business-northeast-logo

Paper packaging industry witnesses healthy revenue growth this fiscal

BNE ADMIN


Spread the love

While prices of raw material-waste paper (recycled fibre) - had jumped from Rs 10 per kg pre-Covid to around Rs 30 per kg this year, though stable now, the paper packaging industry is looking at a significant jump in revenue in the current financial year on the back of revival in consumer spending. The key driver for demand has been the growth in sectors including e-commerce, pharmaceuticals, ready-to-eat, and others during the pandemic, according to experts.

"Paper packaging industry is back to pre-Covid levels. Even during Covid, it had started picking up after lockdown and had revived fastest among all segments in the paper sector.

The paper industry is made up of segments including newsprint, writing and printing, packaging and paperboard, speciality paper like tissue, and other residual items. According to Crisil, the domestic paper industry is dominated by the paper packaging segment that accounts for 50-55 percent of the sector's capacity. On the other hand, around 30 percent is led by writing and printing paper and around 15 percent is contributed by newsprint, and remaining by specialty paper and other segments. The paper packaging segment involves paperboard and kraft paper used in pharmaceutical, e-commerce, consumer durables, fast-moving consumer goods, and ready-made garments segments.

"E-commerce consumption of paper packaging has been significantly sharp. From 2018-19, it has substantially gone up as e-commerce had grown during Covid and lockdown period. Similarly for pharma, the growth has been there. India imports lots of waste paper and is used as feedstock for making packaging material paper. Since there is no standardised scientific way of segregation and collection of waste paper waste in India, businesses are forced to rely on imported paper.

DXA's strong revival in consumer spending amid the waning impact of the pandemic will help the paper packaging industry bounce back with revenue growth of 15 percent this fiscal, after a decline of around 8 percent in the previous fiscal, rating agency Crisil had said on Tuesday. Moreover, "Capacity utilization and operating leverage will also improve and, together with continued high realizations and almost stable raw material prices (mainly waste paper), will help in improving the operating profitability of packaging paper players this fiscal."

With capacity utilisation improving, businesses are also expected to start capital expenditure for improving their capacity by around 10 percent over FY23 and FY24. "A stronger-than-anticipated growth in e-commerce sales due to increasing safety and hygiene consciousness, healthy double-digit growth in domestic pharmaceutical sales, and revival in consumer durable sales are driving demand for packaging paper.

Consequently, capacity utilisation of paper packaging players is seen rising to over 80 percent this fiscal from 65 to 70 percent in the last. Increased sales volume and 6-7 per cent higher realisations mean revenue growth will be healthy this fiscal," said Anuj Sethi, Senior Director, Crisil Ratings.

BNE ADMIN