Dear Members,
 
 The Directors have pleasure in presenting the 47th Annual Report and
 the Audited Accounts for the year ended 31st March, 2011.
 
                                                        Rs. Crore
 
 Financial Results                            2010-11        2009-10
 
 Sales and other income                        798.62         658.02
 
 Earnings before Interest,
 
 Depreciation and Taxation (EBIDTA)            163.94         153.03
 
 Less: Interest                                 39.88          32.16
 
 Depreciation                                   66.97          55.82
 
 Profit before Tax                              57.09          65.05
 
 Less: Provision for Tax                        12.14          10.86
 
 Profit for the year                            44.95          54.19
 
 Add: Profit brought forward
 
 from previous year                             69.99         119.61
 
 Profit available for appropriation            114.94         173.80
 
 Appropriations
 
 Transfer to General Reserve                    50.00         100.00
 
 Proposed Equity Dividend                        3.98           3.27
 
 Corporate Tax on Dividend                       0.65           0.54
 
 Balance carried to Balance Sheet               60.31          69.99
 
                                               114.94         173.80
 
 During the year under review, your Company recorded production of
 1,87,233 MT during the year under review as against 1,76,452 MT in the
 previous year and sales of 1,93,302 MT as compared to 1,77,351 MT in
 the previous year. The increase in volumes and net sales realization
 contributed to higher sales value. EBIDTA was Rs.163.94 crore as against
 Rs.153.03 crore in the corresponding year. However, profitability was
 affected due to higher input cost, retrospective settlement of wage
 revision following an agreement with the union of Unit:APPM, higher
 depreciation cost and interest and finance charges.
 
 Change in the share capital
 
 On 2nd December, 2010, your Company allotted 70,18,242 equity shares of
 Rs.10 each for cash at a premium of Rs.40 per share aggregating to Rs.3509.12
 lakhs by converting equivalent number of Detachable Warrants.
 
 Consequently, the equity share capital has gone up from Rs.32,75,17,970
 divided into 3,27,51,797 equity shares of Rs.10 each to Rs.39,77,00,390
 divided into 3,97,70,039 equity shares of Rs.10 each. The newly issued
 equity shares have since been listed on Bombay Stock Exchange Limited
 and National Stock Exchange of India Limited.
 
 Sale of Promoter Shareholding
 
 On 1st April, 2011, a public announcement was issued by Lazard India
 Private Limited on behalf of IP Holding Asia Singapore PTE. Limited
 (Acquirer) along with International Paper Company (''Person Acting in
 Concert'' or PAC) to the equity shareholders of the Company pursuant to
 Regulations 10, 12 and other applicable provisions of Securities and
 Exchange Board of India (Substantial Acquisition of Shares and
 Takeovers) Regulations, 1997 offering to acquire 85,67,521 equity
 shares of Rs.10 each representing 21.54% of the paid-up capital of your
 Company at Rs.544.20 per share payable in cash. The public announcement
 was made consequent upon share purchase agreement dated 29th March,
 2011 entered into with the promoter group of APPM whereby the acquirer
 would purchase the entire shareholding of the promoter group in APPM.
 
 The acquirer is a private unlisted company incorporated on 15th
 September, 2010 under the laws of Singapore and is a subsidiary of IP
 International Holdings Inc., a subsidiary of International Paper
 Company. The PAC is a global paper and packaging company with
 manufacturing operations in North America, Europe, Latin America,
 Russia, Asia and North Africa.  Its businesses include uncoated papers
 and industrial and consumer packaging, complemented by xpedx, the
 company''s North American distribution company. Net sales for the
 financial year ended 31st December, 2010 were more than USD 25 billion.
 
 After acquisition of shares from the promoter group and the equity
 shareholders from the public category, the acquirer would be holding
 75% of the equity share capital of the Company.  Consequently, the
 Company would become a subsidiary of IP Holding Asia Singapore PTE.
 Limited.
 
 Dividend
 
 Your Directors are pleased to recommend a dividend of Rupee One per
 share on 3,97,70,039 Equity Shares of Rs.10 each including 70,18,242
 equity shares of Rs.10 each allotted in December, 2010 on conversion of
 detachable warrants involving an outgo of Rs.462.22 lakhs including
 Dividend Distribution Tax.
 
 Marketing and exports
 
 Sales for the year were 1,93,302 MT as compared to 1,77,351 MT in the
 previous year. In 2010-11, paper sales comprised 1,88,569 MT and sale
 of surplus pulp was 4,733 MT in comparison, paper sales in 2009-10 was
 1,52,646 MT and that of pulp was 24,705 MT. Additional quantity
 resulted from the commissioning of PM 6. However, the complete benefit
 of the expanded capacity will be derived in the financial year 2011-12.
 
 The Company managed to get a better Net Sales Realization per MT over
 the previous year partly due to better market conditions and revisions
 in the price list across all grades and partly due to change in product
 mix at Unit:CP.
 
 Export volumes were 21,669 MT as against 13,646 MT in the previous
 year. The Company was not only able to significantly increase quantity,
 but also able to substantially increase the sales realization per MT
 over the previous year as well.
 
 Raw material procurement
 
 In the field of social/farm forestry, efforts were made to increase the
 area under plantation activities in order to meet the demand of
 pulpwood in tune with the mill development plan. Concerted efforts by
 APPM have enabled to meet and over come the stiff competition in the
 catchment for pulpwood procurement.
 
 Raw material resource development
 
 103.70 million quality saplings were developed and distributed during
 the year 2010-11 covering an area of 15,000 Ha under plantation against
 development and distribution of 97 million saplings covering an extent
 of 14,000 Ha during previous 2009- 10 planting year. Research on clonal
 development has resulted into introduction of high yielding, disease
 resistant clones and versatile to a wide variety of agro-climatic
 conditions in inland and coastal areas.
 
 Research and Development initiatives with low cost planting techniques,
 quality seed material and high yielding, short rotation planting stock
 have enhanced raw material availability spread over more than 1,15,000
 Ha. These benefits are extended to around 41,000 families creating
 employment resource pool of 57 million man-days especially in rural
 areas so far.
 
 Forestry targeting marginal and wastelands
 
 The ongoing farm forestry activities focused on agrarian community of
 small and marginal land holdings which could be better utilised for
 plantations with minimal investment by adopting low cost planting
 technology. Wasteland development also geared up by introducing site
 specific superior clones.  Introduction of casuarina hybrid has come
 out with higher yield ensuring quality raw material to mills and higher
 returns to farmers.
 
 The mills farm forestry activities have helped in generating the
 pulpwood requirement to mills and also in sustaining the local needs of
 farmers by means of generating employment and upliftment of
 socio-economic conditions of the villagers and tribal communities.
 
 The industries presence in greening waste lands for raw material
 resources have created a strong network comprising tribal
 beneficiaries, self help groups, village organizations etc. to fight
 against poverty and natural disasters.
 
 Projects
 
 Unit:APPM
 
 Paper Machine # 6
 
 Erection of the second hand paper machine of capacity of 67,000 TPA,
 imported from Germany was completed and commissioned in May 2010. The
 machine has stabilized.
 
 Two numbers of sheet cutters were received along with the paper machine
 and installed in conversion unit near mill and were commissioned in
 August 2010.
 
 In addition, one number synchro duplex sheeter and A4 cutting line were
 commissioned at SN Palem facility in March 2011.
 
 Export of power
 
 Retrofit of electro static precipitators (ESP) for reduction of
 emissions and environment in improvement is completed for coal fired
 boilers No.1 to 5. Electrical front arrangements are also completed to
 export power up to 8 MW per day.
 
 Construction of D1 tower for DnD sequence
 
 Tower construction and equipment erection was completed.  Tower
 testing, equipment pre-commissioning trials were completed and
 commissioned in July 2011.
 
 Installation of a new ESP and retrofit of Recovery Boiler # 4
 
 All equipments for ESP are received at site. Erection completed and
 commissioned in April 2011. Boiler retrofit shall be carried out during
 November 2011.
 
 Modifications in Paper Machine # 5
 
 New closed hood and PV system, new state of art design steam &
 condensate system equipment, new ceramic top de-watering elements and
 new micro travel variable speed high pressure oscillating showers are
 ordered on reputed suppliers and partly received at site. The
 modifications of new closed hood & ventilation will be completed during
 November 2011. All other modifications were completed during April
 2011.
 
 Re-winders for PM # 3 and PM # 6
 
 New re-winders are being installed in PM # 6 and PM # 3 to meet the
 production requirements. The existing Jagenberg re- winder of PM # 6 is
 being retrofitted and operates at its rated speed. The existing
 re-winder of PM # 3 will be retrofitted and installed for PM # 2 to
 meet converting capacity of the machine.
 
 On-line monitoring systems for stacks, ambient air quality and waste
 water
 
 New on-line monitoring systems are installed for stacks for CF Boiler #
 1 to CF Boiler # 6 (for SPM) in July 2011. Installation of on-line
 monitoring system is in progress for both the lime kilns (for SPM & HS)
 and Recovery Boiler # 4 (for SPM & HS).  Ambient air quality monitoring
 systems (RSPM, SO2, NOx, and Methyl Mercaptans) are being installed.
 On-line monitoring systems for waste water (for total organic carbon,
 dissolved oxygen, temperature and pH) are also being installed.
 
 Unit:CP
 
 Retrofit of De-Inking Plant
 
 All the imported and indigenous equipment were received at site.
 Erection is completed and commissioned in July 2011.
 
 On-line monitoring systems for stack
 
 New on-line monitoring systems are being installed for stack of CF
 Boiler # 4 (for SPM). On-line monitoring systems for waste water (for
 total organic carbon) are being installed.
 
 Awards
 
 The Company received the following awards during the year under review:
 
 i. The Financial Express - Emergent Venture India (FE-EVI) Green
 Business Leadership Award in pulp and paper Sector for the year 2009-10
 for its commitments and continuous improvements towards environment
 protection, minimizing greenhouse gas emissions through selection of
 state-of-the-art technologies and bringing awareness about climate
 change.
 
 ii.  IPMA Environment Award 2009-10.
 
 iii. The CII Environmental Best Practices Award 2011 for its commitment
 and continuous improvements towards environment protection by
 installing high efficiency and low odour chemical recovery boiler.
 
 Corporate Social Responsibility
 
 Under CSR initiatives, during July 2010, an ambulance was donated to
 Government Hospital, Rajahmundry. A check dam was constructed
 (initiated during 2009-10) at Mamidilova Village, near Pendurthi of
 Visakhapatnam District. This has helped the villages to increase their
 land productivity, wood yield and their earnings considerably. A sum of
 ?18.07 lakhs was spent till now towards this initiative. At
 Venkatanagram village, your Company started operating and maintaining
 the reverse osmosis plant which was installed in the previous year.
 
 Your Company also initiated road development works at quarry market
 area of Rajahmundry City.
 
 Summer training facility was extended to engineering/MBA/
 ITI/polytechnic students for nearby college students. Over 300 students
 underwent such training. At Ongole Division, covering five villages,
 about 800 school bags were distributed to the poor and needy school
 going children.
 
 A number of eye camps and cataract operations, free supply of
 spectacles were organized in and around Rajahmundry. Free tailoring and
 embroidery training facilities were provided to women and youth of
 weaker section of society through APPM developed training centers. 300
 ladies underwent a six months training program, which has helped them
 to provide financial support to their respective families.
 
 Your Company also continued its support to local social-cultural-
 religious functions and sports and games events in and around
 Rajahmundry.
 
 Particulars of conservation of energy, technology absorption and
 foreign exchange earnings and outgo Particulars of conservation of
 energy, technology absorption and foreign exchange earnings and outgo
 as required under Section 217 (1) (e) of the Companies Act, 1956, read
 with the Companies (Disclosure of Particulars in Report of the Board of
 Directors) Rules, 1988, are given in the Annexure - I attached and
 forms a part of this Report.
 
 Particulars of employees
 
 The information required under Section 217 (2A) of the Companies Act,
 1956 and the rules made there under is provided in the Annexure - II
 forming part of the Report.
 
 Public deposits
 
 37 deposits totaling Rs.23.60 lakhs due for repayment on or before 31st
 March, 2011 were not claimed by the depositors as on that date.
 Deposits aggregating to Rs.22.90 lakhs were refunded upto 31st July,
 2011. During the year under review, there was no unclaimed deposit
 amount which is required to be transferred to Investor Education and
 Protection Fund.
 
 The provisions of Section 58A of the Companies Act, 1956 have been
 complied with.
 
 Auditors
 
 M/s. B S R & Co., Chartered Accountants, Hyderabad, Auditors of the
 Company will retire at the conclusion of the ensuing Annual General
 Meeting and, being eligible, have offered themselves for
 re-appointment.
 
 Directors
 
 Pursuant to Article 142 of the Articles of Association of the Company,
 Mr. L.N. Bangur and Mr. Rajiv Kapasi will retire by rotation at the
 ensuing Annual General Meeting and are eligible for re-appointment.
 
 Mr. P.R. Ramakrishnan, who was appointed as Director in the casual
 vacancy caused by the resignation of Mr. R.V. Raghavan, will hold
 office upto the date of ensuing Annual General Meeting and, being
 eligible, has offered himself for re-appointment.
 
 Mrs. Alka Bangur resigned as a Director from the Board of Directors of
 the Company with effect from 17th May, 2011.  The Board placed on
 record its appreciation of the valuable services rendered by Mrs. Alka
 Bangur during her tenure as a Director of your Company.
 
 Mr. R. C. Sarin resigned from the Board with effect from 8th August,
 2011. Your Directors placed on record their appreciation of the
 excellent services rendered by him during his association with the
 Company.
 
 The Board appointed Mr. Paul Brown, nominee of IP Holding Asia
 Singapore PTE Limited as Additional Director through Circular
 Resolution with effect from 18th May, 2011. Pursuant to Article 129 of
 the Articles of Association, Mr. Paul Brown will hold office upto the
 ensuing Annual General Meeting and being eligible, has offered himself
 for re-appointment.
 
 Industrial relations/initiatives
 
 The industrial relations at both the units of the Company have been
 harmonious and cordial. The employees and unions have been proactive in
 maintenance of discipline and cooperative in improving productivity.
 The wage settlement was successfully concluded for Unit:APPM and for
 Unit:CP.
 
 Employee training and development
 
 Thrust is being continued by providing necessary training in their
 respective functional areas as well as on safety, management systems,
 leadership development skills to enhance individual competency to meet
 the current challenges and improve organizational performance. During
 the year 2010-11, total training man-hours were 35,977 which worked out
 to 15 hours per participant.
 
 Cost Accounting Records
 
 Cost accounting records for the year ended 31st March, 2011 were
 maintained as per Cost Accounting Records Rules.  M/s. Narasimha Murthy
 & Co., Cost Accountants were appointed as Cost Auditors of the Company
 with the approval of Central Government to audit the cost accounts for
 the year ended 31st March, 2011.
 
 The cost audit report due for filing on 30th September each year, was
 filed with the Ministry of Corporate Affairs on 24th August, 2010 for
 the financial year 2009-10.
 
 The report for 2010-11 will be filed on or before 30th September, 2011.
 
 Directors'' Responsibility Statement
 
 Your Directors hereby confirm and declare that:
 
 a.  in the preparation of annual accounts for the year ended 31st
 March, 2011, the applicable Accounting Standards has been followed
 along with proper explanation relating to material departures as
 mentioned in Note No. 3 of Schedule No. 20 of the said annual accounts;
 
 b.  they had selected such accounting policies and applied them
 consistently and made judgements and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company at the end of the financial year i.e. 31st March, 2011 and
 of the profit of the Company for that period;
 
 c.  they had taken proper and sufficient care for the maintenance of
 adequate accounting records in accordance with the provisions of
 Companies Act, 1956 for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities;
 
 d.  they had prepared the accounts for the year ended 31st March, 2011
 on a going concern basis.
 
 Response to the Auditors'' observation
 
 As regards Auditors'' observation vide Item No.3 of the Auditors'' Report
 dated 4th May, 2011 regarding Accounting Standard 22 on Accounting for
 Taxes on Income, an explanation has been given in Note No. 3 of
 Schedule No. 20 of the annual accounts for the year ended 31st March,
 2011.
 
 Acknowledgements
 
 Your Directors wish to place on record their gratitude to Central
 Government and the Government of Andhra Pradesh, IFC, DEG, Finnish Fund
 for Industrial Cooperation Limited, State Bank of India, Canara Bank,
 IDBI Bank, ICICI Bank and Axis Bank for their continued support during
 the year. Your Directors also wish to convey their thanks to the valued
 customers and dealers for their continued patronage during the year.
 Your Directors also place on record their appreciation of the
 contribution made by all the employees during the year.
 
                                         For and on behalf of the Board
 
 Secunderabad                                               L.N. Bangur
 
 8th August, 2011                                    Executive Chairman