The Indian paper industry: All ready to rise on a global stage

Over the last decade, paper and paperboard manufacturers in India have expanded and tackled challenges thrown at them by a receding global economy. As the markets recover, the industry is primed to take a bigger bite of the market. Words: Dibyakumar Sarma and Mihir Joshi

12 Sep 2014 | By Dibyajyoti Sarma & Mihir Joshi

According to a news report published in Paper Mart, the paper industry was likely to see a turnaround in the first quarter of 2014, following estimates of increasing profitability on capital expenditure made over the last several years and incremental demand to absorb surplus output.

In five years, the paper sector has invested Rs 20,000 crore towards capacity enhancement, technology upgradation and acquisitions. As a result, it has added manufacturing capacity of a CAGR of 11%. The sector has added 1 million tonnes of capacity in 2013.

Weaker rupee, which prevailed in 2013, has helped, as a tariff barrier against imports. However, the sector has been impacted in the case of wood imports. A study by Emkay Global Financial Services said the balance-sheet leverage continued to remain elevated as a result of increase in Capex over the last decade.

The Indian paper industry accounts for 3.25% of the world production of paper and paperboard. The estimated turnover of the industry is approximately Rs 538 billion. According to a Crisil report, the total global consumption of paper and paperboard is 400 million tonnes, out of which 13 million tonnes (or 3.25% of the total) is from India.

Of this 13 million tonnes, the share of writing and printing paper is 4.1 million tonnes, paperboard 5.9, specialty paper 0.6 and the share of newsprint is 2.5 million tonnes. On the other hand, per capita consumption of paper is 11 kg.

Installations and expansions
In 2013, ITC-PSPD Installed a new machine while Emami ordered a new board machine. There were reports that Tamil Nadu Newsprint and Paper Limited has set aside a sum of Rs 1,200 crores for further expansion. Meanwhile, the West Coast Paper Mills is planning to install a state-of-the-art machine and Rainbow Papers has invested in a board machine.

Tamil Nadu Newsprint and Papers (TNPL) set up a paper pulp machinery to reduce the use of paper-dye with an investment of Rs 164-crore at its plant in Karur district in January 2014. According to an official release, the machinery was to produce 300 metric tonnes of paper pulp on a day and usage of 100tonnes wood paper pulp would be reduced. Again, to meet its power requirements, TNPL has set up boilers at an investment of Rs 167-crore.

Also JK Paper was setting up a new 1.65 lakh tonnes per annum paper plant at its existing unit in Rayagada in Odhisa. For this, the company planned to invest Rs 1650 crore. JK Paper holds 28% of market share of Indian paper industry. The project was go on steam in early 2013 and with this, the total company capacity was to be enhanced to 4.55 lakh per annum.

The mills use a variety of raw material, such as wood, bamboo, recycled fibre, bagasse, wheat straw and rice husk. Statistically speaking, approximately 31% are based on wood, 44% on recycled fibre and 25% on agro-residues. The geographical spread of the industry, as well as the market is mainly responsible for regional balance of production and consumption.

The industry journal, PaperMart expects 0.35 million tonne of capacities to be added during FY14 and 0.3 million tonne in FY15, compared to the current capacity of 13 million tonne. The rating agency said the market would expand by 0.7 million tonne annually, which would be sufficient to absorb the new capacities that will come up in 2-3 years.

Ground Realities
India is the fastest growing market for paper globally. In sync with economic growth, paper consumption is poised for a big leap forward. It is estimated to touch 14.88 million tonnes by 2015-16. The futuristic view is that growth in paper consumption would be in multiples of GDP and hence, an increase in consumption by one kg per capita would lead to an increase in demand of 1 million tonnes.

Interest of foreign funds in the Indian paper sector is growing. International Finance Corporation (IFC), the investment arm of the World Bank, is already associated with at least three Indian mills. International industrial giants have shown considerable interest. Two big ticket deals were: Andhra Pradesh Paper Mills being acquired by International Paper, and Ruby Macons being acquired by MWV.

K S Kasi Viswanathan, managing director, Seshasayee Paper and Boards, and Chairman of PaperTech, said, “There has been constant pressure on margins as the cost of raw material and other inputs, such as power tariffs, have gone up. But we cannot always pass them on to customers.”

He said the FTA, leading to paper imports from countries such as Thailand and Malaysia, have put tremendous pressure on domestic players. Therefore, the industry body Indian Paper Manufacturers Association has taken up the issue with the new Government and the Commerce Ministry.

Will the new Government pay heed?

Paper: Projections
Paper consumption is projected to increase to 16.5 million tonnes in 2016-17, and reach 25.3 million tonnes in 2026-27. 

As per government numbers, the consumption will increase to 18.4 million tonnes in 2016-17 (the terminal year of the 12th Plan) and to 43.9 million tonnes in 2026-27. The production of paper is expected to increase to 16.7 million tonnes in 2016-17 and further to 39.7 million tonnes in 2026-27.

The total import of paper (mostly newsprint) would increase from about 1 million tonnes in 2010-11 to 1.7 million tonnes in 2016-17 and to 4.3 million tonnes in 2026-27.

12 Companies in the Indian paper industry
(In terms of production, installed capacity and turnover)

Ballarpur Industries
Among its seven manufacturing facilities, six are in India and one in Malaysia. Three of the Indian facilities and the Malaysian facility are operated by Bilt Paper PLC and the remaining three are retained by the Ballarpur Group. Bilt Paper PLC is focused on the manufacture of bulk coated and uncoated paper and viscous grade fibre while the rest focus on the manufacture of copier paper, specialty paper and tissue paper and retail and OSSB. Members of the Avantha Group own 49.42% of the issued share capital of Ballarpur, which is listed on the Bombay and National Stock Exchanges in India.
Sales turnover for quarter ended March 2014: Rs 1,374.49-crore

Tamil Nadu Newsprint and Papers
Established by the state, TNPL started production in 1984, with bagasse as raw material, with an initial capacity of 90,000 tpa. Now, the company has a capacity of 4,00,000  tpa. TNPL exports about 1/5th of its production to more than 50 countries. The paper is eco- friendly as the pulp is manufactured out of renewable raw material and is subjected to elemental chlorine-free bleaching.

Sales turnover for quarter ended March 2014: Rs 639.01-crore

West Coast Paper Mills
WCPM operates six versatile machines with an installed capacity of 3,20,000 tpa. The company has adapted to latest technology, with the installation of 500 TPD Voith Paper Machine and Bielomatik, an online cut-pack converting line. The product-line features well-established brands of commercial to premium grades of paper and boards ranging from 54 to 600 gsm.
Sales turnover for quarter ended March 2014: Rs 402.48-crore

Rainbow Papers
Started with a creping and dyeing unit in 1981, Rainbow Papers, now with two new units, produces 186 different varieties of paper, catering to the diverse segments in India as well the overseas market. One of the fastest growing corporations in the industry, RPL exports to countries like the US, Middle East, South Africa, South East Asia and the UK. Their products range from duplex to file board, writing paper, art card packaging, electric grade crepe to decorative tissues crepe.
Sales turnover for quarter ended March 2014: Rs 192.11-crore

International Paper APPM
Established in 1964, International Paper APPM produces writing, printing and copier papers for foreign and domestic markets. Facilities at Rajahmundry and Kadiyam have a total production capacity of 240,000 tpa. The company employs around 2,500 persons and is headquartered in Hyderabad. In 2011, The Andhra Pradesh Paper Mills was acquired by International Paper (IP), a $30 billion American pulp and paper company founded in 1898. In the first significant domestic acquisition by a foreign paper company, IP bought 75% stake. In December, 2013, the company was renamed to International Paper APPM Limited.
Sales turnover for quarter ended March 2014: Rs 287.32-crore

Seshasayee Paper and Boards
SPB operates an integrated pulp, paper and paper board Mill at Pallipalayam in Tamil Nadu. Incorporated in 1960, was promoted by Seshasayee Brothers, in association with a foreign collaborators, who withdrew in 1969. The company embarked on an modernisation project to enhance its production capacity from 60,000 tpa, to 1,15,000 tpa and to upgrade some of the existing facilities, at an estimated cost of Rs 1,890 million. It was completed in December 2000. The current installed capacity stands at 1,15,000 tpa. SPB exports nearly 20% of its production.
Sales turnover for quarter ended March 2014: Rs 282.54-crore

ITC – PSPD (ITC Limited)
ITC is the largest manufacturers of packaging and graphic Boards in South Asia, accompanied by a diverse range of specialty papers & boards. The bandwidth of products has increased continuously and moved up on the value-quality scale. Strongly market driven, the focus is on value addition, new product development, quality enhancement and sustainability backed by a marketing and technical team with the capability to constantly enrich relationships and deliver ever increasing satisfaction levels.
Sales turnover for quarter ended March 2014: Rs 9145.14-crore

ITC-PSPD’s Tribeni unit has a production capacity of 30,000 tonnes per annum

Trident Paper (Trident Limited)
Trident Paper is one of the preferred manufacturers and suppliers of high quality paper for multi-colour high speed printing and publishing and branded copier paper. It is an ISO 9001:2000 & OHSAS 18001 certified mill with an integrated pulp and paper mill using mainly wheat straw as the primary raw material, to produce eco-friendly high quality branded copier paper, along with surface size & NSS, printing & writing paper varieties. New varieties include Diamond Line SS Maplitho, cartridge paper, natural shade paper with 92% brightness.
Sales turnover for quarter ended March 2014: Rs 983.11-crore

JK Paper
JK Paper has a combined production capacity of 2,90,000 tpa. It operates two integrated pulp and paper mills in India: JK Paper Mills in Rayagada, Orissa and Central Pulp Mills in Songadh, Gujarat. Both the units are ISO 14001:2004 certified for their eco-friendly operations and OSHAS
18001:2007 certified for health, safety and security. It is the first paper company in India to be conferred with the TPM Excellence Award by Japan. The company is the market leader in office paper and among the top two players in coated and high end packaging board. The company exports high value branded products and packaging boards in the Middle East, South East Asia, SAARC and various African countries.
Sales turnover for quarter ended March 2014: Rs 500.93-crore

Century Pulp and Paper (Century Textiles & Industries)
CPP is a producer of writing and printing paper, and a leading manufacturer of tissue and board, as well as Rayon Grade Pulp (RGP) products. A division of Century Textile and Industries, CPP has achieved significant efficiencies in various disciplines, all within a short time. Located at the foothills of the Himalayas in Lalkua, Nainital, the company is a committed employer of the local community.

Sales turnover for quarter ended March 2014: Rs 1767.54-crore

BILT: Recent developments
India’s largest paper company Ballarpur Industries Ltd (Bilt) is looking to raise funding from IFC, a lending arm of World Bank Group, for Dutch subsidiary Ballarpur International Graphic Paper Holdings (BIGPH). IFC is also an investor in JK Paper, a key competitor of Bilt in the Indian market.

The paper manufacturing firm said it is also exploring the possibility of listing of equity shares of BIGPH at an overseas stock exchange. It had previously explored such options and even announced plans to raise $330 million through a listing on the London Stock Exchange. Bilt had later postponed and eventually put the plans on the back burner.

GIC and JP Morgan together own a minority stake in the Dutch subsidiary in a deal valued at USD175 million in January 2008. As of June 30, 2013, Bilt indirectly held 79.2% in BIGPH while the remaining stake was with GIC (11.7%) and promoter’s private holding firm Avantha International Assets BV (9.1%).

NR Agarwal Industries
It is one of the largest coated duplex board and newsprint manufacturing group, with its corporate office at Mumbai and four manufacturing units in Vapi, Gujarat. The group started with the incorporation of a 10 TPD unit manufacturing Kraft paper in 1975, and has today evolved as one of the largest manufacturing facilities. The combined manufacturing capacity of coated duplex boards today is 130,000 MT per annum and that of newsprint, 40,000 MT PA. Total manpower, including technical and commercial personnel, handling activities of the company is 1,500. The company exports to countries like Sri Lanka, Bangladesh, Philippines, Egypt, East Africa and Gulf Countries. It manufactures five different qualities of newsprint.
Sales turnover for quarter ended March 2014: Rs 128.07-crore

Murli Industries
Headquartered in Wardhaman Nagar, Nagpur, the company had originally launched its operations with a solvent extraction plant. It went public in 1993, which prompted it to diversify into paper and set up a plant in 1997.  The commissioning of two captive co-generation power units with combined capacity of 18 MW saw a turnaround in company’s fortunes. It produces duplex, newsprint & printing paper, cream wove, map litho paper, copier, etc.
Sales turnover for quarter ended March 2014: Rs 84.40-crore.