South India Paper Mills Ltd Directors Report.


The Members

Your Directors hereby present the 62nd Annual Report of the Company along with the audited accounts for the year ended 31st March, 2021.

The Company has adopted Indian Accounting Standards (Ind AS), from the 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 2020-21 FY 2019-20 FY 2018-19
Finished Production of Paper & Paperboards 53,372 MTs 56,789 MTs 60,331 MTs
Conversion Quantity at the Box Plant (PPD) 29,166 MTs 30,827 MTs 28,127 MTs
(Rs in lacs ) (Rs in lacs ) (Rs in lacs )
Revenue from Operations 22,678.27 21,761.08 24,249.58
Profit before interest, depreciation & tax 3,817.18 3,521.56 3,717.07
Less : Finance costs 445.82 411.46 445.37
Gross (Cash) Profit 3,371.36 3,110.10 3,271.70
Less : Depreciation 1014.38 976.66 949.99
Profit before Exceptional items & Tax 2,356.98 2,133.44 2,321.71
Add : Exceptional income 305.79 - -
Profit after Exceptional items, before tax 2,662.77 2,133.44 2,321.71
Less : Provision for Current tax (483.20) (371.86) (503.00)
Less/(Add) : MAT credit (utilized)/ entitlement (375.16) (285.82) 43.71
Less/(Add) : Deferred Tax (charge)/ credit 100.54 111.06 (24.70)
Profit after tax for the year 1,904.95 1,586.82 1,837.72
(Less) / Add :(Tax Provision for earlier years)/ Reversal - 7.96 (0.97)
Net Profit after Tax 1,904.95 1,594.78 1,836.75


Revenue from operations for the financial year 2020-21 increased to Rs 226.78 crores from Rs 217.61 crores in the previous year.

National Lockdown, imposed to curb the spread of Covid-19 pandemic, towards the end of preceding financial year and continued restrictions impacted production and sales in first quarter of the FY 2020-21 to the extent of about 40%. Paper Division remained shut till 4th May 2020. Box Division resumed operations from 3rd April, 2020 as it was covered under Essential Services. After recommencing, initially both the units were operated with minimum possible employees, and subsequently scaling up gradually with necessary precautions and hygienic care and protection of the employees. The Company has adopted measures to curb the spread of infection in order to protect the health of its employees and ensure business continuity with minimal disruption. Operating levels improved and stabilized during the 2nd quarter and continued for rest of the year.

During the year raw material, fuel prices started moving up and the Company could recover the higher cost by improved realizations, which resulted in increase in top line.

Operation at the Paper Mill was lower @ 81% due to above factors happening in Q1 as against 86% of the Capacity during the preceding year,

At Printing & Packaging Division Conversion tonnage was about 5% lower, compared to preceding year.

Profit before interest, depreciation, tax (PBDIT) in FY 2020-21 was better on account of the above said factors at Rs 3,817 lacs from Rs 3,522 lacs in the preceding year. Finance costs were higher at Rs 446 lacs from Rs 411 lakhs as the utilization of working capital facility, from bank increased. After making a depreciation provision of Rs 1,014 lacs (Previous year Rs 977 lacs), profit before Exceptional income & tax was Rs 2,357 lacs(Previous year Rs 2,133 lacs). Exceptional income of Rs 306 lakhs (previous year nil) on sale of part of an immovable property (held for sale), boosted the profit before tax to Rs 2,663 lakhs (previous year Rs 2,133 lakhs).

After making a provision for current tax of Rs 483 lakhs (Rs 372 lacs) & considering net effect of deferred tax & MAT credit charged of Rs 275 lacs (Rs 175 lacs in the previous year), net profit stood at Rs 1,905 lacs. (Previous Year Rs 1,595 lacs)

Considering the prevailing economic environment and the internal and external 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 31-3-2021. The potential future impact of the global health pandemic may be different from that estimated as at the date of approval of these financial statements and the Company will continue to closely monitor any material changes to future economic conditions and assess the impact on its business


During the year, cash flow & liquidity remained comfortable.

Sources of funds Rs in lacs
Cash flow from operating activities 3,801
Interest receipts 43
Term Loan from Bank 4,444
Capital Subsidy for ETP from State Govt 200
Advance/Amount received for asset sale 402
Increase in short term borrowing 1,990
Total 10,880
Deployment of funds Rs in lacs
Repayment of Term Loans 567
Capital Expenditure & Advances 8,286
Finance Cost incl capitalized interest 531
Income tax Paid 431
Dividend payment 227
Trade deposit refund (net) 4
Increase in Working capital 834
Total 10,880
31.03.2021 31.03.2020
Long Term Gross Debt to Equity Ratio 0.42 0.17
Current Ratio 1.39 2.01

Installments of Term Loans and Interest on Term Loans and Working capital borrowings were paid within due dates. DEPOSITS

The Company has neither accepted nor renewed any deposits within the meaning of Section 73 of the Companies Act, 2013 and rules framed there under, during the financial year.


ICRA had extended the validity of the existing ratings upto 30-9-2020. Subsequently, ICRA downgraded the Long term rating (for Fund based limits) of [ICRA]A- to [ICRA]BBB+ stable and a short term rating (for Non Fund based limits) of [ICRA]A2+ to [ICRA]A2, to the Companys line of credit, stating that the proposed borrowing for the Expansion Project and assumed impact of Covid-19 would affect the revenue & earnings. Company has represented to consider the facts & performance and ICRA has agreed to review.


Current year, the operating levels are better in April & May 2021. However, the demand had fallen due to Lockdowns imposed by the State Governments to combat the 2nd wave of Covid-19, which affected the user industries and consequently led to lower demand, resulting in lower production in June. Company had taken maintenance shutdown for about a week. However, overall performance for the 1st Quarter appears to be normal. Barring further lockdown/ disruption Companys operation in the subsequent quarters is expected to be normal and comparable to that of preceding year, though material costs and overheads are on the rise.

The market conditions for paper, though generally competitive, as the industry capacity has increased substantially over the years, is favourable for quality products in the segment in which the Company operates. Market for corrugated boxes continue to be extremely competitive, as industry shifts towards new paradigm in corrugation. Company is exploring opportunities in new areas, including e-commerce business.

An increase in paper making capacity through brown-field investment is under implementation.


The Companys plan for expansion of the production capacity of paper mill by installing PM6 (Paper Machine No.6) at an estimated cost of about Rs 190 crores,revised to Rs 260 crores is under implementation. Revision is on account of introduction of some systems for process efficiency, automation to handle higher production, without much time loss and water conservation systems considered, as beneficial to the Project.

Production capacity is being increased from the present 200 MTPD (Metric Tonnes Per Day) to 460 MTPD.

Means of finance revised, with proposal to apply & avail additional Term loan of Rs 40 crores. With this, Bank Term Loan of Rs 110 crores, already sanctioned, total Term Loan portion will be Rs 150 crores. Internal accruals of Rs 80 crores is revised to Rs 110 crores, in view of the earnings available during extended implementation period. Civil works delayed due to Covid-19 pandemic and Capex on machineries deferred initially are resumed and progressing satisfactorily. Project is scheduled to be commissioned by Q3 end or early Q4 and the Lending Bank has permitted the extending of date of commissioning upto March 2022, as per RBI circular. This investment in PM6 should further the good standing of Companys products.

Project cost and Means of Finance - update - in crores

Particulars Original estimate Revised estimate Amount incurred As on 31-3-2021 Amount incurred As on 31-5-2021 Balance to be incurred
Project Cost 190.00 260.00 133.03 146.18 113.82
Means of Finance :
Internal accruals 80.00 110.00 88.37 93.07 16.93
Bank Term Loan 110.00 150.00 44.66 53.11 96.89
Total Means of finance 190.00 260.00 133.03 146.18 113.82

In view of the earnings of the current year, estimated conservatively, being available, in addition to unutilised sanctioned limits, and additional term loan (for meeting part of the revised cost of the Project) under sanction at Bank,the Company does not expect any problem in meeting the fund requirements for the Project implementation.


As per SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 separate Report on Corporate Governance, along with Auditors Certificate confirming the compliance is attached.

Directors Responsibility Statement :

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

While preparing the Annual 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 31-3-2021 & of the profit of the Company for the financial year 2020-21.

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 annual accounts on a going concern basis.

The Directors have laid down internal 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.


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


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 furnished as an annexure in Form AOC-2.


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


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 close of the financial year on 31st March 2021 to the date of this report.


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


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.


The Board has adopted policies 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.


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 Division of the Company. This Certification issued is valid up to 17-5-2021.Subsequent Audit completed and certificate awaited.


The Company received FSC certificate under standards of FSC-STD-40-003 v.2-1, FSC-STD-40-004 v.3-0 and FSC- STD-40-007 v.2-0 for its product group. This is an assurance of environmental protection by providing sufficient documentary controls and traceability throughout the Chain of Custody.This certification means Company is capable of manufacturing FSC Recycled and FSC Mixed products.


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


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


Your company has always endeavored to remain in harmony with its eco-sphere and tried to equitably balance the interest of all stakeholders in it, often going beyond the 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. New ETP facility for conserving water and meeting the pollution control norms even on the proposed capacity expansion of the paper mill was installed in the preceeding year. The treated effluent water is utilized for irrigation purposes in the nearby fields of third party farmers with 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 environmentally safe disposal of solid wastes, the Company has started disposing Ash and plastic waste to recyclers authorized by KSPCB. Ash is used in brick manufacturing and plastic is being used in cement kilns.

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


Your Directors recommend a Dividend of 10% i.e. Re 1.00 per equity share of Rs 10 each (last year 15% ). The total distribution amounts to Rs 150 lacs (Last year Rs 225 lacs) As per Finance Act, 2020 Dividend Distribution Tax is not applicable for Dividends declared & paid after 31-3-2020. Dividends will be taxed in the hands of shareholders.

As per Ind AS 10, Events after the reporting period, Proposed Dividends on Equity shares being a non-adjusting event at the Balance Sheet date, is not recognised as a liability in the accounts for the year ended 31st March, 2021. Dividend will be recognised in the accounts in the year of payment i.e. FY 2021-22.


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

Annual Return

Copy of the Annual Return for the financial year ended 31-3-2021 is available on our website 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 Governance 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 Committee. 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 evaluate 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 Cl 49 of the Listing Agreement 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 Mohan Kumar - Member

Mr S R Chandrasekara Setty - Member

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


The industrial relations climate in the Company during the year was cordial and harmonius. A 6 year Wage settlement agreement signed with workers union at the Paper Mill will be in force upto 31-3-2022. In case of the Box unit, a 4 year Wage settlement agreement signed during the year with workers union is in force upto 31-3-2024.

Covid-19 vaccination programmes were arranged at the factory for employees and their family members.


In terms of Section 152 of the Companies Act, 2013 Mr Jitendra A Patel (DIN 00248302) retires by rotation and he, being eligible, offers himself for reappointment. Your Directors recommend his reappointment.


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


The Board of Directors have carried out an annual evaluation of its performance, Board Committees and Individual Directors pursuant to the provisions of the Companies Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board has recorded overall satisfaction.

In a separate meeting of Independent Directors held on 29-03-2021, 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.


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.


The Board has constituted a Corporate Social Responsibility Committee as mandated by Section 135 of the Companies 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 taken up a few CSR activities during the year and spent Rs 8.57 lakhs during FY 2020-21. Balance unspent amount of Rs 20.63 lakhs will be paid as per the CSR rules, as amended.

A report on CSR Activities is annexed herewith and forms a part of the Directors Report.


There are no changes in Key Managerial Positions during the year.


M/s. Murthy Swamy& Associates LLP, Chartered Accountants continue to be the statutory auditors of the Company. At the 59th Annual General Meeting of the Company held on 20th September, 2018, shareholders ratified the appointment of M/s. Murthy Swamy& Associates LLP, Chartered Accountants to hold office for a period of four years commencing from the conclusion of 59th AGM, till the conclusion of 63rd AGM, without seeking any further ratification of their appointment from the shareholders of the company for their appointment as statutory auditors till the conclusion of their tenure.

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


Pursuant to Section 204(1) of the Companies Act, 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr S N Hitaish Kumar, Practicing Company Secretary (C P No. 6553), to conduct the Secretarial Audit of the Company for Financial Year 2020-21. The Secretarial Audit Report in Form MR 3 is annexed.

Explanation for observations / comments made by the Company Secretary in Practice

1. (a) The Company has ratified the appointment of Mr Dineshchandra C Patel (who has attained the age of

75 years) by way of special resolution passed at 61st AGM of the Company held on 24th September 2020, thereby complying with the amended Regulation 17(1A) of Listing Regulations

(b) The Company has re- constituted the Stakeholder Relationship Committee and has appointed Mrs Girija Shankar as a member of the Committee vide Board meeting held on 30-07-2020, thereby complying with the amended Regulation 20(2)/20(2A) of Listing Regulations

2. The Company has not entered into any fresh related party transaction during the half year ended 30th September 2020. Remuneration paid to KMP / Non executive Director are as per the Companys Nomination & Remuneration Policy. Since there was no fresh related party transaction during the period, the requirement of filing the Disclosures of Related party transactions was missed out inadvertently. However subsequently the Company has filed the disclosures of related party transactions on 30.01.2021 in compliance with Regulation 23(9) of Listing Regulations, even though no fresh related party transactions are entered into by the Company.

Above compliances are duly reported to BSE and condonation / waiver requested from BSE.


Pursuant to Section 138(1) of the Companies Act, 2013, the Company has appointed M/s Rau and Nathan Chartered Accountants (Firm Regn. No.003178S), Mysore, to conduct Internal Audit of the functions and activities of the Company for Financial Year 2020-21.


Companys products are not notified for Cost Audit in FY 2020-21.


Your Directors take this opportunity to place on record their appreciation for services rendered by the employees, sales agents, Banks & Financial Institutions.

for and on behalf of the Board of Directors
Nanjangud Manish M. Patel
24th June, 2021 Chairman & Managing Director