Mohit Paper Mills Ltd Management Discussions

Forward-Looking Statements

This Annual Report contains forward-looking information intended to assist investors in evaluating the Companys strategic goals and making informed investment decisions. These forward-looking statements reflect managements current expectations, plans, projections, and assumptions regarding future events and performance.

Forward-looking statements may be identified by the use of words such as “anticipates,” “expects,” “estimates,” “intends,” “plans,” “believes,” and other similar expressions. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied.

While the Company believes the assumptions and expectations reflected in these statements are reasonable at the time of publication, there can be no assurance that such assumptions will prove correct. Actual outcomes may vary significantly due to various risks and uncertainties, including, but not limited to, changes in market conditions, regulatory developments, and operational challenges.

Forward-looking statements are inherently subject to risks and uncertainties and should not be relied upon as guarantees of future performance. The Company undertakes no obligation to update or revise any forward-looking information to reflect subsequent events, new information, or changes in circumstances, except as required by applicable laws or regulations.

Overview

As we navigate the complexities of the modern business landscape, corporate governance remains a critical pillar of success at Mohit Paper Mills Limited (the “Company”). The role of management in steering the company toward sustainable growth, ensuring operational efficiency, and maintaining transparency is more important than ever. Our management team is committed to delivering value not just through financial performance, but by creating positive impacts for all our stakeholders, including employees, customers, shareholders, and the broader community. By adhering to regulatory frameworks and ethical standards, we ensure that our company not only meets its business objectives but also contributes meaningfully to society.

Effective management is essential in cultivating a work environment that promotes innovation, sustainability, and accountability. By aligning our strategies with the interests of our stakeholders, we strengthen the foundation of corporate governance and position ourselves for continued success in the ever-evolving market.

The Company continues to be a prominent player in the Indian paper industry, specializing in the manufacture of a diverse range of writing, printing, and tissue paper. Our operations are primarily agro-based, utilizing agricultural by-products such as bagasse and other readily available agricultural waste materials, reinforcing our commitment to sustainability and resource optimization.

We are continually advancing our technological capabilities to stay ahead in the industry. Our Chemical Recovery Plant, which recovers caustic soda and produces soda ash-a valuable by-product- remains a cornerstone of our resource efficiency strategy. We also take pride in our Effluent Treatment Plant (ETP), which ensures we meet the highest environmental standards for pollution control and water management. In line with our commitment to self-reliance, our Captive Power Plant provides for the entirety of our energy needs, enabling us to operate with greater efficiency and reduced reliance on external power sources.

This report aims to provide a comprehensive overview of the Companys management approach in response to the changing external environment and the evolving landscape of the paper industry. It details our strategic direction, operational and financial performance, and the key developments in human resources and industrial relations for FY 2024-25. Additionally, the report highlights both the risks and opportunities we face, along with an assessment of the effectiveness of our internal control systems.

This report should be read alongside the Companys Financial Statements, supporting schedules, and notes, as well as other relevant information in the Annual Accounts for FY 2024-25. Our financial statements are prepared in full compliance with Indian Accounting Standards (Ind AS) and adhere to the requirements set out by the Companies Act, 2013, along with the regulations issued by the Securities and Exchange Board of India (SEBI).

Industry Structure and Developments:

The Paper Industry: A Key Pillar of the Global Economy

The paper industry plays a vital role in the global economy, with annual revenues exceeding USD 500 billion. Since 1980, global demand for paper has risen significantly from approximately 170 million tonnes per annum (Mtpa) to around 420 Mtpa in 2023. This demand is projected to reach nearly 473480 Mtpa by 2030, growing at an estimated annual rate of 1.1%, according to a global market study by Poyry Management Consulting.

The industry is broadly divided into four major segments:

1. Newsprint

2. Printing and Writing Papers

3. Paperboards for Packaging Applications

4. Tissue and Specialty Papers

Among these, packaging paper and board is the fastest-growing segment globally, driven by the rise in e-commerce and sustainability-focused packaging solutions.

Conversely, the graphic paper segment including newsprint and both coated and uncoated wood- containing and wood-free papers faces considerable challenges due to declining demand in the digital age. From 2022 to 2030, Printing & Writing (P&W) paper markets in Latin America and the Rest of the World are expected to decline slightly at around 0.2% annually, while Europe faces a sharper decline of about 3% per year. In contrast, Asias paper demand remains strong, with packaging and tissue papers growing at 3% and 4% annually, respectively. Although P&W and newsprint markets are shrinking in North America and Europe, this is offset by growth in packaging segments. Overall, demand is shifting from graphic papers to packaging and tissue products. Growth prospects are mixed between Western and emerging markets like India. Many Western producers are strategically exiting the graphic paper sector, with ongoing conversion to packaging, though conversion alone isnt sufficient. These trends create promising opportunities for Indian producers, as the Western graphic paper market shrinks but does not disappear.

Demand for tissue paper, containerboard, and carton board is expected to grow through 2030, driven by rising packaging needs in emerging markets, the booming e-commerce sector, and increasing demand for convenience foods and consumer goods.

Indian Economy

India is recognized as the fastest-growing paper market globally. The Indian pulp and paper industry plays a vital role in the national economy, providing direct employment to around 0.5 million people and indirect employment to an additional 1.5 million. In terms of raw materials, approximately 71% of paper production is based on recovered paper or recycled fiber, 21% on wood and bamboo, and the remaining 8% on agro-residues such as bagasse and wheat straw. The industry maintains strong ties with the farming community, reflecting its deep agro-based roots.

Market Pulp

Market pulp is the second-largest grade in the global pulp and paper industry, accounting for around 16% of total capacity. Since 2020, it has grown at a CAGR of 1.87% and stands out as the only major grade where Latin America leads in production, surpassing the Asia-Pacific region. As a critical raw material in paper manufacturing, market pulp has shown steady growth since 2009.

Global pulp

Global pulp production recorded a 7-year CAGR of 1.1%, rising from 183.9 million tonnes in 2015 to 198.5 million tonnes in 2022. Of this, chemical wood pulp accounted for 158.07 million tonnes, representing 79.6% of total output, while mechanical and semi-mechanical pulp contributed 28.91 million tonnes.

Market Trend

Increasing Demand for Eco-Friendly Packaging Material

The shift toward sustainable practices is driving strong global demand for eco-friendly packaging materials. Paper-based packaging, in particular, is favored for its lower carbon footprint and reduced reliance on energy-intensive resources compared to conventional plastic packaging. As consumers, regulators, and brands increasingly prioritize sustainability, paper has emerged as a key material due to its recyclability, biodegradability, and alignment with circular economy principles.

Key Growth Factors for the Pulp & Paper Industry:

The growing population and rapid urbanization across the Asia-Pacific (APAC) region are major drivers of demand for commercial printing and food packaging. Simultaneously, increasing global environmental concerns and the push to reduce toxic emissions have led to a rise in the use of recycled paper packaging made from fiber crops. This shift is promoting the production of hygienic, sustainable paper products and is expected to significantly support market growth over the forecast period.

Rising consumer awareness about the environmental hazards of plastic, along with the eco-friendly characteristics of fiber-based paper packaging, is further fueling demand. Additionally, the rapid expansion of global e-commerce and retail sectors has created substantial demand for wrapping and packaging paper.

In developing economies, both consumers and manufacturers are increasingly adopting paper-based packaging solutions, reflecting a broader trend toward environmental responsibility and sustainable product choices.

Major Areas of Concern Trend Towards Digitalization

The printing market is evolving as many publishers switch to electronic formats, replacing traditional print volumes. E-books, online newspapers, and digital magazines now dominate, while directories, catalogs, and brochures have electronic alternatives. Increased digital transactions are reducing the need for physical currency and cheques, and advertising investments are shifting toward online platforms and social media. Together, these trends are driving down demand for printed materials like magazines, catalogs, and books, impacting pulp and paper market growth.

Environmental Impact of the Paper Industry

The paper industry, being resource-intensive, often faces scrutiny from environmental advocates concerned about its ecological footprint. The European Environmental Paper Network (EEPN) emphasizes that the industry must contribute to a sustainable future by adhering to seven core principles: reducing global paper consumption and promoting equitable access, maximizing recycled fiber content, ensuring social responsibility, sourcing raw materials sustainably, minimizing greenhouse gas emissions, adopting clean production processes, and maintaining transparency and accountability.

China, the worlds largest consumer of paper and board?with annual consumption exceeding 120 million tonnes is also the top importer of recovered paper and a major producer of recycled paper. However, the Chinese Environmental Paper Network (CEPN) has raised critical concerns including water pollution from untreated mill effluents, unsustainable fiber sourcing practices, deforestation linked to imported pulp, inadequate recovery of waste paper, and excessive paper wastage. Addressing these challenges is vital for the industrys sustainable development and environmental stewardship.

Opportunities and Threats:

Opportunities:

• Anti-Plastic Movement: Rising concerns about plastic pollution are driving demand for biodegradable paper alternatives, supported by government and public initiatives promoting eco-friendly paper products.

• Rise of Online Shopping: Increased online sales are fueling the need for efficient packaging solutions, leading to higher demand for raw materials and corrugated boxes.

• Forest plantation potential.

• Combination of Recycled, Wood & Agro-based papermaking

• Food Packaging: Growing demand for grease-resistant packaging in the food industry is boosting the use of paper-based solutions for various food products and restaurant packaging.

Threats:

• Digitalization: The shift to electronic formats is reducing the demand for traditional print products. E-books, online newspapers, and digital magazines are replacing printed materials, while electronic transactions are diminishing the need for physical currency and

cheques. Digital advertising and social media are also contributing to declining print volumes for magazines, catalogs, and books.

• Lack of Govt. support leading to fragmented and expensive Tree Farming

• Competition in Wood sourcing from competing Industries - Plywood / Particle board / MDF

• Manufacturing cost: The paper industry is capital-intensive, requiring significant investment in machinery, raw materials, and labor. Balancing costs with quality, sustainability, and efficiency is challenging. While new technologies may have high upfront costs, they offer long-term savings and environmental benefits. To stay competitive, the industry must focus on efficiency, waste reduction, and sustainable practices.

Environmental Impact

The paper industry is often under scrutiny for its environmental footprint. To support a sustainable future, the industry must focus on the following priorities:

1. Reduce Paper Consumption: Encourage digital alternatives and promote efficient paper use while ensuring equitable access.

2. Increase Recycled Content: Maximize the use of recycled paper to reduce dependence on virgin fiber and minimize waste.

3. Ensure Social Responsibility: Uphold ethical labor practices and support local communities across the supply chain.

4. Source Fiber Sustainably: Avoid deforestation and commit to certified, sustainable forestry practices.

5. Cut Greenhouse Gas Emissions: Adopt cleaner energy and energy-efficient technologies to lower carbon output.

6. Adopt Clean Production: Use advanced technologies to reduce water and air pollution and control harmful emissions.

7. Promote Transparency: Maintain openness about environmental performance and supply chain practices to build stakeholder trust.

Additional Considerations

• Water Management: Optimize water use and recycling to reduce consumption and pollution.

• Waste Reduction: Strengthen recycling initiatives and minimize waste throughout production and the product lifecycle.

• Biodiversity Protection: Avoid sourcing from ecologically sensitive areas and support habitat conservation.

• Innovation & R&D: Invest in sustainable materials, biodegradable alternatives, and closed- loop production systems.

• Consumer Awareness: Educate consumers on the environmental impact of paper and encourage responsible usage.

Current status of the domestic paper industry

• The Indian paper industry offers significant growth potential, driven by a rising domestic market, supportive government policies, rapid urbanization, and a skilled labor force. However, it also faces key challenges such as high raw material costs, low paper recovery rates, and strict environmental regulations. A balanced and strategic approach-focused on innovation, sustainability, and resource efficiency-is essential to harness opportunities while addressing these constraints. By proactively tackling environmental and operational challenges, the industry can strengthen its long-term sustainability and contribute to a greener future.

Future Outlook

The future of the paper industry will be shaped by several key trends. As digitalization continues, the demand for traditional print media such as newspapers and magazines is expected to decline, prompting a shift toward higher-value specialty papers, particularly in packaging and premium printing. Innovation will also play a major role, with the development of advanced paper materials offering enhanced strength, flexibility, and water resistance. Sustainability will remain a central focus, driving improvements in recycling, cleaner production processes, and responsible forest management. Additionally, the booming e-commerce sector and evolving consumer preferences are expected to significantly increase the demand for paper-based packaging solutions.

Sustainability Initiatives

The company is actively advancing sustainability through a range of focused initiatives. Key efforts include optimizing water and energy use with advanced technologies, promoting recycling by designing recyclable products, and exploring alternative fibers to diversify raw material sources. Energy optimization remains a priority, with investments in energy-efficient and renewable technologies. Collaboration with research institutions, industry peers, and continuous market research supports innovation and ensures alignment with evolving consumer preferences and sustainability goals.

Segment wise or Product wise Performance

The Company is a single product Company and hence segment-wise or product-wise performance is not provided.

Risks and Concerns

Your Company has identified four primary risk categories: Regulatory, Strategic, Operational, and Market risks. Managing these effectively is essential to ensuring long-term sustainability and resilience. A key concern is the availability, cost, and quality of raw materials?making it imperative to diversify sourcing and explore alternative fibers. Technological disruption also presents a risk, necessitating continuous investment in automation, digitalization, and process optimization.

Environmental regulations and climate-related challenges further require the adoption of sustainable practices and clean technologies to minimize impact and maintain compliance. Additionally, the Company operates in a dynamic and highly regulated environment, exposing it to financial, legal, compliance, cybersecurity, and IT-related risks.

To address these, your Company follows a robust risk management framework aimed at minimizing potential disruptions while enhancing its ability to adapt and capitalize on emerging market opportunities. Ongoing policy engagement, proactive mitigation strategies, and collaboration with stakeholders form the cornerstone of this approach.

Human Resources & Industrial Relations

Your Company acknowledges that employees are key stakeholders in its growth journey. It has built a skilled, motivated, and engaged workforce through focused leadership development and continuous training initiatives. As of March 31st, 2025, the Company employed 258 permanent staff members. Industrial relations remained stable and positive throughout the year, fostering a collaborative and performance-driven work culture.

Outlook

The Company remains optimistic about its future growth. Strategic capital investments have been made to scale up production in anticipation of rising demand. Alongside this, efforts are ongoing to strengthen the human resource base to support increased operational volumes. Month-on-month improvements in capacity utilization reflect operational efficiency, while active collaboration with partners is helping to develop new value-added products for the evolving market.

Internal Control Systems

The Company has implemented a robust internal control framework, suited to its scale and operational complexity. An independent internal audit function, managed by an external Chartered Accountant firm, ensures comprehensive operational coverage and oversight. This framework is designed to safeguard assets, uphold compliance, and maintain the accuracy and reliability of financial reporting, in alignment with industry best practices.

Discussion on Financial Performance with respect to Operational Performance

During the financial year 2024-2025, the Company recorded a net revenue of Rs. 18,020.62 lakhs as compared to Rs. 18,562.61 lakhs in the previous year. This reflects a change in sales performance, primarily influenced by the prevailing market conditions, including fluctuations in paper prices.

In FY 2024-25, the Company continued to face challenges with the market price of paper, and the reduction in paper prices had a significant impact on the Companys revenue.

Additionally, the other income of the Company increased to Rs. 654.52 lakhs from Rs. 640.05 lakhs in the previous year, reflecting an improvement driven by strategic initiatives. This represents an increase of approximately 2.26% over the previous year.

Despite the increase in other income, the reduction in paper prices impacted the overall financial performance. As a result, the total income for FY 2024-25 stands at Rs. 18675.15 lakhs, compared to Rs. 19,202.66 lakhs for FY 2023-24.

Key Ratios

In accordance with the SEBI Listing Regulations, the Company is required to provide details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore. The key financial ratios are given below:

Ratios	Numerator	Denominator	FY 2024-25	FY 2023-24	%age Change	Reason for Change
Current Ratio (in times)	Current Assets	Current Liabilities	1.12	1.13	(0.01)	Decrease as a result of increase in Short-Term Debt during the year
Debt Equity Ratio (in times)	Total Debt	Shareholders Equity	1.66	1.81	(0.15)	Decrease due to Repayment of Debts
Debt service coverage ratio (in times)	Earnings for debt service = Net profit after taxes + Noncash operating exp. + Finance Cost	Debt service Interest & Lease Payments + Principal Repayments	1.80	2.11	(0.31)	Decrease as a result of increase in interest & principal repayments during the year
Return on Net Worth (%age)	Net Profits after taxes Preference Dividend	Average Shareholders Equity	13.62	15.63	(2.01)	Decrease Due to Market Recession
Inventory Turnover (in times)	Cost of goods sold	Average Inventory	2.01	4.73	(2.72)	Decrease due to holding of extra inventory as compare to previous year
Debtors Turnover (in times)	Net credit sales = Gross credit sales - sales return	Average Trade Receivable	7.71	8.86	(1.15)	Decrease due to decrease in sales as compare to last year
Trade payables Turnover (in times)	Net credit purchases = Gross credit purchases - purchase return	Average Trade Payables	14.58	12.41	2.17	Rationalization of trade payables for better purchase efficiency
Net capital turnover (in times)	Net sales = Total sales - sales return	Working capital Current assets - Current liabilities	17.09	21.98	(4.89)	Decline in sales and current ratio
Net Profit Margin (%age)	Net Profit	Net sales = Total sales - sales return	3.61	3.48	0.13	Improvement in profit earning as compare to previous year
Return on capital employed (%age)	Earnings before interest and taxes	Capital Employed = Tangible Net Worth + Total Debt + Deferred Tax Liability	11.29	9.77	1.52	Increase due to Repayment of Debts
Return on Investment	Net return on investment	Cost of investment	N/A	N/A	N/A	-

Further as on March 31st, 2025, net worth of the Company was Rs. 5,926.77 lakhs as compared to Rs. 4,452.36 lakhs for the previous financial year.

Date: August 12, 2025	By Order of the Board of Directors
Place: New Delhi	For Mohit Paper Mills Limited
Regd. Office: 15A/13, Upper Ground Floor	Sd/-
East Patel Nagar, New Delhi- 110008	Sandeep Jain
	(Chairman and Managing Director)
	DIN: 00458048