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Directors Report of Mysore Paper Mills Ltd.

Mar 31, 2014

Dear Members,

1. The Directors wish to present the 79th Annual Report together with Audited Accounts of the Company for the year ended 31st March, 2014.

2. OPERATIONAL RESULTS:

The operational results for the year under review are as follows:

FY 2013-14 FY 2012-13 % Change

I PRODUCTION (Qty. in MT)

Writing & Printing Paper 38052 40960 -7.10

Newsprint 38902 45450 -14.41

TOTAL 76954 86410 -10.94

Sugar 24675 17179 43.63

II SALES (Qty. in MT)

Writing & Printing Paper 35515 45927 -22.67

Newsprint 35316 47208 -25.19

TOTAL 70831 93135 -23.95

Sugar 24354 17797 36.84

III TURNOVER (Rs. in Lakhs)

Writing & Printing Paper 18581 20772 -10.55

Newsprint 12990 15468 -16.02

TOTAL 31571 36240 -12.88

Sugar 7306 5105 43.11

Molasses 828 353 134.56

TOTAL TURNOVER 39705 41698 -4.78

IV OPERATING PROFIT /(LOSS) (Rs. in lakhs) (profit before interest and depreciation) (3516) (3770)

V CASH PROFIT/LOSS (Rs. in lakhs) (profit after interest & before depreciation) (6768) (6635)

V NET PROFIT (Rs. in Lakhs) (7816) (7689)

Production Performance:

It may be noticed from the above that the production of WPP has decreased by 7.10% from the level 40960 MT to 38052 MT i.e. down by 2908 MT. The quantity wise sale of WPP has also been decreased by 22.67 % from the level 45927 MT to 35515 MT i.e. down by 10412 MT. The production of NP has been decreased by 14.41 % from the level 45450 MT to 38902 MT i.e. up by 6548 MT. The quantity wise sale of NP has also been decreased by 25.19% from the level 47208 MT to 35316 MT i.e. down by 11892 MT. The production of paper was decreased by 10.94% from the level of 86410 MT in FY 2013 to 76954 MT in FY 2014 i.e., down by 9456 MT. Reduction in sale of paper in quantity from the level of 93135 MT to 70831 MT down by 23.95% i.e less by 22304 MT and the turnover from Rs 36240 lacs to Rs 31571 lacs less by Rs.4669 lacs.

The production of sugar has gone up by 43.63% due to increase in cane crushing activity from the level of 182414.67 MT (recovery of 9.28 %) in FY 2013 to 253854.34 MT (recovery of 9.28 %) in FY 2014. There is an increase in sale of sugar by 36.84 %. The increase in turnover by 49% due to increase in quantity wise sales and there is a decrease in net sales realisation of sugar from Rs 29214/MT to Rs.29034 /MT i.e. down by Rs.180/MT. The turnover from Sugar Division was Rs. 81.34 Crore compared to Rs. 54.58 Crore in the previous year i.e. up by 49%. The total turnover of 2013- 14 has been decreased by Rs 19.93 Crores from the level Rs 416.98 crores to Rs 397.05 crores i.e. down by 4.78%.

The Company has incurred operating loss, Cash loss and Net loss of Rs. 35.16 Crores, Rs.67.68 Crores and Rs. 78.16 Crores compared to previous year losses of Rs. 37.70 Crores, Rs.66.35 Crores and Rs.76.89 Crores respectively.

The accumulated losses at the end of 31.03.2014 stood at Rs.425.94 Crores with that entire net worth of Rs 287.09. crores (including GOK loan of Rs 101.02 crores converted in to equity in 2011-12 and infusion fresh equity of Rs 5.00 Crores in 2011-12, Rs.20 crores in 2012-13 & Rs.40 crores in 2013-14 and Conversion of Guarantee Commission payable upto 31.03.2013 amounting to Rs. 2.18 Crores in 2012-13) has been eroded. The company has been registered as sick company as case no 601/2012 with BIFR, the revival scheme has been submitted by M/s Deloitte and same with Board views sent to Government for its perusal and advice.

STATUS OF BIFR:

The company has been registered as sick company as case No. 601/2012 with BIFR. The draft revival scheme prepared by M/s. Deloitte Touche Tohmatsu India Pvt. Limited have been submitted to Government of Karnataka being the promoter of the Company for their review and comments. The same has also been submitted to the State Bank of Mysore, Ambedkar Veedhi Branch, Bengaluru, the Operating Agency appointed by BIFR for their review and comments.

3. MANAGEMENT DISCUSSION & ANALYSIS:

Segment wise analysis and operational performance of each of the business segments have been comprehensively covered in the Management Discussion & Analysis which forms part of this Directors'' Report.

4. CASH FLOW ANALYSIS:

In conformity with the provisions of the Listing Agreement, the cash flow statement for the year ended 31st March, 2014 is included in the annual accounts.

5. CAPTIVE FORESTRY:

The Forest Wing has supplied 201195 M.T. of pulpwood by harvesting about 2486 hectares of captive plantations during 2013-14.

The lease of forest land will be expiring in the year 2020-21 wherein the plantation crop to be raised in 2014-15 would be the last rotation of crop and till then the management plan has been approved by the Ministry of Environment and Forests, Government of India. The Management plan for a period from 2015-16 to 2020-21 need to be submitted to Govt. of India for approval.

The lease rentals from 1991-92 to 2000-2001 and from 2001-02 to 2009-10 are settled with the Government and from 2010-11 to 2013-14 the lease rent is yet to be paid, which is calculated as Rs.786 lakhs.

Totally 3700.30 ha. of harvested plantation areas were regenerated by replanting/coppicing with species like Acacia hybrid (1199.95 ha.), Eucalyptus pellita (257.65 ha.) and Eucalyptus camaldulensis (2242.70 ha.)

The Farm Forestry programme is continued by selling about 7.00 lakhs seedlings and by entering in to a buy-back agreement with farmers on a plain paper wherever they have availed seedlings in the programme. The Gate purchase of pulpwood is being continued and totally 2209.540 MT was procured @ Rs. 3,683/- per MT.

The programme of raising large scale clonal plants of Eucalyptus species in dry-zone nurseries has been continued which will double the present yield from average 30 MT/ha. to over 60 MT/ ha. Where about 1/3 of the captive plantations are located in dry-zone. The achievement with clonal plantations of Acacia hybrid in wet zone is already with an average yield on 100 M.T./Ha.

The average weighted cost of Acacia and Eucalyptus pulpwood obtained from captive plantations works out to Rs. 2,127/- per tonne as against Rs. 5,288/- per tonne paid to M/s KFDC and M/s KSFIC. Thus Rs.6359.78 lakhs plus tax were saved by obtaining 201195 M.T. pulpwood from captive plantations and also which has minimized the consumption of chemicals and maximized the yield of pulp to fabricate the paper. During 2013-14, 105472 M.T. of Acacia wood was supplied from captive plantations which has helped in minimizing the consumption of chemicals worth over Rs.62.55 lakhs. Hence captive forestry was responsible for saving a total sum of Rs.6422.33 lakhs during 2013-14.

6. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE OUTGO:

Information under Section 134 of the Companies Act, 2013, read with Rule 2 of the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 are furnished at ANNEXURE - I, which form part of this report.

7. INDUSTRIAL RELATIONS:

The overall industrial relations were cordial during the year under review.

8. DIRECTORS:

Sri S Parameswarappa, IFS(Retd.), Director retires by rotation. The said vacancy will be filled up soon as per the Companies Act 2013.

Sri. M Lakshminarayana, IAS, Director retires by rotation. The said vacancy will be filled up soon as per the Companies Act 2013.

9. Apart from the above, the following changes amongst Directors have also taken place during the year under review:

Smt. K Ratna Prabha, IAS: Pursuant to the powers conferred under the Articles of Association of the Company, the Government of Karnataka nominated Smt. K Ratna Prabha, IAS, Additional Chief Secretary to GOK, Commerce & Industries Department, GoK as Director in place of Sri M. N Vidyashankar, IAS & subsequently Chairperson in place of Sri. Umesh, vide Govt. Notification No.CI 49 CMI 2014(8) dated 22.03.2014 & CI-61-CMI-2014 dated 10.06.2014 respectively.

Sri. Naveen Raj Singh, IAS : Sri. Naveen Raj Singh, IAS was nominated as Managing Director of the Company by the Government of Karnataka in exercise of the powers conferred under Articles of Association of the Company in place of Sri. M Maheshwar Rao, IAS vide Govt. Notification No. DPAR 749 sas 2014 dated 3.9.2014. He assumed charge on 08th September, 2014 as Managing Director.

10. DIRECTORS'' RESPONSIBILITY STATEMENT: Pursuant to the requirement under Section-134 of the Companies Act, 2013, with respect to Directors'' Responsibility Statement, it is hereby confirmed that:

The applicable accounting standards have been followed scrupulously, along with proper explanation relating to material departures, if any;

a) The selected accounting policies were applied consistently, and judgements and estimates that are reasonable and prudent were made, so as to give a true and fair view of the state of financial affairs of the Company at the end of the financial year;

b) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;

c) The annual accounts were prepared for the financial year ended 31st March, 2014 on a going concern basis.

11. AUDITORS:

a) As per Section 140 of the Companies Act, 2013, the Government of India, Ministry of Corporate Affairs, appointed M/s. M N S & Co., Chartered Accountants, Bengaluru, as Statutory Auditors of the Company for the year ended 31.03.2014.

b) M/s. K.P.R. & Associates, Cost Accountants, Bengaluru, were appointed as Cost Auditors of the Company for the year 2013-14 by the Board, and the approval to this effect has also been received from the Government of India.

12. PARTICULARS OF EMPLOYEES:

None of the employees of the Company have drawn salary of Rs.24 lakhs or more per annum/Rs.2 lakhs or more per month during the year. Therefore, the particulars of employees as required under Section 134 of the Companies Act, 2013, are not furnished.

13. CORPORATE GOVERNANCE:

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a report on Corporate Governance together with Management Discussion & Analysis Report is enclosed herewith, which forms part of the Directors'' Report. A Certificate from the Auditor regarding compliance of Corporate Governance, as stipulated by clause 49 of the Listing Agreement, is attached to this report.

14. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA:

The comments by the Comptroller and Auditor General of India on the Accounts for the year ended 31.03.2014 are attached to the report as ANNEXURE - II.

15. ACKNOWLEDGEMENT:

Your Directors are pleased to acknowledge the dedicated efforts of all the employees and place on record their appreciation of the valuable contribution made by them during the year 2013- 2014. Your Directors also thank the sugarcane growers for the supply of sugarcane. Your Directors place on record their appreciation for the assistance, support and guidance extended to the Company by the Government of Karnataka through the Departments of Commerce and Industries, Finance, Forest, Environment & Ecology, KPTCL, MESCOM, Directorate of Sugar, and by the Statutory Bodies and Financial Institutions, Karnataka State Pollution Control board & IFCI and Banks. Your Directors also thank the Government of India, Ministry of Corporate Affairs and its various departments, Statutory Auditors, Comptroller of Accounts & Audit, Registrar for Newspapers, Ministry of Railways, Department of Coal, etc., for their continued support to the Company.

for and on behalf of the Board

BENGALURU (NAVEEN RAJ SINGH) (C. SHIVASHANKAR) DATE: 18.11.2014 MANAGING DIRECTOR DIRECTOR


Mar 31, 2013

To the Members,

1. The Directors wish to present the 78th Annual Report together with Audited Accounts of the Company for the year ended 31st March, 2013.

2. OPERATIONAL RESULTS :

The operational results for the year under review are as follows:

FY 2012-13 FY 2011-12 % Change

I PRODUCTION (Qty.in MT)

Writing & Printing Paper 40960 43983 -6.87

Newsprint 45450 40299 12.78

TOTAL - Paper 86410 84282 2.52

Sugar 17179 26198 -34.43

II SALES (Qty. in MT)

Writing & Printing Paper 45927 39573 16.06

Newsprint 47208 39102 20.73

TOTAL - Paper 93135 78675 18.38

Sugar 16926 21971 -22.96

III TURNOVER (Rs. in Lakhs)

Writing & Printing Paper 20772 18386 12.97

Newsprint 15468 12335 25.40

TOTAL - Paper 36240 30721 17.96

Sugar 5105 5887 -13.29

Molasses 353 732 -51.78

TOTAL TURNOVER 41698 37340 11.67

IV OPERATING PROFIT / (- LOSS)

(Rs. in lakhs)

(profit before interest and depreciation) -3770 -3101

V CASH PROFIT / (- LOSS) (Rs.in lakhs)

(profit after interest & before depreciation ) -6635 -6649

VI NET PROFIT / (- LOSS) (Rs. in Lakhs) -7689 -7686

Production Performance:

It may be noticed from the above that during the year under review the production of WPP has decreased by 6.87 % from the level of 43983 MT to 40960 MT i.e, down by 3023 MT. The quantity wise sale of WPP has increased by 16.06 % from the level of 39573 MT to 45927 MT i.e, up by 6354 MT. The production of NP has increased by 12.78 % from the level of 40299 MT to 45450 MT i.e, up by 5151 MT. The quantity wise sale of NP has also increased by 20.73% from the level of 39102 MT to 47208 MT i.e, up by 8106 MT. The marginal improvement in production of paper is 2.52 % from the level of 84282 MT in FY 2012 to 86410 MT in FY 2013 i.e, up by 2128 MT. Improvement in sale of paper in quantity from the level of 78675 MT to 93135 MT up by 18.38 % i.e, up by 14460 MT and the turnover from Rs 30721 lacs to Rs 36240 lacs up by Rs.5519 lacs. The production of sugar has gone down by 34.43% due to decrease in cane crushing activity from the level of 269549 MT(recovery of 9.57 %) in FY 2012 to 182415 MT (recovery of 9.26 %) in FY 2013. There is a substantial reduction in quantity wise sale of sugar by 22.96 %. The decrease in turnover by 13.29% due to decrease in quantity wise sales and some improvement due to improvement in average selling price of sugar from Rs 26539/MT to Rs 29214/MT i.e, up by Rs 2675/MT. The turnover from Sugar Division was Rs.54.58 Crores compared to Rs. 66.19 Crores in the previous year i.e, less by 17.54 %.

The total turnover of 2012-13 has been increased by Rs 43.58 Crores from the level of Rs 373.40 crores to Rs 416.98 crores i.e, up by 11.67 %.

During the year, the Company has incurred operating loss, Cash loss and Net loss of Rs. 37.70 Crores, Rs.66.35 Crores and Rs.76.89 Crores compared to previous year losses of Rs.31.01 Crores, Rs. 66.49 Crores and Rs. 76.86 Crores respectively.

The accumulated losses at the end of 31.03.2013 stood at Rs.347.78 Crores with that entire net worth of Rs 227.16 crores (including GOK loan of Rs 101.02 crores converted in to equity in 2011-12 and infusion fresh equity of Rs 5.00 Crores in 2011-12 and Conversion of Guarantee Commission payable upto 31.03.2012 amounting to Rs.2.18 Crores in 2012-13) has been eroded.

STATUS OF BIFR

The company has been registered as sick company as case no 601/2012 with BIFR, the revival scheme is under preparation by M/s Deloitte Touche Tohmatsu India Pvt. Limited.

1. PROJECTS:

The following projects and energy conservation measures are taken up during FY 2012-13

A. Energy Conservation Measures :

The Management has adopted systematic Energy Management plan with focus on reducing energy cost/consumption. Last year MESCOM has introduced differential tariff system using the TIME OF THE DAY concept. Accordingly, we are trying to reduce grid power usage during peak hours (6pm-10pm) and avail more grid power during night time (10 pm – 6 am). Last year, the Bureau of Energy Efficiency (BEE), New Delhi has introduced PAT.(Perform Achieve and Trade) scheme and we have to comply with it. Since the company is referred to BIFR and unable to invest on large energy savings schemes, we have appealed to BEE to exempt us from above mentioned scheme till the mill is rehabilitated.

Last year, we engaged M/s MITCON - PUNE to conduct detailed Thermal Energy Audit of the company. They have submitted draft final report. Based on findings of the report schemes with minimum investment are being taken up for implementation.

Schemes finalized for implementation are:

- In Sugar Mill vapor line juice heater is being introduced to reduce the energy consumption.

- Modification in coal handling plant to separate fines and feed to CFBC boiler.

B. Lime Sludge Re-burning Kiln :

The Company has taken up installation of Rotary Lime Kiln Project in order to meet the stringent environmental norms costing Rs.35 crores. The civil works for installation of Lime Sludge Re-burning Kiln is under progress. Around 78% of the civil works have been completed. Around 75% of the plant and machinery have been received at MPM site.

2. MANAGEMENT DISCUSSION & ANALYSIS:

Segmentwise analysis and operational performance of each of the business segments have been comprehensively covered in the Management Discussion & Analysis which forms part of this Directors'' Report.

3. CASH FLOW ANALYSIS:

In conformity with the provisions of the Listing Agreement, the cash flow statement for the year ended 31st March, 2013 is included in the annual accounts.

4. CAPTIVE FORESTRY:

The Forest Wing has supplied 194596 M.T. of pulpwood by harvesting about 2986 hectares of captive plantations during 2012-13.

The Public Interest Litigation in Hon''ble High Court in W.P. No.14644/1998 was heard for final hearing and the writ petition was dismissed in favour of MPM. However, the Hon''ble High Court has directed MPM to adhere to the conditions stipulated in the Management plan approved by the Ministry of Environment and Forests, Govt. of India as per the Forest Conservation Act 1980. The lease of forest land will be expiring in the year 2020-21 where in the plantation crop to be raised in 2014-15 would be the last rotation of crop and till then the management plan has been approved by the Ministry of Environment and Forests, Govt. of India. The Management plan for a period from 2015-16 to 2020-21 need to be submitted to Govt. of India for approval.

The lease rentals from 1991-92 to 2000-2001 and from 2001-02 to 2009-10 are settled with the Government and from 2010-11 to 2012-13 the lease rent is yet to be paid, which works out to Rs.529 lakhs.

Totally 2994.65 ha. of harvested plantation areas were regenerated by replanting/coppicing with species like Acacia hybrid (1231.45 ha.), Eucalyptus pellita (255.95 ha.) and Eucalyptus camaldulensis (1507.25 ha.).

The Form Forestry programme is continued by selling about 5.52 lakhs seedlings and by entering into a buy-back agreement with farmers on a plain paper wherever they have availed seedlings in the programme. The Gate purchase of pulpwood is being continued and totally 3159 MT was procured @ Rs.3,250/- per MT. during 2012-13

The programme of raising large scale clonal plants of Eucalyptus species in dry-zone nurseries has been continued which will double the present yield from average 30 MT/ha. to over 60 MT/ha. Where about 1/3 of the captive plantations are located in dry-zone. The achievement with clonal plantations of Acacia hybrid in wet zone is already with an average yield of 100 MT./ha. The average weighted cost of Acacia and Eucalyptus pulpwood obtained from captive plantations works out to Rs.1,701/- per tonne as against Rs.4,025/- per tonne paid to M/s. KFDC and M/s. KSFIC. Thus Rs.4522.50 lakhs plus tax were saved by obtaining 194596 MT. pulpwood from captive plantations and also which has minimized the consumption of chemicals and maximized the yield of pulp to fabricate the paper. During 2012-13, 96100 MT. of Acacia wood was supplied from captive plantations which has helped in minimizing the consumption of chemicals worth over Rs.57.00 lakhs. Hence captive forestry was helped in saving a total sum of Rs.4579.50 lakhs during 2012-13.

5. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE OUTGO:

Information under Section 217(1)(e) of the Companies Act, 1956, read with Rule 2 of the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 are furnished at ANNEXURE - I, which form part of this report.

6. INDUSTRIAL RELATIONS:

The overall industrial relations were cordial during the year under review.

7. FIXED DEPOSITS :

The Company''s Fixed Deposits at the end of the year stood at NIL (Rs.1313 lakhs in the previous year).

8. DIRECTORS :

Sri C Shivashankar, Director of the Company retire by rotation and is eligible for reappointment at the Annual General Meeting.

Sri. C.B. Patil Okaly, Director of the Company, retire by rotation and is eligible for reappointment at the Annual General Meeting.

Apart from the above, the following changes amongst Directors have also taken place during the year under review :

Sri. Kaushik Mukherjee, IAS: Pursuant to the powers conferred under the Articles of Association of the Company, the Government of Karnataka nominated Sri. Kaushik Mukherjee, IAS, ACS to GOK, as Director & also the Chairman of the Company in place of Sri Araga Jnanendra, Ex-MLA, vide Govt. Notification No.CI-45 CMI-2013 dated 06.06.2013 & he held the office upto 6.11.2013.

Sri. L.V. Nagarajan, IAS: Pursuant to the powers conferred under the Articles of Association of the Company, the Government of Karnataka nominated Sri. L.V. Nagarajan, IAS, ACS & Chairman, KUIDFC, as Director & also the Chairman of the Company in place of Sri. Kaushik Mukherjee, IAS, vide Govt. Notification No.CI-86 CPM-2013 dated 06.11.2013 & he held the office upto 5.12.2013.

Sri. V Umesh, IAS: Pursuant to the powers conferred under the Articles of Association of the Company, the Government of Karnataka nominated Sri. V. Umesh, IAS, ACS to GOK, as Director & also the Chairman of the Company in place of Sri. L.V. Nagarajan, IAS, vide Govt. Notification No.CI-86 CPM-2013 dated 05.12.2013.

Sri. M Maheshwar Rao, IAS: Sri. M Maheshwar Rao, IAS, was nominated as Addnl. Director of the Company by the Government of Karnataka in exercise of the powers conferred under Articles of Association of the Company vide Govt. communication No.CI-45-CMI-2013 dated 06.06.2013. Subsequently he was appointed as a nomine director of GOK vide DPAR 591 SAS 2013 Dated 13 Nov 2013. He is currently holding charge of Managing Director of the Company.

Sri. Arvind Shrivastava, IAS: Sri. Arvind Shrivastava, IAS, was nominated as a Director of the Company by the Government of Karnataka in exercise of the powers conferred under Articles of Association of the Company in place of Sri. Ajay Seth, IAS, vide Govt. communication No.CI-50-CPM-2013 dated 25.06.2013.

Sri. Vinay C Sekar: Sri Vinay C Sekar has been nominated as a Director of the Company by IFCI Ltd., in place of Sri. P.V. Srinivas, with effect from 10.07.2013. He is the Non-executive Chairman of M/s. Parijatha Business Solution Pvt. Ltd., Bangalore.

Sri. V. C. Rammohan: Sri V.C. Rammohan has been nominated as a Director of the Company by IFCI Ltd., in place of Sri. Vinay C Sekar, with effect from 17.09.2013. He is the Director of M/s. Madhuben Infra Units & M/s. NSL Tideng Power Generation (P) Ltd.

DIRECTORS'' RESPONSIBILITY STATEMENT : Pursuant to the requirement under Section-217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed that :

The applicable accounting standards have been followed scrupulously, along with proper explanation relating to material departures, if any;

a) The selected accounting policies were applied consistently, and judgements and estimates that are reasonable and prudent were made, so as to give a true and fair view of the state of financial affairs of the Company at the end of the financial year;

b) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;

c) The annual accounts were prepared for the financial year ended 31st March, 2013 on a going concern basis.

1. AUDITORS :

a. As per Section 619(2) of the Companies Act, 1956, the Government of India, Ministry of Corporate Affairs, appointed M/s. M N S & Co., Chartered Accountants, Bangalore, as Statutory Auditors of the Company for the year ended 31.03.2013.

b. M/s. K.P.R. & Associates, Cost Accountants, Bangalore, were appointed as Cost Auditors of the Company for the year 2012-13 by the Board, and the approval to this effect has also been received from the Government of India.

2. PARTICULARS OF EMPLOYEES :

None of the employees of the Company have drawn salary of Rs.24 lakhs or more per annum/ Rs.2 lakhs or more per month during the year. Therefore, the particulars of employees as required under Section 217(2A) of the Companies Act, 1956, are not furnished.

3. CORPORATE GOVERNANCE :

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a report on Corporate Governance together with Management Discussion & Analysis Report is enclosed herewith, which forms part of the Directors'' Report. A Certificate from the Auditor regarding compliance of Corporate Governance, as stipulated by clause 49 of the Listing Agreement, is attached to this report.

4. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA :

The comments by the Comptroller and Auditor General of India on the Accounts for the year ended 31.03.2013 are attached to the report at

5. ACKNOWLEDGEMENT :

Your Directors are pleased to acknowledge the dedicated efforts of all the employees and place on record their appreciation of the valuable contribution made by them during the year 2012-2013. Your Directors also thank the sugarcane growers for the supply of sugarcane. Your Directors place on record their appreciation for the assistance, support and guidance extended to the Company by the Government of Karnataka through the Departments of Commerce and Industries, Finance, Forest, Environment & Ecology, KPTCL, MESCOM, Directorate of Sugar, and by the Statutory Bodies and Financial Institutions, Karnataka State Pollution Control board & IFCI and Banks. Your Directors also thank the Government of India, Ministry of Corporate Affairs and its various departments, Controller of Accounts & Audit, Registrar for Newspapers, Ministry of Railways, Department of Coal, etc., for their continued support to the Company.

for and on behalf of the Board

BANGALORE (M MAHESHWARA RAO) (C. SHIVASHANKAR)

DATE: 20.12.2013 MANAGING DIRECTOR DIRECTOR


Mar 31, 2010

The Directors wish to present the 75lh Annual Report together with Audited Accounts of the Company for the year ended 31st March, 2010.

FINANCIAL RESULTS :

The financial results for the year under review are as follows:

(Rs. in Lakhs)

31 -03-2010 31-03-2009

Year ended Year ended

31.3.2010 31.3.2010

Sales 33743 42490

Profit/ Loss (-) before interest, -5004 4504

Depreciation & Taxation (PBIDC) 1709 1864

interest 1010 995

Depreciation 12

Taxation, Fringe Benefit tax -7723 1633

Net Profit/Loss (-) for the year -3202 -483

Balance of Profit/Loss (-) brought forward from previous year -10925 -3202





3.OPERATIONS & PROFITABILITY:

FY 2008-09 FY 2009-10 % Change

I PRODUCTION (Qty.in MT)

Writing & Printing Paper 32604 46833 43.64

Newsprint 76667 34246 -55.33

TOTAL 109271 81079 -25.80

Sugar 21651 8020 -62.96



It may be seen from the above that the production of WPP was increased by 43.64%, whereas newsprint was reduced by 55.33% which was due to planned reduction in production, as the selling price was not encouraging to produce and sell more newsprint. Similarly, the production of sugar was reduced by 62.96% due to non availability of sugarcane coupled with low recovery of 8.54% as against 8.97% in the previous year which resulted in shortage of bagasse which in turn reduced chemical bagasse pulp production. The overall turnover of the Company during the year under review was in the region of Rs.337.43 crores as against Rs.424.91 crores i.e. reduction of 21%.

The production of Newsprint witnessed adverse market thereby forcing Newsprint machine to stop so as to avoid build up of unsold stock of inventory. Domestically, the trend in usage of Newsprint is towards 45 gsm whereas most of our Newsprint production is in 49 gsm. Though MPM can produce 45 gsm Newsprint, we need more imported / chemical pulp. The cost of pulp furnish make it uneconomical under prevailing Newsprint market condition. However, to improve the sustainability of operation and porofitability, the company successfully introduced value added products viz., Cream Wove Elegant, MPM copier paper and MPM Note Books. These products were produced on the Paper Machine - 4. The Company have also tried new process called AKD sizing in the manufacture of writing and printing paper which has improved the quaky of paper.

During the year, the Company had incurred an operating loss, cash loss and net loss of Rs.48.24 crores, Rs.65.33 crores and Rs.77.23 crores respectively as against the profit of Rs.45.04 crores, Rs.26.40 crores and Rs.16.33 crores in the previous year. The cash loss of Rs.65.33 crores was mainly an account of increase in the variable cost of production of both WPP and newsprint by Rs.5784/- MT and Rs.429/- per MT respectively, which was due to increase in the input cost viz., imported pulp, chemicals, power and fuel and usage of more indigeneous pulp purchased at higher price.

The net loss of Rs.77.23 crores with carried forward loss of Rs. 32.02 crores (accumulated to Rs.109.25 crores) has exceeded the threshold limit of 50% of networth, thereby, the company has become a potentially Sick Industrial Company and as per the statutory provisions, the company is required to make reference to the Board for Industrial & Financial Reconstruction (BIFR).

In its relentless effort to bring down the cost of production and improve the quality, certain small investment projects were8completed viz., New Blow Heat Recovery & Screening System in C P M - 2, Air Preheaters in AFBC Boilers and Cooling Tower in Evaporator. In order to improve the customer satisfaction and environmental image, the company is implementing Integrated Management System (I M S) consisting of ISO 9001 and 14001 series of standards.

While finalizing the provisional accounts for the quarter ended 31.03.2010 the company had recognized the estimated value of standing crop to the extent of Rs.48.00crores on 16,000hectors of captive plantation, at net realizable value as per clause 1 (d) of Accounting Standard 2 Valuation of Inventories. Hither to the standing crop was valued at cost based total expenditure incurred/ allocated to the year of plantation and the total quantity of yield obtained/expected from respective year of crop matured but not cut. The value of standing crop upto seven years was not recognized in the books as inventory (work in progress), the change in method of valuation was also in anticipation of implementation of IFRS (International Financial Reporting Standards) which was subsequently deferred till 2013. Hence the Books of Accounts and Financial Statements as on 31.03.2010 were finalized as per Accounting Policy 1.02, while doing so the opinion of experts on the subject were obtained and the same were examined by the Company in consultation with Statutory Auditors and it was decided to defer the method valuation of Standing Crop adopted while finalizing the quarterly results March, 2010.

LAND FOR REGD. OFFICE/CORPORATE OFFICE IN BANGALORE:

On the direction of the Honble Chief Minister of Kamataka, the BDA has aiiotteo a CA site No.08 (P1) measuring about 1336 sq. mtrs. at HBR I Stage, Bangalore, on lease basis for a period of 30 years on a lumpsum lease amount of Rs.33.82 lakhs for construction of Regd./Corporate office in Bangalore. The Company has paid the said amount and completed the registration formalities. The Company has initiated a necessary action for construction of office Building.

PROJECTS:

In order to meet the stringent environmental norms, which is mandatory, the company had taken up installation of 75 TPD Rotary Lime Kiln immediately.The Government of Kamataka has issued a guarantee to the Company to borrow funds from the Banks/market for Rs.35 crores and accordingly, the company has raised the same by issue of private placement of taxable bonds. The work is under progress.

Further, the GOK has issued guarantee to the Company to raise Rs.100 crores funds from Banks/market in a phased manner for restructuring and revival of the Company. The Company has identified De-inking plant of 200 TPD costing around Rs.100 crores and co-generation plant at the cost of Rs.50 crores, which would improve the profitability. The company has raised Rs.50 crores by issue of private placement of bonds, for the above Projects and the balance Rs.50 crores bonds will be issued by the Company as and when required.

MANAGEMENT DISCUSSION & ANALYSIS:

Segmentwise analysis and operational performance of each of the business segments have been comprehensively covered in the Management Discussion & Analysis which forms part of this Directors Report.

CASH FLOW ANALYSIS:

In conformity with the provisions of the Listing Agreement, the cash flow statement for the year ended 31st March, 2010 is included in the annual accounts.

CAPTIVE FORESTRY:

The Forest Wing has harvested captive plantations over an extent of 1956 ha. and 1,27,673 M.T. of puipwood was supplied to the Mills. The yield of pulpwood from captive plantations have increased considerably since most of the areas are under clonal plantations. The Government has reimbursed lease rentals (Rs.14.34 crores) in lieu of surrendering of captive plantations raised in Wildlife areas pending a study report by the committee comprising officers of Karnataka Forest Department and MPM. The reassigning of Non-forest lands (after surrendering to the Government consequent to the interim orders of Honble High Court of Karnataka in W.P. No. 14644/ 98) is under the consideration by the Government. The lease of degraded forest lands to MPM in iieu of Wildlife areas surrendered (4665.30 ha.) was also requested with the Government and the matter is being persued. About 2445 ha. of harvested areas were regenerated by replanting/ coppicing with species like Acacia hybrid (1041 ha.), Eucalyptus pelita (644 ha.) Eucalyptus comaldulensis (758 ha.) and Miscellaneous species (2 ha.).

The Farm Forestry programme is being continued in the Forest Wing for the benefit of farmers and institutions and about 7.00 lakhs polythene bagged seedlings of improved varieties of Acacia, Eucalyptus.. Casurina and other species were sold and Rs.8,97,169/- revenue is realized. The Gate purchase of pulpwood was made @ Rs.2250/- per M.T. and a small quantity f 346.57 M.T. of pulpwood was procured.

The programme of raising large scale clonal plantations of Eucalyptus cornaldulensis in Dry-zone and Eucalyptus urophylla in Wet-zone is under progress to ensure annual supply of 2.60 lakh tonnes of pulpwood per annum which will be self-sufficient to the Company. The average weighted cost of Acacia and Eucalyptus pulpwood obtained from captive plantations works out to Rs.1,470/- per tonne as against Rs.2,170/- per tonne paid to M/s KFDC & KSFIC. Thus Rs.894.00 lakhs was saved by obtaining pulpwood from captive plantations. During this period 96,770 MT of Acacia wood was supplied from captive plantations which has helped in minimizing the consumption of chemicals worth about Rs.39.00 lakhs. Hence, captive forestry was responsible for saving a total sum of Rs.933.00 lakhs during 2009-2010.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE OUTGO:

Information under Section 217(1 )(e) of the Companies Act, 1956, read with Rule 2 of the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 are furnished at ANNEXURE -!, which form part of this report.

INDUSTRIAL RELATIONS:

The company takes pride in its record for maintaining cordial Industrial Relations. On attaining 75 years of the Company, a "Platinum Jubilee Celebration" has been planned in the mills to commemorate the peaceful co-existence of this organization.

FIXED DEPOSITS :

The Companys Fixed Deposits at the end of the yearstood at Rs.1313 lakhs (Rs.1313 lakhs in the previous year).

DIRECTORS :

Sri. C.B. Patil Okaly and Sri. S Parameswarappa, IFS (Retd), Directors of the Company, retire by rotation and are eligible for reappointment at the Annual General Meeting.

Apart from the above, the following changes amongst Directors have also taken place during the year under review :

Sri V. P. Baligar was nominated as a Director of the Company by the Government of Karnataka in place of Sri. Subir Hari Singh, IAS, vide Govt, communication No.CI-138-CMI- 2009(4) dated 20.11.2009.

Sri. Joseph Gonsalves and Sri. H.S. Srikantaiah ceased to be the Directors of the Company effective from 25th September, 2009 as they had withdrawn their candidature for the directorship of the Company at the lastAGM held on 25.09.2009 due to their personal reasons.

Sri. T.K. Ray was nominated as a Director of the Company by IFCI Ltd., in place of Sri. M. V. Muthu, with effect from 08.09.2009. He held the office upto 11.06.2010. Sri. P.V. Srinivas was nominated as a Director of the Company by IFCI Ltd., in place of Sri. T.K. Ray, with effect from 11.06.2010.

The board appreciated the valuable services rendered by the outgoing Directors.

DIRECTORS RESPONSIBILITY STATEMENT :

Pursuant to the requirement under Section-217(200) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed that:

a) The applicable accounting standards have been followed scrupulously, along with proper explanation relating to material departures, if any;

b) The selected accounting policies were applied consistently, and judgments and estimates that are reasonable and prudent were made, so as to give a true and fair view of the state of financial affairs of the Company at the end of the financial year;

c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;

d) The annual accounts were prepared for the financial year ended 31st March, 2010 on a going concern basis.

AUDITORS :

a) As per Section 619(2) of the Companies Act, 1956, the Government of India, Ministry of Corporate Affairs, appointed M/s. MNS & Co., Chartered Accountants, Bangalore, as Statutory Auditors of the Company for the year ended 31.03.2010.

b) M/s. G.S.R & Associates, Cost Accountants, Mysore, were appointed as Cost Auditors of the Company for the year 2009-10 by the Board, and the approval to this effect has also been received from the Government of India.

15. PARTICULARS OF EMPLOYEES :

16. CORPORATE GOVERNANCE:

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a report on Corporate Governance together with Management Discussion & Analysis Report is enclosed herewith, which forms part of the Directors Report. A Certificate from the Auditor regarding compliance of Corporate Governance, as stipulated by clause 49 of the Listing Agreement, is attached to this report.

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA

The comments by the Comptroller and Auditor General of India on the Accounts for the year ended 31.3.2010 will be forworded to shareholders seperately.

18. ACKNOWLEDGEMENT :

Your Directors are pleased to acknowledge the dedicated efforts of all the employees and place on record their appreciation of the valuable contribution made by them during the year 2009- 2010. Your Directors also thank the sugarcane growers for the supply of sugarcane. Your Directors place on record their appreciation for the assistance, support and guidance extended to the Company by the Government of Kamataka through the Departments of Commerce and Industries, Finance, Forest, Environment & Ecology, KPTCL, MESCOM, Directorate of Sugar, and by the Statutory Bodies and Financial Institutions, Kamataka State Pollution Control board & IFCI and Banks.

Your Directors also thank the Government of India, Ministry of Corporate Affairs and its various departments, Controller of Accounts & Audit, Registrar for Newspapers, Ministry of Railways, Department of Coal, etc., for their continued support to the Company.

For and on behalf of the Board

sd/- sd/-

(Dr.SANDEEP DAVE, IAS) (C. SHIVASHANKAR)

MANAGING DIRECTOR DIRECTOR

Place : Bangalore

Dated : 19-11-2010

 
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