he Directors hereby present their Fifty Seventh Annual Report and the Audited Accountsfor the year ended 31st March 2017 :
| ||2016-17 ||2015-16 |
| ||(in tonnes) ||(in tonnes) |
|Production ||195413 ||1 82634 |
|Sales ||193977 ||1 82230 |
| ||(Rs. lakhs) ||(Rs. lakhs) |
|Revenue from Operations || || |
|Sales and Other Operating Income ||119387 ||1 0831 2 |
|Less: Excise duty and Excise Cess ||5908 ||51 62 |
| ||113479 ||103150 |
|Other Income ||705 ||428 |
|Total Revenue ||114184 ||103578 |
|Profit before interest depreciation exceptional item and tax ||22174 ||11133 |
|Finance Cost ||2156 ||3229 |
|depreciation ||3062 ||2876 |
|Exceptional Item ||0 ||0 |
|Profit before tax ||16956 ||5028 |
|Provision for current tax ||2164 ||0 |
|Transfer to / (from) deferred Tax ||1907 ||1470 |
|Net Profit ||12885 ||3558 |
The directors recommend payment of dividend at ' 10 (' Ten) per Equity Shareabsorbing a sum of ' 1261.36 lakhs.
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 ' 256.78 lakhs.
Pursuant to the Accounting Standard 4 revised by Ministry of Corporate AffairsNotification dated 30th March 2016 Proposed dividend on Equity Shares andCorporate Tax on dividend being a non adjusting event at the Balance Sheet date are notrecognised as liabilities in the accounts for the year ended March 31 2017. The same willbe recognised in the year of payment viz. year ending March 312018.
Your directors propose the following appropriations:
| ||2016-17 |
| ||(Rs. lakhs) |
|Net profit for the year ||12885 |
|Add : || |
|Surplus brought forward from the previous year ||3260 |
| ||16145 |
|Less : || |
|Transfer to General Reserve ||6500 |
|Balance carried forward ||9645 |
during the year the production at Unit : Erode was 1 25 662 tonnes as compared to 123 630 tonnes produced in the previous year. The production was higher by 2 032 tonnescompared to the previous year. The production would have beenhigher but for the plannedshut of equipment to undertake Mill development Plan - Phase - I.
Unit : Erode also produced 31 826 tonnes of Wet Lap Pulp to augment the Pulprequirements of Unit : Tirunelveli.
Unit : Tirunelveli produced 69 751 tonnes of Paper during the year as compared to 59004 tonnes produced in the previous year. Production would have been higher but for theplanned shut of critical equipment for undertaking Mill Expansion Project.
The overall Production for the Company was 1 95 413 tonnes of Paper and Boards for theyear as compared to 1 82 634 tonnes produced in the previous year.
After taking into account 1432 tonnes towards in-house consumption Unit : Erode sold 124 230 tonnes against the production of 1 25 662 tonnes and achieved zero stock at theend of the financial year.
In addition Unit : Erode as part of its trading activity had sold petroleum productsvalued at ' 2 535 lakhs and 1 070 tonnes of Note Books. Closing Stock of Traded Goods was268 tonnes as on March 312017.
After taking into account 4 tonnes for own use Unit : Tirunelveli sold 69 747 tonnesagainst the production of 69 751 tonnes and achieved zero stock at the end of thefinancial year.
In addition Unit : Tirunelveli as part of its trading activities had sold 143 tonnesof Note Books. Closing stock of traded goods was 312 tonnes as on March 312017.
The overall sale of Paper and Paper Boards effected by the Company during the year was1 93 977 tonnes compared to 1 82 230 tonnes sold during the previous year.
The Revenue from Operations of the Company for the year was ' 1 14 184 lakhs asagainst ' 1 03 578 lakhs in the previous year.
Profit before interest depreciation exceptional item and tax was ' 22 174 lakhs forthe Company as a whole compared to '11 133 lakhs in the previous year.
After absorbing interest and depreciation of ' 2 156 lakhs and ' 3 062 lakhsrespectively the Profit before tax was ' 16 956 lakhs as compared to ' 5 028 lakhs inthe previous year.
The Company achieved excellent financial results both in Unit : Erode and Unit :Tirunelveli. Major factors that had contributed to improved financial performance duringthe year were :
Higher production at Unit : Tirunelveli
higher Wood Pulp production at Unit : Erode that enabled replacement of costlyimported pulp at Unit : Tirunelveli
Improved Green Power generation at Unit : Erode that enabled reduced drawal ofGrid Power and nil purchase of costly Power from third parties.
Optimisation in Raw Material consumption.
Moderation in prices of key inputs viz. Wood Coal and Furnace Oil.
Mavourable market conditions that enabled upward price revisions for endproducts.
Mower Interest and Financing Charges due to repayment of Term Loans andutilisation of lower amount of working capital limits.
For the year ended 31st March 2017 the tax liability under MAT works out to' 3590.30 lakhs. The tax liability under the normal method works out to ' 2164.22 lakhsafter fully setting off the carry forward unabsorbed depreciation and deduction underSection 80-IA of the Income tax Act 1961. The excess of MAT tax liability over the taxliability under regular method amounting to '1426.08 lakhs is recognised as MAT CreditEntitlement. Consequently the Company became liable for the net current tax liability of' 2164.22 lakhs. Provision for taxation has been made in the books accordingly. TheCompany is entitled to carry forward ' 1426.08 lakhs as MAT Credit Entitlement and utilisethe MAT tax paid in future when it becomes liable for tax under regular method.
As per the Accounting Standard (AS) 22 of The Companies (Accounting Standards) Rules2006 a sum of ' 1 907 lakhs has been transferred to Deferred Tax to the debit oftheProfit and Loss Account as against transfer of ' 1 470 lakhs in the previous year.
In the result Profit after tax for the year was ' 12 885 lakhs as compared to '3 558 lakhs in the previous year.
Instalments of Term Loans and interest dues on Term Loans and Working Capitalborrowings werepaid on or before the respective due dates.
INTEREST FREE SALES TAX DEFERRAL LOAN
The Company repaid ' 628 lakhs during the year and the balance outstanding as onMarch 312017 was ' 2 235 lakhs.
Market conditions during the year 2016-17 were stable aided by a growing economy andrestricted availability of paper in the domestic market on account of closure of someunits.
Increased demand from educational sector supported the market in the early part of theyear. The subsequent off-season did not see much fall in demand unlike in previous years.
While sale of certain grades like colour paper and copier were affected by theDemonetisation Scheme announced by the Government in November 2016 the main challengescame from influx of imported copier coated grades and even Maplitho grades from ASEANcountries at extremely competitive prices taking advantage of the Zero Import duty window.
Order flow of colour grades and copier improved in the last quarter with betterliquidity in the retail market. With improvement in Indian Economy demand was stableduring the fourth quarter as well and helped the Company to achieve the customaryZero Stock' both in Erode and Tirunelveli Units with relative ease.
Unit : Erode exported 12 737 tonnes during the year as compared to 14 342 tonnesexported during 2015-16. The export proceeds amounted to US $ 10 152 486. In Rupee termsthe value of exports amounted to ' 6 894 lakhs. The export constituted around10.14% of production.
The Unit : Erode also sold 364 tonnes under deemed exports whose proceeds amounted to '209 lakhs.
Unit : Tirunelveli exported 13 130 tonnes of Paper during the year as against 15 006tonnes exported during the previous year. The export proceeds amounted to US $ 8 785 534.In Rupee terms the value of exports amounted to ' 6 561 lakhs. The exportsconstituted around 18.82% of the Production.
The Unit : Tirunelveli also sold 354 tonnes under deemed exports whose proceedsamounted to ' 195 lakhs.
During the year the Company succeeded in exporting paper from Unit : Tirunelveli andUnit : Erode to the USA market.
TREE FARMING ACTIVITY
The Company provides quality Clonal Seedlings of Eucalyptus as well as CasuarinaSeedlings at subsidised rates to interested farmers and assist them with technical helpto achieve higher yields.
Technical Support for this initiative is provided in association with the Department ofTree Breeding of Forest College and Research Institute attached to Tamil NaduAgricultural University Coimbatore through a Collaborative Research Project.
In accordance with the Company's vision to achieve wood positive status over twelvecrore seedlings (Clonal Eucalyptus Seedlings and bare-rooted Casuarina Seedlings) weremade available to farmers at subsidised 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 "ISO14001" accreditation.
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-40-004 FSC-STD-40-005 v2-1 and FSC-STD-40-003 v1-0. By this the Company assures its stakeholdersthat the wood wood fibre and pulp purchased by it are traceable to responsibly managedplantations and that adequate document controls are in place to ensure identification andtraceability throughout the Chain of Custody. This also means that the Company is capableof manufacturing and selling FSC Pure and FSC Mixed Products in the domestic andinternational markets.
During the year under review the Company won the following Awards:
Special Export Award from CAPEXIL for the year 2014-15 for its excellent exportperformance.
IPMA Environment Award for 2015-16 for best environmental practices.
CII's 17th National Award for excellence in energy management - 2016 -"Excellent Energy Efficient Unit".
CII's 17th National Award for excellence in energy management - 2016 -"Innovative Project".
EXPORT HOUSE STATUS
The Company is accredited with "Star Export House" Status by the Governmentof India Ministry of Commerce Directorate General of Foreign Trade in recognition ofits export performance.
As on March 312017 6 346 Members were holding their shares in demat form and 96 68273 Equity shares representing 76.65% of the total Paid up Equity Share Capital of theCompany have been dematerialised.
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 informed last year 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 000tonnes per annum.
Augmentation of Wood Pulp production from 1 15 000 tonnes to 1 45 000 tonnes perannum.
Augmentation of Captive Power Plant capacity by 15 MW.
Up-gradation of Waste Water Treatment facilities to comply with all relevantregulations.
The Company has since received Consent To Operate (CTO) to produce 1 65 000 tonnes perannum of Paper and 1 80 000 tonnes per annum of Pulp. GO for relaxing the 5 kmrestriction (for undertaking expansion of existing units situated within 5 km of RiverCauvery) has since been issued by Government of Tamilnadu.
The Mill Development Plan II is estimated to cost ' 300 crores and will beimplemented in convenient phases.
Similarly Mill Expansion Plan has been drawn up for Unit : Tirunelveli at an estimatedcost of ' 180 crores. The Project is aimed at :
Augmentation of Paper production capacity from 72 000 tonnes to 1 10 000 tonnesper 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 thisProject which is being implemented in convenient phases.
CURRENT YEAR (2017-18)
In Unit : Erode the Production during April 2017 was 9 073 tonnes as compared to 10378 tonnes produced during April 2016. In Unit : Tirunelveli the Production was 5 454tonnes in April 2017 as against 5 400 tonnes in April 2016. The overall Production forthe Company for the month of April 2017 was 14 527 tonnes. Total Revenue (net of ExciseDuty and Cess) during April 2017 amounted to ' 6 897 lakhs compared to '6 202 lakhs during April 2016.
during April 2017 609 tonnes of paper valued at US $ 482 591 (equivalent to '311 lakhs) were exported. In addition 18 tonnes valued at ' 11 lakhs wereexported under deemed exports.
due to severe drought conditions and drying of the perennial Rivers prevailing in theState of Tamilnadu the Tamilnadu Government has advised the Company to restrict thedrawal of water from the River Cauvery for drinking water purposes only. While the Companyhas appealed to the Government to permit minimum quantity of water steps have been takento step-up ground water resources. A similar direction has been given to Unit :Tirunelveli. Subsequently Unit : Tirunelveli has been allowed to draw 50% of permittedquantity of water. This will enable the Unit to maintain full production.
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 andoperates an Anaerobic Lagoon for high BOd liquid effluents and a Secondary TreatmentSystem for total Mill effluent. These facilities are operating efficiently enabling theCompany to comply with the pollution control norms prescribed by the Pollution ControlAuthorities on a sustained basis. The treated effluent water continues to be utilised forirrigating nearby sugar cane fields. The implementation of the Mill development Plan hasenabled the Mill to enhance its environmental performance and compliance therebycomplying with the Charter on Corporate Responsibility for Environmental Protection (CREP)on a sustained basis.
Unit : Tirunelveli is well equipped with efficient Electrostatic Precipitator for thePower Boiler and has an extensive green cover. Its treated waste water after recyclingis used to irrigate the Company owned lands.
MANAGEMENT'S DISCUSSION 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 financial performanceetc. is contained in "Management discussion and Analysis Report" that forms anintegral part of this Report and annexed as Annexure - I.
Pursuant to Regulation 34 and Schedule V to the SEBI (Listing Obligations anddisclosure Requirements) Regulations 2015 Corporate Governance Report together with theCertificate from the Company's Auditors confirming the compliance of conditions onCorporate 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 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 CompaniesAct 2013 have been followed.
The Directors have selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 312017 andof the profit of the Company for the said period.
The Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother 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 theCompany and that such internal financial controls are adequate and were operatingeffectively.
The Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
During the year the Company invested ' 200 lakhs in the Equity Capital of itsfully owned Subsidiary viz. Esvi International (Engineers & Exporters) Limited bysubscribing to 100 000 Equity Shares of ' 100 each at a premium of ' 100 pershare.
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 are 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 are no material changes and commitments in the business operations of the Companysince the close of the financial year on 31st March 2017 to the date of thisReport.
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 (CSR)
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. In Unit : Erode a long term wage settlement for the period April 1 2014 to March312019 was reached during the year with Staff Association with regard to payment ofsalary bonus production incentive and other benefits under Section 12(3) of theIndustrial disputes Act 1947 before the Joint Commissioner of Labour Coimbatore. Suchan agreement was reached with Labour Unions in the previous year. In Unit : Tirunelveli along term agreement has already been reached with the Union covering the wages / salaryand other benefits.
during the year Tamilnadu Industrial Investment Corporation Limited (TIIC) withdrewthe nomination of Mrs Supriya Sahu IAS and in her place nominated its Principal Secretary/ Managing director Mr Md Nasimuddin IAS as its Nominee director on the Board of ourCompany. The nomination of Mr Md Nasimuddin IAS was also withdrawn and in his placenominated its Chairman and Managing director Sri Satyabrata Sahoo IAS as its Nomineedirector on the Board of our Company.
during the year Government of Tamilnadu nominated Sri Atulya Misra IAS PrincipalSecretary to Government Environment and Forests department to represent the Governmentas its Nominee director on the Board of our Company in the place of Sri Hans Raj VermaIAS. The nomination of Sri Atulya Misra IAS was also withdrawn and in his placenominated Mr Md Nasimuddin IAS Principal Secretary to Government Environment andForests department as its Nominee director on the Board of our Company.
Your directors place on record the valuable services rendered by Mrs Supriya Sahu IASand Sri Atulya Misra IAS during their tenure as directors of the Company.
All the Independent directors have given the declaration that they met 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 25thMarch 2017. 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 at its 54th Annual General Meeting for a fixed tenure till 31stMarch 2019.
M/s Suri & Co. (Firm Regn. No. 004283S) and M/s S Viswanathan LLP (Regn. No.004770S / S200025) Chartered Accountants Chennai shall cease to hold office at theconclusion of this 57th Annual General Meeting having regard to the provisionsof Section 139(2) of the Companies Act 2013. Your Board wish to place on record theexcellent professional services received from them all along.
The Board of Directors proposed continuance of M/s Maharaj N R Suresh & Co. asStatutory Auditor till the conclusion of the 58th Annual General Meetingsubject to ratification by Members at every Annual General Meeting.
Further the Board of Directors proposed appointment of M/s R Subramanian and CompanyLLP (Regn No. 004137S) as Joint Auditor to hold office for a term of five years from theconclusion of 57th Annual General Meeting and till the conclusion of 62ndAnnual General Meeting.
Accordingly requisite Resolution for ratifying the appointment of M/s Maharaj N RSuresh & Co. and approving the appointment of M/s R Subramanian and Company LLP isproposed in the manner stated in the Notice for the 57th Annual GeneralMeeting.
Particulars of Statutory Auditors Cost Auditors Internal Auditors and the SecretarialAuditors have been given in the Corporate Governance Report that forms an integral part ofthis report. Secretarial Audit Report as required by Section 204(1) of the Companies Act2013 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 30 2017