JK paper is the stock on the radar as schools and colleges have started reopening in a few states where COVID-19 restrictions have been eased. Additionally, China recently banned imported waste paper and is instead importing pulp paper leading to a supply shortage for Indian box makers.
AS Mehta, President & Director, JK Paper spoke to CNBC-TV18 about the on-ground demand and the outlook going forward. After the reopening of the offices and schools and revival of economic activities, the paper demand is back at robust levels.
Talking about the different categories, he said, demand for office paper, which is responsible for 50 percent of JK paper’s revenue, has picked up well. Last month, it was better than the pre-COVID level, he said, adding that there was some inventory correction from the dealer and the counterpoint of view but the demand is very good for office paper.
Since school and colleges are reopening, the writing and printing paper demand has also picked up, Mehta said.
He also pointed to good demand for the packaging board following a revival in FMCG, food, white goods as well as apparel segments. “In fact, it was robust from the last six months, so there is a good demand seen for the paper industry,” he said.
Due to increases in input prices of fuel and commodities, prices also hiked last month for all papers like coated paper uncoated paper office paper, packaging board, Mehta said there is likely to be further cost increases on the energy part and the company needs to look at what kind of price increase it can take.
The price increases were in the range of 3-5 percent for different products and categories, he said.
When asked about revenues trajectory, he said, the Gujarat plant at its full capacity will give additional turnover of something around Rs 1200 crore per year. When such a big project is commissioned, the ramp-up takes time, he said adding that this quarter and the December quarter volumes may be small but thereafter there would be a sizable volume coming from the Gujarat facility.
“For the Sirpur facility as well, since 80 percent capacity utilisation is more or less already there for this quarter, it will also give additional turnover. At 80 percent capacity, the quarterly turnover would be close to Rs 150 crore from the Sirpur facility,” Mehta added.
He said the company expects revenues above Rs 3000 crore for FY22 and margins would be in the range of 23-24 percent.
Talking about debt, he said, for the Gujarat expansion the firm could add a debt of around Rs 1400-1500 crore and then the total gross debt would be around Rs 2600 crore by end of FY22. However, with capacity addition, there would be a generation of cash flow and so the debt reduction will start after that, he added.
For the full conversation, watch the video