Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements)
Regulation, 2015.Your Directors have great pleasure in presenting the management
discussion and analysis report for the year ended on March 31a, 2023.
San gal Papers Limited (hereinafter called "The Company") incorporated in the
year 1980 and having registered office in the State of Uttar Pradesh. The company is
engaged in manufacturing of Writing and Printing Paper, News Print paper , Kraft and wide
range of color papers. We manufacture paper on customized requirement of the customers.
The management discussed the various aspects and come out this summary:
A) INDUSTRY STRUCTURE AND DEVELOPMENT:
Paper is a very important aspect of our daily life. Our day starts with reading
newspaper we get the source of knowledge through it. It is the backbone of the Education
sector despite of emerging e-leaming platforms post covid. Paper is the cultural barometer
of the nation. We need paper every day for widening the frontier of our knowledge or to
transport or supply any goods or commodity. Pulp and paper constitute one of the most
important segments for paper industry and is treated as a basic requirement. As per IPMAs
(Indian Paper Mills Association) estimates, this industry employs more than 5 lakh people
and indirectly 1,5 million people. The Broad characteristics of the industry are that it
is capital, raw material, energy and water intensive and highly fragmented (small units
account for 60% of the industry size). Globally over 400 million ton of paper and paper
products are consumed. The worlds three largest paper producing countries are China, the
United States, and Japan (these three countries account for approximately half of the
worlds total paper production), while India accounts for a small but growing share of the
global market. The Indian paper industry accounts for approximately 5% of the world"
s total production of paper.
During the financial year 2022-2023 the paper and paper product industry in India have
seen a significant rise in demand in domestic and export market due to strong growth in
organized retail sector and reopen of schools and colleges after covid pandemic The
Company has recorded a significant increase in revenue of 46% (approx.) across all
segments as compared to last year. During the year under review the Company has achieved a
turnover (Revenue from Operations) of Rs. (In lakhs) 2261035 as against previous figure of
Rs. (In lakhs) 15499.76, increase in sale by 46 % (approx).
During the year under review PBT (Profit before Tax) was Rs. (In lakhs) 479.83as
compared to previous year figure of Rs. (In lakhs) 211.83, posting an increase of 127 %
(approx) in PBT. Net profit and PAT (profit after tax and other comprehensive income) were
Rs.(In lakhs) 334.46 as compared to previous year figure of Rs.(In lakhs) 163.35 reporting
an increase of 105 % (approx) in net profit as compared to previous year. The operating
and fixed expenses have increased proportionately during the financial year resulting in
lower cost of production and high operating profit.
Paper pervades all sectors of our activity from books to bullets and from morning
newspaper to nuclear technology. Indian paper industry is highly fragmented widi varying
sizes ranging from 10 tpd to 1500tpd. In global context, India is one of the fastest
growing markets for paper and paper consumption in the country is estimated to touch 30
million tons by 2026-27. Our company also engaged in manufacturing of news print paper and
the newsprint sector in India is governed by the Newsprint Control Order (NCO), 2004. At
present there are more than 120 mills registered under the Schedule of the NCO.
B) Opportunities and Threats:
The Companys products have been enjoying consistently good brand image and loyalty
from the consumers for the past several years and the company is optimistic on increasing
the sale of the paper product in India and abroad. Firstly, due to increase of organized
retail sector and e-commerce in the country and secondly, with reopen of schools and
colleges. After post pandemic era, paper industry witnessed a strong demand in packaging
paper and writing or printing paper in India as well as globally. As per IPMA (Indian
Paper Manufacturers Association) estimates a growth of 7 % on year on year basis annually.
INSTALLED CAPACITY
The Companys current installed capacity is 52,800 MT per annum. During the year under
review there was an increment of 19,800 M.T from 33,000 M.T. to 52,800 M.T. due to
conversion of Machine- No.2 from manufacturing Newsprint to Kraft Paper. However from mid
of May, 2023 Machine No. 2 is again converted for the production of Writing and Printing
Paper/ Specialty Paper.
STATE OF THE COMPANY
The following statement on the affairs of the company under review:
1. The Company engaged in single segment i.e. company engaged in manufacturing of
Paper.
2. There is no change in status of the company.
3. There is no change in financial year of the company.
4. There is capital expenditure of Rs. 494.47 Lakhs during the year in Plant and
Machinery as machine No. II is converted from making Kraft Paper to Newsprint and due to
this diere is an improvement in die production which has taken effect on the financial
position of the company.
5. There is also expenditure in Cogeneration Plant of Rs. 230.03 Lakhs during the year
for installation of (ESP) for optimum utilization of the energy as per Environmental
norms.
6. Due to above there is modernization, expansion and diversification during the year.
Your company is manufacturing paper on demand of the Customer, our production and
market size is negligible in paper industry. We are manufacturing News print and writing
printing paper, Speciality Paper during the reporting year we have produced Kraft paper as
we have converted Machine No. 2 from Newsprint to Kraft. In reference of pricing of
writing printing paper and other various variety of paper, our company is very small
company by size and value. We are following price decided by the customer and the market
forces. We are only price takers and not setters. The price of paper is determined/decided
by taking into various factors like quantity, quality etc.
The company is tiying hard to utilize the capacity to its optimum level, making use of
the best of operational techniques and economical use of the resources. Raw material use
by the company is one of the best quality of its category with strong quality checks, the
availability of raw material for production is depend on the availability in the market
and as well as price consideration.
Manufacturing of paper involves very high volume of water and electricity, which
results in creating pollution to the environment which is one of the biggest threats to
the paper industry. To overcome this challenge, industry requires to adopt latest
technology machines and pollution reducing equipments or filters to curb pollution which
involves high cost and time as required to obtain environmental clearance from the
government.
C) Segment:
Sangal Papers Limited engaged in single segment of business, paper manufacturing is our
primary business activity.
In geographic segment, the company is selling its paper in India and exporting to Sri
Lanka, Singapore, Nepal, Iran, United Arab Emirates and other various countries.
In the significant customers, our company is paper manufacturing and selling the paper
to pan India and export to many countries.
As per END AS and as the standalone balance sheet of the company for the financial year
ended 31st March, 2023, During the year under review the Company has achieved a
turnover (Revenue from Operations) of Rs. (In lakhs) 22610.35 as against previous figure
of Rs. (In lakhs) 15499.76 increase in sale by 46 % (approx).
During the year under review PBT (Profit before Tax) was Rs. (In lakhs) 479.83 as
compared to previous year figure of Rs. (In lakhs) 211.83, posting an increase of 127 %
(approx) in PBT, Net profit and PAT (profit after tax and other comprehensive income) were
Rs.(In lakhs) 334.46 as compared to previous year figure of Rs.(In lakhs) 163.35 reporting
an increase of 105 % (approx) in net profit as compared to previous year.
Your Company have achieved a good revenue and profit increase despite of challenges due
to Covidl9 pandemic which have affected the global demand significantly in last two to
three years. Now, as the economic activity opens up in the postpandemic era, the growth
momentum is likely to get further acceleration in coming months ahead.
D) Outlook and other concerns:
This Section lists future based statement, it depend on the present and future Market
and paper industry situations and also involvement of risk and uncertainties.
After outbreak of Covid-19 pandemie situation in last two to three years which
drastically decline demand of paper. But now, after vaccination to all citizens of India
and normalization, the economic situation is becoming favorable and is accelerating the
manufacturing sector with rising demand of goods and services globally. The smooth
availability of trucks, load in g/un loading crew etc. was put in place which ensured the
better flow of materials across the country. There has also been witnessed strong demand
of packaging paper due to increase in organized retail sector. Reopen of educational
institutions and other organizations added demand of writing and printing paper too.
For Indian paper industry, biggest concern is the use of high volume of water and
electricity consumption in manufacturing process which creates pollution in the
environment. Due to which to reduce such pollution filters and upgradation in technology
requires from time to time which involves heavy investment in CAPEX which is a continuous
challenge to small scale paper manufactures in this price sensitive commodity (paper)
market. Your company have also done expenditure in Cogeneration Plant of Rs. 230.03 Lakhs
during die year for installation of Electro Static Capaciter (ESP) for optimum utilization
of the energy and production.
CARE Ratings or IPMA (Indian Paper Manufacturers Association) estimates a growth of 6
— 7 % on year on year basis and will reach 30 million tons by FY 2026-2027 largely
driven by emphasis on education and literacy coupled with growth in organized retail,
according to industry body IPMA.
The growth will be largely driven by printing & writing and packaging & paper
board segment. The Indian paper industry can be broadly classified into three segments:
1. Printing & writing (P&W): Printing and writing segment caters to office
stationary, textbooks, copier papers, notebooks etc. This segment forms 31% of domestic
paper industry. Governments thrust on education through steps like Right to Education,
Sarva Shiksha Abhiyan, rise in service sector are key factors contributing to the growth
of this segment.
2. Packaging & paper board: Packaging paper & board segment caters to tertiary
and flexible packaging purposes in industries such as FMCG, food, pharma, textiles etc.
This segment forms 47% of the domestic paper industry. This is currently fastest growing
segment owing to factors such as rising urbanization, increasing penetration of organized
retail, higher growth in FMCG, pharmaceutical.
3. Newsprint: Newsprint serves the newspaper & magazines industry. This segment
forms 18% of Indian paper industry. This segment is under stress due to lower growth rates
and import threat.
Our actual results could differ materially from those anticipated in these statements a
result of certain factors. The company will try or make efforts to increase in the revenue
and profit of the company in future. The company will also try to enter in new
geographical area for capturing more market and increased in the percentage of participate
in the national and international market. A large portion of the revenue is dependent on
the top clients of the company and the loss of any one of major client cloud significantly
impact of the business. We may be the subject of litigation which, if adversely determine
could harm our business and operating result.
E) Internal Financial Control and their adequacy:
The Company identifies a risk based internal audit scope and assesses the inherent risk
in the processes and activities of the department within the company and ensures that
appropriate risk management limits, internal control mechanisms and mitigation strategies
are in place. The Internal Auditors, via, their internal audit reports, make suggestion
for better application of policies and rules relating to the deficiencies/non-compliance
of various audit areas and give suggestions/recommendations and control directives like
periodic reconciliation, proper authorizations/approvals, processing controls,
segregations of duties, maker-checker approach, etc. so as to mitigate the deficiencies
and make the process, procedure, systems and functions more robust, accountable, reliable
and compliant. The suggestions made by the Internal Auditors and the compliances thereof
are placed before the Audit Committee. The Audit Committee of the company, the details of
which have been provided in the Corporate Governance Report. The Committee reviews audit
reports submitted by the Internal Auditors. Internal Financial Controls Suggestions for
improvement are considered and the Committee follows
up on the implementation of eorreetive actions. The Committee also meets the Statutory
Auditors to ascertain, inter alia, their views on the adequacy of internal control systems
in the company.
F) Financial Performance:
Funds (Equity):
AS per present capital structure of the company i.e. we have authorized capital is Rs.
7,00,00,000/- divided into 70,00,000 equity share of Rs. 10/- each. The issued, subscribed
and paid-up capital is Rs. 1,30,72,600/- divided into 13,07,260 equity share of Rs. 10/-
each.
Other Funds (Other equity):
1. Revaluation Reserve
As per standalone balance sheet for the financial year ended 31st March,
2023: Revaluation Reserve as on 31st March, 2022 of Rs. 48.56 (Rupees in Lakhs)
and on 31st March, 2023 of Rs. 48.56 (Rupees in Lakhs).
2. Retained Earnings
As per standalone balance sheet for the financial year ended 31st March,
2023: The retained earnings as on 31st March, 2023 of Rs. 3733.94 (Rupees in
Lakhs) and on 31st March, 2022 of Rs.3399.49 (Rupees in Lakhs).
Revenue of Operations:
1. Sale of Product
As per standalone balance sheet of the company that total revenue from operation during
the relevant period as on 31SI March, 2022 of Rs. 15499.76(Rupees in Lakhs) and
as on 31st March. 2023 of Rs, 22610.35 (Rupees in Lakhs) .revenue of the
company increased with 46% in the relevant period.
2. Other Income
As per standalone balance sheet of the company that total other income of the company
as on 31st March, 2022 of Rs. 64.72 (Rupees in Lakhs) and as on 31st
March, 2023 of Rs. 202.03(Rupees in Lakhs), other income of the company increased with
212% approx, in the relevant period.
Earning/Profit of the Company:
As per standalone balance sheet of the company that total profit earned by the Company
during the period April, 2022 to March, 2023.
1. Profit before Tax (PUT)
As per standalone balance sheet of the company that Profit before Tax of the company
for the financial year ended 31st March, 2022 of Rs. 211.83 (Rupees in Lakhs)
and as on 31st March, 2023 of Rs.479.83 (Rupees in Lakhs), Profit Before Tax
increased with 126% approx.
2. Profit after Tax (PAT)
As per standalone balance sheet of the company that Profit after Tax of the company for
the financial year ended 31st March 2022, of Rs. 164.12(Rupees in Lakhs) and as
on 31st March 2023, of Rs.338.59 (Rupees in Lakhs), Profit after Tax increased
with 106 % approx..
3. Earning per equity share
As per standalone balance sheet of the company for the financial year ended 31st
March, 2022, of Rs 12.56(Basic and Diluted) and as on 31SI March, 2023 of Rs.
25.90 (Basic and Diluted). The Earning Per Share (EPS) of the company increased with 106
%.
The financial performance of the company during the year is satisfactory. After post
pandemic era, the growth momentum is likely to get further acceleration in coming months.
G) Human Resources Relationship:
As per human resources relationship policy of the company recognizes the importance of
human value and ensures that proper encouragement both moral and financial is extended to
employees to motivate them and as well as we protects the right of the employee/workers
and provide a comfortable environment to the employee/workers. The company is a paper
manufacturing industry, we are maintaining a culture and custom for our employee to
attract and retain the best talent. During the year under review, your Company enjoyed
cordial relationship with workers and employees at all levels.
Employees of the company are essential assets of the company. Our company believes for
welfare and development of the company as well as employees. As at 31st march,
2023, the company employed 252 employees.
H) Details of significant changes:
During the financial year 2022-2023 changes in financials and operating position of the
company.
Financial Ratio:
| Sr.no. Ratio |
Definition |
UOM |
22-23 |
21-22 |
% change |
| 1. DebtorTurnover |
Net credit Sale/Average Account Receivable |
Times |
8.51 |
6.32 |
34.65% |
| 2. Inventory Turnover |
Sale/Avg. Inventory |
Times |
11.66 |
10.37 |
12.44% |
| 3. Interest Coverage ratio |
EBIT/Finance Cost |
Times |
3.47 |
2.36 |
47.03% |
| 4. Current Ratio |
Current Assets/ Current Liabilities |
Times |
1.46 |
1.62 |
10.96% |
| 5. Debt equity Ratio |
Debt/Equity |
% |
67 |
55 |
21.82% |
| 6. Operation Profit Margin |
EBIT/Sale |
% |
2.98 |
2.37 |
25.74% |
| 7. Net Profit Margin |
Net profit/Total Revenue |
% |
1.50 |
1.06 |
41.51% |
The Company reported a growth of 46% approx, in its sales due to strong market
condition after post pandemic era, both in domestic and export market. The Company
reported an increase of 34.65% in Debtor Turnover Ratio during the financial year
2022-2023 as compared to FY 2021-2022.The Company reported an increase of 12.44% in
Inventory Turnover Ratio during the financial year 2022-2023, The Company reported an
increase of 47.03% in Interest Coverage Ratio during the financial year 2022-23 due to
profit before tax increased sharply with 126% and profit after tax increases with 106%
(other than OCI).The Company reported 10.96% decrease in Current Ratio during the
financial year 2022-2023 due to increase in short term borrowings. There is an increase of
21.82% in Debt Equity Ratio during the financial year 2022-2023 due to increase in bank
borrowings. The Company reported a growth of 25.74% in Operating Profit Margin during the
financial year 2022-23 due to sharp increase in both - profit before tax with 126% and
profit after tax with 106% (other than OCI) and sale increased with 46% approx, during the
year. The Company reported a growth of 41,51% in Net Profit Margin (includes other
comprehensive income) during the financial year 2022-2023 due to growth in profit before
tax with 126% and profit after tax increase with 106% (other than OCI) and total revenue
increased with 46% approx. The upside growth in sales/revenue and profit primarily due to
vaccination drive in the country, the covid case decline suddenly and the proactive
measures in supply chain management in ensuring availability of trucks, loading/unloading
crew, etc were put in place, which ensured the smoother flow of materials across the
country. Also, increase in the growth of organized retail sector and reopening of school,
offices etc. supports in rising demand of paper and paper products during the year.
I) Announcement:
The statements in the "Management Discussion and Analysis Report" section
describes the Companys objectives, projections, estimates, expectations and predictions,
which may be "forward looking statements" within the meaning of the applicable
laws and regulations. The annual results can differ materially from those expressed or
implied, depending upon the economic and climatic conditions, Government policies and
other incidental factors.
|
For and on behalf of the Board of Directors, |
| Date: 26/07/2023 |
Amit Sangal |
Himanshu Sangal |
| Place: Mawana |
Whole Time Director/CFO |
Managing Director |
|
DIN- 00091486 |
DIN -00091324 |
+91-9892691696
