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South India Paper Mills Ltd.

BSE: 516108 Sector: Industrials
NSE: SIPAPER ISIN Code: INE088G01014
BSE 00:00 | 06 Jul 59.50 0.25
(0.42%)
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59.10

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NSE 05:30 | 01 Jan South India Paper Mills Ltd
OPEN 59.10
PREVIOUS CLOSE 59.25
VOLUME 8477
52-Week high 99.00
52-Week low 32.60
P/E 5.60
Mkt Cap.(Rs cr) 89
Buy Price 58.75
Buy Qty 250.00
Sell Price 65.00
Sell Qty 60.00
OPEN 59.10
CLOSE 59.25
VOLUME 8477
52-Week high 99.00
52-Week low 32.60
P/E 5.60
Mkt Cap.(Rs cr) 89
Buy Price 58.75
Buy Qty 250.00
Sell Price 65.00
Sell Qty 60.00

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

Company director report

To

The Members

Your Directors hereby present the 60th Annual Report of the Company along with theaudited accounts for the year ended 31st March 2019.

The Company has adopted Indian Accounting Standards (Ind AS) from the financial year2017-18 as mandated by the Ministry of Corporate Affairs (MCA) in place of Indian GAAPfollowed earlier. Financial statements for the current year including figures of theprevious year are based on IndAS and this adoption has no major impact for the Statementof Profit and Loss.

W ORKING RESULTS 2018-19 2017-18 2016-17
Finished Production of Paper & Paperboards 60331 MTs 32687 MTs 52752 MTs
Conversion Quantity at the Box Plant (PPD) 28127 MTs 15522 MTs 26196 MTs
(' In Lacs) (' In Lacs) (' In Lacs)
Gross Sales 24188.66 13448.91 20673.18
Net Sales excl Excise Duty 24188.66 13448.30 19512.41
FINANCIAL RESULTS:
Profit before interest depreciation & tax 3717.07 1437.11 3159.18
Less : Finance costs 445.37 477.70 388.43
Gross (Cash) Profit 3271.70 959.41 2770.75
Less : Depreciation 949.99 878.81 951.17
Profit before Tax 2321.71 80.60 1819.58
Less : Provision for Current tax 503.00 16.00 410.00
Less/(Add) : Deferred tax incl MAT credit entitlement (19.01) (30.68) 220.10
Profit after tax for the year 1837.72 95.28 1189.48
(Less) / Add : Tax Provision for earlier years (0.97) 5.99
Net Profit after Tax 1836.75 95.28 1195.47

OPERATIONS

Gross sales for the financial year 2018-19 rose to ' 241.89 crores as against ' 134.49crores in the previous year. In the previous year (FY 2017-18) Sales and operatingvolumes were lower owing to labour strike at the Paper Mills upto 26th July 2017 and atPrinting & Packaging Division upto mid August 2017 and hence the figures of FY 2017-18are not comparable with FY 2018-19.

Business was restored and in the FY 2018-19 volumes have improved aided by increaseddemand and exports. Operation at the Paper Mill was higher at 91% of the Capacity duringthe year.

Printing & Packaging Division too operated with higher Conversion tonnage.

Profit before interest depreciation tax (PBDIT) in FY 2018-19 increased to '3717lacs from '1437 lacs owing to full year of operation. Finance costs were lower at ' 445lacs from '4 7 8 lakhs as the Company has used the internal accruals available in placeof short term bank borrowings. After making a depreciation provision of '9 5 0 lacs(Previous year 879 lacs) profit before tax was ' 2322 lacs (Previous year ' 81 lacs).After making a provision for tax of ' 503 lakhs (16 lacs) & considering deferred tax& MAT credit of 19 lacs (31 lacs in the previous year) net profit stood at ' 1837lacs. (PY 95 lacs).

FINANCES

During the year cash flow & liquidity remained comfortable.

Sources of funds ' in lacs Deployment of funds ' in lacs
Cash flow from operating activities 3667 Repayment of Term Loans 547
Interest receipts 48 Capital Expenditure & Advances 1276
Term Loan drawn from Bank 200 Finance Cost 444
Decrease in working capital 203 Income tax Paid 522
Others 5 Dividend & Dividend Tax 180
Decrease in short term Bank Borrowings 1154
Total 4123 Total 4123

 

31.03.19 31.03.18
Long Term Debt to Equity Ratio 0.22 0.27
Current Ratio 2.62 1.99

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

The Company has neither accepted or renewed any deposits within the meaning of Section73 of the Companies Act. 2013 and rules framed thereunder during the financial year.

CREDIT RATING

ICRA has reaffirmed our long term rating of [ICRA]A- and a short term rating of[ICRA]A2+ to the Company's line of credit. Long term rating is reaffirmed with negativeoutlook (from stable outlook) considering the proposed borrowing for the ExpansionProject.

CURRENT PROSPECTS

The market conditions for paper though generally competitive is favourable forquality products in the segment in which the Company operates. Market for corrugated boxescontinue to be extremely competitive as industry shifts towards a new technologicalparadigm and consequent higher capacities in corrugation.

An increase in paper making capacity through brown-field investment is underimplementation.

Overall Turnover and operating profit during the first quarter of the current financialyear is expected to be normal.

CAPITAL EXPENDITURE PLANS

New ETP facility for conserving water and meeting the pollution control norms even onthe proposed capacity expansion of the paper mill was installed during the year underreview.

The Company's plan for expansion of the production capacity of paper mill by installingPM6 (Paper Machine No.6) at an estimated cost of about ' 190 crores is underimplementation. Production capacity is being increased from the present 200 MTPD (MetricTonnes Per Day) to 460 MTPD. This will be financed through Bank Term Loan of ' 110 crores& internal accruals of ' 80 crores. Project is scheduled to be commissioned by June2020. This investment in PM6 should further the good standing of Company's products.

CORPORATE GOVERNANCE

As per SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015separate Report on Corporate Governance along with Auditors Certificate confirming thecompliance is attached.

Directors' Responsibility Statem ent :

As required by Section 134(5) of the Companies Act 2013 we state that :

While preparing the Annual Accounts the Company has followed the applicable AccountingStandards;

The Directors have selected such accounting policies and applied them consistently andhas made judgements and estimates that are reasonable and prudent so as to give true andfair view of the state of affairs of the Company as at 31-3-2019 & of the profit ofthe Company for the financial year 2018-19.

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

The Directors have prepared the annual accounts on a going concern basis.

The Directors have laid down internal financial controls to be followed by the Companyand the controls are adequate and operating effectively.

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

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

During the year the Company did not give any Loan / Guarantee or has provided anysecurity or make investment covered under Section 186 of the Companies Act 2013.

PARTICULARS OF CONTRACTS OR ARRANGEM ENTS W ITH RELATED PARTY

None of the transactions with any of the related parties was in conflict with theinterests of the Company. Details of transactions with related parties are furnished as anannexure in Form AOC-2.

CHANGES IN NATURE OF BUSINESS OF THE COMPANY

There was no change in the nature of business of the Company during the year. MATERIALCHANGES & COM M ITM ENTS

There was no change in the nature of business of the Company during the year.

There was no material changes and commitments in the business operations of the Companysince the close of the financial year on 31ST March 2019 to the date of this report.

SEXUAL HARASSMENT OF W OM EN AT W ORKPLA CE (PREVENTION PR O H IBITION &REDRESSAL) ACT 2013 In terms of provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 the Company has formulated a Policy toprevent Sexual Harassment of Women at workplace. During the year under review there wereno cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention

Prohibition and Redressal) Act 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR

TRIBUNALS IM PACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS

As per Rule 8(5)(vii) of the Companies (Accounts) Rules 2014 there were nosignificant and material orders passed by the regulators or courts or tribunals impactingthe going concern status and company's operations.

INTERNAL FINANCIAL CONTROL W ITH REFERENCE TO FINANCIAL STATEMENTS

The Board has adopted policies and procedures for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguarding of its assets the prevention and detection o f frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialdisclosures.

During the year such controls were tested and no reportable material weakness in thedesign or operation were observed.

ISO 9001 CERTIFICATION

Company's Quality Management Systems (QMS) have been audited by Bureau VeritasCertification India Pvt Ltd and ISO 9001: 2015 Certification was awarded to the Printing& Packaging Division of the Company. This Certification issued is valid up to17-5-2021.

FOREST STEWARDSHIP COUNCIL (FSC) CERTIFICATION

The Company received FSC certificate under standards of FSC-STD-40 003 V2-1 FSC-STD-40004 V2-1 and FSC-STD-40 007 V 2-0 for its product group. This is an assurance ofenvironmental protection by providing sufficient documentary controls and traceabilitythroughout the Chain of Custody.This certification means Company is capable ofmanufacturing FSC Recycled and FSC Mixed products.

RESEARCH & DEVELOPM ENT

Several special application grades have been developed & successfully introducedduring the year to cater to stringent customer specific requirements.

ENERGY CONSERVATION MEASURES

The particulars required under Section 134 (3) (m) of the Companies Act 2013 withregard to energy conservation measures are furnished in the Annexure.

ENVIRONMENTAL PROTECTION

Your company has always endeavoured to remain in harmony with its eco-sphere and triedto equitably balance the interest of all stakeholders in it often going beyond thestatutory impositions placed by regulatory authorities. In such efforts are included theinstallation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwisedry lands. New ETP facility for conserving water and meeting the pollution control normseven on the proposed capacity expansion of the paper mill was installed during the yearunder review. The treated effluent water is utilized for irrigation purposes in the nearbyfields of third party farmers with excellent crop yields. The operating performance of thenew ETP are excellent and the plant easily meets the stipulated water standards. The newETP also enables the complete recirculation of process water without adverse effects onproduct quality.

The Company has installed & been operating the Electro Static Precipitator (ESP)Systems for its Boilers for controlling dust emission and dust extractor system forcontrolling dust at its fuel handling system. Centrifuge and other machineries have beeninstalled for effluent treatment.Fuel shed with roofing controls dust emissions andconserves the resources.

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

The Company has engaged the expert services of University of Agricultural SciencesGandhi Krishi Vigyana Kendra Bangalore for a study of ‘Utilisation of Paper MillEffluent for Agricultural Purpose'. After 4 years study a final report has been issuedconcluding that the effluent generated by the paper mill contains small amount ofnutrients higher amount of salts and are within limits of Central Pollution Control Boardnorms. The finding further says that mill effluent along with additional dose of nitrogenhas significant effect in increasing the crop yields.

DIVIDENDS

Your Directors recommend a Dividend of 15% i.e. ' 1.50 per equity share of ' 10 each(last year 10% i.e. Re 1.00 per share). The total distribution including dividend taxamounts to '271.25 lacs (' 180.83 lacs).

PARTICULARS OF EM PLOYEES

Particulars of employees as prescribed under the Companies Act 2013 are annexed.Extract of Annual R eturn

The Extract of Annual Return in Form MGT 9 is attached and forms a part of this AnnualReport. M anagerial Rem uneration

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

Meetings of the Board

The number of meetings of the Board held and details thereof are mentioned in theReport on Corporate Governance forming a part of this Annual Report.

Whistle Blower Policy

In deference to Section 177 (9) of the Actread with relevant Rule 7 of the Companies(Meetings of Board and its Powers) Rules 2014 and Listing Regulations the Company hasestablished a vigil mechanism overseen by the Audit Committee. The Company has formedWhistle Blower policy as required under the Companies Act 2013 and Listing Regulations andno personnel has been denied access to the Audit Committee.

Risk M anagement

The Company has a risk management framework to identify and evaluate business risks andopportunities. It seeks to create transparency minimise adverse impact on the businessobjective and enhance the Company's competitive advantage. It aims at ensuring that theexecutive management controls the risk through means of a properly defined framework.

The Company has laid down appropriate procedures to inform the Board about the riskassessment and minimization procedures. The Board periodically revisits and reviews theoverall risk management plan for making desired changes in response to the dynamics of thebusiness.

The Board of Directors have constituted a Risk Management Committee as required underCl 49 of the Listing Agreement vide Board Meeting held on 27.01.2015 to frame implementand monitor the risk management plan of the Company. The Committee comprises of thefollowing Directors.

Mr Manish M Patel - Chairman

Mr M G Mohan Kumar - Member

Mr S R Chandrasekara Setty - Member

The terms of reference of risk management committee include review of Risk managementpolicy and its development within the Company to monitor the effectiveness of riskmanagement policy review major risks of the Company and to advice on mitigation to theBoard.

LABOUR RELATIONS

The industrial relations climate in the Company during the year was cordial andharmonius. A 6 year Wage settlement agreement signed with workers' union at the Paper Millwill be in force upto 31-3-2022. In case of the Box unit a 4 year Wage settlementagreement signed with workers' union will be in force upto 31-3-2020.

DIRECTORS

In terms of Section 152 of the Companies Act 2013 Mr Jitendra A Patel (DIN 00248302)retires by rotation and he being eligible offers himself for reappointment. YourDirectors recommend his reappointment.

Pursuant to the provisions of the Companies Act 2013 read with SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 Mr M G Mohan Kumar Mr S RChandrasekara Setty Mr Jagdish M Patel Mr. N S Kishore Kumar and Mrs Girija Shankar wereappointed w.e.f 31-03-2015 by the Company at the 56th Annual General Meeting held on 10thSeptember 2015. The tenure of Independent Directors was for a period of 5 years and willend on 31-03-2020. All the Directors are eligible to be appointed for a second term inoffice for tenure upto 5 years as Independent Directors under the Companies Act 2013.

The Nomination and Remuneration Committee of the Board at its meeting held in May 2019recommended the re-appointment of Independent Directors for a second term from 1st April2020 to 31st March 2025. The re-appointment of Independent Director for a second termhowever require the Company to pass a special resolution in general meeting as per Section149 (10) of the Companies Act 2013. Further Regulation 17(1A) of the SEBI (LODR)Regulations 2015 requires special resolution to be passed for the appointment orcontinuance in any office of any person beyond the age of 75 years as Non executiveDirector. Mr S R Chandrasekara Setty and Mr Jagdish M Patel have attained the age of 75years. Accordingly approval of the shareholders is sought by way of special resolution forre appointment of all the Independent Directors.

The resolution for re-appointment of these directors as Independent Directors for asecond term of 5 years is now being placed before the Members for their approval.

Your directors recommend the resolution set out in Item Nos. 4 to 8 of the notice forthe approval by the members of the Company.

DECLARATION BY INDEPENDENT DIRECTORS

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

BOARD EVALUATION

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

The Board has recorded overall satisfaction.

In a separate meeting of Independent Directors held on 27-03-2019 the performance ofNon Independent Directors Board as a whole and the performance of the Chairman wasevaluated.They have expressed overall satisfaction on such evaluation.

POLICY ON D IRECTO R'S APPOINTM ENT AND REMUNERATION

The Company's Policy on director's appointment and remuneration including criteria fordetermining qualifications positive attributes independence of a Director and othermatters as provided under Section 178(3) is annexed hereto and forms part of this AnnualReport.

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

CORPORATE SOCIAL RESPONSIBILITY

The Board has constituted a Corporate Social Responsibility Committee as mandated bySection 135 of the Companies

Act 2013 vide Board Meeting held on 27.01.2015.

The broad terms of reference of the CSR Committee are as under:

• Formulating and recommending to the Board the CSR Policy which shall indicatethe activities to be undertaken by the Company.

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

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

Company has planned for CSR projects for the benefit of villagers in the villagesaround the factory. As the required land for the project was not made available to theCompany by the Gram Panchayath so far planned CSR project could not be done. Amount willbe spent once the Gram Panchayath clears the site for the Project.

A report on CSR Activities is annexed herewith and forms a part of the Directors'Report.

APPOINTM ENT OF KEY M ANAGERIAL PERSONNEL

There are no changes in Key Managerial Positions during the year. AUDITORS

M/s. Murthy Swamy & Associates LLP Chartered Accountants continue to be thestatutory auditors of the Company. At the 59th Annual General Meeting of the Company heldon 20th September 2018 shareholders ratified the appointment of M/s. Murthy Swamy &Associates LLP Chartered Accountants to hold office for a period of four years commencingfrom the conclusion of 59th AGM till the conclusion of 63rd AGM without seeking anyfurther ratification of their appointment from the shareholders of the company for theirappointment as statutory auditors till the conclusion of their tenure.

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

STATEMENT ON COM PLIANCES OF APPLICABLE SECRETARIAL STANDARDS The company has compliedwith the applicable secretarial standards.

SECRETARIAL AUDIT

Pursuant to Section 204(1) of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr S N Hitaish Kumar Practicing Company Secretary (C P No. 6553) to conductthe Secretarial Audit of the Company for Financial Year 2018-19. The Secretarial AuditReport in Form MR 3 is annexed.

There are no qualifications in the Secretarial Audit Report. INTERNAL AUDITOR

Pursuant to Section 138(1) of the Companies Act 2013 the Company has appointed M/sRau and Nathan Chartered Accountants (Firm Regn. No.003178S) Mysore to conduct InternalAudit of the functions and activities of the Company for Financial Year 2018-19.

COST AUDIT

Company's products are not notified for Cost Audit in FY 2018-19. APPRECIATION

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

for and on behalf of the Board of Directors
Bengaluru M anish M. Patel
23rd May 2019 Chairman & Managing Director