DIRECTORS' REPORT TO THE MEMBERS Your Directors have the pleasure to present the 56th Annual Report of the Company along with the audited accounts for the year ended 31st March, 2015. CREDIT RATING ICRA has assigned a long term rating of [ICRA]BBB+ with a stable outlook and a short term rating of [ICRA]A2+ to the Company's line of credit. Rating Review is in progress. CURRENT PROSPECTS The market conditions for paper continue to be extremely competitive with additional supply from new capacities. Demand is expected to grow in line with growth projected for Indian economy. The bright spot in the horizon is the internal demand from the Printing & Packaging Division, which is seeing an encouraging response from box consuming Brand owners. Your management perceives an opportunity for growth by enhancing its box manufacturing capacity with a new plant at another location. Various site options are under evaluation. An increase in paper making capacity through brown-field improvements to support the higher conversion capacity planned is seen as the way forward. Priority is given for increase in Co-generation facility, with improved efficiency, to bring down the unit cost of energy substantially. Overall Turnover and operating profit is expected to be better in the current year, with improvement over the last year. CAPITAL EXPENDITURE PLANS The Company is planning the upgradation /modernising /balancing of the existing paper machines with focus on quality & higher grades to sustain in the competitive situation. Capital expenditure is planned for process improvement, increased efficiency to reduce the operating costs. Installation of a new Boiler of 50 TPH capacity & Steam Turbine of 11 MW are planned for the current year at an estimated cost of Rs. 47 crores. This will be financed through debt & internal accruals, to obtain optimum returns. Large capital expenditure, and substantial capacity increase is under consideration and will be taken up at the opportune time. CORPORATE GOVERNANCE Securities & Exchange Board of India (SEBI) in order to improve the standard of Corporate Governance has introduced certain amendments in the Listing Agreements with the Stock exchanges. Same have been complied with & a report on this is attached. DIRECTORS' RESPONSIBILITY STATEMENT 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 Accounting Standards; The Directors have selected such accounting policies and applied them consistently and has made judgements and estimates that are reasonable and prudent, so as to give true and fair view of the state of affairs of the Company as at 31-3-2015 & of the profit of the Company for the financial year 2014-15. The Directors have taken proper & sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. 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 and the controls are adequate and operating effectively. The Directors have devised proper systems to ensure compliance with the provisions of all 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 any security or make investment covered under Section 186 of the Companies Act, 2013 PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY The Company has no transactions with related parties other than remuneration to related parties. The details are furnished as an annexure in Form AOC-2. 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 Company since the close of the financial year on 31st March 2015 to the date of this report. ISO 9001 CERTIFICATION Company's Quality Management Systems (QMS) have been audited by Bureau Veritas Certification India Pvt Ltd and ISO 9001: 2008 Certification is awarded to the Printing & Packaging Division of the Company. This Certification issued from May 2012 was valid for a period of 3 years, up to 17-05-2015. Re-certification audit is done & certificate valid for 3 years up to 17-5-2018 is issued. RESEARCH & DEVELOPMENT Several special application grades have been developed & successfully introduced during 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 with regard 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 tried to equitably balance the interest of all stakeholders in it, often going beyond the statutory impositions placed by regulatory authorities. In such efforts are included the installation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwise dry lands. The treated effluent water is utilized for irrigation purposes in the nearby fields of third party farmers with excellent crop yields. The Company has installed & been operating the Electro Static Precipitator (ESP) Systems for its Boilers for controlling dust emission and dust extractor system for controlling dust at its fuel handling system. Centrifuge and other machineries have been installed for effluent treatment. Fuel shed with roofing, controls dust emissions and conserves the resources. In order to ensure environmentally safe disposal of solid wastes, the Company has started disposing Ash and plastic waste to recyclers authorized by KSPCB. Ash is used in brick manufacturing and plastic is being used in cement kilns. The Company has engaged the expert services of University of Agricultural Sciences, Gandhi Krishi Vigyana Kendra, Bangalore for a study of ' Utilisation of Paper Mill Effluent for Agricultural Purpose'. DIVIDENDS Your Directors recommend a Dividend of 25% i.e. Rs. 2.50 per equity share of Rs. 10 each (last year 15% i.e. Rs. 1.50 per share). The total distribution including dividend tax amounts to Rs. 451.34 lacs 263.24 lacs) PARTICULARS OF EMPLOYEES Particulars of employees as prescribed under the Companies Act, 2013 are annexed. EXTRACT OF ANNUAL RETURN The Extract of Annual Return in Form MGT 9 is attached and forms a part of this Annual Report. MANAGERIAL REMUNERATION Requisite details as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith and forms a part of this Annual report MEETINGS OF THE BOARD The number of meetings of the Board held and details thereof are mentioned in the Report on Corporate Governance forming a part of this Annual Report. WHISTLE BLOWER POLICY In deference to Section 177 (9) of the Act, read with relevant Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement, the Company has established a vigil mechanism overseen by the Audit Committee. The Company has framed Whistle Blower policy as required under the Companies Act 2013 and Listing Agreement and no personnel has been denied access to the Audit Committee RISK MANAGEMENT The Company has a risk management framework to identify and evaluate business risks and opportunities. It seeks to create transparency, minimise adverse impact on the business objective and enhance the Company's competitive advantage. It aims at ensuring that the executive management controls the risk through means of a properly defined framework. The Company has laid down appropriate procedures to inform the Board about the risk assessment and minimization procedures. The Board periodically revisits and reviews the overall risk management 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 under Clause 49 of the Listing Agreement vide Board Meeting held on 27.01.2015, to frame, implement and monitor the risk management plan of the Company. The Committee comprises of the following 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 management policy and its development within the Company, to monitor the effectiveness of risk management policy, review major risks of the Company and to advice on mitigation to the Board. LABOUR RELATIONS The industrial relations climate in the Company during the year was generally cordial and harmonious. Long term settlement for a period of 4 years, signed with the Workers' Union last year is valid up to 31-3-2016. DIRECTORS In terms of Section 152 of the Companies Act, 2013 Mr D C Patel (DIN 00167581) retires by rotation and he, being eligible, offers himself for reappointment. Your Directors recommend his reappointment. Mrs Girija Shankar (DIN 07148094 ) was appointed by the Board at its meeting held on 31-03-2015, as an Additional Director. As per Section 161 of the Companies Act 2013 and Articles of Association of the Company, she holds office upto the date of the ensuing Annual General Meeting. It is proposed to appoint Mrs Girija Shankar (DIN 07148094) as an Independent Director for a period of 5 consecutive years w.e.f 31st March, 2015 not liable to rotation. Your Director's recommend her appointment as an Independent Director. The Company had, pursuant to the provisions of clause 49 of the Listing Agreement entered into with Stock Exchange, appointed Mr M G Mohan Kumar, Mr S R Chandrasekara Setty, Mr N S Kishore Kumar and Mr Jagdish M Patel as Independent Directors of the Company. As per section 149(4) of the Companies Act, 2013 (Act), which came into effect from April 1, 2014, every listed public company is required to have at least one-third of the total number of directors as Independent Directors. In accordance with the provisions of section 149 of the Act, the Board at their meeting held on 31st March 2015, based on the recommendation of the Nomination & Remuneration Committee, continued the appointments of these Directors as Independent Directors w.e.f 31st March 2015 for a consecutive period of 5 years, not liable to retire by rotation. The resolution for continuation of appointment of these directors as Independent Directors is now being placed before the Members for their approval. Your directors recommend the resolution set out in Item Nos. 5 to 8 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 Section 149 (7) of the Companies Act 2013, in respect of meetimg the criteria of Independence has provided under Section 149(6) of the Act. BOARD EVALUATION The Board of Directors have carried out an annual evaluation of its performance, Board Committees and Individual Directors pursuant to the provisions of the Companies Act and Clause 49 of the Listing Agreement. The Board has recorded overall satisfaction. In a separate meeting of Independent Directors held on 30-03-2015, the performance of Non Independent Directors, Board as a whole and the performance of the Chairman was evaluated.They have expressed overall satisfaction on such evaluation. POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION The Company's Policy on director's appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matter as provided under Section 178(3) is annexed hereto and forms part of this Annual Report. Criteria for performance evaluation of Independent Directors' as required by the Listing Agreements also forms part of this report. CORPORATE SOCIAL RESPONSIBILITY The Board has constituted a Corporate Social Responsibility Committee as mandated by Section 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 the activities to be undertaken by the Company. • Recommending the amount of expenditure to be incurred on the aforesaid activities and; • Reviewing and Monitoring the CSR Policy of the company from time to time. Reasons for not spending on CSR activities during the financial year Company has planned for following CSR projects for the benefit of villagers in the villages around the factory: i) Chlorination plant for drinking water for Chikkayana Chatra & Banchalli Hundi villages. ii) Sewage Treatment Plant for the 3 villages Chikkayana Chatra, Thandavapura & Banchalli Hundi. Land finalization for the project is awaited from Gram Panchayath. On finalizing the above, Company will be spending on the project. A report on CSR Activities is annexed herewith and forms a part of the Director's Report. APPOINTMENT OF KEY MANAGERIAL PERSONNEL The Board of Directors at their meeting held on 22-05-2014 appointed Mr B Ravi Holla as the Chief Financial Officer (CFO) of the Company as per the requirements of the Companies Act, 2013. AUDITORS There are no adverse comments by the auditors in their report annexed herewith. The Auditors M/s B S Ravikumar & Associates retire at the conclusion of this Annual General Meeting and are eligible for reappointment. Your Directors recommend their reappointment. 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 has appointed Mr S N Hitaish Kumar, Practicing Company Secretary (C P No. 6553), to conduct the Secretarial Audit of the Company for Financial Year 2014-15. The Secretarial Audit Report in Form MR 3 is annexed. Explanation for observations made by the Company Secretary in Practice : i) Woman Director appointed on 31-3-2015, in compliance with the requirement of the Companies Act, 2013. Filing has been approved by MCA. ii) No separate filing is done, as the matter was combined with filing done for final accounts. iii) Forms were filed with additional fees, as the MCA website did not allow the in time filing of MGT 10 due to technical reasons. iv) Website is updated periodically. INTERNAL AUDITOR Pursuant to Section 138(1) of the Companies Act, 2013, the Company has appointed M/s Rau and Nathan Chartered Accountants (Firm Regn. No.003178S), Mysore, to conduct Internal Audit of the functions and activities of the Company for Financial Year 2014-15. COST AUDIT Cost Audit was applicable for Paper manufacture up to FY 2013-14. Mr. Madhukar P Nayak, Cost Accountant, was appointed as Cost Auditor for the year 2013-14. The Cost Audit Report for the year 2013-14 was filed within due date. Paper Industry is not notified for Cost Audit in FY 2014-15. APPRECIATION Your Directors take this opportunity to place on record their appreciation for services rendered by the employees, sales agents, Banks & Financial Institutions. for and on behalf of the Board of Directors Manish M. Patel Chairman & Managing Director Place : Bengaluru Date : 28th May, 2015 |