Microeconomic Analysis of Ballarpur Industries Limited

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GROWTH EXECUTION SUSTAINABILITY

ANALYSIS REPORT 2005-2010 2010

Microeconomic November 15 Analysis of Ballarpur Industries 2011 Limite LimitedMicroeconomics is the study of specific individual units; particular firms, particular households, individual prices, wages, individual industries particular commodities. The microeconomic theory or price theory thus is the study of individual parts of the economy. In microeconomic analysis we study the demand analysis ( derive the market demand for a g good), cost analysis, production function and the market structure of an individual firm Demand Analysis Cost Analysis Production Analysis Market Structure

Submitted By: Nipun Goyal Ist Semester, MBA - Gen Section A University Business School

I TRODUCTIO : I DIA PAPER I DUSTRYhe Indian Paper Industry is a booming industry and is expected to grow in the years to come. The Indian Paper Industry is among the top 15 global players today, with an output of more than 6 millions tones annually with an estimated turnover of Rs. 150,000 millions. (approx. USD 3400 million).Paper Industry in India is riding on a strong demand and on an expanding mood to meet the projected demand of 13 million tonnes by 2020.A large number of expansion programme & expansion of capacities with an outlay of Rs. 10,000 crores have been announced covering the various sectors like paper, paperboard, newsprint etc. The paper industry is regarded as one of the core sectors in India. The industry is estimated to grow at 7-8% compounded rate until 2010. With over 600 mills in India, only few are government owned, making it a largely private sector. Currently, the total paper market is worth around RS 200 billion. Nineteen companies members of Indian Paper Manufacturer's Association (IPMA), who control over 55% of the total aggregate industry revenue will conjointly commit Rs 2.5 billion in the next two or three years to expand additional 2 million tonnes of capacity and improve cost competitiveness. The new millennium is going to be the millennium of the knowledge. So demand for paper would go on increasing in times to come. In view of paper industry's strategic role for the society and also for the overall industrial growth it is necessary that the paper industry performs well. Government has completely delicensed the paper industry with effect from17th July, 1997. The Paper industry is a priority sector for foreign collaboration and foreign equity participation upto 100% receives automatic approval by Reserve Bank of India. Several fiscal incentives have also been provided to the paper industry, particularly to those mills which are based on non-conventional raw material. The usage of paper cannot be ignored and this awareness is bound to bring about changes in the paper industry for the better. It is a well known fact that the use of plastic is being objected to these days. The reason being, there are few plastics which do not possess the property of being degradable, as such, use of plastic is being discouraged. Excessive use of non degradable plastics upsets the ecological equilibrium. (Indian Paper Industry/Paper Watch n.d.)

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Microeconomic Analysis of Ballarpur Industries Limited,

Year: 2005-2010 1

What keeps the Indian Paper industry rolling?n order to keep the Indian Paper industry rolling, the foremost thing which must be kept in mind is the availability of the raw materials. Every possible effort is to be made to take India at par with the other paper industries of the world. Application of paper is varied and one cannot think of a life without paper. The raw materials need to be of good quality. There should be enough modernized techniques to carry out production. Reducing costs should be accompanied by low cost of production. Policies should be implemented to bring about optimum production. Softwood producing wood fibers make up the main raw material in the manufacturing process worldwide. China and India are excluded from this category. The reason being wood products availability is meager. Instead, straw, bagasse which are obtained as residues from the agriculture industry are used for the production of paper. Indian paper industry uses used paper for the manufacturing of paper after recycling. It has been estimated that around 40% of paper used is recycled.

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BILT: Ballarpur Industries Limited

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allarpur Industries Limited (BILT) is a flagship of the US$ 4 bn Avantha Group and India's largest manufacturer of writing and printing (W&P) paper. The current chairman of the company is Gautam Thapar.

BILT's subsidiaries include Sabah Forest Industries (SFI), Malaysia's largest pulp and paper company, and BILT Tree Tech Limited (BTTL), which runs BILT's farm forestry programme in several states in India. BILT has six manufacturing units across India, which give the company geographic coverage over most of the domestic market. BILT has a dominant share of the high-end coated paper segment in India. The company accounts for over 50% of the coated wood-free paper market, an impressive 85% of the bond paper market and nearly 45% of the hi-bright Maplitho market, besides being India's largest exporter of coated paper. BILTs acquisition of SFI in 2007 was a watershed event it was the first overseas acquisition by an Indian paper company. This acquisition transformed BILT into a major regional player, and elevated the company's ranking among the global top 100. (Ballarpur Industries Limited n.d.)

Microeconomic Analysis of Ballarpur Industries Limited,

Year: 2005-2010 2

DEMA D A ALYSIS Determinants of Demand for Papera) Advent of Global Business Houses: The advent of more and more global business houses in different sectors has created more and more need of communication needs. Paper being one of the strongest pillar of any communication, needs have increased many times. Varied applications of the fine paper for annual reports, CSR reports, catalogues, brochures, business cards, carry bags and packaging etc, makes this product extremely important for the corporate world. b) Changing lifestyles: With improving domestic living standards, demand for speciality paper (tissue paper, fine art paper, business card paper and greeting card paper) has increased. Moreover, the bent of young generation towards reading habit has increased the demand of paper. c) Increasing presence of modern retail formats: Opening of realty and retail sectors, have increased the demand of paper and its uses in various type of communication application. Following reasons have also contributed the growing demand for fine paper. The advent of more and more branded paper. The growing acceptance of specialty paper.

d) Government Educational Policies: Demand for writing and printing paper is expected to grow owing to the opening of more schools and colleges, driven by the governments thrust on education sector and overall economic growth. Example: Sarva Shiksha Abhiyaan. e) Packaging industry: The Indian paper industry has close linkages with economic growth as higher industrial output leads to increased demand for industrial paper for packaging, increased marketing spend benefits the newsprint and value-added segments, and increased education and office activities increase demand for writing and printing paper. f) Low per capita consumption: Indias per capita paper consumption grew 10.6% in 2009-10 (from 8.3 kg in 2008-09 to 9.18 kg) compared with 42 kg in China and 350 kg in developed countries (Source: Assocham), implying a large scope for demand. g) Population growth: According to 2011 census of India, Indias population accounts for 17.5 % of the worlds population. India added 181 million to its population since 2001 and it is expected to grow at a very high rate. With the increasing population more paper and paper products will be needed to satisfy the needs of the people. Moreover the average age per person of India is around 26 years which clearly indicates that there would be more demand for education which would further boost the demand for paper. Microeconomic Analysis of Ballarpur Industries Limited, Year: 2005-2010 3

h) Level of literacy: According to 2011 census of India, literacy rate increased to a total of 74.04% from 64.83% in year 2001, which further indicates that with the increased level of literacy, the demand for paper is expected to rise. i) Growing economy: With the growing economy of India, there will be more demand for paper products as consumers will have higher paying capacity. j) Growing circulation and readership: Owing to the increased level of literacy, the newspaper circulation and readers are also growing at a very high rate. Thus the demand for paper is likely to rise. k) Export opportunity: A number of European and US paper mills are shutting down owing to overcapacity and cost issues, an attractive export opportunity for Indian paper mills. Besides, Indian paper manufacturers, utilising agriculture-based raw material, possess a sustainable growth opportunity on account of growing environment consciousness. For more details please refer to the below:

PAPER S. O TYPE 1 Writing and printing paper

USES Writing, printing, stationery

VARIETIES Creamwove, maplitho, paperboard, copier and coated paper

DEMA D DRIVERS Population growth, level of literacy, public and private spending on education, level of business activity, increasing presence of modern retail formats and growth in the printing industry Growth in the packaging industry, industrial production and development in packaging technology and substitution by other materials

2

Paperboard

Industrial purpose

Kraft paper, recycled board and virgin board

3

Speciality paper

Consumption of this paper variety is Tissue paper, fine art Duplex, grey and white board and MG li