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Directors Report of Grasim Industries Ltd.

Mar 31, 2015

TO THE MEMBERS OF GRASIM INDUSTRIES LIMITED

The Directors take pleasure in presenting the 68th Annual Report together with the Audited Financial Statements of your Company for the financial year ended 31st March 2015.

FINANCIAL HIGHLIGHTS

(Rs. Crore)

Consolidated Standalone

2014-15 2013-14 2014-15 2013-14

Revenue from Operations (Net) 32,847.34 29,323.34 6,332.58 5,603.50

Profit before Interest, Depreciation/ Amortization and Tax (PBIDT) 5,683.42 5,491.02 1,013.04 1,246.12

Less: Finance Costs 667.39 447.32 39.33 41.52

Less: Depreciation and Amortisation 1,563.22 1,457.48 262.55 219.61

Profit Before Exceptional Item and Tax 3,452.81 3,586.22 711.16 984.99

Exceptional Item (9.46) - (26.24) -

Profit Before Tax (PBT) 3,443.35 3,586.22 684.92 984.99

Tax Expense 1,015.92 734.79 155.02 89.00

Profit After Tax (PAT) 2,427.43 2,851.43 529.90 895.99

Add: Share in Profit/ (Loss) of Associates 154.23 102.87 - -

Less: Minority Interest 837.86 882.76 - -

Profit for the Year 1,743.80 2,071.54 529.90 895.99

Balance brought forward from Previous Year 166.46 788.09 1,545.04 1,549.40

Dilution of stake in Joint Venture/Associate (6.26) - - -

Depreciation charged to Surplus* (58.71) - (9.25) -

Surplus Available for Appropriation 1,845.29 2,859.63 2,065.69 2,445.39

Appropriations:

Reserve Fund 0.37 0.57 - -

General Reserve 954.52 2,503.68 200.00 700.00

Debenture Redemption Reserve 130.29 (56.50) - -

Proposed Dividend 165.50 192.87 165.37 192.87

Corporate Dividend Tax 33.61 49.43 3.37 7.48

Legal Reserve 0.15 - - -

Share of Appropriation related to Associates 8.10 3.12 - -

Balance carried to Balance Sheet 552.75 166.46 1,696.95 1,545.04

1,845.29 2,859.63 2,065.69 2,445.39

* Carrying value of the assets whose useful life is already exhausted as on 1st April 2014, has been recognised in Surplus as per statement of Profi t & Loss (Net of Deferred Tax) as per Schedule II to the Companies Act, 2013

DIVIDEND

For the year under review, your Directors have recommended a dividend of Rs. 18/- per equity share of Rs. 10/- each. The dividend, if approved by the members, would involve a cash outfl ow of Rs. 168.7 Crore (inclusive of Corporate Dividend Tax).

STRATEGIC INITIATIVES

Your Company''s strategic intent continues to be strengthening of its leadership position in both the Viscose Staple Fibre (VSF) and Cement businesses.

In this regard, signifi cant progress has been made on its expansion/acquisition plans.

As the Management Discussion and Analysis section, which forms part of the Annual Report, focuses on your Company''s strategies for growth and the performance review of the businesses/ operations in depth, we are providing only a brief overview of these matters in this Report.

Growth Plans implemented / initiated during the year ended 31st March 2015

During the year under review, your Company has commissioned the Greenfi eld VSF Project (120K TPA) at Vilayat in Gujarat, thereby enhancing its total capacity to 498K TPA. Of the four lines, two lines (43K TPA) are geared to produce specialty fi bre. This will enable ramping up of VSF volumes and will also augment your Company''s presence into the specialty fi bre market.

The Board of Directors of your Company has approved the amalgamation of Aditya Birla Chemicals (India) Limited (ABCIL) with your Company w.e.f. 1st April 2015, subject to requisite shareholders, court and regulatory approvals. ABCIL is one of the leading Chlor-Alkali companies in India with an installed capacity of ~293K TPA of caustic soda. Upon the effectiveness of the Scheme of Amalgamation, your Company''s total caustic soda capacity will stand enhanced at 804K TPA. The merger will allow your Company to strengthen its existing portfolio of VSF, Chlor-Alkali & allied chemicals and textiles by bringing in Chlor-Alkali and value added product business of ABCIL.

In Cement Business, your Company''s subsidiary, UltraTech Cement Limited (UltraTech) completed the acquisition of the Gujarat units (4.8 Mn. TPA) of Jaypee Cement Corporation Limited (JCCL) in June 2014, at an enterprise value of Rs. 3,800 Crore, besides the actual net working capital at closing.

During the year under review, UltraTech commissioned cement capacity of 1.4 Mn. TPA, clinker capacity of 2.0 Mn. TPA and Captive Power Plants / Waste Heat Recovery System aggregating 72.5 MW.

Further, UltraTech has entered into an agreement with Jaiprakash Associates Limited (JAL) for acquiring JAL''s Cement business at Bela and Sidhi in Madhya Pradesh, consisting of Cement capacity of 4.9 Mn. TPA and Thermal Power Plant of 180 MW. On completion of the ongoing expansion projects and acquisition of JAL''s business as stated above, the total capacity of UltraTech will stand expanded from 63.2 Mn. MT to 74.8 Mn. MT per annum.

PERFORMANCE REVIEW

In VSF, the global weakening of competing fi bres (Polyester and Cotton) and the current overcapacity scenario, especially in China, exerted pressure on realizations. The impact was partially offset by lower pulp cost.

In Cement, the prices in the industry were under pressure due to sluggish demand. Input material and logistic costs continued to rise during the year. UltraTech reported net revenue for the year at Rs. 24,349 Crore, which was up by 12%, over the previous year. UltraTech''s PBIDT was up by 10% at Rs. 4,776 Crore, while the increase in fi nance cost and tax expenses resulted in lower PAT of Rs. 2,098 Crore.

Your Company''s Consolidated revenue rose by 12% from Rs. 29,323 Crore to Rs. 32,847 Crore. Volumes grew in all the businesses led by expansions and acquisitions. PBIDT grew by 4% at Rs. 5,683 Crore with improved performance from Cement and Chemical businesses. Net profi t for the year was Rs. 1,744 Crore as against Rs. 2,072 Crore in the last year as a result of higher interest, depreciation and tax expense.

Your Company''s Standalone revenue stood at Rs. 6,333 Crore vis-à-vis Rs. 5,604 Crore in the previous year. Depreciation increased due to commissioning of VSF plant at Vilayat. Tax expense which was lower at Rs. 89 Crore in the last year due to tax holiday for newly commissioned power plant, increased to Rs. 155 Crore during the year. Net profi t was at Rs. 530 Crore as against Rs. 896 Crore.

SALE OF CONSUMER PRODUCT DIVISION

During the current fi nancial year 2015-16, your Company has sold its Consumer Products Division (the Division) to Future Consumer Enterprise Limited on a slump sale basis for a total consideration of Rs. 10.03 Crore, w.e.f. 16th July 2015. The Division was engaged in the manufacture of Face Care Wipes, Baby Wipes and other products in the Baby/ House care segments and for the fi nancial year 2014-15 its net sale was at Rs. 9.52 Crore.

FINANCE

During the year under review, your Company raised Long Term Rupee Loan of Rs. 36 Crore for fi nancing modernization of its VSF plant at Nagda in Madhya Pradesh. Term loans aggregating Rs. 152 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 re-affi rmed 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.

DEPOSITS

During the year under review, the Company has not accepted or renewed any amount falling within the purview of provisions of Section 73 of the Companies Act, 2013 (the Act) read with the Companies (Acceptance of Deposits) Rules, 2014. Hence, the requirement for furnishing details of deposits which are not in compliance with Chapter V of the Act is not applicable.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

During the year under review, Aditya Birla Power Ventures Limited, a wholly owned subsidiary of the Company, ceased to be a subsidiary of the Company. No company has become/ ceased to be a joint venture or associate of the Company during the fi nancial year 2014-15.

In accordance with Section 129(3) of the Act read with the Companies (Accounts) Rules, 2014, a statement containing salient features of the fi nancial statements of the subsidiaries, associate and joint venture companies in Form AOC-1 is given in Annexure ''A'' to this Report. The audited accounts / fi nancial statements in respect of each of the Subsidiary Companies are available on the Company''s website, www.grasim.com. Any Member, who is interested in obtaining a copy of the Audited Financial Statements of your Company''s subsidiaries, may write to the Company Secretary at the Registered Offi ce of your Company.

The Company has framed a Policy for determining material subsidiaries, which has been uploaded on the Company''s website www.grasim.com.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the Act, read with the Companies (Accounts) Rules, 2014 and Accounting Standard (AS)-21 on Consolidated Financial Statements read with AS-23 on Accounting for Investments in Associates and AS-27 on Financial Reporting of Interest in Joint Ventures, the Audited Consolidated Financial Statement is provided in the Annual Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Act, in relation to the Audited Financial Statements of the Company for the year ended 31st March 2015, the Directors of your Company hereby state that:

a. in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the fi nancial year and of the profi t of the Company for that period;

c. the Directors have taken proper and suffi cient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the Directors have prepared the Annual Accounts of the Company on a ''going concern'' basis;

e. the Directors have laid down internal fi nancial controls to be followed by the Company and that such internal fi nancial controls are adequate and are operating effectively; and

f. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

MANAGEMENT''S DISCUSSION & ANALYSIS REPORT

Management''s Discussion & Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

CORPORATE GOVERNANCE

Your Directors reaffi rm their continued commitment to good corporate governance practices. During the year under review, your Company was in compliance with the provisions of Clause 49 of the Listing Agreement with the Stock Exchanges relating to Corporate Governance.

The compliance report is provided in the Corporate Governance section of the Annual Report. The Auditors'' Certifi cate on compliance with the provisions of Clause 49 of the Listing Agreement is given in Annexure ''B'' to this Report.

BUSINESS RESPONSIBILITY REPORT

As per Clause 55 of the Listing Agreement with the Stock Exchanges, a separate section of Business Responsibility Report describing the initiatives taken by the Company from environmental, social and governance perspective forms part of the Annual Report.

CORPORATE SOCIAL RESPONSIBILITY

In terms of the provisions of Section 135 of the Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of your Company has constituted a Corporate Social Responsibility (CSR) Committee which is chaired by Mrs. Rajashree Birla. The other Members of the Committee are Mr. B. V. Bhargava, Mr. Shailendra K. Jain and Mr. K. K. Maheshwari. Dr. Pragnya Ram, Group Executive President, Corporate Communication & CSR is a permanent invitee to the Committee. The Committee has formulated and recommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board and the same is available on your Company''s website, www.grasim.com.

The Company is a caring corporate citizen and lays signifi cant emphasis on development of the host communities around which it operates. The Company, with this intent, has identifi ed several projects relating to Social Empowerment & Welfare, Infrastructure Developments, Sustainable Livelihood, Health Care and Education during the year and initiated various activities in neighboring villages around its plant locations. The work on several initiatives has picked up momentum during the year, resulting in a spend of Rs. 16.71 Crore (1.69% of the average net profi ts of the last 3 years as defi ned for the purposes of CSR). The Company has identifi ed promotion and development of handloom, handicrafts, and related projects, the work on which was started last year and will be intensifi ed in the current year.

The Annual Report on CSR activities is given in Annexure ''C'' to this Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, Members approved the appointment of Mr. Cyril Shroff (DIN: 00018979), Mr. B. V. Bhargava (DIN: 00001823), Dr. Thomas M. Connelly Jr. (DIN: 03083495), Mr. M. L. Apte (DIN: 00003656) and Mr. R. C. Bhargava (DIN: 00007620) as Independent Directors of the Company, for a period of fi ve consecutive years with effect from 6th September, 2014, whose offi ces are not liable to retire by rotation. The Company has received declarations from all the Independent Directors of the Company confi rming that they meet the criteria of independence as prescribed under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges.

Mr. D. D. Rathi resigned as a Director of the Company with effect from 25th September 2014 due to preoccupation. Your Board has placed on record its deep appreciation of the valuable services rendered by Mr. Rathi during his association with the Company.

Mr. O. P. Rungta (DIN: 00020559) was appointed as an Additional Director and an Independent Director of the Company for a period of fi ve consecutive years w.e.f. 25th September, 2014, subject to the approval of the Members. As per Section 161 of the Act, Mr. Rungta being an Additional Director, holds offi ce upto the date of the ensuing Annual General Meeting (AGM) and is eligible to be appointed a Director of the Company. The Company has received a notice in writing from Mr. Rungta along with the deposit of requisite amount under Section 160 of the Act signifying his candidature for the offi ce of the Director of the Company. The resolution seeking Mr. O. P. Rungta''s appointment has been included in the Notice of the AGM together with his brief details. Your Directors commend the Resolutions for your approval.

In accordance with the provisions of the Act and the Articles of Association of the Company, Mr. Kumar Mangalam Birla (DIN: 00012813) and Mr. N. Mohan Raj (DIN: 00181969), Directors of the Company, will retire by rotation at the Company''s ensuing AGM and being eligible, have offered themselves for re-appointment. Resolutions seeking their appointment together with their brief profi le have been included in the Notice of the AGM. Your Directors commend the Resolutions for your approval.

The Board has accepted the request of Mr. Adesh Kumar Gupta for an early retirement with effect from the close of business hours on 30th June 2015, from the offi ce of the Whole-time Director & Chief Financial Offi cer, to pursue some of his areas of personal interest beyond business. Mr. Gupta ceased to be a Whole Time Director & Chief Financial Offi cer and Director on the Board of the Company with effect from 30th June 2015. Mr. Gupta had been with the Group for 36 years and has made an exceptional contribution to various businesses in a variety of roles and capacities. The Board places on record its deep appreciation of Mr. Gupta''s contribution to the Group, spanning over three decades.

Subject to the approval of the shareholders, the Board has on the recommendation of the Nomination and Remuneration Committee appointed Mr. Sushil Agarwal (DIN: 00060017) as an Additional Director and Whole Time Director & Chief Financial Offi cer (CFO) of the Company for a period of fi ve years, w.e.f. 1st July 2015. As an Additional Director, Mr. Sushil Agarwal holds offi ce upto the date of the ensuing AGM and is eligible to be appointed a Director of the Company. The Company has received a notice from Mr. Sushil Agarwal along with the requisite deposit signifying his candidature for appointment as the Director at the ensuing AGM. The resolution seeking Mr. Sushil Agarwal''s appointment has been included in the Notice of the AGM together with his brief details. Your Directors commend the Resolution for your approval.

A brief resume of the Directors being appointed / re-appointed forms part of the Notice of the ensuing AGM.

Mr. Adesh Kumar Gupta, who was the Whole-time Director & CFO of your Company up to 30th June 2015, was paid sitting fees of Rs. 2.30 Lakh by UltraTech for attending its Board meetings and commission of Rs. 1.00 Lakh will be paid by UltraTech, subject to the approval of its shareholders. Barring this, none of the managerial personnel of the Company is in receipt of remuneration / commission from the subsidiary companies of the Company.

Mrs. Hutokshi Wadia was appointed as a Key Managerial Personnel designated as Sr. Vice President and Company Secretary of the Company in place of Mr. Ashok Malu, with effect from 1st March 2015.

In terms of the provisions of Section 203 of the Act, Mr. K. K. Maheshwari, Managing Director, Mr. Sushil Agarwal, Whole-time Director & CFO and Mrs. Hutokshi Wadia, Sr. Vice President & Company Secretary are the Key Managerial Personnel of your Company.

FORMAL ANNUAL EVALUATION

Pursuant to the provisions of the Act and Clause 49 of the Listing Agreement, a Framework of the Board Performance Evaluation has been formulated. In terms of this Framework, the Nomination and Remuneration Committee and the Board has carried out an annual performance evaluation of its own performance, the performance of the various Committees of the Board, individual Directors and the Chairman. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report

The details of programme for familiarization of the Independent Directors of your Company are available on your Company''s website, www.grasim.com.

REMUNERATION POLICY

The Board has, on the recommendation of the Nomination and Remuneration Committee, formulated the Remuneration policy of your Company which is given in Annexure ''D'' to this report.

COMMITTEES OF THE BOARD

AUDIT COMMITTEE

The Board has constituted an Audit Committee comprising of Mr. B. V. Bhargava, Mr. R. C. Bhargava and Mr. M. L. Apte as its members. The Managing Director and Whole Time Director & CFO are the permanent invitees to the meetings of the Audit Committee. Further details relating to the Audit Committee are provided in the Corporate Governance Report forming part of this Annual Report.

All the recommendations made by the Audit Committee during the year, were accepted by the Board of Directors of the Company.

NOMINATION AND REMUNERATION

COMMITTEE

The Board has constituted a Nomination and Remuneration Committee comprising of Mr. M. L. Apte, Mr. Cyril Shroff and Mr. Kumar Mangalam Birla as its members. Further details relating to the Nomination and Remuneration Committee are provided in the Corporate Governance Report forming part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Board has constituted a Corporate Social Responsibility Committee comprising of Mrs. Rajashree Birla, Mr. B. V. Bhargava, Mr. Shailendra K. Jain and Mr. K. K. Maheshwari as its members. Further details relating to the Corporate Social Responsibility Committee are provided in the Corporate Governance Report forming part of this Annual Report.

STAKEHOLDERS'' RELATIONSHIP COMMITTEE

The Board has constituted a Stakeholders'' Relationship Committee comprising of Mr. B. V. Bhargava, Mr. M. L. Apte, Mr. Cyril Shroff and Mr. Sushil Agarwal (w.e.f. 7th August 2015) as its members. Further details of the Stakeholders'' Relationship Committee are provided in the Corporate Governance Report forming part of this Annual Report.

RISK MANAGEMENT

The Board has constituted a Risk Management Committee to review the risk management plan/ process of your Company which was hitherto being carried out by the Audit Committee. The Risk Management Committee identifi es potential risks, assesses their potential impact and takes timely action to mitigate the same. The Company has a comprehensive risk management policy / framework which is reviewed by the Audit Committee / Risk Management Committee. More details on risk management are covered in the Management Discussion and Analysis forming part of this Annual Report.

RELATED PARTY TRANSACTIONS

During the fi nancial year under review, all contracts/ arrangements / transactions entered into by your Company with Related Parties were on arm''s length basis and in the ordinary course of business. The Company has not entered into contracts / arrangements / transactions with Related Parties which could be considered material in accordance with Section 188 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and the Policy of the Company on Related Party Transactions. All Related Party transactions have been approved by the Audit Committee of your Company.

The Policy on Related Party Transactions as approved by the Board is available on your Company''s website, www.grasim.com.

Since all the contracts / arrangements / transactions with Related Parties during the year under review, were in the ordinary course of business and at arm''s length and were not considered material, disclosure in Form AOC-2 under Section 134(3)(h) of the Act read with Companies (Accounts of Companies) Rules, 2014, is not applicable. The details of contracts and arrangement with Related Parties of your Company for the fi nancial year ended 31st March, 2015 are given in Note 4.5 to the Financial Statements of your Company.

INTERNAL FINANCIAL CONTROLS

The Internal Financial Controls designed and implemented by the Company are commensurate with the size of its operations. During the year under review, no material or serious observation has been received from the Auditors of the Company citing ineffi ciency or inadequacy of such controls.

AUDITORS AND AUDIT REPORTS

STATUTORY AUDITORS

Pursuant to the provisions of Section 139 of the Act and the Companies (Audit and Auditors) Rules, 2014, Deloitte Haskins & Sells LLP, Mumbai and M/s G. P. Kapadia & Co., Mumbai, the Joint Statutory Auditors of the Company, hold offi ce upto the conclusion of the ensuing AGM and are eligible for re-appointment. The consent of the Auditors and certifi cate u/s 139 of the Act have been obtained from each of the Auditors to the effect that their re-appointment, if made, would be in accordance with the prescribed conditions and that they are eligible to hold the offi ce of the Auditors of the Company.

The observations made by the Statutory Auditors on the Financial Statements of the Company, in their Report for the fi nancial year ended 31st March 2015 read with the explanatory notes therein, are self-explanatory and therefore, do not call for any further explanation or comments from the Board under Section 134(3)(f) of the Act. The Auditors'' Report does not contain any qualifi cation, reservation or adverse remark.

BRANCH AUDITORS

M/s Vidyarthi & Sons, Branch Auditors for Vikram Woollens Division, hold offi ce upto the conclusion of the ensuing AGM. M/s Vidyarthi & Sons have expressed their inability to continue as Branch Auditors and accordingly, their appointment is not being considered. The Statutory Auditors of the Company will carry out the audit of the said Division.

COST AUDITORS

Pursuant to the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, as amended, Notifi cations/ Circulars issued by the Ministry of Corporate Affairs from time to time, your Board has appointed M/s. R. Nanabhoy & Co., Cost Accountants, Mumbai, as the Cost Auditors to conduct the cost audit of the Company for the fi nancial year 2015-16 at a remuneration as mentioned in the Notice convening the AGM. Post the merger of ABCIL with your Company, M/s R. Nanabhoy & Co. will also conduct Cost Audit of the Units of ABCIL.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, of the Act, the Company had appointed M/s BNP & Associates, Company Secretaries, Mumbai to conduct secretarial audit for the fi nancial year 2014-15. The Secretarial Audit Report issued by M/s. BNP & Associates, Company Secretaries for the fi nancial year 2014- 15 forms part of this Report and is set out in Annexure ''E'' to this Report. The Secretarial Audit Report does not contain any qualifi cation, reservation or adverse remark.

RESEARCH AND DEVELOPMENT

While continuing to build our technology capabilities during FY 2014-15, we turned most of our efforts to executing a portfolio of technology projects aimed at addressing competitive market challenges in the areas of product quality, cost reduction and new product offerings.

PULP & FIBRE PLANTS

Program Portfolio

Your Company recently commissioned state-of- the-art clonal sapling production facility, which is currently operating at full capacity and will go a long way in supporting your Company''s plan to ensure pulpwood availability for long term sustainability and meeting the ever growing demand for high quality saplings from the farming community. It also aids in making farm forestry an attractive and sustainable land use option to improve the productivity & profi tability of pulpwood plantations.

Pulp and Fibre plants are implementing Statistical Process Control (SPC) and Six Sigma based continuous improvement techniques to improve product quality. The concept of Uptime has been adopted across several fi bre sites. It measures the ability of a process to provide name plate capacity at intended design conditions, and identifi es chronic mechanical conditions, leading to process disturbances, for root cause analysis and resolution by maintenance teams. This approach of combining SPC and Uptime has signifi cantly improved quality and consistency of our product.

Cost reduction efforts focus on reducing raw material and energy consumption in the existing processes. Our emphasis is on the development and commercialization of these advances through technology networks across the fi bre and pulp sites. Reducing consumption ratios for raw materials is a key focus area including ways to utilize waste heat and reduce steam consumption. New fi nishes have been developed to address foaming and fi bre wetting issues enabling growth in non-woven markets.

The Excel® lyocell project, developing alternative fi bre process concepts with superior environmental performance, continues with in-house technology developments and engagement of external knowledge network partners. The Technology organization is increasing its process, product and applications development portfolios to expand its impact on the quality, cost, differentiated products and new business development strategies aimed at improved business performance and growth.

Enabling Capabilities

At your Company''s joint venture, Domsjo''s pulp R&D team is improving process and pulp performance. Alternative additive technologies leading to improved viscose uniformity and lower costs are under development. The Pulp and Fibre Innovation Centre (PFIC) at Taloja and the Birla Research Institute (BRI) are utilizing bench-scale capabilities to explore new, high-value product concepts and improved processes. It has collaborative support from Aditya Birla Science & Technology Company Pvt. Ltd. (ABSTCPL): corporate R&D with advanced facilities and skills in areas such as analytical science, materials, process and design engineering, modelling and control technologies. The Textile Research and Application Development Centre (TRADC) at Kharach is engaged in developments in downstream processing of the fi bres into yarns and fabrics. Working closely with the business development team, it has enhanced the innovative component of its proactive fabric collections offered to customers.

The technology talent pool has been increasing with the addition of skilled R&D professionals with diverse backgrounds, capabilities and experience. We now have a core team of R&D professionals actively engaged in important technology programs and initiatives. External knowledge networks are continuing to be developed to complement internal capabilities, and are actively contributing to advanced technologies in the areas of cellulose pulp and novel new fi bres.

In summary, signifi cant milestones have been achieved in the areas of program portfolio development and execution, infrastructure project execution, staff development, and the creation of the overall R&D function operating systems.

CHEMICAL BUSINESS

Your Company''s Chemical business has set up a pilot scale plant based on Oxygen Depolarization Cathode (ODC) technology with different generation''s anode and cathode elements. This gives us an idea about how each generation will have current and voltage requirement. In this pilot plant, hydrogen generation is there by consuming only 70% of the power consumption as compared to the conventional Membrane cell technology. However, pure liquid oxygen is used for reduction of power consumption. This technology has been established and in second phase, experiments are being carried to use PSA generated oxygen gas in place of liquid oxygen to optimize the higher cost of liquid oxygen.

The business has also fi nalized to set up a pilot lab scale electrolyzer in collaboration with ThyssenKrupp Udhe Chlorine Engineers GmbH, Germany who are the pioneers in the Chlor- Alkali technology development and technology suppliers of latest state of the art Electrolyzer at ABSTCPL. This facility will provide it with an opportunity to run the electrolyzer at various current densities with varying electrolyte parameters which will help in understanding and applications of processes and scaling the experience & knowledge for optimizing the performance of plants where similar electrolyzers are in use for bulk manufacturing.

All the chlor-alkali plants of the Company require high quality brine which is very critical for Optimum performance of Membrane cell plant. To support this, it is proposed to install a Pilot brine plant at Nagda to study the suitability of slat from various sources and also various conditions / parameters that affect the brine quality. The learning and experiences can be scaled up and incorporated in the plant sites for continual improvements.

Demonstrating its commitment for uses of solid wastes, you Company regularly engages with premier institutes such CSMCRI, Bhavnagar, Gujarat; MINT, Bhopal, Madhya Pradesh and ICT, Mumbai.

The Centre of Excellence for Application and Product Development in the fi eld of water and waste water treatment is under establishment at Vilayat. The Centre envisages to have expertise in mainly three key areas of water i.e. drinking water, municipal water and industrial waste water treatment. The activities include identifi cation, development and characterization of new chemicals and support for resolution of issues at customer end by identifi cation/ development of suitable product/application for the issue. The Centre will also be engaged in analyzing various additives to enhance the functionalities of existing chemicals and improvement in the existing water treatment chemicals.

DISCLOSURES

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Your Company has established a robust Vigil Mechanism for reporting of concerns through the Whistle Blower Policy of the Company. Adequate safeguards are provided against victimization to those who avail of the mechanism and access to the Chairman of the Audit Committee in exceptional cases is provided to them. The details of the Vigil Mechanism are also provided in the Corporate Governance Report and the Whistle Blower Policy has been uploaded on the website of the Company www.grasim.com.

MEETINGS OF THE BOARD

During the year ended 31st March, 2015, fi ve Board Meetings were held, on 2nd May, 2014, 2nd August, 2014, 29th October, 2014, 31st January, 2015 and 11th February, 2015. Further details on the Board Meetings are provided in the Corporate Governance Report forming part of the Annual Report.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans given, investments made, guarantees given and securities provided and investments covered under the provisions of Section 186 of the Act are covered in the Notes to the Financial Statements.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information relating to the conservation of energy, technology absorption and foreign exchange earnings and outgo, as stipulated under Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014, is given in Annexure ''F'' to this Report.

EXTRACT OF ANNUAL RETURN

In accordance with the provisions of Section 134(3) (a) of the Act, an extract of the Annual Return of the Company for the fi nancial year ended 31st March 2015 is given in Annexure ''G'' to this Report.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THE FINANCIAL STATEMENT RELATES AND THE DATE OF THE REPORT

Except as disclosed elsewhere in this Report, no material changes and commitments which could affect the Company''s fi nancial position have occurred between the end of the fi nancial year of the Company and the date of this Report.

PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are to be set out in the Board''s Report, as an addendum thereto. However, in line with the provisions of Section 136(1) of the Act, the Report and Accounts as set out therein, are being sent to all Members of your Company excluding the aforesaid information about the employees. Any Member, who is interested in obtaining these particulars about employees, may write to the Company Secretary at the Registered Offi ce of your Company. The aforesaid addendum is also available for inspection by the members at the Registered Offi ce of the Company 21 days before the AGM and upto to the date of the ensuing AGM during business hours on working days.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure ''H'' to this Report.

EMPLOYEE STOCK OPTION SCHEMES (ESOS)

The Company has Employee Stock Option Scheme 2006 (ESOS-2006) and Employee Stock Option Scheme 2013 (ESOS-2013) which provides for grant of Stock Options and/or Restricted Stock Units (RSUs) to eligible employees of the Company.

The Shareholders have approved ESOS-2006 through postal ballot on 20th January, 2007 and ESOS-2013 at the 66th Annual General Meeting of the Company held on 17th August, 2013.

The details of Employee Stock Options granted pursuant to ESOS-2006 and the Employee Stock Options and RSUs granted pursuant to ESOS-2013, as also the other disclosures in compliance with the provisions of the Securities and Exchange Board of India (Employee Share based Employee Benefi ts) Regulations, 2014 are available on the Company''s website, www.grasim.com.

A certifi cate from the Statutory Auditor on the implementation of your Company''s Employees Stock Option Schemes will be placed at the ensuing AGM for inspection by the Members.

HUMAN RESOURCES

Your Company believes that Human Resources will play a signifi cant role in its future growth. With an unswerving focus on nurturing and retaining talent, your Company provides avenues for learning and development through functional, behavioral and leadership training programs, knowledge exchange conferences, communication channels for information sharing to name a few.

The Group''s Corporate Human Resources plays a critical role in your Company''s talent management process.

AWARDS AND ACCOLADES

Some of the signifi cant accolades earned by your Company during the year include:

- "SAMMAAN PATRA" for remarkable contribution in the category of Customs-Imports in fi nancial year 2014-15 from the Government of India, Ministry of Finance, Department of Revenue, Central, Excise and Service Tax, Gwalior to Staple Fibre Division, Nagda;

- Grasilene Division was awarded the 1st Prize for "Best Fuel Effi cient Boiler" category for adopting the Best Safe Practices in the year 2014, by the Karnataka State Safety Institute, Department of Factories, Boilers, Industrial Safety & Health Bengaluru, Government of Karnataka;

- Runner-up - Best Project of the Year (Medium) category awarded at PMI (Project Management Institute) India Awards 2014 to the Green Field Epoxy Project, Vilayat.

- Staple Fibre Division, Nagda, was awarded the "Amity CSR Conclave 14" Award, conducted under the aegis of the Amity Global Business School, Indore.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Issue of equity shares with differential rights as to dividend, voting or otherwise;

2. Issue of shares (including sweat equity shares) to employees of the Company under any Scheme save and except ESOS referred to in this report;

3. There were no revisions in the fi nancial statements;

4. No signifi cant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in the future; and

5. No cases or complaints were fi led pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

ACKNOWLEDGEMENT

Your Directors express their deep sense of gratitude to the banks, fi nancial institutions, stakeholders, business associates, Central and State Governments for their co-operation and support and look forward to their continued support in future.

We very warmly thank all of our employees for their contribution to your Company''s performance. We applaud them for their superior levels of competence, dedication and commitment to your Company.

For and on behalf of the Board

Kumar Mangalam Birla

Chairman

(DIN: 00012813)

Mumbai, 7th August 2015


Mar 31, 2014

Dear Shareholders,

The 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.

STRATEGIC INITIATIVES

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.

Expansion Projects

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.

FINANCIAL PERFORMANCE

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 EBIDTA margins.

In the Cement business, the industry witnessed sluggish demand, given the slowdown in economic growth leading to lower offtake 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-à-vis Rs. 2,500 crore (before exceptional item) in the last year.

Consolidated Standalone 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

DIVIDEND

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.

FINANCE

Your Company raised long-term rupee loan of ? 194 crore for financing its VSF expansion projects. Term loans aggregating ? 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 re- affirmed 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

Programme Portfolio

Your Company''s fibre and pulp sites have implemented 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.

Enabling Capabilities

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 growth.

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.

CHEMICAL BUSINESS

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.

HUMAN RESOURCES

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 organisation.

The Group''s Corporate Human Resources function continues to play an integral role in your Company''s talent management programme.

CORPORATE GOVERNANCE

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 stipulations.

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; 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 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.

DIRECTORS

Mrs. Rajashree Birla and Mr. D.D. Rathi, the Non- Executive 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.

INDEPENDENT DIRECTORS

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 Listing 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 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 General Meeting.

AUDITORS

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 the Company.

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.

COST AUDITORS

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.

APPRECIATION

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 Chairman


Mar 31, 2013

Dear Shareholders,

The Directors have pleasure in presenting the 66th Annual Report and the Audited Accounts of the Company for the year ended 31 st March, 2013.

As the Management Discussion and Analysis Section of the Annual Report focuses on your Company''s strategies for growth and the performance review of the businesses/operations of the Company in depth, your Board is providing only a brief overview in this Report.

STRATEGIC ACQUISITION

Acquisition of Terrace Bay, a Canadian Pulp Mill

In July 2012, in line with your Company''s strategy to secure key inputs, the assets of Terrace Bay, a closed pulp mill in Ontario, Canada, was acquired by AV Terrace Bay, Canada, the pulp JV, with Grasim holding a 40% stake and the remaining 60% held by Thai Rayon Public Company Ltd., Thailand. The operations at this paper grade pulp mill were restarted in October 2012, as planned. This acquisition will help in meeting the increasing pulp requirement for your Company''s VSF business after the mill is converted into dissolving grade pulp mill.

GROWTH OF THE EXISTING BUSINESSES

Expansion of VSF/Chemical Capacities

At Harihar (Karnataka), the 36,500 TPA VSF brownfield expansion was commissioned phase- wise. In Phase I, in September 2012, the plant''s capacity was expanded by 18,250 TPA. In Phase II, in May 2013, the balance capacity of 18,250 TPA became operational with the commissioning of the Power Plant.

The 120,000 TPA greenfield VSF project at Vilayat (Gujarat) is nearing completion and is expected to go on stream in the 2nd Quarter of the FY 2013-14. To improve the technology and efficiency of your Company''s VSF plant at Nagda, a major revamp in phases, spread over the next three years is underway.

The Chemical plant (Caustic Soda - 182,500 TPA), also at Vilayat, commenced commercial production in May 2013. There will be a gradual ramp up in capacity in the first half of the FY 2013-14.

Work on the Epoxy project (51,500 TPA) at Vilayat is progressing, and the same is likely to be commissioned by September 2013.

Expansion of Cement Capacity

Your Company''s subsidiary, UltraTech Cement Limited (UltraTech), has initiated several projects across its locations. Of these, the following projects have been commissioned -

- Clinkerisation plant of 3.30 Mn. TPA at Rawan, Chhattisgarh

- Grinding unit of 1.55 Mn.TPA at Hotgi, Maharashtra

- Increase in cement grinding capacity by 0.60 Mn. TPA at Gujarat plant

- Bulk terminal at Cochin, Kerala

- Wall-care putty plant at Katni, Madhya Pradesh. With the commissioning of these projects, the cement capacity of UltraTech has increased from 51.75 Mn. TPA to 53.90 Mn. TPA. The clinkerisation plant of 3.30 Mn. TPA in Karnataka is expected to go on stream in Q1 of the FY 2013-14.

UltraTech is committed to growth and towards this end, its Board has approved the expansion of capacity at its Aditya Cement Works in Rajasthan by 2.9 Mn. TPA, including the setting up of two grinding units. This expansion envisages a capital outlay of around Rs. 2,000 crore to be funded through a mix of internal accruals and borrowings. The additional facility is expected to be commissioned by March 2015.

With the commissioning of these and other projects in the pipeline, UltraTech''s cement capacity will stand augmented to 64.45 Mn. TPA by March 2015.

FINANCIAL PERFORMANCE

Your Company has reported improved performance for the year, achieving higher Revenue and PBIDT, despite the economic slowdown as reflected in decline in the Indian GDP growth to ~5%. The Company''s Revenue increased by 11% at Rs. 27,904 crore (Rs. 25,245 crore). PBIDT was up from Rs. 6,321 crore to Rs. 6,543 crore, a growth of 4%, led by improved volumes in the VSF business and cost optimisation. Net Profit was Rs. 2,704 crore as compared to Rs. 2,647 crore in the FY 2011-12.

Your Company''s subsidiary, UltraTech, reported a net profit of Rs. 2,678 crore vis-a-vis Rs. 2,403 crore, reflecting a growth of 11%. The pressure on input and logistic cost continued, though there was some relief on account of the softening in prices of imported coal.

(Rs. in Crore)

Consolidated Standalone 2012-13 2011-12 2012-13 2011-12

Revenue from Operations (Net) 27,904.32 25,244.89 5,255.01 4,973.56

Profit before Interest, Depreciation/ Amortisation and Tax (PBIDT) 6,543.12 6,320.60 1,522.75 1,721.81

Less: Finance Costs 324.14 313.99 39.09 35.82

Less: Depreciation and Amortisation 1,252.06 1,154.41 159.21 144.20

Profit before Exceptional Item and Tax 4,966.92 4,852.20 1,324.45 1,541.79

Add: Exceptional Item 204.43 - 204.43 -

Profit Before Tax 5,171.35 4,852.20 1,528.88 1,541.79

Tax Expense 1,467.21 1,320.77 302.89 364.79

Profit After Tax 3,704.14 3,531.43 1,225.99 1,177.00

Add: Share in Profit /(Loss) of Associates 73.65 63.16 - -

Less: Minority Interest 1,073.40 947.13 - -

Profit for the Year 2,704.39 2,647.46 1,225.99 1,177.00

Balance brought forward from Previous Year 778.77 1,520.49 662.34 703.72

Surplus available for Appropriation 3,483.16 4,167.95 1,888.33 1,880.72

Appropriations:

- Reserve Fund 0.77 0.50 - -

- General Reserve 2,424.51 3,206.23 122.60 1,000.00

- Debenture Redemption Reserve 9.36 (71.50) - -

- Proposed Dividend 206.52 206.36 206.52 206.36

- Corporate Dividend Tax 51.75 47.59 9.81 12.02

- Share of Appropriation related to Associates 2.16 - - -

- Balance carried to Balance Sheet 788.09 778.77 1,549.40 662.34

3,483.16 4,167.95 1,888.33 1,880.72

DIVIDEND

Your Directors have recommended a dividend of Rs. 22.50 per equity share, same as per last year. The dividend, if approved by the members, would involve a cash outflow of Rs. 216 crore (inclusive of Corporate Dividend Tax).

Equity shares that may be allotted upon exercise of Options granted under the Employee Stock Option Scheme and out of the Share Capital Suspense, and 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 SCHEME (ESOS)

During the year:

- 19,334 Options were vested out of the Options granted in the earlier years; and

- 66,764 Options were exercised and, accordingly, 66,764 shares were allotted to the concerned option holders.

The details of Employee Stock Options granted pursuant to the Employee Stock Option Scheme - 2006 (ESOS - 2006), as also the 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 the Annexure "A" to this Report. Your Board has also approved formulation of a new Employee Stock Option Scheme. Items seeking your approval for introduction and implementation of the new ESOS Scheme exercisable into not more than 2,30,000 equity shares of Rs. 10/- each by the permanent employees, including any managing or whole-time director(s), of your Company and its subsidiary companies, are included in the Notice convening the AGM together with the Explanatory Statement.

A certificate from the Statutory Auditor on the implementation of your Company''s Employee Stock Option Scheme will be placed at the ensuing Annual General Meeting for inspection by the Members.

FINANCE

Your Company raised long-term rupee loan of Rs. 537 crore for financing its VSF expansion projects. Term loans aggregating Rs. 73 crore were repaid during the year.

Your Company has adequate liquidity and a strong balance sheet. CRISIL Limited has re-affirmed the "CRISIL AAA/Stable" and "CRISIL A1 '''' rating for your Company''s long-term borrowings and short- term bank loan facilities, respectively, aggregating to Rs. 2,900 crore. Credit Analysis & Research Limited (CARE) has also re-affirmed the "CARE AAA" and "CARE A1 " rating for your Company''s long-term and short-term borrowings respectively, aggregating to Rs. 3,000 crore.

AWARDS AND ACCOLADES

Some of the significant accolades earned by your Company during the year include:

- Certificate of Excellence Award for the year 2011-12 from Container Corporation of India Limited for achieving the largest volume as importers in terms of Twenty Foot Equivalent Units (TEUs) at Railway Container Terminal, Vadodara: Birla Cellulosic Division, Kharach

- Gold Award for the year 2012 from Greentech Foundation, New Delhi, for outstanding achievement in Environment Management in the Chemical Sector: Chemical Division, Nagda

- Bhamashah Award for the year 2011-12 from Commercial Tax Dept., Govt. of Madhya Pradesh, for being the third largest tax payer: Caustic Soda Membrane Cell Division, Nagda

RESEARCH AND DEVELOPMENT

Significant progress was made during the FY 2012-13 in building the technology capabilities to address competitive market threats and begin laying the groundwork for significant profitable growth. Key technology programmes were developed in the areas of fibre and cellulose pulp quality and towards enhanced product performance, reduced production costs and improved environmental sustainability. There is progress on building enabling capabilities in the areas of facilities and infrastructure, technology organisation staffing and development, and the engagement of external knowledge networks to complement internal capabilities. The recruitment of professional staff and leadership is ongoing and the programme and staff managing processes have been defined and are being instituted. Some key highlights are outlined to illustrate the progress being made.

Programme Portfolio

A comprehensive quality improvement approach, centred on instituting statistical process control and Six Sigma continuous improvement techniques, has been launched in both fibre and cellulose pulp sites. Significant reductions in process variation are being accomplished, and a robust customer monitoring and a feedback process are enabling the assessment of ongoing quality performance versus competition. Common metrics are being developed across all sites to track improvement and to enable the sharing of best operating practices to accelerate progress. Chronic process and fibre finish issues have been defined, which require additional technology development. Business and corporate R&D resources have been engaged to provide this support. These advances are aimed at significantly enhancing our customers'' satisfaction levels.

A number of programmes, aimed at enhanced fibre product performance, were launched for producing dyed fibres, higher wet modulus and tenacity products, and the incorporation of high value attributes into viscose staple fibres.

Technology developments aimed at reduced costs and improved environmental sustainability are underway. These aim at increasing process productivity and reducing chemical material and energy requirements in the existing processes. Programmes exploring alternative process concepts with superior environmental performance are on, including contributions by external knowledge network partners.

Structured Forestry Plantation R&D programmes commenced at Harihar and Laos. Suitable genetic materials adapted to local edaphic-climatic conditions were selected, and are being used to establish base populations for future genetic selection and breeding. A multi-disciplinary approach to create sustainable and eco-efficient forestry was started. This included 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.

Enabling Capabilities

Extensive new capabilities for pulp R&D were added as part of the Domsjo acquisition, strengthening the existing infrastructure for developments along the entire value chain. This group has now developed a portfolio of programmes aimed at enhancing the value of pulp supplies and improving their use in the fibre facilities. The Wood and Pulp Research Centre at Harihar has been strengthened, and is contributing to better tree stocks for local wood supplies. The contribution of Birla Research Institute for Applied Sciences (for fibres) at Nagda and the Textile Research and Application Development Centre (TRADC) at Kharach to new process and product development, and expanded applications for fibres are commendable. The India-based Centres have accreditations from the Ministry of Science and Technology, Government of India. The project to expand fibre R&D at the Aditya Birla Science & Technology Company Ltd., an Associate of your Company at Taloja, is nearing completion. It will provide significantly enhanced laboratory and semi- works capabilities for fibre research. The semi- commercial scale Fibre Research Centre at Kharach is under construction, and is expected to contribute significantly to the fibre process and product R&D programmes in 2013. 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 growth.

The technology organisation for the business has been strengthened with the recruitment of R&D professionals with diverse backgrounds, capabilities and experiences. A core team of 20 R&D professionals are actively engaged in various technology programmes and initiatives. External knowledge networks to complement internal capabilities have been developed, providing access to advanced technologies in the areas of cellulose pulp and novel new fibres. Many key technology leadership positions have been filled and work is continuing to staff the remaining opportunities.

Systematic programme and intellectual property management processes, engaging all the key business stakeholders, have been developed and are being implemented across all aspects of R&D. An organisation structure and associated personnel management system have been developed and are in the process of being adopted.

All our R&D Centres are being further strengthened with new equipment and analytical instruments.

In summary, significant progress has been accomplished in the areas of programme portfolio development, infrastructure project execution, staff recruiting and development, and the creation of the overall R&D function operating systems. We look forward to the significant contributions and this R&D capability will deliver to the Pulp and Fibre business.

HUMAN RESOURCES

Several innovative people - focused initiatives have been instituted at the Group level, and these are translated into action at all of the Group Companies. Our basic objective is to ensure that a robust talent pipeline and a high-performance culture, centred around accountability is in place. We feel this is critical to enable us retain our competitive edge.

CORPORATE GOVERNANCE

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 stipulations.

As required by Clause 49 of the Listing Agreement of 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 or loss 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; 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 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. 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, attached to this Report and forms part of it as Annexure "B".

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.

DIRECTORS

Mr. Shailendra K. Jain, Dr. Thomas M. Connelly, Mr. M.L. Apte and Mr. R.C. Bhargava, the existing Directors of the Company, retire from office by rotation and, being eligible, offer themselves for re-appointment.

A brief resume of the Directors, being re-appointed, has been incorporated in the notice of the ensuing Annual General Meeting.

AUDITORS

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, 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, 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 Sub-section (1B) of Section 224 of the Companies Act, 1956.

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 the Company.

Resolutions seeking your approval on these items are 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.

COST AUDITORS

In pursuance of Section 233-B 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 2013-14.

Pursuant to Cost Audit (Report) Rules, 2001, the Cost Audit Report of the Company for the financial year ended 31st March, 2012, was filed on 30th January, 2013, vide SRN No. S20083218 with the Ministry of Corporate Affairs, New Delhi.

APPRECIATION

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.

For and on behalf of the Board

Kumar Mangalam Birla

Chairman

Mumbai, 4th May, 2013


Mar 31, 2012

TO THE MEMBER OF GRASIM INDUSTRIES LIMITED,

The Directors have pleasure in presenting the 65th Annual Report and Audited Accounts of the Company for the year ended 31st March, 2012.

As the Management Discussion and Analysis Section focuses on your Company's strategies for growth and the performance review of the businesses/operations of the Company in depth, your Board is providing only a brief overview.

STRATEGIC ACQUISITION

Acquisition of Domsjo Fabriker AB, a Swedish Pulp Manufacturing Company

During the year under review, your Company acquired a 1/3rd stake in Aditya Group AB, Sweden, which controls Domsjo Fabriker AB, Sweden ("Domsjo"), a leading manufacturer of specialty pulp used in the manufacture of Viscose Staple Fibre (VSF). The acquisition will ensure supply of high quality dissolving grade pulp for your Company's VSF projects.

GROWTH OF THE EXISTING BUSINESSES Expansion of VSF Capacity

Your Company's VSF greenfield project (120,000 TPA) at Vilayat (Gujarat) and brownfield expansion (36,500 TPA) at Harihar (Karnataka) are progressing in line with the schedule. The Caustic Soda project (182,500 TPA) at Vilayat is also on track. The Vilayat projects are slated for commissioning by the end of the current financial year, while the Harihar project will be commissioned in two phases during the current financial year.

Expansion of Cement Capacity

Your Company's subsidiary, UltraTech Cement Limited (UltraTech), is setting up additional clinkerisation plants at Chhattisgarh and Karnataka, grinding units, bulk packaging terminals and ready- mix concrete plants at various locations. These are expected to be operational by Q1 FY14. Consequently, UltraTech's cement capacity will stand enhanced by 10 million TPA at 62 million TPA.

These projects are being funded through a judicious mix of internal accruals and borrowings.

FINANCIAL PERFORMANCE

Your Company has reported improved performance during the year with its Consolidated Revenue from Operations (Net) surpassing the Rs 25,000 crore mark at Rs 25,244 crore (up by 17%) and Consolidated Profit for the year growing by 16% at Rs 2,647 crore.

The performance of your Company's subsidiary, UltraTech, improved on all 3 parameters, viz., Production, Sales and Profitability. Variable cost increased, driven by high input and energy costs.

(Rs Crore) Consolidated Standalone 2011-12 2010-11 2011-12 2010-11

Revenue from Operations (Net) 25,244.30 21,550.23 4,969.72 4,640.06

Profit before Interest, Depreciation/ Amortisation and Tax (PBIDT) 6,320.25 5,394.52 1,721.81 1,816.80

Less: Finance Costs 313.64 406.75 35.82 45.81

Less: Depreciation 1,154.41 1,138.37 144.20 176.29

Profit before Tax 4,852.20 3,849.40 1,541.79 1,594.70

Tax Expense 1,320.77 954.21 364.79 412.99

Profit after Tax 3,531.43 2,895.19 1,177.00 1,181.71

Add: Share in Profit /(Loss) of Associates 63.16 43.78 - -

Less: Minority Interest 947.13 659.96 - -

Profit for the Year 2,647.46 2,279.01 1,177.00 1,181.71

Amount Transferred on Change in

Stake in Subsidiaries /Joint Ventures - (350.01) - -

Balance brought forward from Previous Year 1,520.49 3,499.23 703.72 2,219.07

Surplus Available for Appropriation 4,167.95 5,428.23 1,880.72 3,400.78

Appropriations:

- Reserve Fund 0.50 0.29 - -

- General Reserve 3,206.23 3,618.55 1,000.00 2,500.00

- Debenture Redemption Reserve (71.50) 65.17 - -

- Proposed Dividend 206.36 183.40 206.36 183.40

- Corporate Dividend Tax 47.59 40.33 12.02 13.66

- Balance carried to Balance Sheet 778.77 1,520.49 662.34 703.72

4,167.95 5,428.23 1,880.72 3,400.78

DIVIDEND

Your Directors have recommended a dividend of Rs 22.50 per equity share. The dividend, if approved by the members, would involve a cash outflow of Rs 218.38 crore (inclusive of Corporate Dividend Tax).

Equity shares that may be allotted upon exercise of Options granted under the Employee Stock Option Scheme and out of the Share Capital Suspense, and 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 SCHEME (ESOS)

During the year:

- 6,037 Employee Stock Options were granted to the eligible employees of the Company;

- 45,388 Options were vested out of the Options granted in the earlier years; and

- 10,964 Options were exercised and, accordingly, 10,964 equity shares were allotted to the concerned option holders.

The details of Employee Stock Options granted pursuant to the Employee Stock Option Scheme

- 2006 (ESOS - 2006), as also the 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 the Annexure 'A' to this Report.

FINANCE

Your Company raised a long-term rupee loan of Rs 169 crore for financing its VSF expansion projects. Term loans aggregating Rs 259 crore were repaid during the year.

AWARDS AND ACCOLADES

In recognition of the extraordinary contribution made towards setting corporate governance standards in India, for authoring the first ever Securities and Exchange Board of India (SEBI) initiated Corporate Governance Report in India and for benchmarkable Governance standards in Aditya Birla Group companies, the Asian Centre for Corporate Governance and Sustainability has conferred the "Transformational Leader Award" on Mr. Kumar Mangalam Birla.

Some of the significant accolades earned by your Company during the year include:

- GREENTECH Environment Award 2011 - Gold Award - from Greentech Foundation: Chemical Division, Nagda (M.P.)

- State Level Safety Award (1st Prize for Fuel Efficient Boiler) from Karnataka State Safety Institute: Grasilene Division, Harihar (Karnataka)

- Best Fuel Efficient Boiler Award (1st Prize) from Department of Factories and Boilers, Government of Karnataka: Grasilene Division, Harihar

- Unnatha Suraksha Puraskara from National Safety Council, Karnataka, for Outstanding Safety Performance and Management Systems during 2009-10: Harihar Polyfibers, Harihar

- Best Tax Payer Award (2nd Prize) for 2009- 10 from M.P. State Government: Staple Fibre Division Nagda

RESEARCH AND DEVELOPMENT

The focus on building the business' technology capabilities moved forward significantly in 2011. The new leadership team began the development and execution of a comprehensive technology plan extending from plantation to fibre. Extensive new capabilities for pulp R&D were added as part of the Domsjo acquisition strengthening the existing infrastructure for developments along the value chain including the Wood and Pulp Research Centre at Harihar, Birla Research Institute for

Applied Sciences (for fibres) at Nagda and the Textile Research and Application Development Centre (TRADC) at Kharach. These Centres have accreditations from the Ministry of Science and Technology, Government of India. Plans for expanding fibre R&D at Aditya Birla Science & Technology Company Ltd., an Associate of your Company at Taloja, were also initiated along with the pursuit of the semi-commercial scale Fibre Research Centre in Kharach. These investments coupled with the growing analytical and research support available through the Corporate R&D organisation at Taloja, are critical to your Company's growth.

Important programmes aimed at improving pulp quality, productivity, environmental management and cost were supported by the Wood and Pulp Research Centre and the R&D organisation at Domsjo. A global programme portfolio is being formulated as part of the technology plan.

The thrust on developing a novel next generation cellulosic fibre continued at the Birla Research Institute for Applied Sciences. The programme was critically reviewed in the 4th quarter to assess the current technology barriers, and work streams were initiated to define leads for resolution of the issues.

A new process variation for viscose production was successfully tested at bench scale, given its potential for quality and environment improvement at a competitive cost. A novel process and plant for treatment of emissions from VSF manufacturing has been successfully demonstrated on an industrial scale on one of our lines.

Scouting work aimed at creating specialty fibres with innovative characteristics is ongoing. For example, incorporation of nano-cellulose in our fibres is being explored as a route to enhanced tensile properties. Several additional specialty variants of viscose fibres, based on market feedback of limited test quantities, are in the first iteration of testing.

Major application development and downstream process innovations carried out at TRADC include development of Nylon/Excel blended fabrics for

the Army and its comparison with Nylon/Cotton blended fabrics, process optimization to make superior quality yarns from spun-dyed black VSF for knits, and for processing knits made from Excel fibres for which the patent is pending.

All our R&D Centres are being further strengthened with new equipment and analytical instruments.

HUMAN RESOURCES

Your Company continues to believe that Human Resources would be a critical factor for its growth. The key focus of the business remained retaining and helping talent grow so as to meet the growth aspirations of the business. The emphasis was on grooming in-house talent enabling them to take higher responsibilities.

The Senior Management Team spent considerable time in reviewing the existing talent base and processes used for honing the skills of the members in the Talent Pool and assessing their preparedness for shouldering higher responsibilities.

CORPORATE GOVERNANCE

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 stipulations.

As required by Clause 49 of the Listing Agreement of Stock Exchanges, a separate section on Corporate Governance together with a certificate from your Company's Statutory Auditors, 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 or loss 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; and

iv) the annual accounts have been prepared on a going concern basis.

CONSOLIDATED FINANCIAL STATEMENTS AND RESULTS OF SUBSIDIARY COMPANIES

The 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. 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, attached to this Report (Annexure 'B') 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.

DIRECTORS

As you are aware, Mr. K.K. Maheshwari, who was the Whole Time Director of your Company, was appointed as its Managing Director by your Board on 6th March, 2012. His appointment is proposed for your approval in the ensuing Annual General Meeting (AGM) of the Company.

Mr. Kumar Mangalam Birla, Mr. B.V. Bhargava and Mr. D.D. Rathi, Directors of the Company, retire from office by rotation and, being eligible, have offered themselves for re-appointment at the ensuing AGM.

Mr. A.K. Dasgupta, the erstwhile Managing Director of Life Insurance Corporation of India (LIC) and the nominee of LIC on the Company's Board, has resigned with effect from 21st June, 2012. The Board places on record its sincere appreciation of the valuable services rendered by Mr. Dasgupta during his tenure as a Member of the Board.

At the request of LIC, Mr. N. Mohan Raj, Executive Director of LIC, was appointed as an Additional Director of the Company and accordingly, his appointment is placed for your approval.

Resolutions seeking your approval on these items are included in the Notice convening the AGM. The Board recommends the above appointments/ re-appointments. A brief resume of the Directors, being appointed/re-appointed, has been incorporated in the Notice of the ensuing AGM.

AUDITORS

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, 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, 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 Sub-section (1B) of Section 224 of the Companies Act, 1956.

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 the Company.

Resolutions seeking your approval on these items are 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.

COST AUDITORS

In pursuance of Section 233-B of the Companies Act, 1956, your Directors have appointed M/s. R. Nanabhoy & Co., Mumbai, and M/s. R.J. Goel & Co., Delhi, as the Cost Auditors to conduct the Cost Audit for the year 2012-13.

The due date for filing the Cost Audit Reports for the financial year 2010-2011 was 30th September, 2011 and the same were filed by the Cost Auditors on 12th September, 2011 and 17th September, 2011 respectively.

APPRECIATION

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.

For and on behalf of the Board

Kumar Mangalam Birla

Chairman

Date: 21st June, 2012

 
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