Three M Paper Boards Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Paper, Packaging Paper |
| Sub-class | Coated Duplex Board |
| Location | Ratnagiri, Maharashtra Mumbai, Maharashtra |
| Establishment Year | 1989 |
Management
| Managing Director | Mr. Rushabh Hitendra Shah |
| Educational Qualifications | Graduate degree in Mechanical Engineering from Robert Gordon University, Aberdeen, Scotland |
| Experience | Over 15 years in production and marketing operations of the company |
| Annual Salary | ₹ 72 Lakhs |
| Total Number of Employees | 233 |
About
Three M Paper Boards Limited manufactures coated duplex paper boards. These boards are primarily used for packaging purposes across various industries, including food and beverages, pharmaceuticals, cosmetics, and consumer goods, its products are made entirely from 100% recycled waste paper and are fully biodegradable.
Products and Services:
Three M Paper Boards Limited offers a diverse range of coated duplex board products under its well-established “Royal” brand. The product portfolio includes:
Royal Grey Back (200-400 GSM):
This board is known for its high stiffness, bulk, and brightness, making it suitable for packaging applications that require exceptional strength and print quality. It finds applications in food packaging, FMCG, garments, apparel, and liquor cartons.
Prima Grey Back (200-400 GSM):
This high-density board, made primarily from recycled pulp, features a glossy finish and smoothness. Its strength makes it ideal for packaging FMCG goods, footwear, notebooks, garments, apparel, and liquor cartons.
Royal White Back (200-400 GSM):
This board, also produced from recycled pulp, has a white top surface with a smooth finish. It is well-suited for high-speed printing and conversion machines and is used in packaging for playing cards, pharmaceuticals, FMCG, garments, apparel, and liquor cartons.
Clients:
The company serves a wide range of clients across different industries, including:
- Food and beverage
- Pharmaceuticals
- Cosmetics
- Consumer goods
- Other industries requiring packaging solutions
Raw Materials:
The primary raw material used by Three M Paper Boards Limited is waste paper, which is sourced both domestically and internationally. The company also utilizes various chemicals in its manufacturing process.
Suppliers:
Three M Paper Boards Limited has a well-established network of both domestic and international suppliers for its raw materials, primarily waste paper.
Domestic Sourcing:
The company leverages its well-established network of local suppliers to procure waste paper from within India. This domestic sourcing contributes to a significant portion of their raw material needs.
International Sourcing:
To supplement its domestic procurement, the company also imports waste paper from various countries, including the United States of America, the United Kingdom, Central Europe, and the Middle East. This international sourcing strategy allows the company to access a wider variety of waste paper grades and potentially benefit from cost advantages in the global market.
The imports are 57.75% of the total purchases of the company for FY 2024;
Distribution Network:
Domestically, the company relies on a network of approximately 25 dealers spread across the country. This extensive network allows them to efficiently cater to the diverse needs of customers in different regions.
Internationally, the company has successfully expanded its reach to over 15 countries across Asia-Pacific, the Middle East, the Mediterranean, and Africa. This demonstrates the company’s ability to establish a presence in the global market and cater to the packaging needs of customers beyond India’s borders.
Other Key Aspects:
The top 10 customers contribute 45% of revenue and the top 10 suppliers contribute 43% of purchases.
Quality and Certifications
Three M Paper Boards Limited places a strong emphasis on quality and has obtained several certifications to validate its commitment. These include:
- ISO 9001:2015: Certification for Quality Management System.
- ISO 14001:2015: Certification for Environmental Management System.
- ISO 45001:2018: Certification for Occupational Health and Safety Management System.
- FSC (Forest Stewardship Council) Certification: This certification recognizes the company’s adherence to responsible forest management practices.
Manufacturing Capacity:
It operates a manufacturing facility in Chiplun, Maharashtra, and boasts a production capacity of 72,000 tonnes per annum (TPA) as of FY 2024.
Manufacturing Process Flowchart
Revenue – Category
Revenue – Region
Audit and Legal
Auditor’s Remarks:
Regarding payments to MSME vendors:
The auditors noted that the company has made payments to its Micro, Small, and Medium Enterprises (MSME) vendors within the mutually agreed contractual period, even if that period exceeds the contractual time limit stipulated in the MSMED Act, 2006. As a result, the company’s management has not accounted for any interest provisions as required by the MSMED Act, 2006.
Related Party Transactions:
Related party transactions represented 4.32% of the total revenues for the FY ended March 31, 2024.
Non-Compliances and Other Issues:
Untraceable Corporate Records:
The company mentions that certain documents related to a past increase in its share capital are untraceable due to a fire incident in 2020.
Instances of Non-Compliance:
The company acknowledges past instances of non-filing, incorrect filings, or delays in filing statutory forms with authorities like EPFO, GST, and TDS.
Contingent Liabilities:
The total contingent liabilities and commitments of the company as of March 31, 2024, amount to ₹5.86 Crores mostly comprising of,
Disputed income tax and penalty demands:
The company is involved in legal disputes regarding income tax and penalties, with appeals pending before the Bombay High Court and the Commissioner of Income Tax (Appeals). The potential liability related to these disputes is ₹2.57 Crores.
Other Commitments:
The company has additional commitments, including estimated amounts for contracts remaining to be executed on capital account (net of advances) and other miscellaneous commitments, totalling ₹2.84 Crores.
Legal Cases:
Cases Filed Against the Company
State of Maharashtra vs. Omprakash Gorakh Gupta and ors:
A criminal case was filed against three individuals, two of whom are employees of Three M Paper Boards. The case is under Section 304(A) of the Indian Penal Code, pertaining to causing death by negligence. The case stems from an accident on April 19, 2020, where an individual died at the company’s factory premises.
Shramjivi Kamgar Union vs. Three M Paper Manufacturing Company Private Limited:
This complaint alleges unfair labour practices concerning the inadequate payment of four labourers who have been working at the company’s factory for over 20 years.
Cases Filed by the Company
Three M Paper Manufacturing Company Private Limited vs. Government of Maharashtra and Ors.:
The company filed this complaint against the Government of Maharashtra and others regarding the non-disbursement of wages to laborers by a contractor engaged by the company.
Three M Paper Boards Private Limited vs. The New India Assurance Company Limited:
The company has initiated arbitration proceedings against its insurer regarding a claim for flood-related losses at its manufacturing facility in 2021. The company is seeking a total of about ₹14 Crores along with interest.
Tax Proceedings against the Company:
The company is involved in 8 tax proceedings with an aggregate amount involved of ₹3 Crores.
SWOT Analysis
Strengths
| In-house core competency in pulp & paper production |
| Low power cost due to in-house coal-based power generation |
| 34-year-old strong brand in Duplex Paper |
| Location advantages with proximity to local markets and port |
Weaknesses
| High pollution control equipment cost to meet environmental norms |
| Dependence on high-cost imported raw material |
| Lack of own collection centers for recovered paper |
| Thin margins in the industry |
Opportunities
| Plastic ban leading to increased use of packing paper |
| Growing export demand due to restrictions in China |
| Increased demand due to growth in FMCG |
Threats
| Stringent environmental norms |
| Fluctuation in raw material prices |
| Limited availability of imported coal and other raw materials |
Porter’s Five Forces1
| Threat of New Entrants | MODERATE |
| The paper industry, particularly the duplex board segment, requires significant capital investment for establishing new capacity and complying with environmental regulations. This creates a barrier to entry. However, the presence of numerous unorganized players suggests that entry is still possible, though challenging. |
| Bargaining Power of Suppliers | MODERATE |
| The company sources its primary raw material, waste paper, from both domestic and international suppliers without long-term agreements. This suggests that suppliers have moderate bargaining power, as they could influence prices or supply availability. |
| Bargaining Power of Buyers | MODERATE |
| The company’s reliance on a few key customers, who contribute a substantial portion of its revenue, indicates that buyers have moderate bargaining power. They could potentially demand price concessions or switch to competitors, impacting the company’s profitability. |
| Threat of Substitute Products or Services | MODERATE |
| While the demand for paper-based packaging is growing due to environmental concerns and the plastic ban, alternative packaging materials like plastic and other sustainable options exist. |
| Rivalry Among Existing Competitors | HIGH |
| The paper industry, particularly the duplex board segment, is highly fragmented with numerous organized and unorganized players. This, coupled with thin profit margins, indicates intense competitive rivalry. Companies need to differentiate themselves through product quality, innovation, and cost efficiency to maintain their market share. |
Peer Comparison
The company’s performance on various financial and operational metrics compared to its peers is as follows:
| Key Financial Performance FY 2024 | Three M Paper Boards Limited | N R Agarwal Industries Ltd | Kuantum Papers Ltd | Subam Papers Limited |
| Revenue from Operations (₹ in Crores) | 272.2 | 1293.1 | 1211.3 | 494 |
| EBITDA Margin (%) | 9.94% | 14.35% | 27.96% | 14.72% |
| PAT Margin (%) | 4.11% | 9.70% | 15.18% | 6.77% |
| Return on Net Worth (RONW) (%) | 18.57% | 16.50% | 16.36% | 16.79% |
| Return on Capital Employed (ROCE) (%) | 19.71% | 11.06% | 18.31% | 17.9 % |
Smaller Scale of Operations: Compared to its listed peers, Three M Paper Boards Limited operates on a smaller scale, which could limit its bargaining power with suppliers and customers.
Green Box
IPO Funds:
Capacity Expansion:
The company intends to set up a new duplex board plant with a capacity of 400 tonnes per day (TPD). This strategic move is driven by the increasing demand for duplex board products and the company’s expertise in this segment. The estimated cost for this expansion project is INR 400 crores.
Capital Expenditure:
The company plans to allocate a significant portion of the proceeds towards capital expenditure. This includes the installation of new machinery, modernization of certain processes at its existing manufacturing facility, and the installation of a plastic-fired low-pressure boiler. These investments aim to improve product quality, increase production capacity, and enhance overall operational efficiency.
In-house Power Generation:
The company operates a 4 MW captive power plant, which significantly reduces its electricity costs compared to relying on external sources. This cost advantage can enhance its profitability and competitiveness.
Waste Utilization for Power Generation:
The company plans to convert operational waste into electricity, further reducing its energy costs and promoting sustainability.
Favourable Policy Changes:
Changes in policies related to Chinese raw material imports could create a more favourable environment for Indian paper manufacturers, potentially benefiting Three M Paper Boards Limited and contributing to its value appreciation.
Focus on Sustainability:
The company’s commitment to sustainability, evident in its use of 100% recycled waste paper and its FSC® certification, resonates with the growing global emphasis on eco-friendly practices. This focus can enhance the company’s brand image and attract environmentally conscious customers and investors.
Swing Manufacturing Facility:
The company’s flexible manufacturing facility allows it to produce a diverse range of products, enabling it to adapt to changing market demands and customer preferences effectively.
Industry Outlook:
Indian paper and packaging industry is poised for robust growth at a Compound Annual Growth Rate (CAGR) of 26.28% from 2020 to 2025.
In addition to the overall packaging industry, the duplex board segment itself is also expected increase at a CAGR of 6.25% from FY 2023 to FY 2028
E-commerce Growth:
The rapid expansion of e-commerce in India is expected to fuel the demand for packaging materials, including duplex boards. This presents a significant growth opportunity for the company and can drive its value appreciation.
Amber Box
High Capital Investment Requirements:
Expanding production capacity or adopting new technologies in the paper industry necessitates substantial capital investments, which can strain the company’s financial resources.
Capacity Utilization:
As of FY 2024, Three M Paper Boards Limited had a total manufacturing capacity of 72,000 TPA (tonnes per annum) and produced 70,394 MT (metric tonnes) of paper with a capacity utilization rate of 97.76%.
Negative Operating Cash Flow:
Three M Paper Boards Limited experienced a negative operating cash flow of ₹10.3 Crores in FY 2022.
Debt Ratios:
Total Debt-to-Equity Ratio: 0.72
Long-Term Debt-to-Equity Ratio: 0.34
These ratios indicate that the company has a relatively conservative debt structure, with a lower proportion of debt compared to its equity.
Red Box
Dependence on Imported Raw Materials:
The company’s reliance on imported waste paper exposes it to risks associated with exchange rate fluctuations, supply chain disruptions, and geopolitical tensions.
Environmental Regulations:
The company operates in an industry with stringent environmental regulations, and any failure to comply could result in penalties, legal action, or even the shutdown of its manufacturing facilities. These regulations are becoming increasingly stringent, which could necessitate further investments in pollution control and compliance measures, potentially impacting profitability.
Industry Cyclicality and Competition:
The paper industry, particularly the packaging segment, can be cyclical and influenced by economic fluctuations. Additionally, the industry is highly fragmented with numerous players, leading to intense competition and pressure on margins.
Thin Profit Margins:
The paper industry is known for its thin profit margins, making the company vulnerable to fluctuations in raw material costs, energy prices, and other operational expenses.
Images
- The force value of “LOW” is considered good Click Porter’s Five Forces article for more information. ↩︎
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