Shreyans Industries registered a lower profit in FY 20-21; capital expenditure will result in improved working in coming years

The paper manufacturing giant in writing and printing paper segment, Shreyans Industries Ltd (SIL) has registered lower profits in FY 2020-21 mainly on account of the Covid-19 related market disruptions and consequent lower volumes of production/sales and lower net sales realizations. The negative impact, arising out of a significant drop in sales volumes and substantial reduction in Net Sales Realisations in the current year, as compared to the previous year, was partially offset by the increase in fair value of Investments on mark to market basis.

“Indian Paper Industry went through one of its toughest phases in its history with Covid-19 affecting demand and disrupting the supply chain. Paper manufacturers encountered serious challenges in operating their units due to lack of orders, suffered huge reduction in capacity utilisation, eroding substantially the profitability of their units. This was more pronounced in the case of manufacturers of printing and writing grades whose of take fell sharply due to closure of schools, colleges and courts as well as from work-from home practices,” said Mr.  Rajneesh Oswal, chairman and managing director- Shreyans Industries Ltd in the annual report for FY 20-21

One salient feature of the operations of the SIL during these difficult times was maintenance of sufficient liquidity in the system which stood us in good stead. Despite interruption in cash flow due to abnormal market conditions, SIL was able to continue its investments in the necessary capital expenditure during the year which will result in improved working in coming years.

Mr. Oswal looks optimistic about the SIL growth in FY 21-22 as the restrictions on schools and educational institutions has been removed, “However, with continued reduction in COVID-19 infections coupled with increase in pace of vaccination, SIL is hopeful that educational institutions should start opening up by 2nd or 3rd quarter of the current financial year. Education sector still remain a high priority area and is the biggest driver for demand of Writing and Printing Paper. SIL is hopeful that current financial year will result in much better operational results of the Company barring unforeseen circumstances” he said. 

With the ongoing vaccination program in India and with people now adapting to Covid-19 norms and environment, it is expected that the sales of Writing and printing paper will witness an uptick during FY22 on year to year basis backed by better paper demand and increase in its prices. The education institutions are likely to begin upcoming academic sessions (around June 2021) physically at least for higher class students if not for all the students. Physical study sessions for higher class students have been witnessed in the past few months as well. This is expected to result in better demand for printing & writing paper. Considering these factors, the demand for paper is expected to improve by Q2 FY22.

During the year under review, SIL has achieved a production of 73,758 MTs as against 88,307 MTs in the previous year. Total revenue of the Company was INR 386.96 crores against INR 546.33 crores of last year; Profit before interest & financial charges and depreciation stood at INR35.97 crores. Net profit after tax stood at INR 8.77 crores against INR 31.96 crores of last year.

Total production of paper in this unit was 42,784 MTs, which was lower as compared to last year level of 51,088 MTs due to reasons explained earlier. Capital expenditure planned during the current year includes commissioning of separate digester for woodchips to improve the quality of pulp and paper. New and more efficient Bleach Stage Washers were installed resulting improvements in terms of pulp consistency, increase in brightness, cost effectiveness and better environmental performance. A higher capacity captive power generation plant is also being commissioned to meet the entire requirements of electrical power at a much lower cost as compared to grid tariff. Besides above, capital expenditure towards balancing facilities and essential sustenance capital projects is undertaken on year to year basis.

Total paper production in this unit was 30,974 MTs which was lower as compared to last year's production of 37,219 MTs due to reasons explained earlier. During the year a new Oxygen Delignification stage in the pulp mill was commissioned which resulted reduction in consumption of bleaching chemicals. Further, heated calenders to improve the surface properties of paper, Steam and Condensate system for process improvement and overall energy efficiency and additional Fluidized Bed Reactor for Chemical Recovery to meet the enhanced requirement of plant were also commissioned during the year.