Ruchira Papers is making a decisive investment of approximately Rs. 100 Crore to scale its business and emerge bigger

Ruchira Papers is making a decisive investment of approximately Rs.100 Crore to scale its business and emerge bigger
- This capital expenditure will be directed towards an investment in the shoe press and balancing equipment of the paper machine of writing & printing paper segment.
The Pulp and Paper Times

Ruchira Papers Limited (RPL) manufactures and markets kraft paper and writing & printing paper. The Company built a strong presence, extensive reach and leadership position pan-India, where a majority of its products are distributed. The Company commenced operations with a production capacity of seven Tons per day (TPD) of kraft paper that was progressively expanded. In FY 2023-24, the company manufactured 1,49,198 TPA of kraft paper as well as writing & printing paper, establishing itself as an attractive moderately sized paper manufacturer in North India.

“We must take this opportunity to communicate that Ruchira Papers was built around sustainability from the time it went into business a few decades ago. This explains why we have grown across four challenging decades, marked by sweeping changes in consumer preferences, technologies, energy forms, and structural global trade shifts. During this phase, your company responded with speed and competitiveness. During the last few years, your company’s focus on sustainability has only deepened, enhancing stakeholder value,” Mr. Subhash Chander Garg, Chairman of Ruchira Papers Limited said in the annual report for FY 23-24

RPL generated 59.84% of its revenues from the writing & printing segment and 40.16% from the kraft segment (previous year’s numbers were 60.68% and 39.32% respectively). Average realisations in the writing & printing (white) segment declined 15% to INR 71,414 TPA; average realisations in the kraft segment declined 20% to INR 28,315 TPA. On the overall, the company’s average realisations declined 18.90% to INR 44,321 TPA in FY 2023-24.

“RPL is committed to environment responsibility. It continues to deepen environment-friendly priorities, processes and practices. These initiatives have translated into an optimum consumption of fuel, water and energy, moderating the carbon footprint. In the last few years, our operations have resulted in a lower consumption of non-renewable resources with a lower environment load even as our output has increased. The Company is also consuming sustainable raw materials like wheat straw, bagasse, sarkanda and other agro residues in the manufacture of products that enhance the assurance that its products are good for the world, consumers, community and suppliers.” Mr. Garg added.

Our performance overview, FY 2023-24

Ruchira Papers reported a decline in performance during the year under review. This decline was largely driven by a global weakness in realisations for pulp and paper following an unprecedented increase in the previous year. There was an increase in imports that accelerated this decline in realisations. Demand for packaging paper from the country’s FMCG sector was lower on account of sluggish rural offtake. 

The decline in writing and printing paper realisations was an average 15% and in the kraft segment by 20%, resulting in a cumulative notional revenue loss of around Rs. 150 Crore. This decline could not amortise fixed costs as effectively as in the previous year, moderating the company’s margins and surplus.

The decline was also accelerated by a 15-day operational shutdown in the writing & printing unit to strengthen the capacity of the chemical recovery unit, resulting in a notional decline of manufactured tonnage by around 2,625 Tons with a corresponding revenue decline of around Rs. 18 Crore.

The result was a moderation in the company’s revenues by 18% to Rs. 657.6 Crore, reduced EBITDA by 25% to Rs. 81.77 Crore and moderated profit after tax by 27% to Rs. 49.19 Crore. Despite this decline, the company reported its second-best performance in existence. The performance, though lower than the previous year, was better than the sectorial average. Besides, the performance generated adequate cash flows that enhanced net worth and provided the company with resources to re-invest in the business and strengthen fundamentals.

Structural shift:

In a business environment where realisations remained largely outside the company’s control, there was a premium on the capacity to reduce costs. During the year under review, the company made a decisive shift in its coal procurement. The company entered into an arrangement for the procurement of coal directly from Coal India Ltd under the Coal Linkage Policy for the next five years. This arrangement will help the company replace the erstwhile use of other fuels. The standardized supply, sustained access and frozen prices promise to enhance the company’s long-term competitiveness. By freezing the variables related to fuel access – cost as a percentage of revenues in FY 2023-24, the Company strengthened the predictability of its business model and reinforced the sustainability of its business.

The company also increased the stocking of wheat straw resource following a decline in costs. By accessing 50% of the agro resource from within a radius of 50 kms, the company created a competitive hedge at a time of high fuel prices and swings in logistic costs. Besides, by utilizing its cash resource for building its inventory, the company was better placed to ride out price swings and enhance business predictability.

Product mix

Over the years, the Company demonstrated the capacity to remain responsive to changes in market demand.

The Company made a prudent capacity allocation towards products with relatively inelastic demand during industry downcycles as well as products addressing a growing need to replace plastic with environment-friendly grades.

During FY23-24, RPL introduced new kraft paper varieties in its soup bowls, popcorn tubs, paper bags and high strength packaging solutions, addressing emerging requirements. The company addressed the needs for cup stock, carry bags, wedding cards, texture paper, drawing paper and hard copy specialized.

Way forward, FY 2024-25

Ruchira Paper is  in the process of an approximately Rs. 100 Crore capital expenditure project, the largest such programme following the commissioning of its writing & printing unit. This capital expenditure will be directed towards an investment in the shoe press and balancing equipment of the paper machine of writing & printing paper segment. This investment will enhance output and production efficiency.

Value creation

The investment to be made in the current financial year is expected to generate two straight growth years for the Company. The increased output is expected to help the Company amortise fixed costs more effectively while enhancing revenues. The full impact of the capital expenditure programme is expected to play out completely during FY 2026- 27, empowering the Company to touch peak revenues, besides strengthening the bottom line. The complement of increased production, cost moderation and improved product mix is expected to enhance stakeholder value across the foreseeable future.

R&D achievements, FY 2023-24

A major R&D accomplishment comprised the development of kraft paper for burger boxes, cup stocks, wrapping paper, soup bowls and carry bags. This innovative product represented a significant advance in the kraft segment, driven by a rising demand for eco-friendly packaging options. The development involved rigorous testing and refinement to ensure that kraft paper addressed stringent performance standards for durability, printability and environmental impact. The R&D team plans to enhance product formulation and manufacturing processes to ensure optimal performance, cost-effectiveness and environmental sustainability.

In FY 2023-24, RPL expanded its product line, introducing new items under the Chandan, Kansa and Neroli brands. This resulted in the launch of innovative products like high strength packaging solutions, carry bags and bowls, each reflecting the Company’s commitment to quality and customer satisfaction. Under the Chandan brand, the Company introduced folding board boxes respected for durability and high-quality packaging solutions. Kansa introduced soup bowls; Neroli introduced high strength, stylish and eco-friendly carry bags.
 

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