1. At a Glance – Old School Paper, New Age Pressure
Seshasayee Paper & Boards Ltd (SPBL) is that 60-year-old Tamil Nadu uncle who has seen every paper cycle since Nehru jackets were fashionable. Market cap sits at ₹1,427 crore, current price ₹226, down ~11% in 3 months and ~23% in 1 year—clearly Mr. Market is not in a hugging mood.
Despite being almost debt-free (₹77 crore debt) and trading at 0.71× book value, profitability has taken a hit. Q3 FY26 revenue came in at ₹387 crore (-10.3% YoY) while PAT grew 12% YoY to ₹18.6 crore—not because operations suddenly became sexy, but because other income quietly did some heavy lifting.
Operating margins have collapsed from 27% peak levels (FY23) to ~6% now, courtesy imported paper dumping, wood cost inflation, and competitive pressure. ROCE is a sleepy 7%, ROE a modest 5.6%—this is not a momentum stock, this is a balance-sheet uncle waiting for his capex to kick in.
So the big question: Is this a value trap with good manners or a cyclical setup before margins rebound?
2. Introduction – Six Decades of Paper, One Bad Cycle
Seshasayee Paper is not a startup pretending to be profitable. It is a fully integrated pulp & paper manufacturer that has survived licence raj, liberalisation, Chinese dumping, digitalisation fears, and now… imported paper at discount prices.
The company manufactures printing and writing paper, selling under brands like Sprint, SPD, Color Sprint, and Success. Sounds motivational, right? Sadly, FY24–FY26 haven’t lived up to the brand names.
FY24 saw margin and profit erosion due to:
- Cheaper imported paper flooding the domestic market
- Rising wood prices (core raw material)
- Lower volumes in H1 FY24
Fast forward to
FY26, volumes have stabilised, but pricing power hasn’t returned. SPBL is currently operating at full capacity in Erode and ~84% in Tirunelveli, meaning growth will now come only from MDP-IV expansion, not from sweating assets.
So this is a classic cyclical manufacturing story—when times are good, cash gushes; when times are bad, the stock sulks for years.
Do you have the patience of a South Indian temple trustee… or are you looking for quarterly fireworks?
3. Business Model – WTF Do They Even Do?
SPBL converts wood → pulp → paper → distributors → schools, offices, exporters. Simple. Boring. Capital-intensive.
Key highlights:
- Two manufacturing units: Erode & Tirunelveli
- Total capacity: 2,55,000 TPA
- Backward integration into pulp gives cost control… when wood prices behave
- Distribution via 70+ domestic distributors + 10–11 international agents
Revenue mix:
- Domestic: ~88% (FY24)
- Exports: ~12% (FY24)—down sharply from FY23 due to global slowdown
The problem? Paper is a commodity business pretending to be branded. When imports are cheap, customers don’t care about Sprint vs Success. They care about price per ton.
SPBL’s long-term edge lies in:
- Integrated manufacturing
- Strong balance sheet
- Captive renewable energy
