New Delhi, Aug 4 : Writing and printing (W&P) paper manufacturers are expected to see their revenue grow by 4-5 per cent this fiscal, driven by an improvement in prices and steady volumes, a new report said on Monday.

This is a sharp recovery after a 7 per cent decline previous year, according to a data compiled by Crisil Ratings.

The report said realisations, which had dropped by around 12 per cent previous fiscal, are likely to rise 2-3 per cent this year.

This improvement will be supported by stable demand-supply conditions, limited imports of low-cost W&P paper from ASEAN countries, higher domestic production, and no new capacity additions in the country.

While the implementation of the National Education Policy 2020 boosted demand previous fiscal, volume growth is expected to slow by 200-300 basis points this year due to increasing digitalisation.

However, steady demand from the banking, education, and judiciary sectors is expected to keep volume growth positive at around 2-3 per cent.

Operating profitability is forecast to improve by 200-250 basis points as hardwood prices ease on the back of better supply, while process efficiency measures will also support margins.

'With no fresh capacity addition in ASEAN countries and no new domestic capacity on the horizon, we expect a modest increase in realisations along with a similar growth in volumes, helping revenues rebound,' said Shounak Chakravarty, Director, Crisil Ratings.

W&P paper is widely used in education, coaching, banking documentation, and the judiciary.

Factors such as stable school enrolment, the growth of coaching centres, more know-your-customer documentation, and steady judicial demand will help sustain the market even as digital adoption slows growth.

Crisil expects capacity utilisation to remain healthy at 86-87 per cent this fiscal, as paper makers are unlikely to invest in fresh capacity expansion.

Instead, investments will focus on efficiency measures, such as reusing chemicals and adopting energy-efficient production methods, which will help improve yields.

Margins are expected to recover to 15-16 per cent this fiscal from a five-year low of 12-13 per cent previous year, aided by softer hardwood prices and better efficiency.

Hardwood acreage, which fell during the pandemic, has increased since FY23, and the resulting higher harvest is expected to ease supply from the second half of this fiscal, the report said.

The improvement in revenue and margins is also expected to boost cash flows and strengthen credit profiles, helped by negligible capital expenditure and stable working capital.

Debt metrics are likely to improve, with the debt-to-EBITDA ratio expected at 1.3-1.4 times and interest coverage at 7.5-8.0 times, compared to 1.6 times and 6.4 times last year, as per the report.

/IANS