Are Writing and Printing Paper Manufacturers in India Set for 4-5% Revenue Growth This Fiscal?

New Delhi, Aug 4 (NationPress) Manufacturers of writings and printing (W&P) paper in India are anticipated to witness a 4-5% increase in revenue for this fiscal year, propelled by rising prices and consistent volumes, according to a report released on Monday.

This marks a significant recovery following a previous year's decline of 7%, as per data gathered by Crisil Ratings.

The report indicates that realizations, which fell by approximately 12% last fiscal, are expected to rise by 2-3% this year.

This positive trend is backed by stable demand-supply dynamics, restricted imports of inexpensive W&P paper from ASEAN nations, increased domestic production, and the absence of new capacity expansions domestically.

While the rollout of the National Education Policy 2020 stimulated demand in the previous fiscal, volume growth is projected to decelerate by 200-300 basis points this year due to the rise in digitalization.

Nevertheless, consistent demand from sectors such as banking, education, and the judiciary is likely to maintain volume growth in a positive range of 2-3%.

Operating profitability is predicted to enhance by 200-250 basis points as hardwood prices stabilize due to better supply, coupled with efficiency measures that will bolster margins.

“Given that there are no new capacity additions planned in ASEAN countries and no fresh domestic capacity expected, we foresee a moderate rise in realizations along with comparable volume growth, aiding revenue recovery,” remarked Shounak Chakravarty, Director at Crisil Ratings.

W&P paper finds extensive application in education, tutoring, banking documentation, and judiciary processes.

Factors such as consistent school enrollment, the emergence of coaching institutes, increased know-your-customer documentation, and stable judicial demand are set to sustain the market despite a slowdown in digital adoption.

Crisil anticipates that capacity utilization will remain strong at 86-87% this fiscal, as paper manufacturers are unlikely to pursue new capacity expansions.

Instead, investment efforts will focus on enhancing efficiency through methods like chemical reuse and energy-efficient production practices, which will improve yields.

Margins are projected to rebound to 15-16% this fiscal from a five-year low of 12-13% the previous year, supported by lower hardwood prices and improved efficiency.

After a decline during the pandemic, hardwood acreage has increased since FY23, and the resulting higher harvest is expected to alleviate supply issues from the latter half of this fiscal, as stated in the report.

The anticipated boost in revenue and margins is also expected to enhance cash flows and strengthen credit profiles, aided by minimal capital expenditures and stable working capital.

Debt metrics are likely to improve, with the debt-to-EBITDA ratio projected to be between 1.3-1.4 times and interest coverage at 7.5-8.0 times, compared to 1.6 times and 6.4 times last year, according to the report.