Emami Paper Mills to put up Rs 20 bn packaging board unit in Gujarat

Company seeks to establish direct footprint is western India, a market it has so far been serving through its plants in Odisha and West Bengal

Keen to expand its footprint directly in the western region of the country, Emami Paper Mills, part of the Rs 600 billion Emami Group, is investing Rs 20 billion in Gujarat to set up a 0.23 million tonne (mt) multilayer coated packaging board manufacturing plant.

So far, Emami Paper Mills has been catering to the western region from its two plants in Balasore in Odisha and Dakshineshwar in West Bengal.

Aditya V Agarwal, director at the Emami Group, said the company is on the lookout for a western expansion as it is logistically and financially more viable for it to cater to the demand from the western zone.

Expected to be commissioned by early 2020, the upcoming facility is spread across 103 acres in the Saykha Industrial Area at Bharuch district in Gujarat. Additionally, an 18 megawatt captive power plant is also being constructed at an investment of around Rs 10 billion which will cater to the first phase of the project.

“Keeping in view the high quality infrastructure and ease of doing business in Gujarat, we target to complete the first phase of the project by early 2020 and commence our commercial production in the first half of the same year. This project will play a key role in establishing Emami Paper Mills as one of the largest packaging board manufacturers in India. We intend to expand further into Gujarat as we see good potential in the state as well as western India. Having a plant there makes more business sense rather than rout products from the eastern facilities,” Agarwal said.

In the second phase of the expansion, Emami Paper Mills, the largest newsprint producer and one of the major producers of multilayer packaging board in the country, is expected to double the plant capacity in Gujarat to 0.45 mt in the second tranche of expansion. 

Agarwal has targeted to generate Rs 25 billion of revenue by the end of the 2022 fiscal year and this plant is a step towards that goal. It is expected that this plant, once commissioned has a potential to generate around Rs 10 billion worth of business for the company.

In the past 5–6 years, domestic demand for consumer packaging board has increased at 8-9 per cent CAGR to touch 3.7 mt in 2018; and it is expected to grow to 4.7 million tonnes by 2021-22.

In 2015, Emami Paper Mills diversified into packaging board by setting up its Odisha unit. Currently, its total production capacity is 0.34 mt, of which 0.6 mt is newsprint and writing-printing paper and 0.18 mt is paperboard. Completion of the upcoming plant will increase Emami Paper Mills’ total production capacity to 0.56 mt.

The company is expected to fund this new project by a mix of borrowing from banks and the market. The company’s board and the shareholders have approved a qualified institutions placement (QIP) whereby it has targeted to raise Rs. 3.5billion to fund construction of the Gujarat plant.

“Last year only, we had expanded our plant in Odisha where significant investments were made. For the Gujarat plant, the funding has be done by borrowing and the QIP route”, Agarwal said. Around Rs. 6.5 billion was pumped into this plant in 2017.

As on March 31, 2018, the company’s total current and non-current stood at Rs 19.64 billion.

The Bharuch plant is expected to generate direct employment for around 750 people and an additional employment of around 2,000 people in the ancillary industries and service organisations.