Emami Paper Mills Ltd Directors Report.

To the Members of

EMAMI PAPER MILLS LIMITED

Report on the Ind AS Financial Statements

We have audited the accompanying Ind AS financial statements of EMAMI PAPER MILLS LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2021, and the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the Ind AS Financial Statements and a summary of the significant accounting policies and other explanatory information.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Ind AS financial statements give the information required by the Companies Act, 2013 (‘‘the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2021, and its profit, total comprehensive income, its cash flows and the changes in equity for the year then ended.

Basis for Opinion

We have conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Ind AS Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

We draw your attention to note no. 2.57 to the Ind AS Financial Statements for the year ended March 31, 2021, which describes the impact of COVID-19 on the demand and scale of operations of the Company during 1st half of the Financial Year 2020-21 and further states that operation of the company has been in the way of steady recovery since 3rd quarter of the year and in the of 4th quarter the company has achieved 95% utilization of its capacity.

Our conclusion is not modified in respect of the above matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Ind AS financial statements of the current financial year. These matters were addressed in the context of our audit of the Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

1. Temporary shutdown of Gulmohar Unit

Key Audit Matters Response To KAM
Companys Gulmohar unit is under temporary shut since, 24th March,2020 due to low market demand of newsprint as a result of COVID-19 pandemic. Production capacity of the unit is 16,500 ton per annum, which is about 5% of the total capacity of the company. Audit procedures followed is:
These led to checking of impairment of Gulmohar unit (cash generating unit). There exist certain External indicators to Gulmohar Unit and for this impairment testing needs to be done, whether impairment is there or not. We have checked those indicators.
Refer Note No.- 2.57 of Notes to Accounts External indicators:
Significant changes with an adverse effect on the entity have taken place during the period in the market demand of the product.
The outbreak COVID-19 and lockdown has significantly impacted the operation of Gulmohar unit resulting into plant shut.
Because of above mentioned indicators, we checked the fair value through valuation report of Chartered Engineers provided by the management, where we found that the Fair Market Value of the properties at Gulmohar Unit amounts to Rs 34.38 crores, which is higher than the carrying value of the unit amounting to Rs 10.20 crores as on 31st March, 2021.
Conclusion: Hence, it is concluded that no impairment loss is required.

2. Interest Rate Risk Mitigation

 

Key Audit Matter Response to KAM
The company uses derivative financial instruments to hedge interest rate risks arising from loans taken in the ordinary course of business. Managements hedging policy is documented in corresponding internal guidelines and serves as the basis for these transactions. The means of limiting this risk include entering into cross-currency interest rate swaps. The companies enter into interest rate hedges for the purpose of achieving an economically sensible ratio of floating to fixed interest rate exposures. Asset/(Liability) in respect of those interest rate swaps are measured at fair value (i.e., mark to market value). Any change in mark to market value of those swaps are recognized in Other Comprehensive Income when those qualify for hedge accounting and designated as hedge instrument by the company; in other cases, the change in mark to market value is recognized in Profit and Loss Statement. Principal Audit Procedures
Accordingly, the company is carrying interest rate swap assets of Nil value and interest rate swap liability of INR 9.42 Cr as at 31.03.2021; the change in fair value amounting to INR 0.81 Cr loss is recognized in Other Comprehensive Income and that amounting to INR 2.03 Cr loss is recognized in Profit and Loss Statement. As a part of our audit procedures, among other things we assessed the contractual and financial parameters and evaluated the accounting treatment, including the effects on equity and profit or loss, of the various hedging relationships.
Refer Note No – 2.6, 2.14, 2.20 and 2.28 of Notes to Accounts. We also evaluated the Companys internal control system with regard to derivative financial instruments, including the internal activities to monitor compliance with the hedging policy. In addition to evaluating the internal control system,
we obtained bank confirmations for the hedging instruments in order to assess completeness. With regard to the expected cash flows and the assessment of the effectiveness of hedges,
we essentially conducted a retrospective assessment of past hedging levels. In doing so, we were able to satisfy ourselves that the estimates and assumptions made by management were substantiated and sufficiently documented.
Conclusion: We agree with managements evaluation.

3. O ptionally Convertible Preference Shares

Key Audit Matter Response to KAM
The entity had issued 61.25 lacs Cumulative Redeemable Non-Convertible Preference Shares (CRNPS) of Rs 100/- each at a premium of Rs 300/- per share in the years 2012-2013, 2013-2014 and 2014-2015 for a period of 12 years. Those are classified as debt measuring at amortized cost pursuant to Ind AS 32 and Ind AS 109. Our procedures included the following:
On 27th March,2021, the company has made the variations in terms of CRNPS and converted into Non-Cumulative Redeemable Optionally Convertible Preference Shares (OCRPS). Checking proposal of change as per Ind AS 32 for correct classification of the preference shares (OCRPS) to equity as per Ind AS 32.
OCRPS are convertible at the option of the company into fixed number of equity shares. Checking of applicable Indian Accounting Standards.
As a result of variations in terms, the company classified the new OCRPS as equity measuring at fair value. The difference between amortized value of CRNPS and fair value of OCRPS amounting to Rs 72.46 crore is recognized as income in profit and loss statement under exceptional item. Refer Note No.- 2.18 of Notes to Accounts. Checking of certificate issued by the registered valuer for Fair Value of optionally convertible preference shares considered as equity as per Ind AS 32.
Checking of various compliances, viz., compliances of Companies Act 2013, SEBI Regulations, etc.
Checking of tax implication, if any.
Conclusion: We found that the managements evaluation is correct in terms of applicable Ind AS and accounting principle.

Information Other than the Ind AS Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, for example, Corporate Overview, Key Highlights, Board of Directors Report, Report on Corporate Governance, Management Discussion & Analysis Report, Business Responsibility Report, etc., but does not include the Ind AS financial statements and our auditors report thereon.

Our opinion on the Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Ind AS financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Management and Those Charged with Governance for the Ind AS Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In pr the Ind AS financial statements, management eparing is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibility

Our objectives are to obtain reasonable assurance about whether the Ind AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual Ind AS financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: a) Identify and assess the risks of material misstatement of the Ind AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. b) Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls.

c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. d) Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the Ind AS financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern. e) Evaluate the overall presentation, structure and content of the Ind AS financial statements, including the disclosures, and whether the Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Ind AS financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit, we report to the extent applicable that: a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. b) In our opinion, proper books of accounts as required by law have been kept by the Company so far as it appears from our examination of those books. c) The Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of accounts. d) In our opinion, the aforesaid Ind AS financial statements comply with the Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. e) On the basis of the written representations received from the Directors as on 31st March, 2021 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2021 from being appointed as a director in terms of Section 164(2) of the Act. f ) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting.

g) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of Section 197(16) of the Act, as amended: In our opinion and to the best of our information and according to the explanation given to us, the remuneration paid by the company to its directors during the year is in accordance with the provision of Section 196 and 197 of the Act. h) With respect to the other matters to be included in the Auditors Report in accordance with the Rule 11 of the Companies (Audit and Auditors) rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: i. The Company has disclosed the impact of pending litigations on its financial position in its Ind AS financial statements. ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses on long term contracts including derivative contracts. iii. There has been no delay in transferring amounts, which were required to be transferred to the Investor education and Protection Fund by the Company.

2. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in "Annexure B", a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

For Agrawal Subodh & Co.
Chartered Accountants
Firms Registration No – 319260E
Subodh Kumar Agrawal
Partner
Place: Kolkata Membership No. – 054670
Date: 1st June, 2021 UDIN:21054670AAAAAD5797

Annexure ‘A

to the Independent Auditors Report

(Referred to in paragraph 1(f ) under ‘Report on Other Legal and Regulatory Requirements Section of our report of even date to the members of Emami Paper Mills Limited on the Ind AS Financial Statements for the year ended March 31, 2021)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Emami Paper Mills Limited ("the Company") as of 31st March, 2021 in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial controls

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India and the Standards on Auditing, prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system with reference to Ind AS financial statements.

Meaning of Internal Financial Controls with reference to Ind AS financial statements

A companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Ind AS financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control with reference to Ind AS financial statements includes those policies and procedures that (1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of Ind AS financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the Ind AS financial statements.

Inherent Limitations of Internal Financial Controls with reference to Ind AS financial statements

Because of the inherent limitations of internal financial controls with reference to Ind AS financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with reference to Ind AS financial statements to future periods are subject to the risk that the internal financial control with reference to Ind AS financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system with reference to Ind AS financial statements and such internal financial controls with reference to Ind AS financial statements were operating effectively as at 31st March 2021, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Agrawal Subodh & Co.
Chartered Accountants
Firms Registration No – 319260E
Subodh Kumar Agrawal
Partner
Place: Kolkata Membership No. – 054670
Date: 1st June, 2021 UDIN:21054670AAAAAD5797

Annexure ‘B

to the Independent Auditors Report

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements section of our report of even date) i. (a) The Company has maintained proper records showing full particulars, including quantitative details and Situation of fixed assets.

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(c) According to the information and explanations given to us and the records examined by us including registered title deeds, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the Balance Sheet date. In respect of immovable properties of land that have been taken on lease and disclosed as property, plant and equipment in the Ind AS financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement. ii. According to the information and explanations given to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been dealt with in books of accounts. iii. The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act,2013. iv. In our opinion and according to the information and explanations given to us, the Company has not granted any loans, not made investments and has not provided guarantees and securities, as applicable with the provisions of Sections 185 and 186 of the Companies Act, 2013. v. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from the public in accordance with the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder. Accordingly, paragraph 3(v) of the Order is not applicable to the Company. vi. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. vii. According to the information and explanations given to us in respect of statutory dues: (a) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Goods and Service Tax, Cess and other statutory dues to the appropriate authorities during the year. There were no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Goods and Service Tax, Cess and other statutory dues in arrears as at 31st March, 2021 for a period of more than six months from the date they became payable.

(b) D etails of dues of Central Sales Tax, Service Tax, Excise Duty, Entry Tax and Value Added Tax which have not been deposited as on 31st March, 2021 on account of disputes are given below:

Particulars Financial year to which the matter pertains Forum where matter is pending Amount Amount Unpaid
( Rs in Lac) ( Rs in Lac)
The Central Excise Act, 1994 & Service Tax 1994-95 Case to be filed before Additional Commissioner of Central Excise 0.87 0.87
(Finance Act, 1994) 2006-07 Tribunal 110.64 74.81
2008-09 CESTAT, Kolkata 0.21 0.07
2011-12 & 2012-13 CESTAT,Kolkata 9.09 8.18
2012-13 to 2014-15 Commissioner (Appeal - I) 2.89 2.67
2010-11 to 2012-13 Commissioner (A) BBSR 19.03 18.32
2011-12 CESTAT,Kolkata 4.46 3.67
2014-15 Commissioner (Appeal), Bhubaneshwar 18.62 2.43
2014-15 Commissioner (Appeal), Bhubaneshwar 45.76 5.97
Central Sales Tax 2004-05 DCCT 1.99 0.53
2009-10 Commissioner (Appeal) 19.62 17.12
2015-16 Tribunal (Cuttack) 2.17 1.15
2016-17 DCCT 2.75 -
ESIC 1996-97 ESIC Labour Court 0.25 0.22
Entry Tax Act (West Bengal) 2013-14 High Court 89.39 81.28
2014-15 High Court 83.48 83.48
2015-16 High Court 82.42 82.42
2017-18 High Court 23.36 23.36

viii. In our opinion and according to the information and explanations given to us, the Company has not defaulted during the year in repayment of loans or borrowings to financial institutions, bankers and the government. The Company did not have any outstanding debentures during the year. ix. The Company did not raise any money by way of initial public offer and further public offer (including debt instrument). To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the company were applied for the purpose for which the loans were obtained.

x. To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year. xi. According to the information and explanations given to us, the company has paid/ provided for managerial remunerations in accordance with the requisite approvals mandated by the provisions of Sec 197 read with Schedule V to the Act being taken as prescribed under the Act. xii. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi company. Accordingly, paragraph 3 (xii) of the Order is not applicable. xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the Ind AS Financial Statements as required by the applicable Indian Accounting Standards. xiv. According to the information and explanations given to us and based on our examination of the records, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3 (xv) of the Order is not applicable. xvi. According to information and explanations given to us, the Company is not required to be registered under Section 45 IA of the Reserve Bank of India Act, 1934.

For Agrawal Subodh & Co.
Chartered Accountants
Firms Registration No – 319260E
Subodh Kumar Agrawal
Partner
Place: Kolkata Membership No. – 054670
Date: 1st June, 2021 UDIN:21054670AAAAAD5797