Sree Sakthi Paper Mills

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1.1 Introduction
Organizational study helps in the study of the organization from various viewpoints,
methods, and level of analysis. It gives an idea about various strategies and structure
adapted by the organization, it provides knowledge about basic the managerial skills and
corporate culture. It helps in determining their skills and interests which helps in shaping
their career. In addition to this, students come to know the functioning of an
organization, its objectives,its milestones, future plants, vision, Mission and expectations
regarding the qualities and skills of the employees.

1.2 Scope Of The Study
This study aims at understanding the functioning of SreeSakthi Paper Mills ltd. various
departments were analyzed in detail and SWOT analysis of the organization was done.
The study has been conducted during the period of 8
th
May 2013 to 10
th
April 2013. The
study was done at the corporate office of SreeSakthi Paper Mills ltd, Palliam road. It has
two factories one at Edayar manufacturing Kraft paper and the other at Chalakudy
manufacturing duplex board. During the Organisation Study period only the Head Office
and the Kraft paper manufacturing unit atEdayar was visited .The unit in Chalakudy
could not be visited as it is far from Kochi and daily travel is not viable . Also the period
of study provided was short to study the other unit manufacturing duplex boards.

1.3 Objectives Of The Study
To understand the functions of the various departments of the organization.
To know the structure of the organization.
To make SWOT analysis of the organization.
To understand how the organization functions

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1.4 Methodology
The data for this study was purely based on the inputs so imparted by the personnel of
the organization. Data collection was through primary sources as wellas secondary
sources.
Primary sources include:
Discussions
Observation
Interviews

Secondary sources include:
Websites
Journals
Annual repots
Records
Prospectus

1.5 Limitation Of The Study
All information provided by the organization is assumed to be authentic.
Some study of the organization is based on secondary data.
People in the organization was busy so it was difficult to get there
attention.
Limited time schedule of study.

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2.1 Analysis of The Remote External Environment

To assess the working of the industry i.e The Paper and pulp industry of which Sree
Sakthi Paper Mills is a part of, a PESTEL Analysis will be helpful in understanding the
external environment in which the firm exists . PESTEL analysis is a useful tool for
understanding the industry situation as a whole, and is often used in conjunction with a
SWOT analysis to assess the situation of an individual business. PESTEL stands for
Political, Economic, Sociological, Technological, legal and Environmental factors.

2.1.1 Political Factors
The Political factor refers to the governmental policies which are much influenced by the
economic situation in a country. It is a macro aspect of analyse which deal with major
changes to the government policies of a country. It has great influence to the business
outlook and confidence. Political factors comprises of Taxation policies, ie the changes
in tax rate fixed by the government.

2.1.2 Economic Factors
The Economic factor is an area where macro economic environment can affect the
outlook and competitiveness of any business sectors in the country. Economic factors
includes the interest rates, exchange rates, import duties and overall economic condition
of the country. Some of the key economic indicators are repo rate, Reverse repo rate,
Current reserve ratio, statutory liquidity Ratio. Changes in the interest rates and
exchange rates will impact the overall industry and the belonging firms. Increase in
import duty will also affect the business and increases the cost of raw materials.

2.1.3 Sociological Factors

The Social factors refers to the cultural aspects of the country. Social changes have
significantly impacted the paper industry in relation to changing demographics in terms
of the customers it targets. As such then changes in customers needs and preferences for
quality paper products and changing preference towards the paper rather than fiber or
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plastic has increased the pace of the demand in terms of meeting these needs. Increased
globalization arguably has led to customers demanding faster responses to their needs
creating much more competitive business fields attempting to satisfy these desires.
The industry is not only about technology but about pictures illustrating the industry
attempt to relate to the lifestyles of consumers. This is because customers have become
more environmental sensitive as well as technique and quality orientated as a result of
higher educational levels and income levels creating much more discerning customers in
relation to these.The sociological context of human resource has been a major influence.
Flexibility in terms of labor in Indian paper industry has been mainly achieved by
enlarging the scope of tasks and a relaxation of organizational boundaries within the
business industry. As a result it provides employment millions of employees in India to
meet the growing demand for paper. Paper manufacturers are producing white paper and
supply it at a concessional rate to the educational sector and to the governmental
departments as well as per regulation given by the government

2.1.4 Technological Factors
Governmental as well as sector initiatives focus on overcoming the acute raw material
constraints, implementing and adopting better technologies, increasing production,
productivity and efficiency, expanding to economies of scale and decreasing
environmental effluents. Various new technologies are entering the Indian market that
support these movements. Presently, large paper mills are more efficient, using better
and more modern technologies and appropriating economies of scale. Additionally, they
provide chemical recovery facilities which reduce both emissions and external energy
requirements. However, the large paper mills also face severe basic problems such as
high production costs, raw material constraints and low productivity. Overall
performance has been best in medium size firms with regards to average profitability

2.1.5 Environmental Factors

Environment factors which affects a production industry are raw materials constraints,
the level of pollution created by its products and services and also waste disposals.

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2.1.6 Legal Factors

These are related to the legal environment in which firms operate. In recent years in the
India There have been many significant legal changes that have affected firms behavior.
The introduction of discrimination and disability discrimination legislation, an increase
in the minimum wage and greater requirements for firms to recycle are examples of
relatively recent laws that affect an organization's actions. Legal changes can affect a
firm's costs and demand. This consists of legislation that is passed by the parliament and
state legislatures. Examples of such legislation specifically aimed at business operations
include the Trade mark Act 1969,Essential Commodities Act 1955, Consumer Protection
Act 196 and Standards of Weights and Measures Act 1969.

2.2 Industry Profile

2.2.1 Global Scenario

After a smart recovery in 2010, growth in global economic output slowed down
considerably in 2011. According to the International Monetary Funds April 2012 report,
against a growth rate of 5.3% recorded in 2010 and a forecast of 4.4% at the beginning
of 2011, global output is estimated to have grown by only 3.9% in 2011. Growth in
Advanced Economies slowed down to 1.6% in 2011 against 3.2% in 2010 primarily due
to the sovereign debt crisis in the euro zone, contraction of the Japanese economy and a
sluggish recovery in the US. Growth in Emerging & Developing economies also
decelerated from 7.5% in 2010 to 6.2% in 2011 with China, India and Brazil recording
significant decline in growth rates. Capital flows into Emerging and Developing
Economies slowed and remained volatile due to lower risk appetite caused by the
financial uncertainty in the developed world which also led to sharp fluctuations in the
exchange rates in many of these economies. The global economy is currently passing
through a very difficult phase and is expected to grow by only 3.5% in 2012. Growth in
the developing world is forecast to slow down further to 5.7% with the BRIC economies
(China, India, Brazil and Russia) expected to clock lower rates of growth.
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2.2.2 Domestic Scenario

Indian economy decelerated considerably growing below 7% in fiscal 2012 as compared
to 8.6% in 2011. The cumulative impact of a tight monetary policy stance adopted by the
Reserve Bank in a bid to balance the growth-inflation dynamic, lower global demand
and hardening prices of crude oil collectively dragged the growth rate to below 6%
during the second half of the year. The poor performance of the Industrial sector which
grew below 4% - a 10-year low - reflected a number of factors including a higher interest
rate regime, slackening external demand and a general decline in business confidence.
There was a significant fall in the Gross Fixed Capital Formation which dropped below
30% of GDP during the year, representing a decline of nearly 4 percentage points over
the last 4 years. With a burgeoning current account deficit on the one hand and only a
small increase in net capital inflows on the other, the overall Balance of Payments
situation turned negative - the first time in 16 years except in 2008-09. This, amongst
other factors, led to a sharp depreciation of the Indian Rupee which fell to record lows.
There was some ease on the inflation front which, after staying close to 10% for an
extended period of 22 months, moderated to around 7% in recent months. As per the
RBIs Monetary Policy Statement 2012-13 released in April 2012, the Indian economy is
projected to grow by 7.3% in fiscal 2013 assuming normal monsoons. Significant
downside risks to this baseline forecast include the outlook for global commodity prices
- especially of crude oil, slippages on the fiscal front which could stoke inflation and
lead to a crowding out of private investment and the unsustainable current account
deficit levels. This leaves little flexibility in the near term on the interest rates front after
RBIs 50 basis points repo-rate cut in April 2012. While a growth rate of around 7% per
annum would sustain Indias position as one of the fastest growing major economies in
the world, it is far below the desired levels and the countrys potential. Given the low
levels of per capita income and the fact that a significant proportion of our population
lives in poverty, it is imperative that the economy reverts to its 8% to 9% growth
trajectory. Fortunately, India enjoys the unique advantage of having multiple forces
driving its economic growth engine in the form of a favorable demographic profile of
population, relatively high savings and investment rates, a large domestic consumption
base and the oft-quoted entrepreneurial spirit of its people.

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2.2.3 Industry Review

The global demand for Paper & Paperboard slowed down to 1% in 2011 as against a 6%
growth in 2010. In India demand decelerated to around 6.5% during fiscal 2012 against
7.1% in the previous year. The global paper market continued to witness a structural
shift with emerging economies, particularly in Asia such as China and India, driving the
demand growth. Though India has nearly 17% of the worlds population, it consumes
only about 2% of global paper production. Per capita consumption in India is very low at
only 9 kgs compared to a global average of 55 kgs, 65 kgs in China and 215 kgs in
Japan. Shift in demand to Asia and the low levels of per capita consumption in India
offers Indian paper manufacturers exciting opportunities in the years to come. Though
there is considerable scope for growth in the Indian paper market, competition, including
from key global players, has also increased and the industry is witnessing large capital
investments.

2.2.4 Kraft Paper Scenario

The domestic paper and paperboard industry is currently estimated at about 116 lakh
tonnes per annum of which paperboards account for 22 lakh tonnes which is expected to
grow at around 8% per annum aided by value-added paperboard at 12% per annum. The
growth potential of the paperboard industry is anchored on expectations of higher GDP
growth, increase in demand from rural markets, branded packaged products and
organized retail. Further, the need for differentiated packaging coupled with change in
lifestyles will continue to drive demand for paperboard. With increased economic
activity the demand for paper especially Kraft paper, industrial paper, duplex boards, and
corrugating material is too poised for healthy growth.

Industrial paper is the highest value segment in the paper industry and accounts for 41%
of the total market size. Kraft paper is usually the brown paper that is commonly used
for manufacturing brown bags, cartons, etc. It is largely used to manufacture corrugated
boxes, bags, sacks, etc. However, corrugated boxes account for 85-90 per cent of the
total demand for Kraft paper. Demand for Kraft paper depends on the growth in
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consumer durables, the manufacturing industry, horticulture, FMCG etc. Strong growth
in end-user sectors such as pharmaceuticals, horticulture, ready to eat foods, marine
products, textiles, consumer durables and other industrial products is expected to result
in a buoyant growth for Kraft paper. Duplex boards which are mainly used as primary
packaging for various products such as pharmaceuticals, cigarettes, matchboxes,
agarbattis, toothpastes and other similar consumer items is witnessing robust demand.
This, together with the Government policy to replace wooden crates by containerboard
boxes particularly in fresh fruit packaging, will create new demand for corrugated boxes.

2.2.5 Demand Drivers

Consumption of industrial paper is closely linked to the growth of the packaging
industry, development in packaging technology and substitution by other materials. The
growing popularity of ready-to-eat products will result in higher demand for attractive
and durable packaging, thus increasing demand for Kraft paper and duplex boards.
Branding is also a big driver of packaging, as manufacturers try to create identifiable and
attractive brands. Demand for Kraft paper and Duplex board is thus expected to remain
strong in the future as more and more consumers opt for branded goods. With increase in
malls, departmental stores and other such modern retail formats, manufacturers use
innovative packaging solutions to increase their sales. The fastest-growing end-use
segments for duplex boards are foodstuffs, consumer durables, garments,
pharmaceuticals, cigarettes and matchsticks. Gradual shift in population from rural to
urban as well as change in lifestyle due to improvement in the standard of living,
demand for duplex boards is expected to explode.

2.3 Competitors

2.3.1 The South India Paper Mill Limited

The company is involved in the manufactures kraft, paper and board. The paper plant is
located 150 km from Bangalore near Nanjangud in Karnataka state. It was incorporated
in 1959 as a private limited company. SIPM primarily manufactures corrugating raw
material. (Kraft, Liner board, Test Liner & Fluting). SIPM clientele includes top FMCG
companies and several EOUs. SIPM has stake on a Box Manufacturing company as
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well. Future plans include the installations of a state of art sheet plant to cater Box
manufacturer's requirement. The current capacity is about 200 MT/day. The
manufacturing process is based on the recycling of scrap paper both imported and
domestic. Some purchased pulp is also used. Paper is manufactured on three paper
machines of capacity 45TPD (1.83m wide), 50 TPD (2.55m wide) and 115 TPD (2.88m
wide). The plant is fully supported by a 7.5 MW biomass based Cogeneration Power
Plant. About 1.5 to 2.0 MW of excess electricity is exported to the state grid. The plant is
well connected to the major industrial areas in the southern peninsula.

2.3.2 Ruby Mecons Ltd

Ruby Machinery And Consultants was incorporated in the year 1976. Initially the
company was established to supply paper machinery and consultancy services to small
paper mills project. During 1986-88 RML was only supplying paper machines, technical
consultancy services to paper industry and in the year 1988 RML set up is own paper
mill with modest capacity of 20 TDP. Since then, RML has never looked back and over
the period of time, the paper mill division witnessed a 10 fold capacity increase from 20
TPD to 150 TPD.

Made from recovered paper, the full range of recycled liners and flutings is produced by
two mills and three machines located in and around industrial estate of Vapi, 180 kms
north of Mumbai. With a production in excess of 150,000 tons of recycled
containerboard, Ruby Macons contributes significantly to paper recycling in India.With
production in excess of 150,000 tons, Ruby Macons is by far the leading producer of
Testliner and Fluting [containerboard] in India. Its complete product range, made from
recycled fibres, covers almost the full need of the Corrugated Packaging industry.
The product range covers the complete spectrum with regard to weight, strength,
printability and quality. The emphasis is very much on producing the right quality of
paper at the right cost to satisfy the customer, whilst maximizing box performance.Ruby
Macons has secure sources of recovered paper by having its own facility in USA and a
strong vendor base in other parts of the globe.

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2.3.3 The Canara Paper Mills

The Canara Paper Mills is based in Changanacherry, Kerala and is a leader in the
production of kraft paper. Utilizing 100% recycled fiber, the mill has capacity to produce
over 25,000 tons of Kraft paper every year.

The mill was setup in the year 1982 and has been operational since 1985. The mill
underwent several enhancements and additions over the years and a large capacity
expansion in the year 2011-2012. The mill provides direct employment to over 150
employees and indirect employment to hundreds more in the region.

They are a 100% recycling mill and in support of our Green credentials, all the products
are made from 100% Recycled Wastepaper. Recycling efforts lead to a significant
reduction of waste paper going into landfills and alleviate a major problem of waste
disposal and waste reduction for there municipalities and panchayats.

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3.1 Overview Of The Organization

Company Profile
Sree Sakthi Paper Mills Ltd. was incorporated as a limited company in the year 1991
under the companies act 1956. The company has two plants, one at Edayar and the other
at Chalakkudy. The addresses of the registered office and the plants are as follows:

Registered Office
57/2993, Sree Kailas, Paliam Road
Ernakulam, Cochin - 682 016, Kerala
Tel : 0484-4092999, 2373230, 2371085, 2380497
Fax : 0484-2370395
Email : secretary@sreekailas.com
Web :www.sreekailas.com

Factories

Kraft Paper Unit 1 and 2
Industrial Development Area
Muppathadom, Edayar, Aluva - 683 102
Tel : 0484-2540622, 2555451
Fax : 0484-2555835

Duplex Board Unit
Kanjirapilly, Pariyaram, Chalakudy, Thrissur - 680721
Tel : 0480-2746129, 2747529
Fax : 0480-2746410

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3.1.1 Background And History
Sree Sakthi Paper Mills Ltd is an India-based company. The company is engaged in the
manufacture and trading (including exports) of Kraft paper and duplex board. It was
incorporated as a limited company in the year 1991 under the companies act 1956. Their
products include Kraft paper from non-conventional raw materials, such as waste paper
Kraft cuttings, paper board coated with china clay using unconventional raw materials.
The company has three plants:
Kraft paper unit- 1 is commissioned in 1991 to produce Kraft paper at Edayar
Cochin.
Duplex board unit commissioned in 1995 at Chalakkudy.
In 2007 the company started another Kraft paper unit-2 at Edayar Cochin.
The company's Kraft Paper Unit I and II are located at Industrial Development Area,
Muppathadom, Edayar, Aluva and their Duplex Board Unit is located at Chalakudy,
Kerala, India.
The company set up a manufacturing unit with an installed capacity of 6000 tonnes per
annum with a capital investment of Rs 315 lakhs at Industrial Development Area,
Edayar. Subsequently, they increased the capacity to 10000 tonnes per annum to meet
the increased demand of Kraft Paper. Edayar plant started its commercial production on
19
th
April 1993, and is engaged in production of Kraft of various specifications.
In the year 1995, the company commissioned the duplex board plant with the installed
capacity of 9000 MTPA. Further expansion was carried out in 1996 to increase the
production at Kraft Unit by 2000 MT/annum with an additional investment of Rs.100
lakh, making the total production capacity to 12000 MT/annum.
The management then decided to go in for another paper mill for manufacture of boards.
This plant was commissioned in the year 1995 with an investment of around Rs 1100
lakh to produce 10000 MT/ annum. The company felt the necessity of installing
pollution control equipment to have a 100 % zero effluent discharge system during the
early stages and commissioned Merk Save All system in 1995 itself. In the meantime,
the company went for an upgradation by adding necessary equipment in 1996 with an
investment of Rs 100 lakh.
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In the year 1998, the company received Pollution Control Board Award for Best Unit at
Duplex Unit. In the year 1999, they received Pollution Control Board Award for Best
Unit at Kraft Unit. Also, they received ISO certification for their Duplex Unit. In the
year 2000, the company was awarded ISO 9002 to Kraft Unit.

In the year 2003, the company increased the production at Duplex Unit by 5000 MTPA.
In the year 2004, they started production of Double Coated board at Duplex Unit. Also,
they increased production at Duplex Unit by 6000 MTPA. In the year 2005, the company
increased the production at Kraft Unit by 8400 MTPA. During the year 2006-07, the
company increased the production capacity of Paper & Paper Boards by 43400 MT to
85000 MT.
During the year 2008-09, the company completed the modernization project at the
Duplex Board Unit. They took up three small hydro power projects, namely 3 MW at
Mukkuttathode (Kerala), 3 MW at Alamparathode (Kerala) and 5.25 MW at Palchuram
(Kerala). During the year 2009-10, the company modernized their Kraft Paper Unit I and
their capacity were upgraded to 80 tpd by adding more dryers and installing second wire.
Installation of second wire was completed in August 2010. The company has proposed
to install Krima Disperser Unit, which is meant for dispersing contaminants like wax,
bitumen, ink spots, stickies, etc. in the pulp in the stock preparation process. The
equipment has already been ordered and the project is expected to be completed during
the financial year 2010-11. The company plans to modernize the Kraft Paper Unit 2, by
adding dryers and by installing Third Wire. They decided to install a 25 tone high
pressure boiler with 2 MW back pressure turbine.
The company also boasts of a good dealer network built and maintained for the last
twelve years in all major markets/regions. Most of the dealers have been associated with
the company since its inception and hence the relationships between the dealer and the
mill are very cordial and co-operative.

The company is profitable since its inception. It employ thousands directly and several
indirectly. Since 2003 SSPML has a continuous dividend payment. The company is
listed in Bombay stock exchange. The company have more than 1000 shareholders.
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The board of director of the company consist of 12 members of which 50% are
independent. The company is professionally managed. Presently installed capacity is
100000 MT per annum. Annual turnover of the company is 150cr.
SSPML is a flagship company of Sree Kailas group of industries. Today the group has
grown into a huge industrial house with interest in the following segments;
1) Paper segment
2) Logistics segment
3) Construction and infrastructure
Main companies of the group are
1) Sree Giri Packing (Pvt. Ltd.),Chennai.
2) Sree Kailas Transport and leasing.
3) Carto packs Ltd, Kalamassery.
4) Maharaja Continental Traders Ltd.
5) Sree Kails Infrastructure Construction Ltd.

3.1.2 Company Vision Mission And Values
3.1.2.1 Vision
To be the market leader in the respective fields of business by adopting innovative
methods for sustained development.
3.1.2.2 Mission
To attain national and international standards of quality in various business segments.
3.1.2.3 Values
Progressive and open minded with universal welfare as the guiding spirit.
Strong resolve in maintaining ethical business practices.
Multi-faceted, Multi Linguistic, Functional Expertise.
Bonded relationship with employees and customers.
Strong commitment to the society.
Financial stability of the group.
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3.1.3 Milestones Achieved
1993 Paper mill set up for manufacture of Kraft paper with an initial capacity of
15 TPD.
1994 production increased by 4000 TPA at Kraft Unit.
1995 Duplex Board Plant commissioned with 9000 TPA.
1996 Production increased by 2000 TPA at Kraft Paper unit, Started coating at
Duplex Board unit and installed zero discharge system at Duplex unit.
1998 Color Board production 2500 TPA at Duplex Unit.
1998 Received Pollution Control Board Award for Best Unit at Duplex Unit.
1999 Received Pollution Control Board Award for Best Unit at Kraft Unit.
2001 Ribbed Kraft production at Kraft Unit and achieved Export of1600 TPA
from Duplex unit.
2003 Production increased at Duplex unit by 5000 TPA.
2004 Started production of Double Coated Board at Duplex Unit and increased
production at Duplex Unit by 600 TPA.
2005 Increase in production at Kraft Unit by 8400 TPA.
2006 Gone for public issue of Shares and Listed in Mumbai Stoke Exchange.
2007 Commissioned Second Kraft paper unit at Edayar.

3.1.4 Products And Markets

3.1.4.1 Products

Description Specification Burst factor
(Types) (GSM) (BF)
Duplex Board 90- 360 14-40
Kraft Board 90- 360 14-40
Grey Board 90- 360 14-40

Three types of boards are manufactured in the Plant. The boards are composed of three
layers. In the case of duplex boards the top layer is made of superior quality white pulp.
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Middle and bottom layers are made of cheaper low quality pulp. The bottom layer of
duplex boards is again composed of two layers. One is the layer, which can be seen on
the bottom side of the board and the other layer lies just below it. This layer is use to
adjust the weight of then paper. No white pup is used in manufacture of Kraft Board and
Gray Board. For these, lower quality pulps are used in all the three layers of which the
bottom layer is used to adjust the weight of the paper.
On the basis of quality the boards can be classified as follows:
Item Quality
Duplex Board LWC
Deluxe
Special Economy
Economy
Banyans Insert Quality
Match Insert Quality
Kraft Board Kraft
White Kraft
Grey Board Grey Board
Minimum standards have been fixed for each quality of boards by the R&D department.
The production is done in accordance with the standards prescribed for the required
quality of the board.

3.1.4.2 Market Share
SSPML is the largest producers of Kraft paper in south India. Roughly 30% of the
market share is in south India and is expected to increase in the near future.

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3.1.5 Business Performance Of 2011-12

In a year of economic slowdown, company posted satisfactory working performance in
fiscal 2012. Whereas the companys production and sales were marginally up at 78509
MT and 78034 MT respectively, revenue increased 8.2% to Rs 198 crores.
Notwithstanding a forex (fluctuation) loss of about Rs 99 lakhs, the companys operating
profit grew more than 13 % to Rs 22 crores. The commissioning of the boiler and Power
Plant Project towards the end of the year resulted in higher interest and depreciation
which, coupled with a prior-year tax provision of Rs 84 lakhs, put pressure on the
bottom line. The company netted a marginally lower profit of Rs 6.60 crores for the
fiscal. Nevertheless, hoping to reap the benefits of the modernization-cum-expansion
from the current year, the directors have proposed to maintain the dividend. The
company completed the modernization-cum expansion programme during the year by
commissioning 22-TPD boiler project, 2 MW Power Plant project, Press and Steam
condensate system at Kraft Paper Unit-1 and Krima disperser (fibre treatment plant) at
Kraft Paper Unit-2. On completion of the expansion, the companys rated capacity has
increased by 18150 MT making the total capacity to more than 1 lakh MT per annum.
The companys gross fixed assets had an addition of Rs. 26 crores during the year on
account of the modernization-cum-expansion.
Operational highlights of 2011-2012:
Modernization boosted the rated capacity more than 21%, from 85000 MT to
103150 MT.
Net Sales increased 8.2% largely on account of better realization which improved
7.3%, from Rs 23,640 to Rs 25,364 per tonne.
Efficient working capital management reflected by shorter debtor turnaround
time (47 days in FY12 as compared to 49 days in FY11).

3.1.6 Long Term Objectives Of The Company
To attain operational efficiency by adopting innovative methods.
To maximize production facilities and attain growth on sustainable basis
To maximize profitability with all efforts to reduce the cost.
To diversify the activities.
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3.2 Organization Structure

Fig 3.1 Organisation Structure

(Source: departmental manual)

Managing Director
Executive Director
Materials
Department
Finance
Department
Sales and
Marketing
Department
Personnel
Department
Operation
Department
Purchase
Department
Production
Department
Store
Department
Production
control planning
Quality control
Department
Mechanical
Department
Electrical
Department
Administration
H R Department
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3.2.1 Business and department structure
The organization is divided into various departments, each under a general manager. All
the department heads report to the executive director who then reports to the managing
director. Department can be grouped under two heads - plant and corporate office.
The corporate office has the following departments
1. Material Department.
2. Sales Department.
3. Finance Department.
4. Personnel Department.
5. Internal Audit Department.

Departments in the plant are as follows:
1. Stores Department.
2. Production Planning and control Department.
3. Production Department.
4. Quality control Department.
5. Mechanical Department
6. Electrical Department.

3.3 Functional Analysis

3.3.1 Materials Department
The function of the materials department is to purchase the materials required by various
other departments and to deliver it at the factory premises. All the purchases of the
factories are through the material department. The purchases includes raw materials for
the production, mechanical tools, laboratory items for the quality control department etc.
Almost all the purchases are on credit basis. The function of material department is
carried out in four stages. They are:

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Material Planning
Procurement
Receipt of Materials
Customer Clearance

Fig 3.2 Departmental Structure Materials Department


General Manager
Deputy General Manager
Deputy
Manager
Deputy
Manager
Deputy
Manager
Assistant
Manager
Assistant
Manager
Assistant
Manager
Assistant
Manager
Assistant
Manager
Assistant
Manager
Senior Manager
Executive Executive Executive Executives Executive Executive
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3.3.1.1 Material Planning

Annual and monthly requirements of various raw materials needs for production are first
determined in consultation with all the concerned departments. Then, maximum level,
minimum level and reorder levels of stock to be maintained at stores are determined. At
the expected scale of operation, the rate of consumption of material is calculated and on
its basis, the time of delivery, minimum quantity per delivery etc. are found out. Order
plans for the purchase of materials is prepared on the basis of these figures. This
procedure purchase of materials is prepared on the basis of these figures. This procedure
is applicable in the case of major raw materials like scarp paper, chemicals etc.

In the case of consumable stores items, the concerned departments issues purchase
requisitions to the materials departments. The materials departments then taken further
action for its purchase. The requisitions are usually forwarded through stores department
to check whether the department has got stock of the material concerned and accordingly
subsequent actions are taken.

3.3.1.2 Procurement

After the assessment of annual and monthly requirements of raw materials, the
department gives advertisements in major dailies inviting quotations for the supply of the
required materials. Both the quoted price and sale conditions are studied before
accepting the quotations. If one party is not able to supply the full requirement, two or
three parties are selected simultaneously. Then separate agreements of sale are entered
into with the concerned sellers. Afterwards separate order plans and delivery schedules
are prepared for each of them.

The same procedure is followed in the case of costly consumable spares also. Low value
items are purchased outright from the market by payment of cash. At least there
quotations are collected from different suppliers and the one quoting lowest rate is
accepted for such purchases.

In the case of imports also, the same procedure is followed. But the only difference is
that the order is placed only after confirming that the samples are satisfactory and is
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suitable for the requirement. Before placing the order, a letter of credit for an amount
equivalent to the bill amount is opened in the name of the seller with a bank.

3.3.1.3 Receipt Of Material

The ordered goods will be delivered by road at the factory site. Before accepting the
goods their quality is checked. Various materials and their test parameters are explained
later under Research& Development department. The materials department is mainly
concerned with the moisture content of the paper and the regent content of the chemical
raw materials. The moisture content of the paper will increase the total weight of the
material. A certain percentage of moisture is allowable in procured paper. In case actual
moisture content is more than the accepted level, the weight of additional water content
is deducted from the total weight. This is to ascertain the actual weight of paper for the
purpose of bill clearance. In the case of chemicals, the quantity of reagents matters for its
verification of the quality of the material. The price of the materials will vary with the
reagent content of the chemicals.

The stores department after acceptant after of materials, the concerned documents like
MRV, Goods Received Voucher (GRV) etc. are sent to materials department for bill
clearance. The Goods Received Note (GRN) will contain aforesaid details and will be
retained as records for future references.

3.3.1.4 Customer Clearance

After the delivery of materials at the factory premises, the purchase bills/ invoices are
sent to the materials department. The department compares it with the purchase order
and confirms that the materials are billed at agreed rates. Then they check it with
delivery documents and confirm its physical quantity. Then it is forwarded to Finance
department through internal Audit department for payment. In the case of imported
materials, the agreed amount will be paid in advance in the form of Letter of credit.

23

3.3.1.5 Store Department

The Stores Department aids the purchase and production department. It keeps records of
its stock and gives necessary and timely information to purchase and production
department. Two different stores in the organization are: Raw Material Stores and
Mechanical, Consumables and Spare Stores respectively.

3.3.1.5.1 Raw Material Stores
The major types or raw materials stores are Recycled Paper in terms of Card Board,
Cartons (old and new), Newspapers, Note Books, Paper Cuttings and Shreds, Soiled
Waste, White Envelopes, Unbleached Kraft Pulps and White Papers (both local and
imported). The raw materials are handled by contract laborers on tonnage basis to be fed
in the conveyors for pulp production. In addition to the above around 40 different
chemicals and fuel stock (grain husks, sawdust, firewood and good quality charcoal) for
boilers are stored in various places within the complex of the factory. All raw materials
which are costly and impotent are stored in Go downs while other raw materials are
dumped in sheltered bays. This section of raw material is of significant value and is
looked after with great importance. Handling of wow materials is done by mechanical
forklifts by local labor. Mechanical conveyors are used for feeding stock to pulpits.

3.3.1.5.2 Mechanical Consumables And Spare Stores

Consumables, spare parts, tools and spare running machinery are required by the various
line in the production department. The requisite spares and consumables are stocked in
this section. The stores are run in general shift and an average stock is maintained
keeping in view of past experiences and as per requirement of the firm. However, the
Management and the Purchase Department in control of stockings these spares for better
and effective inventory control take care.

24

3.3.1.6 Procurement Procedure

The material department after completing the necessary formalities in procurements as
per the policy of the Management gives Purchase Order to the Supplier. The supplier
delivers the ordered materials periodically as per the requirement/schedules as stated in
purchase orders. Paper locally and imported are delivered by road to the factory
premises. The raw materials liquid in nature is delivered in barrels. Certain materials
which are critical in nature and which is wholly dependent on one supplier, an excess
stock is kept at the factory stores to tide over any contingency.

The incoming materials, irrespective of the nature are first monitored and examined by
the security people at the entrance with regarded to the description given in the delivery
note. On confirmation by the Security regarding the conformity of the material delivered
as per the order, the MRV is prepared and the concerned stores department is informed
to take further action on the delivered item.

The receiving section of the concerned stores department scrutinizes the MRV and
confirms the goods received are correct physically. Sub-sequently, a goods received note
(GRN) is prepared specifying purchase requisition number, purchase order number, L/R
No party challan number, bill number etc. The GRN along with the MRV and Delivery
note is then sent to the quality control department for ascertaining whether the material is
acceptable in quality or not. Accordingly, the quality control department after inspection
gives the QC report. The accepted goods are taken in charge and stored in the respective
rack, shed or bays. If the goods are of lower quality than the desired standard, the
Purchase Department informs the Supplier and necessary negotiations are carried out
either for deduction in cost or retrieval of the materials for replacement.

3.3.1.7 Materials Issue

The materials are issued from the Stores on FIFO basis. Authorized persons designated
form the concerned Departments place material requisition to the Stores Department. On
receiving the requisition, the Stores Department, issues the required materials to the
respective departments. Materials of consumption of daily nature are issued without any
delay. Certain materials, which are viral and costly, are issued only with the concurrence
25

with the GM. There are norms and proportions laid out for raw material to obtain the
desired quality standard. All concerned strictly follows these in letter and spirit. Any
variations on these matters clarifications are sought with the concerned authorities for
issue and accounting purposes. The IA department also keeps a check on the issue and
monitors on a regular basis.

The Stores Department maintains separate accounts for all items. The records maintained
reflect the receipts, issues and the residual stocks of each item on daily basis. The bin
card system is practiced in the department for effective control of Stores.

At the Corporate Office, major material purchases and issues are done to have an
effective control and maintain a minimum inventory level. Then certain important
materials, which are recurrently replaced at regular intervals, Purchase Department
maintains, direct contact with the supplier for providing the desired spare at the
appropriate time to avoid any lapse or stoppages in the production schedule.

3.3.1.8 Stock Control

The production planning section issues purchase requisitions to the purchase department
to take further action for purchase of raw materials. Electrical/ Mechanical Department
places requisition to the purchase department for Machine shop requirements
respectively directly with the concurrence of GM (operation). Low value items, which
are general in nature like nuts and bolts are placed directly with the purchase department
by the Stores Department. ABC analysis is done to facilitate better stock control. A & B
category items are purchased by the purchase department in consultation with the
concerned department whereas C category articles are intended and purchased by the
stores department directly.

26

3.3.2 Production Department

The production department function directly under GM (operation)assisted by DGM
(Production). The Plant works round the clock on a three-shift basis under each shift in
charge person who directly reports to the Senior Manager (Production). The shift in
charge controls the operators, assistants, helpers and laborers under his shift and is
responsible for designated output of production during the shift. An approximate
strength of 200 persons is working in the shop floor level of the department besides the
Managerial Staff. The present installed capacity of the Plant is:
Unit 1 80 tonnes per day
Unit 2 150 tonnes per day

Fig 3.3 Departmental Structure Production Department

General Manager
Senior Manager
Shift Supervisor
Shift In-Charge
Workers
27

3.3.2.1 Production Planning And Control

A production planning and control section has been set up under the GM (operation) to
plan production and to prepare production schedules. In consultation with GM, prepares
production schedule for the coming month. Once the production of a specific type of
paper is started, it is difficult to change over to another type. So, continuous period of a
reasonable number of days is allotted to each type of paper. This is done on the basis of
the targets of the sales department and orders available. For each type of paper, quality
wise schedules are also prepared by the PPC. Also the PPC helps the sales department in
preparing dispatch schedules.
The Meeting of Senior Managers is held daily to plan the production for the next day and
to ascertain the profit or loss on the previous days runs. Daily cost sheets as well as shift
wise cost sheet are prepared to facilitate production planning. As per the given target the
Sales Department collects orders and on its basis issued production intend to the PPC
section. On receiving the production intend the PPC section enter the details in the
production planning and control register and issues a hob card. Separate job cards are
issued for each order. The issued job card is sent to IA department for verification. The
verified job card is then forwarded to the Stores Department for material issue.

3.3.2.2 Production

The production system installed in the plant is continuous batch production system. The
raw material fed at the starting end is collected as board at the latter end. Characteristics
of the board like GSM, thickness of coating, glaze, brightness etc. can be set on required
levels and production can be made accordingly. Paperboards are usually composed of
three layers. The top layer of the board is made of good quality pulp. Middle and bottom
layers are made of lower quality pulp.

In the case of duplex board the top layer is white in color. Therefore only white paper
cuttings are used in top layer. In the middle and bottom layers lower quality raw
materials like OCC, NCC etc. are used. The bottom layer of duplex boards are composed
of two layers viz, third and fourth layers. The top middle and fourth layers GSM of
28

the board are kept constant for boards of all GSM. The third layer is used to adjust the
total GSM of the board. In addition to these to increase the glaze and brightness of the
board, a coating of some chemicals and whiteners re given on the top layer. The coating
is given in the case of printing quality boards only.
In the case of Kraft boards and gray boards all the three layers are made of lower quality
raw materials. The top and the middle layer GSMs of the boards are kept constant and
the bottom layer made of lowest quality pulp is used to adjust the GSM of the board. In
case of printing quality Kraft boards a coating of chemicals is given on the top layer.
The production is again divided into pulping section and board machine section, each
under a section in charge.

3.3.2.3 Production Process

3.3.2.3.1 Pulping Section

The pulp required for the manufacture of paper is made in the pulping section. The pulp
required for the three layers of the board are made separately as they differ in quality and
other characteristics. Three production lines are installed for the three layers. In
manufacture of duplex boards, the pulp from the third line is used in both the third and
fourth layers.
Feeding conveyor: The raw materials ie, waste paper which are issued from the stores
department are weighed and delivered to the feeding end of the conveyor by trucks.
There it is sorted and checked manually and is fed into into the conveyor slowly and
continuously.
Pulpers : The raw material fed into the conveyer reaches the overhead hopper of the
pulpers. In the pulpers the materials are filled to the required level. Then the pulverized
paper or pulp is pumped into a chest. A chest is a tank fitted with impellers, which
rotates continuously inside it.
29

High Density Cleaner: From the chest, the pulp is pumped into the high density cleaner,
where high-density particles like clips metal pieces etc. are separated and removed. From
there the pulp is pumped into the turbo.
Sand Trap: Sand trap has been installed in the bottom line only. Materials of lowest
quality are used for making bottom layer pulp and such pulp will contain more
impurities and sand. The pulp form then pulpers chest is pumped in to the sand trap
where the sand and other heavier particles gets precipitated and removed. Then the pulp
from the sand trap is pumped into the high density cleaner.
Primary Turbo: The pulp from the high-density cleaner is pumped into the primary
turbo where plastics, chips etc., present in it are removed. The purified pulp is then
pumped into a chest. In primary turbo pulp still remains unpurified.

Secondary Turbo: The residual impure pulp from the primary turbo is pumped into the
secondary turbo. The turbo purifies this pulp and it is pumped into the aforesaid chest.
Centry Cleaner: The centry cleaner has been installed in the bottom line only. In the
centry cleaner the lumps and all residual impurities are removed from the pulp.
Thickener: The pulp from the centry cleaner or the turbo chest is pumped into the
thickener. Here the moisture content of the pulp is reduced and the pulp is made thick.
The thickener increases the consistency of the pulp to about 2-3%.
Poucher: The poucher is used to wash the thickened pulp. The poucher is used for stock
preparation for duplex boards only.
Refiner: The thickened/washed pulp is pumped into chest. The refiner grinds the pulp
in the chest to the required level. The refined pulp is again let out into the same chest.
The unit for measuring the level of refining is known as degree SR. The degree SR of the
pulp varies with the layer of the board (top/middle/bottom), GSM of the layer and the
type of board. The refineries shut down when the pulp reaches the required degree SR.
Adding Chemicals: The final process in stock preparation is adding of chemicals to the
pulp. The pulp, which is fed into the board machine, is maintained at a pH value of 5+/-
0.5 (acidic). In addition to these, chemicals like rosin, alum, starch, china clay etc., are
30

added to the pulp. All these chemicals are mechanically mixed with the pulp and the
prepared stock is pumped into the machine chest. From the machine chests the pulp for
different layers are pumped into their respective head boxes. From the head box the pulp
is transferred into the respective moulds of the board machine.
From the stores department the job card reaches the pulp in section of production
department. There, the section in charge fills in the required details about stock
preparation .then the job card is forwarded to the board machine section.

3.3.2.3.2 Board Machine Section
The board machine is actually a series of machinery arranged sequentially, acting as a
single unit. The manufacturing process in the board machine is a continuous one. A
single 400HP DC motor gives the motive power of the whole machine. The section is
under the charge of a board machine in charge, reporting to senior manager (production).
Mould: In the board machine there are six moulds available, laid out one after other in a
line. Out of these only three only three or four moulds as the case may be are used at a
time. The pulp from the head boxes of three layers is transferred into their corresponding
moulds. In the case of duplex boards the bottom layer stock is pumped into both the
three and forth layer moulds. In all the moulds the consistency of the pulp is maintained
at 3+/- 0.2. Primarily the bottom layer mould makes a thin coating. The maximum width
or deckle of the board manufactured is 260 cms. The deckle of the board is reduced the
required measures by trimming off the unwanted length of pulp from either edges of the
belt. The layer GSMs of board is also adjusted in the moulds.
Presses: Next to the moulds, three presses - first press, second press and reverse press
are arranged in a line. The felt belt from the moulds runs into these three presses and
all three presses are electrically operated pneumatic roller presses. Each of the presses
removes about 10 percent moisture and after pressing the moisture of paper reduces to
50 +/ -5%.
Pre dryers: After pressing the paper is removed from the belt by applying vacuum and
it enters the pre dryers. The pre drier is a series of ten stem heated rollers arranged
31

sequentially. The wet paper runs over the ten rollers and emerges out with a reduced
moisture content on 35+/-5%.
Machine glaze: The partially dried paper then enters the machine glaze where the top
surface to the paper is glazed and smoothened. The machine glaze has a steam-heated
rolled, which has a smooth polished outer surface. Some moisture is also removed in the
machine glaze.
Post dryers: The post dryers again consist of five steam-heated rollers arranged
sequentially. The glazed paper from the machine glaze then passes through the post
dryers. After drying the moisture of the paper reduces to 6+/-1% which is allowable
under normal climatic conditions.
Coating: To improve the appearance and whiteness of the paper a coating of various
chemicals are given on the top layer of the paper. The coating solution is prepared in a
separate coating kitchen and is applied on the paper by metering bars. The paper after
passing through the metering bars will have a thin uniform layer of solutions on its top
surface.
Calendering Machine: The coated paper then passes through the Calendering machine
where it is callipered and glazed. Calipering is the process of making the thickness of the
paper uniform through out the deckle.
Pop reek: As per the requirements of the customer the manufactured is either rolled or
cut as per specifications. In the pop reel the paper is rolled into reels of required size and
weight.
Cutter: If the paper is require to cut it is fed into the cutter. Three types of cutting can
be done on the cutter simultaneously-length wise cutting, simplex cutting and duplex
cutting. All the three cutters can be set on required measures. The lengthwise cutter
slices the paper continuously as it comes in and the simplex and duplex cutters chop the
sliced sheets at specific time intervals. In printing quality boards, features like short
grain and ling grain are kept in mind while cutting.
On completion of stock preparation the job card of the specific orders is forwarded to the
board machine section. Details regarding the production run for the order are filled in at
the section. Then it is sent to the finishing house section.
32

3.3.2.3.3 Utilities

Besides the main production line some other equipment has been installed to assist
installed to assist in production. Such equipment known as utilities has a vital role in
production process.

The utilities used in the factory are vacuum pumps, compressors and boilers. The
vacuum pumps are used to separate the wet paper from the felt belt after pressing.
Compressors are used in pneumatic presses and at various other points where air
pressure is used to operate machine.

The boiler is used to produce steam for heating the drier rollers and the machine-glazed
roller. The boiler is able to produce six tons of steam per hour at a pressure of 10.5
kg/sq.cm. Saw dust, de-oiled bran etc. are the major fuels used in the boiler.

3.3.2.3.4 Effluent Treatment
Paper making industries generally consume large volumes of water. The plant under
study consumes comparatively less amount of water, as it is only a recycling plant. To
ensure the continuous supply of water the plant is located on the bank of Chalakkudy
River. Due to pollution control board restrictions, the effluent water cannot be let out
into the river. So, an effluent treatment system has been installed to recycle the effluent
water and to reuse it in the plant. The system is known as Save all System. It is zero
discharge system in which he effluent generated is completely recycled and no water is
discharged into the river.

During production the effluent is generated during pulping, refining, thickening,
pouching and pressing. In addition to these the effluent may be generated due to
abnormal reasons like over flow of head box, over flow of moulds, leakage etc. The
generated effluents flow through chains and gets collected in collection tanks.

The treatment plant consists of two conical shaped tanks, each having a height of 16
meters. One tank has a volume of 350 cu. Meters and the other 250 cub meters. The
33

effluent from the collection thank is filtered and pumped into the save all tank. The
effluent mainly consists of pulp and water. A chemical precol is added to the effluents
in the tank. Then the denser particle of the effluent ie. pulp gets settled in the lower part
of the tank. Clear water from the top of the tank is taken back into the plant through
pipes. The pulp collected during filtration and the bottom of the tank is removed
periodically.

3.3.2.3.5 Finishing House Section

The finishing house section is constituted under the manager (R&D).The finished
product from the board machine reaches the section along with the job card and
production report in the section the jobs are divided and distributed among the workers.

In the case of reel orders, the reels from the pop reel are mounted on the reminder. A
five-ton overhead crane is used for the purpose. In the reminder, the reel is cut in the
required deckle and the paper is re wound in the reverse direction in order to avoid re
rolling. Then the reels are weighed and reel parameters like GSM, job card number, size,
width etc. are rechecked. After that the reels are packed in paper and are secured by
paper tapes and straps. Finally, the reel parameters and rolling directions are marked on
the reel and it is transport to finished goods store.

In the case of boards, the paper is cut into required sizes in the cutter and is collected
from there. Then, random samples are selected from the incoming sheets and its GSM,
Cobb, burst factor, stiffness, caliper etc. are tested. If the parameters are within the
allowable limits, the sheets are sorted out into various qualities by personal observation.
X is the best quality sheets and Y is of next to best quality. B is low quality material and
is sold at a discounted price. Z is rejection quality material.

Stored sheets are counted and stacked into reams (144 sheets) and each ream is packed in
paper and secured with paper tapes. For convenience in handling two or three reams are
bundled together and is packed in gunnies. Each bundle weighs about 70kg. If a single
ream itself weighs more than 70kg half reams(72 sheets) are packed in a bundle. Packing
34

slips showing item, size, GSM, number of sheets, date of packing etc. is pasted on each
bundle.

The packed bundles are stacked in the finished goods store, where bin card system is in
practice. Details about the item, its quality, quantity, number of bundles/reams etc. are
filled in the job card from the section. The care is then forwarded to dispatch section.

The finishing house section maintains a finished products register in which all the details
about the packing and storing of finished goods of specific orders are entered. In
addition to these a finished products reports showing quality and quantity of finished
products is also maintained.

3.3.2.3.6 Dispatch

The finished goods are removed from the plant either by direct sale, even sale or stock
transfer. In direct sale, goods are sold directly to the parties where in even sale the bills
are issued to the dealers. The dealers then issue their vouchers to the parties. In both the
cases the goods are delivered directly to the parties. In the case of stock transfer, the bills
are issued at fixed rates to the dealers/branches and the goods are delivered at their go
down.

Dispatch Procedure

The dispatch section of the basis of job cards prepares delivery challan cum packing
slips. Then invoices/bills are issued to the parties or dealers stating quality of the
product, rate, quantity, amount, taxes and insurance charges. Then in an internal gate
pass is prepared and all these documents along with the Lorry Receipt collected from the
transporters are sent to the internal audit department. After internal, audit checking, the
vehicles are sent out from the factory premises. The internal gate pass issued is collected
at the security office at the gate and is entered in the gate pass record. The details
regarding the dispatch are entered in the job card and then sent to IA Department where
it is kept for further references.

35

3.3.2.4 Mechanical Department

Mechanical Department is a functional department consisting of Skilled Technicians like
Fitters, Welders and Turners under a Foreman. The Department undertakes three types
of maintenance in the factory. They are:
1. Preventive Maintenance
2. Normal Maintenance
3. Breakdown Maintenance

The production being run round the clock, there is no specific maintenance schedule.
The maintenance is carried out during the machine shut down time and sensitive and
critical parts of the machinery have already being identified. The preventive maintenance
is done regularly on such parts during shut down time.

Normal maintenance, is however, carried during the functioning of the Plants when an
abnormality in the functioning of the machineries is observed. In case it is very serious
the Plant need to be shut down and breakdown maintenance have to be carried out.

All spares and parts required for the replacement and repair of machines are either
available in the Mechanical Department or in the Sore Section. The Mechanical
Department is equipped with necessary machinery like Lathe, Drilling Machine, and
Cutting etc.

3.3.2.5 Electircal Department

Electrical Department functional department under production is organized on the
similar lines of Mechanical Department. An Electrical Engineer Heads the Department
consisting of Electricians and skilled persons. He reports directly to the Senior Manager
(Production) and his Assistants are organized in three shifts working round the clock.
The role of this Department is to ensure constant supply of power either from the State
Electricity Board or from standby Generators installed within the factory. In addition to
the above they are also responsible for carrying out maintenance and repair of electrical
equipment within the premises

36

3.3.2.5.1 Electrical Distribution

Electrical Power for the Plant is supplied by a11KV line from the State Electricity
Board. This Department needs to monitor the supply and keep liaison with the Electivity
Board pm a daily basis for the requisite. This 11 KV feeder line through a bulk oil circuit
breaker is fed through two transformers of 1250 KVA capacity each and voltage of 440
V is supplied to a main distribution panel From the sub panels the power is distributed to
electrical equipment by highly insulated cables via. Conduit pipes. The circuit breaker,
transformer and the distribution panels are placed in safe areas in ideal environment
conditions.

The total motive power of the factory amounts to approximately 2000 HP. This is
supplied by approximately 200 AC induction motors and two DC Motors. The power of
the AC motors ranges from 3 horse power to 200 HP. The present level of activity
requires approximately 5 Lack Units of electricity on a monthly basis. Adequate
illuminations within an external to the factory are provided round the clock.

3.3.2.6 Quality Control Department

The QCD is functioning under the Senior Manager, who reports directly to the GM. The
Department consist of Chemists, who work round the clock in the Department in shift.
The function of this Department is to carry out quality at the raw material stage, during
the process and at the final stage before dispatch. The observations during these stages
are reported to the top Management on a regular basis. In addition to the above they also
monitor the quality during the process and ensure that the production is maintained at the
desired quality as stated by the production, planning and control sections.

3.3.2.6.1 Raw Materials

The QCD Department checks the Raw Materials on delivery to the factory location for
its quality as per the consignment GRN. They verify and test the materials for the
parameters as fixed earlier for the materials. The test results and their inferences are sent
37

to the Stores Department in the form of the quality control report. Some of the
parameters, which are verified against each material, are listed below:

Material Parameters
a. DSOCC, NCC, OCC Physical appearance
b. Alum Physical appearance
Aluminum oxide content, pH
c. Rosin Physical appearance
Solid content, Density, pH
d. Starch Physical appearance,
Brightness
e. China clay Physical appearance,
Brightness
Insoluble particles

3.3.2.6.2 In Process Inspection

The production process in the plant consist of two parts namely stock preparation and
board making. In stock preparation, pulp required for the manufacture of boards is
prepared and the prepared pulp is converted into boards in the board machine. Testing
the random samples at the various stages of production ensures the quality checking of
the material. If any abnormalities are detected, at any stage, remedial measures are
initiated immediately to rectify the defects. The various stages no production at which
samples are taken and tested for the parameters are as under.

1) Stock Preparation
a. Refining g chest stock pH, Degree SR
b. Machine chest stock Consistency, pH Degree SR

2) II. Paper Board Making Moisture Content.
3) III. Paper Parent Roll Moisture
Profile
Layer GSM
Size
38

Cobb
Caliper
Ash Content
Shade
Scoring
Appearance
Stiffness

3.3.2.6.3 Final Inspection

In the case of reel orders, 100% sampling method is used for inspection. And in sheet
orders, random sampling is used. Magnitudes of the testing parameters are fixed as per
the requirements of the customers. Features like GSM, profile, burst factor, shade and
brightness are tested in final inspection Brightness test is done in case of duplex boards
only and its magnitude depends on the requirement of the customers. In the case of reel,
its size and deckle is also checked.

In process inspections are usually done at specific time intervals (half an hour) and the
results are recorded in separate reports viz. pulping section production, in process report
and board machine production in process reports. Another function of the department is
to supply shift wise and daily quality reports of production to IA department. Also, the
Q.C. department prepares order wise quality control reports and enters it in the
respective hob card.

Some of the important equipment use by the QC department are recorded in separate
reports viz. pulping section production, in process report and board machine production
in process reports. Another function of the department is to supply shift wise and daily
quality reports of production to IA department. Also, the Q.C. department prepares order
wise quality control reports and enters it in the respective job card.

Some of the important equipment used by the QC department are Electronic balance,
Moisture checking device, pH meter, Ash checking device, Brightness & Gloss checking
39

device, Degree SR checking device, Consistency Meter, BF testing device, Stiffness
tester, Cobb tester, Caliper checking device etc.

3.3.3 Sales Department
Fig 3.4 Departmental Structure Sales Department


The Sales Department is directly under the charge of DGM (sales). The Deputy Manager
(Sales) and Assistants work under him in the department to co-ordinate the activities.
Since it is an industrial product much of the sales are done personally. 30% of the sales
are to the corporate customers and the remaining products are handled by the sister
concern Maharaja Continental Trades. The Carto-manufacturing unit in Cochin as per
the requirement also absorbs a portion of the production.

The products are manufactured as per the specifications and the requirements of the
customer; which implies that the order for each type of product is collected first and then
Unit 1 Unit 2
Manager Manager
Executive Executive Executive Executive
40

only the production of the item is started. The functions of the sales department are
carried out in four stages. They are:

1. Customer Location
2. Sales Booking
3. Delivery
4. Collection of Payments

3.3.3.1 Customer Location
The Kraft Paper mentioned above is an industrial good, which is used for manufacture of
cartons and boxes. The main consumers of these materials are carton manufactures and
packagers. The sales department is provided with the target they have to achieve by the
Management. The sales personnel contact the potential customers and understand their
requirements. On matching the requirements of the customer, they induce the customer
to try their products. Competitive pricing, discounts and credit periods are sales
promotion technique used by the department. Little effort and amount is spent on
advertisements and other sales promotional measures since the products is an indusial
one and not a consumer item. In addition to the above, efforts are also made to market
their products through their sister concern. The Management has made efforts to hold on
to bulk quantity consumers (Corporate MNCs) for marketing their products on long-term
basis. Frequent visits by the management to corporate customers on a regular basis
ensure maintaining a good relationship with the customers and thus meeting their needs.

3.3.3.2 Sales Booking

Agreements are entered with the customers who are ready to abide with the terms and
conditions and prefer to purchase the goods. Their annual and monthly requirements of
each product are identified and then planned for production. Small Order Plans are
prepared based on the orders of the estimated requirements. The production department
receives these orders and schedules for delivery form the sales department. The time
lapsed for the production to materialize is taken into consideration by the sales
department and accordingly, the delivery schedules of the orders are prepared by the
sales department in consultation with the production, planning and control sections.
41

3.3.3.3 Delivery

On materialization of orders placed by the Sales Department, the daily production output
are sized, packed and placed in the Stores Department for their final dispatch. The
dispatch proceedings are only complete after delivered to the customer locations by road
when the payment of necessary duty prevalent as on dat. The consignments are insured
before removal from the factory.

3.3.3.4 Payment Collection

The Management Policy emphasizes on immediate payment on delivery of stocks to the
customers. But due to heavy competition in this industry certain reliable customers need
to be provided credit sale and generally a period of 30 days are allowed for settlement of
dues. The Sales Department carries out with follow up action in collecting the dues by
cheques/draft and a proper feedback on weekly basis is provided to the Management.
Efforts are made by the Sales Department by issuing reminders and speaking to the
persons concerned for expediting delayed cases. Certain delayed cased are brought to the
notice of the Management for their intervention, if need be. If all efforts of recovery are
exhausted, the Sales Department hand over such cases for Legal Advisers for further
action. Customers who have been consistently irregular in prompt payments are
generally discouraged for carrying out any trade activities on direction by the
Management.

DGM (Sakes) is accountable in all respects pertaining to the commercial aspects of
products and he prepares and presents a weekly summary to the Management. His
responsibility remains till the recovery of payment as cleared by the accts department.
Control measures and final decisions based on those reports are taken during weekly
sales meetings. During these sessions, the production Departmental Heads are also in
attendance and feed backs of customer satisfaction in terms of production quality and
quantities are stated. Any clarifications/ discrepancies are sorted out during these
meetings. Any discrepancy arising out of a product consignment the sales department
maintains a constant touch and resolves with prospective customer till his final
acceptance of the consignment. Complaints regarding the product are generally dealt on
42

site at the customer premises. If need be certain negotiation takes place with the
customer for any allowance in certain cases as an extreme.

3.3.4 Finance Department

Departmental Structure Finance Department


The finance department structure consists of GM (finance) at the top. A DGM below
him and a manager and a deputy manager under the DGM. And the executives working
under them. The important functions of the finance department are given below:
General Manager
Manager
Assistant Manager
Senior
Executive
Senior
Executive
Senior
Executive
Junior
Executive
Junior
Executive
Junior
Executive
43

a) Capital and working capital management
b) Income and expenditure planning
c) Bank dealings
d) Accounts preparation and costing.

3.3.4.1 Working Capital

Working capital requirements are assessed keeping in mind the expected level of
activities of the factory, annual production plans and the corresponding previous years
figures. Various long term and short-term budgets are prepared for the purpose. Other
factors, which are considered while estimating working capital are;
Total cost incurred on materials, wages and overheads.
a. The length of time for which the raw materials have to remain in store
before they are issued for production
b. The length of production cycle or work in progress
c. The length of sale cycle during which finished goods are kept waiting for
sales
d. The average credit period allowed to customers
e. The amount of cash required paying day-to-day expenses of the business
f. The average amount of cash required making advance payments
g. The average credit period expected to be allowed by suppliers and
h. Time lag in payment of wages and other expenses.

The Management follows a moderate working capital policy and ensures to create a
situation of sufficient raw materials at any circumstances. Main means of financing of
working capital are loans from commercial banks and plugging back of profits and
surplus.

44

3.3.4.2 Income And Expenditure Planning

The receipts and disbursements projection statements are prepared on the basis of
various budgets like cash budget, etc. for the purpose of planning. Factors like cash
inflows and outflows, receivable, holdings inventories etc. are carefully studied before
making plans.

The major sources of income are:
Capital issue
Long term and short term loan, and
Collection of dues.

The major expenses are:
Payments to creditors (raw materials and purchases)
Repayment of loans
Payment of taxes and other charges
Payment of wages and Salaries
Payments towards office expenses and local purchases

3.3.4.3 Bank Dealings
All financial dealings of the company are done through banks. The amounts due are
collected from the cheques issued to the company. Similarly payments to creditors are
also given through banks. For the purchase of imported materials, a letter of credit is
opened with the bank on the name of the seller to an amount equivalent to the bill
amount. The supplier dispatches the goods only on getting the confirmed L.C.
particulars. Banks from which the loans are taken and there details are given below:

45

Table 3.1 long term borrowing
Rs in Lacs
31.03.2012
Rs in Lacs
31.03.2011
Secured

a Term Loans from:
i. IDBI Bank Ltd.
ii. Syndicate Bank Ltd
iii. Federal Bank Ltd
iv. State Bank of Travancore(Term Loan I)
v. State Bank of Travancore (Term Loan II)
vi. Axis Bank

Total

b Vehicle loan from:
i. Axis Bank

0.00
27.82
39.49
678.13
494.84
710.78

1951.06

6.21

127.53
108.84
106.08
584.44
0.00
0.00

926.89

0.00
Total 1957.27 926.89
(Source: Sree Sakthi Paper Mills ltd annual report 2011-2012)

Nature Of Security
All the loans are secured by Paripassu first charge on the entire fixed assets (both
movable and immovable) and paripassu second charge on the entire current assets of the
company.

Table 3.2 Terms Of Repayment Of Term Loan
Loan Terms of Repayment
a. IDBI Bank

b. Syndicate Bank Ltd.

c. Federal Bank Ltd.

d. State Bank of Travancore
(TL I)

e. State Bank of
Travancore(TL II)

f. Axis Bank

g. Vehicle loan - Axis Bank
Repayment in 60 monthly instalments of Rs 15,81,667/-
each
each
each
each and final payment of Rs. 20,60,000/-

each to commence from May 2012

each and last instalment of Rs. 17,06,000/-
Repayment in 36 EMI of Rs 37615/- each

(Source: sree sakthi paper mills ltd Annual report 2011-2012)

46

Table 3.3 Short Term Borrowings
Rs in Lakhs
31.03.2012
Rs in Lakhs
31.03.2011
A. Secured Loan
1. Loans Repayable On Demand From Bank.

a. IDBI Bank Ltd (Cash credit
b. Federal Bank Ltd (Cash credit)
c. Bank of India (Cash credit)

Total

B. Unsecured Loans
2. Loans Repayable On Demand From Banks

a. IDBI -Dubai - Buyers Credit

283.85
1000.37
243.02

1527.24

480.37

486.54
968.68
237.35

1692.57

0.00
TOTAL 2001.61 1692.57

(Source: sree sakthi paper mills ltd annual report 2011-2012)

Table 3.4 Nature of security
Working Capital Facility
From Bank
Nature Of Security

Repayment
Terms

a. IDBI Bank Ltd (Cash
credit)
b. Federal Bank Ltd (Cash
credit)
c. Bank of India (Cash credit)
All the loans are secured by
Paripassu on demand first charge on
the entire current assets and
paripassu second charge on the
entire fixed assets of the company.
on demand


3.3.4.4 Accounts Preparation And Costing

This is the most important function of the finance department. All departmental accounts
are maintained in the finance department in the corporate office. At the close of every
financial year, all the books of accounts are closed and the chartered accounts prepare
the final accounts. It is this final account, which is described to creditors, bankers and
shareholders.
47

Balance sheet and profit & loss accounts are prepared quarterly (june, september,
december, march). While the full fledge balance sheet, Profit & loss account and the
cash flow statements are prepared yearly (march end) .Though not statutory, cost sheets
are prepared annually or for shorter periods as the case may be, for the purpose of
ascertainment of the actual position of the business and for understanding the profit or
loss incurred in production.

All statutory books of accounts are maintained in the corporate office and only
production function is carried out in the factory.

3.3.4.5 Ratio Analysis
Table 3.5 Investment Valuation Ratios

Mar 12 Mar 11 Mar 10 Mar 09 Mar 08
Face Value 10.00 10.00 10.00 10.00 10.00
Dividend Per Share 2.10 2.10 1.80 1.50 1.50
Operating Profit Per Share (Rs) 12.59 11.61 8.70 7.19 6.13
Net Operating Profit Per Share (Rs) 120.47 111.30 86.10 83.41 64.72
Free Reserves Per Share (Rs) -- 13.83 11.78 10.80 10.30
Bonus in Equity Capital 36.93 36.93 36.93 36.93 36.93

Table 3.6 Profitability Ratios

Mar 12 Mar 11 Mar
10
Mar 09 Mar 08
Operating Profit Margin(%) 10.45 10.43 10.09 8.62 9.46
Profit Before Interest And Tax Margin
(%)
8.29 8.34 7.62 6.31 6.90
Gross Profit Margin (%) 8.30 8.37 7.67 6.37 6.99
Cash Profit Margin (%) 5.88 6.18 5.41 5.51 5.29
Adjusted Cash Margin (%) 5.88 6.18 5.41 5.51 5.29
Net Profit Margin (%) 3.32 3.82 3.25 2.39 2.80
Adjusted Net Profit Margin (%) 3.32 3.82 3.25 2.39 2.80
Return On Capital Employed (%) 20.56 21.84 17.36 14.28 14.01
Return On Net Worth (%) 15.67 17.74 12.84 9.60 8.96
Adjusted Return on Net Worth (%) 17.66 18.22 10.82 12.09 8.02
Return on Assets Excluding 25.63 24.05 22.00 21.02 20.52
48

Revaluations
Return on Assets Including
Revaluations
25.63 24.05 22.00 21.02 20.52
Return on Long Term Funds (%) 27.26 28.64 24.54 21.41 19.13

Table 3.7 Liquidity And Solvency Ratios

Mar 12 Mar
11
Mar 10 Mar 09 Mar 08
Current Ratio 0.68 0.77 0.71 0.68 0.72
Quick Ratio 0.76 1.03 1.21 1.24 1.32
Debt Equity Ratio 0.94 0.80 0.81 0.93 0.75
Long Term Debt Equity Ratio 0.46 0.38 0.28 0.29 0.28

Table 3.8 Debt Coverage Ratios
Mar 12 Mar
11
Mar 10 Mar 09 Mar 08
Interest Cover 2.93 3.21 2.23 2.10 1.98
Total Debt to Owners Fund 0.94 0.80 0.81 0.93 0.75
Financial Charges Coverage Ratio 3.67 4.06 2.97 2.84 2.68
Financial Charges Coverage Ratio Post
Tax
2.89 3.30 2.64 2.46 2.40

Table 3.9 Management Efficiency Ratios
Inventory Turnover Ratio 10.49 21.55 28.10 18.36 26.79
Debtors Turnover Ratio 7.93 8.41 6.99 6.61 6.35
Investments Turnover Ratio 10.49 21.55 28.10 18.36 26.79
Fixed Assets Turnover Ratio 1.92 2.37 2.05 2.10 1.85
Total Assets Turnover Ratio 2.43 2.57 2.14 2.01 1.74
Asset Turnover Ratio 2.59 2.66 2.11 2.12 1.85
Average Raw Material Holding -- 25.18 18.47 29.98 20.00
Average Finished Goods Held -- 0.18 0.63 0.36 1.14
Number of Days In Working Capital 10.91 32.84 42.29 49.42 55.0

49

Table 3.10 Profit & Loss Account Ratios
Mar 12 Mar 11 Mar 10 Mar 09 Mar
08
Material Cost Composition 63.43 61.96 58.62 60.97 57.97
Imported Composition of Raw
Materials Consumed
49.35 50.49 39.46 41.20 35.64
Selling Distribution Cost Composition -- 2.73 3.21 5.18 4.55
Expenses as Composition of Total
Sales
1.00 1.96 0.97 11.64 12.88

Table 3.11 Cash Flow Indicator Ratios
Mar 12 Mar 11 Mar 10 Mar 09 Mar
08
Dividend Payout Ratio Net Profit 60.74 57.38 73.54 86.93 95.36
Dividend Payout Ratio Cash Profit 36.99 36.07 40.41 42.57 47.79
Earning Retention Ratio 46.11 44.14 12.78 30.95 -6.61
Cash Earning Retention Ratio 65.67 64.54 55.78 62.22 49.54
Adjusted Cash Flow Times 3.39 2.80 3.83 4.31 4.58

Table 3.12 Earning per share and book value
Earnings Per Share 4.02 4.27 2.83 2.02 1.84
Book Value 25.63 24.05 22.23 21.49 21.22

3.3.4.6 International Audit Department (IA)
The I.A. Department has two functions. They are:
1. Process Audit
2. Management Information System

3.3.4.6.1 Process Audit

The primary function of I A department is to audit the various internal documents of
different departments

50

In the raw material procurement stage the incoming materials documents like
D/C,MRV,GRN and QC are verified and countersigned by the internal audit personnel.
In the production side the issued hob cards are first checked by the IA Department. The
job cards, while advancing through the various sections in the plant, get audited by the
internal audit personnel on a regular basis. In the finishing house section, after the goods
have been packed and stacked, the internal audit personnel verifies it physically and
countersigns the job card before dispatch. On completion of dispatch procedures, the
dispatch documents along with the production order and job card is sent to internal audit
department. Only after the physical checking of the vehicles by the internal audit
personnel, the consignment can be removed from the factory premises.

Moreover all the financial transactions done through the department audits the office; ie.
the cash vouchers are to be signed by the internal audit manager before actual payment is
made.

In addition to these functions, all the records and ledgers maintained by various
departments are audited by the IA department. Daily cost sheets are prepared by the
department to ascertain the profit or loss incurred in the run. All the costs including
abnormal costs if any due to breakage, leakage etc.-are considered while preparing cost
sheets. The department maintains an internal audit logbook to record the details of the
audited documents.

3.3.4.6.2 Management Information System

The MIS is the formal method of making available to management the accurate and
timely information necessary to facilitate the decision making process and enable the
organizations planning, control and operational functions to be carried out efficiently.
The system in practice in the firm is an operations information system in which details
regarding day-today operations are made available to the management.

In the system, the IA department is provided with the budgeted requirements of raw
materials and other resources. In the first stage of production ie., issue of material, the
internal audit personnel verifies the job card and checks whether the materials issued is
as per the budgeted standards. Then in the plant, they check whether the production is
51

done in compliance with the quality standards prescribed. The department enquires into
abnormalities in production like overflows, breakage, leakage, high top layer GSM,
pulping wastes etc. Finally, the weight of he output and their quality is noted. In order to
implement the system effectively, internal audit personnel are deployed at various points
in the pant to personally observe the production and to record the necessary details.

The collected details are sent to the top management in the form of reports. For this
purpose, daily reports and shift-wise reports are prepared showing budgeted quantity of
raw materials, actual usage, many. Many variations between them and their reasons,
details form the quality control reports, breakage or leakage occurred, if any, loss due to
such abnormalities, weight and quality of the final product and budgeted output and the
reasons for the versions, if any.

Thus, the shift-wise reports and daily reports give the complete summary of the
production details of the day. The department prepare special reports like quality reports,
shift in charge reports, for the top management on a regular basis. The prepare reports
are sent daily to the Corporate Office through massagers/fax. Matters of urgent nature
are reported only through telephone line to the Corporate Office.

The top Management analyses the information and identifies for any lapses occurred at
the personal level or at the process level and then clarifications are sought on such
matters or lapses form persons responsible and the real problem is identified. Once the
problem has been diagnosed the top management endeavors to take collective action to
eliminate the cause and for future recurrences. In addition to daily flow of information,
weekly meetings are held to review all functions at the Departmental heads level with
GMs and MD in presence. This body gets verbal commitments and discusses issues,
which call for any clarification or review of processes. All coordination efforts are done
for the achievement of management objectives. This is an opportunity to express and
exchange information to review certain decisions at the execution levels keeping in view
of the prevailing environment.

52

Audit Committee

By constituting an independent and qualified Audit Committee, the Company has
complied with the requirements of Section 292A of the Companies Act, 1956 and clause
49 of the Listing Agreement relating to the composition of the Audit Committee. The
Committee reviews the financial reporting by ensuring compliance with Accounting
Standards and review Financial Policies of the Company and to recommend the
appointment of Statutory Auditors and fix their remuneration. During the year 2011-12,
Four Audit Committee Meetings were held on 30th May 2011, 1st August, 2011, 31
st

October 2011 and 31st January 2012.

3.3.5 Personnel Department

Personnel department is housed in the corporate office and is directly under the charge of
Manager (Personal and Administration) who directly works under GM (commercial).
Following are the functions of personnel department.

Fig 3.6 Departmental Structure Personnel Department

General Manager
Senior Manager
Junior Executives Senior Executives
53

3.3.5.1 Man Power Planning

Manpower planning is the ascertainment of the total manpower requirement of the firm
and planning the placement of recruited manpower. Manpower planning is done on the
basis of the manpower requirement of the machines use and the expected volume of
production. The number of persons required to operate the machines has been worked in
the project report of the firm. Another source of such information is from study reports
of the manpower structure of similar industries.

3.3.5.2 Recruitment, Training And Placement

Most of the vacancies were filled by direct recruitment during the initial stage of the
operation of the company. Subsequently, for meeting the requirements direct recruitment
was carried out either by accepting applications from the candidates, through
advertisement, manpower consultants or by personal recommendations. Some of the
critical posts are filled by appointing experienced and skilled employees who were
working in similar industries or by transferring employees in other organization of the
group.

With respect to the skills and specializations of the new recruits, they are placed in
appropriate jobs. Since most of the employees have experience in similar industries, no
formal training is given to those who are not familiar with the job.

3.3.5.3 Promotions And Disciplinary Action

Efficiency and overall performance in the jobs are the criteria for promotion of
employees. The promotions are based on annual performance, which is monitored by
MD at the managerial level. However, at the lower level a yearly base conference is held
where respective heads evaluates performance and they recommend to the management
where final review is taken and decision formulated. However mandatory increments
are provided at the end on a regular basis as per terms are discussed ib case-to-case basis
and then awarded accordingly.
54

Disciplinary actions are taken against those who indulge themselves in bad conduct and
breach of company rules and set procedures. Proper disciplinary actions are initiated
against erring employees after giving him/her adequate chance to improve. Efficient
machinery has been set up in the factory to ease out the grievances to the concerned
managers who will take necessary steps to redress their grievances, in consultation with
the DGM (works) or MD. MD has allowed his employees to meet him and personally
vent their grievances in case things are not resolved.

3.3.5.4 Wage Administration
The wage pattern of employees consists of the basis salary and production incentives. I
the production increases, there will be a proportionate increase in their salaries. A basis
production target is been fixed for which minimum wages are paid. Over and above this
level commensurate incentives are paid at a sliding rate mutually agreed as terms and
conditions. The above said wage pattern does not apply to managerial staff, internal
audit personals and security people. Their salary structure consist of the basic pay and
various allowances.

In addition to the above, employees are provided with facilities like PF, ESI, Gratuity
etc. Festival bonuses are distributed to employees every year as part of profit sharing.

3.3.5.5 Industrial Relations

The management maintains a good relation with the trade unions and workers. The two
major trade unions in the factory are INTUC and CITUC. No strikes or industrial unrest
have occurred in the factory since its commencement of business. Major aspects like
salary/wage bonus etc. are fixed on the basis of long-term agreements entered between
the management and trade unions. A 10-year wages and working conditions agreement
has been entered with the employees since 2003 to be implemented in three phases. This
has paved the way for the management and the staff for a good industrial relation set up
in the organization so that production schedules are executed with minimum
interruptions.

55

3.3.5.6 Employees Safety Welfare

In order to endure the safety of workers all safety provisions and precautions as per the
Factories Act has been complied with. Boilers and steam generators, rollers, processes,
overhead cranes and material handling equipment workers are adequately trained in
safely handling these equipment. The management has provided conveyance facilities
and guesthouses for the convenience of employees.

3.3.5.7 Benefits
The benefits given to the employees are of two types, statutory and non-statutory
benefits.
Statutory benefits
Provident fund
Employee State Insurance
Employees Deposit Linked Insurance
Service Gratuity
Labor Welfare Fund
Bonus

Non-Statutory Benefits
Reimbursement of travelling expenses
Leave travel allowance
Medical reimbursement
Personal accident insurance and medi-claim insurance
Performance linked bonus
Reimbursement of telephone/mobile rent
Incentives to marketing personnel
Group saving linked performance
Contribution for employees marriage
Performance linked incentive scheme

56

Types of leave
Casual leave
Sick leave
Annual leave
Marriage leave
Transfer leave
Maternity leave

3.3.5.7 Security

The responsibility of maintaining the security arrangement is with the personnel
department. For the corporate office persons have been recruited and placed. Whereas
the management has appointed private security agencies on a contract basis in the factory
premises. The security office is situated at the entry and the exit gate of the factory. The
main functions of this office are:

a) Maintain attendance records; time punching system is in practice in the firm. All
employees except managerial staff are provide with attendance cards. The
employees get the card punched and countersigned from the security office.

b) Check the incoming and outgoing goods and ensure that the goods are in
confirmation with the documents. In the case of incoming goods the security
person weighs the load and checks the load physically. Then they prepare the
Material Received Voucher (MRV). In the case of outgoing consignments in the
materials are loaded in the presence of a security person and the vehicles are
allowed to remove from the factory only after surrendering the inward gate pass
at the security office.

c) Maintain a peaceful and secure environment inside the factory premises.

57

3.4 Organizational Analysis
3.4.1 SWOT Analysis
3.4.1.1 Strength
1. Production capacity
The production capacity can cater for meeting ever increasing demands for the paper
products. Inherent flexibility exists in manufacturing in varying degrees of product
specification in bulk within a short duration.
2. Communication channel
The flow of information within the organization amongst the management and various
functionaries are steam-lined and effective. Regular interaction and physical exchange of
information within the middle management in presence of top management provides an
opportunity for enhancing clarity and then reducing interpersonal conflicts arising due to
lack of transparency.
3. Recycled raw materials
50-60% recycled paper is used as raw materials for both their plants. There is an
abundant supply of these materials in local market and is also imported. The availability
of raw materials is increasing at greater rates due to the eco-friendly policies of the
governments and the thrust on more recovery for such purpose rather than using as
dumping and filling of each.
4. Customer profile
The company has been able to maintain a good customer profile in finding the market
for the products. The satisfaction level of the customer has been met and this has enabled
them to correct their long term customer as clients. Personal selling has been their
methodology adopted for build up of loyal customers.
5. Labor force
The entire human resources are highly trained, dedicated and loyal. The management
and their workforce relationship are highly cordial. A labour agreement was negotiated
58

for a ten year term in 1993, which has facilitated in the smooth run of production
activities in the plants. Moreover the employees focus in totally in maintaining higher
productivity levels. An ideal industrial relationship environment exists in the
organization as a whole.
6. Business integration
The organization as such was developed on a highly integrated outlook. Their forward
integration can be attributed to their initial business venture that is packing producing
plants, which do consume a sizable amount of their products. Simultaneously their
logistics ventures has enabled to speed up the movements finished goods at a desired
pace. The forward integration in terms of logistics support and marketing effort of their
products has contributed to the growth of their firms. The backward integration in terms
of supply of raw materials by the procurement of recycled paper worldwide do play a
prominent role in the sustained production of products in their factories.
7. Strong brand name
The company has a strong brand name powered by quality of their products and strong
manufacturing base and easy accessibility.

3.4.1.2 Weakness
1. Information technology
The employment of IT in the organization exist but with a limited utility. IT utilities are
not exploited in production, quality control process and analysis. Stores and dispatch
sections also need attention in this aspect.
2. Marketing
Business development is of importance in any organization. It is only possible if
adequate marketing strategies, advertisements and innovative promotional policies are
formulated and new product development is carried out meeting the changing customer
needs and the requirement in the market. This is found not adequate in the existing setup
probably due to certain compulsions.
59

3.4.1.3 Opportunity
1. Industry growth
The paper and pulp industry is growing at 6.5% annually. There is a corresponding
growing packing industry due to present trend in the business environment in India and
international market. This calls for a sustained growth of the firm in business to a
equivalent level in view of the present opportunity. It is heartening to note their upward
trend is likely to sustain due to stable policies. Import policy facilitates the import of
high quality raw materials.
2. Eco-friendly awareness
The public awareness against the use to polymers is showing an increasing trend due to
strong government and non-government agencies. This will reduce the use of plastics
and polymers and thus increase the need for more paper based packing materials. This
will cause a tremendous increase in demand for paper based products in the years to
come. A complete ban on the use of non-degradable polyethylene bags is likely to be
imposed in the near future. There will be a better market for paper based products.
3. Technology
Modern technology in the industry is available and this will improve the product
capacities and efficiency. By bringing in improved technology process, the organization
will be able to meet the demand of the customers and improve its market share in this
highly competitive edge in their perennial industry.
3.4.1.4 Threats
1. Capital intensive
The capital involved in such industries is highly intensive. The rate of return is
considerably slow and not commensurate when compared to other manufacturing
industries. The need for heavy expenditures is essential for any modernization. The small
scale sector involved in this field are better placed in production and pricing norms when
compared to medium scaled with like this organization.

60

2. Imports
The production capabilities of industries involved in packing materials are not meeting
the required demand. The expansion and development of china in this field has started
showing it signs. Lately imports substitution is being done by the packing industry,
where they get supply at an affordable price. These imports cheaply available may harm
the industry as such and a fall in business seems imminent.
3. Power
Interruption in the heavy electric power supply required may cause considerable loss to
the output. The margin available is very slender and loss in the production schedule due
to power shortage and breakages will invite more losses. Since the margin of safety in
this, minimum power interruption is affordable in the production.
4. Environmental restriction
This organization does not handle any hazardous chemicals and manufactures processes.
But the need to follow strict orders on the subject has necessitated the organization to
meet pollution norms. Frequent visits by the law enforcers and local committees makes
the management take strict approach in complying and taking necessary measures. This
will involve cost to the organization and additional trained monitoring personnel. Any
deviation in the follow up action and compliance will invite interruption in the
production schedules.

61

4.1 Observations
The paper industry as such is a progressing industry in the country. More so, the packing
industry is developing well at a faster pace, which can propel the industry. There is a
shift observed in the industry is usage of raw material base. More shift is seen from the
forest base agro based and recycled paper. The demand and supply situation gap exist in
meeting the average per capita consumption within Asia standards. The organization
Sree Sakthi Paper Mills Ltd is well placed in industry as a mid segment player. There is
a great opportunity for the organization to grow and be as one of the leading player is
industry. There is a need for infusing modern technology an highly skilled workforce to
improve the volume output and withstands internal & external competition and sustain
forever in the industry. Core competence should b leveraged for creating new products to
thrive in the present highly competitive environment. Possibility of entering into new
strategic alliances either at the national or international level can reap benefits for the
organization.

62

4.2 Conclusion

The study of the process-based industry in this one-moths has been a good exposure to
the running of business concern. It was possible to relate to the subjects that had been
exposed during the academic sessions in the MBA programme. This study not only
exposed to the organization but also to the paper industry as whole. It enriched the
dynamic nature of organization functioning and the peculiarities in this field. It gave an
exposure to the day-to-day activities of the plant in a physical sense. Certain
organizational characteristics like the flow of information, the decision making process
by various echelons of the functionaries in the organization could be visible from close
vies. There has to exist a good relationship between various team/groups in the
organization and as user lying spirit for the fulfillment of the set organizational goal. The
need for cohesiveness and collective participation by members in the organization
should be prevailing for any entity to survive and sustain. To maintain such a healthy
and conducive environment is a challenging task for the management. All such activities
could be observed within close quarters.

Continuous improvement is the buzzword in todays highly completive environment is a
challenging task for the management. All such activities could be observed within close
quarters.

Competition is more prominent due to entering of new entrepreneurs ready to meet the
needs of the customer. Technology is available at an affordable cost, highly skilled and
diverse labour force touch with the prevailing and the changing environment. It is
imperative that planning the strategies accordingly and taking steps to execute such plans
can help the organization to survive and also bring in more revenues.
Sree Sakthi Paper Mills is a mid segment paper manufacturing industry. They
manufacture by recycling waste paper. It is a limited company and is earning a good
returns for its investors. Sree Sakthi Paper Mills ltd is one of the leading Kraft paper
maker in South India with a market share of 30%. The company is making a steady
progress with its good management, highly customer oriented focus and strict quality
control. It is in the process of placing itself in the big league of paper manufactures in
Southern India.
63

BIBLIOGRAPHY

Sreekailas.com, company profile Sree Sakthi Paper Mills ltd, Kochi: web 17 April
2013.
Sree Sakthi Paper Mills ltd, 2011-2012 Annual report Sree Sakthi Paper Mills ltd,
Kochi: twentieth annual report.
Sree Sakthi Paper Mills ltd, 2010-2011 Annual report Sree Sakthi Paper Mills ltd,
Kochi: nineteenth annual report.
Prasad, L.M. principles and practices of management New delhi: Sultal chand& sons,
2007.
Mankiw, Gregory N. Economics - Principles and Applications. New Delhi: Cengage
India Private Limited, 2010.

64

Financial Highlights (7 Years)
(Rs. in lakhs)
Particulars 2005-
06
2006-
07
2007-08 2008-09 2009-10 2010-11 2011-12
Sales(gross) 6390.6
8
6782.4
6
11624.8
1
14416.1
4
14753.1
8
19081.8
1
20837.9
9
Sales(net) 5761.5
4
6116.5
0
10638.3
0
13708.6
3
14152.0
4
18292.8
3
19792.3
1
Total
income
5841.1
2
6324.9
4
10729.8
9
13928.8
4
14312.8
2
18356.7
4
19837.3
1
Profit
before tax
237.53 354.56 456.23 483.66 706.96 1052.75 1023.57
Profit after
tax
170.73 200.10 302.46 331.79 464.43 701.33 660.33
Earnings
per share
(Rs.)
1.04 1.22 1.84 2.02 2.83 4.27 4.02
Dividend
rate (%)
5.00 10.00 15.00 15.00 18.00 21.00 21.00
Reserve &
retained
earnings
1822.7
2
1830.5
3
1844.55 1887.90 2010.77 2309.61 2568.79
Share
capital
1643.6
2
1643.6
2
1643.62 1643.62 1643.62 1643.62 1643.62
Shareholder
s fund
3466.3
4
3474.1
5
3488.17 3531.52 3654.39 3953.23 4212.41
Fixed
assets(gross
block)
2923.5
7
4992.1
4
5756.44 6543.26 6918.93 7748.46 10357.6
1
Fixed
assets(net
block)
1877.0
9
3792.0
4
4293.61 4772.94 4826.66 5287.67 7472.88


65

Balance Sheet As At 31st March 2012
31-03-2012 31-03-2011
EQUITY AND LIABILITIES
Share Holders Funds
Share Capital 1643.62 1643.62
Reserves & Surplus 2568.79 2309.61
Money received against share warrants 2568.79 2309.61
Share application money pending allotment
Non-Current Liabilities
Long term borrowings 1957.27 926.89
Deferred tax liabilities (Net) 1105.70 800.49
Other long term liabilities 84.88 92.07
Long term provisions 86.67 61.35
Current Liabilities
Short term bank borrowings 2007.61 1692.57
Trade payables 1986.38 2109.72
Other current liabilities 1745.45 1040.49
Short-term provisions 671.04 557.29
TOTAL 13857.41 11234.10
ASSETS
Non-current assets
Fixed assets
Tangible assets 7464.72 5276.64
Intangible assets 8.16 11.03
Capital work-in-progress 15.65 84.37
Intangible assets under development - -
Non-current investments 88.46 88.46
Deferred tax assets (net) - -
Long term loans and advances 573.76 710.79
Other non-current assets - -
Current assets
Current investments - -
Inventories 1986.45 1500.85
Trade receivables 2524.22 2479.15
Cash and cash equivalents 449.42 353.25
Short-term loans and advances 715.62 681.08
Other current assets 30.95 48.48
TOTAL 13857.41 11234.10


66

Statement of Profit And Loss For The Year Ended 31st March 2012
31-03-2012 31-03-2011
I Revenue from Operations 19,800.66 18,307.19
II Other income 36.65 49.55
III TOTAL REVENUE (I+II) 19,837.31 18,356.74
IV EXPENSES
Cost of materials consumed 12,103.45 10,883.86
(Increase) / Decrease in Stock (127.42) (10.12)
Employee benefit expense 1,625.01 1,432.43
Finance cost 574.37 482.94
Depreciation and amortization Expenses 423.95 414.44
Other expense 4,130.38 4,100.44
TOTAL EXPENSES 18,729.74 17,303.99
V Profit before exceptional and extraordinary
items and tax (III-IV)
1,107.57 1,052.75
VI Exceptional Items - Income tax provision relating to
earlier years
84.00 -
VII Profit before extraordinary items (V-VI) 1,023.57 1,052.75
VIII Extraordinary Items - -
IX Profit before Tax (VII-VIII) 1,023.57 1,052.75
X Tax Expense
1) Current tax (MAT Payable) 225.80 285.65
Less MAT Credit Entitlement 167.77 -
Net tax 58.03 285.65
2) Deferred tax 305.21 65.77
XI Profit / (Loss) for the period from continuing
operations (IX-X)
660.33 701.33
XII Profit/(loss) from discontinuing operations - -
XIII Tax expense of discontinuing operations - -
XIV Profit/(loss) from Discontinuing operations (after
tax) (XII-XIII)
- -
XV

Profit (Loss) for the period (XI+XIV) 660.33 701.33
XVI Earnings Per Equity Share ( Basic and Diluted ) 4.02 4.27


67

Capital Structure

Rs in Lakhs
31.03.2012
Rs in Lakhs
31.03.2011
SHARE CAPITAL

Break up of Share Capital

AUTHORISED
3,00,00,000 Equity shares of Rs 10 each

ISSUED, SUBSCRIBED & FULLY PAID UP
1,64,36,217 Equity Shares of Rs.10/- each fully
paid up

3000.00

1643.62

3000.00

1643.62
TOTAL

(Of which 7909939 (PY 7694073) Equity shares
are held by Directors and NIL (PY NIL) by
Officers)
1643.62 1643.62

Reconciliation statement of shares

No: of equity shares at the beginning of the year
Add: Fresh issue
Less: shares bought back
No: of equity shares at the end of the year

16436217
0
0
16436217

16436217
0
0
16436217


68

Share Holding Pattern

Shareholding
pattern as on
31
ST
March
2012
Category No.of
Share
Holders
No.of
Shares
held
% of
share
holding

A. Promoters Holdings

Promoter and promoter group

B. Non Promoters Holding

Institutional Investors

NonInstitutional Investors
a. Corporate Bodies
b. Indian Public - (Individuals)
Capital up to Rs. 1 lacs
Capital >Rs. 1 lacs
c. NRI
d. Others

20

-

134

9897
61
42
10

8492527

-

739895

4132173
2119848
733526
218248

51.67

-

4.50

25.14
12.90
4.49
1.33
Grand Total 10164 164362217 100.00


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