grasim report

Accounting for ManagersSummary of Grasim Industries Limited Annual Report: 2008-09

CONTENTS

Introduction to the Company 2-3

Directors’ Report 4-8

Auditor’s Report 9-10

Profit and Loss Account 11-12

Balance Sheet 13-14

Cash Flow Statement 15-16

Financial Highlights 17

Ratio Analysis 18-22

Conclusion 23

Ballari Institute of Technology and Management, Bellary. 1


GRASIM INDUSTRIES LIMITED

INTRODUCTION

Grasim Industries Limited, a flagship company of the Aditya Birla Group, ranks

among India's largest private sector companies, with consolidated net turnover of

Rs.184 billion and a consolidated net profit of Rs.22 billion (FY2009).Starting as a

textiles manufacturer in 1948, today Grasim's businesses comprise viscose staple fibre

(VSF), cement, chemicals and textiles. Its core businesses are VSF and cement, which

contribute to over 90 per cent of its revenues and operating profits.

The Aditya Birla Group is the world’s largest producer of VSF, commanding a 23 per

cent global market share. Grasim, with an aggregate capacity of 333,975 tpa has a

global market share of 12 per cent. It is also the second largest producer of caustic

soda (which is used in the production of VSF) in India.

In cement, Grasim along with its subsidiary UltraTech Cement Ltd. has a capacity of

45.7 million tpa as on 30 June 2009 and is a leading cement player in India. In July

2004, Grasim acquired a majority stake and management control in UltraTech Cement

Limited. One of the largest of its kind in the cement sector, this acquisition catapulted

the Aditya Birla Group to the top of the league in India.

Viscose staple fibre

Grasim is India's pioneer in viscose staple fibre (VSF), a man-made, biodegradable

fibre with characteristics akin to cotton. An extremely versatile and easily blendable

fibre, VSF is widely used in apparels, home textiles, dress material, knitted wear and

non-woven applications. Grasim's VSF plants are located at Nagda in Madhya

Pradesh, Kharach in Gujarat and Harihar in Karnataka, with an aggregate capacity of

333,975 tpa.



Cement

Grasim ventured into cement production in the mid 1980s, setting up its first cement

plant at Jawad in Madhya Pradesh and since then it has grown to become a leading

cement player in India.

Grasim’s cement operations today span the length and breadth of India, with 11

composite plants, 11split grinding units, four bulk terminals and 64 ready-mix

concrete plants as on 30 June 2009. All the plants are located close to sizeable

limestone mines and are fully automated to ensure consistent quality. All units use

state-of-the-art equipment and technology and are certified with ISO 9001 for quality

systems and ISO 14001 for environment management systems.

Chemicals

Rayon grade caustic soda is an important raw material in VSF production. To achieve

reliable and economical supply of this chemical, Grasim set up a rayon grade caustic

soda unit at Nagda in 1972 with an initial capacity of 33,000 tpa. This has since grown

to 258,000 tpa, making it the country’s second largest caustic soda unit.

Textiles

Grasim has a strong presence in fabrics and synthetic yarns, through its subsidiary,

Grasim Bhiwani Textiles Limited, and is well known for its branded suitings, Grasim

and Graviera, mainly in the polyester – cellulosic branded menswear. Its textile plants

are located at Bhiwani (Haryana) and Malanpur (Madhya Pradesh).



DIRECTORS’ REPORT

Dear Shareholders,

Your Directors have pleasure in presenting the 62nd Annual Report and Audited

Accounts of the Company for the year ended 31st March, 2009.

Company’s Standalone Financial Results

Your Company’s standalone gross turnover for the year grew by 5% to Rs.12,073

Crores (Rs.11,552 Crores).Cash profit for the year under review at Rs.2,362 Crores

(Rs.2,365 Crores) was at par with the previous year, despite increased input cost and

the impact of the economic slowdown. Net profit at Rs.1,648 Crores (Rs.2,002

Crores)was lower by 18% due to higher interest cost and substantially higher

depreciation.

Consolidated Financial Results

Your Company’s consolidated performance during the year was subdued given the

tough macro-economic conditions. Your Company’s consolidated gross turnover for

the year grew by 7% to Rs.20,432 Crores (Rs.19,112 Crores). Cash profit at Rs.3,938

Crores (Rs.3,729 Crores) was higher by 6% over the corresponding. Net profit at

Rs.2,187 Crores (Rs.2,609 Crores) was, however, lower by 16% on account of higher

interest cost and substantially higher depreciation, because of the commissioning of

cement projects during the year, the full benefit of which is expected to accrue only in

the current year. Net profit for the year was also lower due to increased input cost and

impact of economic meltdown which impacted Company’s VSF and Sponge Iron

businesses in particular.

Dividend



Your Board has recommended a dividend of Rs.30 per share, at par with the dividend

paid last year, and seeks your approval for the same. The total outflow on account of

dividend would be Rs.316 Crores.

Employee Stock Option Scheme

During the year 53,570 Options were vested in the eligible employees of the

Company.

Debentures And Term Loans

Your Company has raised long term loans (Non-Convertible Debentures and Foreign

Currency loans) aggregating Rs.722 Crores. The funds were utilized/will be utilized to

meet the requirements of capital expenditure and other approved purposes. Term loans

aggregating Rs.247 Crores were repaid during the year.

Awards And Accolades

Your Company has earned several honours. Some of the significant accolades

received include:

_ National Energy Conservation Award 2008 for Chlor-Alkali Sector (1st Prize):

Chemical Division, Nagda, Madhya Pradesh, by the Ministry of Power, Government

of India

_National Energy Management Award 2008: Aditya Cement, Shambhupura,

Rajasthan by CII

Research And Development

To foster technical excellence and to maintain its leadership position through

development of value added products, your Company continues to accord a high

priority to R&D. A steadfast focus on Research and Development is an ongoing major

driver of its leadership position in an increasingly competitive business environment.

The current economic downturn has only strengthened your Company’s commitment



to R&D in the firm belief that technical leadership across the entire value chain is key

to sustain able performance.

Human Resources

Your Company has an enviable track record of managing its intellectual capital

successfully. Fostering people development and harnessing their creative potential to

the maximum, identifying and grooming management talent and leadership

development at all levels remain a priority.

Introducing global HR practices, systems and best practices in the areas of talent

development, compensation management, recruitment, etc., is enabling and preparing

your Company to address future challenges effectively.

Corporate Governance

Your Company fully adheres to the standards set out by the Securities and Exchange

Board of India for Corporate Governance practices, and has implemented all of its

stipulations. As required by Clause 49 of the Listing Agreement of Stock Exchanges, a

detailed report on Corporate Governance forms part of this Annual Report.

Directors’ Responsibility Statement

As stipulated in Section 217(2AA) of the Companies Act, 1956, your Directors

subscribe to the “Directors’ Responsibility Statement” and confirm that:-

i) In the preparation of the annual accounts, the applicable accounting standards have

been followed along with proper explanation relating to material departures;

ii) The Directors have selected such accounting policies and applied them consistently

and made judgments and estimates that are reasonable and prudent so as to give a

true and fair view of the state of affairs of the Company at the end of the financial year

and of the profit or loss of the Company for that period;



iii) the Directors have taken proper and sufficient care of the maintenance of adequate

accounting records in accordance with the provisions of this Act for safeguarding the

assets of the Company and for preventing and detecting fraud and other irregularities;

and

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

Consolidated Financial Statements

Consolidated Financial Statements pursuant to Clause 41 of the Listing Agreement

entered into with the Stock Exchanges and prepared in accordance with the

Accounting Standards prescribed by the Institute of Chartered Accountants of India,

are attached for your reference.

Particulars as per Section 217 of the Companies Act, 1956

In accordance with the provisions of Section 217(2A) read with Companies

(Particulars of Employees) Rules, 1975, the names and other particulars of employees

are to be set out in the Directors’ Report, as an addendum thereto. However, as per the

provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and

accounts as set out therein, are being sent to all members of the Company excluding

the aforesaid information about the employees.

Directors

Mr. A.K. Dasgupta was appointed as an Additional Director and holds office until the

ensuing Annual General Meeting. The Company has received a Notice from a member

under Section 257 of the Companies Act, 1956, proposing his appointment as a

Director of the Company.

Mr. D.D. Rathi ceased to be the Whole-Time Director of the Company, effective 1st

June, 2009, consequent to his transfer to another Group Company. The Board at its

meeting held on 19th May, 2009, has appointed him as an Additional Director w.e.f.

1st June, 2009.



Mr. R.C. Bhargava, Mrs. Rajashree Birla and Mr. Cyril Shroff retire from office by

rotation and being eligible, offer themselves for re-appointment.

Auditors

The Board, on the recommendation of the Audit Committee, has proposed that M/s

G.P. Kapadia & Co., Chartered Accountants, Mumbai, be appointed as the Joint

Statutory Auditors of the Company along with M/s Deloitte Haskins & Sells,

Chartered Accountants, Mumbai, to hold office till the conclusion of the next Annual

General Meeting of the Company. M/s G.P. Kapadia & Co., Chartered Accountants,

Mumbai and M/s Deloitte Haskins & Sells, Chartered Accountants, Mumbai, have

forwarded their certificates to the Company, stating that their appointment, if made,

will be within the limit specified in that behalf in Sub-section (1B) of Section 224 of

the Companies Act, 1956.

The Board, on the recommendation of the Audit Committee, has also proposed that

M/s Vidyarthi & Sons, Chartered Accountants, Gwalior, be re-appointed as the Branch

Auditor of Vikram Woollens Division of the Company.

Cost Auditors

In pursuance of Section 233-B of the Companies Act, 1956, your Directors have

appointed M/s R. Nanabhoy & Co., Mumbai, M/s R.J. Goel & Co., Delhi, M/s K.G.

Goel & Co., Jaipur, and M/s N.D. Birla & Co., Ahmedabad, as the Cost Auditors to

conduct the Cost Audit of Pulp and Fibre, Caustic Soda, Sulphuric Acid, Textile and

Cement for the year 2009-10, subject to the approval of the Central Government.

Appreciation

Your Directors acknowledge the dedication and commitment of your Company’s

employees to the growth of your Company. Their unstinted support has been and

continues to be integral to your Company’s ongoing success. Your Directors



appreciate the support of the Central and State Governments, bankers, shareholders

and business associates for their continued co-operation and support.

AUDITORS’ REPORT

To the members of Grasim Industries Limited

1. We have audited the attached Balance Sheet of GRASIM INDUSTRIES

LIMITED as at 31st March, 2009, and also the Profit & Loss Account and Cash

Flow Statement for the Year ended on that date annexed thereto. These financial

statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these financial statements based on

our audit.

2. We conducted our audit in accordance with the auditing standards, generally

accepted in India. Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether the financial statements are free of

material misstatement. We believe that our audit provides a reasonable basis for

our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (“the order”),

issued by the Central Government of India in terms of sub-section (4A) of

Section 227 of the Companies Act, 1956.



4. On the basis of written representations received on 31st March, 2009, from the

Directors of the Company and taken on record by the Board of Directors, we

report that none of the Directors is disqualified as on 31st March, 2009, from

being appointed as a Director in terms of Clause (g) of Sub-section (1) of

Section 274 of the Companies Act, 1956.

5. Further to our comments in the Annexure to paragraph 3 of above we report

that:

We have obtained all the information and explanations, which to the best of

our knowledge and belief were necessary for the purpose of our audit.

In our opinion, proper books of account as required by law have been kept

by the Company so far as it appears from our examination of those books.

The reports on accounts of the branches audited by other Auditors have been

forwarded to us.

The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt

with by this report are in agreement with the books of account and with the

audited returns from the branches.



PROFIT AND LOSS ACCOUNT

Profit & Loss Account For The Year Ended 31st March, 2009

(Rs. In Crores)Particulars Current Year Previous

YearIncome

Gross sales 12,072.67 11,551.56

Less: Excise Duty 1,268.66 1,336.51

Net sales 10,804.01 10,215.05Interest and Dividend Income 159.04 165.77

Other Income 191.38 212.07

Increase in Stock 33.54 130.22

11,187.97 10,723.11

Expenditure

Raw Materials Consumed 3,064.25 2,828.25

Manufacturing Expenses 2,735.80 2,202.47

Purchases of Finished and Traded Goods 65.94 97.40

Payments to and Provisions for Employees 598.17 550.07

Selling, Distribution, Administration and Other Expenses

1,920.29 1,696.79

Interest 142.14 107.00



Depreciation and Amortization 456.97 353.27

8,983.56 7,835.25

Less: Self Consumption 43.43 76.36

8,940.13 7,758.89Profit Before Tax and Exceptional Items 2,247.84 2,964.22Write back of Provision for Diminution - 45.68Profit before Tax from Ordinary Activities

2,247.84 3,009.90

Provision for Current Tax (329.40) (940.26)Deferred Tax (257.50) (9.62)Fringe Benefit Tax (12.98) (12.45)Profit after Tax from Ordinary Activities 1,647.96 2,047.57Extra Ordinary Items:Profit on Transfer of Textile Units at Bhiwani

- 4.76

Profit on Sale of Shares of a Subsidiary Company

- 180.27

Profit after Tax 1,647.96 2,232.60Debenture Redemption Reserve no longer required

- 82.92

Balance brought forward from Previous Year

1,064.41 965.33

Profit Available for Appropriation 2,712.37 3,280.85AppropriationDebenture Redemption Reserve 15.00 -Proposed Dividend 275.02 275.02Corporate Dividend Tax 41.38 41.42General Reserve 200.00 1,900.00Balance carried to Balance Sheet 2,180.97 1,064.41

2,712.37 3,280.85Basic earnings per share before Extra Ordinary Items (Rs.)

179.73 223.32

Diluted earnings per share before Extra Ordinary Items (Rs.)

179.73 223.32

Basic earnings per share after Extra Ordinary Items (Rs.)

179.73 243.49

Diluted earnings per share after Extra Ordinary Items (Rs.)

179.73 243.49



BALANCE SHEET

Balance Sheet As On 31st March, 2009(Rs. In crores)

Particulars Sdls Current Year Previous Year

Sources Of Funds:Shareholders’ FundsShare capital 1A 91.69 91.69Employees Stock Option Outstanding 1B 10.45 4.90

Reserve and Surplus 2 9,375.44 8,044.129,477.58 8,140.71

Loan fundsSecured Loans 3 2,205.00 2,350.40Unsecured loans 4 1,189.95 851.47

3,394.95 3,201.87Deferred Tax Liabilities 864.37 606.87

TOTAL 13,736.90 11,949.45

Application Of Funds

Fixed AssetsGross Block 5 11,060.82 7,588.40Less: Depreciation/Amortization 3,972.54 3,564.89

Net Block 7,088.28 4,023.51Capital Work-in-Progress 1,218.64 3,026.31

8,306.92 7,049.82



Fixed Assets Held For Disposal 0.85 4.14Investments 6 4,609.10 4,080.79

Current Assets, Loans And Advances

Interest accrued on Investments 0.48 0.70

Inventories 7 1,378.24 978.44Sundry Debtors 8 559.93 711.98Cash And Bank Balance 9 113.38 127.47Loans and Advances 10 1,045.81 1,167.01

3,097.84 2,985.60

Less:Current Liabilities and ProvisionsLiabilities 11 1,686.93 1,603.91

Provisions 12 590.88 566.99

2,277.81 2,170.90

Net Current Assets 820.03 814.70

TOTAL 13,736.90 11,949.45



CASH FLOW STATEMENT

Cash Flow Statement For The Year Ended 31st March, 2009

(Rs. In crores)PARTICULARS CURREN

T YEARPRVIUS YEAR

A. Cash Flow from Operating Activities a.Net Profit before Tax and Exceptional Item

2,247.84 2,964.22

Adjustment for:Depreciation 456.97 353.27Interest Expenses 142.14 107.00Interest Income (58.51) (81.96)Dividend Income (100.53) (83.81)Provision for Bad and Doubtful Debts - 0.48Employee Compensation Expenses under ESOP

5.55 4.90

Profit/ Loss on Sale of Fixed Assets (Net)

(0.03) (20.99)

Profit on Sale of Long Term Investment (Net)

(0.77) -

Profit on Sale of Current Investments (23.09) (72.40) b. Operating Profit before Working Capital Changes

2,669.57 3,170.71

Adjustments for:Trade and Other Receivables (64.43) (406.83)



Inventories (399.80) (214.94)Assets Held for Disposal 3.29 10.19Trade Payables 81.22 451.76c. Cash generated from operations 2,289.85 3,010.89Direct Taxes Paid (Net) (336.70) (919.86)Cash from Operating Activities 1,953.15 2,091.03Net Cash from Operating Activities 1,953.15 2,091.03

B. Cash Flow from Investing ActivitiesPurchase of Fixed Assets (1,666.08) (2820.77)

Sale of Fixed Assets 24.45 18.22Purchase of Investments (558.54) (276.97)Sale of Investment 54.09 471.23Loans & Advances to Joint Ventures, Subsidiaries & Others

205.05 (67.16)

Interest Received 58.73 81.96Dividend Received 100.53 83.81Net Cash from/(used in) Investing Activities before Extra Ordinary Items

(1,781.77) (2509.68)

Extra Ordinary Items- Sales proceeds from sale of shares of subsidiary – Shree Digvijay Cement Ltd

- 298.00

- Proceeds on Transfer of Textile Units at Bhiwani

- 83.16

Net Cash from/(used in) Investing Activities

1,781.77 2,128.52

C. Cash Flow from Financing ActivitiesProceed from Borrowings 780.27 674.21Repayments of Borrowings (454.56) (438.23)Interest Paid (196.08) (169.62)Dividends Paid (273.68) (17.75)Corporate Dividend Tax (41.42) -Net Cash from/(used in) Financing Activities

(185.47) 48.61

D. Net Increase/(Decrease) in Cash and Cash Equivalent

(14.09) 11.12

Cash and Cash Equivalent at beginning of the Year

127.47 116.38

Less: Cash Balance of Textile Units at Bhiwani Transferred

- 0.03



Cash and Cash Equivalent at the end of the year

113.38 127.47

(Cash and Cash Equivalent represent Cash and Bank balances)

FINANCIAL HIGHLIGHTS

Particulars 2008 2009

Sales 10215.05 10804.01

Operating Profit 3071.22 2389.98

Net Profit 2232.60 1647.96

Earnings Per Share 243.49 179.73

Dividend Per Share 29.99 29.99

Book Value Per Share 887.31 1032.51

Market Price Per Share - 2416.70



Return on net worth 27.44% 17.41%

Return on capital employed 29.28% 20.47%

RATIO ANALYSIS

A. LIQUIDITY RATIO:

1. Current ratio = Current Assets, Loans & AdvancesCurrent Liabilities & Provisions

= 3,097.842,277.81

= 1.36:1

As the ratio is 1.36:1 we can interpret that the current assets are sufficient to meet the current liabilities.

2. Acid Test Ratio = Current assets, Loans & Advances - InventoriesCurrent Liabilities & Provisions - B. O. D

= 3,097.84 - 1,378.242,277.81 - 0

= 0.75:1

As the ratio is 0.75:1, we can say that the liquid assets are not sufficient to meet the liquid liabilities.



B. SOLVENCY RATIOS

1. Debt Equity Ratio = Long Term DebtShareholders Fund

= 2,205.009,467.13

= 0.23:1

As the ratio is 0.23:1, we can interpret that the company has got enough funds to pay out the debts.

2. Interest Coverage = Profit Before Interest & TaxRatio Interest

= 2,389.98 142.14

= 16.8:1

As the ratio is 16.8:1, we can say that the company has got enough profit to pay the interest amount.

C. PROFITABILITY RATIO

1. Operating Profit = Profit Before Interest & TaxSales

= 2,389.9810,804.01

= 22.12%

The company is able to generate 22.12% of operating profit over the sales, which is good performance on part of the company.

2. Net Profit = Profit After TaxSales

= 1,647.9610,804.01



= 15.25%

The company is able to generate to 15.25% net profit over the sales, i. e the profit after meeting interest and tax.

3. Return on Capital = Operating ProfitEmployed Capital Employed

= 2,389.9811,672.13

= 20.47%

The company is able to get return of 20.47% over the capital employed by the company in the business.

4. Return on Net = Profit After TaxWorth Net Worth

= 1,647.969,467.13

= 17.41%

The company is able to get a return of 17.41% on the total worth of the business.

5. Earnings Per = Earnings available to equity shareholdersShare No. of equity shares outstanding

= 1,647.969.169

= Rs. 179.73

The company is earning Rs. 179.73 per share.

6. Dividend Per = Amount of DividendShare No. of equity shares outstanding

= 2759.16



= Rs. 30

The company is able to pay a dividend of Rs. 30 per share.

D. TURNOVER RATIO

1. Inventory turnover = Sales Ratio Avg Inventory

= 10,804.011,178.34

= 9.16 times

Inventory Holding = 12 monthsPeriod 9.16

= 1.3 months

The company is able to get a turnover of 9.16 times and the holding period is 1.3 month.

2. Debtors Turnover = Credit SalesRatio Avg Debtors

= 10,804.01635.95

= 16.98 times

Debtors Collection = 12 monthsPeriod 16.98

= 0.70 month

The company has a turnover of 16.98 times of debtors over the sales and the amount due from debtors can be collected within a month.

3. Creditor Turnover = Credit Purchases Avg Creditors

= 3,130.191,217.86



= 2.5 times

Creditor Cllection = 12 monthsPeriod 2.5

= 4.8 months

The company has a turnover of 2.5 times of the creditors and the period of collection is 4.8 months which is considered to be better when the period is high.

4. Fixed Assets = SalesTurnover Fixed Assets

= 10,804.018,306.92

= 1.3 times

Here we can interpret that the company is able to utilize the fixed assets effectively in order to generate sales.

5. Working Capital = SalesTurnover Working Capital

= 10,804.01365.1

= 29.59 times

The company is able to use the working capital effectively in order to achieve maximum sales.

E. MARKET TEST RATIO

1. Book Value = Net WorthPer Share No. of equity shares

= 9,467.139.16

= Rs. 1,032.51



The company has got huge reserves and is a potential bonus candidate as it has book value of Rs. 1,032.51

2. Market Price Per = Rs. 2,416.70Share

3. Price Earning = Current Market PriceRatio Earning Per Share

= 2,416.70179.73

= Rs. 13.45

The company has got excellent track record of profitability and also the professional management.

CONCLUSION

The overall performance of the company is average when compared to the previous

year as there was slight impact of recession. This can be concluded by the

interpretation of ratios of Return on Capital Employed (20.47% as compared to

29.28% of the previous year), Return on Net Worth (17.41% as compared to 27.44%

as that of last year). By interpreting the liquidity, solvency, profitability, activity and

market test ratios, we can say that the performance of the company is quite average.

During recession, the company managed very well all the activities and earned

sustainable profit.


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