Satia Industries Ltd Management Discussions

Economic Overview Global Economy

The global economy in 2024-25 saw moderate expansion amid mixed signals, characterized by persisting geopolitical tensions, supply chain volatility, monetary policy tightening by central banks, and a general slowdown in advanced economies.

The International Monetary Funds April 2025 World Economic Outlook projects global growth of 2.8% in both 2025 and 2026, down from 3.3% previously, marking the slowest pace since 2020. This pronounced moderation reflects rising trade tensions driven by century-high U.S. tariffs and heightened policy uncertainty that cloud the global economic environment.

The outlook remains finely balanced: key downside threats include geopolitical uncertainties, trade volatility, and stubborn core inflation. In this fraught environment, the IMF cautions that a sharp escalation in trade policies or abrupt tightening of financial conditions could further impede growth and unsettle inflation dynamics.

Indian Economy

Amid a challenging global environment, Indias economic outlook remains positive, led by robust GDP growth of *"7% in FY25, supported by strong domestic consumption, government-led capex, and a resilient services sector. Key macro indicators point to broad- based recovery:

?€? The Manufacturing Purchasing Managers Index (PMI) remained in expansion territory throughout FY24, averaging around 56-58, reflecting sustained demand, improved output, and strong new order inflows (Source: S&P Global, 2024).

?€? Headline retail inflation (CPI) is trending toward the Reserve Bank of Indias comfort band, averaging ~5.0%, aided by easing food and commodity prices. Core inflation also softened to below 4%, giving the central bank policy room to supportgrowth.

?€? Infrastructure, real estate, digital economy, and renewable energy continued to draw both domestic and foreign investment interest.

With this foundation, India is well-positioned to remain one of the fastest-growing major economies globally in

FY25 and beyond.

Global Pulp and Paper Industry Overview

The global paper and pulp industry is undergoing a structural shift, shaped by evolving demand patterns, environmental regulations, and technological transformation. In 2025, the market is estimated to reach USD 351.7 billion, growing at a modest 1.7% CAGR through 2035. The demand for printing and writing paper continues to decline, while sustainable packaging and hygiene-related products are emerging as key growth segments.

Asia-Pacific remains the dominant region, accounting for over half of global consumption, with growth led by China, India, and Southeast Asia. Rapid urbanization, expanding e commerce, and favourable investment climates are supporting capacity additions in packaging and tissue. Europe follows with a focus on fibre recycling, circular economy practices, and specialty paper. North America continues to show stable demand, particularly in food packaging and consumer tissue, while Latin America, the Middle East, and Africa are gradually expanding their production base to meet domestic consumption.

Opportunities

?€? Rising demand for sustainable packaging and recyclable paper products especially across tissue, board, and packaging segments

?€? Technological advances in eco-friendly pulping and alternative fibres (bamboo, bagasse, straw) gaining traction

Threats

?€? Structural decline in graphic papers due to digitisation and cost inflation in pulp and energy

?€? Industry consolidation, closures of less competitive mills, and rising raw material and energy costs, especially in North America and Europe

?€? Trade volatility, including tariffs (e.g., US-China), impacting pulp prices

Outlook

The industry is expected to sustain modest growth, driven by packaging, tissue, and specialty fibres. Profitability will depend on managing input cost volatility, navigating trade policy shifts, and investing in green technology and circular economy practices. Companies that embrace innovation, sustainability, and

regional agility are best positioned to lead in this evolving landscape.

Indian Pulp and Paper Industry

The Indian pulp and paper industry is poised for steady growth, supported by rising consumption, sustainability driven demand, and expanding packaging needs. The market is currently valued at approximately USD 4.7 billion and is projected to grow at a 13.4% CAGR through 2032, reaching nearly USD 11.3 billion. Per capita paper consumption in India remains low at ~15 kg, compared to the global average of 57 kg, indicating significant room for long-term expansion. While the industry remains fragmented, capacity additions, supportive policy initiatives, and shifting consumer preferences are transforming it into a more resilient and diversified sector.

Opportunities

Paperboard & Packaging Boom

The paperboard and packaging segment has emerged as the largest revenue contributor to the Indian paper industry, accounting for nearly 55% of total industry turnover in FY24. This segment recorded a year-on-year growth of 8.2%, driven by structural shifts in consumer behaviour, sustainability mandates, and the growth of digital commerce.

This presents a strategic opportunity for the paper industry to offer eco-friendly alternatives. As the F&B sector, event organizers, and delivery services transition to sustainable options, demand for disposable paper products is projected to grow substantially, supporting greater innovation and market penetration in this segment.

Growth Drivers

?€? GDP growth, rising literacy, and implementation of the New Education Policy (NEP) support demand for writing/printing paper

?€? Surge in packaging demand, fuelled by e-commerce and a ban on single-use plastics, containerboard and corrugated paper segments are expanding

?€? Growth in tissue and hygiene products, with tissue consumption rising at "11-12% CAGR since 2007, though per capita usage remains low ("0.5 kg vs global avg 5 kg)

Challenges

?€? Raw material cost pressure due to imports of pulp, wastepaper, and wood chips

?€? Outdated machinery and low utilisation most mills

rely on decades-old tech, hindering competitiveness

?€? Margin volatility due to fluctuating pulp and energy prices?€”industry margins post decline in FY24 but are expected to recover by *"200 bps in FY26

?€? Environmental regulation compliance, with rising requirements for effluent treatment, sustainable forestry, and recycling

Outlook

The outlook for the Indian pulp and paper industry remains positive, supported by strong domestic demand, a favourable policy environment, and a growing shift toward sustainable and value-added paper products. Continued momentum in packaging, hygiene, and education-related segments is expected to drive steady volume growth over the medium term.

Implementation of the National Education Policy (NEP) 2020 is likely to support demand in the printing and writing segment, particularly through increased enrolment, multilingual education, and greater access to foundational learning materials. At the same time, the sustained rise in e-commerce, food delivery, and FMCG consumption will further boost demand for paper-based packaging.

Investments in capacity expansion, use of alternative raw materials, and adoption of cleaner, more efficient technologies will strengthen the industrys com petitiveness and environmental compliance. The growing focus on recyclability and circularity aligns well with global sustainability trends, opening new opportunities in export-oriented packaging and specialty paper segments.

While challenges such as raw material availability, import pressure, and regulatory compliance remain, the industry is well-positioned to navigate them through innovation, scale, and improved supply chain efficiency. Players that focus on sustainability, product diversification, and operational agility are likely to lead the next phase of growth.

Business Overview

Satia Industries Limited (SIL) is one of Indias largest manufacturers of writing & Printing Paper, with a legacy spanning over four decades. Founded by Dr. Ajay Satia in 1980, the Company began operations in 1984 with a modest annual capacity of 4,950 tonnes. Since then, SIL has undergone a remarkable transformation to become a fully backward-integrated enterprise, with in-house facilities for pulping, chemical recovery, and captive

power generation.

Headquartered in Sri Muktsar Sahib, Punjab, SIL ope rates a fully integrated manufacturing complex equipped with four paper machines, pulping and chemical recovery units, and self-sufficient power infrastructure. The Company has an installed production capacity exceeding 200,000 MTPA, supported by a strong focus on operational efficiency and sustainability. Boilers are powered using biomass fuels such as rice husk and rice straw, reflecting the Companys commitment to environmentally responsible practices.

SIL offers a diversified product portfolio including Super Snow White, Snow White, Maplitho, Coloured Paper, Ledger Paper, Cartridge Paper, Duplicating Paper, Bond Paper (with and without watermarks), and Chromo Paper, ranging from 42 to 200 GSM. These products serve a wide array of applications including textbooks, notebooks, envelopes, calendars, annual reports, computer stationery, wedding cards, paper cups, and premium commercial printing.

The Company has a well-established pan-India distribution network comprising over 100 dealers, supported by regional offices in Delhi, Chandigarh, and Jaipur. With a workforce of over 2,600 employees, SIL continues to strengthen its market presence, catering to both domestic and international demand with an unwavering focus on quality, innovation, and sustaina bility.

As part of its sustainability initiatives, SIL has developed approx 550 acres of eucalyptus plantations using Karnal Technology, which not only meet future wood raw material requirements but also absorb the entire treated wastewater generated by the plantunderscoring its circular approach to resource use.

Business Strategy and Competitive Edge

?€? Market Positioning: Leverage stable demand for educational and packaging paper, aligning with national literacy initiatives and plastic alternatives

?€? Operational Efficiency: Upgrade PM3 and invest in energy efficient tech (Diversification:e.g. biomass boilers) to counter raw material and energy cost inflation

?€? Sustainability Leadership: Expand agro-residue sourcing and recycling practices to tap into growing eco-conscious customer segments

?€? Product diversification: Build on tissue and surface

sized paper segments to capitalize on low per capita usage and rising hygiene needs ?€? Risk Management: Monitor global pulp price trends, trade tariffs, and domestic policy shifts to preempt margin risks

Our Performance for FY 24-25

Our Company recorded a turnover of Rs 15,120 million. Net Profit for the year 2024-25 stood at Rs 1,186 million. SIL during the year repaid debt of Rs 1,340 million during FY25.

Developments at Satia Industries in FY 24-25

In FY25, Satia Industries Limited operated in a subdued market environment, impacted by increased imports from China and ASEAN countries, soft demand, and downward pressure on paper prices. Despite these industry-wide challenges, the Company maintained operational resilience, with healthy sales volumes. This performance was supported by its established strong dealer distribution network and institutional sales.

During the year. Our Company focused on cost optimisation and operational efficiency. The multi-fuel boiler, which became fully operational during the year, contributed to significant savings in fuel costs. A decline in agro-based raw material prices, especially wheat straw, further supported margin stability, even as imported wood pulp prices rose. These efficiencies helped offset the impact of weaker realizations and contributed to improved profitability.

Satia Industries also expanded its biodegradable product offering. The Company operating with nine moulding machines for cutlery production as on 31st March 2025 and has ordered five new machines, expected to be commissioned within two months. This initiative aligns with the growing demand for sustainable alternatives to single-use plastics.

On the financial front, the Company continued to strengthen its balance sheet, achieving debt repayment of ^1,340 million during the year.

Capital Expenditure

Satia Industries has undertaken key capital expenditure initiatives, includes renovation of existing Paper Machine 3 (PM3) which progressed as per schedule next year i.e. FY26. The project is aimed at increasing paper machine speed with improved technology and improving product quality and flexibility. Completion is expected by end of FY26, post a planned six-month shutdown of PM3 during the year.

In parallel, the Company initiated work on a new Soda Recovery Boiler, which will incorporate modern technology to enhance chemical recovery and reduce energy consumption. This project is scheduled for commissioning in FY28, with full operational benefits anticipated in FY29.

Together, the PM3 renovation and the recovery boiler project represent a total planned investment of approximately ^350 crore over the next two years. These projects are critical to supporting future growth, improving efficiency, and meeting evolving market demands.

Risk Management CSR

Giving back to the society has always been a fundamental component of our operational philosophy. We spent Rs 3.97 crores on CSR initiatives this year. CSR initiatives for FY 2024-2025 are described in detail in a separate section of this report.

Human resources and industrial relations

In order to attain higher efficiency and competencies, the company frequently conducts trainings for its employees. The total number of permanent employees as of 31 March 2025 was 2639. The companys key areas of focus continue to be employee safety, wellness, and

training at all levels.

Internal control systems and their adequacy

The Company has established adequate internal control systems, which provide reasonable assurances about safeguarding Companys assets, promoting operational efficiencies and ensuring compliance with various statutory provisions. In addition to we have appointed a firm of practising 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.

Key Financial Ratios

Details of significant changes in key financial ratios as compared to previous financial year.

Parameters	FY2024	FY2025	Change (%)	Reasons for Variation
Current ratio	1.73	2.16	25.05%	Increase in Current Ratio due to reduction in current liabilities.
Debt-equity ratio	0.34	0.23	-32.12%	Decrease in Debt-equity ratio due to repayment of debts.
Net profit ratio	12.27%	7.85%	-36.07%	Decrease in Net Profit Ratio, due to reduction in the revenue.
Operating Profit Margin	15.53%	7.47%	-51.93%	Decrease in Operating Profit Margin Ratio due to reduction in the revenue.
Interest Coverage Ratio	9.43	5.16	-45.31%	Decrease in Interest Coverage Ratio due to reduction in the revenue.
Return on Net worth	25.36%	11.98%	-52.78%	Decrease in Return on Net Worth due to reduction in the revenue.

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 based on subsequent developments, information or events.