Orient Paper & Industries Ltd Management Discussions

GLOBAL MACROECONOMIC LANDSCAPE

The global macroeconomic environment continues to remain complex and fluid, shaped by persistent geopolitical tensions, evolving trade dynamics, and structural shifts in supply chains. Ongoing conflicts in Eastern Europe and the Middle East, coupled with strategic contestations in key maritime regions such as the South China Sea, continue to weigh on global stability and investor sentiment. Protectionist trade measures and tariff-related actions have further contributed to fragmentation in global commerce, dampening cross-border investments and business confidence.

Global economic growth is estimated at ~3.3% for CY2025(1), higher than earlier projections of 2.8% owing to stronger economic growth in advanced economies (1.9% Est. vs. 1.4% Proj.) and consumption-led growth in emerging markets (4.4% Est. vs. 3.7% Proj.). However, global economic growth projections for 2026 stand at ~2.9%(1) reflecting elevated uncertainty, geopolitical fragmentation and structural slowdowns in key economies. While easing inflation and improving financial conditions provide some support, constraints such as weak productivity growth, demographic headwinds in advanced economies, fiscal consolidation, and slower global trade are expected to limit the pace of expansion.

Chinas economic growth in CY2025 is also estimated to have exceeded earlier expectations (4.4% Est. vs. 4% Proj.), supported by targeted policy stimulus, resilient exports, and strength in manufacturing sectors. However, the medium-term outlook remains moderated, with growth projected to ease to around 3.9% in CY2026(1), reflecting structural challenges including a prolonged real estate downturn, subdued consumer confidence, and demographic headwinds.

Amidst this challenging global backdrop, India continues to demonstrate strong resilience and remains the fastest- growing large economy. India continues to demonstrate strong macroeconomic resilience, with the Reserve Bank of India retaining its FY26 GDP growth estimates at ~7.6%(2), supported by robust domestic demand, sustained government capital expenditure, and healthy balance sheets across corporate and financial institutions. However, the outlook for FY27 has been moderated to ~6.9%(2), reflecting rising external headwinds, particularly from geopolitical tensions in the Middle East and the resultant surge in crude oil prices. Elevated energy costs pose risks to inflation, current account balances, and consumption demand, especially given Indias high dependence on oil imports.

1 World Economic Outlook April 26,

(2)The Reserve Bank of India (The Economic Times report)

Inflationary pressures have moderated, with Indias CPI index trending closer to the RBIs target band of 4% (+/- 2%), enabling a more accommodative monetary stance. Policy measures aimed at strengthening liquidity and supporting credit growth are expected to further aid economic activity.

Indias structural growth drivers remain intact, supported by continued reforms in infrastructure, manufacturing (including Production-Linked Incentive schemes), digitalization, and financial inclusion. The governments focus on ease of doing business and supply-side reforms continues to enhance Indias competitiveness in the global landscape.

GLOBAL PAPER INDUSTRY OVERVIEW

With the above macroeconomic context, the global pulp and paper industry remains on a modest growth trajectory of ~1-2% in the period CY2024-26(3). In contrast, the Indian paper industry continues to outperform, with volume growth estimated at ~5-6%(3) during the same period. This is driven by favorable demographics, rising literacy, increasing packaging demand, and a shift towards organized and value-added segments. The sector continues to play a vital role in employment generation and industrial development, with long-term growth prospects aligned to Indias economic expansion.

Global demand for paper and board is estimated to have grown by 1-3% in CY2025(3) reflecting its mature demand profile and structural shifts across segments. The Writing and Printing (W&P) segment, which witnessed a degrowth of 0-1%, is expected to see further demand reduction due to digitization. Newsprint demand is also experiencing a degrowth of 1-3%. Demand for newsprint segment is expected to decline further with the rise of e-paper readership. The paperboard segment is expected to grow by 2-4% in the period CY2024-26 due to rising demand from e-commerce and pharmaceutical industries. Longterm demand for the global paper industry will be driven by the paperboard sub-segment.

On the supply side, capacity rationalization in North America and Europe contrasts with continued additions in China, Latin America and Southeast Asia, with China accounting for ~30% of global production. International trade remains critical but volatile, impacted by geopolitical tensions and logistics disruptions, with Latin America as a key pulp exporter and Asia the largest importer. The industry also faces cyclical imbalances, with oversupply weighing on pulp prices in CY2025, followed by firming trends in early CY2026 due to supply-side disruptions, underscoring the sectors inherently cyclical nature.

(3lCrisil India Report for Paper Industry - Analyst presentation

INDIAN PAPER INDUSTRY OUTLOOK

The Indian paper and pulp industry has been valued at ~ $12 bn(4) in FY26, having grown at ~6-7%. This was led by strong momentum in packaging and specialty paper segments, supported by end-use industries such as FMCG, pharmaceuticals, and e-commerce.

Industry volumes stood at ~25.5 million tonnes(3) in FY26, having grown at ~6%(3). At the sub-segment level, Writing & Printing (W&P) segment grew at 2-3% as customers continued to adopt the ‘print & digital concept while industrial paper / paperboard grew at 6-8% as FMCG and e-commerce industries continued to grow. Newsprint segment had a degrowth of 8-9% while specialty paper saw sustained growth of 10-11% with Tissue segment maintaining 10-15% growth rate. Low per capita consumption in India continues to provide long-term headroom for volume expansion.

On the supply side, India remains structurally deficient in wood pulp with over 90% of hardwood demand being met through industry driven agro-forestry(4). Virgin mills comprise 18-20% of the industry and require some softwood fibre for specialized product applications. This twin effect of limited hardwood fibre and need for softwood fibre has led to heavy dependence on imported pulp and wastepaper, exposing the industry to global price volatility and freight disruptions. Raw material trends are increasingly shifting towards agro-residues and recycled fiber, with recycled paper accounting for over 80% of packaging production, reflecting cost and sustainability considerations.

The industry is currently facing significant cost pressures, with pulp, chemicals, energy, and logistics costs rising sharply due to the Middle East conflict, leading to significant increases in input costs and packaging prices. Regulatory tailwinds remain positive, driven by bans on single-use plastics and stricter environmental norms, accelerating the shift towards paper-based packaging. At the same time, technological advancements, automation, energy- efficient processes and digital quality control are improving productivity and reducing wastage.

TISSUE PAPER

The Indian tissue paper market is experiencing a strong growth of 10-15%(34). Key demand drivers include rising hygiene awareness, rapid urbanization, increasing disposable incomes, and expansion of organized retail and e-commerce channels. Institutional demand from hospitality, healthcare, airports, and food delivery are major growth engines.

In terms of segments, facial tissues and kitchen towels are the fastest-growing categories, driven by lifestyle changes. Additionally, premium products such as colour tissues and eco-friendly options such as bamboo-rich tissues are gaining traction among urban consumers.

l4>Indian Paper Manufacturers Association (IPMA)

WRITING & PRINTING

The Indian Writing and Printing (W&P) paper market remains a stable segment characterized by moderate growth and structural shifts in demand. The segment accounts for ~25% of total paper consumption in India and is growing at a relatively modest CAGR of ~2-3%(3) annually. Demand is primarily driven by education, rising literacy rates and government initiatives such as NEP. 3040% incremental demand has come from NEP with NCERT printing 3x the earlier textbook volumes to meet increased demand(3).

Within the W&P segment, copier paper is the fastest- growing sub-category at ~5-6% CAGR(3), supported by corporate usage, educational institutions, and the expansion of the services sector. However, traditional segments such as newsprint and magazine paper are witnessing gradual decline due to increasing digital adoption and paperless workflows.

Manufacturers are facing intense pricing pressure due to cheaper imports from countries with free trade agreements, such as ASEAN. The writing & printing and notebook segments continue to be impacted by an inverted duty structure under the new GST reforms, wherein input taxes on key materials and services remain higher than output tax rates. This has resulted in accumulation of input tax credits, leading to working capital inefficiencies and margin pressures, particularly in price-sensitive and commoditized segments.

CAUSTIC SODA

The Indian Chlor-alkali sector is exhibiting steady growth driven by industrial expansion and downstream consumption. The demand has grown at a healthy CAGR of ~6-7% over FY22-25(5) and is expected to sustain. This is supported by rising demand across key end-use sectors. Demand is primarily driven by end-use industrial applications like alumina, textiles, pulp & paper, and chemicals.

On the supply side, capacity has expanded by ~8-9% over FY22-25 to reach ~6.4 MTPA in FY25(5), driven by a combination of brownfield expansions and selective greenfield additions. Looking ahead, the sector is entering a stronger capex cycle, with ~2.5 MTPA of additional capacity planned over 2025-2028 which may lead to periods of oversupply and pricing pressure.

Significant demand and strategic positions in the global supply chain allow India to play a key role in the international market. However, close attention must be paid to rising energy costs and capacity utilisation as new capacities are added.

(5) Alkali Manufacturers Association of India (AMAI)

REVIEW AND ANALYSIS OF ORIENT PAPERS PERFORMANCE

The year under review saw robust operations performance for Orient Paper as it continued the momentum built over the last few years. OPILs chemical business recorded its highest ever Caustic Lye production ~ 6.7% higher than previous year. This was achieved by renewed focus on health of all running IEM cells and ensuring availability of healthy spare cells to maximize plant OEE.

The Companys paper business also recorded its highest ever paper production ~ 2.3% higher than last year. This was achieved due to focused efforts to improve plant & machinery reliability as evident from the reduced downtime in FY26 (12% lower than FY25). This achievement was despite one of the lowest spend in repair & maintenance expenses over the last 3 years thus reflecting a paradigm shift in the O&M philosophy of the team. The Company continued to invest towards the upkeep of its assets with a capex of ~ Rs 52 Cr in FY26.

While on one hand the paper business volumes recorded ever-highest numbers, on the other hand market forces dealt headwinds as the average prices dropped by ~6% over FY25. The Writing & Printing segment saw a drop of ~4% in prices over FY25 on account of rising imports at nil duty, sluggish Tender orders and impact of GST reforms affecting notebook segment. The Tissue segment saw a sharper price drop of ~7.5% on account of time-lag taken by domestic markets to absorb the increase in capacity that happened in Q3 FY25.

Orient Paper continued to deepen its engagement with micro-markets through Hub Meets and the Orient Stars digital platform. It widened its presence across new product categories such as bamboo and launched the new colour tissue product line. The Company strengthened its offerings and value chain across growing segments like health and hygiene, copier, and sustainable products. In FY26, the Companys product mix comprised 62% Writing & Printing paper and 38% tissue products. Value-added products represented ~ 55% of the overall product mix.

Raw material sourcing cost continued to be under pressure even though availability improved in H2 FY26 due to arrival of fresh wood. This was due to the effect of transit permit affecting the movement of wood inside of Madhya Pradesh which led to ~7% higher sourcing cost for the Company than FY25. Limited flow of wood also affected the quality of wood getting inside the mill thus impacting the Companys fibre yield. This was reversed towards the latter part of FY26 when the state government removed Eucalyptus from the list of products requiring Transit Permit thereby easing its movement.

The Company remains steadfast in its commitment of achieving net neutrality targets in both carbon and water footprints. During the last financial year, the Company expanded its plantation coverage by 16,491 acres and implemented Good Agricultural Practices across 5,400 acres, benefitting 3,540 families. The proportion of renewables in the energy mix was maintained at ~40%.

The digital transformation journey that Orient Paper had embarked on by implementing state-of-the-art Advanced Process Control (APC) in its facilities has given rich dividends. This led to ~12% reduction in specific consumption of Chlorine Dioxide in its bleaching process.

Below is a snapshot of your Companys SWOT analysis:

STRENGTHS	WEAKNESSES	OPPORTUNITIES	THREATS
Established brand and reputation	Technological gap due to legacy equipment	Abundant regional land availability for capacity expansion & plantation	Rising global pulp production capacity
Strategic presence in high- growth market segments	Inadequate manufacturing scale	Rapid growth potential in the health and hygiene segment	Oversupply from countries such as Indonesia and Latin America
Experienced leadership with deep domain expertise	Elevated labour cost per ton of output	Growth prospects driven by the New Education Policy	Uncertainty due to potential changes in government policies
Robust and transparent corporate governance	High energy consumption and associated costs per ton	Rising demand for value- added products as plastic substitutes	Surplus domestic capacity in the tissue segment
Scalable infrastructure supporting seamless expansion	Need for optimization in product mix strategy	Growth of bamboo as a sustainable source of fibre - wider acceptability in markets

The Company launched ‘Project SANKALP as it embarked on a journey of business excellence to address its weaknesses and threats and become future-ready to capitalize on its strengths and opportunities. 5 key areas of improvement were identified and taken up as daily themes across the week to have data-driven discussions and fast- tracked decisions. Along with the idea-generation drive named ‘Urja-Mitra, the Company got rich flow of ideas that passed through the funnel of desirability, feasibility and viability. All of this resulted in ~10% savings in coal usage per day, increase of speed of our tissue machines, reduction of downtime due to process & mechanical related changeovers and optimization of chemicals and filler in Writing & Printing paper. As we continue to invest in modernization of our machines, these initiatives have helped us de-bottleneck, become more efficient, sweat our assets better and improve our margins.

Though the Company was able to unlock significant value via these small-scale high impact projects, it was still not sufficient to offset the economic headwinds caused by external forces. Pricing pressures and government policies inflating the sourcing side costs led to squeezing operating margins.

Capex project for installing a new Tissue line has been initiated. This capital infusion shall bring in state-of-art technology to Orient Paper and help it stay relevant in todays markets by expanding its product basket and improving its profitability. This shall de-commoditize the Companys product mix and shift it towards value-added categories.

ORIENT PAPERS FINANCIAL PERFORMANCE FOR FY 2025-26

Revenues: Revenue during the year stood at Rs. 905.95 Crores, marking an increase of 1.13 % compared to Rs. 895.79 Crores in FY25.

Net Profit after tax: The Companys profit / (loss) after tax stood at Rs. (28.81) Crores compared to Rs. (54.66) Crores in the previous year.

Projects investment: The Company invested Rs. 51.50 Crores on capital projects during the year.

Key Ratios

Particulars	FY 2025-26	FY 2024-25
Debtors turnover ratio	53.12	60.58
Inventory turnover ratio	5.87	6.44
Interest coverage ratio	-0.79	-0.15
Current ratio (x)	0.57	0.80
Debt-Equity ratio	0.20	0.26
Operating Profit margin (%)	-2.29	-0.57
Return on Net worth (%)	-1.92	-3.47

Reasons for significant changes in the ratios have been explained in Note No. 50 to the financial statements, except for the Interest Coverage Ratio and Operating Profit Margin, where variation is due to lower operating profit as compared to the previous financial year.

ENVIRONMENT PROTECTION & COMPLIANCE

Orient Paper is committed to environmental protection and has implemented robust systems in place to ensure effective monitoring and treatment of waste. Some of these include: Zero Liquid Discharge (ZLD), online stack emission monitoring systems, ambient air quality monitoring systems, dust extraction and suppression systems, Effluent Treatment Plant (ETP), etc.

Our paper business has done better than its GHG target as set by MoEFCC in their gazette notification, while our Caustic Soda business has missed the target by some margin. The net effect at the Company level augurs well as we may have surplus carbon credits. We are keenly following the developments as the National Carbon Market formalizes and begins operating in India.

Our extensive work on water conservation across our supply chain and the surrounding ecosystem will help us conserve more water than what we consume in our operations. In FY26, the Company helped build more than 1280 water harvesting structures across the local community which can harvest up to 32 billion liters of water.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company continues to focus on continuous training and motivation to achieve greater efficiencies and competencies. The total number of permanent employees as of 31st March 2026 was 1209.

Company is working on multiple initiatives to enhance employee engagement levels. 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.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Companys internal audit system is regularly monitored and updated to safeguard its assets, ensure compliance with regulations and promptly resolve outstanding issues. The Audit Committee regularly reviews reports from internal auditors, documenting audit observations and implementing corrective actions as necessary. Continuous and sustained communication is maintained with statutory and internal auditors to ensure the operational efficiency of internal control systems.

CAUTIONARY STATEMENT

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 on 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.

	By Order of the Board of Directors
	CK Birla
Place : New Delhi	Chairman
Date : 09 May, 2026	(DIN: 00118473)