packaging industry requires recovered paper as a raw material. The increasing demand for environmentally friendly projects is expanding the market for recovered paper. As the government has also laid down rules regarding the use of papers in terms of environment security; thus, many businesses have started using recovered paper. The recovered paper market is used by different industries that use an environment-friendly product such as the food and beverage industry, electrical and electronics industry, automobile industry, and pharmaceutical industries.

The recovered paper market is used for manufacturing products such as container boards, corrugated boxes, cartons, and many others. For example, according to the US Census Bureau, in that year 2019, some 17.6 million tons accounting for 35.7% of all recovered paper and paper-boards were shipped out as part of net exports. In that year, around 37.8% of all recovered paper and paper-boards were recycled into container boards. According to METI (Japan), in 2018, approximately 35.4 thousand metric tons of molded pulp were made from recovered paper, down from more than 36 thousand tons in the previous year. The composition ration of recovered paper from molded pulp amounted to around 3.2% in 2018. According to AF&PA, in 2019, approximately 79.5% of wastepaper was recovered in Japan, an increase from about 71% in 2005. The governments role in supporting the recovered paper plays a crucial role in driving the market. The reduction of carbon emission is also one of the major factors that draw more attention to the consumption of recovered paper. According to Global Carbon Atlas and CDIAC, in 2018, some 36.7 billion metric tons of carbon dioxide were emitted globally, and it is projected that worldwide energy-related carbon dioxide emissions will increase to 43 billion metric tons in 2050. In todays world, there is an enhanced demand for online purchase of products where cartons and corrugated boxes are highly used for the packaging. For instance, according to India Brand Equity Foundation, increasing exponentially, the market value of the e-commerce industry in India was nearly 50 billion U.S dollars in 2018. This number was expected to reach 200 billion U.S. dollars by 2027. According to Hootsuite, the third quarter of 2019 saw internet users in Indonesia purchase the most items online, with 88% of active internet users shopping online. Asia, majorly dominated by China and India, is still the primary growth driver. The USA and Europe are the prime exporters of recovered paper, globally. However, these regions are witnessing negative or minimum growth rates after the import restrictions in China. Besides, the sustainability regulations in China have become a significant challenge for global recyclers.

Current Mechanism for Collection of Post Consumer Paper in India Collection Performed by Informal Sector Table 1- Table 1 summarises the collection mechanism prevailing in India. The collection of Post Consumer (PC) paper is mainly performed by the informal sector – a community consisting of rag pickers and door-to-door collectors/vendors at the initiating step. This informal sector is controlled and administrated by big traders. As much as 95 per cent of the collection of waste paper in the country is in the hands of the informal sector. There are large traders who fund the entire value chain. The value chain consists of direct collectors from various source points, small shops where primary sorting of the waste into different categories is done, which follows zonal segregation centres owned by semi wholesalers, where the material gets collected from small shops and baled and kept separately for dispatch to the end users. Opportunities and Threats

2. Segment-wise Performance

The Company deals only in one segment i.e. procurement and supply of recycled paper. During the year operations in the FY 23-24, the company achieved a consolidated turnover of Rs. 3407.88 lakhs and earned a net profit after tax of Rs, 96.78 lakhs.

3. Outlook

Currently, the company is supplying the basic raw material for producing the paper and paper board. With the market experience of 4 moths, the encouragement from the different paper mills is very good and lucrative.

4. Risks and Concerns:

Packaging product in paper packaging comprises folding cartons, corrugated boxes, paper bags, and liquid paperboard. With the considerable increase in organized retail, the demand for paper packaging is anticipated to increase due to the rapid increase in supermarkets and modern shopping centers. In June 2022, the Central Pollution Control Board (CPCB), a federal agency under the Ministry of the Environment, released a list of steps to outlaw specific single-use plastic products by June 2022. Such measures are delayed due to the different options adopted by the State Governments which considerably effect the demand for paper packaging in the country.

5. Internal Control systems and their Adequacy

The Company has adequate control systems commensurate with its business activities.

6. Financial Performance with respect to Operational Performance

Revenues – Standalone

During the year under review, the Company on a standalone basis has recorded an Rs. 1,486.59 lakhs as against Rs. 1,009.39 Lakhs for the previous financial year. The Company recorded a net profit of Rs. 12.84 Lakhs for the financial year 2023-24as against the net profit after tax of Rs. 20.42lakhs for the previous year.

Revenues – Consolidated

During the year under review, the Company on aconsolidated basis, has recorded the total revenue of the Company for the financial year 2023-24 was Rs. 3,411.19 Lakhs as against Rs. 1,892.23 lakhs for the previous financial year. The Company recorded a net profit of Rs. 96.78 Lakhs for the financial year 2023-24 as against the net profit after tax of Rs. 25.78lakhs for the previous year.

7. Material developments in Human Resources / Industrial Relations from, including number of people employed.

There are no material developments in Human Resources / Industrial Relations from FY 23 to FY 24.

8. Details of any change in Return or Net Worth as compared to the immediately previous financial year.

CONSOLIDATED FINANCIALS RATIOS:

Change in Return on Net worth as compared to the immediately previous financial year along with a detailed explanation thereof: The Share Capital of the Company is Increased from 300.00 Lakhs to 1200.00 Lakhs in Current Year.

Any other Sector Specific ratios, as applicable: NIL

9. Disclosure of Accounting Treatment

During the preparation of Financial Statement of F.Y. 2023-24 the treatment as prescribed in an Accounting Standard has been followed by the Company. There are no significant changes in Accounting Treatment as followed by the Company in current financial year as compared to previous financial year.

10. Cautionary Statement

Although we believe we have been prudent in our projections, estimates, assumptions, expectations or predictions while making certain statements, realization is dependent on various factors. Should any known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information.