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Sirpur Paper Mills Ltd.

BSE: 502455 Sector: Industrials
NSE: SIRPAPER ISIN Code: INE202C01010
BSE 00:00 | 04 Mar Sirpur Paper Mills Ltd
NSE 05:30 | 01 Jan Sirpur Paper Mills Ltd
OPEN 14.75
PREVIOUS CLOSE 14.46
VOLUME 1210
52-Week high 14.93
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 25
Buy Price 14.30
Buy Qty 181.00
Sell Price 14.74
Sell Qty 400.00
OPEN 14.75
CLOSE 14.46
VOLUME 1210
52-Week high 14.93
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 25
Buy Price 14.30
Buy Qty 181.00
Sell Price 14.74
Sell Qty 400.00

Sirpur Paper Mills Ltd. (SIRPAPER) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting their Annual Report and audited accounts ofthe Company with Auditors' Report for the financial year ended March 31 2014.

The financial performance of the Company for the year under review is summarized in thetable given below:

Rs Lakhs

Working results 2013-14 2012-13
Production MT 89256 83085
Sales MT 86323 83789
Net operational revenue 42049 35401
Profit/(loss) before other items finance cost depreciation & tax (1392) (1460)
Other items
Fuel surcharge adjustment for earlier years being contested 1050
Provision for loss on assets retired from active use 344
Profit/(loss) before finance cost depreciation & tax (1392) (2854)
Finance cost 4822 4488
Profit/(loss) before depreciation & tax (6214) (7342)
Depreciation 2884 2927
Profit/(loss) before tax (9098) (10269)
Less: Provision for taxation (559)
Profit/(loss) after tax (9098) (9710)
Balance brought forward
from previous year (11263) (1553)
Balance carried to
Balance Sheet (20361) (11263)

Dividend

In view of the loss during the year no dividend is being recommended by the Board.

Performance

Your Company produced 89256 MT of pulp and paper during the year under review ascompared to 83085 MT produced in the previous year and sales were 86323 MT as comparedto 83789 MT in the previous year.

The gross operating revenue during the year under review was Rs 44434 lakhs ascompared to Rs 37244 lakhs in 2012-13. Capacity utilization was 65% as compared to 60% in2012-13.

The loss before other items finance costs depreciation and tax was Rs 1392 lakhscompared to the loss of Rs 1460 lakhs in the previous year. The severe power cut by thestate grid continued during the year till July 2013 resulting in forced shut down of onepaper machine leading to lower production. The rise in cost of major inputs continuedduring the year and affected working of the Company. The availability of prime rawmaterial i.e. wood declined further during the year resulting in increase in price by 42%over & above to increase by 40% over last year. Coal price also increased by 12%during the year besides steep increase in prices of major chemicals ranging from 10% to70%.

The net sales realization of paper was increased by 15% from Rs 42250 to Rs 48711 perton of paper during the year to compensate the increase in input cost; however the impactof increase in production cost could not be passed fully in paper prices.

The wood availability in last quarter improved to some extent and the management ishopeful that prices of wood will soften in next season starting from October 2014. Thepower situation in the state also improved by start of generation of hydel power becauseof adequate rains in the state. However the paper market is under price pressure fromfirst quarter of 2014-15 because of duty free import of paper from South Asian countriesunder bilateral treaties and strengthening of rupee against foreign currency.

Your Company's management is committed to improve the working of the Company and takingnecessary efforts to improve the productivity minimizing of input consumption in terms ofper ton of paper development of new price remunerative paper varieties and by control ofwastages.

In a difficult industry environment your Company ended the year under review with netloss after tax of Rs 9098 lakhs as against Rs 9710 lakhs in 2012-13.

Finance

Your Company's finances have been strained due to continuous losses for the past fiveyears.

Lenders granted moratorium by sanction of CDR package upto December 2013 and principalterm loan instalment payment will start from end of March

2014. Loans increased due to funded interest term loan resulting in increase of financecost during the year under review to Rs 4822 lakhs as against Rs 4488 lakhs in 2012-13.Your Company has paid interest on working capital and FITL regularly and there are no duesin respect of these borrowings. The payment of interest on term loans were due fromJanuary 2014 and the first installment of principal became due on the last day of thisfiscal year.

Due to erosion of net worth fully on account of continuous losses resulting in thetightness in working capital due to which service of interest and first installment ofterm loan due in March end were not paid on due date. Your Company has been able to payinterest for the period January to March 2014 and first installment due on last day offiscal year during the first quarter of financial year 2014-15.

Your Company is in discussion with lenders and is working out a solution to addressshort fall in working capital and repayment of term loan & interest thereon. Furtherthe Company also is in discussion with lenders for disposal of surplus non-productiveassets.

Your Company continues to avail sales tax deferment loan under the then Andhra PradeshState Government policy till March 2015.

Share Capital

In compliance with the terms and conditions of the CDR package & MasterRestructuring Agreement entered with the lenders a preferential issue of 1105100ordinary shares of Rs 10 each at a premium of Rs 33 per share was made to a promoter intranches. The promoter has brought in the balance contribution of Rs 237 lakhs during theyear and the Company has allotted 550000 shares on August 14 2013. Thus the entirecontribution of Rs 475 lakhs was brought in by promoters. The new shares were listed onthe stock exchanges during the year.

Reference to BIFR

The Company had submitted an application to the Hon'ble Board for Industrial andFinancial Reconstruction (BIFR) post erosion of net worth of the Company by more than 50%as per audited accounts for the year ended March 31 2013. The Company had furthersubmitted the required information in the formats as prescribed by the Hon'ble BIFR onperiodical intervals in relation to the performance of the Company.

The net worth of the Company as at March 31 2014 as per the audited accountspresented before the

Board has been eroded fully. Under Section 15(1) of the Sick Industrial Companies(Special Provisions) Act 1985 the Board of Directors has to make a reference to BIFRwithin sixty days from the date of finalisation of the duly audited accounts at the annualgeneral meeting for determination of the measures which shall be adopted by the Company.

Plantation

Efforts made for improvement of wood availability in previous years are now showingresults as availability of wood has improved over the previous year. It is expected thatduring the year 2014-15 the same will improve further and also bring down the cost of woodto some extent. The Company has focused all its attention on assistance in plantation inAdilabad district & other catchment area. Your Company is continuing the distributionof subabul seeds to farmers free of cost to improve availability of raw material in thelong run and has also established nurseries for development of clonal plantation forbetter yield. Plantation has also been done on all vacant land owned by your Company. Thecentral and state government has also been approached by Indian Paper ManufacturersAssociation to allot degraded land for taking up large scale plantation.

Awards & accolades

During the year 2013 in appreciation of its achievements in energy conservation in thepaper & pulp sector your Company has been awarded consecutively second time the FirstPrize by Ministry of Power Government of India. This prestigious National Award wasreceived by Mr. Devashish Poddar Vice-Chairman & Managing Director from Hon'blePresident of India Shri Pranab Mukherjee in the presence of Hon'ble Minister for PowerGovernment of India and several distinguished guests on December 16 2013.

Your Company has been once again declared winner of 'First Prize for EnergyConservation' in the Small and Medium Scale Industry Category for the year 2012-13 by New& Renewable Energy Development Corporation of Andhra Pradesh Limited and the awardwas received at a function held on December 20 2013 at Hyderabad.

Human resources development

During 2013-14 your Company has maintained cordial industrial relations. Top priorityis given to human resources initiatives especially training and development.

Particulars of employees

Statement on particulars of employees drawing Rs 60 lakhs or more per annum ifemployed for whole of the year or Rs 5 lakhs or more per month if employed for a part ofthe year pursuant to the provisions of Section 217(2A) of the Companies Act 1956 is givenin annexure 'B' and forms a part of this report.

Directors' Responsibility Statement

Pursuant to Section 217 (2AA) of the Companies Act 1956 the Directors confirm that:

a. in the preparation of the annual accounts all applicable accounting standards havebeen followed and that no material departures have been made from the same;

b. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the loss ofthe Company for the year ended on that date;

c. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and

d. they have prepared the annual accounts on a 'going concern' basis.

Particulars of conservation of energy technology absorption and foreign exchangeearnings and outgo

Particulars of conservation of energy technology absorption and foreign exchangeearnings and outgo as required to be disclosed under Section 217(1)(e) of the CompaniesAct 1956 read with the Companies (Disclosure of Particulars in the Report of the Board ofDirectors) Rules 1988 are given in annexure 'A' attached hereto and forms a part of thisreport.

Auditors' Report

The observations made in the auditors' report are self-explanatory and therefore donot call for any further comments under Section 217(3) of the Companies Act 1956.

Auditors

The statutory auditors of the Company M/s. Deloitte Haskins & Sells CharteredAccountants retire at the conclusion of the forthcoming Annual General Meeting.

As per the provisions of Section 139 of the Companies Act 2013 they are eligible forre-appointment as auditors for a term of three years.

In accordance with the requirements of Sections 139(1) and 141 of the Companies Act2013 read with Rule 4 of the Companies (Audit and Auditors) Rules 2014 they haveconfirmed in writing their eligibility and willingness to accept office of the statutoryauditors for a period of three years from the conclusion of the forthcoming Annual GeneralMeeting.

The Board on the recommendation of the Audit Committee has proposed that M/s.Deloitte Haskins

& Sells Chartered Accountants (ICAI Firm Registration Number: 008072S) bere-appointed as statutory auditors of the Company to hold office from the conclusion ofthe ensuing Annual General Meeting until the conclusion of seventy eighth Annual GeneralMeeting.

Corporate governance

Your Directors affirm commitment to good corporate governance practices. During theyear under review the Company was in compliance with the provisions of Clause 49 of theListing Agreement with the stock exchanges relating to corporate governance.

A Report on Corporate Governance along with the certificate of practicing companysecretaries for its due compliance forms part of this annual report.

In view of accumulated losses the provisions relating to constitution of CorporateSocial Responsibility (CSR) Committee are not applicable to your Company till it meetsthe criteria specified in Section 135 of the Companies Act 2013 read with rules framedthereunder. Hence the Company has not constituted CSR Committee.

Directors

The term of office of the Executive Director Shri Rameshwar Lall Lakhotia ended onJuly 23 2014. At the meeting of the Board of Directors held on May 29 2014 he has beenre-appointed as Whole-time Director designated as Executive Director with effect from July24 2014 for a further period of two years on remuneration and other terms as approved bythe remuneration committee. The proposal for the reappointment of Shri Rameshwar LallLakhotia as Executive Director remuneration and other terms are being placed for approvalof the Members at the ensuing Annual General Meeting. Approval of the Central Governmentwill be sought where required. The Board recommends passing of a Special Resolutionconfirming his re-appointment.

Shri Sudhir Jalan and Shri Rakesh Bhartia Directors of the Company resigned from theBoard of Directors of the Company and vacated the Office as Directors of the Company dueto personal reasons with effect from December 11 2013 and February 10 2014respectively. The Board placed on record its high appreciation for the valuable advicerendered by Shri Sudhir Jalan and Shri Rakesh Bhartia during their tenure as directors ofthe Company.

In accordance with the provisions of Companies Act 2013 and the Articles ofAssociation of the Company Shri Ranjan Kumar Poddar Director of the Company will retireby rotation at the ensuing Annual General Meeting and being eligible offers himself forreappointment.

In accordance with the provisions of the Companies Act 2013 and the Listing Agreementthe office of directorship of Shri Laxminiwas Sharma and Shri P. Vaman Rao existingIndependent Directors pursuant to Clause 49 of the Listing Agreement was liable toretirement by rotation. Consequent upon commencement of the Companies Act 2013 Section149 of the Act provides that every listed Company shall have at least one-third of thetotal number of directors as Independent Directors who are not liable to retire byrotation and shall hold office for a term up to five consecutive years.

Accordingly it is proposed to appoint Shri Laxminiwas Sharma and Shri P. Vaman Rao asIndependent Directors under Section 149 of the Act and revised Clause 49 of the ListingAgreement to hold office for five consecutive years from September 29 2014 for a termupto the conclusion of the Eightieth Annual General Meeting of the Company to be held inthe calendar year 2019.

The Board of Directors appointed Shri Vedula Srinivas as Additional Director witheffect from August 11 2014 in the category of Independent Non-Executive Director underSection 149 of the Act and revised Clause 49 of the Listing Agreement to hold office forfive consecutive years from September 29 2014 for a term upto the conclusion of theEightieth Annual General Meeting of the Company to be held in the calendar year 2019whose office shall not be liable to retire by rotation.

The Board recommends the appointment of Shri Laxminiwas Sharma Shri P. Vaman Rao andShri Vedula Srinivas as Independent Directors not liable to retire by rotation and to holdoffice for a period of five years up to the conclusion of the Eightieth Annual GeneralMeeting of the Company to be held in the calendar year 2019.

The Board of Directors appointed Shri Padmanabhan Nagarajan as Additional Directorwith effect from August 11 2014 pursuant to the provisions of Section 161(1) of theCompanies Act 2013 and the Articles of Association of the Company and he shall holdoffice upto the date of the ensuing Annual General Meeting. The Board recommends theappointment of Shri Padmanabhan Nagarajan as Director of the Company liable to retire byrotation.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet with the criteria of independence as prescribed both undersub-section 6 of Section 149 of the Companies Act 2013 and under Clause 49 of the ListingAgreement with the stock exchanges.

Your Board recommends the above appointment/ re-appointment of Directors in the bestinterest of the Company.

Chief Financial Officer

Shri Vimal Arora B.Com. F.C.A. has been appointed as Chief Financial Officer (CFO)of the Company pursuant to the provisions of Section 203 of the Companies Act 2013 readwith Clause 49 of the Listing Agreement with the stock exchanges by the Board of Directorin its meeting held on May 29 2014 in place of Shri S. K. Modani who has left theservices of the Company.

Cost accounting records

Pursuant to the provisions of Section 233B of the Companies Act 1956 your Directorshave appointed M/s. S. S. Zanwar & Associates Cost Accountants Hyderabad as the costauditors to conduct the cost audit of your Company for the financial year ended March 312014 which has been approved by the Central Government. Your Company has filed the CostAudit Report for the year ended March 31 2013 on September 21 2013. Further the CostAudit Report for the financial year ended March 31 2014 will be filed within thestipulated time.

Acknowledgements

Your Directors thank the customers suppliers farmers financial institutions banksand Members for their continued support and also recognize the contribution made by theemployees towards the Company's growth.

By order of the Board
Hyderabad Ranjan Kumar Poddar
August 11 2014 Chairman

Annexure 'A' to Directors' Report

Particulars as required under Section 217 (1) (e) of the Companies Act 1956 andforming part of the Directors' Report for the year ended March 31 2014

A. CONSERVATION OF ENERGY

1. Measure taken for conservation of energy a. Installation of new VFDs atEOP vat dilution pump weak liquor supply pump to optimize process. b. Installed VFD attower dilution pump & D-1 washer spray pumps to conserve electrical energy. c.Upgradation of Paper Machine No. 4 & Paper Machine No. 5 salvage rewinder DC drive tominimize losses. d. Old coal crusher & coal feeding arrangement was modified &stopped 2nd stage coal conveyer to save energy. e. Installed & commissioned VFD atwater supplying booster pump for paper machines to on serve water & electrical energy.f. Alfa Laval evaporators' vacuum system was modified and thus saved electrical energy. g.Alfa Laval evaporators' liquor solids concentration increased along with black liquor. h.Firing system modification and reduced furnace oil consumption and conserved thermalenergy. i. Replaced aluminum alloy fan with FRP hallow blade fan assembly at turbinecooling tower conserve electrical energy. j. Installed VFD at fan pumps in Paper MachineNo. 2 for conservation of electrical energy and adjust process parameters. k. Installedvibratory screens at Paper Machine No. 1 & 3 to improve the quality. l. By providing2.5 Kg/cm2 steam in place of 4 Kg/cm2 steam at evaporator thermalenergy saved.

2. Additional investments & proposals if any a. Installation of newenergy efficient pumps and motors in process operation to achieve the PAT target. b.Energy efficient vacuum pumps for Paper Machine No. 3 & Paper Machine No. 6. c.Installation of new floating type aerator in aeration lagoon in effluent treatment plant.d. Proposed water supply to colony with energy efficient pump & modification inservice line dia to conserve water & electrical energy. e. Installation of new VFDs atpaper machine area. f. 250 KW roof top solar energy plant to be put on for the RECcompliance.

. Impact of the above measures on consumption of energy

The implementation of above energy conservation has reduced the distribution losses andsaved electrical & thermal energy considerably.

4. Total energy consumption and energy consumption per unit of production

Form - A annexed.

B. TECHNOLOGY ABSORPTION

Efforts made in technology absorption

Form - B annexed.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

i. During the year under review there was no exports except sales through merchantexporters.

Efforts are being made to augment exports. ii. Total foreign exchange used and earned:Used1 : Rs 151.65 Lakhs Earned : Nil

1 On actual payment basis.

F O R M - A

(Form for disclosure of particulars with respect to conservation of energy)

A. POWER AND FUEL CONSUMPTION1

2013-14 2012-13
Electricity
a. Purchased units (Lakhs Kwh) 625.17 485.62
Total amount (Rs Lakhs)# 3532.27 2824.22
Rate/unit (Rs )# 5.65 5.82
b. Own generation through steam turbine/generator
Units (Lakhs Kwh) 891.69 918.00
Units per litre of fuel oil/Gas
Cost/unit (Rs ) 1.53 2.05
Coal {Grade C to F (R.O.M.) used in boiler & rotary lime kiln}1
Quantity (MT) 195281 201751
Cost (Rs Lakhs) 5526.72 5087.16
Average rate/MT (Rs ) 2830 2521
Furnace oil
Quantity (KL) 3996 3711
Cost (Rs Lakhs) 1665.66 1522.62
Average rate/KL (Rs ) 41686 41030

# Excluding FSA & PDL charges of earlier years.

B. CONSUMPTION PER UNIT OF PRODUCTION1

2013-14 2012-13
Product Electricity Furnace oil Coal Electricity Furnace oil Coal
(Kwh) (Ltrs) (MT) (Kwh) (Ltrs) (MT)
Paper paper board and pulp (for sale) 1699 45 2.188 1689 45 2.428

1 Excluding consumption in colony.

F O R M - B
(Form for disclosure of particulars with respect to technology absorption)

RESEARCH AND DEVELOPMENT (R&D)

Specific areas in which R&D was carried out by the Company

a. New Products development

i. Unbleached cartridge paper - developed and trial taken on machine.

ii. Deep coloured yellow orange and red maplitho - developed as per customerrequirement and taken for regular production on machine.

iii. Black pastel paper - developed and samples sent for customer approval. iv. Copierpaper - developed and samples sent for customer approval.

b. New process development i. Adoption of use of GCC as filler in place of talcumpowder in paper. ii. Adoption of the use of on machine spray starch sizing system. iii.Use of spent caustic of other industry in pulp bleaching process. iv. Use of EOP stageoutlet pulp in the manufacture of coloured varieties of papers.

Benefits derived as a result of above R&D

i. Products developed have enabled us to increase product range enhance productquality and reduce input cost.

ii. Meet customer requirement.

iii. Resource conservation and balancing the chemical circuits.

Future plan of action i. New product and process development. ii. Increasing theGCV of BL solids by innovative methods.

iii. Optimizing the pulp bleaching process to further improve brightness along withpulp strength preservation.

iv. Use of refiner enzyme in EOP outlet pulp processing.

Expenditure on R&D (Rs Lakhs)
a. Capital
b. Recurring 10.69
c. Total 10.69
d. Total R&D expenditure as a percentage
of total turnover 0.03

TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION

1. Efforts made in brief towards technology - absorption adaptation and innovation Investing in technology absorption to keep pace with development.
- Innovate in the existing processes to enhance quality and production.
2. Benefits derived as a result of the above - Effective and optimum use of utilities like power coal and water etc by making use of natural and renewable resource like sunlight.
- Resource conservation.
- Customer satisfaction.
3. In case of imported technology
(imported during the last 5 years reckoned from the beginning of the financial year)
a. Technology imported - Not applicable
b. Year of import - Not applicable
c. Has technology been fully absorbed - Not applicable
d. If not fully absorbed areas where - this has not taken place reasons therefore and future plan of action Not applicable

Annexure 'B' to Director's Report

Statement of particulars of employees as required under Section 217(2A) of CompaniesAct 1956 read with Companies (Particulars of Employees) Rules 1975 and forming a part ofthe Directors' Report for the year ended March 31 2014

Name Shri Devashish Poddar
Age 41 years
Designation Vice-Chairman & Managing Director
Remuneration (Rs ) 67.12 Lakhs*
Nature of duties Oversees the growth and future strategies of the
Company
Qualification B.B.A. (London)
Total experience 15 years
Date of joining August 1 1999
Last employment held

* pending approval of Central Government the remuneration has been restricted asabove.

Notes

1. Remuneration includes actual payment and/or taxable value of perquisites and theCompany's contribution to provident and other funds but excluding provision for gratuityaccumulated leave and long service award.

2. Nature of employment: On contract

• . Other terms and conditions: As per rules of the Company.

4. He does not hold 2% or more of the ordinary shares of the Company by himself oralong with his spouse and dependent children.

5. Shri Devashish Poddar is a relative of a Director.

.