Rainbow Papers Limited Investor Presentation June 2014
Safe Harbor This presentation and the accompanying slides (the Presentation ), which have been prepared by Rainbow Papers Limited (the Company ), have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding commitment whatsoever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company. This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Presentation is expressly excluded. Certain matters discussed in this Presentation may contain statements regarding the Company s market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the paper industry in India and world-wide, competition, the company s ability to successfully implement its strategy, the Company s future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cash flows, the Company s market preferences and its exposure to market risks, as well as other risks. The Company s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation. The Company assumes no obligation to update any forward-looking information contained in this Presentation. Any forward-looking statements and projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third party statements and projections.
Content Page No. 1 Paper Industry An Overview 4 2 Rainbow Papers An Overview 10 3 Company Financials 18 4 Future Growth Strategy 23 Page 3
Global Paper Industry Promising Growth in Asia The size of the global the paper industry is 400 mn tons and $300 bn Asia & Middle East account for 43% of the industry, 172 mn tons and $130 bn Asia pacific region is the biggest potential market and shows the highest growth rates Growth in Asia driven by Population and Economic Growth Demand Drivers: Developed Economies Hygiene (Tissue) Packaged Food Personal Printing Photo - Sharing Developing Economies Education Industrial Packaging Newsprint Mass Marketing Growth % Global Paper Consumption 400 Mn. Tons North America, 21% Europe, 25% Global Growth Rates 4 3 2 1 0-1 -2-3 -4-5 -6 Aisa & Middle East Latin Africa, 3% Oceania, 1% America, 7% Asia & Middle East, 43% Europe Latin America North America 2011 2012 2013 E 2014 E 2015 E 2016 E Source: CRISIL Research Page 4
Indian Paper Industry The Sweet Spot INDIA Highest growth potential due to lowest per capita consumption amongst leading economies o ~ 9kg compared to world average of ~ 58kg o 1 kg of incremental consumption adds more than 1.2 MTPA demand 15 th largest paper manufacturer in the world o One of the fastest growing market in the world o 17% of world population consumes only 1% of global paper production Paper Demand poised for healthy growth of 6% - 8% CAGR between 2011 to 2016 o Demand to grow from 12 MTPA to 20 MTPA Potential growth areas include applications for hygiene, packaging, industrial & newsprint Recycled fiber based units best suited to exploit demand scenario Kg per Capita consumption in 2010 266 242 185 59 58 45 25 9 India Indonesia Brazil China UK Japan USA World 2009 2020 CAGR Segment wise Demand Tissue 15.4% Speciality Paper 9.3% Industrial Paper 8.1% Newsprint 7.9% Writing & Printing 7.9% CartonBoards 6.2% Containerboards 5.7% Source: CRISIL Research Page 5
Indian Paper Industry Structure INDIA Recently included in the Sunrise Sector 80% capacities of small and medium units of less than 33,000 TPA capacity. o Majority of demand fulfilled by large players Imminent closure of small mills due to regulatory overhaul o Inefficient operations in smaller capacities o Outdated infrastructure Large and Small mills in 2009 14% 16% 44% 26% Upto 7,500 TPA 7,501-16,500 TPA 16,501-33,000 TPA > 33,000 TPA Land Availability for forest resources Shift of capacities to larger organized players o Expansion projects undertaken by top 6 players Entry Barriers: o Large Capex Costs o Long Gestation periods o Strict Environmental Compliances o Scarcity of Land, Water, Electricity and Fuel o Economies of Scale o Requirement of Modern Technology o Limited availability of wood based fiber (In million hectares) 2001 2006 Demand from Industrial Segment 73 82 Output from Forests 12 12 Plantations 47 53 Deficit 14 17 Source: CRISIL Research; Ministry of Environment and Forests Page 6
Indian Paper Industry Use of Recycled Fiber Recycled Paper The Prudent Choice Recycled paper constitutes nearly 1/3 rd of the Indian paper industry o Waste paper share to increase in incremental paper production growth India one of the largest importer of recycled fiber from the North America o Poor wastepaper collection mechanism o Multiple usages of paper before recycling o Imported waste paper offers better quality Acute land shortage o 17% of world population lives on 3% of land space Limited local supply of wood pulp as much of the arable land is used for agriculture. Emphasis of Government on food security thus more land being used for agriculture Virgin v/s Recovered Fiber for 1 ton of Paper for 1 ton of paper Wood Use Total Energy Greenhouse Gases Recovery Rates Scope for IMPROVEMENT 80% 60% 40% 20% 0% 67% 100 % Virgin Fiber 100 % Recovered Fiber 70% 20% USA Europe India Source: CRISIL Research Savings (Per ton) 3 tons 0 tons 3 tons (24 trees) 38 22 17 Mn. BTU's Mn. BTU's Mn. BTU's 5690 3582 2108 lbs of CO 2 lbs of CO 2 lbs of CO 2 8750 gallons Wastewater 19075 gallons 10325 gallons Solid Waste 2278 lbs 1155 lbs 1124 lbs Globally approx 50% of fiber source is through recycled paper Page 7
Indian Paper Industry The Opportunities INDIA Demographic advantages o 1.5% absolute growth in population o 2.5% growth in urban population Increased focus of Govt. on education o Sarva Sisksha Abhiyaan (SSA) Total expenditure of USD 12 BillionuptoFY 13 o Right To Education (RTE) Act passed in 2009 215,000 new educational institutes to open by 2015 Restrictions on use of Plastics in packaging o Ban on use of plastic packaging in certain segments Increased Living standards o 9% increase in disposable income o Consumerism and Organized Retail o Lifestyle changes and media growth Increasing promotion, direct advertising and direct mailers Print, Publishing Outsourcing Changing Packaging Patterns Paper market potential in India ( 09 20) Per Capita Consumpion (Kgs) Product Milk, Juices, Beverages Edible Oils 16 14 12 10 8 6 4 2 0 Paper Market in 2009: 10 mn Tons 1.1 Conventional Packaging Glass Tin Containers Current Packaging Tetra Paks TetraPaks, Flexible Pouch Processed Food NA Paper Boxes Tobacco Products Plastic Sachets Paper Sachets Tea / Coffee Cups Glass, Plastic Paper Cups Offline / Online Retail Plastic Bags Paper Bags, Paper Boxes Paper Market in 2020E: 19 mn Tons 1 1.2 2 1.3 3 1.4 4 1.5 Population India (Billion) Source: Poyry Ministry of Human Resource development Page 8
Content Page No. 1 Paper Industry An Overview 4 2 Rainbow Papers An Overview 10 3 Company Financials 18 4 Future Growth Strategy 23 Page 9
Largest manufacturer of recycled based paper in India PRODUCTION CAPACITY MANUFACTURING UNIT RAW MATERIAL PRODUCTS MARKETS Paper Manufacturing 334,700 TPA capacity (including 12,000 MTPA of Coating Capacity) Folding Duplex Board 132,000 MTPA (to be completed in 2015) Integrated Pulp and Paper plant De - inking Facilities 35 MW Captive Co-Gen Power Plant with fuel linkage with GMDC Effluent treatment plant Waste Paper and Pulp 186 varieties of diverse range of paper and paper products o Writing & Printing, Folding Duplex Board, Coated and Crepe Paper, Newsprints, Specialty, Glazed News Print, Light Weight, ColourKraft, Paperboard, Notebooks, Copier Paper Used in manufacturing of writing paper, magazines, brochures, newspapers, food& liquid packaging, industrial paper, tissue etc o ~70% domestic market o ~30% from exports to US, Middle East, South Africa, South East Asia and U.K, Indonesia, France, Sri Lanka & Bangladesh. Page 10
Led by experienced & ambitious management Mr. Ajay Goenka, Chairman & Managing Director More than 33 years of experience in paper industry Under his leadership, Rainbow has expanded capacity from 6,000 TPA in 1991 to 334,700 TPA in 2014 Founder chairman of Indian Agro & Recycled Paper Mills Association, Gujarat Division Supported by team experienced in paper industry Executive Director Mr. Rahul Maheshwari Sr. VP - Finance Mrs. Niyati Agarwal VP - Production Mr. Prabir Das VP Power Plant & Eng. Mr. J B Suhag Page 11
Intrinsic strengths makes it competitive Strategic Location of manufacturing unit o Located at 30 kms from Ahmedabad o Plant Location Kalol - Mehsana Highway o Better infrastructure and good accessibility to Mundra port o Lower freight cost while import of raw material o Easy access to global market s like Middle East and Africa Near Zero Discharge o Efficient plant layout and different product mix allows better utilization of raw material o Sludge from paper plant used as raw material in paper board o Improves operating efficiency and augment earning margins Prudent working capital management o Maintains near zero inventory level o Follows sale and produce policy o Implemented ERP to aid operational efficiency while scaling up the operations Accredited with certifications o ISO 9001 : Quality Management System o ISO 14001 : For Environmental Management Systems o OHSAS 18001 : Health & Safety Performances of Organization o FSC CoC: Forest Steward Council Chain of Custody o Star Export house by Director General of Foreign Trade Page 12
De-inking technology improves quality Waste Paper feeder Pulp Mill De inking process Stock Preparation Sheet Formation & Dewatering Drying & Polishing Paper reeling Page 13
Creating wealth out of waste Innovative ideas & approaches towards productive usage of by products Fly ash Residue of captive power plant Bricks manufacturing Plastic waste Segregated during waste paper processing Produce plastic sheets Sludge Obtain while manufacturing from recycled fiber Manufacture board Waste adds to bottom-line with marginal production cost and also, eliminate problem of waste disposal Page 14
Capacity expansion of 161,700 MTPA Mill Modernization, Not ebooks & Copier Paper Project Completed Entry into value added Consumer Products segment by making Notebooks and Copier papers under Rainbow brand Annual production capacity for Notebooks and Copier Paper will be 20,000 MT and 7,500 MT respectively Annual increment in capacity from Modernization will be 29,700 MTPA Folding Duplex Board Completion in FY 15 Installed Capacity of 132,000 MTPA Cost of the Project Rs. 480 Crores. Cater to High Margin Packaging Segment. Used for packaging of Cosmetics, cigarettes, medicines, electrical appliances & products, etc Capacity to increase from 305,000 MTPA to 466,700 MTPA Page 15
Promoter Holding & Fund Raising Promoters Infused fund of Rs. 63.93 Crores during FY13 through issue/conversion of warrants. The Board of Directors at their meeting held on 20 th December 2012 allotted 90,00,000 Convertible Warrants to one of the Promoters Group Company. Out of the said 90,00,000 convertible warrants, 15,00,000 warrants have been converted into equity shares on March 30, 2013, 2,52,000 warrants on October 21, 2013 and 2,63,300 warrants on 17.04.2014 respectively at a price of Rs. 81/- per share. On conversion of balance 69,84,700 warrants, the promoter s holding shall increase to 43.74% by June 2014. Fund Raising Plan:The Company is proposing to raise funds to the tune of Rs. 1000 crores either in the from of QIBs /ADRs/ GDRs /FCCB /FCEB or any other instrument convertible into equity shares or in the form of Preference shares. The company is exploring the various possibilities to raise fund in any of the above stated manner so as to repay the existing debt of the company / for shoring up of the working capital and for general corporate purposes Page 16
Content Page No. 1 Paper Industry An Overview 4 2 Rainbow Papers An Overview 10 3 Company Financials 18 4 Future Growth Strategy 23 Page 17
Consolidated P & L Rs. Crores FY 2014 FY 2013 FY 2012 YoY Total Income from Operations (Net) 1134.2 900.0 603.5 26% Raw Material Consumption 251 235.8 205.7 Purchase of Traded Goods 540.1 383 151.9 Employee Expenses 21.5 18.2 15.5 Other Expenses 144.81 132.3 121 EBITDA 187.24 136.4 109.4 37.3% EBITDA of Mfg. Goods * 130 103.7 100.4 25.4% EBITDA Margin of Mfg. Goods 23.7% 21.16% 22.68% Interest 67.5 36.7 29.12 Depreciation 47.8 26.6 25.7 Exceptional Items 0.0 0.1-0.01 PBT 71.8 73.2 54.57 Tax ** 9.7 12.1 8.52 PAT 62.1 61.1 46.05 1.6% PAT Margin 5.5% 6.75% 7.6% *- Includes Other Income & Other Operating Income ** - Including MAT Credit Entitlement and Deferred Tax Page 18
Consolidated Balance Sheet Rs. Crores Mar-14 Mar-13 Shareholder s Fund 714.1 441.7 Share capital 19.8 19.7 Reserves & Surplus 679.6 406.7 Money against Share Warrants 14.7 15.2 Non-current liabilities 770.6 652.4 Long term borrowings 725.3 587.5 Deffered tax liabilities (Net) 43.8 34.0 Other Long Term Liabilities Long term provisions 17.1 1.6 29.3 1.6 Current liabilities 429.9 354.7 Short term borrowings 147.3 121.4 Trade Payables 155.5 105.7 Other current liabilities 121.2 121.9 Short term provisions 5.9 5.7 TOTAL LIABILITIES 1,914.6 1.448.8 Non-current assets 1,449.7 1,049.6 Fixed assets 1,383 983.9 Non-Current Investment 0.0 0.2 Other Non-Current Assets 66.7 65.6 Current assets 464.9 399.2 Inventories 121.1 81.1 Trade receivables 220.8 202.3 Cash and bank balances 20.4 18.3 Other current assets 102.6 97.5 TOTAL ASSETS 1,914.6 1,448.8 Page 19
Financial Highlights Sales (MT) Manufactured Goods Sales (Rs. Crores) 180,000 135,000 137,307 139,295 149,354 171,327 600 450 395 440 488 545 90,000 300 45,000 150 0 - FY 2011 FY 2012 FY 2013 FY 2014 FY 2011 FY 2012 FY 2013 FY 2014 EBITDA of Mfg. Goods PAT 150 120 90 60 30 89.1 23% 99.1 23% 103.1 21% 130 24% 24% 23% 22% 21% 20% 60.0 30.0 10% 37.1 46.1 8% 61.1 62.1 7% 6% 12% 9% 6% 3% 0 FY 2011 FY 2012 FY 2013 FY 2014 19% - FY 2011 FY 2012 FY 2013 FY 2014 0% Page 20
Financial Highlights Net worth (including Deferred tax) Long term Borrowing (Rs. Crores) 900 800 700 600 500 400 300 200 100-758 476 306 354 FY 2011 FY 2012 FY 2013 FY 2014 750 600 450 300 150-666 575 366 418 FY 2011 FY 2012 FY 2013 FY 2014 Gross Fixed Assets (Incl. Capital WIP) 1,800 1,600 1,400 1,200 1,000 800 600 400 200-713 848 1,163 1,610 FY 2011 FY 2012 FY 2013 FY 2014 Capital Employed 1,750 1,691 1,500 1,294 1,250 1,000 923 723 750 500 250 - FY 2011 FY 2012 FY 2013 FY 2014 (Capital Employed = Net Worth + Long Term Borrowings + Short Term Borrowings) Page 21
Content Page No. 1 Paper Industry An Overview 4 2 Rainbow Papers An Overview 10 3 Company Financials 18 4 Future Growth Strategy 23 Page 22
Growth Strategy Post project implementation to reach production capacity of 466,700 MTPA Exploring various options for value shareholder s enhancement value enhancement with a philosophy with of a philosophy of; Forward Integration into value added products Supply- Chain Optimization with Just-In-Time inventory management Currently evaluating evaluation options such as; Acquisition of Waste Collection and Pulping capacity To set-up representation and distribution of International Brands in Paper Industry Joint venture with local partner for sourcing and marketing in MENA region Page 23
AWARDS Excellent Achievement Award has been conferred to our CMD, Shri Ajay Goenka at Paperex 2013 towards outstanding contribution to the growth and development of the pulp and paper industry in the country sponsored and supported by the Indian Paper Industry and co-sponsored by the Ministry of Industry & Commerce, Ministry of small scale Industry, Govt. of India, TAPPI, CPPRI- India, IIPTA-India etc. We have been ranked as 108 under the India s fastest growing mid-sized companies by Inc. India 500 for the year 2013 during the fifth Inc. India 500Awards. We were ranked as 272 for the year 2012. Page 24
Join hands with us to create a better world, Save the Environment!!... Use Recycled Paper Page 25