TO THE SHAREHOLDERS OF GRASIM INDUSTRIES LIMITED
Your Directors take pleasure in presenting the 67th Annual Report and
Audited 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 the
businesses/operations in depth. So, we are providing only a brief overview of these
matters in this Report.
Your Company's strategic intent continues to be the strengthening of its leadership
position 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 is
nearing completion. The 36,500 TPA Brownfield expansion at Harihar in Karnataka has been
completed. Trial runs for Line 1 have commenced at the Greenfield project (120K TPA) at
Vilayat in Gujarat from April 2014, to be followed by trial runs of Line 2 shortly. The
other two lines for specialty fibre are expected to be commissioned in the 2nd
quarter of the current year.
The Caustic Soda plant of 182,500 TPA capacity for backward integration for VSF plant
at Vilayat has been commissioned in May 2013. The capacity utilisation of the new plant is
being ramped up in a phased manner. Consequently, your Company now has the largest
capacity of 452,500 TPA in Chlor-alkali segment in India.
As part of its strategy to increase its downstream value added products portfolio, a
51,500 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 agreement
to acquire, by way of a demerger, the Gujarat Cement units (4.8 Mn. TPA) comprising of an
integrated cement plant at Sewagram and a grinding unit at Wanakbori of Jaypee Cement
Corporation Limited (JCCL). The transaction has received the requisite regulatory
approvals from the Competition Commission of India, shareholders, creditors and the
Hon'ble High Courts, and the Scheme is now subject to the approval of Securities and
Exchange 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 in
Chhattisgarh and Malkhed in Karnataka, have already been commissioned along with the
grinding 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 in
phases, in FY 14-15. Work on Aditya Cement expansion of 2.9 Mn. TPA at Shambhupura in
Rajasthan, 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 capacity
will 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 to
remain challenging. The demand supply imbalance and the liquidity crunch in China have
impacted VSF prices in global markets. Your Company's sales volume increased by 9% with
the enhanced capacity at Harihar plant. The decline in realisations was much lower
compared to global trends, supported by rupee depreciation. A steep increase in pulp
costs, due to the rupee depreciation and the increase in wood costs, led to a fall in
In the Cement business, the industry witnessed sluggish demand, given the slowdown in
economic growth leading to lower off take from infrastructure projects, real estate sector
and capex cycle. The subdued demand and over-capacity resulted in a price squeeze. The
year witnessed continuing pressure on input and logistics costs, because of the increase
in 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 other
initiatives helped in maintaining costs almost at the previous year levels. The decline in
average realizations led to a drop in EBIDTA margins. UltraTech reported a net profit of
Rs. 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. While
Revenue rose by 5% at Rs. 29,324 crore (Rs. 27,909 crore), Net Profit for the year was
lower at Rs. 2,072 crore, vis-a-vis Rs. 2,500 crore (before exceptional item) in the last
|Revenue from Operations (Net)
|Profit Before Interest, Depreciation/Amortisation and Tax (PBIDT)
|Less: Finance Costs
|Less: Depreciation and Amortisation
|Profit Before Exceptional Item and Tax
|Add: Exceptional Item
|Profit Before Tax
|Profit After Tax
|Add: Share in Profit/(Loss) of Associates
|Less: Minority Interest
|Profit for the Year
|Balance brought forward from Previous Year
|Surplus Available for Appropriation
|- Reserve Fund
|- General Reserve
|- Debenture Redemption Reserve
|- Proposed Dividend
|- Corporate Dividend Tax
|- Share of Appropriation related to Associates
|- Balance carried to Balance Sheet
Your Directors have recommended a dividend of Rs. 21 per equity share. The dividend, if
approved by the members, would involve a cash outflow of Rs. 200.35 crore (inclusive of
Corporate Dividend Tax).
Equity shares as may be allotted upon the exercise of Options granted under the
Employee Stock Option Schemes and out of the Share Capital Suspense before the Book
Closure for payment of dividend will rank pari passu with the existing shares and
shall 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 the
approval accorded by you at the last Annual General Meeting held on 17th
August, 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 Exchange
Board 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 VSF
expansion 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)
Analysis & Research Limited (CARE) have reaffirmed the ratings of "CRISIL
AAA/Stable" and "CARE AAA" respectively, for your Company's long-term
borrowings and "CRISIL A1+" and "CARE A1+", respectively, for your
Company'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 Systems
in Pulp, Fibre and Paper Products Category Industries during 2011-12: Harihar Division.
"Best CSR Activist of the Year-2013" in the category of Large Scale
Industry from the Federation of Madhya Pradesh Chambers of Commerce & Industry,
Bhopal: Staple Fibre Division, Nagda.
"SAMMAN PATRA" for remarkable contribution in the category of Customs
in 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 technology
capabilities, to address competitive market threats and begin laying the groundwork for
significant profitable growth.
PULP AND FIBRE PLANTS
Your Company's fibre and pulp sites have i mplemented a comprehensive quality
improvement approach centred on instituting statistical process control and Six Sigma
continuous improvement techniques. Process variation has reduced significantly at the lead
sites and best practices are being shared to accelerate improvements across sites. A
robust customer monitoring and feedback process is in place to assess site and line
quality performance versus competition. It identifies specific areas for further
improvement. Focused R&D and Six Sigma improvement projects are resolving chronic
process and fibre finish issues. These advances are aimed at significantly enhancing our
customers' satisfaction levels.
Reducing chemical material and energy requirements in the existing processes are
underway. Strengthened technology networks across the fibre and pulp sites are
accelerating the commercialization of these advances. Programmes exploring alternative
fibre process concepts with superior environmental performance continue with the active
engagement 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 volume
and basic density, high cellulosic pulp yield and low energy consumption. A
multi-disciplinary approach to create sustainable and eco-efficient forestry is ongoing.
This includes programmes in genetic tree improvement, development of site specific
silviculture best practices, integrated pest and disease management and the use of
improved 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 and
process performance. The results to-date are being applied across the pulp production
sites to help optimize performance along the integrated value chain.
The GRASIM Forestry Research Institute (GFRI) at Harihar has been strengthened and
Tissue Culture (TC) protocols have been modified to match different genotypes, and species
to improve efficiency of micro propagation process to contribute to better planting stocks
for local wood supplies. The Birla Research Institute for Applied Sciences (for fibres) at
Nagda is focused on accelerating improvements in new fibre production technologies. The
Textile Research and Application Development Centre (TRADC) at Kharach has ushered novel
applications for fibres to quicken growth and improve overall market position. The R&D
expansion project at Aditya Birla Science & Technology Company Ltd. (ABSTCL), an
associate of your Company at Taloja, is in place. It is contributing to scaling
sophisticated laboratory and semi-works capabilities for fibre research. The construction
of the semi-commercial scale Fibre Research Centre at Kharach is complete and a project
portfolio has been developed which will contribute significantly to the fibre process and
product R&D programmes in 2014 and beyond. These investments, along with significant
increases in R&D resources and the growing analytical and research support available
through the corporate R&D organisation at Taloja, are integral to your Company's
The technology talent pool has been bolstered with the recruitment of talented R&D
professionals with diverse backgrounds, capabilities and experience, along with exposure
to the development of the programme management processes. A core team of R&D
professionals is actively engaged in various technology programmes and initiatives.
Importantly, external knowledge networks to complement internal capabilities are actively
contributing to advanced technologies in the areas of cellulose pulp and novel new fibres.
We are pursuing systematic programme and intellectual property management processes and
engaging key business stakeholders to ensure delivery of quantitative results. An
organisation structure and associated personnel management system is in place to enable
continued enhancement of the effectiveness and performance of the R&D function.
In summary, significant milestones have been achieved in the areas of programme
portfolio development and execution, infrastructure project execution, staff recruiting
and development, and the creation of the overall R&D function operating systems. Our
Leadership is actively engaged in developing the initial contributions from this R&D
capability and looks forward to its increasing impact across the Pulp and Fibre business
in the future.
Your Company's allied Chemical business has set up a pilot scale plant based on Oxygen
Depolarization Cathode (ODC) technology. With this, the energy consumption is lowered by
approx. 30% as compared to conventional membrane cell technology. It is also planning to
set up a pilot lab scale electrolyzer in collaboration with Uhde at ABSTCL, Taloja. This
facility will provide it with an opportunity to run the electrolyzer at various current
densities with varying electrolyte parameters which will help in optimizing the plant
performance. The quality of brine is very critical for optimum performance of Membrane
cell plant. It is proposed to install the Pilot brine plant at Nagda to study the
conditions/parameters affecting the brine quality and incorporate the same learnings in
the 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 with
performance have enabled your Company sustain its reputation of being a meritocratic
The Group's Corporate Human Resources function continues to play an integral role in
your Company's talent management programme.
Your Directors reaffirm their continued commitment to good corporate governance
practices. Your Company fully adheres to the standards set out by the Securities and
Exchange Board of India for Corporate Governance practices and has implemented all of its
As required by Clause 49 of the Listing Agreement with the Stock Exchanges, a separate
section on Corporate Governance together with a certificate from your Company's statutory
auditors, forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT
As per Clause 55 of the Listing Agreement with the Stock Exchanges, a separate section
of 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 subscribe
to the "Directors' Responsibility Statement" and confirm that:
i) in the preparation of the annual accounts, the applicable accounting standards have
been followed along with proper explanation relating to material departures;
ii) the accounting policies selected have been applied consistently and judgements, and
estimates are made that are reasonable and prudent so as to give a true and fair view of
the state of affairs of your Company as at the end of the financial year and of the profit
of your Company for that period;
iii) proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of this Act for safeguarding the
assets of your Company and for preventing and detecting fraud and other irregularities;
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 with
the applicable Accounting Standards (AS-21, AS-23 and AS-27) issued by the Institute of
Chartered Accountants of India and the provisions of the Listing Agreement with the Stock
Exchanges. 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), Government
of 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 Report
of the Company. The related information on the Annual Accounts of the subsidiary companies
shall be made available to the shareholders of the Company and of the subsidiary
companies, who shall seek such information at any point of time. The Annual Accounts of
the subsidiary companies will also be kept for inspection by any shareholder at the
Registered Office of the Company and that of the subsidiary companies concerned during
business 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 financial
performance of the subsidiary companies forms part of the Consolidated Financial
Statements of this Annual Report.
PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956
Information on Conservation of Energy, Technology Absorption and Foreign Exchange
Earnings and Outgo, stipulated under Section 217(1)(e) of the Companies Act, 1956, is set
out in a separate statement. as Annexure "B", attached to this Report and forms
part of it.
In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other
particulars 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 and
Accounts as set out therein are being sent to all members of the Company excluding the
information about the employees. Any member, interested in obtaining such particulars, may
write 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 Independent
Director of your Company, pursuant to the provisions of Section 149 and applicable Rules
and 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 applicable
provisions of the Companies Act, 2013.
Your Board has reviewed the declarations made by the said Independent Directors and is
of the view that they meet the criteria of independence as provided in Section 149 of the
Companies Act, 2013, and the Rules made thereunder, as also those prescribed under the
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 the
Company is expiring on 2nd October, 2014. The Board has re-appointed him as the
Whole-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 sought
for his re-appointment.
Necessary resolutions seeking your approval to the appointments/re-appointments of the
aforesaid Directors, as applicable, have been included in the Notice convening the ensuing
Annual General Meeting of the Company. A brief resume of the aforesaid Directors, being
appointed/re-appointed, has also been incorporated in the Notice of the ensuing Annual
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 & Sells
LLP, Chartered Accountants, Mumbai, be re-appointed as the Joint Statutory Auditors of the
Company, to hold office from the conclusion of the ensuing Annual General Meeting till the
conclusion 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, Chartered
Accountants, Mumbai, have forwarded their certificates to the Company, stating that their
re-appointment, if made, will be within the limit specified in that behalf in Section
139(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 Branch
Auditors of Vikram Woollens, a Division of your Company, from the conclusion of the
ensuing Annual General Meeting till the conclusion of the next Annual General Meeting of
Resolutions seeking your approval on these items have been included in the Notice of
the ensuing Annual General Meeting.
The observations made in the Auditors' Report are self-explanatory, and, therefore, do
not 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 Auditors
to conduct the Cost Audit for the year 2014-15.
In accordance with the Cost Audit (Report) Rules, 2011, the Cost Audit Report of the
Company for the financial year ended 31st March, 2013 was filed in XBRL on 22nd
September, 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 their
whole-hearted support and co-operation.
Your Directors also place on record their deep appreciation of your Company's employees
at all levels, for their contribution to its success.
For and on behalf of the Board
||Kumar Mangalam Birla
|Mumbai, 2nd May, 2014