Steeper-than-expected drop in realisations hits Seshasayee Paper’s FY2025–26 operating margins; Box boards, Absorption Kraft, and Virgin Kraft now form a growing share of the product mix

Steeper-than-expected drop in realisations hits Seshasayee Paper’s FY2025–26 operating margins; Box boards, Absorption Kraft, and Virgin Kraft now form a growing share of the product mix

The Pulp and Paper Times

Seshasayee Paper and Boards Limited (SPB), an Integrated Pulp, Paper and Paper board Mill, and the flagship company belonging to Writing and Printing  paper manufacturing in India, has registered a fall in net profit during FY 2025-26 compared to corresponding period of previous year.

The fall in net profit during FY26 compared to the previous year is mainly due to lower average realisations per tonne of paper in both the Domestic & Export Market. Revenue from Operations of the Company for the year was Rs. 1710.17 crores, as against Rs. 1754.11 crores, in the previous year.

Accordingly, the impact of drop in realisations was much steeper than expected and the successful and significant cost reduction / optimisation efforts undertaken by the company could not offset the impact of drop in realisations in full. This has resulted in drop in operating margins during the FY26 as compared to FY 25.

As part of MDP III, Paper Machine 2 in Erode has been successfully modified to manufacture multi-layer boards, enabling production of cup-stock, carton board, and kraft liner board. The Company has developed in-house pulp-based Virgin Kraft packaging papers for the food industry, eligible for FSSAI certification. Box boards, Absorption Kraft, and Virgin Kraft now form a growing share of the product mix, reducing the Company's exposure to the secular decline in the P&W segment.

OPERATIONS: 

The Company had registered the following landmarks during the FY 2025-26, in-spite of challenging market conditions. 

-Highest ever annual production volumes at 2,48,385 tonnes. 
-Highest ever annual sales volumes at 2,49,714 tonnes, with highest ever annual domestic sales volumes at 2,28,955 tonnes. 
-Highest ever annual Production in Unit : Erode - 1,75,205 tonnes (Erode unit operating at 106% of the installed capacity).

During FY26, the production at Unit : Erode was 1,75,205 tonnes of paper, as compared to 1,70,426 tonnes, produced in the previous year, thanks to overall improved operations. (Average Capacity Utilisation stands at 106% in FY 26 in Unit-Erode).

SPB had completed project Mill Development Plan - III (MDP-III) in Unit : Erode in phases during FY 2020-21 and FY 2021-22. With the completion of Project MDP-III, the annual installed capacity of Paper for Unit : Erode stands augmented to 1,65,000 tonnes. The annual capacity of Unit : Tirunelveli remains at 90,000 tonnes. Accordingly, the total installed capacity of the company currently stands at 2,55,000 tonnes per annum.

Unit : Tirunelveli produced 73,180 tonnes of Paper during the FY26, as compared to 76,005 tonnes, produced in the previous year. (Capacity Utilisation at 81% in FY26 in Unit-Tirunelveli).

During FY26, company registered an overall sales of 2,49,714 tonnes of Paper (Previous year : 2,39,073 tonnes), with sales volumes growing by 4.5% in-spite of challenging market conditions.

The export volumes represented 8.4% of the production during FY26 (This stood at 11.6 % during FY25). The Company’s exports during FY26 was mainly affected due to disruptions to Exports to US in H1 of FY26 on account of the US Tariff related circumstances.

CURRENT YEAR (2026-27)

The margins for first and second quarter of FY 27 is expected to be affected by cost push on most imported and allied items (Pulp, Waste Paper, Chemicals, Coal, etc.) amidst the West Asia War crises. Paper mills are announcing price increases. But the effective implementation of the price increases will depend on the weakening of competition from Cheaper imports. Export business for the company is expected to be strong in FY27, provided the current levels of US tariffs remain.

Domestic market is expected to grow and will provide opportunities for growth for the company, thanks mainly to the wide product offerings by the company and the flexibility in altering product mix to suit dynamic and changing market conditions.

ENVIRONMENTAL PROTECTION

The Company continues to provide utmost attention to the conservation and improvement of the environment. In Unit : Erode, the Power Boilers, Lime kiln and Recovery Boilers are equipped with Electro Static Precipitators, to arrest dust emissions. The Company operates an Anaerobic Lagoon, for high BOD liquid effluents and a Secondary Treatment System, for total Mill effluent.

These facilities are operating efficiently, enabling the Company to comply with the Pollution Control norms, on a sustained basis. The treated effluent water continues to be utilised for irrigating nearby sugar cane fields. During FY 2025-26, the company, in its Erode unit, has installed and commissioned a Wet Electrostatic Precipitator (Wet ESP) in the existing Recovery Boiler to reduce particulate emissions from 100-120 Mg/nm3 to 40-45 Mg/nm3. This installation is the first of its kind in Indian Paper Industry.

The company had entered into Share Purchase Agreement and Energy Supply Agreement with the Indian Renewable Power generating company (SPV), during April & May 2025, for the purposes of developing a 52.8 MWp (DC) / 35.2 MW AC Solar Power Capacity and 9 MW Wind Power Capacity and intending to supply power to our company exclusively. The Solar / Wind power from the facility is expected to available for the company in Q-I of FY27.

MARKET CONDITIONS

FY 2025-26 was a transitional year for India's paper industry, marked by recovering demand, persistent import pressure, and global supply-chain volatility. Domestic demand continued to grow driven by e-commerce, FMCG, food delivery, the ban on single-use plastics and higher education spending, while the Union Budget's continued focus on manufacturing and MSMEs supported allied packaging demand. Cheaper Duty-free Imports from China and Indonesia continued to be the industry's biggest pain point. The pressure from cheaper imports got further accentuated with confusions arising out of GST 2.0 reforms announced in Sep’25, wherein the NIL GST on Paper for Notebooks / Notebooks resulted in imported paper having 12-15% cost advantage vis-à-vis paper manufactured in India. After 3 months of market disruption from GST 2.0 reforms, confusions started wading off and market operating prices settled only in Q-IV, though at comparative lower levels than the prices prior to pre-GST 2.0 reforms.

Disrupted supply chains globally due to the tariffs announced by US and the geopolitical situation prevailing in Middle East market continued until Q-III to have adverse impact on Export volumes and realisations. Post US Supreme Court’s decision on US tariffs, stability is restored on Company’s export volumes to US and outlook for this segment is favourable. The escalation of the US–Iran conflict in early 2026, along with disruptions in Strait of Hormuz, hurt pulp shipment reliability and raised freight costs. The global supply chain volatility has resulted in significant increase in the cost of imported pulp, waste paper, chemicals and coal, which is expected to significantly affect the margins in 1st half of FY27.

After difficult first 3 quarters, domestic market sentiments turned favourable in Q-IV with the notebook season, strengthening global pulp and paper prices and depreciation of INR against USD, with last 2 factors making Paper imports in to India costlier. Even though volume pick-up was seen over last 4 months, margins continue to be under pressure.

OUTLOOK:

FY 2026-27 is shaping up to be a year of recovery and reset for the Indian paper industry. After two demanding years marked by margin compression, import surges, and global supply-chain volatility, multiple drivers are converging to support stronger volumes, healthier realisations, and improved profitability-provided policy support holds and global pulp markets stabilise as expected.

Industry forecasters broadly converge on a 6–7% CAGR for paper consumption in FY27. Packaging and paperboard will continue to be the dominant engine, supported by sustained e-commerce growth, rising FMCG penetration, the structural shift away from single-use plastics, and quick-commerce-led demand for corrugated and folding cartons.
 

Published at : Oct 15, 2026 09:57 AM (IST)

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