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Malu Paper Mills Ltd.

BSE: 532728 Sector: Industrials
BSE 00:00 | 20 Aug 19.45 -1.80






NSE 00:00 | 20 Aug 19.95 -0.85






OPEN 20.85
52-Week high 51.45
52-Week low 18.25
P/E 4.94
Mkt Cap.(Rs cr) 33
Buy Price 19.45
Buy Qty 239.00
Sell Price 20.65
Sell Qty 70.00
OPEN 20.85
CLOSE 21.25
52-Week high 51.45
52-Week low 18.25
P/E 4.94
Mkt Cap.(Rs cr) 33
Buy Price 19.45
Buy Qty 239.00
Sell Price 20.65
Sell Qty 70.00

Malu Paper Mills Ltd. (MALUPAPER) - Director Report

Company director report

The Directors have pleasure in presenting the 25 th Annual Report for the year ended31st March 2018 along with the Audited Statement of Accounts with the Report of theAuditors thereon:


(Rs. In Lakhs)

2017-2018 2016-2017*
Sales & Other Incomes 28322.31 25181.42
Profit Before Interest & Depreciation 1905.72 2348.54
Less: Financial Charges 1200.49 1450.17
Profit Before Depreciation 705.22 898.37
Less: Depreciation 480.35 479.91
Less: Provision For Tax 78.90 129.47
Profit/ (Loss) After Tax 145.97 288.99

* Previous year figures have been regrouped in accordance with Indian AccountingStandard (Ind-AS). REVIEW OF OPERATIONS

Your company has posted another year of profitable results considering the challengesfaced by it in the last financial year. For the year under review the Company recordedtotal income of Rs.28322.31 Lakhs and booked profit before tax of Rs. 224.88 Lakhs.Duringthe year the slow pace of demand continued and towards the end of the financial year thedemand had started to improve as forecasted earlier.


The Industry has experienced a radical shift in the business environment in the secondhalf of the year; These changes has mostly resulted from major policy changes in Chinawhich is the worlds biggest paper recycler country having annual capacity of about 60million tons of recycle based pulp and paper imports about 25-million-ton waste paper perannum considering its size it plays a decisive role in global market of waste paper.Recently Chinese government has decided to ban import of inferior grade of waste paperthis decision has changed the waste paper prices globally. Further due to environmentalissue the China government has ordered closure of a considerable paper productioncapacity. The resultant effect of these decisions has led to sharp decline in globalsupply of recycle grade newsprint paper and paperboard leading to sharp increase in theprices of these grades. China has become a paper importer from a major exporter of paperpaperboard and newsprint due to changes in its internal policies. Demand growth in paperand paperboard is being led by the paperboard segment and the segment reflects impetusfor better growth in coming years.


The domestic Paperboards Paper and Packaging industry remained impacted by sluggishdemand conditions prevailing in the Indian industry. The transition to GST causedshortterm disruptions especially during the first half of the year. The duty imports underASEAN Free Trade Agreement and unabsorbed capacity in the industry weighed on theperformance of the Business. However Indian paper industry looks quite promising as thedomestic demand is on the rise after the stabilisation of the economy post GSTimplementation. The increasing literacy rate rise in the per capita income growth inGDP

improvement in manufacturing sector and changing lifestyle of individuals in the urbanas well as rural India are expected to provide impetus to the growth of paper industry inIndia. A majority of India still lives in ‘villages'. This statement no doubt holdstrue but the figures suggest that there has been a paradigm shift of the Indian populacein terms of rural-urban divide. The aspirations of higher income higher standard ofliving etc. has drawn more and more people from villages to settle in towns and cities.This transition from rural to urban areas has led to an increase in the demand for goods(owing to higher income and ever- expanding needs) and has also shifted the consumptionpattern. Replicating the global market the demand growth in India is largely led byconsumer packaging paperboard segment which is also impacted positively due to risinge-commerce.

The ban on import of waste paper and closure of substantial capacity in China as aresult of the change in the policies has provided double benefits to Indian recycle papermanufacturing industry the reduction in demand from China has led to lower prices ofwaste paper and increase in demand of finished paper from China has seen the finishedprices firming up resulting in higher realization for newsprint paper and paperboard. Thetotal installed capacity in India is about 12.7 million tonnes. The per capita consumptionof paper is around 13 kg against the global average of 57 kg. Every 1 kg increase in percapita consumption results into increase in annual demand over 1 million tons. At presentthe industry is largely fragmented with over 750 paper mills but very few large papermills of capacity above 50000 TPA.


India remains a bright spot in the Newsprint market with its growing young populationand increasing literacy levels. This is in spite of global downward trend in newspapercirculation owing to penetration of digital media. The daily circulation of the newspaperin India is rising continuously with daily circulation up from 150 million in 2002 risingto 264 million in 2017; the rise is expected to continue in the coming years. The Indianprint media continues to command a major share of the advertisement revenues. This beingthe election year and growth in industry picking up resulting in higher advertisementsthis year is expected to be a year of high growth of newspapers in India. In India over50% of the newsprint demand is met through import. The domestic prices of newsprint arelargely determined by the landing cost of the Imported Newsprint. Due to changes in theglobal newsprint market the prices of Newsprint has seen an increase of about 20-22%.Overall performance of Indian newsprint sector is expected to be very promising in theyears to come. The GST council has imposed IGST on imported newsprint this has alsoprovided much needed level playing field to the Indian newsprint manufacturers againstimported ones.

Writing & Printing paper demand remained firm due to steady offtake from theeducation segment while prices witnessed an uptrend largely on account of supplydisruptions due to operational discontinuities at certain mills. Recent ban by variousstate government on the plastic and thermocol packaging to provide impetus to the Kraftpackaging paper. The extension of the E-Commerce trade to the tier 2 and tier 3 citieswill provide a boost to the packaging sector and with ban on plastic packaging in manystates this sector provides a great opportunity for the Kraft paper mills producing thepackaging paper.

Over the next five years the domestic industry is projected to grow at 6-7% CAGR toreach 20 million tonnes by 2022. The Paperboard segment comprising 48% of the market isestimated to grow at around 7.5% CAGR and Writing & Printing paper segment whichcomprises 30% of the market at 6.0% CAGR respectively. In the Writing & Printing papersegment cut-size paper is projected to register the fastest growth at 9.5% CAGR drivenby the education and office stationery segments. The demand for newsprint has grown at aCAGR of 4% from 2.4 million tonnes in 2012-13 to 2.5 million tonnes in 2016-17; it isexpected that the growth will continue at CAGR of 3.5% - 4% to reach 3 million tons in2021-22.


India's share in global paper demand is gradually growing as domestic demand isincreasing at a steady pace while demand in the western nations is contracting Thedomestic demand in India grew from 9.3 million tonnes in FY08 to 15.3 million tonnes inFY16 at a CAGR of 6.4%. In spite of the sustained growth witnessed by the industry theper capita paper consumption in India stands at a little over 13 kg which is well belowthe global average of 57 kg and significantly below 200 kg in North America.

For the Indian paper industry strong economic growth has been accompanied by equallyrobust demand for paper. The demand drivers and growth triggers have come from acombination of factors such as rising income levels growing per capita expenditure rapidurbanization and a larger proportion of earning population which is expected to leadconsumption and there is enormous potential for the paper industry in the country. It isexpected that the overall paper demand growing at a CAGR of 6-7% is likely to touch 18.5million tonnes in 2018-19.

Printing and Writing segment demand is expected to grow at a CAGR of 6% and reach 5.3million tonnes in FY19. The demand is expected to grow on account of an anticipated pickupfrom the education sector with improving literacy rates and growing enrolment as well asincreasing number of schools and colleges.

The Packaging paper & board segment caters to industries such as FMCG food &beverage pharmaceutical textiles etc. Demand for Packaging Paper & Board segment isexpected to grow at a CAGR of 7-8% and reach 9.7 million tonnes in FY19 due to factorssuch as increased urbanization requirement of better quality packaging of FMCG productsmarketed through organized retail E-commerce and increasing preference for ready-to-eatfoods.

The Improving literacy rates rising circulation and an increasing number of newspapersand magazines is expected to support growth in newsprint demand which is expected to reach2.7 million tonnes in FY19.

Malu Paper Mills Ltd has paper mills strategically located in Central India at Nagpur(Maharashtra). The company is the largest newsprint manufacturer of Central India with49500 TPA capacity and produces quality newsprint with recycle process. The company hasswing facility wherein it can change to Newsprint and Writing paper production at shortnotice. The company is also in the manufacture of the packaging paper of recycle gradewith an annual capacity 50000 TPA. The positive turn of events in the Indian paperindustry in the current year due to changes in the international market is expected tobring in good prospects for the company in coming years.


• Central location - equidistant to all the major metro markets in the country.

• Growth trend in the domestic paper market and opportunities in the export marketfor its products.

• Government emphasis on avoid plastic packaging and to promote Bio degradablepackaging to provide impetus to the packaging industry.

• Robust growth in e-commerce FMCG Consumer goods to drive paper board demand.

• Post Implementation of the GST owing to its central location Nagpur isgradually developing into a transportation and logistics hub this will enable the companyto optimise on the transportation cost of raw material and finished goods.

• Close proximity to Western Coal Fields (WCL) for procurement of coal andavailability of biomass from the nearby rice producing regions.

• Three Inland Container Depots (ICD) near by enabling smooth and competitiveinfrastructure for import and export of goods.

• Established customer base and dealers network.

• Governments thrust for education and literacy coupled with increasing disposableincome and overall economic growth of the nation.

• Levy of IGST on imported newsprint as compared to duty free import in pre-GSTregime


• Cyclical nature of the paper industry.

• Numerous Regional Trade scheme (RTs)/Free Trade Agreement (FTAs) withoutadequate safeguard to the domestic industries.

• Increasing competition from electronic media and digitalization (for newsprint).

• Capital-intensive industry.


Your Company has adequate internal control procedures commensurate with the size andnature of business. There is a periodical review mechanism for ensuring the sustenance andup gradation of these systems.


The Company is not required to constitute CSR Committee as per the provisions ofSection 135 (1) of the Companies Act 2013 read with Companies (Corporate SocialResponsibility Policy) Rules 2014. However your company has always discharged its socialresponsibility as a part of its corporate governance philosophy. The company has lendhelping hand by taking up health check up camps drinking water supply tree plantationsin the plant premises and in the vicinity of its plant.


The Company has not accepted any deposits from public during the year under review.


Shri Damodarlal Malu (DIN 00301120) and Shri Vasudeo Malu (DIN 00301313) Directorsretire by rotation at the ensuing annual general meeting and being eligible offersthemselves for re-appointment.


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 independenceprovided under section 149(6) of the said Act.


As required under Section 134(5) of the Companies Act 2013 the Director's confirmthat:

1 In the preparation of the annual accounts the applicable accounting standards havebeen followed.

2 The Directors had selected such accounting policies and applied them consistently andmade judgments and estimate that are reasonable and prudent so as to give a true and fairview of the state of affairs of Company as on 31st March 2018 and of the profit of thecompany for that period.

3 The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities.

4 The annual accounts have been prepared on a going concern basis.

5 The directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

6 The Directors have devised proper systems to ensure compliance with the provisions ofall applicable laws and these were adequate and operating effectively.


Equity Shares of Company are listed on The Stock Exchange Mumbai (BSE) and The

National Stock Exchange (NSE). The Company has duly paid listing fees to stockexchanges.


Remuneration Policy

1) Remuneration to Managing/Whole- time / Executive /Managing Director KMP and

senior Management Personnel:

a) The Remuneration / Commission etc. to be Paid to Managing Director/ Joint ManagingDirectors etc. shall be governed as per provisions of the Companies Act 2013 and rulesmade there under or any other enactment for the time being in force and the approvalsobtained from the Members of the Company.

b) The Nomination and Remuneration Committee shall make such recommendations to theBoard of Directors as it may consider appropriate with regard to remuneration to ManagingDirector.

2) Remuneration to Non- Executive / Independent Director:

a) The Non- Executive / Independent Directors may receive sitting fees and such otherremuneration as permissible under the provisions of Companies Act 2013. The amount ofsitting fees shall be such as may be recommended by the Nomination and RemunerationCommittee and approved by the Board of Directors.

b) All the remuneration of the Non- Executive / Independent Directors (excludingremuneration for attending meetings as prescribed under section 197(5) of the companiesAct 2013) shall be subject to ceiling / limits as proved under Companies Act 2013 andrules made there under or any other enactment for the time being in force. The amount ofsuch remuneration shall be such as may be recommended by the Nomination and RemunerationCommittee and approved by the Board of Directors or Shareholders as the case may be.

c) An Independent Director shall not be eligible to get stock options and also shallnot be eligible to participate in any share based payment schemes of the Company.

d) Any remuneration paid to Non- Executive / Independent Directors for servicesrendered which are of professional in nature shall not be considered as part of theremuneration for the purpose of clause (b) above if the following conditions aresatisfied:

i) The Services are rendered by such Director in his capacity as the professional; and

ii) In the opinion of the committee the director possesses the requisite qualificationfor the practice of that profession.

3) Remuneration to Key Managerial Personnel and Senior Management:

a) The remuneration to Key Managerial Personnel and senior Management shall consist offixed pay and may include incentive pay in compliance with the provisions of theCompanies Act 2013 and in accordance with Company's policy.

b) The Fixed pay shall include monthly remuneration employer's contribution toProvident Fund contribution too pension fund pension schemes etc. as decided from totime.

c) The Incentive pay shall be decided based on the balance between performance of theCompany and performance of the Key Managerial Personnel and Senior Management to bedecided annually or at such intervals as may be considered appropriate.


None of the employee including Key Managerial Personnel was drawing in excess of thelimits prescribed by Section 197 read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 and Companies (Particulars of EmployeesRules 1975 which needs to be disclosed in the director's report.


The assets of the Company are adequately insured against the loss of fire riotearthquake terrorism etc. and other risks which considered necessary by the management.The management has taken adequate steps to protect its assets and safeguard the interestof the company.


The Board of Directors met Six (06) times during the year and the details thereof werementioned in the Report of Corporate Governance forming part of this Annual Report.


The loans given investments made or guarantee given or security provided by theCompany are same as mentioned in notes to the Financial Statements.


The details of related party disclosures and transactions are given in Notes 27 offinancial statements. All contracts/ arrangements/ transactions entered by the companyduring the financial year with related parties were in the ordinary course of business andon arm's length basis and are approved by in the Board Meeting held on 22/05/2017.


As per the provisions of the Listing Regulations and pursuant to Section 177 of theCompanies Act 2013 the Audit committee constituted to review compliances with internalcontrol systems and other various functions of the Company. FCA Shrutika InaniIndependent Director was the Chairman of the Audit Committee.


The notes to the accounts to the comments made by the Auditors in their Report are self- explanatory. The Auditors' report does not contain any qualification reservation oradverse remark.

The Auditors of the Company have not reported any fraud as specified under the section143(12) of the Companies Act 2013.


M/s. R. A Kuvadia & Co. Chartered Accountants Mumbai the Auditors of thecompany will retire at ensuing Annual General Meeting and being eligible offerthemselves for reappointment. In terms of provisions of section 139 of the Companies Act2013 M/s. R. A Kuvadia & Co. Chartered Accountants have furnished a certificate thattheir appointment if made will be within the limits prescribed under the said section ofthe Act. As required under Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 they have also confirmed that they hold a validcertificate issued by the Peer Review Board of the Institute of Chartered Accountants ofIndia.


Pursuant to Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)Regulation 2015 a report on Corporate Governance is made a part of the Annual Report.


Pursuant to the provisions of the Companies Act 2013 the Board of Directors hadappointed M/s. Khanuja Patra & Associates Cost Accountants as Cost Auditors of theCompany for conducting the audit of Cost records for the financial year ended on 31stMarch 2018. The audit is in process and report will be filed within prescribed period.


Criteria for performance evaluation of its Directors as required by the ListingAgreement and SEBI (Listing Obligations of Disclosure Requirements) Regulations 2015 areattending Board/committee meetings; going through the agenda papers and providing inputsin the meeting of Board/committees; guidance to the company from time to time on thevarious issues; discharge of duties as per the Companies Act 2013 and compliance to theother requirements of the said Act.


As per the provisions of Section 177(9) of the Companies Act 2013 a Vigil Mechanismfor Directors and employees to report genuine concerns has been established. The same hasbeen uploaded on company's website at


Pursuant to Regulation 25(7) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Board has framed a policy to familiarize the Independent Directorsabout the Company. The Policy is available on the website of the company.


The Secretarial Audit issued by Practicing Company Secretary is being attached with theDirectors report as Annexure A which is self explanatory.


The Abstract of the Annual Return for the year 31st March 2018 being attached with theDirectors Report as Annexure B.


The information pertaining to conservation of energy technology absorption foreignexchange earnings and outgo as required under the Companies Act 2013 read with theCompanies (Accounts) Rules 2014 is given as per 'Annexure C' and forms part of theDirectors' Report.

As regards disclosure of particulars relating to conservation of energy great emphasishas been given for reduction of energy consumption to reduce cost per unit of goods.Details are attached herewith as per ‘Annexure C'.

The Company imports some portion of its raw material requirement. The foreign exchangeearnings and outgo are as mentioned in the reports of the auditor of the Company.


Your Directors wish to place on record their gratitude to Bankers Customers BusinessAssociates for the co-operation and support and to the Shareholders dealers andsuppliers staff and workers for their contribution to the company's growth.

Place: Nagpur By Order of Board of Directors
Date: 09/08/2018
Punamchand Malu Banwarilal Malu
Managing Director Jt. Managing Director
(DIN:00301030) (DIN:00301297)