V. Sajeev Kumar
Kochi, Jan. 2
, THE Kochi-based Sree Sakthi Paper Mills Ltd, the second largest producer of kraft paper in South India, is expanding the capacity at its Edayar plant to 70,000 tonnes per annum from 40,000 tonnes.
The company is coming out with an IPO of Rs 25 crore to fund its expansion. Mr S. Rajkumar, Managing Director, spoke to
Business Lineabout the general trends in the paper industry. Excerpts from the interview:
Can you give an idea about the industry segment that you are operating in? What is the present status of the industry?We are operating in the packaging segment, specialising in kraft paper of various grades, besides Duplex board and other colour boards are also manufactured to cater to both local and export markets. The packaging segment is the largest consumer of paper where the kraft paper is converted into corrugated boxes of various shapes and strength as per the requirement of the customers. Hence, the growth of packaging segment is directly linked to the CAGR (compounded annual growth rate), which is roughly 7 per cent at present.
What are the factors that affect the demand in your industry?The growth of paper industry is directly linked to economic development in the country and, hence, the demand for paper is likely to go up by at least 7 per cent per annum. Besides, paper imports is a major factor affecting the demand. The ban on plastics is likely to shoot up the demand for quality paper for kraft carry bags. Also, the usage of paper in the food industry will also fuel demand.
What is your market share?SSPML is the second largest producer of kraft paper in South India and is poised to be the largest player in post-expansion scenario. We command roughly 6 per cent of the market share in the South and expect to increase it to 10 per cent in the near future.
Do you see any potential in the export market? If so, which are the countries you are seriously looking at?Yes. We are eyeing specific products such as colour boards, file boards, low GSM Duplex boards and high strength kraft paper. These are the segments not competed by large players. The major countries we are looking at for exports are Sri Lanka, Bangladesh, Nigeria, Kenya, Mozambique, Sudan, Egypt and Iran.
How do you visualise the growth of Sree Sakthi? Five years from now, how large will your firm be?The total income of the company for 2004-05 is about Rs 50 crore. The expected total income for the current year as appraised by SBI Capital Markets Ltd is more than Rs 65 crore. After the expansion, apart from doubling the turnover, we hope to become the largest player in the South Indian kraft paper market.
On the financial performance of the company...It has been making profit from inception. The turnover for 2004-05 stood at Rs 50.57 crore. In the first six months of the current fiscal ended September 2005, the company achieved a turnover of Rs 31.1 crore. The PBDT as on March 31, 2004-05 was Rs 3.01 crore and the profit after tax was Rs 1.03 crore. The PBDT of the company for the period ended September 30, 2005 was Rs 1.78 crore and the PAT was Rs 84 lakh.
What will be the impact of imports into India?Imports into the country do not have any impact on our sales because the company is competing only in the economic segment of the market. The competition in the market is mainly in the premium segment of board and coated paper.
Is there any plan to go for a foreign tie-up?The company is open to collaboration with a foreign company and we have already initiated action in this regard. We strongly feel that we will be in a better position to attract foreign companies in our post-expansion period.