The Directors hereby present their Fifty Ninth Annual Report and the Audited Accountsfor the year ended 31st March 2019: The Company has adopted the IndianAccounting Standards (IndAS) from Financial Year 2017-18 as mandated. Accordingly thefinancial statements for current year including comparative figures of previous year arebased on IndAS and in accordance with the recognition and measurement principles statedtherein as well as other accounting principles generally accepted in India. While thishas no major impact for the Statement of Profit and Loss there is and would be periodicalimpact for "Other Comprehensive Income" in measuring and restating investmentsat fair value.
| ||2018-19 ||2017-18 |
| ||(in tonnes) ||(in tonnes) |
|Production ||2 09 015 ||1 88 203 |
|Sales ||2 07 971 ||1 86 595 |
| ||(र crores) ||(र crores) |
|Revenue from || || |
|Operations || || |
|Sales and Other || || |
|Operating Income ||1325.24 ||1117.79 |
|Less: Excise Duty and || || |
|Excise Cess ||-- ||13.14 |
| ||1325.24 ||1104.65 |
|Other Income ||23.06 ||9.40 |
|Total Revenue ||1348.30 ||1114.05 |
|Profit before interest depreciation exceptional item and tax ||318.90 ||216.59 |
|Finance Cost ||13.81 ||14.30 |
|Depreciation ||33.78 ||31.94 |
|Exceptional Item ||-- ||4.84 |
|Profit before tax ||271.31 ||175.19 |
|Provision for current tax ||58.20 ||36.02 |
|Transfer to / (from) || || |
|Deferred Tax ||23.11 ||16.28 |
|Net Profit ||190.00 ||122.89 |
The Board of Directors recommend payment of Dividend at र 20 (twenty) per EquityShare absorbing a sum of र 25.23 crores.
As per the provisions of the Income tax Act 1961 no tax will be deducted at source ondividends distributed. However the Company will bear the tax on the dividend distributedamounting to र 5.18 crores.
As per Ind As 10 Events after the reporting period Proposed Dividend on Equity Sharesand Corporate Tax on dividend being a non adjusting event at the Balance Sheet date isnot recognised as a liability in the accounts for the year ended March 31 2019.The same will be recognised in the year of payment viz. year ending March 31 2020.
| ||2018-19 |
| ||(र crores) |
|Net profit for the year ||190.00 |
|Add: || |
|Surplus brought forward from the previous year ||89.21 |
| ||279.21 |
|Less: || |
|Re-measurement of Defined || |
|Benefit Plans ||0.02 |
|Dividend paid during the year (For ||18.92 |
|Financial Year 2017-18) || |
|Tax on Dividend distribution ||3.89 |
|Transfer to General Reserve ||100.00 |
|Balance carried forward ||156.38 |
During the year the production at Unit : Erode was 1 32 379 tonnes as comparedto 1 21 594 tonnes produced in the previous year. The production was higher by 10 785tonnes compared to the previous year due to improved performance of Paper Machines.
Unit : Erode also produced 32 138 tonnes of Wet Lap Pulp to augment the Pulprequirements of Unit : Tirunelveli.
Unit : Tirunelveli produced 76 636 tonnes of Paper during the year as compared to 66609 tonnes produced in the previous year. The production was higher by 10 027 tonnescompared to the previous year mainly due to increased machine speed and basis weightoptimisation.
Overall Production for the Company was 2 09 015 tonnes of Paper and Boards forthe year as compared to 1 88 203 tonnes produced in the previous year.
After taking into account 1040 tonnes towards in-house consumption Unit : Erode sold1 31 339 tonnes against the production of 1 32 379 tonnes and achieved zero stock atthe end of the financial year.
In addition Unit : Erode as part of its trading activity had sold petroleum productsvalued at र 26.88 crores and 61 tonnes of Note Books. Closing Stock of Traded Goods was11 tonnes as on March 31 2019.
Unit : Tirunelveli sold 76 632 tonnes after taking into account 4 tonnes towardsin-house consumption and achieved zero stock of finished goods at the end of the financialyear.
In addition Unit : Tirunelveli as part of its trading activities had sold 644 tonnesof Note Books. Closing stock of traded goods was 205 tonnes as on March 31 2019.
The overall sale of Paper and Paper Boards effected by the Company during the year was2 07 971 tonnes compared to 1 86 595 tonnes sold during the previous year.
The Revenue from Operations of the Company for the year was र 1325.24 crores asagainst र 1 117.79 crores in the previous year.
Profit before interest depreciation exceptional item and tax was र 318.90 croresfor the Company as a whole compared to र 216.59 crores in the previous year.
After absorbing interest and depreciation of र 13.81 crores र 33.78 croresrespectively the Profit before tax was र 271.31 crores as compared to र 175.19 crores in the previous year.
The Company registered commendable financial results contributed by all roundoperational improvements both in Unit : Erode and Unit : Tirunelveli. Major factorsthat had contributed to improved financial performance during the year were :
Higher De-inked Pulp production enabled replacement of costly imported pulp.
Optimisation in Raw Material Mix and Chemicals.
Higher sales realisation due to better Product mix.
Improved paper market conditions and favourable exchange rate.
Higher Other income.
Lower Interest and Financing Charges due to repayment of Term Loans and non-utilisationof working capital limits.
For the year ended 31st March 2019 the tax liability under the normalmethod works out to र 79.49 crores after deduction under Section 80-IA of theIncome tax Act 1961. The tax liability under MAT works out to र 58.20 crores.Consequently the Company became liable for the net current tax liability of र 79.49crores. The Company is eligible to utilise र 21.29 crores as MAT Credit Entitlement andconsequently the net payment of tax will be र 58.20 crores.
The net Deferred Tax liability for the year ended March 31 2019 was र 23.11 crores.
In the result profit after tax for the year ended March 31 2019 was र 190.00crores as compared to र 122.89 crores in the previous year.
Instalments of Term Loans and interest dues on Term Loans and Working Capitalborrowings were paid on or before the respective due dates.
INTEREST FREE SALES TAX DEFERRAL LOAN
The Company repaid र 3.89 crores during the year and the balance outstandingas on March 31 2019 was र 14.85 crores.
The year under review commenced with a strong demand for Copier grades as suppliesfrom the domestic mills together with the limited imports could not meet the total demandresulting in a gap in supplies.
Demand for other white grades like Creamwove and Maplitho exhibited a better demandthan the last year permitting opportunities for price revisions.
Flow of imported Copier grades and Maplitho grades gradually moderated when the CustomsDepartment imposed an Anti-dumping Duty on imported Copier if the landed price was lessthan USD 855 on 4th December 2018. The Anti-dumping Duty payable isequal to the difference between the bench mark price and the actual price of import incase it was lower than the bench mark price.
With the prices of imported coated paper and boards being lower than the domesticprices demand for MG Boards and certain Yankee grades was poor throughout the year.
Demand picked up for the white grades in Q-4 more gradually when compared to earlieryea र Zero stock in Q-4 this year was achieved with relative ease at the end of thefinancial year for the 21st time in the last 25 years.
Unit : Erode exported 16 993 tonnes during the year as compared to 14 446 tonnesexported during 2017-18. The export proceeds in Foreign Currency for the year 2018-19amounted to US$ 15 211 167 and Euro 160 056. In Rupee terms the value of exports amountedto र 107.03 crores. Export constituted around 12.84% of the Production.
Unit : Erode also sold 62 tonnes during the year under deemed exports whose proceedsamounted to र 0.40 crores.
Unit : Tirunelveli exported 17 825 tonnes of Paper during the year as against 14 484tonnes exported during 2017-18. The export proceeds in Foreign Currency amounted to US $15 541 015. In Rupee terms the value of exports amounted to र 111.01 crores. Exportconstituted around 23.26% of the Production.
Unit : Tirunelveli also sold 641 tonnes during the year under deemed exports whoseproceeds amounted to र 3.91 crores.
TREE FARMING ACTIVITY
The Company continues to provide quality Clonal Seedlings of Eucalyptus as well asCasuarina Seedlings at subsidised rates to interested farmers and assist them withtechnical help to achieve higher yields.
In addition the Company had identified Melia-Dubia a high yielding fast growingspecies suitable for Pulp production. The Company has been providing Melia- DubiaClones to interested farmers.
Technical Support to the farmers for this initiative is being provided in associationwith the Department of Tree Breeding of Forest College and Research Institute attached toTamil Nadu Agricultural University Coimbatore through a Collaborative Research Project.
In accordance with the Company's vision to achieve wood positive status over thirteencrore Seedlings (Clonal Eucalyptus Seedlings bare-rooted Casuarina Seedlings andMelia Dubia Clones) were made available during the year to farmers at subsidised ratesfor planting in about 16 000 acres of land.
ISO 9001 / ISO 14001 ACCREDITATION
The Company's Quality Management Systems and Environment Management Systems continue tobe covered under ISO 9001 and ISO 14001 Accreditations.
Both ISO 9001 and ISO 14001 Standard have undergone revision to 2015 Standards whichlays emphasis on role of top management adoption of risk management and changemanagement. All these changes are to facilitate sustainability in business performance.
OHSAS 18001 CERTIFICATION
The Company continues to enjoy certification under Occupational Health and SafetyAssessment Series 18001 (OHSAS) which is an international standard that facilitatesmanagement of Occupational Health and Safety risks associated with the business of theorganisation.
FOREST STEWARDSHIP COUNCIL (FSC) CERTIFICATION
The Company has been certified under three Standards of FSC viz. FSC-STD-40-004FSC-STD-40-005 v2-1 and FSC-SSTD-40-003 v1-0. By this the Company assures itsstakeholders that the wood and wood fibre(pulp) purchased by it are traceable toresponsibly managed plantations and that adequate document controls are in place to ensureidentification and traceability throughout the Chain of Custody. This also means that theCompany is capable of manufacturing and selling FSC Pure and FSE Mixed Products in thedomestic and international markets.
The Company won the following Awards and recognitions during the year :
"Tamil Nadu Pollution Control Board Green Award" for the year 2017 for theexcellent contribution to the Environmental protection.
"CII Excellent Energy Efficiency Unit Award" for the year 2018.
"Best maintained outlet during 2017-18 Award" for Namakkal Regiongiven by Indian Oil Corporation Limited to the petroleum products Retail outlet operatedby the Company.
EXPORT HOUSE STATUS
The Company continues to be accredited with "Star Export House" Status by theGovernment of India Ministry of Commerce Directorate General of Foreign Trade inrecognition of its export performance.
As on March 31 2019 9 001 Shareholders were holding Shares in Demat form and 99 30518 shares have been dematerialised representing 78.73% of the total Equity Share Capitalof the Comany.
M/s Esvi International (Engineers & Exporters) Limited (Esvin) is a wholly ownedsubsidiary of the Company. Currently Esvin holds properties and derives property income.
MILL DEVELOPMENT / EXPANSION PLAN
As advised last year the Company had embarked on the implementation of two Projectsviz. Mill Development Plan II at Unit : Erode and Mill Expansion Plan at Unit :Tirunelveli.
Unit : Erode
The Company has completed Phase - I of the Mill Development Plan II (MDP - II) in theyear 2017-18 at a cost of र 75 crores. Phase - II of MDP - II with an estimatedproject cost of र 50 crores is nearing completion.
The successful implementation of MDP - II has helped the Company to increase theProduction of Paper to 1 32 000 tpa and the production of Unbleached Wood Pulp to 1 45 000tonnes per annum in Unit : Erode.
In order to further increase production of Paper and Pulp in its Unit : Erode theCompany has drawn up Mill Development Plan - III (MDP - III) at an estimated costof र 315 crores. The implementation period of this project is estimated at 9 months to21 months and is expected to be completed in phases.
The Techno Feasibility Study of the project has been completed and the Board ofDirectors of the Company after detailed appraisal and review of the Projectreport have approved the Project. The work on the Project has since commenced in theFinancial Year 2019-20.
The MDP-III at Unit : Erode will consist of :
Upgradation and Modernisation of the Paper Machines to increase theCapacity from 1 32 000 tonnes per annum to 1 65 000 tonnes per annum.
Upgradation and Modernisation of the RDH Pulp Mill to increase the Capacity to 154 000 tonnes per annum.
Upgradation of the Recovery Island and
Augmentation of Waste Water Treatment Plant.
Unit : Tirunelveli
Mill Expansion Plan in Unit : Tirunelveli undertaken at a cost of र 75 Crores isnearing completion.
Film Press and Top Wire Former were installed in the Paper Machine to help in improvingthe quality of paper as well as stepping up production. Re-commissioned De-Inking Planthelps us to step up pulp production and reduce use of expensive imported pulp. Re-build ofPower Boiler has also been completed to generate additional power. Waste Water TreatmentPlant has been augmented to handle higher Wetlap Pulp Product.
Considering that the Paper Industry is expected to grow at a CAGR of 5 - 6 % over thenext few years and considering the demand supply gap that is currently prevailing inIndia for high quality paper to continue Company is actively pursuing both Organic andInorganic Growth opportunities.
CURRENT YEAR (2019-20)
In Unit : Erode the Production during April 2019 was 10 611 tonnes as compared to 9712 tonnes produced during April 2018. In Unit : Tirunelveli the Production was 5355 tonnes in April 2019 as against 5 058 tonnes in April 2018. The overall Productionfor the Company for the month of April 2019 was 15 966 tonnes. Total Value ofProduction during April 2019 amounted to र 88.67 crores compared to र 77.60 croresduring April 2018.
During April 2019 782 tonnes of paper valued at र 6.14 crores were exported.
Both Mettur Dam (for Unit : Erode) and Papanasam Dam (for Unit : Tirunelveli) have poorstorage level. The Barrage across River Cauvery downstream of Unit : Erode and scatteredrains in southern parts of Tamilnadu have helped the two units to maintain uninterruptedproduction.
The Company continues to provide utmost attention to the conservation and improvementof the environment. In Unit : Erode the Power Boilers and Recovery Boilers are equippedwith Electro Static Precipitators to arrest dust emissions.
The Company has installed and operates an Anaerobic Lagoon for high BOD liquideffluents and a Secondary Treatment System for total Mill effluent. These facilities areoperating efficiently enabling the Company to comply with the Pollution Control normsprescribed by the Pollution Control Authorities on a sustained basis. The treatedeffluent water continues to be utilised for irrigating nearby sugar cane fields.
Installation of a new Electro Static Precipitator in the Chemical Recovery Boilerunder Mill Development Plan has helped the Company in controlling emission.
A Twin Roll Press has been added in the Wood Pulp Line to control and reduce COD inwaste water.
Alkaline Scrubbing has been provided for the non-condensable gasses for elimination ofemission of mal-odorous gases.
The Company has implemented several projects under Mill Development Plan to reduceconsumption of water as well as energy. Waste water generation in the Mill has beenbrought down significantly.
In accordance with the directives of CPCB adequate monitoring facility has beenprovided for air emissions and liquid effluent discharge.
Online connectivity has been provided for monitoring of emissions and dischargesreal-time by both CPCB and TNPCB.
In addition further treatment facility has been proposed for waste water under theMill Development Plan.
Unit : Tirunelveli is well equipped with efficient
Electro Static Precipitator for the Power Boiler and has an extensive green cover. Itstreated waste water after recycling is used to irrigate the Company owned lands. As partof the Mill Expansion Plan the Waste Water Treatment Plant has been augmented with aDissolved Air Floatation Cell and Anaerobic Digester.
MANAGEMENT'S DISCUSSIONS AND ANALYSIS REPORT
The Report on Management's Discussion and Analysis as required under Clause49(VIII)(D) of the Listing Agreement with Stock Exchanges covering industry structure anddevelopments opportunities and threats outlook discussion on financialperformance etc. is contained in "Management
Discussion and Analysis Report" that forms an integral part of this Report andannexed as Annexure - I.
Pursuant to Regulation 34 and Schedule V to the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 Corporate
Governance Report together with the Certificate from the Company's Auditors confirmingthe compliance of conditions on Corporate Governance is given in Annexure - II.
DISCLOSURE REQUIREMENTS UNDER SECTION 134(3) OF THE COMPANIES ACT 2013
Section 134(3) of the Companies Act 2013 requires the Board's Report to includeseveral additional contents and disclosures compared to the earlier law. Most of them haveaccordingly been made in the Corporate Governance Report at appropriate places that formsan integral part of this Report.
EXTRACT OF THE ANNUAL RETURN
The details forming part of the Extract of the Annual Return in Form MGT - 9 is givenin Annexure - III.
DIRECTORS' RESPONSIBILITY STATEMENT
While preparing the annual accounts the Company has adhered to the following:
Applicable Accounting Standards referred to in Section 129(1) of the Companies Act2013 have been followed.
The Directors have selected such accounting policies and applied them consistently andmade judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2019 and of the profit ofthe Company for the said period.
The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
The Directors have prepared the annual accounts on a "going concern" basis.
The Directors have laid down internal financial controls to be followed the Company andthat such internal financial controls are adequate and were operating effectively.
The Directors have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
PARTICULARS OF LOAN GUARANTEES OR INVESTMENTS
During the year the Company provided a short term Inter Corporate Loan of र 0.60crore to SPB Projects and Consultancy Limited for a period of twelve months.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY
The Corporate Governance Report contains relevant details on the nature of RelatedParty Transactions (RPTs) and the policy formulated by the Board on Material RPTs.Particulars of Contracts or Arrangements with Related Parties referred to in Section188(1) of the Companies Act 2013 is furnished in accordance with Rule 8(2) of theCompanies (Accounts) Rules 2014 in Form AOC - 2 as Annexure - IV.
MATERIAL CHANGES AND COMMITMENTS
There was no change in the nature of business of the Company during the year. There areno material changes and commitments in the business operations of the Company since theclose of the financial year on 31st March 2019 to the date of this Report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information relating to Conservation of Energy Technology Absorption and ForeignExchange Earnings and Outgo as required under Section 134(3)(m) of the Companies Act2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is given in Annexure - V.
CORPORATE SOCIAL RESPONSIBILITY
Section 135 of the Companies Act 2013 mandates every Company having minimum thresholdlimit of net worth turnover or net profit as prescribed to constitute a Corporate SocialResponsibility Committee of the Board formulation of a Corporate Social ResponsibilityPolicy that shall indicate the activities to be undertaken by the Company as specified inSchedule VII to the Companies Act 2013 and duly approved by the Board fix the amount ofexpenditure to be incurred on the activities and monitor the CSR Policy from time to time.
Since your Company falls within the minimum threshold limits constituted a CSRCommittee of the Board and formulated a CSR Policy. The CSR Report forming part of thisReport is furnished in Annexure - VI.
PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 of the Companies(Appointment and Remuneration of Management Personnel) Rules 2014 is furnished inAnnexure - VII.
CASH FLOW STATEMENT
As required under Regulation 53 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a Cash Flow Statement is attached to the Balance Sheet.
Relations between the Management and Employees were cordial throughout the year underreview.
During the year Tamilnadu Government withdrew the nomination of Mr Md Nasimuddin IASand in his place nominated Sri Shambhu Kallolikar IAS the Principal Secretary toGovernment Environment and Forests Department as its Nominee Director on the Board ofour Company.
Sri R V Gupta stepped down from the Board of our Company at the close of business hourson March 31 2019 after a long tenure of nearly 16 years as a Director on the Boardof our Company.
Your Directors place on record the valuable services rendered by Sri R V Gupta and MrMd Nasimuddin IAS during their tenure as Directors of the Company.
Sri Mohan Verghese Chunkath IAS (Retd.) was appointed as an Independent Director onthe Board of our Company for a period of five years with effect from April 01 2019.
All the Independent Directors have given the declaration that they meet the criteria onindependence as laid down under Section 149(6) of the Companies Act 2013. Theperformance evaluation of Independent Directors has been done by the entire Board ofDirectors excluding the Director being evaluated at the Board Meeting held on 27thMarch 2019. The Board on the basis of such performance evaluation determined to continuethe term of appointment of all the Independent Directors who have been appointed by theCompany for a fixed tenure till 31st March 2019 for three Directors and 28thSeptember 2019 for two Directors.
M/s Maharaj N R Suresh & Co. and M/s R Subramanian and Company LLPChartered Accountants continue to be the Statutory Auditors of the Company.
Particulars of Statutory Auditors Cost Auditors Internal Auditors and the SecretarialAuditors have been given in the Corporate Governance Report that forms an integralpart of this report. Secretarial Audit Report as required by Section 204(1) of theCompanies Act 2013 is attached in Annexure - VIII.
The Directors place on record their great appreciation of the tireless efforts of allthe Executives and Employees of the Company for their commendable performance in achievingexcellent financial results. The Directors also express their sincere thanks to theGovernment of India Government of Tamilnadu and Commercial Banks for theirunderstanding guidance and assistance and Dealers Customers Suppliers and Shareholdersfor their excellent support at all times.
On behalf of the Board
May 25 2019