MIRA
INFORM REPORT
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Report Date : |
12.10.2007 |
IDENTIFICATION DETAILS
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Name : |
J K PAPER LIMITED |
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Registered Office : |
P O Central Pulp Mills, |
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Country : |
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Financials (as on) : |
30.06.2006 |
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Date of Incorporation : |
04.07.1960 |
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Com. Reg. No.: |
018099 |
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CIN No.: [Company
Identification No.] |
L21010GJ1960PLC018099 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
BBNJ00250F |
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PAN No.: [Permanent
Account No.] |
AAACT6305N |
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Legal Form : |
Public Limited Liability Company. The Company’s shares are listed on the Stock Exchanges. |
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Line of Business : |
Manufacturer and Marketer of Paper. |
RATING & COMMENTS
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MIRA’s Rating : |
A |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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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 |
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Maximum Credit Limit : |
USD 16000000 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is an old and well established company engaged in manufacturing and marketing of Paper and Board and Pulp. It is one of the reputed companies in the J. K. Group of Industries. The company’s products are popular in the market. The company’s overall performance and progress have been good. Trade relations are reported as fair. Payments are correct and as per commitments. It can be considered good for business dealings at usual trade terms and conditions. |
LOCATIONS
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Registered Office : |
P O Central Pulp Mills,
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Tel. No.: |
91-2624-222078/9/221228/222080 |
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Fax No.: |
91-2624-221138 |
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E-Mail : |
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Website : |
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Administrative Office : |
Nehru House, 4, Bahadur Shah Zafar Marg, |
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E-Mail: |
For Marketing enquiries: marketing@jkmail.com For Export enquiries: vikasgupta@jkmail.com For Purchase enquiries: amitdatta@jkmail.com |
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Factory : |
Subject Mills Phone:
91-2624-220228 / 220278 / 220279 / 220280 |
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Branches : |
NORTH ZONE
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Other Branches: |
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DIRECTORS
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Name : |
Mr. Hari Shankar Singhania |
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Designation : |
Chairman |
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Name : |
Mr. Harsh Pati Singhania |
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Designation : |
Managing Director |
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Name : |
Mr. Shailendra Swarup |
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Designation : |
Director |
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Name : |
Mr. Dhirendra Kumar |
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Designation : |
Director |
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Name : |
Mr. Gajanan Khaitan |
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Designation : |
Director |
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Name : |
Mr. P. K. Kaul |
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Designation : |
Director |
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Name : |
Mr. Om Prakash Goyal |
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Designation : |
Whole-time Director |
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Name : |
Mr. S. K. Pajhak |
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Designation : |
Director |
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Name : |
Mr. Jitendra Balkrishnan |
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Designation : |
Director |
KEY EXECUTIVES
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Name : |
Mr. S. C. Gupta |
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Designation : |
Company Secretary |
MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN
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Names of Shareholders |
No. of Shares |
Percentage of
Holding |
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Domestic Companies |
33752110 |
43.19 |
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Resident Individuals |
18218405 |
23.31 |
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FIs, Mutual Funds and Banks |
8157714 |
10.44 |
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Custodian for GDRs |
7700000 |
9.85 |
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Foreign Investors/ FIIs/NRIs |
10321710 |
13.21 |
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Total |
78149939 |
100.00 |
BUSINESS DETAILS
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Line of Business : |
Manufacturer and Marketer of Paper. |
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Products : |
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Brand Names : |
v J K Copier v J K Easy Copier v J K Laser, Finesse v J K Evernite, J K Excel Bond v J K Bond v J K SHB Maplitho v CPM Parchment v J K MICR |
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Exports : |
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Countries : |
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Terms : |
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Selling : |
D/A or D/P |
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Purchasing : |
D/A or D/P |
PRODUCTION STATUS- as on 30.06.2006
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Particulars |
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Unit |
Installed
Capacity |
Actual
Production |
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Paper and Board including Pulp for sale |
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Tonnes |
180000 |
184982 |
GENERAL INFORMATION
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No. of Employees : |
600 |
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Bankers : |
+
State Bank of + Bank of Maharashtra + Canara Bank + UTI Bank |
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Facilities : |
Notes:
(i)
Zero Coupon Bonds - I (ZCBs –I) of Rs. 1,000 each aggregating to Rs. 58.606
millions, Series A & Series B (each of Rs. 29.303 millions) are
Redeemable in 2 equal half yearly installments commencing from October 2008
and October 2009 respectively. Zero Coupon Bonds - II (ZCBs – II) of Rs.
1,000 each aggregating to Rs. 55.816 millions, Series A, Series B (each of
Rs. 18.603 millions) & Series C (Rs. 18.610 millions) are redeemable in 2
equal half yearly installments commencing from October 2007, October 2008 and
October 2009 respectively. ZCBs
I & ZCBs II are secured by a first Mortgage and charge on all the
immovable properties of the Company situated at Distt. Mehsana, (ii)
Term Loans of Rs. 754.761 millions (FIs – Rs. 149.267 millions, Banks Rs.
6,05.494 millions) are secured by first pari passu charge created/to be
created on the immovable & movable assets of Unit JK Paper Mills and
immovable & moveable assets acquired after 1.4.2000 of Unit Central Pulp
Mills of the Company. Necessary
steps and formalities to extinguish the charges of debt not relating to the
Paper Undertaking (JK Paper Mills) transferred to the Company are being taken
in consultation with the Financial Institutions/Banks. (iii)
Terms Loans of Rs. 31,30.047 millions (FIs – Rs. 89.930 millions, Banks Rs.
30,40.117 millions) are secured by means of first pari passu mortgage/ charge
created/to be created on the fixed assets of the company save and accept
specific assets exclusively charged in favour of specified lenders as
mentioned in clause B and C. B Term
Loan of Rs. 309.310 millions from banks and Direct discounting facility
(equipment) of Rs. 160.000 millions from Financial Institution are secured by
an exclusive charge by way of hypothecation on the specified assets of the
Company. C Term
Loan of Rs. 168.750 millions from bank is secured by first pari passu charge
on immovable and movable assets of Unit Central Pulp Mills existing before
1.4.2000. The said mortgage and charge shall rank pari passu with the
mortgages and charges created and/or to be created in favour of other
participating financial institutions/banks. D Working
Capital Loans are secured by hypothecation of Stores, Raw Materials, Finished
Goods, Stock-in-Process and Book Debts. The same are further secured / to be
secured by a second charge on the immovable assets of the Company. E Installments
of Term Loans repayable within one year - Rs. 863.823 millions. F Terms
loans from Financial Institutions and Banks include Rs. 379.520 millions
foreign currency loans.
Note: During
the year, Company issued 1.25% FCCBs of a face value of US $ 100,000 each at par,
aggregating to US $ 5 Million to finance capital expenditure. The bondholders
have an option to convert FCCBs into equity shares at an initial conversion
price of Rs. 95 per equity share at a fixed rate of exchange of Rs. 44.69=US
$ 1, from 4th April, 2006 to 17th March, 2011. The bonds are redeemable on
30th March, 2011 at 130.441 percent of the principal amount, unless
previously converted or purchased and cancelled. Premium on redemption, if
any, will be provided in the year of redemption. |
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Banking
Relations : |
Satisfactory |
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Auditors : |
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Name : |
+ S.S. Kothari and Company Chartered Accountants + Lodha and Company Chartered Accountants |
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Membership: |
JK Organization |
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Group Companies: |
v
JK Tyre v
JK Seeds v
Fenner v
JK Dairy v
JK Sugar v
CliniRx Research v
PSRi |
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Associates/Subsidiaries : |
+ J. K. Industries Limited + HJ Corp Limited + JK Lakshmi Cement Limited |
CAPITAL STRUCTURE
Authorized Capital:
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No. of Shares |
Type |
Value |
Amount |
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200000000 |
Equity Shares |
Rs. 10.00 each |
Rs. 2000.000 Millions |
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30000000 |
Redeemable Preferences Share |
Rs. 100.00 each |
Rs. 3000.000 millions |
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Total |
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Rs.
5000.000 millions |
Issued, Subscribed & Paid-up Capital:
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No. of Shares |
Type |
Value |
Amount |
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78149939 |
Equity Shares |
Rs. 10.00 each |
Rs. 781.499 millions |
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157000 |
10% Cumulative Redeemable Preferences Shares |
Rs. 100.00 each |
Rs. 15.700 millions |
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5200000 |
3.75% Cumulative Redeemable Preferences Shares |
Rs. 100.00
each |
Rs. 520.000 millions |
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Total |
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Rs. 1317.199 millions |
Notes:
(a)
During the year, Company issued 1, 53, 80,000 equity shares on preferential basis
at a price of Rs. 65 per share (including share premium of Rs. 55 per share)
and 77, 00,000 equity shares in the form of Global Depository Receipts (GDR’s)
at a price of US $ 1.54 (Rs. 69 per share including share premium of Rs. 59 per
share) per GDR (each GDR representing one underlying equity share of Rs. 10/-).
(b)
These shares were allotted as fully paid-up pursuant to the Scheme sanctioned
by the Hon’ble High Courts of Orissa & Gujarat. Company has redeemed 10%
Cumulative Redeemable Preference Shares (Series A) of Rs.14.300 millions with
premium of Rs. 54.500 millions Series B, C & D of Rs. 7.600 millions, Rs.
4.000 millions and Rs. 2.100 millions are redeemable on 30th day of June, 2007,
2008 and 2009 respectively alongwith premium on redemption of Rs. 54.500
millions with each Series. Series E, F and G of Rs. 1.100 millions, Rs. 0.600
million and Rs. 0.300 million are redeemable on 30th day of June, 2010, 2011
and 2012 respectively alongwith premium on redemption of Rs. 54.600 millions
with each Series.
(c)
Redeemable in three annual installments of Rs. 30, Rs. 30 and Rs. 40 on each
share on 29th November 2017, 29th November 2018 and 29th November 2019
respectively.
FINANCIAL DATA
[all figures are
in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES OF FUNDS |
30.06.2006 |
30.06.2005 |
30.06.2004 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
1317.200 |
1100.700 |
2070.700 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
2836.500 |
1443.100 |
1496.300 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
4153.700 |
2543.800 |
3567.000 |
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LOAN FUNDS |
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1] Secured Loans |
4961.300 |
5709.300 |
4524.900 |
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2] Unsecured Loans |
616.400 |
493.100 |
581.800 |
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TOTAL BORROWING |
5577.700 |
6202.400 |
5106.700 |
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DEFERRED TAX LIABILITIES |
683.500 |
504.100 |
555.900 |
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TOTAL |
10414.900 |
9250.300 |
9229.600 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
6858.500 |
6049.300 |
6107.700 |
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Capital work-in-progress |
1089.400 |
936.700 |
589.100 |
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INVESTMENT |
136.100 |
195.300 |
340.100 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
896.000
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726.300 |
642.300 |
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Sundry Debtors |
1169.900
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914.200 |
905.800 |
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Cash & Bank Balances |
67.500
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45.900 |
57.700 |
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Other Current Assets |
0.000
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0.000 |
0.000 |
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Loans & Advances |
1421.000
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1616.100 |
1563.800 |
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Total
Current Assets |
3554.400
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3302.500 |
3169.600 |
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Less : CURRENT
LIABILITIES & PROVISIONS |
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Current Liabilities |
1263.60
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1305.600 |
1041.900 |
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Provisions |
0.000
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0.000 |
0.000 |
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Total
Current Liabilities |
1263.60
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1305.600 |
1041.900 |
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Net Current Assets |
2290.800
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1996.900 |
2127.700 |
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MISCELLANEOUS EXPENSES |
40.100 |
72.100 |
65.000 |
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TOTAL |
10414.900 |
9250.300 |
9229.600 |
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PROFIT & LOSS
ACCOUNT
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PARTICULARS |
30.06.2006 |
30.06.2005 |
30.06.2004 |
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Sales Turnover |
6637.500 |
5700.900 |
6346.100 |
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Other Income |
71.100 |
6.300 |
0.000 |
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Total Income |
6708.600 |
5707.200 |
6346.100 |
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Profit/(Loss) Before Tax |
543.300 |
386.000 |
665.700 |
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Provision for Taxation |
188.100 |
0.700 |
253.500 |
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Profit/(Loss) After Tax |
355.200 |
385.300 |
412.200 |
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Export Value |
341.981 |
502.846 |
476.884 |
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Imports : |
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Raw Materials |
4.388 |
30.171 |
0.098 |
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Stores & Spares |
85.629 |
17.859 |
31.291 |
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Capital Goods |
380.472 |
95.328 |
120.717 |
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Others |
0.000 |
43.983 |
57.943 |
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Total Imports |
470.489 |
187.341 |
210.049 |
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Expenditures : |
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Employees |
804.700 |
715.300 |
727.300 |
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Materials and Manufacturing Expenses |
4259.800 |
3482.300 |
3290.500 |
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Other Expenses |
294.100 |
336.600 |
1662.600 |
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Total Expenditure |
5358.600 |
4534.200 |
5680.400 |
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SUMMARISED RESULTS
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PARTICULARS |
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30.06.2007 (Full Year) |
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Sales Turnover |
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1868.600 |
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Other Income |
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31.900 |
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Total Income |
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1900.500 |
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Total Expenditure |
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1497.300 |
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Operating Profit |
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403.200 |
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Interest |
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|
84.700 |
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Gross Profit |
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318.500 |
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Depreciation |
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|
127.100 |
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Tax |
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|
2.500 |
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Reported PAT |
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|
123.800 |
KEY RATIOS
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PARTICULARS |
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30.06.2006 |
30.06.2005 |
30.06.2004 |
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Debt-Equity Ratio |
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1.80
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1.90 |
1.39 |
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Long Term Debt-Equity Ratio |
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1.66
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1.66 |
1.24 |
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Current Ratio |
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1.41
|
1.29 |
1.34 |
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TURNOVER RATIOS |
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Fixed Assets |
|
0.89
|
0.84 |
0.87 |
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Inventory |
|
10.38
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10.60 |
10.76 |
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Debtors |
|
8.08
|
7.97 |
8.11 |
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Interest Cover Ratio |
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2.38
|
1.85 |
2.52 |
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Operating Profit Margin |
(%) |
16.67
|
16.98 |
20.83 |
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Profit Before Interest And Tax Margin |
(%) |
11.11
|
11.56 |
15.30 |
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Cash Profit Margin |
(%) |
9.78
|
10.74 |
11.24 |
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Adjusted Net Profit Margin |
(%) |
4.22
|
5.31 |
5.72 |
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Return On Capital Employed |
(%) |
10.27
|
9.79 |
13.63 |
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Return On Net Worth |
(%) |
12.19
|
18.73 |
17.11 |
LOCAL AGENCY FURTHER INFORMATION
History
The company was incorporated on 4th July, 1960 at Pune in Maharashtra having Company Registration No. 11740 under name and style “The Central Pulp Mills Limited”.
Subject
is a member of HS Singhania group is originally promoted by Parkhe Group of
Pune to manufacture Paper and Paper products. The company which fell sick and
referred to BIFR was taken over by JK Corp Limited a member of the HS Singhania
Group in 1992. JK Corp. holds 44.76% in the equity of this company as on Nov 6,
2003.
The company has turnaround in a short period of time with the
rehabilitation package by HS Singhania Group companies JK Corp Limited and JK
Industries.
Subject today has a combined installed capacity of 150000 TPA with two
integrated Paper Mills at Subject Mills, Orissa (Inst. Cap 100000 TPA) and
Central Pulp Mills,
Subject has also been consistently exporting its products to markets such
as
The company enjoys the location advantage in respect of sourcing raw material.
It sources all its bamboo requirements within the 200 Kms radius of the plant.
Further for long term continuous source of raw material the company is running
social forestry and farm forestry programmes in 11 districts of Orissa and 3
districts of Andhra Pradesh, covering a total area of over 20,000 hectares. In
2001-02 it has distributed 27 million saplings, covering over 5200 hectares
under plantations in Orissa, AP,
Subject has been a pioneer in every field related to the manufacture and
marketing of paper. It has the distinction of being the Largest manufacturer of
branded copier paper in India.; First to introduce surface sized maplitho in
India.; First to introduce high quality bond paper 'Finesse' in A4 size
consumer friendly retail packs of 100 sheets. ; First to introduce laser paper
in
The company which is well known for its success in creating brand in paper
industry with having top two paper brand(i.e. JK Copier[contributing 1400.000
millions to co's turnover in FY02-03] and JK Easy Copier) in its basket the
company has initiated outsourcing of paper products in India. This outsourcing
activity was kickstarted in the end of 2001-02 and gathered momentum last year.
The company has outsourced JK Cote (positioned in upper art paper segment) from
an international producer who produces as per the specification of Subject. The
company outsource domestically JK Eco Cote (caters to price conscious Chrome
paper segment) and 'JK Eco Print'.
The Scheme of Compromise and/or Arrangement between JK Corp Limited and The
Central Pulp Mills Limited was approved and sanctioned by the High Court of
Orissa and High Court of Gujarat and become effective on 5th November, 2001.
Subsequent to this the name of the company was changed to Subject Limited from
The Central Pulp Mills Limited.
Latest Development: Subject is
planning to upgrade over half of its paper manufacturing capacity to
manufacture coated paper. The upgradation (Conversion from non-coated to
coated) to cost around
Rs.600.000 millions.
It is a first paper mill in
Subject is running social forestry and farm forestry programmes in 11 districts of Orissa and 3 districts of Andhra Pradesh, covering a total area of over 20,000 hectares.
It has a research and development wing involved in high quality seedlings and helping farmers achieve better yields from their plantations.
Today the research and development wing having identified fast growing clones which would be able to produce 150 MT/ha of wood in a period of 7 years as against 60 MT/ha from seed route ones.
The company’s flagship brand “JK Copier”, is
Business
Performance Review
During the year under review, Gross Sales and Other Income increased by 16% to Rs.8446.200 millions and Operating Profit (PBIDT) went up to Rs.1350.000 millions.
Profit before Tax (PBT) increased by 41% to Rs.543.300 millions. After making a substantially higher provision for deferred tax compared to the previous year, Profit after Tax was Rs.355.200 millions.
The Company produced 1, 84,982 tonnes (previous year 1, 80,089 tonnes) of Paper and Market Pulp, recording capacity utilization of over 103% on enhanced capacity. It achieved record Sales of 1, 97,313 tonnes (previous year 1, 82,818 tonnes), reflecting strong market demand for its products.
The Company continued to pursue its outsourcing strategy of
getting some products manufactured to its specifications in order to fully
leverage its marketing capability and offer its customers a wider product
range.
Demand for Paper and Boards grew healthily at around 7.5% overall in 2005-06.
Subject’s focus segments i.e. value added cut-size Papers and Coated varieties
continued to record double-digit growth. The market outlook for 2006-07 remains
positive due to strong growth of the Indian economy and Government thrust on
education.
Subject maintained its dominance in the branded A-4 paper market despite
growing competitive intensity. Sales of Copier paper increased by 17% in the
domestic market. The new high end Coated Paper, launched in 2005 under the
brand name 'JK Cote', found ready acceptance in the market. The Company has
been able to increase its volume steadily in this high growth segment to
achieve a market share of 17% in the last quarter of the year. Volumes have
grown further during the current year accompanied by higher sales realization.
Demand for Company's other products like High-Bright Maplitho, Bonds and Cheque
Papers etc., also continues to be strong.
While there was an increase in overall sales realization during the year, the
Industry continued to witness a strong cost push. Prices of raw materials (wood
and bamboo) continued to rise steeply while coal and transportation costs also
increased. In order to minimize the impact, the company pursued measures to
reduce cost and improve efficiency through programmes like TPM and Operational
Excellence.
To address the issue of raw material, subject assiduously continued its efforts
to promote technology based plantations across the States of Orissa, Andhra
Pradesh, Chattisgarh, West Bengal, Maharashtra and
It distributed over 34 million saplings/clones of pulpwood
trees to farmers, covering an additional area of over 6720 hectares.
Cumulatively, a total area of over 53,000 hectares has been planted so far by
both units of the Company. This is in addition to the bamboo the Company
procures through working of leased forest areas in the States of Orissa and
CAPITAL
EXPENDITURE:
In line with Subject's strategy to focus on value added
product segments and enhance its premium product portfolio, an Oxygen Delignification
facility was commissioned at unit CPM in December 2005. This has reduced
consumption of Chlorine by 35% and commissioning of the Chlorine Dioxide plant
in the current year will further improve product quality and enhance
environment friendliness.
As reported last year, the Company is setting up a state of the art Multi Layer
Packaging Board plant at its unit CPM. The erection work is progressing
satisfactorily and the project is expected to go on stream during the second
half of the Company's current Financial Year. The market for this product
segment continues to grow strongly and the Company has already started its
market development efforts.
In order to retain Subject's leadership in the branded cut size paper market,
the Company is installing a new A-4 cutting line.
ERP System was started up during the year and its application is being
progressively enhanced.
The total capital outlay for the Expansion and Modernization programme
including investments to be made in enhancing power generation and
environmental systems is Rs.3400.000 millions.
Commitment
to Quality and Customer Satisfaction
Subject's products are widely accepted as benchmarks in the
market. It constantly seeks to enhance quality standards with improved levels
of customer service.
During the year the Company further improved the quality of its leading brands
- JK Copier and JK Easy Copier in addition to other printing and writing
papers. Advanced order tracking systems and technical support for product
application have resulted in increased customer satisfaction.
Overview
The
last decade or so has witnessed far reaching changes in the pulp and paper
industry. There has been a clear demand shift towards Asia-Pacific as major
markets such as
On
examination of the specific demand trends observed in the recent years and
based on the above mentioned phenomena, the production of paper has been
progressively shifting from Europe and North America to the emerging markets of
Asia and
Consequently,
significant new capacity is being created in Asia-Pacific supported by
reallocation of funds to the emerging markets. The increasing competition from
low cost Asian producers has had a substantial adverse impact on the
profitability of large American mills. On the other hand, the European
producers by and large attempted to establish equilibrium between supply and
demand by cutting back their capacities, particularly addressing the oldest and
highest cost capacities. Clearly, Asia (in particular
Pulp
will remain a globally traded commodity as pulping plants will be more viable
near the raw material source, thus enabling countries like
The
industry in the past has seen noticeable cyclicality. However, with more paper
capacities being added around the world, the price cycle has become shorter and
less pronounced. As a consequence of this, the industry is becoming less
volatile.
The existing high growth of Indian economy, rising exports,
favourable demographics, growing thrust on education and several macro-economic
factors places Indian paper industry on a high growth path from its current low
level of per capita consumption of paper.
The consumption pattern of the affluent and middle class is fast aligning with
the global trends, resulting in graduation to consumption of higher quality
products. This is clearly reflected in strong demand growth of high end
cut-size papers, coated grades, high bright maplitho papers and the top end of packaging
paper boards - all growing in double digits compared to average industry growth
of 7.5% in
INDUSTRY SCENARIO AND
OUTLOOK:
Global Pulp and Paper Market:
The present global demand for paper and paperboard consumption is estimated to
be 366 million tonnes which is expected to cross 400 million tonnes by 2010 and
490 million tonnes by 2020.
In respect of the global price trend of both pulp and paper,
the last year has witnessed a hardening tendency which has been more pronounced
in the case of pulp. The rising demand for pulp, mainly from
Domestic
Market:
Given the overall buoyant macroeconomic trends in
On an overall level, the domestic demand growth for Paper and Board has been
higher than the growth in capacity. The demand-supply gap has widened in the
last couple of years leading to firming up of paper prices. Hardening of
international prices and a strong cost push across the industry also
contributed to upward movement in end-product prices in the last one
year.
MARKET
FOR COMPANY'S PRODUCTS:
Moving up the Value Chain:
Consistent with its Vision statement 'To be a dynamic benchmark and leader in
the Indian paper industry', Subject has always believed in providing the Indian
consumer international quality products. The Company's recent coated paper
plant and the forthcoming packaging board project, which is expected to come on
stream in the current year, bear out the company's commitment in this
direction. This has enabled the Company to move up the value chain and enlarge
its product portfolio well beyond its traditional maplitho and cut-size categories.
With this, Subject has emerged as a company participating in all high growth
segments.
Share of value added products in the last four years has increased from 36% to
60% of its production.
During the financial year, the Company's overall domestic
sales volume registered a jump of 12% compared to overall industry growth of
7.5%. To meet the strong demand, the Company increased paper production,
intensified outsourcing and cutback exports. The company was also able to
increase its price realization beyond its competitors.
Business Communication Papers:
The market for branded cut-size paper is getting increasingly competitive and
price sensitive with entry of new players, new brands and more product
availability. There is a progressive shift from stand-alone photocopying
machines to universal printer copiers/multi-functional printers, especially in
the Corporate and
Despite growing competition, Subject continues to lead the market in
cut-size products. The Company could maintain its dominant leadership position
through sustained investment in advertising and innovative promotional
activities: JK Copier was able to maintain its price leadership by providing
customers higher value through superior product performance and service. Sales
of JK Easy Copier also continued to grow healthily.
The Company's multi-branding strategy has met with success with major
growth being recorded in brands like 'JK Copier Plus' and 'Sparkle'.
The other key brands- 'JK Excel Bond' and 'JK Bond' continued to remain popular
among consumers.
Printing and Writing Papers:
Subject has been a pioneer and benchmark in the Maplitho segment, with 'JK
Maplitho' being the printer's first choice for over last four decades. It
continues to command a premium price of nearly 3% to 5% over its next
competitor.
To meet the growing demand for high bright maplitho, the Company invested
in Oxygen Dezincification (ODL) process at unit CPM which has resulted in
improved quality with excellent customer response. During the current year, the
Company is scheduled to commission its Chlorine Dioxide plant to further
enhance the quality.
Coated Paper:
The Company's new coated paper-'JK Cote' launched in July 2005 has been
able to notch a market share of 17% in the last quarter of the year despite
stiff competition from both domestic and global players.
The company's marketing efforts focused on identifying the right customer
segments and providing tailor-made products. This was achieved by moving closer
to customers through interactive sessions at both individual and group levels
and extending the distribution network.
'JK Eco Cote' (one side coated paper) has been able to consolidate its
position in the market place. The company introduced another brand'JK Chromo'
which has gained popularity.
Outsourcing:
Beyond manufacturing, the Company has been aggressively outsourcing
products as reflected in its successful development of 'JK Eco Cote', 'JK
Chromo' and 'Maplitho CG' grades. These initiatives have enhanced JK's image of
a customer focused company by addressing their varied needs and offering a
wider product basket.
The Company's domestic outsourced volume grew by 28% during the year.
Market Pulp:
The Company has been selling its surplus pulp from both its units in the
domestic market over the last few years. Number of paper mills is buying the
Company's pulp, substituting imports. Unit CPM more than doubled its volume of
saleable pulp.
OPPORTUNITIES and
STRENGTHS OF THE COMPANY:
Demand for Paper and Boards:
The
maturing of the domestic market with customers demanding world-class products
at globally competitive prices is having profound effects on Indian paper and
paperboard industry.
As
against the earlier estimates of demand growth of 6.5% p.a. it is now estimated
that the overall demand for paper and board will grow at 8% p.a. till 2009/10
to reach a volume close to 90 Lac tonnes
Quality
and Brand Equity:
Subject's obsession for quality places the customer at the very core of its
business. In the area of product quality, Subject has been an acknowledged
benchmark which has given it an enviable quality leadership position in the
domestic industry. Establishing quality benchmarks and developing products to
meet the unique needs of different customer segments has been the essence of
JK's marketing and product development efforts. In its endeavour to enhance its
level of customer service, Subject has started up its ERP System in April
2006.
The Company has invested in creating strong brands which are well recognised by
customers. In the printing and writing range, the 'JK Maplitho' family of
papers, including 'JK Pulp Board', continued to be recognized as premium
products. Niche and speciality products like JK Bond', JK Excel Bond', 'CPM
Parchment', 'Ledger Paper' and 'JK MICR Cheque Paper' enjoyed discerning
customer preference.
'JK Copier', the largest selling brand in the Indian paper industry is the
leader in the cut-size segment supported by brands like 'JK Easy Copier', 'JK
Copier Plus' and 'sparkle'. Other products in this segment include JK Excel
Bond' in cut-size packaging and 'JK Savannah'.
In the coated segment, the Company has been able to establish brands like
'JK Cote' and 'JK Eco Cote' within a relatively short period of three
years.
Distribution Network:
One of the biggest assets subject has been its decades old
distribution network. Nearly 75% of its distributors have been associated with
the Company for over 30 years. More than 120 distributors (60% of them
exclusive) have been carefully nurtured and treated as the Company's strategic
business partners. At the next level, a robust dealer network has been expanded
to 3000 numbers providing both depth and width, reaching out to customers,
providing them with better quality service. The wide reach of the distribution
network and the quality of customer relationships can be validated from the
fact that 60% of sales come from smaller towns.
Apart from a number of multi-product distributors, the Company has
engaged distributors who exclusively handle specific products like coated
paper, cut-size paper and packaging boards. These focused distributors have
successfully and proactively fulfilled the needs of its customers.
Locational advantage:
Going forward in an increasingly competitive business scenario, logistics will
play a key role in terms of both cost and service competitiveness.
While Unit CPM is located in the heart of the largest market of Western India
and also serves the Northern markets, Unit JKPM is ideally located to cater the
needs of the Southern and Eastern regions of
The Board project when commissioned at unit CPM will enjoy significant
advantages due to its excellent location, as the Western market accounts for
over 40% of the packaging board consumption in
EXPANSION:
The coated packaging board segment in
The upper-end of this segment is dominated by a single producer, who has a
share of 25% of the total board market. The rest of the market is shared
between a handful of players in the middle quality and around 50% is in low-end
segment with a highly fragmented supplier base. Imports of packaging boards are
negligible.
The Company's Board project is progressing as per schedule and is
expected to go on stream during the 2nd half of the Company's current financial
year.
The finances have been tied up and the Company does not envisage any major cost
or time overruns. The Company has started contacting customers and finalizing
distribution arrangements. Recruitment of qualified and experienced personnel
is well under way.
MAJOR CONCERNS:
The biggest concern for the Indian Paper Industry is the relative scarcity and
high cost of fibrous raw material. Raw material costs have continued to rise
due to lack of a conducive Government Policy regarding industrial plantations.
Farm and social forestry initiatives are insufficient to meet the needs of
paper mills. The Indian producers have to face competition not only from other
domestic mills but also from paper companies located in
RAW
MATERIAL:
The Company's current production capacities require 5, 40,000 tonnes of bamboo
and wood per annum.
The Company sources its bamboo mainly through working of bamboo forests
in the states of Orissa and
The Company has set up more than 100 nurseries where high quality seedlings are
raised. These saplings are then given to farmers for plantation in their lands
with the twin objectives of increasing raw material availability and improving
their livelihood. The Company has developed its own high quality, high yielding
saplings using clonal technology. This programme, which was started more than a
decade ago has now developed well with farmers demanding JK's clonal plants.
Supply of such plants registered an increase of 45% over the previous year and
the Company intends to further step up its production of clones.
In the absence of a clear Government policy on raising of Industrial
Plantations, such Social/Farm Forestry programmes will help augment raw
material availability. The Company proposes to sharpen these efforts by
encouraging plantation in areas nearer to its mills. This will also help in
reducing transportation cost.
During the year, Subject signed an agreement with the World Bank to benefit the
farmers associated with its plantation programme by linking them to global
trade in carbon emission under the Clean Development Mechanism (CDM) of the
Financial
Highlights
Production at 1, 84,982 TPA and Sales at 1,97,3 13 TPA was the highest ever achieved by the Company. In value terms, Gross Sales and other income went up by 16% during the year and Operating Profit (PBIDT) increased by 15%.
Profit before Tax jumped up by 41%. However, the Company had to make a substantially higher provision for Deferred Tax during the year which resulted in a Profit after Tax of Rs.355.200 millions.
While Sales Realization went up by approx. 5% during the course of the year, it
was insufficient to fully absorb rising cost of inputs, particularly raw
material, coal and transport. The Company continues to pursue efforts to contain
costs while simultaneously enriching its product-mix.
Subject has undertaken an Expansion and Modernization Programme involving a
Capital Outlay of Rs.3400.000 millions. The majority of this expenditure will
be incurred on the Multi-layer Packaging Board project at Unit CPM besides
Oxygen Dezincification, Chlorine Dioxide plant, new A4 Cutting Line and
enhancement of power generation and environmental systems.
Funds for the above have been fully tied up. Equity Shares
on preferential basis were issued to International Finance Corporation (IFC),
Washington and to a promoter Group Company, aggregating Rs.1000.000 millions.
GDRs amounting to Rs.531.300 millions and FCCBs of Rs.223.500 millions were
also issued. Term Loans of approx. Rs.1000.000 millions from International
Finance Corporation, Washington and IDBI have also been contracted. Balance
funds will come from internal accruals.
This has resulted in the Company's paid up Equity Capital increasing to
Rs.781.500 millions from Rs.550.700 millions and increase in Equity
shareholders funds from Rs.1842.700 millions to Rs.3504.200 millions. Debt:
Equity ratio of the Company has also reduced.
Fixed Assets
v Land and Buildings
v Plant and Machinery
v Furniture
v Fixtures
v Equipments
v Vehicles
v Locomotives
v Railway Sidings
v Intangible Assets
Website details attached:
Subject is among
The Company has commissioned a 46,000 TPA state-of-the-art Coating Plant at its
JKPM unit in July 2005. This facility employs superior blade coating technology
to produce international quality coated art paper and boards, being marketed in
the brand name of JK Cote.
About 40% of paper produced by the Company is sold under various brand names,
JK Copier, JK Excel Bond, JK Bond, JK Savannah, JK Copier Plus and JK Easy
Copier. Being the largest selling branded copier paper in
Subject enjoys highest Operating Margins and Highest Net Sales Realization
(NSR) in over 90% of the products it sells, amongst the paper mills across
The Company passionately believes in Environment and Safety
and has been introducing cleaner and environment-friendly technologies. Subject
Mills at Rayagada has been adjudged as the Greenest Paper Mill in
The Company’s plantations, driven by in-house research programme, have covered
more than 45,000 hectares of land over the years. By providing farmers high
quality plant species through the Company’s plantation research centre, it is
helping the farmers to improve their economic well being. Very large number of
farmers in the states of Orissa, Chhattisgarh, West Bengal, Andhra Pradesh,
Gujarat and Maharashtra are benefiting from this programme. The plantation with
its superior quality plants contribute towards a strong base for high quality
raw materials.
The Company is also implementing TPM with the help of Japan Institute of Plant
Maintenance.
The Company has an export footprint for high value branded products in the
Middle East,
Manufacturing
Facilities
Subject has two large integrated paper manufacturing plants - Paper Mills in the Eastern part in the State of Orissa with 1,25,000 tons coated, uncoated and market pulp manufacturing capacity; and Central Pulp Mills in the Western part in the State of Gujarat with 55,000 tons paper and market pulp manufacturing capacity. Both the mills manufacture premium grade writing and printing papers largely branded.
Subject is a Unit of Subject Limited. is a premier integrated Pulp and
Paper Mill located at Jaykaypur, Dist. Rayagada, Orissa. Since its inception,
Subject has strived for excellence and consistently set high standards in
quality, productivity, conservation of energy and water, industrial safety as
well as pollution control and environment protection which are indicated by
achievements like:
- Manufacture of surface sized Maplitho for the first time in the country with
indigenous raw material.
- Capacity utilization of 120%.
- First Paper Mill in
- Adjudged First Greenest Paper Mill in
- Most modern and largest pulp mill in the country.
Subject was commissioned in the year 1962 with an integrated pulp and paper
plant with 15000 TPA installed capacity for manufacturing high quality writing
and printing papers. Over the years, the production capacity has been enhanced
to a level of 127,000 TPA with the addition of 4 more paper machines
manufacturing diversified product range from 29 GSM to 300 GSM of different
grades of paper. In 2005, an offline coating machine has also been set up to
manufacture premium grades of coated papers.
The secret of success of the mill is attributed to its policy for
sustained efforts for quality, new product development and continuous offering
of value added products to customers.
The company was a pioneer to introduce in market a surface sized
finished paper - JK Maplitho - equivalent to uncoated woodfree printing paper
in international parlance. Since then JKPM has further consolidated its
position in the market and has established itself as a brand leader in
different varieties of writing and printing papers like JK Copier, JK Copier
Plus, JK Bond, JK Excel Bond, Super Hibrite (SHB) Maplitho and JK Cote premium
coated paper and board. All these brands are extremely popular papers in the
market place throughout the country and are invariably the first choice of the
consumer
Central Pulp Mills
On the western coast of
In the year 2003, the Unit was accredited to ISO 14001 Environment Management
Systems and ISO 9001 Quality management Systems by DNV,
Group Companies
J.K. Organization, one of the leading Private Sector Groups
in
With its operations spread in almost every state of
Exports
Subject is actively involved in market expansion beyond the
shores of
Taking advantage of its advanced and extensive global network, Subject is today
also exporting products sourced from other Paper Mills in
Network
In order to serve customers across
Subject is now in the process of adding another 25-30 Distributors in the
coming 2 years which will include the marketing of its new Coated Packaging
Boards, Coated Papers and its Branded Papers in the Upcountry markets.
Press Release
GLOBAL RECOGNITION FOR SUBJECT
The Japan
Institute of Plant Maintenance (JIPM), a public corporation under the
administration of Ministry of Economy, Trade and Industry in
TPM i.e. Total
Productive Maintenance is a Japanese concept started in 1971. It addresses all
facets of manufacturing – be it operation, maintenance, purchase, sales,
administration, or people related issues such as safety, health, environment
etc. It is a long but fruitful journey towards Business Excellence.
Both the above
paper mills started their TPM journey back in 2001 at JKPM and in 2002 at CPM.
Mr. Kozo Mizota, a highly competent TPM Consultant from JIPM,
Subject is a
member of JK Organization, is a leading integrated Pulp and Paper Manufacturer
in
CMT REPORT (Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts,
1] INFORMATION ON
DESIGNATED PARTY
No 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. 39.31 |
|
|
1 |
Rs. 80.12 |
|
Euro |
1 |
Rs. 55.76 |
SCORE & RATING EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
7 |
|
PAID-UP CAPITAL |
1~10 |
7 |
|
OPERATING SCALE |
1~10 |
7 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
8 |
|
--PROFITABILIRY |
1~10 |
6 |
|
--LIQUIDITY |
1~10 |
7 |
|
--LEVERAGE |
1~10 |
7 |
|
--RESERVES |
1~10 |
7 |
|
--CREDIT LINES |
1~10 |
7 |
|
--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 |
YES |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
63 |
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. |
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 |
|