Nikita Papers Ltd Management Discussions

Your Directors are pleased to present the Management Discussion and Analysis Report for Nikita Papers Limited for the financial year ended March 31, 2025, which forms an integral part of the Annual Report. This report provides a comprehensive overview of the global and domestic economic environment, industry outlook, financial and operational performance, key strategic initiatives, risk management, internal control systems, and future prospects of the Company.

(A) GLOBAL ECONOMY:

The global economy in FY 2024-25 witnessed a moderate recovery despite persistent geopolitical tensions, inflationary pressures, and tightening monetary policies across key economies. While global trade volumes showed a tentative rebound and inflation rates began to moderate, elevated interest rates and volatile commodity prices continued to exert pressure on industrial sectors worldwide.

Amidst these challenges, Nikita Papers Limited demonstrated resilience by strategically aligning its operations to effectively manage input costs, optimize procurement, and maintain supply chain stability. The fluctuations in fuel and raw material prices—particularly for pulp and recycled feedstock—directly influenced the paper and recycling industries. In response, the Company implemented cost control measures, enhanced operational efficiencies, and prioritized higher-value, eco-friendly products to safeguard margins.

Global demand for sustainable paper products and recycled materials continued to grow, driven by rising environmental awareness, regulatory mandates to reduce plastic use, and increasing adoption of green packaging solutions. These macro trends resonate deeply with our vision of delivering innovative, recyclable, and eco-conscious paper solutions, thereby strengthening our market position domestically and internationally.

Nikita Papers Limited remains vigilant in monitoring global economic and market trends, leveraging its expertise in green innovation to capitalize on emerging export opportunities, and investing in operational excellence to maintain competitiveness on a global scale.

(B) INDIAN ECONOMY:

During the financial year 2024-25, the Indian economy demonstrated strong resilience and continued its growth momentum despite global economic headwinds. With a projected GDP growth rate surpassing 7%, India remains one of the fastest-growing major economies worldwide. This growth is underpinned by the Governments focused initiatives on infrastructure development, manufacturing enhancement, digital transformation, and a deepening commitment to sustainability and circular economy principles.

Significantly, the evolving regulatory landscape and rising environmental awareness have catalyzed growth in the recycling, waste management, and green energy sectors. The nationwide push to eliminate single-use plastics and promote eco-friendly alternatives has heightened demand for sustainable packaging and waste-to- resource solutions—areas where Nikita Papers Limited has established a strong foothold.

The companys core business aligns seamlessly with these national priorities, leveraging cutting-edge technologies in recycling and Refuse Derived Fuel (RDF) production, alongside waste-to-energy initiatives that contribute to cleaner, renewable energy generation. This strategic focus not only addresses environmental concerns but also supports Indias commitments toward carbon reduction and energy security.

Despite some volatility in raw material and energy costs, Nikita Papers Limited proactively strengthened its operational efficiency, diversified sustainable sourcing channels, and expanded its portfolio of value-added green products. These measures have enhanced cost competitiveness while advancing the Companys sustainability agenda.

With sustained government support for circular economy models, enhanced regulations on waste management, and growing consumer preference for green products, Nikita Papers Limited is well-positioned to capitalize on the expanding domestic market. The Company remains committed to driving innovation in recycling technologies, waste-to-energy conversion, and sustainable manufacturing practices, reinforcing its role as a leader in Indias green industrial revolution and delivering long-term value to all stakeholders.

(C) INDUSTRY STRUCTURE AND DEVELOPMENT:

The Indian paper industry plays a crucial role in the nations socio-economic development, underpinning key sectors such as education, FMCG, packaging, printing, publishing, and hygiene products. The industry broadly encompasses four major segments: writing & printing paper, packaging paper & board, specialty paper, and newsprint.

Among these, the packaging paper segment continues to register robust growth, fueled by the surge in e- commerce, organized retail, and increasing consumer preference for sustainable packaging solutions.

India stands as the 15th largest paper producer globally, with the sector rapidly evolving to meet growing demand for eco-friendly, biodegradable, and recyclable paper products. This transformation aligns closely with the global and domestic emphasis on environmental sustainability and circular economy principles. In response, the Indian Government has proactively introduced policies and incentives promoting the adoption of renewable and biodegradable paper-based materials, catalyzing fresh growth opportunities for companies like Nikita Papers Limited.

The industrys ongoing modernization is characterized by increased automation, incorporation of waste reduction technologies, and adoption of energy-efficient manufacturing processes. Additionally, there is a growing focus on integrating waste-to-energy solutions and Refuse Derived Fuel (RDF) initiatives to further reduce environmental impact and enhance resource efficiency.

Nevertheless, the sector faces challenges, including raw material availability constraints, price volatility in pulp and recycled fibers, import competition, and evolving regulatory frameworks aimed at tightening environmental compliance.

Nikita Papers Limited has proactively adapted to these dynamics by upgrading its technological infrastructure, advancing clean energy and waste-to-energy projects, and continuously enhancing operational efficiency. The Company remains steadfast in its commitment to pioneering green innovation, reinforcing sustainable sourcing, and driving the industrys transition towards a greener, circular economy.

Through these initiatives, Nikita Papers Limited aspires not only to strengthen its market position but also to contribute meaningfully to Indias sustainable development goals and a cleaner environment.

(D) OPPORTUNITIES AND THREATS:

Opportunities:

1. Rising Demand for Sustainable and Circular Packaging Solutions:

Growing environmental awareness, coupled with stringent regulatory bans on single-use plastics, is accelerating the shift towards sustainable, recyclable, and biodegradable paper products. This trend presents significant growth prospects for Nikita Papers Limited, particularly in the packaging, recycled paper, and eco-friendly product segments.

2. Government Initiatives and Policy Support:

Proactive government policies encouraging green manufacturing, waste-to-energy projects, and sustainable industrial practices provide a conducive environment for growth. Incentives for energy-efficient equipment, waste management, and renewable energy adoption further bolster the Companys sustainability-driven expansion.

Additionally, investment subsidies offered by the state government significantly enhance the financial viability of capital expenditure (capex) projects, enabling the Company to invest confidently in green technologies, infrastructure modernization, and capacity enhancements aligned with environmental goals.

3. Expansion of E-commerce and Organized Retail:

The rapid growth of e-commerce and organized retail sectors has fueled demand for Kraft paper and corrugated packaging solutions, offering substantial volume growth opportunities aligned with the Companys product portfolio.

4. Growing Export Markets:

Emerging economies in Asia, Africa, and other regions are increasingly sourcing cost-effective, sustainable paper products. Leveraging quality manufacturing capabilities and capacity expansions, Nikita Papers Limited is well-positioned to capitalize on these international growth avenues.

5. Technology-Driven Operational Excellence:

Embracing digital transformation, automation, and energy-efficient technologies enables optimization of production costs, reduction of waste, and improvement of operational margins.

These advancements contribute to long-term competitive advantage and sustainability leadership.

Threats:

1. Raw Material Price Volatility:

Fluctuations in prices of waste paper, pulp, chemicals, and energy inputs remain a critical risk factor impacting production costs.

Despite a focus on recycled inputs, global commodity price shifts and supply constraints can influence margins.

2. Evolving Environmental Regulations and Compliance:

While sustainability opens growth avenues, increasing regulatory requirements around emissions, effluent treatment, and waste management necessitate continuous investments in green technologies and infrastructure, potentially affecting operational flexibility and costs.

3. Global Macroeconomic and Geopolitical Uncertainties:

Inflationary pressures, currency volatility, geopolitical tensions, and supply chain disruptions can impact demand patterns, raw material availability, and export competitiveness.

4. Competition from Imports and Unorganized Sector:

The influx of low-cost imports, particularly from ASEAN countries and China, alongside competition from unorganized domestic players, poses challenges to pricing power and market share.

5. Technological Disruptions and Market Shifts:

Rapid innovation in packaging materials and digital alternatives may reduce demand for certain traditional paper categories, such as writing and printing paper. This necessitates ongoing strategic diversification and product innovation to sustain relevance.

(E) SEGMENT-WISE OR PRODUCT WISE PERFORMANCE:

Nikita Papers Limited is primarily engaged in the manufacturing and sale of various grades of Kraft paper, predominantly used in packaging applications such as corrugated boxes, cartons, and industrial packaging solutions.

For the financial year ended March 31, 2025, the Company continued to prioritize operational excellence, product quality, and market expansion.

The performance across key product segments is summarized below:

1. Kraft Paper (Recycled Paper-based):

• This segment remains the cornerstone of the Companys product portfolio, aligning with its commitment to sustainability and circular economy principles.

• Demand for recycled Kraft paper witnessed robust growth, driven by expanding e-commerce, FMCG, logistics, and retail sectors.

• Increased preference for eco-friendly and biodegradable packaging solutions supported a steady rise in both volumes and sales value in this segment.

2. High GSM & High Burst Factor (BF) Kraft Paper:

• The Company successfully addressed the growing demand for high-strength Kraft paper tailored for heavy- duty and specialized packaging applications.

• A notable increase in orders from industrial and bulk packaging clients contributed to enhanced realizations per tonne, reflecting improved product mix and value addition.

3. Low GSM Kraft Paper:

• Demand for low GSM Kraft paper was moderate during the year, influenced by evolving customer preferences and heightened price sensitivity.

• The Company optimized production capacity and balanced its output between high and low GSM products, leveraging real-time demand analytics to maintain operational efficiency.

(F) OUTLOOK:

Nikita Papers Limited remains optimistic about its future prospects, well-positioned to leverage favorable industry trends and a recovering global economy. The increasing demand for eco-friendly and sustainable packaging solutions continues to drive growth in the Kraft paper segment. Heightened environmental awareness and regulatory mandates promoting biodegradable and recyclable packaging are key factors expected to fuel demand across both domestic and international markets.

Following its successful IPO and listing, the Company has accelerated the installation of a state-of-the-art Waste-to-Energy project to cater to the growing demand for green energy and mitigate reliance on coal-based thermal power for production needs. This strategic initiative not only supports the Companys sustainability goals but also enhances energy security and operational efficiency.

The Company is also strategically equipped to accelerate investments in capacity expansion, modernization, and operational efficiencies. These initiatives will not only boost productivity but also enhance profit margins, reinforcing its competitive edge. Furthermore, the Company plans to broaden its export footprint by targeting emerging markets in Southeast Asia, the Middle East, and Africa, capitalizing on Indias cost advantages and growing global preference for sustainable paper products.

Innovation remains central to the Companys growth strategy. Nikita Papers aims to enrich its product portfolio by developing value-added Kraft paper variants featuring higher strength, durability, and eco-friendly attributes, addressing evolving customer needs and expanding into niche packaging applications.

While the Company remains mindful of risks such as raw material price volatility, fluctuations in power and fuel costs, and stringent environmental regulations, it is confident that its disciplined approach, robust governance framework, and commitment to sustainability will mitigate these challenges effectively.

In summary, Nikita Papers Limiteds strong financial position, combined with its focus on quality, innovation, and market expansion, underpins a positive and sustainable growth outlook, reinforcing its leadership in the green paper industry.

(G) RISKS AND CONCERNS:

Nikita Papers Limited operates in a dynamic industry environment that presents several risks and concerns which the company continuously monitors and manages. A key risk relates to fluctuations in the prices and availability of raw materials such as wood pulp and recycled paper, which can significantly impact production costs and margins. The company is also exposed to volatility in fuel and power prices, which constitute a major portion of operational expenses.

Regulatory and environmental compliance risks are another area of concern. As the paper and packaging industry faces increasing scrutiny regarding sustainable sourcing and pollution control, any non-compliance could lead to penalties, reputational damage, and operational disruptions. The company remains committed to adhering to all environmental norms and has integrated sustainability into its business model to mitigate these risks.

Market competition, both domestic and international, poses a constant challenge, with new entrants and substitute products influencing pricing and market share. The company also faces risks related to changes in government policies, taxation, and trade regulations, which could affect exports and profitability. Furthermore, operational risks such as machinery breakdowns, labor disputes, and supply chain disruptions could impact production schedules and delivery commitments. The company has established robust internal controls and risk management systems to identify and address these concerns promptly.

Despite these challenges, Nikita Papers Limited is focused on strategic risk mitigation through diversification of suppliers, investment in technology, strict compliance adherence, and maintaining healthy relationships with stakeholders. The company believes that proactive risk management will enable it to sustain its competitive edge and achieve long-term business objectives.

(H) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Nikita Papers Limited has established a comprehensive internal control system that is designed to ensure the integrity of financial reporting, safeguard company assets, and promote operational efficiency. These controls are commensurate with the size, nature, and complexity of the companys operations. The internal control framework includes clearly defined policies and procedures, segregation of duties, and periodic checks and audits across all departments.

The Companys management regularly reviews the effectiveness of these controls, supported by an independent internal audit function that conducts systematic evaluations of risk areas and control processes. Any deviations or weaknesses identified are promptly addressed through corrective actions to strengthen the control environment. Additionally, the internal control systems ensure compliance with applicable laws, regulations, and accounting standards. They also facilitate accurate and timely financial disclosures, thus supporting transparent communication with stakeholders.

The Audit Committee of the Board actively oversees the adequacy and functioning of the internal control systems, ensuring continuous improvement and alignment with best practices. During the year under review, the Company found its internal controls to be adequate and effective in achieving their intended objectives, with no significant deficiencies reported. Through these rigorous internal controls, Nikita Papers Limited strives to maintain a robust governance framework that supports sustainable growth and protects stakeholder interests.

(I) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

During the financial year ended March 31, 2025, Nikita Papers Limited demonstrated a strong alignment between its operational performance and financial outcomes. The companys focus on enhancing production efficiency, optimizing resource utilization, and expanding its product portfolio has contributed significantly to its revenue growth and profitability.

The total revenue of the company showed an appreciable increase, reflecting higher sales volumes and improved market penetration. This growth was supported by a consistent demand for the companys paper products, both in domestic and international markets.

Operational improvements, including cost control measures and process enhancements, positively impacted the companys gross and net profit margins. The companys efforts to maintain optimal inventory levels and streamline supply chain operations have further contributed to a better cash flow position. Capital expenditure on modernizing manufacturing facilities and investing in technology has laid a strong foundation for sustainable long-term growth.

While the financial performance reflects a healthy upward trajectory, the company remains cautious about external factors such as raw material price fluctuations and global economic uncertainties, which may influence future results. Nevertheless, the companys robust operational strategies and prudent financial management have enabled it to maintain stability and build resilience in a competitive industry environment.

Overall, the synergy between operational efficiency and financial discipline has helped Nikita Papers Limited strengthen its market position and create value for its stakeholders during the year under review.

(J) MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

Nikita Papers Limited recognizes that its human resources are a critical asset driving the companys growth and success. During the year under review, the company continued to focus on strengthening its workforce through various initiatives aimed at enhancing employee skills, motivation, and engagement. Training and development programs were conducted to equip employees with the latest industry knowledge and best practices, fostering a culture of continuous learning and improvement.

The company maintained harmonious industrial relations throughout the year, emphasizing open communication and proactive conflict resolution mechanisms. Employee welfare initiatives, including health and safety measures, were prioritized to create a safe and conducive working environment.

As of March 31, 2025, the company employed approximately 213 number of people across its manufacturing units, corporate office, and other operational locations. The companys commitment to equal opportunity and diversity has been reflected in its recruitment and retention practices.

Nikita Papers Limited remains dedicated to nurturing talent and fostering a collaborative workplace that supports innovation, productivity, and employee well-being, which are vital for sustaining the companys competitive advantage.

(K) KEY FINANCIAL RATIOS:

S. No. Ratios	March 31, 2025	March 31, 2024	Change in %
1. Debtors Turnover	3.11	3.12	-0.32%
2. Inventory Turnover	7.24	8.08	-10.40%
3. Interest Coverage Ratio	2.98	3.05	-2.47%
4. Current Ratio	1.35	1.22	10.65%
5. Debt Equity Ratio	2.68	2.75	-2.55%
6. Operating Profit Margin (%)	13.49	12.60	7.09%
7. Net Profit Margin (%)	6.32	6.12	3.27%

(L) RETURN ON NET WORTH

The return on net worth for the current year ended on March 31, 2025 is 22.11% as compared to 25.55% during the fiscal year ended on March 31, 2024.

For and on behalf of the Board of Directors,
Sd/-	Sd/-
Ashok Kumar Bansal	Ayush Bansal
Managing Director	Whole-time Director
DIN:00321238	DIN:00774900
Place: Shamli Date: August 20, 2025