Seshasayee Paper & Boards Ltd – Paper Giant in Making?

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This article has been written by K.KOWSHICK for Finmedium Research Desk.

About Seshasayee Paper

Seshasayee Paper & Boards Limited (Here onwards will be referred to as SPBL) is engaged in the business of manufacture and sale of printing and writing paper.

Incorporated in the year 1960, Seshasayee Paper has six decades of experience in the Indian paper industry.

SPB is the flagship company of SPB-ESVIN Group. The headquarters of the group is at Chennai.

The other companies belonging to the group are PONNI SUGARS (sugar industry), HIGH ENERGY BATTERIES (chemical industry), SPB – PC (project consultancy), SPB ESVIN ADVANCED TECHNOLOGIES (information technology).

Paper Industry Overview

Paper industry comprises companies that operate by producing, manufacturing and supplying of paper and paper based products.

The paper industry manufactures:

  • Writing & Printing papers                                                     
  • Paper board for packaging
  • Newsprint                                                                                
  • Specialty papers & Others

Wood pulp remains as a major raw material for manufacturing of the paper.

Though there are various other methods for recycling paper but Wood pulp remains to be a major raw material for Indian Manufacturers.

Recycling of paper remains well below the global benchmark, India recycles only 20 – 25 percent of the used paper whereas the global average remains to be at 60 percentage.

Interesting facts about the paper industry

The first paper mill in the country was set up at Serampore (Bengal) in 1812.Hence, it is known as the paper city of India.

There are approximately 600 mills in India.

Stora Enso ( Finland) is the largest paper company in the world

Industry Growth

According to INDIAN PAPER MANUFACTURER ASSOCIATION, the paper industry accounts for 4 % of the world’s total production of paper. India is the fastest growing market in for paper globally.

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The per capita consumption of an individual is over 13 kgs, which is way behind the global average of 56 kgs.

The Threats


The major threat for the industry is the cheaper imports from countries like china, Korea, Indonesia and other Asian countries.

The current import duty for the paper stands at 10%. In the recent years there has been a significant import of paper.

For instance, Rs 1,773 crore worth of paper imports have landed from China during Apr – Feb FY20 against Rs 1831 crore in the entire FY 19.

The price of wood pulp is volatile and cyclical in nature.

Wood Pulp is the basic raw material for the manufacturing of paper and any increase in the price will have a significant impact on the profit margin of the company.

Also Watch: 5 Best Things in the Business of Seshasayee Paper

The COVID-19 Impact

Impact on the Industry

Covid – 19 had a severe impact on the paper industry. The nation wide lockdown led to shut down of the mills and the production have taken a severe hit.

The demand has also shrunk due to closures of schools and colleges and the majority of offices have also started working online which led to fall in demand of writing & Printing papers

Industrial paper usage has also crumpled because of weakness in FMCG, consumer durables, and apparel segments, which account for 50-60 percent of demand

Impact on the Stock

Seshasayee Paper had its own share of problems because of the nationwide lockdown. They saw their negatives sales growth of 50 percent in the first quarter of the year.

The management of Seshasayee Paper is however positive on the future outlook of the company as they believe that the demand is expected to increase after the crisis and things would return to normal

Let’s Talk Some Numbers

The Performance of the Company

Source: Screener

Key Takeaways from the Chart

  1. The company is able to maintain steady Operating Profit Margin with an average of 20 percentage.
  2. The companies sales growth for the past five years is 3.48% which is less than the GDP growth of the nation but at the same time the company also had a steady sales in every quarter except for the recent quarter.
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Cash Flow Statement of Seshasayee Paper

It’s important to analyse a Cash flow statement of a company, unlike an income statement which tells us about the profit generated by the company.

A cash flow statement tells us about where the money is earned and where the money is spent.

cash-flow-statement-Seshasayee Paper

Key Takeaways from Cash Flow Analysis

1)The company has been maintain a positive Net cash flow for almost every year which is a positive sign

2) The company has been repaying all the debt obligations in the past few years and now the company is virtually a debt-free which is again a positive nod for the company

3) The company has been constantly investing in procuring Fixed assets like updated new machineries.

Balance Sheet Analysis

balance-sheet-analysis-Seshasayee Paper
Source: Screener

The company has a healthy and a solid balance sheet as the value of the balance sheet is increasing at a steady pace.

The company has a reserves of 1019 crores, which is ample enough to meet all the obligations on its own without relying on outside funds.

A negligible borrowings and a phenomenal reserves is note worthy.

Peers Comparison

peers-comparison-Seshasayee Paper
Source: Screener

The major player in the listed market in terms of sales is Century textiles (diversified company) then we have JK paper, West coast paper and then followed by Seshasayee Paper.

SPBL is having a lower debt compared to all its peers and it is also trading a price-multiples of 5.14 which is lower than the industry average of 12.12 times.

SPBL also maintains a phenomenal ROCE of 25.97% with an OPM of 22.60%

The inventory turnover ratio is 3.11 days which is again above the industry average.

If we take a close look, we can clearly see the impact of Covid – 19 in the Paper industry where all the companies have a negative quarterly sales growth of 45 percent and Seshasayee Paper had a negative sales growth of 50 percent which makes it the worst victim of the Covid – 19

The market has punished all the paper companies because of the impact of the Lockdown leading to a negative 3 month returns.

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Most of the companies gave only 5 percent negative returns except for Seshasayee Paper and Andhra papers which have fallen 12 and 15 percent respectively.

From a basic comparison with its peers, we came to know that the company is maintaining good competitive stance with its peers

The Opportunities

The Indian Paper Manufacturers association is lobbying with the government to increase the Import duty to 25 percentage from the current level of 10 percentage.

Any increase in import duty will be a great opportunity for the Indian Manufacturers.

The consumption pattern of India is comparatively low to the Global Consumption story.

In the days ahead the increase in the consumption pattern of Indians will aid the growth of the paper industry in India.

India is getting more conscious about plastic pollution in the nation and there are certain states like Tamil Nadu where several plastic usages is banned. Paper Packaging remains a better alternative to plastic which will contribute to further growth for the industry. 

The Road Ahead for Seshasayee Paper

The outlook of the company remains strongly positive because of its healthy operational and the financial performance which will result in healthy cash accruals.

The company can tackle the current slowdown and can become stronger in the coming days as they enjoy a greater goodwill in the southern India as their 80 percent sales comes from the south India.

They also export their produce to U.S.A, Nepal, and Sri Lanka.

The paper industry in India has a huge untapped market and SPBL is well positioned to get a larger amount of the untapped market share in India.


This article is written by K.KOWSHICK for Finmedium Research Desk.

Cover Image Credits: Tamil Nadu Industry News

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