Tamil Nadu Newsprint & Papers Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call held on 18.08.2022
~
uf. TNPL
Tamil Nadu Newsprint and Papers Limited
(A Govt. of Tamil Nadu Enterprise) Regd. Office : 67, Mount Road, Guindy, Chennai - 600 032. Phone : (81) (044) 22301094-97, 22354415-16 & 18 Fax : 22350834 & 22354614 Web : www.tnpl.com E-mail : response@tnpl.co.in, export@tnpl.co.in
TNPL - The Corporate Indentity Number : L22121TN1979PLC007799
Date: 24" August, 2022
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Disclosure
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under
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SEBI
(Listing
Obligations
and
Disclosure
of
30
the
Regulation
Disclosure Pursuant to Requirements) Regulations 2015, the M/s. Sunidhi Investors/ Analysts Concall organized on Securities & Finance Limited, Mumbai — 400 055 at the TNPL Corporate Office, Chennai.
we enclose herewith the Transcript of 18" August, 2022 by
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SEBI
and
Kindly take the same on record.
Thanking you, Yours faithfully, For Tamil Nadu Newsprint and Papers Ltd.
ave
Anuradha Ponraj Company Secretary
Encl: a/a.
Factory : Kagithapuram - 639 136, karur District, Phone : 04324 - 277001 to 277017 fax : (91) 04324-277025 to 277029
| TNPL- Maker of bagasse based eco-friendly paper
“Tamil Nadu Newsprint and Paper Limited (TNPL) Q1 FY'23 Earnings Conference Call”
August 18, 2022
M
ss cuan SS _..
MANAGEMENT: MR.
SVR_ KRISHNAN — EXECUTIVE
DIRECTOR, OPERATIONS, TAMIL NADU NEWSPRINT AND PAPER LIMITED (TNPL) Mr. SANTOSH WAKHLOO — EXECUTIVE DIRECTOR, MARKETING, TAMIL NADU NEWSPRINT AND PAPER LIMITED Mrs. SATHYA ANANTH — CHIEF FINANCIAL OFFICER, TAMIL NADU NEWSPRINT AND PAPER LIMITED MR. RABINDRANATH NAYAK — SUNIDHI SECURITIES & FINANCE LIMITED
MODERATOR:
Page 1 of 16
Moderator:
Good day, ladies and gentlemen, and welcome to the QI FY'23 Earnings Conference Call of
Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Tamil Nadu Newsprint and Paper Limited hosted by Sunidhi Securities & Finance Limited. As
a reminder, all participant lines will be in the listen-only mode and there will be an opportunity
for you to ask questions after the presentation concludes. Should you need assistance during
the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr.
Rabindranath Nayak from Sunidhi Securities & Finance Limited. Thank you, and over to you,
sir.
Rabindranath Nayak:
Good afternoon and warm welcome to all the participants in the call. First of all, I would like
to thank the management of TNPL for giving Sunidhi Securities & Finance Limited an
opportunity for hosting the call.
From the management side we have Mr. SVR Krishnan -- Executive Director, Operations, Mr.
Santosh Wakhloo -- Executive Director, Marketing, and Mrs. Sathya Ananth -- CFO.
Without taking much time, I'm handing over the line to the “Management for a Bnef Remark
on the QI Performance and Business Outlook” going ahead, post which we will open the floor
for “Q&A.” Over to you.
Sathya Ananth:
Thank you so much. I welcome all of you to the conference call where we are going to present
the performance of our company for QI FY'23.
I'm very happy to announce that this quarter has been good. Our performance is better than all
of our previous quarters. Thanks to
a good demand scenario as well as the improved
operational efficiency.
Turnover, actually, we have achieved Rs.1,147 crores. This is the highest in any quarter we
achieved, excluding the preceding quarter where it was Rs.1,388 crores which had a
liquidation of stock of around 50,000 tons. This is around 76% higher than the previous year
quarter-on-quarter turnover.
Just coming to the EBITDA, in the quarter we have achieved Rs.176 crores. Previous year
being a COVID year, it was Rs.77 crores, it
is 128% over and above the previous year
EBITDA and preceding quarter it was Rs.126 crores. Even though the turnover was higher in
the preceding quarter, our EBITDA in this quarter is 40% higher than the preceding quarter as
well. Then the EBITDA in terms of percentage it is at 15.6. And if you see the split between
the paper segment and the packaging both, paper segment has given us 15.4% and the board is
at 20.9%. Both performance has been really good. This is mainly due to the in-house pulp
which we used from our new pulp mill.
PBT is
at Rs.93 crores versus a loss of Rs.21 crores in the previous year, on the preceding
quarter it was actually Rs.34 crores.
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
So with this, I will hand over to our “ED, Marketing, for the Remarks on the Rest of the
Performance.”
Santosh Wakhloo:
The overall I would say that our performance has been pretty good over what we did in the last
quarter. If you look at the PBT, as madam said, it is improved despite having sold much lesser
quantities in the last quarter.
Realizations have been good, operational efficiencies have been good, we've been able to get a
good amount of pulp from our new pulp mill that was installed. And while costs have
definitely gone up, but we have been able to mitigate a lot of that through increased and
improved realizations from the market.
In terms of our overall credit control and systems, our outstanding’s in the market have come
down considerably, whether it is for institutional sales or it is for domestic sales.
And we have also limited to
a certain extent our exports. That is to ensure that we are
balancing and operationalizing and making more effective use of capacity for segments where
we are getting improved realizations.
So overall, I would say a good performance, but yes, definitely, we can improve and we assure
we will show improvements in the coming quarters.
Moderator:
We will now begin the question-and-answer session. The first question is from the line of
Sudarshan Padmanabhan from JM Financial PMS. Please go ahead.
S Padmanabhan:
My question is to understand a little bit more about the cycle. We are persistently seeing the
prices going up on the back of pulp raw material prices as well as our prices. My question is on
the demand side. What we also read is a lot of capacity shutdown that is happening in Europe,
because of the current gas situation. Does it provide, number one, an opportunity in terms of
exports? And second is as far as cost is concerned, continuously we are seeing the pulp prices
going up, thanks to China. Where do we see the realization, how is the pass-through, is
it
something that is going to be possible for the foreseeable future given the market dynamics,
some color?
Santosh Wakhloo:
I would like to put it
in context. If you look at what's that is happening, India has been
fortunate to have ocean freight differential advantage over China and other Southeast Asian
countries which are exporters to Europe and US. While, yes, paper and packaging board
exports has increased, but a lot of finished paper-based or packaging board-based goods, the
exports have increased to
the international market. That is what has led to
a favorable
demand/supply situation in the domestic market. As far as the pass-through is concerned, I
would say the past five months or six months, the increase in the cost of raw material and fuel,
we have been able to more or less pass through everything. And what has happened is that
some segments where there is difference in the backward integration level of different Indian
players. There, the pass-through has been slower, but where the integration levels of the mills
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
in India are more or less the same, there pass-through has been much quicker. Just to put an
example, if we talk about packaging board, the level of backward integration amongst the
packaging board players is lower, as a result, pass through of the increase in costs happened
very quickly, whereas if you look at the wnting, printing segment, different players are
differently configured, some have total backward integration, some have semi-backward
integration. So in such a scenario, pass through was not immediate. But, yes, over a period of
time, pass through more or less matched or caught up with the increase in costs.
S Padmanabhan:
My other question on my side is, we're talking about integration, I mean, when I compare the
landed prices of pulp versus integrated player like yourself, I mean, I'm coming from the
context that we have done a lot of CAPEX and backward integration program. Just to get an
understanding, how much are we reaping the benefit in terms of costs at this point of time?
Santosh Wakhloo:
We did a substantial amount of CAPEX to put up a new pulp mill, which is the least hardwood
craft line at Unit-2 at Mondipatti. Now, that just about started trial production somewhere in
the month of February, and we've been ramping up production day-on-day, month-on-month, it
has still not reached to its rated capacity,
there has been a considerable advantage of this. To
mention that, if you look at imported BSKP current costs delivered in India will be somewhere
around Rs.88,000 a ton as against domestic hardwood cost of approximately Rs 35,000 a ton.
So, the differential is close to about Rs.50,000 rupees a ton, which is very, very substantial. So,
for people who are integrated backward fully, 1t was a major advantage. For people who are
just getting on stream, the advantage is increasing by the day.
S Padmanabhan:
Given that we are generating a lot of cash, and we just completed this backward integration
program, say in the next two to three years, what is it that we would be looking at in terms of
adding value or putting the cash into good use?
Santosh Wakhloo:
This is not the right time to comment on it. We do have future plans to expand and get into
related segments. With the putting up of this pulp line, we have tried to optimize on the cost
structures, wherein getting backward integration to reduce costs, but the top line has not
increased. So, we are looking at options of how to increase our top line as the first phase of
going forward. The focus nght now has been cost. So, this investment that was done was to
reduce the cost and also reduce the variations in the cost. There are substantial spikes and
downfalls that happen in costs. We have tried to reduce by this recent investment. But looking
forward, we are having plans to improve our top line. Our plans are to increase operational
efficiencies and putting new capacities, we would be working on both fronts.
Moderator:
The next question is from the line of Soumen Choudhury from Jet Age Securities Private
Limited. Please go ahead.
Soumen Choudhury:
I had a few book-keeping questions. Firstly, what was the volume of paper and board sales
during the quarter and the corresponding realizations for the same?
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Santosh Wakhloo:
We sold about 142,000 tons of paper and board combined together in QI, out of which paper
was about 99,000 tons and the balance was board. In terms of net realization to the company,
paper was about Rs.72,000 a ton average for the quarter, and board was about Rs.77,000.
Soumen Choudhury:
What was the quantum of pulp from the new plant? And correspondingly how has imports
declined over the previous quarter?
Santosh Wakhloo:
I don't have the quantum of pulp that has been used from the new plant, but just for your
information if you look at Q3 of last year, we were having the imported pulp content of close
to 53%, which dropped to about 41% in QI of this year. Pulp consumption dropping means
effectively that increase our own pulp production and consequently consumption.
Soumen Choudhury:
What is the current capacity utilization of the new plant -- would it be about 60%, 70% or less
than that?
Santosh Wakhloo:
Upwards of 70%.
Moderator:
The next question is from the line of Monish Gurge from HDFC Mutual Fund. Please go
ahead.
Monish Gurge:
What was the date of commissioning for the new pulp mill?
Santosh Wakhloo:
We have capitalized it, but formal date of commissioning is yet to be announced.
Monish Gurge:
Because the depreciation is the same, around Rs.57 crores quarter-on-quarter.
Santosh Wakhloo:
We have capitalized it from Ist of August this year.
Monish Gurge:
So the EBITDA margin which we had like 15%, this can further improve in the Q2, nght,
because the full impact of the internal pulp will accrue in this quarter, night?
Sathya Ananth:
Yes.
Monish Gurge:
Does this lead to change of raw material mix that we will use less bagasse and more wood pulp
over time?
Santosh Wakhloo:
Over time, yes, but in the current context, say one or two quarters, we will be using less of
imported pulp and more of our indigenous pulp. There will be a slight impact on the less usage
of de-inked pulp rather than less usage of bagasse. We have three sources of pulp, just for you
information. We have deinked pulp, we have bagasse pulp and we have wood pulp. So if you
really look at it, in case waste paper prices remain strong, we might reduce our de-inked pulp
rather than bagasse pulp.
Monish Gurge:
So our new pulp mill would still consume the bagasse pulp, nght?
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Santosh Wakhloo:
No, new pulp mill is wood-based.
Monish Gurge:
I'm asking let's say before commissioning of this mill, what was mix in percentage terms? And
after this wood mill like we will be replacing the de-inked pulp with this wood pulp, nght?
Santosh Wakhloo:
First, we will be replacing imported pulp. Then, we will be replacing deinked pulp.
Monish Gurge:
So, what will be your long-term target import mix like you said that it has reduced from 63%
to 41%?
SVR Krishnan:
There were questions about the pulp mill functioning and pulp mill tonnage. Just for the
clarity, we have the hardwood pulp mill which is right now commissioned for 1,45,000 tons
per annum and going forward, we would be doing almost like 1,70,000 tons per annum and
this will be basically with almost 60% to 70% of Casuarina and balance with eucalyptus. And
somebody was asking about the commissioning of the plant. Yes, the commissioning of the
plant is from end of July and from August onwards the plant is fully commissioned. And today
the operational efficiency and the capacity utilization in that plant is around 65% to 70% and
we will be ramping up slowly.
Monish Gurge:
What would be the change of raw material mix due to this commissioning of the mill?
SVR Krishnan:
Simple equation is the plant of paper and plant of board cannot be compared. Somebody was
putting a question about bagasse, will we be doing less with bagasse? No, because the product
mix in
unit-I, we have three machines -- making, wnting and printing -- making some
specialized low GSM publication paper and also making the office paper like copier. So, all
the three segments they require bagasse pulp of 30% to 40% and also the hardwood mix. And
in some grades like copier, we will have more hardwood. So, the bagasse will continue to be
supplying the full capacity to all the plants. Now, coming to the board machine, for few grades
bagasse usage is hardly and is practically nothing, though the maximum usage is going to be
BCTMP, the mechanical fiber and also the hardwood fiber.
Monish Gurge:
One question related to that import of softwood pulp. Do we have the raw material availability
because I think you would require pine wood to make softwood pulp, right?
Santosh Wakhloo:
The answer is no. Even the kind of bamboo what people are talking about it comes only to
30% or 40% of the fiber length and the strength which is required from a pure pine spruce
softwood species. Whosoever be the person operating or whatever the mills operating in the
country, we continue to import softwood for their requirement, be it 5% or 20%.
Monish Gurge:
Any change of stance with respect to this barter arrangement as like some of the other private
players, they are making EBITDA margin of 20,000 per tons, we are at around 12,000 per
tons. So what is the reason, why our margins are low, is it because of the barter arrangement?
SVR Krishnan:
You're talking about the bagasse?
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Monish Gurge:
Yes.
SVR Krishnan:
See, it is not because of the barter arrangement. Barter arrangement is because of the coal price
flexibility or the fluctuations whatever is happening. Now, today because coal is a high priced
commodity now in the fuel mix, we are thinking about why don't we get out of the barter
system. Practically if you see three years before, the coal prices never went beyond $75 or $90,
The coal price six months before it went as high as $190 to $200 and now hovering between
$90 to $115 depending on the GCV. So, we tend to think that we should come out of the barter
system. It is not that easy to come out of the barter system because the three tied up mills that
we have put our boilers, and we are operating the boilers and giving the steam to them. For that
definitely we need to do the coal exchange. In some places we give them the coal and then
they burn it and they get the energy and we get the bagasse fuel. And also always barter system
is working on the fuel efficiency and the calorific value. It will be 1:1.5 or let it be 1.5:2. It
depends on the coal mix quality and also the efficiency on the boiler and also the energy value
what they get but it's equated to the bagasse. Short term gain, we cannot think and very short
sighted focus we cannot think, it is better we come out of purchase agreement or better we
come out of barter system or something like that. We ensure that we don't lose by exchanging
coal by looking at very carefully the energy transfer.
Moderator:
The next question is from the line of Nitish Mehta from Mahindra & Mahindra Financial
Services. Please go ahead.
Nitish Mehta:
This is a related question to the previous answer that you are giving. So, my question pertains
to this power and fuel cost of Rs.261 crores in this quarter. When we compare the same with
other integrated paper mills like JK which has a higher capacity of 7.5 lakh tons whose cost
was Rs.167 and West Coast with a capacity of 5.8 lakh tons was —
Santosh Wakhloo:
What has happened is power and fuel cost has been wrongly computed the way we look at it,
because, we are using bagasse as well as coal. So, while we are buying coal, technically, we
are buying bagasse. Because on buying coal and I give it to somebody in exchange for bagasse.
so, I think it's internally added to the power cost, whereas that is the raw material cost. So, the
way you look at it is slightly different.
Nitish Mehta:
Sir, if you can give some breakup between our own coal consumption vis-a-vis the coal that
we have purchased in the barter system for the sugar mill, that will be helpful for us to
understand what was our consumption if possible?
SVR Krishnan:
No, but it is always compared from GCV to GCV, right. We don't buy a separate trade of coal
for barter system or separate trade of coal for unit-1 or unit-2. It
all requires a different
moisture and different GCV grade coal, but we take the operational efficiency to almost like
80% to 81% in the boiler, and then we go for the most suitable coal. It is not that one size
doesn't fit all. But, generally particular grade of coal what we select,
4,200 Gar, 5,000 Gar,
that is suiting for ABC and also the offsite ABC boiler.
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Sathya Ananth:
If you’re looking at the consumption and then the barter consumption, total quantity consumed
is around 1,55,000 tons, out of which for barter we have used 44,000 tons which is roughly
28%, balance is for our own fuel.
Nitish Mehta:
Yes, absolutely. Have we now again started getting linkage coal in between? We were hearing
that hardly anyone was getting linkage coal from high value or otherwise.
Santosh Wakhloo:
That's the government of India policy where all coal was diverted straight to the power plants
across the country. So even people who have large linkages are not getting full quantities. We
are making full attempts to ensure that we get it, while the quantity is still a trickle, but we are
continuing with the attempts to get linkage coal.
SVR Krishnan:
Another thing is the lignite coal of that moisture. The lignite coal of that moisture of 50% to
60% cannot be used in normal boilers as a single coal. It can always be as a mix along with the
low moisture coal of 25% to 30%.
Moderator:
The next question is from the
line
of Abhishek Maheshwari from SkyRidge Wealth
Management. Please go ahead.
Abhishek Maheshwari:
So my first question is regarding your margins. You were able to do around 15% EBITDA
margin this quarter. So, I think I was expecting the better benefit of low coal prices will come
in from QI itself. Am I nght or are we seeing the benefit coming in from Q2 because people
hoping that margins would be around 20%.
Santosh Wakhloo:
The margins will improve in the coming quarter.
Abhishek Maheshwari:
Because we'll have the benefit of the pulp mill and lower coal prices?
Santosh Wakhloo:
Yes, that is ramping of production at our pulp mill, improved cost efficiencies, improved
production efficiencies, improved market realization.
So,
overall, we do expect a better
quarter.
Abhishek Maheshwari:
Secondly, as you mentioned, different grades of coal have different prices. Now, we are seeing
internationally coal prices are moving up again strongly and sharply. So, the grade that you
use, are you seeing a major movement in that also or is your grid stable?
SVR Krishnan:
We have carefully selected the grade. I do not want to reveal much of the calorific balance and
the internal study what we have done. We did a lot of R&D work in this. we have selected a
coal grade in such a way that we have a very minimum impact even if the coal prices move up.
We have altogether came for a different fuel mix now in both the factories.
Santosh Wakhloo:
I just put in context is that normally, for coal,
per calorific value the rate is calculated. So, one
grade going up, will automatically ensure that other grades also creep up to that, because it isa
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
cost per calorific value. So, in that sense impact on everybody would be the same except for
those people who have large linkage coals, where the impact is not that substantial.
Abhishek Maheshwari:
But you're still expecting to maintain your margins, measures been taken to accommodate —
Santosh Wakhloo:
Yes, we are very confident of improving on our margins.
SVR Krishnan:
One thing. You are only talking about the market realization and the coal and the bagasse
price. No, you are also on the other side ignoring the internal efficiency factors. To touch about
some of the internal efficiency factors of both the units, typically the finishing loss has gone
down by almost 3% to 4% from three years before what it was. The second one is the uptime
of the machine. Uptime has gone up almost like 3% to 4% on each machine. And the third is
the manufacturing control, the budget adherence or the consumption pattern. The way we use
our DCS control system and QCS control system leveraging on the IT side. Those operational
efficiencies have gone up. The consumption norms are being brought under very strict focus
on control. The losses have come down by 3% to 4%. That is why as a team we are very
confident that will contain the manufacturing costs and we will protect the margins.
Abhishek Maheshwari:
In Q4, we had around Rs.1,400 crores worth of revenue. Now, CFO ma'am said that this was
due to liquidation of excess stocks. So, going forward, can we expect 1,100 crores as around
steady state revenues?
Santosh Wakhloo:
Definitely, yes.
SVR Krishnan:
In fact, we are looking better.
Moderator:
The next question is from the line of Bajrang Bafna from Sunidhi Securities & Finance
Limited. Please go ahead.
Bajrang Bafna:
Sir, my first question pertains to the sort of coal that you are going to get in this quarter. At
what percentage we are expecting to get from linkage and what percentage we still will be
dependent on imports, maybe from next one or two quarters perspective, if you could highlight
that will be really helpful?
SVR Krishnan:
The lignite and the local coal proportion will be maximum 30% to 35%. One is the usage
pattern, the other one is the availability from the source of the Neyveli lignite and the local
source from Singareni calories. And as Mr. Santosh was telling you that more focus is given by
these two are only for the thermal power plants and not for other manufacturing plants. So,
given that scenario, now, what I am expecting that we can do up to maximum 28% to 30% on
the local and lignite coals, and the balance 65% to 70% will stay with imported coal.
Bajrang Bafna:
My second question pertains to since this sugar season is ending, I know the crushing is about
to end. How we are covered for the availability of bagasse for next one or two quarters?
Page 9 of 16
SVR Krishnan:
We are very well covered at least for eight to nine months. When the season is ending, there
Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
appears to be a shortfall of two to three months to makeup. Because of the coal crisis... let me
be very clear, the entire country was going through the crisis. We have in fact reduced the
offtake of bagasse due to the non-availability of coal. When the main plant is starving for coal,
I cannot give for barter system or somebody was nightly mentioning | can't give it for getting
bagasse. So we have rationed the delivery of coal to the offsites / sugar mills. So we have cut
down on the bagasse procurement by barter system. So there is a shortfall of almost two to
three months, but there are staggered way of some other sugar mills in the border and the
nearby Andhra and Karnataka sugar mills also. And that is non-side of sugar mills. It's like an
open market for bagasse. Where we need to procure some 40,000, 50,000 tons and we are quite
confident and we have covered for the whole year, absolutely, there won't be any shortage of
bagasse pulp in the mills, because the whole efficiency and economy of TNPL les with
bagasse pulp.
Bajrang Bafna:
Just one question to Santosh sir. If you could give us some sense on the board side, because we
have recently seen the plastic has been bumed in our country across different categories. And
definitely there is some demand which will percolate to the packaging side which will be made
through paper board. So, how are we seeing this change? I know, it is nascent, just two months
has happened. But some sense that you are envisaging on this aspect and what sort of price
movement that has happened on both writing, printing and board side? You mentioned 72 and
78 for the last quarter. Where they are nght now?
Santosh Wakhloo:
You are talking about the shift of plastic or the focus toward getting out of plastic. Yes, there
has been a lot of talk from the government and a lot of pressure being applied on converters
and uses of plastic for single time usage. No government can implement a policy all of a
sudden. There is a shock, and it takes some time to get absorbed. But yes, we find a lot of
positive traction in cup stock. Also certain segments, where one-time uses their cartons and all
instead of packing and plastic tubs and all, it's been packed in virgin fiber boards. So there are
two advantages of this. One is the industry will grow by leaps and bounds in the virgin fiber
segment and cup stock growth, we anticipating upwards of 18% to 20%. That is very, very
positive for the industry, positive for the environment, and positive for the country per se.
Coming to your second question of realizations, I would say that the market has been able to
absorb price increases in both paper and packaging boards. That is fundamentally because of a
mix of two reasons. One is, as I said, converted or printed exports have also gone up from the
country. And compared to international paper prices, I would say, domestic paper prices are
reasonable. I don't say they are very cheap, but they're fairly reasonable, in the sense that
somebody can buy Indian paper, convert, make it into a book or make a carton and export. You
can still make money. That's why demand has remained firm and we are expecting prices to
remain firm and slightly improve.
Moderator:
The next question is from the line of Shivan Sarvaiya from JHP Securities Private Limited.
Please go ahead.
Page 10 of 16
Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Shivan Sarvaiya:
Sir, my question was on the power and fuel cost again. You spoke that coal prices increasing
was one of the main reasons for the high cost incidents. But sir, are there any other aspects that
need improvement, which could result in a lower power and fuel costs, are there any other
internal efficiencies that we are working on?
Santosh Wakhloo:
There is always a possibility for improvement.
SVR Krishnan:
Now, the point what you've asked is, yes, the power cost has gone up by almost more than
100%, 150%. Now, alternate fuels are only the parts or the shrubs or the paddy husks curving,
the oil brawn or things like that, because boiler is not designed for that. Now, the point is, how
do we then reduce the fuel cost? Now, TNPL has inbuilt advantage, like other guys, they have
their coal mines nearby, they depend more on the local coal, we also have the possibility and
the facility of firing our own pith which is coming from the bagasse. So, today if you talk
about almost like 15% to 20% of my consumption is through pith itself, which is coming from
the bagasse, it's an unwanted waste material. We also started using like paddy husk in some of
the boilers. And earlier typically 15% of the Indian fuel are lignite and I think we moved it up
to 30% depending on the availability. These are all the measures that internally with respect to
the fuel mix you can do. The balance is as you rightly said in the last part of your question is
on the internal efficiency. There are lots of internal measures taken and we also see the mix is
also made suitably well, reducing import coal consumption dependence.
Shivan Sarvaiya:
So sir,
if you could help us kind of quantify the benefits that we could accrue by these power
saving initiatives that are being done, any ballpark figure that you could give us?
SVR Krishnan:
Almost 3% to 5% we have saved on power which is also my PAT efficiency, which is
Perform, Achieve and Trade There's an incentive of the certificates on which you have to
perform there and it's the PAT certificate, that is Perform, Achieve and Trade. And there's a
target for every year that you need to do some 5% to 7% or 3% to 5% of energy savings. In
TNPL, we achieved almost like 4% to 5% of energy saving year-on-year.
Shivan Sarvaiya:
You target another 4% to 5% this year, or anything more than that?
SVR Krishnan:
Hopefully, mostly 3% to 5%.
Moderator:
The next question is from the line of Danesh Mistry from Invest First Advisors. Please go
ahead.
Danesh Mistry:
Most of my questions are answered. I had just one basic question. What would be our total
debt as of the end of the quarter?
Sathya Ananth:
As of QI, we have a total debt of Rs.2,170 crores. We are not availing any further loans. From
Q4 actually we have come down from Rs.2,222 crores to Rs.2,170 crores. And this year, the
total repayment is Rs.236 crores, out of which Rs.42 crores is already done in the QI, balance
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
left out is Rs.196 crores. So if you remove that Rs.196 crores, I think we will be ending the
year at Rs.2,000 crores and not more.
Danesh Mistry:
Any cash on the books, madam, which is there?
Sathya Ananth:
Cash not much, Rs.10, 11 crores.
Danesh Mistry:
And just one related question. This year, are we planning to do any CAPEX because we'll get
substantial cash accrual as well?
Sathya Ananth:
There will be only a sustenance capital, probably Rs.50 crores.
Moderator:
The next question is from the
line
of Vaibhav Badjatya from Honesty and Integrity
Investments, Please go ahead.
Vaibhav Badjatya:
I just have two questions. One is that, you earlier said that the imported pulp cost is around
88,000 currently, and the in-house pulp cost us around 33,000, 35,000. These prices nse
happened before COVID say in FY'2019, or early part of 2020. What was the difference
between the two?
SVR Krishnan:
The prices of imported pulp were only at around 64 and in house pulp was at 31, 32. This
increase is only by Rs.4,000. The imported pulp prices have moved up almost from 63 to
almost like 88, 90.
Santosh Wakhloo:
Current pulp rates are approximately $980/ MT with dollar exchange ratio having gone up
from Rs 74 to Rs 80.
Vaibhav Badjatya:
Secondly, if you can help us understand in terms of our input-to-output ratio in all the three
situations if we use the bagasse as a pulp and wood pulp, which one is the cheapest?
SVR Krishnan:
If you really see the plant capacities, it is not the input-output ratios. If you really see the plant
capacity of 330 tons of hardwood plant and the 500 tons of bagasse plant and 300 tons of this
plant, it
is designed for the requirements of 1,150 or 1,180 tons of day-by-day the pulp
requirement, assuming some X percentage on each machine.
Sathya Ananth:
I think 50% is bagasse and 30% is our wood pulp and the 20%—
SVR Krishnan:
Other things keep varying. It all depends on which grade what you make. You can roughly
take it around 40% to 50% of bagasse increase there. I don't want to elaborate on the individual
product mix, how much is wood percentage and bagasse. The question probably what he
wanted to know, was the input-output of the yield percentage, nght,
If
it
is
a yield a
percentage, typically, and traditionally, the hardwood pulp will always have the yield of almost
like 47% to 48% and the de-inked pulp will be around 75% to 76%. It depends on the number
of loops you have in the de-inked pulp. Some people have two systems, some people have
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
single system. We have three loop system, which gives the best bnghtness. When you process
it more and more, there will be losses in terms of the ash and other contraries and things like
that. So that yield will be around 76%.
Vaibhav Badjatya:
What about bagasse?
SVR Krishnan:
That will be around 55%.
Moderator:
The next question is from the line of Venkatesh Subramanian from LogicTree. Please go ahead
V Subramanian:
Sir, I have two questions. I'm actually looking for slightly a big picture kind of view on what
TNPL would look like in the next three years, because when I used to track it from 2011 to
2017, it was like excellent period, top line went up, we almost clocked Rs.270 crores of profits
during that year, the operating margins were ranging between 21% to 26%. So, can you tell us
whether the conditions now are suitable for us to kind of have a repeat of that over the next
few years in terms of margins in terms of top line, etc.,?
SVR Krishnan:
From the technical front of it and from the plant perspective, what you will be seeing or what
we are seeing, there will not be any doubt of achieving something similar performance of the
figures what you talked about in the next two to three years of time. Because in the next two,
three years of time, the production top line growth also will be for additional 1.8 to 2 lakh tons
per annum. At that time, we'll be having the top line production growth of almost like 8 lakh
tons per annum. Today, we are at 6 or 6.5 lakh tons per annum, and we will be touching almost
like 8 to 8.5 lakh tons.
Sathya Ananth:
I would like to sum it up. See, we are going to have additional production capacity. And if the
input costs were to normalize around the same level, then I think with improved demand,
definitely I think we will be able to reach the pre-COVID level. I can say it is pre-COVID
levels because in '19-20 I think we had a good result. So going forward, yes.
V Subramanian:
Ma'am, particularly on operating margins, internally would you have a target upwards of 20%
going forward?
Sathya Ananth:
Yes, yes, 18% to 20% is what we are aiming at. We are working towards that
V Subramanian:
On your debt repayment plan for the next three years, can you give us an idea?
Sathya Ananth:
Debt repayment actually see for the current year is Rs.236 crores and the next two years it is
Rs.316 crores and Rs.364 crores.
V Subramanian:
For FY'23, you are targeting Rs.236 crores?
Sathya Ananth:
Yes, that is what we need to repay.
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
V Subramanian:
In the big picture, over the next two, three years, if everything goes well in terms of our
capacity, operating demand, is it far-fetched to think about a top line of Rs.6,000 crores?
Santosh Wakhloo:
We are in the process of taking some steps to increase the production volumes at our end. As
Mr. Krishnan said, we are currently at about 6 lakh tons. We are expected to go to 6.8 to 7 lakh
tons in the next three years. That combined with higher realization should definitely give us a
top line as you think so.
Moderator:
Next is a follow up question from the line of Bajrang Bafna from Sunidhi Securities. Please go
ahead.
Bajrang Bafna:
Of late, we are hearing the wood prices are also moving northwards because of the sizable
movement that has happened in rice husk and wheat husk prices. So, most of the mills which
are based out of Northern side are also coming to the market to source the wood from open
market. So, is this applicable to us that are we also experiencing the wood price increase for
our requirement, if you could clanfy will be helpful?
SVR Krishnan:
We are foreseeing similar situation. We have not started facing it now for two reasons. One is
we have a very solid farm forestry and social forestry model, where we are looking our
relationship with the farmers with a very long-term. When I say very long-term, we don't
squeeze the farmers. When there are downward trends in the market, people even speak them
from Rs.2,500 to Rs.3,000 per ton and when the market is going up to even Rs.7,000 per ton,
that type of scenario does not happen with TNPL. TNPL as being a Government of Tamil
Nadu Enterprise, we are very transparent. We have almost like 25,000 farmers lined up with
us. So, we have a very long-term strategy for helping them technologically and then financially
and then having a very clear buyback arrangement of all their woods, which is all their wood
from their forest and it is coming to a factory. So the price stability with which we operate is
much, much better than what even the nearest competition is doing now, Point number two,
our 30% to 40% of the requirement as of today, it comes from a well-protected government
forestry land, (TAFCORN) Tamil Nadu Forest Corporation. Then because we have put our
new pulp in unit-II, we are also aggressively doing almost 22,000 acres to 25,000 acres of
plantation every year for the next five years. We are roping another 10,000-plus farmer to our
farm forestry.
Santosh Wakhloo:
I will tell you what our efforts are. We don't want to reduce the profitability of the farmer. By
providing him good stock and good technology, we are trying to ensure that out of the same
acre of land, he makes more money even by selling the wood at a slightly higher cost. We are
ensuring the profitability of the farmer improves so that we also will continue to get wood at
good prices. We have made all efforts to ensure that their yields per acre go up and up.
Moderator:
Next is a question from the line of Sharon Sharika, an individual investor. Please go ahead.
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Sharon Sharika:
I just wanted to understand the supply side situation in the printing and writing and the
packaging board like what are the capacity additions that are coming up from your competitors
is something in that.
Santosh Wakhloo:
So as far as the A-grade mills are concerned, there've been no announcements of fresh capacity
additions or expansions. Yes, everybody is actively looking at where to do and what to do. But
there've been no formal announcement.
Sharon Sharika:
For any new capacity addition, what will be the formal time to come?
SVR Krishnan:
It will be 24 months you can take it from the product stage to the commercial production.
Sharon Sharika:
What would be peak revenue at full capacity utilization?
Santosh Wakhloo:
As I said, our current capacity is 6 lakh tons. On that, you, you are seeing what the revenue
we're getting. So we sell about lakh and a half tons every quarter, on which the revenues
you've seen is Rs.1,200 crores. But going forward, as I said, our capacity is going to get
debottlenecked and increased, that along with realizations should give us
a top line
of
somewhere around Rs.6,000 crores going forward in next three years.
Sharon Sharika:
And this pulp backward integration should also add to our EBITDA margin. So in QI, what we
saw was 15%. So how much more are we going to end with this year?
Santosh Wakhloo:
It'll be definitely better than what we've done this first quarter. But rest we will have to prove it
to you guys for the next quarter.
SVR Krishnan:
Definitely, it's bigger than this current quarter.
Moderator:
The next question is from the line of Soumen Choudhury from Jet Age Securities. Please go
ahead.
Soumen Choudhury:
We have heard that the paper companies have taken some price increase at the beginning of
August. So can you confirm the same and the quantum of price increase taken by TNPL?
Santosh Wakhloo:
We have definitely increased in the beginning of this month. The quantum of increase would
be somewhere around I would say 5%.
Soumen Choudhury:
This is both for paper and board or only for paper?
Santosh Wakhloo:
No, this is basically for paper. Overall aggregated for the company board is less, but overall
aggregated for the company should be about 3%, 3.5%.
Soumen Choudhury:
And this is the only price increase taken in this quarter?
Santosh Wakhloo:
No, we had a price increase in July also.
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Tamil Nadu Newsprint and Paper Limited (TNPL) August 18, 2022
Soumen Choudhury:
What was the quantum of that?
Santosh Wakhloo:
That was slightly less, might have been about 2%, 2.5%.
Soumen Choudhury:
For the quarter, we are already up about 5% or so over QI?
Santosh Wakhloo:
We are trying to maximize.
Moderator:
Ladies and gentlemen, that was the last question that the management could take today. I
would now like to hand the conference over to Mr. Rabindranath Nayak for closing comments.
Rabindranath Nayak:
I thank the management of TNPL for the call and all the participants for the available
questions. Sir, do you want to give any closing comments?
Santosh Wakhloo:
What I was saying was that with the tremendous confidence reposed by all the shareholders,
and we have also delivered decent results in the first quarter. So much of teamwork happening
from our end, and the markets also supporting us, I'm sure we will be able to give you much
better results for the next following quarter. And I think shareholders should be happy with our
performance going forward also.
SVR Krishnan:
From my side, I would like to thank all of you and all the shareholders and all the financial
experts and people who arranged this. I'm really happy that many of the investors are more
worried on the coal and fuel prices given the fantastic know about it. And the second thing is,
we are doing lot of manufacturing excellence program. This I would like to tell you, it
is
encapsulating the CPM model and Six Sigma model and the lean manufacturing model. So, all
the things are encapsulated and we made it like a tailor-made capsule like manufacturing
excellence. And those initiatives are implemented in all the factories. And we are seeing the
results, nicely, the results are following. And with all the input price coming down slightly in
some cases, some cases going up and operational efficiency scaling up greater height and very
good teamwork all around and a very good committed team work with a lot of action, I think
better days are ahead and we are hopeful of that. Thank you so much for the opportunity.
Moderator:
On behalf of Sunidhi Securities & Finance Limited that concludes this conference. Thank you
for joining us and you may now disconnect your lines.
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