N R AGARWAL INDUSTRIES LIMITED

1. Company Profile

N.R. Agarwal Industries Ltd is one of the largest Coated Duplex Board and Newsprint
manufacturing Group having its corporate office at Mumbai and four manufacturing units
located at Vapi, Gujarat. The Group commenced its activities with the incorporation of a 10
TPD unit manufacturing Kraft Paper in 1975, and has today evolved as one of the largest
manufacturing facility in its chosen area of operation. The combined manufacturing capacity
of Coated Duplex Boards today is 130,000 MT per annum and that of News Print, 40,000 MT
PA.

The Company has vast resources in terms of assets, technical expertise and technology,
Research and Development, plants and state of the art machinery, well equipped laboratories,
excellent infrastructure and utilities including water, own power generation (steam), steam
generation, communication, D.M. Plants, Effluent Treatment Plants, transportation etc. at all
manufacturing locations. The Group has excellent marketing network including highly
effective sales team, end users, distributors, storage facility and fast delivery capabilities.
N.R. Agarwal Industries Ltd has grown significantly during the last decade. The technical
manpower of the company is rated among the best in the Industry. To achieve the objectives
of exponential growth, the company has a well knit organization with clear vision,
coordination and decision channels. The effective functioning of the company is aided by
support services and effective administrative systems and procedures. Total manpower
including technical and commercial personnel handling activities of the company is 1500.

Coated Duplex Boards manufactured by the company are exported across the globe to many
countries including Sri Lanka, Bangladesh, Philippines, Egypt, East Africa and Gulf
Countries to name a few.

The company manufactures five different qualities of News Print depending on the specific
needs of Publishing Houses
 2. Financial Snapshot

During the current year the company achieved a production of 1,26,059 MT of Duplex Board
and 31,972 MT of Newsprint and Writing Printing Paper as against 1,20,602 tones and
32,997 tones for the previous year. The Duplex Board production & Newsprint and Writing
printing paper production have grown by around 6%.

The Turnover for the financial year under review were Rs 38,855 Lacs as against Rs 38,670
lacs for the previous financial year. As compared to the previous year, there has been a
substantial increase in the Net Profit, mainly due to reduction in input costs and improved
Sales realization.

During the year, the Company exported Duplex Board and realized Rs 511 Lacs, as compared
to Rs 1,306 lacs, during the year.

(Rs. in Lakhs)

Particulars Year ended 31.03.2010 Year ended 31.03.2009

Net Sales / Income from Operations and other income 39244.02 39009.96

Interest 861.38 1008.05

Gross Profit after Interest but Before Depreciation and 2857.17 1741.76
Taxation

Depreciation 808.53 809.70

Profit before Tax and exceptional items 2048.63 932.06

Exceptional Item 761.80 250.00

Profit before Tax and after exceptional items 2048.64 1182.06

Provisions for Taxation 715.00 246.33

Deferred Tax - 40.16

Fringe Benefit Tax - 5.00

Prior year Adjustments 63.37 (4.20)

Net Profit for the year 2158.81 886.37

Balance in Profit & Loss Account 2858.68 2196.43

 3. Board of Directors

The present strength of Board of Directors of the Company is Five Directors.

None of the Non-Executive Directors of the Company hold any Equity Shares in the
Company. Shri Raunak Agarwal is the son of Shri R N Agarwal and Shri R N Agarwal is the
son of Shri N R Agarwal and hence they are related to each other.

Shri Raunak Agarwal is the son of Shri R N Agarwal and Shri R N Agarwal is the son of Shri
N R Agarwal and hence they are related to each other.

The independent directors are not related to promoters or management at the board level.
They review at every board meeting legal compliance reports prepared by the company.

Directorship in
No. of Committees in which
Relationship other Companies
Chairman/ Member (other than
Name of Director Category With Other including private
N R Agarwal Industries Ltd)
Directors companies in
India
Member Chairman
*Shri. N R Executive Chairman Non-Independent 4 – –
Agarwal
**Shri. R N Chairman & Non-Independent – – –
Agarwal Managing Director
& CEO
Shri. S N Non-Executive Independent 6 2 –
Chaturvedi
Shri P. Kumar Non-Executive Independent 1 1 3

Shri C R Non-Executive Independent – – –

Radhakrishnan

***Shri Raunak Wholetime Director Non-Independent – – –

Agarwal

*Resigned w.e.f January 29, 2010

** Effective from January 29, 2010
*** Appointed as Whole time Director w.e.f September 1, 2009
 4. Board Meetings and Annual General Meeting

The Board meets at least once in each quarter. Five Board Meetings were held during the
year 2009-10. The meetings of the Board were held on April 29, 2009, July 28, 2009, August
20, 2009, October 26, 2009 and January 29, 2010. The Annual General Meeting (AGM) was
held on September 26, 2009.The details of participation of the Directors of the Company
during the financial year ended March 31, 2010 in Board Meetings and AGM of the

No. of Board Meetings No. of Board

Name of Director Attendance at the last AGM
attended Meetings attended

*Shri. N R Agarwal
5 0 Not Attended

**Shri. R N Agarwal
5 5 Attended

Shri. S N Chaturvedi
5 5 Attended

Shri P. Kumar
5 5 Attended

Shri C R Radhakrishnan
5 5 Not Attended

***Shri Raunak
Agarwal 5 4 Attended

Company is as under:
 Name of Director Shares held by the Director
5. Equity
Shri. N R Agarwal & Shri Jointly owns Shares
Raunak Agarwal 45,38,893
Held By
**Shri. R N Agarwal
79,22,030 Directors
Shri. S N Chaturvedi
Nil

Shri P. Kumar
Nil

Shri C R Radhakrishnan
Nil
 6. Shareholder’s Pattern

7. Directors Remuneration

The Remuneration Committee comprises of three directors all of whom are Non-Executive,
Independent Directors.

Shri P Kumar Chairman - Independent, Non Executive

Shri S. N. Chaturvedi Member - Independent, Non Executive
Shri C.R. Radha krishnan Member - Independent, Non Executive

The remuneration committee deals with the matters specified in clause 49 of the listing
agreement and also reviews the overall compensation structure and policies of the company.
Presently, the Company does not have any stock option plan or performance linked incentives
Category No. of shares held Percentage to total share capital

Foreign holding (FIIs, OCBs and NRIs) 28,655 0.169

Financial Institutions/ Banks/ Insurance Companies 2,500 0.014

Mutual Funds and UTI 0 0

Corporate Bodies 10,89,872 6.404

Directors and their relatives 1,24,60,923 73.217

Public 34,37,150 20.196

Total 1,70,19,100 100

for its Directors.

A meeting of the Committee was held on 20.08.2009.

The details of remuneration to all the Directors for the year ended March 31, 2010 are as
under:
 * Upto 31.08.2009
** Effective from 01.09.2009

8. Governance Report Overview

Corporate Governance is about commitment to values and ethical business conduct. It is also
Name of Director Benefits
Salary (Rs.) Commission (Rs.) Sitting fees (Rs.) Total
(Rs.)
Shri N R Agarwal 25,00,000 50,000 -- -- 25,50,000
(Upto
29.01.2010)
Shri R N Agarwal 42,50,000 7,00,000 -- -- 49,50,000

Shri S N Chaturvedi -- -- -- 65,000 65,000

Shri P Kumar -- -- -- 65,000 65,000

Shri C R Radhakrishnan -- -- -- 53,000 53,000

Shri Raunak Agarwal **3,50,000 -- -- *10,000 3,60,000

about how an organisation is managed viz., its corporate and business structures, its culture,
policies and the manner in which it deals with various stakeholders. Timely and accurate
disclosure of information regarding the financial position of the company, its performance
and ownership forms part of the corporate governance.

N R Agarwal Industries Limited (NRAIL) continues to uphold its commitment to high

standards of corporate governance. In all its operations and processes, the Company adheres
to stringent governance norms so that its stakeholders are ensured of superior financial
performance.
Through its corporate governance measures, the Company aims to maintain transparency in
its financial reporting and keep all its stakeholders informed about its policies, performance
and developments. NRAIL will contribute to sustain and strengthen stakeholder’s confidence
by adopting and continuously improving good corporate practices.

The Company’s Board has laid down identifiable policies and guidelines related to the key
elements of corporate governance-transparency, disclosure, supervision and internal control,
risk management, internal and external communications, high standard of safety, accounting
fidelity, product and service quality. It has also introduced adequate review processes.

Related Party Transactions:

There were no transactions of Material nature with related parties i.e. with its promoters,
directors or the management, their subsidiaries or relatives etc. that may have potential
conflict with the interest of the company at large. The transactions with related parties as per
Accounting Standard AS-18, are set out in notes to accounts in the Annual Report and were
placed before the Audit Committee periodically.

Risk Management:

The Board of Directors have been informed from time to time the business risks faced by the
Company and the steps taken by the management to face them.

Management

The management discussion and analysis report forms part of this annual report.

The Company has complied with the requirements of regulatory authorities on matters related
to capital markets and no penalties/strictures have been imposed against the Company during
the last three years.

Whistle Blowing Policy:

The company has not framed whistle blower policy. However, no personnel has been
denied access to the audit committee
 9. Calculation of Tobin’s Q and Interpretation

The combined market value of all the companies on the stock market should be about equal
to their replacement costs. The Q ratio is calculated as the market value of a company divided
by the replacement value of the firm's assets:

market capitalisation+book value of debt

Q ratio :
book value of equity−revaluation reserves

Market Capitalisation = Weighted average number of shares outstanding x Market Value of

share

Book value of debt = Secured + Unsecured Loan

Book Value of Equity = Equity capital + Reserves & Surplus

 2010 2009 2008

Market 17,019,100 * 17,019,100 * 18.65= 17,019,100 * 33.51=

Capitalisati 30.15=513,125,865 317,406,215 570,310,041
on

Book value 882,284,068 + 45,778,154 733,578,762 + 98,732,173 849,622,13 + 106,652,764

of debt = 928,062,222 = 832310935 = 191,614,977

Book Value 170,191,000 + 510,161,016 170,191,000 + 170,191,000 +261,395,742

of Equity = 680,352,016 330,120,832 = 500,311,832 = 431,586,742

Q ratio 2.11 2.29 1.76

Inference:

 A low Q (between 0 and 1) means that the cost to replace a firm's assets is greater
than the value of its stock. This implies that the stock is undervalued.

 Conversely, a high Q (greater than 1) implies that a firm's stock is more expensive
than the replacement cost of its assets, which implies that the stock is overvalued.

 This measure of stock valuation is the driving factor behind investment decisions in
Tobin's model.

 From here where we infer that in 2008 stocks were overvalued as Q ratio comes out to
be 1.76 but in the next fiscal year 2008-09 Q value increased from to 2.29, which
means that stocks were overvalued compared to last year.

 In the latest fiscal 2009-10 company has performed better as Q ratio has come down
to 2.11. As market capitalisation came down because of the share price has declined.
This indicates the company has improved in terms of firm performance.
Regression Data

TOBIN's Board
  Q Composition
     
2008 1.76 0.571428571
2009 2.29 0.571428571
2010 2.11 0.5

SUMMARY
OUTPUT  
   
Regression
Statistics  
Multiple R 0.7605
0.5783
R Square 6
 Adjusted R 0.1567
Square 2
0.2474
Standard Error 9
Observations 3

ANOVA                
Significan
  df SS MS F ce F      
Regressio 0.0840166 0.08401 1.371700 0.4499069
n 1 67 7 7 2      
Residual 1 0.06125 0.06125          
0.1452666
Total 2 67            
                 
Coefficien Lower Upper Lower Upper
  ts St. Error t Stat P-value 95% 95% 95% 95%
Intercept 4.775 2.33 2.05 0.29 -24.81 34.36 -24.81 34.36
  -4.97 4.24 -1.17 0.45 -58.89 48.95 -58.89 48.95

Inference:

Regression analysis has been conducted to find out the effect of board composition on firm
performance.Seeing the analysis we found that R square =57% which means that 57% of the
variation in tobin’s q is being explained by variation in board composition.Further we find
that there is a inverse relationship between board composition and tobin’s q denoted by beta
coefficient = - 4.97

Correlation Data

BOARD TOBIN's
  SIZE Q
     
2008 7 1.76
2009 7 2.29
2010 6 2.11

Correlation output
board
  size tobin's q
board
size 1  
tobin's q -0.18209 1
Inference:

Correlation between board size and tobin’s q is -.18 which is almost close to zero that
signifies very weak or no correlation .
Annexure