TNPL returns to profitability, but underlying concerns persist

However, the turnaround is tempered by persistent structural challenges. Despite the sequential recovery, profitability remains alarmingly thin, with a wafer-thin PAT margin of just 0.74% and a decline in year-on-year operating margins. The paper manufacturer continues to grapple with an elevated debt burden, signalled by a high Debt-to-EBITDA ratio of 5.01 times, and a weak return profile (ROE of 6.20% on average).

As a paper expert told PrintWeek, "The Indian paper industry is facing significant headwinds, including demand volatility, rising raw material costs, and competitive pressures that have compressed margins across the sector." TNPL is facing challenges that mirror these broader industry trends, particularly in its writing and printing paper segments, which are being impacted by the adoption of digital media.

Today, TNPL has an installed capacity of 400,000 tonnes per annum for paper and 200,000 tonnes per annum for paperboard. However, capacity utilisation and pricing power are constrained by oversupply. 

In a fragmented and highly competitive landscape, TNPL’s market positioning has seen a transition. Its focus on newsprint and writing paper exposes it to risks, while its paperboard operations face intense competition from larger, integrated players. Furthermore, the company's geographical concentration in South India limits its national market reach compared to its pan-India competitors. Sustained profitability will depend on its ability to optimise its product mix and achieve greater scale advantages.