INDUSTRY STRUCTURE AND
DEVELOPMENT
OUTLOOK OF PAPER
INDUSTRY:
The Indian paper
industry has experienced a signi icant improvement in operating margins for top 10 listed
companies in FY23, driven by a 45 per cent revenue growth and a surge in net realisation.
However, the industry showed signs of stabilisation in Q4FY23 due to factors like Chinas
ban on paper waste and supply disruptions from the Russia-Ukraine war.
Looking ahead to FY24,
a moderation in top-line and operating margins is anticipated. The Indian paper and
paperboard packaging market is projected to grow at a CAGR of 6.6 per cent until 2027. The
industry witnessed a rise in sales volumes, higher production, and a remarkable 45 per
cent growth in sales revenues in FY23. Supply-demand disruptions led to higher
realisations, while imports of raw materials and uncertainty in the industry pose
challenges for future growth.
Paper is a versatile
and widely-used material made from cellulose _ibers, usually derived from wood pulp. It
has been an integral part of human society for over two thousand years, with a vast range
of applications including writing, printing, packaging, and more.
The importance of
paper lies in its ability to convey information and ideas, as well as its convenience and
accessibility. Paper is lightweight, easy to transport, and can be produced in large
quantities at a relatively low cost. It has played a critical role in the development and
dissemination of knowledge, allowing for the spread of ideas and information across vast
distances and time periods.
In addition to its
communicative and informational properties, paper also has practical applications in
everyday life. It is used in packaging for products ranging from food to electronics,
providing protection and stability during transportation and storage. Paper products such
as tissues and hygiene products are also an essential part of personal care and hygiene.
Overall, papers
versatility and accessibility have made it a fundamental material in modern society. While
digital technology has led to a decline in certain paper products, such as newspapers and
magazines, it remains a crucial component of many industries and will continue to be so
for the foreseeable future.
SCOPE AND DEMAND OF
PAPER INDUSTRY IN INDIA
The Paper and
Paperboard Packaging market size was worth around US$ 203 billion in 2021 and is estimated
to hit approximately US$ 243 billion by 2030. Due to a variety of driving factors, the
market is predicted to rise at a signi icant rate.
The global paper and
paperboard packaging market is projected to grow owing to increasing strictness adopted by
government and international environmental bodies against the use of single-use plastic in
the packaging industry compelling market players to opt for more sustainable forms of
material to use.
The growing demand for
paperboard packaging in the healthcare segment is expected to help the global market
generate high revenue. Some of the most commonly used materials in the pharmaceutical and
healthcare sectors are metals and plastics. Since there are growing concerns about using
plastics for packaging medicines, providers of paper and paperboard packaging solutions
have increased investment in research to develop better solutions using less harmful
materials.
Other factors like the
reusability of paper packaging may help generate more consumers as the general population
has become aware of the direct consequences consumer shopping patterns have on the
environment. There is a growing set of people who prefer to shop or purchase products only
from companies that support environmental sustainability. Such moves are projected to
drive the demand for paper packaging solutions. The food & beverages industry is one
of the highest consumers of paper and paperboard for packaging and as the industry grows,
the demand will increase.
The growth in the
sector is being driven by a surge in e-commerce, food processing, pharmaceuticals, FMCG,
the manufacturing industry, and the healthcare sector. The signi icant upsurge is fuelled
by a growing demand for paper-based products, evolving consumer preferences, and
increasing emphasis on sustainable packaging solutions. This industry has become a
cornerstone of Indias manufacturing and logistics sectors, contributing to both domestic
consumption and export markets
The growing e-commerce
industry may provide growth opportunities while managing paper quality is expected to act
as a challenge for the market players.
Firstly, the rapid
expansion of the e-commerce sector has created a massive demand for packaging materials
such as corrugated boxes, cartons, and envelopes.
As online shopping
continues to _lourish, the need for safe, durable, and eco-friendly packaging solutions
has skyrocketed. This trend has presented signi icant opportunities for the industry to
innovate and cater to the evolving demands of modern consumers.
Furthermore, the
increasing awareness about environmental sustainability has driven the shift towards
eco-friendly packaging alternatives. With a growing emphasis on reducing plastic waste and
carbon emissions, paper-based packaging solutions have gained immense popularity. From
recycled paper packaging to biodegradable materials, the Indian paper and packaging
industry has been at the forefront of providing sustainable options to meet consumer
expectations and comply with regulatory requirements.
Additionally, the
rising literacy rates, expanding education sector, and government initiatives promoting
education for all have resulted in a surge in demand for paper products. From textbooks
and notebooks to stationery and printing papers, the Indian paper industry plays a vital
role in supporting the education system and knowledge dissemination. This growing demand
for paper-based educational materials has contributed signi icantly to the industrys
expansion.
Moreover,
technological advancements and investments in advanced machinery and equipment have
enhanced production capabilities, ef iciency, and product quality in the industry. The
adoption of cutting-edge technologies has not only improved manufacturing processes but
also enabled customization and specialization, allowing the industry to cater to diverse
customer needs e ectively. Additionally, numerous government initiatives including Make
in India had a positive impact on the packaging industry.
There is a high demand
for palpable wood for paper manufacturing, and the requirement is about 11 million tonnes
per annum, which is further expected to increase. Hence, this has led to the development
of the Indian Handmade Paper Industry and increased paper production from recycled waste.
Due to the scarcity of wood raw material, handmade paper units are becoming increasingly
popular. Due to a shortage of raw materials, the handmade paper industry relies on
secondary resources.
The estimated annual
turnover of the paper industry in India is INR 70,000 crore, with a domestic market size
of INR 80,000 crores. The contribution of the paper industry towards the exchequer is INR
5,000 crore,
The overall
consumption of paper is expected to hit 24 million tonnes in 2024 25. In the past 5 to 7
years, more than 5 USD billion investment has been made towards the paper industry for
setting up state of the art infrastructure.
As per the
geographical location, Maharashtra is the major paper producing state. Maharashtra
consists of the largest number of paper mills and produces the majority percentage of
paper in India.
SWOT ANALYSIS OF THE
INDIAN PAPER AND PACKAGING INDUSTRY
STRENGTHS
· The packaging
board segment is growing attractively · Wide variety of paper is traded ·
Incomes of plantation farmers have increased · There is increased recyclability of
waste paper
WEAKNESSES
· Many
economically unviable plants
· There is a
growing requirement of scale to survive
THREATS
· Costs of raw
materials have increased hence the total cost increased · There is growing
competition from imports · Digitalization is a ecting paper demand · Higher
energy cost imparting competitiveness
OPPORTUNITIES:
· Attractive
demand headroom from a lower per capita consumption perspective · Growing
consumption of packaging paper/board in food and pharma sector · Greater hygiene
awareness following the pandemic · Growing demand from downstream sectors (Kraft,
corrugation, duplex) · Innovative product creation possibilities ·
Progressive ban on single-use plastic to widen the market
SEGMENT -WISE /PRODUCT
WISE PERFORMANCE
Company is engaged in
trading of paper and waste paper. During the year 2022-23, turnover of Paper, Paper Board
and Other Paper items
contributed in the
gross turnover of the Company which is as follows:
Revenue from products
S.No Products |
Total (in Rs.) |
|
247854511.01 |
1 Duplex |
795089863.04 |
2 Kraft Paper |
769099798.70 |
3 Paper Waste |
20693900 |
4 Poster Paper |
353380250 |
5 Maize Starch
“Unicorn” |
286528 |
6 Others |
|
OUTLOOK
The company utilized
the total capital arranged. In addition to the core paper trading, the company always
trying to explore the opportunities in those sector where the company can increase the
value of stakeholders. Paper, Paper Board and Other Paper items contributed 100% in the
gross turnover of the Company.
RISKS AND CONCERN
An integrated risk
management process is being adopted by the company that works towards the evaluation of
the associated business risk and enables the company to survive in the competitive
environment. In todays challenging and competitive environment, strategies for mitigating
inherent risks in accomplishing the growth plans of the Company are imperative. The common
risks inter alia are: Regulations, competition, Business risk, Investments, retention of
talent and expansion of facilities. Business risk, inter-alia, further includes _inancial
risk, political risk, _idelity risk, legal risk. As a matter of policy, these risks are
assessed and the company has not identi ied any element of risk which may threaten the
existence of the company.
INTERNAL CONTROL
SYSTEM AND ADEQUACY
The Company has an
Internal Control System, commensurate with the size, scale and complexity of its
operations. The Internal Audit Department monitors and evaluates the ef icacy and adequacy
of internal control system in the Company, its compliance with operating systems,
accounting procedures and policies at all locations of the Company and its subsidiaries.
Based on the report of internal audit function, process owners undertake corrective action
in their respective areas and thereby strengthen the controls.
The Audit Committee of
the company also reviews the internal control system prevalent at each level of the
organization and passes on its recommendation to the management in respect of the areas,
which requires the correction.
DISCUSSION ON
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The _inancial and
operative performance is already elaborated in Directors Report.
HUMAN RESOURCES
The company
continuously works on the development of the employees at various levels. The management
makes sure that the employee morale and dedication remains high and that they contribute
their fullest and best to the organization. The recreational activities like
st
seminars/vacations are
planned for the employees at regular intervals. As on 31 March, 2023, the Company has 20
employees. Industrial relations are cordial and satisfactory.
KEY FINANCIAL RATIOS
The details of changes
in Key Financial Ratios as compared to the immediately previous _inancial year along with
explanations are as follows:
Nature of Ratios |
For year ended 31st March 2023 |
For year ended 31st March 2022 |
Changes% |
Explanation for the
changes more than 25% |
Debtors Turnover |
4.76 |
3.13 |
52.17 |
Receivable turnover |
|
|
|
|
ratio has improved on |
|
|
|
|
account of better |
|
|
|
|
realization from
debtors |
Inventory Turnover |
NA |
NA |
NA |
NA |
Interest Coverage |
none;
mso-layout-grid-align:none;text-autospace:none>1.35 |
1.50 |
-10.15% |
NA |
Ratio |
|
|
|
|
Current Ratio |
1.89 |
2.02 |
(6.21) |
NA |
Debt Equity Ratio |
0.98 |
0.85 |
15.95 |
NA |
Operating Pro_it |
1.28% |
1.79% |
-28.54% |
Profit declined due to |
Margin % |
|
|
|
higher competition in
the |
|
|
|
|
market |
Net Pro it Margin
% |
0.23% |
0.67% |
(65.49%) |
Company has
exceptional |
|
|
|
|
income during the
Previous |
|
|
|
|
year. |
Return on Capital |
8.00% |
8.53% |
-6.16% |
NA |
employed |
|
|
|
|
Return on
investment |
NA |
NA |
|
|
|
|
|
NA |
NA |
Trade payables |
23.71 |
21.50 |
10.26% |
NA |
turnover ratio |
|
|
|
|
Net capital
turnover |
7.94 |
5.33 |
48.83% |
NA |
ratio |
|
|
|
|
Debt Service |
0.77 |
0.80 |
-3.33% |
NA |
Coverage Ratio |
|
|
|
|
Return on Equity |
2.00% |
3.45% |
-41.99% |
Due to decrease in pro
its |
Ratio |
|
|
|
|
CHANGES IN RETURN ON
NET WORTH
The return on net
worth for the _inancial year 2021-22 and for the _inancial year 2022-23, it is 3.37% and
2.06%respectively. The change in return on net worth as compared to the immediately
previous _inancial year is-38.87%. Return on net worth has changed due to Company has no
Extra ordinary Income income during the year.
CAUTIONARY STATEMENT
Statements in the
Management Discussion and Analysis and in the Directors Report, describing the companys
objectives, projections and estimates, results may vary materially from those expressed or
implied by the forward looking statements due to risks or uncertainties associated
therewith depending upon economic conditions, government policies and other incidental
factors. Readers are cautioned not to place undue reliance on these forward-looking
statements.
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