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Sree Sakthi Paper Mills Ltd.

BSE: 532701 Sector: Industrials
NSE: N.A. ISIN Code: INE266H01014
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VOLUME 1621
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P/E
Mkt Cap.(Rs cr) 7
Buy Price 3.77
Buy Qty 11.00
Sell Price 4.12
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OPEN 4.20
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VOLUME 1621
52-Week high 12.00
52-Week low 3.27
P/E
Mkt Cap.(Rs cr) 7
Buy Price 3.77
Buy Qty 11.00
Sell Price 4.12
Sell Qty 140.00

Sree Sakthi Paper Mills Ltd. (SRSAKTHIPAPER) - Director Report

Company director report

Your Directors have pleasure in presenting their 25th Annual Report and theAudited Financial Statements of the Company for the year ended 31st March 2016.

REVIEW OF OPERATIONS 2015-16

The company is engaged in the business of manufacturing Kraft paper and paper board Inthe year under review the total production was 38606 MT as compared to the previousfinancial year production of 57571 MT and thus the total production fell short by 18965MT. The operation relates to production at Kraft Paper units 1& 2 at Edayar duplexboard unit at Chalakudy having stopped operation in the previous year As mentioned in thelast year's report with the completion of the repairs and maintenance work of the boilerand other equipments the operation of the Kraft Paper Unit have been put into stableoperation from the last Quarter of the financial year 2014-15 . athough the Company haddrawn up plans to operate at 80% capacity in the year under review the Company couldachieve only 59% capacity utilisation The Company suffered setback as the companycontinued to go through a phase of poor demand scenario. The company was facingdifficulties in sales due to imported paper coming into the country As regards the KraftPaper the market conditions were sluggish from the year 2013-14 which continued affectingthe profitability which was coming down from year to year . The average sales realisationrate in the year was Rs.25975/ as compared to previous year sales realization rateRs.29525/- Apart from lack of sales demand the company also faced various issues with theindigenous waste purchase labour unrest and pollution problems and ultimately as pernotice received from Kerala State Pollution Control Board the Company was forced to stopoperations since June 2016 The net loss of the Company for the year ended would have beenlesser by Rs. 676.21 lakhs if the REC income were recognized on the unsold stock(including opening stock) of REC Certificates (45081) as income at the floor price of Rs.1500/- fixed by Government.

DIVIDEND

In view of loss your Directors decided not to recommend payment of dividend on theequity shares and non convertible cumulative Redeemable Preference Shares for thefinancial year under review.

EXPORT PERFORMANCE

Your company's exports of paper and paper boards during the year was NIL as compared to1518.98 Mt during the previous year. The export amounted Rs. NIL as against Rs 385.65 lacsin the previous year.

PROSPECTS

The outlook for paper sector is positive. The sale prices may go up As mentioned abovethe operations of the factories of the company remain closed. The company is seriouslylooking to restart operations In order to resume operations defects in the effluentmanagement system is to be rectified. However it would not be possible to rectify thedefects pointed out by Kerala State Pollution Control Board in the efflument managementsystem as it involves heavy capital expenditure on the one hand and the long time to betaken for completion of the job on the other hand. To raise funds to finance therectification work of effluent waste management system will also require time

FINANCIAL PERFORMANCE (Rs. Lacs)

Particulars For the year ended 31.03.2016 For the year ended 31.03.2015
Sales (Gross) 10698.81 16405.45
Less: Excise Duty 670.58 952.86
Sales (Net) 10028.24 15452.59
Operation Profit/Loss (497.32) 287.73
Interest and Finance 641.64 590.35
Depreciation 328.99 376.81
Profit Before Tax (1467.95) (679.43)
Provision for Tax 0.00 0.00
Profit After Tax (1694.95) (1178.14)
Balance of Profit brought forward (727.31) 513.25
Amount available for appropriation (967.64) (664.89)
Appropriation
General Reserve 0.00 0.00
Proposed Dividend & tax on Dividend 0.00 0.00
Retained profit carried to Balance Sheet (727.31)

SUBSIDIARY COMPANIES

As of 31st March 2016 the company had 3 subsidiaries viz. Sree Kailas Palchuram HydroPower Limited Sree Adisakthi Mukkuttathode Hydro Power Limited and JalashaayiAlamparathode Hydro Power Limited by virtue of the Company having control on the Board ofthese companies. Steps are being initiated to implement the project with the assistance ofGovernment / Private parties.

The Board of directors of the company at its meeting held on 30.05.2011 decided toavail the exemption under section 212 of the Companies Act 1956 pursuant to GC No.2/2011dated 08.02.2011 issued by the Central Government. As required in the Circular theconsolidated financial statements audited by the Statutory Auditors of the companyattached along with the Annual Reports of the company. Annual accounts of the subsidiarycompanies and the related detailed information would be sent to those shareholders seekinginformation in this regard at any point of time. Further annual accounts of the subsidiarycompanies would be available for inspection by any shareholders at the registered officeof the company.

INDUSTRIAL RELATIONS

The industrial relations remained cordial and satisfactory during the year underreview.

CHANGES IN NATURE OF BUSINESS

No significant changes had been made in the nature of the company during the financialyear.

MATERIAL CHANGES AND COMMITMENTS OCCURRED BETWEEN THE DATE OF BALANCE SHEET AND THEDATE OF AUDIT REPORT

No significant material changes and commitments have occurred between the date of thebalance sheet and the date of the audit report.

FINANCE

A) Deposits

The Company has not accepted deposit from the public falling within the ambit ofSection 73 of the Companies Act 2013 and The Companies (Acceptance of Deposits) Rules2014.

B) Particulars of Loans Guarantees or Investments

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.

C) Commitments

During the year under review no additional funds raised All the repayment and interestcommitments were met as per terms of arrangement with the Banks.

In the current financial year the Company has obtained Unsecured loans to the extent ofRs.

INTERNAL CONTROL SYSTEM

Your Company has adequate internal control and internal check system commensurate withsize of the organization.

The Company has appointed M/s. Pooja A Nayak & Co.Chartered Accountants Ernakulamas the Internal Auditor of the Company to monitor and evaluate the efficacy and adequacyof internal control system in the Company its compliance with operating systemsaccounting procedures and policies of the Company and its subsidiary.

Significant audit observations are presented to the Audit Committee of the Board andcorrective actions taken thereon

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

In the Annual General Meeting held on 30 September 2015 Dr. A. R. K. Rao was appointedas Independent Director for further consecutive term of one year and he will be retiringat the ensuing Annual General meeting. However in the meantime he has resigned from theBoard on 16th August 2016. Sri Deveshwer Kumar Kapila Independent Director andChairman of the Company has also resigned from the Board on 16th August 2016Consequently they cease to be members of Audit Committee .Nomination and RemunerationCommittee CSR Committee (Sri D.K. Kapila) Shareholders Relationship Committee(Dr.ARKRao).

Consequent to the resignation of Sri A.R.K.Rao and Sri Deveshwer Kumar Kapila thereare one Independent director five promotional directors one nominee Director and twoother directors thereby having less than 50% representation of Independent Directors inthe Board of Directors. The requirement of Independent Directors has to be fulfilled byfilling vacancy created for complying Regulation 25(6) of SEBI (LODR) Regulations 2015.Efforts are being made to identify suitable persons fulfilling the criteria of independentas required under section 149 of the Companies Act 2013 to fill up the vacancies ofIndependent Directors In terms of Article 83 of the Articles of Association of theCompany Mr. A. Padmanabhan and Mr. S. Subramoniam Director retire on rotation andbeing eligible offer themselves for re-appointment.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet with the criteria of Independence as prescribed both under subsection (6) of Section 149 of the Companies Act 2013 and under SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015.

Mr. N. Purushothama Prabhu Whole Time Director Operations resigned from Board witheffect from 12.02.2016. Mr. Varrey Venkata Mangeswara Rao was appointed as AdditionalDirector at the meeting of Board of Directors held on 17-10-2015. In accordance with theCompanies Act 2013 he would hold office of Director up to the ensuing Annual GeneralMeeting. The Board also appointed him as Whole Time Director in Operations of the Companyfor a period of one year w.e.f 25-11-2015 to 24-11-2016 The Company has not received anynotice from a member proposing his name for the office of Director with necessary depositin accordance with the provisions s of Companies Act 2013

KEY MANAGERIAL PERSONNEL (KMP)

The details of the Key Managerial Personnel of the Company appointed pursuant tosection to section 203 of the Companies Act 2013 are as follows

Sl. No. Name Designation With effect from To
1 Dr S.Rajkumar Managing Director 14-08-2014 13-08-2015
14-08-2015 13-08-2016
14-082016
2 Mr. R.Ponnambalam Company Secretary 09-10-2013
3 Ms Usha Venugopal Chief Financial officer 01-09-2014 11-04-2016
4 Ms Deepa Praveen Chief Financial officer 19-05-2016 25-09-2016

BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Regulations) Regulation 2015 the Board has carried out an annualperformance evaluation of its own performance the directors individually as wellas the evaluation of the working of its Committee. The manner in which the evaluation hasbeen carried out has been explained in the Governance Report.

REMUNERATION TO DIRECTORS

The Remuneration paid to the Executive Directors and the Sitting Fees paid to theNon-Executive and Independent Directors are disclosed in the Extract to the Annual Returni.e Annexure IV to the Board's Report.

AUDIT COMMITTEE

The Audit Committee of the Board was reconstituted on 30-5-2015 and consists of Mr.Deveshwer Kumar Kapila Independent Director Mr. U.Gururaja Bhat Independent DirectorDr. A R K Rao Independent Director and Mr. S. Giridhar Non Independent Director.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE.

The Corporate Social Responsibility Committee of the Company consists of Mr. DeveshwerKumar Kapila(since resigned) Independent Director Dr. S Rajkumar Managing Director andMr. A Padmanabhan Whole Time Director.

However your Company is not obliged to spend any amount on CSR activities under theprovisions of Companies Act 2013 based on the criteria laid down therein The AnnualReport on CSR Activities for the Financial Year 2015-16 is annexed at Annexure VII tothe Directors Report.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee was reconstituted on 30-05-2015 and consistsof Mr. Deveshwer Kumar Kapila Independent Director(since resigned) Mr. U.Gururaja BhatIndependent Director Dr. A R K Rao Independent Director(since resigned) and Mr. S.Giridhar Non Independent Director.

REMUNERATION POLICY

The Company's remuneration policy is directed towards rewarding performance based onreview of achievements periodically. The remuneration policy is in consonance with theexisting industry practice.

SHAREHOLDERS RELATIONSHIP COMMITTEE

Composition of the Committee as from 30 July 2015: Dr S. Rajkumar Managing directorMr.U.G. Bhat Independent Director Dr. A R K Rao Independent Director (since resigned)Mr.S.Giridhar Non Executive/ Non Independent Director

AUDITORS

M/s Balan & Co. Chartered Accountants the present Auditors of the Company retireand are eligible for reappointment and the proposal has been placed before you. Necessarycertificate has been obtained from the Auditors as per section 139 and 141 of CompaniesAct 2013

FOREIGN EXCHANGE EARNINGS AND OUT-GO

During the year under review the foreign exchange earned by the company by way ofexports proceeds is NIL (previous year - Rs. 389.65 Lacs). The foreign exchange outgo forthe company for import purchases – Rs lacs (previous year - Rs 5831.15 lacs)

PARTICULARS UNDER SECTION 134

Conservation of Energy Technology Absorption

Statement of particulars under Section 134 (3) (m) of the Companies Act 2013 read withRule 8 of The Companies (Accounts) Rules 2014 is annexed as

Annexure -I

Particulars of Employees

None of the employees of the company are coming under the provisions of section 197(12)of the Companies Act 2103 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014.

CORPORATE GOVERNANCE

The Company's Equity Shares are listed with Bombay Stock Exchange. The Company hasimplemented all the mandatory provisions of Clause 49 of the Listing Agreement relating tothe Corporate Governance. The Report on Management's Disc ussion and Analysis and Reporton Corporate Governance are forming part of Directors' Report and are annexed as Annexure-II and Annexure – III respectively. As required by the Listing Agreementan Auditors' Certificate on Corporate Governance and a Declaration by the Vice Chairmanand Managing Director with regard to Code of Conduct are attached to the said Report.Further as required by Clause 49 of the Listing Agreement a Certificate duly signed bythe Vice- Chairman and Managing Director and General Manager– Finance was submittedto the Board of Directors on the financial statements and cash flow statement of theCompany for the year ended March 31 2016 at the Meeting held on 13th June 2016

EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT 9 of the Company is annexed as Annexure IVto this Report.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee for approval.Further prior approval of the Shareholders of the company at the Annual General Meetingdated 30 September 2015 has been taken for the business related transactions entered intowith the Related Parties during the year.

Particulars of contract or arrangements with related parties is annexed in Form AOC 2as Annexure V

SECRETARIAL AUDITOR

The Board has appointed M/s. Lakshmi Subramoniam & Associates Practising CompanySecretary to conduct Secretarial Audit for the financial year 2015-16. The SecretarialAudit Report for the financial year ended March 31 2016 is annexed herewith marked as AnnexureVI to this Report.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

In accordance with Section 177 of the Companies Act 2013 and Regulation 22 ofSEBI(LODR)Regulation2015 the Company has constituted a Whistle Blower Policy/ VigilMechanism to establish a vigil mechanism for the directors and employees to report genuineconcerns in such manner as may be prescribed and to report to the management instances ofunethical behavior actual or suspected fraud or violation of the Company's code ofconduct.

The detail of the Whistle Blower Policy has been posted on the website of the Company.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under 134(3) (c) of the Companies Act 2013 Directorsreport that:

1. In the preparation of the annual accounts for the financial year ended 31st March2016 the applicable accounting standards had been followed along with proper explanationrelating to material departures.

2. The directors had selected such accounting policies and applied them consistentlyand made judgment and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe loss of the company for the year under review.

3. The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities.

4. The directors had prepared the Annual Accounts for the financial year ended 31stMarch 2016 on a ‘going concern' basis.

5. That proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.

6. The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

GENERAL

Your directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1) Details relating to deposits covered under Chapter V of the Act.

2) Issue of equity shares with differential rights as to dividend voting or otherwise.

3) Issue of shares (including sweat equity shares) to employees of the Company underany scheme.

4) Neither the Managing Director nor the Whole-time Directors of the Company receiveany remuneration or commission from any of its subsidiaries.

5) No significant or material orders were passed by the Regulators or Courts orTribunal which impact the going concern status and Company's operations in future.

Your Directors further state that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013

ACKNOWLEDGEMENT

The Board places on record its appreciation for the cooperation and support receivedfrom shareholders customers suppliers employees government authorities and banks.

By and on behalf of the Board of Directors

Sd/-
Date :12/11/2016

Annexure - I

ANNEXURES TO THE DIRECTORS' REPORT

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

CONSERVATION OF ENERGY

(a) Energy conservation measures taken: At Kraft Paper Units

• wer factor improvement – we had added additional capacitors of 150 Kvar andimproved the power factor from 0.95 to 0.97

• Unutilised 400 W mercury vapour lamps replaced with 150 W metal halide lamps andtube lights

• Due to installation of Variable Frequency (VF) Drives in Plants 1& 2 in theyear 2012-13 as an Energy conservation measure we are getting benefits in energyreduction since then. During the Financial Year 2014-15 we have saved around 232595Units in Plant-2 and 140922 Units in Plant-1. No appreciable saving in the year 2015- 16since the factory operation was erratic

• VF Drives were installed for three pumps in Plant-2 and for one pump in Plant-1.

At Duplex Board Unit - NIL THE FACORY REMAINED CLOSED

FORM - A (See Rule 8)

A. POWER AND FUEL CONSUMPTION 31.3.2016 31.3.2015
1 Electricity
a) Purchased
Unit 11695700 19855530
Amount (Rs/Lacs) 749.76 1190.82
Rate/Unit 6.41 5.99
b) Own Generation
i) Through Diesel Generator
Unit Nil 4306
Unit per Ltr. of diesel oil Nil 1.65
Cost/Unit Nil 35.18
ii) Through steam turbine/generator*
Unit 7283023 8047338
*(The steam generated is used both for paper production and power generation cost cannot be appropriated separately.)

 

31.3.2016 31.3.2015
2. Coal (Quality - Non Coking Coal;
Usage at Boilers for steam generation)
Quantity (MT) 5491.19 6286.15
Amount (Rs/Lacs) 257.76 309.39
Average Rate / Mt Rs 4693.70 4921.72
3. Furnace Oil Nil Nil
4. Bio fuels
Quantity (MT) 29106.7 36828.7
Amount (Rs/Lacs) 655.49 942.21
Average Rate / Mt Rs 2252.01 2558.36
B. CONSUMPTION PER UNIT OF PRODUCTION.
Electricity (kwh) 492 485
Coal (Kg) 142 110
Furnace Oil Nil Nil
Biofuels (Kg) 754 645

FORM - B (See Rule 8)

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

A. RESEARCH AND DEVELOPMENT (R&D)

Specific Areas in which (R&D): Several special applications have been developedand carried out by the Company successfully introduced during the year to cater customerspecific requirements.

Benefit derived as a result of the above R&D: Better runnability andimprovement in the quality.

Future plan of action: The Company would undertake appropriate R&D activitiesdepending upon future requirements.

Expenditure on R&D: N.A

B. TECHNOLOGY ABSORPTION ADAPTION INNOVATION:

The process of improvement is a continuous one and the Company is experimenting withuse of new raw materials fuels etc. to improve productivity further.

Particulars of imported technology: No Technology has been imported.