In the long list of old economy industries that India stopped paying attention to, paper would easily rank in the top five. It is difficult to find a sector where the narratives have stayed frozen in time.
People still imagine printing paper falling out of favour, schools digitising, offices cutting consumption and global suppliers undercutting domestic manufacturers. The reality is more complicated.
While parts of the business have indeed shrunk, others have quietly strengthened.
And right in the middle of that slow churn stands West Coast Paper Mills, a company that has lived through every cycle but never given up on the idea that a tired industry can become a profitable one again.
A large, integrated mill hiding in plain sight
If you look closely, everything the market claims to dislike about paper stocks is also the reason West Coast Paper now looks mispriced.
Cyclicals fall the hardest when conditions worsen, but their recoveries tend to be larger because years of underinvestment create supply gaps.
West Coast Paper sits on the right side of that equation. It is not a small mill with outdated machines. It is a fully integrated 3,20,000 metric ton per annum operation that ran at nearly 100% utilisation in FY25. That number is buried inside the annual report, but it gives the first clue to why a patient investor would bother giving the company a second look.
The second clue is the one most people skip. It talks about pulp production capacity of 2,55,000 metric tons and captive power of 74.8 megawatts. These are not simple statistics. They are the difference between a mill that pays for lower market pulp prices and a mill that controls its own destiny. Integration matters in commodities. It helps protect margins in bad years and magnifies margins in better ones.
A second engine in optical fibre cables
Then comes the unexpected part. The company has a rapidly expanding optical fibre cable division. It contributed close to 10% of FY25 revenue and grew more than 30% year on year. Production crossed 1,05,000 kilometres while sales crossed 1,08,000 kilometers. The company is building backward integration through optical fibre draw towers in Hyderabad. For a business rooted in paper, this is a second engine. It is not a distraction. It is diversification that adds stability in a sector where stability is rare.
The division supplies telecom operators, network integrators and utilities and exports to more than 25 countries. It has also begun serving data centers. This is not a side business. It sits inside India’s broader digital expansion.
Built for the hard years
West Coast Paper used the difficult years of the industry to upgrade machines, strengthen the pulp line, tighten recovery systems and reduce power costs.
When FY25 began, the company was in a position where its machines could run at full tilt even during a weak demand year. If a plant can hold its rhythm when demand slips, it tells you something important. It is built to survive the years when nothing goes its way.
The company reported Earnings Before Interest, Tax, Deprecitation and Amortisation (EBITDA) of about Rs 493 crore in FY25, with finance cost of roughly Rs 38 crore. Total debt is modest enough to keep the consolidated debt to equity ratio at 0.13 times and the interest coverage ratio for FY25 stands at 6.7 times. With such low borrowing, the balance sheet looks solid going into the next cycle.
Consolidation is quietly reshaping the sector
What helps West Coast Paper further is consolidation. The company’s acquisition of Andhra Paper created a clearer footprint in the industry. Andhra Paper itself has more than 2,50,000 metric tons of paper capacity and about 2,00,000 metric tons of virgin pulp capacity, which strengthens group-level sourcing. The planned capex of roughly Rs 450 crore for equipment upgrades is exactly the kind of investment that creates operating leverage when the cycle turns. It is a slow process but a strategic one.
There is also the export angle. A company selling into more than 20 countries has a buffer against domestic price fluctuations. In an industry where domestic imports are a threat, exports are a counterweight. When realisations rise abroad before they rise at home, integrated exporters benefit first.
Anti-dumping environment
The DGTR’s decision to initiate an anti-dumping investigation into virgin multi-layer paperboard imported from Indonesia is quietly positive for domestic mills. Even before any duty is finalised, such probes tend to slow low-priced imports because buyers turn cautious and foreign suppliers reduce volumes. This tightens pricing and gives integrated producers like West Coast Paper a little more room on realisations in packaging grades.
But why has the market ignored it for so long
So, why is the stock so cheap? The real puzzle becomes not why someone would buy West Coast Paper but why the market has been ignoring it for so long.
The first reason is that people still think of the sector the way it was years ago. The decline in writing and printing paper has become the dominant story, even though packaging, premium grades and export communication papers have quietly strengthened.
Investors remember the bad years, not the balance sheet. Years of weak margins trained investors to expect nothing. Even when utilisation improved and input pressure eased, the memories stayed stronger than the new numbers.
Diversification is often misunderstood. The cable division is already meaningful, growing fast and supplying telecom networks, utilities, data centers and automation users. But the market has not yet priced it in because it is still seen as “non-core”.
Moreover, a sector without sparkle gets ignored easily. Paper is not a fashionable theme. It does not have the appeal of artificial intelligence, renewables or digital platforms. Investors tend to look at it only when earnings surprise, not before.
Valuation
On valuation, the stock trades at about 15.5x earnings, a clear premium to its five-year median of roughly 7.5x. The market has started to price in a steadier balance sheet and a more disciplined industry cycle.
A cycle that may finally turn
The early signs of a turn are visible. Packaging demand is rising as consumption shifts online and organised retail expands. Export markets are recovering in select grades, offering better realisations than the domestic cycle. Wood, chemical and fuel costs have also moderated, improving spreads for integrated mills.
Across the industry, few players are adding fresh capacity, which means any rise in demand will hit a supply base that has barely changed for years. This is usually when well-run mills with low debt and efficient operations begin to pull ahead.
What should a seasoned investor look for?
A large integrated mill running near full capacity in a down year.
A balance sheet with low finance cost.
A second growth engine in optical fibre cables.
A consolidation play through Andhra Paper.
Export optionality.
Sometimes the most interesting recovery stories come from sectors everyone had stopped looking at. West Coast Paper has survived every cycle the industry could throw at it. The next cycle may finally reward that patience.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article. The website managers, its employee(s) and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.