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South India Paper Mills Ltd.

BSE: 516108 Sector: Industrials
NSE: SIPAPER ISIN Code: INE088G01014
BSE LIVE 15:40 | 13 Dec 133.80 -0.50
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OPEN 131.10
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VOLUME 28037
52-Week high 141.50
52-Week low 90.25
P/E
Mkt Cap.(Rs cr) 201
Buy Price 0.00
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Sell Price 0.00
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OPEN 131.10
CLOSE 134.30
VOLUME 28037
52-Week high 141.50
52-Week low 90.25
P/E
Mkt Cap.(Rs cr) 201
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

South India Paper Mills Ltd. (SIPAPER) - Director Report

Company director report

To

The Members

Your Directors have the pleasure to present the 57th Annual Report of theCompany along with the audited accounts for the year ended 31st March 2016.

WORKING RESULTS 2015-16 2014-15
Finished Production of Paper & Paperboards 56268 MTs 49058 MTs
(Rs In Lacs ) (Rs In Lacs )
Gross Sales 21899.17 19674.95
Net Sales excl Excise Duty 20661.87 18537.92
FINANCIAL RESULTS:
Operating Profit 3626.01 3002.71
Less : Finance costs 165.04 181.55
Gross (Cash) Profit 3460.97 2821.16
Less : Depreciation 797.43 750.98
Profit before exceptional items and Tax 2663.54 2070.18
Exceptional items 821.57 -
Profit before tax 3485.11 2070.18
Less : Provision for Tax:
Current Tax Expense 752.96 664.50
Deferred Tax Expense 333.02 49.95
MAT Credit Entitlement (12.54) -
Profit after tax for the year 2411.67 1355.73
Less : Income tax of earlier years 2.68 2.67
Net Profit after Tax 2408.99 1353.06
Add : Balance Surplus brought forward from the previous year 8506.50 7604.78
10915.49 8957.84
APPROPRIATIONS:
Proposed Dividend @ 30% (Previous year 25%) (450.00) (375.00)
Provision for Dividend Tax (91.61) (76.34)
Balance Surplus carried forward 10373.88 8506.50

OPERATIONS

Gross sales for the financial year 2015-16 increased to Rs 218.99 crores as against'196.75 crores in the previous year. Operation at the Paper Mill was higher by about 14.7%during the year.

With the increase in volumes combined with better operating efficiency profitabilityimproved.

Printing & Packaging Division operated with increased volumes & the Conversiontonnage was up by 7.3%. Operating profit improved to Rs 3626 lacs from Rs 3003 lacsowing to above factors. After making a depreciation provision of Rs 797 lacs(Previous yearRs 751 lacs) profit before exceptional items & tax was Rs 2663 lacs (Previous yearRs 2070 lacs).Exceptional items (net) being non recurring nature contributed Rs 822lakhs. PBT after exceptional items increased to Rs 3485 lacs (' 2070 lacs). After makinga provision for tax of Rs 1076 lacs (' 717 lacs in the previous year)net profitincreased from Rs 1353 lacs to Rs 2409 lacs.

FINANCES

During the year cash flow & liquidity remained comfortable.

Sources of funds Rs in lacs Deployment of funds Rs in lacs
Cash flow from operating activities 3582 Repayment of Term Loans 125
Interest Income 44 Deferred Payt Credit-Installments paid 232
Term Loan drawn from Bank 1057 Finance Cost 165
Increase in Bank Borrowings 506 Income tax Paid 822
Exceptional items (net) 822 Dividend & Dividend Tax 446
Decrease in working capital 202 Capital Expenditure & Advances 5275
Deferred Payment credit 852
Total 7065 Total 7065

 

31.03.16 31.03.15
Long Term Debt to Equity Ratio 0.15 0.05
Current Ratio 1.44 2.04

Instalments of Term Loans and Interest on Term Loans and Working capital borrowingswere paid within due dates.

CREDIT RATING

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

CURRENT PROSPECTS

With the implementation of Co-gen facility consisting of 50tph CFBC Boiler SteamTurbine of 11 MW capacity Electro Static Precipitator (ESP) in FY 2015-16 newTransmission line of 66KV is under implementation to bring down the overall energy cost.The market conditions for paper continue to be extremely competitive with additionalsupply from new capacities. Demand is expected to grow in line with growth projected forIndian 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 Brandowners. Your management perceives an opportunity for growth by enhancing its boxmanufacturing capacity with a new plant at another location. Various site options areunder evaluation. An increase in paper making capacity through brown-field improvements tosupport the higher conversion capacity planned is seen as the way forward. Priority isgiven for increase in Co-generation facility with improved efficiency to bring down theunit cost of energy substantially.

Overall Turnover and operating profit is expected to be better in the current yearwith improvement over the last year.

CAPITAL EXPENDITURE PLANS

The Company is planning the upgradation / modernising /balancing of the existing papermachines with focus on quality & higher grades to sustain in the competitivesituation. Capital expenditure is planned for enhancing the box manufacturing capacityconserving water resources & ETP facility & a new 66KV transmission line for Powerevacuation. Adding box manufacturing capacity with a new plant at another location isunder active consideration of your management.

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

CORPORATE GOVERNANCE

Securities & Exchange Board of India (SEBI) in order to improve the standard ofCorporate Governance has introduced certain amendments in the Listing Agreements/Regulations with the Stock exchanges. Same have been complied with & a report on thisis 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 AccountingStandards;

The Directors have selected such accounting policies and applied them consistently andhas made judgements and estimates that are reasonable and prudent so as to give true andfair view of the state of affairs of the Company as at 31-3-2016 & of the profit ofthe Company for the financial year 2015-16.

The Directors have taken proper & sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 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 by the Companyand the controls are adequate and operating effectively.

The Directors have devised proper systems to ensure compliance with the provisions ofall 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 anysecurity 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 relatedparties. 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 Companysince the close of the financial year as on 31st March 2016 to the date of thisreport.

ISO 9001 CERTIFICATION

Company’s Quality Management Systems (QMS) have been audited by Bureau VeritasCertification 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 validfor a period of 3 years upto 17-05-2015. Re-certification audit is done & certificatevalid for 3 years upto 17-5-2018 is issued.

FOREST STEWARDSHIP COUNCIL (FSC) CERTIFICATION

The Company received FSC Certificate under standards of FSC - STD-40 003 V2-1FSC-STD-40 004 V2-1 & FSC - STD - 40 007 V2-0 for its product group. This is anassurance of environmental protection by providing sufficient documentary controls andtraceability throughout the chain of custody. This certification means company is capableof manufacturing FSC recycled and FSC mixed products.

RESEARCH & DEVELOPMENT

Several special application grades have been developed & successfully introducedduring 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 withregard 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 triedto equitably balance the interest of all stakeholders in it often going beyond thestatutory impositions placed by regulatory authorities. In such efforts are included theinstallation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwisedry lands. The treated effluent water is utilized for irrigation purposes in the nearbyfields 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 forcontrolling dust at its fuel handling system. Centrifuge and other machineries have beeninstalled for effluent treatment.Fuel shed with roofing controls dust emissions andconserves the resources.

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

The Company has engaged the expert services of University of Agricultural SciencesGandhi Krishi Vigyana Kendra Bangalore for a study of ‘Utilisation of Paper MillEffluent for Agricultural Purpose’.

DIVIDENDS

Your Directors recommend a Dividend of 30% i.e. Rs 3.00 per equity share of Rs 10 each(last year 25% i.e. Rs 2.50 per share). The total distribution including dividend taxamounts to Rs 541.61 lacs (Rs 451.34 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 AnnualReport.

MANAGERIAL REMUNERATION

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

MEETINGS OF THE BOARD

The number of meetings of the Board held and details thereof are mentioned in theReport 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 Listing Regulations the Company hasestablished a vigil mechanism overseen by the Audit Committee. The Company has formedWhistle Blower policy as required under the Companies Act 2013 and Listing Regulations andno personnel has been denied access to the Audit Committee.

RISK MANAGEMENT

The Company has a risk management framework to identify and evaluate business risks andopportunities. It seeks to create transparency minimise adverse impact on the businessobjective and enhance the Company’s competitive advantage. It aims at ensuring thatthe 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 riskassessment and minimization procedures. The Board periodically revisits and reviews theoverall risk management plan for making desired changes in response to the dynamics of thebusiness.

The Board of Directors have constituted a Risk Management Committee as required underLising Regulation vide Board Meeting held on 27.01.2015 to frame implement and monitorthe risk management plan of the Company. The Committee comprises of the followingDirectors.

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 managementpolicy and its development within the Company to monitor the effectiveness of riskmanagement policy review major risks of the Company and to advice on mitigation to theBoard.

LABOUR RELATIONS

The industrial relations climate in the Company during the year was generally cordialand harmonious.Long term settlement for a period of 4 years signed with the Workers’Union was in force upto 31-3-2016. Negotiation for a 4 year agreement has commenced.

DIRECTORS

In terms of Section 152 of the Companies Act 2013 Mr Jitendra A Patel (DIN00248302)retires by rotation and he being eligible offers himself for reappointment.Your Directors recommend his reappointment.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaration from all the Independent Directors under Section149(7) of the Companies Act 2013 in respect of meeting the criteria of independence asprovided under Section 149(6) of the Act.

BOARD EVALUATION

The Board of Directors have carried out an annual evaluation of its performance BoardCommittees and Individual Directors pursuant to the provisions ofthe CompaniesAct and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.

The Board has recorded overall satisfaction.

In a separate meeting of Independent Directors held on 28-03-2016 the performance ofNon Independent Directors Board as a whole and the performance of the Chairman wasevaluated.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 includingcriteria for determining qualifications positive attributes independence of a Directorand other matters as provided under Section 178(3) is annexed hereto and forms part ofthis Annual Report.

Criteria for performance evaluation of Independent Directors’ as required by theListing Regulations also forms part of this report.

CORPORATE SOCIAL RESPONSIBILITY

The Board has constituted a Corporate Social Responsibility Committee as mandated bySection 135 of the 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 indicatethe activities to be undertaken by the Company.

• Recommending the amount of expenditure to be incurred on the aforesaidactivities and;

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

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

i) Chlorination plant for drinking water for Chikkayana chatra & Banchalli hundivillages.

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

Reasons for not spending on CSR activities during the financial year.

Land finalization for the project is awaited from Gram Panchayath. Amount could not bespent pending finalisation of land by Gram Panchayath. On finalizing the above Companywill be spending on the project. If the Gram Panchayath finalization is not receivedwithin reasonable time company will be spending on other CSR Activities.

A report on CSR Activities is annexed herewith and forms a part of the Director’sReport.

APPOINTMENT OF KEY MANAGERIAL PERSONNEL

Mr N S Hegde Company Secretary of the Company resigned from the post of CompanySecretary w.e.f 29-10-2015. The Board of Directors have taken this on record. The Board ofDirectors at their meeting held on 29-10-2015 appointed Ms Vidya Bhat as the CompanySecretary of the Company w.e.f 29-10-2015.

AUDITORS

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

The Auditors M/s B S Ravikumar & Associates have been appointed as statutoryauditors of the Company till the conclusion of 58th Annual General Meeting of the Companysubject to ratification by members at every AGM. Accordingly requisite resolution forratifying their appointment is proposed in the notice.

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 hasappointed Mr S N Hitaish Kumar Practicing Company Secretary (C P No. 6553) to conductthe Secretarial Audit of the Company for Financial Year 2015-16. The Secretarial AuditReport in Form MR 3 is annexed.

There are no qualifications in the Secretarial Audit Report.

INTERNAL AUDITOR

Pursuant to Section 138(1) of the Companies Act 2013 the Company has appointed M/sRau and Nathan Chartered Accountants (Firm Regn. No.003178S) Mysore to conduct InternalAudit of the functions and activities of the Company for Financial Year 2015-16.

COST AUDIT

Company’s products are not notified for Cost Audit in FY 2015-16.

APPRECIATION

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

for and on behalf of the Board of Directors
Bengaluru Manish M. Patel
26th May 2016 Chairman & Managing Director