t n newsprint Management discussions

I. INTRODUCTION

Tamil Nadu Newsprint and Papers Limited (TNPL) was promoted by the Government of Tamil Nadu in the year 1979 to produce Newsprint and Printing & Writing Paper (PWP) using bagasse as the primary raw material. The plant located at Kagithapuram in

Karur District was commissioned during 1984 with an initial capacity of 90,000 tonnes per annum. The company has enhanced the capacity to 4,00,000 tonnes per annum in four phases. The Company has set up a state-of-the-art Packaging Board Plant in the year 2016 with an annual capacity of 2,00,000 MT per annum in Mondipatti village, Manaparai taluk, Tiruchirapalli District and enhanced the total capacity to 6,00,000 tonnes per annum. With this, the Company has emerged as the third largest player in the Indian Paper Industry. The pulping capacity has been increased from 300 tonnes per day (tpd) in 1984 to 1,580 tonnes per day as of date.

TNPL has the following production facilities

 

Particulars	UOM	As on 31st March 2023
Paper Production	tpa	4,00,000
Packaging Board Production
Board Production	"	2,00,000
Pulp Production - CBP	tpd	550
- HWP	"	730
- DIP	"	300
Total	"	1,580
Cement Plant	tpd	900
Captive Power Plant	MW	153.69
Wind Farm	MW	35.5

II. INDUSTRY SCENARIO

Broadly, the industry is classified into four main segments-namely,writingandprintingpaper,Industrial packaging paper, specialty paper and newsprint. India holds 15th rank among paper producing countries in the world with a total installed capacity of 19 million tonnes. The demand is estimated at 20 million tonnes. The per capita consumption is around 15 kgs against the Asian average of 26 kgs and World average of 57 kgs. India is considered as the fastest growing market for paper in the world with a historical average annual growth of 6%. The domestic consumption is expected to rise to 23 million tonnes by 2025.

Indian Paper Industry is highly fragmented with over 800-850 paper mills of varying sizes spread across the Country. Only 50 mills are of a capacity of 50,000 tpa or more. The overall capacity utilization is estimated at 80-90%.

III. STRATEGY

TNPLs operational and financial performance is one of the best in the Indian Paper Industry. TNPLs success is largely related to the following strategies which enables the company to perform well consistently:

1. Innovation

2. Customer centric

3. Management of Human Resources

4. Efficient cost management

5. Financial re-engineering

6. Continuous sustainable growth

1. Innovation

TNPL is built on the concept that environment should be protected for the benefit of present and future generations. TNPL has perfected the technology of manufacturing printing and writing paper from bagasse, an agricultural residue. This is an outstanding innovation TNPL has set up a 900 tpd Capacity Cement plant for producing high grade cement from inorganic solid wastes-lime sludge and fly ash. TNPL is the first and only paper mill in the country to have set up a cement plant within the factory premises to produce cement from mill wastes. Two bio-methanation plants consisting of four numbers of UASB reactors set up within the factory premises have generated cumulatively 89.86 lakh m3 of methane gas during 2022-23. The methane gas is consumed in lime kilns in replacement of furnace oil and power boilers in replacement of coal. With this, TNPL has saved usage of 5088.90 KL of high cost furnace oil and 432 MT of imported coal during the year. TNPL has established a separate bio-technology and bio-energy Research Centre for producing tissue culture seedlings.

2. Customer Centric

Quality is a way of life in TNPL. The quality control team constantly checks the consistency in quality. A functional team consisting of executives from production, quality control and marketing conduct surveys to check customer satisfaction level.

TNPL is an ISO 9001 & ISO 14001 certified company. TNPL has exported 78201 mts of paper and paper board to 30 countries during the year 2022-23.

Customer complaints are given utmost priority for redressal. Consistency in quality, transparency in pricing and prompt delivery, has made TNPL a household name amongst domestic and export customers.

3. Management of Human Resources

TNPLs Vision is achieved by its team of dedicated Executives, Staff and Workmen. Training is being imparted to sharpen the effortless skill and competency of the Workmen and Executives respectively. Senior Leadership teams are deputed to management programmes conducted by leading Management Institutes/B Schools. The Company has implemented a periodical performance appraisal system. Key performance Indicators (KPI) is set for the organisation, departments and Senior Executives at the beginning of each year and appraisal is carried out at periodical intervals.

4. Efficient Cost Management

Cost saving measures are undertaken as a continuous exercise in TNPL to keep the cost of production low. TNPL has benchmarked the entire operations and monitor the actuals with reference to the targets set. The concerted actions on process improvement, productivity enhancement, cost reduction measures and self-sufficiency in major inputs-pulp, power and filler materials have enabled the company to be one of the lowest cost producer of paper in the country.

5. Financial Re-Engineering:

TNPL has implemented a sound Forex Risk Policy. The expansion schemes are funded through an appropriate mix of internal generation and borrowed funds. High cost loans are replaced with lower cost loans on regular basis. Continuous monitoring and readjusting of loan portfolio have enabled the company to keep the cost of borrowing at the minimum level. The average cost of loans outstanding as on 31.3.2023 is 7.74% (31.03.2022: 6.97 %).

6. Continuous and Sustainable Growth:

TNPL has grown from an initial capacity of 90,000 TPA in 1984 to 6,00,000 TPA in 2016 in tandem with the Industry growth. Currently, TNPL enjoys the third position in installed capacity and second position in production of printing and writing paper in the country. The company has three paper machines each with a capacity of 1,15,000 TPA, 1,30,000 TPA, 1,55,000 TPA respectively and one board machine with a capacity of 2,00,000 TPA. The growth is supported by the latest technology and state-of-the-art equipments. Economies of scale and quality production driven by technology provide competitive edge to the Company in the market

IV. THE SUCCESS DRIVERS

Environment Management

Environmental health is one of the key indicators of industrial sustainability. Industrial activities contribute to economic development of a nation; however, such activities do have its own impact on the environment and society. Impact on Environment due to industrial activities must be minimised by adopting appropriate environmentally benign technologies.

Recreating the Process through sustainable materials

TNPL aims to achieve its environmental objectives and impact reduction measures with multiple approaches right from resource conservation to recycling, restoring ecosystems, conserving biodiversity, awareness creation. Further the monitoring system effectively communicating to top management whenever necessary on the environmental aspects, which may affect the industrial operations, to take appropriate decisions on financial resources necessary to augment environmental performance. The outcome of such transformational decision is the installation of cement factory to effectively utilise the waste generated during co-processing activities, reduction measures of fossil fuel dependency by harnessing renewable energy - wind and solar energy, deinking plant to recycle waste paper, installation of new Generation3 (G3) pulp mill for energy efficiency and water conservation, modern ETP etc. In order to improve renewable energy in its energy mix, budget has been allocated for installation of additional roof top solar power plants. While the operations has positive impact on the employment generation and improvement in socio economic status in the surrounding villages, negative environmental impact due to environmental discharges is controlled with technological interventions. TNPL has invested heavily on discharge control measures such as NCG burning system to burn malodorous gases emanating from the pulping processes, Recovery boiler with ESP to control dust in flue gas below 30 mg/Nm3, fully integrated Chlorine dioxide plant with no effluent discharge, & modern ETP to effectively treat the effluent generated within stipulated norms. Going by the current trends, there is going to be higher demand for paper and paperboards, which in turn, requires additional natural resources. This needs to be wisely balanced and TNPL has already implemented backward the integration to meet the raw material requirement by enhancing the farm forestry and captive plantations in the farm lands. This industry-farmer partnership has created a win-win situation as the arrangement has yielded positive results for both the farmer and industry. By implementing the backward integration, the company established high yielding clonal pulpwood plantations in an extent of 22,495 acres involving 5359 farmers. In this successful pathway of plantation establishment, the company supported 45738 farmers to raise pulpwood plantation extent of 2,33,774 acres in the last 19 years These approaches help to contribute the Sustainable Development Goals (SDGs).

Forest Stewardship Council (FSC) certificate

In order to ensure the protection of natural forests and sustainable use of forest resources, the company aim for 100% use of certified material or material procured are legally verified through reputed global agencies. The company completed the Forest Stewardship Council audit in November 2022 and achieved dual- certification i.e., FSC Forest management (FSC FM) and FSC Chain of Custody (FSC CoC) as part of our commitment to continuous improvement and the environmental care. The certification provided third party assurance that our Plantation and operations are managed responsibly to deliver social, environmental and economic benefits now and into the future. FSC certification for Plantations initiate improvement in forest management practices and leads to sound environment protection measures, socially beneficial and economically viable plantation. R&D team was involved as the central focus point during the Annual Audit conducted for Forest Stewardship Council – Chain of Custody Certification and Controlled Wood with certification body M/s. Nepcon Preferred by Nature.

ISO 9001 & 14001 Certification

Recertification audit was conducted by the certification body M/s TUV India Private Limited in association with Research and Development team members for Quality Management system for "Design, Manufacture and Supply of Writing and Printing Paper" and TNPLs Environment Management system for "Development and Manufacture of Writing and Printing Paper" based on 2015 version. The audit was completed successfully by February 2023 and the audit team had recommended for renewing of ISO 9001 and ISO 14001 certificates of TNPL Unit I, valid till 20th February 2026.

ISO 50001 Certification

Second surveillance audit audit in the year 2022 was conducted for the ISO 50001 Energy Management system for "Design and Manufacture of Pulp and Paper" based on 2018 version by the certification body M/s TUV India Private Limited in association with Research and Development team members.

The audit was completed successfully by February 2023 and the audit team had recommended for the maintenance of ISO 50001 certificates in TNPL Unit I.

Water Management

TNPL sources water from the river Cauvery for both the units. TNPL has installed a series of rain water harvesting structures in the factory campus. Various measures are being initiated to conserve water, both in technology and with process improvement measurers .With the implementation of various water conservation measures, the overall water consumption is reduced to 30 KL per ton of paper- the lowest in the Industry.

Energy Management

TNPL Unit - I has four power boilers and four Turbo-Generators with generation capacity of 103.62 MW. TNPL is 100% self-sufficient in power. Surplus power is exported.

TNPL Unit - II has two power boilers and one Turbo generator with generation capacity of 50 MW. TNPL is 100% self-sufficient in power. Surplus power is exported.

Marketing Management

The increasing use of electronic media for communication and learning is leading to a slowdown in the growth of paper consumption for Writing and Printing Paper. Covid-19 has unleashed major changes like – work from home and distance learning. Some of these changes are irreversible and are going to impact the usage of paper going forward. However, with a large and growing young population, the need for textbooks and notebooks is expected to continue. Consumption growth rates in this segment will slow down. The company is focusing on industrial usages of paper and further diversifying the product mix. Efforts are being put to improve quality and optimize costs. The company is working towards strengthening the dealer network by appointing dealers in unrepresented markets and also reinforcing the dealer network in existing markets. Better credit control measures are being put in place and IT is being leveraged to provide better and faster inputs to the distribution network.

Excellence in Corporate Governance

The Institute of Company Secretaries of India (ICSI), New Delhi, conferred on TNPL, the "ICSI National Award for Excellence in Corporate Governance" for the year 2004 recognizing the companys adoption of effective management practices, compliance with law, adherence to ethical standards, distribution of wealth and discharge of social responsibility for the benefit of all stakeholders.

V. RESOURCES & LIQUIDITY

TNPL funded the expansion project and all other Projects through appropriate mix of internal generation and borrowed funds. TNPL has repaid loans on due dates.

Term loans outstanding as on 31.3.2023 is Rs. 1373.43 Crore. The working capital loans outstanding as on 31.3.2023 is Rs. 487.38 Crore. The weighted average cost of loan outstanding as on 31.3.2023 is 7.74%.

VI. OUTLOOK, OPPORTUNITIES AND CHALLENGES

Having successfully overcome the Challenges Posed by The Covid-19 Pandemic, the last year was an unprecedented year for Indian and the Global Economy. Paper Industry, being closely linked with the economy has had an unprecedented year too.

The entire paper Industry benefited from the release of pent up demand, post COVID-19. The company could achieve Zero Stocks of paper at Unit- I, for the second consecutive year and carry minimum inventory of Board at Unit- II. The year was good for the Writing & Printing segment of the Paper Industry, with demand continuing to be strong through out the year. However, demand has slowed down for both printing & writing and packaging segment of the Paper Industry in the current year. The new pulp mill was commissioned in the 1st quarter of the year giving the much needed relief in terms of self-sufficiency for the hardwood fiber at the Packaging board Unit. This led us to shift to making 100% virgin grade during the year, with focus on the fast – growing high value added cup stock segment, which uses more of our home hardwood pulp. Educational demand of paper is cyclic which leads to periods of low demand and very high demand. Since customer demands are specific made to order sizes and additionally demand forecasting is poor, a lot of inventory accumulation and price corrections happen during the lean periods. Considering this typical nature of the market, your company has started to increase its focus towards industrial uses of paper which will ensure that there is a more uniform off-take of paper during the entire year. The Company has developed certain grades of industrial papers like sublimation papers, Cup Stocks and papers for offline coating applications to ensure greater regularity of demand. Increased focus is being put to ensure higher penetration in these segments. Efforts are also on to improve the sales realisations of different varieties of paper made by the company by optimizing the product and locational mix. Regular evaluation of the distribution network and appointment of new distributors is being done. Increased focus is being laid on greater financial discipline and control measures as well as timely collection of receivables. On an overall basis the year ended on an optimistic note. Demand in the Printing & Writing segment has slowed down in the current year. Supplies from Imports are aplenty. This points to the next year being a subdued one. However, startup of the new pulp mill will help to enrich the product mix and to optimise cost.

Per capita consumption of paper is low in India, in comparison to the world average. Even if there is an slight uptic in the per captia consumption of the paper in India, the growth for paper and packaging board is expected to be good. With greater focus on "Make in India" we expect exports of paper and converted paper products to be robust in future. A strong and robust domestic demand coupled with strategic exports of both paper and converted paper products augers well for the Indian Paper industry. The company is well positioned to take full advantage of this bright future outlook.

RISKS AND CONCERNS

Risks and uncertainties are an inherent part of every business, and yet it is important to identify the risks and take proactive steps to mitigate them. At periodical intervals TNPL identifies and evaluates risks and takes preventive measures. Risk management is a part of the Companys business planning and controlling process.

Depending on the dynamics and severity, risks are categorized functions wise and classified further as High Risk, Medium Risk and Low risk.

VIII. HUMAN RESOURCES DEVELOPMENT

1. TRAINING AND DEVELOPMENT

Training programmes of TNPL facilitates the employees on their career growth, interpersonal relationships, to meet individual and organizational objectives and to face the challenges of changing business environment and to their personal growth also. In the year 2022-23, 98 training programmes were conducted on various topics by covering 2042 mandays. Training Section of HR Department has Alfresco Portal wherein, the training details (in-house training programme circulars, external training materials received from organizers / participants on various topics) are being uploaded for the benefit of employees in order to go through the same. This access helps the employees, who have not attended the programme to update their knowledge, skill, etc., which is an intangible benefit.

In addition, the employees, who attended external programmes, are taking classes for other employees in their respective departments, thereby imparting knowledge of latest technical skills /technology updation. Alike, hard copies of the training materials received from such external training programmes are being placed in Technical Library to facilitate easy access to other employees and get benefit out of the same.

Further, in line with the Managements vision to fulfil the objective of achieving ‘Manufacturing Excellence and ‘Orientation Programme for newly joined employees, interactive sessions are being conducted by the HODs of various departments.

As part of developing skill and improving the employability of the youth, every year, TNPL engages Graduate/Diploma/Sandwich Course (SIT students) Apprentices as per the guidance of the Board of Apprenticeship Training, Chennai and ITI Apprentices as per the guidance of Assistant Director of Training and District Skill Training Offices, Karur/Trichy under the Apprentices Act, 1961.

2. EMPLOYEE/ INDUSTRIAL RELATIONS

TNPL continues to ensure an equitous, safe and secure environment for employees to work with dignity and to have healthy employee relations, thereby paving way for better productivity. Positive work culture built over the years has enabled the company to harness its human resources to the full potential. TNPL is proud to exude that there is no industrial unrest despite of having many Trade Unions. In spite of severe competition, enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the industry.

Since inception, TNPL is committed to provide the basis for sustainable development by upholding ethical practice and promoting the economic and social aspirations of all citizens in the surrounding area to maintain cordial and healthy industrial relations that strike a balance between organisations purpose and business needs and the bottom line work force.

Ix Corporate Social Responsibility (CSR)

TNPLs CSR activities are implemented mostly in the villages / Town Panchayats located in the vicinity of TNPL plants. CSR in TNPL is considered and taken as Personal Social Responsibility. Voluntarily employees come forward for carrying out several

CSR initiatives. TNPL is committed to help the inhabitants of the surrounding villages by improving infrastructure facilities in Government Schools / Government Hospitals, Providing medical equipments to local Primary Health Centre (PHC), Constructing community hall, supplying drinking water to the local villages, de-silting strengthening of bunds, laying and improving roads, Constructing passenger sheds, culverts, providing street light facilities, Development of greeneries, Conducting medical camps, Conducting skill development training programmes in association with nationalized banks, Providing financial assistance under medical assistance / education assistance, Contributing for Cultural programmes, Conducting Sports activities and for renovation of places of worship like Temple, Church, Mosque, etc., This has paved the way for congenial atmosphere with the inhabitants living in the local areas.

2% of the average profit before tax of the previous three years is spent generally by TNPL for various CSR activities covering Education, Health Care, Community Development & Infrastructure Development, Environment & Soil Quality and Culture & Heritage. During 2022-23, TNPL has spent Rs. 2.04 Crores towards CSR activities.

As required in the Companies Act, 2013,"Corporate Social Responsibility Committee" consisting of four Independent Directors is functioning in TNPL.

DISCUSSION ON FINANCIAL PERFORMANCE AND OPERATIONAL PERFORMANCE

Particulars	UOM	2022-23	2021-22
Production (Paper & Board)	MT	588828	572651
Sales (Paper & Board)	MT	588150	622556
Profit Before Interest, Sepreciation & Tax	Rs. in Cr	1048.02	407.13
Finance Cost	Rs. in Cr	181.66	156.42
Depreciation	Rs. in Cr	263.60	228.68
Profit Before Tax	Rs. in Cr	602.76	22.03
Profit After Tax	Rs. in Cr	387.87	14.33

KEY FINANCIAL RATIOS

The Management has reviewed the changes in key financial ratios and noted significant changes in all the ratios as given below:

Particulars	UOM	2022-23	2021-22	% change Inc / Dec	Remarks
Revenue from Operation	Rs Cr	5179.89	4020.29	28.84%	Increase in Turnover due to higher sales realisation
EBIDTA Margin	%	20.23%	10.13%	99.80%	Increase in Turnover due to higher sales realisation
Operating Profit Margin (EBIT)	%	15.14%	4.44%	241.20%	Increase in EBIT due to higher sales realisation
Net Profit Magin (PAT)	%	7.49%	0.36%	1980.56%	Increase in Net Sales due to higher volume & higher sales realisation in Paper
Interest cover ratio (All Loans)	times	5.77	2.60	121.65%	Increase in gross profit and charges reductioninfinancial
Debt Equity Ratio	"	0.71	1.16	-38.79%	Reduction in Long-term debt and increase in equity due to increase retained earnings
Current ratio	"	0.68	0.53	28.77%	Increase in Stock of finished Goods & Trade Receivables
Debtors Turnover	"	17.63	12.66	39.26%	Increase in Net Sales due to higher volume & higher realisation in Paper
Inventory Turnover	"	7.39	7.18	2.95%	Not applicable
Return on Net Worth	%	21.96%	0.90%	2340.00%	Increase in Net Profit due to higher sales & higher contribution