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By
Kumar Mangalam BirlaChairman, The Aditya Birla Group
February 2005
The Aditya Birla GroupThe Aditya Birla GroupGlobal Vision; Indian ValuesGlobal Vision; Indian Values
2
The Aditya Birla Group: An introduction
! Amongst the largest and most reputed industrial houses in India
! Domestic market leaders
! Pioneers of globalisation in India
! Aggregate revenues of US$6.3 bn; Net Profits of US$ 730 mn
! Market capitalisation of US$ 7.1 bn
! Anchored by 72,000 employees; Trusted by 700,000 shareholders
! A responsible corporate citizen
! Group flagships
Grasim - Cement & Viscose Staple FibreGrasim - Cement & Viscose Staple Fibre
Hindalco - MetalsHindalco - Metals
Indian Rayon - Apparels, Insurance, IT / ITeS, Carbon Black & VFYIndian Rayon - Apparels, Insurance, IT / ITeS, Carbon Black & VFY
Indo Gulf - FertilisersIndo Gulf - Fertilisers
3
Successful transformation in recent years
Grasim Hindalco Indian Rayon
- Copper expansions- Copper acquisition- Indal acquisition
- Cement restructuring
- Cement brownfield- Captive power- VSF greenfield
- Utkal Alumina- Alumina expansions- Copper Mines
- UltraTech acquisition
- Mavoor closure- Exit from Software &
Trading- Financial
restructuring
- Efficiency & cost focus
- Aluminum brownfield- Alupuram Smelter
closure
- Insurance JV- IT/ITeS entry- Garment business acquisition
- Insulator JV- Carbon Black
expansion
- Exit Sea Water Magnesia
Enhanced competitiveness in traditional businesses
Built global sized, focused
businesses
Investedfor theFuture
Towards creation of a robust and globally competitive growth plaTowards creation of a robust and globally competitive growth platformtform
4
Net Result #1: Leadership across businesses
Domestic Market Leadership
Largest Player: Cement, Aluminum, CopperViscose Staple Fibre, InsulatorsBranded Apparels
2nd Largest: Carbon Black, Life Insurance (Private) Viscose Filament Yarn
Amongst Top-5: Mutual Fund, Fertilisers, ChemicalsTextiles & Telecom
Global Size and Competitiveness
Cement: 8th Largest in the WorldLargest in a single country
VSF: World’s largest producer 21% global market share
Metals: Global cost leadership; regional major
Carbon Black: 5th largest in the World
Insulators: 3rd largest in the World
5
Net Result #2: Creation of superior shareholder value
0
100
200
300
400
500
600
Jan-9
9Ju
l-99
Jan-0
0Ju
l-00
Jan-0
1Ju
l-01
Jan-0
2Ju
l-02
Jan-0
3Ju
l-03
Jan-0
4Ju
l-04
Jan-0
5
Sensex
Group Market Capitalisation
3.824.69.2SENSEX
––30.7Indo Gulf
31.977.172.2Indian Rayon
9.122.13.1Hindalco
27.967.818.1Grasim
22.648.132.4GROUP
5 Years3 Years1 Year
TSR in excess of 25% p.a. over last 5 yearsTSR in excess of 25% p.a. over last 5 years
Group Market Cap. Vs. Sensex(Indexed)
Individual Stock Returns(Annualised %)
____________________Source: Bloomberg Data
____________________Source: Bloomberg data as on 28th Jan 2005
6
The Next Phase: In the global league
Group Aspiration
Global Cost Leadership
To be in the Top-10 percentile of global
costs in all businesses
Global Cost Leadership
To be in the Top-10 percentile of global
costs in all businesses
7
FY99 FY04 FY10e
International
Domestic Others
Indo Gulf
Indian Rayon
Hindalco
Grasim
Restructuring & Consolidation Growth Phase
Group Aspiration
Global Cost Leadership
To be in the Top-10 percentile of
global costs in all businesses
Global Cost Leadership
To be in the Top-10 percentile of
global costs in all businesses
The Next Phase: In the global league
____________________• Based on Fortune 500 study in 2003• Threshold Sales - $10.83bn • Median Sales - $19.8bn
Aggregate Group Turnover
At the threshold of Fortune 500
Entry*
$5.6bn
$12 -1 3bn
CAGR
13%
CAGR 18
-20%
$3.1bn
PBDIT - $522mnGearing – 37%
PBDIT - $1,273mnGearing – 36%
Shifting gearsShifting gears
8
Value Accretive Growth: Our framework
Strong, value driven organisation
Strategic Strengths
Market Opportunities
Operational Superiority
Strategic Advantages+ +
Superior Stakeholder Value
Corporate
GovernancePrinciples of
Trusteeship Cost
LeadershipQuality
focusOperational
ExcellenceFinancial
PrudenceSystems &
proceses
9
Strong, value driven organisation
Strategic Strengths Market OpportunitiesOperational Superiority Strategic Advantages
+ +
Superior Stakeholder Value
Corporate
GovernancePrinciples of
Trusteeship Cost
Leadership
Quality focus
Operational
ExcellenceFinancial
PrudenceSystems &
proceses
Organisation Building: 5 pronged strategy
Building the leadership
pipeline
1
Addressing cultural issues
2
Institutionalising Processes
3
Internalizing growth
aspirations
4
Looking beyond
boundaries
5
10
Building leaders for tomorrow
! ‘Global Leadership Framework’ instituted
" 10-point criteria to identify potential leaders
" Planned career development for performers with high potential
! Young organization, becoming younger
" 48% of employees are below 38 years
" 30% have less than 5 years of experience
" 52% of managerial resource are professionals, against 46% in 2002
! Encouraging progress on ‘Talent Management’ efforts
" External additions to the talent pool: Lateral inductions & Global recruitments
" Performance coaches and mentors
" Job rotation and multi skill-ing
" Individual Development Plans
" ‘Gyanodaya’ and e-learning programmes
1
11
Building leaders for tomorrow! ‘Performance Management Systems’ towards building meritocracy
" ‘Variable pay’ across all levels being introduced
" Job evaluation by international experts
! ‘Business HR Heads’ to address industry specific issues
! ‘Aditya Birla Awards’ to encourage individual and team excellence
! Organisational Health Study (OHS), conducted by international experts
1
68
72
69
73
65
66
67
68
69
70
71
72
73
OHS III OHS IV
Birla Group Gallup India Avg Gallup Mfg. Avg
Overall Satisfaction
12
Addressing cultural issues through common values
! Cultural diversity widening" Operations across 4 continents; employing 30 different nationals" Acquisitions bring people with diverse backgrounds
! Alignment towards common objectives is key, ahead of a rapid growth phase
! Values: Our common bond, re-defined and re-focused
Integrity
CommitmentPassion
Speed
Seamlessness
2
13
MeasuringPerformance
AnalysingAcquisitions
Reviewing Capital Projects
PayingBonuses
SettingGoals
EvaluatingStrategies
EvaluatingOperationalInitiatives
Communicating
MeasuringPerformance
AnalysingAcquisitions
Reviewing Capital Projects
PayingBonuses
SettingGoals
EvaluatingStrategies
EvaluatingOperationalInitiatives
Communicating
MeasuringPerformance
AnalysingAcquisitions
Reviewing Capital Projects
PayingBonuses
SettingGoals
EvaluatingStrategies
EvaluatingOperationalInitiatives
Communicating
Institutionalising systems to improve capital efficiency
! Value Based Management implemented successfully
" EVA – An understood common metric now, at all levels
" On the success path to result in:
# Business ownership and empowerment
# Explicit commitment to value
# Better use of existing capital and efficient capital planning
! Business Review Councils (BRC) set up
" Cross business, multi functional teams to leverage group expertise
" Reviews strategic progress and operating performance
! ‘Capital Request Evaluation Committee' (CREC) set up
" Standardised capital allocation process
" Cross functional, value focused evaluation of capital proposals
3
14
To be complemented by existing strong systems infrastructure
Financial
Social & Environmental
World Class Manufacturing
Organisationalsystems
ProductivityQualityCost Management
GovernanceMIS ReportingPlanning & Budgeting
VBM
Capital Allocation
Business Reviews
Village Adoption
Health & Education
ISO 14001 EMS
3
Asian CSR Award 2003Excellence in Poverty Alleviation
15
Internalizing growth aspirations is key
! Instituting long-range, strategic planning process" Current planning process strong on operational issues
! New process introduced to sharpen strategic articulation by" Focusing on value creation" Aligning growth and value aspirations" Aligning performance of existing capital and future capital allocation decisions" Emphasizing a rigorous testing process between business and corporate centre
4
AspirationalTargets
3 / 5 year
plans
Annual Budgets
Performance Review
Shareholder Aspirations
Business Review CouncilCorporate Centre
Business Heads
16
Looking for global growth
! Domestic market dependence will restrict growth going forward
! Changing business landscape providing value opportunities
! Group has successful track record " Globalisation efforts on since 1970s" Successful operations in South East Asia
# Leadership in the major economies of SE Asia# Came unscathed even during the Asian Crisis
! Recent experiences encouraging" Carbon Black in China & Egypt" Mines in Australia" Pulp in Canada
5
Manufacturing plansTrading operations
17
Concrete growth prospects
Strategic Strengths
Market Opportunities
Operational Superiority
Strategic advantages+ +
18
0
5
10
15
20
25
30
35
FY91
FY93
FY95
FY97
FY99
FY01
FY03____________________Source: CMA Data
Two pronged strategy: Two pronged strategy: Unlock value from current operationsUnlock value from current operations
Embark on fresh growthEmbark on fresh growth
18%Grasim (standalone)
23%Grasim Consolidated
7%Industry
Capacity Growth CAGR – FY91 to FY04
Grasim Today: A cement major with strategic advantages
States where Grasim Combine is Market Leader : 42% of ind. volumesNo.2 Player : 15% of ind. volumesNo.3 Player : 22% of ind. volumesBelow No.3
Leadership in key consuming markets
____________________Source: Company Data
MT
Grasim Capacity additions (FY91-04)
19
GDP per capita (US$, Purchasing Power Parity)
Cem
ent C
onsu
mpt
ion
(Kg
per c
apita
)India
Philippines
China
Brazil
Thailand
Russia
Mexico
TurkeyMalaysia
US
S. Korea
Spain
Taiwan
Ireland
Japan
France
Sweden
UK
NorwayDenmark
Belgium
40,0035,00030,00025,00020,00015,00010,0005,0000
1200
1000
800
600
400
200
0
Immense long term potential
_______________Source : Smith Barney
Excellent organic growth potential
Capacity needs to grow 35% by 2010 to maintain market shareCapacity needs to grow 35% by 2010 to maintain market share
20
40
60
80
100
120
140
160
180
200
FY90FY93FY96FY99FY02FY05
eFY08
e
CAGR - 7%
CAGR - 8%
Domestic demand growing strong
MT
_______________Source : CMA, Company data
20
Market share of the leader (Analyzed over 52 Countries*)
%
21
42%45%
55%
0102030405060
Top
quar
tile
coun
tries
Wor
ldav
erag
e
Wor
ldm
edia
n
Indi
a
_______________________________________________________* Analysis of 52 countries accounting for 74% of world consumption excluding China Source: Boston Consulting Group
Incremental growth likely to be more profitableIncremental growth likely to be more profitable
Market share enhancement: a further upside
Prices v/s Market Concentration
Market share of top 5 players
40
60
80
100
120
0 20 40 60 80 100
China
US$/T (2002)
India Brazil
Spain Italy
South KoreaUS
Mexico
21
LocationalLocational advantages providing export opportunitiesadvantages providing export opportunitiesGrowth opportunities in SE Asia, in the long runGrowth opportunities in SE Asia, in the long run
Regional markets offer twin opportunities
_______________________________________________________Source: JP Morgan, Cembureau - BrusselsFigures in bracket indicate CAGR in demand since 1985 todate
16.0
7.1
1.62.2
3.5
0.3
13.1
25.38.2
17.213.2
N America (1.9%)
S America (3%)
W. Europe (2%)
China (9.5%)
India (7%)
Australia (1.8%)
M.East (4.3%)
Africa (3.9%)
E. Europe (2.9%)
S.E Asia (8%)
Other Asia (-0.7%)
Global Demand Supply (2003)
Import
Export
= Million tons
22
VSF: Robust growth even in a mature market
50
100
150
200
FY 91FY 92FY 93FY 94FY 95FY 96FY 97FY 98FY 99FY 00FY 01FY 02FY 03FY 04
Grasim World
VSF Production (Indexed)
Significant Competitive Strengths
! Cost leadership! Technology leadership! Integrated operations! Application development competencies
_______________________________________________________Source: Company Data; Industry Sources
Global leadershipLenzing
19%
Others12%Chinese
Producers (Fragmented)
34%
Grasim12%
Formosa7%
Equi4%
April3%
Overseas units
Group Total 21%
VSF Market Share
23
127124
71
9189 89
0
20
40
60
80
100
120
140
FY99FY00
FY01FY02
FY03FY04
VSF: Stable cash generator, momentum rising
Emerging Opportunities
! India Textile advantage
! Emerging opportunities with WTO
! China : Opportunity v/s Threat
! Success of product & application
development efforts
Stable Cash Flows (PBDIT)
Power cement growth and propel Grasim to a higher growth planePower cement growth and propel Grasim to a higher growth plane
$ mn
_______________Source : Company data
24
Leveraging the India Advantage
Strategic Strengths
Market Opportunities
Operational Superiority
Strategic advantages+ +
25
Asian Metal DeficitAsian Metal DeficitAsia Demand Growth: 9.6% CAGR in 5 yearsAsia Demand Growth: 9.6% CAGR in 5 years
Aluminium: Growing metal with regional upside
_______________________Source: Hydro Aluminium & Company Data
-3,5
53
-4,0
13
-4,2
84
-4,2
48
-4,2
84
-4,1
21
-4,1
60
-4,3
26
-4500
-4000
-3500
-3000
-2500
-2000
-1500
-1000
-500
0
2002 2003 2004 2005 2006 2007 2008 2009
Metals Growth (Indexed)
Aluminium Magnesium Copper Steel Zinc
Fact
or
0
5
10
15
20
1950
1960
1970
1980
1990
2000
2003
‘000 MT
_______________________Source: CRU, Dec 2004
KT
26
India has significant long term potential
TurkeyTurkey
_______________________Source: Company Data
0.1
1
10
100
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
GDP per capita US$
USA
ChinaArgentina
Saudi Arabia
Spain
NetherlandsUK
Algeria
Greece
Norway
Canada
Chile
Venezuela
0.1
1
10
100
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
GDP per capita US$
USA
India
ChinaArgentina
Saudi Arabia
Spain
NetherlandsUK
Algeria
Greece
Norway
Canada
Chile
Venezuela
3
0.6
Aluminium Consumption (Per capita kg – log scale)
Growth triggers in place; Demand growth gaining momentum alreadyGrowth triggers in place; Demand growth gaining momentum already
27
Import
Export
= 1000 tons
Alumina Deficit in Asia: Another opportunity
_______________________Source: CRU, Boston Consulting Group
North America (5.8)
Latin America +7.7 Africa
(2.1)
India+1.2
Mid East(2.7)
China(5.3)
E. Europe(1.9)
W. Europe(3.7)
S E Asia+0.4
Australia+12.1
Target markets
Alumina Surplus / (Deficit) 2003(In mn Tonnes)
India uniquely positionedIndia uniquely positioned
28
Hindalco well positioned
Leveraging sustainable competitive strengths for profitable growLeveraging sustainable competitive strengths for profitable growthth
90
140
190
240
290
340
- 25 50 75 100
Hindalco AverageAlumina Cash Cost
Alumina Cash CostsUS$/Ton
__________________________________________Source: CRU Aluminium Production Costs 2003
600
900
1,200
1,500
1,800
2,100
- 20 40 60 80 100(% of Production)
US$/TonAluminium Cash Costs
Hindalco AverageMetal Cash Cost
Bauxite Mineral Map of India
__________________________________Source: Ministry of Mines, Govt. of India
Company Data
RR
R
RS
S
S Hindalco’s Alumina Refinery
Best Quality Bauxite
R
RUtkal Alumina (Proposed)
SHindalco Aluminium Smelter
29
Starting with Alumina…
__________________________________Source: Company Data
Exploring Further
Opportunities
0
500
1000
1500
2000
2500
3000
2004
2005
e
2006
e
2007
e
2008
e
2009
e
2010
e
Muri Expansion
Belguam Expansion
Utkal Alumina
Hindalco Expansion plansIn KT
30
Global Top-10
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Alcoa
Alcan
Rusal
Hydro
BHP
Sual
AlbaCha
lco CVGDub
alCom
alco
Centur
yHind
alco*
Global Aluminium Capacity - 2009e**
…Towards the global league in Aluminium
__________________________________Source: CRU Data * Hindalco – Current operating capacity of 410 KTPA + Hirakud Expansion of 65 KTPA** Global Capacity for 2009 as estimated by CRU, based on announced plans
Strong balance sheet and robust cash flows to be leveraged prudeStrong balance sheet and robust cash flows to be leveraged prudentlyntly
In KT
31Enhanced returns to add further strengthEnhanced returns to add further strength
5
10
15
20
25
30
35
0 1000 2000 3000 4000 5000 6000 7000
Cumulative Production ('000MT)
100
150
250
5004,327
2,309
1,847
1,200
0
200
400
600
FY98 FY00 FY04 FY06E
.
0
1,000
2,000
3,000
4,000
5,000
Capacity Cost
Copper: Amongst Top- 10 global smelters already
US$/MT
____________________________________Source: CRU Copper Smelting Costs 2003
Growth in Copper Capacity
In KT
Moving towards Top-15% of global costs
Dahej Today
US¢/lb
DahejBy End-2005
____________________________________Source: CRU Copper Smelting Costs 2003
32
Growth powered by new businesses
Strategic Strengths
Market Opportunities
Operational Superiority
Strategic advantages+ +
33
Garments to be a key growth contributor…
Madura Garments
Design, Sourcing &
merchandising skills
Well Established
InfrastructureStrong Brand
Equity
Market Leadership & Distribution
Network
Significant Competitive Advantages
MaduraGarments
__________________________________________Source: KSA Technopack, Company Data
Sustained LeadershipMarket Share (FY04)Brand-wise sales
Others34%
Madura Garments
28%
Color Plus3%
Zodiac5%
Raymonds14%
Arvind Mills16%
0
20
40
60
80
100
FY00
FY01
FY02
FY03
FY04
Louis Philippe Van Heusen Allen Solly Peter England Others
$ mn
34
… By capitalising on domestic opportunities
Menswear market size to reach
US$3.3bn by 2010
Branded apparels market to grow 15%
annually
Women’s wear & Denim to achieve
critical mass
$ 220 Mn
1994 1998 2002 2006
Mid Price Segment
Premium Segment
Super Premium
ProductWardrobe Lifestyle
Wardrobe
Lifestyle
Wardrobe
Lifestyle
$ 450 Mn
$ 800 Mn
$ 1,330 Mn
__________________Source: KSA Technopack, IRS, Market Sources
Evolution of Indian Readymade Garments Market (1994-2006)
35
0
20
40
60
80
100
120
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
2002 2003 2004 2005
Annualised Premium Equivalent$ Mn.
Insurance: Successful start to promising new sector
_____________________Source: Company Data
Market Share – Private Players
Others23%
Tata AIG9%
Bajaj alliance8%
HDFC Standard
8%
ICICI-Pru31%
Birla Sunlife21%
_____________________Source : IRDA Reports
Rising share of Private Players%
0
5
10
15
20
25
Q4 '03
Q1 '04
Q2 '04
Q3 '04
Q4 '04
Q1 '05
Q2 '05
Q3 '05
0.00.51.01.52.02.53.03.54.0
Private Players Birla Sunlife (RHS)
%
36
Offers exciting long- term prospects2.
02.
1 2.6 2.9 3.
54.
6 4.8 5.0 5.
87.
4 8.2 8.
610
.2
0
2
4
6
8
10
12
China
Thaila
ndInd
iaMala
ysia
Sinapo
reUSA
World A
vg.
Austra
liaAsia
AvgTaiw
anKore
aJa
pan UK
Life Insurance premium as % of GDP (2002)
Penetration levels to rise to 4.5%Penetration levels to rise to 4.5%Premium size to triple to $46 billion by 2013*Premium size to triple to $46 billion by 2013*
_____________________Source: Swiss Re
%
0
5
10
15
20
25
30
35
40
45
50
1990
1993
1996
1999
2002
2005
E20
08E
2011
EIndia Premium Market Size
US$ Bn
_____________________Source: Swiss Re
37
Indo Gulf: Benefiting from changing policy environment
! Strong position in the fertiliser industry
" Amongst lowest cost urea producers
" Strategically located
" Strong brand equity
" Best equipped to face de-regulated market conditions
! Well poised to capture growth opportunities
" Significant financial strength
" Pursuing growth opportunities
" Potential to grow inorganic 0
200
400
600
800
1000
1200
1400
1600
2004
2005
e20
06e
2007
e20
08e
2009
e20
10e
Brownfield Plans*
Debottlenecking*
_____________________* Awaiting approvals from Govt. of India
Urea Production Capacity In KT
38
Stock valuations yet to reflect the changing growth profile
__________________________________* Bloomberg Data as on 31st January 2005
128
390
1,287
1,317
Stock Price* (Rs.)
On FY06 Consensus Earnings*
-5.86.511.9134Indo Gulf
-7.49.515.0534Indian Rayon
0.65.16.17.82,722Hindalco
0.87.17.511.52,760Grasim
Price to Growth
(x)
EV/ EBITDA
(x)
PCF (x)
PER(x)Market Cap.
(US$ mn)
39
Thank You
Statements in this “Presentation” describing the Company’s objectives, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the Company’s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The Company/Group assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.
Cautionary Statement
