indian paper industry

Research India

Indian Paper Industry

January 2008

2© 2008 Research India – Confidential

Contents

Global Paper Industry


Size & Growth

Sub-segment

Key Drivers

Key Players

Conclusion

Appendix


The global annual production of paper was 382.0 million tonnes in 2006

321.4 328.1360.0 366.0 382.0 402.0

490.0

2002 2003 2004 2005 2006 2010 2020

Paper and Paperboard Production – Global Market, 2002-20(figures in million tonnes)

• 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.

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

• Broadly, the industry can be classified into two segments:

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

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

• The US is the largest market for paper product and commands high per capita consumption. Asia’s main markets are China, Japan, India, Malaysia, Singapore and Thailand.

- In 2005, Japan had the highest per capita consumption (247 kg), followed by Singapore (228 kg), Malaysia (106 kg), Taiwan (51 kg) China (42 kg), Indonesia (22 kg) and Philippines (16 kg).

- India’s per capita consumption is estimated to be as low as 7.0 kg in 2006.

Source: CEPI; RISI; European recover paper council; ICEM World Paper Conference (November 2005); Research India analysis

312.0

247.0228.0

106.0

51.0 42.022.0 16.0 14.0 6.57.0

324.0

USA J apan Singapore Malaysia Thailand China Indonesia Philippines Vietnam India

Consumption per capital, 2005 vs. 2006(figures in Kgs)

2005

2006


Asian region is the largest producer and consumer of paper & paperboard in 2006

• 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.

- 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%.

- 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.

- It is expected that Asian market would account for 60% of global incremental production during the period 2004-2020.

- 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.

- The share of mature markets like North America and Europe would fall to around 50% by 2010 from the 52% in 2006.

Source: CEPI; RISI; European recover paper council; Research India analysis

Paper and Paperboard Consumption – Region wise, 2006(figures in percent)

North America26%

Asia39%

Rest of the world3%

CEPI Countries26%

Latin America

6%

100% =381.2 million tonnes

Paper and Paperboard Production – Region wise, 2006(figures in percent)

North America27%

Asia36%

Rest of the world2%

Europe30%

Latin America

5%

100% =382.0 million tonnes


Contents



Size & Growth

Sub-segment

Key Drivers

Key Players

Conclusion

Appendix


In India, around 666 units are engaged in the production of paper and paper-board

• 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.

- 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 categorised based on the raw

materials - wood/forest based mills, agro-residue based

mills and wastepaper-based mills.

- 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 material.

Category Capacity Range Number of units Capacity (TPA)

Small Up to 10000 299 12,90,382

<2000 69 75,522

2000–5000 107 2,96,980

5000–10000 123 9,17,880

Medium 10000–20000 116 16,69,460

Large >20000 70 38,93,048

Category-wise paper mills in India (figures in number)

Source: DIPP; Water and agro industry; Mysore Mills estimates; Research India analysis

Raw material-wise paper mills in India (figures in number)

Wood32%

Recycled Paper38%

Agri-Residue30%


Due to high growth rate, Indian paper industry is very attractive for the foreign players

6.2 6.4

7.4 7.78.1

5.25.6

5.9 5.96.5

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

Paper and Paperboard - Production in India, 2002-06(figures in million tonnes)

• India is self-sufficient in manufacture of most varieties of paper and paperboards.

- Import is mainly related to certain speciality papers such as light weight coated variety of paper, cheque paper, etc.

- 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 modernisation 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.

Source: DIPP; Water and agro industry; Mysore Mills estimates; CIBA; CRIS INFAC; Research India analysis

Installed Capacity

Production

0.2

0.3

0.2

0.3

0.4

0.2

0.2

0.30.3

0.3

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

Import

Export

Paper and Paperboard - Import-Export, 2002-06(figures in million tonnes)

* Note: estimated figures

*


It is expected that paperboard would grow at a faster rate within paper industry

8.3

13.9

21.0

9.0

14.0

20.0

2009-10 2014-15 2019-20

Paper & Paperboard - Production and Consumption(figures in million tonnes)

• 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

- 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.

- 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.

Production

Consumption

Source: CII; IPMA; Bilt; Research India analysis


1.2

1.6

1.9

2.4

0.7

1.0

1.4

1.8

2005 2010 2015 2020

1.6

2.2

2.9

3.9

0.7 0.91.0

1.2

2005 2010 2015 2020

Projected Demand, Supply of Paper & Paperboard, 2005-20(figures in million tonnes)

6.2

8.3

11.1

14.9

5.86.8

8.0

9.5

2005 2010 2015 2020

4.9

6.7

9.1

12.2

4.5

6.1

8.2

9.5

2005 2010 2015 2020

Source - Financial Express, February 19th, 2006 Source – Jaakko Poyry Report 2002

Demand

Supply

Source: CPPRI; Research India analysis

It is estimated that demand would outpace supply

Projected Demand, Supply of Newsprint, 2005-20(figures in million tonnes)

Demand

Supply


Contents



Size & Growth

Sub-segment

Key Drivers

Key Players

Appendix


Due to high growth rate, Indian paper industry is very attractive for the foreign players

1.2 1.3 1.31.4

1.5

0.60.7

0.8

0.91.0

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

Newsprint Production in India, 2002-06(figures in million tonnes)

• In 2006, there were around 77 mills listed in Schedule to

the Newsprint Control Order, 2004 as mills

manufacturing newsprint paper – of which 2 in Central

Public Sector, 2 in State Public Sector and 73 in Private

Sector.

• The production of newsprint has increased at a CAGR of

12.5% over the last 5 years. The production of newsprint

in 2006-07 (April-August 2006) was 420,000 tonnes.

• According to the International newspaper marketing

association (INMA) estimates that approximately more

than 360.0 million literate people in India are still not

reading newspaper. Thus, increase in the number of

newspaper reader would also increase the demand for

newsprint.

• The demand for newsprint in the country is met partly

from indigenous production and partly by import. Free

imports and low customs duty have made newsprint

market competitive.

- There are no price or quantitative controls. Various

policy measures have been taken to improve

production and availability of newsprint.

Source: DIPP; The Central Pulp and Paper Research Institute (CPPRI),; Mysore Mills estimates; Research India analysis

Installed Capacity

Production

520.0

750.0

670.0 680.0

840.0

0.0 3.0 5.0 10.0 2.4

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

Import

Export

Newsprint - Import-Export, 2002-06(figures in ‘000 tonnes)

** Note: estimated figures


106.0119.0

169.0190.0

215.0

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

Uncoated wood-free paper market is primarily dominated by domestic players

Source: Bilt; Research India analysis

307.0

362.0 381.0415.0

447.2

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

Uncoated Wood Free Paper Market, 2003-07(figures in ‘000 tonnes)

• Uncoated wood free paper market is mainly dominated

by the domestic players. It is highly commoditised and

competitive segment. All players compete with each

other on the basis of cost.

• Uncoated wood free market, including both hi-bright and

low-bright, grew to 860,000 tonnes in 2006-07 from

814,000 tonnes in 2005-06.

- Of the total uncoated paper market, hi-bright accounts

for 52% in 2006-07 and 51% in 2005-06 respectively.

- Hi-bright paper segment includes super printing

paper, NSD and SS Maplitho etc.

• Due to strong economy growth, the demand for copier is

also increasing. It includes paper, which are cut in

different size, for desktop printing and copying.

CAGR

9.76%

CAGR

18.92%

Copier Paper Market, 2003-07(figures in ‘000 tonnes)


1.2 1.2 1.2

1.4 1.4

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

Coated wood-free paper is the fastest growing paper segment in India

Source: Bilt; Research India analysis

222.5244.7

270.0293.0

320.0

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

Coated Wood Free Paper Market, 2003-07(figures in ‘000 tonnes)

• Coated wood free paper is the fastest growing segment in India, with a growth rate of 9.2% in 2006-07. Within the coated segment

- The two side coated paper market grew by 13% to 155,000 tonnes in 2006-07, compared to 140,000 tonnes in 2005-06

- The two side coated board market grew by 9.0% to 62,000 tonnes in 2006-07, compared to 60,000 tonnes in the previous year.

• Coated paper segment witnessed a shift towards high value and good quality blade coating paper. The companies are also facing stiff competition and price pressures from imports – mainly from China and Southeast Asian countries.

• Creamwove paper is a basic printing paper material, mainly caters to excise book makers. This segment is highly competitive and commoditised.

Creamwove Paper Market, 2003-07(figures in million tonnes)

CAGR

5.19%

CAGR

9.82%


Tissue paper segment is at a very nascent stage in India

Source: ICICI direct Research, CRIS Infac; Research India analysis

• Specialty paper market has grown at a compound rate of

7.46% in last 4 years, due to strong domestic demand.

- According to CRIS Infac, speciality paper segment is

expected to grow to 297,000 tonnes by 2008, an

increase of 7.2% over 2006-07.

• Tissue paper industry has emerged as a new sub-

segment within the paper industry in India. Tissue market

is at a very nascent stage in India. Due to increasing

disposable income, the consumers are adopting the

tissue culture.

- The Indian market for tissue paper is only 30,000

tonnes per annum, while that in China is 3.0 million

tonnes.

- With the increasing preferences towards hygiene

products, the demand for tissues is expected to grow

at a faster rate. Moreover, the entry of new players

like BILT would also increase capacity.

205.0221.0

239.0258.0

277.0

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

Speciality Paper Market, 2003-07(figures in ‘000 tonnes)

CAGR

7.46%


Contents



Size & Growth

Sub-segment

Key Drivers

Key Players

Conclusion

Appendix


DescriptionTrend Description Potential ImplicationsPotential

Implications Trend

Strong economic growth

Increased government focus oneducation

Low consumption per capita

Printing Industry

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

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

• 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.

• 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.




Printing IndustryIncreased government

focus oneducation

• 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.

• Strong economic growth would fuel the demand for paper and newsprints.

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

• In 2007-08, the central government has allocated INR106.7 billion for SSA programme.

• It allocated INR6.9 billion (4.1% of total fund) for textbook in 2006-07

• Increased rates of literacy and improved school infrastructure would result in greater demand for paper.

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

Paper and Paperboard Industry – Key Drivers


• Indian economy has grown at a 7-8% rate in last 4 years. All the sector contributed in GDP growth, such as manufacturing, FMCG, services etc. Manufacturing and services industry contributed approximately 90% of the growth.

- A strong economy contributes to consumption of papers in all sectors - office, education and personal consumers.

• Due to improving living standard and higher disposable incomes, the demand for branded high end paper and hygiene paper products has increased in last 3-4 years.

- The demand for upstream market of paper products, like, tissue paper, tea bags, filter paper, light weight coated paper, medical grade coated paper, etc., is picking up with the growth of economy. These developments are expected to give strong support to the paper industry.

• Strong consumer demand for packaged goods is fueling high growth in industrial grades of paper & boards, largely led by growing disposable incomes and lifestyle changes.


4.3

8.5

7.58.4

9.2

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

Indian – GDP Growth Rate, 2003-07(figures in percent)

2,540.02,900.0

3,100.03,400.0

3,800.0

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

Indian – GDP Per Capita (PPP)*, 2003-07(figures in US$)

Source: CIA World Factbook; Research India analysis

* Note: GDP on a purchasing power parity basis divided by population as of 1 July for the same year


• The government has increased its focus on education and initiated several central and state-level programmes to increase the literacy rate.

• Indian government started its flagship programme Sarva Shiksha Abhiyan (SSA) in 2001 to achieve the goal of Universalisation of elementary education.

- It aims to provide useful and relevant elementary education for all children in the 6 to 14 age group by 2010.

- In 2007-08, the central government has allocated INR106.7 billion for SSA programme, moreover, an equal amount would also be allocated by states government.

- Of total fund available, the government allocated INR6.1 billion (4.7% of total fund) and INR6.9 (4.1% of total fund) for textbook in 2005-06 and 2006-07 respectively.

• An increasing expenditure on textbook offers a good opportunity for the companies.

Increased government focus on education

20.936.4

67.7

129.4

172.4

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

SSA – Total Fund Available, 2003-07(figures in INR billion)

13.1

30.6

66.0

100.0

147.8

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

SSA – Total Expenditure, 2003-07(figures in INR billion)

Source: Ministry of human resources development; Planning commission; Research India analysis



• India accounts for nearly 15% of the world population, it consumes only 1% of the world paper consumption.

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

• With the increasing literacy rate and strong economic growth, the per capita consumption of papers is expected to increase in the future

- According to Economic Survey, per capita spending on education, as a percentage of GDP, has increased from 1.2% in 1983 to 4.4% in 2003, at a CAGR of 7.1%.

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

Paper Per Capita Consumption in India, 2003-07(figures in Kgs)

4.44.8 4.6

6.0

7.0

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

Source: Earth trends; ICICI direct Research; CRIS Infac; Research India analysis

7.37.8

8.6 8.7 9.0

7.78.2

8.89.3

9.89.2 9.6

10.511.0

2007 2008E 2009E 2010E 2011E

Paper – Demand vs. Supply, 2007-11*(figures in million tonnes)

* Estimated figures Capacity Demand(7Kgs per capita)

Demand(8Kgs per capita)


• According to Indian Printing, Packaging and Allied

Machinery Manufacturers’ Association (IPAMA)

estimates, the printing industry in India provides

employment to 1.3 million people and consists of

more than 130,000 presses.

• According to Pira International study (2007), the

Indian printing industry would grew at more than 70%

by 2011.

• Massive investments in printing industry spurring

Growth at a CAGR of over 14%

- India would emerge as a global hub for high-quality

printing at a competitive cost

- Strong consumer demand for Packaged goods

fueling high growth in Industrial grades of Paper

and Boards largely led by growing disposable

incomes & Lifestyle changes

Outsourcing Opportunities

Leading Print Markets, 2006-2011(Figures in $ million)

Rank Country 2006 2011 Growth 2006-11

1 US 182,000 196,722 8.1%

2 Japan 84,976 88,363 4.0%

3 China 41,200 65,934 60.0%

4 Germany 38,794 43,329 11.7%

5 UK 34,937 39,030 11.7%

6 France 23,251 26,731 15.0%

7 Italy 23,096 26,000 12.6%

8 Canada 16,136 17,792 10.3%

9 Spain 13,856 16,074 16.0%

10 Brazil 12,552 19,192 52.9%

11 Mexico 12,277 16,550 34.8%

12 India 12,131 20,990 73.0%

Source: PRIMIR; Pira International 2007; Research India analysis


Contents



Size & Growth

Sub-segment

Key Drivers

Key Players

Conclusion

Appendix


113.0

200.0

114.0

215.0

170.0

200.0

146.0

32.0

461.0

128.0

76.0

95.0

96.0

367.0

22.0

29.0

110.0

80.0

25.0

15.0

Source: Business World; Company reports and presentation; Fitch ratings; Research India analysis

Top 10 Paper and Paperboard Producer, 2007(figures in ‘000 tonnes)

BILT is the largest player both in term of revenue and installed capacity in 2006-07

Printing & writing

Industrial grades

Newsprint

BILT

NR Agarwal Group

Century Textiles & Industries

JK Paper Ltd

Andhra Pradesh Paper Mills Ltd

Tamil Nadu Newsprint

Khanna Paper Mills

Hindustan Paper Corp

SK Bangur Group

ITC Ltd

Capital Expenditure Plans

Company Capital Expenditure

(INR billion)

Capacity Addition

(‘000 tpa)

ITC Ltd 25.0 200

BILT 12.5 240

Whitefield Paper Mills 12.0 200

AP Paper Mills Ltd 8.6 84

West Coast Paper Mills 8.2 90

Hindustan Newsprint Ltd 7.2 180

Hindustan Paper Corp 6.6 30

TNPL 5.7 15

Century Pulp & Paper 3.9 75

Rama Paper Mills Ltd 3.5 140

Seshasayee Paper 3.5 30

Sirpur Paper Mills Ltd 2.9 55

JK Paper Ltd 2.4 60

Star Paper Mills Ltd 0.9 30

Orient Paper & Industries 0.5 20

Total 103.2 1,449


Ballarpur Industries Limited (BILT)

Revenue, 2002-06(Figures in INR billion)

21.219.7 20.0 20.8

23.8

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

• Founded in 1945, with the name of Ballarpur Paper and Straw Board Mills Limited. The company changed its name to Ballarpur Industries (BILT) in 1975. BILT is the largest paper manufacturing company in India.

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

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

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

- 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

• To maintains its leadership in the market, BILT is focusing on 4 key areas:

- Securing raw material supply- Rapidly developing larger scale of operations- Continuously innovating to introduce new products

and grow new markets- Creating a de-risked corporate financial and capital

structure

Revenue – Segment wise, 2006-07(Figures in percent)

100% =INR 23.8 billion

Paper76%

Paper products & office supplies

10%

Pulp12%

Others2%

CAGR 2003-07

2.9%

Source: Company reports; news article; factiva; Research India analysis


• The 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).

• BILT is also expanding its production capacity in both coated and non-coated 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.

– The 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.

• 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 speciality and consumer-focused products business.

Paper unit State Installed capacity

Ballarpur Maharashtra 126

Bhigwan Maharashtra 125

Shreegopal Haryana 81

Sewa Orissa 68

Kamalapuram Andhra Pradesh --

Ashti Maharashtra 75

Installed Capacity – Paper unit, 2005-06(Figures in ‘000 tonnes)

Installed Capacity, 2002-06(Figures in ‘000 tonnes)

386.0 386.6 406.6

480.0 480.0

358.9

457.5407.3383.4369.9

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

Ballarpur Industries Limited (BILT)


ITC Limited – Paperboards & speciality Papers

• ITC’s paperboards and specialty paper unit was created after the merger of ITC Bhadrachalam Paperboards Limited with ITC in 2002.

• The company produces paperboards and specialty paper for all types of carton-consuming segments including cigarettes, foods, beverages, pharma, personal care & toiletries, durables and match shells.

- ITC also makes some of the premium graphic boards used for greeting cards , covers, sleeves, tags and playing cards.

- It produces both virgin and recycled boards spanning the full requirement of a packaging customer.

• ITC paper unit exports nearly 15% of the coated papers to customer requirements in Malaysia, Sri Lanka, Bangladesh, Iran, Australia, UAE, UK, Italy, Poland and Russia.

• The paperboard, paper & packaging segment is one of main focus area of the company, accounted for approximately 10% revenue of the ITC group. The company wants to maintain its leadership in value-added coated boards segment by using latest technology.

• ITC is also looking to integrate its operation fully by creating in-house pulping capacity. In 2007, it has a 240,000 tonnes of Elemental Chlorine Free pulp capacity at Bhadrachalam mill

Revenue, 2002-06*(Figures in INR billion)

11.6 12.5

15.7

19.021.0

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


100% =INR213.2 billion

Paper9.9%

FMCG68.2%

Hotel4.6%

Agri-business17.3%

CAGR 2003-07

15.9%

* Revenue for Paperboard, Paper & Packaging segment


ITC Limited – Paperboards & speciality Papers

• The company has four manufacturing units:- Bollaram unit is a value addition plant, which gets paper

from ITC's other units and adds value like coating and polylaminating.

- Tribeni plant manufactures cigarette tissues to fine papers, packaging papers and specialties. It has 3 paper machines

- Bhadrachalam unit has 3 board machines and 2 smaller paper machines.

- Kovai unit was acquired from BILT in 2004. It has a single board machine, producing coated duplex boards greyback and whiteback made with 100% recycled fibre.

• ITC's paperboards business has a manufacturing capacity of 352,000 tonnes per annum and it produced 390,000 tonnes of paperboards and 139,000 tonnes of value added paperboards in 2006-07.

• In 2007, the company initiated 2 major capacity expansion projects - 90,000 tonnes paperboard machine and 100,000 tonnes paper machine for manufacturing uncoated paper including branded copier grades.

- The total paper production capacity of the Bhadrachalam plant would go up to 400,000 tonnes annually by April 2008. the production capacity of Kovai unit would also increase to 180,000 tonnes by October 2008.

- The division is also looking for opportunities to set up a greenfield project at a cost of INR25.0 billion for foraying into the coated wood free paper market, either in Madhya Pradesh or Andhra Pradesh.


352.5 352.5

238.0 237.0

365.8390.5

225.0 225.0

352.5

309.0

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


Bollaram Andhra Pradesh 25

Bhadrachalam Andhra Pradesh 210

Kovai Tamil Nadu 65

Tribeni West Bengal 90



JK Paper Limited


6.8 7.2 7.38.4

9.3

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

• Founded in 1962, JK Paper Mills (JKPM) started its operations with an annual capacity of 18,000 tonnes. It is promoted by the H.S. Singhania Group.

• JKPM is the first paper company to get TPM Certification from JIPM, Japan and 3rd paper company in the world.

• 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.

• 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.

– The other major product is JK Maplitho, a superior uncoated Writing and Printing paper.

– It sells its products through a nationwide distribution network of approximately 100 distributors and 2,500 dealers.

Production – Segment wise, 2006-07(Figures in percent)

Coated and Branded Paper

46%

Others30%

CAGR 2003-07

8.0%


• 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.

• JKPM follows its growth plans through capacity addition and its market expansion plans through outsourcing & trading.

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

• In 2006-07, JKPM registered its highest ever sales volumes at 210,000 tonnes, owing to high capacity utilisation of 110%, improved operating efficiencies and higher sales in the copier and coated Paper segments.

– The plants currently operate at more than 120% capacity utilisation with an aggregate annual output of over 180,000 tonnes per year of paper and pulp, using latest technology.


Paper Pulp

Rayagada

(JK Paper Mills)

Orissa 125 127

Songadh

(Central Pulp Mills)

Gujarat 55 47



172.0 172.5 180.1 185.0196.0

150.0 150.0 150.0

180.0 180.0

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

JK Paper Limited


Orient Paper & Industries Limited


6.87.5

8.6

10.1

12.6

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

• Founded in 1939, Orient Paper & Industries Limited (Orient Paper) is a part of the CK Birla Group and diversified into Paper, Cement and Electric Fans. The company also announced its plans to enter into CFL business.

• The company produces a wide range of writing, printing, industrial and speciality papers. It is also a market leader in the domestic tissue paper industry with over 50% market share.

– Tissue paper is one of the fastest growing segments of paper. The growth in the use of tissue paper is positive for the company.

• In 2007, the company raised approx. INR1.7 billion via a right issue, part of which would be utilized to create additional tissue paper capacity of 20,000 tonnes at paper plant.

– The company plans to hike the capacity of the Amlai paper unit by 50% from the existing 80,000 tonnes a year at an investment of INR1.0 billion.


100% =INR8.6 billion

Paper31%

Cement46%

Electric Fans22%

Know-How & Service Fees

1%

CAGR 2003-07

16.8%


• The company plants is situated in Amlai, Madhya Pradesh with an annual capacity of 76,000 tonnes. The company also provided technical and financial aid to Pan African Paper Mills (EA), to set up a pulp and paper mill in Kenya.

• Orient Paper Mills has chosen Toscotec for the supply of a new tissue plant. The plant will be installed in Amlai, India and will have an overall capacity of 59 tons/day.

– The project involves a full turn-key installation including Modulo tissue machine, all tissue machine accessories, a slitter rewinder, complete stock preparation plant, approach flow system, high efficiency steam heated hood and integrated steam distribution plant, vacuum plant, distributed control system, A.C. drive and the complete electrical plant. It also includes erection supervision, commissioning, start-up and training.

– The Modulo 50 tissue machine would be equipped with single layer headbox, crescent former section, single press section and a 15ft Steel Yankee Dryer

– Site erection would be completed between April to November 2008. Main delivery is scheduled by June 2008, and start-up is scheduled for end of 2008.


Amlai Madhya Pradesh

76

Brajrajnagar Orissa 85



76 76 76 76 76

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

Orient Paper & Industries Limited

Note: The operations of the Brajrajnagar plants have been suspended since 1999. Majority of the employees of this plant have opted for VRS. Machinery has also been sold off.


Contents



Size & Growth

Sub-segment

Key Drivers

Key Players

Conclusion

Appendix


• 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 between 2007-09.

• Metso Corporation must tap the opportunities available in the Indian paper industry. Although big

players form the considerable market share, but the company should also tap the medium and small

players for expansion in India.

Conclusion


Contents



Size & Growth

Sub-segment

Key Drivers

Key Players

Conclusion

Appendix


Paper – Demand Forecast Variety-wise

Uncoated Paper, 2004-10(figures in million tonnes)

1.2 1.2 1.3 1.3 1.4 1.5

0.6 0.6 0.6 0.7 0.7 0.70.1 0.10.2

0.20.2

0.2

2004-05 2005-06 2006-07E 2007-08E 2008-09E 2009-10E

Craemwove Malitho (including unbranded copier)

Branded copier

1.9 2.02.1 2.2

2.32.4

Coated Paper, 2004-10(figures in ‘000 tonnes)

114.0 123.0 133.0 143.0 154.0 166.0

101.0 113.0127.0 142.0

159.0177.080.0

85.090.0

96.0102.0

109.0

2004-05 2005-06 2006-07E 2007-08E 2008-09E 2009-10E

Coated crome paper Art paper Art boards

290.0320.0

350.0380.0

410.0460.0

Source: CPPRI; Research India analysis

Industrial Paper, 2004-10(figures in million tonnes)

1.8 2.0 2.1 2.2 2.4 2.6

1.0 1.01.1

1.21.3

1.40.3

0.30.3

0.30.3

0.3

0.30.3

0.30.3

0.30.3

2004-05 2005-06 2006-07E 2007-08E 2008-09E 2009-10E

Kraft Duplex Grey and white board

3.4 3.63.8

4.14.3

4.6

MG Poster

Speciality Paper, 2004-10(figures in ‘000 tonnes)

1/1/1900 1/2/1900 1/3/1900 1/4/1900 1/5/1900 1/6/1900

Kraft Duplex Grey and white board

240.0260.0

280.0300.0

320.0350.0

MG Poster