MANAGEMENT DISCUSSION AND ANALYSIS REPORT Annexure - II Economic Environment Global View The Global economy began its modest recovery from the second half of 2014. While the trend is expected to accelerate in the current year, the positive outlook is subdued as the market is facing multiple challenges like intense exchange rate brssure, persistent inflation, fiscal imbalances, external sector vulnerabilities and low investment etc. This has resulted in sluggish domestic demand growth. Fiscal and monetary initiatives being taken by the Indian Government and Reserve Bank of India to help stabilization of financial market conditions. Industry Review A Brief Note on Indian Paper Industry - Present & Future The Indian Paper industry, estimated to be around Rs. 50,000 crores, during 2013-14, accounts for about 2.6% of the world's production of paper and paper board. The operating capacity of the industry currently stands at 12.75 million tonnes. India is one of the fastest growing markets for paper and paperboard globally, brsenting an exciting scenario. During the current year the domestic production is estimated to be around 11.38 million tonnes, while consumption is anticipated to touch around 13.10 million tonnes in 2015-16 and 17.6 million tonnes in 2017-18. The last five decades of the Indian Paper industry have been a period of growth, transformation and improvements. The industry has been taken a great leap forward and transformed itself from technological obsolence to competitive sustenance through state-of-art-technology, innovative developments and improved customer service. Looking forward, the demand in India is projected to double and to cross 25 million tonnes during 2025. Several growth triggers are in place to take the Indian Paper industry in India to a new level. These includes economic growth, increase in literacy rate, population growth, changing demographics, improving living standards, increase in advertising and promotional activities and increasing multi colour printing facilities. The market for the packaging paper is currently growing at a steady pace of 7 to 8 percent. Among the type of packaging paper are all kinds test liners, corrugated board, kraft paper for paper bags and classic brown paper as well as cover layers of plaster board. As a rule, a high portion of recovered paper is common to all of them. They perform important function in merchandise management: protection from damage during transit and storage, as information carriers or purely for image enhancement. For this reason, the quality and functionality requirement that packaging paper has to meet differ widely numerous conditions have to be considered, such as the suitability and compatibility of the materials for packaged goods, statutory regulations on hygiene, packaging regulation provisions, marketing aspects, and of course, cost. The Indian packaging industry is currently estimated at Rs. 24000 crores. With the increase in sales of consumer goods like home care products, food products, liquor and soft drinks, the industry is growing at a high pace of over 10 percent for high quality superior variety paper boards. The specialty paper growth is likely to be around 10 percent and especially tissue paper is growing at a pace of over 12 percent. About 25 percent of the specialty paper is met by import. The newspaper growth is over 10 percent due to higher literacy rate and higher corporate spending on advertisements. At brsent more than 65 percent of newsprint requirement is imported. Overall paper industry is poised for a big leap forward. This opens up the need for the large capacity additions to meet the emerging demand. Over the last 5 years the capacity additions are mainly in writing and printing paper. Consequently the operating rates of the packaging industry have increased. Thus a major portion of investment is likely to be in packaging industry to meet the rising demand of the packaging board. The specialty paper has also witnessing a good investment during the last 5 years and likely to continue for the next 5 The projected demand for the paper is as below; In writing and printing paper market, cream wove is likely to grow around 3 to 4 percent, maplitho by about 5 to 6 percent. The copier segment especially the branded copier is likely to grow around 15 percent. years and the complete demand will be met from domestic production. Similarly, the newspaper segment is likely to attract more investment during the next 5 years, to outpace the imported newsprint |