India’s paper industry is one of the world’s fastest-growing in the world, driven by rising literacy, e-commerce, packaging demand, and consumption of tissue and specialty paper.
The paper industry relies on diverse raw materials, including wood, recycled paper, and agricultural residues such as bagasse.
While demand continues to grow, the paper sector faces challenges including high input costs, volatile wastepaper prices, and environmental regulations.
Companies are investing in capacity expansion, automation, and sustainable manufacturing to improve efficiency and meet India’s growing domestic and export demand.
Against this backdrop, here are three undervalued paper stocks to watch. These have been chosen based on PE and PB ratios.
#1 Tamil Nadu Newsprint and Papers
First on the list is Tamil Nadu Newsprint and Papers (TNPL).
Tamil Nadu Newsprint and Papers is one of India’s leading integrated paper manufacturers and a Government of Tamil Nadu enterprise.
Established in 1979, TNPL pioneered the use of bagasse—a by-product of sugarcane—as its primary raw material, making it one of the country’s most environmentally sustainable paper producers.
Over the years, it has diversified from newsprint into writing and printing paper, packaging boards, cement, and renewable power generation through windmills and captive power plants.
The stock is currently trading at a PE of 4.2 and a PB of 0.4.
Financial Highlights of TNPL
| FY23 | FY24 | FY25 | |
| Total Revenues (Rs m) | 51,799 | 46,896 | 44,909 |
| Operating Profit (Rs m) | 10,480 | 8,387 | 5,252 |
| Net Margin % | 7.5 | 4.4 | 0.1 |
| Profit After Tax (Rs m) | 3,879 | 2,082 | 37 |
Source: Equitymaster
On the financial front, Tamil Nadu Newsprint and Papers reported revenues of Rs 12,715 m for Q4FY26, down from Rs 13,368 m YoY. The company reported a net profit of Rs 2,403 m, up from Rs 221 m YoY.
Moving ahead, with the rapid growth of e-commerce, FMCG, food packaging, and pharmaceuticals, demand for paperboard is expected to outpace traditional writing and printing paper. TNPL has been increasing its focus on premium packaging boards to improve profitability.
TNPL produces paper, paperboard, cement, and captive power, enabling better cost control, and improved operational efficiency.
#2 Pudumjee Paper Products
Next on our list is the stock of Pudumjee Paper.
The company produces a wide range of paper grades, including food-packaging paper, decorative paper, pharmaceutical-grade paper, super calendared paper, specialty paper, crepe tissue, towels, and high-opacity, low-grammage printing paper.
Additionally, the company offers hygienic hand washers and cleaning equipment.
The stock trades at a PE ratio of 9.4 and a PB ratio of 1.3.
Financial Highlights of Pudumjee Paper
| FY23 | FY24 | FY25 | |
| Total Revenues (Rs m) | 7,587 | 7,850 | 8,091 |
| Operating Profit (Rs m) | 948 | 1,494 | 1,450 |
| Net Margin % | 7.5 | 12.5 | 11.8 |
| Profit After Tax (Rs m) | 594 | 981 | 958 |
Source: Equitymaster
On the financial front, the company reported revenues of Rs 2,006 m for Q4FY26 vs Rs 1,901 m YoY. The net profits improved to Rs 197 m vs Rs 189 m YoY.
Moving forward, the management plans to invest in greenfield capacity. They have acquired about 75 acres of land in Mahad for the second manufacturing facility, which has the necessary infrastructure for a greenfield project.
The company has received no objection certificate from the regulatory authorities for putting up the project in 5 years. The company has also commissioned 15.4 MW of solar energy. This power is expected to deliver financial savings to the company.
#3 Seshasayee Paper and Boards
Next on the list is Seshasayee Paper and Boards.
Seshasayee Paper and Boards is a leading integrated paper manufacturer based in Tamil Nadu, producing writing, printing, packaging and specialty papers.
Using bagasse, wood and recycled fibre, it has cost-efficient operations and a strong balance sheet. Ongoing capacity upgrades and renewable energy investments support long-term growth, despite cyclical industry demand.
The stock trades at a PE of 21.5 and a PB of 0.7.
Financial Seshasayee Paper and Boards
| FY24 | FY25 | FY26 | |
| Total Revenues (Rs m) | 18,018 | 17,544 | 17,105 |
| Operating Profit (Rs m) | 3,900 | 1,800 | 1,447 |
| Net Margin % | 15.0 | 6.2 | 4.8 |
| Profit After Tax (Rs m) | 2,708 | 1,092 | 825 |
Source: Equitymaster
Moving ahead, the management said in its FY26 annual report that the margin trajectory is likely to be the most-watched dimension in FY27.
According to them, after two cycles of cost inflation – production costs rose an estimated 20–30% from pre-FY24 levels and hardwood pulp surged 20–25% – operating margins will continue the recovery that began in FY26.
The phased rollout of Extended Producer Responsibility (EPR) norms, plastic-substitution mandates from major brands, and growing demand for FSC-certified, food-grade, and recyclable paperboard will reshape the product mix.
Conclusion
Paper stocks can be added to your watchlist as India’s paper demand is expected to grow steadily, driven by packaging, e-commerce, FMCG, education and higher consumption. Capacity additions remain limited, while easing raw material and energy costs could support profitability.
Integrated players with strong balance sheets are better positioned due to improving margins. However, the sector remains cyclical and vulnerable to imports, weak pricing, and rising input costs.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
Happy investing.
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