sophia traexpo ltd Management discussions

A. INDUSTRY STRUCTURE & DEVELOPMENTS GLOBAL PAPER INDUSTRY OVERVIEW

The Global Paper & Paperboard Packaging Market is expected to grow at a CAGR of 3.6% over medium to long term and reach USD 264 billion driven by expansion of businesses globally by 2025.

World paper output is expected to increase to 450 million metric tonnes by the year 2023 from 410 million in 2017. With Global economies transitioning towards digital interface the paper industry are undergoing a structural change. However, the Paper has found new applications across categories, like packaging, paper bags, paper towels / tissues, etc. The paper industry is witnessing the end of dominance by traditional Western Markets and a new, more competitive business environment is taking shape giving rise to dynamic playing fields for the worlds paper, tissue and packaging board industry.

The worlds three largest paper producing countries - China, the United States and Japan, collectively account for approximately half of the worlds total paper production. Last couple of years has been better for the paper industry as there have been few capacity withdrawals which helped to improve the utilization of the existing capacities.

The graphic paper market is expected to continue to face declining demand worldwide. But this decline should be balanced by the increase in demand for packaging - industrial as well as consumer and tissue products. All in all, demand for fibre-based products is set to increase globally with some segments growing faster than others. The one hazy spot in demand might be concerns over how fast it will grow in China. Given Chinas weight in the global paper and board market, even relatively modest slowdown can have significant impact.

Impact on Paper Industry post COVID-19

Noble Corona virus outbreaks have developed across the globe and are causing widespread concerns and hardship for consumers and business alike. With number of COVID-19 rising, the Anxiety levels are also on the rise. The manufacturing sector has been facing quite a few challenges like lower demand and uncertain outlook, the paper manufacturers are a no exceptions to this.

INDIAN PAPER INDUSTRY

India holds 15th rank among paper producing countries in the world, however, the countrys share in global paper demand is gradually increasing with rising domestic demand while demand in the western nations is contracting.

The Indian paper industry has continued to witness steady growth and the domestic demand grew from

9.3 million tonnes in FY08 to 17.1 million tonnes in FY18 at a CAGR of 6.3%. Overall paper demand is expected to grow at a CAGR of 6-7% and is likely to reach approximately 22 million tonnes in 2022-23

The per capita consumption of paper in India currently stands at about 13 kg which is relatively lower compared to global average which stands at 57 Kg per capita and 40 kg per capita for Asian peers. However, the per capita consumption is expected to touch about 17 Kg by 2024-25.

The paper Industry is fragmented with over 750 paper mills, of which less than 100 mills have a capacity of 50,000 TPA or more. Most of the paper mills are in existence for a long time and hence the existing technologies fall in a wide spectrum ranging from oldest to the most modern. However, the focus of paper industry is now shifting towards more eco-friendly products and technology. The mills use a variety of raw material viz. wood, bamboo, recycled fibre, bagasse, wheat straw, rice husk etc. The specie wise share is 30-35% wood based, 45-50% recycled fibre based and 20-22% agro residue based raw material

The Indian Paper Industry currently has a turnover (net of taxes) of approximately 70,000 Crores and contributes over 5,000 Crores per annum to the national exchequer. Even more importantly it provides employment opportunities to over 2 million people directly and indirectly, mostly in rural areas.

Raw material concerns

The availability of raw-material has always been a matter of concern for the Industry. Against the current demand of 11 million TPA for pulp able wood by paper Industry, domestic availability is 9 million TPA only. The projected demand is expected to increase significantly, and hence the Industry has been requesting the Government to allot degraded revenue and forest lands. This will not only fulfil the requirement of raw-material, but also would result in employment generation for rural unskilled population. However, the government has not considered the request. Nevertheless, the Industry in general has taken initiatives by taking up Farm / Social Forestry programme whereby plantation is taken in a big way on the unproductive revenue land and thus generating not only income to the farmers but also providing employment to the rural unskilled population.

B. OPPORTUNITIES AND THREATS PAPER DIVISION

With the growth in GDP, the low per capita consumption of Paper & Paperboard in the Country is bound to improve, resulting in increased consumption of paper. As against the present per capita consumption of 13 kg, every one kg incremental per capita consumption results in additional demand of more than one million ton a year. This indicates there is a lot of scope for growth of paper demand in India.

Increasing population and literacy rate, improvement in manufacturing sector and changing lifestyle of individuals are expected to further boost the demand of paper in India. Additionally, increasing environmental concerns and awareness resulting in ban on single use plastic material by many states and the thrust of the Union Govt. to ban it in a phased manner, has opened up new market for paper industry.

However, there is increasing threat from imported paper as the Import duty on Paper & Paperboard for ASEAN countries has been reduced to Zero since 2014, which resulted in cheaper imports of 2.90 million tonnes of paper in 2018-19 from ASEAN Countries, with 8 Year CAGR of 33.51%. Overall Imports of paper was 14.78 million tonnes in the year 2018-19 with 8 year CAGR of 13.54%. During the 9 months period between April-December 2019, the overall paper and paperboard (excluding newsprint) imports has increased by 16% to approximately 1.3 million metric tonnes from approximately 1.1 million metric tonnes for the corresponding period of the previous year.

Imposition of definite Anti-Dumping duty in benchmark form by Govt. of India from 04.12.2018 for a period of 3 years on import of copier paper from Indonesia, Thailand and Singapore has not yielded desired result and still there is large price gap between imported and Indian copier paper.

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 paidup share capital as on 31st March, 2023 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. (11.09) lacks during the year.

4. Earnings PerShare (EPS):

The Earning per Share for the Financial Year 2022-23 is (0.22)

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.

Human resource:

Your company recognizes that the human resources are the most crucial factor for achieving sustained growth over the years.The management considers its highly motivated and passion driven workforce as its partner in the growth of the company.

	For and on behalf of the Board
	For SOPHIA TRAEXPO LIMITED
	Sd/-
	YERRAPRAGADA MALLIKARJUNARAO
	Chairman & Whole TimeDirector
	(DIN:00905266)
Date: 29.08.2023
Place: Hyderabad.