Table of Contents
This report profiles India's paper and paper products industry, discussing market trends through 2015 and outlook for 2016 and beyond. The report also highlights leading players in the sector including Ballarpur Industries Ltd, Tamil Nadu Newsprint and Paper Ltd and Rainbow Papers Ltd.
The paper industry in India has been in existence since ancient times, experiencing a paradigm change over the years. The existing domestic paper mills employ diverse technologies- from legacy to advanced methods. The paper mills mainly use three types of raw material - wood/chemical pulp, agro residues and recycled fibre - to produce paper and paper products.
After a rapid consumption growth during the 2009-12 period, Indian paper industry experienced a lull in FY13. The rising raw material prices forced domestic manufacturers to increase the prices of paper and paper products. The industry saw a demand revival and decline in raw material prices in FY14 which brought some relief to the manufacturers. However, raw material prices soared again in FY15-16. This together with slug of cheap imports from China and other Southeast Asian nations negatively impacted the profit margins of most paper producers. Domestic manufacturers were not able to raise their prices to match the rise in raw material costs due to the cheaper imports. In order to remain competitive, paper-makers have been seeking the government's intervention to impose a 10% special additional duty on imports of paper and paperboard on an actual-use basis.
This temporary slowdown has forced the industry players to rethink their growth strategy. Some have deferred their expansion plans while others scaled-down operations. Going further, decline in profitability might stimulate consolidation in the industry over the next few years. Despite this, the medium-term outlook for the sector looks stable considering the low per capita consumption of paper in India.
o During 2009-13, the value of paper and paper products production of Indian companies grew at a CAGR of 11%. After recording a peak y/y increase of 34.5% in FY11, the sector saw subdued growth in the last four years.
o India saw rapid growth in the consumption of paper and paper products during 2006-11. During this period, annual consumption of paper and paper products grew at a CAGR of 9.3%, much higher than the average global growth rate of around 3%. However, after peaking in FY11, demand decelerated during FY12 and FY13. The sector finally saw some demand recovery in FY14 but moderated again in FY15. During 2011-15, consumption grew by 6.3%, lower than historic but still higher than the global average.
o The index of industrial production (IIP) recorded a decline of 0.1% in FY14. Paper and paper products industry saw growth of only 0.1% y/y. However, the industry saw a revival in FY15 with a growth of 3% y/y. In 8MFY16, it recorded a growth of 3.2% y/y.
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