Hedging the risk

Written by RajeshRavi | Updated: Jul 30 2012, 07:54am hrs
Hindustan Newsprint Limited (HNL) operates with two handicaps. One, it runs the show in a highly volatile market marked by intense competition. Two, it is a single product company with nothing to fall back on in times of a market slump.

Still, HNL is a consistent performer amongst the central public sector enterprises. The mini-ratna category-I company has a capacity utilisation level above 100% in the last ten years.

But HNL is now making an effort to diversify its production line to shield the company from the vagaries of market. According to MV Narasimha Rao, chairman and managing director of HPC, In order to tide over the risks and challenges connected with the single product portfolio, company has created a swing facility for producing writing and printing paper (WPP) in the existing paper machine. The company started WPP production from July 1, 2012.

Plans are also afoot to build a 300 tonne per day De-inking Plant (DIP) to produce adequate pulp, the key raw material.

HNL is also upgrading and adding capacity to its existing DIP machine. It expects to seize the emerging opportunities in the writing and printing segment, and is determined to upscale its capacity to reasonable levels while significantly mitigating the risks inherent with a single product.

One more power plant to meet the rising need of power is also on the drawing board.

Located at Velloor in the Kottayam district of Kerala, HNL has capacity to produce 100,000 tonnes per annum of newsprint. It has a 22-megawatt captive power plant and a 100-tonne-per-day de-inking unit to convert waste paper into pulp.

The core competence of HNL lies in its highly skilled technical manpower, which is rated as the best in the domestic newsprint industry. HNL is second to none in maintaining the quality of newsprint in the international market, says Rao.

HNL, and a wholly owned subsidiary of Hindustan Paper Corporation Ltd, produces a wide range of newsprint grades. Initially, the company produced 52 GSM (grams per square meter) newsprint. Later, to meet changing market demands, HNL started production of 48.8 GSM newsprint. With increasing demand for lower GSM newsprint, HNL started production of 45 GSM newsprint as well.

Rao says the brightness level of newsprint produced at HNL is at par with imported newsprint. At the time of commissioning in 1982, the company produced newsprint with just 48-50% ISO brightness. Later, it switched over to a superior and eco-friendly technology in bleaching that uses hydrogen peroxide (H202). This enhanced the brightness to 53-55% ISO. The companys competitors soon followed suit. HNL further advanced the brightness levels and it now produces newsprint with 55-58% ISO, HNL sources said.

HNL meets a major portion of its requirement for fibrous raw materials from forest sources. To overcome the problem of dwindling forest resources, the company is focusing on raising captive plantation on agricultural land and as also on vacant land made available by various institutions like the Railways.

The company, which has 750 persons on its rolls, had a gross turnover of R301.66 crore from the sale of 10,4911 tonne of newsprint in the last financial year. Provisional profit before tax for the last fiscal stood at R4 crore and the targeted PBT for the financial year 2012-13 is R10 crore.

Crisil reports that though HNL has an established position in the newsprint industry and good capacity utilisation, it is susceptible to intense competition, cyclicality, and the commoditised nature of the newsprint industry.