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An economic slowdown and a tightening in lending by banks have forced Emami Paper Mills Ltd to defer the setting up its ₹2,000-crore green-field plant at Gujarat. The company instead is looking to shore up margins by focussing on premium offerings and through export markets.
The first phase of Gujarat plant, was supposed to come up at an estimated cost of ₹1,000 crore. A similar amount would go in for phase-II. Initial plans envisaged a 225,000 tonne per annum (TPA) multi-layer coated packaging board manufacturing unit and an 18-MW captive power plant.
“In view of the current economic slowdown and uncertainty in lending by banks, we have decided to defer (work on) Gujarat project. We would review the situation and then take a call on renewing construction,” PS Patwari, Executive Director and CEO, Emami Paper, told BuinessLine on the sidelines of the company’s annual general meeting.
Emami Paper, the paper and packaging board unit of the Kolkata-based Emami Group, is listed on both the NSE and the BSE. Currently, it has two manufacturing facilities – one in Kolkata (West Bengal) and another at Balasore (Odisha) – with a combined capacity of 360,000 TPA. The company reported a turnover of ₹1,542 crore in FY19 with a net profit of ₹44 crore.
According to Patwari, plans are afoot to focus on premium offerings that include making of writing and printing papers and other high value-added offerings (like paper for laminate bases). This would be done by shoring up existing capacities and by cutting back on newsprint production, at its Balasore unit.
The company has already cut-back, by nearly 50 per cent, its newsprint capacity. From 150,000 TPA newsprint capacity, Emami Paper’s current newsprint making capacity stands at 80,000 TPA. The company is amongst the largest newsprint makers in the country.
The focus on high-value added products is expected to shore up margins, according to the CEO. The EBITDA margins are expected to improve to 18-19 per cent for FY20, up from around the 17 per cent level last fiscal.
Another focus would be to push exports and see that it grows by 44 per cent this fiscal. This would be done by going deep into existing markets such as South East Asia, Thailand, Vietnam, West Asia and Sri Lanka.
“Exports grew by 44 per cent in FY19 and we plan to have similar growth numbers this year. Moreover, the focus on high value and premium offerings should shore up margins,” he said.
Meanwhile, sources say, the promoters have roped in investment banker, Nomura, as it plans to bring in a strategic partner or buyer and pare promoter stake in the company. Promoter stake in Emami Paper stands at around 74.97 per cent as on June 30, 2019.
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