Company History - Grasim Industries Ltd.

1947 - The Company was Incorporated on 25th August, at Gwalior. The Company Manufacture viscose staple fibre, carbon-disulphide, sulphuric acid, sodium sulphate, rayon and cotton fabrics, rayon grade pulp, paper, etc. The company also owns an engineering workshop. 1951 - 1,50,000 Right Pref. shares issued at par in prop. 3:1, 24,50,000 Right Equity shares issued at par in prop. 49:1. 1953 - 1,33,000 Right equity share of 1951 subscribed. In October, 10 lakh Rights equity shares issued at par (Prop. 5:6 Equity or Pref.). 1956 - In September 1955, 4,57,000 Right Equity shares issued at par (Prop. 1:2.50 equity and/or Pref.) 1959 - 50,000 Pref. shares issued at par in propn. 1:50 (Only 765 shares taken up). 1963 - The Company purchased a cotton textile mill at Bhiwani (Punjab) with an installed capacity of 18,000 spindles and 286 looms and named it as Bhiwani Textile Mills. 1967 - The Company applied to Government for permission to establish a polynosic fibre unit in Harihar (Karnataka) with a production capacity of 100 tonnes per day. 1968 - In December, 5,00,000 bonus equity shares issued in propn. 1:10. 1969 - In August 2,00,000 - 9.3% Pref. shares offered to public. In August 1970, 11,00,000 bonus equity shares issued in propn. 1:5. 1971 - 765 `B' Pref. and 1725 `A' Pref. shares redeemed on 31.3.1972. 1974 - The Company received a letter of intent for setting up a polynosic fibre unit at Harihar (Karnataka) with a production capacity of 100 TPD. - The Company revalued the machinery and equipment of its staple fibre and pulp units. The Company again revalued the major items of plant and machinery installed in its staple fibre and pulp division as on 1st April, 1980. The value of the assets of the Company's caustic soda plant and new power plants situated at Birlanagram, Nagda were revalued as on 1st April, 1985. - 39,60,000 Bonus equity shares were issued in prop. 3:5. 1976 - 52,80,000 Bonus Equity shares issued in the prop. 1:2.

1979 - The Company participated in a joint venture project in Bihar for the manufacture of 33,000 tonnes of caustic soda per annum. For this purpose, a new Company under the name and style Bihar Caustic & Chemicals, Ltd. was formed. 20,00,000 No. of Equity Shares issued (Prem. Rs 25 per share) 1,00,000 shares reserved and allotted to employees; 3,64,918 shares allotted as Rights to shareholders who were individuals in prop. 3:25 and 15,35,082 shar es offered to public. 1980 - The Company joined as co-promoter with Tamil Nadu Industrial Development Corporation, Ltd. for setting up an aluminium fluoride manufacturing plant in Ramnad, a backward district in Tamil Nadu. For this purpose, a new company under the name and style Tamil Nadu Fluorine & Allied Chemicals, Ltd. was incorporated. - The Company entered into a collaboration agreement with the State Industrial and investment Corporation of Maharashtra (SICOM) for setting up a gas-based sponge iron project with a capacity of 4 lakh tonnes per annum. 1982 - The Company issued 18,75,000-13 1/2% convertible bonds of the face value of Rs 160 each f or an aggregate amount of Rs 30 crores. Rs. 40 out of each bond is convertible into 2 equity shares of Rs 10 each at a premium of Rs 10 per share on 1st April 1983. The balance of Rs 120 per bond will be repayable at par in 5 equal annual instalments commencing from the 8th year from the date of allotment. 1984 - The Company received a letter of intent for the manufacture of stable bleaching powder with an annual capacity of 10,000 tonnes to be implemented in two phases of 5,000 tonnes per annum each. 1985 - A collaboration agreement was entered into with LVD Company N.V., Belgium for the manufacture of sophisticated balers for the man-made fibre industry. - The Company joined as one of the co-promoters in Indo-Gulf Fertilisers and Chemicals Corporation, Ltd. (INDOGULF), which set up a project for the manufacture of 1,350 tonnes per day of ammonia and 2,200 tonnes per day of urea at Jagdishpur, Uttar Pradesh. 1986 - The Company entered into collaboration agreement with Nevmag of W. Germany for the manufacture of a wide range of equipments from spinning down to cutter for polyester, polyamide, polypropylene and acryulic fibre machineries. The Company also explored the possibilities for entering into collaboration for the manufacture of specialised equipment for petrochemical and other chemical industries. - Stable bleaching powder (SBP) was marketed under the brand name "Vikram SBP" and a beginning was also made in the exports market. - The name of the Company was changed from Gwalior Rayond Silk Mfg. (Wvg.) Co., Ltd. to the present one with effect from 22nd July. 1987 - The plant continued to remain closed. The strike by workmen since 7th July, 1985 was called off consequent to a conciliation agreement arrived at on 27th October, 1988 and resumed production on 29th June, 1989. - A letter of Intent was received to install 5,000 worsted spindles at Malanpur in Bhind District, a backward A class area. The licensed capacity of caustic soda plant was re-endorsed at 90,000 tonnes per annum. - The Company proposed to participate in the Mangalore Refinery and Petrochemicals Ltd., a joint venture formed by Indian Rayon & Industries Ltd., Hindustan Petroleum Corporation, Ltd. to the extent of 12% in the equity capital of the Company. This joint venture was to have a capacity of 3 million tonnes per annum a petrochemical complex to produce a minimum of 2,50,000 tonnes per annum of ethylene.

- A letter of intent was received to set up a gas-based sponge iron project with an installed capacity of 6 lakh tonnes per annum in the Raigad District of Maharashtra. - Approval from Government was received for setting up a project for the manufacture of colour T.V. glass shells in foreign technical collaboration with the Asahi Glass Company, Ltd., Japan. - Kerala Spinners, Ltd., Gwalior Properties & Estates Ltd. (GPEL) and Seshasayee Properties Ltd. (SPL) are the subsidiaries of the Company. During the year, Turquoise Investments & Finance Ltd. and Trapti Trading & Investments Ltd. became subsidiaries of GPEL and SPL respectively. - The Company allotted 60,00,000 - 14% non-convertible secured debentures (VI series) of Rs 100 each. These debentures are redeemable at a premium of 5% of face value in three annual instalments commencing from 8.12.1994. 1988 - The Engineering Division entered into a technical agreement with Thai Acrylic Fibres, Ltd. for providing technical know-how. M/s. Andhra Pradesh Rayons entered into a technical collaboration agreement with the Company for the supply of 45 tonne/day viscose staple fibre plant on a turnkey basis valued at Rs 38 crores. - The Company introduced successfully during the year Grasim "MASTERWEAR" readymade shirts and trousers. - Steps were initiated to set up the poly aluminium chloride and the chlorosulphonic acid projects. The Poly Aluminium Chloride (PAC) project was commissioned in the 3rd quarter of 1990. The Commissioning of the Chlorosulphoric Acid project was delayed because of a strike in the supplier's plant which resulted in the delayed delivery of plant and machinery. - It was proposed to set up a hydrogen peroxide project with an installed capacity of 6,000 tonnes per annum at Nagda in collaboration with a renowned company of U.S.A. - During December, the Company offered 92,85,714 - 12.5% secured redeemable partly convertible debentures of Rs 70 each for cash at par of which the following were reserved for allotment on a preferential basis: - (i) 71,42,857 debentures to the equity shareholders of the Company in the proportion 7 deb: 40 equity shares and - (ii) 4,64,286 debentures to employees (including Indian working directors)/workers of the Company on an equitable basis. The remaining 16,78,571 debentures along with the unsubscribed portion, if any, from the preferential quota were to be offered to the public. Additional 13,92,857 debentures allotted to retain oversubscription. - The convertible portion of Rs 35 out of the face value of each debenture was converted into one equity share of Rs 10 each at a premium of Rs 25 per share on 31st March, 1989. The non-convertible portion of Rs 35 out of each debenture was to be redeemed at par in three annual instalments of Rs 10, Rs 10 and Rs 15 on the expiry of 7th, 8th and 9th years respectively from the date of allotment of debentures. 1989 - The cotton textile mill unit's working was affected by protracted labour unrest and strike by workmen. - The Company issued 115,00,000-14% secured redeemable non-convertible debentures of Rs 100/- each (VIIth Series) on rights basis to resident Indian equity shareholders, in the ratio of 245 debentures for every 1000 equity shares held. Additional 15,74,982 debentures were allotted to retain over subscription. As per the terms, the entire amount of Rs 100/- will be redeemed in three equal annual instalments beginning at the end of 6th year from the allotment date with a premium of Rs 5/- per debenture. - During September, the Company issued 1,04,16,666-12.5% secured redeemable partly convertible debentures (IInd Series) of Rs 120/- each to the existing equity shareholders in the ratio of 21 debentures for every 100 equity share held. All were taken up. Additional 15,62,500 debentures issued to retain oversubscription. 5,20,834 debentures were also offered to employees/workers of the Company but only 61,940 debentures were taken up. The balance of 4,58,894 debentures were allowed to lapse. - As per the term of issue, Rs 60 of each debenture was converted into one equity share of Rs 10 each at a premium of Rs 50 per share at the end of six months from the allotment date, i.e. on 1.6.1990. The balance Rs 60/- of each debenture was to be redeemed at par in three equal annual instalments of Rs 20/ - each at the end of 7th, 8th and 9th years from the allotment date. This issue was made to part fi nance the sponge iron project.

1990 - The Company received two letters of intent for setting up new green field site portland cement plants each having an annual capacity of one million tonnes-one in Baloda Bazar, Dist. Raipur (M.P.) and the other at Shamb hupura, Dist. Chittorgarh (Rajasthan). - The Company issued 1,30,00,000-14% secured redeemable non-convertible debentures of Rs 100/- each (IXth Series) and 25,00,000-14% secured redeemable non-convertible debentures of Rs. 100/- each (VIIIth Series) to finance new cement plant at Raipur (M.P.). 1991 - The Engineering division undertook to manufacture equipments for dairy and sponge iron plants. It also manufactured and supplied the state of the art technology lift-box design baling press with autorotation and auto-bale weighing device. It also explored the possibility of supplying know-how and consultancy services along with plant and machinery to existing and potential manufacturers of rayon - both fibre and filament, in China. - The working of the mill was affected to some extent by labour problem leading to a forced lock-out in the spinning section since February 17th, 1992 and resumed to work with effect from 10th October. - The Company issued and allotted 15,00,00014% non-convertible debentures (XI Series) of Rs 100 each. These are redeemable in three instalments commencing from 26th March, 1997. The Company issued and allotted 155,00,000-18% non-convertible debentures of Rs 100 each (X Series) redeemable in three annual instalments Commencing from 18th October, 1997. 1992 - An aggregate of 6,933,745 GDS were offered at an initial price of US $12.98 per GDS by managers concurrently to (i) qualified institutional buyers (UIBs) in the USA and (ii) persons in offshore transactions. - The Company proposed to issue Euro equity to the tune of UA $100 million to investors abroad. The Company proposed to issue another Euro equity to the tune of US $125 million. 1994 - The cotton textile mill unit undertook to set up a new unit "Elegant Spinners" with 14,000 spindles. - The Company issued the following debentures on private placement basis: (i) 160,00,000-16.5% (xiii Series) redeemable in 3 instalments commencing from 11.7.2000, (ii) 70,00,000-15% debentures redeemable in 3 annual instalments commencing from 19.1.2001. 1995 - A new range of fabric under the brand name ADONIS was introduced. - Birla Capital International AMC Ltd. an asset management Company was set up as a joint venture with Capital Group International Inc., a major US based investment management organisation. The Unit launched Birla Advantage Fund in February. - The Company undertook to set up joint venture power projects to be set up in U.P. & M.P. These are to be set up in Collaboration with Powergen Plc., U.K. for Rosa power project of 1000 MW and Bina Power project of 1000 MW detailed techno economic study was undertaken. - The Company undertook to set up a joint venture, Alexandria Carbon Black Co., in Egypt to produce 20,000 tpa of Carbon black at full capacity with an equity participation of an approximate value of US $ 2.25 million, i.e. Rs 7.10 crores representing 15% of the total equity capital. 1996 - A new synthetic denim with an universal blend of polyster, viscose, cotton was launched under the brand name SUMO. 1997 - The Cotton textile division launched a novel denim brand `Jusilk' using a blend of polyester and jute, along with a unique water repellent denim. - In order to establish its own viscose fibre spinning facilities the Company entered into a leave and licence agreement with

Eastern Spinning Mills & Industries, Ltd., Calcutta for running its spinning unit for a period of 3 years from 27th July, 1984. This spinning unit had an installed capacity of about 25,000 spindles. - A new division, Vikram Premium RMC was formed for production of Ready Mixed Concrete. The Company applied for an industrial licence to set up a gas-based fertiliser plant for the manufacture of 4.5 lakh tonnes of ammonia and 7.5 lakh tonnes of urea per annum in U.P. - The flagship company of the Aditya Birla group, Grasim is setting up yet another plant to manufacture rayon grade pulp. - Grasim Industries Ltd., a flagship company of the Aditya Birla Group, has reached final stages of negotiation with the Rajasthan Government for setting up 200 TPD rayon grade pulp plant at Amarpura, about 100 km from Bikaner. - Grasim Industries Ltd., has signed an agreement with National Securities Depository Ltd., (NSDL) and MCS Ltd. to dematerialise its shares. Grasim has its in-house share department. - The company is setting up a new plant in Pondicherry for the production of radial tyres. 1998 - Grasim Industries Limited (GIL) has claimed to have developed a synthetic suiting for the first time in the country. - Vikram Ispat, a unit of Grasim Industries and a part of the Aditya Birla group, has bagged Maharashtra Government's export award for highest export of hot briquetted iron (HBI) which is an integral ingredient of the steel sector. - Shareholders of Indian Rayon Ltd. will get three shares of Grasim Ltd. for every ten shares held, as a part of the cement business restructuring by the A.V. Birla group. - Vikram Cement, a unit of Grasim Industries, Mandasaur has won the IMC's Ramakrishna Bajaj National Quality Award Trophy, and Hindustan Lever's unit at Chindwara has bagged its certificate of merit for 1998. 1999 - Grasim Industries Ltd. has suspended production at its pulp and staple fibre units located at Mavoor, Kerala for want of raw material. 2000 - Grasim Industries Ltd, the Aditya Birla group company, has launched market-seeding for its new micro grade viscose staple fibre - Grasi Soft. - Grasim Industries Ltd. proposes to merge its wholly owned subsidiary Dharani Cements Ltd. with the company. - The Company has hived off the Software Division, called Birla Consultancy and Software Services into a separate subsidiary. - The Company has launched Kool Wool, a polyester viscose blended suiting fabric, under the Graviera Suiting umbrella name. 2001 - The Textiles division of Grasim Industries Ltd. has introduced a trouser fabric, Aquasoft. - Dharani Cements Limited, a wholly owned subsidiary of the company, has been amalgamated with the Company under the Scheme of Arrangement in terms of section 391/394 of the Companies Act 1956 effective from 1st November, 2000. - The Company has transferred its Software Division to its wholly owned subsidiary company Birla Technologies Limited, effective 1st February. 2002 - Birla Technologies ceases to be subsidiary of Grasim Industries -Grasim, Pantaloon in technical tie up to manfacture Viscose Staple Fibre (VSF)

-Grasim, L&T set up joint task force for logistics, promotion and procurement of raw materials -Acquires additional 2.84% stake of L&T, increases the stake to 12.89% -Stops production at Staple Fibre Plant located at Nagda due to water shortage -Restarts production at Staple Fibre Plant located at Nagda - Grasim Industries hikes its holding further in Larsen & Toubro (L&T) which stands at 13 per cent as on June 30 -Approves sale of equity shares in Mangalore Refineries to ONGC -Mops up Rs 50cr through inverse floater -Acquires 1.26 lac shares of Larsen & Toubro, takes its stake to 14.15% -Increases its stake in L&T to 15.15 per cent -SEBI asks Grasim to put on hold L&T open offer -Sends legal notice, challenging Larsen & Toubro's attempt to demerge the cement business into a separate company 2003 -Puts forward alternate proposal for L&T cement demerger -Agrees to pay Rs 130 per share for acquiring the cement company formed by splitting engineering and construction major Larsen & Toubro -Acquires L&T's cement business -SEBI clears the hurdle, allows Grasim to make open offer for L&T -Enhances L&T open offer size by 10.49 lakh shares -Delists from Bangalore Stock Exchange -Grasim's open offer for L&T pie fetches poor response, grabs only 2% through open offer -Grasim mops-up $50-ml loan from SBI -Revises open offer price for L&T cement division to Rs 170 per share from Rs 130 per share -Resumes operations at Nagda plant -Divests its holding in Indo Gulf Fertilisers Ltd (IGFL), holding in the company comes down from 12.6% to nil - Re issuance of GDR -Appointed Shri Y P Gupta as an Additional Director. -Delisted the shares of the Company from its Stock Exchange. -Shri Shailendra K Jain has been reappointed as the Whole Time Director of the Company for a period of 3 years wef December 1, 2003. 2004 -Acquires majority stake in Ultra Tech CemCo Ltd (Ultra Tech), the demerged Cement business of L&T -AV Birla Group flagship Grasim Industries' textile and apparel unit has launched 'Venetia' range of fabric, with the promise of delivering international class suite-length at an 'affordable' Rs 5,000 -Grasim Industries signs an agreement with ST Telemedia & TM International to acquire stake in Idea Cellular

-Delist from the Madhya Pradesh Stock Exchange (MSE), with effect from December 13, 2004 2005 - Grasim acquired St. Anne Nackawic Pulp Mill, Canada with Tembec Inc. 2006 - Grasim formed joint venture company, Birla Jingwei Fibres Company Limited and acquired VSF plant in China. 2007 - Grasims commissioned Eighteen ready-mix concrete plants 2008 -Grasim commissions brownfield expansion at Aditya Cement at Shambhupura (Rajasthan). -Grasim Industries Ltd has informed that the Board of Directors of the Company at its meeting held on October 23, 2008, has appointed Shri. A K Dasgupta as an Additional Director of the Company. -Grasim commissions brownfield expansion at Aditya Cement at Shambhupura (Rajasthan). 2009 -Grasim hives off its sponge iron business by way of slump sale -Grasim commissions a greenfield cement plant at Kotputli (Rajasthan). -Grasim's plants Vikram Cement and Aditya Cement win the Federation of Indian Mineral and Industries' "Social Awareness Award. -Mr. Ratan Shah, the Group Executive President and Chief Marketing Officer, Cement and Mr. R. M. Gupta, Sr. Executive President, Vikram Cement and Aditya Cement, received the Award at the hands of the honourable President of India, Mrs. Pratibha Patil at Vigyan Bhavan, New Delhi. 2010 - Grasim Consolidates the cement business under UltraTech Cement Limited. 2011 - Grasim acquired stake in Domsj Fabriker AB. - Forbes magazine ranks Grasim among the fabulous 50 companies in Asia. - Grasim Industries Ranks second for Best Corporate Governance Practices in Asia-Pacific by IR Global Rankings. Also ranked best company in Corporate Governance Practices in Basic Materials Industry, globally. - Grasim Industries Ranked as the Best Investor Relations Company-Building Materials in Asia by Institutional Investors Magazine. - The CII - Leadership and Excellence Award in Safety, Health and Environment presented to Grasim's Staple Fibre Division, Nagda. - The Asian Corporate Social Responsibility Award presented to Grasim's Staple Fibre Division, Nagda. 2012 - Grasim Industries has signed an agreement through AV Terrace Bay Inc.,Canada, a Special Purpose Vehicle (SPV), to acquire the assets of the Terrace Bay Pulp Inc., a paper grade pulp mill in North America. Grasim will be holding 40% interest in the proposed SPV while Thai Rayon Public Co. Ltd. - Aditya Birla Group-led Grasim Industries Ltd entered into an agreement with Japan-based Omikenshi for developing global markets of functional rayon products.

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

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

STRATEGIC ACQUISITION

Acquisition of Terrace Bay, a Canadian Pulp Mill

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

GROWTH OF THE EXISTING BUSINESSES

Expansion of VSF/Chemical Capacities

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

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

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

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

Expansion of Cement Capacity

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

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

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

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

- Bulk terminal at Cochin, Kerala

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

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

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

FINANCIAL PERFORMANCE

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

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

(Rs. in Crore)

Consolidated 2012-13 2011-12

Standalone 2012-13 2011-12

Revenue from Operations (Net)

27,904.32 25,244.89 5,255.01

4,973.56

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

1,721.81

Less: Finance Costs

324.14

313.99

39.09

35.82

Less: Depreciation and Amortisation

1,252.06 1,154.41

159.21

144.20

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

1,541.79

Add: Exceptional Item

204.43

204.43

Profit Before Tax

5,171.35 4,852.20 1,528.88

1,541.79

Tax Expense

1,467.21 1,320.77

302.89

364.79

Profit After Tax

3,704.14 3,531.43 1,225.99

1,177.00

Add: Share in Profit /(Loss) of Associates

73.65

63.16

Less: Minority Interest 1,073.40

947.13

Profit for the Year

2,704.39 2,647.46 1,225.99

1,177.00

Balance brought forward from Previous Year 778.77 1,520.49

662.34

703.72

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

1,880.72

Appropriations:

- Reserve Fund

0.77

0.50

- General Reserve

2,424.51 3,206.23

122.60

1,000.00

- Debenture Redemption Reserve 9.36

(71.50)

- Proposed Dividend

206.52

206.36

206.52

206.36

- Corporate Dividend Tax

51.75

47.59

9.81

12.02

- Share of Appropriation related to Associates

2.16

- Balance carried to Balance Sheet

788.09

778.77 1,549.40

662.34

3,483.16 4,167.95 1,888.33

1,880.72

DIVIDEND

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

Equity shares that may be allotted upon exercise of Options granted under the Employee Stock Option Scheme and out of the Share Capital Suspense, and before the Book Closure for payment of dividend will rank pari passu with the existing shares and shall also be entitled to receive the aforesaid dividend.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the year:

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

years; and

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

The details of Employee Stock Options granted pursuant to the Employee Stock Option Scheme - 2006 (ESOS - 2006), as also the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure "A" to this Report. Your Board has also approved formulation of a new Employee Stock Option Scheme. Items seeking your approval for introduction and implementation of the new ESOS Scheme exercisable into not more than 2,30,000 equity shares of Rs. 10/- each by the permanent employees, including any managing or whole-time director(s), of your Company and its subsidiary companies, are included in the Notice convening the AGM together with the Explanatory Statement.

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

FINANCE

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

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

AWARDS AND ACCOLADES

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

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

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

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

RESEARCH AND DEVELOPMENT

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

Programme Portfolio

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

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

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

Structured Forestry Plantation R&D programmes commenced at Harihar and Laos. Suitable genetic materials adapted to local edaphic-climatic

conditions were selected, and are being used to establish base populations for future genetic selection and breeding. A multi-disciplinary approach to create sustainable and eco-efficient forestry was started. This included programmes in genetic tree improvement, development of site specific silviculture best practices, integrated pest and disease management and the use of improved genetic material and management of genetic diversity at each site.

Enabling Capabilities

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

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

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

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

In summary, significant progress has been accomplished in the areas of programme portfolio development, infrastructure project execution,

staff recruiting and development, and the creation of the overall R&D function operating systems. We look forward to the significant contributions and this R&D capability will deliver to the Pulp and Fibre business.

HUMAN RESOURCES

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

CORPORATE GOVERNANCE

Your Directors reaffirm their continued commitment to good corporate governance practices. Your Company fully adheres to the standards set out by the Securities and Exchange Board of India for Corporate Governance practices and has implemented all of its stipulations.

As required by Clause 49 of the Listing Agreement of Stock Exchanges, a separate section on Corporate Governance, together with a certificate from your Company''s statutory auditors, forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

As per Clause 55 of the Listing Agreement with the Stock Exchanges, a separate section of Business Responsibility Report forms part of this Annual Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

As stipulated in Section 217(2AA) of the Companies Act, 1956, your Directors subscribe to the "Directors'' Responsibility Statement" and confirm that:

i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) the accounting policies selected have been applied consistently, and judgements and estimates are made that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit or loss of your Company for that period;

iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of your Company and for preventing and detecting fraud, and other irregularities; and

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

CONSOLIDATED FINANCIAL STATEMENTS AND RESULTS OF SUBSIDIARY COMPANIES

Consolidated Financial Statements have been prepared by your Company in accordance with the applicable Accounting Standards (AS-21, AS-23 and AS-27) issued by the Institute of Chartered Accountants of India and the provisions of the listing agreement with the Stock Exchanges. Together with the Auditors'' Report, these form part of the Annual Report.

In terms of the General Circular of the Ministry of Corporate Affairs (MCA), Government of India, the copy of Balance Sheet, Statement of Profit and Loss, Directors'' Report, Auditors'' Report, etc., of the subsidiary companies is not attached with the Annual Report of the Company. The related information on the Annual Accounts of the subsidiary companies shall be made available to the shareholders of the Company and of the subsidiary companies, who shall seek such information at any point of time. The Annual Accounts of the subsidiary companies will also be kept for inspection by any shareholder at the Registered Office of the Company and that of the subsidiary companies concerned. The Statement pursuant to Section 212 of the Companies Act, 1956, containing the details of the Company''s subsidiaries and the gist of the financial performance of the subsidiary companies forms part of the Consolidated Financial Statements of this Annual Report.

PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956

Information on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, stipulated under Section 217(1)(e) of the Companies Act, 1956, is set out in a separate statement, attached to this Report and forms part of it as Annexure "B".

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are to be set out in the annexure to the Directors'' Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Report and Accounts as set out therein are being sent to all members of the Company excluding the information about the employees. Any member, interested in obtaining such particulars, may write to the Company Secretary at the Registered Office of the Company.

DIRECTORS

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

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

AUDITORS

The Board, on the recommendation of the Audit Committee, has proposed that M/s. G.P. Kapadia & Co., Chartered Accountants, Mumbai, and M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai, be re-appointed as the Joint Statutory Auditors of the Company, to hold office from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting of the Company. M/s. G.P. Kapadia & Co., Chartered Accountants, Mumbai, and M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai, have forwarded their certificates to the Company, stating that their re-appointment, if made, will be within the limit specified in that behalf in Sub-section (1B) of Section 224 of the Companies Act, 1956.

The Board, on the recommendation of the Audit Committee, has also proposed that M/s. Vidyarthi & Sons, Chartered Accountants, Gwalior, be re-appointed as the Branch Auditors of Vikram Woollens, a Division of your Company, from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting of the Company.

Resolutions seeking your approval on these items are included in the Notice of the ensuing Annual General Meeting.

The observations made in the Auditors'' Report are self-explanatory, and, therefore, do not call for any further comments under Section 217(3) of the Companies Act, 1956.

COST AUDITORS

In pursuance of Section 233-B of the Companies Act, 1956, your Directors have appointed M/s. R. Nanabhoy & Co., Mumbai, as the Cost Auditors to conduct the Cost Audit for the year 2013-14.

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

APPRECIATION

Your Directors record their sincere appreciation of the Central and State Governments, banks, financial institutions, stakeholders and business associates for their whole-hearted support and co-operation.

For and on behalf of the Board

Kumar Mangalam Birla

Chairman