Kuantum Papers Limited — Q4 FY25 earnings call

Call held 21 May 2025

Management summary

Kuantum Papers reported a mixed Q4 FY25, with operational income declining 7% YoY to ₹277 crores, and full-year FY25 revenue down 9% to ₹1,107 crores. Despite industry headwinds, the company maintained Q4 sales and production volumes, and saw a strong sequential recovery with Q4 EBITDA up 19% QoQ to ₹60 crores and Net Profit up 24% QoQ to ₹26 crores. Strategic initiatives like Project Nirmaan and a ₹735 crore mill expansion project are on track, alongside significant progress in sustainability with 48% biomass usage.

Highlights

  • Maintained sales and production volume in Q4 FY25, with margins amongst the best in the industry.

  • Q4 FY25 EBITDA increased 19% QoQ to ₹60 crores, with EBITDA margins at 21.6%.

  • Q4 FY25 Net Profit increased 24% QoQ to ₹26 crores, with PAT margins at 9.4%.

  • The ₹735 crore mill expansion project is on track for March 2026 completion, with ₹540 crores in purchase orders already issued.

  • Achieved highest ever biomass usage at 48% in Q4 FY25, well above the annual average of 35%.

Concerns

  • Q4 FY25 operational income declined 7% YoY to ₹277 crores.

  • FY25 operational income declined 9% YoY to ₹1,107 crores.

  • FY25 Net Profit declined 37% YoY to ₹115 crores.

  • Indian paper industry faces strong headwinds from rising raw material costs, expensive wood pricing, and cheaper imports from China and ASEAN countries.

  • Writing and printing paper prices declined by ₹3,000-₹4,000 per ton (6-7%) from Q1 to Q4 FY25.

Key financials

2 periods

Q4 FY25

  • Operational Income
    ₹277 Cr
    YoY -7% QoQ +3%
  • EBITDA
    ₹60 Cr
    YoY -6% QoQ +19%
  • EBITDA Margin
    21.6%
  • Net Profit
    ₹26 Cr
    YoY -23% QoQ +24%

FY25

  • Operational Income
    ₹1,107 Cr
    YoY -9%
  • EBITDA
    ₹243 Cr
    YoY -27%
  • Net Profit
    ₹115 Cr
    YoY -37%

What they filed

Q1 FY27: revenue up 36.3%, net profit down 48.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue279 270 277 223 280 +0%290 +7%301 +9%304 +36%
EBITDA61 50 60 40 34 −43%39 −22%48 −20%40 −1%
Net profit30 21 26 12 6 −81%10 −53%14 −45%6 −48%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹735 Cr
    • Mill expansion and upgradation project ₹735 Cr
    • Purchase orders issued for project ₹540 Cr
    Our mill expansion and upgradation project with an outlay of Rs. 735 crores is well underway and we remain firmly on track to complete the project within our stated timeline of March 2026. I am pleased to share that we have already issued purchase orders worth approximately Rs. 540 crores for this project, and the balance is in the final stages of techno commercial closure.
  • Debt Gross ₹600 Cr Cost 8.3%
    • Repayment Existing loan of ₹220 crores will be repaid as new project drawls come in. ₹220 Cr
    So, peak debt we are envisaging at about Rs. 600 odd crores, Rs. 625 crores at the max will be our peak debt. Interest cost, I think as a percentage, it will be in the range of 8.25%, max would be about 8.5%, which is a good cost of funding that we have been able to establish in a good line of funding from our banks. We enjoy very, very good ratings with them. And I think the overall interest amount can be calculated accordingly at Rs. 600 crores with 8.5% is about Rs. 50 crores.

Guidance & targets

Capacity

  • Expanded Capacity Utilization Capacity · FY27 onwards · High confidence 675 tons

    From 450 tons today

    So, the moment we are going to be commissioning all these machines, so they are going to happen over a period of time. Since we are upgrading all our four paper machines one by one, that's a process which will happen over a period of time. And all of them will get commissioned by March '26. So starting April '26, which means for the Financial Year '26-'27, all the four machines will be running at full capacity. We see no problem in running them to the renewed capacity at which they will be established, and returns will come in immediately thereon.

    — Pavan Khaitan

Pricing

  • Industry-wide Paper Price Increase Pricing · Next six months or so · Medium confidence 6-7%
    No, I think even a single digit increase will be very helpful, about 6% to 7% increase is there on the cards, is there in the offing, and that will help the industry to a big extent.

    — Pavan Khaitan

Project Completion

  • Mill Expansion Project Completion Project Completion · March 2026 · High confidence Completion
    Our mill expansion and upgradation project with an outlay of Rs. 735 crores is well underway and we remain firmly on track to complete the project within our stated timeline of March 2026.

    — Pavan Khaitan

What to watch in Q1 FY26

Mill Expansion Project Progress

Next quarter (ongoing)
Current ₹540 crores of POs issued, on track for March 2026 completion.
Target Continued progress towards March 2026 completion.

Why it matters

This is a major capital expenditure and its timely completion is vital for future capacity and revenue growth.

Our mill expansion and upgradation project with an outlay of Rs. 735 crores is well underway and we remain firmly on track to complete the project within our stated timeline of March 2026.

Risks & concerns

  • Rising raw material costs (wood, pulp)

    high

    The Indian paper industry faces strong headwinds primarily due to rising raw material costs and expensive wood pricing, impacting lower realizations and margins.

    Management acknowledged

  • Cheaper imports from China and ASEAN countries

    high

    The growing influx of cheaper imports puts significant pressure on paper mills in terms of lower realizations and margins, though government monitoring is helping.

    Management acknowledged

  • Digital substitution for paper products

    medium

    Demand for writing and printing paper remains stable, but is partially offset by digital substitution.

    Management acknowledged

  • Competition for wood raw material from other industries (e.g., MDF)

    medium

    Competition from the MDF industry is one reason for increased wood pricing across the country.

    Analyst acknowledged

Q&A highlights

8 direct
Eucalyptus trees and their impact on the water table Direct
Eucalyptus is not a water guzzler. Fact is that eucalyptus can sustain itself on very low volumes of water as well. But the fact is that it can sustain itself on lower water, so it does not really deplete the water table below. In fact, it sort of lives very well-off lower water requirements, lower water quantities as well.

Addresses a common environmental concern related to paper manufacturing and clarifies the company's stance and practices, including the use of surface water and mixed plantations.

Asked by Shashank Agarwal

Change in volume reporting methodology Direct
So, till last quarter we were also reporting a byproduct, which is pulp, into the sales. From this time onwards, if you read the table, it says paper sales quantity, and hence you would have seen a decline of 3,000 or 4,000 quantity with respect to previous years as well. ... Yes. We are just giving you the main product.

Clarifies a change in how sales volumes are reported, which is crucial for accurate historical comparisons and financial modeling.

Asked by Krushi Parekh

Utilization of new capacity post-expansion Direct
So, the moment we are going to be commissioning all these machines, so they are going to happen over a period of time. Since we are upgrading all our four paper machines one by one, that's a process which will happen over a period of time. And all of them will get commissioned by March '26. So starting April '26, which means for the Financial Year '26-'27, all the four machines will be running at full capacity. We see no problem in running them to the renewed capacity at which they will be established, and returns will come in immediately thereon.

Provides a clear timeline and confidence level for the utilization of the significant new capacity coming online, which is crucial for future revenue and profitability.

Asked by Krushi Parekh

Outlook on writing and printing paper prices Direct
We are sort of thinking and sort of espousing that pricing is going to go up, there is every likelihood of pricing going up I think on two accounts. One is, international wood pricing has started going up. ... Secondly, board paper, craft paper, packaging paper has already affected an increase of about Rs. 3,000 per ton. So I think the turnaround has started. Signs are there that paper pricing should go up and that's a good outlook for us.

Gives management's forward-looking view on pricing, citing specific drivers (international wood prices, other paper segments), which is a key factor for revenue growth.

Asked by Arihant Baid

Import competition and potential anti-dumping duty Direct
So I think it is tending towards a kind of regulation where all imports are being monitored which is possibly leading to a reduction or maintenance of imports and not that imports are going to grow higher. And yes, as and when anti-dumping is required, we as an association of paper companies, we are in touch with the government.

Addresses a major industry headwind (imports) and indicates government monitoring and potential future protective measures, which could improve domestic market conditions.

Asked by Arihant Baid

Landed cost of imports versus Kuantum's selling price Direct
So, landed cost of imports will be in the range of Rs. 60,000 per ton. And our selling price is closer to Rs. 66,000 per ton. But this landed cost of Rs. 60,000 is at the port and they will incur a cost of about Rs. 3,000 to Rs. 4,000 per ton to come inward/inland to the large markets where we are selling.

Provides specific competitive pricing data, showing Kuantum's ability to command a premium due to quality and market position despite import pressures.

Asked by Deepak Lalwani

Peak debt level and interest cost for capex Direct
So, peak debt we are envisaging at about Rs. 600 odd crores, Rs. 625 crores at the max will be our peak debt. Interest cost, I think as a percentage, it will be in the range of 8.25%, max would be about 8.5%... And I think the overall interest amount can be calculated accordingly at Rs. 600 crores with 8.5% is about Rs. 50 crores.

Clarifies the financial leverage strategy for the ongoing large capex, providing key metrics for debt servicing and financial risk assessment.

Asked by Siddhant Dand

CAPEX per ton for brownfield vs. greenfield projects Direct
So, the thumb rule is about Rs. 5 crores per ton for a greenfield because that includes all your land as well... Brownfield could be anywhere up to Rs. 2 crores to Rs. 2.5 crores per ton.

Provides industry benchmarks for capital expenditure efficiency, highlighting that Kuantum's brownfield expansion is more cost-effective than a new greenfield project.

Asked by Akshay Kothari

3 min read 7 chapters

Detailed narrative

Q4 & FY25 Financial Performance Overview

Kuantum Papers reported a challenging Q4 FY25 with operational income declining 7% YoY to ₹277 crores, and full-year FY25 revenue down 9% YoY to ₹1,107 crores. Despite this, Q4 saw a sequential recovery with EBITDA increasing 19% QoQ to ₹60 crores (21.6% margin) and Net Profit rising 24% QoQ to ₹26 crores (9.4% margin). For the full year, EBITDA stood at ₹243 crores (21.9% margin) and Net Profit at ₹115 crores (10.4% margin), reflecting a 27% and 37% YoY decline respectively.

Strategic Initiatives & Operational Excellence (Project Nirmaan)

The company is progressing with "Project Nirmaan," a central long-term strategy aimed at enhancing operational excellence through Industry 4.0 tools and automation. Significant progress includes installing sensors for APC control in the agro cooking section to manage chemical bleaching costs and improving overall efficiency on paper machine PM4. These initiatives are crucial for cost optimization and maintaining competitive margins.

Mill Expansion & Upgradation Project (CAPEX)

A substantial mill expansion and upgradation project with an outlay of ₹735 crores is well underway, with ₹540 crores in purchase orders already issued. The project is firmly on track for completion by March 2026, focusing on upgrading all four paper machines sequentially. Management expects the expanded capacity of 675 tons (from an existing 450 tons) to be fully utilized by FY27, with immediate returns, noting that brownfield capex is significantly more cost-effective at ₹2-2.5 crores per ton compared to ₹5 crores for greenfield.

Sustainability Efforts & Raw Material Strategy

Sustainability remains a key focus, with the company achieving its highest ever biomass usage at 48% in Q4 FY25, significantly above its annual average of 35%. The in-house clonal sapling capacity reached 40 lakh in FY25, with an additional 8 lakh added in Q4, supporting raw material self-sufficiency and aiming to become wood positive. Furthermore, a connection to the Kandi Dam has been established for surface water, substantially reducing groundwater requirements.

Market Dynamics & Pricing Outlook

The Indian paper industry faces headwinds from rising raw material costs and cheaper imports. Writing and printing paper prices declined by approximately ₹3,000-₹4,000 per ton (6-7%) from Q1 to Q4 FY25. However, management anticipates a turnaround, expecting an industry-wide price increase of 6-7% in the next six months, driven by rising international wood pricing and increases already observed in board, craft, and packaging paper segments.

Import Competition & Regulatory Landscape

The influx of cheaper imports from China and ASEAN countries continues to pressure realizations and margins. However, management notes that imports are not resurging due to government monitoring, where importers must declare quantities and prices. The company, as part of an association of paper companies, is in touch with the government regarding potential anti-dumping duties, which could be implemented if deemed necessary, although current import volumes are considered manageable.

Product Development & Future Growth Areas

Kuantum Papers has developed a new copier-grade paper using a higher proportion of agro pulp, aligning with sustainable manufacturing practices. This eco-friendly product will be launched soon to strengthen the portfolio. The company is also exploring the specialty paper segment, particularly food-grade packaging applications, driven by e-commerce growth and sustainability imperatives, and is looking at export markets for its new agro-based products.

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