MIRA INFORM REPORT

Report Date :

26.04.2007

IDENTIFICATION DETAILS

Name :	TAMILNADU NEWSPRINT AND PAPERS LIMITED
Registered Office :	67, Mount Road, Guindy, Chennai - 600 032, Tamilnadu
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	16.04.1979
Com. Reg. No.:	7799
CIN No.: [Company Identification No.]	L22121TN1979PLC007799
TAN No.: [Tax Deduction & Collection Account No.]	CHET00028A / CHET06348G
PAN No.: [Permanent Account No.]	AAACT2935J
Legal Form :	Public limited liability company. The company’s shares are listed on the Stock Exchanges.
Line of Business :	Manufacturers of Newsprint in Rolls or Sheets-others, Paper and Duplicating Paper.

RATING & COMMENTS

MIRA’s Rating :

A

RATING		STATUS	PROPOSED CREDIT LINE
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large

Maximum Credit Limit :	USD 20000000
Status :	Satisfactory
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well-established and reputed company having satisfactory track. Directors are reported as experienced and respectable businessmen. Trade relations are reported as fair. Business is active. Payments are usually correct and as per commitments. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	67, Mount Road, Guindy, Chennai - 600 032, Tamilnadu, India
Tel. No.:	91-44-22354415 / 16 / 18 / 22301094 / 95 / 96 / 97 /98 / 22350749
Fax No.:	91-44-2235 0834 / 4614
E-Mail :	1. response@tnpl.net 2. export@tnpl.co.in
Website :	http://www.tnpl.net
Administrative Office :	35, Anna Salai, Guindy, Chennai - 600 032, Tamilnadu
Factory 1 :	Kagithapuram - 639 136, Karur District, Tamil Nadu
Tel. No.:	91-4324-277001 to 277017
Fax No.:	91-4324-277025 / 26 / 27
Regional Offices:	Located at : · Mumbai, Maharashtra · New Delhi · Kolkata, West Bengal · Ernakulam, Kerala · Bangalore, Karnataka · Hyderabad, Andhra Pradesh
Wind Farm :	Situated at :- Tirunelveli District, Tamilnadu

DIRECTORS

Name :	Mr. Thiru Shaktikanta Das, I.A.S.
Designation :	Chairman
Date of Birth/Age :	49 Years
Qualification :	M.A
Experience :	26 Years
Other Directorship :	Ø Titan Industries Ø Tamil Nadu Petro Products Limited Ø Tamil Nadu Industrial Guidance & Export Promotion Bureau Ø TASCO Ø Tidel Park Limited Ø Tamil Nadu Industrial Development Corporation Limited Ø Chennai Petroleum Corporation Limited Ø Southern Petrochemical Industries Corpn. Limited Ø Neyveli Lignite Corporation Limited Ø Small Industries Promotion Corporation of Tamil Nadu Limited Ø P.S.G.STEP Governing Body
Name :	Mr. Thiru S Ramasundaram, I.A.S.
Designation :	Director
Date of Birth/Age :	52 years
Qualification :	M.Sc. (Chem.), MS (Applied Demography), USC Los Angeles, USA
Experience :	27 years
Other Directorship :	Tamil Nadu Sugar Corporation Limited
Name :	Mr. Thiru V Murthy, I.A.S.
Designation :	Managing Director
Date of Birth/Age :	58 Years
Qualification :	M.A.B.L, H.D.C.
Experience :	36 years
Name :	Mr. Thiru K Gnanadesikan, I.A.S.
Designation :	Director
Name :	Mr. Thiru Sandeep Saxena, I.A.S.
Designation :	Director
Date of Birth/Age :	40 Years
Qualification :	B.E. (Civil), M.Tech, (Water Resources Engg.IITD), MBA(International Fin.) M.A.(Eco.)
Experience :	17 years
Other Directorship :	Ø Tamil Nadu Sugar Corporation Limited Ø Perambalur Sugar Mills Limited
Name :	Mr. Thiru R S Agarwal
Designation :	Director
Address :	A-102, Chaitanya Towers, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025
Qualification :	Retd CGM from IDBI
Name :	Mr. Thiru R R Bhandari
Designation :	Director
Address :	HB-292, Sector 3, Flat No. 8, Salt Lake, Kolkata – 700 091, West Bengal
Qualification :	B.Sc. Engineering (Mech.)
Name :	Mr. Thiru N Kumaravelu
Designation :	Director
Name :	Mr. Thiru V R Mehta
Designation :	Director
Date of Birth/Age :	72 Years
Qualification :	An Honours degree in Engineering from BITS, Pilani
Experience :	14 Years
Other Directorship :	Ø Sical Logistics Limited, Chennai Ø Southern Petrochemical Ø Industries Corporation Limited, Chennai Ø Tata Motors Limited, Mumbai Ø Telco Construction Equipment Ø Company Limited, Bangalore Ø T T Limited, New Delhi
Name :	Mr. Thiru V Narayanan
Designation :	Director
Address :	Flat No. 19, “The Manor” No. 1, Cenotaph Second Street, Teynampet, Chennai – 600 018, Tamilnadu
Date of Birth/Age :	68 years
Qualification :	M.Sc. (Chemistry)
Experience :	45 Years
Other Directorship :	Ø Ponds Exports Limited : Chairman Ø M M Fbrgings Limited : Chairman Ø UCAL Fuel Systems Limited : Director Ø Bata India Limited : Director Ø Samtel Color Limited : Director Ø Glaxo Smithkline : Director Ø Pharmaceuticals Limited : Director Ø Samcor Glass Limited : Director Ø Hindustan Lever Limited : Director Ø Rane (Madras) Limited : Director Ø Lafarge India Private Limited : Director Ø Sundaram Fasteners Limited : Director Ø FAL Industries Limited : Director Ø Foster's India Limited : Director Ø Rane Holdings Limited : Director
Name :	Mr. Thiru G Prabhakara
Designation :	Director
Name :	Mr. Thiru A Velliangiri
Designation :	Director (Finance)
Address :	Agastiyar Manor, Flat No. 1B, 13, Raja Street, T. Nagar, Chennai – 600 017, Tamilnadu
Qualification :	B. Com., FCA, AICWA, FCS, MBA, ICA, DCA

SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters
- Indian Promoters	24444900	35.32 %
- Foreign Promoters	Nil	Nil
Persons acting in Concert #	-	-
SUB-TOTAL	24444900	35.32 %
NON-PROMOTERS' HOLDING
Institutional Investors	-	-
Mutual Funds	13335596	19.27 %
Banks, Financial Institutions, Insurance Companies, Central/State Govt. Institutions/Non-Government Institutions)	14205562	20.53 %
Foreign Institutional Investors	2884533	4.16 %
SUB-TOTAL	30425691	43.96 %
OTHERS
Private Corporate Bodies	3574254	5.16 %
Indian Public	9979031	14.42 %
NRIs/OCBs	558291	0.81 %
Others	228433	0.33 %
SUB-TOTAL	14340009	20.72 %
Total	69210600	100.00 %

BUSINESS DETAILS

Line of Business :

Manufacturers of Newsprint in Rolls or Sheets-others, Paper and Duplicating Paper.

Products :

Item Code No.	Product Description
480100.09	Newsprint in rolls or sheets-Others
480252.03	Paper weighing 40g/m2 or more than 150g/m2 - Duplicating paper
480252.09	Paper weighing 40g/m2 or more than 150g/m2 - Others

Product range including

Ø Business Stationery

Ø Classical Writing

Ø Computer Stationery

Ø News print

Ø Premium Printing

Ø Quality printing

Exports :

Products :

Super Printing, Hitech Maplitho, OS 2000 and Newsprint

Countries :

Sri Lanka, Singapore, Malaysia, Philippines, Indonesia, Myanmar, Muscat, Dubai, Egypt, Jordan, South Africa, Nigeria, Australia, Korea, UK, Greece and Taiwan

Imports :

Products :

Pulp, coal, spares, machinery, etc

Countries :

Germany, USA, Australia, Indonesia, Sweden adn France

Terms :

Selling :

L/C, Cash or Credit (30 days) terms

Purchasing :

L/C, Cash or Credit (30 days) terms

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Newsprint/Printing & Writing Paper	tons	230000	--
Newsprint	tons	--	5468
Printing & Writing Paper	tons	--	224611

GENERAL INFORMATION

Customers :

Wholesalers, End Users and Government Departments

Ø ELCOT New Era Technologies Limited

Ø Tamil Nadu Theatre Corporation Limited

Ø Tamil Nadu Steels Limited

Ø Salem Co-operative Sugar Mills Limited, Mohanpur

Ø Jupiter Trading Company Limited, 32-A, K Cyril C Perera Mawatha, Colombo – 13, Sri Lanka

Ø Orient Links Company (L.L.C.), The Atrium Centre, Office No. 609, Khalid Bin Walid Road, P. O. Box 52708, Dubai, UAE

No. of Employees :

1777

Bankers :

Ø State Bank of India

Commercial Branch, Bombay Mutual Building,

NSC Bose Road, Chennai – 600 001, Tamilnadu

Ø Canara Bank

Ø Indian Bank

Ø Indian Overseas Bank

Ø Oriental Bank of Commerce

Ø State Bank of Patiala

Ø Syndicate Bank

Ø The Karur Vysya Bank Limited

Facilities :

SECURED LOANS	Rs in Millions
(a) Term Loans:
From Banks
- FCNR(B)	774.740
- Rupee Term Loans	587.722
(Secured by pari passu first charge on fixed assets (land, buildings, Plant and Machinery and other immovable properties-except movable fixed assets given as first charge for ECB Loan) of the company including an equitable mortgage by deposit of title deeds in respect of 566.26 acres of land situated at Kagithapuram, Karur district, Tamil Nadu as primary security on a pari passu basis with other lenders and a pari passu second charge on the current assets of the company viz., stock of raw materials, finished goods, stores and other movables.)
- ECB LOAN	178.440
(External Commercial Borrowing (ECB) Loan is secured by the first charge on the company's movable fixed assets pertaining to the 18.75 MW Wind Farm facilities.)
- Rupee Term Loans	265.000
(Secured by first charge on Wind Mills created out of the respective loans)
(b) Working Capital from Banks
Cash Credit	30.478
Buyer's Credit	106.391
Short Term Loan	100.000
Post Shipment Credit	23.986
Pre-Shipment Credit - Foreign Currency	156.135
Pre-Shipment Credit	20.000
(Working Capital facilities obtained from banks are secured by hypothecation of stock of raw materials, semi-finished and finished goods, consumables, stores and book debts and a second charge by way of extension of equitable Mortgage on immovable properties of the company in Kagithapuram, Karur District, Tamil Nadu.)
Total	436.990
UNSECURED LOANS
Fixed Deposits #	105.149
Short Term Loans from Banks
FCNR(B)	330.114
Pre-Shipment Credit - Foreign Currency	0.000
Pre-Shipment Credit	200.000
Buyer's Credit	113.183
Rupee Loan	90.000
# Due for repayment within one year	55.270

Banking Relations :	Satisfactory
Auditors :
Name :	Maharaj N.R. Suresh & Company Chartered Accountants
Address :	NewNo.9,OldNo.5,IILane, II Main Road, Trustpuram, Kodambakkam, Chennai -600 024

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
13,50,00,000	Equity Shares	Rs. 10/- each	Rs. 1350.000 Millions

Issued Capital :

No. of Shares	Type	Value	Amount
7,00,00,000	Equity Shares	Rs. 10/- each	Rs. 700.000 Millions

Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
6,92,10,600	Equity Shares	Rs. 10/- each	Rs. 692.106 Millions
	Add : Shares Forfeited		Rs. 1.672 Millions
	Total		Rs. 693.778 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2006	31.03.2005	31.03.2004
SHAREHOLDERS FUNDS
1] Share Capital		693.778	693.599	693.600
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		4531.403	3960.734	3798.800
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		5225.181	4654.333	4492.400
LOAN FUNDS
1] Secured Loans		2242.892	1579.497	2276.100
2] Unsecured Loans		838.446	917.775	263.800
TOTAL BORROWING		3081.338	2497.272	2539.900
DEFERRED TAX LIABILITIES		1547.600	1685.700	0.000
TOTAL		9854.119	8837.305	7032.300
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		7023.919	7178.044	7509.500
Capital work-in-progress		1151.328	108.126	96.900
INVESTMENT		11.405	11.405	81.500
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	1215.486	1229.950	1037.500
	Sundry Debtors	1277.668	1181.420	893.100
	Cash & Bank Balances	202.149	136.038	172.900
	Other Current Assets	0.000	0.000	0.0000
	Loans & Advances	1268.084	1306.688	1054.400
Total Current Assets		3963.387	3854.096	3157.900
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	1651.362	1881.237	3442.500
	Provisions	645.877	435.108	373.600
Total Current Liabilities		2297.239	2316.345	3816.100
Net Current Assets		1666.148	1537.751	(658.200)
MISCELLANEOUS EXPENSES		1.319	1.979	2.600
TOTAL		9854.119	8837.305	7032.300

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
Sales Turnover		7756.710	6410.602	6803.700
Other Income		257.361	271.652
Total Income		8014.071	6682.254	6803.700
Profit/(Loss) Before Tax		1014.736	391.695	685.700
Provision for Taxation		209.279	12.235	157.300
Profit/(Loss) After Tax		805.457	379.460	528.400
Earnings in Foreign Currency :
	Export Earnings	1175.476	1187.438	872.383
Total Earnings		1175.476	1187.438	872.383
Imports :
	Raw Materials	745.117	742.359	433.887
	Stores & Spares	193.135	158.539	135.295
	Imported coal	970.929	872.094	405.269
	Capital Goods	111.953	27.844	33.911
Total Imports		2021.134	1800.836	1008.362
Expenditures :
	Manufacturing expenses	4951.742	4444.805	1524.900
	Personnel expenses	516.668	535.800	0.000
	Administration, selling & other expenses	652.327	528.976	719.800
	Interest and finance charges	202.885	162.148	162.500
	Depreciation/amortisation	624.964	618.830	601.500
	Raw Materials	0.000	0.000	741.000
	Excise Duty	0.000	0.000	488.900
	Power and Fuel Cost	0.000	0.000	1287.300
	Employees Cost	0.000	0.000	469.100
	Miscellaneous Expenses	0.000	0.000	123.000
Total Expenditure		6948.586	6290.559	6118.000

QUARTERLY RESULTS

PARTICULARS	30.06.2006	30.09.2006	31.12.2006
Type	1st Qtr	2nd Qtr	3rd Qtr
Sales Turnover	1793.200	2354.500	2144.500
Other Income	43.800	58.100	75.900
Total Income	1837.000	2412.600	2220.400
Total Expenditure	1357.100	1861.100	1706.500
Operating Profit	479.900	551.500	513.900
Interest	53.200	56.000	41.100
Gross Profit	426.700	495.500	472.800
Depreciation	158.000	160.900	162.200
Tax	82.300	103.400	105.100
Reported PAT	188.100	232.300	223.000

200606 Quarter 1 –

EPS is Basic Status of Investor Complaints for the quarter ended June, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 25 Complaints disposed off during the quarter 25 Complaints unresolved at the end of the quarter Nil 1. The above results for the quarter ended June 30, 2006, which are subject to a 'Limited Review' by the auditors of the company have been reviewed by the Audit Committee and taken on record by the Board of Directors in their respective meetings held on July 20, 2006. Wherever necessary, previous year figures have been regrouped to conform to current year's classification, 2. The impact of changes in exchange rates pertaining to foreign currency assets/liabilities outstanding as on June 30, 2006 except those covered by forward contracts, has not been considered. The same will be considered on the date of settlement or at the year end, whichever is earlier. In case such items are revalued based on the closing exchange rate on, June 30, 2006, the net profit would have been lower by Rs 11.20 million. 3. Energy is treated as a reportable segment from the current quarter.

200609 Quarter 2 –

Expenditure Includes (Increase) / Decrease in Stock in Trade Rs 68.20 million (Increase)/Decrease in stock of Raw materials Rs 107.60 million Raw Material & Chemicals Rs 621.40 million Power, Fuel & Water Charges Rs 468.30 million Personnel Expenses Rs 156.00 million Repairs & Maintenance Rs 142.10 million Other Expenditure Rs 297.50 million Tax includes Provision for Current Tax Rs 102.30 million Deferred Tax Rs (1.10) million Fringe Benefit Tax Rs 1.10 million EPS is Basic Status of Investor Complaints for the quarter ended September 30, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 22 Complaints disposed off during the quarter 22 Complaints unresolved at the end of the quarter Nil 1. The above results for the quarter ended September 30, 2006, which are subject to a Limited Review by the auditors of the company have been reviewed by the Audit Committee and taken on record by the Board of Directors in their respective meetings held on October 12, 2006. Wherever necessary, previous year's figures have been regrouped to conform to current year's classification. 2. The Board of Directors have declared interim dividend of 15% and fixed the record date for payment of interim dividend as 27th Oct 2006. 3. The impact of changes in exchange rates pertaining to foreign currency assets liabilities outstanding as on September 30, 2006, except those covered by forward contracts, has not been considered. The same will be considered on the date of settlement or at the year end, whichever is earlier. In case such items are revalued based on the closing exchange rate on September 30, 2006, the net profit would have been lower by Rs 0.115 million. 4. Energy is treated as a reportable segment from the current year. 5. Effective from April 01, 2006, the ICAI has issued revised AS-15(R) on Employee benefits the Company is in the process of ascertaining the impact of said revised AS-15 and the necessary provision in respect of additional liability if any, will be made at the year end.

200612 Quarter 3 –

Expenditure Includes (Increase) / Decrease in Stock in Trade Rs 67.00 million (Increase)/Decrease in stock of Raw materials Rs 19.30 million Raw Material & Chemicals Rs 601.80 million Power, Fuel & Water Charges Rs 454.60 million Personnel Expenses Rs 163.80 million Repairs & Maintenance Rs 145.50 million Other Expenditure Rs 254.50 million Tax includes Provision for Current Tax Rs 103.90 million Deferred Tax Rs (17.50) million Fringe Benefit Tax Rs 1.20 million EPS is Basic Status of Investor Complaints for the quarter ended December 31, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 16 Complaints disposed off during the quarter 16 Complaints unresolved at the end of the quarter Nil 1. The above results for the quarter ended December 31, 2006, which are subject to a Limited Review by the auditors of the company have been reviewed by the Audit Committee and taken on record by the Board of Directors in their respective meetings held on January 23, 2007. Wherever necessary, previous year's figures have been regrouped to conform to current year's classification. 2. The impact of changes in exchange rates pertaining to foreign currency assets / liabilities outstanding as on December 31, 2006, except those covered by forward contracts, has not been considered. The same will be considered on the date of settlement or at the year end, whichever is earlier. In case such items are revalued based on the closing exchange rate on December 31, 2006, the net profit would have been lower by Rs 0.40 million. 3. Energy is treated as a reportable segment from the current year. 4. Effective from April 01, 2006, the ICAI has issued revised AS-15(R) on Employee benefits. The Company is in the process of ascertaining the impact of said revised AS-15 and the necessary provision in respect of additional liability if any, will be made at the year end.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt-Equity Ratio	0.56	0.55	0.67
Long Term Debt-Equity Ratio	0.32	0.36	0.53
Current Ratio	0.76	0.73	0.71
TURNOVER RATIOS
Fixed Assets	0.62	0.53	0.48
Inventory	7.16	6.40	6.29
Debtors	7.12	7.00	6.88
Interest Cover Ratio	6.00	3.42	5.22
Operating Profit Margin(%)	21.33	16.16	22.92
Profit Before Interest And Tax Margin(%)	13.91	7.63	13.41
Cash Profit Margin(%)	16.62	13.76	17.86
Adjusted Net Profit Margin(%)	9.20	5.23	8.35
Return On Capital Employed(%)	15.76	7.81	11.83
Return On Net Worth(%)	16.31	8.30	12.27

STOCK PRICES

Face Value	Rs.10.00/-
High	Rs.90.00/-
Low	Rs.87.05/-

LOCAL AGENCY FURTHER INFORMATION

FIXED ASSETS

Tangible Assets

Ø Land

Ø Buildings

Ø On Free Hold Land

Ø On Lease Hold Land

Ø Railway Sidings

Ø Plant & Machinery

Ø On Free Hold Land

Ø On Lease Hold Land

Ø Furniture, Fixtures &

Ø Other Equipments

Ø Vehicles

Intangible Assets

Ø Computer Software

HISTORY

Tamilnadu Newsprint and Papers (TNPL) was promoted by the Government of Tamilnadu for manufacturing newsprint and printing and writing paper using bagasse as the chief raw material at its plant in Pugalur, Karur district, with technical assistance from Beloit Corporation Research Centre, US.

TNPL was incorporated in Apr.'79, with an installed capacity to manufacture 50,000 tpa of newsprint and 40,000 tpa of printing and writing paper. Commercial production commenced in 1985. 

It undertook an expansion programme to double its capacity from 90,000 tpa to 1,80,000 tpa. The expanded production commenced operations in Jan.'96. The project was funded by a World Bank loan of US $ 75 mln (Rs 2630 Millions), internal generation of Rs 750 Millions and term loans of around Rs 800 Millions For this major expansion, TNPL also went public in Nov.'95 at a premium of Rs 100 per share, aggregating Rs 2200 Millions. Its products are exported to Egypt, Srilanka, Jordan, Iran and Indonesia. 

During 1998-99, the company signed an MOU with Quena Newsprint, Egypt for providing technical assistance and support for erection and commissioning of a Newsprint and Paper Mill in Egypt. It has also received ISO 9001 certification for development, manufacture and supply of NP and PWP.  

The Company was honoured with the 'Mother Teresa Award' for the best corporate citizen for the year 1999 for its outstanding social commitment, exploring eco-friendly technology, professional management and customer friendly and community caring enterprise. It was also awarded the 'Paper Mill of the year 2001-02' by IPMA. 

TNPL has increased the capacity to 0.23 Millions tonnes through the rebuild of the paper machines. These upgradation plans which were chalked out during 2002 was completed successfully in 2003 at a cost of Rs.1400 Millions. The company hopes to hit the bottomline of Rs.1000 Millions in 2003-04. TNPL is also having potentital of expanding its capacity to 3.5 lakh tonne in its Pugalur plant. It is also open to acquisition. During 2000-2001, the Company increased its wind farm capacity from 15 MW to 18 MW, by installing 4 nos of 750 KW wind turbines at Devarkulam at a cost of Rs 100.700 Millions. 

During 2004-05 the company has taken up The Mill Development Plan (MDP) for implementation at a capital outlay of Rs.5650 Millions. Under MDP the company has proposed to replace the existing old hardwood pulp line with a new state-of-art 300 tpd hardwood pulp line with ECF bleaching, recovery boiler and other facilites. This project is expected to be completed by November 2006. 

During 2005-2006, the company set up a Bio-methanation plant for generating methane gas (bio-gas) around 15000 M3 per day from bagasse wash water. The company also increased the wind farm capacity from 21.75 MW to 28 MW by installing 5 Nos of 1250 KW wind energy generators at Devarkulam during February 2006. 

The companies production capacity of Newsprint/Printing & Writing Paper stood at 230000 TPA during the year 2005-2006.

OVERALL PERFORMANCE 

The company has achieved an overall capacity utilization of 100% against 85.47% in the previous year. The production was higher by 33,838 MT over the previous year. 

The production mix of newsprint and printing & writing paper was 2:98 against 4:96 in the previous year. The company's strategy of keeping the production mix flexible between newsprint and printing & writing paper has improved the sales revenue and the profit. 

During the year, the company has exported 38,645 MT of printing & writing paper against 41,264 MT in the previous year. The company has sold the entire production and achieved zero stock of finished goods as on 31.3.2006. This is the 15th year in which the company has achieved 'zero stock' of finished goods at the end of the financial year. This is a unique record in the Paper Industry. 

In-house hardwood pulp production reached a new peak of 41,907 MT registering an improvement of 3644 MT over the previous year. This is the sixth year in which the company has increased the hardwood pulp production in a row. The company has produced 4280.18 lakh units of power during the year against 3810.56 lakh units in the previous year. Of this, 831.38 lakh units were exported to the State grid. During the year, the company has drawn only 14.76 lakh units of power from the State grid, equivalent to 0.43% of the total consumption. This has enabled the company to control the cost on the energy front. 

Consequent on the good monsoon and increased sugar cane production, bagasse supplies have increased and the bagasse stock as on 31.03.2006 swelled to 315000 MT. With the abundant availability of bagasse, the company has stopped procuring bagasse from distant sources to keep the cost low. There was no water shortage during the year. The company has maintained water conservation measures and kept the water consumption at 104 KL per MT of finished production. 

The company set up a novel bio-methanation plant for generating methane gas (bio-gas) around 15000M3 per day from bagasse wash water. The bio-gas is used as fuel in the lime-kiln replacing usage of furnace oil around 10 KL per day. The company has registered the project under Clean Development Mechanism (CDM) with UNFCCC and has obtained 82955 CERs (Certified Emission Reduction) for the period from 1.8.2003 to 31.12.2005. In addition, the company will be generating about 37000 CERs per annum upto 31St July 2013. The company's bio-methanation plant is the country's first ever CDM Project in the waste management sector, to be registered with the UNFCCC and the first CDM Project from the Indian Paper Industry. 

MARKET TRENDS 

Newsprint is in an uptrend right from March 2003. The imported newsprint price has increased from USD 590 per MT during January - March 2005 to USD 670 per MT during January-March 2006 and to USD 700 per MT for supplies during April-June 2006. Correspondingly, the newsprint price in the domestic market has also increased from Rs. 26,250 per MT during January-March 2005 to Rs. 30,250 per MT during January-March 2006 and to Rs. 31,500 per MT for supplies during April-June 2006. 

Printing & Writing Paper market was stable throughout the year. To neutralize partly the cumulative adverse impact of the cost increase, printing & writing paper prices were increased in the domestic as well as export sales. 

Pulp price in the International market was stable during the year, price ranging from USD 486 to USD 540 per MT in the case of soft wood pulp and USD 482 to USD 513 in the case of hardwood pulp. However, imported softwood pulp price has increased to USD 650 per MT and hardwood pulp USD 570 per MT since April 2006. 

To overcome the competition from 'B' Grade Mills, and to improve the sales realization, the company has increased the production of value added products viz. TNPL Copier, Ultrawhite Maplitho, Hi-tech Maplitho, Offset Printing and TNPL Elegant Printing from 78368 Mts. in 2004-05 to 105259 Mts. in 2005-06. 

During the year, the Government of India has reduced the export incentive for printing & writing paper from 9% to 7% for Sheets & Cut size papers with effect from 26.05.2005 and from 4% to 3% for Reels with effect from 14.9.2004. During the year, the company has exported 38,645 MT of PWP to 22 countries. 

OUTLOOK 

The domestic consumption of Newsprint is expected to grow by 5% per annum and printing & writing paper by 6% per annum. The pulp price in the international market has firmed up from April 2006. However, paper price in the international market has increased only marginally. With the steep increase in the pulp prices, the paper prices in the international market may rise in the near term. 

The market for surface sized paper is expected to grow by 8% and Copier paper by 15% per annum. With the installation of the state of the art Size Press in PM-I, Copier  production has been increased from 19311 MT in 2003-04 to 28,141 MT in 2004-05 and 37,645 MT in 2005-06 registering a growth of 46% in 2004-05 and 34% in 2005-06. The company has set a target of 42,000 MT of Copier production for the year 2006-07. 

The newsprint market is also showing a positive trend. The newsprint price in the international market has increased to USD 700 per MT during April - June 2006. The price is expected to remain firm during the current year. 

In the Union Budget 2006-07, the Government has reduced the excise duty on printing & writing paper from 16% to 12% effective from 1.3.2006. Import duty on printing & writing paper has been reduced from 15% to 12.5% with effect from 1.3.2006. Import duty on newsprint is retained at 5%. Cenvatable countervailing duty of 4% introduced in the Union Budget 2006-07 is applicable for printing & writing paper. Newsprint is exempted from the levy of countervailing duty. 

HIGHLIGHTS OF THE YEAR 

- Achieved highest production of 2,30,079 MT and highest sales of 230079 MT Production during the year was higher by 33,838 MT over the previous year. Sales during the year was higher by 28792 MT compared to the previous year. 

- Achieved highest production of 37,645 MT of TNPL Copier Paper against 28,141 MT in the previous year registering a growth of 34%. 

- Achieved highest Hardwood Pulp production of 41,907 MT against 38,263 MT in the previous year. This is the sixth consecutive year in which the company has increased the Hardwood Pulp production. 

- Exported 38,645 MT of Printing & Writing Paper during the year valuing Rs. 1175.500 Millions on FOB basis. This is the highest export of wood free uncoated printing & writing paper from India during 2005-06. 

- Introduced a new product, namely, 'TNPL Copy Crown' for Inkjet and laser printers. 

- Implemented Farm Forestry Scheme in 6054 acres benefiting 1466 farmers in nine districts and Captive Plantation in 188 acres. Total area covered under Farm Forestry Scheme and Captive Plantation during the year is 6242 acres against 3076 acres in the previous year. It is proposed to implement the Farm Forestry Scheme and Captive Plantation in about 10000 acres during 2006-07. 

- Achieved Zero Stock of finished goods (NP & PWP) at the end of the financial year. This is the 15t' year in which the company has achieved Zero Stock (NP & PWP) at the end of the financial year. 

- Received the Special Export Award from CAPEXIL for the seventh consecutive year in recognition of the outstanding export performance. 

- The Mill Development Plan has been taken up for implementation at a capital outlay of Rs.5650 Millions. The project will be implemented before 31.3.2007. 

- Processed 16,70,636 M3 of Black liquor in energy efficient falling film evaporator, against 14,62,850 M3 in the previous year. 

 - Registered the Bio-Methanation project with United Nations Framework Convention Climate Change (UNFCCC) as the country's first CDM Project in the waste management sector. The project generates about 37,000 CERs per annum. 82955 CERs have been received from UNFCCC for the period from 1.8.2003 to 31.12.2005. 

WIND FARM 

The company has increased the wind farm capacity from 21.75 MW to 28 MW by installing 5 Nos. of 1250 KW wind energy generators at Devarkulam during February 2006. During the year under review, the company has generated 309.31 lakh units of wind power against 348.86 lakh units in the previous year. The wind farm, has earned a profit of Rs.17.71 lakhs during the year. 

EXPORTS 

The company has exported 38,645 MT of woodfree uncoated printing & writing paper valuing Rs. 1284.400 Millions (C & F) during the year 2005-06. The company has set a target of 42000 MT for exports during 2006-07. 

MANAGEMENT DISCUSSION AND ANALYSIS 

INDUSTRY SCENARIO 

The Indian Paper Industry ranks 1511 among the global producers. The industry is fragmented with over 600 units. Capacity is ranging from 3 tpd to 700 tpd. Total production capacity is 7.82 million tonnes. Actual production is 5.94 million tonnes. Consumption 6.378 million tonnes. 12 top players with a capacity of over 0.1 Millions tonnes per annum account for a production of 2 million tonnes equivalent to 1/3,d of the total production. Indian average per capita paper consumption is 6 kg. against the Asian average of 45 kg. and world average of 54 kg. The economic growth and the increase in the literacy rate are expected to increase the per capita consumption to 8-9 kg. by 2010 and 11-12 kg. by 2015. 

The compounded average growth rate in the last three years is 5.47%. The current growth rate is estimated at 5% for NP and 6% for PWP. Within PWP, non-surface sized papers are expected to grow at 3-4%, Surface sized paper at 6-8% and copier at 15%. Raw material shortage, high capital outlay, strict environmental regulations are the major entry barriers for the industry. Because of the entry barriers, only very few greenfield projects are at sight. Many `A' grade mills are upgrading their facilities with cleaner technology for improving their competitiveness. Some 'B' grade mills are also expanding their capacity. Small mills not complying with environmental regulations may be forced to close down their operation in course of time. The demand for quality products is on the rise. 

The industry is open to competition from the global players. Imports are freely allowed. In the Union Budget 2006-07, the import duty on paper has been reduced from 15% to 12.5% with effect from 1.3.2006. Countervailing duty of 4% introduced with effect from 1.3.2006 is levied on PWP Import duty on newsprint is retained at 5%. Countervailing duty is not levied on newsprint imports. IPMA member mills have exported around 0.2 Millions mts. during 2005-06. Imports during 2005-06 was 0.9 Millions mts. This includes newsprint imports of 0.7 Millions mts. 

STRATEGY 

With the increasing competition the manufacturing units are compelled to upgrade the technology and the scale of operation to supply quality products at competitive rates. TNPLs strategy in this regard has been to restructure tile company thoroughly to impart to it the ability to meet the adverse conditions and evolve as a globally competitive low cost producer. The strategy adopted in this regard are discussed hereunder: 

Technology upgradation 

Work continuously on cost reduction 

Redesign the financial structure to bring down the interest costs 

Get customer centric 

Be an innovative company 

Development of Human Resources 

The strategy has worked well and facilitated the company to post a healthy profit during 2005-06. 

Technology Upgradation 

TNPL expanded the capacity from 90000 tpa to 180000 tpa during 1993-96 by installing a new Paper Machine. Then enhanced the capacity to 230000 tpa curing 2002-03 through upgradation of Paper Machines. Under the Mill Development Plan being implemented, the existing hardwood line of 120 tpd will be replaced with a new 300 tpd hardwood line with ECF bleaching. The existing two Chemical bagasse bleach lines with a total capacity of 400 tpd will be replaced with a single line of 500 tpd with ECF bleaching. The paper capacity will be increased from 230000 tpa to 245000 tpa. The cut pack line capacity will be expanded from 150 tpd to 350 tpd by December 2006 through adding a new Cut Pack line of 200 tpd. 

The emphasis on the economies of scale and technology upgradation has transformed the company into an efficient producer in the global arena. 

Work Continuously on Cost Reduction 

Companies capable of keeping the cost of production low alone can survive the increasing competition. Having this in view, TNPL has been working continuously on cost reduction measures. The focus has been on pulp and energy cost. Hardwood pulp production was increased from 38263 rats. in 2004-05 to 41907 mts. in 2005-06. This is the sixth year in a row in which the hardwood pulp production has been increased with the existing facilities. Pulp furnish is optimized through usage of purchased pulp of different varieties. 

Captive power capacity was increased from 36.5 MW to 61.12 MW during 2001-02. The capacity will be increased to 81.12 MW during 2006-07 by adding a new 20 MW TG under Mill Development Plan. TNPL will be self-sufficient in power even after enhancing the pulp & paper capacity under MDP. Surplus power will continue to be exported to the State grid. 

CONTINGENT LIABILITIES

Description of the Contingent Liability	Estimated Amount in Millions	Indication of Uncertainty
Letters of Credit issued by Banks on behalf of Company	1510.179	Performance or Non-performance of various parties.
Guarantees issued by the Banks on behalf of the Company	127.830	-do-
Claims against the Company not acknowledged as debts relating to Statutory Dues:		All are disputed before concerned appellate authorities. The Company is advised that the cases are likely to be disposed off in favour of the Company.
i) Income Tax	23.157
ii) Wealth Tax	1.022
Hi) Customs Duty	27.121
iv) Excise Duty	60.483
v) Service Tax	--
vi) Sales Tax	--
Claims against the Company
not acknowledged as debts -
Others:
i) Corporate Office Land -		All are disputed before concerned appellate authorities. The Company is advised that the cases are likely to be disposed off in favour of the Company.
Penal Interest	2.280
ii) Land Acquisition Claims	2.598
iii) Cess on Land Lease at	5.531
Perungudi - Windfarm
iv) Interest on Water Royalty
Paid belatedly	8.248
v) Others	36.694
Concession in Customs Duty availed for imports cleared under Export Promotion on Capital Goods Scheme	94.676	Possibilities of not meeting minimum export quantity requirements by the Company.

It is in trade terms with :-

Ø Shanth Chemicals, Madurai, Tamilnadu

Ø VE1 Industries

Ø Kamalas Graphics

Ø J M Voith GmbH, P. O. Box 1940, D-7920, Heidenheim, Germany

Ø Fibro Source USA Inc, 989, Old Eagle School Road, Suite 810, Wayne PA 19087, USA

Ø Elof Hansson Pulp Inc, 565, Taxter Road, Elmsford NY 10523, USA

Ø Elof Hansson AB, Machinery Export Division, SE-41380, Goteborg, Sweden

Ø Navneet Publications Limited, Navneet House, Gurukal Road, Memnagar, Ahmedabad – 380 052, Gujarat

Ø Tamilnadu Text Book Corporation, 68, College Road, Chennai – 600 006, Tamilnadu

Ø Pandiyan Paper Company, 59, Anderson Street, Chennai – 600 001, Tamilnadu

Profile

- Promoted by the Government of Tamil Nadu in 1979

- Loan assistance extended by World Bank twice .

- Largest producer of Bagasse based paper in the world. Annual consumption of bagasse slated to touch 1 million tonnes per annum.

- Installed Capacity - 2,30,000 tpa

Vision

To be the market leader in the manufacture of world class eco-friendly papers, by adopting innovative technologies for sustainable development.

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.40.90
UK Pound	1	Rs.81.29
Euro	1	Rs.55.47

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	7
PAID-UP CAPITAL	1~10	5
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	5
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	7
--RESERVES	1~10	7
--CREDIT LINES	1~10	6
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		59

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions