Paper industry: the report card -- consolidating amidst headwinds

The Indian paper industry, particularly the packaging segment, is navigating a period of both significant structural tailwinds and immediate operational challenges, as evidenced by the Q2 FY26 results of key players. While sustainable packaging demand and sector-specific capacity expansions underpin long-term optimism, the market is currently impacted by elevated raw material costs, low-priced imports, and recent GST-related disruptions.

Market trends  and outlook

The overall Indian paper market, estimated at approximately 23.84-million tonnes in FY 2024-25, is primarily driven by packaging paper and paperboard, which account for about 65% of the total market. The paper packaging market is estimated at USD 19.07-billion in 2025 and is projected to accelerate at a CAGR of 19.48% to reach USD 46.43-billion by 2030, a momentum fuelled by accelerating eCommerce demand, the ban on single-use plastics, and overall FMCG and packaged food volume expansion.

Corrugated board and paperboard remain key segments, with corrugated board holding 54.23% market share in paper packaging in 2024, while high-end coated paperboard is expected to grow strongly, reaching a projected USD 15.4-billion by 2030. Despite strong demand, manufacturers face intense pricing pressure due to cheaper imports from countries with free trade agreements, such as ASEAN. This, combined with elevated input costs, particularly wood/pulp, is squeezing margins for domestic players. Further compounding these issues are recent GST rate changes, including an increase on paper and boards from 12% to 18% and a reduction on converted products (mono cartons and corrugated boxes) to 5%, which have created an inverted duty structure, compounding margin pressures and increasing working capital blockage.

The entire Indian packaging  industry is a high-growth sector, projected to reach USD 204.81 billion by 2025, and the Indian flexible packaging market is valued at USD 20.41-billion in 2025 and is expected to grow at a CAGR of 11.46% to 2030, though plastic remains the dominant material  due to versatility and cost-effectiveness.

View from the top

The industry’s financial stress was  sharply articulated by management across major companies. SK Bangur, chairman  and managing director of West Coast Paper Mills (WCPM), stated, “The domestic paper industry continued to face pricing pressure through Q2 FY26 as imports remained elevated. Input costs particularly wood continues to remain high, moderating the  pace of margin recovery.” He further detailed the specific disruptions leading to performance drops, noting, “Further, consolidated performance is impacted during  the quarter due to a brief workers’ strike and a subsequent 14-days planned annual maintenance shutdown at the Rajahmundry plant of our one of subsidiaries,  Andhra Paper, resulting in a one-time loss of production and earnings.”

Harsh Pati Singhania, chairman  and managing director of JK Paper, Paper and paperboard segment continue to face challenges arising from higher wood cost and lower sales realisation due  to cheap imports. Harsh Pati Singhania, chairman and managing director of JK Paper provided a similar view, asserting that, “Paper and paperboard segment continue to face challenges arising from higher wood cost and lower sales realisation due to  cheap imports.”

He explained the severity, stating, “This has adversely impacted profitability across the product segments despite increased sales volume over the corresponding period. The performance of the company’s packaging conversion subsidiaries improved during the quarter.”

Singhania also explicitly  addressed the tax issue, adding, “recent changes in GST rates have also had an adverse impact on the paper and board industry.” The collective position was summarised by TNPL’s official statement, which noted that “overall market demands remain subdued with  import of paper at lower prices etc, and the recent GST 2.0 rate changes with regard to paper industries have created few uncertainty in the marketplace, which we expect to get settled over time.”

Even ITC, while noting its  paperboards and packaging segment reported a 5% YoY revenue growth driven by volumes acknowledged the severe industry conditions, stating that “overall Industry remains impacted by low-priced supplies, high wood prices and subdued realisation.” The company added a note of potential  relief, mentioning “initial signs of moderation in wood prices with improving availability.” 

Capacity expansion  and new machinery

Several paper and packaging  companies are strategically investing in capital expenditure (capex) to capture anticipated growth, focusing on both existing plant expansion and new segments. Udaan Paper Industries, as part of its IPO plan, is looking to significantly expand its capacity at its Pithampur, Indore facility (Unit-I), with an increase expected from approximately 22,500 tonnes per annum (TPA) to around 52,500 TPA. The company intends  to allocate INR 894.62-lakh from the net proceeds towards this expansion, which includes new civil construction and the installation of a new five-ply corrugation machine, aimed at catering to increased demand from the FMCG and packaged food sectors.

Andhra Paper, a subsidiary of  WCPM, faced operational challenges as a 14-day planned annual maintenance outage at its Rajahmundry facility in July 2025, along with an illegal worker strike, were cited as key reasons for the significant impact on WCPM’s consolidated performance for the quarter, including a 42% consolidated EBITDA decline.

Seshasayee Paper and Boards  (SPB) is focusing on long-term asset and energy strategy. SPB is taking steps for the revival and refurbishment of the assets of Servalakshmi Paper, which it acquired through an eAuction sale. Furthermore, SPB invested INR 26-crore during the quarter in a special purpose vehicle (Navia One Power) for developing solar and wind power capacity to exclusively supply power to the company, demonstrating a focus on sustainable energy sourcing.

Orient Paper and Industries, despite the dire profitability of its main factories and its paper and tissue segment loss surging by more than 88% to INR 43.84-crore, dem-onstrated a tangible commitment to future modernisation. This intent is evidenced by a sharp increase in capital work-in-progress (CWIP), which grew by nearly INR 40-crore over the half-year period to reach  INR 10,478.78-lakh as of 30 September 2025, signalling plans to upgrade its machinery and infrastructure to improve efficiencies.

As part of operational efficiency,  TNPL emphasised that the company “has gone for product upgradation and improvisation with renewed focus on product quality and customer service.”

Rigid and flexible  packaging focus

The distinction between rigid  (corrugated boxes, paperboard cartons) and flexible (paper/plastic pouches, films) packaging remains crucial, with paper-based formats positioned strongly due to  sustainability drives. Paper-based packaging, which is a major sub-segment experiencing rapid growth as a sustainable alternative to plastic, is buoyed by the fact that the entire Indian packaging industry is a high-growth sector.

Corrugated boxes and folding  cartons are explicitly named as key growth drivers, buoyed by the expanding eCommerce and FMCG sectors. While the Indian flexible packaging market remains strong, valued at USD 20.41 billion in 2025, it is expected to grow at a CAGR of 11.46% to 2030, though plastic remains the dominant material due to versatility and cost effectiveness. There is, however, a growing trend towards eco-friendly alternatives like paper and bioplastics within this flexible segment.