MIRA INFORM REPORT

Report Date :

30.07.2008

IDENTIFICATION DETAILS

Name :	THE PAPER PRODUCTS LIMITED
Registered Office :	Regent Chambers, 13^th Floor, Nariman Point, Mumbai-400021, Maharashtra
Country :	India
Financials (as on) :	31.12.2007
Date of Incorporation :	12.06.1950
Com. Reg. No.:	11-145537
CIN No.: [Company Identification No.]	L21011MH1950FLC145537
TAN No.: [Tax Deduction & Collection Account No.]	MUMT09909E
PAN No.: [Permanent Account No.]	AAACT0086E
Legal Form :	Public Limited Liability Company. The company's shares are listed on Stock Exchange
Line of Business :	Manufacturer and Seller of Laminates and Converted, Coated / Uncoated Paper and Films, Cartons, Moralised Films and Polyethylene Films.

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 11000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a part of worldwide operators of Huhtamaki Oyj, Finland. Available information indicates high financials responsibility of the company. Financial position is good. Trade relations are fair. Payments are correct and as per commitments. The company is doing very well and it can be considered good for any normal business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Regent Chambers, 13^th Floor, Nariman Point, Mumbai-400021, Maharashtra, India
Tel. No.:	91-22-22820969
Fax No.:	91-22-22832860
E-Mail :	sushil.agarwal@pplpack.com
Website :	http://www.pplpack.com
Corporate Office :	LBS Marg, Majiwada, Thane-400601, Maharashtra, India
Tel. No.:	91-22-25343691/ 25427051
Fax No.:	91-22-25340599/ 25427050
E-Mail :	Investor.communication@pplpack.com
Factory :	v Plot No. 139 and 148, Sri Venkateshwara, Co-operative Industrial Estate, Bollarum, Medak District, Hyderabad - 502325, Andhra Pradesh v D-3, Hingna Industrial Estate, Amravati Road, Nagpur - 440016, Maharashtra v Survey No. 33/1, At Post Umerkoi, Via Silvassa – 396230, Dadra and Nagar Haveli, Union Territory v L. B. S. Marg, Majiwade, Thane - 400601, Maharashtra
Sales Office :	Located at:- v Bangalore, Karnataka v Chennai, Tamilnadu v Kolkata, West Bengal v Mumbai, Maharashtra v New Delhi

DIRECTORS

Name :	Mr. K. C. Narang
Designation :	Chairman
Name :	Mr. Suresh Gupta
Designation :	Managing Director and Chief Executive Director
Date of Birth/Age :	52 years
Qualification :	B. A. (Hons), MBA
Experience :	30 Years
Date of Appointment :	27.01.1988
Name :	Mr. C. N. Murthy
Designation :	Executive Director and Chief Operating Officer
Date of Birth/Age :	54 years
Qualification :	B. Tech in Mechanical Engineering
Experience :	32 years
Date of Appointment :	02.01.1995
Name :	Mr. Timo Salonen
Designation :	Director
Name :	Mr. Maurice Petitjean
Designation :	Director
Name :	Mr. Arunkumar R. Gandhi
Designation :	Director
Name :	Mr. P. V. Narayanan
Designation :	Director
Name :	Mr. Ramesh K. Dhir
Designation :	Director
Name :	Mr. Vibhu Talwar
Designation :	Director
Name :	Mr. Henk Beek
Designation :	Alternate to Mr. Maurice Petitjean
Name :	Mt. Juha Salonen
Designation :	Alternate to Mr. Timo Salonen
Name :	Mr. Heikki Takanen
Designation :	Director
Name :	Mr. Antony H. Combe
Designation :	Director
Name :	Mr. Evert A. Ariens
Designation :	Alternate to Mr. Antony H. Combe
Name :	Mr. Sakari Ahdekivi
Designation :	Director

KEY EXECUTIVES

Name :	Mr. Sushil Kumar Agarwal
Designation :	Company Secretary
Name :	Mr. Pradeep Pasari
Designation :	Company Secretary

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

As on 31.12.2007

Names of Shareholders	No. of Shares	Percentage of Holding
Aberdeen Asset Managers Limited	4961820	7.92 %
HDFC-Trustee Company Limited	2404217	3.84 %
Prudential ICICI Trust Limited -Tax Plan	1397159	2.23 %
Birla Sun Life Trustee Company Private Limited	742173	1.18 %
East Sail	450000	0.72 %
Ragini Finance Limited	426815	0.68 %
Shree Capital Services Limited	386149	0.62 %
Mindset Technologies Private Limited	352345	0.56 %
NBI Industrial Finance Company Limited	262850	0.42 %
The New India Assurance Company Limited	227745	0.36 %
Total	11611273	18.53 %

BUSINESS DETAILS

Line of Business :

Manufacturer and Seller of Laminates and Converted, Coated / Uncoated Paper and Films, Cartons, Moralised Films and Polyethylene Films.

Products :

Product Description	ITC Code
Printed Polyester/Polyethylene Laminates	3921 90 96
Shrink Sleeves	3921 90 29
Printed Polyester/ Paper Laminates	3920 69 12

PRODUCTION STATUS

Particulars	Installed Capacity	Actual Production
Laminates and Converted, Coated/Uncoated Paper and Films	34090.000	24927.205
Cartons	11000.000	5489.188
Metalised Films	1000.000	294.789
Polyethylene Films	5400.000	3322.805
Jobwork-Metalised Films	N.A.	499.753
Jobwork-Others	N.A.	6.996

GENERAL INFORMATION

Customers :

Ø Huhtamaki Australia Limited, Australia

Ø Huhtamaki New Zealand Limited, New Zealand

Ø Huhtamki South Africa Limited, South Africa

Bankers :

Ø BNP Paribas

Ø Punjab and Sind Bank

Ø Standard Chartered Bank

Ø The Hongkong and Shanghai Banking Corporation Limited

Ø Union Bank of India

Facilities :

SECURED LOAN	31.12.2007 Rs. In Millions
Loan From Bank and Financial Institutions
Working Capital Loans from Banks Cash Credit Balance	42.894
Total	42.894
UNSECURED LOANS	31.12.2007 Rs In Millions
Fixed Deposits (Repayable within one year Rs. Nil, Previous year Rs. 2.080 Millions)	--
Buyer’s Credit Payable to Banks in Foreign Currency (Repayable within one year)	403.334
Sales Tax Deferred Loan	225.309
Total	628.643

Banking Relations :

Good

Auditors :

Name :

BSR and Associates

Chartered Accountants Accountants

Subsidiaries :

Ø Huhtamaki New Zealand Limited, New Zealand

Ø Huhtamaki Vietnam Limited, Vietnam

Ø Huhtamaki Australlia Limited, Australia

Ø Huhtamaki Deutschland Gmbh and Company KG, Germany

Ø Huhtamaki Finance B.V., Netherlands

Ø Huhtamaki South Africa Limited, South Africa

Ø Huhtamaki Singapore Pte. Limited, Singapore

Ø Huhtamaki (Thailand) Limited, Thailand

Parent company :

Huhtamaki Oyj, Finland

Holding Company :

Huhtavefa B.V., Netherlands

CAPITAL STRUCTURE

As on 31.12.2007

Authorised Capital :

No. of Shares	Type	Value	Amount
150000000	Equity Shares	Rs. 2/- each	Rs. 300.000 Millions
700000	Redeemable Cumulative Preference Shares	Rs. 100/- each	Rs. 70.000 Millions
300000	Unclassified Shares	Rs. 100/- each	Rs. 30.000 Millions
	Total		Rs. 400.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
62687190	Equity Shares	Rs. 2/- each	Rs. 125.374 Millions
	Add: Amount Received on 1449 forfeited shares		Rs. 0.009 Million
	Total		Rs. 125.383 Millions

Notes

Ø Of the above, 7525000 (Previous Year 1505000 Equity shares of Rs. 10/- each) Equity Shares of Rs. 2/- each were issued as fully paid bonus shares by capitalization of the reserves.

Ø Of the above, 36934100 (Previous Year 7386820 Equity Shares of Rs. 10/- each) Equity Shares of Rs. 2/- each fully paid up are held by Huhtavefa B.V. The Holding Company ( A Huhtamaki Group Company)

Ø During the current year each paid up equity share of Rs. 10/- each has been sub divided into 5 paid up equity shares of Rs. 2/- each as per shareholders approval

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.12.2007	31.12.2006	31.12.2005
SHAREHOLDERS FUNDS
1] Share Capital		125.383	125.383	125.383
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		2257.305	2113.118	1842.427
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		2382.688	2238.501	1967.810
LOAN FUNDS
1] Secured Loans		42.894	0.000	0.000
2] Unsecured Loans		628.643	337.736	162.947
TOTAL BORROWING		671.537	337.736	162.947
DEFERRED TAX LIABILITIES		85.149	83.916	60.200
TOTAL		3139.374	2660.153	2190.957
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1778.101	1100.626	1166.449
Capital work-in-progress		366.994	866.390	184.969
INVESTMENT		138.051	5.161	82.468
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	678.339	466.839	529.354
	Sundry Debtors	1030.982	864.015	775.649
	Cash & Bank Balances	39.969	153.761	138.874
	Other Current Assets	51.716	40.153	54.193
	Loans & Advances	246.023	134.192	136.260
Total Current Assets		2047.029	1658.960	1634.330
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	1007.570	797.922	745.135
	Provisions	183.231	173.062	132.215
Total Current Liabilities		1190.801	970.984	877.350
Net Current Assets		856.228	687.976	756.980
MISCELLANEOUS EXPENSES		0.000	0.000	0.091
TOTAL		3139.374	2660.153	2190.957

PROFIT & LOSS ACCOUNT

PARTICULARS		31.12.2007	31.12.2006	31.12.2005
Sales Turnover		5705.874	5795.676	4423.547
Other Income		117.039	783.627	0.000
Total Income		5822.913	6579.303	4423.547
Profit/(Loss) Before Tax		337.798	549.027	378.945
Provision for Taxation		54.128	149.674	102.194
Profit/(Loss) After Tax		283.675	399.353	276.751
Earnings in Foreign Currency :
	FOB Value	995.501	702.704	640.421
	Service Charged Earned	22.078	21.859	0.000
Total Earnings		1017.579	724.563	640.421
Imports :
	Raw Materials	963.990	663.712	605.190
	Stores & Spares	37.269	21.085	0.000
	Capital Goods	329.276	267.161	0.000
	Others	0.000	0.000	0.000
Total Imports		1330.535	951.958	605.190
Expenditures :
	Administrative and Selling Expenses	299.875	245.782
	Material Cost	4058.072	3494.533
	Manufacturing and Operating Expenses	350.010	343.741
	Personnel Expenses	439.421	377.875	4044.602
	Financial Expenses	17.292	2.969
	Depreciation & Amortization	288.597	230.590
	Other Expenditure	31.848	1334.786
Total Expenditure		5485.115	6030.276	4044.602

QUARTERLY RESULTS

PARTICULARS	31.03.2008 1^st Quarter
Sales Turnover	1582.400
Other Income	7.200
Total Income	1589.600
Total Expenditure	1403.000
Operating Profit	186.600
Interest	[4.200]
Gross Profit	190.800
Depreciation	73.000
Tax	26.200
Reported PAT	94.200

KEY RATIOS

PARTICULARS	31.12.2007	31.12.2006	31.12.2005
Debt-Equity Ratio	0.22	0.12	0.08
Long Term Debt-Equity Ratio	0.21	0.12	0.08
Current Ratio	1.55	1.64	1.62
TURNOVER RATIOS
Fixed Assets	1.87	1.95	1.73
Inventory	11.32	11.77	11.13
Debtors	6.84	7.15	6.72
Interest Cover Ratio	19.26	67.51	54.38
Operating Profit Margin(%)	9.92	10.94	12.56
Profit Before Interest And Tax Margin(%)	5.50	7.02	7.64
Cash Profit Margin(%)	8.80	8.99	10.40
Adjusted Net Profit Margin(%)	4.38	5.07	5.48
Return On Capital Employed(%)	12.79	17.72	19.34
Return On Net Worth(%)	12.44	14.34	14.96

LOCAL AGENCY FURTHER INFORMATION

History

Subject, a member of Huhtamaki Packaging Worldwide is a leading manufacture of flexible packaging materials in India. The company founded by Sardari Lal Talwar was originally started as a partnership concern at Lahore (now in Pakistan) in 1935 and was shifted to Delhi in 1947. Later in 1950 it went public. Subject became a 51% subsidiary of Huhtamaki Van Leer, a European Packaging major, when the later acquired 51% stake in Subject through an preferential allotment of equity shares in 1999.

During 1999 Huhtamaki Van Leer the packaging group with worldwide operation and having leadership positions in consumer and industrial packaging became the 51% shareholder of the company through preferential allotment of equity shares. The company is taking all efforts to become a debt-free in the near future. 

Subject which commands a 65% market share in the high end flexible packaging in India and its clientle includes some of the heavyweights of Indian FMCG players like HLL, Colgate, Nestle etc. Some of its overseas clients include subsidiaries of Unilever in Srilanka and Bangladesh. Even though Subject does not face any immediate threat from competition, the demand growth is inextricably linked to the demand growth in the FMCG and the food segment.

The company has technology-transfer agreements with Dennison Manufacturing Company, US, for heat transfer of labels on plastic containers and with Fuji Seal Company, Japan, for shrink sleeve technology for labelling.  

Subject raised Rs.102.9 millions through an rights issue of 14% PCDs (FV of Rs.100) in the year 1995 to part finance its Rs.280 millions Plant for packaging material at Silvasa, Maharashtra. 

Subject is increasing the production capacity of its Silvassa plant at a capex of Rs.185 Millions. The commercial production of the expansion project is expected in March 2003. It has also redeemed its entire preference capital in the current year.

Subject has divested its entire stake in PPL Feedback Packaging Limited (PFL) to Brown Paper Technologies Limited on Jan 29, 2002 and hence PFL ceases to be a subsidiary of Subject . 

The company was awarded the Worldstar For Packaging 1994 by the World Packaging Organisation. In 1994, it also won the Kelkar Memorial Award for Technical Research, instituted by SICOM.

Performance during the Year:

During the year, the gross sales were Rs. 6432.700 million as compared to Rs. 5795.700 million in the previous year and the net sales were Rs. 5705.900 million as compared to Rs. 5012.0 million in the previous year. Profit before tax after Extraordinary/ Exceptional Items was Rs. 337.8 million as compared to Rs. 549.000 million in the previous year.

After providing for income tax of Rs. 54.100 million, Profit after tax was Rs. 283.700 million. Further after transferring an amount of Rs. 28.400 million to General Reserve the surplus available was Rs. 925.600 million including surplus brought forward of Rs. 670.300 million. Earning per Equity Share (EPS) Including Extraordinary Items was Rs. 4.530 Millions and Earning per Equity Share (EPS) Excluding Extraordinary Items was also Rs. 4.530 Millions. 

MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis forms part of this Annual Report for the year ended 31st December 2007. 

SUPREME COURT JUDGEMENT ON EXCISE MATTERS IN RESPECT OF CYLINDER CASE: 

In the second quarter of the financial year 2007 an exceptional charge of Rs. 31.800 Millions has arisen out of the Supreme Court judgment received by the Company on Excise matters in relation to the cylinder case, which was shown as contingent liability in past years' financial statements. Though the Company has deposited this money with the excise authorities, at the same time, the Company has also filed a review petition with the Supreme Court in respect of the same, which is pending.

UPDATE ON THE RECONSTRUCTION OF THANE PLANT: 

The reconstruction and transformation of Company's Thane Plant building is in progress, new state of art printing machines have been procured and production from new facilities is likely to commence from mid 2008. 

OVERVIEW: 

 Building for Growth and Profitability: 

Year 2007 was marked by the implementation of projects aimed at 'Building for Growth and Profitability'. 

The year started with the commissioning of the State of Art Greenfield plant at Rudrapur in the state of Uttarakhand in North India at an aggregate project cost of INR 664 million. The first phase of the project, comprising the construction of the main plant building, utilities and one production line was commissioned in January 2007. The second line was also commissioned thereafter on schedule. The plant achieved satisfactory capacity utilization by Q4 of Y 2007 and has recorded a small operating profit in the first year of operation. 

The specialised pouching project, which is backed by a technology transfer agreement with a European leader, was commissioned at Silvassa. The specialised labels and cartons line at Hyderabad was commissioned in phases in the 2nd half of the year. 

Operating cost efficiencies need good quality power and energy saving measures to counter energy inflation. In Y2006 and during Y2007, investments have been made in 66KV and 33KV power supply lines besides continuous improvement in energy conservation. Benefits from these investments have started flowing in Y2007. 

 The reconstruction of the Thane Plant, which was affected by the floods in July 2005 is in progress and production in the new plant is scheduled to commence from mid 2008.

During the year, the company has launched a Business Excellence Program comprising of: 

· A complete review of their business processes including their quality management systems 

· Implementation of an Enterprise Resource Program (ERP) 

· Six sigma initiatives across plants 

· Focused company wide training 

The Business Excellence program, combined with the strategic projects, is firstly aimed at enhanced value for their customers. Simultaneously, the program targets qualitative improvement in financial performance by creating operating efficiencies and expense effectiveness. All this will prepare the company to meet challenges of growth and competition in the years ahead resulting in an improved bottom line. 

 Financial Overview: 

Y 2007 ended with Gross Sales of Rs. 6433 Million (Y2006 - Rs.5796 Million). Net Sales was Rs 5706 million. This represented' a growth of 13.8% over Y2006. This increase in top line was principally achieved through the gradual ramp up of the Rudrapur plant. The benefits of the Rudrapur plant and other strategic initiatives commissioned in 2007 will be reflected more fully in Y 2008.

 Margins were under pressure right through 2007 due to: 

·  Pressure on value add (Net Sales minus Raw Material cost) resulting from:

 - Rupee appreciation that impacted export realization and margins

 - Rising raw material prices -driven by the increase in prices of crude oil and metals  

 - Continuous pressure on selling prices in a highly price competitive market 

· Increased depreciation and other operating costs of the new projects kicked in immediately on their commissioning, while the ramp up of production was a gradual process. 

· Increase in financial expenses incurred from borrowings availed for the funding of the strategic initiatives and increase in working capital. 

Earnings before interest, depreciation and tax (EBDIT) were at Rs.676 Million as compared Rs.662 Million in the previous year.

Depreciation and Amortisation for Y2007 increased by 25% to Rs. 289 Million as compared to Rs. 231 Million in the previous year due to commissioning of the strategic capital expenditure projects. 

The Operating Profit was Rs. 387 Million and the Profit before tax, exceptional and extraordinary item was Rs. 370 Million. These represented a drop of 10.3% and 13.7% respectively over Y2006.

An exceptional charge arising out of Supreme Court judgment on a contested matter on excise duty of Rs. 32 Million was taken during Q2-2007. This had been disclosed as a contingent liability in past years. A review petition has been filed with the Supreme Court. 

As reported last year, the settlement of the insurance claim raised for damage suffered during the July 2005 floods at Thane had resulted in an extraordinary item of Rs.120 Mn in Y 2006. 

Profit before tax including extraordinary and exceptional items was Rs. 338 Million and Profit after tax was Rs. 284 Million. 

The basic and diluted earnings per share (EPS) excluding extraordinary and exceptional items for Y2007 was Rs. 4.89 as compared to Rs. 5.35 in the previous year. Basic and diluted earnings per share (EPS) including extraordinary and exceptional items for Y2007 were Rs.4.53 as compared to Rs.6.37 in the previous year. 

The next few paragraphs narrate, in more detail, the events of Y2007 and touch upon the outlook for Y2008 and beyond, with appropriate reference to inherent opportunities, threats, risks and concerns. 

OPERATIONS REVIEW: 

Market commentary: 

India the growth story continues: 

The Indian economy witnessed yet another year of robust growth. With a GDP growth rate of over 8.5% for the 3rd consecutive year, India has moved decisively into a higher growth phase. The size of the economy has crossed the US$ One trillion mark and in PPP terms, India is the 3rd largest economy in the world after United States of America and China. 

Notwithstanding concerns of a visible slowdown in the GDP growth in the last quarter, the need for increased focus on inclusive growth, a deceleration in growth of the agricultural sector, inflation and the influence of a slowdown in the US economy, the Indian economy remains on growth path with a growing consumer market. 

The key demand drivers for FMCG products include rising disposable incomes, a favourable demographic profile, relatively low levels of per capita consumption and penetration of FMCG products, growing urbanization and a growing population of working women. Shifting their focus from metros to other urban, semi-urban and rural areas, organized retail chains continue to expand rapidly as they seek to have a strong presence across India. 

Does packaging make a difference in the life of the consumer? The answer is in the affirmative because good packaging protects the contents and contributes to make the life of the consumer healthier especially in the areas of food, pharmaceutical and personal products. The company continues to innovate and provide packaging solutions in this sector. 

'Packaging is the only handshake a product has with a consumer'. 

Growth of high performance packaging is a must for India's societal and human development. Packaging in India presents unique challenges. Climatic conditions vary from extreme cold to extreme hot and humid. Constantly developing infrastructure adds to the challenge for packaged goods and consequently in the design of packaging. Logistics across different climatic conditions and transport infrastructure adds to this complexity. Manufacture of packaging material needs to factor in these circumstances in providing packaging solutions. 

Riding on the nations strong economic growth, the demand for packaging materials that add value to products designed for discerning consumers has continued its strong double-digit growth. 

New opportunities emerge, as India is increasingly seen by global multinationals in FMCG and retail as a 'low cost country source' for quality packaging material. 

With the strategic initiatives implemented, the company is poised to benefit from the emerging growth opportunities. 

Augmentation of capacities in a highly price-competitive market is a cause for concern in the medium term. They continue to experience the trend of 'competition' accepting lower prices based on minimum marginal costing for volumes and market share 'at any cost' due to their bullish view of future pie. Consequently, India is today one of the lowest priced packaging markets in the world.

As narrated in last year's management discussion and analysis, the big challenge for the company continues to be the attempt by buyers in India's customer organizations to commodities flexible packaging in their attempts to control packaging costs. 

Having said that, there is clearly a strong growing demand for higher quality packaging, innovation, and increasing safety standards in packaging. They feel they have an edge in this area to meet the demands of their discerning customers. 

The company's continued thrust on development of new innovative value added packaging formats that provide 'Real Value' to their customers, superior to what competition can offer, and doing this in a profitable manner, is key to sustenance of growth and margins. 

 In a highly cost driven market, the company will grow profitably through: 

A. Effective Business management: 

 * Increasing shares, developing new business with top customers 

 * New growth markets including geographical expansion in export markets 

 * Expanding the customer base through new customer development, in many cases partnering 'small is beautiful' FMCG companies 

 * Using the full potential of their new Rudrapur plant 

B. NASP Unleashing Innovation:

 * Specialised Pouches, Labels, Cartons 

 * Moving into new application areas 

 * Integrating Global Developments 

 C. Marketing Huhtamaki-PPL as a one-stop shop building customer confidence in them when they seek comprehensive packaging solutions and great service! 

 D. The Business Excellence Program besides creating added customer value, the program is focused on continuous improvement in cost efficiency. 

Attention to research and development in the field of packaging materials and manufacturing practices will help them improve their offer to an Indian market with packaging solutions tailored to meet the needs of their customers. Their strategy of continuous innovation and development of newer packaging formats will stand them in good stead to meet the market needs and to grow profitably. Improved cost efficiency will provide the balance needed between being competitive and being profitable. 

Sales Revenues 

Y2007 Gross sales were at Rs. 6433 Million compared to Rs. 5796 million in Y2006. Net Sales grew by 13.8% to Rs. 5706 million in Y2007 from Rs. 5012 million in the previous year. 

In terms of tonnage volumes, sales growth was at 8%. This included a 13% growth in tonnage volumes of laminates and converted coated / uncoated paper and films. As explained in previous reports, given the diversity in the range of products and material structures, any attempt at analyzing volume to value relationship would be purely "arithmetical". Even so, it is relevant to mention that the sales value was influenced by the impact of the NASP aided improvement in product mix. 

Within overall sales, the sale of Flexibles and Labelling materials, which form the bulk of their consumer packaging business, grew by 15%. This increase was possible mainly due to the commissioning of plant at Rudrapur. 

International Business:

Exports grew by 37% in Y2007 in spite of the steep appreciation of the INR (15% from Jan 07 to Dec 07) impacting export realisations. In US$ terms the growth was 54%. Exports exceeded 20% of net external sales in 2007. In spite of an adverse exchange rate situation, the company met the export target that was set three years ago. 

The steep appreciation of the Indian Rupee did impact margins in the export business. The appreciation of the Indian Rupee was much higher than most other currencies such as the Chinese Remnibi. While, as a damage limiting measure, the hedging strategy was changed, the impact on value add margin in Y2007 at total company level was over 1% of sales. 

Opportunities continue to unfold in the developed markets and in the Asian region. Many international majors are looking to source their packaging requirements globally and regionally and India is a potential source. They are developing on this, both directly and with the synergy available to them, as a member of the Huhtamaki group. They expect to continue the momentum of Y2007 into Y2008. 

 NASP programme update and Awards: 

They reiterate their key business strategy to constantly renew their product offer and constantly add perceived value to their customers across functions and teams of the organization. Innovation and creativity are in constant demand. The innovation programme that goes by the acronym NASP (New Applications Structures Products and Processes) in the organization continues to yield results. For the 3rd successive year, sales from NASP initiatives exceeded 30% of total sales.

As in the past, this year too saw a few of their special efforts recognized by discerning juries in Indian and international packaging competitions and They won the following awards in 2007: 

1. 2 Worldstar 2007 awards 

2. 5 PFFCAstar 2007 awards 

Mention has been made of the 'Small is beautiful' customer in earlier reports. This program met with satisfying results as They added 86 new customers in Y2007.

Other Income: 

Other Income in Y2007 was Rs.117 Million compared to Rs 112 Million for Y2006. This includes profit of Rs. 9.500 Million towards sale of residential property and Rs. 7 million received on settlement of claims. 

Dividend Income from Mutual Funds contributed Rs.8.8 Million. The remaining Rs. 91.700 Million includes sale of scrap provisions for doubtful debts written back and foreign exchange gain. 

Raw material: 

As mentioned earlier, they witnessed a steep rise in prices of raw materials across the board in 2007. This was driven by a combination of increase in crude prices and increases in international and domestic prices of petrochemicals and metals. Crude Oil prices have been continuously rising since 2004. From a low of US$ 33/brl in Q1'04, the crude oil prices have breached the US$ 100/brl in Jan 08.

 From the perspective of the packaging industry, this implies that all players across the value chain from crude oil to use of films for packaging of FMCG products have had to face input price pressures. Globally, the packaging industry faced the maximum brunt of the pricing pressures. India was no exception. 

In spite of INR appreciation impacting margins on exports and the raw material price increase, the Raw Material cost as a % of Sales for Y2007 was limited to 71.1%, as compared to 69.7% in Y2006 through a combination of product mix, NASP, buying initiatives and other ongoing material cost reduction strategies.

Expenditure: 

Their "total costs" i.e. all expense items in Y2007 P and L statement other than extraordinary items, amounted to 24.5% of their net sales revenues, as compared to 24% in Y2006. This needs to be seen in the context of the new Rudrapur plant commissioned in Jan 07. 

Overall expenses were kept in good control. To analyse key elements – 

Other manufacturing costs were at Rs.95.600 Million or 1.7% of net sales as against Rs. 87.400 Million or 1.7% of net sales in the previous year. These costs, in main, are related to the outsourcing program. 

Repairs and Maintenance costs aggregate to Rs.84.960 Million or 1.5% of net sales as against Rs. 78.200 Million or 1.6% of net sales in the previous year.

Power and fuel expenses, were at Rs.169.400 Million or 3% of net sales, as against Rs.178.100 Million or 3.6% of net sales the previous year. The investments being made since Y 2006 towards assuring uninterrupted good quality power supply resulted in a significant reduction in power and fuel costs during Y2007 as compared to Y2006 in spite of rising energy costs due to the increase in diesel and furnace oil prices. 

Personnel expenses increased by 16.3% to Rs.439 Million (7.7% of net sales), as against Rs. 378 Million (7.5% of net sales) in the previous year. The global war for talent in India and the consequent steep rise in compensation levels across all levels and functions has impacted the company. Significant increases in personnel costs had to be absorbed to retain skilled talent and to protect its knowledge base. This is crucial in their technology and knowledge intensive business. Additional manpower for the new Rudrapur plant and increase in retirement provisions have also contributed to increases in personnel costs. People processes to ensure that higher personnel costs add to the ability of the company to deliver value to the customer and do not merely add cost have been put in place. 

Administration and Sales expenses increased by 22% to Rs.300 Million (5.3% of net sales), compared to Rs. 246 Million (4.9% of net sales) in the previous year. This included a 31% increase in selling and distribution expenses to Rs.132 Million (2.3% of net sales) compared to Rs. 101 Million (2% of net sales) in the previous year mainly due to increase in exports (54% in US$ terms). Administration expenses rose 17% to Rs.168 Million or 2.9% of sales compared to Rs. 144 Million or 2.9% of sales the previous year, mainly due to administrative costs incurred at the new Rudrapur plant, expenses on business excellence initiatives and software costs. 

Finally: 

 The company is poised to participate in the opportunities emerging from the fast growing Indian economy. They are conscious about being in an environment where challenge of change is the only constant. 

Their strategic plans will, over the next 2 years, take the company forward to a higher level both in terms of capacity and capabilities. 

They continue to place their belief in the value-discerning consumer, and their focus on innovations. Both these should see them emerging stronger in the premier packaging segment. 

However, in the near term, They would continue to face margin pressures. Despite this, They remain cautiously optimistic in their outlook for the year 2008, and expect to close the year with an improved underlying financial performance. 

On the long-term, They have a firmly positive outlook. 

Cautionary statement: 

Statements in the Management Discussion and Analysis describing the Company's objectives, projections, expectations and estimates regarding future performance may be "forward-looking statements" within the meaning of applicable securities laws and regulations and are based on currently available information. The management believes these to be true to the best of its knowledge at the time of preparation of this report. However, these statements are subject to future events and uncertainties, which could cause actual results to differ materially from those that may be indicated by such statement. 

Segmental Reporting

The Company's sole business segment is Consumer Packaging and all activities of the Company are incidental to this sole business segment. Given this fact and that the Company services its domestic and export markets from India only, the financial statements reflect the information required by AS-17 'Segment Reporting' for the sole business segment of Consumer Packaging. The 100% of the business assets of the Company are situated in India. Total Capital employed in the business and as such in the segment is Rs 3139.374 Millions (Previous Year Rs. 2660.153 Millions). Secondary segments for the Company are geographic, namely domestic and exports. Debtors outstanding in respect of export segment are Rs. 285.027 Millions (Previous Year Rs. 188.984 Millions).

a. The Company has availed of unsecured interest free sales tax deferred loan of Rs.225.309 Millions ( Previous Year Rs.198.827 Millions) from the Government of Andhra Pradesh for its Hyderabad (Bollaram) factory.in accordance with their sales tax deferral scheme. The above amount is repayable after 14 years from the date of availment of the loan the first due date for repayment is 1 April 2011.

b. In October 1998, the Company acquired the Hyderabad Plant from APR Limited through an asset buyout deal. To comply with the Andhra Pradesh Sales Tax Deferrment Scheme, the Company took over a sales tax deferred loan of Rs.6.318 Millions from APR Limited As a compensation the company was given 195 IDBl deep discount bonds having issue price of Rs.0.526 Millions and a fair value of Rs.1.541 Millions. These bonds on due date for repayment of this loan were to yield a maturity value of Rs. 9.750 Millions which after meeting the estimated Income tax liability would have fully funded the sales tax loan liability The investment in IDBl bonds valued at Rs.1.541 Millions was shown as long term investment, the sales tax loan under unsecured loans and the differential of Rs. 4.776 Millions under other current assets being the unearned interest component which is being accrued over the tenure of the bonds. Consequent to the exercise of call option on these bonds by IDBl the above deep discount bonds have been redeemed in March,2002. The Board decided to continue to invest in deep discount bonds to fund this liability. Accordingly it has invested an amount of Rs.3.111 Millions in ICICI deep discount bonds. The unearned interest of Rs.1.025 Millions as on 31 December 2007 (Previous Year Rs.1.240 Millions) reflects current estimated yield on this investment.

Fixed ASSETS:

Ø Freehold Land

Ø Leasehold Land

Ø Buildings

Ø Machinery

Ø Computers

Ø Motor Vehicles

Ø Furniture, Fixture and Office

Ø Equipments and Technical Library

AS PER WEBSITE

Profile:

Perhaps it's a vision; Perhaps destiny, that makes subject a part and parcel of the Indian packaging industry. Or perhaps it's more - Their ability to assimilate and innovate.

The Year 1935 saw a young visionary herald the era of modern flexible packaging in India. The next 66 years saw this dream of the company's founder, Shri Sardarilal Talwar, transform itself onto a reality, which totally revolutionized the packaging industry in India.

With consumer packaging sales revenue of Rs 3500 million in the year 2002, subject is India's leading Consumer Packaging company.

Today subject offers a wide portfolio of packaging solutions that include Flexible_Packaging Labelling_Technologies and Specialised_Carton And all this supported by the Packaging_Machine_Divisio to provide the customer with Total packaging solutions. With Three state of the art, fully integrated manufacturing facilities at Thane, Silvassa and Hyderabad; highly skilled and experienced staff, the company is capable of working with the customer from product inception to the super market and with complete control and confidentiality.

Today, they are proud that they matter to those, for whom packaging matters most. And this is reflected in the impressive client list that includes, Levers, Nestle, Cadbury, Britannia, Glaxo Smithkline, Coca Cola, Perfetti, Dabur, Marico, P and G???..

In 1999, the company became a member of the Huhtamaki Packaging Worldwide, a global leader in consumer packaging.

About Huhtamaki

Huhtamaki Oyj headquartered in Finland, is a one of the top 10 consumer packaging companies in the world. Huhtamaki, a market leader in several product categories, has a turnover of Euro 2.1 billion with operations across the globe. A brief profile of Huhtamaki is available in the Annual Report. For more details about Huhtamaki, please visit their web site www.huhtamaki.com

PRESS RELEASE

The Paper Products A Closely Held Public Limited Liability Company

Q1 Net sales up by 21.5% and

Net Profit up by 21.7%

Mumbai, April 23, 2008: The Paper Products Limited (HUHTAMAKI-PPL), India's leading flexible packaging company, today announced its Unaudited Financial Results for the quarter ended March 31, 2008. The company achieved sales of Rs.1582.400 Millions during Q1-2008, growth of 21.5% over sales of Rs.1302.500 Millions in Q1-2007. The profit before tax is Rs.117.800 Millions compared to Rs.93.500 Millions in Q1-2007 showing growth of 26%. The basic and diluted earnings per share is Rs.1.50 as compared to Rs.1.23 in Q1-2007.

The new Rudrapur plant is operating at capacity levels.

A book loss of Rs.11.600 Millions has been taken in above Q1-2008 results, for mark to market valuation of forex contracts which have been entered into to hedge the forecast transactions, consequent to the ICAI announcement of 29th March 2008 on Accounting for Derivatives..

Reconstruction of Thane Plant is on going & relocation of operations in a phased manner is scheduled to commence from mid 2008.

High raw material prices and appreciation of Rupee vis a vis US $ have lead to margin pressure. The company is implementing strategies to counter margin deterioration , & with the growth in the consumer economy believes the medium term outlook to be positive.

About The Paper Products Limited (HUHTAMAKI-PPL):

Subject is India's leading manufacturer of primary consumer packaging with 2007 gross sales of Rs.640.000 Millions, and net capital employed of about Rs.310.000 Millions.

Since 1999, Subject is a joint venture with the global packaging major, Huhtamaki Oyj, Finland who hold about 59% of the equity capital. Huhtamaki is one of the world's top ten consumer packaging multinationals.

Subject is a pioneer and the technology and market leader in flexible packaging in India with manufacturing facilities at Thane, Silvassa, Hyderabad and Rudrapur. It meets the packaging needs of almost the entire range of FMCG segments including personal products, personal wash, laundry, foods, sauces, beverages, bakery products, spices, chocolates and confectionery, dairy and also for seeds, specialized chemicals, electronics and many other specific specialized uses including anti-spurious packaging.

The Package Protection and Decoration products range includes latest leading edge technologies - shrink sleeves, wrap-arounds, heat transfers, pressure sensitives and metallised paper labels.

Manufacturing of specialized cartons and cartoning systems, manufacture of poly films, specialized barrier metallising and high-end application extrusion coating are also part of PPL's product offerings.

The company's packaging machines division offers complete packaging solutions to customers.

PPL mainly caters to the premium segment of packaging and its clients include Britannia, Cadbury, Castrol, Coca Cola, Dabur, Emami, Eveready, GSK, Godrej, Hindustan Latex, Hindustan Unilever, HPCL, ITC, Marico, MICO, Nestle, Pepsi, Perfetti, P&G, Tata Tea, TTK-LIG, Wipro and may more.

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 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.42.54
UK Pound	1	Rs.84.86
Euro	1	Rs.66.95

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	7
--PROFITABILIRY	1~10	7
--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	NO
--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

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