DIRECTORS' REPORT Dear Members, Your Directors have pleasure in presenting their Annual Report and audited accounts of the Company with Auditors' Report for the financial year ended March 31, 2014. Dividend In view of the loss during the year, no dividend is being recommended by the Board. Performance Your Company produced 89,256 MT of pulp and paper during the year under review as compared to 83,085 MT produced in the previous year and sales were 86,323 MT as compared to 83,789 MT in the previous year. The gross operating revenue during the year under review was Rs.444,34 lakhs as compared to Rs.372,44 lakhs in 2012-13. Capacity utilization was 65% as compared to 60% in 2012-13. The loss before other items, finance costs, depreciation and tax was Rs. 13,92 lakhs compared to the loss of Rs. 14,60 lakhs in the previous year. The severe power cut by the state grid continued during the year till July 2013 resulting in forced shut down of one paper machine leading to lower production. The rise in cost of major inputs continued during the year and affected working of the Company. The availability of prime raw material 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% to 70%. The net sales realization of paper was increased by 15% from Rs.42,250 to Rs.48,711 per ton of paper during the year to compensate the increase in input cost; however, the impact of 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 is hopeful that prices of wood will soften in next season starting from October 2014. The power situation in the state also improved by start of generation of hydel power because of adequate rains in the state. However, the paper market is under price pressure from first quarter of 2014-15 because of duty free import of paper from South Asian countries under bilateral treaties and strengthening of rupee against foreign currency. Your Company's management is committed to improve the working of the Company and taking necessary efforts to improve the productivity, minimizing of input consumption in terms of per ton of paper, development of new price remunerative paper varieties and by control of wastages. In a difficult industry environment, your Company ended the year under review with net loss after tax of Rs.90,98 lakhs as against Rs.97,10 lakhs in 2012-13. Finance Your Company's finances have been strained due to continuous losses for the past five years. Lenders granted moratorium by sanction of CDR package upto December, 2013 and principal term loan instalment payment will start from end of March 2014. Loans increased due to funded interest term loan resulting in increase of finance cost during the year under review to Rs.48,22 lakhs as against Rs.44,88 lakhs in 2012-13. Your Company has paid interest on working capital and FITL regularly and there are no dues in respect of these borrowings. The payment of interest on term loans were due from January, 2014 and the first installment of principal became due on the last day of this fiscal year. Due to erosion of net worth fully on account of continuous losses resulting in the tightness in working capital due to which service of interest and first installment of term loan due in March end were not paid on due date. Your Company has been able to pay interest for the period January to March, 2014 and first installment due on last day of fiscal year during the first quarter of financial year 2014-15. Your Company is in discussion with lenders and is working out a solution to address short fall in working capital and repayment of term loan & interest thereon. Further, the Company also is in discussion with lenders for disposal of surplus nonproductive assets. Your Company continues to avail sales tax deferment loan under the then Andhra Pradesh State Government policy till March 2015. Share Capital In compliance with the terms and conditions of the CDR package & Master Restructuring Agreement entered with the lenders, a preferential issue of 11,05,100 ordinary shares of Rs.10 each at a premium of Rs.33 per share was made to a promoter in tranches. The promoter has brought in the balance contribution of Rs.2,37 lakhs during the year and the Company has allotted 5,50,000 shares on August 14, 2013. Thus, the entire contribution of Rs.4,75 lakhs was brought in by promoters. The new shares were listed on the stock exchanges during the year. Reference to BIFR The Company had submitted an application to the Hon'ble Board for Industrial and Financial 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 further submitted the required information in the formats as prescribed by the Hon'ble BIFR on periodical intervals in relation to the performance of the Company. The net worth of the Company as at March 31, 2014, as per the audited accounts presented 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 BIFR, within sixty days from the date of finalisation of the duly audited accounts at the annual general 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 showing results as availability of wood has improved over the previous year. It is expected that during the year 2014-15 the same will improve further and also bring down the cost of wood to some extent. The Company has focused all its attention on assistance in plantation in Adilabad district & other catchment area. Your Company is continuing the distribution of subabul seeds to farmers free of cost to improve availability of raw material in the long run and has also established nurseries for development of clonal plantation for better yield. Plantation has also been done on all vacant land owned by your Company. The central and state government has also been approached by Indian Paper Manufacturers Association 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 the paper & pulp sector, your Company has been awarded consecutively second time the First Prize by Ministry of Power, Government of India. This prestigious National Award was received by Mr. Devashish Poddar, Vice-Chairman & Managing Director from Hon'ble President of India, Shri Pranab Mukherjee, in the presence of Hon'ble Minister for Power, Government of India, and several distinguished guests on December 16, 2013. Your Company has been once again declared winner of 'First Prize for Energy Conservation' 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 award was 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 priority is 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, if employed for whole of the year or Rs.5 lakhs or more per month, if employed for a part of the year pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 is given in 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 have been followed and that no material departures have been made from the same; b. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for the year ended on that date; c. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and d. they have prepared the annual accounts on a 'going concern' basis. Particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo Particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are given in annexure 'A' attached hereto and forms a part of this report. Auditors' Report The observations made in the auditors' report are self-explanatory and therefore, do not 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, Chartered Accountants, 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 for re-appointment as auditors for a term of three years. In accordance with the requirements of Sections 139(1) and 141 of the Companies Act, 2013 read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 they have confirmed in writing, their eligibility and willingness to accept office of the statutory auditors for a period of three years from the conclusion of the forthcoming Annual General Meeting. The Board, on the recommendation of the Audit Committee, has proposed that M/s. Deloitte Haskins & Sells, Chartered Accountants (ICAI Firm Registration Number: 008072S) be re-appointed as statutory auditors of the Company to hold office from the conclusion of the ensuing Annual General Meeting until the conclusion of seventy eighth Annual General Meeting. Corporate governance Your Directors affirm commitment to good corporate governance practices. During the year under review, the Company was in compliance with the provisions of Clause 49 of the Listing Agreement with the stock exchanges relating to corporate governance. A Report on Corporate Governance along with the certificate of practicing company secretaries for its due compliance forms part of this annual report. In view of accumulated losses, the provisions relating to constitution of Corporate Social Responsibility (CSR) Committee are not applicable to your Company, till it meets the criteria specified in Section 135 of the Companies Act, 2013 read with rules framed thereunder. Hence, the Company has not constituted CSR Committee. Directors The term of office of the Executive Director, Shri Rameshwar Lall Lakhotia ended on July 23, 2014. At the meeting of the Board of Directors held on May 29, 2014, he has been re-appointed as Whole-time Director designated as Executive Director with effect from July 24, 2014 for a further period of two years on remuneration and other terms as approved by the remuneration committee. The proposal for the reappointment of Shri Rameshwar Lall Lakhotia as Executive Director, remuneration and other terms are being placed for approval of the Members at the ensuing Annual General Meeting. Approval of the Central Government will be sought, where required. The Board recommends passing of a Special Resolution confirming his re-appointment. Shri Sudhir Jalan and Shri Rakesh Bhartia, Directors of the Company resigned from the Board of Directors of the Company and vacated the Office as Directors of the Company due to personal reasons with effect from December 11, 2013 and February 10, 2014, respectively. The Board placed on record its high appreciation for the valuable advice rendered by Shri Sudhir Jalan and Shri Rakesh Bhartia, during their tenure as directors of the Company. In accordance with the provisions of Companies Act, 2013 and the Articles of Association of the Company, Shri Ranjan Kumar Poddar, Director of the Company will retire by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for re-appointment. In accordance with the provisions of the Companies Act, 2013 and the Listing Agreement, the office of directorship of Shri Laxminiwas Sharma and Shri P. Vaman Rao, existing Independent Directors pursuant to Clause 49 of the Listing Agreement, was liable to retirement by rotation. Consequent upon commencement of the Companies Act, 2013, Section 149 of the Act provides that every listed Company shall have at least one-third of the total number of directors as Independent Directors, who are not liable to retire by rotation 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, as Independent Directors under Section 149 of the Act and revised Clause 49 of the Listing Agreement to hold office for five consecutive years from September 29, 2014 for a term upto the conclusion of the Eightieth Annual General Meeting of the Company to be held in the calendar year 2019. The Board of Directors appointed Shri Vedula Srinivas as Additional Director with effect from August 11, 2014 in the category of Independent Non-Executive Director under Section 149 of the Act and revised Clause 49 of the Listing Agreement to hold office for five consecutive years from September 29, 2014 for a term upto the conclusion of the Eightieth Annual General Meeting of the Company to be held in the calendar year 2019, whose office shall not be liable to retire by rotation. The Board recommends the appointment of Shri Laxminiwas Sharma, Shri P. Vaman Rao and Shri Vedula Srinivas as Independent Directors not liable to retire by rotation and to hold office for a period of five years up to the conclusion of the Eightieth Annual General Meeting of the Company to be held in the calendar year 2019. The Board of Directors appointed Shri Padmanabhan Nagarajan as Additional Director, with effect from August 11, 2014 pursuant to the provisions of Section 161(1) of the Companies Act, 2013 and the Articles of Association of the Company and he shall hold office upto the date of the ensuing Annual General Meeting. The Board recommends the appointment of Shri Padmanabhan Nagarajan as Director of the Company, liable to retire by rotation. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section 6 of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the stock exchanges. Your Board recommends the above appointment/ re-appointment of Directors in the best interest 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 read with Clause 49 of the Listing Agreement with the stock exchanges by the Board of Director in its meeting held on May 29, 2014 in place of Shri S. K. Modani, who has left the services of the Company. Cost accounting records Pursuant to the provisions of Section 233B of the Companies Act, 1956, your Directors have appointed M/s. S. S. Zanwar & Associates, Cost Accountants, Hyderabad as the cost auditors to conduct the cost audit of your Company for the financial year ended March 31, 2014, which has been approved by the Central Government. Your Company has filed the Cost Audit Report for the year ended March 31, 2013 on September 21, 2013. Further, the Cost Audit Report for the financial year ended March 31, 2014 will be filed within the stipulated time. Acknowledgements Your Directors thank the customers, suppliers, farmers, financial institutions, banks and Members for their continued support and also recognize the contribution made by the employees towards the Company's growth. By order of the Board Ranjan Kumar Poddar Chairman Date : August 11, 2014 Place : Hyderabad, |