Annual Report 2019
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CONTENTS BOARD OF COMPANY CHAIRMAN'S 02DIRECTORS 03INforMatioN 04LETTER MANAGEMENT CORPORATE BOARD'S DISCUSSION & GOVERNANCE REPORT 06ANALYSIS 12 22 INDEPENDENT BALANCE STATEMENT OF AUDITORS’ SHEET PROFIT AND LOSS 40REPORT 48 49 STATEMENT OF STATEMENT OF SIGNIFICANT CASH FLOWS CHANGES IN ACCOUNTING EQUITY POLICIES AND 50 51 52NOTES TO FINANCIAL STATEMENTS CONSOLIDATED FINANCIALS 99 1 BOARD OF DIRECTORS B. HARIHARAN Chairman & Executive Director R. R. VEDERAH Vice Chairman GautaM THAPAR A. P. SINGH KRISHAN VARMA Payal Chawla (Ms.) 2 BOARD OF DIRECTORS ANNUAL REPORT 2018-19 COMPANY INFORMATION Registered OFFICE P.O. Ballarpur Paper Mills – 442901, District Chandrapur, Maharashtra Head OFFICE First India Place, Tower-C, Block-A, Sushant Lok I, Mehrauli Gurgaon Road, Gurugram – 122002 Auditors Sharp & Tannan Chartered Accountants Parsn Manere, A-Wing, 602, Anna Salai, Chennai - 600006 LISTING ON STOCK EXCHANGES The Equity Shares of the Company are listed on the following Stock Exchanges: NatioNAL Stock EXCHANGE OF INDIA LIMITED Exchange Plaza, Plot No. C-1, G Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400051 BSE LIMITED Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai – 400001 COMPANY INFORMATION 3 ANNUAL REPORT 2018-19 CHAIRMAN'S LETTER Dear Shareholder, However, it is important to note that paper production is highly capital intensive and Across the globe, certain factors are investments are lumpy in nature. providing a growth impetus to the global paper industry, while others are holding it In the last five years, there have been back. Broadly speaking, the industry is being consistent investments by leading players strengthened by increasing e-commerce in the industry, and over ` 20,000 crore demand for cardboard as packaging has been spent on capacity addition. This material, new market opportunities thanks investment drive has brought in a sudden to increasing demand from the growing spurt of new capacity well in excess of middle class in emerging markets, as well the annual increase in domestic demand. as increasing demand for hygiene products. Consequently, capacity utilisation of much Equally, however, the industry is facing of the new equipment invested has been headwinds from feedstock cost sensitivity, economically unviable. high investment costs to sustain future growth, and competition of plastics with Though most companies, including BILT, had cardboard in certain aspects of packaging. estimated a gestation period while planning Not surprisingly, therefore, global paper their investments, the fact is that this period demand is estimated to be growing at a low has been longer than initially expected. but steady rate of around 2% to 3% per year. For one, while rate of growth of paper demand in India exceeds that of the world Thankfully for us, India is a fast growing as a whole, this demand growth has been market. The domestic market of paper is slower than expected. Second, with global over 16 million tonnes per annum (TPA), excess capacities, there have been increased with over 2 million TPA being imported. imports into India — which has significantly By 2024-25, under the baseline scenario, reduced prices of certain grades of paper, domestic consumption is projected to rise to especially in the value added segments like 23.5 million TPA. If the industry gets the right coated paper, where BILT is a major player. impetus, the optimistic forecast by the Indian Paper Manufacturers’ Association estimates This business scenario has put severe paper consumption in India to increase to financial pressure on companies like BILT 36.90 million TPA by 2024-25. Even as I pen which had made sustained investments in this letter, about 1 million TPA of integrated capacity and technology. Consequently, pulp, paper and paperboard capacity has to we had to recalibrate our business plans be created in India on an annual basis over internalizing a much longer gestation period several years to meet the growing demand. for these new investments. As a result, your 4 BALLARPUR INDUSTRIES LIMITED ANNUAL REPORT 2018-19 Company had to go through a very difficult is particularly impressive as it is after Operations at Sabah Forest Industries (SFI) phase over the last couple of years. There accounting for the losses incurred in have been affected for the last couple of was considerable stress on our ability to some of the other facilities and entities years. The Company had already decided service financial obligations; and inadequate that are yet to be revived. on exiting the business and was in talks working capital prompted severe curtailing with interested investors. However, with a of business operations. • Finance cost reduced by 8% for the changed political environment in the region, consolidated entity. the progress on arriving at a solution for Thankfully, FY2019 has been different — SFI is taking longer than expected. We are, • All these efforts contributed to a and one that I dare say was a watershed however, confident that the new government reduction in net losses before exceptional year for your Company’s revival roadmap. will appreciate and understand our stance items, tax and discontinued operations Operationally, BILT is back on track on on the subject after they get the requisite from ` 840 crore in FY2018 to ` 433 a new growth trajectory. It has already time to study the business condition. demonstrated its abilities to meet obligations crore in FY2019. After accounting for all of the restructured financial plans for its other factors, total net losses for FY2019 During the entire difficult phase of principal entity. And the management is was ` 1,071 crore — which represents a restructuring the business and positioning confident of finalising restructuring plans 47.4% reduction over FY2018. it back on a growth trajectory, our human with our financial partners for some of the resource function and senior management Thus, your Company has continued on other step-down subsidiaries in FY2020. worked very hard in being able to the revival path initiated in FY2018 and successfully retain most of our talent. My operational performance has improved Let’s look at the highlights of the Company’s thanks to them. consolidated performance in FY2019: significantly. My thanks, too, to our sales and distribution While the emphasis on running the • Even with working capital constraints at partners, suppliers and vendors who have operational unit more efficiently and driving both our principal facilities — Ballarpur stuck with us during these difficult times. and Bhigwan — we increased production profitable growth remain the paramount to service the market. At Bhigwan, the objectives, there are some critical issues that I assure all of them that we are now well on production growth was a significant your Company has been actively working on the path of profitable growth. 81%, which has brought the scale of resolving. operations back on track. At Ballarpur, Finally, Mr Gautam Thapar, our Chairman In the early part of FY2018, there were too, there has been around 5% growth. and Chief Executive over the last decade and issues with the lenders of BGPPL and the Consequently, revenue from operations a half, stepped down from his office on 31 entity was advised to be taken to NCLT. has increased by 45% to ` 3,643 crore in March 2019. He continues to be on the Board Subsequently, after obtaining a stay, it FY2019. of your Company. I take this opportunity to finalised a restructuring package for this thank him for being the Chairman of the • Concerted efforts at improvements entity with the financial creditors; and Board at BILT for all these years, and look in operating efficiencies continued BGPPL has already started servicing its debt forward to his regular advice and guidance. unabated across the facilities. as per the restructured package. In addition, there were several I want to thank all the banks and financial The Kamalapuram pulp mill has been shut improvements brought about in existing intermediaries who continue to support our since FY2014. There have been several efforts products; and new products added to business. And to you, our shareholder, my to revive this entity, including introduction provide value addition and enhance gratitude for continuing to repose faith in of an outside investor. The Government of the average realisations. As a result, BILT. The worst is behind us, and we will walk Telangana has been supportive in revival operating margins before exceptional together on the next stage of prosperity for efforts and agreed to provide ` 45 crore items (EBIDTA) increased from 14% in your Company. subsidy every year for a period of seven FY2018 to 18.5% in FY2019. years. The banks are now finalising a Yours sincerely, • The topline growth with improved restructuring package in line with what was operating margins has translated into accepted for BGPPL. And BILT has also made operating profits before exceptional commitments to make an investment in this items (EBIDTA) for the consolidated plant. We expect a clear path to emerge entity almost doubling to ` 676 crore in in the first half of FY2020, with the facility B Hariharan FY2019 compared to the last year. This focusing on paper grade pulp. Chairman & Executive Director CHAIRMAN'S LETTER 5 ANNUAL REPORT 2018-19 MANAGEMENT DISCUSSION & ANALYSIS INTRODUCTION Paper is a capital intensive industry and BILT has always focused on catering to the market Today, BILT’S business operates through two with a portfolio of products that is of the separate groups of subsidiaries and joint highest quality and produced by adopting venture: one under the flagship entity BILT, newer technologies. and the other under its step-down subsidiary BILT Paper. In line with market requirements, the Company had in the recent past made a Under the standalone entity, BILT, the direct series of major investments to augment and assets include: modernise capacity. Unfortunately, actual • The speciality paper business, operating market demand growth was slower than from the Shree Gopal facility in Haryana.