Yash Papers' IPO to fund expansion

Faizabad-based Yash Papers, makers of Kraft paper, is set to float an IPO to part finance a major expansion plan.

The expansion, estimated at Rs 85 crore, will be financed through equity, which is likely to turn in Rs 21"�24 crore, and the rest though borrowings.

The borrowings of Rs 57 crore have been tied up at an interest rate of 9.5 per cent. The price range mentioned in the documents submitted to Sebi is Rs 12"�14. Sebi's decision is likely to come soon. At the end of last month, the firm's share price ruled at Rs 26.

A new integrated project has been envisaged for making speciality paper of industrial grades. Managing Director Ved Krishna told journalists pulp mills would come up, in addition to a caustic recovery plant and a paper mill. The plants will be ecologically balanced, economical, and energy-efficient.

Getting up a captive power plant of 6 MW has been outsourced to Triveni Turbines. Once this increased capacity is in place by next year, the consolidated paper-making capacity of the company will increase to 39,000 tonnes a year, from the present capacity of 16,000 metric tonnes a year.

Even in crisis, the firm managed to ward off the chill winds of recession. This has happened, says Krishna, because the company has chosen its niche, viz. Kraft paper.

It has concentrated on creating products with specific-user applications. To do that, the company, says Krishna, "collaborated with its end users to develop products based on their ongoing and emerging requirements". Thus, it has developed the manufacture of hard tissues, wrapping grades, and packaging/stationery grades of paper.

The firm has a market share of 50 per cent. Its production increased from 13,088 tonnes in 2002 to 14,548 tonnes in 2004.

Over the years it has increased its exports from 633 tonnes in 2001 to 1,735 tonnes in 2004, the proportion increasing from 5 per cent to 12 per cent of the total sales.

Its net sales rose to Rs 25.84 crore in 2004, as against Rs 23.90 crore in 2003. The operating profits in the two years have been Rs 4.51 crore and Rs 3.08 crore, respectively. Post-tax profit has increased to Rs 1.58 crore from Rs 0.87 crore, and dividend payout is now 12.5 per cent (10 per cent last year).

Its paid-up capital stands at Rs 3.86 crore and reserves and surplus at Rs 10.28 crore.

The company has been using bagasse as its key raw material. But bagasse prices have been rising, since it is now being used for many other purposes as well.

Thus, the company has asked the government for permission to start industrial forestry.