Satia Industries expects FY28 volume growth as PM-3 upgrade adds 20,000 tpa capacity; integrated operations and paper price recovery to drive performance

Satia Industries expects FY28 volume growth as PM-3 upgrade adds 20,000 tpa capacity; integrated operations and paper price recovery to drive performance

- Satia Industries' Integrated Strength, Capacity Expansion Support Ratings; FY28 Growth Expected Despite FY26 Margin Pressure

The Pulp and Paper Times | August 7, 2026

India Ratings and Research (Ind-Ra) has affirmed the ratings on Satia Industries Limited (SIL) and continues to take a standalone view of the company for the rating review. The affirmation reflects SIL’s comfortable business profile with integrated operations, a healthy market position in the state textbook segment, operational efficiencies driving robust EBITDA margins averaging 16%-17% over the past 10-15 years, and healthy cash flow generation through industry cycles.

Although the company’s existing paper manufacturing capacities are fully utilised, Ind-Ra expects SIL’s ongoing capacity expansion to drive volume growth in FY28. According to the agency, SIL’s integrated operations, cost efficiencies, and ability to use multiple feedstocks are expected to ensure a healthy margin profile through the cycle.

However, SIL’s EBITDA margin declined to a 15-year low of around 8.5% in FY26 compared with 18% in FY25. The decline was attributed to weak realisations resulting from sustained import pressure and elevated feedstock costs that impacted profitability across the paper industry. The agency noted that the paper industry is inherently cyclical, with volatility largely driven by supply-side factors.

The weakness in paper prices was linked to competition from low-priced imports, while India’s writing and printing paper segment recorded only low-single-digit year-on-year domestic demand growth. Additionally, a sharp increase in wheat straw prices, a key raw material, due to floods in Punjab further compressed margins during FY26.

Ind-Ra noted that paper prices have recovered over the past few months, increasing from INR65/kg in December 2025 to INR71.5/kg in May 2026, and expects realisations to average higher year-on-year in FY27. Nevertheless, the agency expects SIL’s margins to remain broadly stable in FY27 because of the planned shutdown of one of its four paper machines for upgrading and higher costs of certain inputs. A significant recovery in profitability is expected from FY28, supported by higher production volumes and improved operational efficiencies following the completion of the ongoing expansion project.

The agency also expects ongoing capital expenditure for increasing paper capacity and improving operational efficiencies, along with lower EBITDA, to increase SIL’s net leverage to above 2x in FY27. However, leverage is expected to decline meaningfully in FY28 and remain within the agency’s rating sensitivity thereafter.

Integrated Operations and Strong Position in the State Textbook Segment

Ind-Ra highlighted that SIL is among India’s leading integrated manufacturers of writing and printing paper, with an operating track record of over four decades and an installed paper manufacturing capacity exceeding 200,000 tonnes per annum across multiple varieties, colours, and grades.

The company operates an integrated manufacturing facility comprising paper machines, an in-house pulp processing facility, a captive power generation plant that meets almost its entire power requirement, and a chemical recovery plant. According to the agency, while the Indian paper industry remains fragmented, only a limited number of integrated players possess a scale comparable to SIL due to high capital investment requirements, technical expertise, long gestation periods, and challenges in raw material procurement.

SIL also maintains a healthy 10%-15% market share in India's state textbook paper segment and has longstanding relationships with various state textbook corporations. The state textbook business generally delivers higher operating margins than open market sales and contributes 30%-50% of the company’s overall sales.

The company’s product portfolio serves both education and corporate sectors. During FY26, Maplitho paper accounted for 32% of total sales, followed by Snow White paper at 17%, while other products included surface size paper, copier paper, cream wove paper, and high-quality SS Maplitho paper.

SIL has also significantly reduced its dependence on imported pulp to around 5%, compared with nearly 15% a decade ago. Around 95% of its pulp requirement is met in-house through a combination of agro-based and wood-based pulp. In addition, greater utilisation of rice straw for power generation since FY24, reaching 85% in FY25 compared with 30% in FY24, has helped lower power and fuel costs.

Capacity Expansion to Support Medium-Term Growth

Ind-Ra stated that SIL continues to operate its existing paper manufacturing capacity at full utilisation, recording production volumes of 216,190 tonnes in FY26, compared with 215,520 tonnes in FY25 and 213,805 tonnes in FY24.

The company is upgrading its PM-3 paper machine over a six-month period beginning in June 2026, which will increase consolidated capacity by 18,000-20,000 tonnes per annum, representing about a 10% increase, by the end of the third quarter of FY27.

During the upgrade period, PM-3 will remain shut, resulting in temporary volume loss, although the remaining three paper machines will continue operating without interruption. The project had originally been planned for FY25-FY26 but was deferred from November 2025 to June 2026 because of prevailing market conditions and delays in the availability of machinery components.

As a result, Ind-Ra expects meaningful volume growth to materialise in FY28. The agency believes that the long-term demand outlook for paper remains stable due to under-penetration across multiple segments. Paper demand in the education sector is expected to continue growing alongside rising literacy levels in India, while the overall writing and printing paper segment is likely to register low-single-digit growth.

Alongside the PM-3 expansion, SIL is also installing a new chemical recovery boiler, now scheduled for commissioning by the end of FY29 after being deferred from the earlier target of end-2QFY28 due to changes in pulping technology. The company also plans phased investments of around INR1,300 million in a property over the next five years, having already invested approximately INR300 million during FY26.

Improved Raw Material Availability Expected to Support Margins

Despite improved wheat straw availability and better paper realisations, Ind-Ra expects EBITDA to decline marginally in FY27 because of lower production volumes during the PM-3 shutdown and reduced fixed-cost absorption. However, the agency anticipates a significant improvement in EBITDA from FY28 as higher production volumes improve fixed-cost absorption.

The report also noted that wood availability improved from the fourth quarter of FY26 onwards, leading to some easing in wood prices. Ind-Ra expects wood availability in India to improve further over the next two to three quarters as the first harvest from post-Covid plantations reaches the market. While this is likely to moderate wood prices, they are not expected to return to previous lows.

Chemical costs, which account for 18%-22% of SIL’s total cost, increased during the first quarter of FY27 due to the ongoing West Asia conflict. Ind-Ra believes that easing geopolitical tensions and improving supply chain conditions are likely to soften chemical prices over the near term.
 

Published at : Aug 07, 2026 08:08 AM (IST)

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