REVIEW OF ECONOMY
GLOBAL ECONOMIC SCENARIO
The war in Ukraine has triggered an expensive humanitarian disaster
that must be resolved peacefully. At the same time, the conflicts economic consequences
will cause a considerable slowdown in global economy in 2022, as well as an increase in
inflation. Fuel and food prices have risen significantly, disproportionately affecting
vulnerable populations in low-income countries. The global economy is expected to
decelerate from 6.1% in 2021 to 3.6% in 2022 and 2023. (Source: IMF)
INDIAN ECONOMIC SCENARIO
The Indian economy has fully recovered to the prepandemic real GDP
level of 2019-20, according to the provisional estimates of GDP released on May 31, 2022.
Real GDP growth in FY 2021-22 stands at 8.7%, which is 1.5% higher than the real GDP in FY
2019-20. These figures are associated with stronger growth momentum, indicating increased
economic demand. The investment rate in the fourth quarter increased to its highest level
in the previous nine quarters. Moreover, capacity utilisation in the manufacturing sector
rose in the fourth quarter, as against the third quarter, implying a build-up in demand,
which is consistent with the growth objectives of the Indian economy.
Future capital spending of the government in the Indian economy is
expected to be supported by factors such as tax buoyancy, streamlined tax system, thorough
assessment and rationalisation of the tariff structure and digitisation of tax filing. In
the medium term, an increase in capital spending on infrastructure and asset-building
projects is set to increase growth multipliers. Furthermore, revival in monsoon and Kharif
sowing helped the agriculture sector gain momentum. As of July 11, 2022, the South-West
monsoon has covered the entire country, resulting in 7% higher rainfall than the normal
level.
India has emerged as the fastest-growing major economy in the world,
and is expected to be one of the top three economic powers globally over the next 10-15
years, backed by its robust democracy and strong partnerships.
The long-term outlook for the Indian economy is supported by a number
of key growth drivers:
• The important positive factor for India is its large and
fast-growing middle class, which is helping to drive consumer spending and the countrys
consumption expenditure is expected to double from $1.5 trillion in 2020 to $3 trillion by
2030
• Large public infrastructure investments together with the PM
Gati Shakti initiative to improve Indias logistics infrastructure, increased financial and
technical support to states to expand capital investment will boost infrastructure
spending.
• The governments production-linked incentive (PLI) scheme is
expected to provide a thrust to the manufacturing sector in FY2022 and FY2023.
INDUSTRY STRUCTURE AND DEVELOPMENT
GLOBAL PAPER INDUSTRY
The pulp and paper industry is one of the largest industries in the
world. Paper and paper board are used in a wide range of writing & printing and
packaging applications in end-user industries such as consumer goods, hygiene, food and
industrial packaging. The global pulp and paper market are projected to grow from $351.51
billion in 2021 to $370.12 billion in 2028 at a CAGR of 0.74% (Source: Fortune Business
Insights). The World largest paper producing country is China followed by United States
and Japan. These top three paper producing countries account for over 50% of the worlds
total paper production. North America holds the largest market share of the paper and pulp
market due to its growing requirement in the packaging and consumer goods industry. India
embraces 15th rank among paper manufacturing countries in the world. It is expected that
both India and China will become key players in the industry as Asia is responsible for
the bulk of the market in global output and consumption of paper and paper boards.
INDIAN PAPER INDUSTRY
The Indian Paper industry is expected to see increased demand coming
from manufacturing sector, requirement of better-quality packaging of FMCG products
marketed through organised retail and the demand for the upstream market of paper
products, such as copier paper, cup stock paper board, base paper for making straws &
paper bags and other single use paper (SUP) products are expected to drive the paper &
paper products market in India in coming years.
Paper consumption in India is approximately 22.05 MT and expected to
reach 23.5 MT by 2025 (Source: Ministry of Commerce & Industry, Govt. of India), of
whichcartonboardsandcontainerboards(corrugated boards) constitute the largest share of
55%, followed by writing and printing paper by 25%, specialty paper 10% and newsprint by
10%. Paper industry in India is expected to derive an annual average growth rate of 8-9%
(Source: Money control) over the next 5 years led by a robust growth in packaging grade.
Within consumer packaging segment it is expected to clock 9.5% CAGR in the same period
driven by increased volumes in end-user segments such as household appliances, FMCG
products, ready-made garments, pharmaceuticals and e-commerce. Further, the ban on
single-use plastics is expected to fuel the demand for paper-based alternatives.
Consolidation: Indian paper industry could witness a round of
consolidation and co-operation among various players in the next few years to collectively
leverage fast changing manufacturing technologies and smoothen backward integration for
raw materials.
Review and analysis of our performance Opportunities & Threats:
Writing & Printing papers
While the Writing & Printing segment is facing challenges in the
short term, we believe once normalcy returns, we shall see a V shaped recovery due to
emergence of the demand.
Further the impending changes in the education policy and curriculum
are bound to create a huge demand for Writing & printing papers to meet the needs of
new books etc.
Our performance for 2021-22
Our Company recorded a phenomenal growth of 54.04% with the turnover of
Rs 91675.18 Lakh as compared to Rs 59515.57 lakh in the previous year.
Profit before Tax for the year 2021-22 was Rs 12266.88 lakh as against
Rs 6683.58 lakh in the previous year. Profit after Tax for the year 2021-22 stood at Rs
10067.44 lakh as against Rs 4954.86 lakh in the previous year.
Successful commissioning of Paper Machine 4
Satia Industries Limited (SIL) has successfully commenced commercial
production from Paper Machine 4 (PM 4), having an installed capacity of 100,000 TPA. PM 4
is a state-of-the-art paper machine and one of the most advanced machines from Allimand,
France. The new PM 4 will be producing value added paper products like Copier, Surface
sized Maplitho, Cup stock, Wedding base and Carry bag paper. PM 4 gives SIL an opportunity
to manufacture superior quality paper and allows it to add new products to its current
product mix and serve wider spectrum of the Paper market with quality at par with
wood-based mills. PM 4 will enable SIL to have an additional capacity of 300 TPD and will
yield higher price realization and margin as SIL is planning to foray into newer product
segments and markets emerging with single use plastic ban coming from July 2022 as
announced by the govt. The total aggregate installed capacity of SIL, now with the
commissioning of new machine is 205,000 MTPA
CSR
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 spent Rs 194.80 lakh on CSR activities. A detailed report of CSR
initiatives FY 2021-22 is covered in a separate section forming part of this report
Human resources and industrial relations
The Company continues its policy of continuous training and motivation
to achieve greater efficiencies and competencies. The total number of permanent employees
as of 31 March 2022 was 2012.
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
controlsystems,whichprovidereasonableassurances with regard to safeguarding Companys
assets, promoting operational efficiencies and ensuring compliance with various statutory
provisions. In addition to we have appointed a firm of prctising Chartered Accountants as
Internal Auditor 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.
Financial Statement Highlights for FY22 v/s FY21
| Particulars (INR MN) |
FY22 |
FY21 |
| Revenue from Operations |
8,909.30 |
5,884.40 |
| Other Income |
258.22 |
67.16 |
| Total Revenue |
9,167.52 |
5,951.56 |
| Total Expenses (including Depreciation and Finance cost) |
7,940.83 |
5,283.20 |
| EBITDA |
1,812.45 |
1,361.18 |
| EBITDA Margin (%) |
20.34% |
23.13% |
| Depreciation & Amortization Expenses |
635.76 |
584.26 |
| Finance Cost |
208.22 |
175.72 |
| PBT |
1,226.69 |
668.36 |
| Current Tax |
195.02 |
154.95 |
| Deferred Tax |
24.93 |
17.92 |
| Tax |
219.95 |
172.87 |
| PAT |
1,006.74 |
495.49 |
| Other comprehensive profit / loss |
(0.22) |
3.16 |
| Net PAT |
1,006.53 |
498.64 |
| PAT Margin % |
11.30% |
8.42% |
| Diluted EPS |
10.07 |
4.95 |
Financial Comparison Summary of FY22 v/s FY21
• Revenue from operations recorded a growth of 51.41% from
5,884.40 MN in FY21 to 8909.30 MN in FY22 mainly driven by higher volumes with
better price realizations.
• The EBITDA increased by 33.15% from 1,361.18 MN in
FY21 to 1,812.45 MN in FY22 mainly due to the higher sales volumes with
higher realizations in our key products.
• EBITDA margins is 20.34% in FY22 and 23.13% in FY21.
There is a marginal decline in EBITDA margins mainly due to increase in the input prices.
• Net profit stood at 1,006.74 MN in FY22, compared to 495.49
FY21 recording an absolute growth of 2.03x.
• Volume grew exponentially from 1,18,502 MT in FY21 to
1,43,716 MT in FY22 due to rise in demand of our premium products and
operationalization of PM4.
Consolidated Balance Sheet
| Assets (Rs: MN) |
FY 22 |
FY 21 |
| Fixed Assets |
|
|
| Tangible Assets |
7,995.43 |
4,315.91 |
| Intangible Assets |
24.70 |
0 |
| Capital Work in Progress |
873.62 |
3,178.05 |
| Total Fixed Assets |
8,893.75 |
7,493.96 |
| Non-Current Investment & Other Financial Assets |
77.06 |
48.59 |
| Loans |
0 |
0 |
| Deferred Tax & Other Tax Assets |
0 |
0 |
| Other Non-Current Assets |
123.83 |
80.69 |
| Total Non-Current Assets |
9,094.63 |
7,623.23 |
| Current Assets |
|
|
| Inventories |
1,466.71 |
917.75 |
| Biological Assets Other than bearer plants |
374.16 |
299.71 |
| Trade Receivable |
1,064.61 |
908.01 |
| Cash & Cash Equivalent |
10.62 |
6.85 |
| Bank Balances other than cash & cash equivalent |
116.47 |
104.73 |
| Other Financial Assets |
49.40 |
46.88 |
| Current Tax Assets |
0 |
0 |
| Other Current Assets |
193.79 |
107.55 |
| Total Current Assets |
3,275.74 |
2,391.47 |
| Total |
12,370.38 |
1,0014.70 |
| Liabilities (Rs: MN) |
FY 22 |
FY 21 |
| Fixed Assets |
|
|
| Shareholders Fund |
|
|
| Share Capital |
100.00 |
100.00 |
| Reserve & Surplus |
5,349.98 |
4,353.45 |
| Total Shareholders Fund |
5,449.98 |
4,453.45 |
| Non-Current Liabilities |
|
|
| Long term Borrowings |
2,715.38 |
2,279.06 |
| Other Financial Liabilities |
1,165.77 |
1,129.69 |
| Other Non-Current Liabilities |
236.12 |
101.92 |
| Long Term Provision |
98.34 |
102.56 |
| Deferred Tax Liabilities |
55.97 |
31.15 |
| Total Non-Current Liability |
4,271.58 |
3,644.38 |
| Current Liabilities |
|
|
| Short Term Borrowing |
365.45 |
674.29 |
| Trade Payable |
1,106.80 |
502.55 |
| Other Financial Liabilities |
1,046.79 |
630.66 |
| Other Current Liabilities |
104.94 |
43.22 |
| Short Term Provision |
11.10 |
14.30 |
| Current Tax Liabilities |
13.75 |
51.86 |
| Total Current Liabilities |
2,648.82 |
1,916.87 |
| Total |
12,370.38 |
10,014.70 |
Financial Comparison Summary of FY22 v/s FY21
• Total Fixed Asset grew by 18.68% from Rs. 7,493.95 Mn in FY21 to
Rs. 8,893.74 Mn in FY22
• Current Asset stood at Rs. 3,275.74 Mn in FY22, compared to Rs.
2,391.47 Mn in FY21.
• Long term borrowing stood at Rs. 2,715.38 Mn in FY22, compared
to Rs. 2,279.06 Mn in FY21 and Short-term borrowing at Rs. 365.45 Mn in FY22, compared to
Rs. 674.29 Mn in FY21. The company projects to be debt free by end of Q4 FY 25
• Debt Equity ratio has decreased marginally, to 0.74x in FY 22
compared to 0.77x in FY 21, which is in line with the companys aspirations of becoming
debt free.
• Cash flow from operations stands at 1,834.49 Mn for FY 22
compared to 1,574.28 Mn for FY 21
• Return On Capital Employed improved by 14.52% for FY 22 compared
to 10.41% FY 21
• Return On Equity improved to 18.47% for FY 22 compared to 11.13%
FY 21
*ROCE= (PBT+ Inton Term loan)/Net Worth+ Long Term borrowings Including
current Maturities of long term debt+DTL) *ROE= (PAT)/(Net Worth)
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