| Established track record of operations and experienced management
GPBL is the flagship company of the G. N. Agarwal group, which is engaged in the manufacturing of premium coated paper boards (duplex boards). The chairman and managing director of the company, Mr. G. N. Agarwal, has been associated with the paper industry for more than three decades. The extensive experience of the promoters and the management has helped the company build a strong presence in the market thereby establishing healthy relationships with its consumers. The group has an established track record with large distribution network of dealers providing access to a wide range of packaging industries such as food products, personal care, FMCG products, oral care and hygiene products, and the e-commerce industry, among others.
Acuité believes that the group will continue to benefit from its extensive experience in the paper industry and established market presence through a healthy network of dealers and distributors.
Stable operating performance
While the volumes of the paper business have declined marginally due to cheap imports, the operating revenue of group improved to Rs. 1,152.04 Cr. in FY2025 (Prov.) as against Rs. 1,049.59 Cr. in FY2024, majorly on account of commencement of commercial operations of GTPL’s tissue plant in November 2024. The operating margin also improved to 11.49 percent in FY2025 (Prov.) from 10.59 percent in FY2024 due to decline in material and power costs and better realisations (especially in the tissue business). The PAT margin stood at 3.31 percent in FY2025 (Prov.) as against 2.34 percent in FY2024.
Going forward, the operating revenues and margins are expected to improve significantly in FY2026 with full year operations of the tissue business and continued stable operations of the paper business.
Improving financial risk profile
The tangible networth of the group improved to Rs. 346.00 Cr. on March 31, 2025 (Prov.) from Rs. 257.41 Cr. on March 31, 2024 on account of equity infusion in GPBL and GTPL (~Rs. 26.52 Cr.) and accretion of profits. This increase in networth has led to a marginal decline in the gearing which stood at 1.93 times on March 31, 2025 (Prov.) as against 1.99 times on March 31, 2024 (Prov.). The TOL/TNW levels also stood improved at 2.70 times as against 3.09 times on March 31, 2024. However, the debt protection metrics stood moderate with Debt-EBITDA levels of 4.96 times on March 31, 2025 (Prov.) (4.57 times on March 31, 2024), interest coverage ratio (ICR) of 2.45 times in FY2025 (Prov.) (2.43 times in FY2024) and debt service coverage ratio (DSCR) of 1.06 times in FY2025 (Prov.) (0.96 times in FY2024) respectively. Moreover, in April 2025, GPBL raised NCDs of Rs 315 Cr. with an elongated maturity period upto 2033 to refinance its existing debt and utilise for working capital requirements.
Therefore, with increasing accruals and elongation of the repayment period through NCDs, the overall financial risk profile of the group is expected to improve further.
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| Working capital intensive operations
The operations of the group are working capital intensive, as evident from gross current asset (GCA) of 138 days on March 31, 2025 (Prov.) as against 114 days on March 31, 2024. The GCA are majorly driven by high inventory and debtor days which stood at 60 days each on March 31, 2025 (Prov.) (51 days and 56 days respectively on March 31, 2024) to maintain the requisite stock and customer relations. Further, the overall bank limit utilisation stood at 81.39 percent for the last six months ended March 2025. The current ratio of the group stood at 1.36 times on March 31, 2025 (Prov.).
Going forward, restriction in elongation of the working capital cycle will be a key rating sensitivity.
Susceptibility of margins to fluctuations in raw material prices and competition from global markets
The paper manufacturers in India are exposed to the risk of volatility in wastepaper prices, given the limited availability of quality fibres and international pricing changes as majority of the waste paper is imported in India. Therefore, the profitability remains susceptible to raw material price fluctuations, however, the group protects its margin through pass through of such changes to its customers. Further, the domestic paper industry is also exposed to intense competition from global players with cheap imports from countries like Indonesia, China, Chile, etc. which affect their sales volumes and price realizations.
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