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JK Paper Ltd.

BSE: 532162 Sector: Industrials
NSE: JKPAPER ISIN Code: INE789E01012
BSE 00:00 | 26 Nov 212.10 -8.55
(-3.87%)
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NSE 00:00 | 26 Nov 212.25 -8.75
(-3.96%)
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OPEN 217.25
PREVIOUS CLOSE 220.65
VOLUME 43815
52-Week high 284.80
52-Week low 93.80
P/E 8.07
Mkt Cap.(Rs cr) 3,593
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 217.25
CLOSE 220.65
VOLUME 43815
52-Week high 284.80
52-Week low 93.80
P/E 8.07
Mkt Cap.(Rs cr) 3,593
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

JK Paper Ltd. (JKPAPER) - Director Report

Company director report

To the Members

The Directors have pleasure in presenting the 60th Annual Report alongwith Audited Financial Statements of the Company for the financial year ended 31st March2021.

FINANCIAL RESULTS

Rs. in crores (10 Million)

Particulars 2020-21 2019-20
Gross Sales 2969.15 3254.20
Profit Before Finance Costs and Depreciation & Tax (EBITDA) 701.41 984.96
Profit before Depreciation and Tax (PBDT) 607.04 862.15
Profit After Tax (PAT) 322.19 492.71

DIVIDEND

Your Directors are pleased to recommend a Dividend of RS. 4 per share(40%) on the Equity Share Capital of RS. 169.40 crores for the financial year ended 31stMarch 2021. The dividend outgo will be RS. 67.76 crores. The dividend payout is inaccordance with the Dividend Distribution Policy of the Company.

BUYBACK OF EQUITY SHARES

The Board at its meeting held on 28th April 2020 approved Buyback ofupto RS. 100 crores. The Company commenced its Buyback on 8th May 2020 and closed it on6th November 2020. A total of 8841241 Equity Shares were bought back representing 4.96%of the total paid up capital of the Company. The amount utilized for Buyback was RS. 83.41crores. Post Buyback the Paid up Capital of the Company stands reduced from RS. 178.24crores to RS. 169.40 crores.

RESERVES AND APPROPRIATIONS

The amount available for appropriation including surplus from theyear stood at RS. 1204.42 crores. The Directors propose this to be appropriated asunder:

Rs. in crores (10 Million)

Item 2020-21 2019-20
General Reserve 200.00 200.00
Dividend for 2019-20 and 2020-21 - 133.69
Corporate Dividend Tax - 27.47
Surplus carried to Balance Sheet 1004.42 882.23

PERFORMANCE REVIEW

National lockdown due to COVID-19 pandemic at the beginning of the yearand continued restrictions impacted production demand and consequently prices ofproducts. This adversely affected the operations of the Company resulting in a Gross Salesof RS. 2969.15 crores EBIDTA of RS. 701.41 crores and Profit After Tax (PAT) of RS.322.19 crores.

The Company's inherent strengths of its people brand image itsoperating efficiencies and the robustness of its plantation efforts have combined to giveit the ability to withstand the strongest economic shock in our lifetime. It is thereforegratifying that even during these trying times the Company's performance rankedamongst the best in the domestic paper industry. Despite having to shut the plants duringthe lockdown average capacity utilization for the year was 102.6%.

The pandemic severely impacted economic activities all over thecountry. Consequently the overall paper market operated at only around 30-40% till Q2.Demand improved from Q3 with Q4 reaching normal levels. The market situation led tosignificant drop in prices ranging 5% to 25% in various categories. Under this difficultsituation JK Paper volumes and prices dropped the least in the Industry. The Companyovercame the difficult conditions by introducing new brands gaining market share andhigher exports. However the onset of the second wave of COVID and the imposition ofrestrictions across all States in Q1 of FY 2021-22 are likely to again impact operations.

The supply chain of many inputs for the paper Industry were disrupteddue to outages in supplier countries and container shortages. Global pulp prices increasedsharply after November 2020. These uncertainties and volatilities in the commoditymarkets are still continuing and FY 2021-22 will remain challenging for ensuringuninterrupted supplies.

The Industry scenario both domestic and overseas the market and demandsupply balance and other operating conditions are elaborated in the Management Discussionand Analysis section.

LIQUIDITY DURING COVID DISRUPTIONS

Your Company quickly assessed the situation by stress testing the cashflows with different scenarios. The Company had a healthy cash surplus at the outbreak ofpandemic. However since it had already embarked on a major expansion of its PackagingBoard facilities it was thought fit to shore up finances and maintain liquidity.Accordingly the Company contracted some additional loans. The Company continues to repayall its financial obligations as per original schedule and believes that it can overcomethe market uncertainties with its cash balances liquid investments and undrawn banklimits.

IMPACT FROM COVID-19 DURING FY 2020-21

The whole of last year businesses all over the world were impacted dueto the global pandemic COVID-19. The Indian government imposed a complete lockdown duringlate March 2020 to mid-May 2020. The Company had to temporarily suspend operations at itsmanufacturing facilities in Odisha and Gujarat in the last week of March 2020 despitebeing continuous process plants. While operations resumed in the third week of April 2020they continued to be impacted through much of 1st and 2nd Quarter of FY 2020-21 owing tonon-opening of markets and consequent demand contraction difficulty in procurement of rawmaterials and supply chain issues etc. Demand started reviving from September 2020 alongwith a gradual economic recovery.

The Company had put in place "Standard Operating Procedure"(SOP) as per the guidelines and directives of the Ministry of Home Affairs and theMinistry of Health to safeguard against spread of COVID-19. The Company organizedcampaigns to bring awareness amongst all employees and workers on safeguards againstCOVID-19. Thermal temperature measurements at the entry and exit gates mandatory use offace masks hand washing and sanitizing facilities at entry and exit at differentlocations of the plant were put in place along with strict ban on non-essential visitors.Meetings gatherings travelling etc. were avoided with focus on video conferencing andother digital modes. Many of these restrictions either continue till date or have beenreintroduced if earlier relaxed.

PROJECT EXPANSION

The Company had embarked upon an expansion of its Virgin Fibre Board(VFB) capacities by 170000 TPA at Unit CPM to take advantage of its strong marketstanding and double digit growth arising from changes in organised retail and the questfor more eco-friendly aesthetic and customer-friendly packaging. Along with a 160000 TPAchemical pulp mill and utilities the total project cost was estimated at RS. 1935crores net of GST. Once completed the capacity for Packaging Boards will increase to270000 TPA.

Orders for critical equipment were placed and civil constructionstarted in November 2019 well before the COVID Pandemic hit the World. The Project had anestimated time of 24 months from zero date to commence production.

Despite disruptions due to the pandemic affecting manpower availabilityand restrictions on construction activities most of the civil construction has beencompleted. Majority of the equipment and machinery had been received as per schedule. TheManagement does not anticipate any major cost and time overruns. Initial runs of boilerand turbines have commenced and trial production of Packaging Board is expected to startby end of Q2.

PROGRESS AT THE SIRPUR PAPER MILLS LTD. (SPML)

Due to nationwide lockdown caused by COVID-19 pandemic SPML'splant (step down subsidiary) had to be temporarily shut from last week of March 2020 tosecond week of May 2020 and again from August 2020 due to frequent lockdown in variousparts of the country and weak demand for paper resulting in low and unsustainable capacityutilization.

Since re-opening in late 3rd quarter and operations have shown steadyimprovement and reached an average capacity utilisation of approximately 70% in Q4.Considering better market conditions across different segments there has been animprovement in production and sales volumes besides higher sales realisations leading tobetter performance.

The Company has also started trial runs of its new boiler and turbinewhich is expected to contribute significantly to stabilizing operations and reducingcosts. During the financial year 2021-22 SPML is expected to significantly improveoverall paper production and operating margins.

CAPITAL STRUCTURE AND CREDIT RATING

During the year under review there has been no change in theAuthorised Share Capital. However pursuant to Buyback the Paid-up Share Capital of theCompany has been reduced from RS. 178.24 crores to RS. 169.40 crores.

As reported last year the Company achieved financial closure for itsPackaging Board Project from Indian and foreign banks.

In order to optimise cost of working capital funds the Company hasaccessed the Commercial Papers (CPs) market during the year. Over time with a mixture ofCPs Buyers' and Suppliers' Credit in foreign exchange and Working CapitalDemand Loan the Company hopes to further reduce its cost of working capital borrowing.The Company has also met all its financial repayment obligations during the year withoutseeking any waivers or extensions announced by RBI or the Central Government.

JK Paper maintained its credit ratings with CRISIL and India Ratingsupgraded its long term rating to AA – (minus)/Stable inspite of impact of COVID. TheCompany continues to enjoy the highest A1+ credit rating for short term debt.

COMPLIANCE WITH SECRETARIAL STANDARDS

The applicable Secretarial Standards issued under Section 118 of theCompanies Act 2013 (‘the Act') have been complied with.

AWARDS AND RECOGNITION

Our commitment towards Safety & Environment Quality &Operational Excellence and HR practices continue to garner appreciation from variousindustry chambers and social bodies. Some of the accolades and awards received during theyear are as follows: a. Unit JKPM received the "Energy Efficient Unit" at the21st National Award for Excellence in Energy Management 2020 organized by CII b. 8th FICCIQuality System Excellence Awards for Industry 2020 c. In the National Convention onQuality Concept 2020-21 Unit JKPM received Excellence and Par Excellence awards invarious categories.

INDUSTRIAL RELATIONS

Industrial Relations at both units of the Company continued to remainpeaceful and cordial throughout the year. We value the long association of our employeesincluding contractors and their workmen to sustain industrial harmony and create apositive work environment. By introducing various new work practices along with automationwe have succeeded in enhancing manpower productivity. We encourage continuous interactiondialogues and participation of local villagers stakeholders in collaborating varioussocial interventions.

ANNUAL RETURN

Pursuant to the provisions of the Act the Annual Return of the Companyis available on the website of the Company and can be accessed athttps://www.jkpaper.com/images/pdf/Annual%20 Return%202019-20.pdf

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

The particulars of loans guarantees or securities and investments interms of the provisions of Section 186 of the Act are given in the financial statements.

RELATED PARTY TRANSACTIONS

During the financial year ended 31st March 2021 all the contracts orarrangements or transactions entered into by the Company with the Related Parties were inthe ordinary course of business and on arm's length basis and were in compliance withthe applicable provisions of the Act and SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 (‘the Listing Regulations').

Further the Company has not entered into any contract or arrangementor transaction with the Related Parties which could be considered material in accordancewith the Policy of the Company on materiality of Related Party Transactions. In view ofthe above disclosure in Form AOC-2 is not applicable.

The Related Party Transaction Policy as approved by the Board isavailable on the website of the Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board has re-appointed Shri Harsh Pati Singhania (DIN:00086742) asVice Chairman & Managing Director of the Company for a period of five years w.e.f. 1stJanuary 2022 subject to approval of the Members at the forthcoming Annual General Meeting(AGM) of the Company.

Smt. Deepa Gopalan Wadhwa (DIN: 07862942) Independent Director whowas appointed by the Members at the AGM of the Company held on 23rd August 2019 pursuantto the provisions of the Act and Listing Regulations for a term of three consecutiveyears w.e.f. 27th June 2019 is proposed to be re-appointed as Independent Director of theCompany for a further term of five consecutive years w.e.f. 27th June 2022 subject toapproval of the Members at the forthcoming AGM of the Company.

Shri A. S. Mehta (DIN:00030694) President & Director retires byrotation and being eligible offers himself for re-appointment at the forthcoming AGM ofthe Company. Further the Board has re-appointed him as President & Director of theCompany for a period of three years w.e.f. 1st April 2022 subject to approval of theMembers at the forthcoming AGM of the Company.

During the year under review Shri Udayan Bose (DIN: 00004533) anIndependent Director on the Board of the Company passed away on 7th January 2021. TheBoard wishes to place on record its sincere appreciation of the valuable contribution andguidance received from him during his tenure.

Shri Deepak Gupta has been appointed as the Company Secretary a wholetime Key Managerial Personnel of the Company w.e.f. 16th May 2020 and Shri Suresh ChanderGupta Vice President & Company Secretary of the Company had ceased to be the CompanySecretary with effect from the said date.

All the Independent Directors of the Company have given requisitedeclarations that they meet the criteria of independence as provided in Section 149(6) ofthe Act and also Regulation 16(1)(b) of the Listing Regulations and that they arenot aware of any circumstances or situation which exist or may be reasonably anticipatedthat could impair or impact their ability to discharge their duties with an objectiveindependent judgment and without any external influence and have also complied with Rule6(1) and 6(2) of the Companies (Appointment and Qualification of Directors) Rules 2014.

Except as stated above there was no other change in Directors and KeyManagerial Personnel of the Company during the year under review.

INTERNAL CONTROL SYSTEM

The Company has a robust internal control mechanism across all officesplants and key functions. There is a Corporate Internal Audit team consisting of qualifiedprofessionals and system experts. In addition services of external Audit firms and otherspecialized agencies are also availed to further strengthen its effectiveness. Regularinternal audits are conducted to review the internal control systems and compliancethereof as per the annual audit plan approved by Audit Committee of the Board. Thefindings of the Audit team are reviewed by the Audit Committee and corrective actions areinitiated where necessary. In addition the Company also follows a Compliance monitoringsoftware tool to capture status of all applicable statutory compliances online.

The Company has also developed a set of documented Risk ControlMatrices for all major functions and no material reportable weakness was observed duringthe year.

The Company also has a comprehensive budgetary control system in syncwith its Strategic Business Plan. Key performance targets are set for each Plant andproduct lines. The actual performance against these targets is periodically monitored andcorrective actions as needed are initiated.

CORPORATE SOCIAL RESPONSIBILITY

Your Company considers the community as its key stakeholder and is oneof the foremost proponents of inclusive growth and has continued to undertake projects foroverall development and welfare of the society in the fields of environment conservationof natural resources health education rural development and livelihood interventionsetc. In line with its belief of considering Community as its key stakeholder and beingsensitive to its needs during the recent outbreak of COVID-19 pandemic the Company tookseveral initiatives across its plant locations by undertaking distribution of food kitsface masks hand-sanitisers etc. to needy families. Health hygiene and sanitisationmeasures were undertaken in the neighbouring areas. The Company also assisted the localadministration in taking various preventive and safety measures. The Company has aCorporate Social Responsibility (CSR) Policy in accordance with the provisions of the Actand rules made there under. CSR Policy of the Company is displayed on the website of theCompany.

Annual Report on the CSR activities undertaken by the Company duringthe financial year ended 31st March 2021 in the prescribed format as amended is annexedto this Report as Annexure-1 and forms part of it.

AUDITORS & THEIR REPORTS

(a) Statutory Auditors

M/s Lodha & Co. Chartered Accountants have been appointed asAuditors of the Company to hold office from the conclusion of the 56th Annual GeneralMeeting (AGM) held in the year 2017 till the conclusion of 61st AGM of the Company to beheld in the year 2022. The observations of the Auditors in their report on Accounts andthe Financial Statements read with the relevant notes are self-explanatory. The AuditReport does not contain any qualification reservation adverse remark or disclaimer.

(b) Secretarial Auditor

The Board of Directors had appointed Shri Namo Narain Agarwal CompanySecretary in Practice as Secretarial Auditor to carry out Secretarial Audit of theCompany for the financial year 2020-21. The Report given by him for the said financialyear in the prescribed format pursuant to the provisions of Section 204 of the Act andRegulation 24A of the Listing Regulations is annexed to this Report as Annexure-2 andforms part of it. The Secretarial Audit Report does not contain any qualificationreservation adverse remark or disclaimer.

(c) Cost Auditors

In accordance with the provisions of Section 148(1) of the Act theCompany has maintained cost accounts and records. The Cost Audit for the financial yearended 31st March 2020 was conducted by M/s R.J. Goel & Co. Cost Accountants Delhiand as required Cost Audit Report was duly filed with the Ministry of Corporate AffairsGovernment of India. The Audit of the Cost Records for the financial year ended 31st March2021 is being conducted by the said firm and the Report will also be filed with theMinistry of Corporate Affairs Government of India.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS

During the year under review there were no significant and materialorders passed by the Regulators or Courts or Tribunals which would impact the goingconcern status of the Company and its future operations.

MATERIAL CHANGES AND COMMITMENTS

There has been no material contracts and purchase orders placed otherthan those relating to the expansion at Unit CPM.

CHANGE IN THE NATURE OF BUSINESS

During the year under review there was no change in the nature ofbusiness of the Company.

CONSERVATION OF ENERGY ETC.

The details as required under Section 134(3)(m) of the Act read withthe Companies (Accounts) Rules 2014 is annexed to this Report as Annexure-3 and formspart of it.

PARTICULARS OF REMUNERATION

Disclosure of the ratio of the remuneration of each Director to themedian employee's remuneration and other requisite details pursuant to Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed to this Report as Annexure-4 and forms partof it. Further Particulars of Employees pursuant to Rule 5(2) & (3) of the aboveRules also form part of this Board Report. However in terms of provisions of Section 136of the Act the Annual Report for the financial year 2020-21 is being sent to all themembers of the Company and others entitled thereto excluding the said particulars ofemployees. Any member interested in obtaining such particulars may write to the CompanySecretary. The said information is also available for inspection at the Registered Officeof the Company on working days during working hours.

CORPORATE GOVERNANCE

Your Company reaffirms its commitment to the highest standards ofcorporate governance practices. Pursuant to Regulation 34 read with Schedule V of theListing Regulations Management Discussion and Analysis Corporate Governance Report andAuditors Certificate regarding compliance of conditions of Corporate Governance are madepart of this Annual Report.

The Corporate Governance Report which forms part of this Annual Reportalso covers the following:

a) Particulars of five Board Meetings held during the financial yearunder review.

b) Policy on Nomination and Remuneration of Directors Key ManagerialPersonnel and Senior Management including inter alia the criteria for performanceevaluation of Directors.

c) The manner in which formal annual evaluation has been made by theBoard of its own performance and that of its Committees and individual Directors.

d) The details with respect to composition of Audit Committee andestablishment of Vigil Mechanism.

e) Details regarding Risk Management.

f) Dividend Distribution Policy.

g) Disclosures under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.

SUSTAINABILITY AND BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34(2)(f ) of the Listing Regulations theSustainability and Business Responsibility Report of the Company for the financial yearended 31st March 2021 is given in a separate section and forms part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of your Company for the financialyear 2020-21 have been prepared in accordance with the Act and applicable IndianAccounting Standards. The Audited Consolidated Financial Statements together withAuditors' Report form part of the Annual Report.

A report on the performance and financial position of each of thesubsidiaries and joint ventures included in the Consolidated Financial Statements ispresented in a separate section in this Annual Report. Please refer to Form AOC-1 annexedto the Financial Statements forming part of the Annual Report.

Pursuant to the provisions of Section 136 of the Act the Standaloneaudited financial statements Consolidated audited financial statements along withrelevant documents and separate audited financial statements in respect of each of thesubsidiaries are available on the website of the Company.

During the year under review no company has become or ceased to beyour Company's subsidiary or joint venture or associate.

DEPOSITS

Pursuant to the approval of members by means of a Special Resolution atthe AGM held on 27th September 2014 the Company is accepting deposits from the public andits members in accordance with the provisions of the Act and rules thereunder. Theparticulars in respect of the deposits covered under Chapter V of the said Act for thefinancial year ended 31st March 2021 is annexed to this Report as Annexure-5 and formspart of it.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134(3)(c) of the Act your Directors statethat: (a) in the preparation of the annual accounts the applicable accounting standardshave been followed along with proper explanation relating to material departures if any;(b) the accounting policies have been selected and applied consistently and judgments andestimates made are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company at the end of the financial year and of the profit of theCompany for that period; (c) proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with the provisions of the said Act forsafeguarding the assets of the

Company and for preventing and detecting fraud and otherirregularities; (d) the annual accounts have been prepared on a going concern basis; (e)the proper internal financial controls to be followed by the Company have been laid downand that such internal financial controls are adequate and were operating effectively; and

(f ) the proper systems have been devised to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

ACKNOWLEDGEMENT

Your Directors acknowledge the unstinted support and cooperationreceived from the Central Government State Governments Stakeholders participatingFinancial Institutions and Banks Customers Dealers and Suppliers.

The Board wishes to record its highest appreciation of the totalcommitment dedication and hard work put in by every employee and member of the Team JKPaper.

On behalf of the Board of Directors
Place: New Delhi Bharat Hari Singhania
Date: 24th May 2021

Chairman

.