💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue from operations grew by 71.65% YoY to INR 505.51 Cr in FY2025, compared to INR 294.51 Cr in FY2024. This growth was primarily driven by a 27.97% increase in sales volume following the commercialization of Unit II. Q1 FY2026 revenue continued the trend, growing 50% YoY to INR 177 Cr.

Geographic Revenue Split

The company maintains a well-established distribution network across West and South India. While specific percentage splits per state are not disclosed, the manufacturing facilities are concentrated in Vapi, Gujarat, serving regional packaging hubs.

Profitability Margins

Operating profit margin (EBIT) improved to 7.24% in FY2025 from 6.23% in FY2024 due to lower operating costs and better fixed-cost absorption. However, Net Profit Margin declined to 1.86% in FY2025 from 2.68% in FY2024, a 30.59% decrease caused by a sharper drop in sales prices compared to the reduction in raw material costs.

EBITDA Margin

Operating margins improved to 10.1% in FY2025 and further to 13% in Q1 FY2026, compared to 7.1% in FY2024. This 83% relative improvement in Q1 FY2026 margins is attributed to the ramp-up of Unit II, which produces higher-grade, value-added kraft paper with better realizations.

Capital Expenditure

The company completed a major debt-funded capital expenditure project totaling INR 336 Cr to expand kraft paper capacity and modify the unit acquired from NR Agarwal Industries. This project was funded by approximately INR 247 Cr in debt and the remainder through internal accruals.

Credit Rating & Borrowing

The long-term credit rating is [ICRA]BBB+, with the outlook recently revised from Negative to Stable in August 2025. Short-term ratings are reaffirmed at [ICRA]A2. Borrowing costs are impacted by a leveraged structure, with interest coverage declining 34.68% to 1.62x in FY2025 due to increased borrowing for projects.

⚙️ Operational Drivers

Raw Materials

The primary raw materials are wastepaper (imported and domestic) and coal for power generation. Wastepaper and coal represent the largest components of the cost structure, though specific percentage breakdowns per material are not disclosed.

Import Sources

A large portion of wastepaper is imported to ensure quality for high-grade kraft paper. Specific countries are not listed, but the company is noted to be vulnerable to global demand-supply dynamics and forex fluctuations due to these imports.

Key Suppliers

Not specifically disclosed in the provided documents, though the company has established long-term relationships with suppliers since 1995.

Capacity Expansion

Current installed manufacturing capacity is 2,02,500 Metric Tonnes Per Annum (MTPA) following the completion of Unit II. Phase II of the expansion commenced commercial operations in October 2024, significantly increasing the scale from previous levels.

Raw Material Costs

Raw material costs are highly volatile; in FY2025, margins improved as realizations stabilized, but FY2024 margins were squeezed because the contraction in sales realizations was sharper than the decline in raw material prices.

Manufacturing Efficiency

Efficiency is driven by 'mature capacity utilization levels' and the successful ramp-up of Unit II, which has led to better fixed-cost absorption and an improved product mix favoring high-BF (Burst Factor) paper.

Logistics & Distribution

The company utilizes a well-established distribution network across West and South India to reach its diversified customer base in the packaging industry.

📈 Strategic Growth

Expected Growth Rate

30-35%

Growth Strategy

Growth will be achieved through the full-year operations of Unit II, focusing on value-added, premium-grade kraft paper that serves as an import substitute. The company is targeting new customer additions and leveraging its increased capacity of 2,02,500 MTPA to meet rising demand in the e-commerce and FMCG sectors.

Products & Services

Different varieties of kraft paper, specifically Multilayer Testliner and Testliner Paper, primarily used for manufacturing corrugated boxes for the packaging industry.

Brand Portfolio

Shree Ajit Pulp and Paper Limited.

New Products/Services

High-grade, value-added kraft paper from Unit II, positioned as an import substitute, is expected to be the primary driver of the 30-35% revenue growth forecast for FY2026.

Market Expansion

The company is expanding its market reach by targeting the premium segment of the kraft paper market, moving away from low-BF products to higher-quality offerings that command better realizations.

Market Share & Ranking

Not disclosed, but the company is a significant player in the Vapi, Gujarat paper cluster with a 2,02,500 MTPA capacity.

Strategic Alliances

The company holds a 50% stake in Shree Samrat Pulp and Paper LLP (joint venture) and has a wholly-owned subsidiary, Shree Samrudhi Industrial Papers Private Limited, intended as a marketing arm.

🌍 External Factors

Industry Trends

The kraft paper industry is seeing a shift toward higher quality standards driven by e-commerce and organized retail. While the industry faces stiff competition from unorganized players, the long-term outlook is favorable due to the phase-out of plastic packaging and growth in FMCG and Pharma.

Competitive Landscape

Characterized by intense competition and pricing pressure from numerous unorganized players in the kraft paper segment.

Competitive Moat

The company's moat is built on its 30-year operational track record (since 1995), established distribution network, and integrated power generation. These advantages are sustainable but challenged by the low entry barriers for unorganized competitors in the lower-grade segments.

Macro Economic Sensitivity

Highly sensitive to GDP growth as packaging demand is a proxy for industrial and consumer activity. A general economic downturn leads to a corresponding fall in demand for testliner paper.

Consumer Behavior

Increasing consumer preference for sustainable packaging and the boom in e-commerce are driving higher demand for corrugated boxes and kraft paper.

Geopolitical Risks

Vulnerable to global trade dynamics affecting the supply and pricing of imported wastepaper.

⚖️ Regulatory & Governance

Industry Regulations

Subject to wastepaper-related regulations regarding availability and usage of water. Environmental risks are significant as breaches in waste management or emissions could lead to material cost implications or operational shutdowns.

Environmental Compliance

The industry is under high scrutiny for air, water, and land pollution. SAPPL has implemented water treatment processes for pulping and bleaching effluents to meet environmental norms.

Taxation Policy Impact

Not specifically detailed beyond standard corporate tax compliance.

Legal Contingencies

The company received an unmodified audit opinion for FY2024-25, indicating no major reportable legal or financial irregularities in the reviewed statements.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the sustenance of earnings to meet sizeable debt repayment obligations of INR 39-42 Cr per annum through FY2028. Failure to maintain high capacity utilization at Unit II could lead to a liquidity crunch.

Geographic Concentration Risk

Manufacturing is concentrated in Vapi, Gujarat, making it vulnerable to regional regulatory changes or localized industrial disruptions.

Third Party Dependencies

High dependency on external suppliers for wastepaper and coal, particularly international suppliers for high-quality fiber.

Technology Obsolescence Risk

The recent INR 336 Cr investment in Unit II utilizes modern machinery for high-grade paper, mitigating immediate technology risks.

Credit & Counterparty Risk

Trade receivables increased in FY2025 due to higher sales; however, the debtors turnover ratio improved to 7.65, suggesting stable credit quality of customers.