Neeraj Paper Marketing Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENT

PAPER INDUSTRY:

Paper and board packaging is defined as the wrapping and containment of goods & products for protection, distribution, storage and sale using paper as primary material. The paper and board packaging industry, valued at 369 $Billion, holds the largest share i.e. 43% of the total global packaging industry, which is composed of several materials such as plastic packaging, metal packaging, glass packaging, paper & board packaging and others. From a basic usage as a product safeguard or a container, packaging today has become an indispensable marketing tool and an integral part of a products lifecycle.

The demand for packaging has been continuously increasing on account of rising disposable income, single living, on the go lifestyle and convenient packaging. Moreover, the explosive growth in ecommerce over the past few years, mainly due to faster delivery, free shipping and increasing internet penetration, is the major factor fueling the overall growth of the paper & board packaging market. Furthermore, the recyclability proposition of paper as well as growing environmental consciousness among consumers towards sustainable packaging is drawing heightened industry attention to entice customers. Based on the above factors, the paper and board packaging market is growing at a fast pace and is likely to continue growing at a CAGR of 4.4% over the forecast period from 2018-22. This report covers exhaustive analysis on industry dynamics, market size, supply and demand, current trends/issues & challenges and end user industry.

According to the "India Paper & Paper Products Market by Application, by Raw Material, Competition, Forecast & Opportunities, 2024", 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 better 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.

PAPER & PAPER PRODUCTS DEMAND

• Indias share in the demand for paper across the globe were analysed 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 little 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 better 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.

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 cutting 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 better-quality packaging of FMCG products marketed through organized retail.

The paper & paper products market in India has been segmented into North, South, East and West. Western region is the lead consumer of paper & paper products across the country, on account of increasing paper consumption, especially FMCG products.

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.

OPPORTUNITIES AND THREATS

The competitive strengths and the opportunities that are available to the Indian Paper Industry are:

• It is large and growing domestic paper market and potential for export.

• fast growing contemporary printing sector.

• Governments thrust for improving education and literacy in the Country.

• availability of qualified technical manpower with capability to design, build and manage world scale pulp and paper mills.

• well established Research and Development (R & D) facilities / activities encouraging innovation.

• potential for creation of sustainable raw material base through farm plantations.

THREAT:

• There are no threats anticipated towards our business being trading business of paper except competition.

SEGMENT -WISE /PRODUCT WISE PERFORMANCE

Company is engaged in trading of paper and waste paper. During the year 2018-19, 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 Lacs)
1 Duplex 8701.47
2 Kraft Paper 7313.04
3 Paper Waste 5388.47
4 Bindal Fine Print 350.5
5 Art Paper 1430.96
6 Poster Paper 322.13
7 US Steam Coal In Bulk 1076.71
8 Others 189.92

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 financial risk, political risk, fidelity risk, legal risk. As a matter of policy, these risks are assessed and the company has not identified 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 efficacy 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 financial 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 seminars/vacations are planned for the employees at regular intervals. As on 31/03/2019, the Company has 30 employees. Industrial relations are cordial and satisfactory.

KEY FINANCIAL RATIOS

The details of changes in Key Financial Ratios as compared to the immediately previous financial year along with

explanations are as follows:

CHANGES IN RETURN ON NET WORTH

The return on net worth for the financial year 2017-18 and for the financial year 2018-19, it is -9.03% and 1.2% respectively. The change in return on net worth as compared to the immediately previous financial year is -13.33 and reason for change in the above is due to lower interest cost in the FY 2018-19 and some expenses of exceptional nature arising on account of Income Tax and Service Tax liabilities of earlier years incurred in the FY 2017-18

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.