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Ballarpur Industries Ltd.

BSE: 500102 Sector: Industrials
NSE: BALLARPUR ISIN Code: INE294A01037
BSE 16:01 | 27 Mar 2018 Ballarpur Industries Ltd
NSE 05:30 | 01 Jan 1970 Ballarpur Industries Ltd
OPEN 12.69
PREVIOUS CLOSE 12.59
VOLUME 188609
52-Week high 22.70
52-Week low 11.30
P/E
Mkt Cap.(Rs cr) 1,645
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 12.69
CLOSE 12.59
VOLUME 188609
52-Week high 22.70
52-Week low 11.30
P/E
Mkt Cap.(Rs cr) 1,645
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Ballarpur Industries Ltd. (BALLARPUR) - Chairman Speech

Company chairman speech

Dear Shareholder

my letter to you in last year’s annual report focused on three key themes:

(a) the economic condition of India;

(b) the transformation that has taken place in your Company; and

(c) the challenges ahead. these are matters worth repeating this year as well.

As I wrote last year for the first time in three decades India has elected a LokSabha where a single party — the Bharatiya Janata Party (BJP) — has a clearmajority with 282 seats. With the ruling National Democratic Alliance (NDA) winning 336seats and with a determined person like Mr. Narendra Modi as the prime minister Ibelieve today as I did then that India will see better governance and more reforms atthe centre — certainly in comparison with what we witnessed under the secondCongress-led UPA coalition.

Unfortunately we are an impatient lot. Having overwhelmingly elected the BJP and theNDA to power most of us expect instant miracles.

Consider the economy for example. Between 2011–12 and 2013–14 quarterly GDPgrowth had dropped from over 7% to well under 5%. In the last two years of the previousgovernment growth was 4.5% and 4.7%. Investments had come to a standstill — be thesein industry in infrastructure or even the services sector. Companies in most sectors weresuffering not only from the lack of orders but also the financial effects of earliercapital expansions that could not be optimised due to a widespread lack of demand. Powergeneration projects had virtually ground to a halt; as did investments in roads andhighways. The manufacturing sector de-grew quarter after quarter. That was the state ofthe economy in 2015 when the country voted in the BJP-led NDA government.

Since then things have been picking up. Even if one were to discount the new nationalincome estimate of Gross Value Added put forth by the Central Statistical Organisationfew can deny that there has been an uptick in growth — both in manufacturing and inservices. The honest truth is that it will be a gradual process. One cannot expect aneconomy that was crippled by policy — and decision-making paralysis for at leastthree years to suddenly revive and sprint as if nothing went wrong. My guess is that itwill take another few quarters before we see a clear transition to a higher GDP growthrate — something like a steady-state path of 7.5% to 7.7%. Moreover despite lowerenergy minerals and metal prices we may be facing new headwinds particularly on accountof the rapid de-growth in China. Even so I believe that the economy will see distinctlybetter days after two or three quarters which

I hope will continue thanks to better governance and implementation.

One reform that all of us in corporate India look forward to is having the uniformGoods and Services Tax (GST) being implemented nationwide from 1 April 2016. Although thedisruptions in Parliament during this monsoon session may not augur well for the deadlineI hope that the government does everything it can to hold the GST regime from thebeginning of the next fiscal year. India needs it.

Let me now move on to the next theme: the transformation that has taken place in yourCompany. As I wrote last year modernisation and expansion of your Company’s pulpingfacilities at Sabah (Malaysia) and Ballarpur have been completed making BILT a completelyintegrated pulp and paper enterprise — one that is now fully engineered to bestleverage growth in the markets where your Company and its subsidiaries operate.

Unfortunately however the nine-month period ending 31 March 2015 witnessed threenegative forces. The first was external: inadequate demand growth in India coupled withconsiderable excess capacity in China ASEAN countries as well as in India led to averitable glut in supply of paper and a resultant sharp drop in prices. Throughout thefirst nine months of FY2015 prices realised for most of the products were lower thanthose in the corresponding period of FY2014.

The other two factors were internal. Pulp production in Sabah was affected by thebreakdown in the wood chipping facility between September and November 2014. Consequentlyit produced 19% less bleached pulp and 11% less of paper. In addition your Company’srayon grade pulping facility at Kamalapuram continued to be very badly affected and founditself unable to compete with the landed price of imports into India. In fact marketconditions were such that all operations were suspended from May 2014. Without activefiscal assistance from the state government of Telengana it is unlikely that the facilitycan re-start operations.

These three factors have negatively affected your Company’s results. Net salesfell by 9.8% over the same nine-month period last year to Rs. 3625.9 crore. EBIDTAreduced by 17% to Rs. 590.3 crore. The burden of interest payments and depreciation onhigher capital stock led to a loss at the PBT level of Rs. 59.8 crore. And PAT net ofminority interest dropped from Rs. 49.3 crore last year to a loss of Rs. 21.35 crore.

Without doubt these are disappointing results the more so given the financialleverage of your Company. Where do we go from here? Other than hoping for better demandconditions and hence higher prices — over which we have little control — thetask has to involve a Totally focused and almost ruthless effort at reducing costswherever possible. This has been done earlier in the history of your Company. And I dobelieve that the present management can do so just as competently today. Moreover we needto think of what are the non-core assets in your Company as a whole and create a strategyto divest these at the right prices. In a sentence we need to be asset smart cost savvyand operationally much cannier than before. It can be done. Indeed your management hasassured me that it will be done.

Once we substantially tighten operations across a leaner enterprise your Company hasthe end-to-end structure scale product band-width and technology to turn in betterresults. Which I am confident it will. The battles may be tough. But the war can be won.

So join me in wishing your management the very best as it hunkers down to turn yourCompany around. As it must. And will.

Thanks for your support. I appreciate it greatly.

Yours sincerely

GAUTAM THAPAR
Chairman