Shreyans Industries Ltd Management Discussions

As you are well aware that your Company, a Public Limited entity established in the year-1979 is engaged in the manufacturing of Writing and Printing Paper with present capacity of 94,000 MTs per annum. The manufacturing units are located at (i) Ahmedgarh, District Malerkotla, Punjab and (ii) Village Banah, District S.B.S. Nagar, Punjab.

In terms of production capacity, India ranks as the 5th largest producer of paper in the world which is nearly 5% of global paper demand. Paper industry in the country having around 900 mills on record is highly fragmented with capacity ranging from 15-20 MTs per day to 1000 MTs plus per day. Out of this, nearly 400 mills are not operational. While total annual installed capacity is estimated at 29.2 Million Tons approximately but the operating capacity at present is estimated at 24 million tons per annum. Considering estimated capacity utilization at 90%, production of paper, paper board and newsprint is estimated at 22.5 million tons/year while consumption is estimated at 23 million tons/year. Exports at 2.30 Million tons/year are lower than imports at 3.05 million tons in the year 2023-24. In fact, import of paper especially of coated grade and writing-printing paper at competitive prices increased considerably during the year 2023-24. Based on the raw material used, Paper Mills are divided into three categories namely wood-based, agro-based and waste paper based [recycled fiber]. Your Company uses agro residues, viz. wheat straw, kangaroo grass, baggase as the primary raw material. In our country almost 75% of paper production comes from waste paper based mills while agro based mills contribute hardly 6% and balance is contributed by wood based mills.

The four key Paper and Board categories are: Newsprint, writing and printing papers, Paper Boards for packaging applications, Tissue Papers & other Specialty Papers. The global paper industry continues to grow at a compounded annual growth rate of roughly 1.0% though largely due packaging segment. The demand for writing & printing paper segment may not be adversally affected on account of Govt focus on new education policy and increase in literacy rate in the country inspite of rising impact of digitization. Packaging paper segment is rising with growing demand for packaging from e-commerce, food and food products, FMCG and the pharmaceutical sector.

The Indian paper market is the fastest growing market largely on account of packaging segment. The domestic market for writing & printing is still growing although long term perspective for newsprint & cream wove is not that bright. Market share of these categories has come down from roughly 50% to 30% in the last decade. The paper consumption in India is likely grow @ 6 % annual and may reach around 30 million tons in the next 5years. This is likely to occur due to mainly emphasis on education and literacy coupled with growth in organized retail/e-commerce. The paper industry holds immense potential for growth in India as its per capita consumption is one of the lowest at 15 kgs as against worlds average of around 57kgs. Besides this, ban on single use plastic, being harmful from environmental aspect, is expected to gradually create more avenues for paper specially packaging sector.

Paper industry is facing challenges on technical front to bring out new products, innovate and transform for green manufacturing. In the coming years, sustainability shall be defined by capability to innovate, adapt and transform from time to time. Obligations towards Environment and society will immensely impact the operational viability.

One of the main challenge faced by domestic Paper industry is availability of raw materials in adequate quantity. India is a fiber deficient county whether it is wood, agricultural residue or recycles fiber/waste paper. Since the raw material is a major cost component of the production of paper, this lone component adversely affects the cost competitiveness of the Indian Industry as compared to others competing countries.

The paper industry is working in the direction of adopting innovative technologies which could enable it to increase the production with better efficiencies. With more emphasis on proper utilization of agro-residuals which are typically burnt, the availability of agricultural waste can be further improved for the paper industry. Innovations are taking place for proper utilization of agro-residuals, which shall instead be used in the paper industry, and will further supplement farmers income while also regulating pollution levels.

FINANCIAL PERFORMANCE AND ANALYSIS

The discussions in this section relate to the financial results pertaining to the year ended March 31, 2024 prepared in accordance with the Indian Accounting Standards [referred to as Ind AS] prescribed under section 133 of the Companies Act, 2013, read with the Companies [Indian Accounting Standards] Rules, as amended from time to time. Significant accounting policies used in the preparation of the financial statements are disclosed in the notes to the financial statements. The following table gives an overview of the financial results of the Company.

(F in lakhs)

	Year ended 31 March 2024	% of Revenue	% Growth/(Fall)	Year ended 31 March 2023	% of Revenue
Revenue from operations	69,916.82	100.00%	(19.22)%	86,553.04	100.00%
Earnings before interest, tax, depreciation and amortisation (before other income)	9,758.97	13.96%	(8.58)%	10,675.32	12.33%
Profit Before Tax (PBT)	11,473.93	16.41%	22.42%	9,372.54	10.83%
Profit after tax attributable to shareholders of the Company	8,797.54	12.58%	20.84%	7,280.42	8.41%
Earnings per share (in F)	63.24	-	-	53.14	-

KEY FINANCIAL RATIOS

In accordance with the SEBI [Listing Obligations and Disclosure Requirements 2018] [Amendment] Regulations, 2018, the Company is required to give details of significant changes [change of 25% or more as compared to the immediately previous financial year] in key financial ratios. The Company has identified the following ratios as key financial ratios:

	Unit	Year ended 31 March 2024	Year ended 31 March 2023	% Change
Current Ratio	Times	2.46	1.84	33.70
Debt Equity Ratio	Times	0.09	0.14	35.71
Interest Service Coverage Ratio	Times	30.11	19.70	52.84
Inventory turnover Ratio	Times	8.91	11.92	(25.25)
Net Capital turnover Ratio	Times	3.73	7.50	(50.27)
Net Profit Ratio	%	16.41	10.83	51.52

RATIOS WHERE THERE HAS BEEN A SIGNIFICANT CHANGE AS COMPARED TO PREVIOUS YEAR

Net profit margin improved during the year owing to lower input cost and increase in fair value of investments. The repayment of Non-current borrwings along with better operational performance resulted in improvement in Debt Equity Ratio and Interest Coverage ratio. The Current ratio improved due to increase in investments. variance on account of lower input cost during the year resulted in increase in Inventory to Cost of goods sold ratio.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has well defined internal control system that corresponds to the size, scope and complexities of its activities. The Company takes abundant care to design, review and monitor the working of its internal control system. Internal controls are also in place to guarantee that all assets are safeguarded and protected against loss due to unauthorized use or disposition, and that transactions are properly authorized, recorded, and reported. Internal Audit in the organization is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organization. All significant issues are brought to the attention of the Audit Committee of the Board.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS

The human resources development function of the Company is guided by a strong set of values and policies. Your company strives to provide the best work environment with ample opportunities to grow and explore. Your company maintains a work environment that is free from undue stress and harassment. Company enjoys excellent relationship with its personnel and considers them as an essential part of the organization.

Development and well-being of people working for the Company has been a corner stone of the management policy. This is reflected through very low employees turnover at all levels including workers, staff, officers and managers. Company lays special emphasis on staff training and retraining through internal workshops and also nominating staff/officers to various training programs. The total number of permanent employees in the Company is 1352 as on 31st March, 2024. The employee relations continue to be cordial and harmonious at all the locations of the Company.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The companys CSR initiatives prioritize health and education for the unprivileged and needy section of the society.

The company managed to reach the underprivileged sections of the society through its initiatives in:

1) Community welfare by distributing ration, renovating local schools, construction of community ground in village etc.

2) Healthcare by organizing free eye checkup camps, blood donation camps, donating testing equipment etc.

3) Education by distributing free of cost notebooks and uniforms, sponsoring girl child schooling and financial help to children for their education.

OUTLOOK

The paper industry has successfully weathered all turbulences global or indigenous during the last 2 years. The industry as whole has well recovered from the shocks of Covid-19 and global disturbances caused by conflicts between some countries.

There are a few positive developments for the paper industry in India. Some of the mega trends influencing the paper industry such as rapid urbanization, increase in disposable income and sustainable trends augur well for the paper industry. After recording sterling performance during the last two financial years, we hope to continue the journey in FY 2024-25 too. Implementation of National Education Policy (NEP) 2020 and Samagra Shiksha Scheme along with other measures by Indian Government in field of education should lend considerable boost to the demand for writing and printing paper and consequently expectations of a good year ahead. Thrust on reducing/eliminating the use of single use plastic is going to support sustainable products such as paper. In recent years, India has become one of the largest consumers of paper and paper board products though per capita consumption in India is much lower than worlds average. Although packaging is leading the growth story yet writing & printing paper is also proliferating due to increasing business activity and development of education sectors. The market size for writing & printing paper is quite good but not as big as the packaging segment. Thus domestic market opportunities are quite promising and healthy. Further cost of manufacturing in India is quite competitive as compared to China and thus India may gain and corner major chunk of global demand.

CAUTIONARY STATEMENT

Statements in this report on Management discussion and analysis relating to the Companys objectives, 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. Market data and product information contained in this report is gathered from published and unpublished reports and their accuracy cannot be assured.