Global Economy and India

The global economy is exhibiting mixed trends. While US and Euro Zone have stabilized, China is slowing down. Economies depending on commodity exports in general and oil exporters in particular are impacted. Improved US job market and consequent expected increase in interest rates may adversely impact emerging markets and commodities.

Sentiment in the domestic economy is upbeat although activity is yet to pick-up.

Indian Paper Industry Scenario

Indian paper industry, although at less than 2% of the total world production, is one of few where demand is expected to grow. Although during the year under review growth in domestic paper market was subdued in line with rest of domestic economy. Cost of inputs have stabilized for the time being, but long term issues like captive plantation, energy costs are yet to be addressed.

SWOT ANALYSIS

Strengths: Paper Industry has the following strengthsi)

Large and growing domestic paper market

ii) Know how in non wood pulping and applications

iii) Well developed printing industry

iv) Well developed distribution channels.

Weakness: The Industry however suffers some weaknesses as underi)

Highly capital- intensive Industry impacted by domestic Interest rates

ii) Dearth of highly skilled and job specific manpower.

iii) Fragmented industry structure

Opportunities: There are a number of opportunities for the Industry. Illustrative examples are as under:

i) Huge potential for forest plantation on degraded forest land.

ii) Government literacy program – increasing demand for printing/writing papers

iii) Likely consolidation in favour of efficient players

Threats: The Industry is subject to following threatsi)

Environmental regulation impacting cost competitiveness with other countries.

ii) Weakening competitiveness of domestic industry due to shortage and cost of basic inputs.

iii) Free trade agreements with countries having more competitive paper industry.

Social farm forestry

Your company has further enhanced tree plantation program under social farm forestry. Approximately 342 lacs seedlings were planted and distributed during the year under the program. We have added an area of 13,680 hectares under the plantations making a total coverage of 1,32,000 hectares. The program helps in enhancing rural income and facilitate sustained availability of raw material to the Mill.

Risks & Concern

Risk is inseparable from the business. Higher wood and energy costs, less-favoured State Govt policies, Environmental issues and Market risks are some of the concerns associated with the company's operations. The company has a risk management framework in place.

Internal Control System

Your company regularly reviews Internal control systems and procedures to ensure orderly and efficient conduct of business. Internal control system ensures the following:

? Accurate recording of transactions with internal checks and prompt reporting.

? Adherence to applicable accounting standards.

? Periodic review to effectively manage working capital.

? Review of capital investments.

? Compliance with applicable statutes, policies and listing requirements.

? Effective use of resources and safety of assets.

Financial Performance

The company has reported profits for the year under review vis-a-vis losses in the brvious financial years and will strive to improve the performance further in the coming period.

Human Resources

Human resource development programs are linked with organizational needs and performance. The company recognizes human resource as its invaluable asset. Your company regularly conducts need-based HR development programs at all levels. There are 767 employees on the company's roll.

Future Outlook

The paper industry in India is expected to grow in line with rest of the economy. Paper products are used in education, health-care, food, trade, communication, packaging etc. This will provide opportunities for modernization and expansion.

Forward Looking Statements

This Report contains forward looking statements based upon the data available with the company, assumptions with regard to global economic conditions, Government policies etc. The company do not not guarantee accuracy of the assumptions and perceived performance of the company in future. It is thus cautioned that the actual results may materially differ from those exbrssed or implied in the report.