Orient Paper Management Discussions


The global geopolitical landscape has undergone tremendous changes in FY22-23, leading to the emergence of a new world order not seen since WW-II. These changes include high commodity prices, supply-side disruptions, increased food insecurity and poverty, stagflationary headwinds and heightened policy uncertainty. While most of the large economies had low growth forecasts, India benefited from its responsible and innovative fiscal measures taken during COVID-19 pandemic period, resulting in being the torchbearer of global growth. This growth was driven by lesser dependence on global demand, instead far more on private consumption and private investment on the back of government policies to improve transport infrastructure, logistics and the business ecosystem. Govt. policy on near-universal vaccination coverage also enabled people to spend on contact-based services and helped the economic rebound post COVID-19 uncertainties. India grew at a rate of ~ 7.2%, making it the fastest-growing large economy in the world. This led to revival of the capex cycle and healthy increase in consumption across all categories.

Paper industry is a major employer and contributor to the Indian economy. In FY23, the paper industry is estimated to have grown at ~7.2%. This growth was driven by several factors, including:

• Govt. of Indias New Education Policy: aimed at making education more accessible resulting in stable demand for writing & printing category.

• Focus on health & hygiene: drove consumption of tissue paper leading to sustained demand.

• Plastic substitution: governments policies and increased commitment for environment is resulting in several categories to shift their demand from plastics to sustainable options like paper.

• The growth of the e-commerce sector: The e-commerce sector grew at a rate of ~30% in FY23, resulting in increased demand for packaging materials.


Global demand for paper and paperboard in CY22 is estimated to have grown 0-1% Y-o-Y on a low base of CY21, due to COVID-19 related demand contractions across the globe. The writing and printing (W&P) segment, which saw a 0-1% demand growth in CY21 is estimated to have declined further due to digitalisation of offices and educational institutes. On the other hand, newsprint demand which saw sharper drop of ~(4-6)% in CY21, is estimated to have fallen further (6-8)%, due to increasing digitalisation.

Paper demand moderation in CY22 can be correlated with world gross domestic product (GDP) growth during the period. According to the International Monetary Funds (IMF) economic outlook (January 2022), world GDP is estimated to have grown 3.2% in CY22 after expanding 6% in CY21. The emerging markets and developing countries grew 3.7% Y-o-Y. These economies represent major drivers for paper demand. The economy of developed countries is estimated to have grown 2.4% in CY22 after expanding 5.2% in CY21.

Source: Industry, CRISIL Research, NSO


The Indian paper industry is estimated to have grown by ~7.2% in FY23. Tissue and other specialty segment is projected to have grown by ~13% as compared to ~6% of global growth. Packaging segment growth is estimated at ~10% as compared to 5-6% of global growth. Writing & printing segment has maintained steady growth rate at ~4% vs. global degrowth of ~ -0.5%.


Governments Swachh Bharat Abhiyan and the COVID-19 pandemic has accelerated the adoption of healthy and hygienic lifestyle, which has fuelled the demand for several categories in this segment including tissue paper. The growing urbanization and rapid growth of hospitality industry is also contributing to increasing consumption of tissue paper in commercial sectors such as hospitality, healthcare and restaurants. Thus, we anticipate the tissue paper consumption in India is likely to sustain a healthy multi-year demand growth.


The writing & printing paper market in India is expected to grow at a moderate pace in the FY24 compared to FY23. The demand for writing & printing paper is driven by the education sector, government offices and the printing industry.

The Indian governments new education policy focus on promoting education, particularly in rural areas, is expected to create a demand for notebooks, textbooks and other writing & printing paper products. Additionally, the growth of the e-commerce sector is creating opportunities for online stationery stores, which is expected to boost the sales of writing & printing paper products. Thus, we anticipate the demand in WPP segment to be moderately positive in the mid-term.

The Industry witnessed a volumes growth of ~3% in FY23, however, the year also benefited domestic chemical manufacturers with high prices in some of the months of FY23.

Two key factors in the global supply chain for caustic manufacturing led to significant volatility in prices, one was on account of volatility in fuel prices led to disruption in production in Asia and EU for few months and second, the disruption in global supply chain resulted in multi-fold increase in freight charges thus increasing the import parity delta up to ~ Rs 10,000/MT.


The year under review saw significant transition in the Companys strategy for attaining a sustainable, scalable and profitable business model. The Company adopted a thoughtful approach for the market segment for each product category like developing micro-market strategy for the core products and to expand the market presence for new products (mainly aimed at plastic substitution), in a structured manner.

Additionally, the Company also increased engagement across the value chain to develop the category for tissue.

On the operations side, our Company has established strong partnerships with several tier-1 technology providers for enhancing efficiency, improving reliability of operations and building a roadmap for debottlenecking capacity. The outcome of our engagements led to creation of a detailed roadmap for d-bottlenecking & modernisation of our capacity which formed the basis of our announcement of Rs 475 cr. capex in March23. We transitioned from 100% in-house coal-based power generation to sourcing ~40% of our power needs from the grid as a first step towards energy transition by FY25. We also set the foundation for our journey towards industry 4.0 with the implementation plan of a closed loop AI-ML based manufacturing & process excellence in next 24 months. To add to our long-term competitiveness, we have significantly increased plantations around the local area. FY23 saw us achieve highest ever direct plantations ~6395 acres. We also developed a blueprint for an exhaustive outreach program covering 1 lakh acres, enhancing the lives of 4,50,000 people.


• In dustry leading good-will


• Underleveraged balance sheet
o Plant and Machine technology
• World class governance
o High Manpower cost
• Experienced management team
o Product Mix

• Large infrastructure for scaling seamless growth

o High Energy cost

• Integrated paper manufacturing



o Integrated Mill (Pulp to Paper)


o Abundant land in region for plantations
o G lobal Pulp capacity addition
o High growth in Health and Hygiene segment
o Excess capacity in China and Indonesia
o Uncertainty and Volatility in Energy prices
o New Education Policy (WPP)
o Changes in government policies
o High growth for VAP (Plastic substitution)
o Governments focus on promoting Agroforestry


Orient Paper was the first company to launch tissue paper in India, having developed the value chain and category, it has the unique advantage of a deep understanding of the segment and goodwill across the value chain.

Tissue category continues to grow at a healthy rate of over 13%, this also attracts the attention of traders for imports at one end and domestic recycled tissue manufacturing on the other end.

In FY23,

- tissue sales grew by 15 % as compared to FY22

- pricing vs competition in all micro markets remained 2% higher.

- onboarded 8 new customers.

- volumes with key customers grew by 53%.

- volumes in target micro markets grew by 9% in North, 28% in West and 32% in South.


In the W&P segment, the company added several new product categories and worked towards increasing its relevance in the micro markets which led to a consistently healthy order book position and realisation of premium pricing.

In FY23:

- WPP sales grew by 9 % as compared to FY22.

- pricing vs competition in all micro markets remained ~4 % higher.

- commercialised several new products like cartridge, cup stock, pulp board & cover paper.

- volumes with key customers grew by 37%.

- volumes in micro markets grew by 11% in East UP, Delhi- NCR, 14% in MP- CG region.

- added 8 new customers and 2 new markets for VAP.


With the commissioning of the New Recovery Boiler, the Company debottlenecked its pulp capacity by ~24%. This has also helped the Company to increase availability of steam from the recovery boiler by 32% (from 22%) & increased the black liquor consumption by ~9% thereby reducing the cost while sustainably improving the reliability of the process.


The paper industry has historically relied heavily on coal consumption for energy and steam generation. However, the geopolitical developments post Russia - Ukraine war since Feb22 led to unprecedented supply chain shocks resulting in all-time high for coal prices coupled with scarcity in supplies.

In the first half of FY23, despite having secured ~74% of demand from Fuel Supply Agreement (FSA) with Coal India, the Company could hardly mange to get 41% supplies (shortfall of ~33%).

While managing the short term, our Company had developed a blueprint for its energy transition to achieve competitive energy cost sustainably and as an immediate measure we shifted 14MW on grid from Q3 which enabled us to get 100% of coal supplies through FSA and Coal India Auction thereby reducing our coal cost by 44.5%.

As a first step towards reducing our dependence on fossil fuel, we have also progressed on our energy transition agenda to become one of the worlds first paper company to shift ~43% of its energy requirements to renewable sources, this transition is likely to take place in Q2 of FY25.


Our turnover for the year was higher at Rs 942.96 crores compared to Rs 585.65 crores last year. Our net profit after tax was Rs 99.25 crores this year.

We invested Rs 130 crores on capital projects during the year.


2022-23 2021-22
(i) Debtors Turnover Ratio 45.94 23.23
(ii) Inventory Turnover Ratio 9.42 8.22
(iii) Interest Coverage Ratio 7.91 (0.64)
(iv) Current Ratio 0.77 0.46
(v) Debt Equity Ratio 0.18 0.14
(vi) Operating Profit Margin (%) 20.27 (1.32)
(vii) Return on Net Worth (%) 6.47 (2.05)

Reasons for significant changes in ratios have been explained in relevant sections above.


In FY23 we have made a considerable progress on our ESG agenda, the approach has shifted from compliance to setting new benchmarks. Our action plan covers 16 out of the 17 UN-SDG goals, with significant focus on reducing the Eco-system Carbon Footprint, soil and water conservation.

We have done our GHG inventory analysis across scope-1,2,3 and are currently in the process of strategizing ways to reduce our carbon footprint.

As per UNFCCC-CDM methodology (AR-ACM0003) of carbon accounting via GHG removal – creating sinks by afforestation and reforestation activities, we will be carbon negative in 72 sequestration by our large- months (FY29) considering CO2 scale plantation initiatives across barren lands.

Our work on water conservation across our supply chain will help us conserve more water that we consume in our operations by FY26 and by FY30 we shall help conserve 2.6x water more water than our consumption.


The Company continues its policy of continuous training and motivation to achieve greater efficiencies and competencies. The total number of permanent employees as of 31st March, 2023 was 1315.

Industrial relations were harmonious. Safety, welfare and training at all levels of our employees continue to be the areas of major focus for the Company.


The Company has established adequate internal control systems, which provide reasonable assurances regarding safeguarding of the Companys assets, promoting operational efficiencies and ensuring compliance with various statutory provisions. In addition to its own internal audit department, the Company has retained Ernst & Young (EY) to regularly review internal control systems in business processes and verify compliance with the laid down policies and procedures. Reports of these internal audits are reviewed by the senior management and are also placed before and comprehensively discussed in meetings of the audit committee. The audit committee reviews the adequacy of internal control systems, audit findings and suggestions. The internal audit group also keeps a track of and monitors the progress on implementation of suggestions for improvements.

The Companys statutory auditors regularly interact with the audit committee to share their findings and the status of further improvement actions under implementation.


Global influence

The ongoing disruption on the supply side continues to have significant implications for the business. In the first half of the year, approximately 2.5 million tonnes (~10% of global hard-wood capacity) is likely to be commissioned in low-cost countries (LATAM). This is likely to result in a sharp drop in pulp prices globally, resulting in pressure on paper prices. Although, the consumption is projected to increase by ~ 2%, it is likely that some high-cost capacity in north America and Europe may go out of system. Thus, it is anticipated that it may take up to eight quarters for this new low-cost capacity to be absorbed into the system.

C ost implications

Fuel costs are likely to remain rangebound until clarity emerges on the Ukraine-Russia conflict. Similarly, raw material demand and supply are expected to remain range-bound on account of sustained demand of wood from the plywood and MDF value chain, with no additional supplies expected before 2026.

D emand projections

We expect the WPP segment to experience lower single-digit growth (~4% volume growth vs. global degrowth of -0.5%), while the tissue segment is likely to witness a healthy ~13% growth.

With several new, value-added products being planned for commercial launch in FY24 , Orient shall shift its product mix for multi-year growth in various categories.


Statements in this report on Management discussion and analysis relating to the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. These statements are based upon certain assumptions and expectations of future events. Actual results could however differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand-supply conditions, selling prices, raw material costs and availability, changes in government regulations and tax structure, general economic developments in India and abroad, factors such as litigation, industrial relations and other unforeseen events.

The Company assumes no responsibility in respect of forward-looking statements made herein which may undergo changes in future based on subsequent developments, information or events.