Pudumjee Pulp a lone-rangerin troubled paper industry

New Delhi, July 3: Pudumjee Pulp amp; Paper Mills Ltd is a lone-ranger in the beleaguered paper industry. At a time when most of the paper majors have slipped, this Pune-based company has improved its bottomline. For the year-ended March 30, 1998, the company earned a net profit of Rs 10.3 crore compared with Rs 9.36 crore despite a 25 per cent fall in other income. Although on a year-on-year basis, the percentage increase in PAT is only 11 per cent, it is remarkable considering the pall of gloom which has enveloped the industry. Cheap import sluggish demand and excess capacity have hit domestic paper manufacturers. Although the Budget has made imported paper costlier, poor demand in India and abroad particularly Asia continues to haunt these companies.

In tune with the general industry trend Pudumjee Pulp8217;s sales turnover has fallen. For fiscal 1997-98, the company posted a turnover of Rs 132.64 as against Rs 136.24 crore last year. But what has helped the company sail through troubled waters is thereduction in expenditure in interest cost. Cheap international prices of pulp led to lower input costs. However, the excessive dependence on imported raw material could affect the company in this fiscal. The 44 per cent drop in interest cost from Rs 3.36 to Rs 1.88 can be attributed to the efficient working capital management and repayment of loan funds.

The earning per share has jumped from Rs 11.41 to Rs 12.36. On the current market price, the P/E multiple works out to around 2. The poor discounting is partly due to the problems plaguing the industry. However, factors like high employee cost and inefficient power utilisation have also attributed to the low market price. With hardly any exports, the company also cannot benefit from the rupee depreciation.

Pudumjee Pulp8217;s share price has followed a pattern which is similar to the other paper majors. The stock has been falling consistently since June 1997. The scrip has shed approximately 37 per cent since then and currently quotes at Rs 29 against a bookvalue of Rs 122. The scrip has touched an all-time high of Rs 360 in November 1994. However, for the past two years the scrip has been quoting at around Rs 45-50.

All paper manufacturers who have declared results for 1997-98, have either fared badly or have slipped into the red. While ITC Bhadrachalam incurred a loss of Rs 48.2 crore, TNPL8217;s losses amounted to Rs 3.57 crore. Although a few like Seshasayee Paper have posted profits, their bottomlines have dropped drastically. Some paper manufacturers like BILT have even extended their financial year.