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A comprehensive study on Organized sector of Paper Manufacturing Industry in India Management research project ± I

Submitted In partial fulfillment of the degree of Master of Business administration
By Disha Bhagat-42 Urvi Bhatt-103 Jhalak Dave-105 Pooja Jain-108 Batch (2008-2010) Under the Guidance of: Prof (Dr.) Mahendra Sharma Prof. & Head & Dr. Rohit Trivedi Assistant Professor V. M. Patel Institute of Management. Submitted to: V. M. Patel Institute of Management, Ganpat University, Kherva.

Certificate
This is to certify that Ms. Disha Bhagat , Ms. Urvi Bhatt ,Ms. Jhalak Dave, Ms. Pooja Jain has successfully completed the Management Research project-I entitled ´A Comprehensive Study On Organized Sector Of Paper Manufacturing Industry In India µ for the fulfillment of MBA semester-III, project from June 2009 ² December 2009. Certified that, this work is original & wishing them a bright career.

Project Guide: Dr. Rohit Trivedi Date: -

Head of the Department: Dr. Mahendra S. Sharma Date:-

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Certificate
This is to certify that Ms. Disha Bhagat, Ms. Urvi Bhatt, Ms. Jhalak Dave, Ms. Pooja Jain has successfully completed the Management Research project-I entitled ´A Comprehensive Study on Organized Sector of Paper Manufacturing Industry in Indiaµ for the fulfillment of MBA semester-III project from June 2009 ² December 2009. Certified that, this work is original. Student·s Signature: Disha Bhagat ________________ Urvi Bhatt ________________ Jhalak Dave________________ Pooja Jain________________

Project Guide: Dr. Rohit Trivedi Date:-

Head of the Department: Dr. Mahendra S. Sharma Date:-

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PREFACE

One can never deny for the importance of the practical exposure of the problem for its better understanding and greater grip of coming out with an industrially acceptable solution. Being the management students and performing small practical even is in itself an experience of responsibility on our shoulders. The project is certainly the best chance to learn the implications of the Strategic Managements Models and the other Management modules to find out the performance of the Industry and the other things related to it. In view of above, this report has been completed as a part of syllabus prescribed for the MASTER OF BUSINESS ADMINISTRATION. The report contains the analysis of the paper industry in the Indian organized market of paper manufacturing units i.e. from its evolution to the current market scenario; the analysis of the key players who dominate the whole Indian market and what is their respective market share in this segment; the PEST analysis; the SWOT analysis of the industry; financial analysis.

Based on the various articles that we have referred and based on the various internet sites that we have visited for our report, we have done the analysis of the paper industries and we have tried our best to come out with recent news articles related to the industry. Based on the study and the articles, in the final part of our report, we have come up with the major findings of the industry and based upon that, we have given certain recommendations to the industry.

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ACKNOWLEDGEMENTS

We think that this is a good opportunity for us to thank those nice and wonderful people who helped us in our project. We express gratitude to Dr. Mahendra Sharma, Director, V.M.Patel Institute of Management. We would like to thanks our faculty Dr. Rohit Trivedi, for being our project guide helping us in our project work which is not only helpful in our academics but also helpful in the future. We would also like to thank the entire faculty for showing their interest in our Project. We would also like to thank all the people of our institute who directly or indirectly helped us to carry out our project successfully and come out with output that helps then in one way or the other.

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List of Tables Table No.
1.9.1 3.1 3.2 4.1 6.1 7.1.17.1.69 7.3.1

Particulars
Category wise Paper mills in India Installed Capacity Paper unit-Ballarpur Installed Capacity Paper unit-J.K Conclusion-SWOT Analysis Conclusion-Five Force Analysis Tables of Ratio Analysis Trend Analysis

Pg. No.
18 34 41 48 54 5592 9598

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List of Figures & Charts Sr. No.
1.2.1 1.3.1 1.4.1 1.4.2 1.4.3 1.9.1

Particulars
List of Charts Market Share of Paper Manufacturing Companies Process Flow Chart Global Demand Paper & Paper board Production Paper & Paper board consumption Raw material wise Paper Mills

Pg. No.
7 8 11 12 12 18 20 20 21 32 33

1.10.1 Paper & Paper board Production in India 1.10.2 1.10.3 3.1 3.2 Import & Export of Paper & Paper boards Production & consumption of Paper & Paper boards Revenue-BILT Revenue- Segment wise-BILT

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3.3 3.4 3.5 3.6 7.1.17.1.19

Installed Capacity-BILT Revenue-JKPL Production-Segment wise-JKPL Installed Capacity-JKPL Ratio Analysis

33 39 39 40 5591 25 43 52

List of Figures 1.12.1 Supply Chain Management of Industry 4.1.1 SWOT Analysis 6.1.1 Five Force Analysis

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ABBREVIATIONS

BILT TNPL JKPL

Ballarpur Industries Limited Tamilnadu Newsprints and Paper Limited J.K Paper Limited

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Index
Sr. No.
Certificate by the Guide Certificate by the Candidates Preface Acknowledgement List of Tables List of Figures & Charts Abbreviations

Content

Pg. No.
ii iii iv v vi vii viii

1
1.1 1.2 1.3

Introduction
Indian Paper manufacturing Industry Outlook Major Manufacturers of Paper Paper Manufacturing process

1-26
1-5 6-7 8-10

x

1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12

Products of Paper Manufacturing Industry Future Prospects of the Industry Capacity, Production, Raw Material, and Import Demand & Supply Gap in Paper Industry Government regulations, Permission & Taxes Paper Mills Engaged in Production of Paper in India Attractiveness for Foreign Players Key Drivers of Paper Manufacturing Industry Supply Chain Management of Paper Manufacturing Industry

11-13 14 14-15 16-17 17-18 18-19 20-22 23-24 25-26

2
2.1 2.2 2.3 2.4 2.5

Research Methodology
Research Objective Non Financial Analysis Financial Analysis Source of Data collection Research Type

27-29
27 27 28 28 28-29

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2.6

Limitations of the Study

29

3
3.1 3.2 3.3

Major Players In The Industry
Ballarpur Industries Limited Tamilnadu Newsprints and Paper Limited J.K Paper Limited

30-42
30-35 36-37 38-42

4
4.1 4.2 4.3 4.4 4.5 Introduction

SWOT Analysis

43-48
43 44 45 46 46-47

Strengths of Paper Industry Weaknesses of Paper Industry Opportunities for Paper Industry Threats for Paper Industry

5
5.1 Introduction

PEST Analysis

49-51
49

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5.2 5.3 5.4 5.5

Political Factors Influencing the Industry Economical Factors Influencing the Industry Social Factors Influencing the Industry Technical Factors Influencing the Industry

49 49-50 50 50-51

6
6.1 6.2

Michael Porter¶s Five Force Analysis
Introduction Five Force Analysis For the Industry

52-54
52 53-54

7
7.1 7.2 7.3 Ratio Analysis

Financial Analysis

55101
55-92 93-94 95101

Horizontal Analysis Trend Analysis

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Recent News Related to Industry

102-

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103 9 10 Findings & Conclusion References 104105 106

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1

1

Chapter-1 Introduction

1.1 Indian Paper Manufacturing Industry Outlook1:Paper has a long history, beginning with the ancient Egyptians and continuing to the present day. For thousands of years, hand-made methods dominated and then, during the 19th century, paper production became industrialized. Originally intended purely for writing and printing purposes, a wide variety of paper grades and uses are now available to the consumer. Of all the writing and drawing materials that people have employed down the ages, paper is the most widely used around the world. Its name derives from papyrus the material used by the ancient Egyptians, Greeks and Romans. Papyrus, however, is only one of the predecessors of paper that together are known by the generic term µTapa¶ and are
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www.inpaper.com

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mostly made from the inner bark of paper mulberry, Fig and Da Tapa has been found extensively in nearly all cultures along the Equatorial belt and is made by what is possibly the oldest papermaking technique ± one still practiced in some parts of the Himalayas and South East Asia. Indeed, recent archaeological excavations in China have revealed some of the oldest µTapa¶ paper ever found which shows that paper was being produced in China before western records began.

The tapa technique involves cooked baste, which is flattened with a wooden hammer to form a thin, fibrous layer and then dissolved in a vat with water to make a pulp. A screen consisting of a wooden frame with a fabric base is then laid in a puddle or big basin and floats with the fabric just under the surface of the water. The papermaker then pours the quantity of pulp needed to make one sheet into this µfloating mould¶ and spreads it evenly, by hand, across the surface. The screen is then carefully lifted out of the water, allowed to drain off and a sheet of paper forms on the wire. Once the water has dropped off, the screen is placed in the sun or near a fire to dry. When dry, the sheet easily peels off and, apart from possible smoothing, requires no further treatment. This technique has two basic drawbacks. Firstly, a separate screen is needed for each new sheet, and is only available for use again after the last sheet has dried. And secondly, an increase in production can soon lead to a shortage of raw material, since fresh baste is not always available everywhere in the required quantity. The fibers normally used for textiles, like flax and hemp, also served as substitutes for baste. In later times, the fabric was replaced by fine bamboo sticks, which freed the papermaker of the need to let the paper dry naturally in the mould, since the poured or ladled sheet could be µcouched¶ off.

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Paper plays a key role in communication and as a packaging material. Demand for paper is closely linked to prevalent economic conditions. Strong economic growth boosts demand for paper and vice versa. In India, the first paper mill was established in 1867. Raw materials used for the production of paper were rags and wastepaper. Commercial production of paper was started in 1882, and raw materials used were again non-wood fibers, that is, eulaliopsis binata and sacharum bengalense. Development of the fractional process of pulping bamboo at the Forest Research Institute, Dehra Dun, during 1922-24 provided an impetus to the pulp and paper industry in the country, and bamboo became the main raw material for making various grades of paper. Turing establishments cut and coat paper and foil. Stationery product manufacturing establishments make a variety of paper products used for writing, filing, and similar applications. Other converted paper product manufacturing includes, in particular, the conversion of sanitary paper stock into such things as tissue paper and disposable diapers.

Industries in the Paper Manufacturing subsector make pulp, paper, or converted paper products. The manufacturing of these products is grouped together because they constitute a series of vertically connected processes. More than one is often carried out in a single establishment.

There are essentially three activities. The manufacturing of pulp involves separating the cellulose Fibers from other impurities in wood or used paper. The manufacturing of paper involves matting these fibers into a sheet. Converted paper products are made from paper and other materials by various cutting and shaping techniques and include coating and laminating activities. The Paper Manufacturing subsector is subdivided into two industry groups, the first for the manufacturing of pulp and paper and the second for the manufacturing

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of converted paper products. Paper making is treated as the core activity of the subsector. Therefore, any establishment that makes paper (including paperboard), Either alone or in combination with pulp manufacturing or paper converting, is classified as a paper or paperboard mill. Establishments that make pulp without making paper are classified as pulp mills. Pulp mills, paper mills and paperboard mills comprise the first industry group.

India is not just the second most populous market for paper in the world. It is also the most demanding. Indian paper industry not only serves a public utility but fulfils a critical national requirement. It possesses an annual production capacity of five million tones. It generates an annual turnover of approximately 120 billion. It directly and indirectly employs nearly 1.3 million people.

The Indian paper industry has been historically divided on a three dimensional matrix identified by size, grades manufactured and raw material utilized. Generally, tariff rates have protected smaller units utilizing ³unconventional´ raw material. Over the years, the growth of various segments, investments levels in specific segments, technological changes, industry fragmentation and intensity of competition have been significantly influenced by the Government tariff policy. The present Excise duty on Paper is 12 %. The Government of India from time to time has given some benefits to small industries in order to protect them i.e. the first 3500 tons produced by a mill is chargeable only @ 8 % and thereafter it is @ 12 %.

The three main grades of paper manufactured in India are:1. Newsprint 2. Writing and printing. 3. Industrial Variety (Craft paper and Duplex Board)

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Over 550 players currently populate the industry and the estimated capacity is about 7.00 million Metric Tons Per Annum (MTPA)2. Fragmentation is severe in the ³industrial´ (packaging) grades, which rely on ³unconventional´ raw material such as waste paper and partly agro residues. This division generally comprises of units with an average size of about 10000 MTPA and contributes to 45% of the output of paper and paper boards in the country. Although the other divisions in the Indian paper industry are also fragmented by international standards, the degree of fragmentation is less severe.

³Newsprint´ till about 1995, was the sole preserve of large public sector units and was well protected by high import tariff barriers. Nevertheless, imports contributed to about 50% of the domestic consumption. Since then, new domestic capacity with private investment has been allowed to be created. This growth has relied namely on De-inked waste paper as a source of raw material. Currently import duty on newsprint is about 5% and domestic manufacture of newsprint is exempted from excise duty. This tariff structure for newsprint has seen Indian newsprint price closely mapping3.

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www.ipma.co.in www.itcportal.com/paperboards_specialtypapers/paperboards.html

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1.2 ajor Players of Paper Industry4:-

M
If we see the Market Share of Paper Manufacturers on the basis of the Production the first ten Industries are as follows: 1. Ballarpur Industry Limited. 2. ITC Limited. 3. Tamilnadu Newsprints & Paper Limited. 4. Hindustan Paper Corporation Limited. 5. Century Limited. 6. J.K.Paper Limited. 7. Khanna Limited. 8. West Coast Paper Mills Limited 9. Andhra Pradesh Paper Mills 10. Seshasayee Paper Boards

But when we go according to sales of 2007-2008 then the eight major companies are as under:

1. Ballarpur Industries Limited 2. Tamilnadu Newsprints & Paper Limited 3. Hindustan Paper Corporation Limited 4. J.K.Paper Limited 5. West Coast Paper Limited
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6. Andhra Pradesh Paper Mills Limited 7. Seshasayee Paper & Boards 8. Khanna Paper Mill.
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http://www.ipma.com/paper_statistics.asp

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Chart-1.2.1

1.3 aper Manufacturing Process6:Process steps:-

P

PROCESS FLOW CHART-1.3.1  BRIEF PROCESS Chipping-

y

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http://www.paperonweb.com/pmake.htm

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Bamboo or Wood as such cannot be used for pulping. For economical operation of pulping plant as well as for better penetration of cooking liquor, wood logs/bamboo are to be chipped into small pieces. The process is called chipping and the equipment used for chipping are called chip. y PulpingPulp is obtained by removing lignin and other impurities from the wood & other raw materials chips through a cooking process. The chips are loaded into a digester and cooking liquor is added. Then by pressure cooking, the wood, bamboo or other raw material fibers are separated from unwanted ingredients. Either batch digester or continuous digesters are used in cooking.

y

BleachingAlthough cellulose fibre is white in colour, due to residual lignin traces remaining on the fibres, the pulp appears creamish. Therefore, to manufacture white paper we need to remove yellowness without physically or chemically damaging the fibre, with improvement in various properties. To increase brightness of the pulp by removal or modification of some of the unwanted elements in the unbleached pulp.These deleterious elements are lignin traces, resins, metal ions, noncellulosic carbohydrates etc. Bleaching for brightness improvement should also help to keep the pulp stable without turning yellow or lose strength or reduce brilliance - due to aging.

y

AdditivesAdditives are added to paper pulp. Addition of fillers like talcum & calcium carbonate is very common & besides acting as fillers they add brightness to the paper. These additives must be finely ground. Additives like dyes & starch are also added. Other fillers are Titanium Dioxide, Barium Sulphate & Zinc Sulphide.

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y

Removing WaterRemoving water is the next important stage. For this the pulp is passed through a rapidly moving wire mesh called fourdriner. The objective is to remove 93% to 95% of the water in the finished paper. As the paper flows along the wire mesh and water is drained along the way, a dandy roller near the end helps to smooth out the paper. The dandy roller improves the formation of the paper web by application of pressure. When the paper reaches the end of the wire mesh it is transferred to a felt blanket which conveys it through many steam heated driers to remove the excess moisture. In the process the paper gets some glaze like coating also. Then it is made to pass through a series of calendar stacks. The calendars are series of polished iron rollers stacked one on top of the other, through which the finished paper will pass to smoothen down. The next step is rewinding on a metal or fibre core. The last stages after this are sheeting, packing & testing.

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1.4 Production7:

Global & Region wise Paper

Paper and Paperboard Production ± Global Market, 2002-20 (Figures in million tonnes)

Global Demand
60 0 50 0 40 0 30 0 20 0 10 0 0 2 00 2 20 03 20 04 2 00 5 2 00 6 20 10 20 20 2 00 2 2 00 3 2 00 4 2 00 5 2 00 6 2 01 0 2 02 0

Chart- 1.4.1 

The annual global paper and paperboard production was approximately 382.0 million tonnes in 2006. It is expected to increase to 402.0 million tonnes by 2010 and 490.0 million tonnes by 2020.

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small companies.  two segments:

The global pulp and paper industry consists of about 5000 industrial pulp and paper mills, and an equal number of very

Broadly, the industry can be classified into

y

Paper and paperboard (writing, printing, packaging and tissue). The writing and printing paper market can be further divided into coated and uncoated segments.

y

Newsprint mainly uses for newspapers, flyers, and other printed material intended for mass distribution. 

Region wise, 2006 (Figures in percent)

Paper and Paperboard Production ±

100% =382.0 million tonnes

Production

Europe 30%

NorthA rica 27% A sia 36%

R of the est worl 2% LatinA rica 5%

Chart-1.4.2  ± Region wise, 2006 (Figures in percent) Paper and Paperboard Consumption

¡ 

¡ 

¢

12

100% =381.2 million tonnes
Consumption

Rest of the w orld 3% Latin A erica 6%

Asia 39%

Chart-1.4.3 
The US is the largest producer and consumer of paper and paperboard in the world. On a regional basis, Asia emerged as the largest producer and consumer of paper and paperboard in 2006.  The paper and paperboard industry has witnessed a radical shift in last decade. y Due to the strong economic growth in both China and India, the demand for paper and paperboard is increasing at a fast rate i.e. 8-9%. y Latin America in the south and Indonesia in the east are emerged as a fibre supplier with a concurrent decline in the North American pulp industry.  North America, Europe and Asia dominate the global pulp and paper industry. Asia, mainly China and India, would emerge as an important market for pulp & paper. y 2020. It is expected that Asian market would account for 60% of global incremental production during the period 2004-

£

Europe 26%

North A erica 26%

£

13

y

The share of fast developing Asian markets, excluding Japan, in global consumption is estimated to increase to 34% by 2010 from the 32% in 2006.

y 52% in 20068.

The share of mature markets like North America and Europe would fall to around 50% by 2010 from the

1.5 Industry9:-

Future

Prospects

of

The

The globalization of Indian economy has lead to a healthy growth of 6 to 7% industry and that is growth happening in all the sectors. Moreover the Per Capita consumption of paper in India is going up with the advent of packaging in the food industry. Due to environmental concerns, the use of plastics is likely to be banned by the Government of India within a short span of time. Hence within 2 to 3 years we will be witnessing an explosive growth of packaging in India mainly in food, textile and export segments.

The exposure to foreign packaging technology and the need to satisfy the export customers has led to a drastic change in the industrial packing sector. The corrugators have started using high BF, high GSM paper instead of the regular grades and shifting from 7 ply and 9 ply boxes to 5 ply and 3 ply boxes.
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The above change has resulted in more aesthetic and cost effective packing solutions. There is a very good potential market developing for such grades of paper in India. The market of high quality Kraft paper is now catered only by few manufactures from western and northern parts of the country.

1.6 Capacity, Production, Raw Material, and Import10:Government has completely de-licensed the paper industry 17th July, 1997. The entrepreneurs are now required to file an Industrial Entrepreneur Memorandum with the Secretariat for Industrial Assistance for setting up a new paper mill or substantial expansion of the existing mill in permissible locations.

The industry is a priority industry for foreign collaboration and foreign equity participation up to 51% receives automatic approval by Reserve Bank of India. Foreign investment even up to 100% is approved by FIPB on case to case basis. Several fiscal incentives have also been provided to the paper industry, particularly to those mills which are based on non-conventional raw material.

There are, at present, about 515 units engaged in the manufacture of paper and paperboards and newsprint in India. The country is almost self-sufficient in manufacture of most varieties of paper and paperboards. Import, however, is confined only to certain specialty papers. To meet part of its raw material needs, the industry has to rely on imported wood pulp and waste paper. The production of paper and paper board during the year 2001-02 is 31.62 lakh tonnes. The proportion of non-wood raw material based paper is increasing over the years. At

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present about 60.8 per cent of the total production is based on non-wood raw material and 39.2 per cent based on wood.

The performance of the industry has been constrained due to high cost of production caused by inadequate availability and high cost of raw materials, power cost and concentration of mills in one particular area. Several policy measures have been initiated in recent years to remove the bottlenecks of availability of raw materials and infrastructure development. To bridge the gap due to short supply of raw materials, duty on pulp and waste paper and wood logs/chips have been reduced. The capacity utilization of the industry is low at 62% as about 194 paper mills, particularly small mills, are sick and/or lying closed. Several policy measures have been initiated in recent years. Imports of paper and paper products were growing over the years. However, it has decreased during 2000-2001.

1.7 Demand & Supply Gap in Paper Industry11:Indian paper industry is the 15th largest in the world and provides employment to 1.3mn people in the country contributing Rs.25bn to the Government. The industry has recorded a volume growth of CAGR of 5.47% over the last 3 years. In 2003-04, it recorded a volume growth of 6%, in line with the GDP growth. Indian paper industry has a 1:1 correlation with the economy. The demand for paper is linked to the GDP Growth. The government is planning to target a GDP Growth of about 10% in 2-3 years. With this increase in the GDP growth the paper sector is expected to record a similar growth rate.

The Indian paper industry has an installed capacity of 6.7mn tons while, the effective capacity is estimated to be lower at 6.15mn tons. The industry produced
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5.26mn tons of paper in 2003-04. Newsprint capacity in India is estimated at 1.12mn tons however, domestic production is only 0.59mn tons, while consumption of newsprint is 1.1mn tons. Favorable demand - supply scenario to keep prices firm the demand for paper is influenced by various macro-economic factors like national economic growth, industrial production, promotional expenditure, population growth and the Government¶s allocation for the educational sector. Domestic demand for paper is expected to grow at a CAGR of 6-7%. India¶s paper demand is expected to touch 8mn t.p.a by 2010. A leading global paper industry consultant projects a shortage of about 0.7mn tpa by 2010.

Proposed capacity expansions: Capacity expansions (which cost 50% less than new capacities) have been announced by most players, but would take 1-2 years to be operational. Capacity expansions of over 600,000 tons have been announced by the 7 large players in the sector.

1.8 Regulations, Permission & Taxes12:1. Central Excise:

Government

Central Excise is levied @8% for the first 3500 MT production and thereafter @12% on the value of the invoice. The Company is availing permitted Modvat benefits as per Central Excise regulations. For import duty paid on waste paper procured from overseas the Company is entitled to adjust the entire duty paid component as that of Modvat credits.

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2. VAT (Value Added Tax): VAT replaces the existing multipoint taxes levied by various states with effect from April µ05. As that of other industries, the paper trade is also covered under VAT for domestic sales done in the state of Kerala. However for interstate sales CST is continued to be levied as per existing Government regulations.

3. Service Tax: Being classified as a manufacturing industry, the industry even for Job Work on conversion basis will not be subjected to Service Tax requirements. A recent notification from Central Government also confirms such a stand.

4. Factory Licenses: All the licenses required under Municipality Act, Factories Act are obtained and duly renewed. 5. Pollution Control: Necessary permission under effluent discharge Act is obtained and the facilities required to maintain the permission are in place.

1.9 Paper Mills Engaged in Production of Paper in India
Category-wise paper mills in India (Figures in number) Category Capacity Range Small Up to 10000 Number units 299 of Capacity (TPA) 12,90,382

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<2000 2000±5000 5000±10000 Medium Large 10000±20000 >20000

69 107 123 116 70 Table-1.9.1

75,522 2,96,980 9,17,880 16,69,460 38,93,048

Raw material-wise paper mills in India
R M a aterial
W ood 32% Recycled Paper 38%

Agri-Re idue 30%

Chart-1.9.1 
India is the 15th largest paper producer in the world. It provides employment to nearly 1.5 million people and contributes INR25.0 billion to the government's exchequer.  In last 55 years, the number of paper mills has increased from just 17 mills in 1951 to more than 666 units engaged in the manufacture of paper and paperboard, out of which nearly 568 are in operation by 2006. y Capacity utilization of the industry is just 79%, due to old technology. Moreover, 194 mills under the purview of the Board of Industrial and Financial Reconstruction (BIFR) and nearly 60 mills (with a capacity of 1.3 million tonnes is closed).  Indian paper mills can be categorized based on the raw materials wood/forest based mills, agro-residue based mills and wastepaper-based mills.

¤

¥

19 

Due to the increasing regulation and raw material prices, the companies are increasingly using more non-wood based raw material over the years. In 2006, around 70 % of the total production is based on non-wood raw material13.

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1.10 Attractiveness for Foreign Players14: Paper and Paperboard - Production in India, 2002-06 (Figures in million tonnes)
9 8 7 6 5 4 3 2 1 0 20 0 2- 03 20 0 3- 04 2 00 4 -0 5 2 00 5 -0 6 2 0 06 -0 7 In ta lle d Ca p a c it y P ro d u c tio n

Chart Title

Chart-1.10.1 Paper and Paperboard - Import-Export, 2002-06 (Figures in million tons)
0.4 0 .3 5 0.3 0 .2 5 0.2 0 .1 5 0.1 0 .0 5 0 20 02 -0 3 2 00 3- 04 20 04 -0 5 2 00 5-0 6 20 06 -0 7 Im p o rt Ex p o rt

Chart Title

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Chart-1.10.2 
India is self-sufficient in manufacture of most varieties of paper and paperboards. y Import is mainly related to certain specialty papers such as light weight coated variety of paper, cheque paper, etc. y Due to the scarcity of raw material, the companies also need to rely on imported wood pulp and waste paper.  In last 5 years, capacity was increased mainly through expansion and modernization of the existing facilities rather than setting up Greenfield projects.  The per capita consumption of paper in India is very low i.e. 7 Kgs in 2006, as compared to an average consumption of 28 Kgs and 58 Kgs in Asia and world respectively. The per capita consumption is expected to increase to 12 Kgs by 2020.  The domestic paper market is dominated by large players owing to their size, brand value and financial strength. In 2006-07, the top 10 players control around 60% of the market in term of capacity. 

Paper & Paperboard - Production and Consumption (Figures in million tones)
25 20 15 10 P ro d u c tio n C o n u m p tio n 20 09 -1 0 2 01 4- 15 2 0 19 -2 0 0

Ch art

itle

§

5

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Chart-1.10.3 
Various macro-economic factors like national economic growth, industrial production, promotional expenditure, population growth and the government¶s allocations for the educational sector influence the demand for paper y The growth in paper consumption is directly related to GDP growth in the country. In the past, it has shown the 1:1 relationship with the GDP growth rate. y With expected GDP growth of 9-9.5%, the demand for Newsprint and Writing & Printing Paper is expected to grow at the same rate.  Continued availability of raw materials would be a big challenge for the industry in the next 5-10 years. According to the Indian Pulp and Paper Technical Association (IPPTA), the paper industry is expected to fall short of demand by 1.1 million tonnes by 2010-11 due to raw material constraints.  According to ITC¶s estimates, the total demand for paper is around 8.0 million tonnes and is expected to grow to 10.0 million tonnes by 2012 and 21.0 million tonnes by 2020.  According to Indian Paper Manufacturers Association (IPMA),

consumption of paper in India is set to double from the current 7.0 million tonnes per annum by 2015.

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1.11 Key Drivers of Paper Manufacturing Industry15: Strong Consumer Demand for Packaged goods fueling high growth in Industrial grades of Paper & Boards largely led by growing disposable incomes & Lifestyle changes.

Trend: Strong economic growth:y y Indian economy is growing at more than 8% rate over the last 4 years. The government expects that economy would continue to grow at the same pace for the current fiscal 2007-08.

Potential Implications:y Strong economic growth would fuel the demand for paper and newsprints.

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y

The industry would witness a large capital investment both by domestic and international players. 

Increased government focus on education:y In 2007-08, the central government has allocated SSA programme. y It allocated INR6.9 billion (4.1% of total fund) for textbook in 2006-07 INR106.7 billion for

Potential Implications:‡ Increased rates of literacy and improved school infrastructure would result in greater demand for paper. 

Low consumption per capita:‡ The paper consumption in India is just 7 Kgs per capita, as compared to global average of 50 Kgs per capita.

Potential Implications:y The impact of just 1 kg increase in per capita consumption would lead to increase in demand by 1.1 million tonnes of paper. 

Printing Industry:y y There are approximately 130,000 printing presses in India. Indian printing and packaging industry is growing at a CAGR of over 16.2% since 1989.

Potential Implications:y Indian printing industry would grow from $12.1 billion in 2006 to $20.9 billion in 2011. y The strong growth in printing industry would also fuel the demand for paper in the future.

25

1.12 Supply Chain Management of Paper Manufacturing
Industry16: The pulp and paper industry depends on an long and integrated supply chain. It starts in forest harvest areas as trees and ends a s multiple products used in all persons daily usage. The lead time from the first step to the last is long and it involves many steps operated several companies and organizations. The following diagram shows the supply chain management of the paper manufacturing industry.

Logs

Logs

Pulp

Harvest area

Log terminals

Pulp mill

Distribution center

Paper rolls

paper rolls & sheets

Paper rolls & sheets

Paper mill
Paper rolls & sheets

Converting plants

Warehouses

Distribution center

Merchants 

Market for pulp and paper products

Figure-1.12.1

16

https://www.cirrelt.ca/DocumentsTravail/2006/DT-2006-AM-3.pdf

26

We have three major processes, Harvesting, pulp making and paper making.  Harvesting consists of the following major stages y The trees are cut and branches are removed. There after the tree is bucked into the logs. This process is typically done on directly at harvest area. y Logs are transported from harvest areas directly to mills or through intermediate storage at terminal.  The Pulp making process involves the following steps y Conversion of pulp logs to chips. Chips from different species are mixed according to recipes with sawmill chips depending on the pulp quality produced. y y The chips are boiled and washed. Here the fibers and lignin are separated. The fibers are then in a number of steps where chemicals is added bleached in order to produce fibers with a certain brightness.  The paper making process involves the following steps y Fixed width reels of a given paper grade, also referred to as a jumbo rolls, are produced on a paper machine. y The reels are put on a winder and sliced into several rolls of smaller diameters and widths. The part of the reel not cut into rolls in trim loss. y Finally, the rolls are shipped to customer, or converted into cut sheet finished products on a sheet, which may also generate some trim loss. The roll sheeted into finished products is known as parent rolls.

27

Chapter-2 Research Methodology
2.1 Research Objective:The major objective of the project was to study and to know about the Indian market situation of the Paper manufacturing Industry. And after finding the Major three companies based on the Average sales we wanted to find the financial condition and future growth prospects of the Industry.

2.2 Non Financial Analysis:The following were the main objectives under the non financial analysis of the industry:  Identification & analysis of Competitive forces of the industry on the basis of Michael Porter¶s five force model.  Identification of strengths, weakness, opportunities & threat in the External business environment with the help of SWOT (Strengths, Weakness, Opportunities analysis.  In-depth analysis of factors affecting the business environment with the help of Political, Economical, Social and Technological (PEST) analysis.  Comparative analysis would be undertaken to know about the offerings or the products that the particular company offers to the

28

market and also to know their rivals and the key players of this industry.

2.3 Financial Analysis:The following were the main objectives under the financial analysis of the industry:  A percentage change in financial statement items for a number of last five years is calculated with the trend analysis, in order to identify basic changes in nature of the Industry¶s business.  Ratio analysis is to be carried out, which involves a relevant financial relationship between components of the financial statements and is used for recognizing an industry strengths as well as weakness.  Horizontal Analysis is also been done of Income, Expenses, Assets, And Liabilities Statements of last five years to compare the financial condition of the Whole Industry with compare to the precedent year.

2.4 Source of Data Collection:The following are the sources for Secondary Data collection for making our study and making the report:  Research Articles related to Paper Industry.  Prowess Software.  Internet websites.  Business Periodicals.

29

2.5 Research Type:Exploratory Research is being undertaken so we can find insights and understanding of Paper Manufacturing Industr Exploratory research is generally used for below mentioned purposes:  Formulate a problem or define a problem more precisely.  Identify alternative course of action.  Develop hypotheses.  Isolate key variables and relationships for further examination.  Gain insights for developing an approach to the problem. 

Establish priorities for further research.

2.6 Limitations of the Study: We could not apply the Primary research.  All the group mates are living at different cities so to meet at one place
at the same time was our main limitation. 

Time Limitation.  Money Limitations

30

31

Chapter-3 Major Players of the Industry 

allarpur Industries Limited17:
Company Background

B

y

Established in 1945, Ballarpur Industries (BILT) is the flagship company of the L.M. Thapar Group. It is the largest company in the domestic paper industry with an installed paper capacity of 4, 81,568 tons per annum. The company also has 98,550 tons per annum of rayon grade pulp capacity in Kamalapuram at Andhra Pradesh.

17

http://www.biltpaper.com/

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The company mainly manufactures printing and writing paper in five locations - Ballarpur, Bhigwan & Ashti in Maharashtra, Shreegopal in Haryana and Sewa in Orissa. y The company manufactures different types of paper, viz., maplitho, coated paper, cream wove and specialty papers. It claims to be a leader in many of the high--end value--added segments like wood--free coated paper (47 per cent market share) and hi--bright maplitho (42 per cent). The company also has a dominant position in copier paper with a market share of 28 per cent. The company has a network of 126 dealers. y 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. y In June 2006, the company acquired 80 per cent stake in Sabah Forest Industries (SFI), Malaysia's largest pulp and paper mill from Lion Forest Industries for USD 261 million. This acquisition is a strategic fit into the company's growth plans. SFI has paper and pulp capacity of 1.4 lakh tonnes and 1.2 lakh tonnes per annum, respectively. It would also provide the company with huge forest land of 289 thousand acres that can be used captively for fibre requirement. Besides securing future supplies of raw material through this acquisition, the company also created an entry into the rapidly growing South--East Asian markets.

33

y

The company product portfolio includes - coated wood free paper, uncoated hi-bright paper (Maplitho), business stationery, copy paper, and speciality & fine paper

y

In 2006, BILT controlled approximately 21% of Writing and Printing Paper (WPP) market and approximately 53% of the coated paper market.

y

The company is pursuing both organic and inorganic strategy to increase its installed capacity to 1.0 million tonnes paper by 2010.

y

In 2006, the company acquired a paper manufacturing firm, Sabah Forest Industries, in Malaysia. The acquisition not only help the company to secure the future supply but also provide a platform to the company to enter the South-east and east Asian market

y

To maintains its leadership in the market, BILT is focusing on 4 key areas: 1. Securing raw material supply 2. Rapidly developing larger scale of operations 3. Continuously innovating to introduce new products and grow new market. 4. Creating a de-risked corporate financial and capital structure

Revenue, 2002-06 (Figures in INR billion)
25 20 15 10 5 0 2002-03 2003-04 2004-05 2005-06 2006-07 evenu e 23 .7988 21.158 19.695 19.974 20.756

Chart-3.1

¨

34 

evenue ± Segment wise, 2006-0718 (Figures in percent)

R

100% =INR 23.8 billion
Se

O thers 2 Pulp 12

Paper 76

Chart-3.2  stalled Capacity, 2002-06 (Figures in µ000 tonnes) In

Chart Title
600 500 400 300 200 100 0 2002-03 2003-04 2004-05 2005-06 2006-07 I ns tall ed C apaci ty P ap er P ro du ctio n

Chart-3.3

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©

©

Pa per p rod ucts & office supp lies 10

© 

e nt

©

35 

In stalled Capacity ± Paper unit, 2005-06 19 (Figures in µ000 tonnes)

Paper unit

State

Installed capacity

Ballarpur Bhigwan Shreegopal Sewa Kamalapuram Ashti

Maharashtra Maharashtra Haryana Orissa

126 125 81 68 -75

Andhra Pradesh Maharashtra

Table-3.1
y Th e company operations span across 6 units, together with a capacity of 480,000 tonnes and a pulp mill of capacity 100,000 tonnes manufacturing rayon grade pulp, in the state of Andhra Pradesh (Kamlapuram Unit).

19

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y

BI LT is also expanding its production capacity in both coated and noncoated paper, to take its current capacity of 480,000 tonnes in 2006 to around 1.0 million tonnes by 2009-10. With the increase in overall capacity, the company expects to double its turnover by 2009-10. ‡ In October 2007, the company announced to increase the capacity of its coated wood free paper unit at Bhigwan in Pune by adding 190,000 tonnes. After the expansion, the total unit capacity would increase to 315,000 tonnes. ‡ Th e main plant and machinery and its installation would be supplied by Voith, Germany, while some equipment will be sourced locally from suppliers like L&T, etc.

y

In July 2007, the company also initiated a restructuring plan, under which it would transfer 3 manufacturing units at Bhigwan, Ballarpur and Kamalapuram, to a separate company called BILT Graphic Paper Products, which would be transferred to Ballarpur Paper Holdings BV (BPH) after court approval. By this exercise, the company would transfer its commodity business, which is capital-intensive and would focus on the specialty and consumer-focused products business.

37 

amilnadu Limited20:
Company Background

T Newsprint & Paper

Tamil Nadu Newsprint & Papers (TNPL), promoted by Government of Tamil Nadu, is engaged in the manufacture of paper and newsprint. It is the second largest producer of writing and printing paper (WPP) and a dominant company in South India. With its sole plant at Kagithapuram in the Karur district of Tamil Nadu, the company's current capacity stands at 2.3 lakh tones per annum. This makes it the largest paper plant at a single location in the country. The company pioneered the concept of using bagasse as a raw material for paper production. TNPL has prudently reaped the benefit of its plant technology which allows it to switch conveniently from newsprint to WPP and vice--versa. Since realizations in WPP segment are higher, the share of newsprint in the company's total production has sharply declined from 32 per cent in 2000-01 to 1.3 per cent in 2006--07. TNPL has co--generation plants with a capacity of 61 MW, which generate power using steam turbines. Apart from being self sufficient in its power requirements, the company exports surplus power to the state grid. The company also generates

20

www.tnpl.com/

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35.5 MW of wind energy using wind turbines, which is entirely sold to the state grid. TNPL initiated a mill development plan (MDP) project in 2005--06 at an outlay of Rs.565 crore (funded through internal generation of Rs.150 crore and term loan of Rs.415 crore). The project includes expansion of captive pulping capacity (from 520 tpd to 800 tpd) using an environment friendly chlorine--free process, increase in power generation capacity by 20 MW and rise in paper production capacity to 2.5 lakh tones from 2.3 lakh tones per annum. The project is expected to be completed by the end of March 2008. Subsequent to completion of MDP, TNPL plans to undertake execution of mill expansion plan (MEP), for which it has already completed feasibility study and initiated the process for getting requisite clearances. MEP envisages expansion of the paper production capacity from 2.5 lakh tones to 4 lakh tones per annum. The total cost of expansion is estimated at around Rs.725 crore funded in a debt--equity ratio of 2.2:1. The MEP is targeted for completion by December 2009.

39 

J.K. Paper Limited21:
Company Background

y

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 specialty papers. y The company has manufacturing plants at Jaykaypur in Rayagada, Orissa and at Songadh in Gujarat having manufacturing capacity of 150000 tones till June 2005.JK papers distribution networks includes more than 100 wholesalers and 1700 dealers. It also has 10 warehouses and 4 regional offices. y The main brands of the company are JK Copier, JK Easy Copier, JK Evervite, JK Excel Bond, JK Bond, JK SHB Maplitho, CPM Parchment and JK MICR. JK Copier is designed for single and multicolor laser prints for reporting, presentations etc. JK easy copier is designed for y Photocopy machines and desktop publishing. JK bond papers is designed for inkjet and laser printing for photocopying, non- touch printing and use in office stationary. JK copier plus is designed for multipurpose user. y The company exports its products to countries like Sri Lanka, Bangladesh and several West Asian companies.
21

www.jkpaper.com/

40

y

Mr Hari Shankar Singhania is the chairman of the company. Promoters hold around 42 percent of the company's equity while institutional investors and the Indian Public hold nearly 13 percent and above 30 percent respectively.

Revenue, 2002-0622

(Figures in INR billion)
Re enue

12 10 8

R e enu e 4 2 0 2002-03 2003-04 2004-05 2005 -06 2006-07

Chart-3.4 Production ± Segment wise, 2006-07 (Figures in percent)

Production

Ot ers 30 %

C oa te d and Br anded ape rs 70 %

22

http://www.slideshare.net/jaaaspal/indian-paper-industry-presentation 

6  

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Chart-3.5
y JKPM is the first paper company to get TPM Certification from JIPM, Japan and 3rd paper company in the world. y JKPM is the largest producer of branded papers in India. The company is a market leader in copier varieties and SS Maplitho segment. ‡ Due to low capacity, the company started to outsource coated paper in 2003. Outsourcing and trading contributed approx. 10% of total sales. y The company has a wide range of branded products in its portfolio. It sells approximately 40% of paper produced under various brand names - JK Copier, JK Excel Bond, JK Bond, JK Savannah, JK Copier Plus and JK Easy Copier. y The other major product is JK Maplitho, a superior uncoated Writing and Printing paper. y It sells its products through a nationwide distribution network of approximately 100 distributors and 2,500 dealers. 

Installed Capacity, 2002-06

(Figures in µ000 tonnes)

250 200 150 100 50 0

Producti on

2002-03 2003-04 2004-05 2005-06 2006-07  

Cha rt

it le

Instal led Capaci t

42

Chart-3.6 

Installed Capacity ± Paper unit, 2005-0623 (Figures in µ000 tonnes)
Paper unit State Installed capacity Paper Rayagada (JK Paper Mills) Songadh (Central Pulp Mills) Gujarat 55 47 Orissa 125 Pulp 127

Table-3.2
y JKPM¶s strategy its to focus on value added product segments and enhance its premium product portfolio. In line with its strategy, it expanded its value-added cut-size papers and coated varieties portfolio. ‡ It started a 46,000 tonnes per annum plant in Rayagada, Orissa to enter into coated paper and boards segment in 2005. ‡ It commenced commercial production of multilayer duplex board in Gujarat with an annual production capacity of 60,000 tonnes in October 2007. y JKPM follows its growth plans through capacity addition and its market expansion plans through outsourcing & trading.

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‡

The company exports its products to more than 40 countries including Sri Lanka, Bangladesh, Middle East, Africa, Australia, Singapore, Malaysia etc.

y

In 2006-07, JKPM registered its highest ever sales volumes at 210,000 tonnes, owing to high capacity utilization of 110%, improved operating efficiencies and higher sales in the copier and coated Paper segments. ‡ The plants currently operate at more than 120% capacity utilization with an aggregate annual output of over 180,000 tonnes per year of paper and pulp, using latest technology.

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Chapter-4 SWOT Analysis
4.1 Introduction:SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

The following diagram shows how a SWOT analysis fits into an environmental scan.

Situation Analysis / Internal Analysis /\ Strengths Weaknesses | SWOT Profile \ External Analysis /\ Opportunities Threats

Figure-4.1.1

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4.2 Strengths of Paper Industry: Large and growing domestic paper market: - India has the second

most populous market for paper in the world. It is also the most demanding. Indian paper industry not only serves a public utility but fulfils a critical national requirement. It possesses an annual production capacity of five million tones. It generates an annual turnover of approximately 120 billion. 
Non wood pulping: - At present about 60.8 per cent of the total

production is based on non-wood raw material and 39.2 per cent based on wood. 
Well developed printing industry: - Indian printing industry would

grow from $12.1 billion in 2006 to $20.9 billion in 2011. The strong growth in printing industry would also fuel the demand for paper in the future. 
Increase in employment level: - Paper manufacturing industries

directly and indirectly employs nearly 1.3 million people. 
Latest technology for high: - grade paper manufacturing: - The

Company intends to manufacture the paper by using Twin Wire Technology and also plans to incorporate all latest equipments to have a cost effective production. 
Local market knowledge: - The companies which are engaged in the

paper manufacturing industry have a complete knowledge of local market.  WTO impact on paper manufacturing industry: - WTO as discussed the implication of Indian Paper and Newsprint Industry as part of its negotiations and implications.

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4.3 Weaknesses of Paper Industry: Small and fragmented industry: - There are large numbers of small

scale industries in India whose production capacity is only 12, 90,382 tonnes. Which is very low in comparisons to large scale industries? 
Low standard of converting industry: - The manufacturing of paper

involves matting these fibers into a sheet. Converted paper products are made from paper and other materials by various cutting and shaping techniques and include coating and laminating activities. 
Poor Infrastructure, transportation: - In India, the transportation

facility is not good especially in villages. So it is very difficult to lift the heavy bamboos from forest to the manufacturing unit. Due to this the transportation cost is also very high. 
High cost - raw material, energy and finance: - The performance of

the industry has been constrained due to high cost of production caused by inadequate availability and high cost of raw materials, power cost and concentration of mills in one particular area.  Obsolescence of technology: - The small scales of production and outdated technology have been the main features of Indian paper units, and are still so. On an average, to produce 100,000 tonnes in a year, Indian mills manages five paper machines in one or more location, while abroad, paper-making machines of 500,000 tonnes per annum, or more, are the norm. 
Impact of high local taxes: - Central Excise is levied @8% for the

first 3500 MT production and thereafter @12% on the value of the invoice. VAT replaces the existing multipoint taxes levied by various

47

states with effect from April µ05. All the licenses required under Municipality Act, Factories Act are obtained and duly renew.

4.4 Opportunities of Paper Industry: Increase in demand and consumption: - Domestic demand for paper is expected to grow at a CAGR of 6-7%. India¶s paper demand is expected to touch 8mn T.P.A by 2010. A leading global paper industry consultant projects a shortage of about 0.7mn T.P.A by 2010. 
Forest plantation potential: - In India there is a vast forest area

which is useful in paper manufacturing. 
Increase in various usage of paper: - Now days the paper uses for

various purpose. It is not for writing purpose but also now various types of vessels, napkins, packaging etc are highly demanded. 
Increase in consumption of premium quality copier due to growth

in corporate sector and educational levels: - Increased rates of literacy and improved school infrastructure would result in greater demand for paper. 
Export potential: - The export of paper and paperboard is

continuously increasing. In 2006-2007 the export is 0.27 million tones. 
Low labor cost: - In paper manufacturing industry the uneducated

employee is required. So the income of the labor is very low.

4.5 Threats of Paper Industry: Internet threat: - Due to increase in the usage of internet the demand for paper is decrease. Internet is work as a substitute product.  Low per capital consumption: - The per capita consumption of paper in India is very low i.e. 7 Kgs in 2006, as compared to an average

48

consumption of 28 Kgs and 58 Kgs in Asia and world respectively. The per capita consumption is expected to increase to 12 Kgs by 2020.  Decline in capacity due to environmental pressures: - The paper manufacturing industry creates lots of environmental disturbance. The raw material used by the industry is pulp which is come out from the bark of trees. Due to this production capacity is decline and import is increasing.  Fiber Deficit: - The raw material fiber which is used for manufacturing paper is continuously decreasing and due to the quality of paper is also decline.  Lack of international perspective in project development and implementation:-In India there is lack of international projects.  Low Capacity Addition / Expansion:- In last 55 years, the number of paper mills has increased from just 17 mills in 1951 to more than 666 units engaged in the manufacture of paper and paperboard, out of which nearly 568 are in operation by 2006.  Growth in Chinese paper and threats of cheap import: - Due increase in price of raw and growth in Chinese paper the import of paper continuously increases. Imports of paper and paper products were growing over the years. The Chinese papers are of high quality so the import of that paper is increasing.  Competition from existing players: - The domestic paper market is dominated by large players owing to their size, brand value and financial strength. In 2006-07, the top 10 players control around 60% of the market in term of capacity.

49

Conclusion:To conclude, the following table shows the conclusion of SWOT analysis

Sr. no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Large and growing domestic market Non wood pulping Employment level Small scale industry High cost of raw material Taxes Demand of paper Usage of paper Internet threat Environmental issues Import of paper product Competition Fiber deficit Labor cost Forest plantation

High 

Medium low 

            

Table-4.1
So there is lots of strength of paper manufacturing industry India. It is the 15th largest industry among the world. But there are some internal weaknesses of the industry. Industry is also having large number of external opportunities and some external threats.

50

Chapter-5 PEST Analysis
5.1 Introduction:A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

· Political · Economic · Social · Technological

5.2 Political Factors: Government has completely de licensed the paper industry with effect from17th July, 1997. The entrepreneurs are now required to file an Industrial Entrepreneur Memorandum with the Secretariat for Industrial Assistance for setting up a new paper mill or substantial expansion of the existing mill in permissible locations.  Accelerated depreciation to partially mitigate high capital intensity. Allow duty free imports of new & second hand machinery/equipment for Technology Up gradation.

5.3 Economic Factors:-

51 



Manufacturing of paper and thousands of other paper related commodities contributes immensely to the economic growth of India One of the major impacts of Green rating projects has been the setting of AOX standard for the pulp and paper sector. Before GRP, this parameter was neither monitored nor regulated in India. The result was very high chlorine consumption and very high oregano chlorine emissions from the India paper industry. Today, pollution control authorities strictly regulate AOX emissions and paper companies now regularly monitor their AOX loads.

5.4 Social Factors: Transparent extrapolation between our quality discipline and customer delight, so that each workman recognizes the inseparable role of quality in every batch of paper.  A continued focus on enhancing manpower productivity to bring it at par with industry norms. A slew of initiatives and best practices are being implemented in this direction to meet upcoming global challenges in the post±WTO era.  Redefined the dynamics of the paper industry by moving the traditional transaction-based sales system to a relationship-based model.

5.5 Technological factors:-

52 

Annual speed increase of fastest machines in the world is about 50 m/min. When the paper machine is designed for highest speed then the product quality and machine run ability are also excellent.  All grades have today very high speeds. Upgraded second hand machines are not viable anymore, because they are always too slow compared to new machines.  New machines should have as high speed as is possible to be build mainly in India. This has been made in China and the capacities of those machines are about half of the international maximum capacity.  Estimated technology level of best Indian production lines is about 30 years behind the best lines in Europe. Best lines in China are only some years behind the international top level.  There are only some twin wire machines in India. Best roll and blade gap formers improve paper quality and drainage, which are important for paper made of Indian raw materials. 
New drying concepts include web supported run with vacuum pick-up to

dryer section and single-tier dryers. Hood is closed and there are efficient air and infrared dryers.

Conclusion:As per the above factors included in political, economical, Sociological, technological, it can be said that all the factors are having more impact on the paper manufacturing industry which increases the stress on the existing players, more control on the standards application for further growth as well as increasing the competition among the Rivals at the domestic level.

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Chapter-6 Michael Porter¶s Five Force Analysis
6.1 Introduction:-

54

Figure-6.1.1

6.2 Five Force Analysis for the Industry: Threats of intense segment rivalry
There are many strong competitors like BILT, JK, TNPL, ITC, ABIL etc. produces a large number of qualitative papers and the paper products like tissue paper, napkins, and etc faces much stiff competition among them.

55 

Threats of new entrants
This business requires a huge investment and therefore not many entrants jump into this market. But still industry face a merger threat from the local mills such as SETIA, RUCHIRA etc who enter into the market with low priced products. Both entry and exit barriers are very high in the market and hence firm faces less threats from the new potential entrants. 

Threats of substitute products
In the paper industry now-a-days internet work is as a substitute product. But still there is requirement of hard copy in the offices and educational institute. So the industry faces a less threats from the substitute product. And also in comparison to past the use of paper products increase vastly like paper dish, paper soap, napkins etc. 

Threats of buyer¶s growing bargaining power
The paper industry first buyer is dealers, which have bargaining power depending upon the market conditions. When the market is up the dealers have less bargaining power and when the market is down they have more bargaining power. During downturn there is less cash liquidity into the market and hence the dealers get upper hand in terms of bargaining power. 

Threats of supplier¶s growing bargaining power
The main supplier¶s of the paper industry farmers. The farmers in the Punjab, Haryana, U.P, Assam, Andhra Pradesh etc are the main suppliers of raw materials like wood, wheat straws, pulp etc. There are very few mills which makes agro

56

based products like the mill of Punjab ABIL and hence command a high bargaining power with the suppliers.

Conclusion:To conclude the five force model, the following are table Sr. no 1 2 3 4 5 Factors Rivalry New entrants Substitute products Buyer¶s Bargaining power Supplier¶s bargaining power   High    Moderate Low

Table-6.1

Chapter-7 Financial Analysis
7.1 Ratio Analysis:-

57

Paper manufacturing industry
Liquidity ratio 1. Current ratio

Current ratio = Current Assets Current Liability

Year Current assets Current Liability Ratio

2004 4688.9 3108.12 1.50860

2005 5157.55 3383.93 1.52413 Table-7.1.1

2006 6016.55 3515 1.71168

2007 6733.92 3987.47 1.68877

2008 6741.97 3885.17 1.73531

Chart-7.1.1 Ballarpur industry Year 2004 2005 2006 2007 2008

58

Current assets Current Liability Ratio

712.52 494.71 1.4403

882.72 327.38 2.6963 Table-7.1.2

874.62 345.99 2.5279

1377.06 372.01 3.7017

1326.22 440.94 3.0077

J.K industry Year Current assets Current Liability Ratio 2004 235.28 104.56 2.2502 2005 186.13 104.19 1.7864 Table-7.1.3 TNPL industryYear Current assets Current Liability Ratio 2004 305.08 195.48 1.5607 2005 384.71 231.63 1.6609 Table-7.1.4 2006 363.59 196.97 1.8459 2007 367.91 258.32 1.4242 2008 376.76 308.58 1.2209 2006 329.05 130.55 2.5205 2007 270.25 126.35 2.1389 2008 356.11 171.08 2.0815 

Interpretationy y The average current ratio of industry is 1.633698. Among the three companies the Ballarpur industry has the highest current ratio. y The average current ratio of the Ballarpur industry is highest then the overall average current ratio of industry. y The position of the Ballarpur industry is good in the paper manufacturing industry.

59

2. Debt to equity ratio

Debt to equity ratio = Debt Equity Debt = Long term borrowing + Short term borrowing Equity = Issued equity capital

Year Debt Equity Ratio

2004 3078.16 2312.01 1.33

2005 3419.23 2408.16 1.42

2006 3769.3 2600.64 1.45 Table-7.1.5

2007 4995.97 2542.33 1.97

2008 5362.47 2588.4 2.07

Chart-7.1.2

Ballarpur industry ±

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Year Debt Equity Ratio

2004 596.07 39.42 15.12

2005 743.16 39.42 18.85

2006 722.88 39.42 18.34

2007 781.5 18.63 41.95

2008 897.21 285.5 3.14

Table-7.1.6 J.K industryYear Debt Equity Ratio 2004 142.16 5.57 25.5224 2005 228.53 5.57 41.0287 2006 483.55 5.57 86.8133 2007 444.77 5.58 79.7079 2008 609.77 7.27 78.9858

Table-7.1.7 TNPL industryYear Debt Equity Ratio 2004 228.43 1.14 200.38 2005 45.25 1.14 39.69 2006 153.68 1.14 134.81 2007 381.94 1.14 335.04 2008 368.89 1.14 323.59

Table-7.1.8 

Interpretationy The debt to equity ratio of industry is continuously increasing due to continuous increase in debt. The average of debt to equity ratio is 1.648. y Among the three companies the Ballarpur industry has the highest debt to equity ratio. Here the debt is highest.

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y

The average debt to equity ratio of the Ballarpur industry is highest then the average debt to equity ratio of industry.

y

The position of the Ballarpur industry is good in the paper manufacturing industry.

3. Interest coverage ratio

Interest coverage ratio = Interest expenses Total Liability

Year Interest expenses Total liability Ratio

2004 529.55 14685.69 0.0361

2005 473.07 15888.28 0.0298

2006 476.62 17434.25 0.0273

2007 525.83 20432.7 0.0257

2008 604.23 20583. 0.0294

Table-7.1.9

Chart-7.1.3

62

Profitability ratio a. On the basis of Income

1. PBDITA Total income

Year PBDITA Total Ratio

2004 1453.2

2005 1484.28

2006 2111.18 13720.15 0.15387

2007 2507.25 15566.7 0.16106

2008 2352.52 14562.5 0.16155

11335.18 12158.02 0.12820 0.12208

Table-7.1.10

Chart-7.1.4 Ballarpur industryYear PBDITA Total 2004 408.63 1863.64 2005 443.15 2020.45 2006 463.33 2026.35 2007 525.66 2124.33 2008 580.27 2395.97

63

Income Ratio 0.21926 0.21933 0.22865 0.24745 0.24219

Table-7.1.11 J.K industryYear PBDITA 2004 130.76 2005 146.03 788.77 0.1851 2006 122.77 739.45 0.1660 2007 147.98 859.75 0.1721 2008 126.05 746.58 0.1688

Total Income 688.69 Ratio 0.1899

Table-7.1.12 TNPL industryYear PBDITA Total Income Ratio 0.2155 0.1523 0.2014 0.2133 0.2491 2004 142.4 660.89 2005 114.68 752.87 2006 182.95 908.25 2007 208.9 979.46 2008 273.02 1095.82

Table-7.1.13 

Interpretationy The PBDITA/Total income ratio of industry is continuously increasing due to continuous increase in Total income and PBDITA. The average of PBDITA/Total income ratio is 0.145. y Among the three companies the Ballarpur industry has the highest PBDITA/Total income ratio. The total income of Ballarpur industry is highest among the three companies.

64

y

The average PBDITA/Total income of the Ballarpur industry is 0.231 which is highest then the average of industry.

y

The position of the Ballarpur industry is good in the paper manufacturing industry.

2. PBDTA Total income

PBDTA= PBDITA - Depreciation

Year PBDTA Total Ratio

2004 913.57 11335.18 0.08060

2005 900.98 12158.02 0.07411

2006 1506.5 13720.15 0.10980

2007 1825.75 15566.7 0.11729

2008 1733.59 14562.5 0.11940

Table-7.1.14

Chart-7.1.5

65

Ballarpur industryYear PBDTA Total Income Ratio 0.21543 0.21584 0.22486 0.24376 0.23916 2004 401.48 1863.64 2005 436.1 2020.45 2006 455.65 2026.35 2007 517.83 2124.33 2008 573.02 2395.97

Table-7.1.15 J.K industryYear PBDTA Total Income Ratio 2004 100.26 688.69 0.1456 2005 109.34 788.77 0.1386 2006 81.68 739.45 0.1105 2007 109.04 859.75 0.1268 2008 88.19 746.58 0.1181

Table-7.1.16 TNPL industryYear PBDTA 2004 128.55 2005 100.88 752.87 0.1340 2006 166.7 908.25 0.1835 2007 190.8 979.46 0.1948 2008 249.25 1095.82 0.2275

Total Income 660.89 Ratio 0.1945

Table-7.1.17 

Interpretationy The PBDTA/Total income ratio of industry is decreasing in 2005 because of decrease in PBDTA. In 2006, 2007 and 2008 the PBDTA is increasing. The average of PBDTA/Total income ratio is 0.100.

66

y

Among the three companies the Ballarpur industry has the highest PBDTA/Total income ratio. The total income of Ballarpur industry is highest among the three companies.

y

The average PBDTA/Total income ratio of the Ballarpur industry is 0.227 which is highest then the average of industry.

y

The position of the Ballarpur industry is good in the paper manufacturing industry.

3. PBIT= PBIT Total Income

Year PBIT Total Income Ratio

2004 896.23 11335.18

2005 884.43 12158.02

2006 1391.16 13720.15

2007 1814.55 15566.7

2008 1729.11 14562.5

0.07907

0.07274

0.10140

0.11657

0.11874

Table-7.1.18

Chart-7.1.6

67

4. PBT Total income

Year PBT Total Ratio

2004 366.56 11335.18 0.03234

2005 411.2 12158.02 0.03382

2006 914.2 13720.15 0.06663

2007 1288.53 15566.7 0.08277

2008 1124.63 14562.5 0.07723

Table-7.1.19

Chart-7.1.7 Ballarpur industryYear PBT Total Income Ratio 0.07301 0.08794 0.10221 0.12484 0.13507 2004 136.07 1863.64 2005 177.67 2020.45 2006 207.12 2026.35 2007 265.2 2124.33 2008 323.62 2395.97

Table-7.1.20

68

J.K industryYear PBT Total Income Ratio 0.0847 0.0844 0.0522 0.0686 0.0550 2004 58.3 688.69 2005 66.57 788.77 2006 38.6 739.45 2007 58.94 859.75 2008 41.05 746.58

Table-7.1.21 TNPL industryYear PBT Total Income Ratio 0.1038 0.0520 0.1147 0.1269 0.1587 2004 68.57 660.89 2005 39.17 752.87 2006 104.2 908.25 2007 124.27 979.46 2008 173.95 1095.82

Table-7.1.22 

Interpretationy The PBT/Total income ratio of industry is decreasing in 2008 because of decrease in Total income. In 2004, 2005, 2006 and 2007 the PBT and total income is increasing. The average of PBT/Total income ratio is 0.058. y Among the three companies the Ballarpur industry has the highest PBT/Total income ratio. The total income of Ballarpur industry is highest among the three companies. y The average PBT/Total income ratio of the Ballarpur industry is highest then the average of industry.

69

y

The position of the Ballarpur industry is good in the paper manufacturing industry

5. PAT (As reported by company) Total income

Year PAT Total Ratio

2004 261.8 11335.18 0.02310

2005 308.62 12158.02 0.02538

2006 633.47 13720.15 0.04617

2007 924.83 15566.7 0.05941

2008 817.82 14562.5 0.05616

Table-7.1.23

Chart-7.1.8

70

Ballarpur industryYear PAT Total Income Ratio 0.05176 0.06628 0.08296 0.09980 0.10466 2004 96.46 1863.64 2005 133.91 2020.45 2006 168.1 2026.35 2007 212 2124.33 2008 250.77 2395.97

Table-7.1.24 J.K industry ± Year PAT Total Income Ratio 0.0480 0.0523 0.0521 0.0413 0.0465 2004 33.04 688.69 2005 41.22 788.77 2006 38.53 739.45 2007 35.52 859.75 2008 34.71 746.58

Table-7.1.25 TNPL industryYear PAT Total Income Ratio 0.0799 0.0504 0.0887 0.0879 0.1030 2004 52.8 660.89 2005 37.95 752.87 2006 80.55 908.25 2007 86.06 979.46 2008 112.83 1095.82

Table-7.1.26 

Interpretationy The PAT/Total income ratio of industry is decreasing in 2008 because of decrease in Total income and profit after tax. In 2004,

71

2005, 2006 and 2007 the PAT and total income is increasing. The average of PAT/Total income ratio is 0.042. y Among the three companies the Ballarpur industry has the highest PAT/Total income ratio. The total income of Ballarpur industry is highest among the three companies. y The average PAT/Total income ratio of the Ballarpur industry is highest then the average of industry. y The position of the Ballarpur industry is good in the paper manufacturing industry.

6. Cash profit Total income

Cash profit is taken as cash prior period income

Year Cash profit Total Income Ratio

2004 30.96

2005 0.8

2006 5.04

2007 4.72

2008 9.1

11335.18

12158.02

13720.15

15566.7

14562.5

0.00273

0.00007

0.00037

0.00030

0.00062

Table-7.1.27

72

Chart-7.1.9

b.On the basis of sales

1. PBDITA Net of P&E Sales

Year PBDITA Net of P&E Sales Ratio

2004 1379.32 10991.5 0.12549

2005 1494.6 11893.17 0.12567

2006 1932.68 13288.08 0.14544

2007 2305.67 15148.3 0.15221

2008 2066.55 13931 0.14834

Table-7.1.28

73

Chart-7.1.10 Ballarpur industryYear 2004 2005 437.31 2006 463.43 2007 507.25 2008 579.11

PBDITA Net of 404.31 P&E Sales Ratio 1842 0.21950

1999.62 0.21870

2011.59 0.23038

2085.34 0.24325

2375.92 0.24374

Table-7.1.29 J.K industryYear 2004 2005 138.18 2006 122.5 2007 143.54 2008 112.98

PBDITA Net of 128.84 P&E Sales Ratio 679.83 0.1895

725.42 0.1905

732.31 0.1673

848.07 0.1693

726.97 0.1554

Table-7.1.30

74

TNPL industryYear 2004 2005 112.21 2006 185.29 2007 208.07 2008 262.3

PBDITA Net of 145.87 P&E Sales Ratio 637.33 0.2289

741.87 0.1513

892.91 0.2075

962.98 0.2161

1070.38 0.2451

Table-7.1.31 

Interpretationy The PBDITA Net of P&E/Sales ratio of industry is decreasing in 2008 because of decrease in sales. In 2004, 2005, 2006 and 2007 the PBDITA Net of P&E and sales is increasing. The average of PBDITA Net of P&E/Sales ratio is 0.108. y Among the three companies the Ballarpur industry has the highest PBDITA Net of P&E/Sales ratio. The sale of Ballarpur industry is highest among the three companies. y The average PBDITA Net of P&E/Sales ratio of the Ballarpur industry is highest then the average of industry. y The position of the Ballarpur industry is good in the paper manufacturing industry.

2. PBIT Net of P&E Sales

75

Year

2004

2005 894.75

2006 1212.66

2007 1612.97

2008 1443.14

PBIT Net of 822.35 P&E Sales Ratio 10991.5 0.07482

11893.17 0.07523

13288.08 0.09126

15148.3 0.10648

13931 0.10359

Table-7.1.32

Chart-7.1.10 Ballarpur industryYear 2004 2005 298.21 2006 312.67 2007 350.73 2008 419.24

PBIT Net of 269.76 P&E Sales Ratio 1842 0.14645

1999.62 0.14913

2011.59 0.15543

2085.34 0.16819

2375.92 0.17645

Table-7.1.33

76

J.K industryYear 2004 2005 95.41 2006 79.42 2007 93.44 2008 65.84

PBIT Net of 86.88 P&E Sales Ratio 679.83 0.1278

725.42 0.1315 Table-7.1.34

732.31 0.1085

848.07 0.1102

726.97 0.0906

TNPL industryYear 2004 2005 50.5 2006 122.79 2007 141.54 2008 187

PBIT Net of 85.89 P&E Sales Ratio 637.33 0.1348

741.87 0.0681

892.91 0.1375

962.98 0.1470

1070.38 0.1747

Table-7.1.35 

Interpretationy The PBIT Net of P&E/Sales ratio of industry is decreasing in 2008 because of decrease in sales and PBIT Net of P&E. In 2004, 2005, 2006 and 2007 the PBIT Net of P&E and sales is increasing. The average of PBIT Net of P&E/Sales ratio is 0.090. y Among the three companies the Ballarpur industry has the highest PBIT Net of P&E/Sales ratio. The sale of Ballarpur industry is highest among the three companies. y The average PBIT Net of P&E/Sales ratio of the Ballarpur industry is highest then the average of industry.

77

y

The position of the Ballarpur industry is good in the paper manufacturing industry.

3. Earning per share

Earning per share = PAT No. of share Assume that each share is of Rs.10

Year PAT No. Ratio

2004 212.43 of 231.20 0.91881

2005 253.48 240.82 1.05257

2006 658.49 260.06 2.53207

2007 937.75 254.23 3.68859

2008 817.81 258.84 3.15952

Table-7.1.36

Chart-7.1.11

78

Ballarpur industryYear PAT No. shares Ratio 24.470 33.970 42.643 113.795 8.784 2004 96.46 of 3.942 2005 133.91 3.942 2006 168.1 3.942 2007 212 1.863 2008 250.77 28.55

Table-7.1.37 J.K industryYear PAT No. shares Ratio 59.3178 74.0036 69.1741 63.6559 47.7442 2004 33.04 of 0.557 2005 41.22 0.557 2006 38.53 0.557 2007 35.52 0.558 2008 34.71 0.727

Table-7.1.38 TNPL industryYear PAT No. shares Ratio 463.16 332.89 706.58 754.91 989.74 2004 52.8 of 0.114 2005 37.95 0.114 2006 80.55 0.114 2007 86.06 0.114 2008 112.83 0.114

Table-7.1.39 

Interpretationy The Earning per share ratio of industry is decreasing in 2008 because of decrease in no. of shares. In 2004, 2005, 2006 and 2007

79

the earning per share ratio is increasing. The average of earning per share ratio is 2.27. y Among the three companies the Ballarpur industry has the highest no of shares. y The average of earning per share ratio of the Ballarpur industry is highest then the average of industry. y The position of the Ballarpur industry is good in the paper manufacturing industry.

4. PBT Net of P&E Sales Year PBT Sales Ratio 2004 366.56 10991.5 0.03335 2005 411.2 11893.17 0.03457 2006 914.2 13288.08 0.06880 2007 1288.53 15148.3 0.08506 2008 1124.63 13931 0.08073

Table-7.1.40

Chart-7.1.12 Ballarpur industry-

80

Year PBT Sales Ratio

2004 131.75 1842 0.072

2005 171.83 1999.62 0.086

2006 207.22 2011.59 0.103

2007 246.8 2085.34 0.118

2008 322.46 2375.92 0.136

Table-7.1.41 J.K industryYear PBT Sales Ratio 2004 56.38 679.83 0.0829 2005 58.72 725.42 0.0809 2006 38.33 732.31 0.0523 2007 54.5 848.07 0.0643 2008 27.98 726.97 0.0385

Table-7.1.42 TNPL industryYear PBT Sales Ratio 2004 72.04 637.33 0.1130 2005 36.7 741.87 0.0495 2006 106.54 892.91 0.1193 2007 123.44 962.98 0.1282 2008 163.23 1070.38 0.1525

Table-7.1.43 

Interpretationy The PBT Net of P&E/Sales ratio of industry is lightly decreasing in 2008 because of decrease in sales and PBT Net of P&E. In 2004, 2005, 2006 and 2007 the PBT Net of P&E and sales is increasing. The average of PBT Net of P&E/Sales ratio is 0.060. y Among the three companies the Ballarpur industry has the highest PBT Net of P&E/Sales ratio. The sale of Ballarpur industry is highest among the three companies.

81

y

The average PBT Net of P&E/Sales ratio of the Ballarpur industry is highest then the average of industry.

y

The position of the Ballarpur industry is good in the paper manufacturing industry.

5.

PAT Net of P & E Sales

Year

2004

2005 263.8

2006 479.99

2007 736.17

2008 531.84

PAT Net of 138.55 P&E Sales Ratio 10991.5 0.01261

11893.17 0.02218

13288.08 0.03612

15148.3 0.04860

13931 0.03818

Table-7.1.44

Chart-7.1.13 Ballarpur industryYear 2004 2005 128.07 2006 168.2 2007 193.59 2008 249.61

PAT Net of 92.14

82

P&E Sales Ratio 1842 0.050 1999.62 0.064 2011.59 0.084 2085.34 0.093 2375.92 0.105

Table-7.1.45

J.K industryYear 2004 2005 33.37 2006 38.26 2007 31.08 2008 21.64

PAT Net of 31.12 P&E Sales Ratio 679.83 0.0458

725.42 0.0460

732.31 0.0522

848.07 0.0366

726.97 0.0298

Table-7.1.46 TNPL industryYear 2004 2005 35.48 2006 82.89 2007 85.23 2008 102.11

PAT Net of 56.27 P&E Sales Ratio 637.33 0.0883

741.87 0.0478

892.91 0.0928

962.98 0.0885

1070.38 0.0954

Table-7.1.47 

Interpretationy The PAT Net of P&E/Sales ratio of industry is decrease in 2008 because of decrease in sales and PAT Net of P&E. In 2004, 2005, 2006 and 2007 the PAT Net of P&E and sales is increasing. The average of PAT Net of P&E/Sales ratio is 0.031.

83

y

Among the three companies the TNPL industry has the highest PAT Net of P&E/Sales ratio.

y

The average PAT Net of P&E/Sales ratio of the TNPL industry is highest then the average of industry.

y

The position of the TNPL industry is good.

b. On the basis of total income

1. PBDITA Net of P&E Total income

Year

2004

2005 1494.6

2006 1932.68

2007

2008

PBDITA Net of 1379.32 P&E Total Income Ratio

2305.67 2066.55

11335.18 12158.02 0.12168 0.12293

13720.15 0.14086

15566.7 14562.5 0.14812 0.14191

Table-7.1.48

84

Chart-7.1.14 Ballarpur industryYear 2004 2005 437.31 2006 463.43 2007 507.25 2008 579.11

PBDITA Net of 404.31 P&E Total Income Net 1863.64 of P&E Ratio 0.21695

2020.45

2026.35

2124.33 2395.97

0.21644

0.22870

0.23878 0.24170

Table-7.1.49 J.K industryYear PBDITA P&E Total Income Ratio 688.69 0.1871 788.77 0.1752 739.45 0.1657 859.75 0.1670 746.58 0.1513 Net 2004 of 128.84 2005 138.18 2006 122.5 2007 143.54 2008 112.98

Table-7.1.50 TNPL industryYear PBDITA P&E Total Income Ratio 660.89 0.2207 752.87 0.1490 908.25 0.2040 979.46 0.2124 1095.82 0.2394 Net 2004 of 145.87 2005 112.21 2006 185.29 2007 208.07 2008 262.3

Table-7.1.51

85 

Interpretationy The PBDITA Net of P&E/Total income ratio of industry is decrease in 2008 because of decrease in total income. In 2004, 2005, 2006 and 2007 the PBDITA Net of P&E and total income is increasing. The average of PBDITA Net of P&E/Total income ratio is 0.106. y Among the three companies the Ballarpur industry has the highest in PBDITA Net of P&E/Total income ratio. y The average PBDITA Net of P&E/Total income ratio of the Ballarpur industry is highest then the average of industry. y The position of the Ballarpur industry is good.

Return Ratio (Efficiency Ratio)

a. On the basis of net worth

1. PBIT Net of P&E Average net worth

Year PBIT P&E Average Ratio Net

2004 of 822.35

2005 894.75

2006 1212.66

2007 1612.97

2008 1443.14

net 4486.06 0.18331

5186.09 0.17253

6057.21 0.02009

7193.16 0.22424

7198.65 0.20047

Table-7.1.52

86

Chart-7.1.15 Ballarpur industryYear PBIT P&E Average worth Ratio 0.23266 0.21487 0.21362 0.21786 0.21088 net 1159.46 1387.84 1463.67 1609.89 1988.03 Net 2004 of 269.76 2005 298.21 2006 312.67 2007 350.73 2008 419.24

Table-7.1.53 J.K industryYear PBIT Net of P&E 2004 86.88 2005 95.41 356.7 0.2675 2006 79.42 254.37 0.3122 2007 93.44 415.38 0.2250 2008 65.84 392.58 0.1677

Average net worth 347.95 Ratio 0.2497

Table-7.1.54

87

TNPL industryYear PBIT Net of P&E 2004 85.89 2005 50.5 465.43 0.1085 2006 122.79 522.52 0.2350 2007 141.54 576.5 0.2455 2008 187 640.01 0.2922

Average net worth 449.24 Ratio 0.1912

Table-7.1.55 

Interpretationy The PBIT Net of P&E/Average net worth ratio of industry is decrease in 2006. In 2004, 2005 and 2007 the PBIT Net of P&E and Average net worth is increasing. y Among the three companies the J.K industry has the highest in PBIT Net of P&E/Average net worth ratio. y The average PBIT Net of P&E/Average net worth ratio of the J.K industry is highest then the average of industry.

2. PAT Net of P&E Average net worth

Year PAT Net of P&E Average Ratio

2004 138.55

2005 263.8 5186.09 0.05087

2006 479.99 6057.21 0.07924

2007 736.17 7193.16 0.10234

2008 531.84 7198.65 0.07388

net 4486.06 0.03088

Table-7.1.56

88

Chart-7.1.16 Ballarpur industryYear PAT Net of P&E Average worth Ratio 0.07947 0.09228 0.11492 0.12025 0.12556 2004 92.14 2005 128.07 1387.84 2006 168.2 1463.67 2007 193.59 1609.89 2008 249.61 1988.03

net 1159.46

Table-7.1.57 J.K industryYear PAT Net of P&E Average net worth Ratio 2004 31.12 347.95 0.0894 2005 33.37 356.7 0.0936 2006 38.26 254.37 0.1504 2007 31.08 415.38 0.0748 2008 21.64 392.58 0.0551

Table-7.1.58

89

TNPL industryYear PAT Net of P&E Average net worth Ratio 2004 56.27 449.24 0.1253 2005 35.48 465.43 0.0762 2006 82.89 522.52 0.1586 2007 85.23 576.5 0.1478 2008 102.11 640.01 0.1595

Table-7.1.59 

Interpretationy The PAT Net of P&E/Average net worth ratio of industry is decrease in 2008 because of decrease in PAT Net of P&E. In 2004, 2005, 2006 and 2007 the PAT Net of P&E and Average net worth is increasing. y Among the three companies the TNPL industry has the highest in PAT Net of P&E/Average net worth ratio. y The average PAT Net of P&E/Average net worth ratio of the TNPL industry is highest then the average of industry.

b. On the basis of capital employed

1. PBIT Average capital employed Year PBIT Average capital employed 2004 896.23 15689.65 2005 884.43 15888.28 2006 1391.16 17434.25 2007 1814.55 20432.7 2008 1729.11 20983.3

90

Ratio

0.05714

0.05567

0.07979

0.08881

0.08240

Table-7.1.60

2. PAT Average capital employed

Year PAT

2004 212.43

2005 253.48 15888.28 0.01595

2006 658.49 17434.25 0.03777

2007 937.75

2008 817.81

Average capital 15689.65 Ratio 0.01354

20432.7 20983.3 0.04589 0.03897

Table-7.1.61

Chart-7.1.17

Ballarpur industryYear 2004 2005 2006 2007 2008

91

PAT Average employed Ratio

96.46 capital 3057.36

133.91 3242.45

168.1 3217.65

212

250.77

3673.81 4026.38

0.03155

0.04130

0.05224

0.05771 0.06228

Table-7.1.62 J.K industryYear PAT Average employed Ratio 0.01354 0.01595 0.03777 0.04589 0.03897 2004 33.04 capital 958.88 2005 41.22 1057.04 2006 38.53 1091.75 2007 35.52 2008 34.71

1190.41 1414.32

Table-7.1.63 TNPL industryYear PAT Average employed Ratio 0.0487 0.0337 Table-7.1.64 0.0678 0.0553 0.0660 2004 52.8 capital 1084.84 2005 37.95 1125.76 2006 80.55 1188.75 2007 86.06 2008 112.83

1555.73 1709.45 

Interpretationy The PAT/Average capital employed ratio of industry is decrease in 2008 because of decrease in PAT. In 2004, 2005, 2006 and 2007 the PAT and Average capital employed is increasing. In 2007 there is highest increase in ratio.

92

y

Among the three companies the TNPL industry has the highest in PAT/Average capital employed ratio.

y

The average PAT/Average capital employed ratio of the TNPL industry is highest then the average of industry.

c. On the basis of Total Assets

1. PBIT Total assets

Year PBIT Total assets Ratio

2004 896.23 13378.43

2005 884.43 14682.56

2006 1391.16 16342.95

2007 1814.55 19044.6

2008 1729.11 18700.4

0.06699

0.06024

0.08512

0.09528

0.09246

Table-7.1.65

Chart-7.1.18

93

2.

PAT Total Assets

Year PAT Total Ratio

2004 212.43 13378.43 0.01588

2005 253.48 14682.56 0.01726

2006 658.49 16342.95 0.04029

2007 937.75 19044.6 0.04924

2008 817.81 18700.4 0.04373

Table-7.1.66

Chart-7.1.19 Ballarpur industryYear PAT Total Assets Ratio 0.03155 0.04130 0.05224 0.05771 0.06228 2004 96.46 3057.36 2005 133.91 3242.45 2006 168.1 3217.65 2007 212 3673.81 2008 250.77 4026.38

Table-7.1.67

94

J.K industryYear PAT Total Assets Ratio 0.0345 0.0390 0.0353 0.0298 0.0245 2004 33.04 958.88 2005 41.22 1057.04 2006 38.53 1091.75 2007 35.52 1190.41 2008 34.71 1414.34

Table-7.1.68 TNPL industryYear PAT Total Assets Ratio 0.0487 0.0338 0.0678 0.0553 0.0660 2004 52.8 1084.84 2005 37.95 1125.76 2006 80.55 1188.75 2007 86.06 1555.73 2008 112.83 1709.45

Table-7.1.69 

Interpretationy The PAT/Total assets ratio of industry is decrease in 2008 because of decrease in PAT and total assets. In 2004, 2005, 2006 and 2007 the PAT and Total assets is increasing. In 2007 there is highest increase in ratio. y Among the three companies the Ballarpur industry has the highest in PAT/Total assets ratio. y The average PAT/Total assets ratio of the Ballarpur industry is highest then the average of industry.

95

7.2 Horizontal Analysis: Income
As per as horizontal analysis of income is concerned the following are the findings y Total income increases by 8.64%, 7.26%, 12.85%, and 13.45% in the year 2004, 2005, 2006, and 2007 respectively. In the year 2008 it is decreasing by 6.45%. y Sales increases by 8.36%, 8.2%, 11.73%, and 14% in the year 2004, 2005, 2006, and 2007 respectively. In the year 2008 it is decreasing by 8.04%. y Other income decreases by 14.04% in the year 2006 and increases by 21.8%, 17.74%, 0.1% and 14.31% in the year 2004, 2005, 2007, and 2008 respectively. In the year 2008 it shows the highest increase. 

Liabilities
As per as horizontal analysis of liabilities is concerned the following are the findings y Net worth increases by 18.75% in the year 2007 which shows good position of the overall industry. y Reserves and surplus increases by 30.6%, 30.13%, 31.81%, 41.69% and 0.14% in the year 2004, 2005, 2006, 2007 and 2008 respectively. In the year 2007 it shows the highest increase. y Total borrowing increases by 4.23%, 2.67%, 8.05%, 18.61% and 3.81% in the year 2004, 2005, 2006, 2007 and 2008 respectively. In the year 2007 it shows the highest increase.

96

y

Current liabilities and provision shows negative sign in the year 2004 and 2008. In the year, 2005, 2006, 2007 it is increases by 8.87%, 3.87%, 13.44% respectively.

y

Deferred tax liability shows negative sign in the year 2008 which means that tax liabilities is decreasing that year. In the year 2004, 2005, 2006, 2007 it is increases by 11.4%, 6.38%, 38.44% and 13.19% respectively.

97

7.3 Trend Analysis:Trend analysis ± Industry
Assumption ± 2003 is taken as a base year Liabilities 2004 2005 2006 2007 2008

Net worth Authorized capital Issued equity capital

109.48 101.43 104.99

126.56 108.75 109.36 109.38

147.82 116.51 118.10 117.94

175.54 122.35 115.45 115.62

175.56 122.35 117.55 114.38

Paid up equity capital [net 104.92 of forfeited] Forfeited equity capital Paid up preference capital Capital 100.00 68.25

145.45 48.35 479.29

218.18 46.82 302.04

172.73 37.74 92.63

172.73 30.20 255.57

contribution 98.78

suspense & application Reserves & surplus Free reserves Security premium reserves Other free reserves Specific reserves Revaluation reserves Less : accumulated losses Total borrowings Bank borrowings Short borrowings term 130.61 115.78 111.60 119.10 145.03 103.71 105.48 104.23 110.85 bank 116.10 169.96 127.21 115.51 136.50 146.29 289.86 117.73 107.02 123.13 122.77 224.02 156.85 135.18 174.80 145.61 283.02 118.81 115.63 135.74 129.64 317.42 189.52 154.41 217.42 259.93 287.87 107.86 137.15 179.91 162.37 317.87 183.35 106.69 244.27 265.82 287.52 98.55 142.37 193.11 173.82

98

Long borrowings Financial borrowings Central

term

bank 107.24

123.37

139.92

191.94

206.34

institutional 82.24

45.34

37.99

26.29

23.99

&

state 102.85

110.12

116.29

122.01

106.00

government Debentures/bonds Convertible Nonconvertible Fixed deposit Foreign borrowings 103.67 1710.11 7.32 86.70 134.35 50.48 0.00 5.11 64.70 492.69 0.00 40.36 0.00 4.08 34.91 656.67 0.00 52.12 272.65 4.45 28.25 656.57 0.00 44.80 272.65 3.96 29.06 762.89 0.00

Of which euro convertible 0.00 bond Borrowing from corporate 119.38 bodies Group/associate Borrowing promoters/directors Commercial paper Hire purchase borrowing Deferred credit Other borrowings Secured borrowings Unsecured borrowings 0.00 108.29 119.60 93.34 104.30 104.00 97.56 from 121.14

124.26

77.45

90.46

81.83

97.42 156.74

25.47 148.52

26.42 183.83

3.01 167.59

0.00 90.00 139.43 114.64 104.13 115.97 100.58

0.00 84.00 155.73 283.16 111.29 129.07 135.32

0.00 80.86 154.31 293.60 132.11 152.78 175.69

0.00 105.14 156.91 251.19 143.06 140.22 264.66

Current portion of long 74.13 term debt Current liabilities & 92.77

101.01

104.92

119.02

115.97

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provision Sundry creditor Acceptances 89.57 118.68 99.48 135.45 115.75 99.89 96.94 134.88 117.10 57.56 154.63 130.20 82.24 126.43

Deposits & advances from 92.89 customer interest accrued Share application money Other current liabilities Provision Deferred tax liabilities Total liabilities Net worth Contingent liabilities 77.23 91.73 101.81 113.17 111.40 103.50 111.91 108.31

89.48 4.51 95.59 111.20 118.51 111.97 116.06 145.71

88.47 12.03 109.63 156.05 123.05 122.87 143.29 179.19

89.23

63.99

151804.51 130.83 124.69 190.22 137.83 144.00 174.23 221.00 68.87 229.27 131.45 145.06 175.42 181.11

Assets
Gross fixed assets Land & building Plant & machinery Transport 104.10 102.89 105.84 & 106.08 114.20 106.39 114.67 132.95 122.47 103.18 122.02 146.91 141.17 108.00 134.13 188.26 135.53 105.45 132.54 176.93

communication equipment Furniture amenities 7 Capital work in progress Intangible assets Net per operative expenses Net lease reserve Less: depreciation 106.40 105.04 304.09 3.24 0.00 120.18 144.34 309.21 24.80 0.00 120.71 112.87 195.57 333.59 53.96 0.00 127.14 58.91 351.32 368.16 166.09 0.00 138.61 56.67 286.98 369.07 121.37 0.00 130.25

cumulative 110.04

100

Less: areas of depreciation Net fixed assets Investment Equity shares Preference shares Mutual fund Debt instrument Approved security Assisted companies` Others Less: provision for de Group companies Non group companies

87.42 100.66 103.29 108.98 100.38 80.63 105.04 0.00 0.00 18.53 105.14 112.34 86.38

156.17 110.34 99.77 109.63 100.15 48.93 98.42 0.00 0.00 36.00 94.08 111.85 73.67 369.06

213.82 119.62 89.34 102.92 113.12 30.82 9.90 0.00 0.00 66.53 96.42 102.56 59.43 331.22

187.75 142.60 149.92 179.15 164.60 13.99 15.31 0.00 0.00 50.00 95.56 195.39 41.07 206.54

192.02 138.52 161.15 184.21 164.40 59.39 6.68 0.00 0.00 171.73 127.41 202.77 57.09 263.09

Market value of quoted 63.34 investment Deferred tax assets Current assets Cash & bank balance Inventories Receivables Expenses paid in advances Loans & advances Deferred expenditure Total assets 103.50 93.80 109.27 140.10 102.04 109.97 109.54 140.35 revenue 62.28

81.09 120.19 136.67 114.86 123.25 100.67 93.90 120.43

64.98 140.21 301.48 121.69 128.82 139.52 133.85 46.95

64.73 156.93 300.61 136.17 146.62 201.53 153.05 35.52

81.18 157.12 331.54 131.61 140.76 263.67 302.84 12.02

111.97

122.87

144.00

145.06

Table-7.3.1

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Interpretation of trend analysis Liabilities
1. Net worth of paper manufacturing industry is in increasing trend. From 2004 to 2008 it increases by 60.35%. 2. Authorized capital of paper manufacturing industry is in increasing trend. It increases only by 20.62% from 2004 to 2008. 3. Issued equity capital of paper manufacturing industry is in fluctuate trend. Up to 2006 it increases but in 2007 it decreases and in 2008 it goes on increasing. 4. Paid up equity capital [net of fortified is in fluctuate trend. 5. Forfeited equity capital is also in fluctuate trend. First it increases but after 2006 it decreases. 6. Paid up preference capital of paper manufacturing industry is in decreasing trend. It decreases by 55.75% from 2004 to 2008. 7. Capital contribution suspense & application is in fluctuating trend. First it increases but later it decreases. 8. Reserves & surplus of paper manufacturing industry is in increasing trend. It increases by 143.37% from 2004 to 2008. 9. Free reserves of paper manufacturing industry are in increasing trend. It increases by 58.36% from 2004 to 2008. 10. Security premium reserves are in fluctuating trend. From 2004 to 2007 it increases by 38.36% but in 2008 it decreases. 11. Other free reserves are in increasing trend. It increases by 105.09% from 2004 to 2008. 12. Specific reserves are in fluctuating trend.

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13. Revaluation reserves are in fluctuating trend. First it increases but later it decreases. 14. Accumulated losses are in fluctuating trend. From 2004 to 2006 it increases but from 2007 onwards it decreases. 15. Total borrowings are in increasing trend. It increases by 36.59% from 2004 to 2008. 16. Bank borrowings are in increasing trend. It increases by 74.20% from 2004 to 2008. 17. Short term bank borrowings are in increasing trend. It increases by 49.71% from 2004 to 2008. 18. Long term bank borrowings are in increasing trend. It increases by 92.40% from 2004 to 2008. 19. Financial institutional borrowings of paper manufacturing industry are in decreasing trend. It decreases by 70.82% from 2004 to 2008. 20. Central & state government is in fluctuating trend. From 2004 to 2007 it increases by 18.62% but in 2008 it decreases. 21. Debentures/bonds are in fluctuating trend. From 2004 to 2006 it decreases by 61.06% but in 2007 it increases and in 2008 it decreases. 22. Fixed deposit is in decreasing trend. It decreases by 66.48% from 2004 to 2008. 23. Foreign borrowings are in increasing trend. It increases by 467.8% from 2004 to 2008. 24. Borrowing from corporate bodies is in fluctuating trend. 25. Group/associate is in decreasing trend. It decreases by 96.91% from 2004 to 2008.

Assets
1. Gross fixed assets are in increasing trend. It increases by 35.60%.

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2. Intangible assets are in increasing trend. It increases by 21.36% from 2004 to 2008. 3. Net fixed assets are in fluctuating trend. From 2004 to 2007 it increases but in 2008 it decreases. 4. Investment is in fluctuating trend. From 2004 to 2006 it decreases but in 2007 it decreases. 5. Current assets are in continues increasing trend. It increases by 43.79% from 2004 to 2008. 6. Cash & bank balance is in fluctuating trend. 7. Inventories are in increasing trend. 8. Receivables are in increasing trend. It increases by 33.32% till 2007 but in 2008 it decreases. 9. Expenses paid in advances are in fluctuating trend. First it decreases and later it increases. 10. Loans & advances are in fluctuating trend. First it decreases and later it increases

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Chapter-8 Recent News Related to the Industry 
Paper Industry invests in contract farming (February 15 2009)
Paper industry, which faces difficulty in getting wood pulp, has started to induce farmers to take contract farming. Now every farmer, who plants eucalyputus, acacia or sabaul will get Rs.15000 per acre. The agreements are done to benefit the farmers, either they get market price for wood pulp or as per the contract price or whichever is higher. The industry also provides assistance in lending or coax banks to lend, as most plantations take 4 years to yield. Expected demand for paper is to go up from 8.0 million tonnes to 11.5 million tonnes by 2010. 

Paper Industry to face some tough year(September 04 2009)
Indian Paper industry is to face a mismatch in demand-supply as large and small players are adding capacities. Around 4 lakh tonnes of capacity is being added this year where the demand may not be there, though the industry is growing at 5-6%. Importers are also wary in such a situation as larger players are lobbying for safeguard duty. Looking at export opportunities as prices have corrected largely in Europe and US. Locally, the prices have dropped considerably from Rs.50,000 /tone to Rs.38000 /tonne where large mills could barely break even. 

TUF scheme for Indian paper industry on the anvil(march 13 2009)
Once the scheme is through, about 700 to 800 paper manufacturing units in the small and medium sector would go for up gradation and improve the

105

quality of the products The Centre has in principle agreed to come out with a Technology Up gradation Fund Scheme (TUFS) for the benefit of the paper industry, an official of Indian Agro and Recycled Paper Mills Association (IARPMA).  Paper manufacturers pass on benefit of excise duty cuts(December 2008) 
Paper industry for increasing duty against imports(January 12, 2009) 

Orchids Paper Products Company Reports Increased Sales and Earnings in Third Quarter Results(October 28 2009)  Paper wins another battle «««.plastic bags banded and paper bags made from 40% recycled paper is used.(October 2009)

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Chapter-9 Findings & Conclusion 
Indian paper industry is currently in the midst of a transformation with major capital expenditure (capex) underway and improving operating efficiencies is the major concern of the all players. All players are committing a large amount of investment, focusing on:

‡

Improving the operational efficiencies through rightsizing pulping capacities

‡ ‡ ‡

Brown-field capacity expansions Backward integration into captive power Adherence to pollution norms by chemical recovery 

The paper industry would witness an investment worth INR100.0 billion capex in next 2-3 years. The top 10 domestic players in paper sector would account for around 70% of the capex planned to be implemented in 2007-09.  Big players from the considerable market share, but the company should also tap the medium and small players for expansion in India.  Moreover, since plastic bags are going to be banded in coming years completely it will be an opportunity for paper industry to grow.  Companies in paper industry should reduce their current liabilities or increase their current assets to grow.  It should increase the plantation and put efforts to protect plants and recycling of paper is a very good opportunity for this industry and it should grab this opportunity.  Technologies from china and other countries are upgrading in paper industry so India should import this machineries for growth of Indian Paper Industry.

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Also economic growth and FDI investment in Indian Paper Industry is an opportunity for India.  India has availability of cheap labour and also the manpower efficiency and productivity is good in India which is beneficial for Paper Industry.  De-licensing of paper industry has invited entrepreneur and industry development.  Development in printing and packaging industry is opportunity for Paper industry to grow.  Moreover there are around 13,000 printing companies in India which helps in growth of paper industry.

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Chapter-10 References 
www.scribd.com/.../Prospect-of-Pulp-and-Paper-Industry-in-the-Middle-ofRaw-Material-Crisis-2008  www.inpaper.com  www.ipma.co.in  www.scribd.com/doc/21339016/Paper-Industry-Project-Report  www.scribd.com/doc/19989653/OPM-Project-Paper-Industry  www.scribd.com/doc/13629599/Paper  www.itcportal.com/paperboards_specialtypapers/paperboards.html  www.sooperarticles.com/business-articles/small-business-articles/currentscenario-handmade-paper-industry-india-15683.html  http://resources.bnet.com.html  http://www.oppapers.com/essays/Pest-Analysis-Apparel-ManufacturingIndustry/143295  http://www.thehindubusinessline.com/2008/05/28/stories/2008052850350900. htm  http://ies.lbl.gov/iespubs/41843.pdf  http://www.economywatch.com/business-and-economy/paper-industry.html

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