DIRECTORS' REPORT TO THE MEMBERS Your Company's Directors are pleased to present the 35th Annual Report of the Company along with Audited Accounts for the financial year ended 31st March 2015. 2. DIVIDEND Your Directors recommend a dividend of 60% for the year ended 31st March, 2015. The Dividend, if approved by the shareholders atthe AGM, will be paid to the equity shareholders whose names appear in the Register of Members as on 18th September, 2015. Expenditure on the proposed dividend, will be Rs. 49.98 cr. inclusive of taxes. 3. TRANSFER TO RESERVES The Company has transferred Rs. 100 cr. to General Reserves and Rs. 5.42 cr. to Debenture Redemption Reserve out of the amount available for appropriation. Rs. 31.31 cr. is proposed to be retained in the Profit & Loss Account. 4. PERFORMANCE HIGHLIGHTS OF THE YEAR a) Operations 1. Sales turnover crossed Rs.2000 cr mark for the second time. 2. Profit before tax of Rs.230.13 cr. was an all time record. Profit after tax of Rs.166.73 cr. exceeded the PAT achieved in 2013-14 by Rs. 5.60 cr. 3. 373259 MT of Paper and 284091 MT of Pulp were produced during the year. 4. Total sales was 337689 MT. Domestic sales constituted 78.44% and Export 21.56%. 5. 6208.84 lakh units of power were generated. 5841.57 lakh units were consumed. 367.27 lakh units were exported to the state grid. Power drawn from State Grid constitutes only 1.52% of total power consumed. 6. Received 127588 Renewable Energy Certificates (REC) for power generated from the steam produced in the Recovery Boiler. 48200 RECs were sold during the year yielding revenue of Rs. 7.12 crores (Net of exchange fees and service tax). 196381 RECs have been carried forward for sales during 2015-16. 7. Two bio-methanation plants set up within the factory premises have generated cumulatively 91.71 lakh m3 of methane gas during the year 2014 - 2015. By using the methane gas in lime kiln, TNPL has saved consumption of 5378 kl of high cost furnace oil during the year. 8. Two windfarms with an installed capacity of 35.5MW generated 469.20 lakh Kwh Units of'Green Power'. 9. The Company is involved in Farm Forestry and Plantations covering 105968 acres benefitting 20218 farmers in 29 districts of Tamilnadu. 10. Overall Water Consumption was 51 kl. Per MT of paper. 11. 161910 tonnes of cement were produced during the year. TNPL is the first and only company in the Paper Industry to convert mill wastes into high grade cement. 12. The company repaid on schedule Term Loans amounting to Rs.359.89 cr. b. New Projects 1. The company is setting up a state-of-the-art Multilayer Double Coated Board Plant with an annual capacity of 200,000 MT per annum as a green field project in Mondipatti village, Manaparai taluk, Trichy District. The project is progressing as per schedule. The project is targeted to be completed by December 2015. 2. The company is expanding the cement production capacity set up as part of Lime Sludge and Fly ash Management from 600 tpd to 900 tpd. The Project is expected to be completed by December 2015. 3. The company has acquired 38.40 acres land with an Industrial shed measuring 11,248 Sq.Mts at Mayanur in Karur District for setting up paper conversion centre and setting up units related to paper industry. The conversioncentrewillbemadeavailableforsettingup conversion units. This project is also expected to be completed by December 2015. c. Contribution to Environment 1. During January'15, M/s. TuV India Limited, a subsidiary of TuV NORD, Germany carried out Surveillance Audit of TNPL's Environmental Management System and recommended to maintain the certificate till February 2017 as TNPL is conforming to the requirements of ISO 14001:2004 standards. 2. TNPL has launched a new "Eco-friendly" product during the year under the brand name "GreenPal". This paper is produced from Bagasse and recycled fibres. No tree is cut for production of this product, thus making it a totally environmental friendly product. 3. TNPL's treated effluent water is used for irrigation of around 1700 acres of land under TNPL Treated Effluent Water Lift Irrigation Scheme (TEWLIS) and 306 acres of land under Captive Plantation scheme. 4. The bio-gas generated in Bio-methanation plant using bagasse wash effluent with high COD is being used in the lime kilns in lieu of furnace oil . 5. TNPL celebrated the "World Environment Day" on 5th June, 2014 in Kagithapuram unit. 5000 tree saplings were planted in and around cement plant unit for improving green cover. Environment awareness rally was conducted in Unit II at Mondipatti village, Manapparai Taluk involving school children. d. Corporate Social Responsibility (CSR) The company has constituted a Committee called "Corporate Social Responsibility Committee" comprising of 5 Independent Directors. The Committee monitors CSR activities. 1. TheCompanyaimstospend2%oftheaveragenet profit of the company before tax in the last three financial years . The company spent Rs.3.73 cr. on CSR activities during the year under review. 2. The Company has undertaken CSR activities as per the CSR policy (available on your company's website www.tnpl.com) The details are contained in the Annual Report on CSR activities vide Annexure -1, forming part of this Report. The CSR activities are mainly focused on Education, Health care, Socio-economic development, Environmental sustainability and Culture & Heritage promotion. e. Contribution to Innovation and New knowledge development 1. The company nurtures creativity and innovation through its R & D activities which are carried out largely in-house. A few activities are outsourced when warranted. 2. The R & D activities focus on product development, process improvement, raw material substitution, development of new products and protection of the environment. 3. The company spent Rs. 6.12 Cr. on R & D activities during the year. f. Awards • The Company has received " IPMA Paper Mill of the year Award" for the year 2013-14 from Indian Paper Manufacturers' Association (IPMA).The company has received the above award Fourth time and for the Second time in a row. • Dun & Bradstreet, Mumbai, has selected TNPL as the "Top Indian Company" under the sector paper for Dun & Bradstreet Corporate Awards 2015 for the Fourth time in a row. • Confederation of Indian Industry (CII) in its 15th National Award for Excellence in Energy Management 2014, has selected TNPL as one of the 49 companies for the 'Excellent Energy Efficient Unit' Award. 5. MARKET TRENDS a. General The installed capacity of Paper industry in India is approximately 12.75 million tonnes. The Industry's average capacity utilization is 89%. The overall consumption inclusive of imports and net of exports is 13.10 million tonnes. The average per capita consumption in India is around 11 kgs. against the global average consumption of 56 kgs. The world demand growth for paper is around 1.5%. With greater emphasis on education and literacy rate and positive trend in the growth of the economy, the demand growth for paper in India is estimated to be around 6%. Excise duty and Import duty on paper remained unchanged at 6% and 10% respectively. b) Printing & Writing Paper Between 2008 and 2011, many mills added capacity and supplies exceeded demand. Consequently, paper prices dropped in 2012. During 2013, Paper industry faced scarcity in supplies of pulpwood leading to mills importing wood logs and chips at higher prices impacting margins. Consequent to the steep increase in input costs, paper prices increased during 2013. The price rise did not last long. With the paper prices declining in the International market and Rupee strengthening against USD, large volume consumers and traders started importing paper in large volume under Free Trade Agreements (FTA). The domestic industry thus faced unprecedented challenges, both on cost front and on market front during 2014-15. Prices and sales declined eroding margins. With seasonal demand from the Education Sector and positive sign in the economic growth, the market started showing signs of improvement since April 2015. c) Packaging Boards The market for Packaging Board is estimated at 2.4 Million tonnes. Grey-back Boards account for 1.08 million tonnes (45%), White-back Coated Boards and other high-end varieties like Folding Boxboard, Solid Bleached Sulphate Boards, etc. account for the remaining 1.32 million tonnes (55%) The demand growth in the high end segments is estimated at 11.5% per annum. d) Outlook With the demand growth anticipated at 6% per annum, the domestic consumption is expected to rise to 23.50 mtpa. by 2024-25 . There is good potential for domestic manufacturers for adding capacity in Paper and Board about 1 mtpa. Consistent growth in the economy and greater emphasis on education and literacy by the Government are considered the key drivers for demand growth in printing & writing paper. Demand for better quality packaging of food & health care products and high value consumer products are the key demand drivers for growth in Paper Board. e) TNPL response to Market Trends TNPL has increased its production capacity consistently, keeping in pace with Industry growth. The Company is now setting up a Multilayer Double Coated Board Plant with a capacity of 2 lakh MT per annum. With this, the total production capacity of the company will rise to 6 lakh MT per annum from the Financial Year 2016-17. 6. DIRECTORS & KEY MANAGERIAL PERSONNEL The Board of Directors have extended the service of Thiru R Mani as Director (Operations) on contract basis for one year from 27th February, 2015. Thiru R Mani will hold office upto the date of the forthcoming Annual General Meeting and is eligible for appointment as Director at the AGM. In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company, Thiru T Udhayachandran IAS, Director and Thiru Mahesan Kasirajan IAS, Director retire by rotation at the forthcoming Annual General Meeting. They are eligible for reappointment as Directors. The Board of Directors, at its meeting held on 29th May, 2014 appointed Thiru V Sivakumar as the Company Secretary - a key managerial person in accordance with the provisions of Section 203 of the Companies Act, 2013. 6.1 Declaration from Independent Directors on Annual Basis The Independent directors have submitted their disclosure to the Board confirming that they fulfill all the requirements as to qualify for their appointment as an Independent Director under the provisions of Section 149 of the Companies Act, 2013 as well as Clause 49 of the Listing Agreement. The Board confirms that the said independent directors meet the criteria as laid down under the Companies Act, 2013 as well as Clause 49 of the Listing Agreement. 6.2 Remuneration Policy The Board, on the recommendation of the Nomination & Remuneration Committee has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. 6.3 Meetings A calendar of Meetings is prepared and circulated in advance to the Directors. During the year, Eight Board Meetings and Seven Audit Committee Meetings were convened and held, the details are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and Clause 49 of the Listing Agreement. 6.4 Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit and Nomination & Remuneration Committees. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interest of the Company and its minority shareholders etc. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The Directors expressed their satisfaction with the evaluation process. 7. INTERNAL COMPLAINTS COMMITTEE In accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 & the Rules made thereunder the Company has constituted an Internal Complaints Committee (ICC) as per section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with its Rules. The ICC will comprise the following Members: (i) Tmt.R.S.Tamilarasy, Deputy Manager (Lab) - Presiding Officer (ii) Thiru.P.Sundaram, MSW, Manager - HR (Member) (iii)Tmt.M.Pemila Beham, MSW, Assistant Officer - HR (Member) The above members are amongst employees preferably committed to cause of women or who have had experience in social work or have legal knowledge. During the year under review, there were no complaints referred to the Committee. 8. AUDITORS a) Statutory Auditors The Comptroller and Auditor General of India appointed M/s. Raman Associate, Chartered Accountants, Chennai, as the Statutory Auditors of the Company for the Financial year 2014-15 b) Cost Auditors Pursuant to Sec.148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules,2014, the cost audit records maintained by the company in respect of its cement activity is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s Raman & Associates, to audit the cost accounts of the company for the year 2014-15. The cost audit report for the year 2014-15 will be submitted to the Central Government before the due date. Cost Audit report for the financial year 2013-14 was filed on schedule. c) Secretarial Auditor Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s R. Sridharan & Associates, a firm of Company Secretaries in practice to undertake the Secretarial Audit of the company. The Report of the secretarial audit is annexed herewith as "Annexure II". 9. NON- CONVERTIBLE DEBENTURES During the year, the Non-Convertible Debentures Series- II aggregating Rs. 50 Crore were fully redeemed. In the year 2014-15, the company has paid their installments to the debenture holders for NCD Series-I and II aggregating to Rs. 34.72 cr. which was within the stipulated time as per schedule. As on 31st March, 2015, Non-Convertible Debentures Series-I aggregating Rs. 5.56 cr. remain outstanding. 10. FIXED DEPOSITS The company has stopped accepting fresh deposits from 1st June, 2002 and renewals from 1st August, 2005. There was no outstanding deposit as on 31st March, 2015 compared to Rs.0.45 Lakhs in the previous year. The Company has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptances of Deposits) Rules, 2014. 11. RISK MANAGEMENT FRAMEWORK TNPL has established a Risk Management Framework under which the risks covering the entire operation have been identified and categorized as high, medium and low. All the risks are discussed periodically in the Senior Management Committee meetings and appropriate actions are taken pro-actively. The risk details and mitigation plans are placed before the Audit Committee and the Board, bi-annually. 12. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY TNPL has instituted adequate internal control procedures commensurate with the size of its operations. TNPL has also prepared an 'Internal Control Procedure Manual' to ensure that the control procedures are followed by all departments. The departments concerned in the company are complying with the stipulations in the manual without deviating the procedures. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Internal controls are supported by internal audit and management reviews. The Audit Committee meets periodically the Management, External-Internal auditors, Internal auditors, Statutory Auditors and reviews the Annual Audit plans and internal controls. All significant observations of the Auditors are acted upon. The Audit Committee met 7 times during the financial year. The review of Management Response to Audit Observations, constitutes an important aspect of the Agenda for each meeting. 13. VIGIL MECHANISM/WHISTLE BLOWER POLICY The company has framed a vigil mechanism / whistle blower policy, the details of such Policy are explained in the Corporate Governance Report and also posted on the website of the Company at www.tnpl.com 14. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. 15. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND During the year, the company has transferred Rs. 11,03,649/- being the Dividend and Fixed Deposit amount which were due and payable and remained unclaimed and unpaid for a period of seven years, to the Investor Education and Protection Fund, as required under Section 205A (5) of the Companies Act , 1956. 16. UNPAID DIVIDEND STATUS Dividends were remaining unpaid due to non-confirmation of their new addresses by the concerned shareholders. The unpaid dividends were returned by the postal authorities. Effective follow-up by the Company has resulted in Unpaid Dividends being consistently below 0.5% of the total dividends. As and when the shareholders communicate the new address, the dividend is sent to the shareholders. At the end of seven years, the unpaid dividend is transferred to Investor Education & Protection Fund. The table and graph given below summarize the status of Unpaid Dividends. 17.ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars required under Sec. 134(3)(m) of the Companies Act 2013, read with the Rule 8 of The Companies (Accounts) Rules, 2014, is furnished in Annexure III to this Report. 18. HEALTH To render Medical Assistance for the employees and their dependents, company run Occupational Health Centre (OHC). OHC is functioning on round the clock basis in housing colony. In addition, specialist doctors from various fields visit the OHC every Sunday. The company bears the entire medical expenses for 7 Serious Ailments viz. Heart Ailment, Cancer, Kidney Transplantation, Paralysis, Leprosy, Tuberculosis and Brain Surgery. Under a Special Medical Assistance Scheme, 50% of the hospitalization expenses for employee and their dependants are borne by the company. Comprehensive Master Health Check-up is being carried out for employees thrice in their service period. 19. SAFETY TNPL has adopted a clearly defined Occupational Health and Safety Policy. Suitable Personal Protective Equipments are provided to all employees. Periodical Training Programs are conducted to improve safety awareness among the employees including contract workmen. Caution boards, posters, slogans, Do's and Dont's etc. are displayed at prominent places to promote safety at work places. Periodical medical checkups are organized for the employees to identify occupational health hazards. Safety Committee has been constituted and meetings are conducted periodically and suggestions given to improve safety aspects are implemented. Accidents and incidents are investigated and preventive / corrective actions are taken to avoid recurrence. Safety Audit, HAZOP study and Risk Analysis are carried out periodically through safety experts and the recommendations are implemented. Testing of Pressure Vessels, Lifting tackles, Conveyor Systems, Building Stability, etc., are carried out as per statutory requirements through competent person. On-site/Off-site Emergency Plans are available to mitigate emergencies. Periodic mock drills for hazardous chemical leakages and fire incident are conducted to ensure the effectiveness of emergency preparedness. Toxic gas leak sensors and smoke detectors with alarms are installed at hazardous material storage and process areas. The entire Mill is covered with fire hydrant points with pressurized water ring mains for fire fighting. Also different types of fire extinguishers according to the nature of fire are provided at strategic points for use in the event of fire. In addition, two mobile fire tenders and one portable fire pump are available to tackle fire emergency. Since inception, TNPL has maintained an excellent safety record. 20. PARTICULARS OF EMPLOYEES None of the employees of the company was in receipt of remuneration in excess of the limits prescribed under the Companies Act, 2013 and the rules framed thereunder. The information as required under Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the company, is annexed as Annexure V. 21.CASH FLOW STATEMENT As required under Clause 32 of the Listing Agreement with the Stock Exchanges, a Cash Flow Statement prepared in accordance with the Accounting Standard (AS-3) issued by the Institute of Chartered Accountants of India is attached to the Balance Sheet. 22. EXPORT HOUSE STATUS The Company continues to enjoy "Trading House" status, awarded by the Government of India, in recognition of its export performance. 23. INDUSTRIAL AND PERSONNEL RELATIONS The Company continues to have healthy industrial and employee relations at all levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled the company to remain at the forefront of the Industry. Your Company continued to receive co-operation and unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your Company will continue in its endeavor to build and nurture strong links with trade, based on mutuality ,respect and co-operation with each other and consistent with consumer interest. 24. ENHANCING SHAREHOLDERS'VALUE Your Company believes in the importance of its Members who are among its most important stakeholders. Accordingly, your Company's operations are committed to the goal of achieving high levels of performance and cost effectiveness, growth building , enhancing the productive asset and resource base and nurturing overall corporate reputation. Your Company is also committed to creating value for its stakeholders by ensuring that its corporate actions have positive impact on the socio-economic and environmental growth and development. 25. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed: 1. That in the preparation of the annual accounts for the year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; 2. That the directors had selected accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the company for that period; 3. That 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; 4. That the Annual Accounts were prepared for the financial year ended 31st March, 2015 on a going concern basis; 5. That the directors have laid down proper internal financial controls to be followed by the company and that such internal financial controls are adequate and are operating effectively; 6. That the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and are operating effectively. 26. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure IV" 27. CORPORATE GOVERNANCE The Report on Management Discussion and Analysis and the Report on Corporate Governance forming part of Directors' Report are enclosed as "Annexures VI and VII". As required by the Listing Agreement, an Auditor's Certificate on Corporate Governance and a Declaration by the Chairman & Managing Director with regard to Code of Conduct are attached to the Report on Corporate Governance. 28. RELATED PARTY TRANSACTIONS There are no materially significant transactions with related parties during the year with Promoters, Directors, Key Managerial Personnel or other designated persons which are potentially conflicting with the interest of the Company at large. The Board of Directors have framed the policy on Related Party Transactions and the same is uploaded on the Company's website. None of the Directors have any pecuniary relationships or transactions vis-a-vis the Company. Accordingly, the disclosures of Related Party Transactions required under section 134 (3)(h) of the Companies Act, 2013 in Form AOC-2 is not applicable. 29. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. 30. CEO/CFO CERTIFICATION As required by Clause 49 of the Listing Agreement, a Certificate on the Financial Statements and Cash Flow statement of the company for the year ended March 31, 2015 duly signed by the Chairman & Managing Director and Deputy Managing Director was submitted to the Board of Directors at the meeting held on May 28, 2015. 31. ACKNOWLEDGEMENT The Board has pleasure in recording its appreciation for the assistance, co-operation and support extended to the company by the Govt. of Tamil Nadu, Commercial Banks, Financial Institutions, Sugar Mills and Dealers. The Board also places on record its sincere appreciation of the positive response received from the Company's valued customers and thanks them for their continued support . The company is grateful to all employees for their exemplary co-operation during the year. Their contribution has been truly outstanding. The Directors place on record their appreciation of the excellent effort made by every employee to enhance the company's performance in adverse market conditions. Finally, the Board of Directors sincerely thanks the shareholding community for their solid support and for the confidence they have reposed in the Company. 32.CAUTIONARY STATEMENT Statements in the Board's Report and the Management Discussion & Analysis describing the Company's objectives, expectations or forecasts may be forward-looking within the meaning of applicable securities laws and regulations. The Company cannot guarantee the accuracy of assumptions and the projected future performance of the Company. The actual results may materially differ from those expressed or implied in this report. Important factors that could influence the Company's operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations. For and on behalf of the Board C VSANKAR CHAIRMAN AND MANAGING DIRECTOR Date: 3rd August, 2015 Place: Chennai 600 032 |