rama pulp papers ltd Management discussions

1. INDUSTRY OVERVIEW

A. PAPER INDUSTRY

The Indian Paper Industry is the Fifth largest producer of the paper in the world and considered as an important contributor in National Manufacturing Sector. However it accounts only 3.50% of the world paper production and hence it has an immense opportunities for the paper sector to grow sustainably.

In India, the per capita paper consumption is around 15 kg, which is likely to grow to over 30 kg in the next few years, whereas the global average is close to 60 kg. These numbers itself shows the scope for the Indian paper industry. Domestic consumption will help to achieve the growth, and objective of GOI to become a 5 trillion-dollar economy through exports. Currently, India stands at three trillion dollars, we see an opportunity coming our way in the next few years. The global supply chain is getting more integrated, and there are immense opportunities as the manufacturing base shifting to India."

The Clean India mission set by the Government is not possible without the paper industry. The Government has been working with sincerity to ban litter and environmental issues caused by single-use plastics and there is no other viable alternative than paper.

The Indian paper industry has experienced a significant improvement in operating margins due to factors like Chinas ban on paper waste and supply disruptions from the Russia-Ukraine war. Sanctions placed on Russia and ban on paper manufacturing in China have created export opportunities.

Looking ahead to FY24, a moderation in top-line and operating margins is anticipated. The Indian paper and paperboard packaging market is projected to grow at a CAGR of 6.6 per cent until 2027. The industry witnessed a rise in sales volumes, higher production, and a remarkable 45 per cent growth in sales revenues in FY23. Supply-demand disruptions led to higher realisations, while imports of raw materials and uncertainty in the industry pose challenges for future growth.

B. CHEMICAL INDUSTRY

India is the 6th largest producer of chemicals in the world and 3rd in Asia contributing 7% of its GDP.

Domestic demand is expected to rise from US$ 170 billion -U$ 180 billion in to US$ 850 billion to US$ 1000 billion by 2040.

Rise in demand from end-user industries such as food processing, personal care and home care is driving development of different segments in Indias specialty chemicals marker.

2. Opportunities and Threats

PAPER INDUSTRY

Products made from paper have facilitated cultural advancement and literacy, two notions that are essential to society. Each year, around 400 million metric tonnes of paper are produced and used worldwide.

The two most promising growth sectors in the market that are currently receiving more attention from the industry are packaging materials and sanitary goods. As of 2018, packaging accounted for 58% of all paper and board production worldwide, and graphic paper, at 29%, is the second- largest grade of paper.

Post - COVID-19 pandemic, industry growth is being driven by renewed demand in both domestic markets and globally within some paper and board segments, however, some paper and board segments experienced a drop in demand. The production of packaging grades has increased by 7.1% compared to 2020, apparently reaching an all-time high in 2021. The production of wrapping grades, which are used for paper bag production, also increased by 11.6%. However, the graphic grades segment is experiencing an accelerated structural decline, with overall output falling by 19% in 2020.

And, as is common among highly complex businesses, there are various reasons for the challenges the industry is currently facing along with counteracting opportunities to overcome these challenges

PAPER AS AN ECOFRIENDLY RESOURCE

Paper can be recycled up to 6-7 times, making it one of the most recycled products in the world. Apart from recyclable in nature, it is also biodegradable and compostable. Hence it is the most eco-friendly in nature.

MANUFACTURING PROCESS EFFICIENCY

Over the period of time, the consumption of water by paper industry has been reduced by 80% by deploying modern technology solutions and captive power generations to achieve water and energy efficiency. Saving in water and electricity consumption are environment-friendly measures to reduce their carbon and water foot-print.

OPPORTUNITY FOR THERMAL PAPER

Thermal sensitive paper is a highly technical grade of paper. It changes colour when exposed to heat. These papers are made through application (Coating) of specially made heat sensitive materials (Coating Formulation). When the paper is subjected to heat (via a thermal paper printer), the chemicals in the coated layer react and manifest into a colour form. The result is a sharp, clear image, without the need for ink or ribbons.

This technology has created for manifold opportunities for rechargeable hand hold printing devices which can be used in POS machines, printing receipts or invoices and labels , regional transport sector, restaurants, theatres etc. This paper is also used in printing of test reports. Because of its easy to use nature, the growth potential for this paper is tremendous.

RISING COSTS

Paper consumption per capita in India is very low resulting in lower waste generation in India. Hence dependency for recycled waste paper through import is very high. The cost of waste paper is affected by various factors such as lower generation of waste, disruptions in supply chain, decisions of countries banning paper manufacturing or lifting the ban from manufacturing. Hence the prices of waste paper has been on higher side since post covid-19.

DISCRETIONARY SPENDS

Events like rising inflations, recession and weak sentiments impact the sectors which are considered as discretionary spends sector such as furniture and fixtures, gifting and decorative industries. Absorbent kraft paper are used in manufacturing of Laminates which are used in Furniture industry. Tissue papers manufactured as used in decorative industry. Hence in rising inflation scenario or global weak sentiments, the demand for laminates or decorative paper is likely to get affected.

CHEMICAL INDUSTRY

OPPORTUNITIES: -

Indias specialty chemical companies are expanding capacities to cater to the rising demand from domestic and overseas.

With global companies seeking to de-risk their supply chains, which are dependent on China, the chemical sector in India has the opportunity for a significant growth.

POLICY SUPPORT

The Government plans to introduce production linked incentives (PLI) schemes to promote domestic manufacturing of agrochemicals.

Under the Union Budget 2023-24, The Government allocated Rs. 173.45 Cr (US$ 20.93 million) to the Department of Chemicals and Petrochemicals.

INCREASING INVESTMENT AND SPENDING

FDI inflows in the chemical sector (other than fertilizers ) reached US$ 20.96 Billion between April 2000 to December 2022.

The Department of Chemicals & Petrochemicals intent to PLI in Chemicals & Petrochemicals sector and will redraft the Petroleum, Chemicals and Petrochemicals Investment Region ( PCPIR) Guidelines.

Exports

At present, the Company is exporting in 22 counties and witnessing steady demand from the Export markets. The Company is engaged in the manufacturing of specialty paper viz Absorbent Kraft which is used in Laminates Industry, MacD which is used for paper bag manufacturing, Therma Paper which is used in POS machines and also used wide application. All these segments are growing segment across the world which will in turn create demand for the papers manufactured by the company. Looking at the demand, the Company has set the target of achieving 50% revenue of paper division from the export market in next 5 years.

3. Internal Control Systems and their adequacy

The Company believes that Internal Control System is an important pillar of corporate Governance. The Company has adequate internal controls and standard operating procedures in place covering all financial and operational functions commensurate with the size and nature of the business. The same are reviewed and monitored through internal audits and operational Reviews. Company has also installed ERP system ‘PAPERBIZ" which has also helped in strengthening internal controls.

4. Financial performance with respect to operational performance

The Company achieved total income of Rs. 414.42 Crores and recorded EBIDTA of Rs. 12.37 Crores. As mentioned, the margins were low because of lower recovery of fixed overheads due to shutting down of plants for expansion.

5. Development in human resources/industrial relations front

Relations with the employees remain cordial during the year. Human resource development is a continuous process which is achieved through documenting SOPs, on-job training and orientation, safety drills which results in skill development of the employees.

	For and on behalf of the Board,
	Akash Kagliwal
Place: Mumbai	Managing Director
Date: 31.08.2023	(DIN:01691724 )