Orient Paper & Industries Ltd Management Discussions.

Overall economy

Indian economy, which was growing at close to 7% until the previous year started to slow down during the year and was further impacted by the Corona virus outbreak towards the end of the year. Resultantly, the Indian economy is estimated to have registered a growth of only about 4.5%, which is Indias lowest growth rate in last several years.

The Government of India and the Reserve Bank of India have announced several measures to help the agriculture and MSME segments in particular.

We are greatly encouraged by the Hon. Prime Ministers call of ATMA NIRBHAR BHARAT and do hope that some sector specific measures will be announced by the Government of India to boost demand and to provide required relief to the industries which are facing twin threats of lower demand and increased imports.

Indian paper industry – structure & development

International prices of pulp and consequently paper came down sharply during the year. This resulted in huge increase in import of finished papers particularly from countries covered by FTA agreements which permit duty free imports. Consequently, price realization for the Indian paper industry both in domestic as well as export markets also remained depressed.

The world-wide crisis created by the COVID-19 pandemic dealt a further blow to the Industry in the last quarter of the year.

The Paper industry has submitted several representations to the relevant authorities seeking specific measures against duty free imports. We do hope that these will receive the Governments serious consideration.

Writing & Printing Papers

While domestic demand for writing & printing papers increased at the normal pace of around 5-6%, price realizations came down due to competitive pressures from imports.

Tissue papers

The domestic demand for Tissue papers continued to grow by double digit percentages. However, competitive pressures both in domestic and export markets resulted in lower price realization for tissue papers as well.

Review and analysis of our performance

The Companys performance was impacted by lower volumes due to loss of production caused by break-down and maintenance requirement of recovery boiler during 1st & 4th quarters and the Nation-wide lockdown in March 2020. In line with rest of the paper industry our price realization also came down quarter on quarter by almost 10% between 1st quarter and 4th quarter.

We have now been able to fully attend to the recovery boiler and expect steady operations now. The Company has ordered for a new recovery boiler with higher capacity & efficiency which will help increase our pulping capacity which should ultimately result in increase of our paper capacity.

Opportunities & Threats:

Tissue papers

Orient is the largest producer of Tissue papers in India and has been successfully exporting a significant proportion of its Tissue paper production to a number of countries. A number of new overseas markets including USA have been added to our markets during the year.

Tissue paper demand in the domestic market continues to grow at a healthy pace and export markets also provide huge scope in the long run.

Recent devaluation of Rupee vs. US dollars is also expected to reduce the threat from imports in the domestic market and provide better realization from exports.

We therefore see a major growth opportunity in the tissue paper segment.

Writing & Printing papers

While the Writing & Printing segment is likely to face some challenges in the short term, we believe that the import threat should reduce with more favourable exchange rate and the current emphasis on "ATMA NIRBHAR BHARAT".

Pulping Capacity & efficiency

We are also in the process of increasing our pulping capacity which will reduce our dependency on imported pulp and also provide a scope for increasing our tissue paper capacity.

Simultaneously we are taking several steps to cut down both our direct and overhead costs which will provide us with lasting benefits even after normalcy returns.

Therefore, while there are likely to be some challenges in the short term, we expect to come out stronger once normalcy returns.

Resource augmentation

Pulp wood availability in India is another continuing challenge. We have been working towards ensuring virtual self-sufficiency in procurement of pulpwood from areas close to our plant to achieve twin objectives of helping the environment and lowering landed cost of pulpwood. Toward this objective, we have set up a world class clonal development center to produce high yielding clones for distribution to the farmers at a low cost and have so far already covered around 63289 hectares of land with plantations. This is expected to result in increasing quantum of wood year on year.

Water security

We had faced a problem of water scarcity during summer months. To mitigate this risk, we have during this year constructed a permanent RCC barrage to increase our water storage capacity to 4.546 million cubic meters, which is expected to eliminate the risk of water scarcity related plant stoppage in future.

Our performance for 19-20

As a result of the challenges faced during the year, our turnover for the year was lower at Rs 606.56 crores compared to Rs 710.04 crores last year We achieved a PBIDT of Rs 59.33 crores and cash profit of Rs 54.10 crores.

Our PBT for the year was Rs 20.94 crores. Net profit after tax was Rs 19.93 crores this year.

We invested Rs 58.08 crores on capital projects during the year. Significant ratios:

2019-20 2018-19
(i) Debtors Turnover Ratio 21.11 21.16
(ii) Inventory Turnover Ratio 7.97 10.43
(iii) Interest Coverage Ratio 11.34 17.21
(iv) Current Ratio 0.80 0.98
(v) Debt Equity Ratio 0.01 0.01
(vi) Operating Profit Margin (%) 9.78 24.17
(vii) Return on Net Worth (%) 2.94 12.70

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

Environment protection & compliance

We take pride in the fact that we comply with all the environmental norms and are the only integrated paper plant to have achieved zero liquid discharge to the river. This was made possible by utilizing 100 % of the e_uent treated water in our own plantation spread over 600 acres of land, for wood log washing and peripheral sprays for dust suppression inside the plant & colony premise.

Our efforts in this direction have been well recognized by several organizations who have bestowed on us a number of awards and certifications as shown elsewhere in this report.


Corporate Social Responsibility has always been an integral part of our operating philosophy irrespective of the statutory requirement.

As in the past, we have this year also undertaken several activities. Detailed report of CSR initiatives FY 19-20 is attached in a separate section forming part of this report

Human resources and industrial relations

Orient Papers workforce represents its foundation The Company continues its policy of continuous training and motivation to achieve greater efficiencies and competencies. The total number of permanent employees as on 31 March 2020 was 1502.

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 Company has established adequate internal control systems, which provide reasonable assurances with regard to safeguarding 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.

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 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 on the basis of subsequent developments, information or events