Kay Power & Paper Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENT

The Indian paper and packaging industry continued to register steady growth during the financial year 2026-27, supported by increasing domestic consumption, expanding manufacturing activities, growth in e-commerce and logistics, and rising demand for sustainable packaging solutions. Among the various segments of the paper industry, Kraft paper manufactured from recycled fibre continued to remain one of the key growth drivers owing to its extensive use in corrugated boxes, industrial packaging, FMCG products, food processing, pharmaceuticals, consumer goods, textiles and export-oriented industries.

The demand for Kraft paper remained robust during the year, driven by the rapid expansion of e-commerce, organised retail, warehousing and integrated supply chain networks. Increasing preference for recyclable and biodegradable packaging materials, coupled with growing environmental awareness among consumers and businesses, has accelerated the adoption of recycled Kraft paper as a sustainable alternative to plastic-based packaging.

The Government of India continues to encourage sustainable manufacturing practices through various initiatives relating to recycling, waste management, circular economy and Extended Producer Responsibility (EPR). These measures are expected to strengthen the long-term demand for recycled paper products while promoting efficient utilisation of natural resources.

The Indian paper industry comprises paperboard and industrial packaging paper, writing and printing paper, newsprint, tissue paper and specialty paper. Paperboard and industrial packaging paper continue to account for the largest share of the industry, supported by sustained demand from manufacturing, agriculture, food processing, pharmaceuticals, consumer goods and logistics sectors.

During the year under review, the industry also experienced certain challenges, including volatility in recovered paper prices, fluctuations in energy and freight costs, increasing environmental compliance requirements and competitive pricing pressures. Nevertheless, improvements in manufacturing technology, operational efficiency and supply chain management have enabled manufacturers to effectively manage these challenges and improve productivity.

Kay Power and Paper Limited continues to manufacture quality Kraft paper using indigenous and imported waste paper as its principal raw material. The Company remains committed to maintaining consistent product quality, improving operational efficiency, optimising resource utilisation and strengthening customer relationships. During the year, the management continued to focus on prudent raw material procurement, cost optimisation and process improvements to enhance operational performance and profitability.

Looking ahead, the outlook for the Indian Kraft paper industry remains positive. Continued growth in e-commerce, organised retail, manufacturing, infrastructure development and logistics, together with increasing regulatory emphasis on sustainable packaging and recycling, is expected to drive longterm demand for recycled Kraft paper. The Company believes that its continued focus on quality, operational excellence, customer satisfaction and responsible manufacturing practices will enable it to capitalise on future growth opportunities and create long-term value for all stakeholders.

OPPORTUNITIES AND THREATS

OPPORTUNITIES

The Indian Kraft paper and packaging paper industry continues to offer significant growth opportunities, supported by favourable economic conditions, increasing industrial production and the growing preference for sustainable packaging solutions. Rising environmental awareness and the gradual shift from plastic packaging to recyclable and paper-based alternatives continue to drive demand for Kraft paper across a wide range of industries.

The rapid expansion of e-commerce, quick-commerce, organised retail, food delivery platforms and third-party logistics has significantly increased the demand for corrugated boxes and protective packaging materials. Owing to its strength, durability, recyclability and cost-effectiveness, Kraft paper continues to remain the preferred packaging material for these applications.

The continued growth of the FMCG, pharmaceuticals, food processing, agriculture, electronics, textiles and consumer durables sectors is expected to generate sustained demand for packaging paper. In addition, increasing investments in warehousing, logistics infrastructure, industrial corridors and manufacturing facilities are expected to further strengthen the long-term growth prospects of the packaging industry.

Government initiatives promoting sustainable manufacturing, circular economy practices and Extended Producer Responsibility (EPR), together with regulatory measures aimed at reducing plastic waste, continue to encourage the adoption of recyclable and environmentally responsible packaging materials. These initiatives are expected to create long-term growth opportunities for manufacturers engaged in the production of recycled Kraft paper.

Growing consumer preference for eco-friendly and biodegradable packaging has also increased the use of Kraft paper in premium retail packaging, shopping bags, food packaging, gift wrapping and customised packaging solutions. Further, increasing exports from India and continued emphasis on domestic manufacturing under the "Make in India" initiative are expected to support sustained demand for high-quality packaging paper.

Continuous technological advancements in paper manufacturing, automation, energy-efficient production processes and quality control systems are enabling manufacturers to improve productivity, optimise resource utilisation, reduce production costs and enhance product quality. These developments are expected to strengthen the competitiveness of the industry and provide companies with opportunities to improve operational efficiency, expand their customer base and achieve sustainable long-term growth.

THREATS AND CHALLENGES

While the long-term outlook for the Kraft paper industry remains positive, the industry continues to face several operational, financial and regulatory challenges.

1. Raw Material Availability and Price Volatility

The availability and pricing of recovered paper, waste paper and other raw materials remain volatile due to fluctuations in domestic supply, international market conditions and import dependency. Rising procurement costs directly impact manufacturing costs and operating margins.

2. Energy and Fuel Costs

Paper manufacturing is an energy-intensive process. Increases in electricity tariffs, coal prices, fuel costs and transportation expenses continue to influence production costs and overall profitability. Improving energy efficiency remains a key priority for the industry.

3. Environmental and Regulatory Compliance

Manufacturers must comply with increasingly stringent environmental regulations relating to emissions, water consumption, waste management and pollution control. Compliance with evolving statutory requirements may require additional capital investment and operating expenditure.

4. Intense Market Competition

The Indian Kraft paper industry remains highly competitive, with the presence of numerous organised and unorganised manufacturers. Competitive pricing, capacity additions and imported paper products continue to exert pressure on profit margins and market share.

5. Technological Upgradation

Rapid advancements in manufacturing technology require continuous investment.

6. Supply Chain and Logistics Risks

7. Quality and Customer Expectations

8. Occupational Safety and Business Continuity

9. Industrial operations are exposed to risks such as fire, machinery breakdown, accidents and natural calamities. During the previous period, the Company experienced a fire incident, reinforcing the need to strengthen safety systems, preventive maintenance, insurance coverage and disaster recovery plans. The Company continues to implement appropriate risk mitigation measures to safeguard its assets and ensure business continuity.

Despite these challenges, the management believes that the long-term fundamentals of the Indian packaging paper industry remain strong. Increasing domestic consumption, rising environmental awareness, favourable Government policies, expanding manufacturing activities and sustained growth in the e-commerce and logistics sectors are expected to support continued demand for Kraft paper. The Company remains committed to improving operational efficiency, maintaining product quality, strengthening customer relationships and adopting sustainable manufacturing practices to create long-term value for its stakeholders.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company operates in a single business segment, namely the manufacture and sale of Kraft paper. Accordingly, there are no separate reportable business or geographical segments requiring disclosure during the financial year 2026-27 in accordance with the applicable Indian Accounting Standards.

The Company caters to a diversified customer base through its established dealer and customer network, primarily across Western and Southern India. During the year under review, the Company continued to strengthen its market presence by maintaining longstanding customer relationships, expanding its dealer network and enhancing customer service.

The Company manufactures a wide range of recycled Kraft paper with grammage ranging from 80 GSM to 180 GSM, catering to the packaging requirements of industries such as corrugated box manufacturing, FMCG, food processing, pharmaceuticals, textiles, engineering, agriculture, consumer goods and e-commerce. Its ability to manufacture different grades of Kraft paper enables it to meet diverse customer specifications and evolving market requirements.

Despite fluctuations in raw material prices, energy costs and competitive market conditions, the Company remained focused on maintaining consistent product quality, improving operational efficiency and ensuring timely deliveries. Continued emphasis on quality assurance, efficient production processes and customer satisfaction enabled the Company to maintain its competitive position during the year.

The Company also continued to adopt prudent inventory management and effective production planning to optimise capacity utilisation and operational performance. Its focus on quality control, cost optimisation and customer-centric business practices has further strengthened its reputation in the domestic Kraft paper market.

The management remains confident that increasing demand for sustainable and recyclable packaging materials, supported by the continued growth of the packaging, logistics and e-commerce sectors, will create significant opportunities for the Companys products. The Company will continue to focus on operational excellence, strengthening its distribution network and delivering valueadded products to meet evolving customer requirements.

REVIEW OF PERFORMANCE

During the financial year 2026-27, the Company recorded Revenue from Operations of 2,438.04 lakhs and Other Income of 54.68 lakhs, resulting in a Total Income of 2,492.72 lakhs. The Company earned a Profit After Tax of 101.02 lakhs, reflecting a satisfactory financial performance despite challenging market conditions characterized by fluctuations in raw material prices, rising energy costs and intense competition within the paper industry.

During the year under review, the Company continued to focus on improving operational efficiency, prudent cost management and effective utilization of available resources. Continuous emphasis on quality assurance, customer satisfaction and timely execution of orders enabled the Company to maintain its presence in the domestic Kraft paper market.

The demand for Kraft paper remained stable during the year, primarily driven by sustained growth in the packaging, corrugated box, FMCG, pharmaceuticals, food processing and logistics sectors. The Company continued to cater to the requirements of its customers through its established dealer network and maintained healthy business relationships with its customers.

During the financial year, the Company did not undertake any major capital expenditure, expansion or modernization activities and there were no export sales. The management remained focused on optimizing existing manufacturing facilities and improving operational efficiencies through better resource utilization and effective cost control measures.

During the year under review, the Company was affected by a fire incident on 12th March, 2026, which caused disruption to certain operations. The management promptly initiated necessary corrective measures, activated its business continuity plans and undertook restoration activities to minimize the operational impact. The Company has also strengthened its safety systems, preventive maintenance practices and risk management framework with a view to preventing similar incidents in future.

The management remains optimistic about the future prospects of the Company in view of the favourable outlook for the Indian packaging industry, increasing demand for sustainable paper-based packaging materials and the Companys continued focus on product quality, operational excellence and customer satisfaction. The Company will continue to pursue operational improvements, cost optimization and market expansion initiatives to enhance shareholder value and achieve sustainable long-term growth.

STRATEGIES

To sustain long-term growth, strengthen its market position and respond effectively to the evolving business environment, the Company continues to focus on the following strategic initiatives:

Quality Enhancement: The Company remains committed to manufacturing high-quality Kraft paper that consistently meets customer specifications and industry standards. Continuous improvement in quality management systems, stringent process controls and customer feedback mechanisms enable the Company to enhance product reliability, strengthen customer confidence and maintain longterm business relationships.

Operational Efficiency and Cost Optimization: The Company continues to emphasize efficient utilization of resources, optimization of manufacturing processes and effective cost management. Continuous monitoring of production parameters, reduction of process losses and improvement in productivity remain key focus areas to enhance operational performance and profitability.

Sustainable Manufacturing Practices: The Company is committed to promoting environmentally responsible manufacturing by maximizing the use of recycled waste paper, improving resource efficiency and adopting sustainable production practices. The management continues to focus on reducing energy consumption, minimizing waste generation and ensuring compliance with applicable environmental regulations.

Customer-Centric Approach: Customer satisfaction continues to remain a cornerstone of the Companys business strategy. By ensuring consistent product quality, timely deliveries and prompt customer service, the Company aims to strengthen existing customer relationships while expanding its presence in both existing and new markets.

Market Expansion: The Company continues to strengthen its dealer network and enhance its market presence across key domestic markets. The management is focused on identifying new customers, exploring emerging application segments and increasing market penetration in the growing packaging industry.

Risk Management and Business Continuity: Following the fire incident experienced during the previous period, the Company has strengthened its safety standards, preventive maintenance programmes, fire protection systems and business continuity measures. The management remains committed to enhancing operational resilience through continuous risk assessment and implementation of appropriate mitigation strategies.

Technology and Process Improvement: Although no major capital expansion or modernization was undertaken during the year, the Company continues to improve manufacturing efficiency through process optimisation, preventive maintenance, quality control and adoption of best operating practices to enhance productivity and reduce operating costs.

Looking ahead, the Company will continue to focus on operational excellence, prudent financial management, sustainable manufacturing practices, customer satisfaction and strengthening its competitive position. The management remains confident that the continued growth of the Indian packaging industry, increasing demand for recyclable paper products and favourable market fundamentals will provide opportunities for sustainable growth and long-term value creation for all stakeholders.

OUTLOOK, RISK AND CONCERN MANAGEMENT PERCEIVES

The Indian paper and packaging industry continues to exhibit positive long-term growth prospects, supported by increasing demand for sustainable and recyclable packaging solutions, expanding manufacturing activities, rapid growth in e-commerce and logistics, and rising consumption across the FMCG, food processing, pharmaceutical, agriculture and consumer goods sectors. The growing emphasis on environmental sustainability, circular economy practices and regulatory initiatives promoting paper-based packaging are expected to continue driving demand for recycled Kraft paper in the coming years.

The Company believes that the longterm fundamentals of the Indian Kraft paper industry remain strong. Increasing industrialization, infrastructure development, organized retail, warehousing and changing consumer preferences towards eco-friendly packaging are expected to provide sustained growth opportunities for the packaging paper sector. The Company will continue to focus on operational excellence, quality improvement, cost optimization and customer satisfaction to strengthen its competitive position and capitalize on emerging market opportunities.

Notwithstanding the favourable outlook, the Company recognizes that its business is exposed to various risks and uncertainties that require continuous monitoring and effective mitigation measures.

Raw Material Availability and Cost: The availability and pricing of recovered paper, waste paper and other raw materials remain subject to domestic and international market conditions. Fluctuations in raw material prices and supply disruptions may adversely affect production costs and operating margins. The Company continues to strengthen its procurement strategy and maintain diversified sourcing arrangements to mitigate such risks.

Energy, Fuel and Logistics Costs: Paper manufacturing is an energy-intensive process. Variations in electricity tariffs, fuel prices, transportation costs and logistics expenses continue to influence manufacturing costs. The Company continuously monitors these costs and focuses on improving operational efficiency and resource utilization to minimize their impact.

Competitive Market Environment: The domestic Kraft paper industry continues to witness intense competition from both organized and unorganized manufacturers, resulting in pricing pressure and margin challenges. The Company remains focused on product quality, customer service, operational efficiency and cost competitiveness to sustain its market position.

Environmental and Regulatory Compliance: The paper industry is subject to stringent environmental, safety and pollution control regulations. The Company remains committed to complying with all applicable statutory and environmental requirements and continuously upgrades its operational practices to meet evolving regulatory standards.

Operational and Business Continuity Risks: Manufacturing operations are exposed to risks arising from fire, machinery breakdown, industrial accidents and natural calamities. Following the fire incident that occurred during the previous period, the Company has further strengthened its fire prevention systems, preventive maintenance programmes, safety protocols, insurance coverage and business continuity planning to enhance operational resilience and safeguard its assets.

Economic and Market Risks: Macroeconomic conditions, inflationary pressures, fluctuations in interest rates, changing customer demand and global economic uncertainties may influence the Companys business performance. The management continues to monitor market developments closely and adopts appropriate business strategies to respond effectively to changing economic conditions.

The Company has established appropriate internal systems for identifying, assessing and mitigating business risks. The management regularly reviews operational, financial and strategic risks and implements suitable control measures to ensure sustainable business growth. With its continued emphasis on quality manufacturing, prudent financial management, efficient operations and customer-centric approach, the Company remains confident of achieving sustainable growth and creating long-term value for its shareholders and other stakeholders.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has established an adequate system of internal financial controls and internal control procedures commensurate with the size, nature and complexity of its business operations. These controls are designed to ensure the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, compliance with applicable laws and regulations, and timely preparation of reliable financial information.

The Companys internal control framework provides reasonable assurance regarding the effectiveness of operational processes, financial reporting, statutory compliance and risk management. Appropriate policies and standard operating procedures have been implemented to ensure that all transactions are properly authorized, recorded, accounted for and reported in accordance with established accounting principles, applicable Indian Accounting Standards (Ind AS) and statutory requirements.

The management continuously reviews and strengthens the internal control environment through periodic monitoring, supervisory controls and management reviews. The Company has also implemented suitable controls over procurement, production, inventory management, sales, finance and other key operational functions to enhance efficiency, accountability and transparency.

The Audit Committee of the Board periodically reviews the adequacy and effectiveness of the Companys internal financial control systems, internal audit observations and compliance framework. The recommendations of the Audit Committee and management are implemented in a timely manner to further strengthen the Companys governance practices and operational controls.

During the year under review, the Company continued to enhance its internal control processes and risk management systems with particular emphasis on operational safety, asset protection and business continuity. Following the fire incident experienced during the previous period, the Company reviewed and reinforced its safety procedures, preventive maintenance programmes, fire protection measures and insurance coverage to strengthen operational resilience and minimize business risks.

The management believes that the existing internal control systems are adequate and effective and provide reasonable assurance that the Companys assets are safeguarded, business risks are appropriately managed, statutory compliances are adhered to and financial information is reliable, thereby supporting the achievement of the Companys business objectives and long-term sustainable growth.

HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS

The Company firmly believes that its human resources are its most valuable asset and a key driver of sustainable growth. The Company continues to maintain fair, transparent and equitable human resource policies that promote equal employment opportunities, employee welfare, professional development and a performance-oriented work culture. The management remains committed to fostering an inclusive workplace where employees are encouraged to contribute through innovation, teamwork, accountability and continuous improvement.

The Companys human resource practices focus on attracting, developing and retaining competent talent by providing continuous learning opportunities, performance-based recognition and career development initiatives. Regular training programmes are organized to enhance the technical, operational, safety and managerial skills of employees, enabling them to adapt to changing business requirements and technological advancements in the paper industry.

The Company continues to emphasize workplace safety, occupational health and employee well-being by maintaining appropriate safety standards, conducting awareness programmes and ensuring compliance with applicable statutory and labour regulations. Following the fire incident experienced during the previous period, additional emphasis has been placed on strengthening safety awareness, emergency preparedness, fire prevention measures and safe operating practices across the manufacturing facility.

The management maintains open communication and constructive dialogue with employees at all levels, fostering a positive work environment based on mutual trust, transparency and respect. Cordial industrial relations prevailed throughout the year under review, and there were no significant industrial disputes affecting the Companys operations.

As on 31st March, 2026, the Company had 45 employees on its rolls.

The Company remains committed to nurturing its human capital through continuous skill development, employee engagement and a safe and healthy working environment. The management believes that a motivated, skilled and dedicated workforce will continue to play a pivotal role in achieving the Companys strategic objectives and creating sustainable value for all stakeholders.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Financial performance with respect to operational performance is explained in detail in the beginning of the Directors Report. The management is making continuous efforts to improve its financial and operational performance.

There were significant changes in the following ratios (i.e. change of 25% or more as compared to the previous financial year) during the financial year 2025-26 compared to immediately previous financial year.

Particulars	Unit of Measurement	March 31, 2026	March 31, 2025	Variation in %	Reasons for change
Current Ratio	In multiples	3.01	0.78	281.89%	The current ratio is improved in the year under consideration due to substantial decrease in Trade Payables
Debt Equity Ratio	In multiples	0.002	0.017	-87.04%	Debt Equity ratio is improved in the year under consideration due to increase in equity on account of internal accruals and addition to paid up share capital and decrease in outside debts
Return on Equity Ratio	In %	1.56%	4.21%	-63.09%	Return on equity ratio is decreased due to increase in equity on account of internal accruals and addition to paid up share capital.
Inventory Turnover Ratio	In days	31.05	20.34	26.06%	Inventory Turnover Ratio is increased as the sale during the year is decreased substantially
Trade receivables Turnover Ratio	In days	76.09	36.60	107.90%	Trade Receivable turnover ratio is increased during the year as the sale is substantially decreased during the year while amount of trade receivable is also increased
Trade Payables Turnover Ratio	In days	180.73	96.13	88.01%	Trade payable ratio is increased during the year as the amount of purchases were lower while amount of trade payable is increased

There were significant changes in the following ratios (i.e. change of 25% or more as compared to the previous financial year) during the financial year 2025-26 compared to immediately previous financial year.

Particulars	Unit of Measurement	March 31, 2026	March 31, 2025	Variation in %	Reasons for change
Net Profit Ratio	In %	4.14%	2.78%	48.89%	Net Profit Ratio is increased during the year as the amount as the company earned higher gross margin on sale and earned good profit on lower amount of sale
Return on Capital Employed	In %	1.55%	2.74%	-43.53%	The return on equity ratio decreased due to increase in equity due to plough back of profit and addition to paid up equity share capital
Return on Investment	In %	1.39%	2.31%	-39.75%	Return of investment ratio is decreased during the years because the amount of total assets is increased during the year

CAUTIONARY STATEMENT

The statements contained in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations, outlook or predictions may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions, expectations and perceptions of future events, prevailing economic conditions, industry trends, Government policies, regulatory environment and other factors that the Company believes to be reasonable as on the date of this Report.

Forward-looking statements are inherently subject to various risks, uncertainties and other factors, both internal and external, including but not limited to changes in economic conditions, fluctuations in raw material and energy prices, changes in Government policies and regulations, market demand, competitive pressures, technological developments, environmental regulations, supply chain disruptions, inflationary trends, geopolitical developments and other unforeseen circumstances that could cause actual results, performance or achievements of the Company to differ materially from those expressed or implied in such statements.

The Company undertakes no obligation to publicly revise, amend or update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable laws, regulations or statutory obligations.

Readers are, therefore, advised to exercise due caution while placing reliance on such forward-looking statements and are encouraged to consider the risks and uncertainties associated with the Companys business and operations while evaluating the information contained in this Report.

For and on behalf of the Board

Deepa Agarwal

Chairman and Managing Director

DIN: 00452947

Place: - Satara

Date: - 12th August 2026