Mr. Suresh Kilam - APP

A Brief about APP

At present APP manufactures 13 million tons of paper comprising of 3 grades i.e. writing & printing, industrial and tissue paper. Out of the total paper that we produce W&P surround 6½ -7 million ton for which we consume about 65-70% of the hardwood pulp, which is met by our own captive plantations simultaneously we source our softwood pulp from Scandinavian & North American countries. Recently, we did some acquisitions of small mills in Europe for our softwood pulp requirement and to lower our dependency on the open market. We have started producing little bit of mechanical and softwood in Hainan too. Lately, APP ventured into a greenfield project in Indonesia with the capacity of 2 million tons and we have enough forest to support that. Ever since we acquired Indah Kiat in 1986 we have been planting trees and have enough forest cover to support our production capacities. To increase our pulp capacities further we are using the different techniques to boost our per hectare yield of wood by 20-25%.

Thought on over capacity

I would say the market has over capacity, but in W&P paper only. This is not because of the additional machines or the additional capacities that has been added. The main reason is that the market in Western Europe and North America is shrinking. Chinese and the Indonesians can’t export to North America and Chinese can’t export to Western Europe, so the panic button is pressed in Asia. And, the over capacity is only in coated paper and not in wood free uncoated as it is still balanced. People have the temporary phenomenon of getting worried and stop buying. The total world consumption everyday is 1.3 million tons and if you don’t buy for let say 30 days than 39 million tons is what you have for the disposal, so panic situation is created.

Like I said earlier over capacity situation is in coated paper whose worldwide consumption is 22 million tons. China produces 8 million tons of coated paper against 4 million tons of demand. And, because China cannot export to Europe & America, which jointly consumes 11 million tons so it diverts the excess of 4 million tons to Indian sub continent, Middle East and South East Asia. In a nutshell over capacity situation is only in coated paper, which is about 5% of the total global portfolio of paper, and it’s a temporary phase.

Market Synopsis

The graph of W&P paper seems to be going negative and I am talking about the whole market growing at -1.8%. By 2020 it will come down to 105 million tons or 100 million tons from the existing 125 million tons because market in western world is shrinking and the only area where it is growing little bit is Asia. Industrial paper is doing okay and growing at rate of 2-3%. The other item, which is doing very well in the world today is tissue paper. The global consumption is about 30 million ton and still growing at the rate of 6-7%.

APP Plans for India

APP wants to capture some percentage of growth in the Indian market, without displacing the local industry. So far Indian story is very good with the present demand of 11 million tons, growing at 10% every year. We would like to grow in India into high-end packaging board i.e. ivory board or folding boxboard. And if Indian government allows the FDI in retail then the demand for the cartons will double in the next 5 years.

In coated paper segment, India has to import it irrespective of the dollar price, as there is deficit of couple of thousand tons of coated paper. Tissue market in India is very small with the consumption of 60,000-70,000 tons per year as against 6 million tons in China. Though it is very small but in the next 5-10 years it will grow at 20% p.a. highlighting the great opportunity for us.

Views on Indian market & role of international players

If the industry has to survive or if you want to improve the industry, competition has to be there. And, if you want fair & healthy competition then you have to bring down the duties to zero level, as you can’t protect the Indian industry in future. The recent acquisition of APPM by IP shows western interest in the Indian market. IP paid a good entry amount to the mill which is just 250,000 tons p.a. to see whether they want to expand into the Indian market or not.

After our brief stint of Sinar Mas in India we decided it is better for us to export paper here. Now India has joined AFTA, so under the AFTA agreement Indonesia can enjoy 50% set off against the duty, the duty for the rest of the world is 10% and for Indonesia is 5% and under this agreement the duty has to come down to zero in the next 2-3 years.

By 2020 you will see the Chinese producers will dominate 60-70% of the W&P and 30-40% of the industrial grade, why because China has access to new technology, which provides them economies of scale. They can afford to invest in a machine, which costs over a billion dollars even because they have huge domestic base. This year China produced around 105 million tons of paper and growth in every year is as big as one India. The average age of a paper machine in America & Europe is 35-40 years and 27 years respectively whereas in China it is 5-6 years. So even if the prices drop below the raw material cost the Chinese can still survive. The entire growth of 10 million tons in India in the next decade will largely be met by way of imports except for the low value grades. China is efficient and you cannot tell them that no, we will not allow you to come to India. The day the 10% duty comes down to zero then you will see the complete turnaround.

Mr. Paul Brown - Executive Chairman, Andhra Pradesh Paper Mills Ltd.

On October 14, 2011 International Paper (IP) announced that it has completed the acquisition of a 75 percent stake in Andhra Pradesh Paper Mills (APPM). IP purchased 53.5 percent of the APPM shares from Mr. L.N. Bangur and related family members and affiliates for approximately US$226 million in cash. They have also entered into a not to compete agreement, for which they received a cash payment of US$57 million. In addition, International Paper acquired an additional 21.5 percent of APPM shares in a public tender offer completed on October 8, 2011, for approximately US$105 million in cash. Mr. Paul Brown, President, IP India, has become executive chairman of the APPM.

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After the announcement of APPM acquisition by IP, we had an interaction with Mr. Paul Brown in our Apr-May 2011, issue. Now with the completion of the acquisition it was right time to take a snapshot of the comprehensive plan of action which IP has chalked down on paper, the only thing that is left is the execution. During the interaction Mr. Paul Brown highlighted the way forward by saying “It’s a marathon, not a sprint”.

Paper Mart: You have recently completed the acquisition of APPM and now come the prioritizing aspect. Kindly summarize on your stepwise program ahead for APPM?

Paul Brown: We are taking a few months to learn more about the company, get to know the people and discover opportunities for improvement. IP technical experts are beginning to visit APPM and APPM managers are beginning to visit IP operations in the U.S. A long range facility plan for the mills is under development and this will be our roadmap for further investment. We are also getting to know APPM’s distributor network, and learning about the market for APPM’s products. IP’s impact on APPM will happen at a steady and positive pace but we are mindful that APPM has a business to run and customers to satisfy, so I don’t think anyone will detect sudden changes in the way APPM operates. It’s a marathon, not a sprint.

PM: M&A’s are highly effective means of achieving rapid corporate growth, penetrating into new markets and gaining a number of other strategic advantages. But they are also complex endeavors that require swiftly integrating resources and systems of different companies to realize the projected synergies. What steps are planned to ensure smooth integration of diverse corporate cultures and bridging fundamental differences in management style?

PB: International Paper has plenty of experience integrating acquired companies around the world. I’ve been deeply involved in five of IP’s acquisitions in the last 12 years, so I understand the complexities involved. Successful integration requires a thoughtful understanding of the acquired company’s unique company culture, as well as sensitivity to the local culture and norms. One of our first steps with APPM was to establish an integration team, with IP and APPM experts from all of the key business functions. This team is working quickly to ensure that APPM transitions smoothly into International Paper. In the end, some processes and policies in APPM will follow IP’s global norm and other aspects of APPM will continue same as before.

PM: Till today you must be abreast with the technological capabilities of the Indian manufacturers. What are your plans of bringing the IP’s technological forte to your Indian facility?

PB: International Paper has extensive experience in bringing global best practices in operational excellence, environmental, health and safety and social responsibility to the regions in which we operate. Over the next many months, we will have a considerable number of IP resources working closely with APPM management to identify opportunities where IP can bring best practices and transfer knowledge.

I should also note that APPM’s operations are well managed, so we expect to learn things from APPM that IP can spread around its global manufacturing network.

PM: IP specializes in the packaging grades and with the acquisition of APPM you are entering India with W&P grade? Kindly elaborate on the plans when are you bringing your specialization to India?

PB: It’s true that IP has a strong global footprint in packaging, but we also have a strong global footprint in W&P grades. We’ll be studying opportunities for expansion and we may expand into other grades or market segments, if it makes sense and if we can generate attractive returns for our shareholders. In any event, W&P is a good place to be in India for a long time to come.

PM: Kindly brief us about the vision and mission with which this acquisition was primed and your long term plans for the Indian market as a whole?

PB: It’s simple, India is one of fastest-growing markets for paper and packaging in the world and we expect paper and packaging demand to grow at a fast rate for many years. I think it’s an amazing fact that India has about 15 percent of the world’s population, but consumes less than 2 percent of the world’s paper. India’s rapid economic growth, combined with increasing focus on education and the growing middle-class will drive the growth of paper consumption well into the future. IP has entered this fast growing market via an established company, with good assets, good people, access to fiber and room for expansion. We are enthusiastic about India’s future, and pleased with the investment in APPM.

PM: Kindly highlight the areas where you think that the premium which IP has paid for the acquisition will provide you the justified returns in the long term?

PB: APPM is a strategic investment for International Paper and the price we paid reflects the cost of entry into a high-growth market with significant upside in the future. We take a long-term view of the investment, and APPM provides an attractive platform for growth.

PM: Your thoughts on the challenges & opportunities ahead for the IP in the Indian market in terms of customers & suppliers both?

PB: The opportunities are to significantly improve the existing business, grow in line with market growth, and perhaps expand beyond W&P grades into other market segments. I don’t see any specific challenges beyond the normal challenges that you face in any business, every day, in any area of the world. I believe that customers and suppliers will be very pleased with what IP brings to APPM, over time.

PM: “The existing management team and 2,500 employees of APPM will continue to operate the business, supplemented by additional International Paper leadership, and professional and technical resources” Comment?

PB: APPM has experienced and competent people and the current management team will continue to operate the business. We have added a few additional people to the IP team in Hyderabad, including myself, who will support APPM, share global best practices and introduce International Paper culture to the Andhra Paper team. As part of International Paper, Andhra Paper will have access to the company’s network of professional and technical services and expertise. IP puts enormous focus on people and we want to make APPM a great company for people to grow and develop, to have career opportunities, and to be highly engaged in running a very successful business. The future is bright for APPM and International Paper, and I have no doubt that we will be successful in the Indian market.

APRIL started up its biggest single pulp line in the world to produce 1.5 million ton per annum of bleached kraft pulp in Rizhao, Shandong Province of China during mid-2010. In addition to featuring some of the most advanced environmental protection technology, facilities, and control & management systems in the world. The mill is smell-free and the effluent is almost colourless. Recently APRIL has announced a new USD 4.6 billion investment which will be used to increase pulp production of the Rizhao mill by about 1 million tons and production of paper and paperboard by 2.4 million tons.

We had an interview with Mr. AJ Devanesan, COO, APRIL on various subjects including APRIL’s Chinese facility, Indian paper industry synopsis, challenges & opportunities in addition to global industry scenario etc.

Paper Mart: As an international pulp & paper company, how do you look forward for the Indian market?

AJ Devanesan: India is one of the fastest growing markets for us, as its paper and board demand per capita has grown by CAGR 6.2% p.a, from 2.9kg in 1990 to 9.8kg in 2010. This is promising, however India is still lagging behind other growing economies like China and Indonesia where per capita paper consumption in 2010 was 66.2kg and 27.9kg respectively. Clearly there is significant room for development and we anticipate a continued healthy growth rate for the industry.

There is also scope for domestic manufacturers to improve their quality and increase capacity, with the copier segment, tissue & speciality, packaging & certain grades of coated paper like medical grade, fuelling future industry growth. The Indian market is currently highly fragmented, so consolidation in the near future would be highly beneficial for the industry. We expect future market developments to come from new products, introduction of world standard technologies, as well as the aspirations of major domestic players. All these should go far to improve the rating of this undervalued industry.

PM: What opportunities and hitches do you find in Indian paper industry?

AJD: Generally, the growing economy and particularly the service sector will fuel demand, which is expected to cross 20 million tons by 2020. With increases in average income, customers have become more demanding for quality products, meaning they are now ready to pay a premium for higher quality. With demand for improved quality and increased product segments, Indian paper manufacturers will have a great opportunity to increase their share of market. FDI in the retail sector should also further boost demand for packaging and coated paper. New government initiatives related to education such as “Right to Education” & “Sarva Shiksha Abiyan” should also be a boost to the printing and writing segments.

On the downside, the cost of energy as well as wood and pulp, constraints in water supply, and the lack of proper environmental protection facilities at manufacturing plants, are major limitations. To support the industry, the government must relook relevant policies on industrial tree plantations. Of course, significant improvements in infrastructure such as ports, roads and railways need to be made, in addition to improvements in distribution and delivery costs.

PM: Elaborate your plans for India.

AJD: We have been a major supporter of the Indian paper industry with our raw material (pulp) for the last two decades. We have always kept our options open for participation in the downstream market and have explored possibilities of strategic alliances and partnerships. We have noticed the presence of overseas companies in domestic markets and of course have our own interest to participate in partnership with national players.

PM: Take us through your new pulping facility in Rizhao and the new paper machine.

AJD: APRIL SSYMB, as we are known in China, is based in Rizhao, Shandong Province, the province with the 3rd largest GDP in China. To give you some background, Phase One of annual production capacity for BHK pulp was 315,000 tons and 170,000 tons for high grade ivory board. We invested RMB 11.3 billion (INR 78 billion) in Phase Two, which began construction in 2008 and started test production in mid-2010. Phase Two has a production capacity for bleached kraft pulp of 1.5 million ton per annum, making it the biggest single pulp line in the world, in addition to featuring some of the most advanced environmental protection technology, facilities, and control & management systems in the world. The mill is smell-free and the effluent is almost colourless. This establishes new industry benchmarks for scale efficiency and environmental performance. We are especially proud to have reached full capacity utililisation by the 10th month of operations. Our pulp facility is also home to the World’s largest Recovery Boiler (7,000 tDS/d acacia).

We recently announced a new RMB 30 billion (INR 208 billion) investment for Phase 3, which will be used to increase pulp production of the Rizhao mill by about 1 million tons and our production of paper and paperboard by 2.4 million tons. The expansion includes development of a second production line for high quality paper board and additional high quality paper production capacity.

PM: What are the three most important factors for your company to realize rapid growth?

AJD: Firstly we need to broaden our plantation base to strengthen our supply and market leadership. Secondly, a solid pool of talent to sustain and grow our business, and thirdly, a strong focus on product diversification, for example, to new pulp species, tissue and board products.

PM: Sustainability is the buzz word today. Being a forest based industry and considered as a polluting industry too, how do you ensure sustainable operations at APRIL?

AJD: To us sustainability is not a buzz word; it is a fundamental part of a successful business. Sustainability is embedded in everything we do – from identifying and setting aside high conservation value forest (HCVF), to making our mill energy efficient, to ensuring that local communities where we operate share in the benefits of our growth through development opportunities. This makes good sense from a business, social and environmental perspective.

In fact, far from being a “polluting industry” as being considered for paper industry, APRIL is very much part of the solution in addressing major sustain-ability challenges through best-in-class forest management practices in Indonesia, where the bulk of our plantation development is located. We are also proud to establish global industrial benchmarks in environmental performance that others can follow.

PM: What are major changes you foresee happening in the structure of the global paper industry?

AJD: The global paper industry is experiencing some structural changes. Firstly, the correlation between world GDP and global paper and board demand was historically as high as 1.2x during 1985-2005. So theoretically paper and board demand would increase by 1.2% if world GDP increases by 1%. But that correlation is now expected to reduce between 2005-2020, chiefly due to technology impacts from changing consumer behavior, which is favouring electronic substitution (e.g. devices such as computers and iPads). Secondly, global paper and board demand are expected to grow modestly by 1.5% p.a from 2007 to 2025. Thirdly, the center of gravity is shifting from North to South, from West to East, similar to many other industries. The established players are all using older, less efficient and high cost operating facilities that simply cannot compete with the newer players and their modern, efficient large-scale facilities, which are also far superior from an environmental performance perspective.

PM: What are the major causes of concern for the pulp and paper industry in the near future?

AJD: Paper – The Paper industry is expected to experience a challenging period in near future. In North America & Europe, paper producers will enter summer months resulting in seasonally slower paper demand. However, paper producers are more disciplined and will manage their paper supply accordingly in order to match this lower demand, by doing market related downtime to support paper prices at certain levels in these regions. Higher pulp prices, higher energy costs and relatively low paper prices will also impact the profitability of paper producers, especially the small and medium sized ones.

In China, over 1 million tons of additional wood-free paper capacity are expected to start up during 2H 2011. This additional capacity in the market would create extra supply, which may negatively impact the supply demand balance in the wood free paper grade. Also, shortages in water and electricity supply are likely to cause operational difficulty for paper mills.

On Pulp side, though the paper market will face challenging times in the near future, the fundamentals of the hardwood pulp market are still balanced. There is no major additional hardwood pulp capacity until the end-2012. A higher than historical price gap between hardwood pulp and softwood pulp prices can encourage paper producers to shift some of their softwood pulp consumption to hardwood pulp to create additional demand in that area. Cost push factors like higher energy costs and weakening US$ (vis-à-vis pulp producer’s local currencies like rupiah, rias, pesos etc.) will increase production costs for pulp producers hence creating a higher floor in pulp prices.

PM: As President & COO of APRIL, what are the three main objectives you have for the coming years?

AJD: Our business will grow and evolve if we achieve strong results for our triple bottom line – People, Planet and Profit. Being part of the solution on wider sustainability challenges in a way that not only benefits our business but also meets societal expectations, will continue to underpin our right to operate. Ensuring that we excel in delivering terrific products and service for our customers, in combination with achieving people and planet goals, will generate strong returns for us as a business. Currently, we are planting about 200 million trees a year, numbers that will keep growing. Lastly, continuing to attract and retain the right people is key for a stronger future.

Mr. Harsh Pati Singhania, Managing Director, JK Paper Ltd

Mr. Harsh Pati Singhania, Managing Director, JK Paper Ltd, talks to Team Paper Mart on the company’s recently-announced Rs 1650-crore expansion plan giving the general picture of the Indian paper industry with regards to the different subjects like future consolidation in the industry, challenge of raw material and manpower and how India can become truly global. Excerpts.

Paper Mart: Where does the Indian paper industry is heading? How do you see it evolving over the next decade or so? Moreover with the recent takeover of APPM by International Paper, do you see better valuation, professional culture & consolidation happening in industry?

Harsh Pati Singhania: The first point that I want to make is that the paper industry in India will grow strongly and there are several factors pertaining to this, starting from the fact that we have extremely low capita consumption i.e. 9.5 kg per capita as compared to the other developing countries in Asia. So, it is bound to grow. Besides, India’s ongoing strong GDP growth will support the paper growth as paper has traditionally grown along with GDP or even higher than GDP growth. In the recent years the industry has grown tremendously for example there was an increase of almost 30-35% in the installed capacity of Writing & Printing paper and that capacity has got absorbed. Today we are about 10 plus million ton industry and with good growth we are looking forward towards the demand of 20 million tons by 2020.

The recent acquisition of APPM by International Paper has shown that the paper industry in India was grossly undervalued. If we look at the evaluation at which IP has bought APPM there is a huge difference compared to valuation of current paper companies in India. With this I think the industry will clearly improve on valuation in recent times to come which will help the industry to raise more money to fund its growth.

The other aspect of this acquisition is that it will bring in international operating standards not only in terms of production but also in operations, sales, marketing, quality standards and service along with the improved trade channel which will have beneficial effect on the entire industry.

Yes, the competition will be there and I think some paper companies can clearly stand up with it because here in the Indian market our products are established as brands with certain values attached to it. So as long as the Indian brands are going to deliver a good quality product with good levels of customer service, I don’t see any problem.

PM: Do you foresee further consolidation happening in the near future?

HPS: Globally pulp and paper companies have been looking in India for a long time to have their say but the factors like size and the scale of the Indian operations and the issue of raw material availability has resisted them to take a decision. Also, the markets are very fragmented in terms of the quality, price sensitivity, standardization etc. All these things have lead to situation where it was not easy for these companies to find a sight and place themselves in the Indian paper industry.
As far as consolidation is concerned I would imagine that there could be consolidation but it would be gradual and let’s see what happens.

PM: Paper industry has been earning lower margins while on the other side paper convertors always feel that paper mills take benefit of demand and supply gap by fluctuating the prices. Comment.

HPS: Business growth depends upon the sufficient returns on the capital for the reinvestment. As far as margins are concerned, in India we have different sizes of mills i.e. large, medium and small along with their respective raw material base. Due to this it is difficult to evaluate the ROI as paper has long gestation period. One important point about the paper industry is that it is not a glamorous industry so most of the people don’t even notice it and that’s one of the reason why we have been undervalued.

Talking about the prices and convertors feeling, it is completely mistaken because first of all lets understand in today’s era prices are completely market determined. The price of any product not only of paper but anything is what the consumer is willing to pay for it. Its not that the producer can command the price in today’s open economy. Paper prices go up due to the cost push in the prices of the inputs like pulp, chemical, fuel, logistics etc. The second point is that where the prices have gone up and also there have been instances when prices have come down.

If prices grow up which is inevitable than the converting industry will have to look at its pricing availability to the consumers, minus what they can offset from better efficiencies. Today, when input cost goes up for paper mill, we also offset some of them through improved efficiencies, higher productivity but beyond a certain amount we cannot absorb it.

PM: As you said paper industry is not a glamorous industry. How industry should tackle the problem of manpower?

HPS: The issue in the paper industry is that we are being challenged by quality of manpower. First of all there are not so many specialized courses in the pulp and paper technology. The Saharanpur institute got merged and became IIT Roorkee. The students passed under this program get picked up by IT industry.

In order to overcome this challenge we have to re-emphasize our focus on having more programs for the pulp and the paper industry across different levels which emphasis at that one could be managerial in terms of management or engineering. Secondly, introduction of diploma programs is essential. This will not only produce the managers but will also produce good supervisory level people because we need those as well to run the industry. There is a need to revise and upgrade the course content. The third would be to add a basic skill development focusing on the practical aspect of the industry which will create the skilled work force. Laying a career path and providing the career development program for all employees will help us to retain the manpower for longer period.

PM: Does Indian paper industry need an image makeover? And, how this can be perpetuated?
HPS: It’s not that the paper has the negative image but sometimes it is made out to be more negative then actually it is. There are enough things to prove that paper is not anymore a polluting business for example the water which is used for paper making is more than 90% discharged back and it is meeting all the standards, the industry is planting trees and runs in a sustainable manner.

There is a need to have not only awareness but projection in terms of what the facts are. The fact that that industry uses or eats up forest is completely incorrect because there is no wood that the industry uses today which is really coming from forest. Rather, industry actually helps in providing huge amount of jobs in tribal areas through its initiatives like farm forestry programs. And, it is really increasing green cover rather than decreasing, improving water conservation and soil conservation etc.

There is much more that needs to be done by the industry to educate people. The industry as a whole has to confront these issues and at least sensitize people that today paper is a sustainable product as paper can be recycled and apart from that you can clearly grow trees as even if you can cut one then you can plant two more trees. Today a large amount of water recycling is done due to which consumption of water has also come down. The discharge from mills is far more eco-friendly and in any case it is not something which is toxic waste in that sense the need of communication is necessary of this whole aspect.

PM: Rs 1650 crore expansion…that’s fairly large. So how the funding is planned and what are the major highlights of the project i.e. product mix, technology, equipments, scheduled startup etc?

HPS: Basically, we are putting up an integrated plant at our existing location in Orissa and this will consist of a pulp mill of 250,000 TPA and a paper machine of 165,000 TPA along with utilities. The project cost has been computed at about Rs. 1650 crores and from this we will be producing office and copier papers as the main product mix. We hope that with the new machine we would be able to keep our leadership in this segment. This will not just give us the increased capacity but also the increased efficiencies in the form of reduced water consumption, energy usage per ton of paper. This eco-friendly technology will also benefit in terms of improved product quality and most importantly cost of production will come down leading to improved margins.

As far as funding is concerned we are close to completing the financial closure which will be a mix of debt and equity, internal accruals plus an FCCB program of 135 million euro (Rs. 225 crore). Also we have tied up for loans with banks.

PM: How the Indian paper industry can become truly global paper industry?

HPS: If we see it pessimistically, I don’t think that the Indian paper industry can truly become a global paper industry because we have certain constraints and unless they are resolved we can’t go beyond borders. Single biggest constraint is the issue of raw material and the prices which are extremely high in comparison to other competing nations like Brazil, Indonesia and others. Secondly the scales of operations in India are very small as compared to the global companies. Thirdly the technology is not by far of the global standards. We don’t have the ingredients for the global competitive advantage, so first we need to have them to enter the global industry.

On optimistic end we have huge growth happening in India and the world is coming to us plus the fact that the Indian paper industry has been able to satisfy the domestic demand successfully. The things which help in adding the competitive edge to it will be policy of plantation which will make a huge difference in the availability of raw material. We need to do the upscale in terms of size and scale which is going to be important and with scale comes the state of art technology which will help us to improve quality of product at the global level. Above all the reductions in cost of production for the industry entitling it to have more margins and allowing it to plough back funds for growth. Lastly having better carbon footprints with more eco-friendly processes.

PM: According to you how the industry can secure their raw material?

HPS: The industry will have to keep on focusing the agro farm forestry and there’s no doubt that there are limitations to it. The first limitation is that trees are grown on marginal lands which are non-continuous leading to high cost of production. The second thing on these lands is that we have constraints from competing with the food crops. And the last but not the least is that today with the establishment of the bio fuel power plants, most of the wood is being burned to generate power. If we don’t have the raw material then India will have to resort to other sources i.e. imported pulp and waste paper.

Lesson you have learnt during your long experience
• There is no substitute for hard work.
• You have to keep on working on what you want to pursue and you have to work in a focused manner.
• You should be focused to be successful.
• You should keep on looking ahead. There will be ups and downs in life but you have to keep looking ahead and there is no shortcut to that.

Voith Paper in India

Voith Paper has four operating divisions which are represented here in India by two companies under Mr. Panigrahi, one in Kolkata and the other in Faridabad. Voith Paper Technology (India) Limited at Kolkata under the leadership of Mr. Anirban Khamroi looks after three divisions, namely Paper Machine, Fibre Systems & Environmental Solutions and Automation. Voith Paper Fabrics (India) Limited, Faridabad headed by Mr. R. Krishna Kumar looks after the Fabrics and Roll Systems Division in India.

Voith’s Indian Perspective

Mr. Panigrahi quickly responded “Paper Industry is a sustainable industry and Voith is here to help the industry to reduce the use of virgin fiber, fresh water and energy.” These can be achieved through upgrading the existing technology with new ideas and better technologies. Our effort has always been to design a plant which keeps the operating cost low. India’s paper market is growing but with this positive sentiment we realize that only limited resources are available to sustain it. That’s why it is important to develop carefully planned, cost effective and long-term solutions. The new Urban Mill Concept has been consolidated with all the key priorities on fiber, water and energy because “resources are limitedbut not ideas.”

The Urban Mill Concept

Mr. Panigrahi Proudly stated “Voith Paper has been developing a growing spectrum of products and innovations which we refer to as “green technology”. And today, our Urban mill Concept has consolidated all these advances and combined their key priorities of preserving resources, systematically cutting energy consumption, dramatically reducing the use of fresh water and the reprocessing of production wastes.” It is an integrated paper mill for cities. Metropolitan areas with a high population density and an existing industrial infrastructure are ideally suited for the Urban Mill Concept. This is particularly true for emerging markets, such as India.

It’s Approach

This idea was conceived with the future development that can be expected from further urbanization.. The Urban Mill is where paper demand is – near the customers and end consumers. It will be located nearby an urban agglomeration and clearly focused on satisfying the local paper and board demand and use the source of raw material that comes f rom urban agglomerat ions such as recovered paper; work with the most modern and energyefficient systems; and operate with low fresh water consumption. The industrial water is completely treated with the latest Voith technology and fed back to the production process. After a maximum design time of 12 months, a high-tech paper machine provides for an annual paper production of between 70,000 and 150,000 tons of paper at speeds up to 1,300 m/min after startup. The machines are highly efficient and produce the highest quality product for the local market. High logistics costs are thereby avoided.

How It Works

When planning an urban mill, three resource cycles are especially important: the fiber cycle, the water cycle, and the energy cycle. First of all, we’ve established neutral reference concepts for primary paper grades. Then, during a preliminary phase the appropriate reference concept is adapted to the individual requirements of the customer’s plant and location. Each project is based on a detailed analysis of the customer’s unique situation. Here, we ensure that all of the sub-processes in the paper production are working effectively together, so that economical and ecological improvements can be realized. With the Urban Mill concept, we even go one step further: The economic potential and efficiency of   paper mill can be even further improved by integrating the mill’s operations with other industries in its immediate surroundings, such as municipal waste treatment plants, power stations or waste recycling facilities.

It’s Savings

The savings are significantly higher. The operating costs of an urban mill are 50% lower - due to the use of recycled waste paper, 20% less use of energy, the production of energy from solid wastes, as well as the reduced need for fresh water and minimized waste water. In addition, investment costs for an urban mill can also be kept relatively low by adapting the mill’s projected capacity and internal processes to the local market’s demands, as well as by using a single-source supplier. As a result, an urban mill can generate a higher cash flow than a conventional paper mill and an urban mill would also have a faster return-on investment of between 3 and 4 years. For this reason, investing in an urban mill not only pays off ecologically but economically too.

Voith Approach for Indian Paper Industry

Voith puts a lot of emphasis on “Trust” and Voith “never lets the customer down”. We really stand shoulder to shoulder with the Indian paper industry. Our application solutions cover every paper grade imaginable and are specifically tailored to the demands of the individual types. In new plants the goal is to provide lowest total cost of ownership. On the product front we assure the competitiveness of our customers. We constantly provide life cycle support system for optimal conditions for paper making. In the case of rebuilds we provide perfect fit solutions for best efficiency, quality, speed, space and environment. For the new machines we advise people to think of both the “class” and the “scale” because the domestic market may not be enough and in order to survive people have to go global.

Mr. C.S. Panigrahi- Regional President, Mr. Anirban Khamroi- Sr. Vice President, Voith Paper India

He concluded the subject by quoting: “Indian paper industry can boast of having all the latest technologies that are available internationally”.

Training at Voith

We at Voith continuously strive to upgrade the existing skills and to deploy right people at right place. We have also created a training department at Voith where we have different capsules for training. For example if somebody buys a state of art machine then you need skilled operating staff to operate the machine. So, in order to train the selected people from mill we do a skill audit as to what types of skill is required to run the machine. Then, they are being trained both in classroom and mill through our experts from Germany and in India from erection to commissioning and there after. When we sell a project, it’s a part of the project he concluded.

The Voyage

L to R: Mr. Ankur Bindal, Mr. Rakesh Kumar, Mr. Mayank Bindal

First paper came on reel in 1990 on the 30 TPD kraft paper machine setup in the name of Bindlas Duplex. The machine now produces 90 TPD Kraft paper

• 50 TPD duplex board machine was established in 1995, which now produces 130 TPD duplex board.

• In 1998 purchased Tehri Pulp & Paper Mill. Now same machine produces 125 TPD double layer kraft paper.

• Introduced 200 TPD triple wire kraft paper machine in 2007 which is now being targeted to produce 250 TPD.

• Took over Agarwal Duplex in 2001 and modernized existing 2 duplex board machines of 30 TPD & 45 TPD to produce coated duplex board. Today it produces 150 TPD altogether on both the machines.

• 25 TPD tissue machine was installed in 2007 to produce hard tissue and MGposter grades.

Bindal Paper: Outlook of the Project

Bindal group identified a significant investment opportunity in the high end printing and writing paper sector by setting up a modern greenfield plant in M u z a f f a r n a g a r , U . P . w i t h a manufacturing capacity of 300 TPD. The project was conceptualized in the year 2007 with an initial capacity of 200 TPD, which was later increased and the production came on stream in 2009.

The 5 meter wide paper machine with a production speed of 800 mpm is supplied by Servall – Walmsleys. The fourdrinier machine is capable of producing copier, surface sized and non surface sized maplitho grades in 57-100 gsm from a raw material mix of wood pulp (approx 15%) and bagasse or wheat straw. In the finishing section, rewinders are from Globe Radio, sheet cutter from Greatwall, Phillipines and recently a second-hand ECH Will copier line is being sourced. Critical components like head box, top formers fromPMPoland, calendering from Gapcon.

In the pulp mill section, continuous digesters are from Hindustan Dorr Oliver, washing & bleaching section from Wenrui – China, screens from AIMS and a wood pulp section with 6 vertical digesters out of which 3 are in use. For power requirement 15 MW turbine is installed from Triveni and 100 tons boiler is sourced from Cethar Vessels with 65 kg pressure and coal and pith (25 to 30%) as the input.

The Next Level: Strengths & Challenges

Raw Material

For Raw Material Mr. Rakesh Kumar said “Raw material is both a challenge and strength for us”. In a year, 6 months we use bagasse & 6 months wheat straw. Raw material is strength for us because it is available locally in the radius of 120 km. Whereas, importing waste paper is logistically expensive as we are located far from the port, thus waste paper based capacity was not a viable option.

In terms of challenge:

• The availability of raw material is short because there is good number of agro based mills in this region. The raw material is not available in excess and if a new mill comes up with big capacity it will create a real hue and cry situation.

• Sugar mills have also put up co-generation plants which has shortened the supply of bagasse.

• The prices of raw material have increased from Rs.1000/ton to 2200/ton in the period of 5 to 6 years.

• Out of the total consumption of bagasse & wheat straw in Muzaffarnagar based paper mills we consume40% of the total raw material.

On technology

On technology front Mr. Ankur Bindal elaborated “We have been able to achieve overall efficiency of 75-80% with the existing technology we are operating on. We are at par in water consumption but with the new technology coming in we may lack by 20 to 30% in terms of steam & power consumption. We are producing paper upto 90 brightness which is equivalent to A-grade paper mills and we have been able to replace them by offering good quality product at a lower price. But, there are some aspects we need to look upon i.e. we have to improve our packaging and finishing sections”.

Enlightening about the HR policies

Enlightening about the HR policies of Bindal, he said “It depends on the outlook towards manpower. We believe in retaining the people.Weresist on employing fresh engineers from the institutes as their work span is less than a year and they move ahead for more lucrative jobs. We had employed experienced people to ensure consistency in all the operations. For us every day is a new challenge, we face a serious challenge of manpower as people are demanding more. Most people prefer to work where the mills have colonies and people like to go there rather than come to us. To attract them we have to give more remuneration to them. So, if we also develop colonies it will be easy for us to attract people.

Mantra’s that worked for Bindal Papers

• There should be no compromises in technology; we should look upon the long term benefits of them in terms of efficiency, economic viability and value rather than present cost of it.

• We should differentiate between the process people & project people i.e. right people for the right job.

• Waste paper industry should be near the ports.

• Planned investment is very necessary as it is a capital intensive industry.

Having climbed the ladder of success with hard work, brilliance & excellent execution, Shri N.R. Agarwal, a chemical engineer began his entrepreneurial journey in 1975 by setting up a 10 TPD Kraft Paper manufacturing unit. Brewing with confidence, he set up a second unit in 1979. With considerable experience and understanding of the Duplex Board market, he went on to establish 3 manufacturing units of value added product and later diversified into manufacturing Newsprint. In the above course, management was quick to realise the falling margins and profits and so it acted proactively and discontinued manufacturing Kraft Paper and focused its attention to Duplex Boards and Newsprint, the more growing and healthy margin business. N R Agarwal Industries Limited (NRAIL), today has an aggregate manufacturing capacity of 120,000 TPA of Coated Duplex Boards and 36,000 TPA of News Print. We spoke to Mr. R.N. Agarwal about NRAIL journey, industry synopsis & its prospects, new projects & their new technical capabilities etc. Here we present excerpts of the interaction.

The Growth Journey of NRAIL

The journey has been a difficult one but a clear focus and vision coupled with disciplined planning and execution has helped NRAIL establish its footprint in the Indian Paper sector. In fact, the chairman and founder promoter Mr. N R Agarwal has worked his way up in the paper manufacturing business. He started his career working at a shop floor of a renowned paper mill and went on to set up his own manufacturing units at Vapi. The entrepreneurial spirit of his has helped the company to take major strides forward and reach the position it is in today. By early 90’s the company had doubled its capacity of duplex boards. The strategic buyout and turnaround of a sick unit having a capacity of 30 TPD to manufacture duplex boards paid dividends when the company made profits in the first year of operations under NRAIL. Other, key factors in the company’s growth path are its location of its operations and exports. All manufacturing units are well connected by road and rail, thus giving it a distinct advantage. Proximity to Kandla port further provides us with logistic advantages in imports and exports. The company also exports its products across the globe to many countries such as Sri Lanka, Bangladesh, Philippines, Egypt, East Africa and Gulf Countries.

Waste Paper and Growth Scenario

The Indian paper industry accounts for about 1.6% of the world’s production of paper and paperboard with an estimated turnover of Rs. 25,000 crores approximately. As regards the raw material, the prices are largely dependent on international market. In fact, recently in April 2010, the prices of the raw materials were at their peak, thereby forcing the paper manufacturers to pass on the cost to the consumer. But with the increased awareness amongst the citizens to recycle waste, it has benefitted us to a great extent with the improvement in the generation of waste paper in the local market. Closure of few paper units in America and Europe has also led to an increase in the supply of raw material. Finally, the Indian paper industry which was an underperformer till some time back, has currently been in the midst of transformation, with improvement in operating efficiencies and huge capital expenditure in the foreseeable future. The industry has shown promise in the past couple of years, as demand growth has started to outpace supply.

Prospects for Packaging & Publishing industry

The retail boom in the country is a big boost to our industry especially for the packaging boards sector which is growing at an annualized rate of 10- 12%. The demand for writing and printing paper is expected to grow at a CAGR of 12-15% till 2012 as the trends indicates India to be one of the preferred outsourcing hubs for printing and publishing business. The increased budgetary allocation under schemes like Sarvasiksha Abhiyaan and Secondary Education will further provide the necessary boost to the demand for printing and writing paper. Demand for newsprint, which comprises of about 20% of the total paper industry is expected to grow at a CAGR of about 8% over the next few years reaching nearly 2 million TPA by 2012-13.

Copier Segment Synopsis

Copier paper is a growing segment with demand for high quality product. Today the branded copier segment is growing at 15% annually. Recently there has been a sharp increase in the production capacity of copier paper in the country, and the market is expected to get even more competitive. This is where NRAIL will score over the others as other players would face stiff challenge towards product differentiation, distribution, branding, creating demand pull and effectively meeting the needs of its customers. The export market too, offers lots of opportunities provided paper manufacturers meet the quality criteria.

New Project

With an investment of Rs. 200 crores we are setting up a 300 TPD Writing, Printing, Newsprint and Copier paper manufacturing unit at Sarigam, Gujarat. Civil construction is moving in full swing and the orders for all capital equipment have been already placed. A second hand paper machine from France has already arrived at the site. The unit is expected to be commissioned in the Apr-Jun quarter of the year 2011. The company has taken advantage of the 100 acres non agriculture land that it owns at Sarigam, Gujarat to set up this project. Sarigam is situated just 15 kms away from our other 4 manufacturing units of NRAIL at Vapi, and is registered under the “Vibrant Gujarat Scheme” which would be advantageous for this project. Post completion of this 300 TPD project, the company has planned a 400 TPD Multi Wire value added Duplex Board project at the same site. Further NRAIL plans to install a 15 MW power plant for its new project at Sarigam, which will not only make us self sufficient in power require-ments but will also give us tax benefits.

Technical Capabilities of new project

The nucleus of any project of this kind is the de-inking technology. We have chosen the world’s leader – VOITH, Germany, for the supply of 330 TPD of de-inked pulp line, the first of its kind in Asia. The technology of the drum pulper and LEF injected flotation cells supplied by them, would give the project a competitive edge over its competitors in India, as this de-inking machine from VOITH would enable us to manufacture paper of higher brightness and low dust count. The paper produced from the new machine will be superior in terms of brightness, bulk and high speed copying abilities that would give customers greater value for the product. This would also enable our machine to manufacture good copier grade paper based on 100% recycling of waste paper on a sustainable basis. With the advanced technologies, we would be able to produce best quality of news-print and writing & printing paper. Further, our machine would be flexible in terms of manufacturing different products like newsprint, cream wove, maplitho & copier paper depending on the market conditions and we can easily switch over at a short notice.

PAPER MART: What are the most recent technological developments at Andritz that would be of interest to our readers?

Köfler: For my side of the business (service and units) there are new developments in Engineered Wear Products that might be of interest. A new energy-saving screening rotor (the Ro-Tec Dolphin®) and two new screen baskets have been developed for deinked pulp (Bar-Tec® Nobilis) and for the treatment of recycled fibres (Bar-Tec® Valeo) have just been introduced. We also have a new ShortFlow Deaeration system, which is an economical solution for partial air removal from paper stock that combines a white water silo and conventional deaeration system in one unit.

Hornhofer: On the capital side, we have a new film press, the PrimeCoat Film, for simultaneous double-sided coating of paper and board. Different coatings and coat weights can be applied to each side. PrimeCoat Film is compact and requires very little space in the production line.

We also introduced at PulPaper the Wash Press AWP-D, which is particularly suited for bleaching retrofits. The AWP-D fits easily into existing installations due to its small form factor. The installation can be completed in a very short period of time (e.g. during a shutdown) and fully meets the demands of today’s customers.

We are very active in developing technologies and processes for the generation of energy from natural resources which are sustainably renewable, and from waste by-products in a mill. There are several technologies to convert biomass into heat, electricity, and even fuels: combustion, pelletizing, gasification, thermo-chemical processing and bio-chemical processing.

PM: How are you introducing innovations and technology into markets like India?

Köfler: We have an extensive portfolio of products and technologies available. India has very bright and experienced Pulp & Paper engineers working at modern mills around the world where they see these technologies at work on a daily basis, and are also updated on the latest trends. They will bring these technologies to the Indian market as the mill owners can absorb the investments. And when they do, we will be there locally to support them.

Small, mature mills with old technology will be replaced by larger more efficient mills to keep pace with the paper/board consumption growth in the country (currently about 9 kg/person, but growing at a double-digit annual growth rate).

So our technology focus also has to keep pace with the industry’s ability to invest and absorb. The industry knows that we have designed and installed greenfield mills with capacities in excess of one million t/a. However, the industry may not be as aware of our single machines for secondary fibre, annual grasses, deinking, washing, etc. that may be more relevant to the Indian market today.

PM: What challenges do Andritz face in serving the Indian Continent?

Hornhofer: The industry is dominated by small and medium-size mills with only about 25 mills in the country producing more than 50,000 t/a. For specialty paper grades we have seen that small mills can be economically competitive, but for commodity grades it is clear that size matters. One challenge is how to economically serve these small mills and help the owners develop a path to upgrade the capacity & technologies.

In addition, the mills use a variety of raw materials in addition to wood: bamboo, wastepaper, bagasse, wheat straw, rice husks, etc. The nation’s furnish mix is approximately 35% chemical pulp, 44% recycled fibre, and 21% agricultural residues. The challenge here is how to modify or re-invent our machinery to handle the different fibre sources.

The geographical spread of the industry as well as market is another major challenge. How do we build the right infrastructure over time to serve such a geographically large and potentially important market while still keeping our costs in line with revenues?

PM: What kind of future do you foresee for Andritz in the Indian Pulp & Paper industry, and what percentage of market share you target for the same?

Köfler: We would like to think that we are well-positioned to contribute to a rebirth of sorts in the Indian Pulp & Paper industry. In the early years, all the machinery was imported and often purchased second-hand from manufacturers in the USA, the UK, and Nordic countries. The machines were small and the technology mature.

Gradually, the scaling up of the industry is occurring – with integrated mills. Private investments are making it feasible for modern machines and innovations.

This scaling up will happen in a lock-step fashion as domestic paper consumption increases. The compounded annual growth rate of consumption is quite impressive (double-digits), but is also starting from a very low level.

Just like the Indian papermakers, Andritz is patiently investing and we will continue to invest for the future. We are increasing our sales coverage by hiring engineers. As the installed base grows, we increase our service presence. We are investigating local manufacturing, as we know this is a key to our growth.

As for market share, I can only say that Andritz is a global leader and we expect our market shares to reflect this position, with the goal of being #1 in each market we serve.

PM: Kindly share a few major orders and projects in India. Taking everything into account, what has been the response from the Indian market to Andritz as a whole?

Hornhofer: Andritz (earlier Ahlstrom) played a major role in upgrading and installing chemical recovery systems through the joint venture Enmas ANDRITZ Pvt. Ltd. Most of the more modern mills in India now have either major renovations or new boilers of our designs. Since the 1990’s we played major roles in introducing modern washing and screening systems to mills like A P Rayons (BILT Group), Tamilnadu Newsprint & Papers, Century Pulp & Paper, Mysore Paper Mills, Seshsayee Paper and Boards, and Ballarpur Industries.

More recent installations are the complete 550 t/d mill (woodyard to bleached pulp fibreline and complete recovery island) for Andhra Pradesh Pulp and Paper Mills and then a 350 t/d fibreline at Sirpur Paper Mills. We have also supplied over 700 process pumps to TNPL, which is the record by itself, in addition to screens, refiners, and other machinery.

Köfler: Most recently, we have successfully installed recycled fibre technology and DIP technology. A major breakthrough for us is the DIP line at Malu Papers Ltd. which is in operation. We have also sold an OCC line to Dev Products and a retrofit/upgrade of an existing DIP line at ITC-Kovai. This month, we will sign the contract to provide a complete 300 t/d DIP plant for white grades (customer name withheld).

Hornhofer: One of our major references is the complete mill with recovery island for Andhra Pradesh Pulp and Paper Mills which I mentioned earlier. The installation was completed during 2005. Today, the owner of this mill, Mr. L. N. Bangur is proud to say that they produce the best quality pulp at the lowest cost in India. It was a risk for them to “put all their eggs in the same basket” by selecting Andritz, but they had confidence in us. This mill is an example of the latest trends in processes and technologies in a market like India – efficiently utilizing raw materials with environmentally friendly processes.

The confidence in Andritz products and people is very high. Some prominent customers even have said that they feel proud to be associated with Andritz. This is the profile we had hoped for: Andritz enjoying a good and reliable reputation and always ready to accept the challenge.

PM: What kind of infrastructure and service support does Andritz have in India today? How do you plan on updating that support to meet future requirements?

Hornhofer: Modern woodyards, continuous cooking lines, and fibrelines with medium consistency developed for new projects – and the desire to serve the country potential in India led companies such as Andritz (at that time Ahlstrom Machinery) to open an office in New Delhi in 1990.

From that start, today the ANDRITZ GROUP has a presence with about 970 employees in five cities in India. Sales in 2009 were about € 193 million. Our largest presence is in the Hydro area, where we have manufacturing in Bhopal and Haryana. Our Environmental area also has manufacturing in Chennai.

In the PULP & PAPER business, Andritz has the joint venture called Enmas ANDRITZ Pvt. Ltd. in Chennai which supplies recovery island systems totally from indigenous sources. Also in Chennai we have our engineering and project management support. Marketing for chemical pulping systems is conducted from our offices in New Delhi, which gets its technical support from Andritz specialists in Finland and China.

Köfler: We know that our customers prefer products manufactured in India and we fully plan to have more manufacturing done in-country to support our fibreline and other process technologies. The speed with which we do that, of course, depends upon the market growth. We know that the potential is there – and our plans are in place to grow as the Indian Pulp & Paper industry grows. The key is to grow in a cost-effective and sustainable way.

Initial startup

Mr. Ajay Goenka

At the age of 13 joined the family business of paper trade under the name Mahadev Ganga Parsad Kishore & Company, the distributor of Orient Paper Mill and Sirpur Paper Mill. He traded good quantities but learnt a very important lesson in his first deal by facing the challenge of realizing money i.e. the selling is one part of trading but, realizing the money is the most important part of it. Later on he added substantially to his business.

Further to satisfy his ego he wanted to put up a Paper Mill. God paved the way for the land which was a result of an acquisition of the company called Rainbow Pigments. He continued with the name Rainbow as 7 is his lucky number and company started paying dividends. Further in 1981 he was graced with the opportunity to buy a small crepe paper machine from Orient Paper Mill and started to convert kraft paper to crepe paper, which was a big turning point as it cemented the way for product development and they developed varieties of crepe paper. Again in 1987, eyeing on the opportunity he got an Air Knife Coater from Sirpur Paper Mill as a scrap. Rebuild it and started offline coating. In, 1989 sidelined himself from trading and pursued his passion of manufacturing paper.

Business Ideologies&their Application:

He has a firm belief in god and runs his business with open policies i.e. with 100% transparency. His ideologies are as follows:

•Doesn’t take short term gain and believe in long term perspective; which he has strictly inculcated in his business by investing regularly in technology up-gradations, better automation, ERP installation, Quality System etc, instead of simply expanding capacities.

• Understanding the customer, his requirements and developing a cordial relation; as before selecting the customers for export he checks his background, visits his establishments, understand his needs, meet their partners & families and then join hands.

• Not worried about the competition but focus on improving; on which he said “Arjun ki Aankh” only one line i.e. paper line, one culture, moving ahead forgetting past, consolidating position day by day, don’t bother about what people talk , always focuses on future.

• Commitment and transparency is the key to success, which he always infuse in the mind of his team to communicate the true fact i.e. if there are any irregularities in the final product it should be communicated to the customer and that is the USP of Rainbow “work with transparency”.

•Always have alternate plans to fall on them at the time of crisis; like the continuous availability of the raw material is crucial. So he is in a thought process of buying a pulp mill in Africa or Indonesia along with some land to tackle the future pulp requirement.

Business and Market Development

Serving the customers with 186 varieties of papers, improvisation is a regular feature at Rainbow. Started with a small capacity of 6000 TPA Rainbow went through tough times before stabilizing the business. The stint of International market started in 1997-98, when they faced tough competition for their packaging board in the domestic market thus, extensive touring were undertaken, country to country along with samples, presenting to the customer, giving introduction of the company etc. Mr. Goenka himself went to Iran with 72 hour visa, just to explore the market. Facing the challenge of not been established as a brand they opted for the policy of customization as to provide the customer the worth for his money. He use to tell to his customers “Certainly I don’t have a brand but I will provide you commitment, good price, long term contracts but my paper will have this problem”. Now they have dedicated export customer base for the majority of its production.

Continuing the process of improvisation, Rainbow has imported two machines from Germany. One machine is already installed and the other one is under installation with a total capital outlay of Rs. 327 crores. Besides they are also planning to install Packaging Board machine in next financial year. Apart from this

Rainbow had also installed a de-inking plant of Kadant Lamort & 10 MW power plant. Further on the road of improvisation they are planning a subsidiary company in Nigeria carrying the name Rainbow to manufacture paper for the local markets. Rainbow came out with first of its kind of GDR (gross deposit receipt) to raise the capital for investment and got itself registered under Luxemburg stock exchange.

His outlook on industry

The newsprint scenario will be good for another 10 years but the demand will decrease slowly as more and more people are attracted towards the electronic media like IPADS , IPhones , EBook readers etc. Further with the advent of computer arena people thought of paperless office but ultimately it has given push to the use of paper. Moreover today copier paper if the one the fastest growing segment. With the cultural transformation and improvement in the standard of living demand for packaging is growing phenomenally. On the whole the future of the Indian paper industry is bright and uprising .

CSR at Rainbow

As a part of Golden Gujarat initiative they have made a committee where a pregnant women gets cash incentive of 3500 rupees in the 7 8 and the 9 month for upholding the good health. Everyday two trucks of fodder are sent to feed the cows. Besides that, they have joined the scheme of Akshaya Patra, where they are sponsoring 400 children for education along with sponsoring for other charities too. At their factory, subsidized food is available for the entire workforce.

His Journey

Joined paper industry as a management trainee after doing paper technology course from Saharanpur in 1972 and left

Mr. R. C. Rastogi

as a Chief Executive with the stint of 15 years. Belonging to the family of doctors Mr. R.C. Rastogi took up the challenge to set up a business enterprise. He started the commercial production in 1990 with an idea to produce a commodity which is easily saleable. Striking the opportunity of unavailability of high strength kraft paper in India he decided to make kraft liner board which is the right paper for making quality corrugated boxes.

Key Ingredients of his Recipe

According to Mr. Rastogi, the key ingredients of how to produce right paper are availability of right technology & right raw-material sourcing. In which his experience and knowledge helped in procuring right technology with customized equipment along with sourcing of right raw-material from abroad to produce KLB in India

Challenges faced during the successful recipe making

• Raw Material

In order to make high strength KLB from waste paper, he decided to import pre-consumer waste from US & Europe as there the virgin pulp is used in making paper. Being a small company it was a challenging task to source internationally. Further, as the containers came with mixed waste it was difficult to get it cleared through the customs authority but CPPRI helped by defining them the technical process. Adding further to this extracting pulp was another challenge as the waste contains impurities like poly lamination, foil coating, metalizing etc. Right technology for extracting these impurities was not available, so the technology was developed in house. The pulp was extracted in such a manner that it could match the international properties of virgin pulp.

• Awareness among the fraternity

In order to create awareness about KLB he organized seminars highlighting the benefits of KLB to the corrugators & the consumers i.e. MNC’s. His hard work paid as the economy was opening at that time and big electronic & FMCG companies were entering into the market, which created huge demand for better corrugated boxes. The conventional paper had some issues with their physical properties like getting cracked in summers or soggy in monsoons. After the acceptance of KLB, the challenge was to educate the corrugators how to use this paper on their existing machines. For which he worked closely with corrugators helping them understand the technical process of converting it.

Expertise and Practice

They have a very strong R&D department. Where, they undertake market study and make analysis on different subjects like the requirement of the markets, imports in the industry, market trends etc. Through customers feedbacks they develop the solution collectively. Moreover their specialization lies in identifying the raw-material and extracting pulp by eliminating the impurities and finally manufactures different specialized products.

New product development

Again eyeing the opportunity on the unavailability of quality hard tissue and poster paper, Khatema Fibres in 1995 entered. this segment after the success of KLB. In making tissue they used the same recipe as for the KLB i.e. identifying the right waste paper. Likewise they verified the fast food restaurant and imported poly-coated waste like poly cups, plates etc and again developed the technique to purify it in house.

Synopsis of the Indian Corrugation Industry

Since 1990 there is a radical change in the Indian corrugation industry with adoption of imported technology from China, Taiwan etc. capable of producing good quantities of corrugated boxes. But, one thing which is still lacking i.e. the corrugation industry is unorganized and there are no specifications for the corrugated boxes in any segment. So, it is very difficult to procure uniform quality liner board with respective specifications. Moreover most of the Indian corrugators don’t have the automatic line which creates chaos situation amongst the corrugators and the end user. So suggesting on the above Mr. R.C. Rastogi said “that corrugation community must have a forum, where they interact with the end-users which enables them to achieve the uniformity. Further, it would lead to certain benefits like cost minimization, waste control, right costing both for the converter and end user”.

Future of Packaging

I foresee in the next 5 – 10 years a drastic change in the automation level in the corrugating industry as there will be increased demand for the boxes produced on automated machines. As the departmental store or mall culture is coming in all the goods will be sold in the corrugated boxes. I see the very bright and promising future of the corrugated boxes.

Vision

We at Khatema Fibres want to establish ourselves as the specialty product manufacturer. We plan to study the international markets and try to develop the papers which are not produced in India.

Learning’s

Mr. Rastogi enlightened us with his path breaking learning’s:

• Firstly, one should know his subject and if you don’t know your subject then you will be lost.

• Secondly, one must go into the business in a very steady manner, financial stability is important. One should operate according to the available resources else a small mismatch will create lot of problems. So one must not over trade or expand very fast. Market is volatile and uncertain so one has to be cautious before expanding with the available resources.

• Thirdly, one must consider its buyers as partners in the business and be transparent with them. Your chain should be a partnership chain.

• Lastly, market is changing very rapidly, so one must keep pace with the new developments. Today’s specialized product may not be specialized tomorrow.

If one takes all these factors into consideration he may become a long term player in the game.

Personal Information

Age: 61 years

Qualification: Graduate in Paper Technology from IIT, Roorkee

Hobbies: listening old songs, watching movies, reading books, most importantly- workaholic