Sophia Traexpo Ltd Management Discussions

A. INDUSTRY STRUCTURE & DEVELOPMENT

The global paper products market size was estimated at USD 362.41 billion in 2025, with long-term growth expected to hit USD 1,267.8 billion by 2033, at a CAGR of 1.8%. Key Drivers Include:

Rising demand for eco-friendly packaging across e-commerce, FMCG, and food sectors Shift toward recycled pulp and biodegradable materials Government regulations promoting sustainable packaging solutions

This growth is primarily attributed to the rising demand for packaging paper by major companies in the retail, FMCG, pharmaceutical, and hospitality industries. Increasing technological developments for paper-based products have enabled the manufacturing of processed paper with higher strength and durability than plastic packaging materials.

It has been observed that packaging paper material is gaining acceptance in a wide range of industries, such as food and consumer products. Other factors affecting the market growth are rising awareness about environmental issues like biodegradability, global warming, and health problems created by plastic packaging materials. The Quick Service Restaurant (QSR) industry is also one of the major consumers of paper products.

Thus, the rapid expansion of the QSR market has added to the product demand. Shifting preference for off-premises consumption of food on account of busy schedules is expected to drive the product demand further. In addition, the availability of freshly cooked food in franchises and food trucks has also witnessed an upsurge and has added to the demand. For instance, the global food chain McDonalds provide all their orders in paper packages.

Recycled packaging paper has become a popular trend to reduce plastic waste. Cardboard, paper, and other materials can be recycled and used for different kinds of product packing and shipment. Leading companies are investing in paper products. For instance, PepsiCo, Inc. has committed to providing 100% recyclable packaging by 2025. Walmart has declared to provide recyclable packaging for all the private level brands.

Regional Insights

Asia-Pacific was the largest market for paper products in 2018 and accounted for 36.65% of the market share. Key factors behind this growth include growing industrialization across the region. The newsprint category is facing a little slowdown as consumers are shifting towards digital platforms. Asia Pacific is the fastest-growing regional market with a CAGR of 2.3% from 2019 to 2025.

Increasing awareness about the adverse effects of plastic products and growing disposable income, especially in developing countries like China and India, are expected to boost the market growth. Rapid industrialization is also projected to contribute to market development. China, in particular, is the largest market in the Asia Pacific due to the strong presence of key companies, such as Quanzhou Sinowise Machinery Co. Ltd. and Samson Paper Holdings Ltd. (Source: www.grandviewresearch.com)

INDIAN PAPER INDUSTRY

Indias paper industry is navigating a complex landscape marked by:

Surging imports: Paper and paperboard imports rose 8% YoY in Q1 FY26, reaching 486,000 tonnes, with China and ASEAN countries contributing significantly.

Domestic production decline: Output fell 5.1% in FY24, with a further 1-2% drop expected in FY25

Import value: Annual imports crossed Rs.14,629 crore, doubling over four years

Margin Pressures & Cost Challenges

Raw material inflation: Domestic hardwood pulp prices surged 20-25% due to pandemic-era plantation disruptions and competing demand from other wood-based industries

Sales price realization: Declined post-COVID boom, squeezing margins

EBITDA margins: Fell to decade lows in FY25, but expected to recover by ~200 basis points in FY26 with cost stabilization

Policy Interventions

To protect domestic manufacturers, the government has:

Imposed a Minimum Import Price (MIP) of ?67,220/MT on virgin multi-layer paper board until March 31, 2026

Initiated anti-dumping investigations on imports from Indonesia

B. OPPORTUNITIES AND THREATS PAPER DIVISION

The Indian paper and paperboard industry offers significant opportunities driven by the increasing demand for sustainable and eco-friendly packaging solutions, rising e-commerce and FMCG consumption, and supportive government policies encouraging reduction of plastic usage. Indias relatively low per-capita paper consumption also provides long-term headroom for growth, particularly in packaging and specialty paper segments.

On the other hand, the industry continues to face multiple threats, including the surge in low-priced imports, particularly from ASEAN and China under concessional duty regimes, which has intensified competition and eroded market share of domestic players. Elevated raw material and energy costs, along with volatility in pulp and wood prices, have pressured margins, while structural demand decline in writing & printing and newsprint segments due to digitization remains a persistent challenge. Further, the industry is constrained by limited availability of virgin fibre due to the absence of a clear policy on pulpwood plantations, making producers reliant on imported or recycled fibre. Rising environmental compliance requirements and the need for continuous investment in technology upgradation add to the operational burden. These factors collectively indicate that while growth opportunities remain strong in packaging and specialty paper, sustained competitiveness will depend on efficient operations, product mix optimization, and the ability to mitigate cost and import pressures. (source: ICRA Limited)

C. RISKS AND CONCERNS

The Indian paper industry, from FY 2024-25 onwards, faces multiple headwinds that could impact growth and profitability. A sharp increase in paper and paperboard imports, which rose to a record 2.05 million tons in FY 2024-25 with China and ASEAN together contributing nearly half of the volume, has intensified price competition and eroded domestic players market share. This influx of low-priced imports, combined with a decline of around 9% in net sales realisations during FY 23-24 and FY 2024-25, has significantly compressed margins despite volume growth of 6-8%. Input costs, particularly for wood and pulp, have remained elevated-wood pulp prices alone have increased by 20-25%-leading to an estimated 500-700 basis points contraction in operating margins in FY 2024-25. While the packaging paper segment remains resilient, structural demand headwinds persist in the writing & printing and newsprint segments due to digitization and shifting consumption patterns. If current trends in imports, pricing, and raw material costs persist, financial metrics such as debt coverage and interest serviceability could remain under pressure, making operational efficiency, product mix optimization, and cost control critical for sustaining competitiveness. (Source: CareEdge Ratings report)

D. OUTLOOK

The outlook for the Indian paper and paperboard industry remains moderately positive from FY 2024-25 onwards, with the sector expected to witness a recovery in demand growth of around 6-9%, largely driven by sustained expansion in the packaging paper segment supported by e-commerce, FMCG, and pharma. While structural headwinds continue in writing & printing and newsprint grades due to digitization and changing consumption patterns, the long-term demand prospects remain healthy given Indias low per-capita paper consumption, increasing emphasis on education, and growing need for sustainable packaging solutions. However, the industry continues to face challenges in the form of elevated raw material and energy costs, rising imports-especially from ASEAN countries at concessional duties-and limited pricing power, which are likely to exert pressure on margins. (Source: www.icra.in)

Your Company with a strong focus on operational efficiency, product mix optimization, and adoption of sustainable and value-added paper grades which are expected to be better positioned to withstand these challenges and capitalize on the evolving market opportunities.

E. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

During the year under review, the operations of the Company were adversely impacted owing to the temporary shutdown of the manufacturing plant, which resulted in lower capacity utilization and absence of profitable performance across product lines. Consequently, the Company was not in a position to record meaningful segment-wise or product-wise contribution for the financial year. The overall performance across all business segments was subdued, primarily on account of the disruption in operations.

The Company continues to remain focused on restoring normal plant operations at the earliest. Going forward, the management aims to improve operational efficiency, optimize product mix, and strengthen market presence once the plant resumes full-scale production.

F. PERFORMANCE REVIEW

Discussion on Financial Performance with respect to Operational Performance:

1. Total Income:

During the year under review Sophia Traexpo Limited did not make any income due to plant shutdown.

2. Share Capital:

The paid-up share capital as on March 31, 2025 is 5,10,00,000/- divided into 51,00,000 fully paid-up equity shares of Rs.10/-each.

3. Net Profit:

The Company registered a loss of Rs. 19.82 lakhs during the year.

4. Earnings PerShare (EPS):

The Earning per Share for the Financial Year 2024-25 is -0.39

Your directors are putting continuous efforts to increase the performance of the Company and are hopeful that the performance in coming year will overcome from the present situation.

G. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has established robust internal control systems covering business processes, operational efficiency, and compliance with all applicable laws and regulations. Regular internal checks and audits ensure that responsibilities are effectively discharged. A comprehensive review of internal controls, accounting practices, and policies is conducted periodically. Your Company has implemented an adequate internal control and audit framework appropriate to its size and nature of operations.

H. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

Your Company recognizes the Human resource as a critical pillar of sustainable growth and long-term success. The Company has established robust people practices focused on attracting, developing, and retaining skilled talent across all levels of the organization. The Company is committed to fostering an inclusive and performance-oriented culture built continuous learning. Structured training programs, functional capability development, and leadership interventions are regularly conducted to enhance technical and managerial competencies. To strengthen employee engagement and retention, we prioritize transparent communication, employee recognition, and participative decision-making.

The Company will remain focused on nurturing talent, strengthening organizational capabilities, and building a culture that encourages innovation, accountability, and high performance. The management considers its highly motivated and passion driven workforce as its partner in the growth of the company.

I. SIGNIFICANT KEY FINANCIAL RATIOS:

Particulars	FY 2024-25	FY 2023-24	Change	Reason for change
1. Current Ratio	68.61	70.24	-2.33%	-
2. Debt Equity Ratio	0.06	0.06	4.74%	-
3 Inventory Turnover Ratio	-	-	-	-
4 Debtors Turnover Ratio	-	-	-	-
5 Interest Coverage Ratio	-	-	-	-
6 Debtors Turnover	-	-	-	-
7 Net Profit Ratio %	-	-	-	-
8 Operating Profit Margin	-	-	-	-
9 Return on Capital employed	-6.16%	-3.64%	69.19%	Due to Providing the - expected credit loss against the debtors Balances
10 Return on Net Worth	-	-	-	-
11. Return on Equity Ratio	-4.63%	-2.64%	75.47%	Due to increase of other expenses
12. Trade Receivables turnover Ratio	-	-	-	-
13. Trade payables turnover Ratio	-	-	-	-
14. Net capital turnover Ratio	-	-	-	-
15. Return on Investment	-	-	-	-
16. Debt Service Coverage Ratio	-	-	-	-

Disclosure of Accounting Treatment:

The Company follows the guidelines of Accounting Standards referred to in Indian Accounting Standards issued by the Institute of Chartered Accountants of India.

Cautionary Statement:

The statements in this management discussion and analysis describing the outlook may be "forward looking statement" within the meaning of applicable laws and regulations. Actual result might differ substantially or materially from those expected due to the developments that could affect the companys operations. The factors like significant change in political and economic environment, tax laws, litigation, technology, fluctuations in material cost etc. may deviate the outlook and result.

	For and on behalf of the Board
	For SOPHIA TRAEXPO LIMITED
	Sd/-
	YERRAPRAGADA MALLIKARJUNARAO
Date: 04.09.2025	Chairman & Whole Time Director
Place: Hyderabad.	(DIN:00905266)