TNPL outlook revised to stable amid profitability challenges

CARE Ratings has reaffirmed the 'CARE A; Stable' rating for TNPL's long-term bank facilities and 'CARE A1' for short-term facilities, but revised the outlook to Stable from Positive. This change reflects the company's performance in fiscal year 2025, which saw a decline in total operating income and a sharp contraction in profitability. In Q1FY26, TNPL reported a net loss, highlighting continued pressure on margins.

The company's capital structure remains moderately leveraged, with an overall gearing of 1.12x as of March 31, 2025. Debt protection metrics deteriorated in FY25, with TD/PBILDT increasing from 3.03x in FY24 to 5.26x in FY25, and interest coverage ratio decreasing from 3.48x to 2.06x. TNPL's liquidity is deemed adequate, supported by financial flexibility and expected cash accruals of ₹430-₹460 crore in FY26 and FY27 against significant repayment obligations.

Future expectations for improved sales in FY26, driven by favorable demand-supply dynamics and a new minimum import price policy on virgin multi-layer paperboard, underpin the stable outlook. TNPL has planned major debt-funded capital expenditure of over ₹600 crore in the next two years for a tissue paper machine and steam and power system revamping.