Emami Paper Mills Ltd Management Discussions

Global economy

Overview: The global economy registered a decline in growth from 3.5% in 2022 to an estimated 3.1% in 2023. Asia is expected to contribute significantly to global growth in 2023-24, despite the weaker-than-expected recovery in China, sustained weakness in USA, rising energy costs in Europe, weak global consumer sentiment due to the Ukraine-Russia war, and the Red Sea crisis resulting in increased logistics costs. A tightening monetary policy translated into increased policy rates and interest rates for new loans.

Growth in advanced economies is estimated to decline from 2.6% in 2022 to 1.5% in 2023 and further, 1.4% in 2024 as policy tightening takes effect. Emerging market and developing countries are projected to report a modest decline in economic growth from 4.1% in 2022 to 4.0% in 2023 and 2024. Global inflation is projected to decline steadily from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024 on account of a tighter monetary policy coupled with relatively lower international commodity prices. Core inflation is expected to decrease gradually, as inflation is not expected to return to its target until 2025 in most cases. The US Federal Reserve approved a much-anticipated interest rate hike that raising the benchmark borrowing costs to their highest in over 22 years.

Global trade in goods was expected to have decreased by an approximate USD 2 trillion in 2023; trade in services increased by an estimated USD 500 billion. The average cost of Brent crude oil in 2023 stood at USD 83 per barrel, a downturn as compared to USD 101per barrel in 2022. This decrease comes on account of from Russia finding crude oil destinations outside the European Union and global crude oil demand falling short of expectations.

Global equity markets ended 2023 on a strong note, with major global equity benchmarks achieving double-digit returns. This outperformance was driven by a downturn in global inflation, slide in the dollar index, declining crude prices and higher expectations of rate cuts by the US Fed and other Central banks.

Regional growth (%)	2023	2022
World output	3.1	3.5
Advanced economies	1.69	2.5
Emerging and developing economies	4.1	3.8

(Source: UNCTAD, IMF)

Performance of major economies, 2023

United States: Reported GDP growth of 2.5% in 2023 compared to 1.9% in 2022

China: GDP growth was 5.2% in 2023 compared to 3% in 2022

United Kingdom: GDP grew by 0.4% in 2023 compared to 4.3% in 2022

Japan: GDP grew 1.9% in 2023 unchanged from a preliminary 1.9% in 2022

Germany: GDP contracted by 0.3% in 2023 compared to 1.8% in 2022

(Source: PWC report, EY report, IMF data, OECD data, Livemint)

Outlook: Asia is poised to continue leading global growth in 2024-25. Inflation is expected to ease gradually as cost pressures decreases; headline inflation in G20 countries is projected to decline. Amid high inflation and monetary tightening, the global economy has shown resilience as the growth is expected to be stabilised at previous levels over next two years (Source: World Bank).

Indian economy

Overview: The Indian economy was estimated to grow 7.8% in FY 2023-24 as against 7.2% in FY 2022-23 primarily driven by improved performance in the mining and quarrying, manufacturing and certain segments of the services sector. India has maintained its position as the fifth largest economy in the world. The Indian rupee displayed relative resilience compared to the previous year as the rupee depreciated 0.8% from H 82.66 against the US dollar on the first trading day of 2023 to H 83.35 on 27 December versus the greenback.

In the 11 months of FY 2023-24, the CPI inflation experienced an average of 5.4% with rural inflation exceeding urban inflation. Food inflation experienced a spike on account of lower production and erratic weather. Core inflation, on the other hand, averaged at 4.5%, down from 6.2% in FY 23, moderated by softening global commodity prices.

Indias foreign exchange reserves reached a historic peak of USD 645.6 billion. The credit quality of Indian companies remained robust from October 2023 to March 2024 on account of deleveraged Balance Sheets, sustained domestic demand and government-led capital expenditure. Rating upgrades continued to surpass rating downgrades in the second half of FY 202324. UPI transactions in India witnessed a record 56% growth in volume and 43% growth in value in FY 2023-24.

Growth of the Indian economy

	FY 21	FY 22	FY23	FY24
Real GDP growth (%)	-6.6	8.7	7.2	8.2

Growth of the Indian economy quarter by quarter, FY 202324

	Q1	Q2	Q3	Q4
	FY24	FY24	FY24	FY24
Real GDP growth (%)	8.2	8.1	8.4	7.8

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

Indias monsoon in 2023 hit a five-year low, with August marking the driest month in a century. Despite receiving only 94% of its long-term average rainfall from June to September, wheat production estimatedly recorded 114 million tonnes in the 2023-24 crop year due to higher coverage. Rice production was anticipated to decrease to reach 106 million metric tons (MMT) in comparison to 132 million metric tonnes in the previous year. Total kharif pulses produced in 2023-24 stood at an estimated 71.18 lakh metric tonnes, which is lower than FY 2022-23 due to climatic conditions. As per the first advance estimates of national income released by the National Statistical Office (NSO), the manufacturing sector output is projected to have grown 6.5% in FY 2023-24 compared to 1.3% in FY 2022-23. The Indian mining sector experienced an estimated growth of 8.1% in FY 2023-24 compared to 4.1% in FY 2022-23. Financial services, real estate and professional services grew a projected 8.9% in FY 2023-24 compared to 7.1% in FY 2022-23.

Real GDP or GDP at constant prices increased from to H160.71 lakh crore in FY 2022-23 (provisional GDP estimate released on 31st May, 2023) to an estimated H173.82 lakh crore in FY 2023-24. Growth in real GDP during 2023-24 stood at 8.2% compared to 7.2% in FY 2022-23. Nominal GDP or GDP at current prices was estimated at H295.36 lakh crore in FY 202324 as compared to the provisional FY 2022-23 GDP estimate of H269.50 lakh crore. The gross non-performing asset ratio for scheduled commercial banks improved from 4.1% as of March 2023 to 2.8% as of March 2024.

Indias exports of goods and services were expected to reach USD 900 billion in FY 2023-24 compared to USD 770 billion in the previous year despite global headwinds. Merchandise exports were expected to expand between USD 495 billion and USD 500 billion, while services exports were expected to touch USD 400 billion during the year. Indias net direct tax collection increased 17.7% to H19.58 lakh crore in FY 2023-24. Gross GST collection amounted to H20.2 lakh crore, marking an 11.7% increase, with an average monthly collection of H1,68,000 crore, surpassing the previous years average of H1,50,000 crore.

The agriculture sector was projectedly grew 1.8% in FY 202324, which is lower than the 4% expansion recorded in FY 202223. Trade, hotel, transport, communication and services related to broadcasting segment are estimated to grow at 6.3% in FY 2023-24, a contraction from 14% in FY 2022-23. The Indian automobile segment was expected to close FY 2023-24 with a growth of 6-9%, despite global supply chain disruptions and rising ownership costs. The construction sector was expected to grow 10.7% year-on-year from 10% in 2023-23. Public administration, defence and other services were projected to grow by 7.7% in FY 2023-24 as against 7.2% in FY 2022-23. The growth in gross value added (GVA) at basic prices was pegged at 6.9%, down from 7% in FY 2022-23.

India entered a pivotal phase in its S-curve, marked by rapid urbanisation, industrialisation, increase in household incomes and rising energy consumption. The country emerged as the fifth largest economy with a GDP of USD 3.6 trillion and nominal per capita income of H123,945 in FY 2023-24.

In FY2023-24, Indias Nifty 50 index experienced a 30% growth, propelling Indias stock market to become the fourth largest globally with a market capitalisation of USD 4 trillion. Foreign investment in Indian government bonds saw a significant increase in the final quarter of 2023. India ranked 63rd out of 190 economies in the ease of doing business, according to the latest World Bank annual ratings. Moreover, Indias unemployment rate decreased to 3.2% in 2023, down from 6.1% in 2018.

Outlook: India successfully tackled its global economic challenges in 2023 and is poised to continue as the worlds fastest-growing major economy backed by a growing demand, moderate inflation, stable interest rates and robust foreign exchange reserves. The Indian economy is anticipated to surpass USD 4 trillion in 2024-25.

Union Budget FY 2024-25: The Interim Union Budget 2024-25 continued to prioritise capital expenditure spending, comprising investments in infrastructure, solar energy, tourism, medical ecosystem and technology. In 2024-25, the top 13 ministries in terms of allocations accounted for 54% of the estimated total expenditure. Of these, the Ministry of Defence received the highest allocation at H 6,21,541 crore, constituting13% of the total budgeted expenditure of the central government. Other ministries with high allocation included Road transport and highways (5.8%), Railways (5.4%) and Consumer Affairs, food and public distribution (4.5%). (Source: Times News Network, Economic Times, Business Standard, Times of India)

Global paper industry overview

The global pulp and paper market is estimated at USD 365.60 billion in 2023 and is expected to reach USD 434.36 billion with a CAGR of 2.35% between 2024 to 2031. The market has been on a growth trend in the last few years, catalysed by factors such as population growth, urbanisation, and rising consumer demand for paper-based products. Moreover, the rising trend towards sustainable and eco-friendly packaging solutions is anticipated to propel the demand for the product in the coming years.

To remain competitive, pulp and paper industry players emphasised the development of advanced technologies and processes to enhance efficiency, moderate production costs, and improve product quality. Moreover, the industry adopted sustainable practices to moderate environmental impact and address the rising demand for eco-friendly products.

However, the pulp and paper industry faced challenges. This included increasing digitisation, leading to a downturn in the demand for paper products. Furthermore, the fluctuating availability and increasing prices of raw materials such as wood pulp and chemicals affected sectorial viability.

Regional analysis

The Asia-Pacific region is the current market leader with a 37.84% share in 2023 in the packaging industry on account of rising demand for packaging materials. The region is anticipated to witness a significant growth in the pulp and paper market over the upcoming years. This can be attributed to the rising demand for paper and packaging products in countries such as China and India, alongwith the increasing industrialisation and urbanisation in the region.

The European paper market is expected to grow at a CAGR of 4.47% for the time span - 2024 to 2029. The increasing demand from e-commerce applications provided a boost for the paper market in Europe as consumers turned to online shopping during the lockdown.

The market size of Chinas paper and paperboard industry stood at USD 225.27 billion in 2023.

The paper market in Japan stood at USD 16.36 billion in 2024 and expected a CAGR of 1.17% from 2024-28.

E-commerce expansion

The rise of internet and smartphone usage in emerging markets such as China, India, Southeast Asian nations, Brazil, and others, catalysed the growth of online retailing. Particularly, among younger consumers, there was a growing trend of purchasing cosmetics, food, groceries, and other products online.

Paper is an optimal choice for lightweight and efficient packaging. The escalating demand for sustainable retail packaging is aimed at countering the adverse effects of plastic waste, boosting the demand for paper-based packaging solutions. Consequently, the use of corrugated boxes and paper bags is anticipated to surge.

In response to this trend, stakeholders in the pulp and paper industry concentrated on the creation of innovative, sustainable, and cost-effective paper-based packaging options. They implemented environment-friendly practices to reduce their ecological footprint and cater to the growing consumer demand for sustainable packaging solutions. (Source: Statista, Resourcewise,

Mordor Intelligence, Statista, Industry Arc, Extrapolate, India Brand Equity Foundation)

Indian paper industry overview

The pulp and paper market in India was valued at USD 14.75 billion in 2023 and expected to reach USD 35.57 billion by 2030, growing at a CAGR of 13.4% during the time spanning 2023 to 2030. The market value of the Indian paper industry was forecast to peak USD 19.1 billion in 2033. Among the various business segments within the paper industry, the packaging industry fared well across application segments like the pharma sector and FMCG, catalysed by e-commerce.

The Indian paper industrys volume growth is expected to have declined to a 2-5% range in FY 2023-24 as against ~7% in FY 2022- 23. Besides, the industrys revenues were projected to have declined by ~7-10% in FY 2023-24 amid a decline in realisations. The realisation levels in the packaging paper segment (more than 60% of total demand) witnessed a decline starting from the second quarter of FY2023, as the input prices and rising competition softened. This trend continued in FY 2023- 24 as well.

Outlook

The long-term demand outlook for paper in the Indian market remained moderately positive, due to the relatively low per-capita consumption compared to global averages. The implementation of the New Education Policy (NEP) is expected to stimulate demand for printing and writing paper. The increasing use of specialised and traditional packaging in FMCG, healthcare, e-commerce, pharmaceuticals, and consumer industries is expected to drive demand; a focus on innovative and visually appealing packaging, and ongoing transition from plastic to paper-based packaging in the FMCG and food product sectors is expected to catalyse demand as well. (Source: Maximize Market Research, ICRA, Financial Express)

Global paper and paperboard packaging industry overview

The global paper and paperboard packaging market size is estimated at USD 398.65 billion in 2024, and is anticipated to reach USD 501.08 billion by 2029, growing at a CAGR of 4.68% over the time spanning from 2024 to 2029. Paperboard, commonly used in folding cartons, is a predominant material for creating containers. To manufacture paper, the paperboard undergoes several processes including pulping, optional bleaching, refining, sheet forming, drying, calendaring, and winding. Paper packaging materials are notably easier to reuse and recycle than alternatives like metals and plastics.

The growth of the market is propelled by a surge in e-commerce sales and an increasing demand for folded carton packaging. However, the presence of high-performance alternatives may limit the market growth. Paperboard packaging remains one of the top eco-friendly packaging choices, offering versatility in size and a small footprint, which makes it adaptable for nearly all types of end-user industries.

Consumers around the world are increasingly aware of the environmental impacts of packaging and are shifting their buying habits towards more eco-friendly options. This shift is driven by pressure from consumers, governments, and the media on manufacturers to adopt greener practices in their products, packaging, and processes. People are also willing to spend more on environment-friendly packaging, which is expected to drive growth in the paperboard packaging industry.

The global food and beverages market size stood at USD 6,576.96 billion in 2023 and is further anticipated to reach USD 7,000.88 billion in 2024 at a CAGR of 6.4%. In the packaged food industry, paperboard packaging is widely favoured. It is used for various food products such as soups, seasonings, and dairy items. Typically, paperboard is coated with polymers or plastics to preserve its cleanliness and integrity. When compared to glass and metal, it significantly reduces the total weight of the final product while ensuring the freshness of the food. Its neutrality in odour and taste makes paperboard an ideal packaging material. (Source: Mordor Intelligence)

India paper and paperboard packaging industry

The India paper and paperboard packaging market was valued at USD 12.87 billion in 2024 and is forecast to reach USD 17.74 billion by 2029, growing at a CAGR of 6.63% between 2024 and 2029. The growth of the market is dependent on a shift towards flexible packaging on account of high logistics costs, growing retail demand, and increase in the demand for digitally printed packaging.

India has more than enough capacity to produce nearly all grades of paper, yet large imports are threatening the financial health of many mills. Of the over 900 paper mills in the country, only 553 are currently operational. Imports, particularly paper and paperboard from ASEAN countries, enter India duty-free under the ASEAN-India Free Trade Agreement. Additional duty concessions from ASEAN and Korean FTAs, as well as tariff concessions to China under the Asia Pacific Trade Agreement (APTA), have further stimulated paper imports. Subsidies provided to paper mills in some of these countries give them a pricing edge over Indian mills.

For the fiscal year 2023, India exported paper and paperboard products worth around USD 3.04 billion. Conversely, the export value of pulp and waste paper was the lowest at USD 3.59 million. In 2023, Indias per capita paper consumption was about 15 kg. The Indian paper industry contributes 5% to global production, suggesting significant potential for growth.

The flexible packaging market in India is projected to expand by USD 15.57 billion from 2023 to 2028, with a CAGR of 12.69%. There is a growing demand for paper, particularly in the packaging of FMCG products and ready-to-eat foods. Packaging-grade paper represents 55% of the primary types of paper produced in the domestic paper and paperboard industry. In FY 2023-24, the volume of packaging paper was expected to increase by 6-8%, driven by demand in the pharmaceutical and FMCG sectors. Meanwhile, the volume of writing and printing paper grew by a modest 3-5% due to increased digitalisation.

The sectors growth is fuelled by increases in e-commerce, food processing, pharmaceuticals, FMCG, manufacturing, and healthcare. Furthermore, various government initiatives, including Make in India, have positively influenced the packaging industry. The paper and packaging industry ranks as the fifth largest sector in the Indian economy. (Source: Mordor Intelligence, Technavio, Print Week India, Economic Times, Statista)

Wastepaper-based paper manufacturing in India

The demand for pulpable wood in India in FY 2022-23 stood at 11 million tons, which is expected to reach 15 million tons by 2024-25. The availability of the product is pegged at 9 million tons. However, Indias wastepaper collection/recovery is a mere 38% as against 68% in the US.

The paper industry uses wood, agro residues (such as straw and bagasse) and waste paper (imported as well as domestic) as input substrates for production. Currently, in the total production, the share of wood, agro and waste paper-based mills stand at 18%, 7% and 75% respectively. Imports of wastepaper grew by 11.62% in terms of quantity and 9.90% in terms of value in FY 2022-23.

Currently out of 125 newsprint mills in India, 46 have stopped the production of newsprint. The present domestic installed capacity of newsprint stands at 2.2 million tons. The imports of newsprint in the country for FY22 and FY 2022-23 stood at 0.61 million tons and 0.62 million tons respectively. Around 50% of the required newsprint in the nation was met through imports.

75%	Share of waste-paper based mills out of all paper mills in India
68%	Wastepaper collection/recovery in the US
38%	Wastepaper collection/recovery in India

(Source: The Pulp and Paper Times, DPIIT annual report 2022-23, INMA, IPMA)

Environment and economic benefits of wastepaper

Wastepaper consists of various environment and economic benefits:

Energy and water savings: Recycling waste paper is significantly more energy-efficient than producing paper from fresh raw materials. This efficiency comes from the fact that recycled paper fibres have already been subjected to the energy-intensive stages of pulping, bleaching, and refining. Consequently, recycling waste paper can use up to 50% less energy than manufacturing paper from virgin pulp.

Reducing pollution and protecting the environment:

Recycling waste paper contributes to environmental protection by featuring lighter water pollution, reduced water usage, and no waste gas emissions. It also lowers the rate of timber harvesting, which supports ecological balance.

Reduction in carbon emissions: Recycling waste paper reduces energy consumption, thereby helping to decrease carbon emissions. The energy-demanding steps of paper production, including wood chipping, pulping, and drying, generate significant greenhouse gases. By choosing recycled paper, both individuals and industries play a role in curbing these emissions, which in turn helps lessen the effects of climate change.

Saving investment and reducing costs: Investing in wastewater treatment for recycled paper pulp is more cost-effective than for original pulp production. Recycled paper pulp benefits from lower raw material costs, reduced energy consumption, and minimal investment requirements, making its production cost lower than that of original pulp.

Savings

Every 1% increase in waste paper recovery in India leads to savings of:

0.2	Million tons of raw materials
0.16	Million tons of coal
2,750	MW of power
7.7	Million cubic metre of water
0.02	Million tons of greenhouse gas emissions

(Source: Papermart, Paperpulpmachine, pulpandpapertechnology.com)

Writing and printing paper industry in India

The Indian writing and printing paper market was valued at USD 2660.00 million in 2021 and is expected to reach USD 4502.48 million by 2029, registering a CAGR of 6.80 % during the forecast period of 2022 to 2029. The market has expanded significantly in recent years due to the swift adoption of packaging solutions and an increase in home delivery services across various regions. Writing, printing, and specialty paper are essential for protecting and transporting a diverse range of goods. Demand for this paper from catalogues, books, notebooks, industrial printing, stationery, newspapers, magazines, business forms, packaging, and labelling is expected to fuel the growth of the writing, printing, and specialty paper in India. (Source: Data Bridge Market Research)

Growth drivers

Growing literacy: In 2024, Indias literacy rate stood at 77.7%, propelling the demand for writing and printing paper.

Food packaging and beverage: The Indian food and beverage packaging sector is undergoing significant expansion, with its market size expected to grow from USD 33.73 billion in 2023 to USD 46.25 billion by 2028. The industry is seeing innovation, especially in flexible packaging, including pouches and bags, favoured for their versatility and cost-effectiveness.

Growing population: Indias population for 2024 stood at 1.44 billion. The growth in the paper industry will be utilised to cater for the needs of this growing population.

Rising income levels: Indias per capita disposable income is estimated at H 2.14 lakh in FY 2023-24, an increase of 8% year-on-year. Rising income has boosted consumer spending, with more people buying products with high-quality packaging solutions. The Indian paper industry has tapped into this opportunity by capitalizing on a growing demand for quality paperboard and packaging paper and paper boards.

E-commerce expansion: The booming e-commerce sector demands robust packaging solutions. As online shopping grows, so does the need for corrugated boxes, wrapping papers, and other paper-based packaging materials.

Sustainability trends: Increasing environmental concerns are pushing both companies and consumers to seek out greener alternatives to plastic packaging. Paper is often viewed as a more sustainable option, which is boosting its use in packaging applications.

Government policies and regulations: Various government initiatives that promote education and literacy can drive the demand for paper products such as textbooks, notebooks, and other educational materials. Moreover, policies encouraging sustainable packaging solutions also benefit the paper industry. (Source: Economic Times, GeeksforGeeks, Trade Promotion Council of India, Worldometer)

Company overview

Emami Paper Mills Limited, incorporated in 1981, enjoys a leading position as a manufacturer of newsprint, packaging boards writing and printing paper in India. The Company has incorporated measures to safeguard the environment. The Company has a diverse portfolio of products, augmented production capacities and achieved a strong foothold in both domestic and international markets. The Companys resolute focus on customer-centricity and its robust reputation have enabled it to reinforce its leading position in the Indian paper industry.

Opportunities

Rising sustainable packaging focus: The Government and consumers both have concerns about environmentally sustainable packaging solutions, which presents an opportunity for the Company as paper-based packaging is more eco-friendly than plastics and other non-biodegradable materials. The Company can utilise this opportunity by investing more towards sustainable packaging solutions.

Increasing demand: The paper products in the country present a significant opportunity for the Company to grow and expand its operations as the paper products have an increasing demand. The growth-causing factors include population growth, increasing awareness among the people and expansion of the Indian economy.

Growing e-commerce sector: The Company can optimise its opportunities to capture a substantial portion of the growing e-commerce packaging market. There is an increase in the demand for packaging materials made from paper and paper- based products.

Expansion of the digital printing industry: Digital printing is gaining popularity due to its high-quality output and it also requires a specialised range of papers. The Company can tap into this growing demand for digital printing papers and cater for the needs of this industry.

Threats

Intense competition: The competition is intense in the paper industry as there is a presence of a large number of players, in particular small capacity players in the market seeking to capture market share. This creates competition between businesses vying for customers and trying to maintain their position in the market. Another threat to the domestic paper industry in India is from the rampant import of paper.

Volatile raw material costs: The Companys profit margins are dependent on the availability of raw materials such as pulp and other chemicals to manufacture products; with rising global demand and supply chain disruptions, the cost of these raw materials can increase and affect the profit margins.

Fluctuations in foreign currency rates: The Company is exposed to the risks of foreign currency fluctuations because of the import and export of raw materials and finished products. Any changes in the value of the Indian rupee against major currencies can affect the pricing of finished goods and profitability.

Digitalisation: A shift towards a paperless society can impact the demand for paper products. People are increasingly relying on electronic communication and storage, resulting in a reduced demand for paper products. This can impact the sales and profits of the Company.

Risk management

The Company faces various risks and to control these risks the Company has implemented a range of systems, review mechanisms, and procedures to detect and get through these risks.

Raw material risk: The success of the business depend on procuring imported pulp. The availability of pulp affects the Companys paper manufacturing business.

Mitigation: The Company has access to different sources of raw materials to mitigate the impact of imported raw material costs, effective hedging strategies and strategic purchases in the event of supply shortages implemented based on market conditions.

Asset utilisation risk: Fluctuations in demand could affect asset utilisation.

Mitigation: The Companys product portfolio mix offers a variety of products like packaging board, writing and printing paper, niche products as well as newsprint, responding to market movements in a flexible manner.

Talent risk: Talent attrition is a risk.

Mitigation: The Company provides an engaging workplace, which resulted in a high people retention.

Regulatory compliance risk: Non-compliance with regulations can result in penalties as the Company operates in a highly regulated industry.

Mitigation: A team to monitor compliance is appointed to ensure that regulatory compliance is done in the desired manner.

Currency risk: Fluctuations in foreign exchange rates can affect profitability as the Company exports a significant portion of products.

Mitigation: With the help of forward contracts all the foreign currency transactions, including loans, are appropriately hedged.

Economic risk: Economic downturns can affect the demand for paper products.

Mitigation: The Company has created its product mix so that excessive dependence on any one segment has been moderated.

Quality risk: If the Company doesnt fulfil the customers demand with high-quality products then it may cause an adverse effect on the demand for its products.

Mitigation: The Companys certifications (ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018) validate its safety standards.

Liquidity risk: Excessive debt may adversely impact liquidity and profitability.

Mitigation: Moderated debt through timely repayment has strengthened liquidity.

Cyber security risk: Cyber-crimes can lead to the loss of crucial information and theft of confidential data, causing substantial loss for the Company.

Mitigation: Backed with IT security policy. Access control and firewall security also safeguard endpoint systems from Malware, virus, Trojan, and Ransomware.

Financial ratios

Particulars	FY 2023-24	2022-23	Change in ratio	Explanation
Debtors turnover	7.62	9.92	(2.30)	The variance mainly on account of reduction in turnover.
Inventory turnover	7.09	8.78	(1.69)
Interest coverage ratio	3.55	3.10	0.45	Improved profitability strengthen this ratio.
Current ratio	1.02	0.92	0.10	Achieved the benchmark through repayment of short-term debt.
Debt-equity ratio	0.78	1.23	(0.45)	Ratio improved as a result of increase in net worth and debt repayment.
Operating EBITDA margin (%)	12.04%	9.97%	2.08%	Company is able to increase its profitability despite reduction in turnover.
Operating profit margin (%)	10.16%	9.70%	0.46%
Net profit margin (%)	4.23%	2.91%	1.32%
Return on net worth	11.45%	10.23%	1.21%

Human resource

The Company has implemented numerous measures to nurture an involving and engaged workforce. The Company is committed to promoting diversity in the workplace. The Company values its human resources as they are key to its success. Regular training and development opportunities for employees, enabling them to acquire new skills and progress are also provided by the Company. The strength of the employee stood about 1,100 for the year under review.

Sustainability

The Company has always promoted environmental consciousness with recycling techniques. The Company is committed to sourcing wood pulp only through suppliers certified by the Forest Stewardship Council (FSC). The Companys dedication to responsible business practices is highlighted by its protecting and safeguarding measures towards the environment.

Internal control systems

The internal control mechanism is adopted by the Company to ensure the efficient and secure conduct of its operations. To prevent and detect frauds and errors, maintain accurate and complete accounting records as per the Management Information System (MIS). The main objective of these controls is to provide reasonable assurance regarding the proper accounting controls and monitoring of operations while protecting the Companys assets from unauthorised use or losses and ensuring compliance. The Company has engaged the services of an external and independent audit firm to act as its internal auditors. The role of these auditors is to periodically monitor the effectiveness of the Companys internal control measures. Internal auditors are in attendance to discuss their audit reports, management comments, and observations during the meetings of the audit committee. The audit committee encompass various responsibilities including reviewing the adequacy of the internal control environment, ensuring the Companys Risk Management Systems are strengthened in compliance with statutory mandates monitoring the implementation of action plans resulting from internal audit findings. The Company operates a budgetary control system, with key performance indicators (KPIs) established for all significant operational parameters. The KPIs are regularly reviewed by the management team during Management Committee Meetings, which are chaired by the whole-time Director of the Company and attended by all departmental heads.

Cautionary statement

The MDA section may contain forward-looking statements regarding prospects. These statements involve various known and unknown risks and uncertainties, which may result in material differences between actual results and the forward-looking statements. In addition to changes in the macroenvironment, the emergence of a global pandemic like COVID-19 can introduce unforeseen, unprecedented, unascertainable, and continuously evolving risks to the Company and its operating environment. The estimates and figures presented in the report are based on certain assumptions made by the Company, considering internal and external information that is currently available. However, the factors underlying these assumptions can change over time, leading to corresponding changes in the estimates on which they are based. It should be noted that forward-looking statements only reflect the Companys current intentions, beliefs, or expectations as of the date on which they were made. The Company is not obligated to revise or update any forwardlooking statements in light of new information, future events, or other factors.