Indian Paper Industry Set to Boost Earnings with Improved Profit Margins

BOBCAPS report forecasts a rise in the Indian paper industry's profit margins to 16-20% in 4-6 quarters. Key factors include strong domestic operations, expected price hikes after global pulp price stabilization, and a weaker rupee. Industry consolidation and high utilization rates support growth prospects.

The Indian paper industry is on the cusp of a significant profit surge, with expectations of margins climbing to 16-20% over the next 4-6 quarters, a report by BOBCAPS reveals. This anticipated growth is backed by robust domestic operating rates, predicted price hikes post-global pulp price stabilization in December 2024, and the impact of a weakened rupee.

The BOBCAPS report highlights a potential moderation in timber prices, driven by increased plantation efforts by wood-based industries, as a factor contributing to the profit boost. The Indian paper sector had seen its EBITDA margin plummet to a two-decade low of 6.9% in FY25, hindered by soaring timber costs and intensified competition from low-cost imports.

Despite these challenges, the current environment signals a structural change with increased industry consolidation, as top players execute aggressive expansion strategies. Major companies such as ITC Limited, JK Paper Limited, and others are poised to capture larger market shares, ensuring operations at high utilization rates amid limited capital expenditure.

(With inputs from agencies.)