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2010

Ashish Gupta PGPM/0911/020

2009-2011

Grasim Industries

International

Academy

of

Management

&

Entrepreneurship

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Grasim Industries Limited

Team

BOARD OF DIRECTORS Mr. Kumar Mangalam Birla – Chairman Mrs. Rajashree Birla Mr. M.L. Apte Mr. B.V. Bhargava Mr. R.C. Bhargava Mr. Arun Kanti Dasgupta Mr. Cyril Shroff Mr. S.G. Subrahmanyan Mr. D.D. Rathi (Co-opted w.e.f. 1st June, 2009)* Mr. Shailendra K. Jain – Whole-Time Director Chief Financial Officer Mr. D.D. Rathi (upto 19th May, 2009) Mr. Adesh Gupta Company Secretary Mr. Ashok Malu Statutory Auditors M/s G.P. Kapadia & Co., Mumbai M/s Deloitte Haskins & Sells, Mumbai Branch Auditor M/s Vidyarthi & Sons, Gwalior Solicitors M/s Amarchand & Mangaldas & Suresh A. Shroff & Co. M/s Mulla & Mulla and Craigie, Blunt & Caroe EXECUTIVES Fibre & Pulp Divisions Mr. Shailendra K. Jain Business Director Mr. S.K. Saboo Advisor, Chairman’s Office Mr. S.S. Maru Sr. Executive President, Staple Fibre Division, Nagda Mr. Vijay Kaul Chief Marketing Officer Mr. S. Srinivasan Sr. Executive President, Pulp & Fibre Business Mr. S.V. Kulkarni Sr. Executive President, Birla Cellulosic Division, Kharach Cement Division Mr. S. Misra Business Head Mr. O.P. Puranmalka Business Head (Marketing) Mr. Ratan K. Shah Business Head (Manufacturing & Project) Mr. R.M. Gupta Sr. Executive President, Vikram Cement Mr. D.R. Dhariwal President, Birla White Cement Mr. Anil Kumar Pillai Executive President & Unit Head – Rajashree Cement Mr. S. Natarajan Executive President & Unit Head – Grasim Cement (South)

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Nature of Business

Grasim Industries Limited. The Group's principal activities are to manufacture and market cement, fibre and pulp, sponge iron, textile, chemicals and other. The Group operates in five segments: Cement, Fibre and Pulp, Sponge Iron, Chemicals, Textiles. The Cement segment manufactures and markets grey and white cement. The Fibre and Pulp segment products include viscose staple fibre and rayon grade pulp. The Sponge iron segment manufactures and markets sponge iron. The Chemicals segment includes caustic soda and allied chemicals. The Textiles segment includes fabrics and yarn.

History & Milestones

Grasim was incorporated on 25 August 1947, just 10 days after India became independent, manufacturing textiles made from imported raw materials. It is now a global leader in viscose staple fibre (VSF), the country's largest merchant producer of sponge iron and the second-largest caustic soda maker in India; and poised to be India's largest cement manufacturer.

2009 :: Grasim's pulp and fibre division has won the highly prestigious Asian CSR

Award. The Asian CSR Awards, Asia's Premier CSR Awards program, is a

project of the Asian Institute of Management, Manila. :: The Ministry of Labor and Social Welfare, Government of Thailand will be

conferred “The Best Labor Relations and Welfare Award, 2009” on Indo Thai

Synthetic Company Limited. :: Birla Sun Life Mutual Fund has been named "The Asset Management

Company of the Year, India", by the Hong Kong based magazine, "The Asset",

in the country awards category of their "Triple A Investment Performance

Awards 2009". :: CNBC TV18 Crisil recognised Birla Sun Life Mutual Fund as "The Mutual

Fund House of the Year" in 2008 and 2009 (for 2007 and 2008), creating

history as the only fund house to have won this recognition in two consecutive

years. :: The Birla Sun Life Equity-Linked FMP won the "Best Local Currency

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Structured Product-India" at - Triple A Investment Performance Awards 2009. :: The Best "Onshore Fund House - India Award" by Asian Investor, a Hong

Kong based magazine at - Asian Investor Investment Performance Awards

2009”. :: Rajiv Gandhi Award for Eminence in Social Field, 2009 was conferred on Mrs.

Rajashree Birla by Mr. Jyotiraditya Scindia (Union Minister of State,

Commerce & Industry) on 19 August 2009. The award recognises Mrs. Birla's

pathbreaking work among the poor, more so in India's villages, carried out

through the Aditya Birla Centre for Community Initiatives and Rural

Development. :: Idea Cellular wins the Economic Times' "Emerging Company of the Year

Award for 2009". :: Vikram Cement and Aditya Cement wins the Federation of Indian Mineral and

Industries' "Social Awareness Award for the year 2008-09". :: In recognition of work that truly exemplifies the highest values of society and

corporate leadership for social responsibility and sustainable development

initiatives, the Reader's Digest Pegasus Star Award has been conferred on

Hindalco. Mrs. Rajashree Birla who spearheads all the Group's social projects

received this much coveted award on behalf of Hindalco from Mr. Arun Jaitley,

MP, Rajya Sabha, on 21 January 2009 in Delhi.

2008 :: The President of India, Mrs. Pratibha Patil conferred the much coveted Rotary

International Polio Eradication Champion Award on Mrs. Rajashree Birla in an

elegant function at the Rashtrapati Bhavan (Delhi), attended by the Chairman,

select Rotarians and WHO officials.

2007 :: The Aditya Birla Group was honoured with the India Today Group's Readers

Digest Gold award in recognition of the work that truly exemplifies the highest

values of society as well as those of Reader's Digest. The award was received

by Mrs. Rajashree Birla, Chairperson, Aditya Birla Center for Community

Initiatives and Rural Development, at the Pegasus Corporate Social

Responsibility Awards 2007 function. :: Hindalco awarded the CII - Sorabji Green Business Centre "National Award for

Excellence in Water Management 2007". :: In May 2007, Novelis became a Hindalco subsidiary with the completion of the

acquisition process. The transaction makes Hindalco the world's largest

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aluminum rolling company and one of the biggest producers of primary

aluminum in Asia, as well as being India's leading copper producer.

2006 :: Hindalco in a joint venture with Almex USA Inc. :: TransWorks Information Services announces success of bid to acquire Minacs

Worldwide. :: Grasim Industries Limited, India; Thai Rayon Public Company Limited,

Thailand and P.T. Indo Bharat Rayon, Indonesia form a JV with Hubei Jing

Wei Chemical Fibre Company, China, for VSF. :: Hindalco awarded the Greentech Safety Silver Award for its outstanding safety

performance during 2005-06.

2005 :: Indian Rayon re-christened as Aditya Birla Nuvo. :: Aditya Birla Group to set up a world-class aluminium project in Orissa. :: The Aditya Birla Group signs a framework agreement to acquire St Anne

Nackawic Pulp Mill, Canada.

2004 :: Board reconstituted with Mr. Kumar Mangalam Birla taking over as Chairman. :: Completion of the implementation process to demerge the cement business of

L&T and completion of open offer by Grasim, with the latter acquiring

controlling stake in the newly formed company UltraTech. :: Grasim, Nagda, received the FICCI Annual Award 2003-2004 in

recognition of corporate initiaitve in rural development. :: Aditya Birla Chemicals (India) Limited, Rehla, Jharkhand, has received the

FICCI Annual Award 2003-2004 in recognition of corporate initiative in family

welfare. :: Hindalco recieves India CFO Award 2004 for excellence in finance in a large

corporate. :: Scheme of Arrangement announced to merge Indal with Hindalco. :: Indian Rayon completes its brownfield expansion of 40,000 TPA at Hi-Tech

Carbon, Gummidipundi, taking total capacity to 1,60,000 TPA. :: Deming Award for Indo Gulf.

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:: Indal wins FICCI Award 2002-2003 for 'Corporate Initiative in Rural

Development'.

2003 :: Mr. Kumar Mangalam Birla, Chairman of the Group, is selected as Business

India's Businessman of the Year - 2003. :: Mr. Kumar Mangalam Birla is selected as The Economic Times' Business

Leader of the year. :: The Group is ranked 16th in India's first ever survey of 'Great places to work

in', published in Business World magazine. The Group's joint venture concern,

Birla Sun Life Insurance, is ranked 9th in the same study. :: The Group is ranked 20th in a study on the 'Best Employers in India', conducted

by Hewitt Associates and Business Today. :: Hindalco receives the Asian CSR Award for its "Rural Poverty Alleviation

Programme". The Asian CSR Awards are Asia's premier awards programme on

Corporate Social Responsibility. :: The Group acquires the Mount Gordon Copper mines in Australia, another

strategic step in becoming a globally competitive copper player. :: Liaoning Birla Carbon, the Group's first carbon black company in China, is

incorporated. :: Indian Rayon acquires TransWorks, a leading Indian ITES / BPO company. :: The board of engineering major Larsen & Toubro Ltd (L&T) decides to

demerge its cement business into a separate cement company (CemCo), in

which L&T will retain 20 per cent of its equity with the balance to be

distributed to their shareholders in proportion to their shareholding in L&T. As

a consequence, Grasim to acquire an 8.5 per cent equity stake from L&T and

then make an open offer for 30 per cent of the equity of CemCo, to acquire

management control of CemCo. :: The Group divests its entire 37.38 per cent equity stake in Mangalore Refineries

and Petrochemicals Ltd (MRPL) to the Oil and Natural Gas Corporation

(ONGC). :: Birla Copper acquires the Nifty Copper Mines in Australia, as part of a strategic

plan to make the company an integrated copper producer, and source raw

material for its copper smelter at Dahej, Gujarat. :: Indian Rayon formally launches its insulators joint venture with NGK

Insulators Ltd., Japan, christening it as "Birla NGK Insulators Private Limited. :: Birla Copper, a strategic business unit of Hindalco, is accorded London Metal

Exchange (LME) registration. Its copper cathodes are approved as 'Grade A'

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copper brand by LME.

2002 :: The Grasim board approves an open offer for purchase of up to 20 per cent of

the equity of L&T, in accordance with the provisions and guidelines issued by

the Securities & Exchange Board of India Regulations, 1997. :: Grasim increases stake in L&T to 14.15 per cent (351.84 lakh shares). :: Landmark corporate restructuring of Hindalco and Indo Gulf. The fertiliser

business of Indo Gulf to be demerged into a separate company called Indo Gulf

Fertilisers. Indo Gulf's copper business to be merged with Hindalco, creating a

non-ferrous metals powerhouse. :: Grasim divests its Gwalior unit to Melodeon Exports Limited, and consolidates

textile operations at a single location in Bhiwani, MP, which will manufacture

both 'Grasim' and 'Graviera' brands. :: PSI Data Systems acquires Birla Technologies Ltd, bringing the Group IT

services business under one umbrella. :: Indal acquires a controlling stake in Anapurna Foils Ltd (AFL), to augment its

position in the foil and packaging sectors. Subsequently AFL is merged with

Indal. :: The Group receives The Economic Times' "Corporate Citizen" of the year

award.

2001 :: Grasim acquires 2.50 crore shares -- representing just over 10 per cent of the

equity -- in L&T from Reliance Industries Ltd. :: Birla Consultancy & Software Services spun off; becomes a separate entity

called Birla Technologies Ltd. :: Indian Rayon acquires a stake in PSI Data Systems, in one of the largest cash

transactions in the Indian technology sector. :: Grasim closes its pulp plant at Mavoor as a part of its restructuring initiatives.

2000 :: Indian Rayon acquires Madura Garments and selected overseas brand rights,

taking the Group to the top of the league in the branded apparels sector. :: The Group forays into e-business through a strategic alliance of its software

arm, Birla Software and Consultancy Services (BCSS), with Lawson Software

(USA).

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:: 'Gyanodaya', the Institute of Management Learning of the Adiya Birla Group, is

inaugurated. :: Hindalco acquires Indal. The Indal board is reconstituted. Mr Kumar Mangalam

Birla becomes Indal's new chairman. The Group holding goes up to 74.6 per

cent, and further increases to 96 per cent in FY'03. :: The Insurance Regulatory Development Authority (IRDA) grants registration in

principle to Birla Sun Life Insurance Company. Indian Rayon acquires major

world rights for international apparel brands Louis Philippe, Allen Solly and

Peter England. :: The Group announces its intention to launch a 450 MW `Green Power Project'

in Karnataka . :: The merger of Birla AT&T and Tata Cellular is completed.

1999 :: A joint venture with financial services major Sun Life of Canada is inked, as

part of the overall restructuring of the Group's financial services business.

1998 :: The Group forms a 50:50 joint venture company with Tembec Inc. of Canada,

called A.V. Cell Inc., to supply pulp for the Group's VSF operations. :: Grasim acquires Dharani Cement and Shree Digvijay Cement to consolidate the

group's leadership position in cement. :: The cement businesses of Indian Rayon and Grasim are consolidated into a

single division of Grasim – the biggest restructuring ever by any corporate

entity in India. :: The Group forays into copper with the commissioning of Indo Gulf's copper

smelter – the largest of its kind in India. :: Thai Organic Chemicals begins commercial operations of Chlor-Alkali and

Epichlorohydrin.

1996 :: To honour the memory of the late Aditya Birla, a new corporate logo – Aditya,

the rising sun – is launched. :: All group companies are consolidated under the umbrella of the Aditya Birla

Group, led by Mr Kumar Mangalam Birla. :: P.T. Indo Liberty Textiles is incorporated to manufacture yarn in Indonesia.

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1995 :: The Group enters the telecommunications sector through a joint venture with

AT&T (USA). :: Thai Sulphites & Chemicals is incorporated to manufacture sodium sulphite

and sodium metabisulphite.

1994 :: The Birla Growth Fund is renamed Birla Global Finance Limited, as its span of

operations expands. :: Alexandria Carbon Black, the Group's first joint venture with the Egyptian

government, is established.

1992 :: Thai Epoxy and Allied Products commences production of Epoxy Resins in

Thailand.

1991 :: Pan Century Oleochemicals commences production of fatty acids and glycerine

in Malaysia.

1990 :: Mr Kumar Mangalam Birla gets actively involved in the Group's operations.

1989 :: Thai Peroxide commences manufacturing of hygrogen peroxide solutions in

Thailand.

1988 :: The government liberalises the petroleum industry. The Aditya Birla Group

enters into a joint venture with Hindustan Petroleum Corporation Ltd to set up a

three-million-tonne refinery, Mangalore Refineries and Petrochemicals Ltd

(MRPL), at Mangalore, Karnataka.

1987 :: Indian Rayon is renamed as Indian Rayon and Industries Limited (IRIL), to

reflect its wide horizon of activities.

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:: Thai Acrylic Fibre is incorporated to produce fibre and tow.

1986 :: The Birla Growth Fund is set up to finance industrial equipment, plant and

machinery and consumer durables, as well as for stock market operations.

1985 :: India's first gas-based fertiliser plant in the private sector – Indo Gulf – goes on

stream at Jagdishpur, UP.

1984 :: Thai Polyphosphates and Chemicals commences production of sodium

phosphates in Thailand.

1982 :: P.T Indo Bharat Rayon is established. It is the first producer of Viscose Staple

Fibre in Indonesia.

1978 :: Thai Carbon Black, the Group's first carbon black company is incorporated in

Thailand.

1977 :: Pan Century Edible Oils is incorporated in Malaysia, going on to become the

world's largest single-location palm oil refinery.

1975 :: The Indo Phil Group of companies, the first Indo-Filipino joint venture

commences production of spun yarn.

1974 :: Thai Rayon, the Group's Viscose Rayon Staple Fibre business is incorporated in

Thailand.

1973 :: P.T. Elegant Textiles is established to manufacture spun yarn. It marks the

Group's first venture in Indonesia.

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1969 :: Aditya Birla sets up Indo-Thai Synthetics Company Ltd, the group's first

overseas company.

1967 :: Hindalco sets up a captive power plant at Renusagar - a significant strategic

move.

1966 :: The Indian Rayon Corporation Ltd is acquired.

1965 :: Aditya Birla, grandson of the legendary Ghanshyamdas Birla, starts the Eastern

Spinning Mills & Industries.

1962 :: Hindalco commences production at its aluminium complex at Renukoot.

1958 :: Hindalco is incorporated.

1947 :: Grasim is incorporated. It commences operations with a small rayon weaving

unit at Gwalior, MP.

1919 :: Ghanshyamdas Birla, grandson of Shiv Narayan Birla, sets up the first Birla

jute mill, marking his entry into the manufacturing sector. Rapid business

expansion follows.

1857 :: The foundation of the Birla Group of Companies is laid by Seth Shiv Narayan

Birla – cotton trading operations commence at Pilani, Rajasthan.

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Organization Structure

The divisions of Grasim Industries:

Viscose staple fiber: This division of the Aditya Birla Group is the biggest producer of viscose staple fiber worldwide. It fulfills the demand of the domestic market for the viscose staple fiber.

Cement: This division is ranked 11th in the international arena and 7th in Asia. It is further divided into two grey cement and white cement.

o White cement products Birla White GRC Birla White Kool N Seal Birla White Textura Birla White Wallcare Putty Birla White Levelplast

o Grey cement products Rajashree Cement Vikram Cement Grasim Cement Aditya Cement

Sponge iron: The sponge iron division is the biggest Indian commercial producer of sponge iron

Chemicals: Grasim Industries owns one of the biggest caustic soda manufacturing unit

Textiles: With the campaign 'the power of fashion' the company is very well positioned in the domestic Indian market. The premeire brands of the Grasim Industries textile division are the fabric range of the Grasim and the Graviera

Marketing Analysis

Grasim's marketing strategy includes strengthening customer-value creation service, product-specific fibre brand-building campaign and promoting new applications for VSF. The company has started off these new marketing initiatives at a substantial investment outlay over the next one-to-two years.

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"New product development and promotion of new application areas for VSF will be our future focus", said Mr Thomas Varghese, Executive President (Marketing), Grasim Industries Ltd. Grasim, which registered a 17% growth for its VSF in 1999, has seen it sliding to 11% in 2000 and since then it has hovered at that level.

The company feels that the market growth for VSF could be sustained at the 4-5 per cent level in the coming days provided the new product line/new applications are taken up vigorously. Grasim, with its 630-tonne per day capacity in VSF production split between its four operating units, looks at fashion knitwear and non-woven textiles as new growth areas.

As a part of the marketing revamp, Grasim Industries has been working on setting up a product development centre at its Kharach plant at an estimated cost of Rs 30 crore which would provide VSF-based product solution to both the knitwear and woven fabric/processing and garmenting units who are inclined to use the fibre.

Product Profile

The Group operates in five segments:

Cement,

Fibre and Pulp,

Sponge Iron,

Chemicals, Textiles.

The Cement segment manufactures and markets grey and white cement. The Fibre and Pulp segment products include viscose staple fibre and rayon grade pulp. The Sponge iron segment manufactures and markets sponge iron. The Chemicals segment includes caustic soda and allied chemicals. The Textiles segment includes fabrics and yarn.

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Target Market

Positioning Strategies

Strategy o Focus on core businesses - Fibre (VSF) and Cement o No unrelated diversification/ investments o Improve asset utilisation through market expansion and better

penetration o Improve margins through better efficiency and stringent cost

control

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Nature of Competition

Key Challenges o Greater competition among majors o Focus on improving market position o Retention of market share o Cost Control

Strategies to overcome challenges o Maintain market position o Capital and manpower productivity o Maintaining competitive cost structure

Strengthen brands to ensure regional dominance

Improve realisation thru o " Change in product mix o " Change in market mix

Better penetration into new markets of South and North Grinding unit at Bhatinda underway Improve presence in profitable retail segment

Value added products will be a focus area

Selective acquisitions, to benefit from industry consolidation o Strong cash flows to fuel cement growth initiatives

Market competitor

Cement: Cement is a multi-player industry with various regional players in the fray. Holcim Group (ACC and Gujarat Ambuja Cements) is our main competitor. Differentiating factors for Grasim are: - Pan India presence which gives us an edge over other cement players in India in terms of reach to customers - Strong brand which enjoys premium over competitors by virtue of the trust it commands. Hence, we also enjoy a price leadership over some of the regional brands. - State of the art equipment and technology with ISO 9001 certification for quality systems and ISO 14001 for Environment Management Systems. - Strong balance sheet (net debt: equity is 0.1) - Strong promoter backing

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Viscose Staple Fibre: Lenzing of Austria is our main competitor. Significant VSF capacity exists in China. However the industry is very fragmented there. Our major differentiators are: - Grasim has strong backward integration making it one of the world’s lowest cost producers of VSF. 75% of pulp requirement is met through pulp plant in India and pulp joint ventures in Canada. - Captive production of caustic soda and power gives sustainable competitive advantage - Strong investment in R&D to: a. Develop speciality fibres b. Help value chain partners to develop applications for VSF - Branding initiatives for VSF (e.g., co-branding with reputed designers like Anita Dongre) - Patented zinc free technology - Diversification into consumer products and speciality fibres

Financial Analysis

Turnover

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Financial Statement

Ratio Analysis

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Value Chain

Core Competencies

Vision "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 and raise the country's human development index." — Mrs. Rajashree Birla, Chairperson, The Aditya Birla Centre for Community Initiatives and Rural Development Mission To deliver superior value to our customers, shareholders, employees and society at large. Values

o Integrity o Commitment o Passion o Seamlessness o Speed

Quality Mgmt India's Grasim Industries Limited (Cement Division) has once again selected FLSmidth Automation to supply a Quality Control by computer and X-ray (QCX) system. The system will manage laboratory information, and optimise raw mix and cement quality.Grasim Industries are leading cement producers in India and are expanding their production capacities. The quality control systems are for Grasim's three upcoming plants: Grasim Cement at Kotputli; Aditya Cement, Line 2; and UltraTech Cement, Line 2 at Tadpatri, and for the existing Shree Digvijay plant.

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SWOT Analysis

Grasim Industries Limited - SWOT Analysis company profile is the essential source for top-level company data and information. Grasim Industries Limited - SWOT Analysis examines the company’s key business structure and operations, history and products, and provides summary analysis of its key revenue lines and strategy.

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Future Outlook

Grasim has made large investment in capacity expansion and thermal power plants. New capacities will also lead to reduction in lead distance once they are fully operational. Increase in captive power to 80% has helped the Company to reduce power cost. We see Grasim growing steadily in market share this year too with the huge infrastructure demand in India, our capacity expansion and price and volume leadership. Outlook Grasim’s inherent strength, a continual stress on operational excellence, cost optimisation measures, strategic planning, effective financial management and expected improvement in cement prices, the prospects for Grasim continue to be bright.