Change in product mix that translated into superior offtake and improved realisations for Ruchira Papers

Change in product mix that translated into superior offtake and improved realisations for Ruchira Papers

- The Company generated 60.68% of its revenues from the white paper business and 39.32% from the kraft segment
- profit after tax strengthened 104.38% to INR 67.63 Crore in FY 22-23

The Pulp and Paper Times:

Ruchira Papers Limited ( RPL) is a respected multi-decade manufacturer of writing and printing paper and kraft paper. The Company is respected for its quality tree-free paper used in writing, highprinting and packaging applications. In FY 2022-23, Ruchira Papers manufactured 146758 MT of kraft paper and writing and printing paper, establishing itself as an attractive moderately sized paper manufacturer in North India.

RPL’s superior performance ( FY 22-23) was the result of balancing the role of two businesses addressing different downstream customers. In the previous year, the writing and printing paper business had underperformed on account of educational institutions being closed due to the pandemic, while the kraft paper segment capitalised on a growing preference for environment friendly packaging. During FY 22-23, the white paper segment performed creditably. The kraft segment was affected on account of a decline in the export market (off take and realisations), which the Company endeavoured to counter with an increased output of niche kraft products.

“This is particularly relevant in a sector where accelerated conventional resource depletion could affect the supply chain; where inefficient production could result in sub-optimal financial resource use in a capital-unreserved business, and where weak environment control could result in emissions and discharges that compromise environment integrity. In view of this, the need to be responsible and environmentally sustainable is not peripheral to our business, but integral.” Said by Mr. Subhash Chander Garg, Chairman of RPL in the annual report for FY 22-23

While over viewing Ruchira Papers, Mr Garg added, “Over the years, RPL embedded environment sustainability into its DNA. Company selected to manufacture paper products using agricultural resources that could be renewed each year. The result is that to grow the business, the Company did not need to engage in deforestation. The renewable resources used by the Company continued to be sustainable, generating attractive livelihoods for farmers on the one hand and enhancing business model circularity on the other.

“The Company continued to deepen its culture of manufacturing excellence. The result is that the Company prioritised generating more from less; it grew its manufacturing capacity through continuous debottlenecking; its manufacturing prices make a superior and complete utilization of resources that moderate waste.” He stated.

As an environment-committed manufacturer, RPL believes that it is imperative to moderate the consumption of finite natural resources. As an extension, it believes that the most competitive companies of the future will not only be those delivering the highest surplus but those that can sustainably moderate the consumption of natural resources and protect the natural integrity of their hinterlands.  

Ruchira Papers will continue to focus on debottlenecking its manufacturing capacity with the objective of generating a superior output. This increased output is expected to help the Company amortise fixed costs more effectively while enhancing revenues. During the last couple of years, the Company replaced the turbine of the legacy boiler, generating an incremental 0.5 MW (total output now 6.1 MW). The Company also invested in an effluent treatment plant, protecting its business relevance, the report says.

Company continued to seek larger value-added opportunities, whose full potential will be increasingly visible during the current financial year. For instance, the Company could not extend its kraft output beyond 220 GSM; following capital expenditure, the Company can increase output to 350 GSM, addressing the rapidly growing disposable cups and bowl segments.

Improved product mix 

The improvement was partly on account of a 4.31% increase in the RPL’s output during the last financial year that provided it with a larger operational base to evolve the product mix towards enhanced profitability. The Company generated 60.68% of its revenues from the white paper business and 39.32% from the kraft segment (previous year’s numbers were 48.02% and 51.98% respectively). Average realisations in the writing and printing (white) segment strengthened 48.32% to INR 83,618 per MT; average realisations in the kraft segment declined 2.53%. On the overall, the Company’s average realisations strengthened 24.30% to INR 54,619 per MT, validating its overall product mix and decision to pursue value-addition in each.

O U R PE R F O R M A N C E OVE R VI EW, FY 2022-23 

The Ruchira Papers management delivered a creditable performance during the year under review on account of a change in its product mix that translated into superior offtake and improved realisations. The result was profitable growth: sales improved 30.98% to INR 802.70 Crore; profit after tax strengthened 104.38% to INR 67.63 Crore. These financials indicate that the Company capitalised creditably on the first full year of operations after the pandemic.

Production Volume Growth: During FY 2022-23, the Company registered a volume growth of 4.31% on a Year-on-Year (YoY) basis, achieving a production of 146758 MT compared to 140688 MT in FY 2021-22.

Ruchira Papers continued to leverage its engineering capability to enhance output from its given infrastructure. The Company generated a 13.48% increase in output during FY 2021-22 and 4.31% during FY 2022-23 by sweating assets better. Besides, the Company matched its machines with the paper variety, generating the highest realization, strengthening the overall Return on gross block. Normally, the GSM in Mogra grades remain on the higher side around 130-160 GSM compared to 58 GSM of normal writing and printing paper. This higher GSM empowers the Company to enhance productivity on one hand and economies of scale on the other.

WRITING AND PRINTING PAPER MARKET

Increased stationery demand: The Indian school stationery supplies market size reached USD 2,240.1 Million in 2022. According to the IMARC group, the sector is expected to reach USD 3,204.9 Million by 2028, exhibiting a projected CAGR of 6.06% during 2023-2028

Office stationery demand: The office stationery supplies market is valued at USD 75.2 Billion in 2022 and is anticipated to increase to USD 80.16 Billion by 2028, with a CAGR of 6% in the next six years. The surge in remote and hybrid work models along with the adoption of creative and personalised stationery for branding is propelling the growth of the office stationery market. 

Wedding market: India's wedding market is gearing for dynamic growth. The numbers speak volumes: an anticipated rise from 2.5 Million to 3.2 Million events between November 2021 and February 2022 and November 2022-February 2023, marking an impressive 28% increase. This vibrant trend highlights a world of opportunities, shining a spotlight on Ruchira's unique 'Mogra' brand - the epitome of elegant wedding cards.

KRAFT PAPER 

Growing packaging industry: The Indian packaging industry’s market size stood at USD 71.90 Billion in 2023 and is expected to reach USD 130.14 Billion by 2028, growing at a CAGR of 12.60% during the forecast period (2023- 2028). The Company’s kraft paper product is utilised in corrugated boxes, composite cans and other packaging applications; therefore packaging industry growth will drive the Company’s growth in the kraft paper segment.

CUP STOCK PAPER 

Growing demand for beverages: Sales of Indian beverages are estimated to reach USD 47.6 Billion by 2026 from USD 41.4 Billion in 2021, representing an average growth of 2.3% year on year. The ban on plastic cup stock and carry bags is leading to a higher demand for eco-friendly alternatives .The growing demand of hot and cold beverages in expected to drive demand for the Company’s ‘Leher’ and ‘Neer’ brands.
 

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