Kuantum Papers Limited — Q1 FY26 earnings call

On our specialty foray we are looking at creating largely flexible grade food wrapping papers, and we are getting the right full coating plant, which is going to be an offline machine and which is also part of this entire CAPEX that we have planned for ourselves, and that is going to come on stream during the currency of the, either this year or latest by next Financial Year. It took a little bit of time finalizing the technology and the machine components, because there is a lot to play around with, and we have to be careful for our kind of CAPEX that we are intending to incur. So this is on the specialty front. On the CAPEX front itself, our total cost is Rs.735 crores, out of which till date we have already spent about Rs.400 crores on the CAPEX. This entire CAPEX is going to come on stream by June of 2026 but by March of 2026 which is the end of this Financial Year, the major up-gradations of all our machines which will happen one by one, PM4 was already completed in June. All other machines are going to get upgraded. So the next Financial Year 26-27 will see the full force of this entire up-gradation and the positive impact coming out next year.

Provides specific details on the company's new product focus in specialty paper and the financial and timeline aspects of the ongoing CAPEX.

Asked by Manan Poladia

It's a good question Krushi, this shutdown which undoubtedly was planned, and it was for a period of almost 25 days, as enumerated by our CFO, it led to a reduction of almost 9000 tons, which has greatly impacted the performance of this quarter alone. And we just did an analysis in our board meeting also, that had this not happened, we would have maintained our EBITDA margins at 22% which we recorded even in Q4 of last year. So, I may say that EBITDA margins would have been in place. However, the sales reduction is on account of a margin variation which is very, very marginal, hardly any variation in sales pricing of this quarter. So, the majority of the reduction in sales value and EBITDA is on account of the loss of production due to the planned shutdown.

Quantifies the direct impact of the PM4 shutdown on production volume (9000 tons) and clarifies that without it, EBITDA margins would have been higher (22%).

Asked by Krushi Parekh

So the DGTR has just initiated the investigations, particularly into virgin multi layered paper boards from Indonesia. So, this is the beginning of these kinds of investigations where the DGTR has taken cognizance of the fact that the domestic industry has been impacted by routing of imports through Indonesia, whether it is from China or other Southeast Asian countries. So right now, since it's at the inception stage, they have just launched it in July, it remains to be seen as to how this progresses and bases this complaint. And the Indian Paper Makers Manufacturers Association, IPMA which is following up whether this gets extended to other grades of paper as well, because the industry has been talking to the government for protection from these FTAs and also these routings from Southeast Asia. ... So normally these things do take its course and time, nothing can be expected in a short while, but only time will tell since it's the government who is in control of this entire process, and they don't reveal much. One only gets to know once the process is complete. I understand that we may look at about four to six months for a kind of, some kind of impact to come in, but it could go even up to a year, 12 months or so.

Explains the current stage of anti-dumping investigations for paperboards and provides a realistic timeline for potential impact (4-6 months to a year).

Asked by Krushi Parekh

So, this Quarter Q1 we in fact, witnessed a slight marginal increase in prices compared to Q4, we were able to increase our prices by about up to 1%, about 7.8%. However, in July and August, prices have declined up to 7% to 8% from June quarter. ... So normally, this Q2 is the lean season of the industry, so this reduction in pricing is on expected lines. We are quite well versed with handling such kind of declines through our own operations and efficiencies because, on the other side even raw material input and pricing helps us maintain our margins. In future, two things will happen, the printing and publishing industry comes into bigger post Diwali and this this year Diwali is also earlier on 20th of October. So we will see, we will witness a price increase and escalation happening by middle of October or so. Also this year round, the government tenders have opened up much earlier, as compared to the previous years. So the moment they are floated and executed, that is going to release a lot of pressure from the market side, and the demand and supply situation will get balanced out, and that will also help in price stability and with an upward trend.

Provides specific percentage changes in paper prices for Q1 and current quarter, and outlines the management's expectation for price recovery post-Diwali due to seasonal demand and government tenders.

Asked by Arihant

So Tanmay great question, and this is one answer where I will say, I wish I was impacted by wood pricing, because they have gone down internationally. Pulp pricing has, sorry wood pulp pricing. Wood pulp pricing is currently ruling at about $500 a ton, which has gradually come down from a high of $600 plus, which maintained during the last year. And even soft this is hardwood pulp pricing, even soft wood is ruling at about $570 per ton, which is fairly lower than what it was ruling earlier. But we are not really impacted favorably because of reduction in these pricing, because the usage for us for imported pulp is very, very minuscule. No more than 3% to 4% of our complete raw material requirement is furnished by imported wood pulp. But going forward, when we are going to be increasing our production output levels, we are looking at increasing and taking in more imported hardwood pulp for our paper making, and that is going to lend both a betterment in our quality at reasonable pricing. So that's when the positive impact should come in. And as far as the other question, domestically wood availability that unfortunately is remaining on a high because there is another sector which is the pulp board sector and the MDF sector, which is also a sector which procures all this wood in a large quantity. So we are facing competition from that sector in terms of wood procurement, availability and pricing. So that is where we have taken on this social farm forestry measure an initiative in a big way. We have already reached about 40 lakh saplings on an annualized basis, and our target is to create 1 crore saplings every year in the next, by the end of two years, two to three years from here, and that is going to help generate more availability of wood for us and the industry around us.

Clarifies that global pulp price declines have minimal impact due to low import reliance (3-4%), but domestic wood prices remain high due to competition, which the social farm forestry program aims to address.

Asked by Tanmay Mohta

No, I we have done the dipstick study. The market for these kind of papers is fairly big, and so scalability will not be an issue for us. Once we are able to establish this offline portal that we are going to spend on, there we can easily enhance these capacities one by one in modular form and going for increase market output as and when required. But, the fact is that we are going to be making the base paper ourselves on our individual machines. So please understand that variability comes from not only the base paper, which can be created on each of our four machines, which means four different kinds of base paper, and then the coating heads, we are going to implement four different coating heads, allowing us to make differential varieties of coated specialty papers.

Assures that the Indian market for specialty papers is large enough for scalability and explains how the company's modular approach and coating capabilities will support diversification.

Asked by Manan Poladia

So packaging grades is something again, because of the kind of specialization that is getting catered to, the kind of demand that is coming in from Qcom, Ecom and everything, packaging is seeing an uptrend, and the market no doubt in future is going to play out favorably for the packaging grade of again specific grade, specific applications and specialty segments, similar is the case in tissue as well. Tissue, in fact is growing at the fastest pace of about 20% annual growth, and yes, it is getting established very clearly as a dominant product in the industry, largely because the base of this segment, particular segment is very, very low and giving us quite a big enough space for people to get into and make business sense out of it.

Highlights the strong growth trends in packaging (driven by e-commerce) and tissue (20% annual growth), indicating favorable market conditions for these segments.

Asked by Tanmay Mohta