DIRECTORS REPORT The Directors hereby present their Fifty ' / Sixth Annual Report and the Audited Accounts for the year ended 31st March 2016: DIVIDEND The Directors recommend payment of Dividend at Rs. 5 (Rs. five) per equity share, absorbing a sum of Rs. 630.68 lakhs. As per the provisions of the Income tax Act, 1961, no tax will be deducted at source on dividends distributed. However, the Company will bear the tax on the dividend distributed, amounting to Rs. 128.39 lakhs. OPERATIONS PRODUCTION During the year, the production at Unit : Erode was 1 23 630 tonnes, as compared to 1 18 378 tonnes, produced in the previous year. The production was higher by 5 252 tonnes, compared to the previous year. The production would have been higher but for the unfavorable market conditions. Unit : Erode also produced 24 842 tonnes of Wet Lap Pulp to augment the Pulp requirements of Unit : Tirunelveli. Unit : Tirunelveli produced 59 004 tonnes Paper during the year, as compared to 59 526 tonnes, produced in the previous year. Production would have been much higher but for the unfavourable market conditions and planned shut of Paper Machine to install Metering Size Press to facilitate manufacture of Surface Sized papers to service the multi-colour printing segment The overall Production for the Company was 1 82 634 tonnes of Paper and Boards for the year, as compared to 1 77 904 tonnes produced, in the previous year. SALES During the year, Unit : Erode sold 1 23 011 tonnes, against its production of 1 23 630 tonnes. The entire paper produced had been sold and zero stock was achieved at the end of the financial year. In addition, Unit : Erode, as part of its trading activity, had sold 9 tonnes of paper and Note Books and sold petroleum products totally valued at Rs. 2 128 lakhs. Closing Stock of Traded Goods was 165 tonnes, as on March 31, 2016. Unit : Tirunelveli sold 59 210 tonnes, during the year and achieved zero stock at the end of the financial year. The overall sale of Paper and Paper Boards effected by the Company during the year, was 1 82 230 tonnes, compared to 1 77 150 tonnes, sold during the previous year. PROFITABILITY The Revenue from Operations of the Company for the year was Rs. 1 03 578 lakhs, as against Rs. 1 01 996 lakhs, in the previous year. Profit before interest, depreciation, exceptional item and tax was Rs. 11 133 lakhs, for the Company as a whole, compared to Rs. 9 513 lakhs, in the previous year. After absorbing interest and depreciation of Rs. 3 229 lakhs and Rs. 2 876 lakhs, respectively, the Profit before tax was Rs. 5 028 lakhs, as compared to Rs. 2 541 lakhs, in the previous year. Despite difficult market conditions throughout the year, the Company could achieve improved profitability for the year 2015-16, due to higher production in Unit : Erode, improved captive power generation in its Captive Power Plant after retrofit and wheeling of power to Unit : Tirunelveli thereby eliminating purchase of costly third party power, increased Wet Lap Pulp supply from Unit: Erode that resulted in reduced consumption of costly Imported Pulp, favourable oil and coal prices, lower interest cost, due to small reduction in rate of interest charged by banks and repayment of term loans, etc. Due to substantial carried forward unabsorbed depreciation available on account of amalgamation of SPB Papers Limited, the Company was liable only to Minimum Alternate Tax (MAT). As the tax liability under the Regular Method is nil, the entire MAT paid is eligible to be carried forward as MAT Credit Entitlement for set off in future years. Consequently, the Current Tax liability for the year is Nil. As per the Accounting Standard (AS) 22 of The Companies (Accounting Standards) Rules, 2006, a sum of Rs. 1 470 lakhs has been transferred to Deferred Tax to the debit of the Profit and Loss Account, as against transfer of Rs. 806 lakhs in the previous year. In the result, Profit after tax for the year was Rs. 3 558 lakhs, as compared to Rs. 1 735 lakhs, in the previous year. FINANCE Instalments of Term Loans and interest dues on Term Loans and Working Capital borrowings were paid on or before the respective due dates. INTEREST FREE SALES TAX DEFERRAL LOAN The Company repaid Rs. 700 lakhs during the year and the balance outstanding as on March 31, 2016 was Rs. 2 863 lakhs. MARKET CONDITIONS Weak market conditions, that prevailed in 2014-15, deteriorated further during the year under review. The impact was more pronounced on the writing and printing segments. Consequently, the Company was compelled to carry high inventories of unsold stock throughout the first three quarters. Markets turned favorable during the last quarter of the year, facilitating the Company, to clear stocks and achieve 'Zero Stock' at the end of the year. Unit: Tirunelveli bore the brunt of this weak market conditions and throughout the first nine months of the year, had to carry high stocks, suffer production losses, due to frequent order changes and sub-optimal 'deckle' combination of market orders. Exports were stepped up at Unit: Tirunelveli to 25% of the production (15,006 tonnes in 2015-16, against 12,464 tonnes in 2014-15), often at un-remunerative prices. Domestic market, also witnessed frequent price corrections, induced by competitors' pricing strategies. Market conditions remain 'stable' as of now. EXPORT PERFORMANCE Unit : Erode exported 14 342 tonnes during the year, as compared to 12 329 tonnes, exported during 2014-15. The export proceeds amounted to US $ 11 393 757. In Rupee terms, the value of exports amounted to Rs. 7 502 lakhs. The exports constituted around 11.60% of the Production. Besides the above, the Unit : Erode also sold 399 tonnes, under deemed exports whose proceeds amounted to Rs. 221 lakhs. Unit : Tirunelveli exported 15 006 tonnes of Paper during the year, as against 12 464 tonnes, exported during the previous year. The export proceeds amounted to US$ 9 494 382. In Rupee terms, the value of exports amounted to Rs. 7 236 lakhs. The exports constituted around 25.43% of the Production. Besides the above, the Unit : Tirunelveli also sold 186 tonnes, under deemed exports and 124 tonnes under merchant exports whose proceeds amounted to Rs. 96 lakhs and Rs. 51 lakhs, respectively. TREE FARMING ACTIVITY The Company provides quality Clonal Seedlings of Eucalyptus, as well as Casuarina Seedlings, at subsidized rates, to interested farmers and assist them with technical help to achieve higher yields. Technical Support for this initiative is provided in association with the Department of Tree Breeding of Forest College and Research Institute, attached to Tamil Nadu Agricultural University, Coimbatore, through a Collaborative Research Project. In accordance with the Company's vision to achieve wood positive status, over seven crores of seedlings (Clonal Eucalyptus Seedlings and bare-rooted Casuarina Seedlings) were made available to farmers at subsidized rates for planting in about 16 000 acres of land. ISO 9001 / ISO 14001 ACCREDITATION Company's Quality Management Systems continue to be covered by the "ISO 9001" accreditation. Company's Environmental Management System, continues to enjoy "ISO 14001", accreditation. OHSAS 18001 CERTIFICATION The Company continues the enjoy certification under Occupational Health and Safety Assessment Series 18001 (OHSAS) which is an international standard that facilitates management of Occupational Health and Safety risks associated with the business of the organization. FOREST STEWARDSHIP COUNCIL (FSC) CERTIFICATION The Company has been certified under three Standards of FSC, viz., FSC-STD-40-004, FSC-STD-40-005 v2-1 and FSC-STD-40-003 v1-0. By this, the Company assures its stakeholders that the wood, wood fibre and pulp purchased by it are traceable to responsibly managed plantations and that adequate document controls are in place to ensure identification and traceability throughout the Chain of Custody. This also means that the Company is capable of manufacturing and selling FSC Pure and FSC Mixed Products in the domestic and international markets. AWARDS The Company received Special Export Award from CAPEXIL for the year 2012-13 for its export performance. EXPORT HOUSE STATUS The Company is accredited with "Star Export House" status, by the Government of India, Ministry of Commerce, Directorate General of Foreign Trade, in recognition of its export performance. DEPOSITORY SYSTEM As on March 31, 2016, 4 626 Members were holding their shares in demat form and 96 42 223 Equity shares, representing 76.44% of the total Paid up Equity Share Capital of the Company, have been dematerialized. SUBSIDIARY M/s Esvi International (Engineers & Exporters) Limited (Esvin) is a wholly owned subsidiary of the Company. Currently, Esvin holds properties and derives property income. MILL DEVELOPMENT / EXPANSION PLAN The Company embarked on implementation of two Projects, viz., Mill Development Plan II at Unit : Erode and Mill Expansion Plan at Unit: Tirunelveli. The Mill Development Plan II at Unit : Erode is aimed at : ? Augmentation of Paper production capacity from 1 15 000 tonnes to 1 65 000 tonnes per annum. ? Augmentation of Wood Pulp production from 1 15 000 tonnes to 1 45 000 tonnes per annum. ? Augmentation of Captive Power Plant capacity by 15 MW. ? Up-gradation of Waste Water Treatment facilities to comply with all relevant regulations. The Company has since secured the Environmental Clearance from MOEF for the Project. The Mill Development Plan II is estimated to cost Rs. 300 crores and will be implemented in convenient phases. Similarly, Mill Expansion Plan has been drawn up for Unit : Tirunelveli at an estimated cost of Rs. 180 crores. The Project is aimed at : ? Augmentation of Paper production capacity from 72 000 tonnes to 1 10 000 tonnes per annum by various de-bottlenecking measures and up-gradation of quality. ? Installation of a Coal based 18 MW Captive Power Plant. The Company has since secured necessary Environmental Clearance for undertaking this Project which is being implemented in convenient phases. CURRENT YEAR (2016-17) In Unit : Erode, the Production during April 2016 was 10 378 tonnes, as compared to 10 315 tonnes, produced during April 2015. In Unit : Tirunelveli, the Production was 5 400 tonnes in April 2016, as against 5 004 tonnes in April 2015. The overall Production for the Company, for the month of April 2016, was 15 778 tonnes. Total Revenue (net of Excise Duty and Cess), during April 2016, amounted to Rs. 6 202 lakhs, compared to Rs. 6054 lakhs, during April 2015. During April 2016, 869 tonnes of paper, valued at US$ 649 218 (equivalent to Rs. 431 lakhs) were exported. In addition, 43 tonnes, valued at Rs. 23 lakhs and 100 tonnes, valued at Rs. 51 lakhs, were exported under deemed exports and merchant exports, respectively. ENVIRONMENTAL PROTECTION The Company continues to provide utmost attention to the conservation and improvementof the environment. In Unit : Erode, the Power Boilers and Recovery Boilers are equipped with Electro Static Precipitators, to arrest dust emissions. The Company has installed and operates an Anaerobic Lagoon, for high BOD liquid effluents and a Secondary Treatment System, for total Mill effluent. These facilities are operating efficiently, enabling the Company to comply with the pollution control norms, prescribed by the Pollution Control Authorities, on a sustained basis. The treated effluent water continues to be utilised for irrigating nearby sugar cane fields. The implementation of the Mill Development Plan has enabled the Mill to enhance its environmental performance and compliance, thereby complying with the Charter on Corporate Responsibility for Environmental Protection (CREP) on a sustained basis. Unit : Tirunelveli is well equipped with efficient Electrostatic Precipitator for the Power Boiler and has an extensive green cover. Its treated waste water, after recycling, is used to irrigate the Company owned lands. MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT The Report on Management's Discussion and Analysis, as required under Clause 49(VIII)(D) of the Listing Agreement with Stock Exchanges covering industry structure and developments, opportunities and threats, outlook, discussion on financial performance, etc., is contained in "Management Discussion and Analysis Report" that forms an integral part of this Report and annexed as Annexure - I. CORPORATE GOVERNANCE Pursuant to Regulation 34 and Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Corporate Governance Report, together with the Certificate from the Company's Auditors confirming the compliance of conditions on Corporate Governance is given in Annexure - II. DISCLOSURE REQUIREMENTS UNDER SECTION 143(3) OF THE COMPANIES ACT, 2013 Section 143(3) of the Companies Act, 2013 requires the Board's Report to include several additional contents and disclosures compared to the earlier law. Most of them have accordingly been made in the Corporate Governance Report at appropriate places that forms an 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 given in 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 Act, 2013, have been followed. ? The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2016 and of the profit of the Company for the said period. ? 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. ? 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 that such internal financial controls are adequate and were operating effectively. ? The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS During the year, the Company gave an Inter Corporate Loan of Rs. 701 lakhs to M/s High Energy Batteries (India) Limited to meet their working capital requirements. The amount was later utilized partly to buy 2 80 000 Equity Shares of M/s Ponni Sugars (Erode) Limited held by them and the balance was repaid during the year. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY The Corporate Governance Report contains relevant details on the nature of Related Party Transactions (RPTs) and the policy formulated by the Board on Material RPTs. Particulars of Contracts or Arrangements with Related Parties referred to in Section 188(1) of the Companies Act, 2013 is furnished in accordance with Rule 8(2) of the Companies (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 are no material changes and commitments in the business operations of the Company since the close of the financial year on 31st March 2016 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 Foreign Exchange Earnings and Outgo, as required under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014, is given in Annexure-V. CORPORATE SOCIAL RESPONSIBILITY (CSR) Section 135 of the Companies Act, 2013 mandates every company having minimum threshold limit of net worth, turnover or net profit as prescribed to constitute a Corporate Social Responsibility Committee of the Board, formulation of a Corporate Social Responsibility Policy that shall indicate the activities to be undertaken by the Company as specified in Schedule VII to the Companies Act, 2013 and duly approved by the Board, fix the amount of expenditure 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 CSR Committee of the Board and formulated a CSR Policy. The CSR Report, forming part of this Report, 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 in Annexure - VII. CASH FLOW STATEMENT As required under Regulation 53 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Cash Flow Statement is attached to the Balance Sheet. INDUSTRIAL RELATIONS Relations between the Management and Employees were cordial throughout the year under review. In Unit : Erode, a long term wage settlement for the period April 1, 2014 to March 31, 2019, has been reached with Labour Unions under Section 12(3) of the Industrial Disputes Act, 1947, before the Joint Commissioner of Labour, Coimbatore with regard to payment of wages, bonus, production incentive and other benefits. Discussions with Staff Association are in progress with regard to payment of such benefits. In Unit: Tirunelveli, a long term agreement has already been reached with the Union covering the wages / salary and other benefits. DIRECTORS Sri S K Prabakar, IAS, the Nominee Director of Tamilnadu Industrial Investment Corporation Limited (TIIC) ceased to be a Director on our Board with effect from 1st April 2015, as provided under Section 167(1)(b) of the Companies Act, 2013, due to his non-attendance at any of the Board Meetings in the last 12 months. He was re-nominated to the Board on 1st August 2015. His nomination was withdrawn and in his place TIIC nominated its Principal Secretary/ Managing Director Mrs Supriya Sahu, IAS as its Nominee Director on the Board of our Company. Sri Hans Raj Verma, IAS, Nominee Director of Tamilnadu Government ceased to be a Director on our Board with effect from 26th March 2016, as provided under Section 167(1)(b) of the Companies Act, 2013, in view of his non-attendance at any of the Board Meetings in the last 12 months. All the Independent Directors have given the declaration that they met the criteria on independence, as laid down under Section 149(6) of the Companies Act, 2013. The performance evaluation of Independent Directors has been done by the entire Board of Directors, excluding the Director being evaluated at the Board Meeting held on 26th March 2016. The Board on the basis of such performance evaluation determined to continue the term of appointment of all the Independent Directors who have been appointed by the Company at its 54th Annual General Meeting for a fixed tenure till 31st March 2019. AUDITORS M/s Suri& Co., and M/s S Viswanathan LLP, Chartered Accountants, Chennai have been appointed as statutory auditors of the Company till the conclusion of the 57th Annual General Meeting and M/s Maharaj N R Suresh & Co., till the conclusion of the 58th Annual General Meeting, subject to ratification by Members at every Annual General Meeting. Accordingly, requisite Resolution for ratifying their appointment is proposed in the manner stated in the Notice for the 56th Annual General Meeting. Particulars of Statutory Auditors, Cost Auditors, Internal Auditors and the Secretarial Auditors have been given in the Corporate Governance Report that forms an integral part of this report. Secretarial Audit Report, as required by Section 204(1) of the Companies Act, 2013, is attached in Annexure - VIII. ACKNOWLEDGEMENT The Directors place on record their great appreciation of the tireless efforts of all the Executives and Employees of the Company for their commendable performance in a difficult year. The Directors also express their sincere thanks to the Government of India, Government of Tamilnadu and Commercial Banks, for their understanding, guidance and assistance and Dealers, Customers, Suppliers and Shareholders, for their excellent support, at all times. On behalf of the Board N GOPALARATNAM Chairman Place : Chennai date : May 28, 2016 |