Mumbai: The Indian paper industry is poised for a gradual turnaround despite the acute margin pressures that it has been facing due to rising imports and raw material costs in FY24 and the first 9 months of FY25, according to a report by CareEdge Ratings released on Monday.
The report states that with the expected stabilisation of wood pulp prices and moderation in imports, operating margins of the paper industry are projected to improve by about 2 per cent in FY26.
The paperboard and packaging segment, which contributed 55 per cent of industry revenue in FY24, grew by 8.2 per cent driven by e-commerce and the ban on single-use plastics. Additionally, the printing and writing paper segment is set to benefit from the National Education Policy (NEP) 2020 and increased government spending on education, positioning the industry for long-term growth, the report states.
“The Indian paper industry is at a critical juncture. While challenges like rising imports and raw material cost inflation have strained margins in FY24 and the first 9 months of FY25, the sector is poised for recovery. Stabilisation of costs and strong demand drivers will support margin improvement by FY26. To remain competitive, manufacturers must focus on modernisation, cost optimisation, and sustainable packaging innovation,” CareEdge Ratings Associate Director, D. Naveen Kumar, said.
In FY23, the sector experienced significant growth in net sales realisations (NSR), driven by pent-up demand post-Covid and the return to office culture. However, this surge was temporary, with sales realisations moderating thereafter. Post-FY22, paper imports from China and ASEAN countries surged, making India a net importer in FY24 in terms of volume. Duty-free imports under Free Trade Agreements (FTAs) with ASEAN and South Korea further impacted domestic production. In FY24, domestic paper production fell by 5.1 per cent, with another 1-2 per cent decline expected in FY25, the report observes.
The ongoing rise in imports throughout FY24 has increased pressure on domestic manufacturing. The combination of lower sales price realisations and rising input costs led to a projected revenue decline of 3-4 per cent for domestic paper companies in FY25. Domestic wood prices reached unprecedented levels due to increased demand from other industries and reduced plantation activity during Covid. Hardwood pulp prices rose by 20–25 per cent in FY24 and the first 9 months of FY25. Domestic manufacturers struggled to pass on these costs due to competition from cheaper imports, the report added.
(IANS)
