South India Paper Mills Ltd Directors Report

To

The Members

Your Directors hereby present the 65th Annual Report of the Company along with the audited accounts for the year ended 31^st March, 2024.

The Company has adopted Indian Accounting Standards (Ind AS), from tlie financial year 2017-18 as mandated by the Ministry of Corporate Affairs (MCA), in place of Indian GAAP, followed earlier. Financial statements for the current year, including figures of the previous year are based on IndAS and this adoption has no major impact for the Statement of Profit and Loss.

WORKING RESULTS	FY 2023-24	FY 2022-23	FY 2021-22
Finished Production of Paper & Paperboards	69,833 MTs	50,867 MTs	54,991 MTs
Conversi?n Quantity at the Box Plant (PPD)	25,789 MTs	28,068 MTs	29,225 MTs
Revenue from Operations	31,230.62	28,785.11	30,535.57
FINANCIAL RESULTS:
Profit/(Loss) before interest, depreciation & tax	1,870.57	(502.35)	3,822.44
Less : Finance costs	1,838.27	1,624.38	587.75
Gross/Cash Profit/(Loss)	32.30	(2,126.73)	3,234.69
Less : Depreciation	1,789.45	1,603.39	943.92
Profit/(Loss) before Exceptional items & Tax	(1,757.15)	(3,730.12)	2,290.77
Add : Exceptional income	(30.01)	1,327.50	273.05
Profit/(Loss) after Exceptional items, before tax	(1,787.16)	(2,402.62)	2,563.82
Less : Provisi?n for Current tax	—	—	(559.17)
Less/(Add): MAT credit (utilized)/ entitlement	—	—	—
Less/(Add): Deferred Tax (charge)/ credit	444.64	752.38	160.26
Profit/(Loss) after tax for the year	(1,342.52)	(1,650.24)	2,164.91
(Less) / Add :(Tax Provisi?n for earlier years)/ Reversal	(0.25)	(16.95)	1.14
Net Profit/(Loss) after Tax	(1,342.77)	(1,667.19)	2,166.05

OPERATIONS

Revenue from operations for the financial year 2023-24 at? 312.31 crores, increasedby 8.50% from ? 287.85 crores in the previous year.

Operation at the Paper Mili improved to 60% of the new capacity of PM6 (?ie only machine operating after scrapping the o?d machines) from 44% in the preceding year. After the initial struggle to overe?me teething problems in the new machine and efforts to increase the machine speed, operating stability was achieved in the second half of the financial year and production improved to 73% in Q4

At the Printing & Packaging Divisi?n, Conversi?n tonnage was lower due to decline in end user demand, at 72% as against 78%, in the preceding year.

On ll^th November, 2023, an incidence of fire occurred at PM5 stock warehouse, resulting in loss of finished and unfinished paper, machinery spares and damages to building and plant and machinery. There were no human injuries/ casualties. Normal operations were not disrupted. Loss due to fire Rs 30 lakhs is recognized by the Company on account of damage to inventory, net of insurance claim assessed, as exceptional item.

Profit before interest, depreciation, tax (PBDIT) in FY 2023-24 improved to ?L870 lacs, as against a loss of ? 502 lacs, in the preceding year. Finance costs were higher at ?1,838 lacs from ?1,624 lacs. This is due to capitalization of interest on a portion of Capex capitalized in the later part of last year, has become revenue interest this year and despite the higher repayments of Term Loans has led to increase in interest & finance costs. After making a depreciation provisi?n of ?1,789 lacs (Previous year 1,603 lacs), loss before Exceptional income & tax was ? 1.757 lacs (Previous year ? 3,730 lacs). Exceptional loss due to fire accident was ? 30 lacs as against an exceptional income of?l,327 lacs in the previous year on sale of part of an immovable property (held for sale). Loss before tax was ?1,787 lacs (previous year ? 2,403 lakhs).

Company has opted for new regime of Income tax, wherein effective tax rate is 25.17% sans certain exemptions and allowances like additional depreciation, from FY 2021-22.

Provisi?n for current tax ? Nil (Nil) & deferred tax assets credit of ? 445 lakhs is considered in view of loss (previous year ? 753 lacs. Net loss for the year stood at ? 1,343 lacs. (Previous Year ? 1,650 lacs)

Considering the prevailing economic environment and the intemal and extemal factors, the Company has assessed the carrying amount of property, plant & equipment, receivables, inventories, investments and other assets as at the Balance Sheet date, the current liquidity position including its cash flows, the business outlook and has concluded that no material adjustments are required in these financial results and the Balance Sheet as at 31-3-2024.

FINANCE S

During the year, cash flow & liquidity remained comfortable for most of the time.

Sources of funds	Rs. in lacs
Operating profits	1,870
Interest receipts	31
Short Term Loan availed	300
Surplus in Bank Current Accounts (out of Proceeds from issue of shares towards the end ofFY 2022-23)	2,900
Increase in Bank Borrowings for working capital	3,431
Sale of o?d machineries	234
Increase Trade Deposits	6
Total	8,772
Deployment of funds	Rs. in lacs
Repayment of Term Loans	2,602
Repayment of Vendor Financing, STL	566
Payment to Project Cr?ditos, Capex, Advances	410
Finance Cost	1,786
Increase in working capital	3,345
Unclaimed Dividend payments	12
Security Deposits paid	51
Total	8,772

 

	31.03.2024	31.03.2023
Long Tem? Gross Debt to Equity Ratio	0.62	0.68
Current Ratio	1.02	1.12

Installments of Tem? Loans and Interest on Tem? Toans and Working capital borrowings were paid wi?iin due dates.

DEPOSITS

The Company has neither accepted ?or renewed any deposits within the meaning of Section 73 of the CompaniesAct, 2013 and mies framed there un de:., during ?ie financial year.

CREDIT RATING

ICRA has downgraded the Companys Long tem? Credit rating (for Fund based limits i.e. Tem? Loans and CC limits) from [ICRAJBBB with negative outlook to [ICRAJBBB- (pronounced ICRA triple B minus)with negative outlook and a short term ratmg (for Non Fund based limits i.e TC & BG facilities) of [ICRAJA3+, to [ICRAJA3 (pronounced ICRA A tliree) in view of the losses incurred.

CURRENT PROSPECTS

Current year , tlie operatmg levels are expected to improve further, despite challenging market conditions. Company is trying hard to move from operating profits to achieve net profits with valu? added grades, optimum scale of operation, leading to positive eamings.

The market conditions for paper, though generally competitive, as the industry capacity has increased substantially over the years, is favorable for quality produc?s in the segment in which the Company can op?rate with the new plant. The market for corrugated boxes has become extremely competitive, as more play ers shift towards the new technology paradigm in cormgation even as demand growth remains lackluster. The Company is exploring opportunities in new areas of valu? added grades.

CORPORATE GOVERNANCE

As per SEBI (Tisting Obligations & Disclosure Requirements) Regulations, 2015 sep?rate Report on Corporate Governalice, along withAuditors Certif?cate confinning the compliance is attached.

Directors Responsibility Statement:

As requiredby Section 134(5) of the Companies Act 2013, we state that:

While preparing tlie Amiual Accounts, the Company has followed the applicable Accounting Standards;

The Directors have selected such accounting policies and applied them consistently and has made judgements and estimates that are reasonable and prudent, so as to give true and fair view of the state of affairs of the Company as at 31-3-2024 & of the loss of ?ie Company for the financial year 2023-24.

The Directors have taken proper & sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

The Directors have prepared the amiual accounts on a going concern basis.

The Directors have laid down intemal financial Controls to be followed by the Company and the Controls are adequate and operating effectively.

The Directors have devised proper systems to ensure compliance with the provisions of all the applicable laws and these systems are adequate and operating effectively.

PARTICULARS OF LOANS, GUARANTEES OR EWESTMENTS

During the year, the Company did not give any Loan / Guarantee or has provided any security or make investment coveredunder Section 186 of the Companies Act, 2013

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY

None of the transactions with any of the related parties was in conflict with the interests of the Company. Details of transactions with related parties are fumished as an annexure in Form AOC-2.

CHANGES IN NATURE OF BUSINESS OF THE COMPANY

There was no change in the nature of business of the Company during the year.

MATERIAL CHANGES & COMMITMENTS

There was no change in the nature of business of the Company during the year.

There was no material changes and commitments in the business operations of the Company since the ci?se of the financial year on 31 st March 2024 to the date of this report.

SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

In terms of provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 the Company has formulated a Policy to prevent Sexual Harassment of Women at workplace. During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANYS OPERATIONS

As per Rule 8(5)(vii) of the Companies (Accounts), Rules 2014, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations.

ESTERNAL FINANCIAL CONTROL WITH REFERENCE TO FINANCIAL STATEMENTS

The Board has adopted polides and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the 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 disclosures.

During the year, such Controls were tested and no reportable material weakness in the design or operation were observed.

ISO 9001 CERTIFICATION

Companys Quality Management Systems (QMS) have been audited by Bureau Veritas Certification India Pvt Ltd and ISO 9001: 2015 Certification was awarded to the Printing & Packaging Divisi?n of the Company. This Certification issued is valid up to 17-5-2027.

FOREST STEWARDSHTP COUNCIL (FSC) CERTIFICATION

The Company contin?es to be certified under standards of FSC, namely FSC-STD-40-003, FSC-STD-40-004 and FSC-STD-40-007 for its product group. This is an assurance of environmental protection by providing sufficient documentary Controls and traceability tliroughout the Chain of Custody.This certification means Company is capable of manufacturing FSC Recycled and FSC Mixed produc?s.

RESEARCH & DEVELOPMENT

Several special application grades have been developed & successfully introduced during the year to cater to stringent customer specific requirements.

ENERGY C ONSERVATION MEASURES

The particulars required under Section 134 (3) (m) of the Companies Act, 2013 with regard to energy conservation measures are fumished in the Annexure.

ENVIRONMENTAL PROTECTION

Your company has always endeavored to remain in harmony witli its eco-sphere and tried to equitably balance the interest of all stakeholders in it, often going beyond ?ie statutory impositions placed by regulatory authorities. In such efforts are included the installation of a 0.5 acre hold tank and a 2 km delivery pipeline for irrigating otherwise dry lands. ETP facility installed in the preceding year for conserving water and meeting the pollution control norms even on the expanded capacity of the paper mili is functioning satisfactorily. The treated effluent water is utilized for irrigation purposes in the nearby fields of ?iird party fanners witli excellent crop yields.

The Company has installed & been operating the Electro Static Precipitator (ESP) Systems for its Boilers for controlling dust emission and dust extractor system for controlling dust at its fuel handling system. Centrifuge and other machineries have been installed for effluent treatment.Fuel shed with roofing, Controls dust emissions and conserves the resources.

In order to ensure enviromnentally safe disposal of solid wastes, ?ie Company has started disposing Ash and pl?stic waste to recyclers authorized by KSPCB. Ash is used in brick manufacturing and pl?stic is being used in cement kilns.

The Company liad engaged ?ie expert Services of University of Agricultural Sciences, Gandhi Krishi Vigyana Kendra, Bangalore for a study of ‘Utilisation of Paper Mili Effluent for Agricultural Purposeu After 4 years study, a final report has been issued concluding ?iat the effluent generated by the paper mili contains small amount of nutrients, higher amount of salts and are within limits of Central Pollution Control Board norms. The finding further says that mili effluent along with additional dose of nitrogen has significant effect in increasing tlie crop yields.

DIVIDENOS

In view of the loss, no Dividend is recommended for FY 2023-24 (Previous year also Nil Dividend). The total distribution amounts to Rs.Nil (Last year also Nil).

PARTICULARS OFEMPLOYEES

Particulars of employees as prescribed under the Companies Act, 2013 are annexed.

Annual Return

Copy of the Annual Return for the financia! year ended 31-3-2024 is available on our website www.sipaper.com.

Managerial Remuneration

Requisite details as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith and forms a part of this Annual report

Meetings of the Board

The number of meetings of the Board held and details thereof are mentioned in the Report on Corporate Govemance forming a part of this Annual Report.

Whistle Blower Policy

In deference to Section 177 (9) of the Act,read with relevant Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Listing Regulations the Company has established a vigil mechanism overseen by the Audit Committ.ee. The Company has formed Whistle Blower policy as required under the Companies Act 2013 and Listing Regulations and no personnel has been denied access to the Audit Committee.

Risk Management

The Company has a risk management framework to identify and eval?ate business risks and opportunities. It seeks to create transparency, minimise adverse impact on the business objective and enhance the Companys competitive advantage. It aims at ensuring that the executive management Controls the risk through means of a properly defined framework.

The Company has laid down appropriate procedures to inform the Board about the risk assessment and minimization procedures. The Board periodically revisits and reviews the overall risk management plan for making desired changes in response to the dynamics of the business.

The Board of Directors have constituted a Risk Management Committee as required under the Listing Regulations, vide Board Meeting held on 27.01.2015, to frame, implement and monitor the risk management plan of the Company. The Committee comprises of the following Directors.

Mr Manish M Patel	- Chairman
Mr M G Moh?n Kumar	- Member
Mr S R Chandrasekara Setty	- Member

The terms of reference of risk management committee inelude review of Risk management policy and its development within the Company, to monitor the effectiveness of risk management policy, review maj or risks of the Company and to advice on mitigation to the Board.

LABOUR RELATIONS

The industrial relations climate in the Company during the year was cordial and hannonius. A 4 year Wage settlement agreement signed with workers uni?n at the Paper Mili is in forc? upto 31-3-2026. In case of the Box unit, a 4 year Wage settlement agreement signed witli workers uni?n is in forc? upto 31-3-2024. Negotiation for agreement for ?ie subsequent period is in progress.

DIRECTORS

During the year Mr Dineshchandra C Patel (DIN 00167581), Non Executive Director has resigned from the post of Directorship. Your Directors place on record ?ieir appreciation for the Services rendered during his tenure.

It is with a deep sense of sorrow and loss that we report ?ie passing away of our Director Mr Jagdish M Patel (DIN 00128834), on 8^thApril 2024. Your Directors place on record their appreciation for the Services rendered during his tenure.

In terms of Section 152 of the Companies Act 2013, Mr JitendraA Patel (DIN 00248302) retires by rotation and he, being eligible offers himself for re appointment.

As per tlie amended Regulation 17(1A) of the SEBI (LODR) Regulations, 2015, no Company shall appoint any person or continu? the directorship of any person as Non executive Director who has attained the age of 75 years unless a special resolution at the General Meeting is passed to that effect. In order to comply witli tiiis requirement of passing special resolution for appointment / continuation of appointment of Mr Jitendra A Patel beyond 75 years, this special resolution is proposed to be passed. Accordingly approval of the shareholders is sought by wayof special resolution

Your Directors recommend his re-appointment as Director

Mr Meenakshi Sundaram Shivakumar (DIN 06445505) was appomted as an Additional Director (w.e.f lst July 2024) in tile capacity of Non Executive Independent Director by the Board at its meeting held on 30-05-2024. As per Section 161 of the Companies Act, 2013 and ?ie Articles of Association of the Company, he holds office upto the date of the ensuing Annual General Meeting. It is proposed to appoint Mr Meenakshi Sundaram Shivakumar (DIN 06445505)as an Independent Director for a period of 5 consecutive years w.e.f l^st July, 2024 not liable to rotation.

Further as per Reg 17 (1C) of SEBI (LODR)Regulations, the Listed entity is required to obtam the approval of ?ie shareholders at the next annual general meeting or within a time period of 3 months from the date of appointment or reappointment of director, whichever is earlier. Henee ?ie matter is now placed before ?ie shareholders for their approval

Your Directors recommend his appointment for tile approval by tile members of tile Company.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaration from all tile Independent Directors under Section 149(7) of ?ie Companies Act 2013, in respect of meeting the criteria of independence as provided under Section 149(6) of the Act.

BOARD EVALUATION

The Board of Directors have carried out an annual evaluation of its performance, Board Committees and Individual Directorspursuantto the provisions of the CompaniesActand SEBI (Listing Obligations andDisclosure Requirements) Regulations, 2015.

The Board has recorded overall satisfaction.

In a sep?rate meeting of Independent Directors held on 28-03-2024, the performance of Non Independent Directors, Board as a whole and the performance of the Chairman was evaluated.They have expressed overall satisfaction on such evaluation

POLICY ON DIRECTOR S APPOINTMENT AND REMUNERATION

The Companys Policy on directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters as provided under Section 178(3) is annexed hereto and forms part of this Annual Report.

Criteria for performance evaluation of Independent Directors as required by the Listing Regulations also forms part of this report.

CORPORATE SOCIAL RESPONSIBILIT Y

The Board has constituted a Corporate Social Responsibility Committee asmandatedby Section 135 oftheCompanies Act 2013 vide Board Meeting held on 27.01.2015.

The broad terms of reference of the CSR Committee are as under:

• Formulating and recommending to the Board, the CSR Policy which shall indicate the activities to be undertaken by the Company.

• Recommending the amount of expenditure to be incurred on the aforesaid activities and;

• Reviewing and Monitoring the CSR Policy of the company from time to time.

The Company has no obligation towards CSR for the financial year 2023-24, on account of losses incurred during the FY 2022-23. A report on CSR Activities is not applicable and henee not annexed herewith, for the above reason.

APPOINTMENT OF KE Y MANAGERIAL PERSONNEL

During the year Mr Kanishka Harshad Modi (DIN 10260282) has been appointed as the Whole Time Director (KMP) of the Company.

OTHER DISCLOSURES

The Company has not made any application, ?or any proceeding is pending against the Company under the Insolvency and Bankruptcy Code, 2016 during the year under review.

The Company has not made any one time settlement with any Banks or financial institution during the year under

review. Henee Rule 8(5)(xii) of Companies (Accounts) Rules 2014 is not applicable.

AUDITORS

There are no adverse comments by the Auditors in their report annexed herewith.

SECRETARIALAUDIT

Pursuant to Section 204(1) of the Companies Act, 2013, read with tlie Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr S N Hitaish Kumar, Practicing Company Secretary (C PNo. 6553), to conductthe SecretarialAuditof the Company for Financial Year 2023-24. The Secretarial Audit Report in Fonn MR 3 is annexed.

ESTERNAL AUDITOR

Pursuant to Section 138(1) of the Companies Act, 2013, the Company has appointed M/s Rau andNathan Chartered Accountants (Firm Regn. No.003178S), Mysore, to conduct Intemal Audit of the functions and activities of the Company for Financial Year 2023-24.

COST AUDIT

Companys produc?s are not notified for Cos? Audit in FY 2023-24.

APPRECIATION

Your Directors take this opportunity to place on record their appreciation for Services rendered by the employees, sales agents, Banks & Financial Institu?!ons.

	for and on behalf of the Board of Directors
Nanjangud	Manish M. Patel
30,h May, 2024	Chairman & Managing Director
	DIN 00128179