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Seshasayee Paper & Boards Ltd.

BSE: 502450 Sector: Industrials
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OPEN 904.80
52-Week high 1328.00
52-Week low 800.05
P/E 6.24
Mkt Cap.(Rs cr) 1,072
Buy Price 846.00
Buy Qty 1.00
Sell Price 865.00
Sell Qty 5.00
OPEN 904.80
CLOSE 908.45
52-Week high 1328.00
52-Week low 800.05
P/E 6.24
Mkt Cap.(Rs cr) 1,072
Buy Price 846.00
Buy Qty 1.00
Sell Price 865.00
Sell Qty 5.00

Seshasayee Paper & Boards Ltd. (SESHAPAPER) - Director Report

Company director report

The Directors hereby present their Fifty T Eighth Annual Report and the Audited

Accounts for the year ended 31st March 2018 : The Company hitherto was following theCompanies (Accounting Standards) Rules 2006 and Indian GAAP. It has now adopted theIndian Accounting Standards (IndAS) from Financial Year 2017-18 as mandated and reworkedthe financial statements for Financial Year 2016-17 for presenting comparativeinformation.

Accordingly the financial statements for current year including comparative figures ofprevious year are based on IndAS and in accordance with the recognition and measurementprinciples stated therein as well as other accounting principles generally accepted inIndia. While this has no major impact for the Statement of Profit & Loss there is andwould be periodical impact on "Other Comprehensive Income" in measuring andrestating investments at fair value.


2017-18 2016-17
(in tonnes) (in tonnes)
Production 1 88 203 1 95 413
Sales 1 86 595 1 93 977
( Rs crores) ( Rs crores)
Revenue from
Sales and Other
Operating Income 1117.79 1166.67
Less: Excise Duty and Excise Cess 13.14 59.08
1104.65 1107.59
Other Income 9.40 8.14
Total Revenue 1114.05 1115.73
Profit before interest depreciation exceptional item and tax 216.59 221.80
Finance Cost 14.30 23.20
Depreciation 31.94 30.62


2017-18 2016-17
( Rs crores) ( Rs crores)
Exceptional Item 4.84 -
Profit before tax 175.19 167.98
Provision for current tax 36.02 35.90
Transfer to / (from) Deferred Tax 16.28 4.04
Net Profit 122.89 128.04


The Board of Directors recommend payment of Dividend at Rs 15 ( Rs Fifteen) per EquityShare absorbing a sum of Rs 18.92 crores. As per the provisions of the Income tax Act1961 no tax will be deducted at source on dividends distributed. However the Companywill bear the tax on the dividend distributed amounting to Rs 3.89 crores. Pursuant tothe Accounting Standard 4 revised by Ministry of Corporate Affairs Notification dated

30th March 2016 proposed dividend on Equity Shares and Corporate Tax on dividend beinga non adjusting event at the Balance Sheet date are not recognised as a liability in theaccounts for the year ended March 31 2018. The same will be recognised in the year ofpayment viz. year ending March 31 2019.


( Rs crores)
Net profit for the year 122.89
Surplus brought forward from the previous year 84.28
Re-measurement of DefinedB enefit Plans 2.78
Dividend paid during the year (For FY 2016-17) 12.61
Tax on Dividend distribution 2.57
Transfer to General Reserve 100.00
Balance carried forward 89.21


During the year production at Unit : Erode was 1 21 594 tonnes as compared to 1 25662 tonnes in the previous year.

Unit : Tirunelveli produced 66 609 tonnes of Paper during the year as compared to 69751 tonnes produced in the previous year.

Production was affected in both the Units due to severe shortage of water faced duringthe summer season due to continuous failure of monsoon and planned shuts availed forinstalling key equipment under Mill Development / Expansion Plans.

Unit : Erode also produced 24 631 tonnes of Wet Lap Pulp to augment the Pulprequirements of Unit : Tirunelveli.

The overall production for the Company was 1 88 203 tonnes of Paper and PaperBoards for the year as compared to 1 95 413 tonnes produced in the previous year.


After taking into account 1 608 tonnes towards in-house consumption Unit : Erode sold1 19 986 tonnes against the production of 1 21 594 tonnes and achieved zero stock at theend of the financial year.

In addition Unit : Erode as part of its trading activity had sold petroleum productsvalued at Rs 23.92 crores and 510 tonnes of Note Books. Closing Stock of TradedGoods was 16 tonnes as on March 31 2018.

Unit : Tirunelveli sold 66 609 tonnes of all the quantity produced and achieved zerostock at the end of the financial year.

Unit : Tirunelveli had also sold 415 tonnes of Note Books. Closing stock of tradedgoods was 411 tonnes as on March 31 2018.

The overall sale of Paper and Paper Boards effected by the Company during the year was1 86 595 tonnes compared to 1 93 977 tonnes sold during the previous year.


The Revenue from Operations of the Company for the year was Rs 1117.79 crores asagainst Rs 1166.67 crores in the previous year.

Profit before interest depreciation exceptional item and tax was Rs 216.59 croresfor the Company as a whole compared to Rs 221.80 crores in the previous year.

After absorbing interest and depreciation of Rs 14.30 crores Rs 31.94 croresrespectively and after taking into consideration exceptional income of Rs 4.84 crores theProfit Rs 175.19 crores as compared to Rs 167.98 crores in the previous year.

The Company achieved good financialresults despite loss of production both in Unit :Erode and Unit : Tirunelveli. Major factors that had contributed to improved financialperformance during the year were :

• Higher De-inked Pulp production enabling replacement of costly imported pulp.

• Moderation in Wood Prices.

• Optimisation in Raw Material mix Product mix.

• Improved paper market conditions witnessed from the end of third quarter of thefinancial year.

• Higher Operating Income due to monetisation of REC inventory.

• Lower Interest and Financing Charges due to repayment of Term Loans marginalreduction in interest rates and non-utilisation of working capital limits.

The Company could not pass on fully the cost increase arising out of steep increase inthe prices of Coal Furnace Oil and other input chemicals during the year.

For the year ended 31st March 2018 the tax liability under the normal method works outto Rs 39.30 crores after deduction under Section 80-IA of the Income tax Act 1961.The tax liability under

MAT works out to Rs 36.02 crores. Consequently the Company became liable for the netcurrent tax liability of Rs 39.30 crores. The Company is eligible to utilise Rs 3.28crores as MAT Credit Entitlement and consequently the net payment of tax will be Rs 36.02crores.


Instalments of Term Loans and interest dues on Term Loans and Working Capitalborrowings were paid on or before the respective due dates.


The Company repaid Rs 3.61 crores during the year and the balance outstanding as onMarch 31 2018 was Rs 18.74 crores.


The year under review commenced with stable market conditions aided by a growingeconomy and reduction in the supply of paper products in the domestic market on account ofclosure of some units coupled with restricted production of Maplitho and other grades dueto shortage of water in the River Cauvery.

However month June 2017 witnessed huge drop in orders on account of the upcomingintroduction of GST from July 01 2017. Lack of clarity on overall GST provisions andrules as well reluctance on the part of small traders to migrate to GST regime resultedin poor order flow and accumulation of unsold stock with Mills.

Simultaneously the market was flooded with imports of Copier and Maplitho grades fromASEAN countries taking advantage of the Zero Import Duty concession at highly competitiveprices forcing domestic manufacturers to effect price reduction in these grades.

Q-2 and Q-3 saw failure of Indentors / Dealers to lift their assigned quota.Consequently unsold stock with Mills swelled.

Welcome breakthrough came in the form of huge hike in international pulp pricesforcing overseas manufacturers to put up paper prices and cut-down their export volume toIndian market. Softening trend of Indian Rupees vis-a-vis US$ further raised the cost ofimported paper; customers came back to domestic mills to meet their demand. Market becamethus stable in Q-4. This enabled SPB to liquidate accumulated stocks.

Meantime few Indian manufacturers had moved an application with appropriate authorityseeking imposition of Anti Dumping Duty on Copier imports from ASEAN countries.Investigation is currently on by the Director General of Anti-Dumping and AlliedDuties.

With these developments paper market became stable during Q-4 and enabled the Companyto achieve the customary Zero Stock at the end of the Financial Year for the 20th time inthe last 24 years.


Unit : Erode exported 14 446 tonnes during the year as compared to 12 737 tonnesexported during 2016-17. The export proceeds amounted to Rs 81.17 crores. Exportconstituted around 11.88% of the Production.

Unit : Erode also sold 34 tonnes under deemed exports whose proceeds amounted to Rs0.21 crore.

Unit : Tirunelveli exported 14 484 tonnes of Paper during the year as against 13 130tonnes exported during the previous year. The export proceeds amounted to Rs 77.12crores. Export constituted around 21.74% of the Production.

Unit : Tirunelveli also sold 156 tonnes under deemed exports whose proceeds amountedto Rs 0.94 crore.


The Company continues to provide quality Clonal Seedlings of Eucalyptus as well asCasuarina Seedlings at subsidised rates to interested farmers and assist them withtechnical help to achieve higher yields.

In addition the Company had identified Melia-Dubia a high yielding fast growingspecies as suitable for Pulp production and provided Melia- Dubia Clones also tointerested farmers.

Technical Support to the farmers for this initiative is being provided in associationwith the Department of Tree Breeding of Forest College and Research Institute attached toTamil Nadu Agricultural University Coimbatore through a Collaborative Research Project.

In accordance with the Company's vision to achieve wood positive status over twelvecrore seedlings (Clonal Eucalyptus Seedlings bare-rooted Casuarina Seedlings and MeliaDubia Clones) were made available to farmers at subsidised rates for planting in about 15000 acres of land. of Merit


The Company's Quality Management Systems and Environment Management Systems continue tobe covered by ISO 9001 and ISOof14001 Accreditations.

Both ISO 9001 and ISO 14001 Standards have undergone revision to 2015 Standards whichlays emphasis on the role of top management adoption of risk management and changemanagement to facilitate sustainability in business performance.


The Company continues to enjoy certification under Occupational Health and SafetyAssessment Series 18001 (OHSAS) which is an international standard that facilitatesmanagement of Occupational Health and Safety risks associated with the business of theorganisation.


The Company has been certified under three

Standards of FSC viz. FSC-STD-40-004 FSC-STD-40-005 v2-1 and FSC-SSTD-40-003 v1-0. Bythis the Company assures its stakeholders that the wood wood fibre and pulp purchased byit are traceable to responsibly managed plantations and that adequate document controlsare in place to ensure identification and traceability throughout the Chain of Custody.This also means that the Company is capable of manufacturing and selling FSC Pure and FSCMixed Products in the domestic and international markets.

During the year under review the Company won the following Awards and recognitions:
• "GreenCo Gold" rating under the GreenCo Rating System by the Confederation of Indian Industry (CII).
• CII's 18th National Award for Excellence in Energy Management - 2017 - "Excellent Energy Efficient Unit".
(under National Energy Certificate
Conservation Award) by Ministry of Power for the efforts in Energy Conservation in the Pulp & Paper Sector.
by Bureau of Certificate
Energy Efficiency for promoting energy efficient and cleaner production for sustainable industrial growth.


The Company continues to be accredited with "Star Export House" Status by theGovernment of India Ministry of Commerce Directorate General of Foreign Trade inrecognition of its export performance.


As on March 31 2018 7 461 Members were holding their Shares in Demat form and 98 44488 Equirty shares representing 78.05% of the total Paid-up Equity Share Capital of theCompany have been dematerialised.


M/s Esvi International (Engineers & Exporters) Limited (Esvin) is a wholly ownedsubsidiary of the Company. Currently Esvin holds properties and derives property income.


As advised last year the Company had embarked on implementation of two Projects viz.Mill Development Plan II at Unit : Erode and Mill Expansion Plan at Unit : Tirunelveli.

Unit : Erode

The Mill Development Plan II - Phase I has since been completed at a cost of Rs 75crores.

Under Phase-I Wood Pulp Line was upgraded to produce 1 45 000 tonnes per annum of woodpulp. Second Stage Oxygen Delignification System and a Twin Roll Barrier Press wereinstalled in the Wood Pulp Mill. A new Electro Static Precipitator was added in ChemicalRecovery Complex.

In addition a new Winder was added to Paper Machine 1-4. Distributed Control System inthe Stock Preparation Section of Paper Machines 1-4 and Energy Efficient Drive System wereadded in Paper Machine # 3.

Further major retrofit was carried out in Power Boiler to generate additional steamand power. This has helped us to wheel 3 MW of power from Unit : Erode to Unit :Tirunelveli.

Work commenced under Phase-II at an estimated cost of Rs 50 crores to enhance paperproduction and upgrading Bagasse Pulping facility and Waste Water Treatment Plant. Worksare currently in progress.

Unit : Tirunelveli

Mill Expansion Plan in Unit : Tirunelveli has been undertaken at a cost of Rs 75crores.

Film Press and Top Wire Former were installed in the Paper Machine to help in improvingthe quality of paper as well as step up production. Re-commissioned De-Inking Plant helpsus to step up pulp production and reduce use of expensive imported pulp. Re-build of PowerBoiler has also been completed to generate additional power. Augmenting Waste WaterTreatment facility and installation of Wetlap Machine for De-inked Pulp are in progress.

CURRENT YEAR (2018-19)

In Unit : Erode the Production during April 2018 was 9 712 tonnes as compared to 9073 tonnes produced during April 2017. In Unit : Tirunelveli the Production was 5 058tonnes in April 2018 as against 5 454 tonnes in April 2017. The overall

Production for the Company for the month of April 2018 was 14 770 tonnes.Total Revenue during April 2018 amounted to Rs 74.58 crores compared to Rs 68.97crores during April 2017.

During April 2018 815 tonnes of paper valued at US$ 7 47 229 (equivalent to Rs4.96 crores) were exported.

Both Mettur Dam (for Unit : Erode) and Papanasam Dam (for Unit : Tirunelveli) have poorstorage level. However scattered summer showers have kept the Rivers running with waterwhich has helped the two units to maintain production.


The Company continues to provide utmost attention to the conservation and improvementof the environment. In Unit : Erode the Power Boilers and Recovery Boilers are equippedwith Electro Static Precipitators to arrest dust emissions. The Company has installed andoperates an

Anaerobic Lagoon for high BOD liquid effluents and a Secondary Treatment System fortotal Mill effluent. These facilities are operating efficiently enabling the Company tocomply with Pollution Control norms prescribed by the Pollution Control Authorities on asustained basis. The treated effluent water continues to be utilised for irrigating nearbysugar cane fields.

Installation of a new Electro Static Precipitator in the Chemical Recovery Boilerunder Mill Development Plan has helped the Company in controlling emission.

A Twin Roll Press has been added in the Wood Pulp Line to control and reduce COD inwaste water.

Alkaline Scrubbing has been provided for the non-condensable gasses for elimination ofemission of mal-odorous gases.

The Company has implemented several projects under Mill Development Plan to reduceconsumption of water as well as energy. Waste water generation in the Mill has beenbrought down significantly.

In accordance with the directives of CPCB adequate monitoring facility has beenprovided for air emissions and liquid effluent discharge. Online connectivity has beenprovided for monitoring of emissions and discharges real-time by both CPCB and TNPCB.

In addition further treatment facility has been proposed for waste water under theMill Development Plan.

Unit : Tirunelveli is well equipped with efficient Electro Static Precipitator for thePower

Boiler and has an extensive green cover. Its treated waste water after recycling isused to irrigate the Company owned lands. Extensive augmentation of waste water treatmentfacility is under implementation.


The Report on Management's Discussion and Analysis as required under Clause49(VIII)(D) of the Listing Agreement with Stock Exchanges covering industry structure anddevelopments opportunities and threats outlook discussion on financial performanceetc. is contained in "Management Discussion and Analysis Report" that forms anintegral part of this Report and annexed as Annexure - I.


Pursuant to Regulation 34 and Schedule V to the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 Corporate Governance Report together with theCertificate from the Company's Auditors confirming the compliance of conditions onCorporate Governance is given in Annexure - II.


Section 134(3) of the Companies Act 2013 requires the Board's Report to includeseveral additional contents and disclosures compared to the earlier law. Most of them haveaccordingly been made in the Corporate Governance Report at appropriate places that formsan integral part of this Report.


The details forming part of the Extract of the Annual Return in Form MGT - 9 is givenin Annexure - III.


While preparing the annual accounts the Company has adhered to the following:

Applicable Accounting Standards referred to in Section 129(1) of the Companies Act2013 have been followed.

The Directors have selected such accounting policies and applied them consistently andmade judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2018 and of theprofit of the Company for the said period.

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.

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 that such internal financial controls are adequate and were operating effectively.

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


During the year the Company invested Rs 2.00 crores in the Equity Capital of its fullyowned Subsidiary viz. Esvi International (Engineers & Exporters) Limited bysubscribing to 100 000 Equity Shares of Rs 100 each at a premium of Rs 100 per share.


The Corporate Governance Report contains relevant details on the nature of RelatedParty Transactions (RPTs) and the policy formulated by the Board on Material RPTs.Particulars of Contracts or Arrangements with Related Parties referred to in Section188(1) of the Companies Act 2013 are furnished in accordance with Rule 8(2) of theCompanies (Accounts) Rules 2014 in Form AOC - 2 as Annexure - IV.


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

There are no material changes and commitments in the business operations of the Companysince the close of the financial year on 31st March 2018 to the date of this Report.


The information relating to Conservation of Energy Technology Absorption and ForeignExchange Earnings and Outgo as required under Section 134(3)(m) of the Companies Act2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is given in Annexure - V.


Section 135 of the Companies Act 2013 mandates every company having minimum thresholdlimit of net worth turnover or net profit as prescribed to constitute a Corporate SocialResponsibility Committee of the Board formulation of a Corporate Social ResponsibilityPolicy that shall indicate the activities to be undertaken by the Company as specified inSchedule VII to the Companies Act 2013 and duly approved by the Board fix the amount ofexpenditure to be incurred on the activities and monitor the CSR Policy from time to time.

Since your Company falls within the minimum threshold limits constituted a CSRCommittee of the Board and formulated a CSR Policy. The CSR Report forming part of thisReport is furnished in Annexure - VI.


The information required pursuant to Section 197 read with Rule 5 of the Companies(Appointment and Remuneration of Management Personnel) Rules 2014 is furnished inAnnexure - VII.


As required under Regulation 53 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a Cash Flow Statement is attached to the Balance Sheet.


Relations between the Management and Employees were cordial throughout the year underreview.


During the year Tamilnadu Industrial Investment Corporation Limited (TIIC) withdrewthe nomination of Sri Satyabrata Sahoo IAS and in his place nominated its ManagingDirector Dr (Mrs) M Aarthi IAS as its Nominee Director on the Board of ourCompany.

Your Directors place on record the valuable services rendered by Sri Satyabrata SahooIAS during his tenure as Directors of the Company. All the Independent Directors havegiven the declaration that they met the criteria on independence as laid down underSection 149(6) of the Companies Act 2013. The performance evaluation of IndependentDirectors has been done by the entire Board of Directors excluding the Director beingevaluated at the Board Meeting held on 23rd March 2018.

The Board on the basis of such performance evaluation decided to continue the term ofappointment of all the Independent Directors who have been appointed by the Company for afixed tenure till 31st March 2019 for three Directors and 28th September 2019 for twoDirectors.


The term of appointment of M/s Maharaj N R Suresh & Co. (Firm Regn. No. 001931S)as Statutory Auditor of the Company expires at the conclusion of the 58th Annual GeneralMeeting. They are eligible for re-appointment for a further term of five years from theconclusion of the 58th Annual General Meeting as provided under Section 139(2) of theCompanies Act 2013. Taking into consideration the excellent services rendered by M/sMaharaj N R Suresh & Co. the Board of Directors on the recommendations of the AuditCommittee of the Board appointed them as one of the Statutory Auditors of the Company tohold office for a term of five years from the conclusion of the 58th Annual GeneralMeeting and till the conclusion of 63rd Annual General Meeting.

M/s R Subramanian and Company LLP (Firm Regn. No. 004137S) continue to be the otherStatutory Auditor of the Company.

Particulars of Statutory Auditors Cost Auditors Internal Auditors and the SecretarialAuditors have been given in the Corporate Governance Report that forms an integral part ofthis report. Secretarial Audit Report as required by Section 204(1) of the Companies Act2013 is attached in Annexure - VIII.


The Directors place on record their great appreciation of the tireless efforts of allthe Executives and Employees of the Company for their commendable performance in achievingexcellent financial results. The Directors also express their sincere thanks to theGovernment of India Government of Tamilnadu and Commercial Banks for theirunderstanding guidance and assistance and Dealers Customers Suppliers and Shareholdersfor their excellent support at all times.

On behalf of the Board
May 26 2018 Chairman