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Bio Green Papers Ltd.

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Annual Report

For Year :
2014 2013 2012

Director’s Report

The Members, The Directors'' have pleasure in presenting the Twentieth Annual Report of the Company and the Audited Financial Statements of Accounts for the year ended 31st March 2014. FINANCIAL HIGHLIGHTS: The main Financial Highlights of the Company are given below: Particulars As on 31/3/2014 As on 31/3/2013 (Rs.) (Rs.) Total Income 61,362,845 88,455,089 Increase or Decrease in stock 109,184 2,722,252 Operating & Admn. Expenses 52,115,240 80,198,580 Depreciation 8,913,984 8,484,970 Profit for the Year 373,872 1,663,986 REVIEW OF OPERATIONS: During the year under review the Company could earn Income of Rs. 6.14 Crores as compared to Rs. 8.85 Crores, whereas profit of the Company after taxation is Rs. 0.04 Crores as compared to 0.17 Crores last year. DIVIDEND: In view of the inadequate profits, your Directors do not recommend any dividend. MANAGEMENT DISCUSSION AND ANALYSIS REPORT About Company Introduction This is only a summary. Investors should read the following summary with the Risk Factors mentioned and the more detailed information about us and our financial statements included elsewhere in this Information Memorandum Summary of Industry The global pulp and paper industry consists of about 5000 industrial pulp and paper mills, and an equal number of very small companies. The annual global paper and paperboard production was approximately 382.0 million tonnes in 2006. It is expected to increase to 402.0 million tonnes by 2010 and 490.0 million tonnes by 2020. USA is the largest market for paper products and commands high per capita consumption of 260 Kgs. Asia''s main markets are China, Japan, India, Malaysia, Singapore and Thailand. (Source: Websites of global consulting group ''Pyory'' and International Council of Forest and Paper Association) The paper and paperboard industry has witnessed a radical shift in the last decade. Due to the strong economic growth in both China and India, the demand for paper and paperboard is increasing rapidly and they are expected to emerge as an important market for pulp & paper. The share of fast developing Asian markets, excluding Japan, in global consumption has increased to 34% by 2010 from 32% in 2006. The share of mature markets like North America and Europe would fall to 50% by 2010 from 52% in 2006. It is expected that Asian market would account for 60% of global incremental production during the period 2004-2020. Indian Paper Industry The Indian Paper Industry accounts for about 1.6% of the world production of paper and paperboard. The estimated turnover of the industry is Rs 25,000 crore (USD 5.95 billion) approximately and its contribution to the exchequer is around Rs. 2918 crore (USD 0.69 billion). The industry provides employment to more than 0.12 million people directly and 0.34 million people indirectly. The industry was de-licensed effective from July, 1997 by the Government of India; foreign participation is permissible. Most of the paper mills are in existence for a long time and hence present technologies fall in a wide spectrum ranging from oldest to the most modern. The mills use a variety of raw material viz. wood, bamboo, recycled fibre, bagasse, wheat straw, rice husk, etc.; approximately 35% are based on chemical pulp, 44% on recycled fibre and 21% on agro-residues. The geographical spread of the industry as well as market is mainly responsible for regional balance of production and consumption. With added capacity of approximately 0.8 million tons during 2007-08 the operating capacity of the industry currently stands at 9.3 million tons. During this fiscal year, domestic production of paper and paperboard is estimated to be 7.6 million tons. As per industry guesstimates, over all paper consumption (including newsprint) has now touched 8.86 million tons and per capita consumption is pegged at 8.3 kg. Demand of paper has been covering around 8% for some time. During the period 2002-07 while newsprint registered a growth of 13%, Writing & Printing, Containerboard, Carton board and others registered growth of 5%, 11%, 9% and 1% respectively. So far, the growth in paper industry has mirrored the growth in GDP and has grown on an average 6-7 per cent over the last few years. India is the fastest growing market for paper globally and it presents an exciting scenario; paper consumption is poised for a big leap forward in sync with the economic growth and is estimated to touch 13.95 million tons by 2015-16. The futuristic view is that growth in paper consumption would be in multiples of GDP and hence an increase in consumption by one kg per capita would lead to an increase in demand of 1million tons. As per industry estimates, paper production are likely to grow at a CAGR of 8.4% while paper consumption will grow at a CAGR of 9% till 2013-14. The import of pulp & paper products is likely to show a growing trend. Foreign funds interest in the Indian paper sector is growing. IFC, the investment arm of the World Bank is already associated with at least three of the IPMA member mills. The increasing demand for paper brings with it new challenges of economies of scale, efficient usage of resources, need to develop and expand sustainable use of fibre, and value chain management, etc. Despite the fact that the Indian Paper Industry holds its importance to the national economy, unfortunately it stands fragmented. Paper sector is dominated by small and medium size units; number of mills of capacity 50000 tons per annum or more is not more than 25. Less than half a dozen mills account for almost 90% production of newsprint in the country. There is a growing need to modernize the Indian mills, improve productivity and build new capacities. Demand for Kraft paper With increased economic activity the demand for paper especially Kraft paper, industrial paper, duplex boards, and corrugating material is too poised for healthy growth. Industrial paper is the highest value segment in the paper industry and accounts for 41% of the total market size. Kraft paper is usually the brown paper that is commonly used for manufacturing brown bags, cartons, etc. It is largely used to manufacture corrugated boxes, bags, sacks, etc. However, corrugated boxes account for 85-90 per cent of the total demand for Kraft paper. Demand for Kraft paper depends on the growth in consumer durables, the manufacturing industry, horticulture, FMCG etc. Strong growth in end-user sectors such as pharmaceuticals, horticulture, ready to eat foods, marine products, textiles, consumer durables and other industrial products is expected to result in a buoyant growth for Kraft paper. Duplex boards which are mainly used as primary packaging for various products such as pharmaceuticals, cigarettes, matchboxes, agarbattis, toothpastes and other similar consumer items is witnessing robust demand. Growing agro-based sector, including horticultural products, fresh and canned fruits, etc. This, together with the Government policy to replace wooden crates by containerboard boxes particularly in fresh fruit packaging, will create new demand for corrugated boxes Demand Drivers for Kraft paper Consumption of industrial paper is closely linked to growth in the packaging industry, industrial production and development in packaging technology and substitution by other materials. Following are other important factors contributing to demand growth in industrial paper:- a) The growing popularity of ready-to-eat products, liquid products and other perishable products will result in higher demand for attractive and durable packaging, thus increasing demand for Kraft paper and duplex boards._ b) Branding is a big driver of packaging, as manufacturers try to create identifiable and attractive brands. With more and more consumers opting for branded goods, demand for Kraft paper and duplex boards is expected to remain strong in the future. c) With increase in malls, departmental stores and other such modern retail formats, manufacturers use innovative packaging solutions to increase their sales. d) The fastest-growing end-use segments for duplex boards are foodstuffs, consumer durables, garments, pharmaceuticals, cigarettes and matchsticks. Gradual shift in population from rural to urban as well as change in lifestyle due to improvement in the standard of living, demand for duplex boards is expected to explode. OVERVIEW Bio Green Papers Limited is in business of Kraft Paper Production and Duplex Board Production. The Kraft Paper produced by the Company is of 70 GSM to 180 GSM quality range and used to make corrugated boxes, paper tubes, cones, match boxes, shoe boxes and cosmetic containers. The Duplex Board has 150 to 400 GSM range and used for Gift Boxes, Shoes Boxes, Product and Food Packaging and Flat Files. Product Profile The line of business in which BGPL is engaged in are manufacturing of Kraft Paper board, Duplex paper board and Bio Fuel plantation. Kraft Paper:- Manufacturing Process of Kraft & Duplex Board: Manufacturing process of Kraft & Duplex paper consists of the following stages: 1. Pulping 2. Paper Making 3. Finishing & Storage PULPING: The waste paper is so chosen that no deinking process is involved. Waste Paper is fed into the high speed hydra pulper filled with plain water and rotated to form a mass known as water turbulence. The mass is discharged over the wire mash. Water collected is taken away. This will give the paper higher bursting strength. PAPER MAKING: Paper can be defined as a sheet or continuous web of fibers. The strength of the paper is obtained by interlacing of fibers. The fibers in water suspension with requisite consistency are allowed to pass over the endless wire from where the drained away and the paper after pressing and drying are reeled. The strength of paper is determined largely by the length, diameter and thickness of wall and flexibility and bonding characteristics of fiber used. The bulk density, porosity, uniformity and other properties are dependent on the inherent qualities of fibers as well as on the treatment given in the process of manufacture. Mixing, Cleaning and Refining are done in this stage. Waste paper pulp is properly mixed in a Beater. Any dust if remaining, is thoroughly removed. This pulp is passed through Vibrating Screen, Centrifugal Cleaner and refined in Disc Refiners. PAPER FORMING: The refined slurry, treated with additive chemicals and binding agents is pumped into Head Box of Paper Machine and couched on to the moving moulds which takes it to Press Rolls and paper is formed. The excess water has been squeezed out and paper formed is taken to MG Drier for drying by steam and reeling. TRIMMING & PACKING: The dried paper is trimmed in slitter for required width - usually 48 and packed on reels for selling. Kraft Paper is used in: 1) Packaging of Consumer Durables (TV, Fridge/AC/Washing Machine), Oil Packaging, Textile Industries, Yarn Industries, Engineering Goods, Fruits / vegetables / Flowers, Pharmaceutical Companies, Foods & Beverages Companies, Glass Industries, Ceramic Industries, Auto Part, Garment Industries, Cosmetic Industries. 2) Tubes & Cones Cone Tubes for Paper Mills, Core Polly Films/Plastic, and Textile tubes/Yarn Tubes. 3) Wrapping Purpose Wrapping of paper rolls/sheets, Wrapping of laminate, Furniture wrapping, Bags Manufacturing. Also to make corrugated boxes, / Match Boxes /Shoe Boxes, etc. Kraft Paper Range: GSM BF Deckle Size Cobb Die. of Reel Color 70 to 170 12 to 25 2.5 m As per req. 48 Max. As per requirement Duplex Paper:- Duplex Paper is generally manufactured by using bleached and unbleached paper together to form duplex paper. One side of the duplex paper will be cleaned and bleached and the other sides are unbleached and rough. In India there are few manufacturers in organic sector. Duplex paper largely used in paper bags like cement bags and paper shopping bags and even also for food packaging industry, Also used for Gift Boxes / Shoe Boxes / Product Packaging Boxes/ Food Packaging/ Flat Files. There is good market growth of paper bags. Duplex Board Range GSM Deckle Size Cobb 150 to 400 30-450 As per requirements Bio Fuel The Bio-Diesel production involves mainly two steps: 1) Extraction of oil from the seeds. 2) Conversion of vegetable oil to bio diesel. The extraction of oil can be done in any suitable oil extraction unit. Commonly used oil extraction units can be used for extraction of oil from Jatropha as well. The second step of conversion of vegetable oil to bio diesel requires chemical processing plant. The operation of this plant requires specific training and this can be done by well trained engineers/ diploma holders/chemists. HUMAN RESOURCES & INDUSTRIAL RELATIONS Industrial relations continue to remain peaceful at the manufacturing plant. All the employees are working with the Company for a common objective. Industrial relations of the Company were cordial during the year. SHAREHOLDING OF DIRECTORS The shareholding of the directors as on March 31,2014 is as under: Sr. No Name of the Director No. of Shares held 1 V. Jagdish 8,25,000 Total 8,25,000 AUDITOR''S REPORT: The observations made in the Auditors'' Report are self-explanatory and therefore do not call for further comments under Section 217 of the Companies Act, 1956. AUDITORS: M/s. D.M.Rao & Co, Chartered Accountants, Visakhapatnam, have given their consent for appointment as Statutory Auditors of the Company, if appointed at the ensuing Annual General Meeting. The Company has received a letter from M/s. D.M.Rao & Co,, Chartered Accountants, to the effect that their appointment, if made would be within the prescribed limit under Section 224(1-B) of the Companies Act, 1956. Yours Directors recommend their appointment. CORPORATE GOVERNANCE: The company has been proactive in following the principles and practices of good Corporate Governance. The company has taken adequate steps to ensure that the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreements of the Stock Exchanges are complied with. A report on Corporate Governance, along with a certificate of compliance from the Auditors, forms part of this report. DEPOSITORIES: The Company is registered with both National Securities Depository Limited and Central Depository Services (India) Limited. The shareholders can take advantage of holding their scrips in dematerialised mode. FIXED DEPOSITS: The Company has not accepted fixed deposits from public during the year under review. INSURANCE: All the assets of the Company wherever necessary and to the extent required have been insured. PERSONNEL: There was no employee employed during the year or part of the year drawing remuneration, which falls within the purview of the provisions of section 217(2A) of the Companies Act, 1956. Therefore the statement for the same is not attached. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE: The information 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, with respect to conservation of energy, technology absorption and foreign exchange earnings is given below: Part B. Consumption per Unit of Production: Particular Consumption per Unit of Production Electricity 370 units Coal/Rice Husk 0.85 tons B. Technology Absorption Adaptation and innovation: The research and product development activities are primarily directed towards product development. DIRECTORS RESPONSIBILITY STATEMENT: In Compliance of Section 217 (2AA), as incorporated by the Companies (Amendment) Act, 2000 in the Companies Act, 1956 your Directors confirm that: (a) The Company has followed the applicable standards in the preparation of the Annual Accounts and there had been no-material departure. (b) The Directors had selected the accounting policies and applied them consistently and made judgments 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 and of the profit or loss of the Company for the aforesaid period. (c) The Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (d) The Directors have prepared the Annual Accounts on a going concern basis. ACKNOWLEDGMENTS: The Board of Directors expresses their deep gratitude for the co-operation and support extended to your Company by its customers, Bankers and various Government agencies and looks forward to their continued cooperation. For and on behalf of Board of Directors Sd/- Sd/- Place: Hyderabad Velamala Jagadish Venkateswarlu Velamala Date: 30/05/2014 Managing Director Director

Director’s Report