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South India Paper Mills Ltd.

BSE: 516108 Sector: Industrials
NSE: SIPAPER ISIN Code: INE088G01014
BSE 00:00 | 27 Jan 114.95 -2.05
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NSE 05:30 | 01 Jan South India Paper Mills Ltd
OPEN 117.00
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VOLUME 3226
52-Week high 195.00
52-Week low 107.00
P/E 80.38
Mkt Cap.(Rs cr) 172
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Sell Price 0.00
Sell Qty 0.00
OPEN 117.00
CLOSE 117.00
VOLUME 3226
52-Week high 195.00
52-Week low 107.00
P/E 80.38
Mkt Cap.(Rs cr) 172
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

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

Company director report

To

The Members

Your Directors hereby present the 63" Annual Report of the Company along with theaudited accounts for the year ended 31% March 2022. The Company has adopted IndianAccounting Standards (Ind AS) from the financial year 2017-18 as mandated by the Ministryof Corporate Affairs (MCA) in place of Indian GAAP followed earlier. Financialstatements for the current year including figures of the previous year are based on IndAS and this adoption has no major impact for the Statement of Profit and Loss.

WORKING RESULTS FY 2021-22 FY 2020-21 FY 2019-20
Finished Production of Paper & Paperboards 54991 MTs 53372 MTs 56789 MTs
Conversion Quantity at the Box Plant (PPD) 29225 MTs 29166 MTs 30827 MTs
(Rs Lacs ) (Rs Lacs ) (Rs Lacs )
Revenue from Operations 30535.57 22678.27 21761.08
FINANCIAL RESULTS:
Profit before interest depreciation & tax 3822.44 3817.18 3521.56
Less : Finance costs 587.75 445.82 411.46
Gross (Cash) Profit 3234.69 3371.36 3110.10
Less : Depreciation 943.92 1014.38 976.66
Profit before Exceptional items & Tax 2290.77 2356.98 2133.44
Add : Exceptional income 273.05 305.79 -
Profit after Exceptional items before tax 2563.82 2662.77 2133.44
Less : Provision for Current tax (559.17) (483.20) (371.86)
Less/(Add) : MAT credit (utilized)/ entitlement (375.16) (285.82)
Less/(Add) : Deferred Tax (charge) credit 160.26 100.54 111.06
Profit after tax for the year 2164.91 1904.95 1586.82
(Less) / Add : (Tax Provision for earlier years Reversal 1.14 a 7.96
Net Profit after Tax 2166.05 1904.95 1594.78

OPERATIONS

Revenue from operations for the financial year 2021-22 increased to Rs 305.35 croresfrom % 226.78 crores in the previous year. During the year 2021-22 operations in Q1 wentwell with stable input costs. During Q2 and onwards raw material and fuel costs went upsteeply due to the Global surge in commodity prices and freight costs as pent-up demandduring the Covid-19 pandemic surfaced. The Company had to constantly negotiate withcustomers for price increases to mitigate the rise in input costs. Due to the steep andfrequent rise in key inputs it was a struggle to recover the cost increases 1n time. Mostoften the recoveries lagged the cost increase even as costs continued to rise. As aresult the price increase at best was limited to the cost increase. During this periodthe Company's attempt was to revise prices to maintain at leastthe unit variable marginper tonne of output. Consequently although the sales realization per MT was higher theoperating margin as a proportion of selling prices was lower. Operation at the Paper Millwas @ 83% as against 81% of the Capacity during the preceding year. At Printing &Packaging Division Conversion tonnage was about the same level of about 81% compared tothe preceding year. Profit before interest depreciation tax (PBDIT) in FY 2021-22 wasmarginally better at 3822 lacs as against $3817 lacs in the preceding year. Financecosts were higher at \ 588 lacs from & 446 lakhs as the utilization of working capitalfacility from bank increased. After making a depreciation provision of 944 lacs (Previousyear 1014 lacs) profit before Exceptional income & tax was 2291 lacs (Previous year2357 lacs). Exceptional income of & 273 lakhs (previous year 306 lakhs) on sale ofpart of an immovable property (held for sale) led the profit before tax to 2564 lakhs(previous year 2663 lakhs). Company has opted for new regime of Income tax whereineffective tax rate is 25.17% sans certain exemptions and allowances like additionaldepreciation from FY 2021-22. After making a provision for current tax of \ 559 lakhs(483 lacs) & considering net effect of deferred tax of F 160 lakhs reduction due toopting of lower tax rate ( MAT credit charged net % 275 lacs in the previous year) netprofit for the year stood at % 2165 lacs. (Previous Year 1905 lacs) Considering theprevailing economic environment and the internal and external factors the Company hasassessed the carrying amount of property plant & equipment receivables inventoriesinvestments and other assets as at the Balance Sheet date the current liquidity positionincluding its cash flows the business outlook and has concluded that no materialadjustments are required in these financial results and the Balance Sheet as at 31-3-2022.FINANCES

During the year cash flow & liquidity remained comfortable for most of the time.

Sources of funds in lacs Deployment of funds % in lacs
Cash flow from operating activities 3790 Repayment of Term Loans 606
Interest receipts 44 Capital Expenditure & Advances 10752
Term Loan from Banks 8771 Finance Cost incl capitalized interest 1285
Income tax Paid 359
Dividend payment 151
Increase in short term borrowing 1658 Increase in Working capital 1110
Total 14263 Total 14263

 

31.03.2022 31.03.2021
Long Term Gross Debt to Equity Ratio 0.74 0.42
Current Ratio 1.15 1.39

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

DEPOSITS

The Company has neither accepted nor renewed any deposits within the meaning of Section73 of the Companies Act 2013 and rules framed there under during the financial year.

CREDIT RATING

ICRA retained the Long term rating (for Fund based limits) of [ICRA]BBB+ stable and ashort term rating (for Non Fund based limits) of [ICRA]A2 to the Company's line ofcredit.

CURRENT PROSPECTS

Current year the operating levels were normal in April 2022. May 1s below normal.Inflationary conditions prevailing all over the world have impacted the demand forproducts. Unusually adverse market conditions are not permitting higher production. Thoughthe impact of Covid-19 has subsided due to continuing Ukraine Conflict fuel prices havestayed elevated. With a threefold increase in imported coal prices over the level inSeptember 2021 power generation via co-generation for captive consumption which hasalways been beneficial earlier has become uneconomical with cost of own generation goingabove the grid power price for the first time. Due to soaring coal prices and supplyconstraints continuous production on new plant requires additional power from 66KV linesfor stable supply. Our application is in process with utility company for quite some timeand expected by Q1 end. Additional white pulp line plant installation work is in progressand is expected to be completed in Q2 of FY 2022-23. Relief is expected in steam and powerconsumption per unit of production in the new machine with capability of higher valuegrades even in the inflationary conditions. Company's operation in the 2 half of thefinancial year is expected to be normal operating economy with higher output. The marketconditions for paper though generallycompetitive as the industry capacity has increasedsubstantially over the years 1s favorable for quality products in the segment in whichthe Company can operate with the new plant. The market for corrugated boxes has becomeextremely competitive as more players shift towards the new technology paradigm incorrugation even as demand growth remains lackluster. The Company is exploringopportunities in new areas where the ban in single use plastic affords new opportunities

CAPITAL EXPENDITURE PLANS

Major phase of the Company's plan for expansion of the production capacity of papermill by installing PM6 (Paper Machine No.6) at an estimated cost of about % 190croresrevised to \ 260 crores is implemented in March 2022 within the time permitted bythe Lending Bank. Second phase involving additional machineries under the expanded scopeof the project is under implementation. Revision in project cost is on account ofintroduction of some new systems for process efficiency automation to handle higherproduction without much time loss and water conservation systems and additional pulpingline considered as beneficial to the Project.

Production capacity 1s being increased from the present 200 MTPD (Metric Tonnes PerDay) to 460 MTPD. Means of finance revised with additional Term loan of 40 crores andinternal accruals 30 crores. This investment in PM6 should further the good standing ofCompany's products and the additional lines to be commissioned in the first half of FY2022-23 should improve the operating margin. Project cost and Means of Finance update Rscrores

Particulars Original estimate Revised estimate Amount incurred As on 31-3-2022 Amount incurred As on 25-5-2022
Project Cost 190.00 260.00 250.36 261.55
Means of Finance :
Internal accruals 80.00 110.00 117.82 129.88
Bank Term Loans 110.00 150.00 132.54 134.37
Total Means of finance 190.00 260.00 250.36 261.55

Company can easily meet the balance amount to complete the second phase In view of theliquidity available in addition to unutilised sanctioned limits of Term Loan.

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 Statement : As required by Section134(5) of the Companies Act 2013 we state that : While preparing the Annual Accounts theCompany has followed the applicable Accounting Standards; The Directors have selected suchaccounting policies and applied them consistently and has made judgements and estimatesthat are reasonable and prudent so as to give true and fair view of the state of affairsof the Company as at 31-3-2022 & of the profit of the Company for the financial year2021-22.

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 Company andthe controls are adequate and operating effectively. The Directors have devised propersystems to ensure compliance with the provisions of all the applicable laws and thesesystems are adequate and operating effectively.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

During the year the Company did not give any Loan / Guarantee. It has not provided anysecurity nor made any investment covered under Section 186 of the Companies Act 2013

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH 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.

MATERIAL CHANGES & COMMITMENTS

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 31*t March 2022 to the date of this report.

SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION & 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 (PreventionProhibition and Redressal) Act 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING 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 WITH 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 safeguardingof its assets the prevention and detection of 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 1s valid up to17-5-2024.

FOREST STEWARDSHIP COUNCIL (FSC) CERTIFICATION

The Company continues to be certified under standards of FSC namely FSC-STD-40-003FSC-STD-40-004 and FSC-STD-40-007 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 & DEVELOPMENT

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 endeavored 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. ETP facility installed in the preceding year for conserving water and meetingthe pollution control norms even on the expanded capacity of the paper mill is functioningsatisfactorily. The treated effluent water is utilized for irrigation purposes in thenearby fields of third party farmers with excellent crop yields. The Company has installed& been operating the Electro Static Precipitator (ESP) Systems for its Boilers forcontrolling dust emission and dust extractor system for controlling dust at its fuelhandling system. Centrifuge and other machineries have been installed for effluenttreatment.Fuel shed with roofing controls dust emissions and conserves the resources. Inorder to ensure environmentally safe disposal of solid wastes the Company has starteddisposing Ash and plastic waste to recyclers authorized by KSPCB. Ash is used in brickmanufacturing and plastic is being used in cement kilns.

The Company had 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 10% i.e. Re 1.00 per equity share of 10 each(last year also 10% ). The total distribution amounts to F 150 lacs (Last year Rs 150lacs) As per Finance Act 2020 Dividend Distribution Tax is not applicable for Dividendsdeclared & paid after 31-3-2020. Dividends will be taxed in the hands of shareholders.As per Ind AS 10 Events after the reporting period Proposed Dividends on Equity sharesbeing a non-adjusting event at the Balance Sheet date is not recognised as as a liabilityin the accounts for the year ended 31% March 2022. Dividend will be recognised in theaccounts in the year of payment 1.e. FY 2022-23.

PARTICULARS OF EMPLOYEES

Particulars of employees as prescribed under the Companies Act 2013 are annexed.Annual Return Copy of the Annual Return for the financial year ended 31-3-2022 isavailable on our website www.sipaper.com. Managerial Remuneration Requisite details as perRule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is annexed herewith and forms a part of this Annual report. Meetings of the Board Thenumber of meetings of the Board held and details thereof are mentioned in the Report onCorporate Governance forming a part of this Annual Report. Whistle Blower Policy Indeference 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 Management The Companyhas a risk management framework to identify and evaluate business risks and opportunities.It seeks to create transparency minimise adverse impact on the business objective andenhance the Company's competitive advantage. It aims at ensuring that the executivemanagement controls the risk through means of a properly defined framework. The Companyhas laid down appropriate procedures to inform the Board about the risk assessment andminimization procedures. The Board periodically revisits and reviews the overall riskmanagement plan for making desired changes in response to the dynamics of the business.

The Board of Directors have constituted a Risk Management Committee as required underthe Listing Regulations vide Board Meeting held on 27.01.2015 to frame implement andmonitor the risk management plan of the Company. The Committee comprises of the followingDirectors.

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 Millwas in force upto 31-3-2022. Negotiation for agreement for the subsequent period hascommenced. In case of the Box unit a 4 year Wage settlement agreement signed during theyear with workers' union is in force upto 3 1-3-2024.

DIRECTORS

In terms of Section 152 of the Companies Act 2013 Mr Dineshchandra C Patel (DIN00167581) retires by rotation and he being eligible offers himself for re appointment. Asper the amended Regulation 17(1A) of the SEBI (LODR) Regulations 2015 no Company shallappoint or any person or continue the directorship of any person as Non executive Directorwho has attained the age of 75 years unless a special resolution at the General Meeting ispassed to that effect. In order to comply with this requirement of passing specialresolution for appointment / continuation of appointment of Mr Dineshchandra C Patelbeyond 75 years this special resolution is proposed to be passed. Accordingly approval ofthe shareholders is sought by way of special resolution. Further Mr JitendraA Patel (DIN00248302) was appointed on 23 September 2021 as a Director liable to retire by rotation.Mr JitendraA Patel would be attaining the age of 75 years on 02-05-2023. As per theamended Regulation 171A) of the SEBI (LODR) Regulations 2015 no Company shall appoint orany person or continue the directorship of any person as Non executive Director who hasattained the age of 75 years unless a special resolution at the General Meeting is passedto that effect. In order to comply with this requirement of passing special resolution forcontinuation of Mr JitendraA Patel's appomtment beyond 75 years this special resolutionis proposed to be passed. Accordingly approval of the shareholders is sought by way ofspecial resolution. Your Directors recommend the special resolutions set out in Item No 5& 6 of the notice for the 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 hasrecorded overall satisfaction. In a separate meeting of Independent Directors held on28-03-2022 the performance of Non Independent Directors Board as a whole and theperformance of the Chairman was evaluated.They have expressed overall satisfaction on suchevaluation.

POLICY ON DIRECTOR'S APPOINTMENT 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 indicate theactivities to be undertaken by the Company.

* Recommending the amount of expenditure to be incurred on the aforesaid activities and;2

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

The Company has spent towards CSR activities during the year Rs 44.77 lakhs in full.There is no unspent amount. A report on CSR Activities is annexed herewith and forms apart of the Directors' Report.

APPOINTMENT OF KEY MANAGERIAL PERSONNEL

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

OTHER DISCLOSURES

The Company has not made any application nor any proceeding is pending against theCompany under the Insolvency and Bankruptcy Code 2016 during the year under review. TheCompany has not made any one time settlement with any Banks or financial institutionduring the year under review. Hence Rule 8(5)(xi1) of Companies (Accounts) Rules 2014 1snot applicable.

AUDITORS

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

M/s Murthy Swamy & Associates LLP Chartered Accountants Mysuru who were appointedat the 58" Annual General Meeting which was held on 26-09-2017 for a period of 5years will be retiring at the forthcoming Annual General Meeting. The Board wishes toplace on record its appreciation for the professional services rendered by them duringtheir tenure.

M/s BS Ravikumar and Associates Chartered Accountants Mysuru have submitted theireligibility for appointment as Statutory Auditors. The Board based on the recommendationof the Audit Committeerecommends the appoimtment of M/s B S Ravikumar & AssociatesChartered Accountants Mysuru as the statutory auditors of the Company for the approvalof the shareholders of the Company Your Directors recommend the resolution at Item No. 4of the accompanying AGM notice.

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 SN Hitaish Kumar Practicing Company Secretary (C P No. 6553) to conduct theSecretarial Audit of the Company for Financial Year 2021-22. The Secretarial Audit Reportin Form MR 3 is annexed. Explanation for observation/comments made by the CompanySecretary in Practice

1. The Board has taken note of the revised format of the CSR Report and the same hasbeen complied with by the Company.

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.0031788) Mysore to conduct InternalAudit of the functions and activities of the Company for Financial Year 2021-22.

COST RECORDS AND AUDIT

Necessary cost records as required by rules are made and maintained Company's productsare not notified for Cost Audit in FY 2021-22. 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
Nanjangud Manish M. Patel
26" May 2022 Chairman & Managing Director

.