The agency has assigned ‘IND A1’ rating to the short-term facilities of the company.

India Ratings and Research stated that the rating factors in KPL’s healthy business profile with integrated operations, a diversified feedstock mix and improved operating efficiencies with the investments made over FY20-FY21, which have likely resulted in healthy EBITDA margins and cash flows through the cycle.

The EBITDA margins declined in FY25, owing to an industry-wide fall in the sales realisation, driven by an increase in the import of paper; however, the fall was lower than that of the industry average due to the company’s dual feedstock mix (wood and agro residues).

Nevertheless, the threat of import persists due to geopolitical issues and the consequent movements in domestic prices, is a key monitorable, given its potential impact on profitability and credit metrics.

KPL is in the process of increasing its capacity by 50% over FY26, which is likely to drive growth over the next couple of years, given the company was operating at near-full capacity over FY23-FY25.

However, a large capex, coupled with the EBITDA fall led to a rise in the net leverage in FY25 from FY24 levels.

The leverage is likely to remain elevated in FY26, after which the gradual ramp-up of the added capacity will lead to deleveraging and aid the improvement in scale of operations in FY27. With the improvement in EBITDA, Ind-Ra also expects liquidity buffers to strengthen.

The ratings are also constrained by the inherent cyclicality in the industry and the lack of pricing power, which makes the profitability of the entities susceptible to fluctuations in raw material as well as paper prices.

Kuantum Papers manufactures writing, printing and specialty papers at its plant located at Hoshiarpur, Punjab with a total capacity of 450TPD as of 31 March 2025. KPL uses agro residues such as wheat straw along with wood chips, veneer waste & bamboo as its key raw materials.

The scrip shed 0.24% to currently trade at Rs 127.25 on the BSE.