Star Paper Mills Ltd Management Discussions.

GLOBAL ECONOMY

The World Bank forecasts global economic growth to edge up to 3.1 percent in the coming year after a much stronger-than-expected growth in current year, as the recovery in investment, manufacturing and trade continues and as commodity-exporting developing economies benefit from firming commodity prices.

However, fears of a trade war between the United States and China have risen sharply with both governments announcing plans to slap tariffs on major imports. The impact on individual economies and WTO system of trade negotiations are difficult to predict and will become apparent only in due course. USA has abandoned the 2015 Iran nuclear deal, which allowed Iran to export more crude. Prices have also gotten a lift from strong global demand and supply cuts by OPEC and Russia. OPEC and Russia have succeeded in raising crude oil prices substantially with no indications of softening of their approach.

Growth in advanced economies is expected to moderate slightly to 2.2% as central banks gradually remove their post-crisis accommodation and as an upturn in investment levels off. Growth in emerging market and developing economies as a whole is projected to strengthen to 4.5%, as commodity exports continues to recover.

Continued trends of protectionism in global trade and oil price increase may adversely impact our Countrys balance of payments.

INDIAN PAPER INDUSTRY

Indias GDP grew at 7.3% in the recent past, which was lower than the average growth of 7.6% in the preceding decade. The growth slowdown was partly a result of policy choices aimed at improving macroeconomic parameters such as inflation and fiscal deficit.

In context of Indian paper Industry, however most of the domestic growth got off-set due to year on year increasing cheaper imports from ASEAN under FTAs. During the year, the restriction imposed by Chinese Government on waste paper imports resulted in lower global waste paper prices. Consequently, the price of recycled paper in China, used for packaging material, increased due to short supply of Waste Paper. Indian manufacturers using waste paper stand to benefit on account of above restriction in China.

As per International Monetary Fund, India will be the fastest growing economy in 2018, with a growth rate of 7.4 per cent that rises to 7.8 per cent in 2019 with medium-term prospects remaining positive.

However, in the medium term downside risks would be there for the ASIAN region due to tightening of global financial conditions, a shift toward protectionist policies and an increase in geo-political tensions.

SWOT ANALYSIS

Strengths:

As the demand for upstream market of paper products like tissue paper, tea bags, filter paper, light weight online coated paper, medical grade coated paper etc. is growing up apart from conventional usage growth; a large user base and growing national economy is expected to lead to enhanced demand for Paper.

Weaknesses:

Major issues confronting Indias pulp and paper industry are competitive disadvantages in cost of raw Materials and energy, smaller size units compared to global peers and higher cost of capital.

Opportunities:

India ranks 11th largest producer of paper in the world. However, Indian Paper Industry accounts for a meagre 3% of global paper demand. The per-capita consumption of 13 kgs is significantly lower than the world average of around 67 kgs. Indias per capita consumption is considerably lower than Chinas (65 kg), Indonesias (22 kg), Malaysias (25 kg) and USAs (312 kg) consumption levels. This indicates the ample scope for expansion of the Indian Paper Industry.

Threats:

Increasing electronic media and digital communication alternatives, various Regional Trade Agreements (RTAs) / Free Trade Agreements (FTAs) without adequate safeguards expose Indian paper Industry to unfair competition. There has been a substantial rise in import volume in recent past

SOCIAL FARM FORESTRY

As in the past, the company continued to implement social farm forestry program in Western U.P. More than Three Crores seedlings were distributed and planted during the year on farm-land under Agro-Forestry Model. We have further added an area of 12581 hectares under plantations. This program has not only augmented supply of raw material but has also helped in enhancing rural income.

RISKS & CONCERN

Risk is associated with every kind of business. There are risks and concerns such as less-favoured environmental policies, market risks, increasing input cost, competition from imports, foreign exchange fluctuations etc.

State government degraded forest land should be made available to the Industry for raising plantations. Import duty on waste paper should be reduced, duty free imports of new and second hand machinery, equipment should be allowed for technology up gradation.

Your company regularly identifies the risks and undertakes appropriate measures to mitigate risk through risk identification and management.

INTERNAL CONTROL SYSTEM

The company continuously reviews Internal control systems and procedures to ensure conduct of business effectively and efficiently. Internal control system ensures:

• Accurate recording of transactions with internal checks and prompt reporting.

• Adherence to applicable accounting standards.

• Periodic review to effectively manage working capital.

• Review of capital investments and long term business plans.

• Compliance with applicable statutes, policies and listing regulations.

• Effective use of resources and safety of assets.

FINANCIAL PERFORMANCE

The company yet again reported an excellent financial and operational performance for the year despite various challenges and constraints.

HUMAN RESOURCES

Human resource development programs are linked with organizational needs and performance. Your company recognizes human resource as its invaluable asset. There are regular activities/ development programs for enhancing skills/competencies of the work-force at all levels. Industrial relations remain cordial throughout the year under review. There are 564 employees on the companys roll.

FUTURE OUTLOOK

Domestic paper demand expected to improve futher with steady economic growth, newer applications of paper, expectation of no further capacity addition, increasing other paper usage etc. However challenges such as cheaper import under FTAs, increasing cost of inputs-fuel oil and coal etc. will pose a challange in future.

FORWARD LOOKING STATEMENTS

This Report contains forward looking statements based upon the information available with the company, assumptions with regard to global economic conditions, Government policies etc. The company do not guarantee accuracy of the assumptions and perceived performance of the company in future. It is thus cautioned that the actual results may materially differ from those expressed or implied in the report.