N R Agarwal Industries Ltd Management Discussions.


The global economy grew 2.9% in 2019 compared to 3.6% in 2018. This sharp decline was precipitated by an increase in global trade disputes that affected the cross-border movement of products and services, a slowdown in the global manufacturing sector, weak growth coming out of some of the largest global economies and the impact of Brexit. The result was that global trade grew a mere 0.9% in 2019, pulling down the overall economic growth average. United States: The countrys Gross Domestic Product grew by 2.3% in 2019 compared to 2.9% in 2018-19 as a result of a decline in business investments and the ongoing trade war with China.

China: The countrys Gross Domestic Product grew by 6.1% in 2019 compared to 6.7% in 2018 as a result of the trade war with the United States, overcapacity in some industries, corporate sector indebtedness and a shrinking room for monetary and fiscal policies.

United Kingdom: The countrys Gross Domestic Product grew by 1.4% in 2019 compared to 1.3% in 2018.

Japan: The countrys Gross Domestic Product grew by 2.0% in 2019 compared to 2.4% in 2018.

The Great Lockdown, as a result of the pandemic Covid-19, is projected to shrink global growth significantly starting from the calendar year 2020.


(Source: World Economic Outlook, April 2020, CNN, Economic Times, trading economics, Statista, CNBC)


World output Advanced economies Developing and emerging
2015 3.5 2.3 4.3
2016 3.4 1.7 4.6
2017 3.9 2.5 4.8
2018 3.6 2.2 4.5
2019 2.9 1.7 3.7


(Source: IMF)


India emerged as the fifth-largest world economy in 2019 with a gross domestic product (GDP) of $2.94 trillion. India jumped 14 places to 63 in the 2020 World Banks Ease of Doing Business ranking.

There was a decline in consumer spending that affected Indias GDP growth during the year under review. Indias growth for FY 19-20 was estimated at 4.2% compared with 6.1% in the previous year. Manufacturing growth was seen at 2%, a 15-year low as against 6.9% growth in FY19.

Y-o-Y growth of the Indian economy

FY17 FY18 FY19 FY20
Real GDP growth (%) 8.3 7 6.1 4.2
Growth of the Indian economy, 2019-20
Q1, Q2, Q3 Q4,
FY20 FY20 FY20 FY20
Real GDP growth (%) 5.2 4.4 4.1 3.1


(Source: Economic Times, CSO, Economic Survey, IMF, EIU)

A sharp slowdown in economic growth and a surge in inflation weighed on the countrys currency rate; the Indian rupee emerged as one of the worst performers among Asian peers, marked by a depreciation of nearly 2% since January 2019. Retail inflation climbed to a six-year high of 7.35% in December 2019.

During the last week of the financial year under review, the national lockdown affected freight traffic, consumer offtake and a range of economic activities.


National infrastructure pipeline: To achieve a GDP of USD 5 trillion by 2025, the government announced a National Infrastructure Policy entailing an investment of -102 trillion in five years. Corporate tax relief: The government moderated the corporate tax rate to 22% from 25%; it announced a new tax rate of 15% for new domestic manufacturing companies, strengthening the Make-in-India initiative. The new effective CIT (Corporate Income Tax)would be 25.17%, inclusive of a new lower surcharge of 10% and cess of 4%. Indias CIT is now closer to the global average statutory CIT of 23.03%.


Various forecasts have estimated a sharp de-growth in the Indian economy for the current financial year, the first such instance of a de-growth in decades.


The pulp and paper industry is one of the largest industries in the world and was pegged at US$ 63.30 billion in 2019. The packaging industry segment and the food and healthcare sub-segment accounted for the largest share of the paper market in 2019. Pulp and paper is used in a wide range of packaging applications in end-user industries such as consumer goods, hygiene, food, industrial packaging, and agricultural films. North America holds the largest market share of the paper and pulp market due to its growing requirement in the packaging and construction and consumer industry.

Other factors driving the success of the pulp and paper industry are the demand for hygiene products like paper towels, toilet paper and disposable make up wipes, coupled with the increased economic participation of the global middle-class. (Source: Global News Wire)


The global paperboard and packaging market is estimated to reach a market value of a US$ 84.54 billion by 2024 (pre- Covid estimate) growing at a CAGR of 5% between 2019 and 2023. North America, Western Europe and East Asia account for the majority of the production share of paper and paperboards. Global paper prices declined in 2019 due to a decline in demand. Pulp prices dropped from a high of US$ 760 to US$800 per metric tonne in January 2019 to US$ 470-US$ 510 per metric tonne in November 2019.

The emergence of online shopping or ecommerce has driven the growth for cardboard and other packing materials.

E-commerce companies require an extensive amount of packaging solutions for a wide range of products. Among the varying available packaging solutions, paper and paperboard container and packaging products have been gaining traction because of their environmental benefits.

Rising consumer awareness about non-biodegradable materials and their effect on the environment, resulted in the demand for eco-friendly materials over the past few years. Growing popularity of sustainable packaging and recyclable feature of paper and paperboard packaging are some of the other factors driving the growth of paper and paperboard packaging industry. The growth of the foods and beverages sector, coupled with the rising incomes in emerging economies, is projected to drive demand over the foreseeable future. (Source: Bloomberg)


The Indian paper industry size was pegged at H 70,000 crore in 2019-20, accounting for >4% of the global paper production. It is also responsible for the employment of >20 lakh individuals across the country. India is one of the fastest growing paper markets globally and total paper production was estimated around 25 million tonnes in 2019-20. Indias per capita paper consumption was estimated at ~13kg compared to the global average of 57kg, indicating vast headroom for growth. Most of the paper mills in India are located in the states of Tamil Nadu, Andhra Pradesh, Maharashtra, Punjab, Madhya Pradesh and Gujarat. Western India is the largest consumer of paper and products in the country mainly due to the ever-increasing consumption of paper and FMCG products. The Indian paper and paper products market is projected to grow from US$ 8.6 billion in 2018 to US$ 13.4 billion by 2024, growing at a CAGR of 7.8% during 2019-24. Growth of the manufacturing sector, increased requirement for better quality packaging of FMCG products and the demand for the upstream market of paper products, such as tissue paper, filter paper, light-weight online coated paper and medical grade coated paper, are expected to be catalysts of the growth of the Indian paper and paper products market over the foreseeable future. (Source: Globe News Wire)


The value of the Indian packaging industry was pegged at US$50.5 billion in 2019 and is projected to reach a value of US$204.81 billion by 2025, growing at a CAGR of 26.7% between 2020-25. The rapid growth of the industry is driven by the growth of the pharmaceuticals and the foods and beverages industry. Besides this, the rise of the middle class, growth of organised retail and exports, coupled with Indias booming e-commerce sector, have been the major catalysts of growth for Indias packaging industry. The total packaging consumption in India has increased ~200% over the past decade, rising from 4.3 kg per person per annum to 8.6 kg per annum. However, the outbreak of the novel coronavirus caused major supply chain disruptions for packaging manufacturers, resulting in decreased manufacturing. In a bid to ensure the smooth flow of the supply chain, Global Food Safety Initiative (GFSI) certification programmes are providing six-month certificate extensions by conducting audit and risk assessments pertaining to the novel coronavirus.


Rising population: Indias population has grown from 555.2 million in 1970 to 1.36 billion in 2019, a 146 per cent increase and is expected to add more 273 million people by 2050. Rising incomes: The nominal per-capita net national income during 2019-20 is estimated at B 1,35,050, a rise of 6.8 per cent compared to B 1,26,406 during 2018-19. Urbanisation: Nearly 34% of the Indian populace reside in urban areas and is projected to increase to >40% by 2030, thereby driving the demand for the paper industry.

Increasing literacy rate: Indias youth literacy rate was pegged at 74% in 2017 and is expected to reach 90% in 2020. The rise in literacy rate is expected to catalyse the demand for textbooks, notebooks and other paper related products. E-commerce growth: India is projected to reach an internet user base of 829 million by 2021 compared to 665 million in 2019. The increase in e-commerce transactions is expected to the drive the demand for paper packaging over the foreseeable future.

Growth of the FMCG sector: Indias FMCG sector is projected to grow by 4-5% and reach a market value of US$103.7 billion in 2020. The growth of the FMCG sector is projected to drive the demand for paper packaging products.


(Source: India Today, MoSPI, Economic Times)


Established in 1993, the Company is engaged in the manufacturing of duplex boards and writing and printing paper. The Companys production facility is located in Gujarat and comprises five paper units. The Company is environmentally-conscious and utilizes waste paper as a raw material. During the year under review, the Company produced 338988 tonnes of paper. The Companys products are primarily used in FMCG packaging, textbooks and notebooks and print media applications. Over the years, the Company has placed emphasis on product development, quality improvement and cost optimisation.


Balance Sheet

• Borrowings for FY 19-20 stood at H173.43 crore compared to H 241.48 crore during FY 18-19

Total non-current assets for FY 19-20 stood at H 603.86 crore compared to H 553.76 crore in FY 18-19

Profit & Loss statement

• Revenues increased 6.58% from B 1404.93 crore in FY 19-20 to B 1318.18 crore in FY 18-19

• EBITDA increased to H 228.34 crore in FY 19-20 compared to H 192.69 crore in FY 18-19

Profit after tax increased 23.36% from B 116.75 crore in FY 19-20 to B 94.64 crore in FY 18-19

Total expenses for FY 19-20 stood at H 1256.16 crore compared to H 1195.91 crore in FY 18-19

• Depreciation and amortisation stood at H 31.51 crore in FY 19-20 compared to H 27.45 crore in FY 18-19


Particulars 2018-19 2019-20
EBIDTA/Turnover (%) 14.62 16.25
EBIDTA/Net interest ratio 6.25 7.15
Debt-equity ratio 0.75 0.40
Return on equity (%) 28.69 29.60
Book value per share (Rs) 10.00 10.00
Particulars 2018-19 2019-20
Earnings per share (Rs) 55.61 68.60
Interest Coverage Ratio (x) 5.24 6.58
Current Ratio (x) 1.10 1.30
Operating Profit Margin (%) 12.11% 13.31%
Net Profit Margin (%) 7.18% 8.31%


Raw material risk: Scarcity of raw materials could lead to an increase in paper prices

Mitigation: All five paper units of the Company utilise waste paper as raw material, thereby reducing its dependence on natural sources.

Digitalisation risk: Increasing digitalisation could lead to a decline in paper demand Mitigation: The Company has placed an emphasis on innovation and as a result, has been able to maintain its sectoral leadership. The Company has also placed emphasis on the paper packaging segment to capitalise on the growing demand of the e-commerce industry.

Capex risk: High funding cost could affect capex requirements. Mitigation: The timely repayment of debt and a moderate gearing enabled the Company to raise additional debt in a cost-effective manner.


The internal control and risk management system is structured and applied in accordance with the principles and criteria established in the corporate governance code of the organisation. It is an integral part of the general organisational structure of the Company and the Group and involves a range of personnel who act in a coordinated manner while executing their respective responsibilities. The Board of Directors offers its guidance and strategic supervision to the Executive Directors and management, monitoring and support committees. The control and risk committee and the head of the audit department work under the supervision of the Board-appointed Statutory Auditors.


The Company believes that the quality of employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve with ongoing technological advancements. During the year, the Company organised training programmes in different areas such as technical skills, behavioural skills, business excellence, general management, advanced management, leadership skills, customer orientation, safety, values and code of conduct. The Companys employee strength stood at 1522 as on March 31, 2020.


The Management Discussion and Analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.