Shree Ajit Pulp and Paper FY26: Revenue Doubled in Two Years, and the Market Still Pays Single-Digit Earnings

Shree Ajit Pulp and Paper FY26: Revenue Doubled in Two Years, and the Market Still Pays Single-Digit Earnings

General information and entertainment, not investment advice. The author is not a SEBI-registered adviser or research analyst. No recommendation, no promised returns. Markets carry risk including loss of capital. Figures may not be current. Consult a registered adviser before acting.

1 — At a Glance

Here is a company that manufactures the brown paper inside your cardboard boxes, and in FY26 it did so with unusual conviction: revenue of ₹701 Cr, up from ₹295 Cr just two years earlier. Net profit landed at ₹30 Cr against ₹9 Cr the year before — a jump the data sheet records as a 219% TTM profit surge. Operating margin, which spent FY24 loitering at 7%, closed the March quarter at 15.1%.

That is the attention signal. The worry signal sits one line down on the balance sheet: borrowings of ₹256 Cr against a net worth of ₹278 Cr, and an interest bill that swelled to ₹34 Cr for the year. The company earned more, then handed a growing slice of it to lenders.

The market, for its part, prices all of this at roughly 8x earnings — against a peer median near 19x. A doubling of revenue, a tripling of profit, and a multiple that reads like the market hasn’t quite finished the sentence.

Two years of capex just landed. The question is whether the machines can keep the margin they found.

2 — Introduction

Incorporated in 1995 and run out of Vapi, Gujarat, Shree Ajit Pulp and Paper makes kraft paper — testliner and multilayer testliner — from waste paper, and sells it mostly to corrugated-box makers. It is a single-segment business: paper in, paper out, no diversification story to dress up the numbers.

The recent chapters are about capacity. In July 2023 the company commenced commercial production at Unit 2 in Valsad, moving into lighter-weight, high-tensile grades. Installed capacity climbed to 2,02,500 MTPA. That expansion was funded the expensive way — a large debt-funded capex programme estimated at around ₹305 Cr, split between roughly ₹233 Cr of borrowing and internal accruals.

The financing shows. Borrowings went from ₹46 Cr in FY22 to ₹285 Cr by FY25 before easing to ₹256 Cr in FY26. Interest costs tracked the climb, and ICRA’s rating rode the same wave — downgraded through FY24 to A-, then to BBB+, with the outlook eventually revised back to Stable in August 2025.

FY26 is the year the revenue caught up to the capacity. Whether the profit stays is the rest of the entry.

3 — Business Model: WTF Do They Even Do?

The product is kraft paper in the 80–300 GSM range, in shades with names like “Ajit Gold,” destined to become the box your online order arrives in. The GSM matters more than the poetry: 80 gsm sheets double as interleaving for metal and auto components; heavier grades go to fluting and test liner. The end users span textiles, appliances, pharma, food — anyone who ships something in a carton, which is to say everyone.

This is a conversion business at heart. Waste paper goes in, testliner comes out, and the spread between the two is the entire game. Raw-material cost consumed ₹431 Cr of the ₹701 Cr top line in FY26 — around 62 paise of every revenue rupee before a single other expense. Power and fuel took another ₹93 Cr. The company runs windmills in Rajkot and Jamnagar and a co-generation unit at the plant, which is less a green-energy narrative and more a quiet acknowledgment that in paper, the electricity bill is a competitor.

There is no brand moat here; corrugated-box buyers buy on price and GSM spec, not loyalty. The moat, such as it is, is being a low-cost converter with your own captive power and a plant that runs. FY25 capacity utilisation, oddly, read just 68.4% on the expanded base — a lot of new machine waiting for volume.

Does a commodity converter get to keep a 15% operating margin, or is that the top of the cycle waving?

4 — Financials Overview

Figures are consolidated, in ₹ crore.

The March quarter is the strongest in the set: operating profit of ₹26 Cr on a 15.1% margin, PAT of ₹9.6 Cr more than doubling year-on-year. Revenue barely moved sequentially, yet operating profit rose 13% quarter-on-quarter — the margin, not the volume, did the work this quarter.

Other income of ₹2.42 Cr in the quarter is worth marking, because in the prior March quarter a ₹5.65 Cr other-income line had flattered the picture. The interest cost, meanwhile, sat at ₹11.67 Cr for the quarter — the single biggest drag between operating profit and what reached the bottom line.

5 — Market Expectations & Historical Multiples

This section describes how the market is currently pricing the company and how that compares with its own history and peer group. It is descriptive, not predictive.

The market currently pays about 8x earnings here versus a peer median near 19x. On book value it pays 0.89x — below the company’s own equity. ROCE of 14.3% sits well above the peer-set median of 6.2%, while current ROE of 11.4% runs ahead of the company’s own five-year average of 7.9%.

What the market appears to be weighing is a business whose returns just improved sharply — ROCE recovered from 3% in FY24 to 14% in FY26, per the ratios — against a balance sheet still carrying ₹256 Cr of borrowings and a profit record that was volatile as recently as FY24. The low multiple pairs a fresh margin recovery with an unproven durability.

One factual observation: the market prices this business below its own book value and at under half the peer earnings multiple, even after a year in which profit tripled.

6 — What’s Cooking

The spiciest item in the record is not an order win. On September 2, 2025, the Income Tax Department began a search at the company; a filing dated September 5 confirmed operations were unaffected, and a later clarification noted an IT/ERP shutdown had delayed a 24-hour material disclosure. The company reported the search itself, which is the extent of what the record states.

On the routine side: the Board approved FY26 audited results on May 28, 2026, with no qualification in the auditor’s report. In March 2026, shareholders reappointed Gautam D. Shah as Managing Director, Bela G. Shah as Whole-Time Director and CFO, and an independent director. Borrowings fell about ₹29 Cr over the year — the first reduction after three years of climbing.

7 — Balance Sheet

Assets equal liabilities in every column — the arithmetic behaves.

• Borrowings of ₹256 Cr sit almost neck-and-neck with net worth of ₹278 Cr, giving a debt-to-equity of 0.92. This is a business financed roughly half by lenders.
• Fixed assets ballooned from ₹140 Cr (FY23) to ₹389 Cr — the capex is now on the books as steel and machinery, no longer as promise.
• Cash and bank stood at just ₹3.98 Cr against that ₹256 Cr of debt. There is no cash cushion here; there is a plant.

Net cash is not a concept that applies to this balance sheet. A company can build capacity or hold a buffer — this one chose capacity.

8 — Cash Flow: Sab Number Game Hai

The story is a phase change. For two years, investing ate ₹134 Cr as the capex ran, and financing poured in ₹114 Cr to feed it. In FY26 the pattern flips: operating cash surged to ₹63 Cr, investing outflow shrank to ₹8 Cr as the building finished, and financing turned to a ₹63 Cr outflow — money going back to lenders instead of coming from them. The year the machines stopped being paid for is the year they started paying.

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