Star Paper Mills Ltd Management Discussions

The Global economy entered the year on a reasonably solid footing, though with important divergences across countries reflecting varying exposure to trade tensions, policy shifts, and structural headwinds. Towards the end of financial year, the outbreak of war in the Middle East introduced a new and significant shock. The disruptions associated with the Iran-USA-Israel war including to energy markets and supply chains have lowered forecasts for GDP growth, pushed up inflation expectations, and made the outlook more uncertain. Financial markets have reflected these developments: Energy prices have surged, equity markets sold off, and interest rates moved higher.

Artificial Intelligence has also taken off in a big way. While there is no doubt that its impact will be truly transformative, the exact contours of changes are not yet clear. Large job losses are also being feared which may ultimately impact livelihoods and consumption negating economic gains from productivity improvements.

India displayed a steady economic growth despite various uncertainties. Indias GDP growth for FY26 is estimated at 7.4% (Press Information Bureau, GOI). All major sectors contributed to it with agriculture stabilising rural demand, manufacturing gaining momentum and services leading expansion.

Despite a challenging global environment, the economy remained resilient, with robust growth, historically low inflation, improving labour market indicators, and strengthening external and financial buffers. Coordinated fiscal, monetary, and structural policies have reinforced macroeconomic stability while supporting investment, consumption, and inclusive growth.

Conflicts in the Middle East however caused energy price shocks and stagflationary pressures on the Indian economy In later part of the financial year. While strong domestic demand and policy buffers are offering some mitigation, the Middle East conflict administered a supply shock in India, threatening growth and increasing inflation through rising fuel and logistics costs which poses risks of stagflation. Steep depreciation of Indian Rupee and loss of export Markets will also have an effect.

During most of the year, Indian Paper Industry face the onslaught from cheap Imports. After break out of hostilities in Middle East, Notebook segment was impacted by changes in GST rates. Indian paper Industry too suffered rising energy costs and potential export market disruptions. West Asia is a significant market for the Industry. Geopolitical tensions in the region impacted energy supplies and chemical imports. Higher energy prices and supply disruptions triggered by the crisis directly impact production costs for Indian paper mills.

Growing literacy rates are supporting demand for educational materials like textbooks. Technological advancements in manufacturing are improving efficiency, cost-effectiveness, and product quality. Further, the booming e-commerce and consumer goods sectors are increasing demand for paper-based packaging solutions.

Higher input costs, expensive energy, relatively small scale, scarcity of raw materials at competitive prices and capital intensive nature of the Industry coupled with competition from duty free imports are some of its weaknesses.

The cumulative impact of policy reforms over recent years should strengthen economys growth potential. This, in turn, should lead to better prospects for the Industry.

Due to Middle-East crisis, export-oriented nations like China and Indonesia may divert surplus paper to India, creating price pressure on domestic manufacturers. Further, Free Trade Agreements (FTA) has emerged as a major threat to the Industry. It is not clear how the ongoing Geo-political tensions will play out and may endanger Economic prospects across the World. India is particularly vulnerable due to import dependence for Energy requirements.

The Companys social farm forestry program has become driver for re-generation of green cover. The program is of immense importance to rural economy and facilitate sustained availability of raw material. As in the past, the company continued the propagation and distribution of plants and the area coverage with the help of farming community. Your company planted and distributed approximately 51.50 lacs clonal and 300 lacs seedling during the year covering an area of 13,016 Hectares. The program generates not only income for the farmers but also providing rural employment.

Various risks are associated with the business operations of the company. Geo-political uncertainties, supply chain disruptions, Government policies, market risks, competition from imports etc. are some of the key risks associated with the companys business.

The company identifies and evaluates various risks associated with the organization and takes appropriate steps to the extent possible.

The company has established adequate internal control systems, which provide reasonable assurances with regard to safeguarding Companys assets, promoting operational efficiencies and ensuring compliance with various statutory provisions. The company periodically reviews Internal control systems and procedures to ensure conduct of business effectively and efficiently. Internal control system ensures:

a) Accurate recording of transactions with internal checks and prompt reporting.

b) Adherence to applicable accounting standards.

c) Periodic review to effectively manage working capital.

d) Review of capital investments and long term business plans.

e) Compliance with applicable statutes, policies and listing regulations.

f) Effective use of resources and safety of assets.

Your company reported satisfactory financial and operational performance for the financial year ended 31^st March26 despite facing various challenges and constraints. Your company clocked a turnover of Rs. 409.94 Crores for the year 2025-26 vis-a-vis Rs. 436.34 Crores for the preceding year. The Profit after tax (PAT) for the year stood at Rs. 32.75 Crores as against Rs. 41.14 Crores for FY 2024-25.

The changes in key financial ratios as compared to previous financial year are as under:

The Union governments landmark step of notifying the implementation of the Labour Codes marks a significant reform in the regulatory framework. The consolidation of 29 central laws into four Labour Codes aims to simplify compliance, enhance labour market flexibility, and extend security to a broader section of the workforce, while maintaining safeguards for wages, occupational safety, and social security. There are 371 employees on the companys roll.

We have in place a healthy and productive learning climate for all the employees within the organization. The companys training programmes facilitate employees on growth, interpersonal relationships and enable them to meet individual and organizational objectives and to face the challenges of changing business environment. Industrial relations remained cordial throughout the year under review.

Looking forward, Indias economic prospects are projected to be steady. Headwinds to growth include elevated geopolitical and trade uncertainties and possible energy & commodity price shocks. However, position of Indian Economy is better than the other developing economies which provide stable environment and a hope for nearterm growth.

This Report contains forward looking statements based upon the information available with the company, assumptions with regard to global economic conditions, Government policies etc. The company do not guarantee accuracy of the assumptions and perceived performance of the company in future. It is thus cautioned that the actual results may materially differ from those expressed or implied in the report.