Financial Daily from THE HINDU group of publications
Sunday, Sep 01, 2002
Columns - FD Watch
JK Paper: Crumpled?
JK PAPER accepts fixed deposits under two schemes. Scheme `A' is non-cumulative and offers 9.5 per cent for one year, 10.5 per cent for two years and 11 per cent for three years. Interest is payable at quarterly intervals.
Scheme `B' is cumulative and the interest rates translate into effective yields of 9.84 per cent, 11.52 per cent and 12.83 per cent for the same tenures. The minimum deposit amount under both schemes is Rs 10,000 and, thereafter, in multiples of Rs 1,000.
Further details can be obtained from the company's office at Nehru House, 4, Bahadur Shah Zafar Marg, New Delhi - 110 002.
Investors with an appetite for risk can consider the one-year cumulative and non-cumulative deposits in JK Paper.
The two- and three-year tenures can be avoided due to the cyclical nature of the paper business.
JK Paper is the outcome of the restructuring of the paper business of the JK Group. The paper division of JK Corp was hived-off and merged with Central Pulp Mills and the entity was renamed JK Paper.
Post-restructuring, JK Paper is one of the major players in the industry with a capacity of 1.5 lakh tonnes per annum.
JK Paper is one of the leading players in the paper industry and has a strong presence in the branded paper segment, with 35 per cent of its output in volume terms and 40 per cent in value coming from this segment.
For the paper industry, the worst appears to be over as the fall in pulp prices seems to have almost bottomed out.
With the US economy showing signs of revival, international pulp prices might firm up in the near-to-medium term. This could have a crucial impact on the domestic markets too.
JK Paper concentrates more on the high-end branded paper segment, which is growing at a fast pace.
For the year ended June 2002, the branded paper sales rose 35 per cent in volume terms, while the total turnover rose 14 per cent. From a financial perspective, margins are under pressure despite the growth in sales. Interest costs account for 42 per cent of the operating profits.
Despite moderate gearing levels, better business prospects and a strong brand name give comfort to an investor in the short term.
In the long term, the swing in business cycles might affect profitability and gearing levels. One can, therefore, stick to the short-end options.
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