ASSIGNMENT ON

PUDUMJEE PAPER MILL PUNE

Submitted by

SARANG WADYALKAR

PGDM OPERATIONS, BALAJI INSTITUTE OF TELECOM & MANAGEMENT,PUNE

As part of the selection process for ARC ADVISORY GROUP

EXECUTIVE SUMMARY

Pudumjee Pulp & Paper Mills Limited (PUDUMJEE), a Pune (Maharashtra, India)
based Company engaged in the manufacture and sale of Specialty Papers is a
flagship Company of the M.P.Jatia Group of Companies.

The mill has a good set up of manufacturing facilities, administration, a capacity of

75000 tpa of paper production. Out of which 20000 tpa are paper tissues.

The company enjoys a leading position in specialty paper market. Has a huge
clientele spread across variety of industries like Retail, Hosptials, Hotels, Airlines,
Steel, Pharma, etc

It is competed by very few players as others don’t have the variety and uniqueness
that Pudumjee has for its produce. In the past the company has enjoyed good
margins of profits across almost all the varieties of specialty papers but since last
decade or so the company’s share prices have fallen considerably. Note- Rs.120+ in
2006 to less than Rs. 25 in 2009.

What must have been the reason that the company has come down the ladder?

Is it the shift towards more newsprint production from its specialty papers OR

Is it the fact that the mill is gripped with issues regarding Quality, Profitability, and
Inefficiencies in operations, excessive energy consumption, lack of futuristic
planning?

One may guess that its the combined effect of all these things!

There are some key areas which are good and there are some which could be
improved to increase the productivity of the mill which is getting older and price of
land; a good location in Real Estate attraction Pune is probably more than the mill
itself. The Chairman Mr. MP JATIA could go either way.

But there’s an opportunity Mr. Jatia can’t afford to lose, and that is the unique
products this mill can produce considering the fact that demand for these is only
going to increase in future.

This article aims to put forward what’s existing that is good about Pudumjee and
make suggestion what could be improved and how. There are some suggestions in
this article which could solve owner’s problem and change the fate of the mill.
INTRODUCTION OF THE COMPANY

Pudumjee Pulp & Paper Mills Limited (PUDUMJEE), a Pune (Maharashtra, India)
based Company engaged in the manufacture and sale of Specialty Papers is a
flagship Company of the M.P.Jatia Group of Companies.

Beginning with manufacture of India`s first indigenous Greaseproof and Glassine

papers for packaging for the first time in India, PUDUMJEE went on to extend range
of papers to include Security Papers such as MICR Paper, Sensitized Paper, Postal
Stamp, Impressed Stamp, Passport and Excise Banderoll, Laminating Base, Silicone
base paper, Wax Match paper, Packaging Papers of various kinds and types, Tissue
Papers, etc. catering to wide range of industrial applications specially manufactured
to meet customers specific requirements. Starting with a capacity of 6,000 MT of
paper per annum in 1968, PUDUMJEE has now reached a capacity of 42,500 MT per
annum of Specialty Papers.

The Company which has its plant and registered office at Thergaon, Pune(India) is
managed by Board of Directors comprising eminent personalities from various fields
and discipline headed by Mr.M.P. Jatia. The company`s equity shares are listed at
Pune, Mumbai and National Stock Exchanges.

The company has various landmarks to its credit.

It comes with a tradition of over 100 years in the Paper Industry was incorporated in
November 1964 and commenced production in January 1968 at its plant at Pune

The Management of the Company is vested in the Board of Directors consisting of

persons from various disciplines headed by Mr. Mahabirprasad Jatia, Chairman and
Managing Director and assisted by experienced and qualified team of professionals.

Mr. M.P. Jatia, Chairman and Managing Director has an overall experience of over 51
years in Business administration and Corporate Finance and is a Director of many
well-known companies.

Mr.Ved P. Leekha, the Director-Technical is a B.E. (Mech.) and has a wide and varied
experience of over 44 years in Paper Mills.

Mr. S.K. Bansal, the Director-Finance & Administration and Company Secretary is a
Bachelor of Commerce, a Chartered Accountant and an Associate Member of the
Institute of Company Secretaries of India and has over 24 years of experience in
Finance and Business Administration.
Industry Background

The Indian Paper Industry is among the top 15 global players today, with an output of
more than 6 millions tones annually with an estimated turnover of Rs. 150,000
millions. (approx. USD 3400 million).
The industry, one of the few sectors largely unaffected by the global downturn, has
witnessed a steady growth in volumes of more than 8% during the period April-
November 2009 as against the corresponding period in the previous year.

However, with a faster addition to the total operating capacity (expected at around
9.5% for FY11) in Writing & Printing (W&P) segment, paper prices have been under
pressure. Over the past two years, the domestic industry had also to contend with a
sustained high level of cheap imports from East and South East Asia.

Besides the threat from imports, the sector faces challenges in terms of its inherent
fragmented nature, its vulnerability to prices of its raw materials – pulp and waste
paper (both domestic and imported) and environmental issues.

However, the prospects for the overall industry are likely to be stable in the long run,
on account of significant growth drivers like increasing population, increased
government expenditure on education, higher circulation of newspapers, higher
urbanization, increase in retail outlets and increase in print advertisements, among
others. With a per capita consumption of around 7-8 kg per annum (much lower than
the global average of around 45 kg per annum), the current growth rates are more
likely to be sustained in future.

Budget Proposals

1. As part of rollback of stimulus package, the standard rate of excise duty

increased from 8% to 10% across the board.
2. Reduction in excise duty on corrugated boxes and cartons manufactured by
standalone manufacturers from 8% to 4%.
3. Outright exemption from 4% additional duty of customs is being provided to
wastepaper and paper scrap.
4. Surcharge on customs duty for domestic companies reduced from 10% to
7.5%.
5. Proposed plan to increase allocation for school education from Rs.26,800
crore in 2009-10 to Rs.31,036 crore in 2010-11. In addition, States will have
access to Rs. 3,675 crore for elementary education under the Thirteenth
Finance Commission grants for 2010-11.
 Budget Impact on paper industry:

1. The increase in standard rate of excise duty is likely to have a negative

impact on the paper industry, considering the current oversupply situation.
2. Increase in planned allocation for school education and recasting of National
Literacy Mission may lead to enhanced demand for paper.
3. The increase in personal disposable incomes and steps to bolster economic
growth is expected to increase household spending on education.
4. Reduction in excise duty for corrugated boxes and out right exemption of 4%
CVD for waste paper and paper scrap would act as incentives for recycling of
waste papers. Newsprint industry dependent on waste paper as also
corrugated box makers will benefit from these incentives.

The Indian Economy is progressing well and targeting 8%+ growth. The economic
reforms coupled with the liberalized Government Policies, India today offers
excellent business opportunity for investments.

One of the first FDI Projects may come through the proposed Finnish proposal to set
up a 400000 tpa capacity plant with an investment of US$240 million.

The expanding Industrial Scenario calls for efforts to tackle related problems:

Industry needs capital and technology to solve its operational issues. And since
energy cost accounts nearly 25 per cent of cost of production there is an urgency to
improve energy management and energy consumption.
Let’s see how Pudumjee Pulp Mills Ltd could handle it-

The company has a good set up of manufacturing and is a leader in paper tissue
market. Though the process is good enough to produce almost all the varieties in
specialty papers it has some pros and cons.

Capacity utilization,production planning,operational deficiencies, energy eficiency

Ordinary R&D facilities and Worker’s union, are still a big problem!

All these things add up to the cost of production of paper and brings down the profits
considerably.

Let’s have a look on what’s good and what could be changed or improved-

What is good?
1) Almost all the varieties in specialty papers, Unique products
many of these are exported
2) Good clientele, mostly business-to-business environment
3) Good market share, 75% in tissues market
4) Very low competition, not many players in this segment of papers
5) Experienced people at almost all hierarchy levels across all functions
6) Good set of “key individuals/problem solvers”
7) Good process
8) Most of the equipments are old so good ROI on cost of capital
9) Good location
10) Sufficient water supply
11) Non-stop power supply
12) Odourless environment ,a plus for any paper mill
13) Good lay-out,
14) Scope for future changes
15) Present cost of land is higher than the mill itself.

What is not good?

1) Turning away from it’s uniqueness
2) Marketing people want more of newsprint to be produced
3) Low Capacity utilization
4) Poor production planning
5) Operational deficiencies
6) Low energy eficiency
7) Ordinary R&D facilities
8) Worker’s union
9) Paper quality issues
Let’s see in detail what is in favor of the company-

1)Almost all the varieties in specialty papers

Name Uses

Calendared paper

Glassine paper For packing and wrapping fatty goods.

Opaline & Intaglio paper For printing and then used for different purposes.

Release Base paper For coating of release, etc.

Super Calendar Kraft paper For printing coating, laminating etc.

Opaque Laminating Base paper For laminating, printing & packing.

Twist Wrap paper For packing etc.

Coated Paper

Coated Art & Chromo paper For printing & packing.

Industrial Paper

Grease proof paper For packing and wrapping fatty goods.

Imitation Parchment paper For packing and wrapping.

Packing Tissue paper For packing.

Parchmentine paper For wrapping.

Absorbent Kraft paper For printing, coating, laminating etc.

Bactite paper For wrapping of medical/surgical consumables.

Electrical Grade Kraft paper For wrapping of cables.

Tracing paper For tracing, drawings etc.

Wax Match paper Manufacturing of match sticks.

Laminating Base Paper

Barrier/Print Base paper For Printing and Lamination.

Gold Rust paper For Printing and Lamination.

Mysore Teak paper For Printing and Lamination.

Overlay paper For chemical coating for further use.

Other Specialties

Bible Printing paper For Printing of Bible.

Computer Stationary For Printing computer stationery.

Foam Base paper For lining in foam making etc.

Interleaving Kraft paper For lining.

Thin Printing paper For Bidies.

Yellow Interleaving paper Cover for X-ray film etc.

Packing Tissue
Packing Tissue paper For Packing.

Bleached Packing Tissue (Acid For Packing of brass.

Free)

Security paper

MICR Cheque paper Printing of cheque.

2) Good clientele-

Cadbury
Nestle
DNA
Sakal
TOI
Dainik bhaskar
Big bazaar
Reliance retail
Carrefour
Wal-mart
Almost all modern outlets of trade
Steel industries
Many pharma cos
Chemical cos
Auto components manufacturers
Hotels
Airlines
Hospitals

3) Good market share, 75% in tissues market

The company has the capacity to meet 75-80% of the raw tissues requirement in the
market. Some of the major users of tissues are in kitty. Capacity to produce 20,000
tpa of tissue paper.

4) Very low competition

Very few players in this segment of papers

Andhra Pradesh Paper Mills
Abhishek paper mill
ITC
Amol paper mill
A.L. paper house
Asskay paper products

5) Good set of “key individuals/problem solvers”

Every company has it’s key people in every dept. These people have experience of
handling difficulties,at odd times and have problem solving skills.
Pudumjee also has a good set of such people in depts like Paper
machine,electrical,mechanical and instrumentation maintenance depts. These vary
across the hierarchy, few are Asst Managers,Executives,Operators,Mechanics even
helpers.

6) Good process

VACCUM BOXES PRESS NO.1

PULPER WIRE PART PRESS NO.2

HEAD BOX
SAND TRAP DRYER SECTION1

CENTI CLEANER

DUMPING DRYER
CHEST SECTION 2
FLOW BOX

HIGH DENSITY DRYER

MACHINE CHEST
CLEANER SECTION 3

MIXING CHEST NO.2

TURBO CALENDER,

REWINDER

REFINER MIXING CHEST 1 FINISH

PRODUCT

The above figure shows the proper flow of the process that is required in any
specialty producer mill operating on a Fordrinier machine.
With the same process Pudumjee Paper mill has been producing so many varieties of
paper over a long time. Therefore the process has to be good.
How it could be improved is suggested later on.
7) Most of the equipments are old so good ROI on cost of capital

It’s not always necessary to imploy the latest technology outright. One has to justify
it in terms of economy,skill set of employees,actual need,labor costs,technology-
whether its proven or not?cost of procurement, availability of spares and
components,service,maintenance,etc
All this comes down to return on investment!
In this case Pudumjee Paper mill has been smart to use old equipments,some of
those bought second-hand and most importantly PROVEN ones.
Investment is made in one of the key areas,which is De-inking Plant. It’s equipped
with latest technology, has huge caapcity to process waste paper to produce
recycled pulp.
Day by day use of waste paper is increasing due to environment and cost concerns.
So to invest in a up-to-date De-inking plant was a good decision.This will give a high
ROI in times to come.

8) Good location-

Proximities include-

Mumbai-Pune-Bangaloru Express Highway

Pune-Mumbai Old highway
Pavana River
PCMC industrial zone-one of the richest municipal corp in asia
Aditya Birla Memorial Hospital
All these are ideal conditions for a location of a paper mill.
9) Good FACTORY LAYOUT

Scope for future changes

Present cost of land is higher than the mill itself

DEFINITION

A factory layout can be defined as follows; Factory layout refers to the arrangement
of physical facilities such as machinery, equipment, furniture etc. with in the factory
building in such a manner so as to have quickest flow of material at the lowest cost
and with the least amount of the finished product.

The efficiency of production depends on how well the various machines; production
facilities and employee’s amenities are located in a factory. Only the properly laid
out factory can ensure the smooth and rapid movement of material, from the raw
material stage to the end product stage. Factory layout encompasses new layout as
well as improvement in the existing layout.An ideal factory layout should provide the
optimum relationship among the output, floor area and manufacturing process.

DYNAMICS OF PLANT LAYOUT

Plant layout is a dynamic rather than a static concept meaning thereby if once done
if is not permanent in nature rather improvement or revision in the existing plant
layout must be made by keeping a track with development of new machines or
equipment, improvements in manufacturing process, changes in materials handling
devices etc. But any revision in layout must be made only when the savings resulting
from revision exceed the costs involved in such revision.

Revision in plant layout may become necessary on

account of the following reasons:

a) Increase in the output of the existing product

b) Introduction of a new product and diversification
c) Technological advancements in machinery, material,
processes, product design, fuel etc.
d) Deficiencies in the layout unnoticed by the layout
engineer in the beginning.
The following is the Factory Layout of Pudumjee Paper mill. It is spread across
nearly 23-28 acres of land.

Though the diagram is not a perfect replica of the plant layout, I’ve tried to get as
close as possible to the actual top view of the plant. (aprx.15 acres) It doesn’t
include company’s residential colony, effluent treatment and water treatment
plant.(all towards north of the diagram.)

The mill uses and returns (cleaner than the river itself) huge amount of water. Mill
effluent is treated in the primary clarifier for solids removal. An activated sludge
aeration basin with secondary clarifier is used for BOD reduction before discharge to
the Pavana river.
The current location has a huge land value as this area is being rapidly developed by
real estate players. If sold to these players, the price would be greater than the price
of the mill itself.

The layout is good but it has some operational deficiency which discussed later on in
this article.
Now let’s see what is not good about the company-

1) Turning away from it’s uniqueness

Pudumjee Paper Mills has been known for it’s quality specialty paper grades.
Some of those exclusively produced by it. But as seen in last
decade, the production of newsprint is growing and specialty grades
production decreasing. Excessive production of newsprint also erodes the
machines as a result maintenance cost goes up. Set up times increases.

2) Marketing people want more of newsprint to be produced

As the demand for newsprint is higher, it’s easy to get orders for marketing
people. But it’s not company’s specialty. This way they’ll lose out on their
regular specialty paper buyers. And the company will have to enter in huge
competition because of the large number of players in the newsprint market.

3) Low Capacity utilization

When paper is manufactured on all four machines using only virgin pulp, the
De-inking plant remains idle.

Uncertainty in planning, frequent breakdowns result in lower capacity

utilization.

4) Poor production planning-

Though the higher management knows what and how much to produce over
a period of one month same is not conveyed to frontline employees. The
sudden changes in planning are frequent. Many times changes come from
the owner sitting in Mumbai, giving very less time(less than 20hrs) time to
make adjustments.

As the material for production is issued from the store and stacked up there
near the pulper,it becomes a herculean task to suddenly change from one
grade to other.

Mathadi and contract laborers also refuse to co-operate when such a

change comes.

Lot of inventory,spillage/waste is generated due to sudden change in

requirement of raw matetial.
 This also result in longer set-up times.

5) Operational deficiencies-

Longer set-up times due to lack of co-ordination among

production,maintenance,store and quality depts.

Achieving correct shade of colored paper is great difficulty.It takes 2-3

batches to arrive at right combination of additives. This results in either low
quality or waste of 2-3 tn of fibre and other additives. Main reason being
ordianry R&D dept and incosistancy of process variables & error in manual
addition of additives like color,chemicals,water,etc.

This also increases load of waste treatment plant.

The process has so many equipments and variables and performance of

each one matters very much. Chances of breakdowns are huge when one
uses some outdated or poorly maintained equipments.

Some of the inconsistent performers in operations at Pudumjee are:

A) Mill Computer Systems

Automation technology is critical to the operations of the mill. Computer based

systems work to account for and to improve the quality of mill products.

 The process control systems constantly monitor and control thousands of

process variables such as pressure, flow, temperature, and tank levels in the
area of pulp production, stock preparation, coating and additives, electrical and
steam generation and effluent treatment.

 The on-machine scanning systems measure and control the standards of the
paper produced on each machine. Every grade of paper is made to conform to
measurements such as moisture, basis weight, coating weight and caliper.

 PLC (Programmable Logic Control) Systems control the stopping, starting, and
speed control of most mill equipment including the speed of, and draw between
each section of the paper machine.
B) Refiners

Refiners often breakdown due to impurity in stock and long run during newsprint
production. These are old and less in number resulting in excess load and power
consumption.
Refiners are the major consumers of power in stock preparation section. It is
possible to save a considerable amount of energy (20-25% savings) by installing
energy efficient refiners. Energy efficient refiners consume very low 'no-load' energy.
'No-load' energy refers to the power consumed by the refiner with pulp stock passing
through the refiner when refiner tackles are moved apart.

The ratio between net refining energy to total refining energy, should be as high as
possible. This should be the selection/sizing criterion for refiners.

C) Centricleaners

Frequent clogging of centricleaners requires lot of attention and till the time these
are addressed to, considerable amount of paper loses it’s quality due to impurity.

There is a good scope for optimizing the power consumption and improving
performance by considering the following points at design stage

• Installation of low pressure drop centricleaners (maximum 15 m drop).

• The operating consistency should be 1% (against the present average
consistency of 0.7%).
• Installation of double dilution system. It gives better control and saves
considerable energy, particularly when machine headbox consistency
requirement is low. A necessity in specialty paper production.

D) Presses

Paper machine is the major steam consumer in a paper mill. The steam consumption
in paper machine area depends mainly on the off-press dryness. The dryness after
press on both the machines at Pudumjee was not more than 40%. There is a scope
for improvement, which should lower steam consumption considerably.

The off-press dryness of 50% can be achieved by extended nip press/shoe press.
Pulp or paper web should not be overdried by evaporation rather it should be dried
maximum by efficient pressing.
E) STEAM----Condensate Removal System

For the time I spent there in Pudumjee, I hardly saw dryer cylinders getting cleaned
for internal scaling. A thick layer of scale decreases rate of heat transfer
considerably, upto 5%.

Proper condensate removal system with the latest design, high speed separation
efficiency, improves the evaporation rate at the paper machine drying section.

The speed of machine for newsprint production is about 30% higher than other
grades at Pudumjee. But margin of profit in newsprint is very low as compared to
specialty grades.

At higher machine speeds, the thickness of the condensate rim dictates the heat
transfer rates for drying. Lower the rim thickness, higher the heat transfer rates and
lower the steam consumption

Breaking the condensate rim by means of spoiler bars can significantly improve
thermal efficiencies in drying. With a good steam and condensate system steam
requirements can be brought down to 1.3 kg steam for every kg water evaporated
from the paper web. This currently is as high as 1.8 kg steam for every kg of water
evaporated.
It is also advised that steam should be used at low pressures-
Advantages-
1. Less radiation loss from dryers
2. Less danger of steam leakage
3. Better quality of paper from low temperature of dryer surface.
F) Improper use of lay-out for storage and carrying of virgin Pulp bales to the pulpers-

As shown in diagram above,

The Pulp bales are stored far away from the pulpers in storage area G1, marked
yellow. Therefore transporting the bales from store to the pulpers it takes-

At least one trip of fork-lift truck for every tonne of pulp

Distance of more than 250m for each trip
3 forklift trucks working round the clock
Lot of diesel
Lot of maintenance
All this could be reduced to 1/5th if storage area G2 and G3 are used for pulp storage
instead of G1. It will also minimize the no. of trucks needed.

It is recommended that a crane be incorporated to transfer the material from G2 and

G3 to the pulpers 4,5,6 and 7.
It will also save a considerable amount of time.
The necessary adjustment of crane is shown in the diagram above, marked with
Blue path.
CONCLUSION

Many of the issues of

1) Low energy eficiency

2) Paper quality
3) Profitability

could be solved if the above mentioned operational deficiencies are

eliminated.
But it requires a huge change!

Change in operations,
Change in mindset of employees,
Change in approach of the owner.

A change comes through new opportunities and ideas. There has to be that change
agent this company needs. A change agent though visible in present,lives in the
future. Unless there is an urgency to find it,the Chairman Mr. M.P. JATIA who bought
this mill about 12 yrs ago when it was performing far better than today, looks to just
Make the HEN hatch GOLDEN EGGs till it’s dead!