Companies

Seshasayee Paper to realign business focus with three-pronged strategy

G Balachandar Chennai | Updated on July 28, 2021

N Gopalaratnam

₹315-crore expansion to be completed in FY22

Seshasayee Paper and Boards (SPB) has indicated that it has worked out a three-pronged strategy to realign the company’s focus to emerging global and regional trends amid its efforts to return to pre-Covid-19 levels of revenue and profit.

“The impact of Covid-19 pandemic on the paper industry has been severe. The second wave and resultant lockdowns affected and halted the demand up-tick that was witnessed in the last quarter of FY21. Order inflow has once again been impacted due to the consequences of the second wave, with schools and colleges continuing to remain closed and the work-from-home trend continuing. The company is yet to return to pre-Covid levels of revenue and profits,” N Gopalaratnam, Chairman of the company, told shareholders during the 61st AGM held over video conference on Saturday.

During Q1 of this fiscal, its revenue stood at ₹139 crore against ₹218 crore in the year-ago quarter, while profit after tax was ₹18 crore against ₹19 crore. For FY21, its revenue was ₹782 crore against ₹1,184 crore in FY20. Profit after tax was also lower at 100 compared to ₹173 crore in FY20.

Merger of Subburaj offers multiple advantages to Seshasayee Paper

However, its presence in a number of export markets and wide portfolio of products, partially helped the company negate the impact of the weak domestic demand and order inflow. Outlook for the second quarter doesn’t look promising with domestic demand yet to pickup. We expect a stronger Q3 and Q4 with a large set of our population getting vaccinated by then and the general economic mood turning positive, he added.

Strategic initiatives

In this backdrop, the company has taken a few strategic initiatives to realign its focus. It will increase the product range with capabilities to manufacture single-layer and multi-layer boards. The company will launch a slew of new products in the non-printing and writing segment such as kraft paper for bags, food packaging, and corrugated packaging boards. SPB also plans upgradation of key equipment to improve the quality of paper and the efficiency of operations.

It had prepaid all its term loans to banks and achieved zero debt status in December 2019. It continued to remain debt-free in FY21.

While it hopes to end the year with 11-15 per cent growth in FY22, helped by the reopening of schools, colleges and offices, there are concerns over increase in cost of import materials such as coal, pulp and wastepaper, chemicals, and also the spike in shipping freight rates.

Meanwhile, the company’s Mill Development Plan 3 (MDP 3) project, which is being executed at a cost of ₹315 crore at Erode, has been delayed due to the impact oflockdown. Work started in July 2019 and was expected to be completed within 21 months. Now, the company expects completion of the project, which will increase the capacity to 165,000 tonnes a year from 132,000 tonnes among other upgradations, during this fiscal.

Published on July 26, 2021

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