Seshasayee Paper & Boards Ltd Management Discussions.

(i) Industry Structure and Developments Global

Paper Industry, occupies a prestigious position, among the various manufacturing enterprises, in view of its significant to the Society. Role of paper in promotion of literacy and education, propagation of information and knowledge and in packaging of commodities of commercial value, makes it an indispensable product. Its hygiene products offer appropriate solutions to societys needs.

Despite predictions that the on-going digital revolution would make paper obsolete, paper remains central to our lives. Paper is interwoven with human life in innumerable ways. Think of the hundreds of times, we touch paper, everyday. Paper is a bio-degradable product with a benign foot print at the end of its life cycle and this adds further strength to this product, promoting its growing usage.

Paper Industry is a significant player in the

World Economy. Its annual revenue exceeds US $ 500 billions. World consumption of paper and paper boards grew from 169 million tonnes in 1981 to 253 million tonnes in 1993 and to 352 million tonnes in 2005. Current consumption is in excess of 400 million tonnes. Paper usage has been declining in North America and Europe since 2006 while steeply rising in China and other Asian Economies. About half of the paper produced each year is recycled. (200 million tonnes).

As per Fisher International, share of major players in global production capacity in 2019 was:

China 26% India 4%
USA 15% Germany 4%
Brazil 6% Canada 4%
Japan 5% Others 36%

The four key Paper and Board categories are: Newsprint, Printing and Writing Papers,

Paper Boards for packaging applications, Tissue Papers & other Speciality Papers. Packaging grades account for over 55% of consumption, printing and writing grades over 32%, tissue papers 8-10% and others about 3%.

Tissue and packaging grades are expected to witness higher growth rates, in future while newsprint and printing and writing grades may witness declining trend.

Global demand for paper and paper board is forecast to grow to 482 million tonnes in 2030, or 1.1 per cent per year, according to a global paper market insight study by Poyry Management Consulting. The study forecasts the graphic paper market facing huge challenges, in particular, due to shrinking of demand for newsprint as well as uncoated and coated wood containing and wood free papers. Demand for tissue paper, container boards and carton board, is expected to grow upto 2030, driven by increasing packaging needs in emerging markets, booming e-commerce and the growing demand for convenience food and consumer goods. The annual consumption of packaging material and tissue / hygiene products is estimated to rise by upto 2.9 per cent.

As per "Paper-360" - a publication of TAPPI, healthy gains in packaging and tissue outweighed the slide in graphic paper demand in 2016, allowing global paper and paperboard demand to grow by 1 percent, or 3.9 million metric tonnes. This growth comes despite global graphic paper demand shrinking by 2.6 percent in 2016, its second-worst performance ever outside of a recession. The worst non-recession performance by global graphic paperdemandoccurredin2015,whenglobalpaper and paperboard demands anemic growth of just 0.3 per cent also represented its worst non-recession year ever.

Paper Industry, is often at the receiving end from environmental activists who are wary of the environmental footprint of this resources-intensive industry. As per European Environmental Paper Network (EEPN), Paper Industry should enable a clean, healthy, just and sustainable future for all life on Earth. EEPNs vision encompasses 7 principles; namely: Reduce global paper consumption and promote fair access to paper, maximize recycled paper content, ensure social responsibility, source fibre responsibly, reduce green house gas emissions, ensure clean production and ensure transparency and integrity. China is the largest producer and consumer of paper and boards more than 100 million tonnes annually. China is also the biggest importer of recovered paper and producer of recycled paper. The Chinese Environment Paper Network

(CEPN) has flagged its major concerns like, Pollution of water from untreated mill effluent, unsustainable sourcing of fibre for Mills, imports of pulp from countries causing deforestation, insufficient levels of wastepaper recovery and wasteful use of paper.

According to RISI, in China, graphic markets have transformed because of use of electronic media and economic restructuring in recent years. Chinas economic growth has slowed from 9 - 10% per annum in 2009-10 to close to 7% in 2014-15 and to less than 7% last year as the Govt. seeks to re-orient the economy from investment driven growth to consumption driven growth. This, combined with a major shift toward digital media usage has slowed Chinese graphic paper demand growth. RISI estimates that demand declined 1% - 2% from 2014-15, a strong contrast to the 6% - 7% demand growth that the market experienced from 2009-10, onwards.

"Post COVID-19, the pandemic has caused widespread concern and economic hardship for consumers, businesses and communities across the globe. Manufacturers are facing unique challenges caused by the crisis and forest paper and packaging producers are no exception" as per a Report from PWC.

The report adds that the Companies in the sector must navigate the challenge of simultaneously safeguarding employee wellbeing, managing potentially disrupted supply chains and evaluating tumultuous economic and capital market conditions.

"Paper 360" (a TAPPI publication) has provided the following sectoral assessment of impact of COVID-19 in the year 2020.

Printing & Writing Paper

Printing & writing suffered its worst decline in 2020, with operating rates tumbling to as low as 50% during the worst of the crisis, in the U.S. However, the sector began to recover from Aug 20 onwards.

Global demand is estimated at 102 million tonnes and an increase of 1.8 million tonnes is expected in 2021.

In North America, demand was expected to drop by 22.6% in 2020. For the total graphic paper sector, since 2015, nine million tonnes of capacity have closed of which half was converted into other grades.

Packaging Grades

In the last couple of years, a global downturn in manufacturing followed by Covid-19, has hurt paper & packaging demand. China and Europe have suffered big drops in 2020.

In 2019, global demand for packaging was 265 million tonnes with Asia accounting for about 40% of demand. In North America, two thirds of demand is for container board which is closely tied to the manufacture of consumer goods. Carton Board is about 25% of the market, balance was met by wrapping and industrial grades.

There has been a 36% drop in away from home activities in North America. Cup-stock demand fell sharply due to sudden loss of demand from entertainment sector.

In Europe demand growth is slowing and over-supply is developing with one million tonnes of new capacity added in 2020.

In Asia, Chinese recovered paper policies are changing the way Companies are operating around the globe. Chinese container board production fell by 4 million tonnes in 2020. In rest of Asia, demand has declined but should rebound in 2021. Shifts in retail trade are giving a boost to corrugated demand.

Overall, an annual increase of 1.5% is expected through 2022.


Everything, seems to have changed for Tissue market in 2020.

Consumer Tissue sales boomed while AfH (Away from Home) sales suffered. North America, Europe and Australia were hit hard, because extra capacity was not available to fill demand.

In China, excess capacity in the industry helped to increase production even though some mills closed down for about 8 weeks.

In the short term, in the USA, impact will definitely be positive for the at-home sector. While

AfH, suffered most in 2020, the outlook for AfH is still positive. In 2019, global tissue consumptioncapital investment to ramp was 40.6 million tonnes, Asia accounted for 39% share of this market. Continued growth is expected in this sector through 2022.

In western Europe, a growth of 1.8% is estimated in 2020, which may go down to 0.5% in 2021.

In China, the growth rate is estimated at 6% - 7% in 2020.

Market Pulp

Pulp consumption growth has softened as frenzied pace in Tissue consumption eases and graphic papers hit a low point in the cycle. In all, in 2020, there is likely to be a 5% collapse in the world paper demand i.e. about 20 million tonnes. Consequently a decline in market pulp demand by around 2.5 million tonnes is estimated in 2020. However, demand is expected to rebound in 2021 and 2022.

According to CRISIL, during 2020, operating rates of printing & writing segment would drop to 50-55% in 2020 from 72% in 2019 before gradually improving to 65-70% by 2024.


Indias paper production is estimated at about 20 million tonnes. IPMA estimates the domestic market size of paper to be around 18.6 million tonnes per annum. By 2025, consumption is projected to rise to 23 million tonnes. As per FAO, Indias paper production is around 17.28 million tonnes in 2018. FAO also estimates Indias imports at 1.5 million tonnes and imports at 2.86 million tonnes. Thus 18.64 million tonnes will be Indias domestic market size.

The Indian Pulp and Paper Industry provides direct employment to 5.0 lakhs persons and indirectly 15.0 lakhs persons. Annual turnover of the industry is over INR 70,000 crores.

About 1 million tonnes of paper production capacity is to be created in India on annual basis, over the current capacity, to meet growing demand. The Indian Pulp and Paper Industry has made significant up capacities, but the gestation period is long and economic viability of operations has been impacted significantly by raw material scarcity and high prices as well as rising import.

India ranks as the 5th largest producer of paper in the world. However, the Indian Paper Industry accounts for a meagre 4% of global paper demand. The per-capita consumption of

14-15 kgs is significantly lower than the world average of around 57 kgs. Indias per capita consumption is considerably lower than Chinas 65 kg, Indonesias 22 kg, Malaysias 25 kg, and of course USAs 312 kg consumption levels. This indicates the ample scope available for expansion of the Indian Paper Industry.

While the market size and per capita consumption are relatively low, they have exhibited a rising trend over past several years, from 9.3 million tonnes in 2008 to 17.37 million tonnes in 2016. As per CARE Ratings, the total paper consumption has grown at a CAGR of around 6.4% over last decade with none of the last ten years showing a decline in consumption demand. The long-term demand outlook for the Indian paper industry remains favorable, driven by increasing literacy levels, growth in print media (particularly in the vernacular languages), higher government spending on education sector, changing urban lifestyles as well as economic growth. Given that these factors are likely to be sustained, the paper industry is likely to continue growing at a rate of 6-8% per annum in the medium to long term although there may be aberrant years given the cyclical nature of the industry.

A CRISIL study indicates that demand for P&W paper would fall by a sharp 25-30% in fiscal 2021 because of 1) most of the schools and colleges are shut and shifted to digital based education, 2) fall in demand from office space as majority of them are working from home and also fall in advertising spaces and bill boards, 3) Govt ban on printing & distribution of all kinds of diaries, calendars and festival greeting cards by all ministries, depts & public sector undertaking from 2021 to cut costs and promote digitalisation. However, demand is expected to pick up and grow by 11-15% year on year in fiscal 2022 with schools, colleges and office spaces are likely to open and drive the demand.

Going ahead, CRISIL expects demand for P&W paper to grow at a muted 1-3% CAGR and reach 5.5 million tonnes by fiscal 2025. Enrolment of students is expected to increase at a relatively faster pace of 0.5 - 1% CAGR over the next 3 years, compared with de-growth of 0.4% CAGR during the past 3 years. Also with new education policy, coming into effect and a gradual rise in education spend by the Govt (~20% higher spend) and increased thrust on education are likely to support demand for creamwove and maplitho (60-65% P&W segment).

Demand for copier paper (~20% of P&W segment) is expected to increase at 3 - 4% CAGR through fiscal 2025, primarily on account of moderation of spends on stationary by corporates due to focus on digital based commercial. Demand growth for coated paper is expected to remain moderate at 1-2% CAGR led by slow down in the circulation of magazines and newspapers.

According to the CRISIL study,

Paperboard demand is expected to de-grow 4-7% on year in fiscal 2021, on account of muted demand across major end-user industries along with lower export demand (paperboard used for packaging of goods). In fiscal 2020, paperboard demand registered a moderate growth 3.9% on-year due to moderation in demand from FMCG and consumer durables sectors. However, we expect growth to recover to

5-6% CAGR in the next five fiscals to -12.5 million tonne by fiscal 2025. This revival will largely emanate from growth in sectors such as consumer durables, readymade garments, FMCG, pharmaceuticals: and rising penetration of e-commerce during this period.

In the current fiscal, demand for consumer durables is expected to de-grow 20-25% in volume terms but recover and increase at 3-4% CAGR between fiscals 2020 and 2025. This will be marked by better affordability, shorter replacement cycles, multiple ownership (in case of CTVS) and low penetration levels (in case of other appliances such as room ACs).

FMCG volumes are expected to remain flat this fiscal, which is the major demand driver for paperboard. But over the long term, rise in population and gradual increase in private spends would keep demand from the FMCG segment afloat.

Demand from the readymade garment industry, too, is expected to de-grow 25-30% on-year in volume terms this fiscal. However, long-term demand is expected to remain steady at 4-6% CAGR.

E-retailing growth is expected to register a healthy 15-20% growth this fiscal but rapidly rising shipments in the e-retail industry (estimated at 1.2-1.5 million shipments per day) and rise in penetration levels in overall retail will provide a fillip to the volumes within the segment over the medium term.

Similarly, Pharma is also expected to grow by a healthy 9-11% on-year, supporting the paperboard demand.

Within paperboard, the consumer packaging segment (40-50% of volumes), is expected to clock 5.5-6.5% CAGR up to fiscal 2025, driven by rise in demand for FMCG, pharmaceuticals, cosmetics and apparels. Higher disposable income and higher demand for ready-to-eat foods will support overall volumes. Demand from pharmaceuticals will also be aided by increased exports and new drug launches. Further the ban on single-use plastics is expected to augur well for the paper industry.

CRISIL Research expects demand for specialty paper to increase 8-11% on-year in fiscal 2021, driven by strong demand for Tissue paper. "Over the next five fiscals, we expect this segment to grow at robust 10-12% CAGR to

-1.8 million tonne by fiscal 2025 from-1.1 million tonne in fiscal 2020. The main varieties of specialty paper are: tissue, decor. thermal fine printing. cigarette, and business card paper. Rise in urbanisation, emphasis on hygiene through increased government thrust (via initiatives such as Swatch Bharat), and steady rise in healthcare and hospitality demand will lead to rise in demand for tissue paper consumption. Moreover, rise in the number of cashless transaction (ATM. debit/credit card purchase, etc.) and increased billing (owing to rise in share of organised retailing) will boost demand for thermal paper. Increased usage of tissues, napkins, toilet and towel grade paper coupled with increasing penetration of international brands such as Paseo, Tempo, etc. will lead to healthy demand for the segment."

In fiscal 2021, demand for newsprint is expected to de-grow sharply by 30-35% on account of severe contraction of newspaper circulation and reduction in no of pages. Demand for newsprint is expected to de-grow at 4-5%

CAGR between fiscals 2020 and 2025 on account of decrease in circulation of both vernacular as well as English newspapers due to increased smartphone and internet penetration and shift in preference towards e-newspaper.

While fortunes of the Paper Industry appears muted in 2021-22, according to Poyry, Indian Paper Industry will witness highest annual growth of about 6.5% per annum while Chinas growth is projected to be in the order of 5.25%, in the near term. North America and Japan may witness marginal or negative growth. Amongst the various grades, Container Boards, Tissue Paper, followed by Carton Boards will witness higher rates of growth, while growth rate of Coated / Uncoated wood-free Paper is expected to be under 2%.

(ii) Opportunities and Threats

The competitive strengths and the opportunities that are available to the Indian Paper Industry are:

its large and growing domestic paper market and potential for export.

Governments thrust for improving education and literacy levels in the Country.

growing urbanisation and e-commerce activities.

fast growing contemporary printing sector.

availability of qualified technical manpower with capability to design, build and manage world scale pulp and paper mills.

well established Research and Development (R & D) facilities / activities encouraging innovation.

potential for creation of sustainable raw material base through farm plantations for wood and agro residues.

The following competitive weaknesses and threats confront the Industry:

high cost of raw materials, including wood, non-wood and waste paper.

poor collection of used paper resulting in low recovery rate and undue dependence on imports to meet domestic needs.

absence of policy measures for creation of sustainable raw material base through industrial plantations and used paper recovery.

likely closures, owing to increasingly stringent environmental regulations.

lack of global competitiveness in cost and consistency in quality of products.

increasing imports consequent on numerous Regional Trade Agreements (RTAs) / Free Trade Agreements (FTAs) entered into by the Govt without adequate safeguards.

increasing competition from electronic media and digital communication alternatives.

Paper Industry is capital intensive and yields poor returns on investments. To enhance the competitiveness of the Industry, Govt must address the issues of creation of robust raw material base as well as extending fiscal incentives for assimilation of eco-friendly technologies, etc.

International Competitiveness is the key issue that is confronting the Indian Paper Industry, today especially in the context of Governments resolve to bring down import tariff every year and RTAs/ FTAs entered into with ASEAN / SAARC countries.

The major players, alive to the emerging international threats, have been aggressively pursuing quality improvement programmes, coupled with cost rationalisation and capacity additions. Increasingly, more up-to-date technologies are sought to be implemented, with added focus on environmental compliance.

(iii) Segment-wise or Product-wise performance

The Company is a single product Company and hence segment-wise or product-wise performance is not provided.

(iv) Risks and Concerns

Unprecedented and rapid spread of Covid-19 and its impact on economic recovery affecting the industrys futures.

Disruptions in supply-chain affecting availability and prices of key input materials as well as in shipping costs.

Post COVID-19, a huge downturn in the fortunes of Paper Industry is predicted, given the hit on demand from education, corporate and print media sectors due to the prolonged nation-wide lockdown.

Printing and writing paper segment which is the prime grade among Companys products, is expected to be impacted more severely in the near term.

The Company is taking necessary steps to weather this storm by expanding its product-mix to include Carton Boards, Virgin Kraft and Absorbent Kraft and by strengthening its marketing network, as well as the supply chain in addition to maintaining its liquidity to overcome extended periods of low-sales and poor revenue collections.

Failure of Monsoon and absence of water flow in the River Cauvery, from where the Company draws its water requirements, had created anxious moments to the Company in the past. Such contingency has recurred in the last season forcing the Company to curtail production of certain grades and alter the product mix. Further, inter-state sharing of River Cauvery water has become a political / legal issue in recent times. The Company is taking various initiatives to curtail quantum of water used in the process and has taken steps to identify ground water resources (which are meagre) within the Mills premises.

Continuous failure of monsoons resulting in scanty rainfall in the State of Tamil Nadu, had also affected substantially planting of sugarcane.

This had brought down, significantly the availability of cane for ‘crushing by sugar mills in the State, including by our Group Company, Ponni Sugars. Bagasse availability, consequently, has been significantly affected in the past.

This trend continues.

While there has been some improvement in the availability of wood from within the State, unprecedented shortageofwoodfeltintheneighbouring State of Andhra Pradesh in 2013-14, which has been the primary sourcing point for the Andhra based mills and few upcountry Mills had forced these mills to turn to Tamil Nadu for meeting, at least a part, of their shortfall. This has seriously affected the availability and cost of wood for the Tamil Nadu based mills.

With this mismatch of supply and demand, price of casuarina wood had skyrocketed by over 50% during 2013-14 & 2014-15, causing serious erosion in the profitability of operations.

If this trend is to resurface again in future, the Company may have to resort to import of wood logs / chips at higher prices, to sustain production.

The supply side constraints have since eased, and availability of wood improved.

The Company has taken steps to step-up production of clonal seedlings and bare-rooted seedlings by the Companys nursery as well as by the Company sponsored nurseries, to support planting of nearly 16 crores of Casuarina and Eucalyptus seedlings in about 20,000 acres by small and marginal farmers in Tamil Nadu.

The Company depends entirely on imported coal for operating its Captive Power Plant. The price of imported coal witnessed an unprecedented increase of more than 100% during 2007-08. Prices which softened from second half of 2008-09, have shown a rising trend currently. Presently, Coal prices have shot up by 70-80% over the previous year. Profitability of the Company will be impacted by price increases as well as by weakening of Indian Rupee.

Undue haste in reducing tariffs, for imports from countries covered by Government of Indias RTAs / FTAs, will likewise expose the Industry to inexpensive imports from low cost producers of paper.

Undue fluctuation rate between Indian Rupee and US Dollar will impact the margins of the Company.

(v) Outlook for 2021-22

Paper Industry which was one of the worst hit in the wake of the COVID-19 pandemic, has been witnessing signs of revival from Q4 of 2020-21 onwards.

However, the escalating second wave of COVID-19 infection poses serious down-side risks to the economy and heightens the possibility of business disruptions - according to a S&P Global Ratings report.

Indian Rating Agency ICRA has observed that the rise in infections was dampening the economic recovery with several indicators losing momentum in April 2021.

Indian Paper Industry went through one of its toughest phases in its history with Covid-19 affecting demand and disrupting the supply chain. Paper manufacturers encountered serious challenges in operating their units due to lack of orders, suffered huge reduction in capacity utilisation, eroding, substantially the profitability of their units.

This was more pronounced in the case of manufacturers of printing and writing grades whose oftake fell sharply due to closure of schools, colleges and courts as well as from work-from home practices. In addition, galloping oil prices, disruption in availability of containers for export besides huge rise in shipping costs had crippled the industry.

The severity and longevity of the surge in second wave of Covid-19 is unknown at this point of time and hence it is hard to guess the recovery time. Paper Industrys growth, generally, mirrors the growth in the economy and hence an early economic recovery is a pre-requisite for paper industrys revival of fortunes.

The Company, on its part has been taking steps to expand its product portfolio to reduce its dependence on manufacture of printing and writing grades.

As a part of the ongoing MDP III, Paper

Machine 2 has been modified to include manufacture of multi-layer boards. This will facilitate ‘up-stock and ‘carton board manufacture.

The Company has also developed in-house pulp based virgin kraft packaging papers for the food industry. These papers will be able to secure FSSAI (Food Safety and Standards Authority of India) certification.

Hopefully, the Covid-19 impact may not last beyond Q2 which will help the industry to put together a quick recovery act.

(vi) Internal control systems and their adequacy

The Company maintains all its records in ERP system developed in-house and the work flow and majority of approvals are routed through this system.

The Company has laid down adequate systems and well drawn procedures for ensuring internal financial controls. It has appointed an external audit firm as Internal Auditors for periodically checking and monitoring the internal control measures.

Internal Auditors are present at the Audit Committee Meetings where Internal Audit Reports are discussed alongside of management comments and the final observation of the Internal


The Board of Directors have adopted various policies, like Related Party Transactions Policy and Whistle Blower Policy and put in place budgetary control and monitoring measures for ensuring the orderly and efficient conduct of the business of the Company, 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.

The Company has enlisted the services of an external firm of Chartered

Accountants to evaluate the adequacy of the internal financial control systems adopted by the Company. They have expressed satisfaction with the existing internal financial control system prevalent in the Company.

The Statutory Auditors have also expressed satisfaction with the existing system in their Audit Report to the Shareholders.

(vii) Discussion on financial performance with respect to operational performance

2020-21 2019-20
(in tonnes) (in tonnes)
Production 1 70 138 1 97 547
Sales 1 39 005 1 87 271
(Rs crores) (Rs crores)
Profit before interest, depreciation, exceptional item and tax 126.87 289.57
Finance Cost 2.91 6.89
Depreciation 37.60 35.00
Exceptional Item -- --
Profit before tax 86.36 247.68

The Management reviewed the significant changes in the financial ratios and the same are presented in this section. The unfavourable movements in the ratios during the FY 2020-21 as compared to FY 2019-20 are mostly attributed to adverse market conditions.

Financial Year % Change - Inc / (Dec) Remarks
2020-21 2019-20
1 Revenue from Operations (RFO) - Rs crores 781.79 1183.98 (-)34.0% Drop in Volumes by 25.8% and balance due to drop in Net Realisations.
Ratios - % on RFO
2 Other Income 2.5% 1.9% 29% The drop in the margins, are mainly attributed to lower volumes and drop on realisations.
3 EBIDTA Margin 16.2% 24.5% (-) 34%
4 PBIT Margin (Operating Margin) 11.4% 21.5% (-) 47%
5 PAT Margin 12.8% 14.7% (-) 12%
Other P&L Ratios
6 Return on Net Worth (PAT / Equity) 9.1% 17.6% (-) 48 % Drop in % terms is due to drop in absolute value of PAT.
7 Interest Coverage Ratio (PBIT / Interest) in times
30.68 36.95 (-) 17 % NIL interest on Bank Borrowings during FY 2020-21.

Financial Year % Change - Remarks Inc / (Dec) 2020-21 2019-20 Balance Sheet Ratios

8 Gross Debt (^^) to 1 : 142 1 : 97 Debt represented in the Equity Ratio ratio in current year pertains only to "Interest Free Sales Tax Loan".

Bank Borrowings during the Year - NIL.

9 Net Debt to Capital (-) 21.8% (-) 46.8% Net Debt to Capital Ratio is Ratio Negative due to the Cash and Bank Balances being significantly higher than the

Gross Debt.

10 Networth per Share 174.67 156.33 12 % Networth expanded during (Face Value of the year on account of

Rs 2 each) Current year profits.

11 Current Ratio ## 2.64 2.61 No major change in the FY 2020-21.

12 Debtors Turnover Ratio 10.4% 6.8% Higher receivables mainly (as a % on RFO) on account of high sales in the month of March 2021 (represented in receivables) disproportionately higher compared to other months in FY 2020-21.

The sales were more even in FY 2019-20.

13 Inventory Turnover 29.1% 14.3% Mainly due to higher Ratio (as a % on RFO) Finished Goods Inventory at the end of Current Year, as compared to the previous year.

^^ Debt Includes Current Maturities of Long Term Loans (grouped under "Current Liabilities" as per Balance Sheet).

## For Current Ratio, Current Liability excludes "Current Maturities on Long Term Loans".

The Company registered lower profits in FY 2020-21 mainly on account of the Covid-19 related market disruptions and consequent lower volumes of production / sales, lower net sales realisations and higher finished goods inventory of Paper at the close of March 31, 2021.

The negative impact, arising out of significant drop in sales volumes and substantial reduction in Net Sales Realisations in the current year, as compared to previous year, was partially offset by the following factors :

Improved Operational efficiencies.

Optimisation in Raw Material Mix and


Lower Interest and Financing Charges, due to repayment of Term Loans and non-utilization of working capital limits.

(viii) Material developments in Human Resources / Industrial Relations front, including number of people employed

Relations between the Management and the labour were cordial throughout the year under review. The five year wage / salary agreement with labour unions / Staff Association expired on March 31, 2019. Negotiation are underway for entering into a new agreement.

Currently, the Company employs 1 278 persons of all ranks in its two Units.