Crisil Ratings in its latest report has said that the domestic packaging paper industry is poised to extend its double-digit growth trajectory in this fiscal (FY27), with revenues expected to expand by 10-11%. Volume growth of 6-7% and 3-4% gains in realisations are expected to drive the expansion. Growing demand from consumption-linked sectors, rising use of recyclable packaging and a richer product mix should further support growth.
According to the report, efficiency-focused investments are also expected to improve operating margins by 40-50 bps to around 9%. Credit profiles are likely to remain stable as companies largely fund capex through internal accruals. Packaging paper - comprising kraft paper, duplex board and virgin board - is expected to account for nearly two-thirds of domestic paper volumes this fiscal, up from just over half in fiscal 2022, as paper-based formats gain penetration across consumption-linked sectors and the shift towards sustainable packaging gathers pace.
The report further noted that with wastepaper prices - the largest cost component - largely outside manufacturers’ control, investments are increasingly targeting controllable costs such as energy, labour and logistics. Waste-to-energy boilers, renewable power, agro-residue processing and debottlenecking, together with higher realisations, should partly offset input-cost pressures and lift operating profitability by 40-50 bps this fiscal. It further said that a rise in cheaper imports could pressure domestic realisations, while supply-chain disruptions and geopolitical tensions could raise wastepaper, energy and logistics costs. The extent to which efficiency gains offset these pressures will therefore remain a key monitorable.
