DIRECTORS' REPORT TO THE MEMBERS, The Directors have pleasure in presenting the 54th Annual Report and Audited Accounts of the Company for the year ended 3 Ist March, 2015 DIVIDEND In view of the losses, the directors regret their inability to recommend dividend. PERFORMANCE REVIEW The Company recorded the highest ever sales at Rs 2514.97 Crore (up 24%) during the year as compared to Rs 2025.47 Crore in the previous year. The Operating Profit (PBIDT) increased to Rs 266.49 Crore (up 92%) from Rs 138.51 Crore in the previous year. Higher interest and depreciation on account of the Company's new project at Jaykaypur, Odisha which was commissioned in the previous year impacted net profit (PAT). The Company has stabilized operations of the project during the year and supplemented it byappropriate marketing efforts. As a result loss for the year was significantly reduced to Rs 12.74. Crore as compared to Rs 77.19 Crore in the previous year. The Company recorded the highest ever production of 4.14 Lac tonnes (up 26%) and sales of 3.9B Lac tonnes (up 24%) as compared to 3.28 Lac tonnes and 3.21 Lac tonnes respectively in the previous year. Overall capacity utilization (including new plant) was over 90%. Wood prices which had increased substantially (by 33%) in the previous year continued its upward trend though at a slower pace of 13%. There is an evidence of increased wood availability due to social farm forestry done by the paper industry. As the availability increases further, we expect a favourable impact on raw material prices in future. Hardwood pulp prices which were ruling lower during much of the year exhibited upward trend towards last quarter of the financial year. This trend is continuing till this time but does not seem sustainable due to surplus global capacities and prices are likely to remain stable going forward. Increase in rail freight resulted in higher landed cost of linkage Coal, though international Coal prices continued to below. The Company had increased sales realization by 8% during 2013-14; however the economic slowdown and domestic surplus resulted in improvement of only 1% in the current year. The Company is continuously focusing on improving operating efficiencies and minimising cost for better financial performance. The Company has also engaged external consultants to provide outside-in perspective in its endeavour to optimize cost and unlock value. The Company has been aggressively pursuing farm forestry efforts to develop sufficient raw material resources within 200 Km of its mills. The Company continued its focus on this programme and has covered 16,934 hectares during the year thus achieving a cumulative acreage of 1,32,934 hectares from the inception of its farm forestry programme. The Company had to import lesser quantities of wood logs and wood chips as a result of improved availability during the year. The developed markets are experiencing decline in Paper consumption due to widespread use of electronic media, however growth in packaging paper & board continues due to demand from its end use segments. Contrary to this, the Indian Paper and Board Industry has been growing at 7%, which is one of the highest in the world. At 14.5 Mn tonnes, the India ranks amongst the top 15 Paper and Board markets globally. The lower per capita consumption of 12 Kg as compared to world average of 57 Kg indicates that the growth is likely to continue. Some of the value added segments in Paper and Board are likely to grow at higher rate thus offering new product opportunities for the Company. With this growth the market is projected to reach 20 Mn tones by 2020. The Company has been following a policy of focusing on value added products like Copier Paper, Coated Paper, Virgin Fibre Packaging Boards and High end Maplitho Paper which has paid rich dividends. The Company's wide distribution network along with emphasis on meeting customer expectations has helped it to establish a leadership position in the market, despite strong competitive challenges. The recent expansion has increased its ability to provide high quality paper in-line with changing end user requirements at competitive costs. OFFICE PAPER PROJECT As you are aware that the Company has set up a 2,15,000 TPA Pulp Mill, a 1,65,000 TPA Paper Machine and a 55 MW captive power plant at Unit JKPM in Odisha. You will be happy to note that after the teething issues, the new facilities have stabilized in short time. The plant performance in its first full year of operations has been up to expectations with the company realising cost advantages on account of reduced wood, water and energy consumption. The technology and scale provided by the new project will help the Company to produce high quality printing paper at reasonable costs and further strengthen its position in Office Papers. The Average capacity utilization for the new paper machine for the year 2014- 15 was 94% and full capacity utilization in February 2015. CORRUGATED PACKAGING PROJECT The Company's JV with Oji Holdings Corporation and Marubeni Corporation of Japan to produce Highend Corrugated Packaging commissioned its plant at Neemrana, Rajasthan in July 2014. The production is being steadily ramped up and 100% utilization is likely to be achieved in next 2/3 years. The high quality corrugated packaging from this facility is gaining acceptance among Consumer Durables, Electronics, Auto Components, FMCG and Food Processing Industries. The emergence of online retail and consequent demand for corrugated packaging is also creating exciting market opportunities for the venture. CUSTOMER SATISFACTION AND QUALITY The Company has always been at the forefront in providing value added products and services to its customers. JK Paper's obsession with Quality and Customer Satisfaction has been a major strength in its attaining and retaining a leadership position in the Indian Paper Industry. The Company's wide distribution network has also extended a similar belief in fulfillment of expectations of the customers, big or small. J K Paper became the first Indian Company to produce and sell high quality Colorlok papers in India. This tie up with HP, helped in producing world class printing paper for the increasingly demanding Indian customers. The Company continues to conduct regular audit for its quality standards and customer satisfaction through research conducted both in-house and by an independent agency. Customer feedback is taken seriously with prompt actions for resolution and prevention of future occurrence. The product and quality standards are also benchmarked with the best in class to bring about continuous improvement and exceed customer expectations. This process helps to understand changing customer preferences and develop products that meet their requirements. Continuous interaction between the customers and factory is promoted through mill visits to generate valuable ideas that could be used for quality improvement, new product development and service enrichment. These customer visits help in showcasing the Company's state of the art manufacturing facilities and building a strong long term relationship with them. AWARDS AND RECOGNITION The Company has been committed towards ensuring high standards of Safety and Environment, Quality & Operational Excellence and HR practices. It is a matter of great satisfaction that these initiatives taken by the Company have been appreciated at various industry forums. The Company received following accolades during the year; > Unit - JKPM was awarded the certificate for Well- Managed Group Plantation by Forest Stewardship Council in 2014. > Unit CPM was presented the Certificate of Honour - 2013 from Gujarat Safety Council. > Unit CPM received Greentech Environment Management Award 2014 from Greentech Foundation, New Delhi. > Unit CPM received First Position in Importer Category by single industry at 1CD Ankleshwar from Container Corporation of India Ltd (CONCOR). > Unit JKPM received the state safety award for the year 2011 and 2012. ENVIRONMENT The company is committed to health and safety of its employees and its neighbouring communities and believes in pursuing its business growth objectives in asocially responsible and ecologically sustainable way. It has been a pioneer in adopting latest environment friendly processes and technologies in its manufacturing processes with an aim to have minimum impact on the environment. The recent new project at Unit JKPM has corroborated the Company's' endeavour in that direction. It has helped to minimise consumption of natural resources like wood, water and coal while minimizing waste and emissions to the environment. The use of Elemental Chlorine Free (ECF) technologyhas eliminated the direct use of Chlorine thus minimizing environmental impact and safety hazard. Both its production units are certified for ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007. The Occupational Health and Safety process is implemented through periodic safety audits, safety observations, TPM Internal Audits and Environment Audits focusing on Safety Health and Environment (SHE) related issues. At Unit CPM, the use of Treated Effluent for Irrigationunder the Zero Discharge Scheme Phase-1 (Part A & 8) has increased from 56 % in previous year to 62 % in the current year. In Phase 11 about 80 - 90 Ha of additional land has been covered for irrigation with our Treated Effluent. It is a matter of great satisfaction that treated effluent from the plant is being effectively utilized for Agriculture, Subabul, and Eucalyptus plantations. Combined Recharging cum Rain water harvesting system (RWH) has been installed in the company's colony premises as a part of water conservation efforts. Solar heaters have also been installed for utilisation of clean energy. INDUSTRIAL RELATIONS Industrial Relations remained cordial throughout the year under review. We acknowledge the wholehearted support and cooperation provided by employees at all levels of the organization during commissioning and stabilization of the new project and the valuable contribution made by them towards the growth of your company. A number of employee welfare initiatives have been implemented by the company which have significantly helped in improving the work environment, productivity, discipline and enriching employees quality of life. Our continuous dialogue with the union and workers representatives have ensured transparency and improved the industrial harmony to create a positive work environment EXTRACT OF ANNUAL RETURN An extract of the Annual Return as on 31 st March 2015 in the prescribed form MGT-9 is attached as Annexure- 1 to this Report and forms part of it PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The particulars of loans, guarantees or securities and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the financial statements. The Company has not made a provision of money during the financial year 2014-15 for the purchase of, or subscription for, shares in the company by trustees of JK Paper Employees' Welfare Trust, which was formed by the Company in the year 2004 for the welfare of the employees of the Company, for the shares to be held by or for the benefit of the employees of the company. RELATED PARTY TRANSACTIONS During the financial year ended 31* March 2015, all the contracts or arrangements or transactions entered into by the Company with the Related Parties were in the ordinary course of business and on arm's length basis and were in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Agreement. Further, the Company has not entered into any contract or arrangement or transaction with the Related Parties which could be considered material in accordance with the Policy of the Company on materiality of Related Party Transactions. In view of the above, disclosure in FORM AOC-2 is not applicable The Related Party Transaction Policy as approved by the Board is available on the website of the Company. DIRECTORS AND KEY MANAGERIAL PERSONNEL With enactment of the Companies Act, 2013, all the six Independent Directors of the Company, namely - Shri Arun Bharat Ram, Shri M.H. Dalmia, Shri R.V. Kanoria, Shri Shailendra Swarup, Shri Udayan Bose and Shri Sandip Somany, were appointed by the membersat the Annual General Meeting (AGM) held on 27th September 2014 under Section 149 of the Act for a term of five consecutive years commencing from the date of the AGM. All Independent Directors of the Company have given declarations that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and also Clause 49 of the Listing Agreements with the Stock Exchanges. Shri Shailesh Haribhakti who was liable to retire by rotation at the last Annual General Meeting of the Company held on 27th September 2014 had not offered his candidature for reappointment as a Director due to SEBI's impending limits on the number of Boards that he could serve on and consequently he ceased to be a director of the Company w.e.f. 27.09.2014. Shri O.P. Goyal retires by rotation and being eligible offers himself for re-appointment at the ensuing AGM. Further, in terms of Section 203 of the Companies Act, 2013, Shri Harsh Pati Singhania, Vice Chairman and Managing Director, Shri O.P. Goyal, Whole Time Director, Shri V. Kumaraswamy, Chief Finance Officer and Shri Suresh Chander Gupta, Company Secretary were appointed as "Key Managerial Personnel" (KMP) of the Company on their existing terms and conditions. INTERNAL CONTROL SYSTEM The corporate internal audit team consisting of Chartered Accountants and system experts review the internal control system on a regular basis to improve its effectiveness besides verifying statutory compliances. Based on Annual Internal Audit programme as approved by Audit Committee of Board, regular internal audits are conducted covering all offices, factories and key areas of the business. Findings are placed before Audit Committee, which reviews and discusses the actions taken with management. The Audit Committee also reviews the effectiveness of Company's internal controls and regularly monitors implementation of audit recommendations. The Company has also put in place a comprehensive budgetary control system. Key performance goals are set for each of the units and product lines. The performance against these goals are monitored and reviewed on a periodic basis and corrective actions as needed are initiated. The Company has in place adequate internal financial controls with reference to financial statements and no material reportable weakness was observed in the system. Further, the Company has in place adequate internal controls commensurate with the size and nature of its operations. CORPORATE SOCIAL RESPONSIBILITY Your Company has been one of the foremost proponents of inclusive growth and since inception, has been continuing to undertake projects for overall development and welfare of the society in the fields of environment, conservation of natural resources, health, education, rural development, etc. The Company has framed Corporate Social Responsibility (CSR) Policy in accordance with the provisions of the Companies Act 2013 and rules made there under. The contents of the CSR Policy are disclosed on the website of the Company. Even though, the company was not required to spend towards CSR since it incurred a net loss of Rs.8.09 Crore in the preceding three years, it has spent Rs.77.83 lac towards CSR activities during the Financial year 2014-IS. A detailed report on Company's C5R activities along with the annual report on the CSR activities undertaken by the Company during the financial year under review, in the prescribed format is annexed to this Report as Annexure-2. AUDITORS (a) Statutory Auditors and their Report M/s S S Kothari Mehta & Co., Chartered Accountants, have been appointed as Auditors of the Company to hold the office from the conclusion of the 53rd Annual General Meeting held on 27<h September 2014 until the conclusion of the 56th Annual General Meeting to be held in year 2017, subject to ratification of the appointment by the members at the respective AGMs to be held in the years 2015 and 2016. Accordingly, matter relating to the appointment of the Auditors will be placed for ratification by members at the forthcoming Annual General Meeting. The observations of the Auditors in their report on Accounts and the Financial Statements, read with the relevant notes are self explanatory. (b) Secretarial Auditor and Secretarial Audit Report Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Board of Directors appointed Shri Namo Narain Agarwal, Company Secretary in Practice as Secretarial Auditor to carry out Secretarial Audit of the Company for the financial year 2014-15 . The Report given by him for the said financial year in the prescribed format is annexed to this Report as Annexure-3. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. (c) Cost Auditor and Cost Audit Report Pursuant to order of the Central Government dated 30* June 2014, your Company did not fall within the ambit of Cost Audit for the year 2014- 15. However, pursuant to the revised order of the Central Government dated 31st December 2014, Cost Audit of the Cost Records of the Company is mandatory from the financial year starting I" April 20IS and M/s R.J. Goel & Co., Cost Accountants have been appointed as Cost Auditors of the Company to conduct cost audit of cost records for the financial year 2015-16 subject to ratification of their appointment and remuneration at the forthcoming Annual General Meeting of the Company. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS During the financial year under review, there were no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations. CONSERVATION OF ENERGY ETC. The details as required under Section 134(3)(m) read with the Companies (Accounts) Rules, 2014 is annexed to this Report as Annexure-4 and forms part of it. PARTICULARS OF REMUNERATION Information in accordance with the provisions of 5ection 197 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 regarding remuneration and other details is annexed to this Report. However, as per the provisions of Section 136 of the said Act, the Report and Accounts are being sent to all the members of the Company and others entitled thereto, excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company. The said information is available for inspection at the Registered Office of the Company during working hours. CORPORATE GOVERNANCE Corporate Governance - including details pertaining to Board Meetings, Nomination and Remuneration Policy, Performance Evaluation, Risk Management, Audit Committee and Vigil Mechanism: Your Company reaffirms its commitment to the highest standards of corporate governance practices. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made a part of this Report. The Corporate Governance Report which forms part of this Report, also covers the following: a) Particulars of the four Board Meetings held during the financial year under review. b) Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and Senior Management including, inter alia, the criteria for performance evaluation of Directors. c) The manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual Directors. d) The details with respect to composition of Audit Committee and establishment of Vigil Mechanism. e) Details regarding Risk Management. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements have been prepared by the Company in accordance with the applicable Accounting Standards. The Audited consolidated financial statements together with Auditors' Report form part of the Annual Report A report on the performance and financial position of each of the subsidiaries and associates included in the Consolidated Financial Statements is presented in a separate section in this Annual Report Please refer to AOC-1 annexed to the Financial Statements in the Annual Report. Pursuant to the provisions of Section 136 of the Act the financial statements of the Company, Consolidated Financial Statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of the Company. During the financial year under review, no company has become or ceased to be your Company's subsidiary and joint venture. In terms of Section 2(6) of Companies Act 2013, your Company has become an associate of Bengal & Assam Company Ltd. DEPOSITS Pursuant to the approval of members by means of a Special Resolution dated 27th September 2014, the Company has continued to accept deposits from the public, in accordance with the provisions of the Companies Act 2013 and rules there under. The particulars in respect of the deposits covered under Chapter V of the said Act, for the financial year ended 31 st March 2015 are - (a) Accepted during the year Rs. 2.23 Crore; (b) Remained unclaimed as at the end of the year - Rs. 0.63 crore; (c) Default in repayment of deposits or payment of interest thereon at the beginning of the year and at the end of the year - Nil and (d) Details of deposits which are not in compliance with the requirements of Chapter V of the said Act - Nil. DIRECTORS' REPONSIB1LITY STATEMENT As required under Section 134(3)(c) of the Companies Act, 2013, your Directors state thac- (a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) the accounting policies have been selected and applied consistently and judgments and estimates made 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 profit of the Company for that period; proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the said Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; the annual accounts have been prepared on a going concern basis; the proper internal financial controls to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and (f) the proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. ACKNOWLEDGEMENT The Directors acknowledge the continued support and cooperation received from the Central Government, State Governments, Shareholders, participating Financial Institutions and Banks, Customers, Dealers and Suppliers. The Board also wishes to record its sincere appreciation of the total commitment, dedication and hard work, put in by every member of the Team JK Paper. On behalf of the Board of Directors BHARAT HARI S1NGHANIA Chairman Date : 3rd August, 2015 Place : New Delhi |