Tamilnadu Newsprint & Paper - 100.00 Rs

Incorporated in 1979, Tamilnadu Newsprint & Paper Ltd (TNPL) was promoted by the Government of Tamil Nadu who still hold around 35% stake in the company. Inspite of being a public sector company, TNPL pioneered the concept of producing paper from Bagasse, namely sugarcane waste thereby using as little wood as possible. Today apart from being one of the lowest cost manufacturer, company boast of having the world’s largest bagasse based paper mill with a capacity of 2,30,000 TPA. It is also the largest exporter of wood free paper from India. TNPL basically manufactures printing and writing paper comprising cream wove, copier and mapiltho paper for business stationery, classical writing, computer stationery and other commercial and quality printing. It offers a range of high-quality surface sized maplitho paper to suit any kind of printing - sheet-fed or web-offset. It is the undisputed market leader for computer stationery in domestic market. It also derives nearly 2% revenue from newsprint. Presently company’s product is exported to over 20 countries across Asia-Pacific, Australia, Middle East, the Mediterranean and the African subcontinent.

TNPL is acknowledged as the world leader in technology for the manufacture of paper from bagasse and has the most modern paper mill in the country with unique bagasse procurement, storing, preserving, handling, processing and pulping system. Ironically, due to this technology it actually avoids the chopping down of trees in about 30000 acres of forest land every year. However it maintains a relationship of 65:35 for bagasse and wood pulp in production to ensure high quality of the paper. To cater the increasing paper demand and become a global player, TNPL has implemented Phase-I of Mill Development Plan envisaging increase in captive pulp production capacity from 170,000 TPA to 260,000 TPA with element chlorine free (ECF) bleaching at a capital outlay of Rs 565 Crore. This will also increase the paper production capacity by 15,000 tonnes to 245,000 TPA and is expected to become operational from Oct 2007. Till now company has substantially raised pulpwood plantation in 19349 acres through farm forestry and captive plantation schemes to meet the growing needs of pulp wood. Importantly, TNPL is self-sufficient in power having in-house captive power generation capacity of 61.12 MW and another 35.50 MW thru wind farm. Still in the current year it will be increased to 81.12 MW by adding a new 20MW turbo generator and surplus power will be exported to the State grid.

Post completion of Phase-I of mill development plan, TNPL will start implementing Phase-II to hike to hike its paper production capacities to 400,000 TPA by Sept 2009 thru a capex of 680 cr. Besides, company has entered into the carbon trading by having got its Bio-methanation plant registered as CDM project with UNFCCC and is expected to get 37000 CER as carbon credit till 2013. Moreover it has plans to establish a mini cement plant with a capacity of 400 tpd for producing high grade cement using the lime sludge and fly ash generated in the process of manufacture of paper. TNPL is also contemplating to construct an IT Park measuring an office area of 4 lakhs sq. ft. on its surplus land.

Financially as well as fundamentally company is on a strong footing, but however has a huge debt of more than 550 crore. For FY07 it reported highest ever production and sales of 231,161 tonnes with more than 100% capacity utilization. Net sales grew by 10% to 855 cr buy PBT increased by 25% to 125. Due to higher tax provisioning NP rose only 7% to 86 cr. It reported an EPS of more than 12 Rs on equity of 69 cr and declared 40% dividend for entire year. On the back of robust paper prices, it reported encouraging nos for the June qtr and is expected to end FY08 with sales of 1000cr and PAT of 110 cr i.e. EPS of 16 Rs on current equity. Hence investors are recommended to buy at declines with a price target of 130 Rs in 9~12 months.