Subam Papers - Subam Papers

📊 BSE: 544267 🏢 Packaging 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

The company's subsidiary/LLP investment, Mercury Pack and Paper Products LLP, saw revenue grow by 63.45% YoY, increasing from INR 9.03 Cr in FY2024 to INR 14.76 Cr in FY2025. Overall group revenue is driven by Kraft paper and Duplex board manufacturing, supported by a 53.8% planned capacity expansion from 650 MTPD to 1,000 MTPD.

Geographic Revenue Split

Operations are primarily concentrated in the South Indian region, specifically Tamil Nadu, which accounts for the majority of the customer base of over 1,000 direct clients. Specific regional percentage splits are not disclosed in available documents.

Profitability Margins

Operating profit margins are noted as vulnerable to cyclicality and raw material volatility. The Debt Service Coverage Ratio (DSCR) stood at 1.6 times in FY2025, which is below the negative rating trigger of 2.0 times, indicating tightened profitability relative to debt obligations.

EBITDA Margin

While specific EBITDA % is not provided, the company faces margin pressure from input costs. A Total debt/OPBDITA ratio of more than 2.3 times is identified as a downgrade trigger, suggesting current levels are monitored closely against this benchmark.

Capital Expenditure

The company is investing in a co-generation power plant expected to be commercialized by Q4 FY2026. Additionally, a capital contribution of INR 10.00 Cr was made for a 51% stake in Mercury Pack and Paper Products LLP in January 2025.

Credit Rating & Borrowing

ICRA reaffirmed a rating of [ICRA]A- (Stable) for INR 177.90 Cr of bank facilities in June 2025. However, CRISIL classified the company as 'Issuer Not Cooperating' in June 2025 due to lack of information. Borrowing includes term loans of INR 52.64 Cr and cash credit of INR 102.00 Cr.

⚙️ Operational Drivers

Raw Materials

Recycled paper (waste paper) serves as the primary raw material, supplemented by chemicals for paper processing and fuel for power generation. Specific cost percentages per material are not disclosed.

Import Sources

Sourced from diversified raw material sources to cater to the Tamil Nadu market; specific countries or states of origin are not detailed beyond local proximity advantages.

Capacity Expansion

Current installed capacity is over 650 MTPD across multiple locations. The company is expanding this to over 1,000 MTPD (a 53.8% increase) through ongoing expansion projects.

Raw Material Costs

Raw material costs are subject to high volatility; the company maintains a substantial storage facility to mitigate supply disruptions and ensure consistent production quality.

Manufacturing Efficiency

Efficiency is driven by an integrated manufacturing setup and the use of ERP technology to streamline processes from sourcing to final manufacturing.

Logistics & Distribution

Distribution is focused on a direct-to-customer model with over 1,000 direct customers in the packaging industry.

📈 Strategic Growth

Expected Growth Rate

54%

Growth Strategy

Growth will be achieved by increasing installed capacity from 650 MTPD to 1,000 MTPD and through forward integration. The company acquired 51% to 80% stakes in three packaging LLPs (Nellai Subam, Mercury Pack, Rajapalayam Success) in FY2025 to create business synergies in the corrugated box segment.

Products & Services

Kraft Paper, Duplex Board, Paper Cones, Corrugated Paper, and Paper Board Containers.

Brand Portfolio

Subam Papers, Subam Agro, Nellai Subam Packaging.

New Products/Services

Expansion into high-quality corrugated boxes and printed cartons through the newly acquired LLP partnerships, contributing to a diversified packaging portfolio.

Market Expansion

The company is transitioning from a regional paper manufacturer to an integrated packaging solution provider, targeting the growing Indian manufacturing and e-commerce sectors.

Market Share & Ranking

Established market presence in Tamil Nadu; specific industry ranking is not disclosed.

Strategic Alliances

Entered LLPs with Nellai Subam Packaging (80% share), Mercury Pack and Paper Products (51% share), and Rajapalayam Success Packagings (51% share) in FY2025.

🌍 External Factors

Industry Trends

The industry is shifting toward sustainable packaging and recycled paper. The Indian government is lowering tax rates for new manufacturing units to turn India into a global hub, benefiting packaging firms.

Competitive Landscape

Faces competition from large organized paper mills and numerous small unorganized players, limiting bargaining power.

Competitive Moat

Moat is built on cost leadership through 15.7 MW of captive renewable energy and proximity to the Thambaraparani River for water (25,000 gallons/hour), which is critical for paper quality.

Macro Economic Sensitivity

Highly sensitive to India's manufacturing GDP and government initiatives like 'Make in India' which promote the development of the packaging sector.

Consumer Behavior

Increasing demand for eco-friendly packaging and corrugated boxes driven by e-commerce growth.

Geopolitical Risks

Vulnerable to global supply chain disruptions affecting the availability and pricing of imported waste paper.

⚖️ Regulatory & Governance

Industry Regulations

Subject to water drawl permissions (currently authorized for 25,000 gallons/hour from the Thambaraparani River) and environmental norms for paper manufacturing.

Environmental Compliance

High focus on ESG through the use of recycled paper, 15.7 MW of renewable energy, and a 10 lakh liter/day rainwater harvesting system.

Taxation Policy Impact

Benefits from government strategies to lower tax rates for new manufacturing companies to promote India as a global manufacturing hub.

Legal Contingencies

The statutory and secretarial audit reports for FY2025 do not contain any qualifications, reservations, or adverse remarks.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the timely ramp-up and stabilization of the new 1,000 MTPD capacity to improve debt protection metrics. Failure to do so could lead to a rating downgrade if Debt/OPBDITA exceeds 2.3x.