The fifty four year old IPAPPM (formerly Andhra Pradesh Paper Mills) is an integrated paper and pulp manufacturer with a total production capacity of 241,000 TPA. The company produces a range of premium grade writing, printing, copier and industrial papers for domestic and export markets. Each of these products offers a differentiated proposition and is targeted to meet unique needs of discerning customers.

It employs around 1,900 people.

A 75% subsidiary of a strong American company

The Parent company, International Paper is a leading global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Latin America, Europe, North Africa, India and Russia. It is the largest such company in the world.

It produces corrugated packaging products that protect and promote goods, and enable worldwide commerce; pulp for diapers, tissue and other personal hygiene products that promote health and wellness and papers that facilitate education and communication.

International Paper is headquartered in Memphis, Tennessee, USA, and employ approximately 52,000 colleagues located in more than 24 countries.

Net sales for 2017 were $22 billion or more than Rs 150000 crore.

The Parent company holds 75% stake in the Indian subsidiary.

During the quarter it registered a 10% rise in sales to Rs 375.39 crore. OPM improved 630 basis points to 29.1% which saw OP rise 41% to Rs 109.05 crore. Other income jumped 276% to Rs 2.83 crore and interest fell 86% to Rs 85 lakh. After providing for depreciation (up 11% to Rs 18.27 crore), PBT went up 68% to Rs 92.76 crore.

EO loss was NIL against Rs 8.37 crore. Thus PBT after EO grew 98% to Rs 92.76 crore.

Tax grew 131% to Rs 32.86 crore (tax incidence went up from 30.3% to 35.4%), after which PAT went up 83% to Rs 59.91 crore.

FY 2019 results

In FY 2019 it registered 13% rise in sales to Rs 1427.33 crore. OPM improved 900 basis points to 26.5% which saw OP rise 71% to Rs 378.58 crore. Other income jumped 176% to Rs 14.59 crore and interest fell 67% to Rs 8.54 crore. After providing for depreciation (up 3% to Rs 67.87 crore), PBT went up 135% to Rs 316.76 crore.

EO loss was Rs 5.43 crore against Rs 8.37 crore. Thus PBT after EO grew 146% to Rs 311.33 crore. EO loss is due to provision made towards interest demand arising Income Tax dispute.

Tax grew 156% to Rs 111.26 crore (tax incidence went up from 34.3% to 35.7%), after which PAT went up 141% to Rs 200.08 crore.

In FY 2017, the Hon'ble High Court for the State of Telangana and the State of Andhra Pradesh upheld the validity of levy of electricity duty @ 25 paisa per unit by the State Government on consumption of electricity by captive generating units relating to earlier years. The Company (along with other petitioners) filed a Special Leave Petition in the Hon'ble Supreme Court, which in the interim, directed the petitioners to pay partial amount without prejudice to the rights and contentions of the petitioners, pursuant to which the Company had paid Rs 15.02 crore under protest in FY 2017. The matter is pending hearing.

In view of the inherent uncertainty in predicting the final outcome of the above litigation, the Management has, on grounds of prudence and abundant caution, made a provision amounting to Rs 2,3.57 crore during FY 2017 towards the potential liability in the event of an unfavourable verdict in this matter, which amount was disclosed as an exceptional item. Additionally, an amount ofRs 15.72 crore has been disclosed as contingent liability. On the basis of the legal advice obtained, in the opinion of the Management no further provision would be required in relation to this disputed matter.

Paper Industry is growing steadily

The Paper Industry in India is growing steadily with increasing demand from various customer segments like education, business & corporate and commercial printing. The demand and growth drivers have come from a combination of factors such as rising income levels, growing per capita expenditure, rapid urbanization, industrial production, government spending on education and increased school enrollments.

To cater to the customer needs, IPAPPM offers the best and recyclable products and services using innovation, sustainability and manufacturing excellence programs. The company has been able to grow in most regions through distribution expansion and customer engagement programs.

Focuses on creating innovative, sustainable and recyclable products

IPAPPM manufactures a wide variety of writing, printing, copier and offers a wide range of high quality specialty grade products for a diverse range of applications for foreign and domestic markets.

These products are designed to provide outstanding performance, functional excellence and exceptional finish quality.

The well-known cut-size papers of the Company offer a wide range of office documentation and multipurpose papers, from economy to premium grades, ideal for both home and commercial use.

The papers are available in best-in-class brightness and produced with Elemental Chlorine Free (ECF) pulp technology.

In Writing and Printing it offers a wide range of superior quality writing and printing papers suitable for printing journals, text books, reference books, calendars and a variety of other commercial printing applications as well as for notebooks and diaries.

In copier, the papers are available in best in class brightness and produced with Elemental Chlorine Free (ECF) Pulp technology. Its range is perfect for high volume photocopying and high-quality color printing needs and engineered to run flawlessly on all types of Photocopiers, Laserjet and Inkjet printers and Multi functional devices.

In speciality papers, IPAPPM offers a wide range of superior quality Specialty grade products that are custom engineered to suit specific and diverse range of applications.

Valuation

The stock trades at Rs 447