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GRASIM INDUSTRIES LIMITEDANNUAL REPORT 1999-2000

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Contents

Chairman's Letter ........................................................................................................ 3

Management's Discussion and Analysis ...................................................................... 7

Environment Report .................................................................................................. 21

Social Report .............................................................................................................. 23

Corporate Governance Report ................................................................................... 25

Shareholder Information ........................................................................................... 31

Board of Directors ...................................................................................................... 36

Directors' Report ........................................................................................................ 37

Auditors' Report ......................................................................................................... 45

Balance Sheet ............................................................................................................ 47

Profit and Loss Account ............................................................................................. 48

Schedules ................................................................................................................... 49

Cash Flow Statement ................................................................................................. 63

Statement relating to Subsidiary Companies ........................................................... 64

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Dear fellow shareholders,

GRASIM � IN FOCUS

Operational ReviewIt was a satisfactory year for Grasim operationally. Its key businesses namely, viscose staple fibre (VSF) and cementdemonstrated significant improvement benefiting from a turnaround in the economy, aggressive marketing, brandpromotion efforts and the positive impact of the restructuring initiated last year. Sponge iron also put in a commendableperformance during the year.

The VSF division reported improved volumes due to better export of VSF based downstream products and concertedmarketing efforts. The pickup in the economic and industrial activity as well as a turnaround in the housing andconstruction sectors proved advantageous for the cement division. Despite weak prices, the margins remained stable dueto gains from cement restructuring. The sponge iron division did a smart turnaround aided by a positive industryenvironment, subdued competition and benefits of several strategic moves made earlier. It remained a challenging yearfor the textile business, which suffered from sluggish demand, intense price competition and a rise in input costs.

Gross revenues have grown 16% year-on-year to Rs.4,982 Crores in 1999-2000. Operating margins remained flat,despite serious cost reduction measures, on account of higher input costs and lack of pricing power in the VSF and cementbusinesses. Operating profits have gone up 13% from Rs.678 Crores to Rs.756 Crores while net profits soared by 42%year-on-year to Rs.233 Crores in 1999-2000.

Strategic FocusIt was a year of consolidation strategically. Grasim completed the cement restructuring process and concentrated onreaping its benefits. The 900,000 TPA cement plant in Tamil Nadu has commenced trial operations during the year.Commercial production went on stream in April 2000.

The Company has decided on the permanent closure of its pulp and fibre plants at Mavoor, Kerala consequent tocontinuing problems of raw material availability, increasing dependence on heterogeneous woods and the resultantadverse impact on fibre quality, cost and realisation. The plant operations remained suspended from May 1999. Itspermanent closure will enable Grasim prevent any further erosion in shareholder value.

Financial restructuring has been accomplished. Aggregate debts worth Rs.631 Crores were re-negotiated and couponsreset at around 11%-14.5% as against 15%-18.5% earlier. The positive impact of this move is partly reflected in thecurrent year. Its benefits will accrue over the next 3 years.

OutlookAs mentioned in my letter last year, Cement, and Fibre will be the focus areas going forward. The cement business willcontinue to be the platform for building shareholder value in future.

CementWe are excited about the growth opportunities in the cement industry. The positive outlook for the economy, acceleratinglevels of industrial activity and the expected augmentation in the housing sector augurs well. The growing focus ondevelopment of infrastructure will further strengthen long-term prospects of the industry. Our strategy for cement is threepronged: Improve capital productivity, enhance margins and reduce costs further.

Improving capital productivity and optimising use of physical, brand and distribution assets is the first leg of our strategy.We will achieve this by increasing market share in profitable regions, focusing on the retail segment and value addedproducts and by expanding capacities cost effectively. To ensure profitable growth in future, we will move close tocustomers.

The Chairman�s Letter to Shareholders

"It was a year ofconsolidationstrategically.

Grasim completedthe cement

restructuringprocess and

concentrated onreaping itsbenefits".

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We will strengthen our logistics management to reduce freight costs and concentrate on further lowering of energy costsin future. To do so, use of alternative energy sources, increasing share of imported coal and better process control is theroute chosen by us.

Grasim will aim to retain its brands as �brand leaders� in their respective markets to ensure higher realisation and bettermargins. It will also look for opportunities emerging from the industry consolidation process, leverage its market positionand strong cash flows to ensure profitable growth in future.

FibreThe outlook for the fibre business is positive and is predicated on the rising trend in the export of VSF based yarns, fabrics,made-ups and garments as well as increasing preference for VSF rich blends in the local markets. Regardless of thispositive outlook, industry volumes are expected to grow only modestly due to the mature nature of the VSF industry.Profitability then will depend on improved asset utilisation and ability to pass on cost increases to customers. Given suchan environment, Grasim�s strategy is to maintain its cost leadership and improve asset utilisation through marketenlargement and application development in future.

Grasim is the market leader and is amongst the lowest cost manufacturers in the world. It will focus on processimprovements, input cost reduction and improvement in consumption norms to increasingly tighten cost structure. It willbeef up its marketing and distribution network and concentrate on improvement in blend ratio to ensure higher volumesin future. Energies will be channelised on development of new applications by leveraging superior properties of VSF interms of better feel, hygiene and comfort. These measures will enable Grasim improve asset utilisation and margins infuture.

TextilesThe outlook for the textile sector remains challenging. The branded fabrics market is likely to remain stagnant and sufferfrom price competition even in the future. The domestic over-capacity, commoditisation of the suiting fabrics market andincreasing preference for ready-to-wear products will heighten the pressure. In such an environment, Grasim will laystress on improving efficiency and leveraging brand equity for stable returns. Our strategy is to enhance market share,strengthen distribution network and improve efficiency.

We will invest in our existing strong brands , �Graviera� and �Grasim suitings�, through aggressive marketing and brandpromotion. Product innovation and design development will be focused on for improved market share and bettervolumes. Amplifying our distribution network and better management of show rooms will be a priority to maximise thebenefits of the brand building efforts. Efficiency improvement for cost reduction and enhanced margins will be anotherarea of attention going forward.

SummaryIn essence, the Company�s growth will be driven by the cement business and VSF will remain a key contributor to earningsin future. The expected positive outlook for the cement and VSF coupled with well crafted strategies will ensure improvedvolumes and profitability in our core area of operations and enable us deliver enhanced value in future.

At this juncture, I would like to take the opportunity of placing on record my appreciation of the employees and themanagement team at Grasim. Their dedication and commitment have enabled us reap the benefits of the upturn in theeconomy and our core sectors optimally and better realise synergies of the restructuring efforts initiated last year. Ouremployees are, and will continue to be, integral to our success even in future.

THE ADITYA BIRLA GROUP � IN PERSPECTIVEI would now like to brief you on some of the measures taken by us at the Group level. As you are aware, tectonic shifts arechanging the very contours of the economic and business environment, regardless of geographic boundaries.Digitalisation, deregulation, globalisation and investor activism have altered the corporate landscape and ushered in anera of discontinuity. Organisations have had to reconstruct their business architecture and we, at the Aditya Birla Group,are no exception. To face these challenges, we have been constantly re-inventing our Group over the last few years.

"The Company�sgrowth will bedriven by theCement businessand VSF willremain a keycontributor toearnings infuture. Theexpected positiveoutlook for theCement and VSFbusinessescoupled with wellcrafted strategieswill ensureimprovedvolumes andprofitability inour core area ofoperations ".

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Our objective is to ensure success and deliver sustained value for our shareholders, customers, employees and thecommunity at large.

A slew of proactive measures have been unveiled, riding on our renewed strategic thrust, innovative structuralinitiatives and contemporary systems adoption. In my letter last year, I had shared several of these. Today, I wish tokeep you abreast of the progress achieved in these areas and the growth trajectory that we will traverse in this newmillennium.

Renewed Strategic ThrustFundamental value creation and a razor-sharp business focus continue to be the pillars of our strategic thrust.Consequent to the in-depth review of the business portfolio by the Boston Consulting Group, we have identified the corebusiness for each of our Companies. Businesses have been evaluated against stringent value-creation criteria. We havemade a conscious decision to build and grow only those businesses that have high value creation potential.

While in the past, our portfolio focused heavily on capital-intensive manufacturing businesses, the future may see usmove increasingly into knowledge-based, brand-management and service sectors, where again we will scout for apremium position � a position of leadership. At the portfolio level, we will continue to look into some of the businessesthat are futuristic and add to enhancing shareholder value.

Knowledge-based industries offer enormous growth. This sunrise sector is far less capital intensive and has the advantageof enhanced value creation in a much shorter time frame. Acquiring management control in Learning Byte Internationalby the overseas companies of the Group and the strategic alliance with Lawson for setting up the Lawson CompetencyCentre by Birla Consultancy and Software Services, a division of Grasim Industries Limited � are forward steps in thisdirection. Similarly, the acquisition of Madura Garments by Indian Rayon & Industries Limited has overnight catapultedthe Group to the top-of-the-league in the branded apparels sector. Importantly, these strategic moves have significantlyenhanced value for shareholders of Indian Rayon and Grasim.

In the new economy, cellular services offer a significant growth platform in the telecom sector that is rapidlyconsolidating. Our strategic alliance with Tata Telecommunications is a move that will help take our telecom businessahead.

To bring in sharper business focus in each of our businesses, so as to realise better synergies, we have recoursed torestructuring, where necessary. Restructuring of the cement business has not only created synergies and simplicity ofoperations, but has given us one resounding voice in the market place, propelling our growth from one strong platformvis-à-vis fragmented units in operation.

Structural InitiativesTo institutionalise enabling processes that help us benchmark with the best in the world, to align the interest ofshareholders and employees, and to better manage capital, we have chosen CVA (Cash Value added) as ourmeasurement metric. It is the cornerstone of the �value management� architecture, to which I am personallycommitted. CVA helps us focus on the three key aspects of value creation, i.e., profitability, asset productivity andgrowth. Simply put, CVA is a structured, exhaustive process that entails understanding business variables in depth andquantifying their effect on value creation. This process enables us put our finger on the key value drivers in everysingle activity that we do.

In response to the changing times, we are continuously striving to make the Aditya Birla Group as market-driven andagile as possible. To do so, we are doing our utmost to create an organisational ambience where talent can bloom.Unleashing people power in a planned manner through a focus on their growth, development and learning is our priority.

"While in the past,our portfolio

focused heavily oncapital-intensive

manufacturingbusinesses, the

future may see usmove increasingly

into knowledge-based, brand-

management andservice sectors,

where again wewill scout for a

premium position� a position of

leadership".

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Our thrust is on developing the Group�s intellectual capital. Infusion of fresh blood and talent at all levels coupled withthe creation of �thought leaders� has gained momentum.

Six directors have been inducted at the Corporate level and professionals of high calibre have been recruited. Theretirement policy has been implemented and succession plans are in place. Building, developing and upgradingcompetencies across the Group through training continues as an ongoing activity. These steps will not only help us nurtureleaders, but capable, self-assured colleagues across all levels. The push on growing intellectual capital in the Group willpropel it to new heights of value-creation in future.

Contemporary Systems AdoptionWe are institutionalising processes to realise better value for our shareholders. To create a wired organisation, which willaccentuate the quality of communication and information flow throughout the Group, we have set up the �Aditya BirlaInformation Highway�. �Gyanodaya� our temple of learning has gone on-stream. It will help us constantly upgrade ourknowledge base.

These proactive measures, in my view, will help weave our Group into one seamless organisation, with the singular aimof creating value for our shareholders in 21st century and beyond.

Thank you,

Yours sincerely,

28th April, 2000 Kumar Mangalam Birla

"Our thrust is ondeveloping theGroup�sintellectualcapital. Infusionof fresh bloodand talent at alllevels coupledwith the creationof �thoughtleaders� hasgainedmomentum".

Mumbai

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Management�s Discussion and Analysis

OVERVIEWIt was a satisfactory year for Grasim operationally. Its key businesses demonstrated substantial improvement on the back of an economicrecovery and improved demand for key products namely, Viscose Staple Fibre (VSF), Cement and Sponge Iron. Aggressive marketing efforts,relentless focus on efficiency improvement and cost control measures contributed towards improved performance during the year.

The Viscose Staple Fibre (VSF) business reported improved volumes benefiting from the rising trend in deemed exports, increase in prices ofsubstitute fibres and concerted marketing efforts taken by the Company. The Cement business improved volumes following a pick-up in theeconomy and with the benefits of restructuring initiated last year. The Sponge Iron business reported turnaround in operations consequent tothe modest recovery in the steel sector, subdued competition and reduced threat of cheaper substitute imports.

Reflecting these, gross revenues grew by 15% year-on-year (YoY) to Rs.4,982.3 Crores in 1999-2000. Operating margins remained flat despiteimproved asset utilisation. The lack of pricing power in VSF and Cement businesses offset the impact of serious cost reduction measures takenby the Company. Operating profits grew from Rs.678 Crores in 1998-99 to Rs.756 Crores in 1999-2000, while net profits soared 42% YoY fromRs.164 Crores to Rs.233 Crores during this period.

STRATEGIC MOVES TO ENHANCE SHAREHOLDER VALUEStrategically, it was a year of consolidation. The Company successfully completed the cement restructuring process initiated last year andconcentrated on realising its benefits at the Cement division. Other strategic moves made by the Company to enhance value included thecommissioning of a new cement plant in Tamil Nadu, restructuring of the existing debt, closure of pulp and VSF plants at Mavoor, Kerala.

Cement Restructuring

The Company completed the cement restructuring process during this year. The necessary approvals from the High Courts of Gujarat andMadhya Pradesh for the acquisition of the cement division of Indian Rayon and Industries Limited were received and equity shares were issueddirectly to the shareholders of Indian Rayon. Grasim concentrated on realising synergy gains by realigning resources, centralising marketingand procurement activities and rationalising the marketing and distribution structure. The realised benefits were in excess of its initialestimates and had telling impact on the divisional volumes and profitability in 1999-2000.

Commenced Trial Runs at �Grasim South�

The Company completed the construction of a new 900,000 tpa cement plant in Tamil Nadu during the year. The plant was set up at the costof Rs.315 Crores, including the cost of a 12 MW diesel generating set and modvat benefits. Trial runs at the plant commenced during mid-March 2000. Commercial production started during April 2000. The new plant is equipped with an auto/robot lab system to ensure uniformand consistent quality of cement produced. This together with Grasim�s existing strong brand equity will enable it to strengthen its presence inthe high growth, profitable markets of Tamil Nadu and Kerala.

Restructured Existing High Cost Debt

The Company focused on financial restructuring as well. Given the high cost nature of its existing debt and risk associated with the commoditynature of its businesses, Grasim took serious efforts in this regard. It successfully restructured Rs.630.7 Crores of debt during the year.

The Company pre-paid debts worth Rs.327 Crores carrying a coupon of 15%-18.5% and refinanced the same at 14.5% as a compositepackage. This resulted in a savings of Rs.11.5 Crores during the year under review and will result in a further savings of Rs.10 Croresduring the next three years.

The coupon on XII Series Non-Convertible Debentures of Rs.26.67 Crores was reset at 13.25% against original coupon of 18%, effectiveJuly 1999. These debentures are due for redemption in June 2000 and the coupon reset will thus result in net savings of Rs.1.10 Croresover the remaining life of these debentures.

Debts worth Rs.277 Crores were re-negotiated and coupon reset at 11% by making certain upfront payments. These debts carried acoupon of around 17%-18%, besides redemption premium in one case. The reset of coupon, net of upfront payment made, will result inan interest saving of Rs. 11 Crores over the remaining life of the debt. The new rates will be effective 1st April 2000 and the impact ofreduced coupon will be seen during the current financial year.

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Suspended Operations at MavoorThe Company suspended operations at the pulp and fibre plants at Mavoor, Kerala from 15th May 1999 and have filed an application for thepermanent closure. This was due to continuing poor availability of comitted quantities of quality wood from the State Government andincreasing dependence on heterogeneous wood, which impacted the quality of dissolving pulp and VSF therefrom and resulted in increasedcost of production.

The Company received less than 60% of contracted wood supplies during last 6 years, despite a subsisting agreement with the KeralaGovernment. As a result, the Company was compelled to procure even unsuitable raw material from neighbouring states paying hugetransporation and other costs. The use of heterogeneous wood affected the quality of pulp and fibre adversely and forced Grasim to liquidateinventory at discounted rates. The pulp and fibre units incurred huge losses leading to significant erosion of Shareholders value.

There appeared no definite signs of improvement in wood supplies from the Kerala Government to sustain operations, to produce quality pulpand disposal of poor quality VSF, produced at higher costs, was posing a serious problem. Grasim therefore decided to suspend operations inMay 1999 and opted for permanent closure of Mavoor plants. The State Government has rejected Grasim�s application for permanent closureduring October 1999 and a review petition has been filed already. The operations at the pulp and fibre units, in the meantime, remainsuspended.

Rationalisation of Work Force at the Fibre DivisionTo improve margins through productivity improvements, a voluntary retirement scheme (VRS) was introduced at the VSF divisions in Nagdaand Harihar as well as at the Engineering division in Nagda. The Scheme was opted by 748 employees, which together with on-going VRS atthe textile division enabled the Company reduce employee strength by 854 at a total cost of Rs.18 Crores. The Company has decided to write-off the entire cost in one year and has thus taken a non-recurring charge of Rs.18 Crores in the revenue account in 1999-2000.

SEGMENTAL ANALYSIS AND REVIEWThe key businesses of the Company viz., VSF and Cement together accounted for 76% of gross turnover in 1999-2000. Sponge iron andtextiles accounted for 10% and 7% of gross revenues respectively.

VISCOSE STAPLE FIBRE (VSF)1999-00 1998-99 % Change

Installed Capacity (TPA) 246,775 * 246,775 �Production (Tonnes) 188,002 164,355 14.4Sales Volume (Tonnes) 192,452 164,130 17.3Gross Divisional Turnover (Rs. Crores) 1,688.2 1,614.1 4.6- Viscose Staple Fibre & Allied Chemicals 1527.7 1360.6 12.3- Pulp** 160.5 253.5 (-)36.7Net Divisional Turnover (Rs. Crores) 1451.4 1388.8 4.5- Viscose Staple Fibre & Allied Chemicals 1290.9 1135.3 13.7- Pulp** 160.5 253.5 (-)36.7VSF Realisation (Rs./Kg) 64.5 66.1 (-)2.4Operating Margins before employee separation costs (%)@ 31.4 33.4 �

* Includes 26,000 TPA capacity at Mavoor plant, which remains suspended** Inter-divisional transfers@ Operating margins calculated on the Divisional Net Turnover, excluding pulp, which is meant for captive consumption; Operating margins after employee separation costs

is 30.5% vis-à-vis 33.4% last year.

Business Mix

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Review of Operations

It was a satisfactory year for the VSF division, which reported improved capacity utilisation, higher sales volumes and revenues. Divisionaloperating margins suffered due to lower realisation, increased costs and fixed overheads of the Mavoor plant, which remained suspended from15th May 1999.

Improved volumes

The sales volumes rose sharply from 164,130 tonnes to 192,452 tonnes in 1999-2000, reflecting an increase of 17% YoY. The upturn involumes, after two years of sluggish growth, was due to improved export of VSF based yarns and textiles from India, availability ofinternational quality VSF from the Company�s Kharach plant and a favourable blend ratio in the domestic market.

The Company, in addition to its focus on greater field penetration and improvement in quality of service, endeavoured to segment the marketsfor warding off competition from cheaper substitute fibres. The Company divided user industry in smaller segments based on usage profileand developed specific marketing strategies for individual segments. These approaches enabled Grasim better market its produce to usersegments and create a sustainable demand for its products. To improve service to customers and strengthen brand equity further, severalregional and branch offices were setup.

Concurrently, efforts are being made to �Customaries the Commodity� for the first time in the global VSF industry by covering the entire valuechain and establishing strategic alliance with the manufacturers of several VSF based end products on the merit of superior properties of VSFin terms of feel, comfort and hygiene. The strong growth in sales volumes, up 17% at 192,452 tonnes, is the reflection of the marketacceptance of this new strategy and increased recognition of Grasim's focus on product quality and customer service.

Profitability under pressure

Despite buoyant market conditions, the Company followed a cautious pricing strategy to induce a favourable change in blend ratio (i.e.,viscose rich PV blends) and higher volumes. This necessitated offering of appropriate incentives and promotional rebates for specific usersegments, which in turn affected the overall realisation during the year. The average realisation declined from Rs.66.1/Kg in 1998-99 toRs.64.5/Kg in 1999-2000, reflecting a fall of around 2% YoY.

Operating margins fell marginally from 33% in 1998-99 to 31% in 1999-2000, due to a marginal fall in the realisation and fixed overheadsof the Mavoor plant. The Company�s average cost of VSF production increased by 1.7% YoY due to increase in input costs and fixed costs ofRs.2.3 Crores per month associated with the Mavoor plant. The impact would have been even larger but for better asset utilisation, reductionin consumption norms and lower manufacturing costs.

Sector Outlook

The outlook for VSF industry is positive and is predicated on the likely strong growth in export of VSF based yarns, fabrics, made-ups andgarments as well as a favourable trend of VSF rich blends in the domestic market. The recovery in Indian economy is likely to boost demandfor textiles in the domestic market while recovery in the Asian economies is likely to strengthen prospects of direct as well as deemed exportsof VSF based downstream textile products. This augurs well for the domestic VSF industry.

The forecast firm outlook for global petrochemical prices and resultant likely stabilisation of PSF prices at a higher level in the local marketswill also contribute towards improved VSF demand locally. The reduction in gap between prices of VSF and PSF, together with the superiorproperties of VSF in terms of feel, comfort and hygiene is likely to induce viscose rich PV blends. Consequently we expect a healthy growth inVSF consumption and forecast demand to grow 4-5% annually over the next few years. This is significant considering the mature nature of theVSF industry globally.

The profitability of domestic VSF manufacturers rests on improved asset utilisation, cost cutting and the ability to pass on the increase in pulpprices to customers. VSF prices are likely to firm up during the year on the back of increasing prices of rayon grade wood pulp globally.

Outlook for Grasim�s VSF Business

Grasim is the market leader with over 90% share of the domestic industry and is also amongst the lowest cost manufacturers in the world.Going forward, Grasim will focus on maintaining cost leadership and improving asset utilisation through market enlargement and applicationdevelopment.

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Maintaining cost leadershipGrasim�s strategy for improving cost competitiveness is two pronged: Focus on process improvements for reduced consumption norms andreduce cost of key inputs.

The Company successfully implemented a zinc free process, developed in-house, in the VSF manufacture at its Nagda and Harihar plants. Thishas enabled it to reduce consumption of pulp, zinc and effluent treatment chemicals and eventually result in lower manufacturing costs infuture. The Company ensured better control over supply and cost of key input i.e., rayon grade wood pulp, by acquiring a 33% share of outputfrom A V Cell Inc., Canada. The acquisition, made along with other VSF manufacturing units of the Aditya Birla Group last year has enabledGrasim source quality wood pulp at competitive prices. The benefits of these measures are already reflected in the operations and will accrueto the Company in future as well. The Company is continuously looking for such opportunities with the objective of improving processefficiencies and reducing costs further.

Improving asset utilisationThe Company�s strategy for improving asset utilisation is pegged on three critical areas: Expanding the market through greater fieldpenetration, applications development and strengthening of exports.

Greater field penetrationThe Company will augment its marketing and distribution network and re-orient them towards segmented marketing approach to improvevolumes. Concurrently, it is concentrating on improving quality of support to customers.

Application developmentGiven the declining trend in VSF consumption in traditional areas, identification of new application becomes critical for sustainable volumegrowth in future. To leverage superior properties of VSF in terms of better feel, comfort, hygiene and aesthetics, Grasim has established anApplication Development Centre. The Company is exploring possibilities of strategic alliances with large manufacturers of downstream textileproduct manufacturers for commercial exploitation of such new applications and is confident of achieving positive results in the near future.

Strengthening of exportsThe prospects of VSF exports are brightening due to the erosion of developed countries� cost competitiveness in the textile industry andcontinuance of DEPB incentives. The Company is promoting speciality fibres, such as spun dyed, micro and macro denier fibres as well tostrengthen their direct and deemed exports. Energies will be concentrated on creating a brand equity for the Company�s products in theInternational markets, leveraging on its wide product range, logistics, technical support and application development efforts.

CEMENT1999-00 1998-99 % Change

Grey CementInstalled Capacity (TPA) 82,00,000 82,00,000 �Production (Tonnes) 83,96,110 58,23,378 44.2Sales Volume (Tonnes) 84,15,088 58,77,704 43.2Gross Divisional Turnover (Rs. Crores)* 1,757.5 1,246.0 41.1Net Divisional Turnover (Rs. Crores) 1,461.3 1,041.3 40.3Average Ex-Factory Realisation (Rs./Ton) 1,179 1,234 (-)4.5

White CementInstalled Capacity (TPA) 360,000 360,000 �Production (Tonnes) 240,492 131,979 82.2Sales Volume (Tonnes) 240,014 133,660 79.5Gross Divisional Turnover (Rs. Crores) 149.4 80.1 86.5Net Divisional Turnover (Rs. Crores) 120.8 64.4 87.6Average Ex-Factory Realisation (Rs./Ton) 4,577 4,495 1.8

Gross Divisional Turnover (Rs. Crores) 1,906.9 1,326.1 43.8Net Divisional Turnover (Rs. Crores) 1,582.1 1,105.7 43.0Operating Margins (%) ** 13.3 13.5 �

Note: Figures for the current year are not strictly comparable with those of previous year. The figures for 1999-2000 includes performance of erstwhile cement division ofIndian Rayon for the full year whereas the figures for 1998-99 include performance for only 7 months since the acquisition was effective only from 1st September 1998.* Includes turnover of Rs.10.49 Crores (previous year -Rs.1.93 Crores) from ready-mix concrete** Calculated on Net Divisional Turnover

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Review of Operations

The Cement division reported an encouraging performance during the year. It benefited from an upturn in the economy and pick-up in thehousing and construction sectors and reported improved volumes and utilisation. Divisional margins remained flat due unfavourable pricesituation, increased competition and sharp rise in input costs, which could not be passed on entirely to customers.

Improved asset utilisation and volumes

The Company reported a sharp rise in grey cement volumes from 58.8 lac tonnes in 1998-99 to 84.2 lac tonnes in 1999-2000, an increase of43% YoY. This includes the full year performance of the erstwhile cement division of Indian Rayon and Industries Limited, acquired effective1st September 1998. The re-stated figures represent a volume growth of 22% YoY and compare favourably with industry growth of 15% in1999-2000. Reflecting this encouraging sales performance, overall production grew by 44% YoY, pushing average utilisation up from 84% in1998-99 to over 102% in 1999-2000.

The strong sales performance is attributed to favourable demand situation, slow growth in supplies, aggressive marketing efforts and benefitsof the restructuring programme, initiated last year.

Domestic demand growth at its decade high level

The cement industry witnessed a turnaround after two years of sluggish growth, reporting a consumption growth of 15%, amongst the highestlevels in the past decade. This strong growth was resultant of a pick-up in the level of economic and industrial activity as well as strongdemand for housing from the rural and urban sectors. The fiscal incentives offered by the Government in the budget, rise in per capita income,improved consumer spending and satisfactory performance of the agricultural sector drove growth in housing demand last year.

The construction of fly-overs and bridges by the State Governments as well as a modest rise in demand from the infrastructure sector led to apositive demand situation. Improved growth in real gross capital formation (higher at 4% as against 2.5% in 1998-99) and higher projectinvestment by corporates further helped increase consumption last year.

Slow growth in supplies

After having witnessed a huge addition of capacities during the last 3 years, the industry witnessed an addition of only 30 lac tpa capacityduring 1999-2000, compared with 84.6 lac tpa added during 1998-99. Together with improved demand, this enabled manufacturers improveplant utilisation and realise better prices.

Grasim was a key beneficiary

Grasim was amongst the major beneficiaries of such a positive demand situation, being one of the three large producers in the country. TheCompany, following integration, focused on exploiting the full potential of its brands through more focused, region specific marketing effortsand better logistics management. Energies were concentrated on establishing one strong brand in each region, which contributed positivelytowards improving market share in Grasim�s core markets and enabled it achieve higher-than-industry growth in volumes during the year.

Cement Demand-Supply

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Prices suffered despite strong volumes

Despite strong growth in volumes, cement prices suffered due to intense competition in select regions and increased supplies with stabilisationof additional capacities commissioned during the past few years. This adversely impacted the average realisation during the year.

Although national average prices have risen by 2-3% last year, regional trends varied significantly. Average realisation declined by 10% inthe South and by 16% in the East due to regional imbalances, an aggressive pricing policy followed by select players and increasedcompetition with the entry of multinationals. Cement prices in the West and North remained firm, except for short-term weaknesses due totemporary demand-supply mismatches during the year.

Grasim was affected due to the fall in cement prices in the South and East, which together account for 30% of volumes. The average ex-factoryrealisation declined by 4.5% YoY, from Rs.1,234 per tonne to Rs.1,179 per tonne. Serious efforts to improve logistics take advantage of itsstrong market position and brand equity. Better logistics management enabled the Company improve average realisation in a significant wayduring the year.

Operating margins maintained

Operating margins remained flat at 13% despite lower average realisation, due to improved asset utilisation, synergy gains and intensivecost reduction efforts taken by the Company.

The Company reduced its average production cost by 3% from Rs.963 per tonne in 1998-99 to Rs.934 per tonne in 1999-2000, despite anincrease in the power, fuel and freight charges. Reduction in unit power consumption and increased use of high calorific imported coal playeda major role in achieving lower production costs during the year. The Company brought its unit power consumption down from 95.0 units pertonne to 90.2 units and energy consumption from 736 K.Cal/Kg to 720 K.Cal/Kg during the year. The benefits of centralised procurement andmarketing as well as lower average freight distance following the business restructuring also contributed toward this end.

Sector Outlook

The outlook for the Cement sector is encouraging. The positive outlook for the economy, expected strong growth in GDP at 6-7% per annumand accelerating level of industrial activity augur well for the cement sector. Domestic demand is expected to grow between 8-10% per annumover the next two years and is predicated on strong growth in housing demand, improved demand from the infrastructure and governmentsectors as well as likely increase in project investment by corporates during this period.

The housing sector, which accounts for 60% of consumption, is expected to report continued strong growth over the next 2 years. Thefiscal incentives for individual housing in recent budgets, improved availability of cheaper finance, rising per capita income and consumerconfidence will drive housing demand in the urban sector. The shift towards cement houses on the back of a bumper crop last year,among the rural sector will lead to enhanced demand for cement in future. The rise in sanctions for individual home loans by largehousing finance companies, up 20-30%, also endorses our view on this issue.

Renewed focus on infrastructure development by the Central government as well as State governments bodes well for the cement sector.The Prime Minister�s Quadrilateral National Highway Project, we believe, is a step in the right direction. In addition to this, several stategovernments notably Andhra Pradesh, Maharashtra, Delhi and Tamil Nadu, have initiated development of flyovers, roads and highways.

Cement Price

13

These projects, at various stages of implementation, will continue to drive increased consumption of cement in the infrastructure sector.Any significant progress on the private infrastructure projects including power projects will only contribute positively towardsstrengthening demand from the infrastructure sector, which currently accounts for 20-25% of cement consumption.

Demand from the corporate sector, which account for 10-15% of domestic consumption, is likely to improve with the economic recoveryand lead to rise in project investments. This augurs well for cement consumption.

The only short-term concern on the sector is the impact of drought on the construction sector and notably on the rural demand, which accountsfor 25% of demand from the housing sector.

Pricing and profitability

Cement prices are expected to firm up from their current level during next 12-24 months. The industry witnessed sluggish price conditions lastyear despite significant improvement in volumes. The situation is expected to improve considerably during the current financial year due tolow capacity addition and likely demand-supply balance in the industry during 2000-01. The pricing situation will improve further during thenext year as the likely fresh capacity additions are unlikely to match the incremental growth in demand and thus resulting in a demand supplygap and firm pricing next year.

Industry margins will increase due to improved volumes and possibly better realisation across most regions. The Company�s ability to pass oncost increases, with the probable increase in power and freight charges, as well as internal factors such as improved consumption norms andcost reductions would be key to superior margins.

Outlook for Grasim�s Cement Business

The Company aims to remain amongst the top three producers and ensure profitable growth in future. The Company�s strategy for achievingthis is three pronged: Focus on capital productivity, enhance margins by improving revenue-mix and continued cost saving measures.

Improving capital productivity

The cement business is capital intensive and hence asset utilisation is a key success factor. Grasim is focusing on optimum utilisation ofphysical, brand and distribution assets developed over the years. Towards this end, the Company is embarking on a four pronged strategy.

Increase market share in profitable segments/regions. Grasim believes regional dominance will create more value for shareholders. TheCompany will concentrate on select markets which offer excellent potential and where Grasim�s brands have substantial share. Thecommissioning of the new 0.93 million tpa cement plant in Tamil Nadu will contribute immensely towards this end.

Focus on retail segment will be another important area of activity. The retail market is a highly profitable segment and accounts for only70% of sales volumes now. It is expected to increase in the next 3 years. The renewed fix on the retail segment is aimed at pos itioningthe Company�s brands as strong retail brands, which will not only enable it to ensure sustained volume growth, but also bring in higheraverage realisations. In addition, it will also aid Grasim optimally utilise its brand and distribution assets, developed over the years.

Focus on cost effective expansions through de-bottlenecking is the third leg of our strategy.

Finally, Grasim will concentrate on value added products. The Company is setting up four ready-mix concrete (RMC) plants, close to themarkets, with an aggregate capacity of 240,000 M3 per annum. These plants together with the two existing RMC plants will guaranteestrong captive volumes and aid Grasim inprovding value added service to customers.

Enhancing marginsTo enhance margins in future, the Company will concentrate on revenue boosting and cost cutting measures. Grasim has reduced power, fueland distribution costs, as part of its cost cutting measures going forward. The Company aims to reduce power costs by bringing down unitpower consumption and increasing reliance on low cost, captive power, through fresh investments in power generation facilities.

Grasim will stress on process control measures, use of alternative energy sources and increased use of high calorific imported coal to bringdown energy costs. The Company is working towards increasing the share of imported coal and has already commenced use of pet-coke.

Bettee logistics management will be a key area for reducing distribution costs in future. A renewed emphasis on reducing working capitalThrough better management of inventories and receivables as well as improvement in labour productivity at all units will be a continuingphenomenon and should contribute towards reducing costs in future.

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As part of its revenue enhancement measures, the Company will aim to retain its brands as �price leaders� in their respective markets.Through this Grasim will attain higher value for its products, in turn contributing significantly toward enhanced margins in the years to come.

Capitalise on emerging opportunities for growth

The consolidation process in the cement industry is expected to continue in the short term. The Company is continuously looking out for newopportunities and will leverage its strong market position and improved cash flows to capitalise on these for profitable growth in future.

SPONGE IRON1999-00 1998-99 % Change

Installed Capacity (TPA) 900,000 900,000 -Production (Tonnes) 709,094 670,231 5.8Sales Volume (Tonnes) 822,996 565,682 45.5Gross Divisional Turnover (Rs. Crores) 482.4 315.7 52.8Net Divisional Turnover (Rs. Crores) 418.1 283.2 47.6Average Realisation (Rs./Ton) 5,037 4,879 3.2Operating Margins (%) * 13.5 12.1 -

* - Calculated on Net Divisional Turnover

Review of Operations

It was a turnaround year for the Sponge Iron division. The division demonstrated significant improvement in volumes, pricing andprofitability. This was an outcome of the positive industry environment, aggressive marketing and benefits of several strategic moves initiatedlast year. Notably, enhanced plant capacity and product flexibility contributed immensely towards improved sales performance during the year.

Sales volumes up 46% YoY

The aggregate sales volumes shot up 45.5% YoY from 565,682 tonnes in 1998-99 to 822,996 tonnes in 1999-2000. The improved demandwas attributed to a modest recovery in the steel sector, rising trend in global scrap prices and reduced competition in the local market. This isa credible achievement since the strong volume growth was without any significant support from exports. Infect, the share of exports wasinsignificant during this year as against 26% and 36% in the last two years. Domestic sales volumes increased by 83% YoY in 1999-2000.

Improved domestic demand

Domestic demand grew by 15.4% on the back of a modest recovery in the steel sector and sharp rise in global scrap prices. After two years ofrecession, the domestic steel industry showed signs of recovery consequent to an upswing in the economic and industrial activity as well asimproved performance of the construction and capital goods sectors. The domestic steel industry is estimated to have grown 5% in 1999-2000.

Rising trend in global scrap prices

Reflecting improved performance of the steel industry in Asia and Western World, global scrap prices recovered smartly and registered a netincrease of 16% YoY in 1999-2000. Such a sharp rise induced steel manufacturers to shift from steel scrap to sponge iron. This, together withthe strong demand enabled domestic sponge iron manufacturers improve volumes significantly.

Scrap Price Movement

15

Reduced competition

Grasim has benefited from this positive industry environment and reduced competition in the local markets. With the commissioning ofdownstream steel making facilities, two large producers of sponge iron went captive, leasing Grasim as the sole gas based merchant saleproducer of sponge iron in the country. Leveraging this and the advantage of its location and product flexibility, the Company increasedmarket share substantially during this year.

The Company�s market share soared from 26% in 1998-99 to 40% in 1999-2000. The rest of the market is being shared by high-cost coalbased producers of sponge iron in the country. Considering opportunities in the local market, the Company consciously moved away from theexport market, which offered relatively lower margins.

The Company could have ensured much higher volumes except for the interruption in plant operations during 1999-2000 due to the shortageof Natural Gas supplies from Gas Authority of India Limited during the year.

Improved profitability despite sluggish realisation growth

Despite the buoyant demand situation, average realisation moved up only marginally due to the cautious pricing approach followed by theCompany with the objective of increasing volumes and asset utilisation. The average realisation grew only by 3.2%YoY from Rs.4879/Ton in1998-99 to Rs.5,037 /Ton in 1999-2000. The operating margin improved from 12.1% to 13.5% riding on improved volumes and lower costs.A further reduction in unit consumption of iron oxide, higher iron ore-pellet ratio and lower raw material costs enabled the Company reduceoperating costs during the year.

The Company improved its iron ore�pellet consumption ratio further from 34.9% in 1998-99 to 36.1%, which is the highest level achieved byany manufacturer using HYL technology globally. It has contributed significantly towards reducing costs, as lump ore is about 24% cheaperthan landed cost of pellets. In addition, Grasim reduced pellets and lump ore costs by 4% YoY through a successful re-negotiation with globalsuppliers and better management of freight costs. The Company also reduced iron oxide consumption ratio from 1.58 tonnes per tonne ofsponge iron to 1.54 tonnes due to improvements in process and plant efficiencies.

These factors, together with reduction in energy costs, led to reduction of production costs and improved margins, regardless of the sluggishgrowth in realisation during the year.

Sector Outlook

The Outlook for the sponge iron industry is promising and is based on the following factors:

The domestic as well as South East Asian economies have shown strong improvement in activity, after two years of recession. Indications arethat the recovery process will gain further momentum, which augurs well for the steel as well as the sponge iron industries.

Global scrap prices are on a rising curve and are stated to remain firm given that the steel sector and the regional economies are on the mend.It should result in higher average realisation for sponge iron in the local as well as export markets.

The changing trend in favour of Electric Arc Furnace for steel manufacturing is another encouraging development for the global sponge ironindustry. The electric arc furnace is a key user segment and hence any switch towards electric arc furnace by the steel industry will strengthenglobal demand and brighten export prospects for Indian manufacturers.

Domestic competition is expected to subside further due to the withdrawal of large gas based producers from the merchant sale market. Thecompetition in the domestic market will come mainly from the coal based producers, who suffer from an un-competitive cost structure. Webelieve large gas based merchant producers will gain significantly and report increasing market share, volumes and realisation in future.

Outlook for Grasim�s Sponge Iron

Grasim is the only gas based merchant sale producer in India. It is well positioned to capitalise on the emerging opportunities. Grasim willfocus on asset utilisation for improved return and has no plans to make significant capex in the future. Towards improving returns through�asset-sweating� and margin enhancement, Grasim is embarking on a two pronged strategy - Leverage on strategic advantages for revenuesand focus on cost control for enhanced margins.

16

Leveraging strategic advantages

The Company's advantages stem from product flexibility, technological superiority and lower costs. Grasim is the only merchant producer in theWorld to produce both DRI and HBI from a single reactor. This flexibility gives it a strong competitive edge in terms of meeting variedcustomer demands and increasing market share.

The Company also benefits from lower cost of production given its high ore-pellet ratio, zero power cost and strategic port location. Its' ironore consumption ratio at 36.1% is the highest in the World in the HYL technology and works in Grasim�s favour since iron ore is 24% cheaperthan pellets. The use of HYL technology enables it to operate with zero power from the grid, ensuring lower production costs.

Towards leveraging these competitive advantages and ensuring optimum asset utilisation, the Company is laying great stress on revenueboosting measures including a changed product mix, value addition of by-products and expansion of geographical presence. A glimse of plansis given below :

Grasim will increase its share of DRI from the present 50% of production to over 67% in next two years. This will be done with the twinobjectives of capturing higher market share and increasing realisation. Higher average selling price of DRI and lower generation of chipsand fines will maximise realisation. On the other hand, increased DRI production will help Grasim enhance market share, especially withtwo large DRI producers withdrawing from the merchant sale market.

Sponge iron export is another key area. The turnaround in regional economies and improved demand for sponge iron in Asia offersimmense potential for exports over the next few years. Grasim will boost its exports and leverage its strong brand and distributionnetwork in the export markets.

It will concentrate on adding value to the carbon-di-oxide (CO2) generated at the plant for merchant sale in India. An agreement witha third party for sale of CO2 has already been completed and revenues would start flowing from 2001-02 onwards.

Increasing sales of iron ore fines in the domestic as well as export markets is also on the cards.

Finally, Grasim will concentrate on optimum utilisation of other assets. The Company handled 5.24 lac tonnes of coal in 1999-2000 bychartering its own floating crane. Plans to increase the quantity handled to over 8 lac tonnes during the current fiscal is on the anvil.

The biggest risk factor going forward is the continuous availability of Natural Gas from the Gas Authority of India Limited. The Company willbe able to overcome this problem with the implementation of the LNG pipeline by Enron Corporation. The pipeline will pass by the plant ata short distance and hence will enable Grasim procure LNG in a more stable and cost efficient manner.

Margins enhancement through cost control measures

The Company is continuously looking for opportunities to reduce costs and improve margins. It has prioritised a few areas, which offerpotential to bring down costs significantly over the next few years.

Reduction in the Iron Oxide consumption ratio from the present 1.54 tonnes per tonne of sponge iron, through process and efficiencyimprovements will be a key focus area for Grasim. This will have a significant bearing on cost given that iron oxide accounts for 52% ofthe aggregate production costs.

Increase ironore � pellet consumption ratio from 36.1% to 40% will be focused for cost reduction in the future. This, together withreplacement of BF grade pellets with DR grade will result in the reduction of iron oxide costs significantly.

Reduce energy consumption from present level of 2.94 G.Cal to 2.83 G.Cal per tonne of finished goods over the next two years andsubstitution of Magnesite coating with relatively cheaper Lime coating, at least partially, will also contribute significantly towardsreducing manufacturing costs and improving margins in future.

To increase operational efficiencies and reduce costs, the Company has initiated implementation of Total Productive Maintenance (TPM).

17

TEXTILES1999-00 1998-99 % Change

FabricsProduction (Lac Meters) 165.5 182.9 (-)9.5Sales Volume (Lac Meters) 165.3 198.8 (-)16.9Gross Turnover (Rs. Crores) 192.8 246.7 (-)21.8Average Realisation (Rs./Mtr) 116.6 124.1 (-)6.0Yarn*Production (Tonnes) 11934 10562 13.0Sales Volume (Tonnes) 12021 8325 44.4Gross Turnover (Rs. Crores) 159.71 147.36 8.4Average Realisation (Rs./Kg) 132.85 141.66 (-)6.2Gross Divisional Turnover (Rs. Crores) 352.5 394.1 (-)10.6Net Divisional Turnover (Rs. Crores) 300.79 336.45 (-)10.6Operating Margins before employee separation costs (%) ** 7.9 11.5 -

* Includes inter-divisional transfers** Operating margins calculated on Net Divisional Turnover; Operating margins after employee separation cost is 7.3% vis-à-vis 11.1% last year.

Review of Operations

It was yet another challenging year for the textiles division. The fabrics division, which accounts for 62% of revenues, suffered with lowervolumes, realisations and margins due to the continued sluggish market conditions, intense price competition and accelerated input costs. Theyarn segment witnessed similar trends. Fabric production declined by 9.5% from 182.9 lac meters in 1998-99 to 165.5 lac meters in 1999-2000. Sales volumes plummeted by 17% to 165.3 lac meters vis-a-vis 198.8 lac meters sold last year.

The suiting fabrics market was lacklustre , not withstanding the pick-up in the economic activity and rise in consumer purchasing power.The changing buying behaviour and shift in preference towards cotton fabrics and ready-to-wear products led to this situation.

The increasing level of competition from the unorganised sector, proliferation of smaller brands and spurious materials had an adverseimpact on the suiting fabric volumes. Given obvious benefits of their small-scale nature, manufactures from the unorganised sectorcompeted with large brands on prices. Grasim suffered on account of proliferation of smaller brands and spurious materials. Reflectingprice competition, the Company�s average realisation declined 6% to Rs.117 per meter in 1999-2000.

Grasim suffered also due to increased rejections/ returns from dealers. This was due to design and quality issues and unequal assortmentof designs in total despatches. The Company is taking serious measures to overcome these issues during current fiscal.

The adverse impact of such a challenging business environment on volumes would have been greater, had it not been for the variousinitiatives taken by the Company to strengthen its brands and distribution network.

Introduction of new products and leveraging existing wide product range was prioritised. The Company introduced new products like�Coolers� and fabrics from Lykra yarn to cater to the changing market preference and leveraged new products introduced last year. Theseincluded Stainoff, Technosoft, Santa Maria, Topstar, Wonder Wash Fabrics.

Strengthening brand equity and distribution network was another focal point. Given the proliferation of smaller brands and increasedcompetition, the robustness of �Graviera� and �Grasim Suitings� became critical. The Company maintained its advertising budget atRs.13.8 Crores and stepped up retailing efforts while also strengthening sales force and upgrading of retail network.

Grasim upgraded product quality through improvement in plant and process efficiency as well as installation of modern equipments.

Scaling down operations, where required, with the ultimate objective of reducing inventories was also effected.

Margins remained under pressure

Suffering from such a competitive environment, lower realisation and increased costs, operating margins declined sharply from 11.5% to7.9% in 1999-2000. Lower average relisation and rise in production costs led to this steep fall in margins. The average cost of fabricsproduction soared primarily due to the sharp rise in fibre and labour costs. Lower average asset utilisation compounded the situation further.

18

Sector Outlook

The outlook for textiles business remains daunting. The market for branded fabrics is likely to remain stagnant and witness intense pricecompetition even in future.

The continuing recovery in the economy, resultant likely boost in demand is an encouraging development. However, it is unlikely to result inany turnaround in the fortunes of the industry, given huge over-capacity, gradual commoditisation of the suiting fabrics markets and thepreference for ready-to-wear products. The discriminatory excise duty in favour of independent process houses, unprecedented growth of theunorganised sector and emergence of smaller brands will result in continued intense price competition in the market. This may put pressureon realisation and profitability of large composite mills.

Export prospects are unlikely to be improve as well, owing to changing customer preference for readymade garments, sluggish marketconditions as well as oversupply in the international markets. Exports are thus likely to remain unattractive even in future.

Outlook for Grasim�s Textiles Business

In such a business scenario, Grasim will endeavour to improve efficiency and leveraging strong brand equity for stable returns. The Company�sstrategy is three pronged: Enhance market share, Strengthen distribution network and Improve efficiency.

Improving market share

The Company will invest behind two brands viz., Graviera and Grasim Suitings. Graviera will be positioned as a popular brand and Grasim asa premium brand in the suiting fabrics market. With aggressive promotion and marketing efforts these brands would grow. The Company willconcentrate on product innovation and design development, which together with brand positioning will enable it to increase its market shareand volumes in future.

Strengthening distribution network

The Company will rebuild wholesale network and re-orient its show-room network to take advantage of its brand building efforts. Energieswill be focused on better management of existing showrooms, increasing number of showrooms for greater reach and wider coverage over thenext two years. Grasim will also upgrade its existing 185 showrooms and train sales force for better customer orientation and service in future.

Improving operational efficiency

Improving efficiency for cost reduction and better margins is yet another way forward to grapple with the situation. Increase in working capitalturns, improvement in loom efficiency and reduction in fixed costs is the route adopted by Grasim.

FINANCIAL REVIEW AND ANALYSISHighlights

(Rs. in Crores) 1999-2000 1998-99 % ChangeGross Turnover 4982.3 4325,1 15.2Net Turnover 4272.6 3756.9 13.7Operating Profit 668.0 568.5 17.5Other Income 88.3 109.8 (-)19.6PBDIT 756.3 678.3 11.5Interest 256.1 292.3 (-)12.4Depreciation 237.0 209.7 13.0Profit Before Tax and Employee Separation Compensation 263.3 176.3 49.2Employee Separation Compensation 17.8 4.6 286.9Profit Before Tax 245.5 171.8 42.9Tax 12.4 8.0 55.0Profit After Tax 233.1 163.8 42.3

Turnover

Gross revenues have grown 15% YoY to Rs.4,982.3 Crores on account of strong growth in sales volumes of cement, VSF and sponge ironduring the year. Aggregate revenues of the cement and fibre divisions have risen 43% and 14% YoY respectively while sponge iron revenueshave jumped 46% in 1999-2000.

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Operating Profit

The operating profit has gone up from Rs.568.5 Crores in 1998-99 to Rs.668.0 Crores in 1999-2000. Improved asset utilisation and continuedcost cutting has enabled the Company report improved operating profit during the year. The growth would have been stronger except forcontinued pressure on realisation in a few key businesses during the year.

Other Income

Grasim�s other income consisted of operating receipts of the units, bill discounting charges and interest and dividend income. Other incomedropped 20% YoY from Rs.109.8 Crores to Rs.88.3 Crores largely due to a decline in the non-recurring income. The Company reported lowerinterest on income tax refunds at Rs.12 Crores in 1999-2000 as against Rs.22 Crores in 1998-99.

Interest

Aggregate interest charges declined 12% YoY to Rs.256.1 Crores in 1999-2000, an account of repayment and restructuring of high cost debtsdetailed at the beginning of this section.

Depreciation

Depreciation charges were up 13% YoY to Rs.237 Crores due to the charging of the full years� depreciation of the VSF plant at Kharach,Gujarat commissioned last year and the transfer of Indian Rayon�s cement business during 1998-99.

Income Tax

Improved asset utilisation , improved margins and lower interest charges have resulted in a 43% YoY rise in pre-tax profits to Rs.245.5 Crores,despite higher depreciation charges in 1999-2000. Consequently, aggregate tax provision is also higher at Rs.12.4 Crores in 1999-2000, asagainst Rs.8 Crores in 1998-99. The Company has paid the Minimum Alternative Tax (MAT) during the year.

Net Profit

The Company�s net profit soared 42%, from Rs.163.8 Crores in 1998-99 to Rs.233.10 Crores in 1999-2000. Earnings per share increased by30% from Rs.19.6 per share in 1998-99 to Rs.25.4 per share in 1999-2000 and Cash earnings per share has risen 17.7% from Rs.45.2 toRs.53.2 during this period.

Cash Flow Analysis1999-2000 %

Source of CashCash from operations 669 76.4Income from investing activities 51 5.8Reduction in working capital 156 17.8Total 876 100.0

Use of CashNet capital expenditure 265 30.3Net investments 89 10.2Reduction in Debt 156 17.8Interest 281 32.1Dividend (including Corporate Tax on Dividend) for 1998-99 57 6.5Increase/ (Decrease) in cash and cash equivalents 28 3.1Total 876 100.0

Source of Cash

l Cash from operationsCash from operations has gone up by 20% from Rs.557 Crores in 1998-99 to Rs.669 Crores in 1999-2000. This is attributable toimproved volumes and higher contribution from the fibre, cement and sponge iron businesses during the year.

l Income from investing activitiesIncome from investing activities primarily consist of dividend, interest and other income at various division. The inflows declined by 26%to Rs.51 Crores in 1999-2000 owing to lower interest receipt on income tax refunds during the year.

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Use of Cash

l Capital expenditure

The company incurred a net capital expenditure of Rs.265 Crores in 1999-2000. This was towards setting up a new cement plant with aninstalled capacity of 900,000 TPA at Reddipalayam in Tamil Nadu and towards maintenance capex as well as modernisation undertakenat various units.

l Investments

The Company investments to the tune of Rs.89 Crores during the year. Of this, a sum of Rs.3.3 Crores were invested in other companiesof the Aditya Birla Group viz., Birla AT&T Communications Limited and Bina Power Supply Company Limited. These investments werein line with commitments made by the Company in the past. The balance amount was invested in short term liquid investments by theCompany.

l Reduction in debt

The Company raised Rs.680.5 Crores and repaid a sum of Rs.836.9 Crores during the year. This included pre-payment of high cost debtto the tune of Rs.327 Crores and refinancing of the same with debts bearing lower coupon rate. Following a net reduction in debt ofRs.156 Crores, the Company�s debt equity ratio came down to 0.82 by end of 1999-2000.

l Net working capital

Net Working capital requirements declined by Rs. 156 Crores on account of effective inventory and better cash flow management.

l Dividend

The Company has paid Rs.57 Crores towards dividend for 1998-99. For the year 1999-2000, the Company has announced an InterimDividend of Rs.6 per share and has proposed a Final Dividend of Rs.1 per share. Including the Corporate Tax on Dividend, the outflowon account of dividend payment would be Rs.72.2 Crores for 1999-2000 as compared to Rs. 62.7 Crores for 1998-99.

DELIVERING ENHANCED VALUE TO SHAREHOLDERS IN THE NEW MILLENNIUMThe Company was constrained during the past two years on account of a slowdown in the economy and the resultant difficult environment inits core sectors. Grasim�s key businesses appear to have turned around smartly after having bottomed out during second half of 1999-2000.The impressive performance for the year under review thus appears to be just the beginning, bearing in mind the positive outlook for its corebusinesses.

Going forward, towards achieving its ultimate objective of delivering value for shareholders on a sustainable basis in the new millennium, theCompany is relentlessly pursuing on the following strategy

Focus on core businesses � Grasim will focus on VSF and Cement. While cement will the key driver of growth, VSF will remain a cashgenerator in future. The Company will not indulge in any unrelated diversification or any investments in non-core, unrelated businesses.

Improve asset utilisation � This will be achieved through expansion of key markets, better penetration into new markets and byleveraging existing strong brand and distribution strengths developed over the years.

Improve cost competitiveness and margins � Grasim will concentrate on further improvements in operational efficiency and costreduction through process improvements, reduction in consumption norms and reallocation of resources. The Company will also enhanceits emphasis on value added products with the twin objective of reaching closer to the customers as well as enhancing realisation forbetter margins.

CAUTIONARY STATEMENTStatement in this Management�s Discussion and Analysis describing the Company�s objectives, projections, estimates, expectations or predictions may be �forward-looking

statements� within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that

could make a difference to the Company�s operations include global and Indian demand-supply conditions, finished goods prices, feedstock availability and prices, cyclical

demand and pricing in the Company�s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within

which the Company conducts business and other factors such as litigation and labour negotiations.

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ENVIRONMENT PROTECTION: A WAY OF LIFE AT GRASIM

At Grasim we firmly believe in sustainable development. We fully appreciate that the earth�s resources and its capacity to

absorb pollution and regenerate are finite. Therefore, operations at all of our Units are conducted in a manner that

respects the ecological balance.

Naturally then the environmental dimension forms an integral part of all business decisions.

Pollution prevention, product stewardship and clean technologies enable us to fulfil our goal of sustainable development.

We have clearly spelt out production norms that enable us to run our operations in an Eco-efficient manner. These revolve round:

● Adoption of cleaner technologies.

● Designing products and processes with as little environment impact as possible.

● Optimising resource efficiency in plant operations to minimise waste while maximising treatment of inevitable

wastes in an environmentally compatible manner.

● Creation and building of an Eco-friendly family.

To achieve these goals, environment protection systems and processes are well in place.

To meet the challenge of environment protection in a proactive manner, unavoidable wastes are dealt with in the most

efficient and scientific way.

State-of-the-art industrial treatment plants are in operation at all of our Units for air, water and solid wastes. An

appreciable quantity of the treated effluent is reused to meet the plants� needs. The solid waste sludge is used as a soil

conditioner in the special green belts developed at the sites. Alongside, full-fledged laboratories for testing of treated

effluent, water and air have been set up at the plants.

Pulp and Fibre units at Harihar and Nagda are certified under ISO 14001. Our ongoing focus has been and continues to be

directed towards increasingly developing environment friendly process and sub-processes. We have succeeded in eliminating

the use of heavy metals such as zinc in the conventional fibre process as also in the fibre, which is a path-breaking feat.

At the Pulp Plant at Harihar, Biomethanation unit for treatment of BOD rich waste liquor generates methane, which is

used as a substitute for LDO in the pulp flash drying process.

At Pulp and Fibre units, we are continuously innovating the process and more effective treatment of the inevitable waste

and the following innovations in that direction are under progress:

● At Birla Cellulosic, we have worked out a novel method of treating and reusing effluents. We have opted for

vermicastings consisting of diverse bacteria in abundance, viz. cellulose degrading, naturally oxidising,

nitrogen fixing and fungi actinomycetes, a facilitating bacteria. These render the treated effluent highly

Environment Report

''At all our Plants,pollution

prevention,product

stewardship andclean technologiesenable us to fulfil

our goal ofsustainable

development''.

22

productive for agriculture. An innovative experiment using the approach of phyto-remediation for utilisation of secondary treated

effluent is being carried out at our treated effluent disposal farm in Birla Cellulosic. Mainly plantation crops like coconut, accasia

mangium (Australian teak) have been grown and field crop like vegetables, cotton, sugarcane and wheat cultivated.

● Experiments on utilisation of fly ash and ETP sludge were carried out on wheat cultivation. Periodic analyses of the fruits and

vegetables at reputed labs have indicated encouraging results.

● Successful trial of proto-type sludge dryer for ETP sludge drying to facilitate final disposal of incineration in existing Boilers.

At Textile units - Grasim Gwalior, Bhiwani Textiles Mills and Elegant Spinners - towards waste recovery, we recycle steam condensate through

Ogdem Pump in the fibre dyeing process. The condensate water is used in the final process and this has resulted in saving energy besides

upgrading the quality of the dyed fibre. Through recycling and utilising waste steam and water, we have been able to improve the recovery of

chemicals from the effluent discharge.

Cement units are ISO 14001 certified. Reuse of bi-products and residual wastes is in-built into the cement production systems. Our production

processes are highly energy efficient. The environmental standards followed at our cement plants are fully in conformity with the stringent local

and national regulations. To ensure a dust free atmosphere in and around the plant and not to allow dust to escape into the environment, our

cement plants have electrostatic precipitators and dust collectors such as bag house and bag filters.

As in all the of Plants, at Sponge Iron Unit at Salav, at Alibaug, environment management systems are accorded a priority. The superior technology

Plant has in-built pollution abatement systems. Its liquid effluent is recycled. As it uses natural gas as the prime source of energy, gases from

its stacks are free of pollutants. Alongside dry bag filters and wet scrubbers ensure a dust free environment.

A systematic assessment at all of the plants for potential hazards and the risk of accidental pollution is in-built as a proactive measure.

Through these ways of conserving the environment, we make sure that in meeting our needs, we do not encroach upon the ability of future

generations to meet their needs of the earth�s finite resources.

In fact our Plants have a very wooded look, given the thousands of trees that encircle them. Importantly it adds grace and beauty to our Plants.

The effect is one of tranquility.

23

To qualitatively impact the life of the weaker sections of society, we engage in a series of welfare driven initiatives.These are carried out under the aegis of �The Aditya Birla Centre for Community Initiatives and Rural Development�,spearheaded by Mrs. Rajashree Birla, who is director on the Board of your Company.Our vision is �To actively contribute to the social and economic development of the communities in which weoperate. In so doing, build a better, sustainable way of life for the weaker sections of society�.Our far-ranging activities span a host of villages, crisscrossing the country. From Nagda, Jawad, Gwalior, Raipur inMadhya Pradesh, Bhiwani in Haryana, Shambhupura in Rajasthan, Harihar and Malkhed in Karnataka, Mavoor inKerala, Kharach in Gujarat, Raigarh and Hotgi in Maharashtra, Reddipalayam in Tamil Nadu, our work is visible.Our focus areas are health-care, sustainable livelihood and education.

MEDICAL CAMPSTo provide health care to villagers in the nook and cranny of the villages surrounding our units, we organize medicalcamps.At more than a 100 medical camps conducted during the year, over 20,000 villagers were examined and treated fordiverse ailments including tuberculosis, leprosy, cataract, polio and skin-related diseases. Immunization camps formpart of this activity. Hundreds of people have benefited immensely. For instance, 343 patients gained better sightthrough the operation of the cataract in their eyes.The physically impaired are also serviced by us. Our team of doctors examine the extent to which their disability canbe reduced. Depending on their affliction, they are provided with tricycles, callipers, crutches, artificial limbs, andspecial shoes � to cite a few examples. These supportive aids have been instrumental in significantly enhancing theself sufficiency levels. We were able to reach out to more than 1500 physically impaired persons.We have also begun laying stress on family planning. At Harihar, 256 family planning operations were carried out.

SPREADING LITERACYTo raise the literacy level, in the areas around our Plants, we recourse to various ways. These encompass the settingup of adult education centres, and �balwadis�, which are non-formal education centres.To encourage and imbibe values among students, Birla Cellulosic have evolved the �Jivan Utkarsh Shibir�. These areresidential camps organized during the summer where students are given an orientation into basic values such ashonesty, integrity, simplicity, perseverance which are all character forming. Additionally, they are given guidance oncareer planning.To encourage girl students, special scholarships are offered at many of our Units.At Bhiwani, we have taken on the responsibility of supporting the education of 640 students, through paying theirfees, supplying text books and stationery, free of cost.We are involved in developing the infrastructure for rural schools in Reddipalaym, ostensibly one of the mostbackward areas in Tamil Nadu.In collaboration with the District Education Department, we organized Teachers Training programmes at VikramIspat. The teachers were drawn from the schools in the villages. At Harihar, we have undertaken a similar projectDistribution of text books to the Panchayat Schools, and financial aid to needy educational institutions also formspart of our canvas. We have kindled the desire to learn among 6000 children.

Social Report : Beyond Business � Reaching out to Communities

Free Eye Camp at Harihar

�Our Socialengagement stems

from ourfundamental belief

that theorganization of the

future will bejudged by the

values it stands for,for its contribution

and for the benefitsit offers to

communities amidstwhich it operates�.

� Smt. Rajashree Birla,Chairperson,

The Aditya BirlaCentre for Community

Initiatives and RuralDevelopment.

24

WOMEN EMPOWERMENT PROJECTS

To empower women through attaining financial independence, we train them in various vocations. Our carpet weaving project at Athana,spearheaded by Vikram Cement is growing from strength to strength. Besides giving meaningful employment opportunities to more than 50 of thepoorest women, it has instilled in them a deep sense of pride, as their carpets increasingly find the acceptance of global customers.

Aditya Cement have initiated the skill Development Training Programme for women below the poverty line. Around 450 women are being trainedin the art of sewing and embroidery at 33 sewing centres and 8 embroidery centres.

TOWARDS SUSTAINABLE LIVELIHOOD

Farmer Focus

Acting as a catalyst, our teams narrow in on farmers who can avail of the economic programmes launched by the Government. They then assistthe farmer in accessing the necessary funds which go towards enhancing his yield. The farmer is thus assured of a sustainable income, given anormal monsoon.

To boost agricultural and horticultural activities, we reach out to thousands of farmers in manifold ways. Farmer training programmes, teachingthem better farming techniques on demonstration plots and agricultural meetings where agricultural experts give them valuable i nputs which areproving most useful to them.

To enable villagers have a sustainable livelihood, hundreds of them have been trained in cottage industries as well.

Village Development Schemes

We aim to embed the villages with at least the basic amenities, such as providing support towards better infrastructure through construction ofroads, check-dams, drains and the repair of buildings which house the panchayats.

The changing face of Nagda and Malkhed

At Nagda, we have taken the challenging task of converting the village of �Nayan� into a model village. Under this project init iated last year, aCommunity Hall-cum-Training Centre has been established. The Centre serves as a Balwari, reading room cum library, a Sewing Centre and hubfor cultural activities. Decent sanitation facilities have been provided as well under this project.

Under the Swasthi Gram Yojana, the Malkhed Village, which has been adopted by us, is making remarkable progress. Among our collectiveaccomplishments are providing water supply, constructing 100 toilets, cementing and tarring of the roads, plantation in the village, soilconservation in the farmer�s lands, and constructing a small two room school in the centre of Malkhed, among others.

Garnering Development Aid

For the year 1999-2000, we mobilized over Rs. 1900 lakhs through different development programmes. This is apart from our own contribution. Weinfluenced the lives of 50,000 people directly, by ensuring their well-being physically, and for many others a sustainable means of livelihood.

MAKING A DIFFERENCE

Our involvement in these community driven initiatives has made a perceptible difference to the lives of the marginalized villagers. Many of themare no longer below the poverty line and are in good-health. And that gives us a humble sense of fulfilment, and pride in the fact that we arehelping in shaping new societies.

25

CORPORATE GOVERNANCE

Corporate Governance refers to a combination of laws, regulations, procedures, implicit rules and voluntary practices that enable companies attractfinancial and human capital, perform efficiently and thereby maximise long-term value for shareholders, while respecting the aspect of multiplestakeholders. Corporate Governance strengthens investors� trust and ensures a long-term partnership that helps in fulfilling a company�s quest forhigher growth and profits. It rests upon four pillars viz., transparency, full disclosure, independent monitoring and being fair to all, especially tominority shareholders. A good corporate governance policy should ensure that

● A best possible management team is in place● The Board is strong with non-executive and independent directors, who represent the interest of all stakeholders● The Board effectively monitors management�s progress and key corporate decisions● The Board is aware of the concerns of the Company�s shareholders● The Management and employees have a stable environment, in which to plan and execute strategy● The Board is effectively in control of the Company�s affairs● The Company�s policies benefit all of its shareholders

In sum, the essence of Corporate Governance is the phrase �Your Company�. It is �your� company because it belongs to you, the shareholders. TheChairman and Directors are your fiduciaries and trustees. Their objective is to push the business forward to maximise �your� long-term value.

A BEGINNING AT GRASIM

Corporate Governance is an important cornerstone of the Aditya Birla Group�s objective of creating shareholder value. Grasim, a flagship companyof the Aditya Birla Group, is no exception. Your company is committed to benchmarking itself with the best in all areas including corporategovernance. Towards this end, this year�s Annual Report has made substantial disclosures on the Board of Directors, financial and stock performance.In addition, the Company has benchmarked its practices with the guidelines recommended by the SEBI Committee on Corporate Governance.

BOARD OF DIRECTORSComposition of the Board

The need for having a majority of non-executive directors on the Board is internationally well recognised. Grasim�s board meets this requirement asit consists entirely of non-executive directors. Of this, two Directors are nominees of financial institutions. Moreover, 50% of the Board consists of�independent� directors, who have no business and/or professional relationship with the Company.

Director Executive/Non-executive/ Independent # No. of Outside Directorship heldMr Kumar Mangalam Birla Non-Executive 18*

Mrs Rajashree Birla Non-Executive 9**

Mr S V Muzumdar @ Non-Executive 11Mr M C Bagrodia@@ Non-Executive 16***

Mr P K Mohta Non-Executive 18Mr S K Kapur Non-Executive/ Nominee1 4Mr Y P Gupta Non-Executive/ Nominee2 4Mr A N Lalbhai Independent 11Mr M L Apte Independent 17Mr B K Sethi Independent 1Mr R K Kaul Independent 4Mr S G Subrahmanyan Independent 6Mr B V Bhargava Independent 9

Corporate Governance Report

# An Independent director is● not a formal executive and has no professional relationship with the company● not a large customer and/ or vendor to the company● not a close relative of the promoter and / or any executive directors● not holding a significant stake● not a nominee of any large shareholder / creditor.@ Resigned from the Board effective 1st September 1999@@ Appointed in place of Mr S V Muzumdar, effective 1st September 1999

1 Nominee of Industrial Development Bank of India (IDBI) - Lender2 Nominee of Life Insurance Corporation of India (LIC) - Investor* Excluding 18 foreign companies, SEBI and the GD Birla Medical

Research & Education Foundation** Excluding 16 foreign companies and the GD Birla Medical

Research & Education Foundation*** Excluding 6 foreign companies and 1 private limited company

26

Remuneration Paid During 1999-2000(All figures in Rupees)

* Annual General Meeting (AGM) held on 11th September 1999 at the Company�s Registered Office@ - Resigned from the Board effective 1st September 1999

@@ - Appointed in place of Mr S V Muzumdar, effective 1st September 1999

Directors� Interest in the Company

Grasim�s commitment to transparency goes beyond statutory requirements. The company has, therefore, decided to make full disclosures regardingthe interests of, and payments to, all Directors on the Board.

Director Relationship with Business Loans &Other Directors Relationship Advances

with the ReceivedCompany, if from the Sitting Fees Salary & Commission Totalany Company* Perks

Mr Kumar Mangalam Birla Son of MrsRajshree Birla - - 16,000 - - 16,000

Mrs Rajashree Birla Mother ofMr KumarMangalam Birla - - 8,000 - - 8,000

Mr S V Muzumdar@ - - 6,000 - - 6,000Mr M C Bagrodia@@ - - 6,000 - - 6,000Mr S K Kapur Nominee of IDBI - 6,000 - - 6,000Mr Y P Gupta Nominee of LIC - 10,000 - - 10,000Mr A N Lalbhai - - 8,000 - - 8,000Mr M L Apte - - 10,000 - - 10,000Mr B K Sethi - - 6,000 - - 6,000Mr R K Kaul - - - - - -Mr S G Subrahmanyan - - 12,000 - - 12,000Mr P K Mohta Uncle of

Mr KumarMangalam Birla - - - - - -

Mr B V Bhargava - - 10,000 - - 10,000

* The Company does not pay any commission on profits to any directors and also has a policy of not advancing loans to any non-executive directors of the Company@ Resigned from the Board effective 1st September 1999@@ Appointed in place of Mr S V Muzumdar, effective 1st September 1999

Attendance Record of the Directors

It is important for the shareholders to know the number of times the Board had met during the past year as well as attendance record of their directors.The Company has, therefore, decided to make full disclosure on the board meetings as well as attendance record of all Directors on the Board.

Director No. of meetings Attended Last AGM*

Held AttendedMr Kumar Mangalam Birla 8 8 NoMrs Rajashree Birla 8 4 NoMr S V Muzumdar@ 4 3 NoMr M C Bagrodia@@ 4 3 NoMr S K Kapur 8 3 NoMr Y P Gupta 8 5 NoMr A N Lalbhai 8 4 NoMr M L Apte 8 5 NoMr B K Sethi 8 3 NoMr R K Kaul 8 - NoMr S G Subrahmanyan 8 6 NoMr P K Mohta 8 - NoMr B V Bhargava 8 5 No

27

CORPORATE GOVERNANCE DISCLOSURES

As mentioned earlier, Grasim has endeavoured to benchmark itself with the guidelines issued by the Committee on Corporate Governance set up

by the Securities and Exchange Board of India (SEBI). Your company adheres to most of the recommendations made by the SEBI Committee, but for

a few areas such as Audit Committee, Remuneration Committee and reduction in outside directorship. The Company is reviewing theserecommendations.

Recommendations complied already

1. The Board should have an optimum combination of executive and non-executive directors and at least 50% of the Board should comprise of

non-executive directors. Further, at least one-third of the Board should comprise of independent directors where the Chairman is non-executive and at least half of the Board should be independent in case of an Executive Chairman.

The Board of Grasim consists entirely of non-executive directors. Moreover, 50% of the non-executive directors are independent, who have noprofessional, business relationship with the Company.

2. The Board should set up a committee under the chairmanship of a non-executive / independent director to specifically look into theshareholder issues including share transfer and redressal of complaints.

Grasim has a Share Transfer Committee to look into issues relating to shareholders, including share transfers. The Committee is however notbeing headed by any non-executive / independent director.

3. To expedite the process of share transfers, the Board should delegate the power of share transfer to an officer or a committee or to theregistrar and share transfer agents. The delegated authority should attend to share transfer formalities at least once in a fortnight.

The delivery of equity shares of the Company is now mandatory in the dematerialised form in all the stock exchanges. The Company�s sharesare therefore traded in dematerialised form. To expedite the transfer process in the physical segment authority has been delegated to the ShareTransfer Committee, which comprises of four senior officers.

Members of the Share Transfer Committee: Mr. D N Makharia, Company SecretaryMr. Pankaj Kapdeo, Dy SecretaryMr. Y JoshiMr. Shivkumar

The Committee is authorised to approve transfer of up to 5000 shares/debentures each under one transfer deed, else approval of a Director isrequired. Share transfers/transmissions approved by the Committee are placed at the Board meeting from time to time.

Details of complaints received, number of shares transferred during last year as well as average time taken for effecting these transfers arehighlighted in the �Shareholder Information� section of the Annual Report.

Mr D N Makharia, Company Secretary and Mr Pankaj Kapdeo Deputy Secretary have been designated as Compliance Officers.

4. The Corporate Governance Section of the Annual Report should make disclosures on remuneration paid to Directors in all forms including

salary, benefits, bonuses, stock options, pension and other fixed as well as performance linked incentives.

Details of remuneration paid to the Directors are highlighted at the beginning of this section. The Company does not pay any commission on profits to itsDirectors.

5. The Board meetings should be held at least four times in a year, with a maximum time gap of four months between any two meetings and

all information recommended by the SEBI Committee should be placed at the Board.

The Board of Grasim met 8 times during the past year (see details below). Agenda papers were sent to the Directors well in advance of eachmeeting. The Company placed before the Board, the performance of various units/divisions and all statutory reports from time to time. Asregards various items recommended by the SEBI Committee on Corporate Governance, the following items are not presented in a structuredmanner at present. However, necessary steps are being taken to present all the items recommended by the SEBI Committee in a structuredmanner from the current year.

28

● Annual operating plans and budgets● Information on recruitment and remuneration of senior officers, just below the Board level● Show cause notice, demand and prosecution notices, which are materially important● Any material default in financial obligations to and by the Company and substantial non-payment for goods sold by the Company● Significant labour problems and their proposed solutions as well as any significant development on the Human Resources / Industrial

Relations front● Quarterly details of foreign exchange exposures and steps taken by the management to limit the risk of adverse exchange rate

movement, if material

Date of Board Meeting Place / City No. of Directors Present

30th April 1999 Industry House, Mumbai 729th June 1999 Industry House, Mumbai 527th July 1999 Industry House, Mumbai 730th August 1999 Industry House, Mumbai 525th September 1999 Industry House, Mumbai 622nd October 1999 Industry House, Mumbai 527th January 2000 Industry House, Mumbai 631st March 2000 Industry House, Mumbai 8

6. As a part of the disclosure related to management, in addition to the Director�s Report, Management�s Discussion and Analysis should form

part of the Annual Report to the shareholders.

Management�s Discussion and Analysis forms part of the Annual Report. The Company introduced this new section in the Annual Report for theyear 1998-99.

7. All company related information like quarterly results, presentation made by companies to analysts may be put on company�s web-site or

may be sent in such a form so as to enable the stock exchange on which the company is listed to put it on its own web-site.

The Company makes presentation to investors as well as equity analysts following announcement of quarterly/half-yearly results. A copy of thePress Release and result announcements is made available on the web site of the Aditya Birla Group (www.adityabirla.com).

8. There should be a separate section on Corporate Governance in the Annual Report, with details on the level of compliance by the Company.

Non-compliance of any mandatory recommendation with reasons thereof and the extent to which the non-mandatory recommendations have

been adopted should be specifically highlighted.

The Company has introduced a section on Corporate Governance in its Annual Report for the year 1999-2000.

9. No Director should be a member in more than 10 committees or act as Chairman of more than five committees across all companies in which

he is a director. Furthermore, it should be a mandatory annual requirement for every director to inform the Company about the committee

positions he occupies in other companies and changes.

None of the Directors of the Company is a member in more than 10 committees or Chairman of more than 5 committees across all companies

in which he is a Director.

10. The Non-Executive Chairman of the Company should be entitled to maintain an office at the Company�s expense and also allowed

reimbursement of expenses incurred in performance of his duties. This will enable him to discharge the responsibilities effectively. (This is

a non-mandatory recommendation)

The Chairman does not have a separate office at present and the Corporate Office of the Company supports him in discharging his

responsibilities.

29

11. Disclosures to be made to the Board by the management relating to all material, financial and commercial transactions, where they have

personal interest, that may have a potential conflict with interests of the Company at large. These include dealing in shares, commercial

dealings with bodies, which have shareholding of management and their relatives, etc.

No transaction of material nature has been entered into by the Company with the Promoters, Directors or the Management, their subsidiaries

or relatives etc., that may have a potential conflict with interests of the Company.

12. While appointing a new director or re-appointing an existing director, the Company should provide a brief resume, expertise in specific

functional area and names of companies, in which the person also holds the directorship and the membership of Committees of the board.

These should form part of notice to shareholders.

Relevant details forms part of the explanatory statement of the Notice of the Annual General Meeting.

Recommendations Under Review

13. A qualified and an independent �Audit Committee� should be set up by the Board of the Company. This would go a long way in enhancing

the credibility of the financial disclosures of a company and promoting transparency.

The Company does not have an Audit Committee at present and is reviewing this option.

14. The Board should set up a �Remuneration Committee� to determine on their behalf and on behalf of the shareholders with agreed terms of reference,

the Company�s policy on specific remuneration packages for Executive Directors, including pension rights and any compensation payment.

Grasim does not have any Executive / Whole-time Director on its Board. Hence Remuneration Committee is not required.

15. The half-yearly declaration of financial performance including summary of the significant events in last six-months, should be sent to each

household of shareholders.

The Company aims to send half yearly performance update to the individual shareholders from 2000-01 onwards.

Recommendations not pertaining to the Company

16. The financial institutions should under normal circumstances have no direct role in the decision making of the Board of the Company. They

should not have nominees on the Board, merely by virtue of their financial exposure by way of investment in the securities of t he Company.

There is however a ground for the term lending institutions to have nominees on the Boards of the borrower companies, to protec t their

interests as creditors. In such cases, the nominee directors should take an active interest in the activities of the Board and have to assume

equal responsibility, as any other director on the board.

Not a company level issue

OTHER DISCLOSURES RECOMMENDED BY THE SEBI COMMITTEE

1. Details on Annual General Meetings

1.1. Location and time, where last three AGMs held

Year Type Location Date Time

1998-99 AGM Grasim Staff Club, Registered Office, Birlagram, Nagda, M P 11th September 1999 11.00 a.m.

1998-99 EOGM Grasim Staff Club, Registered Office, Birlagram, Nagda, M P 10th December 1998 10.30 a.m.

1997-98 AGM Grasim Staff Club, Registered Office, Birlagram, Nagda, M P 25th July 1998 11.00 a.m.

1996-97 AGM Grasim Staff Club, Registered Office, Birlagram, Nagda, M P 12th July 1997 11.00 a.m.

30

1.2. Whether special resolutions were put through postal ballot last year? NO

1.3. Are polls proposed to be conducted through postal ballot this year? NO

2. Disclosures on materially significant related party transactions (i.e. transactions of the company of material nature, with its promoters, the

directors or the management, their subsidiaries or relatives etc.) that may have potential conflict with the interests of company at large.

There are no material transactions with related parties, which require separate disclosure.

3. Details of non-compliance by the Company, penalties, strictures imposed on the Company by Stock Exchange or SEBI or any statutory

authority, on any matter related to capital markets, during the last three years.

The Company has not made any non-compliance and has not been imposed any penalty / stricture by the Stock Exchanges or SEBI or any otherstatutory authority during the last three years.

4. Means of communication● Half-yearly report sent to each household of shareholders No● Quarterly results● Which newspapers normally published in Financial Express, Mumbai, Nai Dunia, Indore● Any web site, where displayed www.adityabirla.com,www.grasim.com● Whether it also displays official news releases and Official news releases are displayed

presentations made to institutional investors/ analysts on the web site● Whether MD&A is a part of annual report Yes● Whether Shareholder Information section forms Part of the annual report Yes

31

Shareholder Information1. Annual General Meeting

- Date and Time : 15th July 2000, 11.00 A.M.- Venue : Grasim Club, Birlagram 456 331

Nagda, Madhya Pradesh

2. Financial Calendar :- Financial reporting for the quarter ending June 30, 2000 : End July 2000- Financial reporting for the half year ending September 30, 2000 : End October 2000- Financial reporting for the quarter ending December 31, 2000 : End January 2001- Financial reporting for the year ending March 31, 2001 : End April 2001- Annual General Meeting for the year ended March 31, 2001 : End July 2001

3. Dates of Book Closure : 1st July 2000 � 10th July 2000

4. Dividend Payment Date :- Interim Dividend : 8th May 2000- Final Dividend : 25th July 2000

5. Registered Office : Birlagram 456 331Nagda, Madhya PradeshTel: (07366) 46760 / 46766Fax: (07366) 44114 / 46024E-Mail: grsmsfd@vsnl.com

6. Listing on Stock Exchanges at :Equity Shares Global Depositary Receipts Non-Convertible Debentures

(GDRs)

The Stock Exchange - Ahmedabad Societe de la Bourse de Luxembourg National Stock Exchange of India LimitedKamdhenu Complex, Panjara Pole Societe Anonyme (Wholesale Debt Market Segment)Near Polytechnic, Ahmedabad 380 015 R.C. B 6222, B P 165 Trade World, Senapati Bapat Marg,

L-2011, Luxembourg Lower Parel, Mumbai 400 013Bangalore Stock Exchange LimitedStock Exchange Towers, 51 1st CrossJ .C .Road, Bangalore 560 027

The Calcutta Stock Exchange Association Limited7 Lyons Range, Calcutta 700 001

Cochin Stock Exchange LimitedP O Box No. 3529, Veekshanam RoadErnaculam, Cochin 682035

Madras Stock Exchange LimitedExchange Building, Post Box No. 18311 Second Line Beach, Chennai 600 001

Madhya Pradesh Stock Exchange, Rajani Bhavan3rd Floor, 569 M G Road, Opp High Court, Indore 452001

The Stock Exchange � MumbaiPhiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 023

National Stock Exchange of India LimitedTrade World, Senapati Bapat MargLower Parel, Mumbai 400 013

The Delhi Stock Exchange Association LimitedDSE House, 3/1, Asaf Ali RoadNew Delhi 110 002

Note: Listing fee for the year 2000-01 has been paid to the Indian Stock Exchanges. Listing fees to the Societe de la Bourse de Luxembourg for listing of GDRs has been paidfor the Calendar year 2000.

32

7. Stock Code :Routers Bloomberg

Bombay Stock Exchange GRAS.BO GRASIM INNational Stock Exchange GRAS.NS NGRASIM INLuxembourg Stock Exchange � GRDS LI

8. Stock Market Data :

Bombay Stock Exchange (BSE) National Stock Exchange (NSE) Luxembourg Stock Exchange(In Rs.) (In Rs.) (GDRs in US$)

High Low Close Average High Low Close Average High Low AverageVolume Volume Price

Apr-99 159.5 102.1 113.0 145,263 160.8 102.3 117.5 108,873 4.2 3.3 3.8May-99 197.8 113.5 171.7 326,831 197.8 113.1 171.7 313,039 5.5 3.7 4.7Jun-99 261.0 161.0 221.5 438,058 261.0 161.0 221.5 438,058 7.9 4.9 6.5Jul-99 374.3 215.1 286.0 388,696 374.3 215.1 286.0 388,696 11.3 7.3 9.9Aug-99 474.0 276.0 436.0 421,843 474.0 276.0 436.0 421,843 13.8 9.8 11.2Sep-99 489.0 385.0 396.0 344,550 489.0 385.0 396.0 344,550 14.3 12.3 13.6Oct-99 538.0 367.0 422.3 310,622 538.0 367.0 422.3 310,622 16.0 12.2 13.9Nov-99 473.0 411.0 445.0 150,543 473.0 411.0 443.2 130,804 16.5 12.8 15.4Dec-99 447.3 373.2 408.0 252,392 459.9 370.1 405.8 172,203 16.8 13.7 15.1Jan-00 541.6 374.0 379.0 240,933 553.9 370.0 384.5 182,432 19.0 14.3 16.8Feb-00 434.9 272.2 319.1 318,263 434.1 278.1 323.8 232,959 16.3 11.8 14.4Mar-00 385.0 263.1 359.7 165,598 385.0 266.0 307.5 98,160 15.3 8.7 12.1

9. Stock Performance (Indexed) :

10. Stock Performance Over The Past Few Years :

(In Percentage) 1 Year 3 Years 5 YearsGrasim 100.8 (-)12.0 (-)48.2BSE Sensex 35.7 41.3 50.8BSE 200 65.6 87.2 68.6Nifty 43.7 57.5 52.0

33

11. Registrars and Transfer Agents : Share Department(Share transfer and communication Grasim Industries Limitedregarding share certificates, Birlagram 456 331dividends and change of address) Nagda, Madhya Pradesh

Shares can also be lodged for transfers and other related issues at thefollowing offices:

Grasim Industries LimitedCentury Bhavan, 3rd Floor, Dr. A. B. Road, Worli, Mumbai 400 025Tel: (91-22) 4303162, Fax: (91-22) 4220892

Grasim Industries LimitedBirla Building, 14th Floor, 9/1 R N Mukherjee Road, Calcutta 700 001Tel: (91-33) 2482985, Fax: (91-33) 2482985

Grasim Industries LimitedUco Bank Building, 4th Floor, Parliament Street, New Delhi 110 001Tel: (91-11) 3710548, Fax: (91-11) 3718370

12. Share Transfer System :

Share transfers are registered and returned within a period of 30 days from the date of receipt, if the documents are clear in all respects. TheShare Transfer Committee meets at least 8 times a month. The total number of shares transferred during the year (including demat) was13,766,385 (previous year 28,222,243).

1999-2000 1998-99Transfer Period No. of Transferees No. of Shares % No. of Transferees No. of Shares %(In Days) (Folios) (Folios)

1-15 139 53,195 3.3 72 22,434 0.4

16-20 4,362 640,549 40.2 138 15,849 0.3

20-30 266 37,380 2.4 2,264 5,907,748 93.6

30 and Above* 5,314 860,450 54.1 2,758 362,888 5.7

Total 10,081 15,91,574 100.0 5,232 6,308,919 100.0

* Delays due to signature mismatch and other issues notices for which have been sent to the sellers.

13. Investor Services :

Complaints received during the year

Nature of Complaints 1999-2000 1998-99

Received Cleared Received ClearedRelating to Transfer, Transmission, Dividend, 455 455 462 462Interest, Demat & Remat and Changeof address

Others 14 14 8 8

Legal proceedings on share transfer issues, if any - 7 Cases

34

14. Distribution of Shareholding (as at the year end):

No. of Shares 1999-2000 1998-99

No. of % of No. of % share No. of % of No. of % shareshare share share held holding share Share shares holding

holders holders holders holders held

1-100 265,262 88.9 7,951,183 8.7 177,564 89.1 5,982,615 8.3

101-200 18,237 6.1 2,599,720 2.8 11,555 5.7 1,654,404 2.3

201-500 10,276 3.5 3,158,666 3.5 6,821 3.3 2,097,700 2.9

501-1000 2,716 0.9 1,864,430 2.0 1,946 0.9 1,331,560 1.8

1001-5000 1,413 0.5 2,667,640 2.9 1,047 0.4 2,001,221 2.8

5001-10000 119 0.0 864,014 0.9 76 0.3 523,699 0.7

10001 and above 209 0.1 72,563,996 79.2 74 0.3 58,722,771 81.2

Total 298,232 100.0 91,669,649 100.0 199,083 100.0 72,313,970 100.0

15. Categories of Shareholders (as at the year end) :

1999-2000 1998-99

No. of % of No. of % share No. of % of No. of % shareCategory share share shares holding share share shares holding

holders holders held holders holders held

Individuals 289,503 97.07 19,332,257 21.08 194,150 97.53 15,749,562 21.78

Corporate 2,569 0.86 21,732,647 23.71 1,477 0.74 15,849,555 21.91

Financial Institutions 8 0.00 19,896,033 21.70 9 0.01 23,200,089 32.08

FIIs 100 0.03 14,675,984 16.02 56 0.03 4,537,482 6.28

NRI / OCBs 5,990 2.01 3,814,083 4.16 3,331 1.67 3,584,389 4.96

Banks 60 0.02 1,836,332 2.00 51 0.03 412,050 0.57

GDRs 2 0.00 10,382,313 11.33 2 0.00 8,980,843 12.42

Total 298,232 100.00 91,669,649 100.00 199,076 100.00 72,313,970 100.00

16. Dematerialisation of Shares and Liquidity : Over 63% of outstanding shares (including 11.3% of outstanding capital in the formof Global Depository Receipts � GDRs) have been de-materialised as on 31st March 2000.

Trading in Grasim�s shares is permitted only in dematerialised form from 5 th April 1999,as per notification issued by the Securities and Exchange Board of India.

17. Details on Use of Public Funds Obtained : Not Applicable.

18. Outstanding GDR/ Warrants : Outstanding number of GDRs as on 31st March 2000 is 10,383,263 (previous year �8,980,843). Each GDR represents one underlying equity share.There are no warrants / convertible bonds outstanding at the year-end.

35

19. Plant Locations :

Fibre, Pulp and Chemical Plants Cement Plants Other Plants

Staple Fibre DivisionBirlagram 456 331, Nagda, Madhya PradeshTel: (07366) 46760 / 46766Fax: (07366) 44114 / 46024

Harihar Polyfibers & Grasilene DivisionHarihar, Dist. HaveriKumarpatanam 581 123, KarnatakaTel: (08192) 42171 / 42175Fax: (08192) 42875

Pulp and Fibre DivisionsBirlakootam, KozhikodeMavoor 673 661, KeralaTel: (0495) 483161 - 3Fax: (0495) 483116

Birla CellulosicBirladham, Kharach, Dist. BharuchGujaratTel: (02629) 31391 � 5Fax: (02629) 339626

20. Investor Correspondence : The Company SecretaryGrasim Industries LimitedBirlagram 456 331, Nagda, M.P.Tel: (07366) 46760 / 46766Fax: (07366) 44114 / 46024

21. Per Share Data :

1999-2000 1998-99 1997-98 1996-97

Net Earnings (Rs. Crores) 233.1 163.8 230.8 274.6Cash Earnings (Rs. Crores) 470.1 373.5 397.8 422.1EPS (Rs.) 25.4 19.6 31.9 38.0EPS Growth (%) 29.6 (-)38.6 (-)16.0 (-)17.3CPS (Rs.) 51.3 44.7 55.0 58.4Dividend Per Share (Rs.) 7.0 6.8 6.8 6.5Dividend Payout (%) 31.0 34.4 21.2 17.1Book Value Per Share (Rs.) 303.0 285.9 320.2 296.0Price to Earnings (x) * 11.9 8.1 9.8 9.0Price to Cash Earnings (x) * 5.9 3.5 5.7 5.8Price to Book Value (x) * 1.0 0.6 1.0 1.2

* Based on stock price as on 31st March

Vikram CementDt. Mandsaur, Khor 458 470, M.P.Tel: (07420) 35540 / 35525 / 35526Fax: (07420) 35524

Aditya CementAdityapuram Sawa-ShambhuparaDist. Chittorgarh, Rajasthan � 312 613Tel: (01472) 87436 / 46 / 70Fax: (01472) 87471

Grasim CementVairija Bhawan 3rd Floor, Sai nagarJail Road, Raipur 490 001Tel: (0771) 521251 / 52Fax: (0771) 521259

Rajashree CementAditya Nagar, Gulbarga, Malkhed 585292Tel: (08474) 66166 / (08441) 78221-5Fax: (08474) 66285 / (08441) 78229 / 39

Birla WhiteRajashree Nagar, BhopalgarhDt. Jodhpur Kharia, Khangar 342606Tel: (02920) 64224-6Fax: (02920) 64225

Textiles DivisionBirlanagar, Gwalior 474 004, M.P.Tel: (0751) 365 806 / 365 807Fax: (0751) 365 813

Bhiwani Textile MillsBirla Colony, Bhiwani 125 021HaryanaTel: (01664) 42577 / 42579Fax: (01664) 43717

Vikram IspatSalav, Dist. Raigad 402 202, MaharastraTel: (02141) 40103 / 40110Fax: (02141) 40122

36

BOARD OF DIRECTORSMR. KUMAR MANGALAM BIRLA- ChairmanMRS. RAJASHREE BIRLAMR. A.N. LALBHAIMR. S.K. KAPURMR. M.L. APTEMR. B.K. SETHIMR. R.K. KAULMR. Y.P. GUPTAMR. S.G. SUBRAHMANYANMR. P.K. MOHTAMR. B.V. BHARGAVAMR. M.C. BAGRODIA

AdviserMr. D.P. Mandelia

ManagerMr. Shailendra K. Jain

ExecutivesStaple Fibre & Engineering Divisions, NagdaPulp & Grasilene Divisions, Harihar and BirlaCellulosic Division, Birladham, KharachMr. Shailendra K. Jain - President &

Business Head

Staple Fibre & Engineering Divisions, NagdaDr. Lalit Gupta - Sr. Executive President

Staple Fibre Division, NagdaMr. S.K. Saboo - Sr. Executive PresidentMr. P.P. Agarwal - Jt. Executive President (F&C)Mr. D.N. Makharia - Jt. Executive President

(Commercial)Mr. Thomas Varghese - Head (VSF) Marketing

Pulp & Grasilene Divisions, HariharMr. O.P. Rungta - Sr. Executive PresidentMr. S.S. Maru - Executive President

Birla Cellulosic Division, Birladham, KharachMr. Vijay Kaul - Sr. Executive President

Pulp & Staple Fibre Divisions, MavoorMr. R.N. Saboo - President

Cement DivisionsMr. Saurav Mishra - Business HeadMr. C.P. Jajoo - Sr. Executive President

(Chief of Manufacturing)Mr. O.P. Puranmalka - Sr. President

(Chief of Marketing)

Vikram Cement, Jawad and Aditya Cement,Shambhupura

Mr. K.C. Jhanwar - Executive President

Mr. G. Vittal Rao - Advisor (Tech)

Mr. N.R. Jain - Jt. Executive President

Grasim Cement, Raipur

Mr. G.K. Maheshwari - Jt. Executive President

Mr. M.K. Parasrampuria - Jt. Executive President

Mr. R.S. Sharma- Jt. Executive President

Rajashree Cement, Malkhed

Mr. G. Jayaraman - Sr. Executive President(Central Cement Cell)

Mr. Dwaraka Prasad Somani - Executive President

Mr. T.R. Venugopal Rao - Jt. President (Tech.)

Birla White, Kharia

Mr. S.N. Jajoo- Executive President

Cement Division - Reddipalayam

Mr. K.C. Birla- Jt. Executive President

Vikram Ispat

Mr. Ratan K. Shah - President

Mr. H.N. Singh - Jt. Executive President (Tech.)

Birla Consultancy & Software Services

Mr. Ashok Sand - Executive President

Chemical Division, Nagda

Mr V.T Moorthy - Business Head

Mr. Ashok Parekh - Group Advisor -Caustic Business

Mr. S.K. Maheshwari - Executive President

Mr. G.K. Tulsian - Executive President

Textile Divisions, Gwalior & Bhiwani

Mr. S.B. Agarwal - Group ExecutivePresident (Spg. Business)

Mr. Vikram Rao, Group ExecutivePresident (Fabric & Apparel Business)

Textile Division, Gwalior

Mr. S.K. Jain - Sr. President

Mr. S. Krishnamoorthy- Jt. Executive President

Bhiwani Textile Mills, BhiwaniMr. J.C. Soni - Executive President

Corporate Cell

Dr. Bharat Singh - Sr. Group President(Corporate Strategy & Business Development)

Mr. A.M. Singhvi - President (WCM)

Mr. M.R. Prasanna - President (Legal)

Dr. Santrupt Mishra - President (Corporate HRD)

Mr. Dev Bhattarcharya - Jt. ExecutivePresident (Corporate Strategy Cell)

Mr. B.C.P. Singh - Jt. Executive President(Corpo. Tech. Cell)

Management Audit Cell

Mr. S.N. Neotia - Executive President

Corporate Affairs

Mr. B.N. Puranmalka - Advisor

Mr. R. Vaidyanathan - Executive President(Corporate Affairs & Development,New Delhi)

Ms. N. Chainani - Executive President(Corporate Affairs & Development,New Delhi)

Corporate Finance Division

Mr. D.D. Rathi - Sr. President & CFO

Project Cell

Mr. S.S. Chhaparia - Executive President

Mr. P. Ramakrishnan - Executive President(Petro.)

Mr. P.L. Sharma - Sr. Jt. President

Secretary

Mr. D.N. Makharia

Auditors

M/s. G.P. Kapadia & Co.,(Chartered Accountants, Mumbai)

M/s. Lodha & Co., (Chartered Accountants, Delhi)

Solicitors

M/s. Mulla & Mulla & Craigie, Blunt & Caroe,Mumbai

Registered Office

PO : Birlagram, Nagda - 456 331 (M.P.)

37

Dear Shareholders,

Your Directors have pleasure in submitting the 53rd Annual Report and Audited Accounts of the Company for the year ended 31st March, 2000.

FINANCIAL RESULTS (Rs. in crores)1999-2000 1998-99

Gross Turnover 4982.32 4,325.08

Gross Profit 482.43 381.49Less:

Depreciation 236.98 209.68

Tax provision 12.35 249.33 8.00 217.68

233.10 163.81Add:

Balance Brought forward 1,023.12 1,010.01

Investment Allowance Reserve no longer required 16.46 17.00

Gratuity and Leave encashment liability accrued for earlier years � (49.63)

Debenture Redemption Reserve no longer required 147.47 80.40

1,187.05 1,057.78

1,420.15 1,221.59Less:

Appropriations

Debenture Redemption Reserve 107.45 117.32

Dividends

a) Interim Dividend on Equity Shares 55.00 �

Corporate tax thereon @11% 6.05

b) Proposed Final Dividend on Equity shares 9.17 56.44Corporate Tax thereon @ 22% 2.02 72.24 6.21 62.65

Transfer to General Reserve 24.47 18.50

204.16 198.47

Balance in Profit & Loss Account carried to Balance Sheet 1,215.99 1,023.12

Your company has recorded all round improved performance with turn over, gross profit and net profit showing substantive increa ses. Substantialvolume growth in key businesses of Viscose Staple Fibre, Cement and Sponge Iron, saving in operating costs resulting from on going modernizationefforts, upgradation of plants and energy optimization have helped the company to post healthy growth in its net profit. The Company achieved areduction of 12.4% in finance costs over the corresponding year through restructuring of certain high cost debt and effective fund management, whichcontributed further to its net profit.

Directors� Report

38

DIVIDENDS (Rs. in crores)Corporate

Dividend Tax on Dividend Total OutgoInterimInterim Dividend in respect of FY 1999-2000 @ Rs. 6.00 per share on 9,16,69,649 equityshares to be paid to the equity shareholders of the Company whose names appear in theregister of members as on 1st May 2000. 55.00 6.05 61.05

(@11%)FinalIn view of the excellent performance of the company for FY 1999-2000, the Board recommendsa final dividend on 9,16,69,649 Equity shares @ Re. 1/- per share, which if approved at theforthcoming Annual General Meeting will be paid to all those equity shareholders whose names 9.17 2.02 11.19appear on the Register of Members as on 10.7. 2000. (@ 22%)

Absorbing 64.17 8.07 72.24

DEBENTURESDuring the year under review, your Company issued Secured Redeemable Non-convertible Debentures of an aggregate value of Rs. 210 crores, onprivate placement basis to part finance its New Cement Plant at Reddipayalam in Tamil Nadu.The Directors confirm that the funds raised through the issue of debentures have been utilized for the purposes slated.

NEW CEMENT PLANTYour Company�s new 0.93 mn. tonne cement plant at Reddipayalam, near Trichy (Tamil Nadu), set up at a cost of Rs. 315 crores, commenced trial runin the month of March, 2000. Commercial production at this plant has begun from mid-April. This plant is expected to add significantly to the company�smarket share in the southern states of Tamil Nadu and Kerala. With the economy on the upturn and increased focus on infrastructure and housingsectors, the commissioning of the new plant should augur well for the company in the times to come.

FIBRE AND PULP DIVISIONS AT MAVOORThe Company had filed separate applications with State Government seeking permission for closure of Pulp and Fibre Plants at Mavoor (Kerala) w.e.f.30th November, 1999. Vide order dated 16th October, 1999, the State Government refused permission for closure of plants against which reviewpetitions have been filed and are pending. Meanwhile, the operations at both plants continue to remain suspended.

RESEARCH AND DEVELOPMENTTo enhance its competitive edge through product innovations and quality upgradation so as to serve its customers better, your Company pursues afocused R&D strategy. Research efforts are also structured to ensure cost optimization and environment protection.Currently your company is working closely with the Birla Research Institute of Applied Sciences, based at Nagda (M.P.) towards developing, innovativetechnologies for Cellulosic Fibre. The process of refining the existing technology is ongoing.To transform its customers expectations into controlled functional features of cement, a state-of-the-art Central Research And Development Laboratoryhas been instituted at Jawad (M.P.). Your company�s R&D laboratory is recognized by the Department of Scientific and Industrial Research (DSIR),Government of India.Research activity is also focused on development of high performance blended cement as a low cost, value added product and use of fluoride waste asmineraliser to develop mineralized cement. Raw-mix optimization of cement has met with encouraging results as well. Plans to develop belitic/sulphobelitic cement and sulpho-auminate cements, are on the anvil.In the area of Ecology your company�s R&D efforts have resulted in converting industrial waste into fuel. Research to explore use of alternate fuel andnon- conventional energy sources is also ongoing.

HUMAN RESOURCE DEVELOPMENTYour Company continues to focus on human resource development for remaining at the cutting edge in a rapidly changing globally competitive businessenvironment. A series of innovative HR initiatives have been launched towards creation of a working environment in which every employee, irrespectivelevels, can contribute his/her best.

39

Planned change interventions leading to productivity improvements by adopting a leaner work-force, grooming our managers by sharpening theirskills continually and providing them with challenges and opportunities to exhibit their talent are HR processes increasingly in vogue at your company.Assessment of competencies that are required globally for effective performance and organizational growth is done through powerful assessment toolssuch as Managerial Assessment of Proficiency and 360° Performance Feedback Systems.

The Internal recruitment scheme launched a year ago met with success and has led to the optimum utilization of talent and developing synergies.

Your company is successfully implementing innovative practices for better performance management.

SUBSIDIARY COMPANIESAs required under section 212 of the Companies Act 1956, the audited statements of accounts along with report of the Board of Directors and AuditorsReport of the following subsidiaries are annexed to this report:

(i) Kerala Spinners Limited(ii) Shree Digvijay Cement Company Limited(iii) Sun God Trading And Investments Limited(iv) Samruddhi Swastik Trading & Investments Limited(v) Dharani Cements Limited

PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956

The particulars of Employees, as required under Section 217(2A) of the Companies Act, 1956 are given as an Annexure to this report. However, as perthe provisions of Section 219(1)(b)(iv) of the Companies Act 1956, the report and accounts are being sent to all the shareholders of the Company,excluding the aforesaid information. Shareholders who are interested in obtaining such particulars may write to the Company Secretary, at theCompany�s registered office.

Additional information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, required under Section217(1)(e) of the Companies Act 1956 is set out in a separate statement attached to this report and forms part of it.

DIRECTORS

Mr. M.C. Bagrodia was appointed as a Director to fill in the casual vacancy caused on the Board by the resignation of Mr. S.V. Muzumdar. Your Directorsdeem it their privilege to have had a long association with Mr. S.V. Muzumdar and express their great appreciation for the valuable services rendered byhim during his tenure in the office.

Mr. Kumar Mangalam Birla, Mr. M.L. Apte, Mr. S.G. Subrahmanyan and Mr. B.V. Bhargava retire from office by rotation under Article 143 of the Articlesof the Association of the company and being eligible offer themselves for reappointment.

AUDITORS/AUDITORS� REPORT

Your Directors request you to appoint Auditors for the current financial year and fix their remuneration.

The observations made in the Auditors� Report are self-explanatory and therefore do not call for any further comments under Section 217 of theCompanies Act 1956.

APPRECIATION

Your Directors wish to place on record their deep appreciation of the dedication and commitment of employees to the growth of your Company duringa challenging year.

Industrial relations in all Divisions of your Company continued to be cordial.

Your Directors also express their gratitude to the Central and State Governments, banks, financial institutions and shareholders for their continuedco-operation and patronage.

On behalf of the Directors

KUMAR MANGALAM BIRLADated: 28th April, 2000 Chairman

40

Annexure to the Directors� Report

Information under Section 217(1) (e) of the Companies Act, 1956 read with Companies Act, 1956 read with Companies (Disclosure of Particulars in

the Report of Board of Directors) Rule, 1988 and forming part of the Directors� Report for the year ending 31st march, 1999.

A. CONSERVATION OF ENERGY

a) Energy Conservation measures taken

The Company is engaged in the continuous process of further energy conservation through improved operational and maintenance

practices:

i) Viscose Staple Fibre Units

- Use of chilled water instead of brine in cs2 condenser.

- By adopting variable frequency drives for spinning viscose feed pumps.

- Reducing the drier fan RPM where the fibre is on top position or reduce the No. of fans to 16.

- Energy efficient TEFC motors in place SPDP motors in Dissolvers (2 Nos.)

- Equalisation tank.

- Replacement of V belts with Flat belts for Air Compressors.

- Installation of Capacitors to improve power factor

- Complete independent Effluent Treatment System in SFD

- Installation of frequency drive speed control in ID Fans to regulate airflow to the boilers.

- Installation of air monitoring stations to monitor the ambient air.

- Lifting of Mixing Condensers of Horizontal Crystalizer and Swenson Evaporators.

- Energy efficient HP Boosters in place of LP Boosters in Cryatallizers.

- Enhancing capability of Caustic dilution plant for generating refrigeration.

- Automatic Control of HP & LP Steam pressure at various consuming ends.

- Change over from Hydro vector to Vacuum based Ash Evacuation system in Energy Centre.

ii) Pulp Units

- Modification of wood chipping system

- Use of CLO2 back water in place of CL2 back water in chlorination stage to stop CL2 back water pump.

- Higher efficiency bleach & unbleach stock pumps - 2 Nos.

- Diversion control of WBL pumps sealing water outlet based on conductivity in filtrate tank area.

- Instrumentation & Control for uniform lime sludge to and sea shell feeding to Lime Kiln.

- Higher efficiency Pump for PH drain liquor.

- VFD for Pressure Washer (3Nos.) in brown stock washing.

- Temperature Controller for Causticizing Water Tank & Recuasticizer.

- Higher Efficiency Screw Press back water Pump.

41

iii) Caustic Soda/Chemical Units

- Remembraning and Reconfiguring Membrane Cell Elements.

- Changing the Blade angle of Cooling Tower Fans.

- Using energy efficient lighting luminaries.

- Installation of variable frequency drives.

iv) Cement Units

- Installation of online energy monitoring system

- Modification of Kiln inlet & outlet seals

- Installation of frequency converter and variable frequency drives.

- Arresting of false air leakages.

- Optimization of grinding media in cement mill

- Swapping of motors

- Retrofitting of coolers

- Reduction in idle running of auxiliaries.

v) Textile Units

- Modified stenter overfeed to conserve electrical energy.

- Install cooling tower on DG Set & removed radiators.

- Installed electronic chokes.

- Installed big size inter cooler on air compressor.

- Installed power capacitors on big size motor terminals.

- Insulation of vessels of HTHP Beam dyeing & Jet dyeing m/cs.

- Installed waste heat recovery on HTHP Beam dying & Jet dyeing m/cs/

b) Additional investment and proposals, if any, being implemented for reduction of consumption of energy:

i) Viscose Staple Fibre Units

- Flow Control by installing Frequency drives in flash deareators and 3rd filtration pump

- Optimisation of Air Flow in boilers by installing flow controllers to improve efficiency.

- Installation of CO2 and O2 analysers in Boilers.

- Replacement of SPDP motors in SO3 blower and Air Compressors.

- Eco-friendly fibre by eliminating Zinc in the manufacture of Fibre.

ii) Pulp Units

- Renovation of Recovery Boiler No. II renovation for improved plant working.

42

iii) Caustic Soda/Chemical Units

- Variable frequency drives.

- Automatic voltage stabilizer in lighting circuits and operating of lesser voltage than the normal system voltage.

iv) Cement Units

- Retrofitting of Grate cooler with high efficiency cooler.

- Replacement of pneumatic transport system with mechanical transport system.

- Waste Heat recovery

- Modification in classifier and nozzle ring in raw mill

- To install low pressure cyclones.

v) Textile Units

- Reciprocating Chillers at New Factory may be replaced by centrifugal chiller. (Rs. 50 lacs)

c) Impact of Measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of

production of goods:

The above measures have resulted in energy saving and consequent reduction in cost of production.

d) Total Energy Consumption and Energy Consumption per Unit of Production:

As per Form �A� attached.

B. TECHNOLOGY ABSORPTION

Efforts made in Technology Absorption in Form �B�

RESEARCH & DEVELOPMENT (R&D)

FORM �B�

1 Specific areas in which R&D carried out by the Company: VSF & Pulp

- Improving product quality, developing new products and reducing cost of production.

- Improving viscose quality and fibre properties by incorporating additives.

- Close collaboration with Birla Research Institute for Applied Sciences (BRIAS) for various R&D activities.

2 Cement Units

- Actively collaborates with the National Council for Cement and Building Material for R&D activity

- Development of high performance blended cements.

3 Future Plan of Action

- To develop 63 grade, Masonry Cement, Slag Cement and other Blended Cement.

- To develop and design a scheme for using alternative fuel for kiln firing in place of fuel oils.

43

4 Expenditure on R & D

Expenditure on in-house Research & Development has been shown under respective heads of expenditure in the Profit & Loss Account.

Further, a total of Rs.106.19 lacs was paid to various 28.99. Research Institutes for carrying out Research and Development work related

to Company�s products.

5 Technology Absorption, Adoption and Innovation

The latest technology adopted for improving productivity and product quality and reducing consumption of scarce raw materials and fuels.

Information regarding technology imported during the last 5 years.

1. Membrane Cell Technology : From M/s Udhe GmbH, Germany for manufacture of Caustic Soda by

Membrane Cell in Caustic Soda Division.

Year of Import : 1994-95

Has Technology been fully absorbed : Yes

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on Foreign Exchange earnings and outgo is contained in Schedule 24 (4) and (5) of accounts. The Company is exporting

Viscose Staple Fibre, Chemicals, Sponge Iron, Cement, Textiles and Sophisticated Plant & Machinery of non-traditional natur.

44

FORM �A�Total Energy Consumption and Energy Consumption per unit of Production(A) POWER & FUEL CONSUMPTION Unit Current Year Previous Year

1. Electricitya) Purchased - Unit �000 186917 265199

Total amount Rs in lacs 8101.56 10121.25Rate per Unit Rs./Unit 4.33 3.82

b) Own GenerationI) Through Diesel Generator - Unit �000 369117 264242

Unit per Liter of Diesel Oil\ Units/Ltr. 3.71 4.18Cost / Unit Rs./Unit 2.18 1.70

II) Through Stem Turbine - Units �000 942659 809717Units per Kg. Of Steam Co-generation of Steam & PowerCost / Unit Rs./Unit 1.69 1.67(Cost of fuel and duties only)

2. Coal (slack, Steam & ROM including Lighting Coal)For Co-generation of Steam & Power Tonne 956232 856330For Process in Cement Plants Tonne 657484 774147Total amount Rs in lacs 32776.05 32532.77Average rate Rs./Tonne 2031.09 1995.29

3. Furnace Oil (Including LSHS)Quantity K. Ltrs. 117623 98496Total amount Rs in lacs 9693.26 6132.95Average rate Rs./K. Ltrs. 8241 6227

4. Light Diesel Oil (LDO)Quantity K. Ltrs. 1641 1631Total amount Rs in lacs 175.55 139.87Average rate Rs./K. Ltrs. 10697 8574

5. High Speed Diesel Oil (HSD)Quantity K. Ltrs. 7449 12978Total amount Rs in lacs 868.62 1259.48Average rate Rs./K. Ltrs. 11662 9704

6. Internal GenerationSteama) From Chemical Recovery Boiler in Rayon Pulp plants

Quantity Tonne 560125 846245Total Cost Rs in lacs 31.20 50.17Rate/Unit Rs./Tonne 5.57 5.93(Cost of Oil used for firing support in Boiler)

b) From Waste Heat Boiler in Sulphuric Acid Plants:Quantity Tonne 203403 134345Total Cost Rs in lacs N.A. N.A.Rate/Unit Rs./Tonne N.A. N.A.

(B) CONSUMPTION PER UNIT OF PRODUCTION :(Electricity units) (Furnace Oil (Kg.) Coal (Kg.) Steam (Tonne)

Current Previous Current Previous Current Previous Current Previous Name of the Product Unit Year Year Year Year Year Year Year Year 1. Viscose Staple Fibre

(incl. for intermediate & by products)Standard Per Tonne 1500.00 1500.00 � � � � 12.50 12.50 Actual Per Tonne 1303.15 1439.00 � � � � 9.23 9.88

2. Caustic Soda(For Cell House only)a. Mercury Plant

Standard Per Tonne 3400.00 3400.00 � � � � � �Actual Per Tonne 2823.00 2816.00 � � � � � �

a. Membrane Cell PlantStandard Per Tonne 2400.00 2400.00 � � � � � �Actual Per Tonne 2196.00 2204.00 � � � � � �

3. CementGreyStandard Per Tonne 120.00 120.00 � � 220.00 220.00 � �Actual Per Tonne 90.22 95.00 � � 128.22 141.00 � �WhiteActual Per Tonne 109.56 118.00 0.13 0.13 � � � �

4. TextilesActual

Yarn Per 100 Kg. 423.40 448.00 � � � � � 0.43Fibre Dyeing Per 100 Kg. 410.83 � � � � � 0.40 0.41Cloth Per 100 Kg. 418.27 324.00 � � � � 0.59 0.45

5. Stable Bleaching Powder (SBP)Standard Per Tonne 230.00 230.00 � � � � 0.28 0.28Actual Per Tonne 156.00 164.00 � � � � 0.13 0.13

6. Poly Aluminium ChlorideStandard Per Tonne 75.00 75.00 � � � � 0.33 0.33Actual Per Tonne 61.00 61.00 � � � � 0.27 0.23

7. Chlorosulphonic AcidStandard Per Tonne 125.00 125.00 � � � � 0.33 0.33Actual Per Tonne 125.00 131.00 � � � � 0.16 0.17

Note : Form �1A� is not applicable to Sponge Iron Division

45

AUDITORS� REPORT

TO THE MEMBERS OF GRASIM INDUSTRIES LIMITED

We have audited the attached Balance Sheet of GRASIM INDUSTRIES LIMITED as at 31st March, 2000 and also the Profit and Loss Account of theCompany for the year ended on that date annexed thereto and report that-

(a) We have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purposes of ouraudit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of the books.Proper returns adequate for the purposes of our audit have been received from the branches;

(c) The reports on the accounts of the Branches audited by other Auditors, have been forwarded to us and have been appropriately dealt with by usin preparing our report;

(d) The Balance Sheet and Profit and Loss Account referred to in this report are in agreement with the books of account;

(e) In our opinion, the Profit and Loss Account and Balance Sheet comply with the Accounting Standards referred to in Sub-Section 3(c) of Section 211of the Companies Act, 1956 ( hereinafter referred to as the Act) ;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with Notes onAccounts and Accounting Policies of the Company give the information required by the Act in the manner so required and give a true and fair view:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2000

and

ii) in the case of the Profit and Loss Account, of the Profit for the year ended on that date.

As required by the Manufacturing and Other Companies (Auditor�s Report) Order 1988 issued by the Company Law Board in terms of Section 227 (4A)of the Act and on the basis of such checks as we considered appropriate, we further report that :

1. The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets. All Fixed Assetshave been physically verified by the Management according to the regular programme of periodical verification in phased manner which in ouropinion is reasonable having regard to the size of the Company and the nature of its Fixed Assets. No material discrepancies were noticed onverification.

2. None of the Fixed Assets have been revalued during the year.

3. The Stocks of Finished Goods, Stores, Spare Parts, Packing Materials, Fuel and Raw Materials of the Company at all its locations ( except stockslying with third parties and in transit) have been physically verified by the Management at reasonable intervals.

4. The procedures of physical verification of stocks followed by the Management are reasonable and adequate in relation to the size of the Companyand nature of its business.

5. The discrepancies noticed on verification between physical stocks and book records were not material.

6. On the basis of our examination of stock records, the valuation of stocks is fair and proper in accordance with the normally accepted accountingprinciples and except changes made in the basis of valuation as stated in Note No. 6 of schedule 23 B is on the same basis as in the preceding year.

7. In our opinion the rate of interest and other terms and conditions on which unsecured loans have been taken from companies listed in the registermaintained under Section 301 of the Act are not, prima facie, prejudicial to the interest of the Company. The provisions of section 370(1B) of theAct are not applicable to a Company on or after 31st October, 1998.

8. In respect of unsecured loans granted to Companies listed in the register maintained under section 301 of the Act the rate of interest and otherterms and conditions of such loans are not, prima facie, prejudicial to the interest of the Company. The provisions of Sec. 370(1B) of the Act are notapplicable to the Company on or after 31st October, 1998.

46

9. The parties to whom the loans or advances in the nature of loans have been given by the Company are repaying the principal amount as stipulatedand are also regular in payment of interest, wherever applicable.

10. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate withthe size of the Company and the nature of its business with regard to purchase of stores, raw materials including components, plant andmachinery, equipment and other assets and for the sale of goods.

11. According to the information and explanations given to us, purchases of goods and materials and sale of goods, materials and servicesaggregating during the year to Rs. 50,000 or more in respect of each party in pursuance of contracts or arrangements entered into the registermaintained under section 301 of the Act have been made at prices which are reasonable having regard to prevailing market prices for such goods,materials or services or the prices at which transactions for similar goods, materials or services have been made with other parties.

12. As explained to us the Company has a regular procedure for determination of unserviceable or damaged store, raw material and finished goods.Adequate provision has been made in the accounts for the loss arising on items so determined.

13. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58 A of theAct and the Companies (Acceptance of Deposit) Rules, 1975 framed thereunder with regards to the deposits accepted.

14. In our opinion, reasonable records have been maintained by the Company for the sale and disposal of realisable by-products and scrap.

15. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

16. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for themaintenance of cost records under the Section 209 (1) (d) of the Act in respect of the Company�s products to which the said rules are madeapplicable and are of the opinion that, prima facie, the prescribed records have been made and maintained. We have not, however, made adetailed examination of the said records with a view to determine whether they are accurate or complete.

17. According to the records of the Company, Provident Fund and Employees State Insurance dues have been generally regularly deposited during theyear with the appropriate authorities.

18. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth tax, Sales tax,Customs duty and Excise duty were outstanding as at the last day of the financial year for a period of more than six months from the date theybecame payable.

19. During the course of our examination of books of account carried out in accordance with the generally accepted auditing practices, we have notcome across any personal expenses other than expenses under contractual obligations and/or generally accepted business practices, which havebeen charged to revenue account.

20. The Company is not sick industrial company within the meaning of Clause(o) of sub section (1) of Section 3 of the Sick Industrial Companies(Special Provisions) Act, 1985.

21. In respect of service activities, we report that (a) the Company has a reasonable system of recording receipts, issues and consumption of materialscommensurate with its size and the nature of its business, (b) as the processing jobs are undertaken at prices agreed with the parties, allocation oflabour to individual jobs is not considered necessary, and (c) the Company has a reasonable system of authorization at proper levels and anadequate system of internal control on issue and allocation of stores.

22. In respect of the Company�s trading activities we are informed that there are no damaged stocks.

For G.P. KAPADIA & CO., For LODHA & CO.,Chartered Accountants Chartered Accountants

UDAY R. PARIKH PRAMOD K. JAINPartner Partner

MumbaiDated : 28th April, 2000

47

Balance Sheet as at 31st March, 2000Rs. in Crores

Schedules Previous YearSOURCES OF FUNDSShareholders� FundsShare Capital 1 A 91.67 72.31Share Capital Suspense 1 B 0.02 19.38Reserves and Surplus 2 2704.57 2546.23

2796.26 2637.92Loan FundsSecured Loans 3 1536.60 1602.24Unsecured Loans 4 580.08 667.69Deferred Payment Credits 5 0.18 0.67Documentary Bills Discounted with Banks 6 158.13 150.53

2274.99 2421.13TOTAL 5071.25 5059.05

APPLICATION OF FUNDSFixed AssetsGross Block 7 4911.23 4703.55Less: Depreciation 1804.58 1582.67Net Block 3106.65 3120.88Capital Work-in-Progress 314.38 255.61

3421.03 3376.49Investments 8 682.98 680.37Current Assets, Loans and AdvancesInterest accrued on Investments 0.03 0.03Inventories 9 643.69 652.55Sundry Debtors 10 622.88 645.16Cash and Bank Balances 11 56.76 29.17Loans and Advances 12 437.15 327.83

1760.51 1654.74Less:Current Liabilities and ProvisionsLiabilities 13 637.69 491.71Provisions 14 155.58 160.84

793.27 652.55Net Current Assets 967.24 1002.19TOTAL 5071.25 5059.05Accounting Policies and Notes on Accounts 23

As per our separate report attachedKUMAR MANGALAM BIRLA

ChairmanFor G. P. KAPADIA & Co., For LODHA & Co., RAJASHREE BIRLAChartered Accountants Chartered Accountants A.N. LALBHAI

M. L. APTEUDAY R. PARIKH PRAMOD K. JAIN S. G. SUBRAHMANYANPartner Partner B. K. SETHI

B. V. BHARGAVAMumbai D. N. MAKHARIA SHAILENDRA K.JAIN M. C. BAGRODIADated: 28th April, 2000 Secretary Manager Directors

48

Rs. in Crores Schedules Previous Year

INCOMESales 4982.32 4325.08Interest and Dividend Income 15 50.71 65.74Other Income 16 37.62 44.07Increase in Stocks 17 12.61 15.27

5083.26 4450.16

EXPENDITURERaw Materials Consumed 18 1317.69 1214.02Manufacturing Expenses 19 999.81 805.71Purchases of Finished and Other Products 287.31 389.02Payments to and Provisions for Employees 20 298.87 260.31Selling, Distribution, Administration and Other Expenses 21 713.56 534.55Excise Duty 709.70 568.21Interest 22 256.08 292.26Depreciation [Note A of Schedule 7] 236.98 209.68

4820.00 4273.76

Profit before Tax & Employee Separation Compensation 263.26 176.40Employee Separation Compensation 17.81 4.59Profit before Tax 245.45 171.81Provision for Tax 12.35 8.00

Profit after Tax 233.10 163.81Gratuity & Leave encashment liability of earlier years -� (49.63)Investment Allowance Reserve no longer required 16.46 17.00Debenture Redemption Reserve no longer required 147.47 80.40Balance brought forward from Previous Year 1023.12 1010.01

Profit available for Appropriation 1420.15 1221.59

AppropriationsDebenture Redemption Reserve 107.45 117.32Interim Dividend 55.00 �Proposed Dividend 9.17 56.44Corporate Dividend Tax 8.07 6.21General Reserve 24.47 18.50Balance carried to Balance Sheet 1215.99 1023.12

1420.15 1221.59

Accounting Policies and Notes on Accounts 23

As per our separate report attachedKUMAR MANGALAM BIRLA

ChairmanFor G. P. KAPADIA & Co., For LODHA & Co., RAJASHREE BIRLAChartered Accountants Chartered Accountants A.N. LALBHAI

M. L. APTEUDAY R. PARIKH PRAMOD K. JAIN S. G. SUBRAHMANYANPartner Partner B. K. SETHI

B. V. BHARGAVAMumbai D. N. MAKHARIA SHAILENDRA K.JAIN M. C. BAGRODIADated: 28th April, 2000 Secretary Manager Directors

Profit & Loss Account for the year ended 31st March, 2000

49

Schedules forming part of AccountsLtd.

SCHEDULE 3Rs. in Crores

SECURED LOANS Previous Year

Non-Convertible Debentures 1075.77 1218.11Interest accrued and due on debentures � 0.87Other Loans:Term Loans from Banks:

Rupee Loan secured on movable assets of Textiles Division, Gwalior & Malanpur 0.80 1.60Foreign Currency Loans: Secured by bank guarantee against hypothecation of the machineries/movable assets purchased there against 7.09 13.64 Secured by first pari passu charge on assets of Cement Plant at Raipur � 0.85

Term Loans from Financial Institutions:Rupee Loans

Secured by first pari passu charge on assets ofCaustic Soda Plant at Nagda and CementPlant at Raipur 310.10 �

Secured by hypothecationof the machineries/movable assets purchased thereagainst 5.25 102.47

Secured by first pari passu charge on assets ofcertain divisions � 23.15

Housing loans secured by first equitablemortgage of land and buildings constructedthereon 1.27 2.11

Foreign Currency Loan secured by first pari passucharge on assets of Sponge Iron Division at Salav � 8.23

Interest accrued and due on loans � 0.02Deferred Sales-tax Loan secured by first available charge [subject to charge referred in Note 1 (g) & (j) below]

on assets of Cement Unit I & II at Jawad 39.58 42.32Working Capital Borrowings from Banks secured by hypothecation of stocks and book debts of the Company 96.74 188.87

Total 1536.60 1602.24

Notes:

1) Non-Convertible Debentures are secured by firstlegal/equitable mortgage on immovable assets,hypothecation of movable assets and floating chargeon other assets, both present and future, of thespecified divisions, ranking pari passu with the chargescreated in favour of Banks and Financial Institutionsfor their term loans. This charge is subject tohypothecation/charges in favour of Banks on stocksand book debts for working capital borrowings (exceptXXII and XXIII Series debentures which do not haveany charge on current assets) and charges created forcertain term loans and deferred payment credit on thespecified assets purchased thereagainst.a) 18% - X Series Non-Convertible Debentures

(Redeemed) on assets of Cement Plant atShambhupura. � 51.68

b) 13.25% - XII Series Non-ConvertibleDebentures (redeemable in three equal annualinstalments commenced from 5.6.1998 withpremium @ 5% paid with the secondinstalment) are secured on assets of SpongeIron Division at Salav. 26.67 53.33

c) 16.5% - XIII Series Non-convertibleDebentures (redeemable in three equal annualinstalments commencing from 11.7.2000 withpremium @ 5% payable on redemption) aresecured on assets of Caustic Soda Plant atNagda and Cement Plant at Raipur. 70.00# 160.00

SCHEDULE 1Rs. in Crores

A. SHARE CAPITAL Previous YearAuthorised

95000000 Equity Shares of Rs. 10 each 95.00 95.00Redeemable Cumulative PreferenceShares of Rs. 100 each

150000 15 % �A� Series 1.50 1.50100000 8.57 % �B� Series 1.00 1.00300000 9.30 % �C� Series 3.00 3.00

100.50 100.50

Issued, Subscribed and Paid up91669649 Equity Shares of Rs. 10 each fully

paid (Previous year 72313970Equity Shares) 91.67 72.31

Of the above 29532500 EquityShares were issued as fully paid upBonus Shares by way of Capitalisationof Share Premium and Reserves.19355679 Equity Shares of Rs.10 eachissued as fully paid up for acquiringthe cement business pursuant toScheme of Arrangementwithout payment being receivedin cash.

B. SHARE CAPITAL SUSPENSE19836 Equity Shares (Previous year

19375515) of Rs. 10 each to be issuedas fully paid up pursuant toacquiring of cement business ofIndian Rayon and IndustriesLimited under Scheme ofArrangement without paymentbeing received in cash. 0.02 19.38

SCHEDULE 2

RESERVES AND SURPLUS Rs in CroresAddition Deduction/

Balance as at during the Adjustments Balance as at31st March, 99 year during the year 31st March,

2000

1. Capital Reserve- On Revaluation of Fixed Assets 22.14 2.52* 19.62- Capital Subsidy 1.21 1.21

2. Preference Share CapitalRedemption Reserve 1.48 1.48

3. Debenture Redemption Reserve 394.24 107.45 147.47 354.224. Share Premium Account 823.32 823.325. General Reserve 255.53 24.47 280.006. Investment Allowance Reserve 25.19 16.46 8.737. Surplus as per Profit and Loss Account 1023.12 192.87 1215.99

2546.23 324.79 166.45 2704.57

Previous year 2268.42 378.93@ 101.12 2546.23

* Deduction/adjustment on account of :-

a) assets sold/discarded Rs.0.95 Croresb) Depreciation provided on revalued block Rs.1.57 Crores

Rs.2.52 Crores

@ Rs.46.02 Crores was added in Debenture Redemption Reserve and Rs.183.98 Crores was added in Share Premiumaccount pursuant to the acquisition of cement business under the Scheme of Arrangement with Indian Rayon and Industries

50

SCHEDULE 3 (Contd.) Rs. in CroresPrevious Year

d) 15% - XIV Series Non-Convertible Debentures(Redeemed) on assets of Cement Plant atShambhupura. � 70.00

e) 15% - XV Series Non-Convertible Debentures(Redeemed) on assets of Staple Fibre Divisionat Kharach. � 114.00

f) 17.50% - XVI Series Non-ConvertibleDebentures (redeemable at par in three equalannual instalments commencing from3.12.2000) are secured on assets of40MW Power Plant at Nagda. 50.00# 50.00

g) 17.50% - XVII Series Non-ConvertibleDebentures (redeemable at par in threeequal annual instalments commencing from1.1.2002) are secured on assets of CementUnits - I, II and III at Jawad. 85.00# 85.00

h) i)14.75% - XVIII Series Non-ConvertibleDebentures (redeemable at par on5.6.2002); 50.00 50.00andii)14.50% - XIX Series Non-ConvertibleDebentures redeemable at par on16.7.2002 50.00 50.00are secured on assets of Staple FibreDivision (excluding 40MW Power Plant)at Nagda.

i) 12.25% - XX Series Non-ConvertibleDebentures (redeemable at par in threeannual instalments of Rs.35, Rs.35 and Rs.30respectively, commencing from 18.12.2002)are secured on assets of Staple Fibre Divisionat Kharach. 200.00 200.00

j) 13.50% - XXI Series Non-ConvertibleDebentures (redeemable at par on 14.7.2003)are secured on assets of Cement Plants atJawad and Shambhupura ranking pari passuinter alia with XVII series Non-ConvertibleDebentures 150.00 150.00

k) i)13.25% - XXII Series Non-convertibleDebentures (redeemable at par inthree equal annual instalmentscommencing from 31.3.2005); 80.00 �andii)12.6% - XXIII Series Non-convertibleDebentures (redeemable at par inthree annual instalments of 33%,33% and 34% respectively of the facevalue of the debentures, commencingfrom 17.8.2005) 130.00 �are secured on a plotof land situate in Maharashtra and onthe assets of Cement Division-South atReddipalayam.

l) i)15.50% - IRIL - XVI Series Non-convertible Debentures (redeemableat par in three equal annualinstalments commencing from31.7.2000); 154.10# 154.10

andii)17.50% - IRIL - XVIII Series Non-convertible Debentures (redeemableat par in three equal annualinstalments commencing from29.11.2000) 30.00# 30.00are secured on assets ofBirla Super Cement division at Hotgi,Rajashree Cement Division at Malkhedand Birla White Cement Division atKharia Khangar.

1,075.77 1,218.11

SCHEDULE 3 (Contd.) Rs. in CroresPrevious Year

# # # # # 2) The interest rate on following series of debentures,for the amount specified thereagainst, stands revisedto 11% p.a. (payable annually) from 1st April 2000-

Series Amount on whichrevised rate of

11% is applicable(Rs. Crores)

XIII *45.00XVI 50.00XVII 85.00IRIL-XVI 67.00IRIL-XVIII 30.00

* As per revised terms, redemption premium of 5% will notbe payable on this component of XIII series debentures3) In case of Term Loans which carry pari passu charge

on the movable assets, such charge on movableassets is subject to prior charge of Banks on stocksand book debts for the working capital borrowings.

SCHEDULE 4UNSECURED LOANS

Fixed Deposits 5.44 5.13Short Term Loans and Advances:From Banks:

Commercial Paper(Maximum Balance Rs. 200 Crores,Previous Year Rs. 200 Crores) 100.00 200.00Buyers� Import Credit 105.35 14.40Cash Credit Account with Overseas Banks 20.51 31.15

225.86 245.55From Others � Inter Corporate Deposits � 97.85

225.86 343.40

Other Loans and Advances:From Banks 104.36 126.48From Others:

Deferred Sales Tax / Loan 238.67 186.13Other Loans 5.75 6.55

244.42 192.68

348.78 319.16

580.08 667.69

SCHEDULE 5DEFERRED PAYMENT CREDITSOn Usance Bills against purchase of Machineryon Deferred Payment Terms guaranteedby Banks, Secured by hypothecation of someof the Machinery in favour of Banks(including Rs. 0.12 Crores falling due within one year,Previous Year Rs. 0.54 Crores) 0.22 0.82Less:Interest in respect of future instalments 0.04 0.15

0.18 0.67

SCHEDULE 6DOCUMENTARY BILLS DISCOUNTED WITH BANKSAgainst Demand/ Usance Bills under Letter of Credit (Secured) 122.68 115.67Against Usance Bills (Unsecured) 35.45 34.86

158.13 150.53

51

SCHEDULE 7FIXED ASSETS

Rs. in Crores

S. No. PARTICULARS GROSS BLOCK DEPRECIATION NET BLOCK

As at Additions Deductions As at Upto Deductions For the Upto As at As at31.3.99 and/or and/or 31.3.00 31.3.99 and/or Year 31.3.00 31.3.00 31.3.99

transfers # transfers transfers

1. FREEHOLD LAND 34.85 3.18 0.02 38.01 � � � � 38.01 34.852. LEASEHOLD LAND 15.58 1.08 0.64 16.02 1.50 � 0.32 1.82 14.20 14.083. BUILDINGS 368.78 36.57 0.44 404.91 55.80 0.03 8.93 64.70 340.21 312.984. WORKERS� QUARTERS

UNDER GOVERNMENTSUBSIDISED SCHEMES 2.15 � � 2.15 1.12 � 0.02 1.14 1.01 1.03

5. RAILWAY SIDINGS 43.90 59.03 � 102.93 10.79 � 3.49 14.28 88.65 33.116. PLANT & MACHINERY 3985.04 112.03 21.81 4075.26 1430.88 14.74 208.43 1624.57 2450.69 2554.167. SHIPS 106.98 1.94 � 108.92 16.52 � 5.30 21.82 87.10 90.468. FURNITURE, FITTINGS &

OFFICE EQUIPMENTS 120.97 18.31 2.85 136.43 56.80 1.07 10.34 66.07 70.36 64.179. LIVESTOCK 0.01 � � 0.01 � � � � 0.01 0.0110. VEHICLES ETC. 25.29 5.02 3.72 26.59 9.26 1.71 2.63 10.18 16.41 16.03

4703.55 237.16 29.48 4911.23 1582.67 17.55 239.46 1804.58 3106.65 3120.88Previous Year 3548.52 *1165.84 10.81 4703.55 1083.78 *(286.91) 211.98 1582.67CAPITAL WORK-IN-PROGRESS 314.38 255.61(including Advances & Pre-operative Expenses)

3421.03 3376.49

* Gross Block of Fixed assets of Rs.886.69 Crores, Capital work-in-progress of Rs.23.80 Crores and accumulated depreciation of Rs.293.70 Crores were acquired from Indian Rayon and Industries Ltd. underScheme of Arrangement and are included in previous year�s figures.

Rs. in CroresPrevious Year

A. Depreciation for the yearTotal Depreciation 239.46 211.98Less:Additional depreciation on revalued assets withdrawnfrom capital reserve 1.57 2.23Depreciation included under other heads of expenses 0.02 �Transferred to Pre-operative expenses 0.89 0.07

2.48 2.30

236.98 209.68

B. 1. Freehold/Leasehold Land includes -a) Value of Shares of Rs.3750 ( Previous year Rs. 3750) issued by the Co-operative

Housing Society under its Bye-laws, in the name of Company�s nominees.b) Execution of documents in respect of Land at Malkhed amounting to Rs.0.56 Crore is still

pending.c) Rs.0.88 Crores jointly owned with other corporates.

2. The title deeds of some of the immovable properties transferred pursuant to the Scheme ofArrangement are yet to be transferred in the name of company.

3. Buildings and Workers� Quarters include -a) Those mortgaged with State Governments against subsidies received.b) Cost of Ownership Flat/Office Premises Rs.1.53 Crores (Previous Year Rs. 1.53 Crores)

(including Electrical Installations) held singly and jointly in Formed/ProposeCo- operative Housing Societies including value of Shares of Rs.500 (Previous year Rs.500) issued by the Societies under their Bye-laws.

c) Cost of Land and Buildings (including Electrical Installations) amounting to Rs.0.12 Crore(Previous Year Rs. 0.12 Crore) held on Co-ownership with Other Companies.

d) Buildings of Rs.0.61 Crores (Previous Year Rs. 0.61 Crores), yet to be registered in thename of the Company.

e) Building include Rs.15.13 Crores towards advance against shares and debentures forright of exclusive use, possession and occupation of office space. The Shares anddebentures are yet to be allotted to the Company.

4. Railway siding amounting to Rs.15.60 Crores is held on Co-ownership with Other Company forwhich documents are being executed.

SCHEDULE 7 (Contd.)Rs. in Crores

Previous Year

5. Addition to Plant & Machinery/Capitalwork-in-progress include as under :-a) Loss on Cancellation of Forward Cover 3.33 1.03b) Increase due to Foreign Exchange

fluctuation on loans/liabilities 0.59 3.97c) Roll-over charges 3.52 7.25

7.44 12.25

6. Plant & Machinery include assets of Rs.9.08 Crores(Previous year Rs.2.82 Crores) and Buildings includeassets of Rs. Nil (Previous year Rs. 1.55 Crores)not owned by the Company

7. Plant and Machinery include assets given onoperating lease amounting to Rs. 25.53 Crores (Previous year Rs.25.53 Crores)

8. Capital work in progress include advance againstCapital Orders, Technical know-how and Supervisionfees,Machinery under installation/in transit;construction materials purchases and other assetsunder erection; and pre-operative expenses.

C. Pre-operative Expenses pending Allocation /Appropriation : 1. Rehabilitation compensation 0.42 0.25 2. Raw Materials Consumed 0.77 (Rs. 28609) 3. Power & Fuel 5.83 0.23 4. Repairs to Other Assets 0.03 (Rs. 18985)5. Salaries, Wages, Bonus, Gratuity, etc. 2.24 0.926. Contribution to Provident & Other Funds 0.14 0.057. Employee�s Welfare Expenses 0.20 0.098. Insurance 0.69 0.649. Rent and Hire Charges 0.36 0.16

10. Rates & Taxes 0.07 0.0111. Stationery, Printing, Postage and Telephone

Expenses 0.41 0.22

52

SCHEDULE 8 (Contd.) Rs. in CroresPrevious Year

Pledged with Toronto Dominion Bank(South East Asia) Limited andBank of America 157.01 154.40

180.35 177.74

520.11 517.50B OTHER INVESTMENTS

a) Quoted - Fully Paid :i) Equity Shares of Rs. 10 each.

15 Mysore Cement Limited(Rs.117, Previous Year Rs. 117)

2117170 Century Enka Limited 1.35 1.35400000 Mangalam Cement Limited 1.15 1.15625900 Industrial Development Bank of India 8.02 8.02

i i ) Optionally Convertible Cumulative Preference Shares of Rs.10 each

400000 Mangalam Cement Limited 0.40 0.40

10.92 10.92b) Unquoted - Fully Paid:

i ) Equity Shares422496 Indophil Textile Mills Inc.,Philippines

of peso 10 each 0.04 0.04825000 Thai Carbon Black Public Co. Ltd.,

Thailand of Thai Baht 10 each 2.18 2.182500 Birla International Ltd. - Isle of

Man of CHF 100 each 0.53 0.531300 Gwalior Rayon Consumers Co-op.,

Stores Limited of Rs.100 each 0.01 0.01468 Industry House Limited of

Rs. 100 each (Rs. 31200,Previous year Rs. 31200)

500 Super Bazar Co-operative SocietyLimited of Rs.10 each(Rs.5000, Previous year Rs.5000)

ii) Unquoted - Fully Paid - Equity Shares ofRs.10 each

12000 Birla Consultants Limited 0.01 0.01100 Eastern Spg.Mills & Industries Ltd. 0.01 0.01

1982125 Gwalior Properties and Estates Ltd. 6.41 6.411982125 Seshasayee Properties Ltd. 6.41 6.411909550 Turquoise Investments and Fin. Ltd. 15.21 15.211911500 Trapti Trading & Investments Ltd. 15.22 15.22

iii) Others1 15.50% Secured Redeemable

Non-Convertible Bond of Rs.500000each in Sardar Sarovar NarmadaNigam Limited 0.05 0.05

46.08 46.08

57.00 57.003. Shares In Subsidiary Companies

Quoted -Fully Paid - Equity Shares of Rs.10 each4652870 Shree Digvijay Cement Co. Ltd. 66.36 66.36

66.36 66.36Unquoted -a ) Fully Paid - Equity Shares of Rs.10 each

193120 Kerala Spinners Limited 0.19 0.192895602 Dharani Cement Company Limited 32.01 32.016500000 Samruddhi Swastik Trading And

Investments Limited 6.50 6.50520 Sun God Trading And Investments

Limited (Rs.5200, PreviousYear Rs.5200)

SCHEDULE 7 (Contd.) Rs. in Crores Previous Year

12. Travelling & Conveyance 0.72 0.5113. Legal and Professional Charges 0.23 0.2314. Debenture Issue Expenses 0.74 �15. Miscellaneous Expenses 1.52 0.3816. Interest -

- On Loans and Debentures 18.04 �

Less :- Interest Received (Tax deducted atsource Rs. 0.03 Crore, Previous year Rs. Nil) 0.16 �

17.88 �17. Depreciation 0.89 0.07

33.14 3.76Less :Stock of Finished Goods under Trial Run(Cement-1859 MT) 0.40Process Stock under Trial Run 2.34Sale of Trial Run Production 0.06Miscellaneous Receipts 0.06 (Rs. 16209)

30.28 3.76Add: Pre-operative Expenditure incurred uptoPrevious Year 7.83 4.32

Total Pre-operative Expenditure 38.11 8.08Less: Allocated to Fixed Assets 2.65 0.25

Balance transferred to Capital Work-in-progress 35.46 7.83

SCHEDULE 8INVESTMENTS - Long Term

1. Government and Trust Securitiesi) Government Securities

Unquoted -Securities deposited with GovernmentDepartments 0.05 0.05

ii) Trust securities - In UnitsUnquoted -

500000 Units of Rs.10 each in Units(1964 Scheme) of UnitTrust of India 0.76 0.76

2. Shares, Bonds and DebenturesA TRADE INVESTMENTS

Equity Shares - Fully paida) Quoted - Rs.10 each

2964111 Indian Rayon and Industries Limited 38.10 38.10780000 Bihar Caustic and Chemicals Limited 0.78 0.78996000 TANFAC Industries Limited 1.00 1.00

27641445 Indo Gulf Corporation Limited 61.18 61.18150379023 Mangalore Refinery &

Petrochemicals Ltd. 238.70 238.70

339.76 339.76b) Unquoted -

1398857 Thai Rayon Public Company Limited,Thailand of Thai Baht 10 each. 1.07 1.07

5000 P.T. Indo Bharat Rayon Co. Limited,Indonesia of IndonesianRph 62625(US $100) each. 0.40 0.40

15000 A.V Cell Inc., Canada Class �A� Shareof total value of CanadianDollar 2.5 Million 6.88 6.88

149250 Alexandria Carbon Black Co.,S.A.E. of L.E. 100 each 14.99 14.99

157013894 Birla AT & T Communications Limited26,10,661 Shares of Rs 10 eachpurchased during the year) -

53

SCHEDULE 9

INVENTORIES(As valued and certified by the Executives of the respective Divisions)At lower of cost and net realisable value unless otherwise stated

Stores and Spare parts, Packing Materials and Fuels 217.76 234.66

Raw Materials 195.11 202.42

Finished Goods 170.72 167.90

By Products 8.29 2.02

Process Stock 50.53 44.28

Waste/Scrap (at net realisable value) 1.28 1.27

643.69 652.55

SCHEDULE 10 Rs. in CroresPrevious Year

SUNDRY DEBTORSExceeding six months:

Good and Secured 0.12 1.92

Good and Unsecured 93.81 98.52

Doubtful and Unsecured 0.50 0.50

94.43 100.94

Less: Provision for Doubtful Debts 0.50 0.50

93.93 100.44

Others

Good and Secured 117.34 98.57

Good and Unsecured 411.61 446.15

528.95 544.72

622.88 645.16

SCHEDULE 11

CASH AND BANK BALANCES

Cash balance on hand 0.59 0.95

Bank Balances:

With Scheduled Banks:

Current Accounts (including chequesunder collection) 54.68 26.23

Saving Accounts (Earmarked forEmployees Security Depositsand others) (Rs.33865, Previousyear Rs. 48569)

Deposit Accounts (Note 1) 1.30 1.51

55.98 27.74

With Others (Note 2) 0.16 0.45

56.14 28.19In Post Office Savings & Deposit Accounts(Rs.2389, Previous year Rs.2050)In Government Treasury Saving Account 0.03 0.03

56.76 29.17

Notes :

1. Deposits include (a) Rs.0.10 Crore (Previous Year Rs.0.11 Crore) lodged as security withGovernment Department (b) Rs.0.16 Crore (Previous year Rs. 0.35 Crore) earmarked forEmployees� Security Deposit and (c) Rs.0.09 Crore (Previous Year Rs.0.12 Crore) as Interestaccrued.

2. Balances with Others represents :

Rs. in Crores

Bank Balance Maximum Outstanding

Name of the Bank As at As at PreviousNature of Account 31.3.00 31.3.99 Year

Current Account with :

Nations Bank, U.S.A 0.09 0.45 1.15 1.42

British Bank of Middle East, Dubai 0.07 0.20

SCHEDULE 8 (Contd.) Rs. in CroresPrevious Year

b ) Partly Paid:100 Preference Shares of Rs.100 each,

Paid up Rs.25 each in SamruddhiSwastik Trading And InvestmentsLimited (Rs.2500, PreviousYear Rs.2500)

100 Preference Shares of Rs.100 each,Paid up Rs.25 each in Sun GodTrading and Investments Limited(Rs.2500, Previous Year Rs.2500)

38.70 38.70

105.06 105.06

682.98 680.37

Aggregate Book Value of :a) Quoted Investments 417.04 417.04b) Unquoted Investments 265.94 263.33

682.98 680.37

Aggregate Market Value of Quoted Investments 342.47 263.82

Notes: 1. The Company has earmarked 500000 units of the Unit Trust of India (UTI) 1964 Scheme of Rs.10 each Cost being Rs. 0.76 Crores (Market Price Rs. 0.72 Crore) in compliance with theprovisions of Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975

2. 7841445 Equity Shares of Indo Gulf Corporation Ltd. & 95379023 Equity Shares of MangaloreRefinery & Petrochemicals Limited are not transferrable for a period of 5 years from 7thJanuary, 1998 and 26th December, 1998 respectively.

3. 12049835 Units of Birla Cash Plus of Birla Mutual Fund purchased & sold during the year.4. Commercial Paper issued by Indian Rayon & Industries Ltd. - 5 Crores, ACC Ltd-15 Crores,

Reliance Industries Ltd.- Rs. 10 Crores and Tata Iron & Steel Co.Ltd.-5 Crores purchased andmatured during the year.

5. Pursuant to undertaking given to some financial institutions and others, the company can notdispose of shareholding without their prior approval (till such time the loans given to thesecompanies by these institutions are repaid in full) in following companies:(a) Indo Gulf Corporation Ltd. (b) Kerala Spinners Limited (c) Mangalam Cements Ltd.(d) Century Enka Limited, (e) Mangalore Refinery & Petrochemicals Ltd. and (e) Bihar Causticand Chemicals Limited.

54

SCHEDULE 12LOANS AND ADVANCES (Considered Good)

Secured Loan 0.48 0.51Unsecured-Deposits with Bodies Corporate(including accrued Interest Rs. 0.38 CrorePrevious Year Rs. Nil) 103.76 20.38Deposits and Balances with Government and otherAuthorities (including accrued interest ) 29.51 41.13Other Deposits 33.39 25.57Advances to Subsidiaries 16.58 14.60Advances recoverable in cash or in kind or for value to bereceived (Due from Officers of the Company Rs.0.06Crore, Previous Year Rs.0.01 Crore, Maximumoutstanding during the Year Rs.0.07 Crore, Previousyear Rs. 0.01 Crore) 156.36 138.29Advance Income tax (Net of Provision) 97.07 87.35

436.67 327.32

437.15 327.83

SCHEDULE 13

CURRENT LIABILITIESSundry Creditors :a) Small scale industrial undertakings *

(To the extent identified with available information) 0.34 0.31b) Others 486.28 372.56

486.62 372.87Security and Other Deposits 56.98 49.98Unclaimed Dividends 6.96 0.84Other Liabilities 37.78 27.35Interest accrued but not due on debentures/loans 49.35 40.67

637.69 491.71* Names of small scale industrial undertakings

to whom an amount of Rs. 1.00 lac or more wasoutstanding for more than 30days are as under:Manilal Singhavi

SCHEDULE 14

PROVISIONSFor Retirement Benefits 79.84 80.60For Premium on Debenture Redemption 3.50 17.59Interim Dividend 55.00 �Proposed Dividends 9.17 56.44Corporate Dividend Tax 8.07 6.21

155.58 160.84

SCHEDULE 15INTEREST AND DIVIDEND INCOMEi) On Long Term Investments

Interest (Gross) on :a) Government and other Securities (Rs. 38026,

Previous Year Rs. 23251)b) Trade Investments (Tax deducted at source Rs. Nil,

Previous Year Rs. 2.35 Crores) 9.49c) Other Investments (including for tax free bonds

Rs. Nil, Previous year Rs. 0.23 Crore)(Tax deducted at source Rs.8455,Previous year Rs. 0.01 Crore) 0.01 0.34Dividend (Gross) from:

a) Trade Investments(Tax deducted at source Rs. NilPrevious Year Rs. 0.02 Crore) 8.21 6.57

b) Subsidiary Companies � 0.03c) Other Investments(Tax deducted at source

Rs. 0.02 Crore, Previous year Rs. 0.02 Crore) 2.24 0.89

SCHEDULE 15 (Contd.)

ii) OthersInterest (Gross) on :Bank and Other Accounts (Tax deducted at sourceRs.2.89 Crores, Previous year Rs.1.27 Crores) 40.25 48.42

50.71 65.74

SCHEDULE 16

OTHER INCOMEExport Incentives 10.67 14.22Rent Received (Tax deducted at source Rs.0.10 Crore,Previous year Rs.0.24 Crore) 0.83 1.23Lease Rent 4.05 4.04Processing Charges (Tax deducted at Source Rs.Nil,Previous year Rs.0.01 Crore) 0.40 0.60Insurance Claims 3.13 6.18Profit on Sale and/or Discard of Fixed Assets (Net) � 2.27Profit on Sale of Long Term Investments (Net) � 0.49Profit on Sale of Short Term Investments (Net) 0.05 �Excess/Short Provisions (Net) 6.05 5.10Prior period Adjustments (Net) � 1.86Commission Income 1.15 2.53Miscellaneous Receipts 11.29 5.55

37.62 44.07

SCHEDULE 17

INCREASE IN STOCKSClosing StockFinished Goods 170.32 167.90By-Products 8.29 2.02Process Stock 48.19 44.28Waste/Scrap 1.28 1.27

228.08 215.47

Opening StockFinished Goods 167.90 137.05By-Products 2.02 2.13Process Stock 44.28 37.40Waste/Scrap 1.27 1.71

215.47 178.29Add: Stock of transferred business as on 1.9.1998pursuant to the Scheme of Arrangement(Finished goods Rs. 13.50 Crores, Process StockRs. 8.21 Crores and Waste Rs. 0.20 Crore) � 21.91

215.47 200.20

Increase in Stocks 12.61 15.27

SCHEDULE 18

RAW MATERIALS CONSUMEDOpening Stock 202.42 232.51Add: Stock of transferred business as on 1.9.1998pursuant to the Scheme of Arrangement � 1.89

202.42 234.40Purchases and Incidental Expenses(includes cost of Lime Stone raised) 1318.41 1184.89

1520.83 1419.29Less:Sales 8.03 2.85Closing Stock 195.11 202.42

203.14 205.27

1317.69 1214.02

Rs. in CroresPrevious Year

Rs. in CroresPrevious Year

55

Rs. in CroresSCHEDULE 19 Previous Year

MANUFACTURING EXPENSESConsumption of Stores, SpareParts and Components, PackingMaterials and Incidental Expenses - Less salesRs.0.34 Crore (Previous year Rs.0.47 Crore) 249.15 195.38Power & Fuel 650.76 521.10Processing Charges 39.67 34.02Repairs to Buildings 18.28 17.15Repairs to Machinery (excluding Spare Parts and Components) 30.66 27.50Repairs to Other Assets 11.29 10.56

999.81 805.71

SCHEDULE 20

PAYMENTS TO AND PROVISIONS FOR EMPLOYEESSalaries, Wages & Bonus, etc. 232.67 202.88Contribution to Provident and Other Funds 23.92 20.74Employees� Welfare Expenses 42.28 36.69

298.87 260.31

SCHEDULE 21

SELLING, DISTRIBUTION, ADMINISTRATIONAND OTHER EXPENSESCommission to Selling Agents 22.93 18.47Brokerage and Discount 21.38 16.90Freight, handling and other expenses 448.53 333.00Advertisements 41.68 26.05Insurance 20.27 20.90Rent (including Lease Rent) 11.95 7.51

Rates and Taxes 14.58 8.81Stationery, Printing, Postage and Telephone Expenses 17.99 16.05Travelling and Conveyance 25.80 23.07Legal and Professional charges 11.08 11.77Bad debts written off 7.25 2.95Research contribution (including Expenses) 1.06 0.87Donations (including Rs.0.95 Crore, Previous yearRs. 0.40 Crore paid to General Electoral Trustfor contribution for political purpose as may bedecided by the Trustees from time to time) 1.05 3.16Directors� Fee 0.01 0.02Exchange Rate difference (Net) 3.21 1.69Prior period Adjustments (Net) 3.35 �Loss on Sale and/or discard of Fixed Assets (Net) 3.07 �Miscellaneous Expenses 58.37 43.33

713.56 534.55

SCHEDULE 22

INTERESTOn Fixed Loans and Debentures

(including pro-rata Premium on Redemption -Rs. 0.10 Crore, Previous year Rs. 3.66 Crores) 203.22* 233.18*

On Other Accounts 52.86 59.08

256.08 292.26

* Includes Rs.0.03 Crore (Previous year Rs.0.02 Crore) paidto the Manager of the Company in respect ofFixed Deposits/Debentures.

SCHEDULE 23

ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

A SIGNIFICANT ACCOUNTING POLICIES:

1. ACCOUNTING CONCEPTS

The financial statements are prepared under the historical cost convention (except for certain fixed

assets which are revalued) on an accrual basis and in accordance with the mandatory Accounting

Standards.

2. FIXED ASSETS

Fixed assets are stated at cost (including other expenses related to acquisition and installation)

adjusted by revaluation of certain fixed assets.

3. TRANSLATION OF FOREIGN CURRENCY ITEMS

Foreign currency assets and liabilities covered by forward contracts are stated at the forward contract

rates while those not covered are restated at year end rate. Exchange differences relating to fixed

assets are adjusted in the cost of the asset. Any other exchange difference is dealt with in the profit

and loss account. Premium in respect of forward contracts is recognised over the life of contracts.

Transactions relating to overseas offices have been converted as under:

i) Net revenues at the average rate for the year.

ii) Fixed assets at rates prevailing on the dates of addition. Depreciation is accounted for at the

same rate at which assets are converted.

iii) Other current assets and liabilities, at rates prevailing at the end of the year.

4. TREATMENT OF EXPENDITURE DURING CONSTRUCTION PERIOD

Expenditure during construction period is included under Capital Work-in-Progress and the same

is allocated to the respective Fixed Assets on the completion of its construction.

5. INVESTMENTS

Current investments are stated at lower of cost and fair value. Long term investments are stated at

cost after deducting provisions made for permanent diminution in the value.

6. INVENTORIES

Inventories are valued at the lower of cost and net realisable value except waste/scrap which is

valued at net realisable value. The cost is computed on weighted average/FIFO basis. Finished goods

and process stock include cost of conversion and other costs incurred in bringing the inventories to

their present location and condition. Obsolete, defective and unserviceable stocks are duly provided

for.

7. RESEARCH AND DEVELOPMENT EXPENDITURE

Revenue expenditure is charged to the profit and loss account and capital expenditure is added to

the cost of fixed assets in the year in which it is incurred.

8. DEPRECIATION

Depreciation is charged in the Accounts on the following basis:

a) On fixed assets (other than Revalued Assets) - on written down value method in respect of

Viscose Staple Fibre Division and Engineering Division at Nagda, Textiles Division at Gwalior,

Bhiwani Textiles Mills at Bhiwani, Birla International Marketing Corporation and on Straight

Line Method in other Divisions including Power Plants at Nagda applying the rates of

Schedule XIV of the Companies Act, 1956. Continuous process plant as defined in Schedule

XIV has been taken on technical assessment.

56

SCHEDULE 23 (Contd.)

b) In respect of Revalued Fixed Assets, on straight line method on the gross value of assets as

increased by the amount of revaluation at lower rates, based on life of assets, as ascertained

by the valuers.

c) In respect of the amounts capitalised during the year on account of foreign exchange

fluctuation is provided prospectively over the residual life of the assets.

d) In respect of assets added/disposed of during the year on pro-rata basis with reference to the

month of addition/deduction except in case of new projects where it is provided for the period

of use.

e) Leasehold land is being amortised over the period of lease.

f) Capital expenditure on assets not owned by the company is amortised over a period of five

years.

9. RETIREMENT BENEFITS

The Company makes regular contribution to provident fund and superannuation fund. Liability for

Gratuity and Leave Encashment are accounted on actuarial valuation basis.

10. GOVERNMENT GRANTS

Capital grants relating to specific assets are reduced from the gross value of the Fixed Assets and

capital grants for Project Capital Subsidy are credited to Capital Reserve.

Other revenue grants are credited to profit and loss account or deducted from the related expenses.

11. CONTINGENT LIABILITIES

Contingent liabilities are not provided for and are disclosed by way of Notes.

B NOTES ON ACCOUNTS Rs.in Crores

Previous Year

1. Contingent Liabilities not provided for in respect of :

a) Claims not acknowledged as debts (Net of tax

Rs. 78.66 Crores, Previous Year Rs.101.97 Crores) 127.91 159.38

b) Uncalled liability on partly paid shares (Rs.15000,

Previous year Rs. 15000)

c) Custom duty which may arise if obligation for

exports is not fulfilled against import of raw materials

and machinery (Net of tax Rs. 6.38 Crores,

Previous year Rs. 16.04 Crores) 10.39 24.68

d) Custom duty on import of technical know-how and

other services relating to projects against which

Bank Guarantee/Bond of Rs. 5.75 Crores is furnished 10.81 10.81

2 The Ministry of Textiles, vide its orders dated 30th June 1997

and 1st July, 1999 has deleted cement from the list of

commodities to be packed in Jute bags under the Jute

Packaging (Compulsory Use in Packing Commodities)

Act 1987. In view of this, the company does not expect

any liability for non-despatch of cement in Jute bags

in respect of earlier years.

3 Estimated amount of Contracts remaining to be executed on

capital account and not provided (advance paid Rs. 9.30

Crores, Previous year Rs. 49.09 Crores). 48.23 203.30

SCHEDULE 23 (Contd.) Rs.in Crores

Previous Year

4 i) Value of assets taken on lease 12.68 12.68

ii) Future obligation of Lease Rent as Lessee 0.80 8.84

5 Land, Building and Plant & Machinery of some of the Units were revalued on 1.4.1974,

1.4.1980,1.4.1982 and 1.4.1985 by approved valuers on the basis of assessment about the current

value of the similar assets. As a result book value of such assets was increased by Rs. 116.40 Crores

which had been transferred to Capital Reserve.

6 As per the requirements of Accounting Standard -2 "Valuation of Inventories" made mandatory

effective from 1st April, 1999, the company has -

a) provided liability of excise duty on the finished goods lying in stock at factories / bonded

warehouse at the close of the year, resulting in increase in the value of inventories and

corresponding increase in current liabilities by Rs. 17.07 Crores. However, this has no impact

on the profit for the year.

b) i) Changed the method of valuation of process stock, stores and spares parts,packing

materials and fuels from �at cost� to �at lower of cost and netrealisable value�.

ii) Changed the computation of conversion cost of process stock and finished goods by

including depreciation and factory administration expenses.

iii) Amortised the machinery spares, the uses of which are irregular, over the residual

useful life of respective plant and machinery.

These changes resulted in net increase in the value of inventories and profits by Rs. 12.35 Crores.

7 The Company had filed separate applications with State Government seeking permission for closure

of Pulp and Fibre Plants at Mavoor (Kerala) w.e.f. 30th November, 1999. Vide order dated 16th

October,1999, the State Government refused permission for closure of plants against which review

petitions have been filed and are pending. Meanwhile, the operations at both plants are suspended.

8 As it is not possible to ascertain with reasonable certainty the quantum of accruals in respectof certain

insurance and railway claims, export incentives and interest on overdue bills from customers, the

same are accounted on acceptance basis.

9 a) Inter-Divisional transfers of goods as independent marketable products of separate divisions

for captive consumption are included in respective heads of accounts to reflect the working

of the respective divisions. Any unrealised profit on unsold stock is eliminated while valuing

theinventories. The accounting treatment has no impact on the profit of the company.

b) Sales include inter-divisional transfers to fixed assets Rs.4.77 Crores at Cost (Previous year

Rs.9.31 Crores) and other inter-divisional transfers Rs. 336.58 Crores, at market rate

(Previous year Rs.427.62 Crores).

10 Advances recoverable in cash or in kind include the payments made to / on behalf of Rosa Power

Supply Co. Ltd. Rs. 1.74 Crores (Previous year Rs.1.74 Crores) and payments made to / on behalf

of Bina Power Supply Co. Ltd. Rs.14.48 Crores (Previous year Rs.13.79 Crores) which are intended

to be adjusted against the value of the Equity Shares to be issued by such Co-promoted Companies

in the event of relative projects are implemented after procuring all regulatory approvals.

11 The Company has an investment of Rs.66.36 Crores in share capital of Shree Digvijay Cement

Company Limited (SDCC), a subsidiary company. The losses of SDCC exceed its paid-up capital and

reserves as on 30th Sept. 99. In view of the long term strategic investment of the Company in SDCC,

in the opinion of the management no provision is required to be made since diminution in the value

of such investment is of temporary nature.

57

SCHEDULE 23 (Contd.) Rs.in Crores

Previous Year

12 The Following are included under other heads of expenses in the

Profit and Loss account :

i) Stores and Spares Consumed 31.90 16.34

ii) Power & Fuel 4.49 3.52

iii) Repairs to Machinery 4.39 2.01

iv) Repairs to Buildings 0.63 0.07

v) Repairs to Other Assets 0.62 �

vi) Salaries, Wages, Bonus & Gratuity 5.69 4.20

vii) Contribution to Provident and Other Funds 0.45 0.24

viii) Welfare Expenses 0.70 0.43

ix) Insurance 0.71 0.49

x) Hire Charges 0.32 0.48

xi) Royalty & Cess 39.94 27.86

xii) Rates & Taxes 2.79 0.50

xiii) Ship Operation and Management charges 3.07 3.16

xiv) Depreciation 0.02 �

xv) Lease Rent 3.64 3.65

SCHEDULE 23 (Contd.)

Previous Year

13 Auditors� remuneration Rs

a) Statutory Auditors:Audit Fee 1680000 1325000Tax Audit Fee 183225 176750For Certification and Other Work 62200 139225Reimbursement of Expenses 274003 224028

b) Branch Auditors:Audit Fee 1024230 669133Tax Audit Fee 120875 38875For Certification and Other Work 116063 74312Reimbursement of Expenses 87749 54230

c) Cost Auditors:Audit Fee 305500 273158For Certification and other work 21000 �

Reimbursement of Expenses 26231 18084

14 Manager�s remuneration Rs. in Lacs

Salary 29.94 15.48

Contribution to Provident Fund & Other Funds 5.91 4.08

Perquisites 5.76 2.92

41.61 22.48

15 Previous year�s figures have been regrouped/rearranged wherever necessary to confirm to this

year�s classification.

16 All the amounts in rupees have been rounded off to crores with lacs in decimals as approved under

Section 211 (1) of the Companies Act, 1956. Figures of Rs.50,000 or less have been shown at actuals

in brackets.

17 Additional information required under Part II of Schedule VI to the Companies Act, 1956 (as certified

by the Executives of the respective Divisions) is as per Schedule 24.

58

SCHEDULE 24

ADDITIONAL INFORMATION UNDER PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956

1. CAPACITY & PRODUCTION

Products Unit Licensed/Registered * Installed Capacity Production #Capacity (Quantity)

1999-00 1998-99 1999-00 1998-99 1999-00 1998-99

1. Viscose Staple Fibre/Polynosic/ TonneHWM/ /Hi-Performance/ Speciality Fibre� At Nagda, Mavoor, Harihar & Kharach 354950 354950 246775 246775 188002 164355

2. Sulphuric Acid Tonne(Captive & Intermediate Products)� At Nagda, Mavoor, Harihar & Kharach 324570 324570 210370 210370 178333 130312

3. Carbon-di-Sulphide Tonne(Captive & Intermediate Products)� At Nagda, Mavoor, Harihar & Kharach 73265 73265 46798 46798 34257 30611

4. Rayon Grade Pulp Tonne 108000 108000 130000 130000 73283 111263(At Mavoor & Harihar)

5. Paper Tonne 2700 2700 2700 2700 � �

6. Rayon Grade Caustic Soda Tonne 175800 175800 160600 198300 135260 130047

7. Stable Bleaching Powder Tonne 45000 45000 15000 15000 16732 16293

8. Man-Made Fibre Fabrics Mtr. (in 000�s) 1598 1598 278 278 16553 18290(At Gwalior & Bhiwani) Looms Looms Looms Looms

Kg. (in 000�s) 394 299

9. Man-Made Fibre Yarn Kg. (in 000�s) 117500 117500 43488 43488 11934 10562(At Bhiwani & Malanpur) Spindles Spindles Spindles Spindles

10. Cement TonneAt Jawad, Raipur, Shambhupura & Malkhed 14000000 14000000 8200000 8200000 8396110 5823378At Reddipalayam (Under Implementation) 900000 900000 900000 900000 � �

11. White Cement Tonne 360000 360000 360000 360000 240492 131979(At Khariakhangar)

12. Articles of Cement or of ConcreteReady Mix Concrete Cu. Mtr.At Gurgaon 67200 67200 67200 67200 21582 98At Hyderabad 50000 50000 50000 50000 43848 12587

13. Industrial Machinery Tonne 25000 25000 15950 15950 ## ##

14. Poly Aluminium Chloride Tonne 66000 66000 13860 13860 18888 19369

15. Chloro Sulphonic Acid Tonne 49500 49500 16500 16500 15126 13814

16. Sponge Iron Tonne 600000 600000 900000 900000 709094 670231

Notes:

(a) * Registered capacities are those capacities for which registrations granted pursuant to the schemes of delicensing.

(b) The Installed Capacities are certified by the Management and accepted by the Auditors as correct, being a technical matter.

(c) # Includes third party processing

(d) Installed capacities for the year indicated above include those vested in the Company consequent to the Scheme of Arrangement. Necessary applications have been submitted to obtain endorsementof the name of the Company.

(e) ## Quantitative data can not be given as production represents fabrication,machining, etc. against individual tailor made orders.

59

SCHEDULE 24 (Contd.)

2. TURNOVER AND STOCKS (Value Rs. in Crores)

Products Unit Turnover Stock

1999-00 1998-99 As on 31.3.2000 As on 31.3.1999 As on 31.3.1998

Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value

1. Viscose Staple Fibre Tonne 186885 1326.44 159526 1172.43 4398 23.04 8848 31.72 8623 35.24(At Nagda,Mavoor, Harihar & Kharach) 5567 49.87* 4604 42.18*

2. Rayon Grade Pulp Tonne 74429 160.49 * 111716 253.43 * 1580 2.37 2726 3.94 3219 4.48(At Mavoor & Harihar) 40 0.12

3. Rayon Grade Caustic Soda Tonne 66999 74.67 65576 69.36 4015 3.92 2776 1.96 2951 1.7867022 69.21* 64646 61.20*

4. Stable Bleaching Powder Tonne 16738 16.56 16209 17.83 568 0.37 575 0.34 495 0.311* 4*

5. Man-Made Fibre Fabrics Mtr. 16528} 187.86 19879 } 241.07 4489} 42.48 3046 } 24.94 2526} 27.48

(At Gwalior & Bhiwani) (in 000�s) } 0.95* } 0.48* } } }

Kg. 383} 290} 53} 42} 33 }

(in 000�s)

6. Man-Made Fibre Yarns Kg. 9662 124.03 8001 102.47 1237 15.78 1324 13.75 1649 19.51(At Bhiwani & Malanpur) (in 000�s) 2359 35.68* 2890 44.89 *

7. Industrial Machinery Tonne 2.28 2.00 � � �(At Nagda & Harihar) 10.32* 15.65*

8. Poly Aluminium Chloride Tonne 17748 10.07 18052 9.88 858 0.44 925 0.41 684 0.261207 0.57* 1076 0.50*

9. Chlorosulphonic Acid Tonne 15104 8.20 13840 6.41 88 0.03 66 0.02 92 0.02

10. Cement Tonne 8392978 1731.02 5865131 1236.18 190171 30.62 209149 26.20 184638 24.30(At Jawad, Raipur, 22110 4.59* 12573 1.99*Shambhupura & Malkhed)

11. White Cement Tonne 240014 149.36 133660 80.07 1568 0.60 1090 0.20 � �(At Khariakhangar) 0.01*

12. Ready Mix Concrete Cu. Mtr. 65430 10.49 12685 1.93 � � � � � �(At Gurgaon & Hyderabad)

13. Sponge Iron Tonne 822996 476.87 565682 313.64 20469 11.26 134371 52.70 29822 11.51

14. Trading Activities :Spices Tonne 2762 52.89 3571 56.45 174 3.41 267 5.07 342 6.30Sulphur Tonne 248420 60.38 137804 21.82 6763 1.62MAP Tonne 38093 35.12 14460 11.61Coal Tonne 211760 29.98 67886 9.58 17999 2.34S. Kerosene oil Tonne 38327 56.97 - - 25103 25.76Coffee, Rice, Oil, Sugar, etc. 48.90 313.95 4.56 4.54 3.24

0.93* 6.48*

15. Others @ 238.88 221.35 1.72 2.11 2.628.73* 10.13*

4640.97 3888.15341.35* 436.93*

4982.32 4325.08 170.32 167.90 137.05

Notes:

1. * Inter-Divisional transfers

2. @ Includes Service Income Rs.27.36 Crores (Previous year Rs.20.79 Crores), Tax deducted at source Rs 0.14 Crore (Previous year Rs.0.27 Crore).

60

SCHEDULE 24 (Contd.)

3. RAW MATERIALS, STORES, SPARE PARTS AND COMPONENTS (Value Rs.in Crores)

Unit 1999-00 1998-99

Quantity Value Quantity Value

a) Raw Materials Consumed:

Pulp Wood Tonne 223306 51.48 343083 90.99

Dissolving Pulp Tonne 119137 301.00 57762 152.9074424 * 166.03 * 112190 * 263.35 *

Caustic Soda Tonne 43596 43.50 35388 34.1864494 * 60.50 * 61844 * 53.21 *

Sulphur Tonne 91504 31.43 71882 19.48

Salt Tonne 213110 21.73 203479 21.26

Hydrated Lime Tonne 12925 3.76 12497 3.79

Man-made Fibre Yarn Kg.(in 000�s) 4517 56.53 3140 35.93800 * 8.30 * 2901 * 38.26 *

Cotton Man-made Fibres Kg.(in 000�s) 7334 39.67 7027 32.06

6142 * 44.46 * 5092 * 37.56 *

Lime Stone Tonne 11518512 71.67 7771943 54.47

Steel Plates, Sheets, etc. Tonne 296 0.94 701 1.82

Natural Gas SMQ(�000) 215208 59.46 228039 55.85

Naptha Tonne 22823 24.56 1839 1.23

Iron Ore Pellets Tonne 699262 122.77 687337 124.59

Iron Ore Lumps Tonne 394952 52.43 368508 50.99

Others 152.80 135.694.67 * 6.41 *

1033.73 815.23283.96 * 398.79 *

1317.69 1214.02

* Consumption of own Production at Market Rate.

b) Purchase of Finished Goods:

Fabrics Mtr.(in 000�s) 1418 6.56 2109 9.05

Spices Tonne 2669 47.08 3496 54.33

Sulphur Tonne 255183 48.86 137804 14.33

MAP Tonne 38093 35.54 14440 11.34

Coal Tonne 229759 28.82 67686 9.73

S. Kerosene oil 63430 72.62

Coffee, Rice, Oil, Sugar, etc. 47.83 290.24

287.31 389.02

c) Imports at CIF Value :

Raw Materials 285.46 180.47

Finished Goods 103.14 106.71

Spare Parts and Components 48.87 23.32

Capital Goods 21.67 60.35

61

SCHEDULE 24 (Contd.)

d) Total Value of Raw Materials, Stores, Spare Parts and Components consumed: (Value Rs.in Crores)

Raw Materials Stores, Spare parts, Components, etc.

1999-00 1998-99 1999-00 1998-99

Value % Value % Value % Value %

Imported 307.52 23.34 237.97 19.62 37.63 13.39 30.49 14.40

Indigenous 1010.17 76.66 976.05 80.38 243.42 86.61 181.23 85.60

1317.69 100.00 1214.02 100.00 281.05 100.00 211.72 100.00

4. EXPENDITURE IN FOREIGN CURRENCY : 1999-00 1998-99

i) Technical know-how and Services 0.32 1.54

ii) Professional and Consultancy Fees 0.91 0.40

iii) Interest and Commitment Charges on Foreign Currency Loans/Debentures 9.79 12.47*

iv) Others 85.83 28.24

* Includes Rs.0.01 Crore (Previous year Rs. 0.06 Crore) pertaining to interest on Non-resident Debentureholderssent to their Bankers/Mandates in India.

5. EARNINGS IN FOREIGN EXCHANGE :

i) Export of Goods - On F.O.B basis 200.91 260.42

ii) Technical Know-how & Service charges 0.42 0.38

iii) Interest and Dividend 1.13 0.48

iv) Others 0.01 2.73

6. DIVIDEND TO NON-RESIDENT SHAREHOLDERS :

For 1998-99 For 1997-98

No. of Shares held *Gross Amount No. of Shares held * Gross Amount ofShareholders of Dividends Shareholders Dividends

(Rs.in lacs) (Rs.in lacs)

Equity 6620 23349977 1483.99 3598 18547382 1251.95

* Includes Rs.1480.90 Lacs (Previous year Rs. 1250.88 Lacs) pertaining to Dividend Warrants of Non-Resident shareholders sent to their Bankers/Mandates in India.

Signatures to Schedules 1 to 24

As per our separate report attachedKUMAR MANGALAM BIRLA

ChairmanFor G. P. KAPADIA & Co., For LODHA & Co., RAJASHREE BIRLAChartered Accountants Chartered Accountants A.N. LALBHAI

M. L. APTEUDAY R. PARIKH PRAMOD K. JAIN S. G. SUBRAHMANYANPartner Partner B. K. SETHI

B. V. BHARGAVAMumbai D. N. MAKHARIA SHAILENDRA K.JAIN M. C. BAGRODIADated: 28th April, 2000 Secretary Manager Directors

62

Additional Information under Part IV of schedule VI to the Companies Act, 1956Balance Sheet abstract and General Business Profile1 Registration details

Registration No. 1 0 - 0 0 4 1 0 State Code 1 0

Balance Sheet Date 3 1 - 0 3 - 0 0

Date Month Year

2 Capital raised during the year (Amount in Rs. Thousands)

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement

N I L N I L

3 Position of mobilisation and deployment of funds (Amount in Rs. Thousands)

Total Liabilities Total Assets

5 0 7 1 2 5 6 7 5 0 7 1 2 5 6 7Sources of Funds :

Paid up Capital Reserves & Surplus

9 1 6 8 9 5 2 7 0 4 5 7 3 1

Secured Loans Unsecured Loans

1 6 9 4 7 3 6 2 5 8 0 2 5 7 9Application of Funds :

Net Fixed Assets Investments

3 4 2 1 0 2 9 4 6 8 2 9 7 8 7

Net Current Assets Miscellaneous Expenditure

9 6 7 2 4 8 6 N I LAccumulated Losses

N I L

4 Performance of the Company (Amount in Rs. Thousands)Turnover Total Expenditure

4 9 8 2 3 3 3 7 4 8 2 5 1 8 1 5

+ - Profit / (Loss) before Tax + - Profit / (Loss) after Tax

+ 2 4 5 4 7 5 7 + 2 3 3 1 2 4 7

Earnings per Share (Rs.) Dividend Rate (%)

2 5 . 4 2 7 0 . 0 0

5 Generic names of three principal products / services of the Company (As per monetary terms)

a) Item Code No. 5 5 0 4 1 0 - 0 0

Product Description S T A P L E F I B R E

b) Item Code No. 2 5 2 3 2 9 - 0 1

Product Description G R E Y P O R T L A N D C E M E N T

c) Item Code No. 7 2 0 3 1 0 - 0 0

Product Description S P O N G E I R O N

KUMAR MANGALAM BIRLAChairman

RAJASHREE BIRLAA.N. LALBHAI

M. L. APTES. G. SUBRAHMANYAN

B. K. SETHIB. V. BHARGAVA

Mumbai D. N. MAKHARIA SHAILENDRA K.JAIN M. C. BAGRODIADated: 28th April, 2000 Secretary Manager Directors

63

Rs.in CroresPrevious Year

A. Cashflow from Operating Activitiesa. Net profit before tax and extraordinary item 245.45 171.81

Adjustment for :Depreciation 236.98 209.68Foreign Exchange Fluctuation 2.41Interest expenses 256.08 292.26Interest Income -40.26 -58.25Dividend Income -10.45 -7.49Profit/Loss on sale of Fixed Assets 3.07 -2.27Profit on sale of Investments -0.05 -0.49

690.82 607.66b. Operating profit before working capital changes

Adjustments for :Trade and other receivables 16.33 -27.67Inventories 8.86 33.82Trade Payables 130.42 38.93

846.43 652.74c. Cash generated from Operations

Direct Taxes Paid -22.07 -51.09Net Cash from operating activities 824.36 601.65

B. Cashflow from investing activitiesPurchase of fixed assets -272.88 -279.50Sale of fixed assets 7.91 5.48Acquisitions of companies � -98.37Purchase of investments -2.61 -61.27Investments / Advances in joint ventures, subsidiaries and others -86.05 -15.78Sale of Investments 0.05 196.88Interest received 40.42 61.19Dividend received 10.45 7.49Net Cash from/(used in) financing activities -302.71 -183.88

C. Cashflow from financing activitiesProceeds from borrowings 680.54 460.35Repayments of borrowings -836.91 -542.44Interest paid -281.16 -287.30Dividends paid -50.32 -48.81Corporate dividend tax -6.21 -4.88Net Cash from/(used in) financing activities -494.06 -423.08

D. Net increase/(Decrease) in Cash and Cash equivalent -27.59 -5.31Cash and Cash equivalent at beginning of the year 29.17 34.48Cash and Cash equivalent at end of the year 56.76 29.17(Cash and cash equivalent represent Cash and Bank balances)

Note :Previous year figures have been regrouped/recast wherever necessary

KUMAR MANGALAM BIRLAChairman

For G. P. KAPADIA & Co., For LODHA & Co., RAJASHREE BIRLAChartered Accountants Chartered Accountants A.N. LALBHAI

M. L. APTEUDAY R. PARIKH PRAMOD K. JAIN S. G. SUBRAHMANYANPartner Partner B. K. SETHI

B. V. BHARGAVAMumbai D. N. MAKHARIA SHAILENDRA K.JAIN M. C. BAGRODIADated: 28th April, 2000 Secretary Manager Directors

Cash Flow Statement for the year ended 31st March,2000 as per the listing agreement

Auditor�s CertificateWe have examined the annexed Cash Flow Statement of Grasim Industries Limited for the year ended 31st March, 2000. The Statement has been prepared by the Company in accordance with the requirementsof listing agreement with Stock Exchanges and is based on and in agreement with the corresponding Profit and Loss account and Balance Sheet of the Company covered by our report of 28th April, 2000 to theMembers of the Company.

For G. P. KAPADIA & CO., For LODHA & CO.,Chartered Accountants Chartered Accountants

UDAY R PARIKH PRAMOD K JAINPartner Partner

Mumbai: April 28, 2000

64

Statement pursuant to Section 212 of the Companies Act, 1956 Relating to SubsidiaryCompanies

Name of the Subsidiary Company Kerala Shree Sun God Samruddhi DharaniSpinners Digvijay Trading Swastik CementsLimited Cement and Trading Ltd.

Company Investments andLtd. Ltd. Investments

Ltd.

1 Financial year of the Subdidiary ended on 31.03.2000 30.09.1999 31.03.2000 31.03.2000 31.03.2000

2 Holding Company�s Interest

(i) Equity Shares of Rs. 10 each(a) Number of Shares

Fully Paid 193120 4652870 520 6500000 2895602

(b) Extent of holding 56.8% 62.42% 100% 100% 100%

(ii) 15% Redeemable Cumulative Preference Shares

(a) Number of Shares (Face Value Rs. 100 each) � 100 100 �

Partly Paid (Rs. 25 per share paid up

(b) Extent of holding 100% 100%

Rs. in Lacs Rs. in Lacs Rs. in Lacs Rs. in Lacs Rs. in Lacs

3 Net aggregate amount of Profit/(Losses ) of the Subdiary,so far as they concern members of Grasim Industries Limited

(i) For the Financial Year of Subsidiary

(a) Dealt with in the accounts of the Holding Company NIL NIL NIL NIL NIL

(b) Not dealt with in the accounts of the Holding Company (10.44) (6392.5) (0.02) 12.37 (91.84)

(ii) For the previous Financial years of the Subsidiary sinceit became the holding Company�s Subsidiary

(a) Dealt with in the accounts of the Holding Company 29.34 NIL NIL NIL NIL

(b) Not dealt with in the accounts of the Holding Company (168.18) � (0.10) (0.09) (33.59)

4 As the Financial Year of the Subsidiary Companies coincidewith the Financial Year of the Holding Company, Section212(5) of the Companies Act, 1956, is not applicable.

KUMAR MANGALAM BIRLAChairman

RAJASHREE BIRLAA.N. LALBHAI

M. L. APTES. G. SUBRAHMANYAN

B. K. SETHIB. V. BHARGAVA

Mumbai D. N. MAKHARIA SHAILENDRA K.JAIN M. C. BAGRODIADated: 18th May, 2000 Secretary Manager Directors