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Directors Report of South India Paper Mills Ltd.

Mar 31, 2015

The Members

The Directors have the pleasure to present the 56th Annual Report of the Company along with the audited accounts for the year ended 31st March, 2015.

WORKING RESULTS 2014-15 2013-14

Finished Production of Paper & Paperboards 49,058 MTs 36,891 MTs (Rs. In Lacs) (Rs. In Lacs)

Gross Sales 19,674.95 15,212.83

Net Sales excl Excise Duty 18,537.92 14,342.82

FINANCIAL RESULTS

Operating Profit 3,002.71 1,512.96

Less : Finance costs 181.55 193.08

Gross (Cash) Profit 2,821.16 1,319.88

Less : Depreciation 750.98 745.81

Profit before Tax 2,070.18 574.07

Provision for Tax-including deferred tax 714.45 185.12

Profit after tax for the year 1,355.73 388.95

Less : Income tax of earlier years 2.67 -

Net Profit after Tax 1,353.06 388.95

Add : Balance Surplus brought forward from the previous year 7,604.78 7,517.97

8,957.84 7,906.92

APPROPRIATIONS

Transfer to General Reserve - (38.90)

Proposed Dividend @ 25% (Previous year 15%) (375.00) (225.00)

Provision for Dividend Tax (76.34) (38.24)

Balance Surplus carried forward 8,506.50 7,604.78

OPERATIONS

Gross sales for the financial year 2014-15 stood at Rs. 196.75 crores as against Rs. 152.13 crores in the previous year. Operation at the Paper Mill was normal during the year as against loss of production on account of labour strike during the first quarter of the previous financial year.

With the increase in volumes, combined with better operating efficiency, profitability improved.

Printing & Packaging Division operated with increased volumes & the Conversion tonnage was up by 5%.

Operating profit improved to Rs. 3,003 lacs from Rs. 1,513 lacs, owing to above factors. After making a depreciation provision of Rs. 751 lacs (Previous year 746 lacs), profit before tax was Rs. 2,070 lacs (Previous year Rs. 574 lacs). After making a provision for tax of Rs. 717 lacs ( Rs. 185 lacs in the previous year), net profit increased from Rs. 389 lacs to Rs. 1,353 lacs.

FINANCES

During the year, cash flow & liquidity remained comfortable.

Sources of funds Rs. in lacs

Cash flow from operating activities 2,933

Interest Income 24

Term Loan drawn from Bank 600

Increase in Trade/ Security Deposits 7

Total 3,564

Deployment of funds Rs. in lacs

Repayment of Term Loans 312

Deferred Payt Credit-Installments paid 175

Finance Cost 182

Income tax Paid 536

Dividend & Dividend Tax 263

Capital Expenditure & Advances 769

Increase in Working Capital 1,239

Decrease in Bank Borrowings 88

Total 3,564

31.03.15 31.03.14

Long Term Debt to Equity Ratio 0.05 0.03

Current Ratio 2.04 1.67

There are no overdue deposits or unclaimed matured Fixed Deposits as on 31-3-2015.

CREDIT RATING

ICRA has assigned a long term rating of [ICRA]BBB with a stable outlook and a short term rating of [ICRA]A2 to the Company's line of credit. Rating Review is in progress.

CURRENT PROSPECTS

The market conditions for paper continue to be extremely competitive with additional supply from new capacities. Demand is expected to grow in line with growth projected for Indian economy. The bright spot in the horizon is the internal demand from the Printing & Packaging Division, which is seeing an encouraging response from box consuming Brand owners. Your management perceives an opportunity for growth by enhancing its box manufacturing capacity with a new plant at another location. Various site options are under evaluation. An increase in paper making capacity through brown-field improvements to support the higher conversion capacity planned is seen as the way forward. Priority is given for increase in Co-generation facility, with improved efficiency, to bring down the unit cost of energy substantially.

Overall Turnover and operating profit is expected to be better in the current year, with improvement over the last year. CAPITAL EXPENDITURE PLANS

The Company is planning the upgradation /modernising /balancing of the existing paper machines with focus on quality & higher grades to sustain in the competitive situation. Capital expenditure is planned for process improvement, increased efficiency to reduce the operating costs. Installation of a new Boiler of 50 TPH capacity & Steam Turbine of 11 MW are planned for the current year at an estimated cost of Rs. 47 crores.

This will be financed through debt & internal accruals, to obtain optimum returns. Large capital expenditure, and substantial capacity increase is under consideration and will be taken up at the opportune time.

CORPORATE GOVERNANCE

Securities & Exchange Board of India (SEBI) in order to improve the standard of Corporate Governance has introduced certain amendments in the Listing Agreements with the Stock exchanges. Same have been complied with & a report on this is attached.

DIRECTORS' RESPONSIBILITY STATEMENT

As required by Section 134(5) of the Companies Act 2013,we state that :

While preparing the Annual Accounts, the Company has followed the applicable Accounting Standards;

The Directors have selected such accounting policies and applied them consistently and has made judgements and estimates that are reasonable and prudent, so as to give true and fair view of the state of affairs of the Company as at 31-3-2015 & of the profit of the Company for the financial year 2014-15.

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

The Directors have prepared the annual accounts on a going concern basis.

The Directors have laid down internal financial controls to be followed by the Company and the controls are adequate and operating effectively.

The Directors have devised proper systems to ensure compliance with the provisions of all the applicable laws and these systems are adequate and operating effectively.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

During the year, the Company did not give any Loan / Guarantee or has provided any security or make investment covered under Section 186 of the Companies Act, 2013

PARTICULARS OF CONTRACTS OR Arrangements WITH RELATED Party

The Company has no transactions with related parties other than remuneration to related parties. The details are furnished as an annexure in Form AOC-2.

MATERIAL CHANGES & COMMITMENTS

There was no change in the nature of business of the Company during the year.

There was no material changes and commitments in the business operations of the Company since the close of the financial year on 31st March 2015 to the date of this report.

ISO 9001 CERTIFICATION

Company's Quality Management Systems (QMS) have been audited by Bureau Veritas Certification India Pvt Ltd and ISO 9001: 2008 Certification is awarded to the Printing & Packaging Division of the Company. This Certification

issued from May 2012 was valid for a period of 3 years, upto 17-05-2015. Re-certification audit is done & certificate valid for 3 years upto 17-5-2018 is issued.

RESEARCH & DEVELOPMENT

Several special application grades have been developed & successfully introduced during the year to cater to stringent customer specific requirements.

ENERGY CONSERVATION MEASURES

The particulars required under Section 134 (3) (m) of the Companies Act, 2013 with regard to energy conservation measures are furnished in the Annexure.

ENVIRONMENTAL PROTECTION

Your company has always endeavoured to remain in harmony with its eco-sphere and tried to equitably balance the interest of all stakeholders in it, often going beyond the statutory impositions placed by regulatory authorities. In such efforts are included the installation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwise dry lands. The treated effluent water is utilized for irrigation purposes in the nearby fields of third party farmers with excellent crop yields.

The Company has installed & been operating the Electro Static Precipitator (ESP) Systems for its Boilers for controlling dust emission and dust extractor system for controlling dust at its fuel handling system. Centrifuge and other machineries have been installed for effluent treatment. Fuel shed with roofing, controls dust emissions and conserves the resources.

In order to ensure environmentally safe disposal of solid wastes, the Company has started disposing Ash and plastic waste to recyclers authorized by KSPCB. Ash is used in brick manufacturing and plastic is being used in cement kilns.

The Company has engaged the expert services of University of Agricultural Sciences, Gandhi Krishi Vigyana Kendra, Bangalore for a study of ' Utilisation of Paper Mill Effluent for Agricultural Purpose'.

DIVIDENDS

Your Directors recommend a Dividend of 25% i.e. Rs. 2.50 per equity share of Rs. 10 each (last year 15% i.e. Rs. 1.50 per share). The total distribution including dividend tax amounts to Rs. 451.34 lacs (Rs. 263.24 lacs)

PARTICULARS OF EMPLOYEES

Particulars of employees as prescribed under the Companies Act, 2013 are annexed.

EXTRACT OF ANNUAL RETURN

The Extract of Annual Return in Form MGT 9 is attached and forms a part of this Annual Report.

MANAGERIAL REMUNERATION

Requisite details as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith and forms a part of this Annual report

MEETINGS OF THE BOARD

The number of meetings of the Board held and details thereof are mentioned in the Report on Corporate Governance forming a part of this Annual Report.

WHISTLE BLOWER POLICY

In deference to Section 177 (9) of the Act,read with relevant Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement, the Company has established a vigil mechanism overseen by the Audit Committee. The Company has framed Whistle Blower policy as required under the Companies Act 2013 and Listing Agreement and no personnel has been denied access to the Audit Committee

RISK MANAGEMENT

The Company has a risk management framework to identify and evaluate business risks and opportunities. It seeks to create transparency, minimise adverse impact on the business objective and enhance the Company's competitive advantage. It aims at ensuring that the executive management controls the risk through means of a properly defined framework.

The Company has laid down appropriate procedures to inform the Board about the risk assessment and minimization procedures. The Board periodically revisits and reviews the overall risk management plan for making desired changes in response to the dynamics of the business.

The Board of Directors have constituted a Risk Management Committee as required under Clause 49 of the Listing Agreement vide Board Meeting held on 27.01.2015, to frame, implement and monitor the risk management plan of the Company. The Committee comprises of the following Directors.

Mr Manish M Patel - Chairman Mr M G Mohan Kumar - Member Mr S R Chandrasekara Setty - Member

The terms of reference of risk management committee include review of Risk management policy and its development within the Company, to monitor the effectiveness of risk management policy, review major risks of the Company and to advice on mitigation to the Board.

LABOUR RELATIONS

The industrial relations climate in the Company during the year was generally cordial and harmonious. Long term settlement for a period of 4 years, signed with the Workers' Union last year is valid upto 31-3-2016.

DIRECTORS

In terms of Section 152 of the Companies Act, 2013 Mr D C Patel (DIN 00167581) retires by rotation and he, being eligible, offers himself for reappointment. Your Directors recommend his reappointment.

Mrs Girija Shankar (DIN 07148094 ) was appointed by the Board at its meeting held on 31-03-2015, as an Additional Director. As per Section 161 of the Companies Act 2013 and Articles of Association of the Company, she holds office upto the date of the ensuing Annual General Meeting. It is proposed to appoint Mrs Girija Shankar (DIN 07148094) as an Independent Director for a period of 5 consecutive years w.e.f 31st March, 2015 not liable to rotation.

Your Director's recommend her appointment as an Independent Director.

The Company had, pursuant to the provisions of clause 49 of the Listing Agreement entered into with Stock Exchange, appointed Mr M G Mohan Kumar, Mr S R Chandrasekara Setty, Mr N S Kishore Kumar and Mr Jagdish M Patel as Independent Directors of the Company. As per section 149(4) of the Companies Act, 2013 (Act), which came into effect from April 1, 2014, every listed public company is required to have at least one-third of the total number of directors as Independent Directors. In accordance with the provisions of section 149 of the Act, the Board at their meeting held on 31st March 2015, based on the recommendation of the Nomination & Remuneration Committee, continued the appointments of these Directors as Independent Directors w.e.f 31st March 2015 for a consecutive period of 5 years, not liable to retire by rotation. The resolution for continuation of appointment of these directors as Independent Directors is now being placed before the Members for their approval.

Your directors recommend the resolution set out in Item Nos. 5 to 8 of the notice for the approval by the members of the Company.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaration from all the Independent Directors under Section 149 (7) of the Companies Act 2013, in respect of meetimg the criteria of Independence has provided under Section 149(6) of the Act.

BOARD EVALUATION

The Board of Directors have carried out an annual evaluation of its performance, Board Committees and Individual Directors pursuant to the provisions of the Companies Act and Clause 49 of the Listing Agreement.

The Board has recorded overall satisfaction.

In a separate meeting of Independent Directors held on 30-03-2015, the performance of Non Independent Directors, Board as a whole and the performance of the Chairman was evaluated.They have expressed overall satisfaction on such evaluation.

POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION

The Company's Policy on director's appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matter as provided under Section 178(3) is annexed hereto and forms part of this Annual Report.

Criteria for performance evaluation of Independent Directors' as required by the Listing Agreements also forms part of this report.

CORPORATE SOCIAL RESPONSIBILITY

The Board has constituted a Corporate Social Responsibility Committee as mandated by Section 135 ofthe Companies Act 2013 vide Board Meeting held on 27.01.2015.

The broad terms of reference of the CSR Committee are as under:

- Formulating and recommending to the Board, the CSR Policy which shall indicate the activities to be undertaken by the Company.

- Recommending the amount of expenditure to be incurred on the aforesaid activities and;

- Reviewing and Monitoring the CSR Policy of the company from time to time.

Reasons for not spending on CSR activities during the financial year

Company has planned for following CSR projects for the benefit of villagers in the villages around the factory:

i) Chlorination plant for drinking water for Chikkayana Chatra & Banchalli Hundi villages.

ii) Sewage Treatment Plant for the 3 villages Chikkayana Chatra, Thandavapura & Banchalli hundi.

Land finalization for the project is awaited from Gram Panchayath. On finalizing the above, Company will be spending on the project.

A report on CSR Activities is annexed herewith and forms a part of the Director's Report.

APPOINTMENT OF KEY MANAGERIAL PERSONNEL

The Board of Directors at their meeting held on 22-05-2014 appointed Mr B Ravi Holla as the Chief Financial Officer (CFO) of the Company as per the requirements of the Companies Act, 2013.

AUDITORS

There are no adverse comments by the auditors in their report annexed herewith.

The Auditors M/s B S Ravikumar & Associates retire at the conclusion of this Annual General Meeting and are eligible for reappointment. Your Directors recommend their reappointment.

SECRETARIAL AUDIT

Pursuant to Section 204(1) of the Companies Act, 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr S N Hitaish Kumar, Practicing Company Secretary (C P No. 6553), to conduct the Secretarial Audit of the Company for Financial Year 2014-15. The Secretarial Audit Report in Form MR 3 is annexed.

Explanation for observations made by the Company Secretary in Practice :

i) Woman Director appointed on 31-3-2015, in compliance with the requirement of the Companies Act, 2013. Filing has been approved by MCA.

ii) No separate filing is done, as the matter was combined with filing done for final accounts.

iii) Forms were filed with additional fees, as the MCA website did not allow the in time filing of MGT 10 due to technical reasons.

iv) Website is updated periodically.

INTERNAL AUDITOR

Pursuant to Section 138(1) of the Companies Act, 2013, the Company has appointed M/s Rau and Nathan Chartered Accountants (Firm Regn. No.003178S), Mysore, to conduct Internal Audit of the functions and activities of the Company for Financial Year 2014-15.

COST AUDIT

Cost Audit was applicable for Paper manufacture up to FY 2013-14.

Mr. Madhukar P Nayak, Cost Accountant, was appointed as Cost Auditor for the year 2013-14. The Cost Audit Report for the year 2013-14 was filed within due date. Paper Industry is not notified for Cost Audit in FY 2014-15.

APPRECIATION

Your Directors take this opportunity to place on record their appreciation for services rendered by the employees, sales agents, Banks & Financial Institutions.

for and on behalf of the Board of Directors

Bengaluru Manish M. Patel 28th May, 2015 Chairman & Managing Director


Mar 31, 2014

The Members

The Directors have the pleasure to present the 55th Annual Report of the Company along with the audited accounts for the year ended 31st March, 2014.

WORKING RESULTS 2013-14 2012-13

Finished Production of Paper & Paperboards 36,891 MTs 49,678 MTs ( Rs.In Lacs ) ( Rs. In Lacs )

Gross Sales 15,212.83 17,804.50

Net Sales excl Excise Duty 14,342.82 16,830.18

FINANCIAL RESULTS:

Operating Profit 1,512.96 2,760.75

Less : Finance costs 193.08 184.75

Gross (Cash) Profit 1,319.88 2,576.00

Less : Depreciation 745.81 731.70

Profit before Exceptional items & Tax 574.07 1,844.30

Less : Exceptional items - -

Profit before tax 574.07 1,844.30

Provision for Tax-including deferred tax 185.12 448.70

Profit after tax for the year 388.95 1,395.60

Less : Income tax of earlier years - 30.40

Net Profit after Tax 388.95 1,365.20

Add : Balance Surplus brought forward from the previous year 7,517.97 6,675.38

7,906.92 8,040.58

APPROPRIATIONS :

Transfer to General Reserve (38.90) (136.52)

Proposed Dividend @ 15% (Previous year 22%) (225.00) (330.00)

Provision for Dividend Tax (38.24) (56.09)

Balance Surplus carried forward 7,604.78 7,517.97

OPERATIONS

Gross sales for the financial year 2013-14 stood at Rs. 152.13 crores as against Rs. 178.04 crores in the previous year. Operation at the Paper Mill was affected due to labour strike, which resulted in loss of production during the first quarter of the financial year. Printing & Packaging Division was operative during the quarter with material purchased from outside.

Operating volumes for the paper plant was at 65.88% (last year 88.71%). Volumes could have been higher, but for the labour strike at the Paper plant, which affected the production during the first quarter, for 89 days. Increase in Raw material, Fuel cost, affected the earnings as it was possible to recover the costs partially owing to tight market conditions.

Printing & Packaging Division operated with reduced volumes, owing to market conditions during the year & supply constraints of required raw materials during first quarter. Conversion tonnage was lower by 13.5%.

Operating profit declined to Rs. 1,513 lacs from Rs. 2,761 lacs, owing to above factors. After making a depreciation provision ofRs. 746 lacs (Previous year Rs. 732 lacs), profit before tax was Rs. 574 lacs (Previous year Rs. 1,844 lacs). After making a provision for tax of Rs. 185 lacs (Rs. 449 lacs in the previous year), net profit decreased from Rs. 1,365 lacs to Rs. 389 lacs.

FINANCES

During the year, cash flow & liquidity remained comfortable.

Sources of funds Rs. in lacs

Cash flow from operating activities 1,467

Interest Income 46

Proceeds from Sale of Fixed Assets 5

Increase in short term borrowings 526

Decrease in cash/cash equivalents 140

Increase in Deferred credit from- Machinery vendors 318

Total 2,502

Deployment of funds Rs. in lacs

Repayment of Term Loans 295

Finance Cost 196

Decrease in Security Deposits 5

Increase in Working Capital 66

Income tax incl earlier years 261

Dividend & Dividend Tax 382

Capital Expenditure & Advances 1,297

Total 2,502

31.03.14 31.03.13

Long Term Debt to Equity Ratio 0.05 0.08

Current Ratio 1.67 2.00

There are no overdue deposits or unclaimed matured Fixed Deposits as on 31-3-2014.

CREDIT RATING

ICRA has assigned a long term rating of [ICRA]BBB with a stable outlook and a short term rating of [ICRA]A2 to the Company''s line of credit.

CURRENT PROSPECTS

The market conditions for paper are extremely competitive with supply from new capacities outstripping demand. Whilst there had been a steep increase in raw material and fuel prices due to a steep depreciation in the rupee, it is extremely difficult to push through an increase in selling prices due to demand-supply situation in the paper market. The bright spot in the horizon is the internal demand from the Printing & Packaging Division, which is seeing an encouraging response from box consuming Brand owners. The combination of high inflation, poor growth in demand and a capacity overhang will ensure that capacity in this segment remains flat in the near term. Your management however perceives an opportunity for growth by enhancing its box manufacturing capacity with a new plant at another location. Various site options are under evaluation. An increase in paper making capacity through brown-field improvements to support the higher conversion capacity planned is seen as the way forward.

Overall Turnover and operating profit is expected to be higher in the current year, as against loss of production at the paper plant due to labour strike in Q1 of last year.

CAPITAL EXPENDITURE PLANS

The Company is planning the upgradation /modernising /balancing of the existing paper machines with focus on quality & higher grades to sustain in the competitive situation. Capital expenditure is planned for process improvement, increased efficiency to reduce the operating costs. This will be financed through debt & internal accruals, to obtain optimum returns. Large capital expenditure, and substantial capacity increase is under consideration and will be taken up at the opportune time.

CORPORATE GOVERNANCE

Securities & Exchange Board of India (SEBI) in order to improve the standard of Corporate Governance has introduced certain amendments in the Listing Agreements with the Stock exchanges. Same have been complied with & a report on this is attached.

Directors'' Responsibility Statement :

As required by new amendments to Companies Act, 1956, we state that :

While preparing the Annual Accounts, the Company has followed the applicable Accounting Standards, referred to in Section 211 (3-C) of the Companies Act, 1956.

The Directors have selected such accounting policies and applied them consistently and has made judgements and estimates that are reasonable and prudent, so as to give true and fair view of the state of affairs of the Company as at 31-3-2014 & of the profit of the Company for the financial year 2013-14.

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

The Directors have prepared the annual accounts on a going concern basis.

ISO 9001 CERTIFICATION

Company''s Quality Management Systems (QMS) have been audited by Bureau Veritas Certification India Pvt Ltd and ISO 9001: 2008 Certification is awarded to the Printing & Packaging Division of the Company. This Certification issued from May 2012 is valid for a period of 3 years, upto 17-05-2015.

RESEARCH & DEVELOPMENT

Several special application grades have been developed & successfully introduced during the year to cater to stringent customer specific requirements.

ENERGY CONSERVATION MEASURES

The particulars required under the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 with regard to energy conservation measures are furnished in the Annexure.

ENVIRONMENTAL PROTECTION

Your company has always endeavoured to remain in harmony with its eco-sphere and tried to equitably balance the interest of all stakeholders in it, often going beyond the statutory impositions placed by regulatory authorities. In such efforts are included the installation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwise dry lands. The treated effluent water is utilized for irrigation purposes in the nearby fields of third party farmers with excellent crop yields.

The Company has installed & been operating the Electro Static Precipitator (ESP) Systems for its Boilers for controlling dust emission and dust extractor system for controlling dust at its fuel handling system. Centrifuge and other machineries have been installed for effluent treatment. New fuel shed with roofing, controls dust emissions and conserves the resources.

In order to ensure environmentally safe disposal of solid wastes, the Company has started disposing Ash and plastic waste to recyclers authorized by KSPCB. Ash is used in brick manufacturing and plastic is being used in cement kilns.

The Company has engaged the expert services of University of Agricultural Sciences, Gandhi Krishi Vigyana Kendra, Bangalore for a study of '' Utilisation of Paper Mill Effluent for Agricultural Purpose''.

DIVIDENDS

Your Directors recommend a Dividend of 15% i.e. Rs. 1.50 per equity share of Rs. 10 each (last year 22% i.e. Rs. 2.20 per share). The total distribution including dividend tax amounts to Rs. 263.24 lacs (Rs. 386.08 lacs)

PARTICULARS OF EMPLOYEES

Particulars of employees pursuant to Section 217 (2A) of the Companies Act, 1956 are annexed.

LABOUR RELATIONS

The industrial relations climate in the Company during the year was generally cordial and harmonious except during the first quarter of the FY 2013-14 which witnessed labour strike at the paper plant pressing for higher wages. Long term settlement for a period of 4 years, was signed with the Workers'' Union. This will be valid upto 31-3-2016.

DIRECTORS

In terms of Section 152 of the Companies Act, 2013 Mr Ajay D Patel (DIN 00466905) & Mr M G Mohan Kumar (DIN 00020029) retire by rotation and they, being eligible, offer themselves for reappointment. Your Directors recommend their reappointment.

AUDITORS

There are no adverse comments by the auditors in their report annexed herewith.

The Auditors M/s B S Ravikumar & Associates retire at the conclusion of this Annual General Meeting and are eligible for reappointment. Your Directors recommend their reappointment.

COST AUDIT

Pursuant to Section 233-B of the Companies Act, 1956, the Central Government has ordered that the Company''s cost accounts relating to paper be audited every year. Mr. Madhukar P Nayak, Cost Accountant, was appointed as Cost Auditor for the year 2013-14. The Cost Audit Report for the year 2012-13 was filed within due date and the Report for 2013-14 will be submitted to the Central Government before the due date.

APPRECIATION

Your Directors take this opportunity to place on record their appreciation for services rendered by the employees, sales agents, Banks & Financial Institutions.

for and on behalf of the Board of Directors

Nanjangud Manish M. Patel

22nd May, 2014 Chairman & Managing Director


Mar 31, 2013

To The Members

The Directors have the pleasure to present the 54th Annual Report of the Company along with the audited accounts for the year ended 31 st March, 2013.

WORKING RESULTS 2012-13 2011-12

Finished Production of Paper & Paperboards 49,678 MTs 50,890 MTs

(Rs.In Lacs ) (Rs.In Lacs)

Gross Sales 17,804.50 17,869.00

Net Sales excl Excise Duty 16,830.18 17,022.76

FINANCIAL RESULTS:

Operating Profit 2,760.75 2,461.24

Less : Finance costs 184.75 226.19

Gross (Cash) Profit 2,576.00 2,235.05

Less : Depreciation 731.70 614.36

Profit before Exceptional items & Tax 1,844.30 1,620.69

Exceptional Items: Profit on Sale of shares in Associate Co. - 463.67

Electricity Tax relating to earlier years - (75.73)

Profit before tax 1,844.30 2,008.63

Provision for Tax-including deferred tax 448.70 481.38

Profit after tax for the year 1,395.60 1,527.25

Less : Income tax of earlier years 30.40 (12.39)

Net Profit after Tax 1,365.20 1,539.64

Add : Balance Surplus brought forward from the previous year 6,675.38 5,673.27

8,040.58 7,212.91

APPROPRIATIONS :

Transfer to General Reserve (136.52) (154.00)

Proposed Dividend @ 22% (Previous year 22%) (330.00) (330.00)

Provision for Dividend Tax (56.09) (53.53)

Balance Surplus carried forward 7,517.97 6,675.38



OPERATIONS

Gross sales for the financial year 2012-13 stood at Rs. 178.04 crores as against Rs. 178.69 crores in the previous year.

Operating volumes for the paper plant was at 88.71% (last year 90.88%). Volumes could have been higher, but for the labour strike at the Paper plant from 11th March, 2013, which affected the production for 21 days in the financial year. Realisation was slightly better & overall costs remained at the last year s level. Increase in Fuel cost & sizing materials was offset by reduction in raw material cost and repairs & maintenance.

Printing & Packaging Division operated with higher volumes and conversion tonnage was higher by 8%. Operating profit improved from X 2,461 lacs to X 2,761 lacs. After making a higher depreciation provision of X 731.70 lacs (Previous year - 614.36 lacs), profit before tax increased from X 1,621 lacs to Rs.1,844 lacs. Net profit decreased from X 1,539 lacs (last year included exceptional items amounting to Rs 388 lacs, which are non recurring) to X 1,365 lacs. Excluding the effect of exceptional items, net profit for the reporting year is higher.

FINANCES

During the year, cash flow & liquidity remained comfortable.

Sources of funds X in lacs Deployment of funds X in lacs

Cash flow from operating activities 2,704 Repayment of Term Loans 295

Interest Income 55 Finance Cost 188

Proceeds from Sale of Fixed Assets 5 Decrease in Security Deposits 12

Increase in short term borrowings 160 Increase in Working Capital 624

Income Tax 429

Capital Expenditure and advances 813

Dividend & Dividend Tax 379

Increase in cash & cash equivalents 184

Total 2,924 Total 2924



31.03.13 31.03.12

Long Term Debt to Equity Ratio 0.08 0.12

Current Ratio 2.00 1.81

There are no overdue deposits or unclaimed matured Fixed Deposits as on 31-3-2013.

CREDIT RATING

ICRA has assigned a long term rating of [ICRA] BBB with a stable outlook and a short term rating of [ICRA] A2 to the Company s Line of Credit.

CURRENT PROSPECTS

Labour strike which commenced in March 2013 at the paper plant, continued in the first quarter of FY 2013-14 and is bound to affect the working results of Ql.

The market conditions for paper are extremely competitive with supply from new capacities outstripping demand. Whilst there had been a steep increase in raw material and fuel prices due to a steep depreciation in the rupee, it is extremely difficult to push through an increase in selling prices due to demand-supply situation in the paper market. The bright spot in the horizon is the internal demand from the Printing & Packaging Division, which is seeing an encouraging response from box consuming Brand owners. The combination of high inflation, poor growth in demand and a capacity overhang will ensure that capacity in this segment remains flat in the near term. Your management however perceives an opportunity for growth by enhancing its box manufacturing capacity with a new plant at another location. Various site options are under evaluation. An increase in paper making capacity through brown-field improvements to support the higher conversion capacity planned is seen as the way forward.

Overall Turnover and operating profit is expected to be lower, mainly due to loss of production at the paper plant due to labour strike. It is hoped that operating levels will be higher in the other quarters with higher output at both the plants.

During the year 2012-13 overall economic growth of India was lowerat about 5% as against 6.5% in the last year. Manufacturing sector growth was down at 1% (2.9%).

CAPITAL EXPENDITURE PLANS

The Company is planning the upgradation /modernising /balancing of the existing paper machines with focus on quality & higher grades to sustain in the competitive situation. Capital expenditure is planned for the Printing & Packaging Division to increase overall volumes and productivity. This will be financed through debt & internal accruals, to obtain optimum returns. Large capital expenditure, and substantial capacity increase is under consideration and will be taken up at the opportune time.

CORPORATE GOVERNANCE

Securities & Exchange Board of India (SEBI) in order to improve the standard of Corporate Governance has introduced certain amendments in the Listing Agreements with the Stock exchanges. Same have been complied with & a report on this is attached.

Directors Responsibility Statement:

As required by new amendments to Companies Act, 1956, we state that:

While preparing the Annual Accounts, the Company has followed the applicable Accounting Standards, referred to in Section 211 (3-C) of the Companies Act, 1956.

The Directors have selected such accounting policies and applied them consistently and has made judgements and estimates that are reasonable and prudent, so as to give true and fair view of the state of affairs of the Company as at 31-3-2013 & of the profit of the Company for the financial year 2012-13.

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

The Directors have prepared the annual accounts on a going concern basis.

ISO 9001 CERTIFICATION

Company''s Quality Management Systems (QMS) have been audited by Bureau Veritas Certfication India Pvt Ltd and ISO 9001: 2008 Certification is awarded to the Printing & Packaging Division of the Company. This Certification issued from May 2012 is valid for a period of 3 years, upto 17-05-2015.

RESEARCH & DEVELOPMENT

Several special application grades have been developed & successfully introduced during the year to cater to stringent customer specific requirements.

ENERGY CONSERVATION MEASURES

The particulars required under the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 with regard to energy conservation measures are furnished in the Annexure.

ENVIRONMENTAL PROTECTION

Your company has always endeavored to remain in harmony with its eco-sphere and tried to equitably balance the interest of all stakeholders in it, often going beyond the statutory impositions placed by regulatory authorities. In such efforts are included the installation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwise dry lands. The treated effluent water is utilized for irrigation purposes in the nearby fields of third party farmers with excellent crop yields.

The Company has installed & been operating the Electro Static Precipitator (ESP) Systems for its Boilers for controlling dust emission and dust extractor system for controlling dust at its fuel handling system. Centrifuge and other machineries have been installed for effuent treatment. New fuel shed with roofng, controls dust emissions and conserves the resources.

In order to ensure environmentally safe disposal of solid wastes, the Company has started disposing Ash and Plastic waste to recyclers authorised by KSPCB. Ash is used in brick manufacturing and plastic is being used in Cement Kilns.

The Company has engaged the expert services of University of Agricultural Sciences, Gandhi Krishi Vigyana Kendra, Bangalore for a Study of "Utilisation of Paper Mill Effuent for Agricultural Purpose".

DIVIDENDS

Your Directors recommend a Dividend of 22% i.e. Rs. 2.20 per equity share of Rs. 10 each (same as in last year). The total distribution including dividend tax amounts to Rs. 386.08 lacs (Rs. 383.53 lacs)

PARTICULARS OF EMPLOYEES

Particulars of employees pursuant to Section 217 (2A) of the Companies Act, 1956 are annexed.

LABOUR RELATIONS

The industrial relations climate in the Company during the year was generally cordial and harmonious except towards the end of FY 2012-13, which witnessed labour strike at the paper plant pressing for higher wages. Management is analysing the causes and is aiming for prevention of work disruption.

DIRECTORS

In terms of Section 255 of the Companies Act, 1956 Mr Jagdish M Patel & Mr N S Kishore Kumar, retire by rotation and they, being eligible, offer themselves for reappointment. Your Directors recommend their reappointment.

Mr Jitendra A Patel was appointed by the Board at its meeting held on 27-09-2012 as an Additional Director. As per Section 260 of the Companies Act, 1956 and the Articles of Association of the Company, he holds offce upto the date of the ensuing Annual General Meeting. Your Directors recommend his appointment as Director, liable to retire by rotation.

AUDITORS

There are no adverse comments by the auditors in their report annexed herewith.

The Auditors M/s B S Ravikumar & Associates retire at the conclusion of this Annual General Meeting and are eligible for reappointment. Your Directors recommend their reappointment.

COST AUDIT

Pursuant to Section 233-B of the Companies Act, 1956, the Central Government has ordered that the Company''s cost accounts relating to paper be audited every year. Mr. Madhukar P Nayak, Cost Accountant, was appointed as Cost Auditor for the year 2012-13. The Cost Audit Report for the year 2012-13 will be submitted to the Central Government before the due date.

APPRECIATION

Your Directors take this opportunity to place on record their appreciation for services rendered by the employees, sales agents, Banks & Financial Institutions.



for and on behalf of the Board of Directors

Nanjangud Manish M. Patel

30th May, 2013 Chairman & Managing Director


Mar 31, 2011

The Members

The Directors have the pleasure to present the 52nd Annual Report of the Company along with the audited accounts for the year ended 31st March, 2011.

Working Results 2010-11 2009-10

Finished Production of Paper & Paperboards 50,223 MTs 49,452 MTs

Sales Volume of Paper, corrugated cartons & sheets 53,358 MTs 47,567 MTs (Rs.in Lacs) (Rs.in Lacs)

Gross Sales 17,318.35 13,419.83

Net Sales excl Excise Duty 16,657.09 12,809.66

FINANCIAL RESULTS

Operating Profit 2,509.53 2,476.78

Less : Finance charges (net) 147.44 186.18

Gross (Cash) Profit 2,362.09 2,290.60

Less : Depreciation 482.13 457.07

Profit before tax 1,879.96 1,833.53

Provision for Tax-including deferred tax 480.44 456.54

Profit after tax for the year 1,399.52 1,376.99

Less : Income tax of 12.25 - earlier years

Net Profit after Tax 1,387.27 1,376.99

Add : Balance in Profit & Loss Account brought forward 4,775.79 3,798.87 from the previous year 6,163.06 5,175.86

APPROPRIATIONS :

Transfer to General Reserve (139.96) (137.70)

Proposed Dividend @ 20% (300.00) (225.00) on post bonus capital (prev.yr.30%)

Provision for Dividend Tax (49.83) (37.37)

Balance carried forward in Profit & Loss Account 5,673.27 4,775.79

Operations

Gross sales for the financial year 2010-11 increased to Rs. 173.18 crores as against Rs.134.20 crores in the previous year.

Operating volumes in both the Paper Plant as well as Printing & Packaging Division, were higher. Capacity utilization in Paper Plant was 89.68% (last year 88.31%). Raw material, fuel prices were higher due to inflationary pressures, which also led to higher cost of funds. With the planned maintenance shut down in Q4, replacement of old components, repairs & maintenance expenses increased. Despite above factors, Company could achieve higher output & better recovery of costs in the second half of the year, helped in reporting marginally better results.

Cash generated after finance charges and taxes was (Rs. 1,869 lacs during the year as against (Rs. 1,834 lakhs in the preceding year. Net finance charges were (Rs. 147 lacs ( (Rs. 186 lacs). Net profit increased marginally to Rs. 1,387 lacs (1,377 lacs).

Finances

During the year, cash flow & liquidity remained comfortable.

Sources of funds Rs. in Deployment of funds Rs. in lacs lacs

Net operating 2,479 Repayment of Term Loans 330 profit Interest & Finance 147 charges

Dividend received 13 Income tax & Wealth tax 526

Increase in Security 25 Dividend & Dividend Tax 262 Deposits

Increase in short 297 Capital Expenditure & 1,032 term Bank borrowing Advances for working capital Increase in working 595 capital

Term Loans drawn 300 Increase in cash & 222 cash equivalents

TOTAL 3,114 TOTAL 3,114

Capital expenditure & advance includes substantial amounts towards Printing & Packaging Division. The long term Debt to Equity ratio as on 31-03-2011 stands comfortably at 0.15 as against 0.17 as on 31-03-2010. The current ratio as on 31-3-11 is 1.95 (1.98 as on 31-3-10).

There are no overdue deposits or unclaimed matured Fixed Deposits as on 31-3-2011.

CURRENT PROSPECTS

The operating level is steady & overall paper production/ sales volumes are picking up on the back of internal demand from the Printing & Packaging Division, which is seeing an encouraging response from the market. Prevailing inflationary effect in the economy contributing to higher input prices and higher interest costs is a matter of concern deterring large capex and capacity expansion. With this scenario, a gradual increase in paper manufacturing capacity through brown-field improvements is the way forward.

Overall Turnover and operating profit is expected to be better, mainly due to higher volume of value addition through conversion.

During the year 2010-11 overall economic growth was 8.5% as against 8% in last year. Manufacturing sector growth was maintained at 8.8%.

CAPITAL EXPENDITURE PLANS

The Company is now taking up the upgradation of the existing machines to increase output by about 25% on PM-4 & 5 for brown grades. Capital expenditure is planned for the Printing & Packaging Division to increase overall volumes and productivity. This will be financed through debt & internal accruals, to obtain optimum returns. Large capital expenditure, and substantial capacity increase is under consideration to be taken up next.

CORPORATE GOVERNANCE

Securities & Exchange Board of India (SEBI) in order to improve the standard of Corporate Governance has introduced certain amendments in the Listing Agreements with the Stock exchanges. Same have been complied with & a report on this is attached.

Directors' Responsibility Statement :

As required by new amendments to Companies Act, 1956, we state that :

While preparing the Annual Accounts, the Company has followed the applicable Accounting Standards, referred to in Section 211 (3-C) of the Companies Act, 1956.

The Directors have selected such accounting policies and applied them consistently and has made judgements and estimates that are reasonable and prudent, so as to give true and fair view of the state of affairs of the Company as at 31-3-2011 & of the profit of the Company for the financial year 2010-11.

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

The Directors have prepared the annual accounts on a going concern basis.

QMS Initiative:

Company has taken up Quality Management System (QMS) initiative and is working towards ISO 9001 certification for its Printing & Packaging Division.

RESEARCH & DEVELOPMENT

Several special application grades have been developed & successfully introduced during the year to cater to stringent customer specific requirements.

ENERGY CONSERVATION MEASURES

The particulars required under the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 with regard to energy conservation measures are furnished in the Annexure.

ENVIRONMENTAL PROTECTION

Your company has always endeavored to remain in harmony with its eco-sphere and tried to equitably balance the interest of all stakeholders in it, often going beyond the statutory impositions placed by regulatory authorities. In such efforts are included the installation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwise dry lands. The treated effluent water is utilized for irrigation purposes in the nearby fields of third party farmers with excellent crop yields.

The Company has installed & been operating the Electro Static Precipitator (ESP) Systems for its Boilers for controlling dust emission and dust extractor system for controlling dust at its fuel handling system. Centrifuge and other machineries have been installed for effluent treatment. New fuel shed with roofing, controls dust emissions and conserves the resources.

DIVIDENDS

Your Directors recommend a Dividend of (Rs. 2 per share on the post bonus capital comprising of 1.50 crore equity shares as against (Rs. 3 per share on 75 lakh shares last year. Bonus shares issued in September 2010 are also eligible for full dividend. Dividend distribution in absolute terms is higher by 33% over last year. The total distribution including dividend tax amounts to (Rs. 350 lakhs ( (Rs. 262 lakhs)

PARTICULARS OF EMPLOYEES

Particulars of employees pursuant to Section 217 (2A) of the Companies Act, 1956 are annexed.

LABOUR RELATIONS

The industrial relations climate in the Company during the year was generally cordial and harmonious.

DIRECTORS

In terms of Section 255 of the Companies Act, 1956 Mr M G Mohan Kumar & Mr Ajay D Patel , retire by rotation and they, being eligible, offer themselves for reappointment. Your Directors recommend that the proposed resolutions for their reappointment be passed.

Mr N S Kishore Kumar was appointed by the Board at its meeting held on 31-1-2011 as an Additional Director. As per Section 260 of the Companies Act, 1956 & the Articles of Association of the Company, he holds office upto the date of the ensuing Annual General Meeting. Your Directors recommend that the proposed resolution appointing him as Director, liable to retire by rotation, be passed.

AUDITORS

There are no adverse comments by the auditors in their report annexed herewith.

The Auditors M/s B S Ravikumar & Associates retire at the conclusion of this Annual General Meeting and are eligible for reappointment. Your Directors recommend that the proposed resolution appointing them be passed.

APPRECIATION

Your Directors take this opportunity to place on record their appreciation for services rendered by the employees, sales agents, Banks & Financial Institutions.

for and on behalf of the Board of Directors

Manish M. Patel Chairman & Managing Director

Nanjangud 26th May, 2011

 
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