A Project Report on ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD

“ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD.”

EXECUTIVE SUMMARY Ballarpur Industries (BILT) is India’s largest exporter of paper with a significant presence in the manufacturing of various types of paper like writing and printing paper, industrial paper and specialty paper.

The company is backward integrated and produces most of the raw materials required for manufacturing paper. It is India’s largest paper company, ranks among the top 200 paper companies in the world.

The project tries to measure the economic value added at BILT. It also tries to compare the unit’s performance with the group. the comparison helps to ascertain the difference between the performances and gives an insight for the improvements.

The project has been divided in to three parts and each part play an important role. The first part e deals with the company profile its potentialities and plans.

The second part of the project deals with the calculation of the economic value added for the unit as well as the group.

The third and the final phase deals with the comparison of EVA and the findings and suggestions.

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“ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD.�

TABLE OF CONTENTS SL NO. 1

PARTICULARS INDUSTRY SCENARIO

PAGE NO. 1

2 3 4 5 6 7

COMPANY PROFILE UNIT BHIGWAN ECONOMIC VALUE ADDED COMPARISON OF EVA INTERPRETATION & FINDINGS SUGGESTIONS

2 11 19 45 47 48

INDUSTRY SCENARIO OF THE YEAR The global paper markets remained stable during the first three quarters of the financial year and in the last quarter, followed the surge in pulp prices to end at a higher level.

The major global focus in terms of new capacities has been China, where additional capacities at an average of nearly a million metric tonnes are being created every year. This capacity creation is largely aimed at domestic demand and substitution of current imports into China.

The domestic paper & paperboard market was firm and maintained a healthy price level throughout the year as a result of the overall economic growth. The price levels were also helped by only marginal increases in capacities and domestic production. During the first half of the year, the prices remained largely stable, with demand also being stable. The second half registered a significant price increase where the Company took the lead by undertaking two general across the board price increases and a few other selective increases.

Indian paper industry is the 15th largest in the world and provides employment to 1.3mn people in the country contributing Rs25bn to the Government. It recorded a volume growth of 6%, in line with the GDP growth. Indian paper industry has a 1:1 correlation with the economy. With the expected GDP growth of 6.9% for FY05 and 7-8% for FY06 as per RBI, the paper sector is expected to record a similar growth rate.

The domestic market has been growing at a healthy rate of 6% with the supply side lagging with a growth of 2.5%. This widening gap of demand and supply will turn India into

growing import market.

Looking at this opportunity and in order to leverage its superior marketing and distribution reach, the

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“ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD.” Company has initiated an outsourcing program for strategic tie-ups with overseas manufacturers of paper and boards for sourcing value added products for Indian markets.

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BALLARPUR INDUSTRIES LIMITED (BILT).

Ballarpur Industries (BILT), India’s largest paper company, ranks among the top 200 paper companies in the world. It is India’s largest exporter of paper with a significant presence in the manufacturing of various types of paper like writing and printing paper, industrial paper and specialty paper. The company is backward integrated and produces most of the raw materials required for manufacturing paper.

In recent years,

BILT has evolved as a more dynamic, knowledge driven organization focused towards

creation of stakeholder value. In the process, it has also transformed the paper industry from its traditional 'commodity market' mindset to a branded one.

The company has 6 manufacturing units across the country.

BILT basically has two business segments – paper and chemicals. However, the paper division contributes the major chunk of revenues (over 60%). .

A concerted program of innovation and technological

excellence helps it proactively respond to the needs of each individual segment. Today, BILT not only has the range, but also a well-entrenched distribution network that enables it to reach customers, any time, any place.

BACKGROUND OF BILT It was incorporated in 1945 under the name of Ballarpur Straw Board Mills, which was later changed to Ballarpur Paper & Straw Board Mills. The paper mill was commissioned at Ballarpur(Maharashtra) in 1953. In June 1969, Shree Gopal Paper Mills manufacturing paper, stationery and vanaspati, was merged with it.The caustic soda/chlorine plants went into production at Yamunanagar(1973), Ballarpur(1974) and Karwar(1975) The name was changed to Ballarpur Industries Ltd. in 1975.

STRATEGIC INTENT OF BALLARPUR INDUSTRIES BILT, in the recent years has evolved as a more dynamic, knowledge-driven organization with a singular focus on creating stakeholder value. Aimed at making the organization more market-oriented and customer-centric, the following initiatives are to drive BILT forward in the rapidly changing business environment:

Consolidation

A continuous streamlining of capacities and products in our core business area - Paper. BILT has been coming on the path of strategic movement. Its acquisitions, takeovers & tie ups prove the point. Consolidation has given good fruits to the organization as the statistics show the same.

Brand Building

Increasing brand involvement for the products amongst customers to reduce market fragmentation and attain 'generic-brand' status for BILT via strategic branding. It is continiously trying to convert the commodity to the brand.

Wider product range Adding high value-added products to BILT's portfolio expanding it to cover the widest range of basic to high-end usage paper products. BILT is coming with a wide range of new products supplies,etc.

like cream vowe, computer peripherals, office

Product-mix rationalization Maintaining an intelligent product-mix based on value and demand curves to maximize returns.

Exploring global markets Reaching out to international markets with world-class products while maintaining leadership in India.

Operational Improvements & Cost-competitiveness To attain higher efficiency levels and world-class quality in production processes.

Increasing capacities Expansion of manufacturing and processing capabilities across product range, in line with market dynamics.

Sound Investments Accelerate growth by way of investments into focused, synergetic acquisitions.

Captive Market Share Sustaining and strengthening BILT's leadership position in its market segments way ahead of competitors.

Extending 'Touch-Points' Building a wider and 'intelligent' distribution network that enables BILT to serve its markets in a customized and localized manner and attain higher penetration, without losing the economies of scale.

WHAT BILT OFFERS BILT services its customers' needs for quality Paper - both in India as well as overseas.

Our paper touches our customers' lives everyday. In more ways than they even know. Stationery, playing cards, high quality coated paper for brochures and magazines, currency notes, copier paper… We service these everyday instances across the length and breadth of the nation with our wide product portfolio ranging from basic to high-end specialty paper.  Coated Wood Free Paper  Uncoated Hi-bright Paper (Maplitho)  Business Stationery  Copy Paper  Speciality & Fine Paper While these indicate our broad product segments, BILT also continuously focuses on serving customers with customised, value-added products to suit specific applications.

CORPORATE

BILT

MILESTONES

has demonstrated a tradition of leadership across six decades and three generations. Over the

years, it has only emerged as a more dynamic, focused corporate leveraging its vast asset and knowledge pool to enhance shareholder value. Its pathway through the history can be summarized as follows:

1945 - Ballarpur Paper and Straw Board Mills Limited incorporated. First brand names 'Three Aces' for paper and 'Wisdom' for stationary 1969 - Shree Gopal Paper Mills Limited merges with Ballarpur Paper and Straw Board Mills Limited.

1975 - Entity name changed to Ballarpur Industries Limited.

1983 - Modernization of Ballarpur and ShreeGopal mills initiated 1988 - Entry into industrial paper segment 1989 - Inception of BILT TreeTech Limited. Reinforcement of commitment to Farm Forestry 1990 - Sewa Paper Mills acquired 1992 - Choudwar unit acquired

1994 - US $ 35 million FCCB Issue launched 2000 - Business portfolio restructuring completed 2001 - Sinar Mas Pulp and Paper (India) Limited acquired and renamed Bilt Graphic Papers Limited (BGPL).

2002 - New Corporate Identity initiative. Genesis of BILT 2003

-

BILT

Graphic

Papers

Limited

merged

with

BILT

BILT’S REACH

With the customer at the center of our business activities, we have pioneered the transition of the traditional 'transaction-based' model to a 'relationship-based model' in the Indian paper industry.

This relationship is built by constantly leveraging our physical proximity to the markets, further enhanced by intelligent systems offering a strong emotional proximity to our customers even at a micro-level.

Physical Proximity

Our distribution network and understanding of local requirements is unmatched in the Indian paper industry. Over the decades,

BILT has transitioned from the 'metro' concept to cross country

distribution. While our five manufacturing facilities for paper and pulp are strategically spread across the country, we have assiduously brought our products within physical proximity of the customers. Our network of 126 dealers - the largest within the industry in India - is present across the principal consuming centers of the country and is the key fulcrum to this proximity.

CONCERN TOWARDS SOCIETY

BILT has achieved the honour of getting 2005’s prestigious TERI National Award for Corporate Social Responsibility. Mr Kamal Nath, Hon’ble Union Minister for Commerce and Industry, presented the awards. This year’s awards were in two categories – Environment Excellence and Corporate Social Responsibility and were selected from among 178 entries by an eminent jury chaired by Justice J S Verma, Former Chief Justice of India.

As the industry leader,

BILT is committed to developing its business towards ecological, social and

economic sustainability. Community development and upliftment of the marginalized class have been identified as focus areas. BILT has joined hands with Pratham, an NGO that runs primary education programs all over the country. A key initiative in environmental accountability is the BILT Farm forestry program that has covered more than 7500 farmers since 2001.

BILT’s POSITION The Ballarpur Industries Ltd has significant domestic market position and the positive growth prospects

for

the

domestic

uncoated

writing

and

printing

paper

market.

Ballarpur is a leading player in the Indian writing and printing paper (WPP) segment, with an 18% market share, and the coated paper market, with about 45% market share. BILT’s favorable market position is attributable to its relatively large and integrated production capacities compared with other domestic manufacturers. A wide product mix and well-established distribution

network

reinforce

the

company's

market

position.

BILT is looking for the expansion. The expansion will increase its installed paper manufacturing capacity to 650,000 tons per annum (tpa), from 387,000 tpa currently. The program is essential to sustain its strong market position and to modernize its production facilities. A mixture of debt and internal

cash

generation

will

fund

the

capital

expenditure.

The stable outlook reflects Ballarpur's ability to maintain its leading market position, improving operations, and competitive cost position, which could mitigate potential margin pressures from increasing competition and volatile price cycles.

BILT’s PLANS BILT is planning to expand its branded office product line by targeting a 300 per cent jump in its retail business. At present, the turnover from our retail business is Rs 25 crore. It aims to increase the figure to Rs 100 crore in the next couple of years. The company will add new products in the non-paper category like computer peripherals, office supplies and stationery to strengthen its retail section. It would source the new line of products from a third party and add the BILT branding to it. BILT brand name is important to project themselves from a pure commodity supplier

to

a

trusted

brand

name

in

paper

and

office

products.

The retail business of the company is currently carried out through its 110 exclusive wholesalers, 110 retail distributors and over 10,000 stationers. The company also plans to increase its number of stationers from 10,000 to 25,000 and to make its presence felt in around 3,000 cities across the country

in

the

next

few

years.

Currently the company has three products in the BILT branded category product range, which includes royal executive bond paper and matrix multi-purpose paper. BILT is also looking to enter the high volume segment of “cream wove”, a special kind of paper used by the writing industry. Out of a total paper market size of 2.5 million tonnes, “cream wove” alone accounts for 1.1

million

tonnes,

which

amounts

to

Rs

This is one segment where BILT’s presence is relatively less.

2,600

crore

annually.

BILT’s STRATEGIES BILT has launched a $60-million foreign currency convertible bond offering on 21/06/2005. The bonds will be listed on the Singapore Stock Exchange and bondholders have an option of converting

them

to

equity

shares.

The offering comprises zero coupon premium redemption bonds aggregating to $60 million, convertible at Rs 180 a share, which is 52.47 per cent premium to the stock price of Rs 118.05 on the NSE on June 17. The bonds have a maturity of five years, with a yield to maturity set at 6.3 per

cent.

Proceeds from the issue would be used for capital expenditure and repayment of existing FCCBs. LINKS Registered

Office

&P

O

Ballarpur District

Paper ,

Mills

Factory

Chandrapur

Maharashtra

-

India

Factory/plant

PinCode : Unit Bhigwan, 105 Milestone, Pune - Solapur Highway,

Factory/plant

Pune District , Maharashtra - India Unit Shree Gopal, P O Yamunanagar

Factory/plant

Yamunanagar , Haryana - India Unit Choudwar, P O

Factory/plant

Cuttack District , Orissa - India Unit APR, Kamalapuram,

Corporate Office

Warangal District , Andhra Pradesh – India First India Place, Tower - C, Block - A, Gurgaon PinCode

,

Haryana

Daulatabad Township

-

India :122002

Phone

:2804242/

2804243,,,

Fax :2389495, UNIT BHIGWAN A consolidation in the highly fragmented paper industry, Ballarpur Industries clinched the deal to buy paper major, Sinar Mas Pulp & Paper India for over Rs 500 crore.

This news flash has made a great change in paper scenario of the country.This acquisition helped Ballarpur Industries strengthen its position as the largest paper manufacturer in India.

Sinar Mas Pulp & Paper (India) Ltd located along the Pune-Solapur highway near village Bhadalwadi of district Pune, Maharashtra, was set up by the Indonesian company. The project plan started in the year 1993. the project was implemented in the year 1995. the production was trailed and started in the year 1997. the company stared the generation of the power through its own thermal plant in the year 1998.

As the project was in its inception stage, it didn’t make its profits till the year 2000. In the year 2003

BILT

took

over

the

major

stake

and

became

the

holding

company.

BGPL has a state-of-the-art paper manufacturing plant with a capacity of 115,000 tpa and is the market leader in the high-end coated paper and art board segments in India. Post the acquisition, BILT commands a 50% share of the coated paper market.

The unit was started as an export oriented unit. The unit bought the plant and machinery with a nil custom duty on the condition of exporting the finished goods amounting to $ 165 million dollars. The unit is able to export only a half of it.

PRODUCTION CAPACITY - 300 T.P.D. (tonnes per day) TOTAL PLANT AREA

- 750 acres & Colony area 250 acres.

MAJOR SUPPLIERS COAL BHATIA INTERNATIONAL ARIHANT SALES CORPORATION GUPTA ENGINEERING IBS SONOCO MGM Motoro A P Enterprises CENT Co International

PALLETS Sanghvi Pallets & Drums CHEMICALS Taiwan hopex – Indonesia CIBA specialty Chemicals BASF – Indonesia BASF - INDIA IMERY’s NewQuest Pvt Ltd – Thailand IMERY’s Onik – Malaysia

PULP Qumica speciality – Thailand Tapioca development corporation – Indonesia Quality Minerals – Germany J.M. Huber corporation – USA Kolin International – USA Diamond DICEM – INDIA VARALAKSHMI STARCH – INDIA Anil products Ltd. – INDIA DOW chemicals – USA L G Chemicals USA JPN Chemicals

MAJOR CUSTOMERS – INDIA Anil agency Ajanta papers delhi Standard press Chennai Form prints Mumbai Sham traders Shambhu traders

MAJOR CUSTOMERS – ABROAD Dye papers – USA

Dye papers – AUSTRALIA European paper - UK Vital solution pte – SINGAPORE Paper com traders – SRILANKA Oriental press – USA Necron B V – NEWYORK

TYPES OF PRODUCTS Art board Chromo Emperor Print plus DEPARTMENTS 1. ADMIN -HR -administration -PDC 2. COMMERCIAL -purchase -logistics -stores -engineering -chemical -pulp -coal

-pallet -warehouse 3. ACCOUNTS & FINANCE 4. POWER PLANT -turbine / boiler -DM(de-mineral) water plant -EPC(environment pollution control) -WTP(water treatment plant) -ETP(effluent water treatment plant) 5. WORKSHOP -roll grinding -vehicle maintenance wing 6. MECHANICAL 7. ELECTRICAL 8. INSTRUMENTATION 9. DRAWING 10. QUALITY ASSURANCE & QUALITY CONTROL 11. PRODUCTION

PRODUCTION PROCESS

Stock preparation

Paper machine plant

Color kitchen

IMERY’s NEW QUEST

OMC(on machine coating) plant

Rewinder

Sheet cutter

Finishing

Dispatch LANDMARKS Project Conceived in July 1993.

Land Acquisition started in 1995.

Construction started in March 1995.

Trial production started in Jan 1997.

Commercial production started in July 1997.

Power Plant started in 1998.

Power export started in February 1999.

Profit posted in year 2000

BOILER CFBC Boiler Oil Boiler TG Set Self Power cons.

Power Export

: 175 TPH : 50 TPH : 30 MW : 17 MW : 10.7 MW

Water Treatment

PLANT LAYOUT Power Plant

Warehouse Stock Prep.

Paper m/c

Color Kitchen Workshop & Engg.

Stores

Chemical storage

Off m/c coater C R

Finishing House

Pallet yard

Effluent Treatment

ECONOMIC VALUE ADDED The basic objective of any entity (business) is to maximize shareholders’ wealth or value of the business. There are many traditional measures through which the performances are evaluated, but

they are falling short of achieving the objective of value maximization. Some of the traditional measures to analyze the performances are Net profit margin Operating profit margin Return on investment etc.

It is said that shareholders wealth or value increases automatically when the value of the business increases.

Economic Value Added is increasingly popular corporate performance measure one that is often used by companies for evaluating the performance Economic Value Added (EVA) The concept of EVA was introduced by a New York based consulting firm STERN STEWART & Co in early eighties.

STERN STEWART & Co defines EVA as “Economic Value Added is the financial performance measure that comes closer than any other to capturing the true economic profit of an enterprise. EVA ® also is the performance measure most directly linked to the creation of shareholder wealth over time. Stern Stewart & Co. guides client companies through the implementation of a complete EVA-based financial management and incentive compensation system that gives managers superior information - and superior motivation - to make decisions that will create the greatest shareholder wealth in any publicly owned or private enterprise.”

Stern Stewart developed EVA to help managers incorporate two basic principles of finance into their decision-making. The first is that the primary financial objective of any company should be to maximize the wealth of its shareholders. The second is that the value of a company depends on the extent to which investors expect future profits to exceed or fall short of the cost of capital. By definition, a sustained increase in EVA will bring an increase in the market value of a company. This approach has proved effective in virtually all types of organizations, from emerging growth companies to turnarounds.

This is because the level of EVA isn't what really matters. Current performance already is reflected in share prices. It is the continuous improvement in EVA that brings continuous increases in shareholder wealth.

EVA is a corporate surplus, which is shared by the employees, management and the shareholders. Efficiency bonus, profit sharing schemes, managerial remuneration over and above a minimum sustenance salary, issue of onus shares and incentive dividend to equity and preference share holders respectively can be linked to EVA.

EVA Bonus To Employees

Extra Remuneration to Management

Remuneration To management Incentive Remuneration To Preference share holders Bonus Share To Share Holders Remuneration ToEquity management

Remuneration To management

NEED FOR EVA To provide customers with high-quality products and services To provide secure employment for the employees To make its lenders i.e., the banks happy To provide the government with tax revenues

To create value for its share-holders

OLD/

CONVENTIONAL

FINANCIAL

EVA IN FINANCIAL MANAGEMENT

MANAGEMENT SYSTEM Incomplete measurement.

No accountability for invested capital.

SYSTEM Measures economic profit Accountability for bothprofit maximization &

No focus on current operations rather than long-term

capital usage.

Balanced focus on current operations and

competitiveness.

Often inconsistent with the goal to increase share

long-term investments.

Consistent with goal to increase shareholder

holder value.

value.

CALCULATION OF EVA EVA is the excess of net operating profit after tax over the capital charge. In other words eva is a company’s net operating profit after tax after deducting th cost of capital employed or total investment in the business.

NOPAT Nopat is the profit derived from the company’s operations after taxes but before financing costs and non cash book-keeping entries.

Formula NOPAT= EBIT (1-t) CAPITAL EMPLOYED Invested capital or capital employed refers to total assets in the business (net of revaluation) after deducting non-interest bearing current liabilities. From operating view point, invested capital may be described as Net Fixed Assets, plus investments, plus net investments plus net current assets.

WACC

WACC represents overall cost of capital employed in the business (i.e., debt plus equity).

The cost of each source of capital is calculated separately and then weights are assigned to each source on the proportion of a particular source in the capital invested.

Operating decisions (profit)

EVA= Profit – (capital * cost of capital)

EVA Investment decisions (capital)

Financing decisions (cost

of

capital)

DRAWBACKS OF EVA Though EVA seems to be a good measurement of the efficiency with which the entire capital is used by an enterprise, it has got some limitations: 1. A flat rate of total cost of capital may not be appropriate, as it does not consider the ‘rate advantage’ enjoyed by an enterprise, by raising cheap funds.

2. EVA does not consider the ‘appreciation in the price of fixed assets’, on account of market variables.

3. EVA does not give a correct, specific computation of the ‘net real growth’ in the owner’s wealth. This is because; ‘total cost of capital at a blanket rate’ also includes ‘cost of owners fund’.

4. Computation of segmental or divisional EVA depends on accurate division of assets among the various segments. Division of ‘common assets’ used for ‘common corporate functions’ is very difficult (rather impossible).

BILT GROUP STATEMENTS

As on (Rs. Million) RS 30-Jun-00 30-Jun-01 30-Jun-02 30-Jun-03 31-Mar-0 I SOURCE OF FUNDS 1. Shareholder's Funds Capital Share Suspense Reserves and Surplus 2. Loan Funds Secured Loans Unsecured Loans def tax liab Total

1,103 130 7,203

1,307 12 7,663

1,274 2,171 6,965

8,516 2,096

8,862 2,784

8,164 2,767

19,048

20,628

21,342

1913293 10800000 10469399 12382692 8960057 2814323 11774380 1214577 25371649 10800000

II APPLICATION OF FUNDS 1. Fixed Assets Gross Block (Adjusted) Less: Depreciation Net Block Capital Work in Progress Advance against Machinery, Land etc 2. Investments 3. Current Assets, Loans and Advances Net Income accrued on Investments and Fixed Deposits Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Less: Current Liabilities and Provisions Liabilities Provisions Net Current Assets Net Deferred tax assets Less: Deferred tax liability p & l account Miscellaneous expenditure not written off or adjusted Total

17,722 5,277 12,446 2,773 997 1,343

17,462 5,659 11,804 3,838 1,138 1,312

19,327 6,464 12,863 3,256 678 3,203

28779677 9674312 19105365 1999129 723917 550533

19416430 4353465 15062965 -

497 1,321 1,166 367 1,334

77 1,665 1,429 603 1,963

19 1,841 1,542 3,720 1,688

15268 2828898 1834886 521916 1950726

2,992 333 1,361

3,068 348 2,321

6,089 507 2,214

4434778 512366 2204550

--

--

1,212

0

129 19,048

215 20,628

339 21,342

3338708 788155 25371649 10800000

9500 1752786 122500 1791742 1470275 12545120 331310 -7739127 127954

PROFIT & LOSS ACCOUNT Gross Sales Less: Excise Duty Net Sales* Other Income

12 Months Ended (Rs. Million) Jun-00 jun--01 jun--02 jun--03 14,464 15,676 15,379 211,583 -1,071 -1,221 -1,115 16,796 13,393 14,455 14,263 194,787 63 127 99 944

jun--04 224,417 18,975 205,442 1,089

Total Income

13,456 14,582 14,362 212,527

225,506

Expenditure (a) Amortisation of Deferred Revenue Expenditure Manufacturing Costs* Raw Material, Purchases, (Increase)/Decrease in Stocks (c) Consumption of Raw Materials Stores & Spare Parts Power & Fuel Costs Other Manufacturing Expenses Personnel Cost Selling & Administration Costs Total EBIDTA Interest (Net) Profit before Depreciation Depreciation Amortisation PBT Provision for Tax Current Tax / MAT Deferred Tax Liability (Net)

916

1,129

-2,934 -2,647 -2,908 18,775 34,985 -2,064 -2,247 -2,127 33,633 -3,814 -3,783 -3,835 41,160 -581 -821 -762 13,546 -1,001 -1,231 -1,165 12,447 -611 -735 -439 -11,005 -11,464 -11,236 172,258

21,675 37,810 34,540 41,777 13,328 12,798

2,451 3,118 3,127 40,269 -1,128 -1,242 -1,198 13,814 26,455 -569 -751 -835 12,665 -61 -37 -47 693 1,088 1,046 13,790 -86 (332)** 1,085 2,876 3,961 693 1,003 714 9,829

43,474 12,633 30,841 13,074

PAT Less : Minority Interest Add : Share of Profits in Associate Net Profit after Taxation,Minority Interest & Share in Associate Extra-Ordinary Expense / Income -12 Paid up Equity Share Capital

--

182,032

17,767 1,375 3,001 4,376 13,391

-14,119

16,245

Reserves as per last Balance Sheet Basic EPS for the Nine Months / Quarter / Year a) Before Deferred Tax b) After Deferred Tax Diluted EPS for the Nine Months / Quarter / Year EPS (Rs.) eq sh cap no of shares

11.61 597

14.01 716

Jun-00 100 -81.8 18.2 -8.4 -4.7 5.1

125,057

8.53 6.49 6.49

9.95 8.11 7.27

9.98 716 81,997,240 102,281,246

12 Months Ended (%) Total Income Operating Expenditure EBIDTA Interest Depreciation / Amortisation PBT

104,694

Jun-01 100 -78.6 21.4 -8.5 -5.4 7.5

Jun-02 100 -78.2 21.8 -8.3 -6.1 7.3

Provision for Tax PAT

-5.1

-0.6 6.9

-2.3 5

Notes: The Auditors' have observed in the audited accounts of the Company for the year ending 30th June,2004 about non-provision of duty , incidental

expenses etc. in respect of Plant &

Machinery lying at Port / Warehouse. The Management is of the opinion that the same is not going to materially affect the Profit & Loss of the Company.

The Consolidated Financial Results represent those of the Company , its subsidiaries - Bilt Treetech Ltd and The Paperbase Company Ltd .

The results also include share of profits of

Associate Company - APR Packaging Ltd . The Consolidated Financial Results have been made in accordance with

Accounting Standard 21 "Consolidated Financial Statements " issued by

the Institute of Chartered Accountants of India.

Figures of the previous period / year have been recast to make them comparable to the Current period / year.

Investor Complaints outstanding at the beginning of the quarter were NIL , No. of Complaints received and resolved during the quarter ended 30th June,2004 were 4.

No. of Complaints

outstanding at the end of the quarter NIL. These results were reviewed by the Audit Committee and approved by the Board of Directors in its meeting held on 25th August,2004.

New Delhi25th August, 2004 For and on behalf of Board of DirectorsFor Ballarpur Industries Ltd. GAUTAM THAPAR Vice Chairman & Managing Director

BILT BHIGWAN UNIT STATEMENTS Jun-04

Jun-03

18 months in '000 jan-01 to jun-02 Dec-01 Dec-00

I SOURCES OF FUNDS 1. SHARE HOLDERS FUNDS Share capital / head office

4954600532 3931180680 6476218

6476218 6476218

2. RESERVES & SURPLUS

205179112 128233799 28703

0

3. LOAN FUNDS a. secured loans

69968149

1583254836 1967309

0 1546543

b. unsecured loans

365513420 373431282 427600 435481569 1956686118 2394909

1033443 3008746 2579986

TOTAL

5595261213 6016100597 8899830

9484964 9056204

gross block less: depreciation Net blok

7454779735 7385737300 7366844 2403179968 2027866532 1658215 5051599767 5357870768 5708629

7344847 7307838 1471996 1145753 5872851 6162085

construction & installation in progress including expenditure thereon / capital work in progress.

0

5728

advane against machine, land etc..

0 3275981 0 5051599767 5363057307 5713987

0 0 5878579 6169588

2. INVESTMENTS

0

500000

1000

1000

1000

income accrued on investments & F.D.s

170027

583062

0

0

0

inventory

574920204 951533260 801144

958051 1041018

other current assets

0

1046

sundry debtors

448795818 383565262 367603

469900 693169

cash & bank balance

32684724

14738

50906

laons & advances

104754336 22690990

327267

439096 168700

II APPLICATION OF FUNDS 1. FIXED ASSETS

1910558

5358

7503

3. CURRENT ASSETS LOANS & ADVANCES

0

21972908

358

1069

158517

1161325109 1584345482 1511110

1918999 2062473

less: current liabilities & provisions

680748780 1115620967 1111785

1091428 1841642

Net current assets

480576329 468724515 399325

827571 221371

4. MISC. EXPENSES (to the extent not written off or adjusted)

63085117

183818775 183927

145664 12215

DEBIT BALANCE IN P & L ACCOUNT

0

0

2601591

2632150 2652030

TOTAL

5595261213 6016100597 8899830

9484964 9056204

PROFIT AND LOSS ACCOUNT OVER THE YEARS Jun-04

Jun-03

18 months in '000 jan-01 to jun-02 Dec-01

Dec-00

INCOME gross sales less: Excise

5471993866 4861224148 7940727 632547868 471130202 756930

5176291 0 501377 0

sales Net

4839445998 4390093946 7183797

4674914 4241421

other income

41829082

26570

17582

14550

(increase / decrease) in stocks

-250546530 49324965

0

0

0

TOTAL

4630728550 4476378089 7210367

4692496 4255971

manufacturing & other costs

3296463294 3036253012 6018968

3786669 3500425

purchases of traded goods

0

280413439 0

0

0

personnel costs

141171549 112848192 0

0

0

administration, selling & misc costs

255837879 219802625 0

0

0

inetrest & finance cost

362198894 312923185 563268

494922

345270

depreciation

375659506 373097787 513893

371440

326597

provision for taxation

0

0

103

0

103

msc. Expenses written off

22920370

41508104

0

0

0

P & L bal B/F

0

0

-2652030

-2691495 -2652030

prior period adjustment

0

0

-63696

0

TOTAL

4454251492 4376846344 2601591

SURPLUS TO BALANCE SEET

176477058 99531745

36959178

EXPENSES

-63696

2652030 2632150

WORKING NOTES OF EVA FOR BILT pbdita less : dep pbit 1 - tax rate nopat= pbit * 1- tax

Jun-00 2541 630 1,911 1.00 1911

Jun-01 3,118 788 2,330 0.92 2145.82748

Jun-02 3127 882 2,245 0.68 1532.6615

Jun-03 40,269 12665 27,604 0.71 19676.1312

Jun-04 43,474 13074 30,400 0.75 22915.52

capital eq % of eq deb % of deb intr

19048 8,436 0.442 10,612 0.550 1128

20,628 8,982 0.435 11,646 0.564 1,242

21,341 10,410 0.487 10,931 0.512 1198

24,157,072 12,382,692 0.513 11,774,380 0.487 13814

10800000 10800000

cost of deb eps mkt price ke = eps / mkt price

0.11 8.2 91

0.10 13.3 84.7

0.07 5.5 119.4

0.00084 6.9 149.6

0 8.2 137.9

cos of equity

0.09

0.16

0.05

0.05

0.06

% * cos of eq

0.039828571

0.068305785

0.022432998

0.023638035

0.06

% * cos of deb

0.058462118

0.055394009

0.038308645

0.0004076

0

WACC

9.829068979

12.36997939

6.074164302

2.404563518

0.06

cap * wacc

1872.241059

2551.679349

1296.287404

580872.1402

648000

EVA = NOPAT - C* WACC

38.75894097

-405.8518691

236.3740962

-561196.009

-625084.48

rate of return = nopat / cap

0.100

0.104

0.072

0.001

0.002122

R - C*

0.002

-0.020

0.011

-0.023

-0.058

EVA = CAP(R - C*)

38.75894097

-405.8518691

236.3740962

-561196.009

-625084.48

EVA OF BILT (group)

YEARS

EVA

Jun-00

38.758941

Jun-01

-405.85187

Jun-02

236.374096

Jun-03

-561196.01

Jun-04

-625084.48

ECONOMIC VALUE ADDED OVER THE YEARS 50000

-50000

-150000

EVA

-250000

-350000

-450000

-550000

-650000

-750000

Jun-00

EVA 38.75894097

Jun-01

Jun-02

Jun-03

Jun-04

-405.8518691

236.3740962

-561196.009

-625084.48

YEARS

TRENDS OF THE EVA DETERMINANTS

YEARS

NOPAT

Jun-00

1911

Jun-01

2145.8

Jun-02

1532.7

Jun-03

19676

Jun-04

22916

NOPAT

Jun-04 Jun-03 Jun-02

Series1

Jun-01

Series2

Jun-00 YEARS 0

5000

10000

15000

20000

25000

YEARS

WACC

Jun-00

9.8291

Jun-01

12.37

Jun-02

6.0742

Jun-03

2.4046

Jun-04

0

WACC

2004 2003 2002

WACC

2001 2000 0

5

10

15

YEARS Jun-00 Jun-01 Jun-02 Jun-03 Jun-04

PBDITA 2541 3,118 3127 40,269 43,474

PBDITA 2004 2003 2002

pbdita

2001 2000 0

10000

20000

30000

40000

50000

WORKING NOTES OF EVA FOR BHIGWAN

nopbt less : TAX nopat= pbit * 1- tax

Jun-04 1185838624 415,043,518 770795106

Jun-03 938678479 328,537,468 610141011

18 months jan-01 to jun-02 7681199692 2,688,419,892 4992779800

in '000 Dec-01 7598438154 2659453354 4938984800

Dec-00 7353478538 2573717488 4779761050

capital eq % of eq deb % of deb

5566559159 5,131,077,590 0.921 435,481,569 0.079

5,987,398,543 4,030,712,425 0.673 1,956,686,118 0.327

8,871,127,000 6,476,218,000 0.730 2,394,909,000 0.270

9,056,204,000 6,476,218,000 0.715 2,579,986,000 0.285

9,484,964,000 0 0.682 3,008,746,000 0.318

cost of deb

0.111

0.117

0.120

0.120

0.124

cos of equity

0.09

0.16

0.05

0.05

0.06

% * cos of eq

0.082991209 0.105677686 0.033626466

0.032977941 0.040554025

% * cos of deb

0.0087295

0.038259

0.0324675

0.03427125

0.039273

WACC

0.1376

0.129

0.1492

0.1486

0.1483

cap * wacc

765958540

772374412

1323572148

1345751914

1406620161

EVA = NOPAT - C* WACC 4836566

-162233401

3669207652

3593232886

3373140889

rate of return = nopat / cap

0.138

0.102

0.563

0.545

0.504

R - C*

0.001

-0.027

0.414

0.397

0.356

EVA = CAP(R - C*)

4836565.722 -162233401

3669207652

3593232886

3373140889

EVA OF BILT –UNIT BHIGWAN

YEARS

EVA

Jun-04

4836566

Jun-03

-162233401

Jan- Jun 02

3669207652

Jan - Dec 01

3593232886

Jan - Dec 00

3373140889

EVA 4000000000 3500000000 3000000000

AMOUNT

2500000000 2000000000

1500000000 1000000000 500000000 0 -500000000

Jan - Dec 00

Jan - Dec 01

Jan 01- Jun 02

Jun-03

EVA 337314088 359323288 366920765 -162233401

YEARS

Jun-04 4836566

TRENDS OF THE EVA DETERMINANTS

YEARS

NOPAT

Jun-04

770795106

Jun-03

610141011

Jan- Jun 02

4992779800

Jan - Dec 01

4938984800

Jan - Dec 00

4779761050

NOPAT

Jan - Dec 01 Jan- Jun 02 Jun-03

Jun-04

Jun-03

Jan- Jun 02

Jan - Dec 01

60 00 00 00 00

50 00 00 00 00

40 00 00 00 00

30 00 00 00 00

20 00 00 00 00

10 00 00 00 00

Jun-04 0

YEARS

Jan - Dec 00

Jan - Dec 00

NOPAT 770795106 610141011 499277980 493898480 477976105

AMOUNT

YEARS

WACC

Jun-04

0.1376

Jun-03

0.129

Jan- Jun 02

0.1492

Jan - Dec 01

0.1486

Jan - Dec 00

0.1483

WACC

Jan - Dec 00

YEARS

Jan - Dec 01

Jan- Jun 02

Jun-03

Jun-04

0.115

WACC

0.12

0.125

0.13

Jun-04

Jun-03

0.1376

0.129

0.135

0.14

0.145

0.15

0.155

Jan- Jun 02 Jan - Dec 01 Jan - Dec 00 0.1492

AMOUNT

0.1486

0.1483

COMPARISON OF EVA (BILT GROUP & UNIT BHIGWAN)

YEARS

EVA - UNIT BHIGWAN

EVA - BILT

Jan - Dec 00

3373140889

38.758941

Jan - Dec 01

3593232886

-405.8519

Jan 01- Jun 02

3669207652

236.3741

Jun-03

-162233401

-561196

Jun-04

4836566

22915.52

EVA - BILT GROUP vs UNIT BHIGWAN 4000000000 3500000000 3000000000 2500000000 2000000000 1500000000 1000000000 500000000 0 -500000000 Jan - Dec 00

Jan - Dec 01 Jan 01- Jun 02

Jun-03

Jun-04

YEARS

EVA - BILT EVA - UNIT BHIGWAN

Jan - Dec 00

Jan - Dec 01

Jan 01- Jun 02

Jun-03

Jun-04

38.758941

-405.85187

236.374096

-561196.01

22915.52

3373140889

3593232886

3669207652

-162233401

4836566

EVA - BILT

EVA - UNIT BHIGWAN

INTERPRETATION & FINDINGS EVA OF BILT –UNIT BHIGWAN: The EVA of the unit saw a rising trend in the first three years. It started from 337 crore in 2000, moved to 359 Crores and touched a peak of 366 crores. But suddenly it saw a downfall to a negative of 16 Crores, and again picked the track of a positive of 48 lacs.

Possible reasons 1. The profits of the years 2000 & 2001 included the profits of the proceeding years.

2. As per the company’s policy the product development expenses and the deferred financial charges were written off to the head office in the years 2003 & 2004.

3. The unit transferred the loan amounting to Rs 55 crores to the head office in the year 2004.

EVA OF BILT The EVA of BILT caught a volatile trend over the years. It started from a positive of Rs 38 in 2000, fell down to a negative of 405 and raised to the positive of 236. But collapsed to a negative of 5 lacks, and continued to 6 lacks.

Possible reasons 1. The reasons for the fluctuations of the group company are the fluctuations in the units of the group and the strategic movements of the company.

2. No doubt the sales of the company saw an upward trend, the company has not paid the taxes (current tax and deferred liability) for the years 2000 & 2001.

3. The changes in the reserves and dividend paid out have resulted into the changes in the capital, which in turn has caused the fluctuations in the EVA.

SUGGESTIONS Under the process of the project work, various movements were noticed regarding the inter unit transactions and the transactions with the head office.

1. Decisions taken by the executives are efficient but some times were hampering the positions of the individual units.

2.

The movements like acquisitions, fund transfers and share transfers are important and un avoidable. But care should be taken that it should not affect the unit.

3. During the in-plant training it came to the notice that the company was paying the extra ground rent was paid due to the storage problem. Hence the adequate storage facilities should be accommodated.

4. The movements such as the writing off of the loans to the head office should be done with taking care of the financial positions of the units.

5. The reserves maintained by the group saw an upward trend which is to be made if only it sounds necessary.

6. The dividend paid out saw a reducing trend which in turn has affected EVA.

BIBLIOGRAPHY

1. Strategic financial management – g p jakhotiya.

2. BILT's website - http://www.bilt.com