SESHAPAPER - Seshasayee Paper

📊 NSE: SESHAPAPER 🏢 Paper 📅 Last Updated: 12/14/2025 13:02

💰 Financial Performance

Revenue Growth by Segment

Paper is the only reportable segment. Standalone revenue from operations for H1 FY26 (ended September 30, 2025) was INR 731.58 Cr, representing a 10.84% decline compared to INR 820.56 Cr in H1 FY25. Consolidated revenue for H1 FY26 was INR 731.72 Cr, down 10.84% from INR 820.70 Cr YoY.

Geographic Revenue Split

Domestic sales grew 4.8% in volume terms for Unit-Erode, while export volumes saw a significant drop, particularly to the US market where exports were suspended from June 2025 to September 2025 due to steep tariffs. Export tonnage for H1 FY26 was 2,333 tonnes compared to 14,062 tonnes in H1 FY25, a decline of 83.4%.

Profitability Margins

Net Profit After Tax (Standalone) for H1 FY26 was INR 34.66 Cr, a 45.09% decrease from INR 63.12 Cr in H1 FY25. Net profit margins were severely impacted by a drop in average realizations per tonne of paper and elevated input costs.

EBITDA Margin

EBITDA margin experienced a steep decline from 19.07% in FY24 to 6.88% in 9M FY25. This compression is attributed to lower realizations caused by cheap imports from China and ASEAN countries and a drastic increase in raw material prices.

Capital Expenditure

The company spent INR 28.33 Cr on the purchase of Property, Plant, and Equipment in H1 FY26. Additionally, the company is planning to incur INR 100 Cr for the repair, refurbishment, and upgradation of the newly acquired Unit-III (Servalakshmi Paper assets).

Credit Rating & Borrowing

CRISIL has assigned a rating of 'CRISIL AA-/Negative' for long-term facilities and 'CRISIL A1+' for short-term facilities. The negative outlook reflects pressure on profitability. The company maintains a strong capital structure with total outside liabilities to adjusted networth at 0.26 times as of March 31, 2024.

⚙️ Operational Drivers

Raw Materials

Key raw materials include wood pulp and wood. Wood pulp prices have been highly volatile, and the company faces continued scarcity in wood availability, leading to price hikes that cannot be fully passed on to customers.

Import Sources

Not specifically disclosed, but the company is impacted by cheap finished paper imports from China and ASEAN countries which compete with its domestic production.

Capacity Expansion

Current capacity utilization for Unit-Erode is 103%, while Unit-Tirunelveli operated at 76% in H1 FY26. Planned expansion includes the revival of Unit-III (Servalakshmi Paper), which was acquired as a going concern through an e-auction.

Raw Material Costs

Raw material prices increased drastically in FY25, contributing to the EBITDA margin drop to 6.88%. The company uses strategic initiatives like tree farming and contract farming to mitigate wood supply risks.

Manufacturing Efficiency

Unit-Erode shows high efficiency with 103% capacity utilization. Unit-Tirunelveli's efficiency was hampered by external trade factors, dropping to 76% utilization.

📈 Strategic Growth

Expected Growth Rate

15%

Growth Strategy

Growth will be driven by the refurbishment and recommencement of operations at Unit-III (Servalakshmi Paper), which is expected to add significant capacity. The company is also focusing on the Writing and Printing Paper (WPP) segment, which is supported by demand from the New Education Policy and increased 'work from office' trends.

Products & Services

Writing and Printing Paper (WPP), copier paper, and other printing grades.

Brand Portfolio

Seshasayee Paper and Boards (SPBL).

New Products/Services

Not specifically disclosed, though the company is focusing on high-demand WPP grades for the education sector.

Market Expansion

The company is focusing on domestic market growth (4.8% volume growth in Erode unit) to offset the 83.4% drop in export volumes caused by US tariffs.

Market Share & Ranking

The company was ranked 1087th on NSE and 1113th on BSE by average market capitalization during H2 2024.

Strategic Alliances

The company entered into a Share Purchase Agreement and Energy Supply Agreement with the Indian subsidiary of Zelestra Corporacion S.A.U. for renewable energy.

🌍 External Factors

Industry Trends

The paper industry is inherently cyclical with long gestation periods for capacity. Current trends show a shift toward green energy and sustainable wood sourcing (tree farming) to combat raw material volatility.

Competitive Landscape

Faces intense competition from low-cost imports from China/ASEAN and domestic mills aggressively liquidating stock at low prices.

Competitive Moat

Moat is built on integrated operations, extensive promoter experience (5 decades), and a strong financial profile with nil net debt. Sustainability is supported by voluntary ESG compliance (BRSR).

Macro Economic Sensitivity

Highly sensitive to global pulp prices and domestic education spending. The New Education Policy is a key macro driver for WPP demand.

Consumer Behavior

Increased demand for WPP due to the rollout of the New Education Policy and a return to physical offices.

Geopolitical Risks

Significant risk from trade barriers; US tariffs imposed in June 2025 led to a suspension of exports to that region, impacting the Tirunelveli unit's utilization.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to environmental clearances from the EAC of MoEF & CC. The company is also navigating the legal complexities of the Insolvency and Bankruptcy Code regarding its Unit-III acquisition.

Environmental Compliance

The company is voluntarily complying with Business Responsibility and Sustainability Reporting (BRSR) for FY25. It is also seeking MoEF & CC approval for expansion projects.

Taxation Policy Impact

Income tax paid in H1 FY26 was INR 14.27 Cr. Deferred tax liabilities stand at INR 129.25 Cr.

Legal Contingencies

The e-auction sale of Servalakshmi Paper Limited (Unit-III) for approximately INR 100 Cr is being challenged in the National Company Law Appellate Tribunal (NCLAT) by several appellants.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the volatility of wood pulp prices and the outcome of the NCLAT appeals regarding the Unit-III acquisition, which could impact expansion timelines.