INDIAN PAPER INDUSTRY

Paper industry in India is the 15th largest paper industry in the world. It provides employment to
nearly 1.5 million people and contributes Rs 25 billion to the government's kitty. The
government regards the paper industry as one of the 35 high priority industries of the country.
today there are about 515 units engaged in the manufacture of paper and paperboards and
newsprint in India. The pulp & paper industries in India have been categorized into large-scale
and small-scale. Those paper industries, which have capacity above 24,000 tonnes per annum are
designated as large-scale paper industries. The Indian Paper manufacturing Industry is highly
power and capital intensive, is broadly divided into paper, paperboards, and newsprint.

Indian paper industry needs the following for being globally more competitive:

 Sustained availability of good quality of raw materials (forest based) and bulk import of
waste paper to supplement the availability of raw materials.
 Adequate modernization of the manufacturing assets.
 Improvement of the infrastructure
 Quality improvements and reduction in cost of production
 Import policy conducive for import of material, equipment, instruments, raw materials &
technologies which are bearing of the quality and environment.

Infrastructure

Improvements of key ports, roads and railways and communication facilities which will help the
entire industrial sector including pulp & paper.
Raw Material

For Wood Based industry

Revision of forest policy so that plantation can be raised by industry/Cooperatives of

farmers/State Government. Degraded forest land to be made available to the industry for raising
plantations.

For Waste Paper based Industry

Import of waste paper at minimum import duty. Introduction of ecolabeling system where in
products made from recycled fibre are rated higher than the products made form virgin fibre.
Introduction of modern and effective collection and grading system.

For Agro Based Industry

Funds to be made available for technology upgradation for handling & processing of agro
residue fibre, in small & medium scale industries.

Government Policies

Accelerated depreciation to partially mitigate high capital intensity. Allow duty free imports of
new & second hand machinery/equipment for Technology Up gradation.

Energy Policy

Better availability & quality of coal. More uniform Energy Policy by States.

MARKET METRICS
 • Over 1000 firms with installed capacities ranging from 1000 metric tons (MT) per annum
to 300,000 MT per annum capacities operate in the country, making India the 15 th largest
paper producing country in the world.
• The Indian paper and paperboards industry grew by nearly 7 percent during the year
2008-2009. This is substantially higher than the world average of 2 percent.
• India’s paper manufacturing capacity is expected to grow at a Compounded Annual
Growth Rate (CAGR) of 3.7 percent from 7.30 million MT per annum to 8.75 million
MT per annum between 2008-9 and 2009-10.
• The domestic demand for paper and paperboard is expected to rise at a compounded
annual growth rate of 6.1 percent by 2008-9

The healthy growth in the paper industry was driven by:

➢ Strong growth in the economy

➢ Increasing sophistication of the Indian consumer
➢ Emergence of packaging as a key driver of product differentiation.
➢ Expanding the circulation of leading English and vernacular newspapers

IMPORT MARKET

The Indian import of paper is expected to continue for the next five years and beyond to meet the
expanding local demand. Indian firms also import pulp from other countries. The Indian paper
manufacturers have started facing serious challenges.

The major threat faced:

• Shortage of quality raw material

• Restricted availability of wood and thereby pulp made prices to rise
• Increase in product cost
• Consistent denial of permission by the central government

Advantages:

• Government of India has been reducing the peak import tariffs each year.
 • Pursuing the policy of actively entering into Regional Trade Agreements (RTA) to
countries in ASEAN group.

COMPETITION

The Indian paper industry has an installed capacity of 6.7 million tons per annum (tpa) while, the
actual production was approximately 5.26 million tons of paper in 2008-2009. The local
production is estimated to have reached 6 million tons in 2009. Newsprint capacity in India is
estimated at 1.2 million tons per annum, however domestic production is only around 0.6 million
tons per annum while consumption of newsprint is 1.1 million tons per annum. The domestic
pulp and paper industry is expected to increase its production from the present six million tons to
eight million tons by 2012 to meet the growing demand. Recognizing this, several top players
have initiated capacity expansion plan that is expected to be start commercial production. Further
confronted with limited raw material resources and technology options, the efficiency levels
have to be improved.

MAJOR PLAYERS

The Andhra Pradesh Paper Mill Ltd

Incorporated in 1964, the company has two manufacturing units and an off-site
conversion center with a total capacity of 153, 500 TPA. There are five paper machines installed
in the mill, which produces paper of different M.F & M.G varieties in the range of 21 to 250
GSM. The mill is manufacturing largest range of papers and boards. Annual sales volume is
around USD 82 million.

Ballarpur Industries Ltd – BILT

BILT is India's largest paper company and the only Indian company to rank amongst top
100 paper companies in the world. BILT is India's largest manufacturer and exporter of paper,
with a strong presence in all segments of the usage spectrum that includes Writing & Printing
Paper, Industrial Paper and Specialty Paper.

ITC Limited

ITC is one of the world's most modern and contemporary manufacturers of packaging and
graphic series of boards. ITC's Paperboards business has a manufacturing capacity of over
360,000 tons per year and is India's market leader across all carton-consuming segments
including cigarettes, foods, beverages, pharma, personal care & toiletries, durables and match
shells.

JK Paper Ltd

JK Paper Ltd., India’s largest producer of branded papers is a leading player in the Printing and
Writing segment. The company operates two plants in India, one in the East

➢ JK Paper Mills (JKPM) in Rayagada, Orissa with a capacity of 125,000 tons per year,
and the other in the West – Central
➢ Pulp Mills (CPM), located in Songadh, Gujarat with a production capacity of 55,000
tons per year.

Both plants are ISO 9001 – 2000 and ISO 14001 certified and operate at around 120% capacity
utilization. The aggregate annual output is over 180,000 tons per year of Paper and Pulp, using
contemporary technology.

Pudumjee Pulp & Paper Mills Limited (PUDUMJEE)

A Pune (Maharashtra, India) based Company engaged in the manufacture and sale of Specialty
Papers is a flagship Company of the M.P Jatia Group of Companies. Beginning with
manufacture of India’s first indigenous Greaseproof and Glassine papers for packaging for the
first time in India, PUDUMJEE went on to extend range of papers to include Security Papers
such as MICR Paper, Sensitized Paper, Postal Stamp, Impressed Stamp, Passport and Excise
Banderoll, Laminating Base, Silicone base paper, Wax Match paper, Packaging Papers of
various kinds and types, Tissue Papers, catering to wide range of industrial applications specially
manufactured to meet customers` specific requirements. Starting with a capacity of 6,000 MT of
paper per annum in 1968, PUDUMJEE has now reached a capacity of 38,500 MT per annum of
Specialty Papers.

Seshasayee Paper and Boards Limited (SPB)

Incorporated in 1960, the company was promoted by Seshasayee Brothers Pvt. Ltd., in
collaboration with Parsons and Whittemore, USA. SPB commenced production in 1962, on
commissioning a 20,000 tpa integrated facility comprising a pulp mill and two paper machines
capable of producing, writing, printing, kraft and poster varieties of paper. The plant capacity
was expanded to 35,000 tpa in 1967-68, and in 1976 to 55,000 tpa. SPB undertook various
equipment balancing and modernization programs improving its operating efficiency, captive
power generation capacity. The current installed capacity of the company stands at 1,15,000 tons
per year.

Tamil Nadu Newsprint and Papers Ltd.(TNPL)

Promoted by the Government of Tamil Nadu in 1979, and with an installed capacity of 2,30,000
tpa, TNPL is the largest producer of bagasse based paper.

The West Coast Paper Mills Ltd.

Promoted by Shree Digvijay Cement Company Limited, Sikka, Gujarat in 1955 and located at
Dandeli in Karnataka, the mill manufactures writing, printing and wrapping papers. The Mill is
based on conventional Kraft process using wood as main raw material. Annual Production
capacity is 157,750 TPA. In 1964 the company promoted The Andhra Pradesh Paper Mill Ltd.,
to take over Andhra Paper Mills owned by the Government of Andhra Pradesh.

CUSTOMERS

End users of paper are both industrial and individuals.

• The $10 billion Indian pharmaceutical industry, $8.5 billion Indian consumer products
industry sector, and $6.1 billion processed food industry segment, are the major end users
of papers for packaging their products.
• Schools, colleges, offices are also major end users of paper.
• Book publishing firms, print media and newspaper publishers are another major
industrial end users of paper.

TRENDS IN PAPER INDUSTRY

Paper industry looks to be moving away from a period of relatively low prices. That will affect
what you pay for both office paper and for sending print jobs to commercial printers. The cost of
paper hit a peak in 2009 and has retreated ever since, with reductions in price of around 10-15%
in 2010. But that will change in 2011. The trends:

i. Mills will try to raise prices while continuing to limit production

The cause of the price decreases of the last few years: overproduction. Paper
companies have learned their lesson, and there will be an attempt to limit of the supply of
paper. After all, demand has gone down in recent years, so the reduction in supply has
become critical.
ii. Tax credits for paper industry ended December 31, 2009
Paper companies were the beneficiaries of a major energy tax credit for recycling
waste from the pulping process back into energy to power that process. The tax break,
worth millions to some companies, ends, so the general expectation is that prices will
have to rise.
iii. Demand will rise
As the economy gets better, more paper will be needed. Due to lack of advertising,
publications have gotten smaller and smaller, but that trend may reverse. A quick rise in
demand may mean a sudden jump in prices.
iv. Paper industry is now sales driven; new products are in the pipeline
This has more to do with commercial printing than office use, though there have
been a wider variety of paper options even for regular copier paper. That’s especially
true in the recycled paper area, which leads to..
v. Environmentally-friendly options will continue to grow
Recycled paper used to mean a big drop-off in quality, but no longer. As the
demand for recycled paper goes up thanks to corporate Green initiatives, paper makers
have responded with a bigger selection of papers suitable for office and publication uses.

PORTERS 5 FORCE ANALYSIS

Diagram of Porter's 5 Forces

SUPPLIER POWER
 Supplier concentration
Importance of volume to supplier
Differentiation of inputs
Impact of inputs on cost or
differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in
industry
BARRIERS
TO ENTRY
Absolute cost advantages
Proprietary learning curve THREAT OF
SUBSTITUTES
Access to inputs -Switching costs
Government policy -Buyer inclination to
Economies of scale substitute
Capital requirements -Price-performance
Brand identity trade-off of
Switching costs substitutes
Access to distribution
Expected retaliation
Proprietary products
BUYER POWER DEGREE OF
Bargaining leverage RIVALRY
Buyer volume -Exit barriers
Buyer information -Industry
Brand identity concentration
Price sensitivity -Fixed costs/Value
Threat of backward integration added
Product differentiation -Industry growth
Buyer concentration vs. industry -Intermittent
Substitutes available overcapacity
Buyers' incentives -Product differences
-Switching costs
-Brand identity
-Diversity of rivals
-Corporate stakes
 Rivalry among existing firms
There is large number of players in paper industry, which increases rivalry among them.
There is an intense rivalry as paper has high storage cost. There is a higher level of
rivalry as there is a low level of product differentiation. As the market growth is slow,
firms fight for market intense. Rivalry is measured using concentration ratios. The CR
indicates the percent of market share held by the four largest firms
  Bargaining power of suppliers
A producing industry requires raw materials - labor, components, and other supplies. This
requirement leads to buyer-supplier relationships between the industry and the firms that
provide it the raw materials used to create products.
 Bargaining power of buyers
The power of buyers is the impact that customers have on a producing industry. In paper
industry, buyers are powerful as they purchase a significant proportion of output, and
they possess a credible backward integration threat, they are weak as they are
fragmented.
 Entry barriers
➢ Government policy
➢ Economies of scale
➢ Capital requirement
➢ Special access to distribution
➢ Switching cost
➢ Expected retaliation from present players
➢ Large investments in technology, not capable of alternate uses
 Exit barriers

Easy to exit as exit cost is low and it is an independent business.

 Threat from substitutes

In Porter's model, substitute products refer to products in other industries. 8 GB pendrive
can hold the same data where 8 tonnes of paper can hold. Substitutes for paper is pen
drives, PCs, etc n in case of packaging, glasses, aluminium foil, plastics, etc.. Threat
arises from the price change of substitute product and also their availability which gives
more choice for the customers.

ANDRAPRADESH PAPER MILLS LTD

The Andhra Pradesh Paper Mills Ltd. was formed with infusion of funds and high calibre
management of the well-known industrial house of Bangurs of Calcutta, who have interests in
textile manufacturing, tea plantation, wind energy generation and trading and investment
business other than paper. In 2001, Coastal Papers Ltd was taken over by the company.
 The production capacity of both the units put together is 1,74,000 TPA. There are eight
paper machines installed at the two locations which produce papers of different M.F & M.G
varieties in the range of 21 to 250 GSM as well as newsprint.

With the commissioning of largest continuous digester in the country, the total bleached
pulp production at APPM (Unit Rajahmundry) is 1,81,500 TPA. The paper production capacity
will increase to 2,41,000 TPA after commissioning of 67000 TPA paper machine which is
undererection.

YEAR 2006 2007 2008 2009 2010 AVEGRAGE

GROWTH IN
PERCENTAGE
SALES 497.56 533.03 628.24 657.33 669.34 5.971%

TOTAL 509.45 567.09 676.95 667.6 681.83 7.54%

INCOME

ANALYSIS

➢ The average growth of the industry has been 5.97 % was Farley good, were the industry
has grown by 7 % during the year 2008-2009.

➢ The company has been growing well along with the industry growth. As the industry
growth has been ranking higher than the world average.

➢ The total income of the industry has been continuously rising which depicts that the
company has been in a slowly and steadily increasing their earnings growth.

➢ Though the total income has been contributed by various other factors such as generation
of electricity and generation of power paper board has the major contributions.
 ➢ As could be expected from how the worldwide pulp and paper industry has shaken out
over the past few years, the real movers were the Asians, Which has been clearly
mentioned by the growth of the company.

➢ One cannot replace paper for a new book publication or for fresh usage. Statistics would
reveal that more than 50 per cent of white paper produced annually is used for record
purposes, and if this were to be replaced by CD or magnetic tapes, consumption would
drastically fall.

JK PAPER LTD

J K Paper Limited was incorporated in 1960 under the ownership of Hari Shankar Singhania
Group. The company is engaged in manufacturing and sale of pulp paper, paper board, straw
paper, writing and printing papers and speciality papers.

The company has manufacturing plants at Jaykaypur in Rayagada, Orissa and at Songadh in
Gujarat having manufacturing capacity of 150000 tonnes till June 2005.JK papers distribution
networks includes more than 100 wholesalers and 1700 dealers. It also has 10 warehouses and 4
regional offices.

YEAR 2006 2007 2008 2009 2010 AVEGRAGE

GROWTH IN
PERCENTAGE

SALES 848.07 904.04 726.97 1227.94 1252.1 9.91%

TOTAL 859.75 917.21 746.58 1241.56 1261.98 10.05%

INCOME
ANALYSIS

➢ The company’s sales has grown in average by 9.91% which has been grown steady state,
whereas there is a fall in the year 2008 alone as it is accounted for 9 months alone.

➢ The year 2008-2009 has been having a high growth of 24.6% when comparing the other
years.

➢ The sales has been very steady as because the demand for paper have been from
newsprint, notebooks, book printing where there won’t be any sudden raise of demand
for paper.

➢ When the income has been rising it has been raising with the raw materials expenses as it
continuously increases year after year.

➢ Overall, sales of pulp, paper, board and converted materials showed a significant drop in
2009 compared with 2008, from $313.8 billion to $282.6 billion, which specifies a clear
down fall of the demand in the market were companies couldn’t do well.

SESHASAYEE PAPER & BOARDS LTD.

Seshasayee Paper and Boards Limited (SPB), the flagship company belonging to 'ESVIN
GROUP', operates an integrated pulp, paper and paper board Mill at Pallipalayam, Erode-638
007, District Namakkal, Tamilnadu, India.

SPB, incorporated in June 1960, was promoted by Seshasayee Brothers (Pvt) Limited in
association with a foreign collaborator M/s Parsons and Whittemore, South East Asia Inc.,
USA. After commencement of commercial production, having fulfilled their performance
guarantee obligations, the foreign collaborators withdrew in 1969.
Main promoters of the Company as on date are a group of companies belonging to the
ESVIN group headed by Mr. N Gopalaratnam.
 The Plant capacity was expanded to 35000 tpa in 1967-68, by modification of PM-2 and
addition of a third Paper Machine (PM-3). The cost of the expansion scheme, at Rs 34 Millions,
was part financed by All India Financial Institutions (Rs 31 Millions)

YEAR 2006 2007 2008 2009 2010 AVEGRAGE

GROWTH IN
PERCENTAGE

SALES 469.3 503.95 547.28 561.21 529.02 5.221%

TOTAL 477.71 511.07 556.48 571.08 537.7 5.30%

INCOME

ANALYSIS

➢ The average growth in sales of the company has been 5.22%. This depicts a steady
growth rate.

➢ The sales have fallen down in the recent years due to lack of demand as there were many
substitutes for the paper has been rising in recent years.

➢ Also the raw materials costs have increasing. And this ultimately results in the costs of
production which lead to lag behind other competitors.

➢ The company has also been under debt. It has also been incurring fixed costs, which also
leads to companies decreasing their income growth.
 ➢ To bridge the shortfall of these 50 million tonnes, paper imports in 2009 should have shot
up to maintain the consumption level. But this did not happen, implying that there has
been no growth in consumption

ITC LMITED

ITC Ltd is the largest tobacco company in India with an annual turnover of Rs.19,844 crore. The
company was incorporated way back in 1910 under the name of Imperial Tobacco Company of
India Limited and was renamed as I.T.C Limited in 1974.
Later in 2001, the dots were removed from the name and today the company is known as
ITC Limited. ITC has 11 subsidiaries engaged in various business activities such as hotel &
restaurants, commercial complexes, computer software, trading and NBFC.

YEAR 2006 2007 2008 2009 2010 AVEGRAGE

GROWTH IN
PERCENTAGE

SALES 16236.65 19505.06 21467.38 23247.84 26399.63 32.799%

TOTAL 16611.54 20007.43 22131.92 23827.27 27061.12 2.91%

INCOME

ANALYSIS
 ➢ The average growth rate of the company has been 32.7%. There is no fall in the sales
where they could maintain it steadily. They have been managing the sales apart from the
demand.

➢ The company has been showing a good growth rate which ultimately pushes the industry
to grow.

➢ This has also been determined under the growth of raw materials as it has been natural
pulp, which constitutes the major raw materials.

➢ The total income has been rising at a slower rate as it could not withstand with the
expenses paid to the raw materials.

➢ The advent of the digital revolution and environmental protection has affected the
production and consumption of paper worldwide which has adversely affected the
industry.

BALLARPUR INDUSTRIES LTD.

Established in 1945, Ballarpur Industries (BILT) is the flagship company of the Avantha
Group headed by Gautam Thapar. It is the largest company in the domestic paper industry with
an installed paper capacity of 4,81,568 tonnes per annum.
The company also has a 98,550 tonnes per annum of rayon grade pulp capacity in
Kamalapuram at Andhra Pradesh. The company has grown over the past few years organically as
well as inorganically.
It acquired and subsequently merged Bilt Graphic Papers in 2003.
Further, in April 2006, the company merged APR Packaging which is engaged in writing and
printing paper.
The merger increased BILT's paper capacity by 55,000 tonnes per annum.
With a view to cater to the growing demand, the company has chalked a capex plan of Rs.800
crore towards increasing its total capacity by 2.5 lakh tonnes per annum. The project is expected
to be completed by June 2008.
YEAR 2006 2007 2008 2009 2010 AVEGRAGE
GROWTH IN
PERCENTAGE

SALES 2085.34 2375.92 1049.67 1076.32 1102.17 15.37%

TOTAL 2124.33 2395.97 1172.18 1110.16 1127.79 15.86%

INCOME

ANALYSIS

➢ The company has been growing at average growth rate of 15.37% which depicts a good
growth rate among the industries.

➢ Though the industry has been doing in reasonably way they could maintain their steady
income level.

➢ They have shown a fair growth rate among the other companies in the industry. Also they
could manage with their raw material costs as it was increasing every year.

➢ The industry has been falling as it could not cope with its competitors who become the
substitutes for the products which is ultimately reducing the demand.

➢ Total reported paper and board production fell to 206.6 million tons from 219.7 million
tons in 2008. This marked the second consecutive year of decline were in the industry
demand has been coming down which depicts the availability of raw materials at cheaper
costs.