Kuantum Papers Ltd (NSE: KUANTUM) Q1 2026 Earnings Call dated Aug. 11, 2025
Corporate Participants:
Unidentified Speaker
Pavan Khaitan — Vice Chairman and Managing Director
Vikram Kumar Khaitan — Chief Financial Officer
Prachi Sharma — Vice President-Corporate Strategy
Analysts:
Unidentified Participant
Nupur Jainkunia — Analyst
Manan Poladia — Analyst
Krushi Parekh — Analyst
Arihant Baid — Analyst
Tanmay Mota — Analyst
Tejas Khandelwal — Analyst
Karan Bhatelia — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Quantum Papers Limited Q1FY26 earnings conference call. As a reminder, all participant lines will be in the lesson only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing then 0 on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Nupur Jayankuniya from Valoram Advisors. Thank you. And over to you ma’ am.
Nupur Jainkunia — Analyst
Thank you. Good afternoon everyone and a very warm welcome to you all. My name is Nupur Jain Kunya from Valorum Advisors. We represent the investor relation of Quantum Papers Ltd. On behalf of the company and I would like to thank you all for participating in the company’s earnings call for the first quarter of financial year 2026. Before we begin, a quick cautionary statement. Some of the statements made in today’s earnings call may be forward looking in nature. Such forward looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated.
Such statements are based on management’s beliefs as well as assumptions made by the information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward looking statements in making any investment decisions. The purpose of today’s conference call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today’s earnings call and hand it over to them for their opening remarks. We have with us Mr. Pawan Keton, Vice Chairman and Managing Director, Mr.
Vikram Ketan, Chief Financial Officer and Ms. Prachi Sharma, VP Corporate Strategy. Without any further delay, I request Mr. Pawan Ketan to give his opening remarks. Thank you. And over to you sir.
Pavan Khaitan — Vice Chairman and Managing Director
Thank you. Good afternoon everyone and welcome to the earnings conference call for the first quarter of the financial year 2026. Let me begin by sharing a few business highlights following which our CFO, Mr. Vikram Ketan will take you through the financials. The domestic paper industry continues to face significant challenges marked by persistently high domestic wood pricing and an influx of competitively priced imports. These pressures have resulted in a visible strain on sales and margins across the sector. Cheaper imports have impacted sales realizations and intensified competition in the domestic market leading to lower net sales realizations.
In response to the sustained industry appeals, the DGTR has recently initiated anti dumping investigations into paperboard imports from Indonesia, signaling potential trade protection measures. Despite these hurdles, we are witnessing a clear acceleration in market preferences. There is a robust growing demand for sustainable recyclable and agro based paper products, particularly in specialty food grade and packaging applications. This evolution aligns with tightening regulations, heightened consumer consciousness around environmental stewardship and a broad based move away from single use plastics. At Quantum, we’ve aligned our long term strategy with these evolving customer needs and paving the path for responsible and purposeful growth.
I’m pleased to update you on our ongoing projects and performance this quarter. Our largest machine at the mill which is Paper Machine 4, was successfully upgraded on 30 June 2025. With the addition of a modern shoe press from Belmer, advanced draining and drying systems, a modified hood and oil heated calendar and upgraded automation, we are poised for a substantial boost in productivity and efficiency. This will also support our diversification into higher value writing, printing and specialty paper grades. We’ve also completed the retrofitting of our recovery boiler in July 2025 including the installation of a two stage causticizer and a new electrostatic precipitator.
This will enhance our chemical recovery efficiency and optimize process performance operationally. Both Paper Machine 1 and Paper Machine 2 posted their highest ever monthly production figures in this Q1 FY26. PM1 reached 1860 metric tons in the month of May and PM2 achieved its mark of 1491 metric tons in June. On the digitalization front, Project nirman, our Industry 4.0 and AI driven transformation is progressing well with stable MAX system performance on key production sections. The phase one implementation for PM4 is ready to launch in Q2, expected to further enhance productivity, consistency and cost efficiency from an environmental and sustainability perspective.
I would like to share that we are now fully compliant with the European Union Deforestation Regulation which is eudr reinforcing our dedication to combating deforestation and promoting the sustainable management of natural resources. Our social farm forestry program has gained traction and we covered almost 1400 additional acres in the quarter, bringing the total area under plantation to 13,870 acres and positively impacting nearly 16,000 local farmers. These achievements and initiatives are in line with our vision and commitment towards sustainability, operational excellence and value creation for all our stakeholders. With that, I would now like our CFO Mr.
Vikram Thetan to walk you through the financial highlights for the quarter.
Vikram Kumar Khaitan — Chief Financial Officer
Thank you sir and good afternoon everyone. Let me share a summary of our financial performance for the first quarter of the financial year 2026 for the quarter under review, our operational income stood at rupees 223 crores reflecting a decline of 20.6% year on year basis and 19.6% on quarter on quarter basis. This was primarily due to planned shutdown of PM4 for its upgradation which reduced production by almost 9,000 tonnes and in turn impacted both revenue and EBITDA margin. EBITDA for the quarter was rupees 40 crores down 43.6% year on year basis. The EBITDA margin stood at 18.1%.
Net profit for the quarter was rupees 12 crore making a decline of 68.3% year on year basis. Weight margins were reported at 5.4%. With this we can now begin the question and answer session.
Questions and Answers:
operator
Thank you very much sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch. Don’t telephone. If you wish to withdraw yourself from the question queue, you may press star. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Manan Poladia from MKP Securities. Please go ahead.
Manan Poladia
Hello. Hi sir. Am I audible?
Pavan Khaitan
Yes, please.
Manan Poladia
Yeah. So my first question is on the lines of the specialty paper thing. So I know that we’re one of the only two larger companies that are in the space and we’re trying to foray into tissue paper and other specialty grids. If you could provide a bit more color on what specific products are we looking to get into and what the competitive landscape is around that. And my second question is on the capex front, if you could provide an update or what sort of timeline we’re looking at for the capex to like get over, that would also be great.
I think that’s my two questions. Thank you.
Pavan Khaitan
Okay, thank you for your questions. I’ll take them up one by one on our specialty foray. We are looking at creating largely flexible grade food wrapping papers and we are getting the rightful which is going to be an offline machine and which is also part of this entire capex that we have planned for ourselves and that is going to come on stream during the currency of the either this year or latest by next financial year. It took a little bit of time finalizing the technology and the machine components because there is a lot to play around with and we have to be careful for our kind of capex that we are intending to incur.
So this is on the specialty front. On the Capex front itself, our total cost is 735 crores out of which till date we have already spent about 400 crores on the capex. This entire capex is going to come on stream by June of 2026. But by March of 2026 which is the end of this financial year, the major upgradations of all our machines which will happen one by one PM4 was already completed in June. All other machines are going to get upgraded. So the next financial year 2627 will see the full force of this entire upgradation and, and the positive impact coming out next year.
Manan Poladia
So just a follow up on the. Specialty paper thing if you could since you’re getting into food grade happy paper. I know there’s one more other company that’s in this but apart from that. If you could explain the competitive landscape a little bit more that would be really great.
Pavan Khaitan
So I think competitive analysis, the environment is positive because the kind of consumer offtake that is going to happen because of the single use plastic ban is going to be quite positive. The demand is going to grow and we are going to see a fair bit of competition coming in with people wanting to invest in this category. At the moment, as you rightly said, there is one big operator, the industry but there are a lot of small time operators who are, who’ve taken single, single machines and buying paper from outside, quoting them and creating the rightful product, how effective they are and how versus us, how effective we will be.
Time will tell. But I am hopeful that with our kind of size and our kind of technical advancements we should be able to fare quite better.
Manan Poladia
Right, thank you.
Pavan Khaitan
Yeah.
operator
Thank you. We have a next question from the line of Khrushi Pari from Virgil Rock, pms. Please go ahead.
Krushi Parekh
Yeah, hi sir. So my first question is that how much of the declining sales and profitability can be attributed to the planned shutdown and is there anything else that you would want to bring out apart from that?
Pavan Khaitan
It’s a good question, Khushi. This shutdown which undoubtedly was planned and it was for a period of almost 25 days as enumerated by our CFO, it led to a reduction of almost 9,000 tons which has greatly impacted the performance of this quarter alone. And we just did an analysis in our board meeting also that had this not happened we would have maintained our ebitda margins at 22% which we recorded even in Q4 of last year. So I may say that EBITDA margins would have been in place. However the sales reduction is on account of a margin variation which is very, very marginal, hardly any variation in sales pricing of this quarter.
So I think the majority of the reduction in sales value and EBITDA is on account of the loss of production due to the planned shutdown.
Krushi Parekh
So can we expect, because we intend to upgrade our machines one by one over this current financial year, so can we expect a similar kind of numbers for next 2, 3, 4 quarters as well?
Pavan Khaitan
No, I wouldn’t say so. As I said, PM4 is our largest machine where our output is almost 300 tons per day. So the impact is more other machines, two machines are about 40 tons each and one machine is 120 tons. So the impact will be much lower and by that time, during the time that they will be shut down, our PM4 is also going to work at a higher capacity.
Krushi Parekh
Okay, I understand. And second thing, this, about this anti dumping investigation that the, that the government is undertaking. How can we understand the stage at which these investigations are and how do we update ourselves in terms of if at all any potential action will come on these imports or not? So I’m just trying to get some sense on how can we measure it, how can we follow it up?
Pavan Khaitan
I’ll let Prachi answer that for me.
Prachi Sharma
So the DGTR has just initiated the investigations particularly into virgin multi layered paper code from Indonesia. So I think this is the beginning of these kind of investigations where the DGTR has taken cognizance of the fact that the domestic industry has been impacted by routing of imports through Indonesia, whether it is from China or other Southeast Asian countries. So right now, since it’s at the inception stage, they’ve just launched it in July. It remains to be seen as to how this progresses and basis this complaint and the Indian Paper Makers Manufacturers Association, ICMA which is following up whether this gets extended to other grades of paper as well because the industry has been talking to the government for protection from these FTAs and also these routings from Southeast Asia.
Krushi Parekh
But any specific timeline that we can benchmark ourselves from the past under such incidences either in the paper industry or. In some another industry that we can work with.
Pavan Khaitan
So normally these things do take its course and time. Nothing can be expected in the in a short while but I think only time will tell since it’s the government who is in control of this entire process and they don’t reveal much. One only gets to know once the process is complete. I understand that we may look at about four to six months for a kind of Some kind of impact to come in. But it could go even up to a year, 12 months or so.
Prachi Sharma
Okay, understand. Thank you so much.
operator
Thank you. A reminder to all participants, if you wish to ask any questions, you may press Star and one on your touch. Don’t telephone anyone willing to ask a question. You may press Star and one. Now we have a next question from the line of Arihant from Bowhead India Fund. Please go ahead.
Arihant Baid
Hi sir. Thanks for taking my question. Sir, I wanted to know. Since the start of this year from April 25, has there been any increase or decrease in paper prices? If you can tell in rough percentage terms.
Pavan Khaitan
So this quarter Q1 we in fact witnessed a slight marginal increase in prices compared to Q4. We were able to increase our prices by about up to 1%, about 0.7.8%. However, in July and August prices have declined up to 7 to 8% from June quarter.
Arihant Baid
Okay sir. And how do you see the outlook in short term like in next three, four months, do you expect them to remain at current levels or do you expect them to increase?
Pavan Khaitan
So normally this Q2 is the lean season of the industry. So this reduction in pricing is on expected lines. We are quite well versed with handling such kind of declines through our own operations and efficiencies. Because on the other side, even raw material input and pricing helps us maintain our margins. In future two things will happen. The printing and publishing industry comes into vigor post Diwali. So. And this, this year Diwali is also earlier on 20th of October. So we will see we will witness a price increase and escalation happening by middle of October or so.
Also this year round the government tenders have opened up much earlier as compared to the previous years. So the moment they have, they are floated and executed that is going to release a lot of pressure from the market side. And the demand and supply situation will get balanced out and that will also help in price stability and with an upward trend.
Arihant Baid
Sir, can you provide some color? Like what led to the decline in July and August paper price by 7 to 8%, a steep decline.
Pavan Khaitan
As I said, this is the lean season. The demand for paper sort of declines a bit because everybody starts preparing for the new education year which is 26, 27 only post Diwali. All the printing happens post Diwali and that’s when the paper industry picks up. So this we consider as normal for the industry. And this trend has we’ve been witnessing for the past many years. Nothing untoward about it.
Arihant Baid
Okay, got it. Thank you sir. And one More question I wanted to ask regarding, you know like the investigation has started for the paper boards category. So any color, whether the investigated regarding investigation on, you know, writing and printing paper, when it will happen or if the government will take that, we are.
Pavan Khaitan
Hopeful because IPMA is representing on behalf of the industry and we are thankful to them that they have taken up the cause for at least investing in investigating into paper boards. Paper can follow next. We are hopeful.
Arihant Baid
How is the competitive intensity been from imports? Has this been like similar to last quarter or has the intensity increased?
Pavan Khaitan
It’s very, very similar. It’s not in Greece. It’s very similar. So it’s nothing, nothing alarming.
Arihant Baid
Okay, thank you sir.
operator
Yeah, thank you. A reminder to all participants, if you wish to ask any questions you may press star and 1. We have our next question from the line of Tanmay Mota from Lucas Investments. Please go ahead. No Tanmay, your voice is quite breaking.
Tanmay Mota
Is it still breaking?
operator
Yes.
Tanmay Mota
Okay. Can you move to a better network area?
Pavan Khaitan
Yeah, one second. Can you hear me now?
Tanmay Mota
Yeah.
Pavan Khaitan
Yes, much better.
Tanmay Mota
Yeah. Hi, sorry for the inconvenience. So I just had two questions. So one was in the lives of sort of global.
Pavan Khaitan
But we are not able to hear you properly. Oh, I think you to rejoin again.
Tanmay Mota
Yeah, I’ll just rejoin.
Pavan Khaitan
Yeah.
operator
Thank you so much. We have a next question from the line of Tejas Kandelwal from Prudent Equity. Please go ahead.
Tejas Khandelwal
Oh yeah. So would you be able to give the capacity expansion for each of our machines and the timeline like the machine 4 contributes highest part of our capacity and how much capacity increased or you have done in machine four, the remaining three or remaining three machines, how much capacity increase is going to be in each machine and the timeline as well. Thank you.
Pavan Khaitan
PM4 we were averaging about 275 tons per day. That will go up to between 315 and 325 tons per day. That also because it depends on the GSM that is being produced on the machine. Lower GSM even at full efficiency will lead to a total overall dipped output. That’s I’m giving a range 315 to 325 tonnes. Our next upgradation will be PM1 which will be in November. That current capacity is 45 tonnes. We are planning to take it up to between 80 and 90 tons per day. Second next will be PM2 in December. Very similar to PM1 from the current about 40, 45 tonnes is going to go up to about 80, 85 tons.
And third PM3 will happen in March of 2026. And from the current levels of about 120 tons per day it will go up to 200 tons plus. I hope that answers your question.
Tejas Khandelwal
Yeah, that answers my question. Thank you.
operator
Thank you, thank you. A reminder to all participants, if you wish to ask any questions you may press star and 1. We have a next question from the line of Karan Bhattelia from Maiq Capital. Please go ahead.
Karan Bhatelia
Hi sir. So my question to you would be can you give a segment wise breakup of the papers you’re manufacturing between writing and printing and specialty?
Pavan Khaitan
So specialty is about 20% of our portfolio and balance will be 80% will be writing and printing grades of various qualities which is maplitho, cream, wove copier and so on and so forth.
Karan Bhatelia
From the 20% is it a split between tissues and the food like the paper cups which you talked about wrapping baby.
Pavan Khaitan
So at the moment we do not make tissue at all. We are sort of manufacturing various specialty grades which goes into very very niche applications like cup stock which you asked for. There is paper bag, there is straw, straw paper and these are base papers which go into multiple applications where we don’t directly make the final product but we give it to converters who convert it into various products of specialty nature. So for instance there is a thermal paper which goes out on which all these bills are printed in these automated machines, in the teller machines.
So we are making the base paper. Then we are making various kinds of colored copier which goes into high end office stationery and sort of has a very, very specific application and use.
Karan Bhatelia
Got it. Now what would be the sales realization per done on this? If you could give a figure for the specialty paper.
Pavan Khaitan
So the sales revenue will be about 3 to 5% higher than writing and printing grades.
Karan Bhatelia
So from the average 70,000 per turn. You mean to say 4% higher on that number? On 70,000?
Pavan Khaitan
Yes please.
Karan Bhatelia
And so going forward, like the capacity expansion we are doing the ratio, the split remains the same between specialty and lighting and building or are we announcing more towards specialty?
Pavan Khaitan
We will be enhancing, as I said, we will be putting and installing a coating plant and that coating plant will help us manufacture further quantities of specialty grades. So I’m expecting our this percentage to go up from 20 to about 30% by the end of next financial year.
Karan Bhatelia
Got it sir. Thank you.
operator
Thank you. A reminder to all participants, if you. Wish to ask any questions you may press star and 1. A reminder to all participants, if you wish to ask any questions you may press star and 1. We have a next question from line off Tanmay Mota from Locust Investments, please go ahead.
Tanmay Mota
Hello, Am I audible?
Pavan Khaitan
Yes Tanmay, please go ahead.
Tanmay Mota
So I had one question on the lines of pulp prices. So I just wanted to know how we are sort of impacted by global pulp prices. And I mean pulp, I mean having bottomed out global, are we impacted with global pulp prices? And I mean if so, then what is the sort of nature we expect in terms of realizations going forward? And secondly, the question was in the lines of raw materials. So I think, you know, a few other wood panel manufacturers mentioned that they expect some wood supply to enter the market this year. So how is that shaping up and what is our sort of expectations on domestic wood prices?
Pavan Khaitan
So Tanmy, great question and this is one answer where I will say I wish I was impacted by wood pricing because they have gone down internationally. Pulp pricing has. Sorry, wood pulp pricing. Wood pulp pricing is currently ruling at about $500 a ton which has gradually come down from a high of $600 plus which maintained during the last year. And even soft, this is hardwood pulp pricing, even soft food is ruling at about five $70 per ton which is fairly lower than what it was ruling earlier. But we are not really impacted favorably because of reduction in these pricing because the usage for us for imported pulp is very, very minuscule.
No more than 3 to 4% of our complete raw material requirement is furnished by imported wood pulp. But going forward, when we are going to be increasing our production output levels, we are looking at increasing and taking in more imported hardwood pulp for our paper making. And that is going to lend both better maintenance quality at reasonable pricing. So that is when the positive impact should come in. And as far as the other question, domestically wood availability, that unfortunately is remaining on a high because there is another sector which is the pulp board sector and the MDF sector which is also a sector which procures all this wood in a large quantity.
So we are facing competition from that sector in terms of wood procurement availability and pricing. So that is where we’ve taken on this social farm forestry measure and initiative in a big way. We’ve already reached about 40 lakh saplings on an annualized basis. And our target is to create 1 crore saplings every year in the next by the end of two years, two to three years from here. And that is going to help generate more availability of wood for us and the industry around us.
Tanmay Mota
Got it. Just a follow up sir. Just to follow up sir, if you can. If it’s okay. So I just wanted to. Hello. Sorry. Yes please. Yeah, Just a follow up, sir. The follow up was mainly that I just want to know if you can sort of quantify the delta. Like for example, example like if you said pulp internationally at $500. So until what price of pulp is the, what’s the, what would be the price of domestic pulp of the same quantity? If you know, say for someone like you who grows it and then uses your own saplings, what would be the delta between your price and the global pulp price? Like until what prices pulse have to fall to sort of, you know, make you buy the global pulse?
Pavan Khaitan
So today at $500, it is a kind of a balanced pricing for both imported hardwood and the pulp that we make from locally procured wood. They will be costing us in a similar range of about 47 to 48,000 rupees per ton. So there is no advantage as of now. However, if domestic pricing starts going up from here, then yes, imported hardwood pulp makes sense and starts getting an advantage. And also the fact that with use of imported pulp our quality is better. So we are able to establish better efficiencies on our machine production. And that helps that delta is though very marginal.
It helps in that additional 0.5 to 1% efficiency on our machines, which comes helpful and comes to our advantage.
Tanmay Mota
Understood sir. Sure.
operator
Thank you. A reminder to all participants, if you wish to ask any questions, you may press Star and one. Now. Anyone willing to ask a question, you may press Star and one. We have a next question from line of Arihant from Bowhead India Fund. Please go ahead.
Arihant Baid
Yeah, hi sir, just wanted to ask on the imported pulp price. So wanted to know like do you expect the price, international pulp prices to fall from this level or remain constant? Do you see any new capacities coming up globally which can further aid in reducing the price any color on that?
Pavan Khaitan
So I think in the near term pricing should not see any kind of variability because at the moment the entire world trade is quite balanced. However, one doesn’t know what will happen with the kind of stance the US government is taking in terms of tariffs. So what has happened is that they have increased tariffs from the closer by countries like Mexico and Brazil. Brazil is a big exporter of wood into US So if they feel the heat by not being able to gain on their sales and markets in US they may be able to divert all those pulp capacities to other parts of the world and that may help in reducing the pricing somewhat.
But that only time will tell because these are country specific decisions. Doesn’t something happen in a short term, long term for the Long term, as you pointed out, there are no fresh capacities that are there which are going to help reduce pricing. Availability and supply is quite matched. And I think for the near term it’s going to remain stable. But as a tendency, I think being the kind of material that it is, it can see an upward trend from Q3, Q4 onwards.
Arihant Baid
Thank you sir.
Pavan Khaitan
Yeah.
operator
Thank you. A reminder to all participants, if you wish to ask any questions, you may press star and 1. We have a next question from the line of Manan Poladia from MKP Securities. Please go ahead.
Manan Poladia
Hi sir, thanks for giving me another opportunity. So my question is on the ASP right now. I think last quarter we had said that it was about 66,000 rupees worth empty and you said that this quarter, whatever it was, and 7, 8% lower in July and August. One that and secondly, if you could also tell me in 2122 when there was a like very big paper cycle and realization that really shot up, what sort of realization were we getting then? Do you think those realizations are possible again? Or that was just a one off because of what a Covid led supply pressures or something of that sort of.
And secondly, sir, on the specialty paper front, I was just wondering if the pricing of specialty paper also fluctuates like printing and writing paper or it’s more or less stable at like a negotiated contract price with the customer. How does that work?
Pavan Khaitan
So I’ll try and answer all your questions one by one. As you rightly said, Q1 of this financial year versus Q4, the prices have remained largely stable. Other than the about 0.7 to 0.8% increase which we were able to effect. And yes, the pricing has come down in this Q2 July, August by about 7 to 8%. And that is largely led by the fact that traditionally this quarter is a lean season for the industry and pricing generally comes down a bit from Q1 and then starts to rise in Q3 and Q4. With respect to specialty paper, the pricing again gets varied according to the base pricing of writing and printing paper.
So if the pricing of writing and printing paper has come down, the pricing of the specialty segment also, though not by the same percentage term, but yes, it will come down also and start showing some kind of impact. But as I said, the margins or the premium on specialty paper may vary from about 1500 tons to about 1500 rupees per ton to about 3000 rupees per ton. That premium and margin is better.
Manan Poladia
But it is affected by rise and fall.
Pavan Khaitan
In paper prices also yes, and I think you also mentioned that 2223 was an exceptional year for the paper industry where we as an industry also averaged about between 85 to 90,000 rupees per tonne. That is the kind of pricing that we were getting. I think these kind of milestones come once in a lifetime. And as you rightly suggested, that was the COVID pressure getting released which led to such a huge increase in the paper industry pricing. We are not likely to witness that kind of surge in pricing. But yes, we can certainly expect it to go up to levels of between 75 to 80,000 in the coming years.
Manan Poladia
Right. And just one more question on the specialty front, like since we’re getting into food grade paper etc. My understanding is that one large competitor that exists has a decent arrangement with some of the large QSR players, right? Just, just trying to get an understanding of where we would look into, break into that market. Smaller QSR players or smaller one to kitchen sort of like things or how would we want to get into that business particularly since they already have a old established over there.
Pavan Khaitan
So we will obviously play out differently because we gained the specialty of serving niche products and niche markets. So since our capacities will be of specialty paper will not be as large as the competition. So we will be looking at creating very, very specific applications, specific products for special needs of our customers. And that is why we will be adopting a very different route and creating a better margin for ourselves.
Manan Poladia
But would scalability. Sorry, please continue.
Pavan Khaitan
Actually what. That’s why we are taking a little bit of more time finalizing that offline coating machine for ourselves. We are going to create much more variability and flexibility in being able to make differential grades of specialty paper and thereby allowing us to serve a very, very differential and a wide variety of customers. And that is going to be our stronger USP and strength.
Manan Poladia
So I like, I completely understand what you’re saying. Just one thing, what I’m trying to understand over here is will that still be scalable domestically or will we have to look towards exports in that case? If we want to scale like very niche lines, I’m assuming the market in India would be a relatively smaller market, right?
Pavan Khaitan
No, we’ve done the dipstick study. The market for these kind of papers is fairly big and so scalability will not be an issue for us. Once we are able to establish this offline quota that we’re going to spend on there, we can easily enhance these capacities one by one in modular form and going for increased market output as and when required. But the Fact is that we are going to make, we are going to be making the base paper ourselves on our individual machines. So please understand that variability comes from not only the base paper which can be created on each of our four machines which means four different kinds of base paper and then the coating heads.
We are going to implement four different coating heads allowing us to make differential varieties of coated specialty papers.
Manan Poladia
Right sir, thank you so much.
operator
Thank you, thank you. We have a follow up question from the line of Tanma Mohta from Lucas Capital Locus Investment. Please go ahead.
Tanmay Mota
Hi sir, you can hear me?
Pavan Khaitan
Yes please.
Tanmay Mota
Yeah, so I just wanted to ask two questions. One was regarding, you know, the packaging sort of industry. So I mean given in on the industry level, packaging seems to be one of the high growth areas. So any expectations of, you know, packaging segment in any way in, you know, corrugation etc. And the second question was on the line of the tissue capex. So I think there’s some capacity which has come up in western India in tissue and you know there’s a lot of capacity coming up in south. So you know, I just wanted to understand, you know, how is the sort of demand supply going to go forward in tissue? Is there that much demand for so much new capacity to be absorbed?
Pavan Khaitan
Yeah, so packaging grades is something again because of the kind of specialization that is getting catered to, the kind of demand that is coming in from qcom, E Com and everything. Packaging is seeing an uptrend and the market no doubt in future is going to play out favorably for the packaging grade of again specific grade, specific applications and specialty segments. Similar is the case in tissue as well. Tissue in fact is growing at the fastest pace of about 20% annual growth. And yes, it is getting established very clearly as a dominant product in the industry largely because base of this segment, particular segment is very, very low and giving us quite a big enough space for people to get into and make business sense out of it.
Tanmay Mota
Okay, so just a follow up. Do we plan on entering this packaging sort of grade of paper or as of now there’s no plan, no, sorry.
Pavan Khaitan
Packaging is not something that we’re looking at at all other than the flexible packaging grades that we can make from our writing and I mean it’s called graphic papers. So we are able to make graphic papers on our machines and whatever flexible packaging that can be created from a mix of our graphic papers with the coating plant that we are investing in, that is what we are going to enter. Not the normal packaging of the craft varieties that one knows of and on the tissue side. Yes, there is a future plan to go into tissue manufacturing at some point of time.
Tanmay Mota
Okay. And sir, last question from my end. Like just wanted to understand the sort of. Sort of geo breakup like given I think paper cannot be transported very long distances. Do you plan on going towards the central or south Indian market? Or as of now your focus is primarily on the northern.
Pavan Khaitan
No, we are already available all across the country. Though 40% of our production does get sold in the northern market. And that is close to in and around Delhi. And we have a locational advantage there. And also because Delhi market happens to be the largest market for printers and publishers and paper consumption in India happens in the most volume in around Delhi. But we are already present in the western, southern and eastern sectors of India even today and for the last so many years. Got it.
Tanmay Mota
Thank you so much. Wishing you all the best.
Pavan Khaitan
Thank you.
operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Pavan Khaitan
Thank you. Thank you all for participating in this earnings conference call. I hope we were able to answer your questions satisfactorily and at the same time offer insights into our business. If you have any further questions or would like to know more about the company, please reach out to our investor relation managers at Valorum Advisors. Thank you. And wishing you all a great day ahead.
operator
Thank you sir. On behalf of Quantum Papers Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines.