Dear Shareholder,
 
 Early in 2011, we at Sirpur Paper anticipated a slow down in the
 economy and its impact on the paper industry, and have been proactive
 in controlling costs and improving our productivity.
 
 Consequently, we closed the financial year 2011-12 with a rise in
 production and sales volume, higher net sales realization and more
 important, managed to improve our profit before finance costs,
 depreciation and tax (PBIDT) over the previous year.
 
 We overcame challenges of high inflation, high interest, tight
 liquidity conditions, and ensured that we made a cash profit.
 
 Despite the competitive pricing pressures that accompanied slowdown in
 industry volumes during the year, we at Sirpur Paper experienced
 satisfactory development in our key indicators. We saved on raw
 material, improved efficiencies in coal usage and reduced consumption
 of power and water. We lowered the costs per tonne of paper produced in
 each of these metrics. Simultaneously, we improved the pulp yield,
 chemical recoveries and overall machine efficiencies. We sweated our
 assets and got better value per rupee invested.
 
 I must hasten to add that these improvements were despite significant
 cost increases in raw materials especially wood, coal, power, fuel,
 chemicals and manpower. In a high inflationary regime, rising interest
 costs put pressure on our financial results.
 
 Unfortunately, we had an accident in our chemical recovery section and
 the mill was shut down in April- May 2012 and we have started the
 current financial year with a loss. The unrelenting inflationary trend,
 spiraling wood prices, severe power cuts and subdued paper prices is
 adding to our complexities. We are working hard to control the
 situation and are keen
 
 that we do not let events beyond our control and erode our
 fundamentals.
 
 As a team, we are confident of overcoming challenges and a difficult
 business environment, by positioning ourselves better with our
 customers, with our quality assurance as well as by working on our
 internals.  We have several levers to further improve our efficiencies,
 refine the cost structure and enhance productivity. We have a measure
 of our challenges and shall strive hard to revert to profitability and
 demonstrate sustainable growth and do whatever it takes to make it
 happen. This is a work-in-progress.
 
 These are turbulent times, both for the economy and the paper industry.
 Our journey cannot be done alone and we believe we need temporary
 assistance. We are in conversation with our bankers to seek their
 support to ensure that we revert to profitable growth, as early as
 possible. While we shall work to regain our financial health and be a
 high energy business enterprise, we seek relief, more in terms of time.
 A flexible arrangement will ensure that we stay viable, grow in a
 calibrated manner and meet all obligations to our stakeholders. In
 fact, our commitment to our bankers is that we shall stay accountable
 and be a reliable partner with all those associated with us.
 
 At Sirpur Paper, we have a dedicated leadership, a talented team,
 strength of our competence and a determination to succeed. We are
 focused on creating a high-quality, high value robust business that
 works in the best interest of all our stakeholders. In the long term,
 we shall prove that temporary setbacks and challenges become staircases
 of growth and reciprocate the trust of each of our stakeholders.
 
 With best regards
 
 Devashish Poddar
 
 Vice-Chairman & Managing Director