Malu Paper Mills plans newsprint unit in Nagpur

Company to come out with Rs 20 cr public issue to part-fund facility

Newsprint manufacturer Malu Paper Mills is planning to set up a Rs 70 crore facility in Nagpur.

The plant, with a capacity of 50,000 tonne a year, would increase the company's output by two-and-a-half times and account for around 6 per cent of the country's newsprint production.

The company is set to come out with a Rs 20 crore initial public offer (IPO)by end of next month to part-fund the facility. The issue, managed by Kolkata-based Microsec Capital, will offer around 66.67 lakh shares of Rs 10 each at a premium of Rs 20.

Based on the revenue figures provided by the company for the last six months, the issue price carries a PE of 7.48 times against prevailing ratios of 43.3 and 35 for BILT and TNPL, respectively.

"We are likely to see a rapid increase in demand for papers in the coming years. The annual consumption of newsprint in the country is around 14.5 to 15 lakh tonne compared with production of only around 7 to 7.5 lakh tonne. This gives us a large volume to grow," said Venugopal Malu, vice-president.

"At present, the per capita consumption is just above 5 kg a person per year compared with the global average of 52 kg. China has a per capita consumption of 30 kg," he added.

The company produces around 28,000 tonne paper, with newsprint accounting for 20,000 tonne.

"We are a regular supplier of newsprint to leading publishing houses, including Lokmat, Jagran and Sakal. Once we increase our capacity to 70,000 tonne, we will broaden our customer base to include more national and vernacular dailies," said Malu.

The company has received allotment letter from MIDC for 32 hectare of land, about 40 km from Nagpur. But formalities such as securing environmental and pollution clearances for the project are yet to be completed.

The project will be entirely based on waste-paper and the company is banking on its the proposed volumes in newsprint business to head off bigger competition.

Other players are also upgrading operations to meet demand, which is estimated to grow by around 6 per cent annually for four years. Seven big players have also launched plans to augment their capacity by 10 per cent (around 6 lakh tonne) over the next two years.

India produces around 8 lakh tonne of newsprint and around 45 lakh tonne of other paper products. The biggest producer, Bilt accounts for around 9 per cent of the total output.

ON A ROLL

The plant, with a capacity of 50,000 tonne per year, would increase the company's output by two-and-a-half times

Firm has received allotment letter from MIDC for 32 hectares of land, about 40 km from Nagpur

Rival paper firms are also upgrading operations to meet demand, which is estimated to grow by around 6 per cent annually for the next four years