The Hindu Business Line : Sree Sakthi to reposition as high-end player in kraft paper

Mr S. Rajkumar (right), Managing Director, Sree Sakthi Paper Mills Ltd, and Mr S.S. Pillai, Chairman, at a press conference in Chennai on Wednesday. - Bijoy Ghosh

Chennai , Jan. 11

SREE SAKTHI Paper Mills Ltd hopes to reposition itself as a high-end player in the kraft paper market through an expansion programme, which it plans to fund through a Rs 25-crore equity offer to the public.

Making a sales pitch prior to the public issue set to open on January 17, Mr Rajkumar, Sree Sakthi's Managing Director, said that high-quality kraft paper would be the company's growth area.

Focus on its other product, duplex board, would come down since it is an area dominated by much larger players.

The company is moving into a high-value segment with lesser competition.

The Kerala-based company makes industrial packaging papers — kraft paper, for corrugated box making, and duplex board for making cartons.

The kraft paper unit is at Edayar, Alwaye, and the duplex board unit (capacity 20,000 tonnes a year) in Kanjirapilly, Chalakkudy.

The expansion will take its kraft paper production capacity to 50,000 tonnes a year from the present 20,000 tonnes.

The company would strengthen its position in the market through quality, size and efficiency. In size it would be the second biggest producer of kraft paper in South India.

It also has the flexibility to produce kraft paper at its duplex board unit, which it utilises depending on market conditions, he said.

The quality upgrade would result in production of 120-300 GSM (grammes per square metre) kraft paper against the present 100-180 GSM range and the burst factor (BF), a measure of paper strength, would go up to 16-32 BF against the present 14-22 BF. This would also help it to tap the export market, he said.

It is also setting up a 2 MW cogeneration unit as a part of the expansion plan to control energy cost.

On the customer base and markets, he said that corrugated box manufacturers constitute 40 per cent of its customers, MNC manufacturers 20 per cent, safety match and fireworks makers 15 per cent, garment manufacturers 15 per cent and industrial consumers 10 per cent.

These are all growing areas where the demand is expected to increase.

The economy is buoyant; manufacturing sector is growing; so packaging materials will grow, according to Mr Rajkumar.

The company plans to issue 83.33 lakh equity shares at a price of Rs 30 each (face value of Rs 10 and premium Rs 20).

It opens on January 17 and closes on January 21.

The project cost of Rs 26.55 crore includes Rs 12 crore for kraft paper capacity expansion, Rs 7 crore for cogeneration unit, Rs 2.5 crore for additional working capital requirement, Rs 4 crore for retiring high cost loans and Rs 1 crore for issue expenses.

The company will bring in Rs 1.55 crore through internal accruals.