A Study on the Indian Containerboard Industry

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By: Usman Shaik -- Senior Research Analyst

18 June, 2013

A Study on the Indian Containerboard Industry
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The Indian Paper Industry is highly fragmented and is dominated by small and medium size players. The production capacity of Indian paper mills are typically classified as large (exceeding 33,000 TPA), medium (in between 7500 TPA and 33,000 TPA) and small (with capacity of less than 7,500 TPA). Out of the total 759 mills in India, 114 mills are large (15% of mills) whereas medium and small mills contribute for 303 (40%) and 342 (45%) respectively. The annual paperboard production capacity of India as of 2012 stood at 5.3 Million MT, with Kraft paper contributing close to 60% of the production. With promising growth opportunities, the country has been a target geographic market for international players. In October 2012, the leading global paper packaging player, Mead West Vaco acquired the Gujarat based corrugating materials manufacturer Ruby Macons, which has an annual production capacity of close to 150,000 tons. In 2012, paper companies witnessed a squeeze in their profit margins on account of input cost escalations. High debt levels due to capital expenditure and low margins led to poor credit metrics in 2012 for the industry players. All these factors together pose a negative industry outlook in the medium term. Depreciation of INR as against USD and other foreign currencies has also increased the import spend accounting for a significant contribution to the cost structures. In addition, sluggish demand leading to low operating rates (recorded at 76% in 2012-13 for paper and paperboard, which is the lowest in the last 6 years) further worsened the conditions.




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