Paper stocks rally; Pakka, TNPL, Star, West Coast, JK Paper zoom up to 20%

Shares of paper & paper products companies were in focus, zooming up to 20 per cent on the BSE in Wednesday’s intraday trade on positive outlook. The Indian paper industry is expected to record sustained growth in demand due to rising literacy rates and business activities.

Paper stocks have been among the top performers in the last calendar year, 2022, on the back of robust demand, consolidation in the sector, stable margins, and the ban on single-use plastic.

The growth in the Indian packaging industry has been catalyzed by a surge in e-commerce, food processing, pharmaceuticals, FMCG, manufacturing and health care sectors. The Indian government’s ‘Make in India’ initiative has catalyzed the packaging industry and the country’s paper and packaging industry is the fifth largest sector in the economy.

India is a major exporter of flattened cans, printed sheets, components, crown cork, lug caps, plastic film laminates, craft paper, paperboard and packaging machinery. The laminates and flexible packaging segment, particularly PET and woven sacks are growing fastest.

Packaging-grade paper accounts for 55 percent of the main types of paper produced domestically in the paper and paperboard industry.

United States was the leading export destination for the Indian packaging industry, followed by United Kingdom, United Arab Emirates, Netherlands and Germany.

The Indian paper and paperboard market is also predicted to expand at 6-7 per cent annually. (Source: ibef.org, niir.org) India’s paper and packaging industry is expected to grow to a value of $204.81 billion by 2025, with a CAGR of 26.7 per cent from 2020 to 2025, Pakka said in its FY23 annual report.

Shares of Pakka were locked in the 20 per cent upper circuit, also its new high, at Rs 260.90 on the BSE. In past two months the stock price of the company doubled from a level of Rs 131. Today, the average trading volumes at the counter jumped over six-fold with a combined 1.5 million equity shares of the company changing hands on the NSE and BSE. There were pending buy orders for 250,000 shares on both the exchanges at 11:01 PM.

Among other paper stocks, Andhra Paper rallied 13 per cent to Rs 675, followed by Star Paper Mills (11 per cent at Rs 244.95), Emami Paper (10 per cent at Rs 143), Tamil Nadu Newsprint & Papers (TNPL) (9 per cent to Rs 280), West Coast Paper (8 per cent at Rs 778), Ruchira Paper (7 per cent at Rs 149.65) and JK Paper (5 per cent to Rs 408.70). In comparison, the S&P BSE Sensex was up 0.58 per cent at 66,466.

The world is seeing the emergence of a new trend - an increased replacement of plastic packaging with agro-based paper. The world is increasingly focused on replacing the consumption of single-use plastic and plastic cups with packaging paper alternatives that are derived from environment-friendly and renewable sources. An improvement in retail-driven demand should catalyse the offtake of environment –friendly packaging, strengthening prospects for companies like ours, said Ruchira Papers.

The Indian paper industry is poised for growth, with increasing demand driven by population growth, urbanisation, and rising literacy rates. Government initiatives promoting education, skill development, and sustainability further contribute to the industry’s positive outlook.

Opportunities lie in adopting sustainable practices, leveraging the growth of the packaging sector, embracing technological advancements, and exploring export potential. Paper companies should focus on innovation, diversification, sustainable practices, and strategic collaborations across the value chain to capitalise on these prospects, said Star Paper Mills in its FY23 annual report.