Sangal Papers Ltd Management Discussions

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, your directors have great pleasure in presenting the management discussion and analysis report for the year ended on March 31^st, 2025.

Sangal Papers Limited (hereinafter called "The Company") incorporated in the year 1980 and having its registered office in the State of Uttar Pradesh. The company is engaged in manufacturing of Writing and Printing Paper, News Print paper, Kraft and wide range of color papers. Sangal Papers Limited manufactures paper on customized requirement of the customers. The management discussed the various aspects and come out with this summary:

A) INDUSTRY STRUCTURE AND DEVELOPMENT:

The outlook for the Indian Paper Industry is seen as positive, due to the strong growth expected in the coming years, driven by increasing demand for paper products and a growing economy. The industry is forecast to reach a market value of USD 35 billion by 2030, expanding at a CAGR of 13.4%.

Factors Driving Growth are: a. Rising Demand b. E- Commerce growth c. Focus on sustainability d. Government Initiatives e. Focus on Education and Literacy

Despite several infrastructural and geo- political hurdles there is strong growth in demand in various segments of the Indian Paper Industry. There is a shift in preference for higher quality products in the market and players are seeing opportunities for profitable growth. For meeting the growing demand, capacity upgrading, improvement in the quality, is the need of the hour. Industry needs to have cost effective funds and availability of good quality and cost- effective raw material and low- cost energy.

Paper pervades all sectors of our activity from books to bullets and from morning newspaper to nuclear technology. Indian paper industry is highly fragmented with varying sizes.

Paper Industry in India, despite facing challenges, holds considerable promise for the future. By embracing technological advancements, focusing on sustainability, and adopting to changing market dynamics, the industry can continue to thrive and contribute to India?s economic and environmental goals.

Financial Performance of Sangal Papers Limited

B) Opportunities and Threats:

The Company?s products have been enjoying consistently good brand image and loyalty from the consumers for the past several years and the company is optimistic on increasing the sale of the paper product in India and abroad. There is opportunity to explore global markets due to restrictions on China and the global players are eying on India for their needs.

Population growth, urbanization, increasing consumer demand for eco-friendly products, e-commerce market is all going to help in the overall growth of the industry.

Our best practice is that we are sourcing recycled materials so that we can reduce reliance on virgin pulp and have certification of FSC as we are making FSC Certified products. We are enhancing water and energy efficiency through re-cycling and renewable energy use.

The paper industry is increasingly relying on waste paper as a raw-material, with import of waste paper also growing steadily.

The Government has also prioritized policies aimed at promoting rapid up-gradation in supply chain systems for retail distribution and export of food materials. The footwear and garment export segment are growing. All these and other trends indicate that there will be better demand for high- quality, world class packaging material.

For Indian paper industry, biggest concern is the use of high volume of water and electricity consumption in manufacturing process which creates pollution in the environment. Due to which to reduce such pollution filters and up-gradation in technology requires from time to time which involves heavy investment in CAPEX which is a continuous challenge to small scale paper manufactures in this price sensitive commodity (paper) market.

Industry needs Government intervention such as government subsidies for sustainable practices, stabilization of raw-material prices, energy incentives and improved supply chain infrastructure. These interventions can help industry to become more competitive, resilient and sustainable in the long run.

STATE OF THE COMPANY

The following statements are on the affairs of the company under review:

1. The Company is engaged in single segment i.e. company is engaged in manufacturing of Paper.

2. There is no change in status of the company.

3. There is no change in financial year of the company.

4. There was capital expenditure of Rs. 517.02 lakhs during the year in plant and machinery for quality improvement, cost effectiveness and value addition.

5. Due to above there is modernization, expansion and diversification during the year.

Your company is manufacturing paper on demand of the customer. In reference of pricing of writing printing paper and other various variety of paper, our company is very small company by size and value. We are following price decided by the customer and the market forces. We are only price takers and not setters. The price of paper is determined/decided by taking into various factors like quantity, quality etc.

The company is trying hard to utilize the capacity to its optimum level, making use of the best of operational techniques and economical use of the resources. Raw materials used by the company are of the best quality in their category with strong quality checks, the availability of raw material for production depends on the availability in the market as well as price consideration.

Manufacturing of paper involves very high volume of water and electricity, which results in creating pollution to the environment which is one of the biggest threats to the paper industry. To overcome this challenge, industry needs latest technology-based machines and pollution reducing equipment?s or filters to curb pollution which involves high cost and also it takes time to get the environmental clearance from the government.

C) Segment:

Sangal Papers Limited engaged in single segment of business. Manufacturing of Paper is our primary business activity.

In geographic segment, the company is selling its paper in India and exporting to Sri Lanka, Singapore, Nepal, Iran, United Arab Emirates and other various countries.

We have good network of dealers and significant customers base which are scattered around the country and the world.

Sangal Papers Limited

There is a dip in the Turnover this year as compared to last year due to geopolitical issues around the world and its effect on the Demand side. Despite of this there is improvement in the profit side due to operational efficiency by your Company. Your management hopes are high for the coming years and are of the view that the pressure of geo political issues will ease out and the demand of paper will rise.

D) Outlook and other concerns:

The paper industry in India is set for significant growth. The growth of the paper industry in India not only generates substantial revenue but also contributes to the nation?s economy and creates employment opportunities. With current conditions, the paper industry employs around 5 lakh employees directly and 15 lakhs indirectly. The rising literacy rates, increased industrial activity, advancement in technology, e-commerce are all enablers in the growth of paper industry which is expected to be 6% to 7% annually.

The Government of India is also focusing on overall development of all the sectors with the aim of improving infrastructural facilities. This has resulted in opening of the global markets and more of foreign players are coming in India for fulfilling their demand. This will give boost to the Paper Industry as well. There is better flow of materials across the country due to improved infrastructure facilities.

Government has banned the single use plastic. Industries are looking for eco-friendly alternatives to plastic. Paper products are promising substitute. Sign of growth in e- commerce market and quick service restaurants will give boost to the paper industry.

There has also been witnessed strong demand of packaging paper due to increase in organized retail sector. Focus on education sector and other organizations added demand of writing and printing paper too.

For Indian paper industry, biggest concern is the use of high volume of water and electricity consumption in manufacturing process which creates pollution in the environment. Due to which to reduce such pollution filters and up-gradation in technology, funds are required in CAPEX, which is a challenge to small scale paper manufacturers in this price sensitive commodity (paper) market.

Demand supply imbalance in almost all sectors is affecting not only sales revenue but profitability as well. Imports from South East Asia and other Countries duty free are posing threats to paper industry. As the global scenario is not stabilized, it is a challenge to the industries. However, despite the challenges pulp and paper industry is likely to grow in the coming years.

CARE Ratings or IPMA (Indian Paper Manufacturers Association) estimates a growth of 6 7 % on year on year basis and will reach 30 million tons by FY 2026-2027 largely driven by emphasis on education and literacy coupled with growth in organized retail, according to industry body IPMA.

The growth will be largely driven by writing & printing and packaging & paper board segment. The Indian paper industry can be broadly classified into three segments:

1. Printing & writing (P&W): Printing and writing segment caters to office stationary, textbooks, copier papers, notebooks etc. This segment forms 31% of domestic paper industry. Governments thrust on education through steps like Right to Education, Sarva Shiksha Abhiyan, and rise in service sector are key factors contributing to the growth of this segment.

2. Packaging & paper board: Packaging paper & board segment caters to tertiary and flexible packaging purposes in industries such as FMCG, food, pharma, textiles etc. This segment forms 47% of the domestic paper industry. This is currently fastest growing segment owing to factors such as rising urbanization, increasing penetration of organized retail, higher growth in FMCG, pharmaceutical.

3. Newsprint: Newsprint serves the newspaper & magazines industry. This segment forms 18% of Indian paper industry. This segment is under stress due to lower growth rates and import threat.

Our actual results could differ materially from those anticipated in these statements as a result of varied factors. The company will try or make efforts to increase in the revenue and profit of the company in future. The company will also try to enter in new geographical area for capturing more market and try to increase the percentage to participate in the national and international market. A large portion of the revenue is dependent on the top clients of the company and the loss of any one of major client cloud significantly impact of the business. We may be the subject of litigation which, if adversely determine could harm our business and operating result.

E) Internal Financial Control and their adequacy:

The Company identifies a risk based internal audit scope and assesses the inherent risk in the processes and activities of the department within the company and ensures that appropriate risk management limits, internal control mechanisms and mitigation strategies are in place. The Internal Auditors, via, their internal audit reports, make suggestion for better application of policies and rules relating to the deficiencies/non-compliance of various audit areas and give suggestions/recommendations and control directives like periodic reconciliation, proper authorizations/approvals, processing controls, segregations of duties, maker-checker approach, etc. so as to mitigate the deficiencies and make the process, procedure, systems and functions more robust, accountable, reliable and compliant. The suggestions made by the Internal Auditors and the compliances thereof are placed before the Audit Committee. The Audit Committee of the company, the details of which have been provided in the Corporate Governance Report. The Committee reviews audit reports submitted by the Internal Auditors.

Internal Financial Control?s Suggestions for improvement are considered and the Committee follows up on the implementation of corrective actions. The Committee also meets the Statutory Auditors to ascertain, inter alia, their views on the adequacy of internal control systems in the company.

Funds (Equity):

There is no change in the Capital Structure during the year.

Other Funds (Other equity):

Revenue from Operations:

G) Human Resources Relationship:

Human resources relationship policy of the company recognizes the importance of human value and ensures that proper encouragement both moral and financial is to be extended to the employees to motivate them and protect the right of the employees. We try to provide a comfortable environment to the employees.

We are maintaining a culture and custom for our employee to attract and retain the best talent. During the year under review, your Company enjoyed cordial relationship with workers and employees at all levels.

Employees of the company are essential assets of the company. Our company believes for welfare and development of the company as well as employees. As at 31^st March, 2025, the company employed 217 permanent employees.

H) Details of significant changes:

During the financial year 2024-2025, changes in financials and operating position of the company.

Financial Ratios:

The Company reported a decline of 15.82% in its sales due to geopolitical issues which has the effect of reducing demand. The Company reported decrease of 2.25 % in Debtor Turnover Ratio during the financial year 2024-2025 as compared to last year due to better operations. Company reported decrease of 6.75% in Inventory Turnover Ratio during the financial year 2024-2025 due to better operations. The Company reported increase of 8.86% in

Interest Coverage Ratio during the financial year 2024-25 due to better earnings. The Company reported 5.48% increase in Current Ratio during the financial year 2024-2025 due to increase in current assets. There is decrease of 4.55% in Debt Equity Ratio during the financial year 2024-2025 due to retained earnings effect on equity. The Company reported a growth of 14.92% in Operating Profit Margin during the financial year 2024-25 due to better operations. Company reported increase of 20.77% in Net Profit Margin due to taxation effect.

I) Announcement:

The statements in the "Management Discussion and Analysis Report" section describes the Company?s objectives, projections, estimates, expectations and predictions, which may be "forward looking statements" within the meaning of the applicable laws and regulations. The annual results can differ materially from those expressed or implied, depending upon the economic and climatic conditions, Government policies and other incidental factors.