Demand for paper which at present is approx. 8.0 mn tons is expected to grow to 14 mn tons by 2015 and 20 mn tons by 2020. Indian GDP maintained healthy growth of 9% and demand of paper generally follows the GDP growth. Hence, demand of paper is likely to outstrip the supply of paper in India. Although, Indian Paper Ind. suffers from disadvantages like shortage and high cost of wood pulp. higher energy cost, still Shreyans is being recommended, as company has different R/M and is going for captive power generation.

Shreyans is engaged in manufacture of writing and printing paper with total installed capacity of 66,000 tons p.a. spread over 2 locations called Shreyans Paper and Shree Rishabh Papers. It is Agro based company in the sense that instead of wood pulp, it uses straw/grass as its main R/M.

Financial Performance:

2006-07: During the year, company produced 58954 tons against 58775 tons last year. However, turnover increased by 11% due to higher input costs and higher realization. PBT increased to 11.92 crs. as against 10.77 last year. NP during the year is 11.01 crs. Company made provision of 4.39 crs. for deferred tax which is just an accounting entry and hence, it has been included in the NP Figure. EPS stands at 10.00. Stock is trading at 6.50 x FY07 Earnings.

Future Plans: During the year, Bio-Methanation Plant to treat R/Ms Wash Water was commissioned. This project has been registered under CDM of United Nation and company will be eligible for carbon credits.

During the year, company started work to set up 3.5 MW Cogen Power Plant which is likely to be commissioned by Feb 08. It is being financed through Rs. 10 cr. bank loan. Impact of cogen will be felt in 08-09 and company is likely to save atleast Rs. 3 crs. per year in power cost alone.

Company is setting up another 5.5 MW Cogen Power Plant at its other factory at a cost of Rs. 24.56 crs. This Plant is likely to be commissioned by Dec. '08. Impact of the same will be felt in Q4FY09 and company will save more than Rs. 5 crs. p.a. in power cost from the same. To part finance this project, company has issued 6.90 lakh warrants to promoters and 20.60 lakh warrants to non-promoters @ Rs. 32.50. Each Warrant can be converted into an Equity Share within 18 months. Allotment to promoters will be locked in for 3 years and for 1 year to non-promoter.

Future Prospects:

In terms of R/M, company is at advantage because wood pulp prices are continuously rising whereas, good monsoon makes straw prices very affordable. In our estimates, we have not taken into account monetary gains which will accrue from sale of carbon credits although company should gain atleast Rs. 2 crs. p.a. from the same. In near future, it will be out of BIFR. COMPANY HAS CHALKED OUT AN EXPANSION PLAN COSTING Rs 180 CRS TO SET UP A NEW UNIT WITH CAPACITY NEARLY 500 TPD. In our projections, we have not taken into consideration financing/impact of proposed expansion as exact details of same are not available still

Valuations: Stock is trading at just 5.41 x FY08E EPS. By any standard it is extremely low considering that it is Agro based Industry and will have Captive Power Generation Plant and also entitled for carbon credit. Our price target:

1) Rs. 90/ in 3-4 months.

2) Rs. 125/ in 12 months.

Sooner or later, it is bound to catch attention of investing community and share prices may surpass our estimates.

Hemant K. Gupta
Centre for Development Of financial Treasure