Auditors' Report
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contents 02 04 board of directors consolidated highlights 06 10 chairman’s letter management discussion & analysis 22 30 corporate social corporate governance responsibility 39 48 directors’ report auditors’ report financials 52 53 balance sheet profit & loss account 54 55 cash flow statement schedules 74 77 balance sheet abstract consolidated accounts board of directors GAUTAM THAPAR Chairman R. R. VEDERAH Managing Director & Executive Vice Chairman B. HARIHARAN Group Director (Finance) R. K. AHOOJA SANJAY LABROO A. S. DULAT ASHISH GUHA DR. PRAMATH RAJ SINHA A. P. SINGH Nominee of LIC 2 BALLARPUR INDUSTRIES LIMITED | ANNUAL REPORT 2010–11 company information listing on stock exchanges REGISTERED OFFICE The Equity Shares of the Company P. O. Ballarpur Paper Mills-442 901, are listed on the following Stock District Chandrapur, Maharashtra Exchanges: HEAD OFFICE BOMBAY STOCK EXCHANGE LIMITED Thapar House, 124 Janpath, Phiroze Jeejeebhoy Towers, New Delhi-110 001 Dalal Street, Mumbai-400 001 OPERATING OFFICE NATIONAL STOCK EXCHANGE OF First India Place, Tower-C, Block-A, INDIA LIMITED Sushant Lok-I,Mehrauli-Gurgaon Road, Exchange Plaza, Plot No. C-1, Gurgaon-122 002 G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400 051 AUDITORS K.K. Mankeshwar & Co., Chartered Accountants Kingsway, Nagpur-440 001 COMPANY INFORMATION 3 consolidated highlights 2010-2011 Financials Awards & Certifications NET SALES UNIT BALLARPUR Increased by 18.5 per cent from Lime Sludge Greening Project rated Rs. 3794.6 crore in 2009-10 to as “Innovative Environmental Project” Rs. 4498.1 crore in 2010-11. by Confederation of Indian Industry, Hyderabad. PAPER PRODUCTION Environmental Best Practice Award Increased by 6.2 per cent from by Confederation of Indian Industry 796,718 MTPA in 2009-10 to 846,230 GBC, Hyderabad. MTPA in 2010-11. UNIT BHIGWAN OPERATING PROFIT (PBDIT) Good Green Governance (G3) Award Increased by 6.9 per cent from from Srushti Publications, New Delhi. Rs. 818.4 crore in 2009-10 to Greentech Safety Gold Award from Rs. 875.0 crore in 2010-11. Greentech Foundation, New Delhi. National Award for Prevention of PROFIT AFTER TAX (PAT) Pollution from Ministry of Environment Increased by 10.7 per cent from and Forests, Government of India. Rs. 240.4 crore in 2009-10 to Rs.266.1 Pulp and Paper International Award crore in 2010-11. for efficiency improvement from RISI. DILUTED EPS UNIT KAMALAPURAM Increased from Rs. 3.11 in 2009-10 to Integrated Management System Rs. 3.23 in 2010-11. Certification i.e ISO-9001:2008, ISO-14001 and OHSAS-18001. UNIT ASHTI Forest Stewardship Council Chain of Custody Certification. 4 BALLARPUR INDUSTRIES LIMITED | ANNUAL REPORT 2010–11 PAPER PRODUCTION (IN MT) NET SALES (IN RS CRORE) DILUTED EPS (IN RS) CAGR CAGR 14.24 18.03 PER CENT PER CENT 4.76 4498.1 796,718 846,230 3794.6 3.11 3.23 604,731 599,929 2.81 2.72 2831.1 2824.7 496,847 2317.8 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 PBDIT (IN RS CRORE) DEBT EQUITY RATIO PAT (IN RS CRORE) CAGR 10.57 PER CENT 1.7 303.6 875.0 818.4 1.4 266.1 255.1 1.3 714.7 240.4 655.8 585.5 1.1 187.9 0.7 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 CONSOLIDATED HIGHLIGHTS 5 chairman’s letter DEAR SHAREHOLD ER Global economic developments between July 2010 and June 2011, which is your Company’s financial reporting year 2010-11, have shown both positive and negative tendencies. On the plus side, most developing economies are back on to their growth momentum, although the rates of growth are lower than the pre-crisis days. The negative clearly is the imperceptibly slow improvement of the US economy and the increasingly serious fiscal crisis in the Eurozone, especially in Greece, Italy, Spain, Portugal and Ireland, which threatens the long term existence of the Euro. 6 BALLARPUR INDUSTRIES LIMITED | ANNUAL REPORT 2010–11 INDEED, AS I WRITE this letter to you, global Let me move on to your Company’s analysts are fearing a double-dip for the US performance. As you know, BILT’s business and lower growth for Western Europe. strategy primarily focuses on addressing The one fact that stands The one fact that stands out is that the the Indian market and markets in emerging out is that the emerging emerging economies and Asia are back to economies, especially in Asia where there economies and Asia solid growth rates. In calendar year 2010, is sufficient growth and strong domestic are back to solid growth these countries grew by 7.4 per cent and demand. rates. In calendar year were the principal engine of global growth. In 2010-11, BILT remained steadfast in its The majority of these countries either have pursuit of long term strategic objectives while 2010, these countries or are close to having regained full-capacity focusing on the basics of execution. grew by 7.4 per cent levels of output. Many of them — especially and were the principal India and China — are having to deal with The highlights of your Company’s financial engine of global growth. higher inflation; and uncertainties in financial performance in 2010-11 were: markets plus higher interest rates have put NET SALES increased by 18.5 per cent to a temporary brake on major investments in Rs.4,498.1 crore. additional capacity. Even so, the fact is that PBDIT (Profit before depreciation, interest China is growing at over 9 per cent; India at and tax) grew by 6.9 per cent to Rs.875 over 7.5 per cent; and Indonesia at 6.5 per crore. cent. These rates compare very well with the PAT (Profit after tax) after minority interest US growing at 1 per cent and the Eurozone at and share in associate companies rose by 0.7 per cent. 8 per cent to Rs.212.7 crore. CHairman’s LETTER 7 There are three broad facets to your is expected to be commissioned at Ballarpur Company’s performance that I must share by June 2012. With these expansions, BILT Apart from these with you. will have largely integrated pulp and paper developments, it is First, in a competitive market environment, operations, which should insulate your also important to note BILT succeeded in raising sales volumes, Company’s operations from sharp rises in which was the principal driver of growth. market price of pulp. that your Company Operationally, this was possible through I expect the management to get back to is growing in terms of efficient management of the supply chain, higher EBIDTA margins after the additional its asset base. Pulp greater utilisation of new capacities that came pulp capacities come into play. and paper are capital on-stream in the last couple of years, as well intensive businesses as a judicious mix of product positioning Third, there was a strong performance of where investments are and distribution. Your Company’s sales the rayon grade pulp (RGP) business out of and marketing activities were planned and Kamalapuram. In an environment of supply essential to develop executed very well; and BILT’s product side constraints with growing demand, pulp optimal scale of differentiation, brand positioning, sales and prices remained firm throughout 2010-11. operations, remain distribution have been fundamental to the This included rayon grade pulp that is used cost competitive and Company’s overall growth model. in the production of viscose staple fibre. produce the appropriate On a broader perspective, your Company Your Company capitalised on the prevailing quality of products. is following a two-pronged market positioning market conditions and increased production strategy. For one, it pushes for attaining at its RGP unit at Kamalapuram in 2010-11. leadership position in its primary markets, This volume growth coupled with higher unit India and Malaysia, where it has its sales realisation translated into a 47 per cent manufacturing facilities. These are growing increase in segment revenues from the pulp economies with strong internal demand that business to Rs.504.8 crore. The growth in is fairly insulated from trends in the developed RGP profits helped to partially offset the drop world. Here, the focus is on being a trend- in margins of the core paper business. setter, and growing its business with the Apart from these developments, it is expansion of the markets. For another, BILT is also important to note that your Company utilising its competitive strength as a low cost is growing in terms of its asset base. Pulp manufacturer of quality products to grow its and paper are capital intensive businesses exports. In 2010-11, your Company exported where investments are essential to develop 14 per cent of its volumes produced in India, an optimal scale of operations, remain cost over a significantly higher base. competitive and produce the appropriate quality of products. In 2010-11 alone, the Second, EBIDTA margins were under total capital employed increased by 15 per pressure. Even after significant improvements cent to Rs.7,409 crore. This will increase in operating efficiencies, sharp increase further with the investments in the new pulp in prices of key inputs like pulp and coal facilities in Ballarpur and SFI. contributed to a 2 percentage point drop in This quantum of investments requires the PBDIT/Sales margin. July-December astute financing. So far, your Company has 2010 saw robust demand growth across been successful in optimally raising capital global economies, especially in large from various markets across the globe.