1. Term loans from the financial institutions viz. International
Finance Corporation, Deutsche Investitions-und Entwicklungsgesellschaft
mbH, State Bank of India, Axis Bank Limited and ICICI Bank Limited are
secured by a pari passu first charge on all movable and immovable
properties of the Company situated at Rajahmundry, Serinarasannapalem
and Kadiyam, in accordance with respective loan agreements and subject
to charge under Note No. 2. Further, term loans from Axis Bank Limited
have a second charge on current assets of the Company. As of December
31, 2011, the Company is in the process of creating exclusive first
charge on specific moveable fixed assets of the Company for the term
loan of Rs 1,900 lakhs taken from BNP Paribas.
2. a. Working capital facilities from State Bank of India and Canara
Bank are secured by hypothecation of current assets along with a second
charge on the fixed assets of the Company situated at Rajahmundry,
Serinarasannapalem and Kadiyam.
b. Working capital facilities from BNP Paribas are secured by first
pari passu charge on the inventory and receivables of the Company and
Letter of Comfort from International Paper Company, USA.
3. 1,499,330 equity shares of Rs 10 each of the Company held by M/s.
Digvijay Investments Limited were pledged in favour of IDBI Trusteeship
Services Limited for the benefit of International Finance Corporation
and Deutsche Investitions-und Entwicklungsgesellschaft mbH as on March
31, 2011. The pledge was released during the current year and no pledge
was outstanding as on December 31, 2011.
4. Represents 14 years interest free sales tax deferment loan received
from Government of Andhra Pradesh. Repayment commences from March 31,
2013 based on the deferment availed in the respective year.
5. Terms of repayments are given below :
a. Loan taken from International Finance Corporation is repayable in
half-yearly installments of Rs 1,239.23 lakhs each.
b. Loan taken from Deutsche Investitions-und Entwicklungsgesellschaft
mbH is repayable in half-yearly installments of Rs 663.88 lakhs each.
c. Loan taken from State Bank of India is repayable in yearly
installment of Rs 800 lakhs each.
d. Loan taken from Axis Bank is repayable in quarterly installments of
Rs.866.67 lakhs each.
e. Loan taken from ICICI Bank are repayable in quarterly installments
of Rs 411.35 lakhs and half yearly instalments of Rs 124.14 each.
f. Loan taken from BNP Paribas Bank is repayable in quarterly
installments of Rs 118.75 lakhs each.
6. Public deposit aggregating to Rs.614.50 lakhs is repayable within 1
year and Rs 221.50 lakhs is repayable within next 2 years. Unclaimed
public deposit Rs 17.01 lakhs (March 31, 2011: Rs 23.60 lakhs) is included
under the head ''Unpaid matured deposits and interest accrued thereon''.
7. Term loan from banks has a maturity tenor of 15 months, renewable
automatically for successive periods of 15 months, subject to consent
of both parties.
The Company has since the inception of Accounting Standard 22 on
Accounting for Taxes on Income, recognized the deferred tax expense,
which arises primarily from depreciation on tangible fixed assets on
the basis of the currently applicable enacted Minimum Alternate Tax
rate rather than the regular tax rates as specified by paragraph 21 of
Accounting Standard 22. The Company has challenged the provisions of
Accounting Standard 22, in so far as it relates to the above matter and
has accordingly filed a writ petition in June 2003 before the Hon''ble
High Court of Andhra Pradesh. The case has been subsequently
transferred to the Hon''ble Calcutta High Court. The writ petition has
been admitted and is currently pending resolution.
The management is of the view that notwithstanding the writ petition
and its ultimate outcome, the differential liability needs to be
provided for in accordance with the provisions of AS 22 - Accounting
for Taxes on Income and has accordingly quantified and recorded the
deferred tax liability relating to earlier years up to March 31, 2011
of Rs 8,046 lakhs. The cumulative amount of Rs 8,046 lakhs pertaining to
the period up to March 31, 2011 has been debited to the profit and loss
account for the period ended December 31, 2011 and has been disclosed
1. Both the gratuity and the compensated absences plans of the Company
are funded. As of March 31, 2011, the Company had an overfunded
position for both its gratuity and compensated absence benefit plans
and accordingly, no provision existed as at March 31, 2011.
2. The Board of Directors have not recommended dividend for the period
ended December 31, 2011. However, the Board of Directors had
recommended Rs.1 per share for the year ended March 31, 2011.
1. Represents goodwill arising on acquisition of Coastal Papers
Limited and its subsequent amalgamation with the Company. The amount
has been written off in earlier years.
2. During the current period, foreign exchange fluctuation loss
amounting to Rs 1,683.21 lakhs has been capitalized to the block of fixed
assets pursuant to notification no G.S.R. 225 (E) dated March 31, 2009.
The notification was valid upto March 31, 2011 and was subsequently
extended upto March 31, 2012 based on notification no. G.S.R 378(E).
During the previous period, sales/adjustments made to the block of
fixed assets aggregated to Rs.92.33 lakhs representing foreign exchange
fluctuation gain decapitalized.
3. Depreciation for the period includes Rs 134.78 lakhs (March 31, 2011:
Rs 33.89 lakhs) towards depreciation effect on foreign exchange
fluctuations upto the end of the period ended December 31, 2011.
4. Sale/adjustment to the block of fixed assets includes Rs.9,270.39
lakhs (March 31, 2011: Rs 258.18 lakhs) towards fixed assets discarded.
Accumulated depreciation on such asset discarded amounted to Rs.6,034.02
lakhs (March 31, 2011: Rs 180.44 lakhs) as at December 31, 2011 and
balance Rs 124.35 lakhs (March 31, 2011: Nil) has been shown under
''short-term loans and advances'' as assets held for sale.
5. Depreciation for the period includes depreciation amounting to
Rs 4.07 lakhs (March 31, 2011: Rs 5.03 lakhs) on assets used for research
and development. During the period, the Company incurred X7 lakhs
(March 31, 2011: Rs 7.81 lakhs) towards capital expenditure for research
1. Balance with scheduled banks include Rs 253.20 lakhs (March 31, 2011:
Rs 182.20 lakhs) representng margin money for letters of credit and bank
2. Section 205 of the Companies Act, 1956 mandates that companies
transfer dividend that has been unclaimed for a period of seven years
from unpaid dividend account to the Investor Education and Protection
Fund (IEPF). Accordingly, if dividend is unclaimed for a period of
seven years, it will be transferred to IEPF.
Includes amount of Rs 8,046 lakhs pertaining to differential deferred tax
expense on account of accounting for deferred taxes based on enacted
tax rate as compared to Minimum Alternate Tax rate as followed in
8.1 Commitments and contingent liabilities
As at As at
December 31, 2011 March 31, 2011
a. Guarantees issued by
banks 687.39 684.36
b. Letters of credit
outstanding 1,629.08 1,014.83
c. Corporate guarantee
given to the Forest
Government of Andhra
Pradesh 1,472.09 1,472.09
ii. Claims against the Company
not acknowledged as debts
in respect of
a. Income tax matters, pending
decisions on various appeals
made by the Company and by
the Department 52.51 138.82
b. Excise matters, under dispute 1,510.99 1,647.02
c. Sales tax matters, under
dispute 306.28 365.33
d. Other matters, under dispute 334.12 297.25
e. Vacant land tax 357.39 228.31
f. Demand raised by Eastern
Power Distribution Corporation of
Andhra Pradesh Limited for
surplus power supplied by APGPCL
disputed by the Company. An
amount of Rs76.98 lakhs paid
under protest (March 31, 2011:
Rs76.98 lakhs) has been grouped
under loans and advances.
The appeal filed by APTRANSCO is
pending before the Hon''ble
High Court of Andhra Pradesh in
which other companies similarly
placed are made respondents. 87.66 87.66
iii.Estimated amount of contracts
remaining to be executed on
capital account and not
provided for (net of advances) 1,043.89 2,136.94
iv. Commitment under Export
Promotion Capital Goods
(EPCG) Scheme 51,360.62 57,613.38
8.2 Related party disclosures
a. Related parties where control exists or where significant influence
exists and with whom transactions taken place during the year:
Ultimate holding company
International Paper Company, USA
IP Holding Asia Singapore PTE. Limited, Singapore
Enterprises where principal shareholders have control
Samay Books Limited (Up to October 14, 2011) Enterprises where
principal shareholders have significant influence (Up to October 14,
2011) i. Digvijay Investments Limited ii. Amalgamated Development
Limited iii. Apurva Export Private Limited iv. MB Commercial Company
Limited v. Maharaja Shree Umaid Mills Limited
vi. Mugneeram Ramcoowar Bangur Charitable & Religious Company vii.
Placid Limited viii. Shree Krishna Agency Limited ix. The General
Investment Company Limited x. The Kishore Trading Company Limited xi.
The Peria Karamalai Tea & Produce Company Limited xii. The Swadeshi
Commercial Company Limited
Key Management Personnel represented on the Board
Mr. Paul Brown (from October 15, 2011) Chairman and CEO
Mr. L.N. Bangur (upto October 14, 2011) Executive Chairman
Mr. M.K. Tara (upto October 14, 2011) Managing Director & CEO
Ms. Sheetal Bangur (upto October 14, 2011) Director (Commercial)
Mr. Shreeyash Bangur (upto October 14, 2011) Director (Corporate)
Mr. P.K. Suri Director (Operations)
Non-Executive/Independent Directors on the Board
Mrs. Alka Bangur (upto May 17, 2011)
Mr. N. Srinivasan (upto December 6, 2011)
Mr. R.C. Sarin (upto August 8, 2011)
Mr. P.J.V. Sarma (upto December 6, 2011)
Mr. P.K. Paul (upto December 6, 2011)
Mr. Rajiv Kapasi (upto December 6, 2011)
Mr. P.R. Ramakrishnan (upto December 6, 2011)
Mr. Thomas G. Kadien (from October 14, 2011)
Mr. Brett A. Mosley (from October 14, 2011)
Mr. Shreeyash Bangur (from October 14, 2011)
Mr. M. S. Ramachandran (from December 6, 2011)
Mrs. Ranjana Kumar (from December 6, 2011)
Mr. M.K. Sharma (from December 6, 2011)
Mr. M. Adhiraj Sarin (from December 6, 2011)
Mr. Milind Sarwate (from December 6, 2011)
The Company contributed Rs 54.35 lakhs (March 31, 2011: Rs 94.79 lakhs) to
the superannuation fund maintained with Life Insurance Corporation of
India during the period ended December 31, 2011.
8.4 Provident fund
The Company contributed Rs 277.81 lakhs (March 31, 2011: Rs 310.16 lakhs)
to the Provident Fund trust maintained by the Company and Rs 92.09 lakhs
(March 31, 2011: Rs 104.76 lakhs) to Regional Provident Fund Commissioner
during the period ended December 31, 2011.
The Guidance on Implementing AS 15, Employee Benefits (revised 2005)
issued by Accounting Standards Board (ASB) states that benefits
involving employer established provident funds, which require interest
shortfalls to be recompensed by the Company. Accordingly, the Company
has provided Rs 28.40 lakhs (March 31, 2011: Rs.Nil) as shortfall to the
provident fund trust.
8.5 Employee benefit plans
The following table sets out the status of the gratuity plan as
required under AS-15 (Revised):
Discount rate: The discount rate is based on the prevailing market
yields of Indian government securities as at the balance sheet date for
the estimated term of the obligations.
Expected rate of return on plan assets: This is based on the
expectation of the average long term rate of return expected on
investments of the fund during the estimated term of the obligations.
Salary escalation rate: The estimates of future salary increases
considered takes into account the inflation, seniority, promotion and
other relevant factors.
8.6 Segment information
The Company is in the business of manufacture and sale of pulp, paper
and paper board. Considering the core activities of the Company,
management is of the view that manufacture and sale of pulp, paper and
paper boards is a single reportable business segment and hence
information relating to primary segment is not required to be
8.7 Clean Development Mechanism (CDM) Emission Reductions
On account of energy efficiency measures undertaken by the Company
during the period from June 2000 to December 2006, UNFCCC (in
accordance with the regulations of United Nations body on environment)
has approved the project and accorded Certified Emission Reduction
(CERs) points to the Company, which have been sold during the previous
period. Income from such sales has been credited to the profit and loss
account and has been disclosed under other income.
The Company is obligated under non-cancellable operating lease
agreements. Total rental expense under non-cancellable operating leases
for the current period is Rs 23.50 lakhs (March 31, 2011: Rs 31.33 lakhs).
The total rental expense under cancellable operating leases for the
current period amounts to Rs 146.83 lakhs (March 31, 2011: Rs.161.31
lakhs). The future minimum lease payments under non-cancellable
operating leases are as follows:
8.9 The Promoters of the Company, LN Bangur Group informed the Company
on March 29, 2011 that they had entered into an agreement to sell their
entire shareholding of 21,260,008 equity shares of Rs.10 each held by
them in the Company to IP Holding Asia Singapore PTE. Limited
(Acquirer), a subsidiary of International Paper Company, USA. The
Acquirer is an unlisted company incorporated under the Laws of
Singapore. International Paper Company, USA is a global paper and
packaging company and is listed on the New York Stock Exchange.
Lazard India Private Limited, Manager to the Open Offer appointed by
the Acquirer had given a certificate dated October 11, 2011 to the
Company confirming that the Acquirer along with International Paper
Company complied with all applicable provisions of Securities and
Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations and completed their obligations in relation to
the Open Offer made in accordance with the Interim Order dated August
11, 2011 to Securities Appellate Tribunal. They have also confirmed
that despatch of payment consideration to the shareholders whose equity
shares have been accepted in the Open Offer was completed by October 8,
2011. The Board approved transfer of 35,762 equity shares of Rs.10 each
in physical form to the Acquirer and noted the acquisition of 8,531,759
equity shares in electronic form from public shareholders by the
Pursuant to such Open Offer and above mentioned share sale agreement,
29,827,529 shares of the Company were acquired by the Acquirer on
October 14, 2011 being the effective date of the change in the
ownership. Pursuant to such acquisition, the Acquirer became the
holding company of the Company, with International Paper Company being
the ultimate holding company.
8.10 During the period, the Company carried out an internal technical
assessment based on its global standards and methodologies whereby
assets with a net book value of Rs 3,112.02 lakhs have been identified as
unsuitable for future use and accordingly was debited to the profit and
8.11 Addition to fixed assets include an amount of Rs 227.91 lakhs (March
31, 2011: Rs 222.69 lakhs) on account of capitalisation of interest cost
as stipulated under Accounting Standard -16 (Borrowing cost).
8.12 During the period ended December 31, 2011, the Company has accrued
for managerial remuneration in excess of the maximum limits specified
in Schedule XIII to the Companies Act, 1956 to the extent of Rs.194.64
lakhs. The Company proposes to apply to the Central Government for
8.13 The Company in its Board meeting held on December 6, 2011 approved
the change of financial year from March 31 to December 31, every year.
Pursuant to such change, the Company has closed its accounts for the
nine months period ended December 31, 2011.
8.14 Comparative figures
The current period figures are for nine months period and hence not
comparable to the previous period figures for the year ended March 31,