GRASIM INDUSTRIES LIMITED ANNUAL REPORT 1999-2000

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

The Chairmans Letter to Shareholders

Dear fellow shareholders,

GRASIM IN FOCUS
Operational Review It was a satisfactory year for Grasim operationally. Its key businesses namely, viscose staple fibre (VSF) and cement demonstrated significant improvement benefiting from a turnaround in the economy, aggressive marketing, brand promotion efforts and the positive impact of the restructuring initiated last year. Sponge iron also put in a commendable performance during the year. The VSF division reported improved volumes due to better export of VSF based downstream products and concerted marketing efforts. The pickup in the economic and industrial activity as well as a turnaround in the housing and construction sectors proved advantageous for the cement division. Despite weak prices, the margins remained stable due to gains from cement restructuring. The sponge iron division did a smart turnaround aided by a positive industry environment, subdued competition and benefits of several strategic moves made earlier. It remained a challenging year for 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 cement businesses. 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 Focus It was a year of consolidation strategically. Grasim completed the cement restructuring process and concentrated on reaping 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 to continuing problems of raw material availability, increasing dependence on heterogeneous woods and the resultant adverse impact on fibre quality, cost and realisation. The plant operations remained suspended from May 1999. Its permanent 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 coupons reset at around 11%-14.5% as against 15%-18.5% earlier. The positive impact of this move is partly reflected in the current year. Its benefits will accrue over the next 3 years. Outlook As mentioned in my letter last year, Cement, and Fibre will be the focus areas going forward. The cement business will continue to be the platform for building shareholder value in future. Cement We are excited about the growth opportunities in the cement industry. The positive outlook for the economy, accelerating levels of industrial activity and the expected augmentation in the housing sector augurs well. The growing focus on development of infrastructure will further strengthen long-term prospects of the industry. Our strategy for cement is three pronged: 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 added products and by expanding capacities cost effectively. To ensure profitable growth in future, we will move close to customers.
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"It was a year of consolidation strategically. Grasim completed the cement restructuring process and concentrated on reaping its benefits".

We will strengthen our logistics management to reduce freight costs and concentrate on further lowering of energy costs in future. To do so, use of alternative energy sources, increasing share of imported coal and better process control is the route chosen by us. Grasim will aim to retain its brands as brand leaders in their respective markets to ensure higher realisation and better margins. It will also look for opportunities emerging from the industry consolidation process, leverage its market position and strong cash flows to ensure profitable growth in future. Fibre The 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 this positive 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 such an environment, Grasims strategy is to maintain its cost leadership and improve asset utilisation through market enlargement and application development in future. Grasim is the market leader and is amongst the lowest cost manufacturers in the world. It will focus on process improvements, input cost reduction and improvement in consumption norms to increasingly tighten cost structure. It will beef up its marketing and distribution network and concentrate on improvement in blend ratio to ensure higher volumes in future. Energies will be channelised on development of new applications by leveraging superior properties of VSF in terms of better feel, hygiene and comfort. These measures will enable Grasim improve asset utilisation and margins in future. Textiles The outlook for the textile sector remains challenging. The branded fabrics market is likely to remain stagnant and suffer from price competition even in the future. The domestic over-capacity, commoditisation of the suiting fabrics market and increasing preference for ready-to-wear products will heighten the pressure. In such an environment, Grasim will lay stress 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 brand promotion. Product innovation and design development will be focused on for improved market share and better volumes. Amplifying our distribution network and better management of show rooms will be a priority to maximise the benefits of the brand building efforts. Efficiency improvement for cost reduction and enhanced margins will be another area of attention going forward. Summary In essence, the Companys growth will be driven by the cement business and VSF will remain a key contributor to earnings in future. The expected positive outlook for the cement and VSF coupled with well crafted strategies will ensure improved volumes 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 the management team at Grasim. Their dedication and commitment have enabled us reap the benefits of the upturn in the economy and our core sectors optimally and better realise synergies of the restructuring efforts initiated last year. Our employees are, and will continue to be, integral to our success even in future.

THE ADITYA BIRLA GROUP IN PERSPECTIVE

I would now like to brief you on some of the measures taken by us at the Group level. As you are aware, tectonic shifts are changing 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 an era 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.
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"The Companys growth will be driven by the Cement business and VSF will remain a key contributor to earnings in future. The expected positive outlook for the Cement and VSF businesses coupled with well crafted strategies will ensure improved volumes and profitability in our core area of operations ".

Our objective is to ensure success and deliver sustained value for our shareholders, customers, employees and the community at large. A slew of proactive measures have been unveiled, riding on our renewed strategic thrust, innovative structural initiatives and contemporary systems adoption. In my letter last year, I had shared several of these. Today, I wish to keep you abreast of the progress achieved in these areas and the growth trajectory that we will traverse in this new millennium. Renewed Strategic Thrust Fundamental 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 core business for each of our Companies. Businesses have been evaluated against stringent value-creation criteria. We have made 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 us move increasingly into knowledge-based, brand-management and service sectors, where again we will scout for a premium position a position of leadership. At the portfolio level, we will continue to look into some of the businesses that 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 advantage of enhanced value creation in a much shorter time frame. Acquiring management control in Learning Byte International by the overseas companies of the Group and the strategic alliance with Lawson for setting up the Lawson Competency Centre by Birla Consultancy and Software Services, a division of Grasim Industries Limited are forward steps in this direction. Similarly, the acquisition of Madura Garments by Indian Rayon & Industries Limited has overnight catapulted the Group to the top-of-the-league in the branded apparels sector. Importantly, these strategic moves have significantly enhanced 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 rapidly consolidating. Our strategic alliance with Tata Telecommunications is a move that will help take our telecom business ahead. To bring in sharper business focus in each of our businesses, so as to realise better synergies, we have recoursed to restructuring, where necessary. Restructuring of the cement business has not only created synergies and simplicity of operations, but has given us one resounding voice in the market place, propelling our growth from one strong platform vis--vis fragmented units in operation. Structural Initiatives To institutionalise enabling processes that help us benchmark with the best in the world, to align the interest of shareholders and employees, and to better manage capital, we have chosen CVA (Cash Value added) as our measurement metric. It is the cornerstone of the value management architecture, to which I am personally committed. CVA helps us focus on the three key aspects of value creation, i.e., profitability, asset productivity and growth. Simply put, CVA is a structured, exhaustive process that entails understanding business variables in depth and quantifying their effect on value creation. This process enables us put our finger on the key value drivers in every single activity that we do. In response to the changing times, we are continuously striving to make the Aditya Birla Group as market-driven and agile 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 on capital-intensive manufacturing businesses, the future may see us move increasingly into knowledgebased, brandmanagement and service sectors, where again we will scout for a premium position a position of leadership".

Our thrust is on developing the Groups intellectual capital. Infusion of fresh blood and talent at all levels coupled with the creation of thought leaders has gained momentum. Six directors have been inducted at the Corporate level and professionals of high calibre have been recruited. The retirement policy has been implemented and succession plans are in place. Building, developing and upgrading competencies across the Group through training continues as an ongoing activity. These steps will not only help us nurture leaders, but capable, self-assured colleagues across all levels. The push on growing intellectual capital in the Group will propel it to new heights of value-creation in future. Contemporary Systems Adoption We are institutionalising processes to realise better value for our shareholders. To create a wired organisation, which will accentuate the quality of communication and information flow throughout the Group, we have set up the Aditya Birla Information Highway. Gyanodaya our temple of learning has gone on-stream. It will help us constantly upgrade our knowledge base. These proactive measures, in my view, will help weave our Group into one seamless organisation, with the singular aim of creating value for our shareholders in 21st century and beyond. Thank you, Yours sincerely, Mumbai 28th April, 2000

"Our thrust is on developing the Groups intellectual capital. Infusion of fresh blood and talent at all levels coupled with the creation of thought leaders has gained momentum".

Kumar Mangalam Birla

Managements Discussion and Analysis

OVERVIEW
It was a satisfactory year for Grasim operationally. Its key businesses demonstrated substantial improvement on the back of an economic recovery 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 of substitute fibres and concerted marketing efforts taken by the Company. The Cement business improved volumes following a pick-up in the economy and with the benefits of restructuring initiated last year. The Sponge Iron business reported turnaround in operations consequent to the 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 despite improved asset utilisation. The lack of pricing power in VSF and Cement businesses offset the impact of serious cost reduction measures taken by 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 from Rs.164 Crores to Rs.233 Crores during this period.

STRATEGIC MOVES TO ENHANCE SHAREHOLDER VALUE

Strategically, it was a year of consolidation. The Company successfully completed the cement restructuring process initiated last year and concentrated on realising its benefits at the Cement division. Other strategic moves made by the Company to enhance value included the commissioning 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 and Madhya Pradesh for the acquisition of the cement division of Indian Rayon and Industries Limited were received and equity shares were issued directly to the shareholders of Indian Rayon. Grasim concentrated on realising synergy gains by realigning resources, centralising marketing and procurement activities and rationalising the marketing and distribution structure. The realised benefits were in excess of its initial estimates 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 cost of Rs.315 Crores, including the cost of a 12 MW diesel generating set and modvat benefits. Trial runs at the plant commenced during midMarch 2000. Commercial production started during April 2000. The new plant is equipped with an auto/robot lab system to ensure uniform and consistent quality of cement produced. This together with Grasims existing strong brand equity will enable it to strengthen its presence in the 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 commodity nature 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 composite package. 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 Crores during 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%, effective July 1999. These debentures are due for redemption in June 2000 and the coupon reset will thus result in net savings of Rs.1.10 Crores over 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 a coupon of around 17%-18%, besides redemption premium in one case. The reset of coupon, net of upfront payment made, will result in an 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 of reduced coupon will be seen during the current financial year.
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Suspended Operations at Mavoor The Company suspended operations at the pulp and fibre plants at Mavoor, Kerala from 15th May 1999 and have filed an application for the permanent closure. This was due to continuing poor availability of comitted quantities of quality wood from the State Government and increasing dependence on heterogeneous wood, which impacted the quality of dissolving pulp and VSF therefrom and resulted in increased cost of production. The Company received less than 60% of contracted wood supplies during last 6 years, despite a subsisting agreement with the Kerala Government. As a result, the Company was compelled to procure even unsuitable raw material from neighbouring states paying huge transporation and other costs. The use of heterogeneous wood affected the quality of pulp and fibre adversely and forced Grasim to liquidate inventory 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 pulp and disposal of poor quality VSF, produced at higher costs, was posing a serious problem. Grasim therefore decided to suspend operations in May 1999 and opted for permanent closure of Mavoor plants. The State Government has rejected Grasims application for permanent closure during October 1999 and a review petition has been filed already. The operations at the pulp and fibre units, in the meantime, remain suspended. Rationalisation of Work Force at the Fibre Division To improve margins through productivity improvements, a voluntary retirement scheme (VRS) was introduced at the VSF divisions in Nagda and Harihar as well as at the Engineering division in Nagda. The Scheme was opted by 748 employees, which together with on-going VRS at the textile division enabled the Company reduce employee strength by 854 at a total cost of Rs.18 Crores. The Company has decided to writeoff 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 REVIEW

The key businesses of the Company viz., VSF and Cement together accounted for 76% of gross turnover in 1999-2000. Sponge iron and textiles accounted for 10% and 7% of gross revenues respectively. Business Mix

VISCOSE STAPLE FIBRE (VSF)

1999-00 Installed Capacity (TPA) Production (Tonnes) Sales Volume (Tonnes) Gross Divisional Turnover (Rs. Crores) - Viscose Staple Fibre & Allied Chemicals - Pulp** Net Divisional Turnover (Rs. Crores) - Viscose Staple Fibre & Allied Chemicals - Pulp** VSF Realisation (Rs./Kg) Operating Margins before employee separation costs (%)@ 246,775 * 188,002 192,452 1,688.2 1527.7 160.5 1451.4 1290.9 160.5 64.5 31.4 1998-99 246,775 164,355 164,130 1,614.1 1360.6 253.5 1388.8 1135.3 253.5 66.1 33.4 % Change 14.4 17.3 4.6 12.3 (-)36.7 4.5 13.7 (-)36.7 (-)2.4

* 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--vis 33.4% last year.

Review of Operations It was a satisfactory year for the VSF division, which reported improved capacity utilisation, higher sales volumes and revenues. Divisional operating margins suffered due to lower realisation, increased costs and fixed overheads of the Mavoor plant, which remained suspended from 15th 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 in volumes, after two years of sluggish growth, was due to improved export of VSF based yarns and textiles from India, availability of international quality VSF from the Companys 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 markets for warding off competition from cheaper substitute fibres. The Company divided user industry in smaller segments based on usage profile and developed specific marketing strategies for individual segments. These approaches enabled Grasim better market its produce to user segments and create a sustainable demand for its products. To improve service to customers and strengthen brand equity further, several regional 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 value chain and establishing strategic alliance with the manufacturers of several VSF based end products on the merit of superior properties of VSF in terms of feel, comfort and hygiene. The strong growth in sales volumes, up 17% at 192,452 tonnes, is the reflection of the market acceptance 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 user segments, which in turn affected the overall realisation during the year. The average realisation declined from Rs.66.1/Kg in 1998-99 to Rs.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 overheads of the Mavoor plant. The Companys average cost of VSF production increased by 1.7% YoY due to increase in input costs and fixed costs of Rs.2.3 Crores per month associated with the Mavoor plant. The impact would have been even larger but for better asset utilisation, reduction in 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 and garments as well as a favourable trend of VSF rich blends in the domestic market. The recovery in Indian economy is likely to boost demand for textiles in the domestic market while recovery in the Asian economies is likely to strengthen prospects of direct as well as deemed exports of 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 markets will also contribute towards improved VSF demand locally. The reduction in gap between prices of VSF and PSF, together with the superior properties of VSF in terms of feel, comfort and hygiene is likely to induce viscose rich PV blends. Consequently we expect a healthy growth in VSF consumption and forecast demand to grow 4-5% annually over the next few years. This is significant considering the mature nature of the VSF industry globally. The profitability of domestic VSF manufacturers rests on improved asset utilisation, cost cutting and the ability to pass on the increase in pulp prices 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 Grasims 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 application development.
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Maintaining cost leadership Grasims strategy for improving cost competitiveness is two pronged: Focus on process improvements for reduced consumption norms and reduce 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. This has enabled it to reduce consumption of pulp, zinc and effluent treatment chemicals and eventually result in lower manufacturing costs in future. The Company ensured better control over supply and cost of key input i.e., rayon grade wood pulp, by acquiring a 33% share of output from A V Cell Inc., Canada. The acquisition, made along with other VSF manufacturing units of the Aditya Birla Group last year has enabled Grasim source quality wood pulp at competitive prices. The benefits of these measures are already reflected in the operations and will accrue to the Company in future as well. The Company is continuously looking for such opportunities with the objective of improving process efficiencies and reducing costs further. Improving asset utilisation The Companys strategy for improving asset utilisation is pegged on three critical areas: Expanding the market through greater field penetration, applications development and strengthening of exports. Greater field penetration The Company will augment its marketing and distribution network and re-orient them towards segmented marketing approach to improve volumes. Concurrently, it is concentrating on improving quality of support to customers. Application development Given the declining trend in VSF consumption in traditional areas, identification of new application becomes critical for sustainable volume growth in future. To leverage superior properties of VSF in terms of better feel, comfort, hygiene and aesthetics, Grasim has established an Application Development Centre. The Company is exploring possibilities of strategic alliances with large manufacturers of downstream textile product manufacturers for commercial exploitation of such new applications and is confident of achieving positive results in the near future. Strengthening of exports The prospects of VSF exports are brightening due to the erosion of developed countries cost competitiveness in the textile industry and continuance of DEPB incentives. The Company is promoting speciality fibres, such as spun dyed, micro and macro denier fibres as well to strengthen their direct and deemed exports. Energies will be concentrated on creating a brand equity for the Companys products in the International markets, leveraging on its wide product range, logistics, technical support and application development efforts.

CEMENT
Grey Cement Installed Capacity (TPA) Production (Tonnes) Sales Volume (Tonnes) Gross Divisional Turnover (Rs. Crores)* Net Divisional Turnover (Rs. Crores) Average Ex-Factory Realisation (Rs./Ton) White Cement Installed Capacity (TPA) Production (Tonnes) Sales Volume (Tonnes) Gross Divisional Turnover (Rs. Crores) Net Divisional Turnover (Rs. Crores) Average Ex-Factory Realisation (Rs./Ton) Gross Divisional Turnover (Rs. Crores) Net Divisional Turnover (Rs. Crores) Operating Margins (%) **

1999-00
82,00,000 83,96,110 84,15,088 1,757.5 1,461.3 1,179 360,000 240,492 240,014 149.4 120.8 4,577 1,906.9 1,582.1 13.3

1998-99
82,00,000 58,23,378 58,77,704 1,246.0 1,041.3 1,234 360,000 131,979 133,660 80.1 64.4 4,495 1,326.1 1,105.7 13.5

% Change
44.2 43.2 41.1 40.3 (-)4.5 82.2 79.5 86.5 87.6 1.8 43.8 43.0

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 of Indian 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 the housing and construction sectors and reported improved volumes and utilisation. Divisional margins remained flat due unfavourable price situation, 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 of 43% YoY. This includes the full year performance of the erstwhile cement division of Indian Rayon and Industries Limited, acquired effective 1st September 1998. The re-stated figures represent a volume growth of 22% YoY and compare favourably with industry growth of 15% in 1999-2000. Reflecting this encouraging sales performance, overall production grew by 44% YoY, pushing average utilisation up from 84% in 1998-99 to over 102% in 1999-2000. The strong sales performance is attributed to favourable demand situation, slow growth in supplies, aggressive marketing efforts and benefits of 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 highest levels in the past decade. This strong growth was resultant of a pick-up in the level of economic and industrial activity as well as strong demand 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 a positive demand situation. Improved growth in real gross capital formation (higher at 4% as against 2.5% in 1998-99) and higher project investment 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 capacity during 1999-2000, compared with 84.6 lac tpa added during 1998-99. Together with improved demand, this enabled manufacturers improve plant utilisation and realise better prices. Cement Demand-Supply

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. The Company, following integration, focused on exploiting the full potential of its brands through more focused, region specific marketing efforts and better logistics management. Energies were concentrated on establishing one strong brand in each region, which contributed positively towards improving market share in Grasims core markets and enabled it achieve higher-than-industry growth in volumes during the year.
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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 stabilisation of 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% in the South and by 16% in the East due to regional imbalances, an aggressive pricing policy followed by select players and increased competition with the entry of multinationals. Cement prices in the West and North remained firm, except for short-term weaknesses due to temporary 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-factory realisation 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 its strong market position and brand equity. Better logistics management enabled the Company improve average realisation in a significant way during the year. Cement Price

Operating margins maintained Operating margins remained flat at 13% despite lower average realisation, due to improved asset utilisation, synergy gains and intensive cost 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 an increase in the power, fuel and freight charges. Reduction in unit power consumption and increased use of high calorific imported coal played a major role in achieving lower production costs during the year. The Company brought its unit power consumption down from 95.0 units per tonne 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 and marketing 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 annum and accelerating level of industrial activity augur well for the cement sector. Domestic demand is expected to grow between 8-10% per annum over the next two years and is predicated on strong growth in housing demand, improved demand from the infrastructure and government sectors 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. The fiscal incentives for individual housing in recent budgets, improved availability of cheaper finance, rising per capita income and consumer confidence 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 large housing 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 Ministers Quadrilateral National Highway Project, we believe, is a step in the right direction. In addition to this, several state governments notably Andhra Pradesh, Maharashtra, Delhi and Tamil Nadu, have initiated development of flyovers, roads and highways.
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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 towards strengthening 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 recovery and 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 accounts for 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 last year despite significant improvement in volumes. The situation is expected to improve considerably during the current financial year due to low capacity addition and likely demand-supply balance in the industry during 2000-01. The pricing situation will improve further during the next year as the likely fresh capacity additions are unlikely to match the incremental growth in demand and thus resulting in a demand supply gap and firm pricing next year. Industry margins will increase due to improved volumes and possibly better realisation across most regions. The Companys ability to pass on cost increases, with the probable increase in power and freight charges, as well as internal factors such as improved consumption norms and cost reductions would be key to superior margins. Outlook for Grasims Cement Business The Company aims to remain amongst the top three producers and ensure profitable growth in future. The Companys strategy for achieving this 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 of physical, 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. The Company will concentrate on select markets which offer excellent potential and where Grasims brands have substantial share. The commissioning 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 only 70% of sales volumes now. It is expected to increase in the next 3 years. The renewed fix on the retail segment is aimed at positioning the Companys brands as strong retail brands, which will not only enable it to ensure sustained volume growth, but also bring in higher average 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 the markets, with an aggregate capacity of 240,000 M 3 per annum. These plants together with the two existing RMC plants will guarantee strong captive volumes and aid Grasim inprovding value added service to customers. Enhancing margins To enhance margins in future, the Company will concentrate on revenue boosting and cost cutting measures. Grasim has reduced power, fuel and distribution costs, as part of its cost cutting measures going forward. The Company aims to reduce power costs by bringing down unit power 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 bring down 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 capital Through better management of inventories and receivables as well as improvement in labour productivity at all units will be a continuing phenomenon 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 new opportunities and will leverage its strong market position and improved cash flows to capitalise on these for profitable growth in future.

SPONGE IRON
Installed Capacity (TPA) Production (Tonnes) Sales Volume (Tonnes) Gross Divisional Turnover (Rs. Crores) Net Divisional Turnover (Rs. Crores) Average Realisation (Rs./Ton) Operating Margins (%) *
* - Calculated on Net Divisional Turnover

1999-00 900,000 709,094 822,996 482.4 418.1 5,037 13.5

1998-99 900,000 670,231 565,682 315.7 283.2 4,879 12.1

% Change 5.8 45.5 52.8 47.6 3.2 -

Review of Operations It was a turnaround year for the Sponge Iron division. The division demonstrated significant improvement in volumes, pricing and profitability. This was an outcome of the positive industry environment, aggressive marketing and benefits of several strategic moves initiated last 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 demand was attributed to a modest recovery in the steel sector, rising trend in global scrap prices and reduced competition in the local market. This is a credible achievement since the strong volume growth was without any significant support from exports. Infect, the share of exports was insignificant 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 of recession, the domestic steel industry showed signs of recovery consequent to an upswing in the economic and industrial activity as well as improved 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 net increase of 16% YoY in 1999-2000. Such a sharp rise induced steel manufacturers to shift from steel scrap to sponge iron. This, together with the strong demand enabled domestic sponge iron manufacturers improve volumes significantly. Scrap Price Movement

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Reduced competition Grasim has benefited from this positive industry environment and reduced competition in the local markets. With the commissioning of downstream steel making facilities, two large producers of sponge iron went captive, leasing Grasim as the sole gas based merchant sale producer of sponge iron in the country. Leveraging this and the advantage of its location and product flexibility, the Company increased market share substantially during this year. The Companys market share soared from 26% in 1998-99 to 40% in 1999-2000. The rest of the market is being shared by high-cost coal based producers of sponge iron in the country. Considering opportunities in the local market, the Company consciously moved away from the export 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 shortage of 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 the Company with the objective of increasing volumes and asset utilisation. The average realisation grew only by 3.2%YoY from Rs.4879/Ton in 1998-99 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 reduce operating costs during the year. The Company improved its iron orepellet consumption ratio further from 34.9% in 1998-99 to 36.1%, which is the highest level achieved by any manufacturer using HYL technology globally. It has contributed significantly towards reducing costs, as lump ore is about 24% cheaper than landed cost of pellets. In addition, Grasim reduced pellets and lump ore costs by 4% YoY through a successful re-negotiation with global suppliers and better management of freight costs. The Company also reduced iron oxide consumption ratio from 1.58 tonnes per tonne of sponge 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 sluggish growth 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 are that 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 iron industry. The electric arc furnace is a key user segment and hence any switch towards electric arc furnace by the steel industry will strengthen global 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. The competition in the domestic market will come mainly from the coal based producers, who suffer from an un-competitive cost structure. We believe large gas based merchant producers will gain significantly and report increasing market share, volumes and realisation in future. Outlook for Grasims Sponge Iron Grasim is the only gas based merchant sale producer in India. It is well positioned to capitalise on the emerging opportunities. Grasim will focus 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 revenues and focus on cost control for enhanced margins.

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Leveraging strategic advantages The Company's advantages stem from product flexibility, technological superiority and lower costs. Grasim is the only merchant producer in the World to produce both DRI and HBI from a single reactor. This flexibility gives it a strong competitive edge in terms of meeting varied customer 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' iron ore consumption ratio at 36.1% is the highest in the World in the HYL technology and works in Grasims favour since iron ore is 24% cheaper than 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 revenue boosting measures including a changed product mix, value addition of by-products and expansion of geographical presence. A glimse of plans is 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 twin objectives of capturing higher market share and increasing realisation. Higher average selling price of DRI and lower generation of chips and fines will maximise realisation. On the other hand, increased DRI production will help Grasim enhance market share, especially with two 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 offers immense potential for exports over the next few years. Grasim will boost its exports and leverage its strong brand and distribution network 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 with a 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 by chartering 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 will be able to overcome this problem with the implementation of the LNG pipeline by Enron Corporation. The pipeline will pass by the plant at a 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 offer potential 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 efficiency improvements will be a key focus area for Grasim. This will have a significant bearing on cost given that iron oxide accounts for 52% of the aggregate production costs. Increase ironore pellet consumption ratio from 36.1% to 40% will be focused for cost reduction in the future. This, together with replacement 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 and substitution of Magnesite coating with relatively cheaper Lime coating, at least partially, will also contribute significantly towards reducing manufacturing costs and improving margins in future. To increase operational efficiencies and reduce costs, the Company has initiated implementation of Total Productive Maintenance (TPM).

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TEXTILES
1999-00 Fabrics Production (Lac Meters) Sales Volume (Lac Meters) Gross Turnover (Rs. Crores) Average Realisation (Rs./Mtr) Yarn* Production (Tonnes) Sales Volume (Tonnes) Gross Turnover (Rs. Crores) Average Realisation (Rs./Kg) Gross Divisional Turnover (Rs. Crores) Net Divisional Turnover (Rs. Crores) Operating Margins before employee separation costs (%) ** 165.5 165.3 192.8 116.6 11934 12021 159.71 132.85 352.5 300.79 7.9 1998-99 182.9 198.8 246.7 124.1 10562 8325 147.36 141.66 394.1 336.45 11.5 % Change (-)9.5 (-)16.9 (-)21.8 (-)6.0 13.0 44.4 8.4 (-)6.2 (-)10.6 (-)10.6 -

* Includes inter-divisional transfers ** Operating margins calculated on Net Divisional Turnover; Operating margins after employee separation cost is 7.3% vis--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 lower volumes, realisations and margins due to the continued sluggish market conditions, intense price competition and accelerated input costs. The yarn segment witnessed similar trends. Fabric production declined by 9.5% from 182.9 lac meters in 1998-99 to 165.5 lac meters in 19992000. 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 adverse impact on the suiting fabric volumes. Given obvious benefits of their small-scale nature, manufactures from the unorganised sector competed with large brands on prices. Grasim suffered on account of proliferation of smaller brands and spurious materials. Reflecting price competition, the Companys 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 assortment of 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 various initiatives 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. These included 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 increased competition, the robustness of Graviera and Grasim Suitings became critical. The Company maintained its advertising budget at Rs.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% to 7.9% in 1999-2000. Lower average relisation and rise in production costs led to this steep fall in margins. The average cost of fabrics production soared primarily due to the sharp rise in fibre and labour costs. Lower average asset utilisation compounded the situation further.

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Sector Outlook The outlook for textiles business remains daunting. The market for branded fabrics is likely to remain stagnant and witness intense price competition even in future. The continuing recovery in the economy, resultant likely boost in demand is an encouraging development. However, it is unlikely to result in any turnaround in the fortunes of the industry, given huge over-capacity, gradual commoditisation of the suiting fabrics markets and the preference for ready-to-wear products. The discriminatory excise duty in favour of independent process houses, unprecedented growth of the unorganised sector and emergence of smaller brands will result in continued intense price competition in the market. This may put pressure on 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 market conditions as well as oversupply in the international markets. Exports are thus likely to remain unattractive even in future. Outlook for Grasims Textiles Business In such a business scenario, Grasim will endeavour to improve efficiency and leveraging strong brand equity for stable returns. The Companys strategy 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 as a premium brand in the suiting fabrics market. With aggressive promotion and marketing efforts these brands would grow. The Company will concentrate on product innovation and design development, which together with brand positioning will enable it to increase its market share and 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. Energies will be focused on better management of existing showrooms, increasing number of showrooms for greater reach and wider coverage over the next 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 capital turns, improvement in loom efficiency and reduction in fixed costs is the route adopted by Grasim.

FINANCIAL REVIEW AND ANALYSIS

Highlights (Rs. in Crores)
Gross Turnover Net Turnover Operating Profit Other Income PBDIT Interest Depreciation Profit Before Tax and Employee Separation Compensation Employee Separation Compensation Profit Before Tax Tax Profit After Tax 1999-2000 4982.3 4272.6 668.0 88.3 756.3 256.1 237.0 263.3 17.8 245.5 12.4 233.1 1998-99 4325,1 3756.9 568.5 109.8 678.3 292.3 209.7 176.3 4.6 171.8 8.0 163.8 % Change 15.2 13.7 17.5 (-)19.6 11.5 (-)12.4 13.0 49.2 286.9 42.9 55.0 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 iron during the year. Aggregate revenues of the cement and fibre divisions have risen 43% and 14% YoY respectively while sponge iron revenues have 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 continued cost cutting has enabled the Company report improved operating profit during the year. The growth would have been stronger except for continued pressure on realisation in a few key businesses during the year. Other Income Grasims other income consisted of operating receipts of the units, bill discounting charges and interest and dividend income. Other income dropped 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 lower interest 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 debts detailed 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 Rayons 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, as against Rs.8 Crores in 1998-99. The Company has paid the Minimum Alternative Tax (MAT) during the year. Net Profit The Companys net profit soared 42%, from Rs.163.8 Crores in 1998-99 to Rs.233.10 Crores in 1999-2000. Earnings per share increased by 30% 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 to Rs.53.2 during this period. Cash Flow Analysis
Source of Cash Cash from operations Income from investing activities Reduction in working capital Total Use of Cash Net capital expenditure Net investments Reduction in Debt Interest Dividend (including Corporate Tax on Dividend) for 1998-99 Increase/ (Decrease) in cash and cash equivalents Total 1999-2000 669 51 156 876 265 89 156 281 57 28 876 % 76.4 5.8 17.8 100.0 30.3 10.2 17.8 32.1 6.5 3.1 100.0

Source of Cash
l

Cash from operations Cash from operations has gone up by 20% from Rs.557 Crores in 1998-99 to Rs.669 Crores in 1999-2000. This is attributable to improved volumes and higher contribution from the fibre, cement and sponge iron businesses during the year. Income from investing activities Income 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 an installed capacity of 900,000 TPA at Reddipalayam in Tamil Nadu and towards maintenance capex as well as modernisation undertaken at various units.

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 companies of the Aditya Birla Group viz., Birla AT&T Communications Limited and Bina Power Supply Company Limited. These investments were in line with commitments made by the Company in the past. The balance amount was invested in short term liquid investments by the Company.

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 debt to the tune of Rs.327 Crores and refinancing of the same with debts bearing lower coupon rate. Following a net reduction in debt of Rs.156 Crores, the Companys debt equity ratio came down to 0.82 by end of 1999-2000.

Net working capital Net Working capital requirements declined by Rs. 156 Crores on account of effective inventory and better cash flow management. Dividend The Company has paid Rs.57 Crores towards dividend for 1998-99. For the year 1999-2000, the Company has announced an Interim Dividend of Rs.6 per share and has proposed a Final Dividend of Rs.1 per share. Including the Corporate Tax on Dividend, the outflow on 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 MILLENNIUM

The Company was constrained during the past two years on account of a slowdown in the economy and the resultant difficult environment in its core sectors. Grasims 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 core businesses. Going forward, towards achieving its ultimate objective of delivering value for shareholders on a sustainable basis in the new millennium, the Company 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 cash generator 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 by leveraging 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 cost reduction through process improvements, reduction in consumption norms and reallocation of resources. The Company will also enhance its emphasis on value added products with the twin objective of reaching closer to the customers as well as enhancing realisation for better margins.

CAUTIONARY STATEMENT
Statement in this Managements Discussion and Analysis describing the Companys 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 Companys operations include global and Indian demand-supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Companys 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 Report
ENVIRONMENT PROTECTION: A WAY OF LIFE AT GRASIM At Grasim we firmly believe in sustainable development. We fully appreciate that the earths 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:
q q q

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.

''At all our Plants, pollution prevention, product stewardship and clean technologies enable us to fulfil our goal of sustainable development''.

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:
q

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
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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.
q

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 earths 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.

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Social Report : Beyond Business Reaching out to Communities

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 we operate. 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 in Madhya Pradesh, Bhiwani in Haryana, Shambhupura in Rajasthan, Harihar and Malkhed in Karnataka, Mavoor in Kerala, 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 CAMPS To provide health care to villagers in the nook and cranny of the villages surrounding our units, we organize medical camps. At more than a 100 medical camps conducted during the year, over 20,000 villagers were examined and treated for diverse ailments including tuberculosis, leprosy, cataract, polio and skin-related diseases. Immunization camps form part of this activity. Hundreds of people have benefited immensely. For instance, 343 patients gained better sight through 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 can be reduced. Depending on their affliction, they are provided with tricycles, callipers, crutches, artificial limbs, and special shoes to cite a few examples. These supportive aids have been instrumental in significantly enhancing the self 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 LITERACY To raise the literacy level, in the areas around our Plants, we recourse to various ways. These encompass the setting up 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 are residential camps organized during the summer where students are given an orientation into basic values such as honesty, integrity, simplicity, perseverance which are all character forming. Additionally, they are given guidance on career 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 their fees, supplying text books and stationery, free of cost. We are involved in developing the infrastructure for rural schools in Reddipalaym, ostensibly one of the most backward areas in Tamil Nadu. In collaboration with the District Education Department, we organized Teachers Training programmes at Vikram Ispat. The teachers were drawn from the schools in the villages. At Harihar, we have undertaken a similar project Distribution of text books to the Panchayat Schools, and financial aid to needy educational institutions also forms part of our canvas. We have kindled the desire to learn among 6000 children.

Our Social engagement stems from our fundamental belief that the organization of the future will be judged by the values it stands for, for its contribution and for the benefits it offers to communities amidst which it operates.
Smt. Rajashree Birla, Chairperson, The Aditya Birla Centre for Community Initiatives and Rural Development.

Free Eye Camp at Harihar 23

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 the poorest 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 trained in 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 assist the farmer in accessing the necessary funds which go towards enhancing his yield. The farmer is thus assured of a sustainable income, given a normal monsoon. To boost agricultural and horticultural activities, we reach out to thousands of farmers in manifold ways. Farmer training programmes, teaching them better farming techniques on demonstration plots and agricultural meetings where agricultural experts give them valuable i nputs which are proving 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 of roads, 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, a Community Hall-cum-Training Centre has been established. The Centre serves as a Balwari, reading room cum library, a Sewing Centre and hub for 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 collective accomplishments are providing water supply, constructing 100 toilets, cementing and tarring of the roads, plantation in the village, soil conservation in the farmers 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. We influenced 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 them are 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 are helping in shaping new societies.

24

Corporate Governance Report

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

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 managements progress and key corporate decisions The Board is aware of the concerns of the Companys shareholders The Management and employees have a stable environment, in which to plan and execute strategy The Board is effectively in control of the Companys affairs The Companys 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. The Chairman 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 Groups objective of creating shareholder value. Grasim, a flagship company of the Aditya Birla Group, is no exception. Your company is committed to benchmarking itself with the best in all areas including corporate governance. Towards this end, this years 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 DIRECTORS Composition of the Board The need for having a majority of non-executive directors on the Board is internationally well recognised. Grasims board meets this requirement as it 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 Mr Kumar Mangalam Birla Mrs Rajashree Birla Mr S V Muzumdar @ Mr M C Bagrodia@@ Mr P K Mohta Mr S K Kapur Mr Y P Gupta Mr A N Lalbhai Mr M L Apte Mr B K Sethi Mr R K Kaul Mr S G Subrahmanyan Mr B V Bhargava Executive/Non-executive/ Independent # Non-Executive Non-Executive Non-Executive Non-Executive Non-Executive Non-Executive/ Nominee1 Non-Executive/ Nominee2 Independent Independent Independent Independent Independent Independent
1 2 * ** ***

No. of Outside Directorship held 18* 9** 11 16*** 18 4 4 11 17 1 4 6 9

# An Independent director is q not a formal executive and has no professional relationship with the company q not a large customer and/ or vendor to the company q not a close relative of the promoter and / or any executive directors q not holding a significant stake q 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

Nominee of Industrial Development Bank of India (IDBI) - Lender 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

25

Directors Interest in the Company Grasims commitment to transparency goes beyond statutory requirements. The company has, therefore, decided to make full disclosures regarding the interests of, and payments to, all Directors on the Board. Director Relationship with Other Directors Business Relationship with the Company, if any Nominee of IDBI Nominee of LIC Loans & Advances Received from the Company* Remuneration Paid During 1999-2000 (All figures in Rupees) Sitting Fees 16,000 8,000 6,000 6,000 6,000 10,000 8,000 10,000 6,000 12,000 10,000 Salary & Perks Commission Total 16,000 8,000 6,000 6,000 6,000 10,000 8,000 10,000 6,000 12,000 10,000

Mr Kumar Mangalam Birla Mrs Rajashree Birla Mr S V Muzumdar@ Mr M C Bagrodia@@ Mr S K Kapur Mr Y P Gupta Mr A N Lalbhai Mr M L Apte Mr B K Sethi Mr R K Kaul Mr S G Subrahmanyan Mr P K Mohta Mr B V Bhargava
*
@ @@

Son of Mrs Rajshree Birla Mother of Mr Kumar Mangalam Birla

Uncle of Mr Kumar Mangalam Birla

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 Mr Kumar Mangalam Birla Mrs Rajashree Birla Mr S V Muzumdar@ Mr M C Bagrodia@@ Mr S K Kapur Mr Y P Gupta Mr A N Lalbhai Mr M L Apte Mr B K Sethi Mr R K Kaul Mr S G Subrahmanyan Mr P K Mohta Mr B V Bhargava Held 8 8 4 4 8 8 8 8 8 8 8 8 8 No. of meetings Attended 8 4 3 3 3 5 4 5 3 6 5 Attended Last AGM* No No No No No No No No No No No No No

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

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

26

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 these recommendations. 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 nonexecutive 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 no professional, 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 the shareholder 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 not being 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 the registrar 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 Companys shares are therefore traded in dematerialised form. To expedite the transfer process in the physical segment authority has been delegated to the Share Transfer Committee, which comprises of four senior officers. Members of the Share Transfer Committee: Mr. D N Makharia, Company Secretary Mr. Pankaj Kapdeo, Dy Secretary Mr. Y Joshi Mr. Shivkumar The Committee is authorised to approve transfer of up to 5000 shares/debentures each under one transfer deed, else approval of a Director is required. 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 are highlighted 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 its Directors. 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 each meeting. The Company placed before the Board, the performance of various units/divisions and all statutory reports from time to time. As regards various items recommended by the SEBI Committee on Corporate Governance, the following items are not presented in a structured manner at present. However, necessary steps are being taken to present all the items recommended by the SEBI Committee in a structured manner from the current year.
27

q q q q q

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 30th April 1999 29th June 1999 27th July 1999 30th August 1999 25th September 1999 22nd October 1999 27th January 2000 31st March 2000 Place / City Industry House, Mumbai Industry House, Mumbai Industry House, Mumbai Industry House, Mumbai Industry House, Mumbai Industry House, Mumbai Industry House, Mumbai Industry House, Mumbai No. of Directors Present 7 5 7 5 6 5 6 8

6.

As a part of the disclosure related to management, in addition to the Directors Report, Managements Discussion and Analysis should form part of the Annual Report to the shareholders. Managements Discussion and Analysis forms part of the Annual Report. The Company introduced this new section in the Annual Report for the year 1998-99.

7.

All company related information like quarterly results, presentation made by companies to analysts may be put on companys 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 the Press 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 Companys 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.

28

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 Companys 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 1998-99 1998-99 1997-98 1996-97 Type AGM EOGM AGM AGM Location Grasim Staff Club, Registered Office, Birlagram, Nagda, M P Grasim Staff Club, Registered Office, Birlagram, Nagda, M P Grasim Staff Club, Registered Office, Birlagram, Nagda, M P Grasim Staff Club, Registered Office, Birlagram, Nagda, M P Date 11th September 1999 10 th December 1998 25 July 1998
th

Time 11.00 a.m. 10.30 a.m. 11.00 a.m. 11.00 a.m.

12th July 1997

29

1.2. Whether special resolutions were put through postal ballot last year? 1.3. Are polls proposed to be conducted through postal ballot this year? 2.

NO NO

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 other statutory authority during the last three years. Means of communication q Half-yearly report sent to each household of shareholders No q Quarterly results q Which newspapers normally published in Financial Express, Mumbai, Nai Dunia, Indore q Any web site, where displayed www.adityabirla.com,www.grasim.com q Whether it also displays official news releases and Official news releases are displayed presentations made to institutional investors/ analysts on the web site q Whether MD&A is a part of annual report Yes q Whether Shareholder Information section forms Part of the annual report Yes

4.

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Shareholder Information
1. Annual General Meeting Date and Time Venue Financial Calendar Financial reporting for the quarter ending June 30, 2000 Financial reporting for the half year ending September 30, 2000 Financial reporting for the quarter ending December 31, 2000 Financial reporting for the year ending March 31, 2001 Annual General Meeting for the year ended March 31, 2001 Dates of Book Closure Dividend Payment Date Interim Dividend Final Dividend Registered Office : : : : : : : : : : : : : 15th July 2000, 11.00 A.M. Grasim Club, Birlagram 456 331 Nagda, Madhya Pradesh End July 2000 End October 2000 End January 2001 End April 2001 End July 2001 1st July 2000 10th July 2000 8th May 2000 25th July 2000 Birlagram 456 331 Nagda, Madhya Pradesh Tel: (07366) 46760 / 46766 Fax: (07366) 44114 / 46024 E-Mail: grsmsfd@vsnl.com
Non-Convertible Debentures National Stock Exchange of India Limited (Wholesale Debt Market Segment) Trade World, Senapati Bapat Marg, Lower Parel, Mumbai 400 013

2.

3. 4.

5.

6.

Listing on Stock Exchanges at :

Equity Shares The Stock Exchange - Ahmedabad Kamdhenu Complex, Panjara Pole Near Polytechnic, Ahmedabad 380 015 Bangalore Stock Exchange Limited Stock Exchange Towers, 51 1st Cross J .C .Road, Bangalore 560 027 The Calcutta Stock Exchange Association Limited 7 Lyons Range, Calcutta 700 001 Cochin Stock Exchange Limited P O Box No. 3529, Veekshanam Road Ernaculam, Cochin 682035 Madras Stock Exchange Limited Exchange Building, Post Box No. 183 11 Second Line Beach, Chennai 600 001 Madhya Pradesh Stock Exchange, Rajani Bhavan 3rd Floor, 569 M G Road, Opp High Court, Indore 452001 The Stock Exchange Mumbai Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 023 National Stock Exchange of India Limited Trade World, Senapati Bapat Marg Lower Parel, Mumbai 400 013 The Delhi Stock Exchange Association Limited DSE House, 3/1, Asaf Ali Road New 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 paid for the Calendar year 2000.

Global Depositary Receipts (GDRs) Societe de la Bourse de Luxembourg Societe Anonyme R.C. B 6222, B P 165 L-2011, Luxembourg

31

7.

Stock Code : Routers Bombay Stock Exchange National Stock Exchange Luxembourg Stock Exchange GRAS.BO GRAS.NS Bloomberg GRASIM IN NGRASIM IN GRDS LI

8.

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

9.

Stock Performance (Indexed) :

10. Stock Performance Over The Past Few Years : (In Percentage) Grasim BSE Sensex BSE 200 Nifty 1 Year 100.8 35.7 65.6 43.7 3 Years (-)12.0 41.3 87.2 57.5 5 Years (-)48.2 50.8 68.6 52.0

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11. Registrars and Transfer Agents (Share transfer and communication regarding share certificates, dividends and change of address)

Share Department Grasim Industries Limited Birlagram 456 331 Nagda, Madhya Pradesh Shares can also be lodged for transfers and other related issues at the following offices: Grasim Industries Limited Century Bhavan, 3rd Floor, Dr. A. B. Road, Worli, Mumbai 400 025 Tel: (91-22) 4303162, Fax: (91-22) 4220892 Grasim Industries Limited Birla Building, 14th Floor, 9/1 R N Mukherjee Road, Calcutta 700 001 Tel: (91-33) 2482985, Fax: (91-33) 2482985 Grasim Industries Limited Uco Bank Building, 4th Floor, Parliament Street, Tel: (91-11) 3710548, Fax: (91-11) 3718370 New Delhi 110 001

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. The Share Transfer Committee meets at least 8 times a month. The total number of shares transferred during the year (including demat) was 13,766,385 (previous year 28,222,243). Transfer Period (In Days) 1-15 16-20 20-30 30 and Above* Total No. of Transferees (Folios) 139 4,362 266 5,314 10,081 1999-2000 No. of Shares 53,195 640,549 37,380 860,450 15,91,574 % 3.3 40.2 2.4 54.1 100.0 No. of Transferees (Folios) 72 138 2,264 2,758 5,232 1998-99 No. of Shares 22,434 15,849 5,907,748 362,888 6,308,919 % 0.4 0.3 93.6 5.7 100.0

* 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 Relating to Transfer, Transmission, Dividend, Interest, Demat & Remat and Change of address Others Received 455 1999-2000 Cleared 455 Received 462 1998-99 Cleared 462

14

14

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

33

14. Distribution of Shareholding (as at the year end): No. of Shares No. of share holders 1-100 101-200 201-500 501-1000 1001-5000 5001-10000 10001 and above Total 265,262 18,237 10,276 2,716 1,413 119 209 298,232 % of share holders 88.9 6.1 3.5 0.9 0.5 0.0 0.1 100.0 1999-2000 No. of share held 7,951,183 2,599,720 3,158,666 1,864,430 2,667,640 864,014 72,563,996 91,669,649 % share holding 8.7 2.8 3.5 2.0 2.9 0.9 79.2 100.0 No. of share holders 177,564 11,555 6,821 1,946 1,047 76 74 199,083 % of Share holders 89.1 5.7 3.3 0.9 0.4 0.3 0.3 100.0 1998-99 No. of shares held 5,982,615 1,654,404 2,097,700 1,331,560 2,001,221 523,699 58,722,771 72,313,970 % share holding 8.3 2.3 2.9 1.8 2.8 0.7 81.2 100.0

15. Categories of Shareholders (as at the year end) : 1999-2000 Category Individuals Corporate Financial Institutions FIIs NRI / OCBs Banks GDRs Total No. of share holders 289,503 2,569 8 100 5,990 60 2 298,232 % of share holders 97.07 0.86 0.00 0.03 2.01 0.02 0.00 100.00 No. of shares held 19,332,257 21,732,647 19,896,033 14,675,984 3,814,083 1,836,332 10,382,313 91,669,649 % share holding 21.08 23.71 21.70 16.02 4.16 2.00 11.33 100.00 No. of share holders 194,150 1,477 9 56 3,331 51 2 199,076 % of share holders 97.53 0.74 0.01 0.03 1.67 0.03 0.00 100.00 1998-99 No. of shares held 15,749,562 15,849,555 23,200,089 4,537,482 3,584,389 412,050 8,980,843 72,313,970 % share holding 21.78 21.91 32.08 6.28 4.96 0.57 12.42 100.00

16. Dematerialisation of Shares and Liquidity

: Over 63% of outstanding shares (including 11.3% of outstanding capital in the form of Global Depository Receipts GDRs) have been de-materialised as on 31st March 2000. Trading in Grasims 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 18. Outstanding GDR/ Warrants

: Not Applicable. : 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.

34

19. Plant Locations : Fibre, Pulp and Chemical Plants Staple Fibre Division Birlagram 456 331, Nagda, Madhya Pradesh Tel: (07366) 46760 / 46766 Fax: (07366) 44114 / 46024 Harihar Polyfibers & Grasilene Division Harihar, Dist. Haveri Kumarpatanam 581 123, Karnataka Tel: (08192) 42171 / 42175 Fax: (08192) 42875 Pulp and Fibre Divisions Birlakootam, Kozhikode Mavoor 673 661, Kerala Tel: (0495) 483161 - 3 Fax: (0495) 483116 Birla Cellulosic Birladham, Kharach, Dist. Bharuch Gujarat Tel: (02629) 31391 5 Fax: (02629) 339626 Cement Plants Vikram Cement Dt. Mandsaur, Khor 458 470, M.P. Tel: (07420) 35540 / 35525 / 35526 Fax: (07420) 35524 Aditya Cement Adityapuram Sawa-Shambhupara Dist. Chittorgarh, Rajasthan 312 613 Tel: (01472) 87436 / 46 / 70 Fax: (01472) 87471 Grasim Cement Vairija Bhawan 3rd Floor, Sai nagar Jail Road, Raipur 490 001 Tel: (0771) 521251 / 52 Fax: (0771) 521259 Rajashree Cement Aditya Nagar, Gulbarga, Malkhed 585292 Tel: (08474) 66166 / (08441) 78221-5 Fax: (08474) 66285 / (08441) 78229 / 39 Birla White Rajashree Nagar, Bhopalgarh Dt. Jodhpur Kharia, Khangar 342606 Tel: (02920) 64224-6 Fax: (02920) 64225 The Company Secretary Grasim Industries Limited Birlagram 456 331, Nagda, M.P. Tel: (07366) 46760 / 46766 Fax: (07366) 44114 / 46024 1999-2000 Net Earnings (Rs. Crores) Cash Earnings (Rs. Crores) EPS (Rs.) EPS Growth (%) CPS (Rs.) Dividend Per Share (Rs.) Dividend Payout (%) Book Value Per Share (Rs.) Price to Earnings (x) * Price to Cash Earnings (x) * Price to Book Value (x) * * Based on stock price as on 31st March
35

Other Plants Textiles Division Birlanagar, Gwalior 474 004, M.P. Tel: (0751) 365 806 / 365 807 Fax: (0751) 365 813 Bhiwani Textile Mills Birla Colony, Bhiwani 125 021 Haryana Tel: (01664) 42577 / 42579 Fax: (01664) 43717 Vikram Ispat Salav, Dist. Raigad 402 202, Maharastra Tel: (02141) 40103 / 40110 Fax: (02141) 40122

20. Investor Correspondence :

21. Per Share Data : 1998-99 163.8 373.5 19.6 (-)38.6 44.7 6.8 34.4 285.9 8.1 3.5 0.6 1997-98 230.8 397.8 31.9 (-)16.0 55.0 6.8 21.2 320.2 9.8 5.7 1.0 1996-97 274.6 422.1 38.0 (-)17.3 58.4 6.5 17.1 296.0 9.0 5.8 1.2 233.1 470.1 25.4 29.6 51.3 7.0 31.0 303.0 11.9 5.9 1.0

BOARD OF DIRECTORS
MR. KUMAR MANGALAM BIRLA- Chairman MRS. RAJASHREE BIRLA MR. A.N. LALBHAI MR. S.K. KAPUR MR. M.L. APTE MR. B.K. SETHI MR. R.K. KAUL MR. Y.P. GUPTA MR. S.G. SUBRAHMANYAN MR. P.K. MOHTA MR. B.V. BHARGAVA MR. M.C. BAGRODIA Adviser Mr. D.P. Mandelia Manager Mr. Shailendra K. Jain Executives Staple Fibre & Engineering Divisions, Nagda Pulp & Grasilene Divisions, Harihar and Birla Cellulosic Division, Birladham, Kharach Mr. Shailendra K. Jain - President & Business Head Staple Fibre & Engineering Divisions, Nagda Dr. Lalit Gupta - Sr. Executive President Staple Fibre Division, Nagda Mr. S.K. Saboo - Sr. Executive President Mr. 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, Harihar Mr. O.P. Rungta - Sr. Executive President Mr. S.S. Maru - Executive President Birla Cellulosic Division, Birladham, Kharach Mr. Vijay Kaul - Sr. Executive President Pulp & Staple Fibre Divisions, Mavoor Mr. R.N. Saboo - President Cement Divisions Mr. Saurav Mishra - Business Head Mr. C.P. Jajoo - Sr. Executive President (Chief of Manufacturing) Mr. O.P. Puranmalka - Sr. President (Chief of Marketing)
36

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 Executive President (Spg. Business) Mr. Vikram Rao, Group Executive President (Fabric & Apparel Business) Textile Division, Gwalior Mr. S.K. Jain - Sr. President Mr. S. Krishnamoorthy- Jt. Executive President Bhiwani Textile Mills, Bhiwani Mr. 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. Executive President (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.)

Directors Report
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 1999-2000 Gross Turnover Gross Profit Less: Depreciation Tax provision Add: Balance Brought forward Investment Allowance Reserve no longer required Gratuity and Leave encashment liability accrued for earlier years Debenture Redemption Reserve no longer required 1,023.12 16.46

(Rs. in crores) 1998-99 4,325.08 381.49 209.68

4982.32 482.43 236.98 12.35 249.33 233.10 1,010.01 17.00 (49.63) 80.40 1,187.05 1,420.15

8.00

217.68 163.81

147.47

1,057.78 1,221.59

Less: Appropriations Debenture Redemption Reserve Dividends a) b) Interim Dividend on Equity Shares Corporate tax thereon @11% Proposed Final Dividend on Equity shares Corporate Tax thereon @ 22% 55.00 6.05 9.17 2.02 72.24 24.47 204.16 Balance in Profit & Loss Account carried to Balance Sheet 1,215.99

107.45

117.32

56.44 6.21

62.65 18.50 198.47 1,023.12

Transfer to General Reserve

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

37

DIVIDENDS Dividend Interim Interim Dividend in respect of FY 1999-2000 @ Rs. 6.00 per share on 9,16,69,649 equity shares to be paid to the equity shareholders of the Company whose names appear in the register of members as on 1st May 2000. Final In view of the excellent performance of the company for FY 1999-2000, the Board recommends a final dividend on 9,16,69,649 Equity shares @ Re. 1/- per share, which if approved at the forthcoming Annual General Meeting will be paid to all those equity shareholders whose names appear on the Register of Members as on 10.7. 2000. Absorbing Corporate Tax on Dividend

(Rs. in crores) Total Outgo

55.00

6.05 (@11%)

61.05

9.17 64.17

2.02 (@ 22%) 8.07

11.19 72.24

DEBENTURES During the year under review, your Company issued Secured Redeemable Non-convertible Debentures of an aggregate value of Rs. 210 crores, on private 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 PLANT Your Companys new 0.93 mn. tonne cement plant at Reddipayalam, near Trichy (Tamil Nadu), set up at a cost of Rs. 315 crores, commenced trial run in the month of March, 2000. Commercial production at this plant has begun from mid-April. This plant is expected to add significantly to the companys market share in the southern states of Tamil Nadu and Kerala. With the economy on the upturn and increased focus on infrastructure and housing sectors, the commissioning of the new plant should augur well for the company in the times to come. FIBRE AND PULP DIVISIONS AT MAVOOR 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 continue to remain suspended. RESEARCH AND DEVELOPMENT To enhance its competitive edge through product innovations and quality upgradation so as to serve its customers better, your Company pursues a focused 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, innovative technologies 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 Laboratory has been instituted at Jawad (M.P.). Your companys 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 as mineraliser 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 companys R&D efforts have resulted in converting industrial waste into fuel. Research to explore use of alternate fuel and non- conventional energy sources is also ongoing. HUMAN RESOURCE DEVELOPMENT Your Company continues to focus on human resource development for remaining at the cutting edge in a rapidly changing globally competitive business environment. A series of innovative HR initiatives have been launched towards creation of a working environment in which every employee, irrespective levels, can contribute his/her best.
38

Planned change interventions leading to productivity improvements by adopting a leaner work-force, grooming our managers by sharpening their skills 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 tools such 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 COMPANIES As required under section 212 of the Companies Act 1956, the audited statements of accounts along with report of the Board of Directors and Auditors Report 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 per the 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 the Companys registered office. Additional information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, required under Section 217(1)(e) of the Companies Act 1956 is set out in a separate statement attached to this report and forms part of it. 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 Directors deem it their privilege to have had a long association with Mr. S.V. Muzumdar and express their great appreciation for the valuable services rendered by him 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 Articles of 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 the Companies 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 during a 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 continued co-operation and patronage. On behalf of the Directors

Dated: 28th April, 2000

KUMAR MANGALAM BIRLA Chairman

39

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 ii) 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.

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.

40

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 v) 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.

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 ii) 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.

Pulp Units Renovation of Recovery Boiler No. II renovation for improved plant working.
41

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 v) 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.

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 2 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.

Cement Units Actively collaborates with the National Council for Cement and Building Material for R&D activity Development of high performance blended cements.

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.

42

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 Companys products.

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 Year of Import Has Technology been fully absorbed C. FOREIGN EXCHANGE EARNINGS AND OUTGO

: : :

From M/s Udhe GmbH, Germany for manufacture of Caustic Soda by Membrane Cell in Caustic Soda Division. 1994-95 Yes

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.

43

FORM A
Total Energy Consumption and Energy Consumption per unit of Production (A) POWER & FUEL CONSUMPTION 1. Electricity a) Purchased - Unit Total amount Rate per Unit b) Own Generation I) Through Diesel Generator - Unit Unit per Liter of Diesel Oil\ Cost / Unit II) Through Stem Turbine - Units Units per Kg. Of Steam Cost / Unit (Cost of fuel and duties only) 2. Coal (slack, Steam & ROM including Lighting Coal) For Co-generation of Steam & Power For Process in Cement Plants Total amount Average rate 3. Furnace Oil (Including LSHS) Quantity Total amount Average rate 4. Light Diesel Oil (LDO) Quantity Total amount Average rate 5. High Speed Diesel Oil (HSD) Quantity Total amount Average rate 6. Internal Generation Steam a) From Chemical Recovery Boiler in Rayon Pulp plants Quantity Total Cost Rate/Unit (Cost of Oil used for firing support in Boiler) b) From Waste Heat Boiler in Sulphuric Acid Plants: Quantity Total Cost Rate/Unit (B) CONSUMPTION PER UNIT OF PRODUCTION : Name of the Product Unit 1. Viscose Staple Fibre (incl. for intermediate & by products) Standard Per Tonne Actual Per Tonne 2. Caustic Soda (For Cell House only) a. Mercury Plant Standard Per Tonne Actual Per Tonne a. Membrane Cell Plant Standard Per Tonne Actual Per Tonne 3. Cement Grey Standard Per Tonne Actual Per Tonne White Actual Per Tonne 4. Textiles Actual Yarn Per 100 Kg. Fibre Dyeing Per 100 Kg. Cloth Per 100 Kg. 5. Stable Bleaching Powder (SBP) Standard Per Tonne Actual Per Tonne 6. Poly Aluminium Chloride Standard Per Tonne Actual Per Tonne 7. Chlorosulphonic Acid Standard Per Tonne Actual Per Tonne Note : Form 1A is not applicable to Sponge Iron Division Unit 000 Rs in lacs Rs./Unit 000 Units/Ltr. Rs./Unit 000 Co-generation of Steam & Power Rs./Unit Tonne Tonne Rs in lacs Rs./Tonne K. Ltrs. Rs in lacs Rs./K. Ltrs. K. Ltrs. Rs in lacs Rs./K. Ltrs. K. Ltrs. Rs in lacs Rs./K. Ltrs. Current Year 186917 8101.56 4.33 369117 3.71 2.18 942659 1.69 956232 657484 32776.05 2031.09 117623 9693.26 8241 1641 175.55 10697 7449 868.62 11662 Previous Year 265199 10121.25 3.82 264242 4.18 1.70 809717 1.67 856330 774147 32532.77 1995.29 98496 6132.95 6227 1631 139.87 8574 12978 1259.48 9704

Tonne Rs in lacs Rs./Tonne Tonne Rs in lacs Rs./Tonne (Furnace Oil (Kg.) Current Previous Year Year

560125 31.20 5.57 203403 N.A. N.A. Coal (Kg.) Current Previous Year Year

846245 50.17 5.93 134345 N.A. N.A. Steam (Tonne) Current Previous Year Year 12.50 9.23 12.50 9.88

(Electricity units) Current Previous Year Year 1500.00 1303.15 1500.00 1439.00

3400.00 2823.00 2400.00 2196.00 120.00 90.22 109.56 423.40 410.83 418.27 230.00 156.00 75.00 61.00 125.00 125.00

3400.00 2816.00 2400.00 2204.00 120.00 95.00 118.00 448.00 324.00 230.00 164.00 75.00 61.00 125.00 131.00

0.13

0.13

220.00 128.22

220.00 141.00

0.40 0.59 0.28 0.13 0.33 0.27 0.33 0.16

0.43 0.41 0.45 0.28 0.13 0.33 0.23 0.33 0.17

44

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 the Company 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 our audit; (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 us in 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 211 of 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 on Accounts 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 (Auditors 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 Assets have been physically verified by the Management according to the regular programme of periodical verification in phased manner which in our opinion is reasonable having regard to the size of the Company and the nature of its Fixed Assets. No material discrepancies were noticed on verification. None of the Fixed Assets have been revalued during the year. The Stocks of Finished Goods, Stores, Spare Parts, Packing Materials, Fuel and Raw Materials of the Company at all its locations ( except stocks lying with third parties and in transit) have been physically verified by the Management at reasonable intervals. The procedures of physical verification of stocks followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business. The discrepancies noticed on verification between physical stocks and book records were not material. On the basis of our examination of stock records, the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles 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.

2. 3. 4. 5. 6.

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 register maintained under Section 301 of the Act are not, prima facie, prejudicial to the interest of the Company. The provisions of section 370(1B) of the Act 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 other terms 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 not applicable to the Company on or after 31st October, 1998.
45

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 stipulated and 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 with the size of the Company and the nature of its business with regard to purchase of stores, raw materials including components, plant and machinery, 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 services aggregating during the year to Rs. 50,000 or more in respect of each party in pursuance of contracts or arrangements entered into the register maintained 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 the Act 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 the maintenance of cost records under the Section 209 (1) (d) of the Act in respect of the Companys products to which the said rules are made applicable and are of the opinion that, prima facie, the prescribed records have been made and maintained. We have not, however, made a detailed 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 the year 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 they became payable. 19. During the course of our examination of books of account carried out in accordance with the generally accepted auditing practices, we have not come across any personal expenses other than expenses under contractual obligations and/or generally accepted business practices, which have been 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 materials commensurate with its size and the nature of its business, (b) as the processing jobs are undertaken at prices agreed with the parties, allocation of labour to individual jobs is not considered necessary, and (c) the Company has a reasonable system of authorization at proper levels and an adequate system of internal control on issue and allocation of stores. 22. In respect of the Companys trading activities we are informed that there are no damaged stocks. For G.P. KAPADIA & CO., Chartered Accountants UDAY R. PARIKH Partner Mumbai Dated : 28th April, 2000
46

For LODHA & CO., Chartered Accountants PRAMOD K. JAIN Partner

Balance Sheet as at 31st March, 2000

SOURCES OF FUNDS Shareholders Funds Share Capital Share Capital Suspense Reserves and Surplus Loan Funds Secured Loans Unsecured Loans Deferred Payment Credits Documentary Bills Discounted with Banks TOTAL APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Capital Work-in-Progress Investments Current Assets, Loans and Advances Interest accrued on Investments Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Less: Current Liabilities and Provisions Liabilities Provisions Net Current Assets TOTAL Accounting Policies and Notes on Accounts As per our separate report attached For G. P. KAPADIA & Co., Chartered Accountants UDAY R. PARIKH Partner Mumbai Dated: 28th April, 2000 For LODHA & Co., Chartered Accountants PRAMOD K. JAIN Partner D. N. MAKHARIA Secretary SHAILENDRA K.JAIN Manager Schedules 1A 1B 2 3 4 5 6 91.67 0.02 2704.57 2796.26 1536.60 580.08 0.18 158.13 2274.99 5071.25 Rs. in Crores Previous Year 72.31 19.38 2546.23 2637.92 1602.24 667.69 0.67 150.53 2421.13 5059.05

4911.23 1804.58 3106.65 314.38 3421.03 682.98 0.03 643.69 622.88 56.76 437.15 1760.51 637.69 155.58 793.27 967.24 5071.25

8 9 10 11 12

4703.55 1582.67 3120.88 255.61 3376.49 680.37 0.03 652.55 645.16 29.17 327.83 1654.74 491.71 160.84 652.55 1002.19 5059.05

13 14

23 KUMAR MANGALAM BIRLA Chairman RAJASHREE BIRLA A.N. LALBHAI M. L. APTE S. G. SUBRAHMANYAN B. K. SETHI B. V. BHARGAVA M. C. BAGRODIA Directors
47

Profit & Loss Account for the year ended 31st March, 2000
INCOME Sales Interest and Dividend Income Other Income Increase in Stocks EXPENDITURE Raw Materials Consumed Manufacturing Expenses Purchases of Finished and Other Products Payments to and Provisions for Employees Selling, Distribution, Administration and Other Expenses Excise Duty Interest Depreciation [Note A of Schedule 7] Profit before Tax & Employee Separation Compensation Employee Separation Compensation Profit before Tax Provision for Tax Profit after Tax Gratuity & Leave encashment liability of earlier years Investment Allowance Reserve no longer required Debenture Redemption Reserve no longer required Balance brought forward from Previous Year Profit available for Appropriation Appropriations Debenture Redemption Reserve Interim Dividend Proposed Dividend Corporate Dividend Tax General Reserve Balance carried to Balance Sheet Accounting Policies and Notes on Accounts As per our separate report attached For G. P. KAPADIA & Co., Chartered Accountants UDAY R. PARIKH Partner Mumbai Dated: 28th April, 2000
48

Schedules 15 16 17 4982.32 50.71 37.62 12.61 5083.26 1317.69 999.81 287.31 298.87 713.56 709.70 256.08 236.98 4820.00 263.26 17.81 245.45 12.35 233.10 - 16.46 147.47 1023.12 1420.15 107.45 55.00 9.17 8.07 24.47 1215.99 1420.15 23

Rs. in Crores Previous Year 4325.08 65.74 44.07 15.27 4450.16 1214.02 805.71 389.02 260.31 534.55 568.21 292.26 209.68 4273.76 176.40 4.59 171.81 8.00 163.81 (49.63) 17.00 80.40 1010.01 1221.59 117.32 56.44 6.21 18.50 1023.12 1221.59

18 19 20 21 22

For LODHA & Co., Chartered Accountants PRAMOD K. JAIN Partner D. N. MAKHARIA Secretary SHAILENDRA K.JAIN Manager

KUMAR MANGALAM BIRLA Chairman RAJASHREE BIRLA A.N. LALBHAI M. L. APTE S. G. SUBRAHMANYAN B. K. SETHI B. V. BHARGAVA M. C. BAGRODIA Directors

Schedules forming part of Accounts

SCHEDULE 1
A. SHARE CAPITAL Authorised 95000000 Equity Shares of Rs. 10 each Redeemable Cumulative Preference Shares of Rs. 100 each 150000 15 % A Series 100000 8.57 % B Series 300000 9.30 % C Series Rs. in Crores Previous Year 95.00 1.50 1.00 3.00 100.50 Issued, Subscribed and Paid up 91669649 Equity Shares of Rs. 10 each fully paid (Previous year 72313970 Equity Shares) Of the above 29532500 Equity Shares were issued as fully paid up Bonus Shares by way of Capitalisation of Share Premium and Reserves. 19355679 Equity Shares of Rs.10 each issued as fully paid up for acquiring the cement business pursuant to Scheme of Arrangement without payment being received in cash. B. SHARE CAPITAL SUSPENSE 19836 Equity Shares (Previous year 19375515) of Rs. 10 each to be issued as fully paid up pursuant to acquiring of cement business of Indian Rayon and Industries Limited under Scheme of Arrangement without payment being received in cash. 95.00 1.50 1.00 3.00 100.50
Ltd.

SCHEDULE 3
SECURED LOANS Non-Convertible Debentures Interest accrued and due on debentures Other Loans: Term Loans from Banks: Rupee Loan secured on movable assets of Textiles Division, Gwalior & Malanpur Foreign Currency Loans: Secured by bank guarantee against hypothecation of the machineries/movable assets purchased there against Secured by first pari passu charge on assets of Cement Plant at Raipur Term Loans from Financial Institutions: Rupee Loans Secured by first pari passu charge on assets of Caustic Soda Plant at Nagda and Cement Plant at Raipur Secured by hypothecationof the machineries/ movable assets purchased thereagainst Secured by first pari passu charge on assets of certain divisions Housing loans secured by first equitable mortgage of land and buildings constructed thereon Foreign Currency Loan secured by first pari passu charge on assets of Sponge Iron Division at Salav Interest accrued and due on loans Deferred 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 Working Capital Borrowings from Banks secured by hypothecation of stocks and book debts of the Company Total Notes: 1075.77

Rs. in Crores Previous Year 1218.11 0.87

0.80

1.60

7.09

13.64 0.85

91.67

72.31

310.10 5.25 1.27 39.58 96.74 1536.60

102.47 23.15 2.11 8.23 0.02 42.32 188.87 1602.24

0.02

19.38

SCHEDULE 2
RESERVES AND SURPLUS
Balance as at 31st March, 99 Capital Reserve - On Revaluation of Fixed Assets - Capital Subsidy Preference Share Capital Redemption Reserve Debenture Redemption Reserve Share Premium Account General Reserve Investment Allowance Reserve Surplus as per Profit and Loss Account Previous year * Deduction/adjustment on account of :a) b) assets sold/discarded Depreciation provided on revalued block Rs.0.95 Crores 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 Premium account pursuant to the acquisition of cement business under the Scheme of Arrangement with Indian Rayon and Industries Addition Deduction/ during the Adjustments year during the year Rs in Crores Balance as at 31st March,

1)

2000 1. 2. 3. 4. 5. 6. 7.

22.14 1.21 1.48 394.24 823.32 255.53 25.19 1023.12 2546.23 2268.42 107.45 24.47 192.87 324.79 378.93@

2.52*

19.62 1.21 1.48 354.22 823.32 280.00 8.73 1215.99 2704.57 2546.23

147.47 16.46 166.45 101.12

Non-Convertible Debentures are secured by first legal/equitable mortgage on immovable assets, hypothecation of movable assets and floating charge on other assets, both present and future, of the specified divisions, ranking pari passu with the charges created in favour of Banks and Financial Institutions for their term loans. This charge is subject to hypothecation/charges in favour of Banks on stocks and book debts for working capital borrowings (except XXII and XXIII Series debentures which do not have any charge on current assets) and charges created for certain term loans and deferred payment credit on the specified assets purchased thereagainst. a) 18% - X Series Non-Convertible Debentures (Redeemed) on assets of Cement Plant at Shambhupura. b) 13.25% - XII Series Non-Convertible Debentures (redeemable in three equal annual instalments commenced from 5.6.1998 with premium @ 5% paid with the second instalment) are secured on assets of Sponge Iron Division at Salav. c) 16.5% - XIII Series Non-convertible Debentures (redeemable in three equal annual instalments commencing from 11.7.2000 with premium @ 5% payable on redemption) are secured on assets of Caustic Soda Plant at Nagda and Cement Plant at Raipur.

51.68

26.67

53.33

70.00#

160.00

49

SCHEDULE 3 (Contd.) d) e) f) 15% - XIV Series Non-Convertible Debentures (Redeemed) on assets of Cement Plant at Shambhupura. 15% - XV Series Non-Convertible Debentures (Redeemed) on assets of Staple Fibre Division at Kharach. 17.50% - XVI Series Non-Convertible Debentures (redeemable at par in three equal annual instalments commencing from 3.12.2000) are secured on assets of 40MW Power Plant at Nagda. 17.50% - XVII Series Non-Convertible Debentures (redeemable at par in three equal annual instalments commencing from 1.1.2002) are secured on assets of Cement Units - I, II and III at Jawad. i)14.75% - XVIII Series Non-Convertible Debentures (redeemable at par on 5.6.2002); and ii)14.50% - XIX Series Non-Convertible Debentures redeemable at par on 16.7.2002 are secured on assets of Staple Fibre Division (excluding 40MW Power Plant) at Nagda. 12.25% - XX Series Non-Convertible Debentures (redeemable at par in three annual instalments of Rs.35, Rs.35 and Rs.30 respectively, commencing from 18.12.2002) are secured on assets of Staple Fibre Division at Kharach. 13.50% - XXI Series Non-Convertible Debentures (redeemable at par on 14.7.2003) are secured on assets of Cement Plants at Jawad and Shambhupura ranking pari passu inter alia with XVII series Non-Convertible Debentures i)13.25% - XXII Series Non-convertible Debentures (redeemable at par in three equal annual instalments commencing from 31.3.2005); and ii)12.6% - XXIII Series Non-convertible Debentures (redeemable at par in three annual instalments of 33%, 33% and 34% respectively of the face value of the debentures, commencing from 17.8.2005) are secured on a plot of land situate in Maharashtra and on the assets of Cement Division-South at Reddipalayam. i)15.50% - IRIL - XVI Series Nonconvertible Debentures (redeemable at par in three equal annual instalments commencing from 31.7.2000); and ii)17.50% - IRIL - XVIII Series Nonconvertible Debentures (redeemable at par in three equal annual instalments commencing from 29.11.2000) are secured on assets of Birla Super Cement division at Hotgi, Rajashree Cement Division at Malkhed and Birla White Cement Division at Kharia Khangar.

Rs. in Crores Previous Year 70.00 114.00

SCHEDULE 3 (Contd.) # 2) The interest rate on following series of debentures, for the amount specified thereagainst, stands revised to 11% p.a. (payable annually) from 1st April 2000Series Amount on which revised rate of 11% is applicable (Rs. Crores) XIII *45.00 XVI 50.00 XVII 85.00 IRIL-XVI 67.00 IRIL-XVIII 30.00 * As per revised terms, redemption premium of 5% will not be payable on this component of XIII series debentures 3) In case of Term Loans which carry pari passu charge on the movable assets, such charge on movable assets is subject to prior charge of Banks on stocks and book debts for the working capital borrowings.

Rs. in Crores Previous Year

g)

50.00#

50.00

h)

85.00# 50.00

85.00 50.00

50.00

50.00

SCHEDULE 4
UNSECURED LOANS Fixed Deposits Short Term Loans and Advances: From Banks: Commercial Paper (Maximum Balance Rs. 200 Crores, Previous Year Rs. 200 Crores) Buyers Import Credit Cash Credit Account with Overseas Banks From Others Inter Corporate Deposits 5.44 5.13

i)

j)

200.00

200.00

100.00 105.35 20.51 225.86 225.86

200.00 14.40 31.15 245.55 97.85 343.40 126.48 186.13 6.55 192.68 319.16 667.69

k)

150.00

150.00

80.00

Other Loans and Advances: From Banks From Others: Deferred Sales Tax / Loan Other Loans

104.36 238.67 5.75 244.42 348.78 580.08

130.00

SCHEDULE 5
DEFERRED PAYMENT CREDITS On Usance Bills against purchase of Machinery on Deferred Payment Terms guaranteed by Banks, Secured by hypothecation of some of the Machinery in favour of Banks (including Rs. 0.12 Crores falling due within one year, Previous Year Rs. 0.54 Crores) Less: Interest in respect of future instalments

l)

154.10#

154.10

0.22 0.04 0.18

0.82 0.15 0.67

30.00#

30.00

SCHEDULE 6
DOCUMENTARY BILLS DISCOUNTED WITH BANKS Against Demand/ Usance Bills under Letter of Credit (Secured) Against Usance Bills (Unsecured) 122.68 35.45 158.13 115.67 34.86 150.53

1,075.77

1,218.11

50

SCHEDULE 7
FIXED ASSETS Rs. in Crores S. No. PARTICULARS As at 31.3.99 1. 2. 3. 4. FREEHOLD LAND LEASEHOLD LAND BUILDINGS WORKERS QUARTERS UNDER GOVERNMENT SUBSIDISED SCHEMES RAILWAY SIDINGS PLANT & MACHINERY SHIPS FURNITURE, FITTINGS & OFFICE EQUIPMENTS LIVESTOCK VEHICLES ETC. Previous Year CAPITAL WORK-IN-PROGRESS (including Advances & Pre-operative Expenses) 34.85 15.58 368.78 2.15 43.90 3985.04 106.98 120.97 0.01 25.29 4703.55 3548.52 GROSS BLOCK Additions Deductions and/or and/or transfers # transfers 3.18 1.08 36.57 59.03 112.03 1.94 18.31 5.02 237.16 *1165.84 0.02 0.64 0.44 21.81 2.85 3.72 29.48 10.81 As at 31.3.00 38.01 16.02 404.91 2.15 102.93 4075.26 108.92 136.43 0.01 26.59 4911.23 4703.55 Upto 31.3.99 1.50 55.80 1.12 10.79 1430.88 16.52 56.80 9.26 1582.67 1083.78 DEPRECIATION Deductions and/or transfers 0.03 14.74 1.07 1.71 17.55 *(286.91) For the Year 0.32 8.93 0.02 3.49 208.43 5.30 10.34 2.63 239.46 211.98 Upto 31.3.00 1.82 64.70 1.14 14.28 1624.57 21.82 66.07 10.18 1804.58 1582.67 NET BLOCK As at 31.3.00 38.01 14.20 340.21 1.01 88.65 2450.69 87.10 70.36 0.01 16.41 3106.65 314.38 3421.03 As at 31.3.99 34.85 14.08 312.98 1.03 33.11 2554.16 90.46 64.17 0.01 16.03 3120.88 255.61 3376.49

5. 6. 7. 8. 9. 10.

* 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. under Scheme of Arrangement and are included in previous years figures. Rs. in Crores Previous Year 239.46 1.57 0.02 0.89 2.48 236.98 B. 1. 211.98 2.23 0.07 2.30 209.68 6. Plant & Machinery include assets of Rs.9.08 Crores (Previous year Rs.2.82 Crores) and Buildings include assets of Rs. Nil (Previous year Rs. 1.55 Crores) not owned by the Company Plant and Machinery include assets given on operating lease amounting to Rs. 25.53 Crores (Previous year Rs.25.53 Crores) Capital work in progress include advance against Capital Orders, Technical know-how and Supervision fees,Machinery under installation/in transit; construction materials purchases and other assets under erection; and pre-operative expenses. Pre-operative Expenses pending Allocation / Appropriation : 1. Rehabilitation compensation 2. Raw Materials Consumed 3. Power & Fuel 4. Repairs to Other Assets 5. Salaries, Wages, Bonus, Gratuity, etc. 6. Contribution to Provident & Other Funds 7. Employees Welfare Expenses 8. Insurance 9. Rent and Hire Charges 10. Rates & Taxes 11. Stationery, Printing, Postage and Telephone Expenses SCHEDULE 7 (Contd.)

A.

Depreciation for the year Total Depreciation Less: Additional depreciation on revalued assets withdrawn from capital reserve Depreciation included under other heads of expenses Transferred to Pre-operative expenses

Rs. in Crores Previous Year 3.33 0.59 3.52 7.44 1.03 3.97 7.25 12.25

5.

Addition to Plant & Machinery/Capital work-in-progress include as under :a) Loss on Cancellation of Forward Cover b) Increase due to Foreign Exchange fluctuation on loans/liabilities c) Roll-over charges

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 Companys 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. The title deeds of some of the immovable properties transferred pursuant to the Scheme of Arrangement are yet to be transferred in the name of company. 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/Propose Co- 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 the name of the Company. e) Building include Rs.15.13 Crores towards advance against shares and debentures for right of exclusive use, possession and occupation of office space. The Shares and debentures are yet to be allotted to the Company. Railway siding amounting to Rs.15.60 Crores is held on Co-ownership with Other Company for which documents are being executed.

7. 8.

2. 3.

C.

4.

0.42 0.77 5.83 0.03 2.24 0.14 0.20 0.69 0.36 0.07 0.41

0.25 (Rs. 28609) 0.23 (Rs. 18985) 0.92 0.05 0.09 0.64 0.16 0.01 0.22

51

SCHEDULE 7 (Contd.) 12. 13. 14. 15. 16. Travelling & Conveyance Legal and Professional Charges Debenture Issue Expenses Miscellaneous Expenses Interest - On Loans and Debentures Less : - Interest Received (Tax deducted at source Rs. 0.03 Crore, Previous year Rs. Nil) 0.72 0.23 0.74 1.52 18.04 0.16 17.88 0.89 33.14 0.40 2.34 0.06 0.06 30.28 7.83 38.11 2.65 35.46

Rs. in Crores Previous Year 0.51 0.23 0.38

SCHEDULE 8 (Contd.)

Rs. in Crores Previous Year Pledged with Toronto Dominion Bank (South East Asia) Limited and Bank of America

157.01 180.35 520.11

154.40 177.74 517.50

B 0.07 3.76

17. Depreciation Less : Stock of Finished Goods under Trial Run (Cement-1859 MT) Process Stock under Trial Run Sale of Trial Run Production Miscellaneous Receipts Add: Pre-operative Expenditure incurred upto Previous Year Total Pre-operative Expenditure Less: Allocated to Fixed Assets Balance transferred to Capital Work-in-progress

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 400000 Mangalam Cement Limited 625900 Industrial Development Bank of India i i ) Optionally Convertible Cumulative Preference Shares of Rs.10 each 400000 Mangalam Cement Limited b) Unquoted - Fully Paid: i ) Equity Shares 422496 Indophil Textile Mills Inc.,Philippines of peso 10 each 825000 Thai Carbon Black Public Co. Ltd., Thailand of Thai Baht 10 each 2500 Birla International Ltd. - Isle of Man of CHF 100 each 1300 Gwalior Rayon Consumers Co-op., Stores Limited of Rs.100 each 468 Industry House Limited of Rs. 100 each (Rs. 31200, Previous year Rs. 31200) 500 Super Bazar Co-operative Society Limited of Rs.10 each (Rs.5000, Previous year Rs.5000) ii) Unquoted - Fully Paid - Equity Shares of Rs.10 each 12000 Birla Consultants Limited 100 Eastern Spg.Mills & Industries Ltd. 1982125 Gwalior Properties and Estates Ltd. 1982125 Seshasayee Properties Ltd. 1909550 Turquoise Investments and Fin. Ltd. 1911500 Trapti Trading & Investments Ltd. iii) Others 1 15.50% Secured Redeemable Non-Convertible Bond of Rs.500000 each in Sardar Sarovar Narmada Nigam Limited

1.35 1.15 8.02 0.40 10.92

1.35 1.15 8.02 0.40 10.92

(Rs. 16209) 3.76 4.32 8.08 0.25 7.83

0.04 2.18 0.53 0.01

0.04 2.18 0.53 0.01

SCHEDULE 8
INVESTMENTS - Long Term 1. Government and Trust Securities i) Government Securities Unquoted Securities deposited with Government Departments ii) Trust securities - In Units Unquoted 500000 Units of Rs.10 each in Units (1964 Scheme) of Unit Trust of India Shares, Bonds and Debentures TRADE INVESTMENTS Equity Shares - Fully paid a) Quoted - Rs.10 each 2964111 Indian Rayon and Industries Limited 780000 Bihar Caustic and Chemicals Limited 996000 TANFAC Industries Limited 27641445 Indo Gulf Corporation Limited 150379023 Mangalore Refinery & Petrochemicals Ltd. b) Unquoted 1398857 Thai Rayon Public Company Limited, Thailand of Thai Baht 10 each. 5000 P.T. Indo Bharat Rayon Co. Limited, Indonesia of Indonesian Rph 62625(US $100) each. 15000 A.V Cell Inc., Canada Class A Share of total value of Canadian Dollar 2.5 Million 149250 Alexandria Carbon Black Co., S.A.E. of L.E. 100 each 157013894 Birla AT & T Communications Limited 26,10,661 Shares of Rs 10 each purchased during the year) -

0.05

0.05

0.76

0.76

2. A

0.01 0.01 6.41 6.41 15.21 15.22

0.01 0.01 6.41 6.41 15.21 15.22

38.10 0.78 1.00 61.18 238.70 339.76 1.07 0.40 6.88 14.99

38.10 0.78 1.00 61.18 238.70 339.76 1.07 0.40 6.88 14.99

0.05 46.08 57.00

0.05 46.08 57.00 66.36 66.36 0.19 32.01 6.50

3.

Shares In Subsidiary Companies Quoted -Fully Paid - Equity Shares of Rs.10 each 4652870 Shree Digvijay Cement Co. Ltd. Unquoted a ) Fully Paid - Equity Shares of Rs.10 each 193120 Kerala Spinners Limited 2895602 Dharani Cement Company Limited 6500000 Samruddhi Swastik Trading And Investments Limited 520 Sun God Trading And Investments Limited (Rs.5200, Previous Year Rs.5200)

66.36 66.36 0.19 32.01 6.50

52

SCHEDULE 8 (Contd.) b) Partly Paid: 100 Preference Shares of Rs.100 each, Paid up Rs.25 each in Samruddhi Swastik Trading And Investments Limited (Rs.2500, Previous Year Rs.2500) 100 Preference Shares of Rs.100 each, Paid up Rs.25 each in Sun God Trading and Investments Limited (Rs.2500, Previous Year Rs.2500) 38.70 105.06 682.98 Aggregate Book Value of : a) Quoted Investments b) Unquoted Investments Aggregate Market Value of Quoted Investments 417.04 265.94 682.98 342.47

Rs. in Crores Previous Year

SCHEDULE 10
SUNDRY DEBTORS Exceeding six months: Good and Secured Good and Unsecured Doubtful and Unsecured 0.12 93.81 0.50 94.43 Less: Provision for Doubtful Debts 0.50 93.93 Others Good and Secured Good and Unsecured 117.34 411.61 528.95 622.88

Rs. in Crores Previous Year

1.92 98.52 0.50 100.94 0.50 100.44

38.70 105.06 680.37 417.04 263.33 680.37 263.82

98.57 446.15 544.72 645.16

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 the provisions of Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975 2. 7841445 Equity Shares of Indo Gulf Corporation Ltd. & 95379023 Equity Shares of Mangalore Refinery & Petrochemicals Limited are not transferrable for a period of 5 years from 7th January, 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 and matured during the year. 5. Pursuant to undertaking given to some financial institutions and others, the company can not dispose of shareholding without their prior approval (till such time the loans given to these companies 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 Caustic and Chemicals Limited.

SCHEDULE 11
CASH AND BANK BALANCES Cash balance on hand Bank Balances: With Scheduled Banks: Current Accounts (including cheques under collection) Saving Accounts (Earmarked for Employees Security Deposits and others) (Rs.33865, Previous year Rs. 48569) Deposit Accounts (Note 1) With Others (Note 2) In Post Office Savings & Deposit Accounts (Rs.2389, Previous year Rs.2050) In Government Treasury Saving Account 0.59 0.95

54.68

26.23

1.30 55.98 0.16 56.14 0.03 56.76

1.51 27.74 0.45 28.19 0.03 29.17

Notes :

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 Raw Materials Finished Goods By Products Process Stock Waste/Scrap (at net realisable value) 217.76 195.11 170.72 8.29 50.53 1.28 643.69 234.66 202.42 167.90 2.02 44.28 1.27 652.55

1.

Deposits include (a) Rs.0.10 Crore (Previous Year Rs.0.11 Crore) lodged as security with Government Department (b) Rs.0.16 Crore (Previous year Rs. 0.35 Crore) earmarked for Employees Security Deposit and (c) Rs.0.09 Crore (Previous Year Rs.0.12 Crore) as Interest accrued. Balances with Others represents : Rs. in Crores Bank Balance Maximum Outstanding Previous Year

2.

Name of the Bank Nature of Account Current Account with : Nations Bank, U.S.A British Bank of Middle East, Dubai

As at 31.3.00

As at 31.3.99

0.09 0.07

0.45

1.15 0.20

1.42

53

SCHEDULE 12

LOANS AND ADVANCES (Considered Good) Secured Loan UnsecuredDeposits with Bodies Corporate (including accrued Interest Rs. 0.38 Crore Previous Year Rs. Nil) Deposits and Balances with Government and other Authorities (including accrued interest ) Other Deposits Advances to Subsidiaries Advances recoverable in cash or in kind or for value to be received (Due from Officers of the Company Rs.0.06 Crore, Previous Year Rs.0.01 Crore, Maximum outstanding during the Year Rs.0.07 Crore, Previous year Rs. 0.01 Crore) Advance Income tax (Net of Provision) 0.48

Rs. in Crores Previous Year 0.51

SCHEDULE 15 (Contd.) ii) Others Interest (Gross) on : Bank and Other Accounts (Tax deducted at source Rs.2.89 Crores, Previous year Rs.1.27 Crores)

Rs. in Crores Previous Year

40.25 50.71

48.42 65.74

103.76 29.51 33.39 16.58

20.38 41.13 25.57 14.60

SCHEDULE 16
OTHER INCOME Export Incentives Rent Received (Tax deducted at source Rs.0.10 Crore, Previous year Rs.0.24 Crore) Lease Rent Processing Charges (Tax deducted at Source Rs.Nil, Previous year Rs.0.01 Crore) Insurance Claims Profit on Sale and/or Discard of Fixed Assets (Net) Profit on Sale of Long Term Investments (Net) Profit on Sale of Short Term Investments (Net) Excess/Short Provisions (Net) Prior period Adjustments (Net) Commission Income Miscellaneous Receipts 10.67 0.83 4.05 0.40 3.13 0.05 6.05 1.15 11.29 37.62 14.22 1.23 4.04 0.60 6.18 2.27 0.49 5.10 1.86 2.53 5.55 44.07

156.36 97.07 436.67 437.15

138.29 87.35 327.32 327.83

SCHEDULE 13
CURRENT LIABILITIES Sundry Creditors : a) Small scale industrial undertakings * (To the extent identified with available information) b) Others Security and Other Deposits Unclaimed Dividends Other Liabilities Interest accrued but not due on debentures/loans * Names of small scale industrial undertakings to whom an amount of Rs. 1.00 lac or more was outstanding for more than 30days are as under: Manilal Singhavi

0.34 486.28 486.62 56.98 6.96 37.78 49.35 637.69

0.31 372.56 372.87 49.98 0.84 27.35 40.67 491.71

SCHEDULE 17
INCREASE IN STOCKS Closing Stock Finished Goods By-Products Process Stock Waste/Scrap Opening Stock Finished Goods By-Products Process Stock Waste/Scrap 170.32 8.29 48.19 1.28 228.08 167.90 2.02 44.28 1.27 215.47 167.90 2.02 44.28 1.27 215.47 137.05 2.13 37.40 1.71 178.29

SCHEDULE 14
PROVISIONS For Retirement Benefits For Premium on Debenture Redemption Interim Dividend Proposed Dividends Corporate Dividend Tax 79.84 3.50 55.00 9.17 8.07 155.58 80.60 17.59 56.44 6.21 160.84

Add: Stock of transferred business as on 1.9.1998 pursuant to the Scheme of Arrangement (Finished goods Rs. 13.50 Crores, Process Stock Rs. 8.21 Crores and Waste Rs. 0.20 Crore) Increase in Stocks

215.47 12.61

21.91 200.20 15.27

SCHEDULE 15
INTEREST AND DIVIDEND INCOME i) 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) c) 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) Dividend (Gross) from: a) Trade Investments(Tax deducted at source Rs. Nil Previous Year Rs. 0.02 Crore) b) Subsidiary Companies c) Other Investments(Tax deducted at source Rs. 0.02 Crore, Previous year Rs. 0.02 Crore)

SCHEDULE 18
RAW MATERIALS CONSUMED Opening Stock Add: Stock of transferred business as on 1.9.1998 pursuant to the Scheme of Arrangement 9.49 Purchases and Incidental Expenses (includes cost of Lime Stone raised) 0.01 8.21 2.24 0.34 6.57 0.03 0.89 Less: Sales Closing Stock 202.42 202.42 1318.41 1520.83 8.03 195.11 203.14 1317.69 232.51 1.89 234.40 1184.89 1419.29 2.85 202.42 205.27 1214.02

54

SCHEDULE 19
MANUFACTURING EXPENSES Consumption of Stores, Spare Parts and Components, Packing Materials and Incidental Expenses - Less sales Rs.0.34 Crore (Previous year Rs.0.47 Crore) Power & Fuel Processing Charges Repairs to Buildings Repairs to Machinery (excluding Spare Parts and Components) Repairs to Other Assets

Rs. in Crores Previous Year

SCHEDULE 23
ACCOUNTING POLICIES AND NOTES ON ACCOUNTS A SIGNIFICANT ACCOUNTING POLICIES: 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) ii) Net revenues at the average rate for the year. Fixed assets at rates prevailing on the dates of addition. Depreciation is accounted for at the same rate at which assets are converted. Other current assets and liabilities, at rates prevailing at the end of the year.

249.15 650.76 39.67 18.28 30.66 11.29 999.81

195.38 521.10 34.02 17.15 27.50 10.56 805.71

1.

SCHEDULE 20
PAYMENTS TO AND PROVISIONS FOR EMPLOYEES Salaries, Wages & Bonus, etc. Contribution to Provident and Other Funds Employees Welfare Expenses 232.67 23.92 42.28 298.87 202.88 20.74 36.69 260.31

SCHEDULE 21
SELLING, DISTRIBUTION, ADMINISTRATION AND OTHER EXPENSES Commission to Selling Agents Brokerage and Discount Freight, handling and other expenses Advertisements Insurance Rent (including Lease Rent) Rates and Taxes Stationery, Printing, Postage and Telephone Expenses Travelling and Conveyance Legal and Professional charges Bad debts written off Research contribution (including Expenses) Donations (including Rs.0.95 Crore, Previous year Rs. 0.40 Crore paid to General Electoral Trust for contribution for political purpose as may be decided by the Trustees from time to time) Directors Fee Exchange Rate difference (Net) Prior period Adjustments (Net) Loss on Sale and/or discard of Fixed Assets (Net) Miscellaneous Expenses 22.93 21.38 448.53 41.68 20.27 11.95 14.58 17.99 25.80 11.08 7.25 1.06 18.47 16.90 333.00 26.05 20.90 7.51 8.81 16.05 23.07 11.77 2.95 0.87

iii) 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.

1.05 0.01 3.21 3.35 3.07 58.37 713.56

3.16 0.02 1.69 43.33 534.55

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.

SCHEDULE 22
INTEREST On Fixed Loans and Debentures (including pro-rata Premium on Redemption Rs. 0.10 Crore, Previous year Rs. 3.66 Crores) On Other Accounts * Includes Rs.0.03 Crore (Previous year Rs.0.02 Crore) paid to the Manager of the Company in respect of Fixed Deposits/Debentures.

8.

DEPRECIATION Depreciation is charged in the Accounts on the following basis:

203.22* 52.86 256.08

233.18* 59.08 292.26

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.

55

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. 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. 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. Leasehold land is being amortised over the period of lease. Capital expenditure on assets not owned by the company is amortised over a period of five years.

SCHEDULE 23 (Contd.) 4 i) ii) 5 Value of assets taken on lease Future obligation of Lease Rent as Lessee 12.68 0.80

Rs.in Crores Previous Year 12.68 8.84

c) d)

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. 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. i) ii) iii) 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. Changed the computation of conversion cost of process stock and finished goods by including depreciation and factory administration expenses. Amortised the machinery spares, the uses of which are irregular, over the residual useful life of respective plant and machinery.

e) f)

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.

b)

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. 7 Rs.in Crores Previous Year 8 127.91 159.38 9

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

B 1.

NOTES ON ACCOUNTS Contingent Liabilities not provided for in respect of : a) b) c) Claims not acknowledged as debts (Net of tax Rs. 78.66 Crores, Previous Year Rs.101.97 Crores) Uncalled liability on partly paid shares (Rs.15000, Previous year Rs. 15000) 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) 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

10.39

24.68

b)

d)

10.81

10.81

10

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. 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).

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. 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.

11

48.23

203.30

56

SCHEDULE 23 (Contd.) 12 The Following are included under other heads of expenses in the Profit and Loss account : i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) Stores and Spares Consumed Power & Fuel Repairs to Machinery Repairs to Buildings Repairs to Other Assets Salaries, Wages, Bonus & Gratuity Contribution to Provident and Other Funds Welfare Expenses Insurance Hire Charges Royalty & Cess Rates & Taxes Ship Operation and Management charges Depreciation Lease Rent 31.90 4.49 4.39 0.63 0.62 5.69 0.45 0.70 0.71 0.32 39.94 2.79 3.07 0.02 3.64

Rs.in Crores Previous Year

SCHEDULE 23 (Contd.) 13 Auditors remuneration a) Statutory Auditors: Audit Fee Tax Audit Fee For Certification and Other Work Reimbursement of Expenses b) Branch Auditors: Audit Fee Tax Audit Fee For Certification and Other Work Reimbursement of Expenses c) Cost Auditors: Audit Fee For Certification and other work Reimbursement of Expenses Managers remuneration Salary Contribution to Provident Fund & Other Funds Perquisites Previous Year Rs 1680000 183225 62200 274003 1024230 120875 116063 87749 305500 21000 26231 29.94 5.91 5.76 41.61 15 16 1325000 176750 139225 224028 669133 38875 74312 54230 273158 18084 Rs. in Lacs 15.48 4.08 2.92 22.48

16.34 3.52 2.01 0.07 4.20 0.24 0.43 0.49 0.48 27.86 0.50 3.16 3.65 17 14

Previous years figures have been regrouped/rearranged wherever necessary to confirm to this years classification. 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. 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.

57

SCHEDULE 24
ADDITIONAL INFORMATION UNDER PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 1. CAPACITY & PRODUCTION Products Unit Licensed/Registered * Capacity 1999-00 1. Viscose Staple Fibre/Polynosic/ HWM/ /Hi-Performance/ Speciality Fibre At Nagda, Mavoor, Harihar & Kharach Sulphuric Acid (Captive & Intermediate Products) At Nagda, Mavoor, Harihar & Kharach Carbon-di-Sulphide (Captive & Intermediate Products) At Nagda, Mavoor, Harihar & Kharach Rayon Grade Pulp (At Mavoor & Harihar) Paper Rayon Grade Caustic Soda Stable Bleaching Powder Man-Made Fibre Fabrics (At Gwalior & Bhiwani) Tonne 354950 Tonne 324570 Tonne 73265 Tonne Tonne Tonne Tonne Mtr. (in 000s) Kg. (in 000s) 9. 10. Man-Made Fibre Yarn (At Bhiwani & Malanpur) Cement At Jawad, Raipur, Shambhupura & Malkhed At Reddipalayam (Under Implementation) White Cement (At Khariakhangar) Articles of Cement or of Concrete Ready Mix Concrete At Gurgaon At Hyderabad Industrial Machinery Poly Aluminium Chloride Chloro Sulphonic Acid Sponge Iron Kg. (in 000s) Tonne 117500 Spindles 14000000 900000 360000 117500 Spindles 14000000 900000 360000 43488 Spindles 8200000 900000 360000 43488 Spindles 8200000 900000 360000 108000 2700 175800 45000 1598 Looms 73265 108000 2700 175800 45000 1598 Looms 46798 130000 2700 160600 15000 278 Looms 46798 130000 2700 198300 15000 278 Looms 34257 73283 135260 16732 16553 394 11934 30611 111263 130047 16293 18290 299 10562 324570 210370 210370 178333 130312 354950 246775 246775 188002 164355 1998-99 Installed Capacity 1999-00 1998-99 Production # (Quantity) 1999-00 1998-99

2.

3.

4. 5. 6. 7. 8.

8396110 240492

5823378 131979

11. 12.

Tonne

Cu. Mtr.

67200 50000 25000 66000 49500 600000

67200 50000 25000 66000 49500 600000

67200 50000 15950 13860 16500 900000

67200 50000 15950 13860 16500 900000

21582 43848 ## 18888 15126 709094

98 12587 ## 19369 13814 670231

13. 14. 15. 16. Notes: (a) (b) (c) (d) (e)

Tonne Tonne Tonne Tonne

* #

Registered capacities are those capacities for which registrations granted pursuant to the schemes of delicensing. The Installed Capacities are certified by the Management and accepted by the Auditors as correct, being a technical matter. Includes third party processing 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 endorsement of the name of the Company.

## Quantitative data can not be given as production represents fabrication,machining, etc. against individual tailor made orders.

58

SCHEDULE 24 (Contd.) 2. TURNOVER AND STOCKS Products Unit 1999-00 Quantity 1. 2. 3. 4. 5. } Viscose Staple Fibre (At Nagda,Mavoor, Harihar & Kharach) Rayon Grade Pulp (At Mavoor & Harihar) Rayon Grade Caustic Soda Stable Bleaching Powder Man-Made Fibre Fabrics 27.48 (At Gwalior & Bhiwani) Tonne Tonne Tonne Tonne Mtr. (in 000s) Kg. (in 000s) 6. Man-Made Fibre Yarns (At Bhiwani & Malanpur) Industrial Machinery (At Nagda & Harihar) Poly Aluminium Chloride Chlorosulphonic Acid Cement (At Jawad, Raipur, Shambhupura & Malkhed) White Cement (At Khariakhangar) Ready Mix Concrete (At Gurgaon & Hyderabad) Sponge Iron Trading Activities : Spices Sulphur MAP Coal S. Kerosene oil Coffee, Rice, Oil, Sugar, etc. Others @ Kg. (in 000s) Tonne Tonne Tonne Tonne 17748 1207 15104 8392978 22110 240014 65430 822996 2762 248420 38093 211760 38327 9662 2359 124.03 35.68* 2.28 10.32* 10.07 0.57* 8.20 1731.02 4.59 * 149.36 0.01* 10.49 476.87 52.89 60.38 35.12 29.98 56.97 48.90 0.93* 238.88 8.73* 4640.97 341.35* 4982.32 Notes: 1. 2. * @ Inter-Divisional transfers 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). 18052 1076 13840 5865131 12573 133660 12685 565682 3571 137804 14460 67886 8001 2890 102.47 44.89 * 2.00 15.65* 9.88 0.50* 6.41 1236.18 1.99* 80.07 1.93 313.64 56.45 21.82 11.61 9.58 313.95 6.48* 221.35 10.13* 3888.15 436.93* 4325.08 170.32 167.90 137.05 858 88 190171 1237 15.78 1324 13.75 1649 19.51 186885 5567 74429 66999 67022 16738 1* 16528} } 383} Value 1326.44 49.87* 160.49* 74.67 69.21 * 16.56 187.86 0.95* 290} Turnover 1998-99 Quantity 159526 4604 111716 40 65576 64646 16209 4* 19879 } } Value 1172.43 42.18* 253.43 * 0.12 69.36 61.20* 17.83 241.07 0.48* 53} As on 31.3.2000 Quantity 4398 1580 4015 568 4489} } Value 23.04 2.37 3.92 0.37 42.48 Stock As on 31.3.1999 Quantity 8848 2726 2776 575 3046 } } 42} 33 Value 31.72 3.94 1.96 0.34 24.94 As on 31.3.1998 Quantity 8623 3219 2951 495 2526 } } Value 35.24 4.48 1.78 0.31 (Value Rs. in Crores)

7. 8. 9. 10.

0.44 0.03 30.62 925 66 209149

0.41 0.02 26.20 684 92 184638

0.26 0.02 24.30

11. 12. 13. 14.

Tonne Cu. Mtr. Tonne Tonne Tonne Tonne Tonne Tonne

1568 20469 174 6763 17999 25103

0.60 11.26 3.41 1.62 2.34 25.76 4.56 1.72

1090 134371 267

0.20 52.70 5.07

29822 342

11.51 6.30

4.54 2.11

3.24 2.62

15.

59

SCHEDULE 24 (Contd.) 3. RAW MATERIALS, STORES, SPARE PARTS AND COMPONENTS Unit Quantity a) Raw Materials Consumed: Pulp Wood Dissolving Pulp Caustic Soda Sulphur Salt Hydrated Lime Man-made Fibre Yarn Cotton Man-made Fibres Tonne Tonne Tonne Tonne Tonne Tonne Kg.(in 000s) Kg.(in 000s) 223306 119137 74424 * 43596 64494 * 91504 213110 12925 4517 800 * 7334 6142 * Lime Stone Steel Plates, Sheets, etc. Natural Gas Naptha Tonne Tonne Tonne SMQ(000) 22823 Tonne Tonne 11518512 296 215208 24.56 699262 394952 51.48 301.00 166.03 * 43.50 60.50 * 31.43 21.73 3.76 56.53 8.30 * 39.67 44.46 * 71.67 0.94 59.46 1839 122.77 52.43 152.80 4.67 * 1033.73 283.96 * 1317.69 * b) Consumption of own Production at Market Rate. Purchase of Finished Goods: Fabrics Spices Sulphur MAP Coal S. Kerosene oil Coffee, Rice, Oil, Sugar, etc. Mtr.(in 000s) Tonne Tonne Tonne Tonne 1418 2669 255183 38093 229759 63430 6.56 47.08 48.86 35.54 28.82 72.62 47.83 287.31 c) Imports at CIF Value : Raw Materials Finished Goods Spare Parts and Components Capital Goods 285.46 103.14 48.87 21.67 180.47 106.71 23.32 60.35 290.24 389.02 2109 3496 137804 14440 67686 9.05 54.33 14.33 11.34 9.73 343083 57762 112190 * 35388 61844 * 71882 203479 12497 3140 2901 * 7027 5092 * 7771943 701 228039 1.23 687337 368508 124.59 50.99 135.69 6.41 * 815.23 398.79 * 1214.02 90.99 152.90 263.35 * 34.18 53.21 * 19.48 21.26 3.79 35.93 38.26 * 32.06 37.56 * 54.47 1.82 55.85 1999-00 Value Quantity (Value Rs.in Crores) 1998-99 Value

Iron Ore Pellets Iron Ore Lumps Others

60

SCHEDULE 24 (Contd.) d) Total Value of Raw Materials, Stores, Spare Parts and Components consumed: Raw Materials 1999-00 Value Imported Indigenous 307.52 1010.17 1317.69 % 23.34 76.66 100.00 Value 237.97 976.05 1214.02 1998-99 % 19.62 80.38 100.00 Value 37.63 243.42 281.05 (Value Rs.in Crores) Stores, Spare parts, Components, etc. 1999-00 % 13.39 86.61 100.00 Value 30.49 181.23 211.72 1998-99 % 14.40 85.60 100.00

4.

EXPENDITURE IN FOREIGN CURRENCY : i) ii) iii) iv) Technical know-how and Services Professional and Consultancy Fees Interest and Commitment Charges on Foreign Currency Loans/Debentures Others

1999-00 0.32 0.91 9.79 85.83

1998-99 1.54 0.40 12.47* 28.24

Includes Rs.0.01 Crore (Previous year Rs. 0.06 Crore) pertaining to interest on Non-resident Debentureholders sent to their Bankers/Mandates in India. EARNINGS IN FOREIGN EXCHANGE : i) ii) iii) iv) Export of Goods - On F.O.B basis Technical Know-how & Service charges Interest and Dividend Others 200.91 0.42 1.13 0.01 260.42 0.38 0.48 2.73

5.

6.

DIVIDEND TO NON-RESIDENT SHAREHOLDERS : For 1998-99 No. of Shareholders Equity 6620 Shares held *Gross Amount of Dividends (Rs.in lacs) 1483.99 No. of Shareholders 3598 For 1997-98 Shares held * Gross Amount of Dividends (Rs.in lacs) 1251.95

23349977

18547382

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 attached

For G. P. KAPADIA & Co., Chartered Accountants UDAY R. PARIKH Partner Mumbai Dated: 28th April, 2000

For LODHA & Co., Chartered Accountants PRAMOD K. JAIN Partner D. N. MAKHARIA Secretary SHAILENDRA K.JAIN Manager

KUMAR MANGALAM BIRLA Chairman RAJASHREE BIRLA A.N. LALBHAI M. L. APTE S. G. SUBRAHMANYAN B. K. SETHI B. V. BHARGAVA M. C. BAGRODIA Directors

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Additional Information under Part IV of schedule VI to the Companies Act, 1956 Balance Sheet abstract and General Business Profile
1 Registration details Registration No. Balance Sheet Date 2 Capital raised during the year (Amount in Rs. Thousands) Public Issue N Bonus Issue N 3 Position of mobilisation and deployment of funds (Amount in Rs. Thousands) Total Liabilities Sources of Funds : 5 0 7 1 2 5 6 7 5 0 7 Total Assets 1 2 5 6 7 I L I L Rights Issue N Private Placement N I L I L 1 3 Date 0 1 0 0 0 3 4 1 0 Year 0 0 State Code 1 0

Month

Paid up Capital 9 1 6 9 1 4 6 7 8 3 9 6 5 2 2 7 5 Secured Loans

Reserves & Surplus 0 8 4 0 5 2 7 5 3 7 1 9 Unsecured Loans

Application of Funds :

Net Fixed Assets 3 4 2 1 0 2 9 8 I 4 6 L 6 8 Net Current Assets 9 6 7 2 4 Accumulated Losses N 4 Performance of the Company (Amount in Rs. Thousands) 4 9 Turnover 8 4 2 5 2 5 3 4 5 3 7 . 3 5 4 7 7 2 4 8 + - Profit / (Loss) before Tax + 2 Earnings per Share (Rs.) Generic names of three principal products / services of the Company (As per monetary terms) a) Item Code No. Product Description b) Item Code No. Product Description c) Item Code No. Product Description 5 S 2 G 7 S 5 T 5 R 2 P 0 A 2 E 0 O 4 P 3 Y 3 N 1 G 1 L 2 0 E 9 P 0 E O 0 F 0 R 0 I 0 I 1 T 0 R O N L A N D C E M E N T B R E

Investments 2 9 7 N 8 I 7 L Miscellaneous Expenditure

Total Expenditure 2 3 5 3 7 1 1 0 8 2 . 1 4 0 5 7 0 + - Profit / (Loss) after Tax + 2 Dividend Rate (%)

Mumbai Dated: 28th April, 2000

D. N. MAKHARIA Secretary

SHAILENDRA K.JAIN Manager

KUMAR MANGALAM BIRLA Chairman RAJASHREE BIRLA A.N. LALBHAI M. L. APTE S. G. SUBRAHMANYAN B. K. SETHI B. V. BHARGAVA M. C. BAGRODIA Directors

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Cash Flow Statement for the year ended 31st March,2000 as per the listing agreement
A. Cashflow from Operating Activities a. Net profit before tax and extraordinary item Adjustment for : Depreciation Foreign Exchange Fluctuation Interest expenses Interest Income Dividend Income Profit/Loss on sale of Fixed Assets Profit on sale of Investments b. Operating profit before working capital changes Adjustments for : Trade and other receivables Inventories Trade Payables Cash generated from Operations Direct Taxes Paid Net Cash from operating activities Rs.in Crores Previous Year 245.45 236.98 256.08 -40.26 -10.45 3.07 -0.05 690.82 16.33 8.86 130.42 846.43 -22.07 -272.88 7.91 -2.61 -86.05 0.05 40.42 10.45 680.54 -836.91 -281.16 -50.32 -6.21 824.36 171.81 209.68 2.41 292.26 -58.25 -7.49 -2.27 -0.49 607.66 -27.67 33.82 38.93 652.74 -51.09 -279.50 5.48 -98.37 -61.27 -15.78 196.88 61.19 7.49 460.35 -542.44 -287.30 -48.81 -4.88 601.65

c. B.

Cashflow from investing activities Purchase of fixed assets Sale of fixed assets Acquisitions of companies Purchase of investments Investments / Advances in joint ventures, subsidiaries and others Sale of Investments Interest received Dividend received Net Cash from/(used in) financing activities Cashflow from financing activities Proceeds from borrowings Repayments of borrowings Interest paid Dividends paid Corporate dividend tax Net Cash from/(used in) financing activities Net increase/(Decrease) in Cash and Cash equivalent Cash and Cash equivalent at beginning of the year Cash and Cash equivalent at end of the year (Cash and cash equivalent represent Cash and Bank balances)

-302.71

-183.88

C.

-494.06 -27.59 29.17 56.76

-423.08 -5.31 34.48 29.17

D.

Note : Previous year figures have been regrouped/recast wherever necessary KUMAR MANGALAM BIRLA Chairman RAJASHREE BIRLA A.N. LALBHAI M. L. APTE S. G. SUBRAHMANYAN B. K. SETHI B. V. BHARGAVA M. C. BAGRODIA Directors

For G. P. KAPADIA & Co., Chartered Accountants UDAY R. PARIKH Partner Mumbai Dated: 28th April, 2000

For LODHA & Co., Chartered Accountants PRAMOD K. JAIN Partner D. N. MAKHARIA Secretary SHAILENDRA K.JAIN Manager

Auditors Certificate
We 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 requirements of 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 the Members of the Company. For G. P. KAPADIA & CO., Chartered Accountants UDAY R PARIKH Partner Mumbai: April 28, 2000 For LODHA & CO., Chartered Accountants PRAMOD K JAIN Partner

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Statement pursuant to Section 212 of the Companies Act, 1956 Relating to Subsidiary Companies
Name of the Subsidiary Company Kerala Spinners Limited Shree Digvijay Cement Company Ltd. Sun God Trading and Investments Ltd. 31.03.2000 Samruddhi Swastik Trading and Investments Ltd.

Dharani Cements Ltd.

1 2

Financial year of the Subdidiary ended on Holding Companys Interest (i) Equity Shares of Rs. 10 each (a) Number of Shares Fully Paid (b) (ii) Extent of holding

31.03.2000

30.09.1999

31.03.2000

31.03.2000

193120 56.8%

4652870 62.42%

520 100%

6500000 100%

2895602 100%

15% Redeemable Cumulative Preference Shares (a) (b) Number of Shares (Face Value Rs. 100 each) Partly Paid (Rs. 25 per share paid up Extent of holding Rs. in Lacs Rs. in Lacs 100% Rs. in Lacs 100% Rs. in Lacs Rs. in Lacs 100 100

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 (b) Not dealt with in the accounts of the Holding Company (ii) For the previous Financial years of the Subsidiary since it became the holding Companys Subsidiary (a) Dealt with in the accounts of the Holding Company (b) Not dealt with in the accounts of the Holding Company 29.34 (168.18) NIL NIL (0.10) NIL (0.09) NIL (33.59) NIL (10.44) NIL (6392.5) NIL (0.02) NIL 12.37 NIL (91.84)

As the Financial Year of the Subsidiary Companies coincide with the Financial Year of the Holding Company, Section 212(5) of the Companies Act, 1956, is not applicable.

Mumbai Dated: 18th May, 2000

D. N. MAKHARIA Secretary

SHAILENDRA K.JAIN Manager

KUMAR MANGALAM BIRLA Chairman RAJASHREE BIRLA A.N. LALBHAI M. L. APTE S. G. SUBRAHMANYAN B. K. SETHI B. V. BHARGAVA M. C. BAGRODIA Directors

64