'Paper industry will continue to prosper, as there is still lot of things that digital media like the internet cannot do’

By 17 Oct 2016

Siddharth Bang of Bang Paper, based in Hyderabad has served the industry for a decade with his team of sixty.

Siddharth Bang of Bang Paper

The paper turnaround in 2016
Most of the paper mills who have been manufacturing uncoated wood free have reported a sharp increase in profitability. There are a few reasons for this. First reason is the interim shut down of BILT which has created a scenario of acute shortage of paper in India because of which mills have been able to increase prices and hence operating margins have increased. Mills have also reduced their stocks considerably.

Apart from this, there has been the addition of uncoated wood free manufacturing capacity in India in the last four to five years. The return on investment in paper industry in India is very low because of which no major group has planned to invest further money in this sector. The free trade agreements with ASEAN and SAARC countries have made it difficult for mills in India to compete with counterparts in Indonesia, Thailand, Japan, Korea etc, because the cost in these countries is very low.

Paper challenge
As a trader we are facing a lot of challenges. India has been a very fragmented and unorganised market over the years because of this the trader had a big role to play, in terms of the market challenges. As we go forward, markets in India are getting matured and this is inviting a lot of big trading firms from other countries to set up shop. There are capacity constraints on account of no further investments in green filed paper mills in India. Some of the big mills are also acting as traders wherein they are importing big volumes from paper mills in South East Asia and distributing their products through their existing network. These factors has resulted in our role as a trader getting marginalised. The biggest challenge for us is to face this competition, expand our network, build up relations with the customers and try to see if some consolidation can happen at our level so that we grow faster and we are able to compete with the bigger traders from other countries.

Key paper projects
Major investments by big mills in India have been done more than four years back. After 2011, there have been no major investments in the writing and printing sector. ITC and IP are also not planning for any expansion in this segment. JK has made an offer to buy BILT but we will have no clarity on this till the time the deal is actually finalised. As far as Emami and TNPL are concerned, both these expansions are in the packaging board segment with majority of their capacity manufacturing virgin boards. Packaging is the only space in India where you will see big paper companies investing money. There is a healthy growth rate of 12% per annum in the packaging segment in India (virgin boards, duplex boards, kraft paper) and because of this you will see further investments in this segment.

TNPL is the mill to watch out for because of its state of the art plant and quality. It is the single biggest board machine in India.

Pain areas for a trader
Bad debts and long credit periods have been the challenges for the paper trading fraternity for a long time and these two challenges will be there in the future as well. As far as bad debts are concerned, it is upon the traders to be very selective with the customers that they want to deal with. I don’t see long credit periods as a big challenge because it again gives you an entry barrier in the trade. So if you are efficient in managing your credits in a better way, it can be a blessing in disguise. The biggest challenge as far as I am concerned is to improve the service levels in our industry, develop infrastructure which can help you doing that.

We are all a part of the value chain which connects the customer and the paper mill. As long as we are adding a significant value to this chain, we will make money. The moment we do not add any value, our role will be diminished and either the manufacturer or the customer will bypass us.

Paper tigers in their comfort zone
Each industry has its own set of challenges so I think all of us need to keep moving out of our comfort zones and keep pushing the boundaries further so as to stay abreast of the competition.

First and foremost is that they can make payments in time. This will help the printers more than it helps the traders because longer payment times will increase the cost considerably at their end. No paper trader funds the customer below the bank rate of interest, which the customer has to realise. The margin which a trader adds for credit sale is also considerably more than what he would add to a customer who pays on time.

Further, I also think that the customer needs to be more transparent with the trader in terms of procurement. This will help the trader plan inventory at customer level in a much more optimum way.

Popularising paper
At the FPTA level we have an awareness committee which spreads this message. From FPTA it goes down to the regional associations also which are doing their bit in spreading this awareness. For example, we have asked all the notebook manufacturers to add one page in each and every book that they make which carries this message.

Bang Paper deals in BILT, APPM and TNPL in the A grade segment. All the products made by these mills are quite popular. The customers include the top print firms in Hyderabad and Bengaluru.



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