Genus Paper & Boards Ltd Management Discussions.

I. INDIAN PAPER INDUSTRY

Indias share in the demand for paper across the globe was analyzed 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 li le 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 be er 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. 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 cu ing 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 be er-quality packaging of FMCG products marketed through organized retail. 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 materials.

II. GROWTH AND OPPORTUNITIES

India paper market has grown at more than 10% CAGR starting from 2011-12 to 2016-17. Total paper market is combination of paperboard & industrial packaging paper, paper stationery, newspaper print and specialty paper. The paperboard & industrial packaging paper and newspaper print market altogether will be anticipated to acquire more than 60 % market share of overall paper market at the end of forecasted year. But it is to be forecasted that paper stationery market and specialty paper market will shown the upward trend in annual growth of the market in volume term, where as in value term the growth of paper stationery shows the downward trend. Currently, increasing demand for eco-friendly drives the marketer to find the effective way to meet this emerging demand. With the help of technology advancement paper market touch the new heights as paper industry is benefited in co many ways likewise, production capacity increase, fuel cost decrease, etc.

The Indian paper industry faces challenges like low economies of scale, environmental concerns, increasing cost of inputs & utilities and so on, which need to be addressed by the industry. Many mills have upgraded the technology and are expanding capacities through brown field expansion/ new capacity additions and by focusing on cost control measures. The Company has improved significantly the operational efficiencies. Further, the Mill Expansion Programme envisaging se ing up of co-generation power plant and installation of new capacity of finished paper and other capital expenditure projects will enable the Company to have an edge in quality and further improve the efficiencies.

III. OUTLOOK

Kraft paper is a paper or paperboard that has a more high strength and high tear resistance. It is largely used in the packaging industry and is made from wood pulp or recycling materials and adding chemicals to increase its fiber’s strength, thickness, and durability while maintaining the light weighted property. The growing environmental concerns to use recyclable and degradable packages have led to a rise in the demand for Kraft papers. Kraft papers have a rising trend of manufacturing it through natural recycling which has though lesser strength than virgin natural craft paper, but it is more eco-friendly and still has enough strength to fill void applications. The growing packaging industry and paper industry is largely driving the growth of the global kraft paper market.

Moreover, there is a huge demand for printed craft paper, as the packaging of products such as sandwiches or burgers or shoes also has the company name and logo printed that makes it appealing to the customers. Kraft papers are available in different forms as per the business requirement, thus ranging from kraft paper rolls to kraft paper sheets. Moreover, for packaging the metal objects, poly coated kraft paper is largely used. Further, the government of various countries has mandated to use paper as a packaging substitute; kraft paper where strength is required which has provided the manufacturers an advantageous position and earn higher profits. Goldstein Research analyst forecast that the Global kraft paper market is set to reach nearly USD 87.5 billion by 2024, growing at a CAGR of 3.60% over the forecast period (2017-2025).

IV. RISKS AND CONCERNS

The Company is deriving 98.24% of its revenue from paper business and 1.76% from other business. Environmental issues, continuous availability of raw materials & fuels and increasing interest rates are the important issues concerning the paper industry. The paper industry is one of the highly polluting categories of industries today. The Company is meeting all the norms as prescribed under Environment Protection Act, 1986 and other environmental laws consistently.

V. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

(Rs. in Lakh)

Financial Highlights 2018-19
Revenue from Operations 43143.73
Other Income 221.13
Finance Income 136.95
Profit before Tax (PBT) 1174.76
Profit after Tax (PAT) 782.93
EPS (Basic & Diluted) (in Rs.) 0.30

The Company Posted Net Sales of Rs. 42385.15 lakh and the Net Profit after tax stands at Rs. 782.93 lakh

VI. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has evolved a system of internal controls to ensure that the assets are safeguarded and transactions are authorised, recorded and correctly reported. The internal control system is supplemented by management reviews and independent periodical reviews by the outside chartered accountancy firms which evaluate the functioning and quality of internal controls and provides assurance of its adequacy and effectiveness. The scope of internal audit covers a wide variety of operational methods and, as a minimum, ensures compliance with specified standards with regard to availability and suitability of policies and procedures, extent of adherence, reliability of management information system and authorization procedures including steps for safeguarding of assets. The Reports of internal audit are placed before Audit Commiee of the Directors. Audit Commiee reviews such audit findings and the adequacy of internal control systems. The Statutory Auditors, Internal Auditors and the Cost Auditors of the Company also interact with the Audit Commiee to share their findings and the status of corrective actions under implementation.

VII. HUMAN RESOURCES

Inspite of enduring perhaps the toughest phase in the Company’s history it must be mentioned that the trusted loyal work force has always stood firmly in the hour of need. The Company also looks after its human resources well and always judiciously rewarded performance.

VIII. CAUTIONARY STATEMENT

Statements in this “Management’s Discussions and Analysis” describing the Company’s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include global and Indian demand supply conditions, finished goods prices, raw material availability and prices, cyclical demand, changes in Government regulations, environmental laws, tax regimes, economic developments within India and abroad and other factors such as litigation, industrial relations and other unforeseen events.