Three M Paper Boards Ltd Management Discussions

Industry Structure and Developments

The global paper and packaging industry continues to face both opportunities and challenges. The Duplex Board segment, which is primarily used for packaging applications such as FMCG, pharmaceuticals, food products, and consumer durables, has been influenced by:

• Global Trends: Fluctuations in waste paper prices, supply chain disruptions, and energy costs have significantly impacted production economics. Developed markets in Europe and North America are witnessing lower consumption due to sustainability regulations and digital substitution, while developing economies, particularly in Asia and Africa, are showing strong demand growth.

• Domestic Scenario: In India, the packaging industry continues to be driven by growth in e-commerce, FMCG, retail, and exports. The Governments focus on sustainability, reduction in single-use plastics, and growing awareness of eco-friendly packaging solutions have provided a long-term boost for recycled paper-based products like Duplex Boards.

Outlook

The long-term prospects for the Duplex Board industry remain positive given the sustained shift towards eco-friendly and recyclable packaging. Demand from the e-commerce and FMCG sector in India is expected to grow steadily.

However, in the near term, challenges like raw material price fluctuations, higher freight costs, and global economic uncertainty may impact margins. The Company aims to mitigate these risks by:

• Increasing domestic waste paper procurement to reduce dependence on imports.

• Improving energy efficiency through technology upgradation and alternative fuels (including plastic waste-based boilers).

• Strengthening export presence in emerging markets.

• Emphasis on premium product segments to improve realizations.

Global paper industry overview

Pulp, the fundamental raw material in paper manufacturing, is derived from sources such as wood, recycled paper, and agricultural residues. The paper production process begins with the conversion of these materials into pulp through mechanical or chemical treatment, separating cellulose fibres essential for paper formation. This pulp is then processed, refined, and, where necessary, bleached to meet specific quality standards. It is subsequently formed into sheets, pressed, and dried to produce finished paper products. As a key input in a wide array of applications, from packaging and publishing to hygiene products, pulp forms the backbone of our operations and supports our commitment to sustainable, high-quality paper solutions. Eco-friendliness has become a key focus, with a growing demand for sustainable packaging solutions. Leading paper manufacturers are investing in renewable energy initiatives and developing environmentally friendly packaging products. In the food and beverage sector, there is a clear shift toward paper based packaging solutions, fuelled by consumer preferences and the movement against plastic usage.

The global pulp and paper market size was valued at USD 340.1 billion in 2024 and is expected to grow from USD 343.0 billion in 2025 to USD 391.39 billion by 2032, exhibiting a CAGR of 1.0% during the forecast period.

The industry grew steadily due to rising demand for paper-based packaging, driven by the boom in e-commerce and the global push to replace plastic with eco-friendly materials. Growth in emerging markets like China and India, along with increased use of paper in hygiene and food products, also boosted demand.

E-commerce expansion

The rise of e-commerce has greatly increased the demand for paper-based packaging like cardboard boxes and paper fillers. As more people shop online, companies need more packaging materials to safely deliver products. This trend has led to a 12% rise in demand for such materials globally, especially in sectors like electronics, fashion, and groceries.

To meet growing environmental concerns, e-commerce companies are switching to more sustainable packaging. For example, Amazon has started replacing plastic air pillows with recycled paper fillers, cutting out nearly 15 billion plastic pieces annually. This shift reflects a wider global move toward using eco-friendly, recyclable materials instead of plastic.

E-commerce growth in regions like Asia-Pacific — particularly China and India—has further boosted paper consumption. These countries are seeing fast growth in online shopping, increasing the need for innovative and sustainable packaging solutions. As a result, the paper industry is investing in new materials and technologies to support this shift while reducing its environmental impact.

(Source: Precedence Research, Economic Times, Financial Times, Bonafide Research, Mordor Intelligence, Fortune Business Insights, Global Growth Insights, AP News, Grand View Research)

Indian paper industry overview

The pulp and paper industry in India play a key role in supporting education, packaging, and hygiene needs. It relies on wood, agro residues, and recycled paper. Though challenged by resource constraints and environmental concerns, the industry is steadily moving towards more sustainable and efficient practices.

Indias paper industry, ranked 15 th globally, is growing rapidly with a demand of 23 million tonnes and a capacity of 25 million tonnes. By 2047, the industry is expected to embrace a circular economy with increased recycling, sustainable practices, and use of alternative fibres. As digital transformation evolves, the focus will shift to high-value, eco-friendly products. Technological advancements and consumer demand for sustainability will drive innovation. The industrys future will depend on adapting to changing regulations, consumer behaviour, and market opportunities.

The pulp and paper market in India are expected to be valued at USD5.83 billion in 2025 at a CAGR of 3.45% (2025-2029). The value added per capita in the pulp and paper market is projected to amount to USD4.01 in 2025. The market value of the Indian paper industry was

forecast to peak USD 19.1 billion in 2033. Among the various business segments within the paper industry, the packaging industry fared well across application segments like the pharma sector and FMCG, catalysed by e-commerce.

Company Overview

Three M Paper, established in 1989, is a prominent player in the Indian paper industry, known for producing packaging boards. The Company is committed to environmental sustainability, incorporating eco-friendly practices in its operations. With a diverse product range, expanded production capacities, and a strong presence in both domestic and international markets, Three M Paper has built a solid market position. Its focus on customer satisfaction and its trusted reputation have further cemented its leadership in the industry.

Opportunities

• Rising demand from e-commerce and FMCG sectors in domestic and export markets.

• Ban on certain categories of plastic packaging driving substitution towards paperboards.

• Increasing awareness of sustainable and recyclable packaging materials.

• Export opportunities in South Asian, African, and Middle Eastern markets.

Threats

• Volatility in raw material (waste paper) prices due to dependence on imports and global supply chain factors.

• Rising energy costs (coal, power, and logistics) putting pressure on margins.

• Stiff competition from both organized and unorganized players in the Indian market.

• Currency fluctuations affecting import of raw materials and export realizations.

Segment-wise or Product-wise Performance

• Your Company is primarily engaged in the manufacture of Duplex Boards. During Financial Year 2024-25:

• Domestic sales continued to remain strong, contributing around 80% of revenue, supported by demand from packaging and FMCG customers.

• Export sales contributed 20% of revenue, with higher realization in certain geographies despite global economic headwinds.

• The Company focused on higher grammage and value-added products to improve realizations.

Risks and Concerns

• Raw Material Risk: Dependency on imported waste paper exposes the Company to price and supply volatility.

• Regulatory Risk: Environmental and compliance requirements are becoming more stringent.

• Currency and Market Risk: Export revenues are subject to forex fluctuations; domestic oversupply may put pressure on pricing.

• Energy Cost Risk: Volatility in coal and power tariffs directly impacts cost of production.

The Company has adopted risk mitigation strategies including long-term supplier

arrangements, energy conservation measures, and prudent financial hedging.

Internal Control Systems and Their Adequacy

The Company has a robust internal control framework commensurate with the size and nature of its operations. Internal audits are carried out at regular intervals by independent auditors and findings are reviewed by the Audit Committee of the Board. This ensures that assets are safeguarded, operational efficiency is maintained, and statutory compliance is ensured.

Financial Performance vis-a-vis Operational Performance During Financial Year 2024-25, the Company achieved a turnover of ? 26,553.41 lakhs as compared to ? 27,223.48 lakhs in Financial Year 2023-24, registering a decline of 2.46%. Operating margins were impacted due to higher raw material and energy costs; however, improved product mix and operational efficiency helped mitigate part of the impact.

Human Resources / Industrial Relations

The Company continues to invest in human capital through training, skill development, and employee engagement initiatives. Industrial relations remained cordial during the year. As on March 31, 2025, the Company had 218 employees on its rolls.

Key Financial Ratios

Particulars	FY 2024-25	FY 2023-24
Debtors Turnover	4.70%	5.63%
Inventory Turnover	73.81	82.15
Interest Coverage Ratio	1.86	1.71
Current Ratio	1.31	1.25
Debt Equity Ratio	0.23	0.56
Operating Profit Margin (%)	3.83%	4.19%
Net Profit Margin (%)	3.76%	4.14%
Return on Net Worth (%)	12.14%	20.87%

Cautionary Statement

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations, or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference include raw material availability and prices, economic developments, changes in government policies and regulations, tax laws, and other incidental factors.