Rainbow Papers Limited Investor Presentation Investor Presentation February 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 contentsof 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 g the Company s market opportunity and business prospects that are individually and collectively forward looking statements. Such forward looking statementsarenotguarantees 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 d in this Presentation are not adopted d 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 24 Page 3
Global Paper Industry Promising Growth in Asia The size of the global lthe paper industry is 397 mn tons and $320 bn Asia & Middle East account for 43% of the industry, 170 mn tons and $138 bn Global Paper Consumption * 397 Mn. Tons Latin America, Africa, 3% Oceania, 1% 7% North America, 21% Asia & Middle East, 43% Asia pacific region is the biggest potential market and shows the highest h growth rates Europe, 25% Growth in Asia driven by Population and Economic Growth Demand Drivers: Developed Economies Developing Economies 1 Hygiene (Tissue) Education 3 Packaged Food Industrial Packaging 4 Personal Printing Newsprint 5 Photo Sharing Mass Marketing 6 Gro owth % Global Growth Rates 4 3 2 1 * Year 2010 0 Aisa & Europe Latin America North 2 Middle East America 2011 2012 2013 E 2014 E 2015 E 2016 E Source: CRISIL Research Page 4
Indian Paper Industry The Sweet Spot INDIA Kg per Capita consumption in 2010 Highest g growth potential due to lowest per 242 capita consumption amongst leading economies 185 o ~ 9kg compared to world average of ~ 58kg o 1 kg of incremental consumption adds more than 1.2 MTPA demand 9 15 th largest paper manufacturer in the world o One of the fastest growing market in the world o 17% ofworld population consumes only 1% of global paper production Paper Demand poised for healthy growth of 6% CAGR between 2011 to 2016 o Demand to grow from 8.7 MTPA to 12.8 MTPA Potential growth areas include applications for hygiene, packaging, industrial & newsprint 9 25 45 266 59 58 India Indonesia Brazil China UK Japan USA World 2009 2020 CAGR Segment wise Demand Tissue Speciality Paper Industrial Paper Newsprint Writing & Printing Recycled fiber based units best suited to exploit CartonBoards demand scenario Containerboards 5.7% 6.2% 8.1% 7.9% 7.9% 9.3% 15.4% 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 ofdemand fulfilled by large players Imminent closure of small mills due to regulatory overhaul o Inefficient operations in smaller capacities o Outdated infrastructure 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 Large and Small mills in 2009 16% 14% 26% 44% Upto 7,500 TPA 7,501 16,500 TPA 16,501 33,000 TPA > 33,000 TPA Land Availability for forest resources (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 100 % Virgin i 100 % Recovered Savings paper Fiber Fiber (Per ton) Wood Use Total lenergy Greenhouse Gases 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 Recovery Rates Scope for IMPROVEMENT 80% 60% 40% 20% 0% 67% Source: CRISIL Research 70% 20% USA Europe India 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 15 1.5 o Sarva Sisksha Abhiyaan (SSA) Total expenditure of USD 12 Billion in FY 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 6 o Lifestyle changes and media growth Increasing promotion, direct advertising and direct mailers Fund allocation for SSA (USD Billion) 0.5 2.2 2.5 40 4.0 2002/03 2004/05 2006/07 2008/09 2010/11 Paper market potential in India (2009 2020) 16 Per Capita a Consumpion (K Kgs) 14 12 10 8 4 2 0 Paper Market in 2009: 10 mn Tons Paper Market in 2020E: 19 mn Tons 1 2 3 4 1.1 11 1.2 12 1.3 13 1.4 14 1.5 15 Population India (Billion) Print, Publishing Outsourcing 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 24 Page 9
Largest manufacturer of recycled based paper in India PRODUCTION CAPACITY Paper Manufacturing 305,000 TPA capacity o 171,000 TPA of Paperboard, Writing & Printing and Newsprint capacity o 134,000 TPA capacity for Valued added Specialty segment MANUFACTURING UNIT RAW MATERIAL PRODUCTS MARKETS Integrated Pulp and Paper plant De inking Facilities 35 MW Captive Co Gen Power Plant with fuel linkage with GMDC Effluent treatment e plant pa Waste Paper and Pulp 186 varieties of diverse range of paper and paper products o Writing & Printing, Duplex Board, Coated and Crepe Paper, Newsprints, Maplitho, Creamwove, Colour Manila, Glazed News Print, Light Weight, Colour Kraft Used in manufacturing of writing paper, magazines, brochures, newspapers, food packaging, industrial paper, tissue, decorative paper 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 305,000 TPA in 2013 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 Kll Kalol Mh 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 withmarginal production cost and also, eliminate problem of waste disposal Page 14
Capacity expansion Mill Modernization and Notebooks & Copier Paper expansion 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 expansion p p y p p Installed Capacity of 132,000 MTPA Folding Duplex p y, Board Cost of the Project Rs. 480 Crores. Completion in g g g g g p g g FY 15 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 Promoters Infused fund of Rs. 63.93 Crores during FY13 through issue/conversion of warrants. Increase in Promoter Holding The Board of Directors at their meeting held on 20th 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 share on March 30, 2013 and 2,52,000 Warrants have been converted into equity shares on October 21, 2013 at price of Rs. 81/ per share. 24.8% 29.8% 34.5% 38.5% 43.7% On conversion of balance 72,48,000 warrants, the Promoter s holding shall increase to 43.74% by end June 2014. FY10 FY11 FY12 FY13 By June 14 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 24 Page 17
Consolidated P & L Quarterly Highlights Rs. Crores Q3 FY 2014 Q3 FY 2013 YoY 9m FY 2014 9m FY 2013 YoY Revenue * 146.7 129.4 400.44 348.9 Trading Revenue ** 144.8 107.1 418.3 327.5 Total Income from Operations (Net) 291.5 236.5 23% 818.7 676.4 21% Raw Material Consumption 68.1 57.4 183.7 163.9 Purchase of Traded Goods 129.4 104.2 380.8 305.6 Employee Expenses 5.6 4.5 16.1 12.8 Other Expenses 38.6 38.4 103.1 99.3 EBITDA 49.8 32.0 56% 135.0 94.8 42% EBITDA of Mfg. Goods 34.4 29.1 18% 97.5 72.9 34% EBITDA Margin of Mfg. Goods 23.5% 22.5% 24.3% 20.9% Interest 17.6 9.3 49.6 25.3 Depreciation 12.6 6.5 34.8 19.4 Exceptional Items 0.0 0.0 0.0 0.1 PBT 19.6 16.2 50.6 50.2 Tax *** 0.0 0.0 0.0 0.0 PAT 19.6 16.2 21% 50.6 50.2 1% PAT Margin 6.7% 6.9% 6.2% 7.4% * - Includes Other Income & Other Operating Income ** Trading Revenue includes trading of papers & recycled waste papers *** Including MAT Credit Entitlement and Deferred Tax Page 18
Consolidated P & L Rs. Crores 9m FY 2014 FY 2013 FY 2012 YoY Revenue * 400.44 490.00 442.6 Trading Revenue ** 418.3 415.7 160.9 Total Income from Operations (Net) 818.7 905.7 603.5 50% Raw Material Consumption 183.7 235.8 205.7 Purchase of Traded Goods 380.8 383 151.9 Employee Expenses 16.1 18.2 15.5 Other Expenses 103.1 132.3 121 EBITDA 135.0 136.4 109.4 25% EBITDA of Mfg. Goods 97.5 103.7 100.4 3% EBITDA Margin of Mfg. Goods 24.3% 21.1616 22.68 Interest 49.6 36.7 29.12 Depreciation 34.8 26.6 25.7 Exceptional Item (+) 0.0 0.1 0.01 PBT 50.6 73.2 54.57 Tax *** 0.0 12.1 8.52 PAT 50.6 61.1 46.05 33% PAT Margin 6.2% 6.7% 7.6% * - Includes Other Income & Other Operating Income ** Trading Revenue includes trading of papers & recycled waste papers *** Including MAT Credit Entitlement and Deferred Tax Page 19
Content Page No. 1 Paper Industry An Overview 4 2 Rainbow Papers An Overview 10 3 Company Financials 18 4 Future Growth Strategy 24 Page 20
Growth Strategy Post project implementation to reach production capacity of 466,700 MTPA Exploringvarious optionsfor value shareholder s enhancement value enhancement with a philosophy witha of philosophy of; Forward Integration into value added products Supply Chain Optimization i 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 21
AWARDS Won the Gujarat State Safety Award 2012 during the 35th Annual Safety conference o The award consists of Certificate of Honour & Appreciation from Gujarat Safety Council Vadodara, Directorate of Industrial Safety & Health Gujarat State Awarded Certificate of Excellence in recognition of smart innovation by Inc. India Innovative 100 2013 Received the Special Award in recognition of outstanding export performance in respect of Paper and Paper Board by CAPEXIL for the fourth consecutive year Page 22
Join hands with us to create a better world, Save the Environment!!... Use Recycled Paper Page 23