Aditya Birla Nuvo Ltd


BSE: 500303 | NSE: ABIRLANUVO | ISIN: INE069A01017 
Market Cap: [Rs.Cr.] 14,503 | Face Value: [Rs.] 10
Industry: Textiles - Manmade

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Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

Indian Economy: GDP Growth slows down

The year gone by was challenging for economies across the world. Global GDP growthcontracted from 4% in 2011 to 3.2% in 2012. Indian economy was not insulated from theglobal slowdown. India’s GDP growth rate slipped to a decade low of 5% in 2012-13.Reserve Bank of India cut key lending rates thrice during the year to support slowingeconomy, however, sluggish domestic consumption and slack in investments impacted growth.

While a high Current Account Deficit, which peaked at 6.7% during the year, has beenthe main driver of slowdown in growth, other factors have also contributed. Fiscal deficitreached to 5.2% in 2012-13 on account of higher imports bill, weakening of Indian Rupeeand increased subsidy burden. Persistently high inflation and interest rates affectedsavings growth, consumption and the investment cycle. Wholesale Price Index-basedinflation eased to 4.9% in April 2013. Consumer Price Index-based inflation, thoughdeclined from earlier highs, remained high at 9.4% in April 2013.

Going forward, economists are forecasting gradual recovery in the world’s economy.Monetary stimulus measures in the advanced as well as emerging economies should helpsupport growth. These positive developments on the global front and policy measures takenby the Government of India are expected to drive improvement in the Indian economy.Inflation and interest rates are also anticipated to ease but the Indian Rupee is expectedto weaken further. Falling prices of gold and commodities are likely to tame inflation andreduce Current Account Deficit. Government is also targeting to contain fiscal deficit tobelow 4.8% in 2013-14 through diesel and petrol price hikes and disinvestment plans.

The long-term growth prospects of the Country remain strong, however, in the short termthe economy is expected to witness gradual improvement. India’s GDP growth isprojected to grow at 6% in 2013-14 (Source: World Bank).

Note : USD 1 = Rs. 54; 1 billion = 100 Crore

Note : The financials in the Management Discussion and Analysis have been rounded offto the nearest Rs. 1 Crore

Note : The Profit and Loss Account for 2010-11, 2011-12 and 2012-13 has been preparedas per the revised Schedule VI of the Companies Act, 1956

Aditya Birla Nuvo: Strong earnings growth

Given the testing macro-economic scenario and despite earnings pressure in some of itsbusinesses, Aditya Birla Nuvo (‘ABNL’ or ‘the Company’) has postedstrong earnings growth. This reflects the strength of its conglomerate model. The Companyoutperformed the industry and strengthened market positioning in most of the businesses.

The business-wise key achievements and highlights during 2012-13 are as under:

• Aditya Birla Financial Services

• Aditya Birla Financial Services (ABFS) ranked among the top 5 fund managers inIndia, excluding LIC.

• Its funds under management crossed Rs. 100,000 Crore.

• ABFS reported revenue at Rs. 6,390 Crore (USD 1.2 billion).

• It gained market share across most of the businesses.

• Lending book in the NBFC business more than doubled to Rs. 8,000 Crore.

• Life Insurance business recorded strong growth in profit and distributed interimdividend.

• ABFS generated return on average capital employed of 31%.

• Fashion & Lifestyle

• ABNL’s Fashion & Lifestyle business is the largest branded apparelplayer in India selling one apparel every second.

• With the acquisition of Pantaloons Fashion business, the annual revenue ofFashion & Lifestyle business reached USD 1 billion.

• The nation-wide reach of Madura, Pantaloons and Jaya Shree Textiles, combinedtogether, expanded to 1,443 exclusive brand outlets/stores spanning across 3.7 millionsquare feet besides more than 4,750 departmental stores and multi-brand outlets.

• The business generated return on operating capital employed of 25% driven bystrong earnings and working capital management.

• Telecom

• Idea has been the biggest revenue market share gainer since past four years.

• It ranks among the top 10 cellular operators in the world with 1.6 billionminutes of voice usage per day.

• It ranks 3rd in India in terms of revenue market share, which grewfrom 14.4% to 14.8%1 in past one year.

• It was serving a large customer base of about 122 million subscribers as on 31stMarch, 2013.

• Idea is a USD 8 billion company by market cap (as on 29th May, 2013) and USD 4billion company by revenue size.

• Idea is generating strong cash profit and has a sound balance sheet to supportits growth plans.

• The Board of Directors of Idea proposed a maiden dividend.

• IT-ITeS:

• Aditya Birla Minacs ranks among the top six Indian BPO companies by revenue size(Source: NASSCOM).

• During 2012-13, its revenue reached near to Rs. 2,500 Crore mark (USD 457million). It is generating steady cash profit to fund its capex and working capitalrequirements.

• Considering the Carbon Black Business scenario, both in the Indian and theglobal context, ABNL has decided to divest its Carbon Black Business, subject to therequisite approvals, on a going-concern basis, by way of slump sale for a lump sumconsideration of Rs. 1,451 Crore as an enterprise value, subject to the adjustment for networking capital. Having received the shareholders’ approval, the Company is in theprocess of divesting the Carbon Black business, effective from 1st April, 2013. The cashinflow from the divestment will strengthen the Company’s balance sheet.

• Manufacturing Businesses:

• The combined revenue of Agri, Rayon and Insulators businesses rose by 28% to Rs.4,155 Crore. EBITDA is up by 10% to Rs. 446 Crore despite lower profitability in the Agribusiness on account of planned maintenance shutdown. Rayon business contributed stronglyto the earnings led by higher volumes and improved realisation in both the VFY andChemicals segments.

• Rayon business has commissioned an additional unit of VFY using Spool Technologyimported from ENKA, Germany, at a capex of about Rs. 270 Crore. This will help business tomanufacture premium quality yarn especially in the superfine segment. The new VFY planthas been commissioned and is currently under ramp up.

• Capital Infusion:

Aditya Birla Nuvo, as a premium conglomerate, is progressing well on the growth path totap sector opportunities. To meet its growth capital requirements, the Company had issued16.5 million warrants in May 2012 to Promoters/Promoter Group on a preferential basisafter being approved by the shareholders. Of the planned equity infusion of about Rs.1,500 Crore, a sum of Rs. 376 Crore has already been received as 25% application money inMay 2012 itself. A sum of Rs. 456 Crore was received towards the balance 75% amountpayable on conversion of 6,680,000 warrants, in March 2013. In terms of the Issue, thebalance 9,820,000 warrants are to be converted for Rs. 671 Crore on or before 9thNovember, 2013. The equity infusion will not only strengthen the financial position of theCompany but also act as a seed capital for capturing the next level of growth.

Delivered robust earnings growth

• Revenue crossed Rs. 25,000 Crore mark

• Posted highest ever EBITDA at Rs. 4,142 Crore – Grew by 27% year on year

• Achieved highest ever Net Profit at Rs. 1,059 Crore – Grew 19% over theprevious year.

Consolidated Profit and Loss Account

(Rs. Crore)

2012-13 2011-12
Revenue 25,490 21,840
EBITDA 4,142 3,259
Less: Depreciation and Amortisation 1,295 1,092
Earnings Before Interest and Tax (EBIT) 2,847 2,167
Less: Finance Costs related to NBFC 456 202
Less: Other Finance Costs 865 636
Earnings Before Tax and Exceptional Items 1,526 1,330
Add: Exceptional Gain/(Loss)1 (104)
Earnings Before Tax 1,526 1,226
Less: Tax Expenses 342 216
Less: Minority Interest and Share of (Profit)/Loss of associates 125 120
Consolidated Net Profit 1,059 890

Note1 : A provision of Rs. 104 Crore was made during 2011-12 towards entrytax liability (largely related to previous years, earlier recognised as contingentliability) w.r.t. the Carbon Black business; the matter is sub-judice.

Consolidated Revenue of ABNL grew year-on-year by 17% to Rs. 25,490 Crore supported bythe top-line growth across the businesses. This is despite the fact that Life Insurancewitnessed challenging sector environment.

• During the year, private sector’s total new business premium de-grew y-o-yby 4%. Growth was impacted y uncertain equity markets and high interest rates coupled withregulatory changes. Birla Sun Life Insurance (BSLI) reported a lower de-growth at 2% andmaintained its 5th rank among private sector players. Its market share improvedfrom 7.8% to 8%. BSLI’s revenue de-grew year-on-year by 11% to Rs. 5,037 Crore.

• Revenue of other financial services surged by 79% to Rs. 1,258 Crore led by theNBFC business. The revenue of NBFC business more than doubled to Rs. 713 Crore in linewith growth in its lending book.

• Combined revenue of Fashion & Lifestyle business rose by 50% to Rs. 4,930Crore. Madura Fashion & Lifestyle continued to outperform the industry. Driven bystores expansion and like-to-like stores sales growth, its revenue grew by 15% to reachRs. 2,500 Crore. Pantaloons Fashion & Retail Ltd. reported revenue of Rs. 1,285 Crore.

It includes nine months financials of Pantaloons business acquired with effect from theappointed date, i.e., 1st July, 2012. Hence, to that extent, performance is not comparablewith that of the previous year. Revenue in the Textiles business grew by 9% to Rs. 1,144Crore led by the volume growth and higher realisation in the linen segment.

• In the Telecom business, strong 17% growth in total minutes on network led to15% growth in the top-line at Rs. 22,407 Crore (ABNL’s share: Rs. 5,662 Crore).

• IT-ITeS business posted 18% revenue growth driven by both existing and newclients and favourable currency movement.

• Combined revenue of the manufacturing businesses (Agri, Rayon and Insulators),grew by 28%. Revenue growth was largely driven by higher trading of imported P&Kfertilisers and rise in feed and fuel (natural gas) prices in the Agri-business. Volumegrowth and higher realisation in the Rayon business also contributed.

• Revenue in the Carbon Black business grew by 5%. Lower sales volumes due tohigher imports were offset by increase in realisation on account of higher raw materialcost.

Consolidated Revenue - Segmental

(Rs. Crore)

2012-13 2011-12
Financial Services 6,295 6,392
Life Insurance 5,037 5,691
Other Financial Services1 1,258 702
Fashion & Lifestyle 4,930 3,281
Branded Apparels and Accessories2 3,802 2,243
Textiles 1,144 1,046
Inter-segment Elimination (16) (8)
Telecom3 5,662 4,933
IT-ITeS 2,466 2,082
Manufacturing4 4,155 3,255
Carbon Black 2,036 1,943
Inter-segment Elimination (54) (46)
Consolidated Revenue 25,490 21,840

Note1: Other Financial Services include Asset Management (proportionatelyconsolidated at 50%, being a 50:50 JV till 9th October, 2012, and thereafterconsolidated as subsidiary since Aditya Birla Financial Services holds 51% w.e.f. 10thOctober, 2012), NBFC, Private Equity, Broking, Wealth Management & General InsuranceAdvisory.

Note2: Represents Madura Fashion & Lifestyle (division of ABNL) andPantaloons Fashion & Retail Limited (subsidiary of ABNL). In 2012-13, nine monthsfinancials of Pantaloons business are included pursuant to its acquisition with effectfrom the appointed date, i.e., 1st July, 2012.

Note3: Represents ABNL’s share in Idea’s earnings. Being a jointventure, Idea is consolidated at ~25.3% as per AS-27.

Note4: Manufacturing includes Agri, Rayon and Insulators businesses.

Consolidated EBITDA rose by 27% from Rs. 3,259 Crore to Rs. 4,142 Crore. The FinancialServices, Fashion & Lifestyle, Telecom, IT-ITeS and Manufacturing businesses (Agri,Rayon and Insulators) posted 24%, 38%, 19%, 33% and 10% growth in EBITDA, respectively.

Consolidated depreciation grew by 19% to Rs. 1,295 Crore largely in the Telecombusiness on account of 2G and 3G network expansion.

Consolidated EBIT rose by 31% from Rs. 2,167 Crore to Rs. 2,847 Crore.

• In the Life Insurance Business, segment EBIT rose by 18% from Rs. 461 Crore toRs. 542 Crore.

• Higher profitability in other Financial Services was driven by AUM growth in theAsset Management business and expansion of lending book in the NBFC business.

• In the Fashion & Lifestyle business, strong 22% sales growth in the retailchannel of Madura and 20% revenue growth in the linen segment of Jaya Shree Textilesaugmented earnings.

• In the Telecom business, segment EBIT grew by 20% to Rs. 2,527 Crore(ABNL’s share: Rs. 639 Crore) led by sound growth in total minutes of use on network.

• Revenue growth and favourable forex movement improved profitability in theIT-ITeS business.

• In the manufacturing businesses, segment EBIT of Rayon business grew by 67% toRs. 153 Crore led by higher volumes and improved realisation in both the VFY and Chemicalssegments. Lower profitability in the Agri business was on account of planned annualmaintenance shutdown for 20 days.

(Rs. Crore)

Segment EBIT as per Accounting Standard ("AS")-17 2012-13 2011-12
Financial Services 706 541
Life Insurance 542 461
Other Financial Services1 165 80
Fashion & Lifestyle 299 242
Branded Apparels and Accessories2 170 125
Textiles 129 117
Telecom3 639 534
IT-ITeS 164 111
Manufacturing4 369 329
Carbon Black 93 164
Segment EBIT as per AS–17 2,270 1,921
Add: Unallocated Income/(Expenses) (Net) 8 (7)
Add: Finance Costs related to NBFC5 456 202
Add: Consolidated Interest Income (Excluding Interest Income of NBFC) 5 113 51
Consolidated EBIT 2,847 2,167

Note1: Other Financial Services include Asset Management (proportionatelyconsolidated at 50%, being a 50:50 JV till 9th October, 2012 and thereafterconsolidated as subsidiary since Aditya Birla Financial Services holds 51% w.e.f. 10thOctober, 2012), NBFC, Private Equity, Broking, Wealth Management & General InsuranceAdvisory. In accordance with AS-17 on ‘Segment Reporting’, finance cost of NBFCbusiness is reduced from segment EBIT.

Note2: Represents Madura Fashion & Lifestyle (division of ABNL) andPantaloons Fashion & Retail Limited (subsidiary of ABNL). In 2012-13, nine monthsfinancials of Pantaloons business are included pursuant to its acquisition with effectfrom the appointed date, i.e., 1st July 2012.

Note3: Represents ABNL’s share in Idea’s earnings. Being a jointventure, Idea is consolidated at ~25.3% as per AS-27.

Note4: Manufacturing includes Agri, Rayon and Insulators businesses.

Note5 : In accordance with AS-17 on ‘Segment Reporting’, financecost of NBFC business is reduced from segment EBIT, hence, added back-to-arrive atConsolidated EBIT. In accordance with AS-17, interest income (excluding interest income ofNBFC business) is not included in segment EBIT, hence, added back-to-arrive atConsolidated EBIT.

Earnings in the Carbon Black and Insulators businesses were constrained due to cheaperimports.

Finance costs related to NBFC business increased in line with the growth in its lendingbook. Other finance costs increased mainly due to higher working capital employed in theAgri business on account of increase in subsidy receivable from the Government coupledwith consolidation of financials of Pantaloons Business acquired with effect from 1stJuly, 2012.

Tax expenses increased mainly in the standalone financials, Telecom and NBFCbusinesses. ABNL’s consolidated net profit grew by 19% from Rs. 890 Crore to Rs.1,059 Crore.

Consolidated Balance Sheet

Net worth increased by Rs. 1,867 Crore to Rs. 9,384 Crore, led by promoters infusion ofRs. 832 Crore and profit earned during the year.

Net debt3, excluding NBFC borrowings, increased from Rs. 7,491 Crore to Rs.9,391 Crore, firstly, due Consolidated Balance Sheet

(Rs. Crore)

March 2013 March 2012
Net Worth 9,384 7,517
Total Debt1 11,799 9,224
NBFC Borrowings 6,903 2,973
Minority Interest 940 301
Deferred Tax Liabilities (Net) 428 317
Capital Employed 29,455 20,331
Life Insurance Policyholders’ Funds
(Including Funds for Future Appropriation) 21,576 19,964
Total Funds Employed 51,031 40,295
Net Fixed Assets (Including Capital Advances) 10,677 9,354
Goodwill 4,825 3,177
Long term Investments 354 319
Life Insurance Investments 22,929 21,110
Policyholders’ Investments

21,559

20,095

Shareholders’ Investments

1,371

1,015

NBFC Lending 8,000 3,425
Net Working Capital1 1,837 1,177
Cash Surplus and Current Investments2 2,409 1,733
Total Funds Utilised 51,031 40,295
Book Value per Equity Share (Rs.) 781 662
Net Debt3/EBITDA (x) 2.3 2.3
Net Debt3/Equity (x) 1.00 1.00

Note1 : Total Debt and Net Working Capital are excluding MTM gain of Rs. 22Crore as on 31st March, 2013, and MTM loss of Rs. 104 Crore as on 31stMarch, 2012, w.r.t. fully hedged foreign currency working capital debt.

Note2: Include cash, cheques in hand, remittances in transit, balances withbanks, fertilisers bonds and current investments. Note3: Total Debt less CashSurplus and Current Investments. to consolidation of debt of Pantaloons business pursuantto its acquisition with effect from 1st July, 2012, and secondly, on account of investmentof Rs. 800 Crore, for acquiring controlling stake in the Pantaloons business. In theIT-ITeS business, net debt reduced by Rs. 129 Crore due to repayment of borrowings out ofinternal accruals. Borrowings related to NBFC business grew in line with its lending book.

Deferred tax liabilities have increased primarily in the Telecom business.

Minority interest increased from Rs. 301 Crore to Rs. 940 Crore, mainly on account ofAsset Management and Pantaloons subsidiaries. Birla Sun Life Asset Management, which wasconsolidated proportionately as a joint venture till 9th October, 2012, as per AS-27,became subsidiary w.e.f. 10th October, 2012. Pursuant to its acquisition, Pantaloonsbusiness was consolidated as subsidiary w.e.f. 1st July, 2012. Net fixed assets haveincreased owing to capital expenditure, largely in the Telecom, Manufacturing and Fashion& Lifestyle businesses.

Goodwill has increased mainly on account of acquisition of the Pantaloons business.

Increase in Long term investments represent sponsor commitment of ABNL towards AdityaBirla Private Equity Funds.

Net working capital at Rs. 1,837 Crore has increased, largely due to higher workingcapital requirement in the Agri business as explained earlier.

NBFC business has more than doubled its lending book to Rs. 8,000 Crore.

Cash Surplus and Current Investments are higher on account of current investment of Rs.800 Crore lying in books of Pantaloons subsidiary as on 31st March, 2013. Pantaloonsutilised these funds to repay its debt, post-effectiveness of scheme, on 8th April, 2013.

Standalone Balance Sheet

ABNL has a strong standalone balance sheet with Net Debt to EBITDA ratio at 3.3 timesand Net Debt to Equity ratio at 0.53 times. The Company’s standalone balance sheetwill be further strengthened by proceeds from divestment of Carbon Black business, balanceequity infusion of Rs. 671 Crore by promoters on conversion of remaining 9.82 millionwarrants, rationalisation of working capital with the realisation of subsidy and dividendinflows from Idea Cellular and Birla Sun Life Insurance.

The business-wise performance and outlook follows.

FINANCIAL SERVICES (ADITYA BIRLA FINANCIAL SERVICES)

The economic environment of the Country during 2012-13 was characterised bypersistently high interest rates and inflation, coupled with decline in GDP growth rate.This adversely impacted the demand and growth of the financial services and products inthe Country. Lower consumer confidence along with weak financial markets affected thecustomer’s ability to commit for the long term. The volatility in the macro-economicscenario may continue in the short-run. However, long term growth prospects of thefinancial services sector remain intact.

India has one of the highest household savings rate in the world. Household savings inIndia as a percentage of GDP have been rising. Over 90% of household savings are investedin bank deposits and only 10% in other financial asset classes. This offers a hugepotential market size for non-bank financial services and products. Besides this,favourable demographics, viz., a large growing young population, expanding middle classsegment and rising per capita income signals robust long-term growth prospects ahead forIndian financial services sector. The high savings rate of Indian households at over 25%and a low level of financial products penetration, make this vast market for mutual funds,portfolio and wealth management services, insurance and a variety of other products.

Aditya Birla Financial Services ("ABFS") has created a large presence in theIndian financial services industry and is well positioned to tap future sector growthopportunities. Even when it is a non-bank player presently, ABFS ranks among the top 5fund managers in India, excluding LIC. Its assets under management has surged year-on-yearby 22% crossing Rs. 100,000 Crore mark. It is the 5th largest private life insurer inIndia. Its asset management business is the 4th largest player in the country. It is alarge player in the NBFC space having lending book in excess of Rs. 8,000 Crore andgrowing. Anchored by about 14,750 employees and trusted by about 5 million customers, ABFShas a nation-wide reach through about 1,550 branches and about 160,000 agents / channelpartners.

Besides, being equipped with a nation-wide distribution network, a large customer base,a talented human resource pool, proven track record of product innovation, customercentric approach and superior investment performance, Aditya Birla Financial Services hasa strong brand.

During 2012-13, Aditya Birla Financial Services has gained market share in most of itsbusinesses and posted improvement in profitability across all the business lines. Itsrevenue at USD 1.2 billion (Rs. 6,390 Crore) de-grew marginally year-on-year by 2% aspremium growth in the Life Insurance business remained subdued. However, NBFC and AssetManagement businesses witnessed strong revenue growth.

Earnings before tax of ABFS rose by 27% from Rs. 600 Crore to Rs. 761 Crore. Net profitsurged by 25% to Rs. 672 Crore, led by Life Insurance, Asset Management and NBFCbusinesses. Insurance Advisory and Private Equity businesses also contributed. Driven byrevenue growth, losses in Broking and Wealth Management businesses reduced year-on-year.

It generated a healthy 31% return on average capital employed. The Life Insurancebusiness, in particular, posted a strong growth in bottom-line and is returning surplusfunds as dividend to the shareholders. This dividend income will support ABNL’scapital commitment towards other financial services businesses.

Online money management platform launched by ABFS in June 2012 – Aditya BirlaMoney MyUniverse - was voted "Product of the Year, 2012" for innovation infinancial services in a survey conducted by Nielson. It is a one stop shop portal for anindividual to aid money management and better financial decisions. This unique brandagnostic platform enables customers to aggregate their various financial relationships ina highly secure environment and provides customised and completely automated advice onmoney management, based on the financial position and risk profile of the customer. Theplatform also enables users for expense tracking, setting budgets, getting alerts,investment transactions, tax filing and registering for bill payment. MyUniverse hasregistered more than 250,000 customers on its portal.

As a significant development in the financial services sector, RBI has releasedguidelines for issue of new banking licenses to private players. It is a welcome steptowards further strengthening and broadening the banking sector and bringing it closer tothe common man.

(Rs. Crore)

Aditya Birla Financial Services1 2012-13 2011-12
Revenue
Birla Sun Life Insurance 5,037 5,691
Birla Sun Life Asset Management 405 315
Aditya Birla Finance 713 348
Aditya Birla Money 84 88
Aditya Birla Money Mart 76 60
Aditya Birla Insurance Brokers 57 32
Aditya Birla Capital Advisors 24 21
Others / Elimination (6) (5)
Total Revenue 6,390 6,550
EBITDA2 819 661
Earnings Before Tax 761 600
Net Profit 672 539

Note 1: Above financials include full financial figures of partly owned subsidiaries,viz., Life Insurance, Asset Management, Broking and General Insurance Advisory.

Note 2 : Finance cost of NBFC business, being an operating expense as per AS-17, isdeducted from EBITDA.

Given expertise of Aditya Birla Financial Services, high corporate governance standardsand strong capabilities of the Aditya Birla Group franchise, the Company is keen to enterthe banking sector. The Indian Banking sector has grown steadily over the past decade interms of both top line and bottom line, and this is likely to remain a growth opportunityin India. Banking will be both a contributor and beneficiary of economic growth in Indiaand the Company would like to participate in this process of nation building. Given thecurrent levels of under-penetration of these services in certain sections and the positivelong-term macro outlook, banking will provide an opportunity to create a highly successfulservice institution at scale, like the Company has demonstrated in other businesses. Webelieve that bank will be a strategic fit for Aditya Birla Financial Services.

We are in the process of preparing and filing the application by 1st July 2013, as perthe RBI guidelines.

Life Insurance (Birla Sun Life Insurance Company Limited)

Industry Overview

The Indian Life Insurance industry currently comprises of 23 life insurers and onepublic sector life insurer – LIC.

In 2012-13, the industry’s new business premium1 de-grew by 15% to Rs.57,466 Crore. LIC de-grew by 21% while private players contained de-growth to 4%.Consequently, share of private players in total pie increased from 35% to 40%. In terms ofIndividual Life new business1, private life insurers posted a positive 2%growth while LIC de-grew by 4%. (Source: IRDA, www.irda.gov.in).

Industry growth was impacted on account of moderation of GDP growth, high inflation,high interest rates and uncertainty on other macro economic and regulatory parameters.Sluggish capital markets and high interest rates affected the consumer’s appetite forlong-term investment

Indian Life Insurance Industry :

Growth in new business1

(Rs. Crore)

Individual Life New Business Total New Business
Premium Y-o-Y Growth Premium Y-o-Y Growth
Private Players 17,849 2% 22,780 -4%
LIC 29,171 -4% 34,686 -21%
Total 47,019 -2% 57,466 -15%

Source: IRDA, www.irda.gov.in

(Rs. Crore)

Birla Sun Life Insurance 2012-13 2011-12
Assets Under Management ("AUM") 22,929 21,110
Individual First Year Premium 1,048 1,250
Group First Year Premium 788 676
First Year Premium 1,837 1,926
Renewal Premium 3,380 3,959
Premium Income (Gross) 5,216 5,885
Less: Reinsurance Ceded and Service Tax (313) (261)
Premium Income (Net) 4,903 5,624
Other Operating Income 134 67
Revenue 5,037 5,691
Earnings Before Tax 542 461
Net Profit 542 461
Capital 2,450 2,450
Net Worth 1,248 1,073
ABNL’s Investment 1,814 1,814

products, thereby affecting growth of both unit-linked as well as traditional lifeinsurance products.

The top 7 out of 23 private players contributed to 75% of the private sector’stotal new business premium1. Individual new business premium growth fornon-bank backed life insurers remained affected.

Performance Review

Birla Sun Life Insurance ("BSLI") completed its 13th year ofsuccessful operations amidst the challenging sector environment. It ranked 5th amongprivate players with 8% market share in terms of new business premium1 for2012-13

[Source: IRDA, www.irda.gov.in]. As of 31st March, 2013, BSLI’s nationwidereach encompassed over 600 branches, an agency force of over 105,000 empanelled agents,tie-ups with more than 150 non-bank corporate agents and brokers, and 4 key bancassurancepartners.

BSLI recorded gross premium income at Rs. 5,216 Crore vis--vis Rs. 5,885 Crore earnedin the previous year. New business premium income de-grew by 5% to Rs. 1,837 Crore. Whilenew business premium income from Group segment witnessed a growth of 17%, individual lifesegment de-grew by 16%. Renewal premium at Rs. 3,380 Crore de-grew year-on-year by 15%.

BSLI posted a strong growth in profitability. Earnings before tax and Net Profit soaredby 18% from Rs. 461 Crore to Rs. 542 Crore. Key drivers of the growth in profitabilityinclude strong in-force business, reduction in operating expenses and change in productmix.

Assets under Management grew by 9% to Rs. 22,929 Crore. Equity and Debt assetscontributed to 41% and 59% of the total AUM respectively. BSLI continued to deliversuperior investment returns to its policyholders.

The 13th month premium persistency ratio as on 31st March, 2013 is 81.3% vis-a-vis82.1% last year.

For the third year in a row, BSLI has achieved zero percent claim outstanding ratio atthe end of the year, a testimony to its continued focus on customer satisfaction.

With the strong emergence of profitability, BSLI is returning surplus funds to theshareholders. It declared an interim dividend amounting to Rs. 197 Crore (Previous Year:Rs. 98.5 Crore) @ 10% of its paid-up capital. Aditya Birla Nuvo received Rs. 146 Crore forits 74% shareholding. BSLI plans to distribute surplus funds of about Rs. 400 Crore in2013-14.

No capital infusion has been required since past three years as the business isgenerating adequate internal accruals to fund its requirements.

Post regulatory changes over last couple of years, product mix at industry level hasshifted towards non-unit-linked insurance plans (non-ULIPs). In line with the trend in theindustry, during the past three years, contribution of non-ULIP portfolio in Individualnew business sales of BSLI has increased from about 5% to 56%. During the year underreview, BSLI launched several new products to augment its product portfolio.

BSLI has focused on a multi-distribution strategy to offer its wide range of lifeinsurance products to numerous customer segments. Agency continues to be the largestdistribution channel for BSLI, contributing to 67% of its individual life new businesssales. Over the past few years, a strong franchise network has been created in theCorporate Agent and Broker segment.

Note1: Average AUM for the fourth quarter ended 31st March of the respectiveyear.

Outlook

The life insurance industry has been under a changing, volatile and uncertainregulatory and macro-economic environment. However, life insurance will continue tocommand a large share of financial investment by retail investors and dominate long-tenureinvestments. Furthermore, the life insurance industry is most likely to benefit from therobust structural and demographical drivers offered by the country in the long-term. BSLIis well positioned to face the challenges and tap the sector growth opportunity. It hasidentified the following focus areas to strengthen its competitive and financial positionin ensuing years.

• Achieving sales growth through balanced channel mix, optimal capacities,complete product range and improved distribution efficiencies.

• Augmenting product offerings and achieving a balanced mix of ULIPs andNon-ULIPs.

• Higher focus on customer satisfaction through need-based selling and bettercustomer service.

• Increasing efforts towards retaining customers and maintaining high persistency.

• Leveraging the full potential of the brand.

Asset Management (Birla Sun Life Asset Management Company Limited)

Industry Overview

The Indian mutual fund industry comprises 43 asset management companies. Top 10 assetmanagement companies command 77% of the industry’s domestic AAUM1. Afterdeclining in past two years, the AAUM1 of mutual fund industry grew strongly by23% from about Rs. 664,800 Crore (~USD 123 billion) in 2011-12 to around Rs. 8,16,700Crore (~USD 151 billion) in 2012-13. The growth was largely driven by Debt and Liquidassets which recorded strong inflows and grew by 31% on account of liquidity and highinterest rates during the year. Industry’s equity AAUM1 grew by 2.3% toUSD 38 billion on account of market action as net sales remained negative. Share of equityAAUM in industry’s AAUM de-grew from 30% to 25%.

[Source: Association of Mutual Funds in India ("AMFI"), www.amfiindia.com].

Performance Review

Birla Sun Life Asset Management Company ("BSAMC") completed 18 years of itsjourney towards offering wealth creation solutions to its customers. During the year,BSAMC outperformed the industry and registered 26% year on year growth in domestic AAUM1- second highest among the top 5 players. This led to market share expansion from 9.2% to9.4%. BSAMC maintained its market positioning as the 4th largest assetmanagement company in India.

Total AAUM1 of BSAMC, including domestic, offshore, real estate fund and PMSAUM, surged year-on-year by 26% to reach Rs. 83,451 Crore (USD 15.5 billion). Debt segmentwas the largest contributor to the growth followed by offshore AAUM. Offshore AAUM isgaining momentum and rose by 37% to over USD 850 million. Led by strong growth in assetsunder management, BSAMC posted sound earnings growth. Revenue grew by 29% from Rs. 315Crore to Rs. 405 Crore. Earnings before tax rose by 21% from Rs. 89 Crore to Rs. 107Crore. Net profit surged by 24% to Rs. 73 Crore.

Aditya Birla Financial Services Pvt. Ltd., the wholly owned subsidiary of ABNL, held50% stake in BSAMC till 9th October, 2012. It acquired an additional 1% holdingin BSAMC from Sun Life, raising its holding to 51% effective from 10th October,2012.

BSAMC is serving its large investor base through a strong distribution network of 95branches and about 35,700 financial advisors.

The fund performance of BSAMC remained strong across the asset classes. As anacknowledgement of its investment performance and customer service, the following awardsand recognitions were conferred on BSAMC at various forums:

(Rs. Crore)

Birla Sun Life Asset Management 2012-13 2011-12
Average Assets under Management1
Equity 10,860 10,631
Debt and Liquid 66,284 50,543
Domestic 77,144 61,174
Offshore 4,600 3,368
Real Estate Onshore Fund 1,063 1,078
PMS 643 461
Total 83,451 66,082
Revenue 405 315
Earnings Before Tax 107 89
Net Profit 73 59
Net Worth 357 283

Note1: Average AUM for the fourth quarter ended 31st March of the respectiveyear. Note2: Equity AAUM (Domestic + Offshore) + PMS + Real Estate OnshoreFund.

• "The Best Debt Fund House of the Year 2012" by CNBC TV 18 –CRISIL, UTV Bloomberg

• "International Service Excellence Award" by Customer Service Instituteof Australia

• "Golden Peacock Award, 2012" for Business Excellence.

Outlook

The long-term outlook for the mutual fund industry remains attractive backed by lowermutual fund penetration, growing incomes and savings level. Mutual fund AUM as apercentage of Indian GDP was 14% in 2012-13. Yet, it is very low compared to 50%-90% inthe developed countries. With furthermore regulatory changes and an increasing focus ofasset management companies on enhancing retail participation in smaller cities will helpin higher retail share in the mutual fund industry.

With a target of profitable growth, BSAMC will focus on enhancing distribution capacityand productivity across the channels, improving customer engagement and costsrationalisation. Having a strong brand name, experienced management and proven trackrecord of investment performance, BSAMC is well positioned as a leading player in theIndian mutual fund industry.

NBFC (Aditya Birla Finance Limited)

Industry Overview

The activities of non-banking financial companies (NBFCs) in India have undergonequalitative changes over the years through functional specialisation. The role of NBFCs aseffective financial intermediaries has been well recognised as they have inherent abilityto take quicker decisions, assume greater risks, and customize their services according tothe needs of the clients. While these features, as compared to the banks, have contributedto the proliferation of NBFCs, their flexible structures allow them to unbundle servicesprovided by banks and market the components on a competitive basis.

Aditya Birla Finance Limited (ABFL) is one of the leading NBFCs in India. Incorporatedin 1991, ABFL offers specialised solutions in areas of Capital Market, Corporate Finance,Project & Structured Finance and Mortgages. Headquartered in Mumbai, ABFL has a widenetwork through its branches and associates across the country.

Performance Review

Lending book portfolio of ABFL more than doubled year-on-year to cross Rs. 8,000 Croreas on 31st March, 2013. All the business segments contributed significantly tothe growth. The Capital market book, comprising promoter funding, loan against shares,broker funding, etc., is the largest component of ABFL’s lending book. It rose by 70%from ~Rs. 1,625 Crore to ~Rs. 2,750 Crore. Corporate Finance book has almost doubled toRs. 1,650 Crore. Infra financing, which was commenced in the previous year, is growingmuch faster. It reached Rs. 2,100 Crore and became the second largest book in theportfolio. Mortgages book, comprising loan against property and lease rental discounting,was also commenced in the previous year. It has expanded significantly in the past oneyear from Rs. 65 Crore to Rs. 1,400 Crore. The Syndication team, which was formed in themid of the year 2012-13, was able to mobilise funds over Rs. 3,000 Crore and contributedto the earnings. Driven by strong growth in the lending book and fee-based income, revenueof ABFL doubled from Rs. 348 Crore to Rs. 713 Crore. Its earnings before tax rose by 76%to Rs. 147 Crore absorbing the rise in operating costs due to team build-up and additionof new lines of business. Net profit surged by 78% to Rs. 100 Crore.

ABFL received a capital infusion of Rs. 350 Crore during the year. This supported thegrowth while keeping leverage at optimum levels. Its net worth increased from Rs. 628Crore to Rs. 1,079 Crore led by capital infusion and internal accruals. The business isgrowing at a good pace and will require further capital for future growth.

(Rs. Crore)

Aditya Birla Finance 2012-13 2011-12
Revenue 713 348
Operating Profit1 150 86
Earnings before Tax 147 84
Net Profit 100 56
Net Worth 1,079 628

Note1: EBITDA less Finance cost. Finance cost, being an operating expensefor the NBFC business, is deducted from EBITDA to arrive at operating profit.

Outlook

The outlook for the NBFC sector remains positive backed by the lower credit penetrationand huge capital formation requirement of the country. However, in the short term, thesector may found the macro-economic environment challenging for growing quality book onaccount of slowing economy, volatile capital markets and high interest rates.

ABFL aims at scaling up its book size in the existing segments as well throughextension of portfolio, while keeping risk under control. Strong parent brand and anexperienced team having seen more than two decades of business cycles will aid ABFL inreaching towards its goal.

Private Equity (Aditya Birla Private Equity)

Industry Overview

Private Equity ("PE") industry witnessed sluggish activities during the year.The fund-raising during the calendar year (CY) 2012 for investments into India remaineddepressed due to regulatory uncertainties and depreciating Indian rupee. The total PEinvestments in India (excluding Realty Funds and Infrastructure Funds) de-grew by about15% from USD 10.4 billion in CY 2011 to USD 8.9 billion in CY 2012. The industry alsowitnessed growing trend of secondary deals. [Source: Venture Intelligence].

Performance Review

Aditya Birla Private Equity (ABPE) is managing

Rs. 1,179 Crore of corpus under two sector-agnostic funds, i.e., Aditya Birla PrivateEquity – Fund I, (providing growth capital to the established companies acrosssectors) and Aditya Birla Private Equity – Sunrise Fund (providing growth capital toemerging companies in sunrise sectors). ABPE-Fund I, is managing Rs. 881 Crore corpus andhas invested in Anupam Industries, Bombay Stock Exchange, Credit Analysis and ResearchLtd., GEI Industrial Systems, Alphion India Pvt. Ltd., Trimax IT Infrastructure &Services Ltd. and Ratnakar Bank Ltd.

ABPE-Sunrise Fund, is managing Rs. 299 Crore corpus and has invested in SMS ParyavaranLtd., Olive Bar and Kitchen Pvt. Ltd. and Tree House Education and Accessories Ltd.

Combined together, both funds have already deployed/committed about 58% of thedeployable corpus. Both the funds have strong pipeline of deals to deploy the balancecorpus.

Aditya Birla Capital Advisors Private Limited ("ABCAP") provides theinvestment management and advisory services to Aditya Birla Private Equity Trust, aventure capital fund registered with SEBI. During 2012-13, revenue of ABCAP grew by 11% toRs. 24 Crore. It posted net profit of Rs. 6 Crore, a 55% rise over the previous year.

Outlook

According to a new study by Venture Intelligence, a leading research firm focused onPrivate Equity and Mergers & Acquisition activities in India, PE and Venture Capitalbacked companies are growing significantly faster compared to non-backed peers as well asmarket indices. This underscores the importance and growth potential of PE industry inIndia.

Backed by its strong investment management team and salient parentage brand, AdityaBirla Private Equity is well positioned to tap the opportunity offered by the privateequity space.

Broking (Aditya Birla Money Limited)

Industry Overview

The Indian retail broking industry is highly fragmented. During 2012-13, the capitalmarkets remained volatile leading to decline in participation of retail investors. Thedaily cash volumes decreased by 6% year-on-year to Rs. 13,235 Crore while daily Futures& Options (F&O) volumes remained flat at Rs. 128,475 Crore. The product mix inequities market continued to favour low yielding derivative segment. The share ofderivatives in exchange volumes is more than 90%. The structural shift from high yieldcash delivery to low yield derivatives market is resulting in prolonged earnings pressurein the broking industry.

The subdued primary market activities and muted retail participation also resulted inslow down in the demat account openings. Only 1 million new demat accounts were addedduring 2012-13. The Indian commodity markets saw decrease in volumes by about 3%, quite inline with the trends of global commodity markets. The currency futures market did showimprovement; however, currently the overall volumes are much lower compared to the equityand commodity markets.

Performance Review

Aditya Birla Money Ltd. (ABML) continued to focus on retail investor segment, costreduction and improvement in market share. Its market share grew across the segments -from 1.16% to 1.50% in retail cash equity segment, from 0.73% to 0.94% in retail equityF&O segment and from 0.38% to 0.48% in commodity broking segment.

ABML has also launched mobile trading platform and entered into a strategic alliancewith Allahabad Bank to offer broking services to their clients.

While ABML has shown improvement in its market share, de-growth in overall marketvolumes has affected its earnings growth. Revenue of ABML de-grew by 5% to Rs. 84 Crore.Driven by cost rationalisation initiatives, net Loss has reduced year on year from Rs. 18Crore to Rs. 15 Crore.

Outlook

The overall growth in the market size in short to medium term will be dependent on thedirection of the financial markets and confidence in equities as an asset class. This, inturn, is partially going to be dependent on global factors, viz. foreign inflows,liquidity, etc., and partially on corporate earnings. However, the highly under penetratedIndian securities market will provide an ample growth opportunity in the long run.

ABML’s thrust is on increasing its market share by creating product and servicedifferentiators across all the segments. Efficient use of technology to become a costefficient player will also be a key focus area. It will continue to drive clientacquisition and cost rationalisation, besides providing efficient trading tools and valueadded research advice to its clients.

Wealth Management (Aditya Birla Money Mart Limited)

Industry Overview

While there are a few large wealth management players in India; mutual funddistribution industry is very fragmented. Aditya Birla Money Mart Limited (ABMM) is asignificant player in the wealth management space having Assets under Advisory of aboutRs. 11,200 Crore as on 31st March, 2013.

Performance Review

During 2012-13, revenue of ABMM grew year on year by 27% from Rs. 60 Crore to Rs. 76Crore. Net loss significantly reduced from Rs. 21 Crore to Rs. 2 Crore led by revenuegrowth and cost rationalisation initiatives.

Outlook

High savings growth in India implies a huge opportunity for financial intermediationservices. The long-term fundamental growth for the manufacturing and distribution of lifeinsurance, mutual funds and equity broking products and services remains strong. Besides,increasing preference towards investment with the help of professional advisors portrays apositive outlook for the wealth management sector in the longer run.

ABMM’s thrust will be to provide quality wealth management solutions to its clientthrough product innovation and technology support.

General Insurance Advisory (Aditya Birla Insurance Brokers Limited)

Industry Overview

Gross premium, underwritten in the general Insurance segment, has grown by 13% from USD11.2 billion to USD 12.6 billion (Source: IRDA). Aditya Birla Insurance BrokersLtd. ("ABIBL") is one of the leading general insurance brokers in India with alarge and diverse client base spread across geographies.

Performance Review

Premium placement by ABIBL more than doubled from Rs. 304 Crore to Rs. 634 Crore. Itsmarket share in non-life industry premium enhanced from ~0.5% to ~0.9%.

Driven by the strong growth in premium placement, ABIBL posted its highest everearnings. Revenue grew by 77% from Rs. 32 Crore to Rs. 57 Crore, which is far higher thanindustry growth rates. Earnings before tax rose by 84% from Rs. 9 Crore to Rs. 16 Croreand net profit almost doubled to Rs. 11 Crore, despite intense competition.

Outlook

Lower general insurance penetration in India is likely to boost growth of generalinsurance industry. ABIBL will focus on reaching a larger customer base in a costeffective way to grow the business.

Fashion & Lifestyle (Branded Apparels & Accessories and Textiles)

ABNL’s Fashion & Lifestyle business is the largest branded apparel player inIndia, selling one branded apparel every second. It is also the largest Indianmanufacturer in the linen segment.

Its annual revenue size reached USD 1 billion, with the acquisition of Pantaloons.Comprising Madura Fashion & Lifestyle, Pantaloons Fashion & Retail Ltd. and JayaShree Textiles, the business has an unparalleled nationwide presence through 1,443exclusive brand outlets / stores spanning across 3.7 million square feet.

It also reaches customers through more than 4,750 multi brand outlets and departmentalstores.

Driven by strong earnings and efficient working capital management, the businessreported a notable return on operating capital employed of 25%.

Fashion & Lifestyle: Retail Presence

Business EBOs/ Stores Retail Space (million sq. ft.)
Madura 1,272 1.9
Pantaloons (incl. Factory Outlets) 95 1.7
Jaya Shree Textiles (Linen Club) 76 0.1
1,443 3.7

Branded Apparels and Accessories

Industry Overview

Apparel Retailing is the second largest contributor to the Indian Retail Market afterfood and grocery. Interestingly, in the organised sector, apparel retailing is the largestand the most penetrated segment. During, past three years, Indian apparel retail markethas grown at a CAGR of 10% to reach Rs. 174,000 Crore in 2012. The urban ready-to-wearsegment is growing at a faster rate than overall apparel retail market. Having grown at astrong CAGR of 12% in the past three years, the size of urban ready-to-wear segment isestimated at Rs. 48,000 Crore in 2012 accounting for 28% of the apparel retail market inIndia. Categorising the urban ready-to-wear sector by gender, Menswear was the largestcategory with 53% share, followed by womenswear at 23%.

After recording healthy sales growth in fiscal 2010-11 and 2011-12, the industry haswitnessed moderated sales growth during 2012-13. Persistently high inflation and slowingeconomy affected consumers spending on apparels.

Performance Review

Madura Fashion & Lifestyle

Madura Fashion & Lifestyle ("Madura") is the largest premium brandedapparel player in India. Its premium brands – Louis Philippe, Van Heusen, Allen Sollyand its popular brand Peter England –are leaders in respective categories. LouisPhilippe and Van Heusen are the best selling apparel brands in India. Madura also retailsinternational brands like Armani Collezioni, Hugo Boss, Versace Collection, and many moreunder one roof ‘The Collective’, and has also launched Hackett’s mono brandstores. Madura has also launched online shopping portal www.TRENDIN.com. It is one-stopshopping destination for Madura brands catering to both Men and Women. During the year,Madura exited strategic distribution tie up with Esprit and closed all 22 Esprit stores.

Retail channel comprising 1,272 Exclusive Brand Outlets (EBOs) and spanning across 1.9million square feet, accounts for 46% of Madura’s revenue. Besides these EBOs, Madurais reaching customers through more than 1,750 MBOs and Department Stores which account for37% of Madura’s revenue. Balance 17% revenue is contributed by clearance sale andexports segments.

Madura continued to outperform the industry. In 2012-13, it registered 15% growth inrevenue (excluding Esprit) to reach Rs. 2,500 Crore revenue mark. Its retail channelposted 22% sales growth led by stores expansion and 4% like-to-like growth. During theyear, Madura added 270 new EBOs.

Driven by the strong sales growth across the brands and channels, EBITDA rose by 25%from Rs. 196 Crore to Rs. 245 Crore. EBITDA (excluding Esprit) surged by 32% from Rs. 204Crore to Rs. 269 Crore. EBITDA margin (excluding Esprit) of the brands enhanced from 10.2%to 11.5%.

Led by sound profitable growth and improved working capital management, return oncapital employed grew significantly from 20% to 29%.

(Rs. Crore)

Madura Fashion & Lifestyle 2012-13 2011-12
Revenue 2,523 2,239
Revenue (excluding Esprit) 2,483 2,167
EBITDA 245 196
EBITDA (excluding Esprit) 269 204
Segment EBIT 157 123
Capital Employed 479 615
ROACE (%) 29% 20%

Pantaloons Fashion & Retail Limited

ABNL has acquired a controlling stake in Future Group’s ‘PantaloonsFashion’ business post its demerger from Pantaloon Retail (India) Ltd. (PRIL). Thedemerged Pantaloons Fashion business got transferred to Peter England Fashions &Retail Limited [renamed as Pantaloons Fashion & Retail Limited (PFRL)], a subsidiaryof ABNL. The Appointed Date of transfer is 1st July, 2012. Post-demerger, the holding ofABNL, through its wholly owned subsidiary Indigold Trade and Services Ltd. (ITSL), in PFRLbecame 50.09%. An open offer, at a predetermined price of Rs. 175 per share, has been madeby ITSL to the public shareholders of PFRL. On receipt of necessary approvals, the equityshares of PFRL will be listed on the National Stock Exchange of India and the StockExchange, Bombay.

Pantaloons is among the top 2 large format fashion retailers in India. Its acquisitionnot only expands ABNL’s operating market size through extension into womens wear andkidswear, it also compliments ABNL’s existing geographical presence and productofferings in the Fashion & Lifestyle business.

Menswear, womenswear, kidswear and Non-apparels account for 35%, 38%, 9% and 18% ofPantaloons’ revenue. Private labels and licensed brands contribute to approximately50% of its sales.

Pantaloons has around 3.8 million loyalty customer base – one of the largest inthe country. Pantaloons enjoys a pan India presence across all zones with a strongpresence in the Eastern Zone.

As on 31st March, 2013, Pantaloons operated through 70 large format company - owned andcompany - operated stores and 26 Factory Outlets spanning across 1.7 million square feet.

Financials of Pantaloons Fashion & Retail Ltd. for 2012-13 include nine monthsfinancials of Pantaloons business transferred with effect from the appointed date, i.e.,1st July, 2012.

In 2012-13, PFRL reported revenue at Rs. 1,285 Crore and EBITDA (excluding interestincome of Rs. 62 Crore on current investments) at Rs. 67 Crore. Gross margin wassustained, however, moderated sales growth and higher retailing costs impacted EBITDAmargin. Change in accounting policy also lowered profitability.

(Rs. Crore)

Pantaloons Fashion & Retail Ltd. 2012-13
Revenue 1,285
EBITDA@ 67
Net Profit/(Loss) (69)
Goodwill 1,168
Net Fixed Assets 488
Net Working Capital 44
Capital Employed 1,700
Net Worth 770
Net Debt# 931

@ Net of interest income of Rs. 62 Crore on current investments. # Net of currentinvestments of Rs. 800 Crore.

Outlook

Some of the macro-economic challenges, for instance, high inflation, may continue inthe near term. However, with the inflation projected to stabilise at lower levels andexpected improvement in GDP growth, the customer spending is likely to improve in themedium term. The long - term outlook for domestic apparel industry remains positive on theback of favourable demographics, viz., rising disposable income, burgeoning aspiringmiddle class segment, large young and working population, and increasing shift towardsbranded apparels.

Urban ready-to-wear apparel retail market is expected to grow at a CAGR of 13% to reachRs. 77,000 Crore by 2016. Menswear will continue to dominate the sector, however,womenswear and kidswear are expected to grow faster and enhance their share in overallexpanding pie. Madura’s thrust will be on leveraging its brand leadership, expandingretail space and strengthening channel relationships.

Pantaloons growth strategy includes increasing its customer reach, augmenting itsmerchandise by adding new product categories, expanding brand portfolio and enhancingloyalty customer base.

Textiles (Jaya Shree Textiles)

Industry Overview

Jaya Shree Textiles ("JST") operates in two business segments, i.e., Linenand Wool. Linen industry witnessed strong growth in demand. However, wool industrywitnessed weak demand from Europe leading to fall in wool prices.

Performance Review

JST is the largest manufacturer of linen yarn and linen fabric in India with spinningand weaving capacities at 16,408 spindles and 106 looms, respectively. JST retails linenfabric under the well-known brand "Linen Club Fabrics".

It is a leading manufacturer of wool tops and worsted yarn in India with a capacity of8 carding machines and 25,984 spindles, respectively.

(Rs.Crore)

Textiles 2012-13 2011-12
Revenue 1,144 1,046
Linen Segment 499 415
Wool Segment 645 631
EBITDA 154 141
Segment EBIT 129 117
Capital Employed 179 88
ROACE (%) 97% 82%

JST achieved its highest ever earnings, with revenue at Rs. 1,144 Crore and EBITDA atRs. 154 Crore. Higher volumes and realisation in the linen segment contributed to theearnings growth, absorbing brand promotion costs and lower margin in wool segment.

Linen yarn and linen fabric registered 6% and 11% growth in sales volume, respectively.Revenue from linen segment rose by 20% to Rs. 499 Crore. JST’s efforts for increasingawareness for linen in domestic market and creating a wide distribution channel ofwhole-sellers, multi-brand outlets and EBOs are yielding results.

JST is also focusing on high margin Linen Fabric OTC segment, which accounts for 50% ofits total linen fabric sales. JST added 19 new EBOs during the year taking the total to76. Linen Club is also being retailed through more than 3,000 MBOs.

ROACE at 97% is driven by improved earnings and robust working capital management.

To tap growing demand of Linen, JST is expanding its capacity of linen yarn from 2,300tons per annum (TPA) to 3,400 TPA and linen fabric processing capacity from 7.3 millionmetres to 10.1 million meters, at a capex of Rs. 100 Crore. The expansion is targeted tobe completed in mid of 2013-14.

Outlook

Increasing awareness about linen coupled with wider usage will drive volume upward indomestic market. Hence, expansion of in-house capacity of yarn, fabric and processing isunder implementation in addition to creation of world class design and developmentfacilities for linen fabric. Demand revival is expected in wool segment.

Telecom (Idea Cellular Limited)

Industry Overview

The Indian Telecom sector witnessed easing of competitive intensity post thecancellation of licenses in February 2012 and resulting auction of spectrum in November2012 and March 2013, which met with muted response. Reflecting its strong commitmenttowards customers, Idea Cellular won back spectrum for all the 7 service areas where itslicenses were cancelled. However, some players have either exited the sector or havecurtailed their operations to select service areas. With the rationalisation ofcompetition, health of the industry has improved and is expected to improve further.

During 12 months ended 31st December, 2012, upto which the latest industrydata is available, gross revenue of the Indian wireless sector grew year-on-year by 11% toRs. 1,476 billion (USD 27.3 billion). Top three cellular operators in India contributed68% of the industry’s wireless revenue market share1. (Source: TRAI)

Performance Review

Idea Cellular is among the top 10 cellular operators in the world carrying 1.6 billionminutes of voice usage every day. In India, it is the 3rd largest playerserving about 122 million subscribers across more than 4,600 census towns and 300,000villages.

During 2012-13, Idea Cellular continued its journey as the fastest growing largecellular operator in the Country. It has been the biggest revenue market share gainer inIndia since past four years. Its revenue market share1 has grown to 14.8%compare to 14.4% a year ago. Idea contributed to 20.5% of the industry’s incrementalmobile revenue during nine months ended 31st December 2012 – growing atone and a half times of the industry growth rate.

Mirroring the brand popularity and quality service experience of its customers,Idea’s active subscribers’ ratio at 98.4%, as on 28th February, 2013,is the highest in the industry. Idea is the leading net subscribers’ gainer in theMobile Number Portability programme, a strong indicator of the popularity of Idea’smobile services. Idea generated 532 billion minutes of voice usage during the year,registering a strong 17% year on year growth.

Led by strong growth in minutes of usage, top-line of Idea grew by 15% to USD 4.15billion (Rs. 22,407 Crore) and EBITDA surged by 19% to USD 1.13 billion (Rs. 6,091 Crore)during the year. Its net profit rose by 40% from Rs. 723 Crore to Rs. 1,011 Crore.

Note1: Based on gross revenue for UAS and Mobile licenses only, as released by TelecomRegulatory Authority of India ("TRAI").

(Rs. Crore)

Idea Cellular 2012-13 2011-12
Revenue 22,407 19,489
EBITDA 6,091 5,135
Segment EBIT 2,527 2,111
Net Profit 1,011 723
Cash Surplus 1,171 250
Net Worth 14,305 13,050
Total Debt 14,044 13,337
Capital Employed 28,349 26,387
ABNL’s Investment 2,356 2,356
ABNL’s shareholding in Idea at the year end (%) 25.27% 25.31%

Idea generated cash profit of Rs. 4,697 Crore (USD 870 million) – recording a 30%growth over previous year. Its standalone Net Debt/EBITDA improved year on year from 2.65times to 2.16 times and Net Debt/Equity improved from 0.93 times to 0.82 times.

Supported by the free cash flows and strong balance sheet, Idea is well placed tocapitalise on future growth opportunities. Idea has proposed its maiden dividend duringthe year @ 3% of share capital. Overall payout including dividend distribution tax will beRs. 116 Crore.

Idea continues to strengthen its competitive standing by investing in long-term valuecreators. It launched about 7,000 2G cell-sites and about 4,300 3G cell-sites during theyear to scale up its network capacity to over 90,000 2G sites and more than 17,000 3Gsites. Idea also expanded its optical fibre network to 74,000 km and strengthened itspresence in NLD, ILD, ISP, Data Services and Smartphone Device business.

Currently, 26.2 million subscribers of Idea use mobile data services, contributing 6.6%of total service revenue during the fourth quarter ended 31st March, 2013.

Outlook

India is primarily a voice market, and voice will continue to dominate the India mobilesector over next few years. There is still a lot of potential in the voice market as ruralpenetration is low. Having said that, with the roll of 3G operations, data is growingrapidly and data growth will outpace voice growth in the coming years.

Idea is one of the few companies in the world, which is able to run high qualitytelecom services at the world’s lowest price points and yet deliver stable CashProfits. The improving capacity utilisation, increasing brand popularity and quality ofconsumer service with a strong Balance Sheet underscores Idea’s ability to benefitfrom long-term sector opportunities. A large base of about 122 million subscribersprovides a huge platform for upgrading pure voice customers to wireless data services infuture.

IT-ITeS (Aditya Birla Minacs Worldwide Limited)

Industry Overview

The global economic conditions in 2012-13, remained challenging, especially in the keymarkets of the US and the Europe. The IT-ITeS industry did grow and customers did continueto outsource, though at a slower pace. The economic uncertainty has affected the demandfor outsourcing, as customers have increased interest in availing broad mix of servicedelivery options including BPO and ITO, and have increased use of shared services and thee-Cloud as outsourcing alternatives.

Performance Review

Aditya Birla Minacs ranks among the top 6 Indian BPO companies by revenue size (Source:NASSCOM). Aditya Birla Minacs is a business process outsourcing solutions providerthat partners with global corporations and works towards enhancing clients’ revenue,profitability and quality of customer service. It serves several Fortune 500 clientsthrough 20,500 experts. It has global delivery capabilities across 3 continents and 35centres spanning Canada, Germany, Hungary, India, Jamaica, Philippines, the UK and the US.

(Rs. Crore)

Aditya Birla Minacs 2012-13 2011-12
Revenue 2,466 2,082
Operating EBITDA 247 201
Non-recurring Gain/(Loss) 4 (12)
EBITDA 251 189
Segment EBIT 164 111
Net Profit 125 70
Capital Employed 1,449 1,399

Aditya Birla Minacs won 13 new clients during the year and sold new business TotalContract Value ("TCV") of about USD 230 million. It has witnessed slowerconversion of the sales pipeline due to the challenging economic conditions in the US andthe Europe. The clients located in the US contributed 77% of the revenue, while Canada,Europe and the Asia Pacific contributed 14%, 3% and 6%, respectively.

In 2012-13, revenue grew year on year by 18% to Rs. 2,466 Crore. Growth in existingaccounts, conversion of order book and favourable forex movement contributed to the growthin top-line.

Operating EBITDA grew by 23% to Rs. 247 Crore and EBITDA margin improved from 9.6% to10%. Net profit surged by 80% from Rs. 70 Crore to Rs. 125 Crore.

On constant currency basis (normalising for translation impact of foreign currencymovement between Canadian Dollar and Indian Rupee), revenue and EBITDA rose by 8% and 13%,respectively.

The business is generating steady cash profits to fund its capex and working capitalrequirements. Its net debt at Rs. 977 Crore stands reduced year on year by Rs. 129 Crore.It generated an ROACE of 11.5%.

Outlook

While the global economic outlook seems to remain challenging, outsourcing contractsare expected to grow at a steady rate. In fact, mid-sized companies, that have been slowadopters of outsourcing, are also expected to enter the market due to cost pressures andtheir need to access technology and best practices.

Aditya Birla Minacs will endeavour to sustain its sales momentum and optimise operatingcosts to enhance its margins.

Manufacturing Business

Aditya Birla Nuvo has a strong market positioning across its manufacturing businesses,viz., Agri, Insulators, and Rayon. All the manufacturing businesses are among the leadersin their respective sectors in terms of size as well as profitability. Aditya Birla Nuvois:

• The second largest producer and largest exporter of Viscose Filament Yarn inIndia

• Among the top two energy efficient Urea plants in India

• India’s largest and world’s fourth largest manufacturer of Insulators

They have a consistent track record of generating steady cash flows, healthy operatingmargins and strong return on capital employed. Cash flows generated by these manufacturingbusinesses have historically provided cushion to Aditya Birla Nuvo for meeting the fundingrequirements of services businesses. At the same time, ABNL continued to invest in thecapacity expansion of these manufacturing businesses to tap growth opportunities.

Agri (Indo Gulf Fertilisers)

Industry Overview

Urea consumption in India grew by 2% from 29.5 million metric tons (MT) in 2011-12 to30.2 million MT in 2012-13. India is heavily dependent on urea imports for meeting thedomestic consumption requirements. Urea imports have surged in the past few years leadingto rising subsidy burden on the exchequer. In 2012-13, urea imports at ~8 million MTaccounted for 26% of total demand in India. No new urea capacity has come up in the past13 years and the gap between indigenous production and demand continues to widen. Toreduce mounting urea subsidy bill in the national interest, the Government of Indianotified New Investment Policy (NIP) for Urea on 2nd January, 2013. Objectiveis to cut down urea imports by promoting indigenous capacity expansion. Industry isawaiting approval from the Department of Fertilizers for brown field projects under thenew investment policy. During 2012-13, the industry witnessed slower recovery offertiliser subsidy from the Government due to inadequate budgetary provision. Thisaffected the profitability of the industry due to steep rise in working capital.

Performance Review

Indo Gulf Fertilisers is the 8th largest urea manufacturer in India and has2nd best energy efficient plant. The goal of the business is to become a ‘totalagri solutions provider’ offering a full range of agri inputs – fertilisers,seeds, agrochemicals and specialties from sowing to harvesting.

Birla Shaktiman Urea – Neem-coated and Gold continued to remain the farmers’product of first choice, with market leadership position in the entire zone of UttarPradesh, Bihar, Jharkhand and West Bengal, through excellent product quality and customerservicing.

The business continued to expand its product offering to provide a full range of N, P,K fertilisers by offering ‘Birla Shaktiman DAP, MOP and SSP’.

This helped the business in promoting balanced use of nutrients and strengthening itstrade channel.

The business of ‘Birla Shaktiman Seeds, Agrochemicals & Specialties’continued to have a healthy growth – a reflection of brand equity, good productquality and in-depth trade channel reach.

Indo-Gulf’s customised fertiliser – ‘Birla Shaktiman Vardaan’ –which is manufactured with in-house patented technology, has been successfully testmarketed in wheat, paddy, potatoes and sugarcane. The results have been very encouragingand we look forward to build the business volumes in the coming years.

In 2012-13, Indo Gulf achieved an all time high Urea sales of 1.23 million MT, bysupplementing its own production with 0.14 million MT of imported urea.

Revenue rose year on year by 39% to Rs. 2,924 Crore. Revenue from manufacturingoperations grew by 19% to Rs. 1,859 Crore. Pass through of rise in natural gas pricesreflected in higher urea prices while manufactured urea sales volumes de-grew by 5% due toplanned annual maintenance shutdown for 20 days. Trading revenue almost doubled to Rs.1,065 Crore led by higher sales of imported P&K fertilisers.

(Rs. Crore)

Agri 2012-13 2011-12
Revamped Capacity (MTPA) 1,072,500 1,072,500
Urea Production (MT) 1,085,358 1,162,819
Urea Sales (MT) 1,090,505 1,151,929
Revenue 2,924 2,107
Manufacturing (Urea, Customised Fertilisers) 1,859 1,563
Trading (Imported Fertilisers, Agri-inputs etc.) 1,065 544
EBITDA 197 211
Segment EBIT 177 192
Capital Employed 1,854 984
ROACE (%) 12% 26%

EBITDA de-grew by 7% to Rs. 197 Crore. Lower manufactured urea sales volume and higherenergy costs on account of shutdown strained profitability.

Capital employed has increased year on year due to higher subsidy outstanding onaccount of slower recovery, rise in natural gas prices and increase in trading sales ofimported P&K fertilisers. Subsidy and receivables stood at Rs. 1,625 Crore as on March2013. A sum of Rs. 376 Crore has been realised since then.

The Board of Directors of ABNL approved proposal for Urea brownfield expansion by 3,850tons per day under the New Investment Policy subject to requisite Government approvals.Land is available at the existing plant location. The proposed plant will be located inthe heart of Indo-Gangetic plains, which gives a logistic advantage. Plant will bestrategically located near to the urea deficit North Eastern India region. Birla Shaktimanenjoys top of the mind recall among farmers.

Major regulatory approvals are in place, viz., Environment, Pollution Control, WaterSupply, etc. Final approval for setting up of the proposed urea plant is awaited fromDepartment of Fertilisers.

Outlook

Agriculture continues to be a key focus area for the Government. The government hastaken several initiatives toward providing food security. This renewed focus on the agrieconomy has opened new business opportunities.

Indo Gulf’s plant is strategically well positioned in the Indo-Gangetic plains– the main agricultural heartland of the country. It is uniquely positioned to takeadvantage of these opportunities to build a sustainable agribusiness, by adding value tothe farmers and all stakeholders.

Rayon (Indian Rayon)

Industry Overview

Indian Rayon, a unit of ABNL, manufactures and sells viscose filament yarn, causticsoda and allied chemicals. Viscose filament yarn ("VFY") is a man-made naturalfilament yarn having comfort of cotton and lustre of silk. It is used in georgette andcrepe sarees, home textiles, embroidery, etc. Domestic consumption of VFY de-grew by 2.5%to 55,303 MT in 2012-13. Domestic VFY production has increased by 1% to 42,888 MT. VFYexports grew by 3% to 6,315 MT. Imports decreased by 23% to 17,176 MT owing to extensionof anti-dumping duty on VFY imports by Ministry of Finance. In 2012-13, wood-pulp pricessoftened from the level of USD 1,450/MT to USD 1,220/MT. Lower VFY imports and softeningof wood-pulp prices aided domestic Industry. Indian Rayon and Century Textiles &Industries Ltd. are the leading domestic VFY manufacturers.

Caustic Soda is a versatile alkali. Its main uses are in the manufacture of pulp andpaper, alumina, soaps and detergents, petroleum products and chemical production. Otherapplications include water treatment, food, textiles, metal processing, mining, glassmaking, etc. Caustic Soda production in India witnessed de-growth of around 2% during2012-13, mainly due to lower consumption of chlorine.

Performance Review

Indian Rayon is the second largest manufacturer of VFY in India with 39% productionshare. It remained the largest Indian exporter of VFY for the eighth consecutive year with48% share in VFY exports from India.

Revenue from the VFY segment of Indian Rayon grew by 13% to Rs. 569 Crore. VFYrealisation increased by 5% to Rs. 302 per kg led by product mix. VFY sales volumes grewby 4% to 16,806 MT. Caustic soda sales volumes grew by 6% to 87,565 MT. ECU realisationgrew by 12% to Rs. 26,541 per MT. As a result, revenue from Chemicals segment rose by 18%to Rs. 208 Crore.

Total revenue of Indian Rayon grew by 14% to Rs. 777 Crore. EBITDA soared by 48% to Rs.189 Crore led by increase in VFY and Caustic Soda volumes, coupled with higher realisationfor both VFY and Chemicals segments.

(Rs. Crore)

Rayon 2012-13 2011-12
VFY
Capacity (MTPA) 19,800 17,520
Production (MT) 16,621 16,399
Sales Volumes (MT) 16,806 16,183
Realisation (Rs./Kg.) 302 288
Revenue 569 504
Chemicals
Caustic Soda Capacity (MTPA) 91,250 91,250
Caustic Soda Production (MT) 88,334 82,287
Caustic Soda Sales (MT) 87,565 82,289
ECU Realisation (Rs./MT) 26,541 23,700
Chemicals Revenue 208 175
Total Revenue 777 680
EBITDA 189 128
Segment EBIT 153 92
Capital Employed 681 515
ROACE (%) 26% 19%
Gross Block (including CWIP and Capital Advance) 1,081 864
VFY # 606 415
Chemicals (including Captive Power Plant) 475 449

# Gross block of VFY includes a sum of Rs. 243 Crore incurred on additional unit ofSuperfine Yarn using Spool technology imported from ENKA, Germany

Increase in capital employed is primarily on account of VFY capacity expansion. IndianRayon has successfully commissioned an additional unit of Viscose Filament Yarn usingSpool Technology imported from ENKA, Germany, in the existing premises at Veraval. Out ofthe planned investment of Rs. 270 Crore for the additional unit, a sum of Rs. 243 Crorehas been spent till 31st March, 2013. The production from the new unit hadcommenced in the month of March 2013, however, the full benefit shall accrue in thefinancial year 2013-14. With this, Indian Rayon emphasises its focus on technologyupgradation to improve product quality and enhance product range, especially in superfinesegment.

Indian Rayon is operating at a sound ROACE of 26%.

Outlook

Growth in the domestic VFY market seems to remain stable. With the commissioning ofadditional unit of VFY, Indian Rayon is well positioned to improve its earnings.

Caustic soda demand in India is expected to grow on back of growth in Aluminacapacities in the East and growth in Textiles and fibre capacities in Western India.

Insulators (Aditya Birla Insulators)

Industry Overview

Power generation, transmission and distribution sector is the key growth driver for theinsulators industry. Indian power sector has been affected by multiple factors. Defermentof projects and excessive dumping from China has affected the domestic manufacturers byshrinking the market size as well as pressurising the price levels. Imports from Chinahave gone up by 65% from 39,703 MT in 2011-12 to 65,424 MT in 2012-13. Liquidity crunch inthe power sectors is also restricting dispatches. Domestic sales volume of the Indianinsulators industry have de-grown year on year by 15% during April 2012- February 2013 (Source:IEEMA). Exports markets have also witnessed sluggish demand due to slowdown in globaleconomies. To create a level playing field for the domestic industry, Finance Ministry hasimposed safeguard duty of 35% on imports from China of electrical insulators made ofglass, ceramic and porcelain for one year starting 20th December 2012 after which it willbe reduced to 25% till 31st December 2013.

Performance Review

Aditya Birla Insulators, the India’s largest and the world’s fourth largestmanufacturer of insulators, contained de-growth in its sales volume to 8% and maintainedits domestic market leadership.

Its revenue de-grew year on year by 3% to Rs. 454 Crore. EBITDA de-grew from Rs. 67Crore to Rs. 61 Crore. Lower capacity utilisation strained profitability. ROACE decreasedto 10%.

Outlook

In the short term, investments in the power sector are likely to remain affected owingto liquidity crunch. However, the capacity utilisation and profitability of the domesticmanufacturers are likely to improve due to imposition of Safeguard Duty on Chineseimports.

(Rs. Crore)

Insulators 2012-13 2011-12
Capacity (MTPA) 45,260 45,260
Production (MT) 36,517 40,270
Sales Volumes (MT) 35,889 39,024
Revenue 454 468
EBITDA 61 67
Segment EBIT 39 46
Capital Employed 395 375
ROACE (%) 10% 12%

Aditya Birla Insulators will continue to focus on yield improvement and costrationalisation to enhance its cost competitiveness besides exploring new geographies inthe exports market.

Carbon Black (Hi-Tech Carbon)

Industry Overview

Carbon Black is used in the tyre industry as well as in the non-tyre sector. It is usedas reinforcing filler in rubber products and in the printing inks and paints industry.Carbon Black constitutes ~28% of tyre by weight.

Hi-Tech Carbon and Phillips Carbon Black Ltd. are the leading carbon blackmanufacturers in India. During 2012-13, steep rise in imports of Carbon Black from Chinaaffected the off-take and capacity utilisation of the domestic carbon black manufacturers.Finance Ministry has imposed safeguard duty of 30% minus anti-dumping duty on Carbon Blackimports from China for one year starting 5th October, 2012, after which it willbe reduced to 25% minus anti-dumping till 31st December, 2013. The duty willapply on carbon black used in rubber applications including tyres.

(Rs. Crore)

Carbon Black 2012-13 2011-12
Capacity (MTPA) 314,000 314,000
Production (MT) 252,021 270,953
Sales Volumes (MT) 251,855 270,111
Realisation (Rs. / MT) 76,894 68,276
Revenue 2,036 1,943
EBITDA 132 204
Segment EBIT 93 164
Capital Employed 1,249 1,365
ROACE (%) 7% 13%

Performance Review

Sales volume of Hi-Tech Carbon decreased year on year by 7%, mainly due to dumping fromChina. Despite imposition of safeguard duty on imports of Carbon Black from China w.e.f.5th October, 2012, total imports remained at high level due to carbon black importsagainst advance license. Exports sales of Carbon Black were also impacted due to cheaperexports from China.

Despite lower volumes, revenue of Hi-Tech Carbon grew by 5% to Rs. 2,036 Crore due tohigher realisation. Carbon Black realisation increased by 13% to Rs. 76,894 per ton onaccount of rise in raw material costs, which tend to move in line with crude oil prices.Power and Steam sales grew by 2% to Rs. 96 Crore.

EBITDA de-grew from Rs. 204 Crore to Rs. 132 Crore. Cheaper imports and lower off-takefrom tyre manufacturers constrained sales volume and cost pass through. ROACE de-grew to7%.

Divestment of the Carbon Black Business

Given that multi-national tyre manufacturers prefer to deal with Carbon Black playershaving global delivery capabilities, the scale and global positioning in the Carbon Blacksector have become increasingly important. ABNL’s Carbon Black business contributesto merely 2% of the global industry capacity. Moreover, in view of ABNL’s capitalcommitments towards other businesses, it is challenging for ABNL to become a global CarbonBlack player.

Hence, the Company has decided to divest the Carbon Black business, on a going-concernbasis, by way of slump sale to SKI Carbon Black (India) Private Limited, an Aditya BirlaGroup Company, for a lump sum consideration of Rs. 1,451 Crore as an enterprise value,subject to the adjustment for net working capital. This is on the basis of an independentvaluation carried out by M/s. Deloitte Touche Tohmatsu India Private Limited, Mumbai.Having received the shareholders’ approval, the Company is in the process ofdivesting the Carbon Black business w.e.f. 1st April, 2013.

The cash inflow from the divestment of Carbon Black business will reduce the debt andstrengthen ABNL’s balance sheet. This will support ABNL’s growth plans andensure greater focus in the other businesses of the Company.

Financial Review and Analysis – Standalone Financials

(Rs. Crore)

Standalone Profit and Loss Account 2012-13 2011-12
Revenue 9,754 8,433
EBITDA 1,116 1,050
Less: Finance Costs 360 313
Earnings before Depreciation and Tax 756 737
Less: Depreciation and Amortisation 219 203
Earnings before Tax and Exceptional Items 537 534
Add: Exceptional Gain/(Loss)1 (104)
Less: Tax Expenses 114 85
Net Profit 423 345

Note1: A provision of Rs. 104 Crore was made during 2011-12 towards entrytax liability (largely related to previous years, earlier recognised as contingentliability) w.r.t. the Carbon Black business; the matter is sub-judice.

(Rs. Crore)

Standalone Balance Sheet March 2013 March 2012
Net Worth 6,854 5,679
Total Debt1 4,005 4,457
Deferred Tax Liabilities (Net) 155 158
Capital Employed 11,014 10,294
Net Fixed Assets (Including Capital Advances) 2,226 1,976
Long-term Investments 5,857 5,598
Net Working Capital1 2,577 2,012
Cash Surplus and Current Investments2 353 707
Book Value per Equity Share (Rs.) 570 500
Net Debt3/EBITDA (x) 3.3 3.6
Net Debt3/Equity (x) 0.53 0.66

Note1: Total Debt and Net Working Capital are excluding MTM gain of Rs. 22Crore as on 31st March 2013 and MTM loss of Rs. 104 Crore as 31st March 2012 w.r.t. fullyhedged foreign currency working capital debt.

Note2: Include cash, cheques in hand, remittances in transit, balances withbanks, fertilisers bonds and current investments.

Note3: Total Debt less Cash Surplus and Current Investments.

Standalone revenue grew by 16% to Rs. 9,754 Crore. Sales growth in the Fashion &Lifestyle business, higher trading sales of imported P&K fertilisers coupled withhigher volumes and realisation in the Linen and VFY segments contributed.

Standalone EBITDA grew by 6% to Rs. 1,116 Crore. While earnings in the Carbon Black andInsulators businesses were constrained due to cheaper imports, volume growth and higherrealisation in the linen segment and in the Rayon business supported the earnings growth.Fashion & Lifestyle business also contributed to the profitability. Planned annualmaintenance shutdown for 20 days impacted the profitability of the Agri business. Dividendincome of Rs. 146 Crore received from Birla Sun Life Insurance added to the bottom-line.

Finance costs increased from Rs. 313 Crore to Rs. 360 Crore due to rise in the workingcapital requirement, largely on account of slower recovery of subsidy in the Agribusiness.

Depreciation grew primarily in the Fashion & Lifestyle business with the opening ofnew stores.

Standalone Net profit grew by 22% to Rs. 423 Crore.

The Board of Directors of the Company have recommended a final equity dividend of 65%(Rs. 6.5 per equity share) for the financial year 2012-13 entailing a total outgo of Rs.78 Crore.

Led by equity infusion by promoters to the tune of Rs. 832 Crore, dividend income andcash flow from operations, standalone Net Worth increased from Rs. 5,679 Crore to Rs.6,854 and net debt reduced from Rs. 3,750 Crore to Rs. 3,651 Crore. Standalone Net Debt toEBITDA at 3.3 times and Net Debt to Equity at 0.53 times improved year on year.

The Company’s standalone balance sheet will be further strengthened by proceedsfrom divestment of Carbon Black business, balance equity infusion of Rs. 671 Crore bypromoters on conversion of remaining 9.82 million warrants, rationalization of workingcapital with the realisation of subsidy and dividend inflows from Idea Cellular and BirlaSun Life Insurance.

(Rs. Crore)

Standalone Cash Flow 2012-13
Cash Flow from Operations (Net of Tax) 815
(Increase)/Decrease in Net Working Capital (813)
Net Cash from Operating Activities 2
Capital Expenditure (Net) (449)
Investments in Subsidiaries/Joint Ventures/Associates (Net) (259)
(Increase)/Decrease in Inter-Corporate Deposits to Subsidiaries (Net) 145
Interest Received 41
Dividend Received/Profit on Sale of Current Investments 232
Net Cash from/(used in) Investing Activities (291)
Proceeds from/(Repayment of) Borrowings (Net) (452)
Proceeds from Issue of Equity Shares/Warrants 833
Dividend Paid (68)
Interest Paid (379)
Net Cash from/(used in) Financing Activities (65)
Increase/(Decrease) in Cash Surplus and Current Investments1 (354)
Opening Cash Surplus and Current Investments 707
Closing Cash Surplus and Current Investments 353

Note1: Include cash, cheques in hand, remittances in transit, balances withbanks, fertilisers bonds and current investments.

Net Cash from Operating Activities

Cash Flow from Operations

Net cash flow from operations stood at Rs. 815 Crore. The Fashion & Lifestylebusiness was the largest contributor followed by Agri, Rayon and Textiles businesses.

Working Capital

Net working capital stands increased by Rs. 813 Crore. Debtors and other tradereceivables increased by Rs. 1,122 Crore mainly due to slower recovery of outstandingsubsidies in the Agri business. Inventory increased by Rs. 73 Crore primarily in theCarbon Black business due to rise in raw material prices. Trade Payables increased by Rs.300 Crore, largely in the Carbon Black business owing to rise in raw material prices andin the Fashion & Lifestyle business in line with sales growth.

Net Cash from/(used in) Investing Activities

Capital Expenditure

Capex of Rs. 449 Crore was spent during the year. Project capex includes expansion ofVFY capacity, scaling up of retail channel in the Fashion & Lifestyle business throughopening up of exclusive brand outlets, capacity expansion in the linen segment, etc. Thebalance capital expenditure was incurred on debottlenecking, upgradation, modernisationand maintenance of plants and retail stores across the businesses.

Investments

ABNL invested a sum of Rs. 280 Crore in its wholly owned subsidiary, Aditya BirlaFinancial Services Private Ltd., towards capital requirement of NBFC business, foracquisition of 1% stake in Birla Sun Life Asset Management and towards sponsor commitmentin Aditya Birla Private Equity funds.

Net Cash from/(used in) Financing Activities

Proceeds from/(Repayment) of borrowings

ABNL raised term loans aggregating to Rs. 162 Crore by way of foreign currencyborrowings and Rs. 35 Crore by way of Rupee term loan to fund capital expenditurecommitments. ABNL also raised Non-Convertible Debentures (NCDs) worth Rs. 300 Crore.Working capital borrowings aggregating to Rs. 199 Crore (net) were also raised during theyear.

Term Loans aggregating to Rs. 293 Crore and NCDs of Rs. 200 Crore were repaid duringthe year. Commercial paper and other short-term debt of Rs. 655 Crore (net) were repaidduring the year.

Risk Management

Governance, Risk Management and Compliance processes form an integral part of theCompany’s planning and review mechanism. The Company’s risk management frameworkestablishes risk management processes at each business, helping in identifying, assessingand mitigating risks that could materially impact the Company’s performance inachieving its stated objectives. The components of risk management are different fordifferent businesses and are defined by various factors including the business model,business strategy, organisational structure, risk appetite and available dedicatedresources.

The Company’s structured Risk Management process provides confidence to thestakeholders that the Company’s risks are known and well managed. The risk managementframework ensures compliance with the requirements of amended Clause 49 of ListingAgreement.

Since the Company is a diversified conglomerate, the risk events are identified,assessed, mitigated and monitored for each business separately.

The risk management approach comprises three key components:

(1) Risk identification: External and internal risk events, which could affect theprofitability, competitiveness, brand value, reputation and/or image of the Company, areidentified in the context of the strategy and specific objectives of each individualbusiness.

(2) Risk assessment and mitigation: The identified risks are further evaluated by thesenior management team of the respective business to assess the potential severity oftheir impact and the probability of occurrence. Based on the assessment, they develop anddeploy mitigation strategies.

(3) Risk monitoring and assurance: The Risk Management Committee ("RMC") isthe apex body taking all the decisions regarding risk management activities. The overallrole of RMC is to review risk management process and implementation and effectiveness ofrisk mitigation plans. The committee comprises of three independent directors, thewhole-time directors and the business heads. The proceedings of meetings of RMC arediscussed at the meetings of the Board of Directors from time to time.

Business Risks

Business risks are classified into Strategic, Operations, Financial and Knowledgerisks, which are further drilled down to market structure, process, systems, legalcompliance, corporate governance and people culture.

Apart from the internal business risks, the Company is exposed to external risks onaccount of interest rate, foreign exchange, commodity pricing and regulatory changes,which are being effectively monitored and mitigated.

Foreign Exchange Risk

The Company is exposed to fluctuations in exchange rates of various foreign currenciesdue to revenue earned or expenditure incurred in such currencies. Additionally, the debtportfolio of the Company includes a mix of foreign currency loans, which carry risk ofmovements in exchange rates of foreign currencies against Indian Rupee. The Company usesappropriate hedging tools such as forward contracts, currency swap, etc., to hedge foreignexchange risk in accordance with its foreign exchange risk management policy.

Interest Rate Risk

The Company has a mixed basket of fixed and floating rate borrowings. It continuouslymonitors its interest rate exposure to have a proper mix of fixed and floating rateborrowings in order to mitigate interest rate risk. The Company also uses interest rateswap in case of foreign currency borrowings having floating interest rates.

Commodity Price Risk

The Company is exposed to the risk of fluctuation in prices of raw materials as well asfinished goods in all its products. However, the risk is mitigated well considering theinventory levels and normal correlation in the prices of raw materials and finished goods.

Environment, Health and Safety ("EHS")

The Company is conscious of its strong corporate reputation and the positive role itcan play by focusing on EHS. Towards this, the Company has set very exacting standards inEHS management. The Company recognises the importance of EHS issues in its operations andhas established comprehensive indicators to track performance in these areas. The Companyvalues the safety of its employees and constantly raises the bar in ensuring a safe workplace.

Internal Control System

The Company has adequate internal control systems for business processes across variousprofit and cost centres, with regard to efficiency of operations, financial reporting,compliance with applicable laws and regulations, etc. The internal control system issupplemented by extensive audits conducted by the Corporate Audit Cell.

Clearly defined roles and responsibilities for all managerial positions have beeninstitutionalised. Regular internal audits and checks ensure that responsibilities areexecuted effectively. The Audit Committee of the Board of Directors actively reviews theadequacy and effectiveness of the internal control systems and suggests improvements.

The Management Information System is the backbone of the Company’s controlmechanism. All operating parameters are monitored and controlled regularly. Any materialchange in the business outlook is reported to the Board of Directors. Material deviationsfrom the annual planning and budgeting, if any, are reported on a quarterly basis to theBoard of Directors. An effective budgetary control on all capital expenditure ensures thatactual spending is in line with the capital budget.

Human Resource Management

The Company had about 19,000 employees on its rolls as on 31st March, 2013. Includingits subsidiaries and joint ventures, the manpower strength is about 69,000 employees. Thisintellectual resource is integral to the Company’s ongoing operations and enables itto deliver superior performance year after year. Human Resource processes of the Companyhave been covered in depth in the Directors’ Report.

To Sum up

Aditya Birla Nuvo has posted robust earnings growth amidst challenging businessenvironment. This is an outcome of enhanced focus on profitable growth across thebusinesses. With a leadership position across its businesses that mirrors the growingsectors of the Indian Economy, ABNL is a uniquely positioned conglomerate. ABNL remainsfocused to capture opportunities across the businesses to achieve the next level ofgrowth. A strong balance sheet, an experienced and focused management team, salient brandequity, leadership positions across businesses and a talented human asset are the keydrivers which will support future growth of ABNL and create value for all thestakeholders.

Disclaimer

Certain statements in this "Management’s Discussion and Analysis" maynot be based on historical information or facts, and may be "forward lookingstatements" within the meaning of applicable securities laws and regulations,including, but not limited to, those relating to general business plans and strategy ofthe Company, its future outlook and growth prospects, future developments in itsbusinesses, its competitive and regulatory environment, and management’s currentviews and assumptions, which may not remain constant due to risks and uncertainties.Actual results could differ materially from those expressed or implied. Important factorsthat could make a difference to the Company’s operations include global and Indiandemand-supply conditions, finished goods prices, feed stock availability and prices,cyclical demand and pricing in the Company’s principal markets, changes in Governmentregulations, tax regimes, competitors actions, economic developments within India and thecountries within which the Company conducts business and other factors such as litigationand labour negotiations. The Company assumes no responsibility to publicly amend, modifyor revise any statement, on the basis of any subsequent development, information orevents, or otherwise. This "Management’s Discussion and Analysis" does notconstitute a prospectus, offering circular or offering memorandum or an offer to acquireany shares, and should not be considered as a recommendation that any investor shouldsubscribe for or purchase any of the Company’s shares. The financial figures havebeen rounded off to the nearest Rupee one crore. For currency conversion, one USD isconsidered to be equal to Rs. 54.

   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
Grasim Inds 25,340.56 25.90 2.50 15.68 10.0 11.4 0.10
Aditya Bir. Nuv. 14,502.62 19.72 1.93 13.91 6.8 8.6 0.68
SRF 2,275.55 9.66 1.15 2.75 13.7 15.6 0.48
JBF Inds. 555.26 24.85 0.59 6.38 5.3 9.1 1.60
Century Enka 327.20 5.10 0.51 3.71 4.4 7.7 0.49
Kama Hold. 309.60 9.73 0.74 6.29 7.7 7.9 0.00
Indo Rama Synth. 243.37 2.18 0.42 3.17 -19.8 -6.8 0.99
Vardhman Acrylic 146.49 3.37 0.57 2.21 9.6 14.8 0.02
Sumeet Inds. 84.45 5.07 0.46 7.04 10.4 8.6 2.02
APR 77.87 20.10 0.51 11.51 -4.6 3.9 2.39
Indian Acrylics 48.17 12.28 0.76 1.28 -2.4 8.0 0.34
Pasupati Acrylon 44.21 2.51 1.22 13.57 0.0 0.0 2.18
CIL Nova Petro. 39.30 15.26 7.88 7.25 10.0 8.8 11.48
Filatex India 38.15 0.00 0.24 8.24 1.6 5.5 2.25
Sanghi Polyester 33.00 0.00 0.15 0.00 0.0 0.0 1.93

Futures & Options Quote

 
Expiry Date
1109.90 23.35  [2.1]%
Instrument: FUTSTK
Expiry Date: 24 Apr 2014
Open Price: 1,137.00
Average Price: 1,121.42
No. of Contracts Traded: 701,000
Open Interest: 261,000
Underlying: ABIRLANUVO
Market Lot: 250
Previous Close: 1,109.90
Day’s High | Low: 1,138.70 | 1,103.25
Turnover (Cr.): 78.61
Open Int. Change: -330,000.00 ( [55.8]% )
View detailed F& O quotes >>

Key Information

Key Executives:

Kumar Mangalam Birla , Chairman  

Rajashree Birla , Director  

B L Shah , Director  

P Murari , Director  


Company Head Office / Quarters:
Indian Rayon Compound,
,
Veraval,
Gujarat-362266
Phone : 91-2876-245711/248401
Fax : 91-2876-243220
E-mail : abnlsecretarial@adityabirla.com
Web : http://www.adityabirlanuvo.com
Registrars:
Aditya Birla Nuvo Ltd
Indian Rayon Comp.


Veraval - 362266

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