'Paper and paperboard is the most eco-friendly product'

The paper turnaround in 2016
Indian paper mills are finally coming out of the long down cycle primarily because of better demand growth environment coupled with no new capacities being added in the last couple of years. There is a growth of approximately 5% every year which means 1-1.5 lakh tonnes of additional paper is required (writing printing grade). Also going forward, there are no new capacity additions on the horizon at least in the next three years. Further, as we understand, the raw-material prices have also softened in the last six to eight months which have resulted in better margins for the industry.

Paper challenge
India is at a very sweet spot in terms of demand growth for the paper industry. We seem to be one of the few countries which is growing at a reasonably good rate compared to most other countries of the world. The industry will require to invest close to Rs 90,000 crores in the next 10 years to meet the growing demand of paper and paper board. The trade also will have to invest close to Rs 15,000 crores to meet this growing demand of paper and paperboard. The biggest challenge that the trade faces is the low margins and the unsecured credit in the trade which is affecting its ability to raise the capital to grow the business. Also, the cost of capital in India is very high when compared to most other countries.

Key paper projects
Amongst all the recent investments in the industry, the packaging segment seems to attract the maximum capital as the growth rates in the high-end packaging segment are the highest. Therefore, Emami and TNPL’s projects are the ones to watch out for. In the writing printing segment also we see the demand graph to be out pacing the supply graph which is why JK’s investment of Rs 2000 crores has fully been absorbed by the market.

Pain areas for a trader
The biggest challenges faced by the Indian paper trade are of long credit periods, bad debts and wafer thin margins which it is working on. Internationally, on the stock and sale model, traders work on margins which are close to double digits and for indenting, it is 2.5% whereas in India, in either case, it is approx 2% on gross basis which is abysmally low and not sustainable.

Paper tigers in their comfort zone
The market conditions are very dynamic and change very frequently. Hence, every player in the supply chain needs to get out of the comfort zone from time to time. The paper mill needs to bring down the lead times significantly. The paper dealers need to be more technology driven and the printer / converter needs to adopt latest technology to match up to market demands.

Message for printers
The thing that needs to be done on urgent basis is the standardisation of the sizes. There are enormous number of sizes that the industry demands which is resulting in huge amount of inventory for the trade. This results in escalation of cost. Nowhere in the world do so many sizes exist.

Popularising paper
We need to articulate the benefits of using paper over electronic media to children at a very young age as paper is more eco-friendly and bio-degradable as it emits approximately 20% less carbon than the electronic medium. We have also taken up similar initiatives collectively with the local associations and the FPTA at large.

Kar represents ITC– PSPD, JK Paper, BILT Graphic Paper Products, IP APPM and Star Paper Mills. The Cyber XL Pac of ITC is the fastest moving product for the group.