a. Borrowings secured against current assets
The Quarterly returns or statements of current assets filed by the Company with Banks or financial statements are in agreement with the books of account.
i) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other persons or entities, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities Identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
ii) No funds have been received by the company from any persons or entities, including foreign entities (“funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
Year ended 31-03-2024 ' crores
Year ended 31-03-2023 ' crores
35 CONTINGENT LIABILITIES AND COMMITMENTS a. Contingent Liabilities
Claims against the company not acknowledged as debts: (i) Demands for various years relating to Central excise, Customs duty, Service tax, VAT and GST contested in appeal (Refer Note -1 given below)
7.05
7.44
(ii) Differential duty on Coal imported and consequent penalty contested before CESTAT, Chennai
21.64
(iii) Demand by Public Works department based on Sanctioned quantity of water as against actual water drawn contested in writ petition before Hon'ble High Court of Madras.
29.49
27.29
(iv) Demand towards energy charges (Start-up Power) as per TNERC order contested in writ petition before Hon'ble High Court of Madras.
4.63
(v) Partial Disallowance of the claim w.r. to Arm's Length Price and consequent disallowance under Section 80IA of the Income Tax Act, 1961 - contested / estimated
11.72
15.01
(vi) Demand raised by GST and Central Excise Department - 5 years Audit observations on Input tax credit disputed, Applicability of RCM on Import of Service and Dispute on GST on Canteen Services
8.13
(vii) Other - Demand contested.
0.18
b. Commitments
(i) Estimated amount of contracts remaining to be executed on capital account and not provided for
43.13
3.19
Note - 1 - Includes the following :
a) Alleged Irregular Availment of CENVAT Credit of CVD on Import Coal; matter pending before CESTAT, Chennai
5.11
b) Disputed Service Tax Credit b/fd into GST Tran -1 Credit; Fresh demand raised by GST Authorities post settlement under Sabkha Viswas Scheme; matter pending before Hon'ble High Court of Madras.
1.29
c) DEPB licences purchased and utilised were disallowed; matter pending before CESTAT, Chennai
0.37
d) Others
0.28
0.67
* Investments in these equity shares are not held for trading. Upon the application of Ind AS 109-Financial instruments, the Company has chosen to measure these investments in equity instruments at FVTOCI irrevocably as the management believes that presenting fair value gains and losses relating to these Investments in the Profit or Loss may not be indicative of the performance of the Company.
1. The fair value of quoted investment in quoted equity shares measured at quoted price.
2. In case of trade receivables, cash and cash equivalents, trade payables, short term borrowings and other financial assets and liabilities it is assessed that the fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.
3. The fair values of the financial assets and financial liabilities included above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counter parties.
The Company’s operational activities expose to various financial risks i.e. market risk, credit risk and risk of liquidity. The Company realises that risks are inherent and integral aspect of any business. The primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The Company’s financial assets comprise mainly of cash and cash equivalents, other balances with banks, trade receivables, other receivables and investments.
The Company has financial risk exposure in the form of market risk, credit risk and liquidity risk. The risk management policies of the Company are monitored by the Risk Management Committee of the Board of Directors. The present disclosure made by the Company summarizes the exposure to the financial risks.
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Regular interaction with bankers, intermediaries and the market participants help us to mitigate such risk.
The risk is that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s financial liabilities comprise mainly of trade payables and other payables. The Company has NIL Term Loan Borrowings from Banks / any Financial Institutions as on March 31,2024 and has working capital borrowings only to the extent of ' 21.0 crores availed in the form of Export Packing Credit, which is significantly less than the total Cash and Bank balances of ' 747 crores as on March 31,2024. Hence the Company doesn’t have any financial liability and allied risk on this account. The Company has not entered into any of the interest rate swaps.
The Company is however exposed to the risk of interest rate fluctuations on the rate of return on fixed deposits of ' 721.72 crores as on 31.03.2024 (excluding accrued interest), maintained by the company with State Bank of India (SBI), HDFC Bank Limited and Kotak Mahindra Bank (Fixed Deposit balance as at 31.03.2023 - ' 519.90 crores).
* The working capital availment of ' 21.0 crores in the form of Export Packing Credit outstanding only for 33 days in FY 2023-24.
The Company’s investment in fixed deposit with banks is only on Fixed Interest Rate Terms and hence, there is no exposure to future interest rate movement.
The Company imports coal, pulp, waste paper and other stores & spares for which payables are denominated in foreign currency. The Company is exposed to foreign currency risk on these transactions. The Company, in general, follows a conservative and sound policy by entering into simple Forward Exchange Contracts to hedge the foreign currency risk whose maturity is coterminous with the maturity period of the foreign currency liabilities (underlying). The Company had Foreign Exchange liability for US $ 9.67 Mn as on 31st March 2024 (Previous
Year - US $ 11.87 Mn) of which US $ 0.70 Mn (Previous Year -US $ 1.85 Mn) is hedged with forward contracts, leaving US $ 8.97 Mn (Previous Year -US $ 10.02 Mn) as unhedged.
The Company is also exposed to foreign currency risk on its Exports. As on March 31,2024, the Company had Export Receivables in Foreign Currency amounting to US $ 2.74 Mn. (Previous Year -US $ 2.91Mn), of which US $ 0.5 Mn (Previous Year -US $ 1.95 Mn) is hedged with forward contracts on cash flow basis.
The Company is exposed to the movement in price of key input materials in domestic and international markets. The Company has in place policies to manage exposure to fluctuations in the prices of the key raw materials used in operations. The Company manages fluctuations in raw material price through hedging in the form of advance procurement when the prices are perceived to be low, in order to keep raw material prices under check, to the extent possible.
Other price risk is the risk that the fair value of a financial instruments will fluctuate due to changes in market traded prices. The Company’s equity investment in its subsidiary and associate is for strategic purposes and not held for trading. They are carried at cost and are hence not subjected to price related risk. Other investments in equity instruments are held with a view to hold them for a long-term basis and not held for trading. The investments are in fundamentally strong companies and temporary fluctuations in price do not attribute any investment risk. (Refer Note No.3 for details on Investments)
The Company faces competition from local and foreign competitors. Nevertheless, it believes that it has competitive advantage in terms of the wide spread of product offerings, good quality products and continuous upgrading its expertise to meet the needs of its customers.
The credit risk refers to risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, other balances with banks and other receivables.
The credit risk arising from the exposure of investing in other balances with banks and bank balances is limited and there is no collateral held against these because the counter parties are public sector banks / AAA rated private sector banks.
The Company sells its products through appointed indentors. The Company has established a credit policy under which every indentor is analysed individually for creditworthiness. Each indentor places security deposit in the Company, based on the quota allocated to him. Though the invoices are raised on the individual customer, the indentor is responsible for the collection and in case of default by the customer, the dues from the customer are withheld / adjusted against the payables to indentor. Over 13% of the receivables as on 31.03.2024 (Previous Year 32%) is covered by the credits available with the Company against indentors account. The balance receivables are insured with Trade Credit Insurance programs offered by a premier Indian Insurance Company. Thus, the credit risk is mitigated in full.
Exports are, in general, made against advances received or terms with payment against documents. The Company has also covered the residual risk with a credit insurance from a premier Indian Insurance Company. Hence, the credit risk in respect of its exports is fully covered.
For trade receivables, as a practical expedient, the Company computes the credit loss allowance if there is life-time expected credit losses.
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly to meet obligations when due. The Company’s exposure to liquidity risk arises primarily from mismatches of maturities of financial assets and liabilities.
The Company manages the liquidity risk by (i) maintaining adequate and sufficient cash and cash equivalents including investments in fixed deposits with banks (ii) making available the funds from realizing timely maturities of financial assets to meet the obligations when due. The management monitors rolling forecast of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. Also, the Company manages the liquidity risk by projecting cash flows considering the level of liquid assets necessary to meet the obligations by matching the maturity profiles of financial assets and financial liabilities and monitoring balance sheet liquidity ratios. Further, the liquidity risk management involves matching the maturity profiles of financial assets and financial liabilities.
The Company makes an annual / long term financial plan so as to ensure there are no maturity mismatches in settlement of liabilities.
Working Capital borrowing facilities (' 25 crores and ' 36 crores of Fund Based Limits sanctioned by HDFC and State Bank of India respectively; ' 25 crores and ' 31 crores of Non-Fund Based Limits sanctioned by HDFC and State Bank of India respectively ) secured by :
- Hypothecation of stocks of Raw Materials, Stores, Spares, Chemicals and others, including Goods-in-Transit, Stock-in-Trade, Stock-in-Process, Finished Goods and Book Debts of the Company
- Second charge, by way of hypothecation of movable fixed assets of the Company, consisting of plant and machinery, fixtures and fittings.
The Company is not a Large Corporate as per the applicability criteria given under the Chapter XII of SEBI Operational Circular SEBI/HO/DDHS/P/CIR/2021/613 dated August 10, 2021 (as updated on 13th April 2022).
ii) The table below summarises the maturity profile for the remaining contractual maturity period at the Balance Sheet date for its non-derivative financial assets and liabilities-
The Company adheres to a cautious capital management that seeks to trigger growth creation and maximization of shareholders’ value. For the purpose of the Company’s capital management, capital includes issued capital and all other equity reserves attributable to the shareholders of the Company. The Company has been funding its growth and acquisition plans and working capital requirements through a balanced approach of internal accruals and external debt from banks. The Company monitors the capital structure on the basis of net debt to equity ratio and maturity profile of the overall debt component of the Company.
The Board of directors at its meeting held on 27th April 2024 have recommended a payment of dividend of ' 5.00 per equity share of face value of ' 2 each for the financial year ended 31st March 2024. The same amounts to ' 31.53 crores.
(i) Defined Contribution Plans:
The Company makes Provident Fund and Superannuation Fund contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised ' 5.90 crores (Year ended March 31, 2023 ' 5.91 crores) for Provident Fund contributions and ' 0.28 crores (Year ended March 31,2023'0.22 crores) for Superannuation Fund contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
In respect of Gratuity, the most recent actuarial valuation of the plan assets and in respect of Gratuity and Retirement benefit Scheme the present value of the defined benefit obligation were carried out by actuarial valuation. The present value of the defined benefit obligation and the related current service cost and past service cost, were measured using the projected unit cost method. The following table sets forth the status of the Gratuity Plan and the Retirement benefit Scheme of the Company and the amount recognised in the Balance Sheet and Statement of Profit and Loss. The Company provides the gratuity benefit through annual contributions to the funds managed by the Life Insurance Corporation of India.
The Company is exposed to various risks in providing the above gratuity benefit and Leave encashment which are as follows:
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future, based on past experience. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan’s liability.
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out adverse compared to the assumptions.
The Company pays contributions to the insurer as determined by them. The insurance company has invested the plan assets in Government Securities, Debt Funds, Equity shares, Mutual Funds and Money Market Instruments. The expected rate of return on plan assets based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligation. Significant actuarial assumptions for the determination of the defined benefit obligation are as discussed above.
Sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.
The Company has purchased insurance policy, which is basically a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance Company, as part of the policy rules, makes payment of all gratuity outgoes happening during the year (subject to sufficiency of funds under the policy). The policy, thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in a increase in liability without corresponding increase in the asset).
The Company’s best estimate of the contribution expected to be paid to the plan during the next year is ' 4.50 crores ( Previous year Actual ' 1.14 crores).
The Managing Director of the Company has been identified as the Chief Operating Decision Maker. The CODM has considered only Paper as the operating segment as defined under Ind AS 108. The Company’s operations primarily relate to Sale of Paper and Paper Boards.
The Assets and Liabilities of the Company can not be identified to a specific segment since they are common in nature to all the reported segments.
The financial statements were approved for issue by the Board of Directors at their meeting held on 27th April 2024.