ruchira papers share price Management discussions

GLOBAL PAPER AND PULP INDUSTRY

At present, paper is the most sustainable and recyclable packaging material in the world. The global pulp and paper market size is expected to grow from USD 354. 39 Billion in 2022 to USD 372. 70 Billion by 2029, recording a CAGR growth of 0.72% during the forecasted period. Due to growing environmental concerns, consumers and manufacturers are shifting their focus to more ecological paper packaging solutions. Major cosmetics, food and FMCG players are consistently engaging with paper manufacturers to create advanced paper packaging solutions to fulfill their sustainability commitments. The growing demand for e-commerce and increasing concerns about plastic packaging pollution is expected to drive paper packaging consumption in the coming years. The global demand for containerboard is the most consumed paper type globally and is expected to grow 27% from 2021 to reach 226 Million Tonnes by 2032. Containerboard also known as corrugated case material is used in the production of corrugated boxes. The food contact paper market size is expected to grow from USD 75.44 Billion in 2022 to USD 104.24 Billion by 2029, growing at a CAGR of 4.7%. The sectorial growth in these markets is expected to catalyse the demand for pulp and paper market.

Asia-Pacific was the largest region in the paper products market in 2022. North America was the second largest region in the paper products market. The paper industry is transforming from labour intensive manufacturing processes to automated production facilities. Automation has helped paper product companies to increase productivity and moderate production costs. Strengthening the control systems such as integrated drive systems (IDS) are increasing plant efficiency through lower energy consumption and streamline service and maintenance processes. (Source: Fortune Business Insights, Statista, globenews wire.com)

INDIAN PAPER INDUSTRY OVERVIEW

Indias paper industry has reported one of the fastest growth numbers across the globe. The growth trajectory is expected to continue as the Indian economy is well-placed to encounter global disruptions. India is the 15^th largest paper market in the world, recording a 10.6% growth in per capita consumption of paper during 2019-27. Indias domestic paper market produces 16 Million Tonnes per annum with more than 2 Million Tonnes being imported.

On account of the growing emphasis on education and literacy rate in the country, paper consumption is expected to grow by 6-7% annually reaching 30 Million Tonnes by FY 2026-27. The market demand is further attributed by the growing adoption of paper packaging and e-commerce. The Rs 80,000 Crore paper industry has witnessed a growing momentum in exports since the last five years as India engaged with UAE, China, Saudi Arabia, Bangladesh, Vietnam and Sri Lanka as major exporting partners. The Indian paper packaging market is expected to register a 6.1% CAGR between 2022-2027. Consistently evolving demand from the food and beverage segment, healthcare and personal care segment is primarily strengthening the demand for paper packaging in India. The paper industry has welcomed the governments announcement on the need for faster environmental clearance as part of its larger goal of ‘ease of doing business and legislative changes to promote agro forestry and private forestry to enhance green cover in the country. Indias paper industry is witnessing new innovations and trends as the increased focus on cleanliness has created new opportunities for tissue and toilet papers. The growth in online shopping has significantly catalysed the demand for corrugated boxes and container board. Indias paper industry has emerged as technologically advanced with an amount of more than Rs 25,000 invested in new capacities and green technologies in seven years. (Source: Indian mirror. com, Imarc group, paper mart. in, research and markets)

DEMAND CATALYSTS

Population: India surpassed China as the most populous country in 2023. Indias population is expected to reach 1.51 Billion in 2030 creating larger headroom for growth. (Source: outlook india.com)

Increasing literacy: According to the National Survey of India, Indias literacy rate stood at 77.7% in 2022. The growing literacy rate and increased allocation in the education budget is expected to catalyse the demand of paper. (Source: times of India)

Growing urbanisation: Indias urban population is expected to reach 630 Million by 2030. Indias estimated rate of urbanisation in 2022 stood at 35.9% which is expected to reach 50% by 2047. (Source:urbanet.info)

E-commerce boost: Indian B2B e-commerce market is expected to reach USD 90-100 Billion in gross merchandise value by 2030. Smaller cities are playing a crucial role in the countrys e-commerce growth with 30 of the top 50 mature e-commerce markets. These cities are expected to be the source of ~60% of urban e-shoppers and nearly 45% of spending by 2030. (Source: Business Standard)

FINANCIAL PERFORMANCE

Revenues: Revenue during the year stood at Rs 802.70 Crore, an increase by 30.98% compared to Rs 612.86 Crore in FY 2021-22.

Profit after Tax: The Company reported a profit after tax of Rs 67.63 compared to Rs 33.09 Crore in the previous year.

Production capability: The Company commenced operations with a production capability of 7 Tonnes per day (TPD) of kraft paper, which is now approx 450 TPD of kraft paper, writing and printing paper.

RISK MANAGEMENT

Environment risk: Any kind of non-conformance with environmental regulations might disrupt the Companys operations.

Mitigation: The Company established a state-of-the-art effluent treatment plant and chemical recovery unit for recycling the black liquor manufactured in the pulping process.

Competition risk: Entry of new players can affect the Companys market share and reduce margins.

Mitigation: The Company is among the leading printing and Kraft paper producer in North India. It utilised agricultural leftovers for paper manufacturing to save raw material costs.

Quality risk: The Companys inability to constantly conform to the standard quality might affect product demand.

Mitigation: The Company enjoys a structured quality control procedure to maintain quality standards. The Company is accredited with IS 14490: 2018 by the Bureau of Indian Standards for plain copier paper and ISO 9001: 2015, affirming its dedication to quality excellence.

Raw material risk: The Companys inability to obtain raw materials might affect the operations of the Company.

Mitigation: The Company utilises imported softwood to a minimum extent and uses substitutes like bagasse, wheat straw, sarkanda, imported and indigenous waste paper. The Company maintains substantial stock of bagasse round the year to take care of any adverse impact on supply chain.

People risk: The Companys inability to hire the skilled and experienced professionals might affect quality.

Mitigation: The Company works to continuously update its employees through investments in training and development.

Liquidity risk: The Companys operations might be hampered on account of a liquidity crunch. Mitigation: The Companys working capital cycle stood at 67 days in FY 2022-23, with its debt-equity ratio at 0.02x.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Companys internal audit system is regularly tracked and updated to ascertain the safeguard of assets, proper compliance with established regulations and prompt remittance of pending issues. Reports presented by internal auditors are assessed by the audit committee on a regular basis. Audit observations are jot down and corrective actions are taken, if required. It keeps the continuous sustained dialogue with statutory and internal auditors to make sure the operating efficiency of internal control systems.

HUMAN RESOURCES

The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve with ongoing technological advancements.

During the year, the Company organised training programmes in different areas such as technical skills, behavioural skills, business excellence, general management, advanced management, leadership skills, customer orientation, safety, values and Code of Conduct. The Companys employee strength stood at 1,025 as on 31^st March, 2023.

CAUTIONARY STATEMENT

The Management Discussion and Analysis report containing your Companys objectives, projections, estimates and expectations may constitute certain statements, which are forward-looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, and economic developments within India and the countries with which the Company conducts business and other incidental factors.