TO THE SHAREHOLDERS OF GRASIM INDUSTRIES LIMITED
Your Directors take pleasure in presenting the 67th Annual Report andAudited Accounts of your Company for the year ended 31st March, 2014.
The Management Discussion and Analysis Section, forming part of the Annual Report,focuses on your Company's strategies for growth and the performance review of thebusinesses/operations in depth. So, we are providing only a brief overview of thesematters in this Report.
Your Company's strategic intent continues to be the strengthening of its leadershipposition in both the Viscose Staple Fibre (VSF) and Cement businesses. In this regard,significant progress has been made on its expansion/acquisition plans.
Your Company's expansion plan to increase VSF capacity from 334K TPA to 498K TPA isnearing completion. The 36,500 TPA Brownfield expansion at Harihar in Karnataka has beencompleted. Trial runs for Line 1 have commenced at the Greenfield project (120K TPA) atVilayat in Gujarat from April 2014, to be followed by trial runs of Line 2 shortly. Theother two lines for specialty fibre are expected to be commissioned in the 2ndquarter of the current year.
The Caustic Soda plant of 182,500 TPA capacity for backward integration for VSF plantat Vilayat has been commissioned in May 2013. The capacity utilisation of the new plant isbeing ramped up in a phased manner. Consequently, your Company now has the largestcapacity of 452,500 TPA in Chlor-alkali segment in India.
As part of its strategy to increase its downstream value added products portfolio, a51,500 TPA Epoxy plant at Vilayat in Gujarat, was commissioned in December 2013.
Acquisition of 4.8 Mn. TPA Cement Capacity in Gujarat
Your Company's subsidiary, UltraTech Cement Ltd. (UltraTech), entered into an agreementto acquire, by way of a demerger, the Gujarat Cement units (4.8 Mn. TPA) comprising of anintegrated cement plant at Sewagram and a grinding unit at Wanakbori of Jaypee CementCorporation Limited (JCCL). The transaction has received the requisite regulatoryapprovals from the Competition Commission of India, shareholders, creditors and theHon'ble High Courts, and the Scheme is now subject to the approval of Securities andExchange Board of India.
Capacity Expansion by UltraTech Cement
UltraTech is implementing capacity expansion projects at its plants in Chhattisgarh,Karnataka and Rajasthan. The Clinkerisation plants of 3.3 Mn. TPA, each at Raipur inChhattisgarh and Malkhed in Karnataka, have already been commissioned along with thegrinding capacity at Hotgi in Maharashtra (1.55 Mn. TPA), Malkhed in Karnataka (1.45 Mn.TPA) and Jharsuguda in Odisha (1.60 Mn. TPA).
The balance grinding facility of ~4.5 Mn. TPA of cement is slated to be commissioned inphases, in FY 14-15. Work on Aditya Cement expansion of 2.9 Mn. TPA at Shambhupura inRajasthan, is on track and the capacity is expected to go onstream in FY 15-16.
On completion of all the expansions and the acquisition, UltraTech's cement capacitywill increase to 70 Mn. TPA.
In the VSF business, globally the demand was healthy led by growth in Asian countries,particularly China. Despite the volume growth, the business environment continues toremain challenging. The demand supply imbalance and the liquidity crunch in China haveimpacted VSF prices in global markets. Your Company's sales volume increased by 9% withthe enhanced capacity at Harihar plant. The decline in realisations was much lowercompared to global trends, supported by rupee depreciation. A steep increase in pulpcosts, due to the rupee depreciation and the increase in wood costs, led to a fall inEBIDTA margins.
In the Cement business, the industry witnessed sluggish demand, given the slowdown ineconomic growth leading to lower off take from infrastructure projects, real estate sectorand capex cycle. The subdued demand and over-capacity resulted in a price squeeze. Theyear witnessed continuing pressure on input and logistics costs, because of the increasein railway freight and a continuous hike in diesel prices. Your Company's subsidiary,UltraTech's volume growth also remained subdued at 3%. Optimization of fuel mix and otherinitiatives helped in maintaining costs almost at the previous year levels. The decline inaverage realizations led to a drop in EBIDTA margins. UltraTech reported a net profit ofRs. 2,206 crore as compared to Rs. 2,678 crore in the previous year.
Despite the prevailing economic slowdown, Volumes have risen in all the businesses,viz., VSF, Chemical and Cement, driven by the commissioning of new capacities. WhileRevenue rose by 5% at Rs. 29,324 crore (Rs. 27,909 crore), Net Profit for the year waslower at Rs. 2,072 crore, vis-a-vis Rs. 2,500 crore (before exceptional item) in the lastyear.
| || |
| ||2013-14 ||2012-13 ||2013-14 ||2012-13 |
|Revenue from Operations (Net) ||29,324.04 ||27,909.34 ||5,603.50 ||5,255.01 |
|Profit Before Interest, Depreciation/Amortisation and Tax (PBIDT) ||5,491.02 ||6,543.12 ||1,246.12 ||1,522.75 |
|Less: Finance Costs ||447.32 ||324.14 ||41.52 ||39.09 |
|Less: Depreciation and Amortisation ||1,457.48 ||1,252.06 ||219.61 ||159.21 |
|Profit Before Exceptional Item and Tax ||3,586.22 ||4,966.92 ||984.99 ||1,324.45 |
|Add: Exceptional Item ||- ||204.43 ||- ||204.43 |
|Profit Before Tax ||3,586.22 ||5,171.35 ||984.99 ||1,528.88 |
|Tax Expense ||734.79 ||1,467.21 ||89.00 ||302.89 |
|Profit After Tax ||2,851.43 ||3,704.14 ||895.99 ||1,225.99 |
|Add: Share in Profit/(Loss) of Associates ||102.87 ||73.65 ||- ||- |
|Less: Minority Interest ||882.76 ||1,073.40 ||- ||- |
|Profit for the Year ||2,071.54 ||2,704.39 ||895.99 ||1,225.99 |
|Balance brought forward from Previous Year ||788.09 ||778.77 ||1,549.40 ||662.34 |
|Surplus Available for Appropriation ||2,859.63 ||3,483.16 ||2,445.39 ||1,888.33 |
|Appropriations: || || || || |
|- Reserve Fund ||0.57 ||0.77 ||- ||- |
|- General Reserve ||2,503.68 ||2,424.51 ||700.00 ||122.60 |
|- Debenture Redemption Reserve ||(56.50) ||9.36 ||- ||- |
|- Proposed Dividend ||192.87 ||206.52 ||192.87 ||206.52 |
|- Corporate Dividend Tax ||49.43 ||51.75 ||7.48 ||9.81 |
|- Share of Appropriation related to Associates ||3.12 ||2.16 ||- ||- |
|- Balance carried to Balance Sheet ||166.46 ||788.09 ||1,545.04 ||1,549.40 |
| ||2,859.63 ||3,483.16 ||2,445.39 ||1,888.33 |
Your Directors have recommended a dividend of Rs. 21 per equity share. The dividend, ifapproved by the members, would involve a cash outflow of Rs. 200.35 crore (inclusive ofCorporate Dividend Tax).
Equity shares as may be allotted upon the exercise of Options granted under theEmployee Stock Option Schemes and out of the Share Capital Suspense before the BookClosure for payment of dividend will rank pari passu with the existing shares andshall also be entitled to receive the aforesaid dividend.
EMPLOYEE STOCK OPTION SCHEMES (ESOS)
Employee Stock Option Scheme 2006 (ESOS- 2006)
During the year:
- 11,201 Options were granted;
- 20,370 Options were vested out of the Options granted in the earlier years; and
- 50,438 shares were allotted upon exercise of Options by the concerned option holders.
Employee Stock Option Scheme 2013 (ESOS- 2013)
A new Employee Stock Option Scheme was formulated during the year, pursuant to theapproval accorded by you at the last Annual General Meeting held on 17thAugust, 2013. A total of 1,37,384
Options and 32,985 Restricted Stock Units (RSUs) were granted under the said Scheme.
The details of Employee Stock Options/RSUs granted pursuant to ESOS-2006 and ESOS-2013,as also the other disclosures in compliance with Clause 12 of the Securities and ExchangeBoard of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)Guidelines, 1999, are set out in Annexure "A" to this Report.
Your Company raised long-term rupee loan of Rs. 194 crore for financing its VSFexpansion projects. Term loans aggregating Rs. 106 crore were repaid during the year.
Your Company has adequate liquidity and a strong Balance Sheet. CRISIL Limited (CRISIL)and Credit
Analysis & Research Limited (CARE) have reaffirmed the ratings of "CRISILAAA/Stable" and "CARE AAA" respectively, for your Company's long-termborrowings and "CRISIL A1+" and "CARE A1+", respectively, for yourCompany's short-term borrowings.
AWARDS AND ACCOLADES
Some of the significant accolades earned by your Company during the year include:
"Unnatha Suraksha Puraskara" from the National Safety Council,Karnataka chapter in recognition of Outstanding Safety Performance and Management Systemsin Pulp, Fibre and Paper Products Category Industries during 2011-12: Harihar Division.
"Best CSR Activist of the Year-2013" in the category of Large ScaleIndustry from the Federation of Madhya Pradesh Chambers of Commerce & Industry,Bhopal: Staple Fibre Division, Nagda.
"SAMMAN PATRA" for remarkable contribution in the category of Customsin FY 2013-14 from the Government of India, Ministry of Finance, Department of Revenue,Indore: Staple Fibre Division, Nagda.
RESEARCH AND DEVELOPMENT
Significant progress was made during FY 2013-14 in building the technologycapabilities, to address competitive market threats and begin laying the groundwork forsignificant profitable growth.
PULP AND FIBRE PLANTS
Your Company's fibre and pulp sites have i mplemented a comprehensive qualityimprovement approach centred on instituting statistical process control and Six Sigmacontinuous improvement techniques. Process variation has reduced significantly at the leadsites and best practices are being shared to accelerate improvements across sites. Arobust customer monitoring and feedback process is in place to assess site and linequality performance versus competition. It identifies specific areas for furtherimprovement. Focused R&D and Six Sigma improvement projects are resolving chronicprocess and fibre finish issues. These advances are aimed at significantly enhancing ourcustomers' satisfaction levels.
Reducing chemical material and energy requirements in the existing processes areunderway. Strengthened technology networks across the fibre and pulp sites areaccelerating the commercialization of these advances. Programmes exploring alternativefibre process concepts with superior environmental performance continue with the activeengagement of external knowledge network partners.
In forestry R&D at Harihar and Laos, the high-skill Control Pollination (CP)technique was perfected to produce genetic material with desired traits like high volumeand basic density, high cellulosic pulp yield and low energy consumption. Amulti-disciplinary approach to create sustainable and eco-efficient forestry is ongoing.This includes programmes in genetic tree improvement, development of site specificsilviculture best practices, integrated pest and disease management and the use ofimproved genetic material and management of genetic diversity at each site.
Your Company's Joint Venture, Domsjo's pulp R&D team is improving its fibre andprocess performance. The results to-date are being applied across the pulp productionsites to help optimize performance along the integrated value chain.
The GRASIM Forestry Research Institute (GFRI) at Harihar has been strengthened andTissue Culture (TC) protocols have been modified to match different genotypes, and speciesto improve efficiency of micro propagation process to contribute to better planting stocksfor local wood supplies. The Birla Research Institute for Applied Sciences (for fibres) atNagda is focused on accelerating improvements in new fibre production technologies. TheTextile Research and Application Development Centre (TRADC) at Kharach has ushered novelapplications for fibres to quicken growth and improve overall market position. The R&Dexpansion project at Aditya Birla Science & Technology Company Ltd. (ABSTCL), anassociate of your Company at Taloja, is in place. It is contributing to scalingsophisticated laboratory and semi-works capabilities for fibre research. The constructionof the semi-commercial scale Fibre Research Centre at Kharach is complete and a projectportfolio has been developed which will contribute significantly to the fibre process andproduct R&D programmes in 2014 and beyond. These investments, along with significantincreases in R&D resources and the growing analytical and research support availablethrough the corporate R&D organisation at Taloja, are integral to your Company'sgrowth.
The technology talent pool has been bolstered with the recruitment of talented R&Dprofessionals with diverse backgrounds, capabilities and experience, along with exposureto the development of the programme management processes. A core team of R&Dprofessionals is actively engaged in various technology programmes and initiatives.Importantly, external knowledge networks to complement internal capabilities are activelycontributing to advanced technologies in the areas of cellulose pulp and novel new fibres.
We are pursuing systematic programme and intellectual property management processes andengaging key business stakeholders to ensure delivery of quantitative results. Anorganisation structure and associated personnel management system is in place to enablecontinued enhancement of the effectiveness and performance of the R&D function.
In summary, significant milestones have been achieved in the areas of programmeportfolio development and execution, infrastructure project execution, staff recruitingand development, and the creation of the overall R&D function operating systems. OurLeadership is actively engaged in developing the initial contributions from this R&Dcapability and looks forward to its increasing impact across the Pulp and Fibre businessin the future.
Your Company's allied Chemical business has set up a pilot scale plant based on OxygenDepolarization Cathode (ODC) technology. With this, the energy consumption is lowered byapprox. 30% as compared to conventional membrane cell technology. It is also planning toset up a pilot lab scale electrolyzer in collaboration with Uhde at ABSTCL, Taloja. Thisfacility will provide it with an opportunity to run the electrolyzer at various currentdensities with varying electrolyte parameters which will help in optimizing the plantperformance. The quality of brine is very critical for optimum performance of Membranecell plant. It is proposed to install the Pilot brine plant at Nagda to study theconditions/parameters affecting the brine quality and incorporate the same learnings inthe main plant to enhance its performance.
Your Company strives to foster a culture of high performance. Ongoing learning,aligning HR systems in line with global benchmarks, aligning rewards and recognitions withperformance have enabled your Company sustain its reputation of being a meritocraticorganisation.
The Group's Corporate Human Resources function continues to play an integral role inyour Company's talent management programme.
Your Directors reaffirm their continued commitment to good corporate governancepractices. Your Company fully adheres to the standards set out by the Securities andExchange Board of India for Corporate Governance practices and has implemented all of itsstipulations.
As required by Clause 49 of the Listing Agreement with the Stock Exchanges, a separatesection on Corporate Governance together with a certificate from your Company's statutoryauditors, forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT
As per Clause 55 of the Listing Agreement with the Stock Exchanges, a separate sectionof Business Responsibility Report forms part of this Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
As stipulated in Section 217(2AA) of the Companies Act, 1956, your Directors subscribeto the "Directors' Responsibility Statement" and confirm that:
i) in the preparation of the annual accounts, the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
ii) the accounting policies selected have been applied consistently and judgements, andestimates are made that are reasonable and prudent so as to give a true and fair view ofthe state of affairs of your Company as at the end of the financial year and of the profitof your Company for that period;
iii) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of your Company and for preventing and detecting fraud and other irregularities;and
iv) the annual accounts have been prepared on a going concern basis.
CONSOLIDATED FINANCIAL STATEMENTS AND RESULTS OF SUBSIDIARY COMPANIES
Consolidated Financial Statements have been prepared by your Company in accordance withthe applicable Accounting Standards (AS-21, AS-23 and AS-27) issued by the Institute ofChartered Accountants of India and the provisions of the Listing Agreement with the StockExchanges. Together with the Auditors' Report, these form part of the Annual Report.
In terms of the General Circular of the Ministry of Corporate Affairs (MCA), Governmentof India, the copy of Balance Sheet, Statement of Profit and Loss, Directors' Report,Auditors' Report, etc., of the subsidiary companies is not attached with the Annual Reportof the Company. The related information on the Annual Accounts of the subsidiary companiesshall be made available to the shareholders of the Company and of the subsidiarycompanies, who shall seek such information at any point of time. The Annual Accounts ofthe subsidiary companies will also be kept for inspection by any shareholder at theRegistered Office of the Company and that of the subsidiary companies concerned duringbusiness hours. The Statement pursuant to Section 212 of the Companies Act, 1956,containing the details of the Company's subsidiaries and the gist of the financialperformance of the subsidiary companies forms part of the Consolidated FinancialStatements of this Annual Report.
PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956
Information on Conservation of Energy, Technology Absorption and Foreign ExchangeEarnings and Outgo, stipulated under Section 217(1)(e) of the Companies Act, 1956, is setout in a separate statement. as Annexure "B", attached to this Report and formspart of it.
In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, readwith the Companies (Particulars of Employees) Rules, 1975, as amended, the names and otherparticulars of employees are to be set out in the annexure to the Directors' Report.Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Report andAccounts as set out therein are being sent to all members of the Company excluding theinformation about the employees. Any member, interested in obtaining such particulars, maywrite to the Company Secretary at the Registered Office of the Company.
Mrs. Rajashree Birla and Mr. D.D. Rathi, the NonExecutive Directors of your Company,retire from office by rotation in line with the provisions of the Companies Act, 2013,and, being eligible, have offered themselves for re-appointment.
Your Board has recommended re-appointment of Mr. Cyril Shroff as an IndependentDirector of your Company, pursuant to the provisions of Section 149 and applicable Rulesand Schedule of the Companies Act, 2013.
Other Independent Directors on your Board, viz. Mr. M.L. Apte, Mr. B.V. Bhargava, Mr.R.C. Bhargava and Dr. Thomas M Connelly, continue in office as per the applicableprovisions of the Companies Act, 2013.
Your Board has reviewed the declarations made by the said Independent Directors and isof the view that they meet the criteria of independence as provided in Section 149 of theCompanies Act, 2013, and the Rules made thereunder, as also those prescribed under theListing Agreement.
RE-APPOINTMENT OF MR. ADESH KUMAR GUPTA AS WHOLE-TIME DIRECTOR
The term of appointment of Mr. Adesh Kumar Gupta as a Whole-Time Director of theCompany is expiring on 2nd October, 2014. The Board has re-appointed him as theWhole-Time Director for a further period of 5 years with effect from 3rd October,2014. The approval of the members in the ensuing Annual General Meeting is being soughtfor his re-appointment.
Necessary resolutions seeking your approval to the appointments/re-appointments of theaforesaid Directors, as applicable, have been included in the Notice convening the ensuingAnnual General Meeting of the Company. A brief resume of the aforesaid Directors, beingappointed/re-appointed, has also been incorporated in the Notice of the ensuing AnnualGeneral Meeting.
The Board, on the recommendation of the Audit Committee, has proposed that M/s. G.P.Kapadia & Co., Chartered Accountants, Mumbai, and M/s. Deloitte Haskins & SellsLLP, Chartered Accountants, Mumbai, be re-appointed as the Joint Statutory Auditors of theCompany, to hold office from the conclusion of the ensuing Annual General Meeting till theconclusion of the next Annual General Meeting of the Company. M/s. G.P. Kapadia & Co.,Chartered Accountants, Mumbai, and M/s. Deloitte Haskins & Sells LLP, CharteredAccountants, Mumbai, have forwarded their certificates to the Company, stating that theirre-appointment, if made, will be within the limit specified in that behalf in Section139(1) of the Companies Act, 2013.
The Board, on the recommendation of the Audit Committee, has also proposed that M/s.Vidyarthi & Sons, Chartered Accountants, Gwalior, be re-appointed as the BranchAuditors of Vikram Woollens, a Division of your Company, from the conclusion of theensuing Annual General Meeting till the conclusion of the next Annual General Meeting ofthe Company.
Resolutions seeking your approval on these items have been included in the Notice ofthe ensuing Annual General Meeting.
The observations made in the Auditors' Report are self-explanatory, and, therefore, donot call for any further comments under Section 217(3) of the Companies Act, 1956.
Your Directors have appointed M/s. R. Nanabhoy & Co., Mumbai, as the Cost Auditorsto conduct the Cost Audit for the year 2014-15.
In accordance with the Cost Audit (Report) Rules, 2011, the Cost Audit Report of theCompany for the financial year ended 31st March, 2013 was filed in XBRL on 22ndSeptember, 2013 vide SRN No. S22430193 with the Ministry of Corporate Affairs, New Delhi.
Your Directors record their sincere appreciation of the Central and State Governments,banks, financial institutions, stakeholders and business associates for theirwhole-hearted support and co-operation.
Your Directors also place on record their deep appreciation of your Company's employeesat all levels, for their contribution to its success.
For and on behalf of the Board
| ||Kumar Mangalam Birla |
|Mumbai, 2nd May, 2014 ||Chairman |