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.

Babasabpatilfreepptmba.com Page 1


TABLE OF CONTENTS

SL NO. PARTICULARS PAGE NO.

1 INDUSTRY SCENARIO 1

2 COMPANY PROFILE 2

3 UNIT BHIGWAN 11

4 ECONOMIC VALUE ADDED 19

5 COMPARISON OF EVA 45

6 INTERPRETATION & FINDINGS 47

7 SUGGESTIONS 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

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.


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

like cream vowe, computer peripherals, office supplies,etc.

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 MILESTONES

BILT 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 2,600 crore annually.

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

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.

LINKSRegistered Office &

Factory

P O Ballarpur Paper Mills

Chandrapur District , Maharashtra - India

PinCode :

Factory/plant Unit Bhigwan, 105 Milestone, Pune - Solapur

Highway,

Pune District , Maharashtra - India

Factory/plant Unit Shree Gopal, P O Yamunanagar

Yamunanagar , Haryana - India

Factory/plant Unit Choudwar, P O Daulatabad

Cuttack District , Orissa - India

Factory/plant Unit APR, Kamalapuram, Township

Warangal District , Andhra Pradesh – India

Corporate Office First India Place, Tower - C, Block - A,

Gurgaon , Haryana - India

PinCode :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

Stock preparation

OMC(on machine coating) plant

Paper machine plant

Color kitchen IMERY’s NEW QUEST

Rewinder

Sheet cutter

Finishing

Dispatch

PRODUCTION PROCESS

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 : 175 TPH

Oil Boiler : 50 TPH

TG Set : 30 MW

Self Power cons. : 17 MW

Power Export : 10.7 MW

Paper m/c Off m/ccoater

FinishingHouse

Warehouse

Pallet yardChemicalstorage

Color Kitchen

Workshop& Engg.Stores

PowerPlant

CR

StockPrep.

Effluent Treatment

WaterTreatmentPLANT LAYOUT

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.”

EVA

Bonus To Employees

Extra Remuneration to Management

Remuneration To management

Incentive Remuneration To Preference share

holders

Remuneration To managementBonus Share To Equity Share Holders

Remuneration To management

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.

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

MANAGEMENT SYSTEM

EVA IN FINANCIAL MANAGEMENT

SYSTEM

Incomplete measurement. Measures economic profit

No accountability for invested capital. Accountability for bothprofit maximization &

capital usage.

No focus on current operations rather than long-term

competitiveness.

Balanced focus on current operations and

long-term investments.

Often inconsistent with the goal to increase share

holder value.

Consistent with goal to increase shareholder

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.

EVA= Profit – (capital * cost of capital)

EVA

Operating decisions (profit)

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-04

I SOURCE OF FUNDS

1. Shareholder's Funds

Capital 1,103 1,307 1,274 1913293 10800000

Share Suspense 130 12 2,171 -

Reserves and Surplus 7,203 7,663 6,965 10469399

2. Loan Funds 12382692

Secured Loans 8,516 8,862 8,164 8960057

Unsecured Loans 2,096 2,784 2,767 2814323

11774380

def tax liab 1214577

Total 19,048 20,628 21,342 25371649 10800000

II APPLICATION OF FUNDS

1. Fixed Assets

Gross Block (Adjusted) 17,722 17,462 19,327 28779677 19416430

Less: Depreciation 5,277 5,659 6,464 9674312 4353465

Net Block 12,446 11,804 12,863 19105365 15062965

Capital Work in Progress 2,773 3,838 3,256 1999129 -

Advance against Machinery, Land etc 997 1,138 678 723917

2. Investments 1,343 1,312 3,203 550533 9500

3. Current Assets, Loans and Advances

Net Income accrued on Investments and Fixed Deposits 497 77 19 15268

Inventories 1,321 1,665 1,841 2828898 1752786

Sundry Debtors 1,166 1,429 1,542 1834886 122500

Cash and Bank Balances 367 603 3,720 521916 1791742

Loans and Advances 1,334 1,963 1,688 1950726 1470275

Less: Current Liabilities and Provisions

Liabilities 2,992 3,068 6,089 4434778 12545120

Provisions 333 348 507 512366 331310

Net Current Assets 1,361 2,321 2,214 2204550 -7739127

Net Deferred tax assets 127954

Less: Deferred tax liability -- -- 1,212 0

p & l account 3338708

Miscellaneous expenditure not written off or adjusted 129 215 339 788155 -

Total 19,048 20,628 21,342 25371649 10800000

PROFIT & LOSS ACCOUNT 12 Months Ended (Rs. Million)

Jun-00 jun--01 jun--02 jun--03 jun--04

Gross Sales 14,464 15,676 15,379 211,583 224,417

Less: Excise Duty -1,071 -1,221 -1,115 16,796 18,975

Net Sales* 13,393 14,455 14,263 194,787 205,442

Other Income 63 127 99 944 1,089

Total Income 13,456 14,582 14,362 212,527 225,506

Expenditure

(a) Amortisation of Deferred Revenue Expenditure 916 1,129

Manufacturing Costs*

Raw Material, Purchases, (Increase)/Decrease in Stocks -2,934 -2,647 -2,908 18,775 21,675

(c) Consumption of Raw Materials 34,985 37,810

Stores & Spare Parts -2,064 -2,247 -2,127 33,633 34,540

Power & Fuel Costs -3,814 -3,783 -3,835 41,160 41,777

Other Manufacturing Expenses -581 -821 -762 13,546 13,328

Personnel Cost -1,001 -1,231 -1,165 12,447 12,798

Selling & Administration Costs -611 -735 -439

Total -11,005 -11,464 -11,236 172,258 182,032

EBIDTA 2,451 3,118 3,127 40,269 43,474

Interest (Net) -1,128 -1,242 -1,198 13,814 12,633

Profit before Depreciation 26,455 30,841

Depreciation -569 -751 -835 12,665 13,074

Amortisation -61 -37 -47

PBT 693 1,088 1,046 13,790 17,767

Provision for Tax - -86 (332)**

Current Tax / MAT 1,085 1,375

Deferred Tax Liability (Net) 2,876 3,001

3,961 4,376

PAT 693 1,003 714 9,829 13,391

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 14,119 16,245

Reserves as per last Balance Sheet 104,694 125,057

Basic EPS for the Nine Months / Quarter / Year

a) Before Deferred Tax 8.53 9.95

b) After Deferred Tax 6.49 8.11

Diluted EPS for the Nine Months / Quarter / Year 6.49 7.27

EPS (Rs.) 11.61 14.01 9.98

eq sh cap 597 716 716

no of shares 81,997,240 102,281,246

12 Months Ended (%)

Jun-00 Jun-01 Jun-02

Total Income 100 100 100

Operating Expenditure -81.8 -78.6 -78.2

EBIDTA 18.2 21.4 21.8

Interest -8.4 -8.5 -8.3

Depreciation / Amortisation -4.7 -5.4 -6.1

PBT 5.1 7.5 7.3

Provision for Tax -- -0.6 -2.3

PAT 5.1 6.9 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

18 months in '000

Jun-04 Jun-03 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 0

3. LOAN FUNDS

a. secured loans 69968149 1583254836 1967309 1546543

b. unsecured loans 365513420 373431282 427600 1033443

435481569 1956686118 2394909 3008746 2579986

TOTAL 5595261213 6016100597 8899830 9484964 9056204

II APPLICATION OF FUNDS

1. FIXED ASSETS

gross block 7454779735 7385737300 7366844 7344847 7307838

less: depreciation 2403179968 2027866532 1658215 1471996 1145753

Net blok 5051599767 5357870768 5708629 5872851 6162085

construction & installation in progress 0 1910558 5358 5728 7503

including expenditure thereon / capital

work in progress.

advane against machine, land etc.. 0 3275981 0 0 0

5051599767 5363057307 5713987 5878579 6169588

2. INVESTMENTS 0 500000 1000 1000 1000

3. CURRENT ASSETS LOANS & ADVANCES

income accrued on investments & F.D.s 170027 583062 0 0 0

inventory 574920204 951533260 801144 958051 1041018

other current assets 0 0 358 1046 1069

sundry debtors 448795818 383565262 367603 469900 693169

cash & bank balance 32684724 21972908 14738 50906 158517

laons & advances 104754336 22690990 327267 439096 168700

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 63085117 183818775 183927 145664 12215

(to the extent not written off or adjusted)

DEBIT BALANCE IN P & L ACCOUNT 0 0 2601591 2632150 2652030

TOTAL 5595261213 6016100597 8899830 9484964 9056204

PROFIT AND LOSS ACCOUNT OVER THE YEARS

18 months in '000


INCOME

gross sales 5471993866 4861224148 7940727 5176291 0

less: Excise 632547868 471130202 756930 501377 0

sales Net 4839445998 4390093946 7183797 4674914 4241421

other income 41829082 36959178 26570 17582 14550

(increase / decrease) -250546530 49324965 0 0 0

in stocks

TOTAL 4630728550 4476378089 7210367 4692496 4255971

EXPENSES

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 & 255837879 219802625 0 0 0

misc costs

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 -63696

TOTAL 4454251492 4376846344 2601591 2652030 2632150

SURPLUS TO BALANCE SEET 176477058 99531745

WORKING NOTES OF EVA FOR BILT

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04pbdita 2541 3,118 3127 40,269 43,474less : dep 630 788 882 12665 13074pbit 1,911 2,330 2,245 27,604 30,4001 - tax rate 1.00 0.92 0.68 0.71 0.75nopat= pbit * 1- tax 1911 2145.82748 1532.6615 19676.1312 22915.52 capital 19048 20,628 21,341 24,157,072 10800000eq 8,436 8,982 10,410 12,382,692 10800000 % of eq 0.442 0.435 0.487 0.513 deb 10,612 11,646 10,931 11,774,380 % of deb 0.550 0.564 0.512 0.487 intr 1128 1,242 1198 13814 cost of deb 0.11 0.10 0.07 0.00084 0eps 8.2 13.3 5.5 6.9 8.2mkt price 91 84.7 119.4 149.6 137.9ke = eps / mkt price 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 0.100 0.104 0.072 0.001 0.002122 = nopat / cap 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

TRENDS OF THE EVA DETERMINANTS

YEARS NOPAT

Jun-00 1911

Jun-01 2145.8

Jun-02 1532.7

Jun-03 19676

Jun-04 22916

YEARS WACC

Jun-00 9.8291

Jun-01 12.37

Jun-02 6.0742

Jun-03 2.4046

Jun-04 0

YEARS PBDITA

Jun-00 2541

Jun-01 3,118

Jun-02 3127

Jun-03 40,269

Jun-04 43,474

WORKING NOTES OF EVA FOR BHIGWAN

18 months in '000


nopbt 1185838624 938678479 7681199692 7598438154 7353478538

less : TAX 415,043,518 328,537,468 2,688,419,892 2659453354 2573717488

nopat= pbit * 1- tax 770795106 610141011 4992779800 4938984800 4779761050

capital 5566559159 5,987,398,543 8,871,127,000 9,056,204,000 9,484,964,000

eq 5,131,077,590 4,030,712,425 6,476,218,000 6,476,218,000 0

% of eq 0.921 0.673 0.730 0.715 0.682

deb 435,481,569 1,956,686,118 2,394,909,000 2,579,986,000 3,008,746,000

% of deb 0.079 0.327 0.270 0.285 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 0.138 0.102 0.563 0.545 0.504

= nopat / cap

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

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

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

COMPARISON OF EVA (BILT GROUP & 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.

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

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

Documents

A Project Report on ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD