S I Paper Mills - S I Paper Mills

📊 BSE: 516108 🏢 Paper & Paper Products 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

Total operating income grew by 8.47% YoY to INR 312.3 Cr in FY2024 from INR 287.9 Cr in FY2023. The growth was driven by a sharp improvement in Q4 FY2024 revenues following the commercialization of new capacities. Segment-specific growth for the paper division (115,500 MT/year) and packaging division (36,000 MT/year) was not individually broken down by percentage, though 40-45% of paper production is captively consumed.

Geographic Revenue Split

The company maintains a strong distribution network across South India, which serves as its primary market. Specific percentage contribution by state is not disclosed, but the manufacturing base is concentrated in Nanjangud, Karnataka.

Profitability Margins

The company reported a Net Loss of INR 13.4 Cr in FY2024, an improvement from a loss of INR 16.7 Cr in FY2023. Net Margin (PAT/OI) improved from -5.8% to -4.3%. Profitability is currently constrained by suboptimal utilization of new capacities and a high interest cost burden.

EBITDA Margin

Operating Margin (OPBDIT/OI) stood at 5.5% in FY2024, a significant recovery from -2.2% in FY2023. This 770 bps improvement reflects better absorption of costs despite ongoing losses at the net level.

Capital Expenditure

The company recently completed a large capex program that was commercialized in FY2023. While the exact INR value of the recent capex is not specified, the company raised INR 45.37 Cr in equity in FY2023 to support its liquidity and debt repayments related to these investments.

Credit Rating & Borrowing

Ratings were downgraded in June 2024 to [ICRA]BB+ (Negative) for long-term and [ICRA]A4+ for short-term. The downgrade from [ICRA]BBB- reflects stretched liquidity and high impending debt repayments of INR 166.77 Cr in term loans against subdued cash accruals.

⚙️ Operational Drivers

Raw Materials

Wastepaper is the primary raw material, accounting for the bulk of input costs. The company is highly sensitive to global demand-supply dynamics of wastepaper prices.

Import Sources

Approximately 50% of raw material requirements (wastepaper) are imported, exposing the company to international price volatility and forex risks.

Key Suppliers

Not specifically named in the documents; however, the company has forged strong relationships with global wastepaper suppliers over five decades of operation.

Capacity Expansion

Current installed capacity is 115,500 MT/year for the Paper Division and 36,000 MT/year for the Packaging Division. The company is currently focused on scaling up utilization of these capacities commercialized in FY2023 rather than further expansion.

Raw Material Costs

Raw material costs are a major component of the cost structure; the company's ability to pass on price increases is limited by intense competition from unorganized players, leading to margin volatility.

Manufacturing Efficiency

Capacity utilization is currently described as 'suboptimal' following the recent expansion. Reaching optimal levels is critical for improving the DSCR and overall earnings profile.

Logistics & Distribution

The company leverages an established distribution network across South India to reach its diversified customer profile, particularly in the FMCG sector.

📈 Strategic Growth

Expected Growth Rate

8.5%

Growth Strategy

Growth will be achieved by scaling up utilization of the new capacities commercialized in FY2023, increasing the production of value-added kraft paper grades to substitute imports, and deepening forward integration into the packaging segment for FMCG clients.

Products & Services

Kraft liners, test liners, machine-glazed (MG) kraft paper, corrugated boards, and wraparound boxes.

Brand Portfolio

The South India Paper Mills (SIPM).

New Products/Services

Value-added grades in kraft paper are planned to act as import substitutes, though specific revenue contribution percentages are not yet established.

Market Expansion

Focus remains on consolidating the South Indian market and leveraging established relationships with major FMCG players.

Market Share & Ranking

Not disclosed; however, the industry is noted for having many unorganized players, indicating a fragmented market where SIPM competes in the moderate-to-high grade segment.

🌍 External Factors

Industry Trends

The kraft paper industry is recovering from two years of turbulence. Future growth is driven by the shift toward sustainable packaging and import substitution for high-grade paper.

Competitive Landscape

Characterized by intense competition from a large number of unorganized players, leading to significant pricing pressure.

Competitive Moat

The moat consists of 50+ years of promoter experience, forward integration (40-45% captive consumption), and a captive 11-MW power plant. These provide cost advantages and stable demand that are difficult for new unorganized entrants to replicate.

Macro Economic Sensitivity

Highly sensitive to global wastepaper demand-supply cycles and domestic FMCG consumption trends.

Consumer Behavior

Increased demand for corrugated packaging from the FMCG and e-commerce sectors is a positive trend for SIPM's forward-integrated packaging division.

Geopolitical Risks

Global trade dynamics affecting wastepaper availability and shipping costs are primary geopolitical concerns.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to environmental risks related to air, water, and land pollution, requiring continuous investment in treatment systems. Compliance with SEBI (LODR) for corporate governance is maintained.

Environmental Compliance

The company has invested in Electrostatic Precipitator (ESP) systems for boilers and effluent treatment machineries (centrifuges) to comply with air and water pollution norms.

Legal Contingencies

The company has disclosed the impact of pending litigations on its financial position in its financial statements. Specific case values were not provided in the summary documents.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the timing of reaching optimal capacity utilization, which is essential to cover high debt repayments. Failure to do so could lead to further liquidity stress (Impact: High).