Rustomjee Business School

L6. Value Chain Analysis I

Dr. Hanif Kanjer

MBA (London Business School), BE (Production) Founder Director, Rustomjee Business School Founder Director, Rustomjee Cambridge International School Director, Rustomjee International School

Index

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Air Transport Industry Value Chain Would you bet on Sirpur Paper Mills? Sirpurs Product Portfolio Value Chain - Sirpur A Shredded Scenario
Paper Industry Operating Profit Margin Paper Industry Net Operating Margin Will Sirpur achieve its target growth of 100% in 3 years?

Air Transport Industry Value Chain

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Aircraft Leasing

Aircraft Manufacturing

16%

15%

4 - 6%

11 14%

10 13%

10%

>30%

Return on Capital

Computer Reservation Systems

Ground Handling

Catering

Airports

Airlines

Would you bet on Sirpur Paper Mills?

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Oldest integrated paper mills Largest manufacturer of variety and colour paper Grown at a slow and steady rate during the last 6 decades. Turnover increased at an average rate of 4% Sales grew by 5.65% to Rs 268 crores in 2006 Profit increased by 3.5% tp RS 14.6 crores Target to grow by 100% in the next three years Domestic Demand expected to grow @ 6.1% to 7.4m tons in 2008-09 Supply expected to grow @3.7%

Product Portfolio

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1. Writing and printing paper 2. Cream work and maplitho paper 3. Ledger, bank and account bank book paper 4. Specialty grade bond, parchment, airmail, manila and poster paper 5. Duplex and Triplex boards 6. Kraft paper

30%
Growth

Monopoly

25%

Other Initiatives

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Capacity Increased by 66% Enhancement of Environment Compliance Improvement in paper quality Increases in the realisation per tonne Reduction in Cost of production Conservation of natural resources through installation of new chippers, digesters, fiber line

Value Chain - Sirpur

Rustomjee Business School HR R&D Finance

Purchasing

Manufacturing

Distribution

Sales & Marketing

Bamboo & Wood Coal

67% input costs

7 machines Mill Development Plan Increase wood to pulp conversion Increase efficiency Lower operating cost of Paper per tonne Capacity Expansion

Principal markets located in South and West India Within a radius of 800km

Industrial Boards

Card Manufactures

Publishers

EBITDA expected to grow faster than revenues

A Shredded Scenario!!!

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Sirpur Paper mills 3% Karur KCP Pack 3% Rama Newsprint 4% Mysore Paper 4% Seshasayee Paper 5% A P Paper 5%

Others (9) 9%

Ballarpur Industries 23%

Orient Paper 11% TN Newsprint 10% J K Paper 9%

Balkrishna Industries 8% West Coast Paper 6%

Ba lla rp ur

10

15

20

25

0
s
23

In du st rie ap er
10

O ri e TN N ew sp rin t
21

nt P

Ba J K Pa pe r lkr is hn a In du

18 22 12 14 11

Paper Industry Operating Profit Margin

2 14 14

W st es rie tC s oa st Pa pe r A Se P sh Pa as pe ay r ee Pa pe M r ys or e R Pa am pe a r N ew sp Ka rin ru t rK CP Si rp Pa ur ck Pa pe rm ills

Rustomjee Business School

10%

12%

0%

2%

4%

6%

8%

Paper Industry Margins Net Profit Margin

Ba l la rp ur In du st rie s O ri e nt Pa pe TN r N ew sp ri n t J Ba K Pa lk ri s pe hn r a In du W st ri e es s tC oa st Pa pe r A P Se Pa sh pe as r ay ee Pa pe M r ys or e P ap R am er a N ew sp rin Ka t ru rK C P Si Pa rp ck ur P ap er m i lls

-4%

-2%

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Will Sirpur achieve its goal of growing by 100% in the next three years?

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Market Share

OPM

NPM

Ballarpur Industries
Orient Paper TN Newsprint

23%
11% 10%

23%
10% 21%

11%
2% 11%

J K Paper
Balkrishna Industries Sirpur Paper mills

9%
8% 3%
67% input costs

18%
22% 9%

5%
11% 7%

Target to grow by 100% in the next three years Domestic Demand expected to grow @ 6.1% to 7.4m tons in 2008-09 Supply expected to grow @3.7%