Debt free! Andhra Paper in focus as SBI MF, Damani take stakes

Mumbai: Interest in Andhra Paper, a debt-free company with a strong balance sheet, has spiked after market purchases by big investors like Radhakishan Damani and SBI Mutual Fund, the country’s largest fund house.

While Damani bought over 1 per cent last Friday, SBI MF acquired nearly 8 per cent on June 25. Shares of Andhra Paper were locked in 20 per cent upper circuit at Rs 254 on Monday, but they are still 44 per cent below the 52-week high of 452.

Andhra Paper reported earnings per share of Rs 53 for the year ended March 2020 and the stock is available at a PE of 4.6. It has grown its profit by 47.11 per cent over the last five years and its return on equity of 30 per cent. It has Rs 171 crore in cash and Rs 936 crore in reserves as on FY20. Promoters hold about 82 per cent of its equity.

But some analysts warn that the fortunes of the paper industry are bleak now. “Due to sharp correction in global pulp prices, postponement of school and college terms due to Covid-19 outbreak and logistical issues, the domestic paper industry has witnessed huge downward pressure on net sales,” said Archana Gude, analyst, IDBI Capital.