In an interview with CNBC-TV18, Venugopal Malu, VP Projects at Malu Paper Mills said that the paper industry is in the phase of re-rating and is seeing a paradigm shift in packaging demand due to change in technology.
In the last few trading sessions paper company stocks have been buzzing and Malu Paper has rallied 63 percent in the last 5 trading sessions.
In an interview with CNBC-TV18, Venugopal Malu, VP Projects at Malu Paper Mills said that the paper industry is in the phase of re-rating and is seeing a paradigm shift in packaging demand due to a change in technology.
He said that demand from FMCG players has also led to production pick-up in packaging segment.
Below is the verbatim transcript of Venugopal Malu's interview to Prashant Nair and Reema Tendulkar on CNBC-TV18.
Prashant: Could you tell us what’s going on, any fundamental reason for the price move that we have seen in the stock?
A: The basic reason is that the paper industry off late have crossed the bottom of it cycle and the industry has been in the course of re-rating. The basic products which we manufacture are packaging and newsprint, there has been a strategic shift in packaging boot consumption, so earlier there were conventional ways of packaging in consumer goods, which have moved into more sophisticated and organised way.
Secondly, what has happened is that the boom in the e-commerce in the last 2 years have taken the packaging segment into a steep rally with the parts and number of shipment being increasing.
Thirdly, the amount of the FMCG good like the new entrance like Patanjali or PepsiCo or Haldiram or all the new entrants have defined their geographies across the countries which has impacted the packaging industry demand and finally the packaging industry have off late changed its view, so the conventional technology of packing machines have seen through new generation packing machines which requires new technology packaging paper, which we have over the period evolved into that segment and that is why we have turnaround our performance in last two years after doing the capital goods changes in our plant.
Reema: Have there been any recent price increases and if yes the quantum?
A: There has been a recent price jump of around 10-15 percent in the bid released bids of the paper as well as newsprint. I like to share you that in this newsprint segment which was say a static segment for a long time, but you will see that for the quarter 3 we are completely sold out and almost for the quarter 4 we would be selling out in maybe a month or two.
It has been a very good year for us since last many years and we foresee that there has been closure of industries across India and in newsprint the demand of newsprint is 2 million tonne paper in India and the production is 0.7 million tonne, so the growth in this segment is quite high.
There has been closure of imported newspaper across North America and Russia, Finland, Canada so that has been impacted our demand cycle and US dollar has also been static in past 2-3 years so that created benchmark pricing right now.