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Recovery hopes spur demand for paper stocks
FE Investor Bureau
NEW DELHI, January 2: The paper stocks appear to be bouncing back. After being hammered in the sensex meltdown in the second half of 1997, the stocks are once again showing signs of a turnaround. Stocks like ITC Bhadrachalam, Andhra Paper, Ballarpur, Balkrishna Industries and Pudumjee Pulp have shot up in the past few sessions. ITC Bhadrachalam, after being hammered from Rs 87 in August to Rs 26 in November, has shot back to Rs 37 in the past few sessions. Andhra Paper slipped from Rs 1000 (Rs 100 paid up) in August last year to a low of Rs 480, but has shot back to Rs 600. Balakrishna Industries has shown a whopping 57 per cent rise to Rs 60, up from Rs 38.The paper stocks are not merely riding on the general reversal in the market mood. The improved sentiment in the paper scrips is attributed to an anticipated rise in demand. Although the domestic paper prices have not picked up, the demand is likely to improve by 6-7 per cent. A possibility of a hike in paper prices, according to market sources, too has
fuelled the surge in a number of paper stocks. The Indian paper industry has not seen a price hike for almost two years now. In fact, the last price hike was way back in October 1995. The consistent downtrend in prices took a toll on paper companies and the impact of a drop in prices was visible in the first half performance since a majority of paper companies witnessed a substantial drop in both revenue and net profit. Those hit included paper majors like Tamilnadu Newsprint, ITC Bhadra, Ballarpur, Orient Paper, Andhra Paper which reported a shrinking bottomline. Ballarpur Industries's net slumped by over 80 per cent to Rs 8.9 crore for the first half ended September 1997. Turnover too dropped by 10 per cent to 676 crore. ITC Bhadrachalam's net dropped more than 60 per cent to Rs 16.23 crore for the year ended March 1997. The net slipped by another 66 per cent to Rs 4.92 crore for the first half ended September 1997 over the corresponding half of previous fiscal. Turnover too stagnated and dropped
marginally by 9 per cent and 6.4 per cent in 1996-97 and first half of 1997-98, respectively. TN Newsprint's net too dropped by 37 per cent in 1996-97 and by 11 per cent for the first half ended September 1997. The paper companies are down but not out. These companies are consolidating their operations in one way or the other. ITC Bhadrachalam, for instance, is now banking on its 1.2 lakh tonne coated board plant to take it out of the woods. The plant, expected to soon go on-stream, would help the company create world class capacity by enhancing its annual coated board capacity to around two lakh tonne. Ballarpur on the other hand, in order to reduce dependence on pulp imports, is increasing its pulping capacity from 300 to 370 tonnes per day (tpd). However, the scrip of joint sector newsprint major, TN Newsprint at Rs 23 has failed to enthuse the marketmen. The scrip has been on a consistent slide since August 1997 and has lost more than 67 per cent from Rs 85 in August 1997. A few other paper scrips
like Seshasayee Paper, Star Paper Mills, Sirpur Paper too have failed to recover and have been on a consistent slide. Seshasayee Paper has almost halved in the past few months from Rs 35 to Rs 17. Star Paper too has dropped from Rs 21 to a low of Rs 6 and Sirpur has fallen from Rs 37 to Rs 15.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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