Shree Ajit Pulp and Paper Ltd Management Discussions.

1. INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Company manufactures Multilayer Testliner and Testliner Paper from 80 to 350 GSM and 18 to 35 BF. This product is mainly used for making Corrugated Boxes, Duplex Cartons, Corrugated small e-flute etc. as packaging material.

The Company is having two wind mills for total capacity of 2.75 MW in Gujarat State, set up for captive consumption. These are in operation. The Company is having wheeling arrangement with GETCO and DGVCL whereby the set off is given to the Company for generation of electricity from the wind mills.

2. AN OVERVIEW:

The overall performance of the Company during the year under report has been satisfactory in line with general economic conditions in the country. The revenue from operations of the Company has increased by 6.73% to Rs.26,970.23 lakh during the year from Rs. 25,269.76 lakh in the previous year. The Profit before Tax has increased to Rs.3,261.95 lakh from Rs. 1,188.84 lakh and the Profit after Tax at Rs. 2,312.86 lakh as compared to Rs. 825.41 lakh of the previous year. The profit before tax has increased by 174.38% and profit after tax has increased by 180.21%.

3. OVERALL PRODUCTION AND SALES PERFORMANCE:

Name of product

Production (MT)

Sales (MT)

2018-19 2017-18 Increase % 2018-19 2017-18 Increase %
Multilayer Testliner & Testliner Paper 89716 82478 8.78 89685 81599 9.91

4. CURRENT AND FUTURE OUTLOOK:

The company has been constantly upgrading manufacturing facilities for improving production, quality of products and yields.

The Directors expect that there will be reasonable improvement in production, sales turnover and profitability of the Company in the current year.

5. PLANS FOR UP-GRADATION AND IMRPOVEMENT:

The investment in plant and machinery for improvement in quality and reduction in cost of production taken up during the previous year is continuing.

The Board had announced the setting up of the project for manufacture of corrugated boxes plant at the meeting held on 28th March, 2017. On re-examination of the critical aspects of the project, based on the prevailing situation, the Board has now decided to implement in future.

The Board of Directors of the Company in its meeting held on 28th May, 2019 have approved setting up a new plant for the manufacture of fluting, testliner and kraftliner paper in Vapi, Gujarat at an estimated capital outlay approximately of Rs. 275 Crores. This is a capacity expansion plan. This will be financed by appropriate mix of debt and internal accruals of the Company.

The wholly owned subsidiary of the Company, namely Shree Samrudhi Industrial Papers Pvt Ltd has not yet commenced business.

6. OPPORTUNITIES AND THREATS / RISKS AND CONCERNS:

The future of the Paper industry in general and Multilayer Testliner and Testliner Paper in particular is linked with the future of world economy. When the economy in general is on the down turn, the demand for Companys products is also likely to fall. On the other hand, when the economy in general is on the up-turn, the demand for the Companys products is likely to increase. The Company is having advantage over most of the other manufacturers as it is professionally managed and its operations are efficient, cost effective and highly competitive.

7. FINANCIAL ANALYSIS:

a) REVENUE:

During the year under review, the revenue from operations has increased by 6.73% to Rs. 26,970.23 lakh from Rs. 25,269.76 lakh in the previous year. The sales in terms of volume increased by 9.91% compared to previous year. The profit before tax has increased by 174.38%.

b) DEBT:

As at 31st March, 2019, the Companys total debt including Term Loans and Working Capital Facilities was Rs. 3,591.51 lakh as compared to Rs. 5,109.10 lakh in the previous year. The finance cost has decreased to Rs. 515.13 lakh during the year under report from Rs. 565.07 lakh during the previous year. The repayment of Term Loan is being done regularly.

c) PROFIT FOR THE YEAR:

The profit for the year under review was Rs. 2,312.86 lakh as compared to Rs. 825.41 lakh in the previous year. The EPS has increased to Rs. 43.18 against Rs. 15.41 in the previous year.

d) INTERNAL CONTROL SYSTEMS:

The Company has adequate Internal Control System in place. The Internal Audit is conducted by a reputed Firm of Chartered Accountants specializing in Internal Audits, whose report is placed before the Audit Committee periodically. The Audit Committee closely reviews the progress made on the observations which helps strengthen overall financial control. The details of the Audit Committee Meetings are given under the Corporate Governance Section of this report.

8. INCREASE IN SHAREHOLDER VALUE:

Your Company makes all efforts to adopt the best systems and methods of doing the business, reduce overheads, improve productivity and establish better customer relations with improved quality and effective distribution network. The Company periodically, evaluates the overall business and tries to shift towards value added products. The Company is making sincere efforts to devise better strategy for growth and improving profitability, thereby enhancing shareholder value in the changing market situation.

9. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NO. OF PEOPLE EMPLOYED:

The Company has a team of 36 competent and highly motivated technical and management staff. It has 60 clerical, computer operating and other staff and 167 workmen handling factory operations. There is continuous communication between all levels of employees. The Employer- Employee relations are harmonious and cordial.

10. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND RETURN ON NETWORTH:

As per the amendment made under Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regulations, details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and any changes in Return on Net Worth of the Company including explanations therefor are given below:

Sr. No. Particulars Current year ended 31st March, 2019 Previous year ended 31st March, 2018 % Change Explanation
1 Debtors turnover 7.47 7.00 6.78 -
2 Inventory turnover 6.48 7.60 (14.73) -
3 Interest coverage 7.33 3.10 136.23 Higher profitability and reduction in borrowings
4 Current ratio 1.63 1.34 21.56 -
5 Debt equity ratio 0.29 0.50 (42.70) Higher profitability and reduction in borrowings
6 Operating profit margin (EBIT) (%) 14.02 6.94 101.94 Improved Profitability due to reduction in cost of material consumed
7 Net profit margin (%) 8.57 3.26 162.50 Improved Profitability due to reduction in cost of material consumed
8 Return on net worth (%) 18.64 8.14 129.05 Higher Profitability