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Grasim Industries Ltd.

BSE: 500300 Sector: Industrials
NSE: GRASIM ISIN Code: INE047A01021
BSE LIVE 15:56 | 22 Nov 1195.60 27.80
(2.38%)
OPEN

1170.10

HIGH

1207.30

LOW

1166.80

NSE 15:57 | 22 Nov 1194.20 25.55
(2.19%)
OPEN

1170.00

HIGH

1204.00

LOW

1167.90

OPEN 1170.10
PREVIOUS CLOSE 1167.80
VOLUME 123986
52-Week high 1299.90
52-Week low 645.40
P/E 48.88
Mkt Cap.(Rs cr) 78,593
Buy Price 1195.60
Buy Qty 1325.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1170.10
CLOSE 1167.80
VOLUME 123986
52-Week high 1299.90
52-Week low 645.40
P/E 48.88
Mkt Cap.(Rs cr) 78,593
Buy Price 1195.60
Buy Qty 1325.00
Sell Price 0.00
Sell Qty 0.00

Grasim Industries Ltd. (GRASIM) - Chairman Speech

Company chairman speech

Dear Shareholders

Global Economy

The global scenario continues to be trapped in a low growth trajectory despite thesteep drop in crude oil and commodity prices. Furthermore a barrage of monetary stimulushas driven down interest rates close to zero in many of the advanced economies. With themonetary stimulus option by and large exhausted governments are more likely to turn tofiscal and structural measures to revive growth.

The IMF projects global growth to inch up from 3.1% in 2015 to 3.2% in 2016 andincreasing to 3.5% in 2017 Growth in the advanced economies is projected at 1.9% in 2016with US growth pegged at 2.4% Europe at 1.5% and Japan at 0.5%. Growth in the emergingmarkets in 2016 overall is projected at 4.1% much of it coming from China India andthe ASEAN region. Growth in Latin America is expected to be only 0.5% on account of a3.8% decline in growth in Brazil. No sustained upside is seen in oil and commodity pricesin 2016.

The path ahead for the global economy remains challenging with greater uncertaintiesthrown in. Concerns persist about the slowdown in China and its ability to shift smoothlyfrom export-led to domestic-led growth. Fiscal pressures will accentuate in the oilproducing countries including the rich Middle-East countries. Financial markets remainnervous and exchange rate volatility has been pronounced. This is reinforced by theimpending reversal of the interest rate cycle in the US.

Indian Economy

Against the backdrop of a muted global economy India's economy is an outperformer. For2016-17 GDP growth is projected at 7.5%. This would make it the fastest growing among thelarge economies. This is particularly creditable in the context of two successiveunfavourable monsoons and a decline in exports. Recent data indicate a 5.7% year-on- yeargrowth in eight of the key core sector industries against 2.3% growth registered lastyear.

Inflationary pressures have been contained. The rise in the consumer price indexaveraged 4.9% in 2015-16 down from 5.9% in the previous year. The wholesale price indexdeclined 2.5% on an averaged basis compared to a rise of 2.0% in the previous year. In2015-16 merchandise exports and imports each fell over 15% over 2014-15. The tradedeficit in 2015-16 was US$ 118.5 billion a decline of 14% over the previous year. Thecurrent account deficit narrowed sharply from US$ 26.1 billion to US$ 22.0 billionrepresenting 1.4% of GDP India's foreign exchange reserves as at March-end 2016 were US$360.2 billion. The government is also committed to meeting the current year's fiscaltarget of 3.5% of GDP Overall the economic fundamentals are sound.

There have also been positive moves on the policy front in areas related to ease ofdoing business promoting start-ups rationalising the tax structure and administrationand opening up more areas for foreign investment through the automatic route. Thegovernment is substantially stepping up infrastructure spending.

Having said that some issues come to the fore. For instance capital investment willtake time to revive given stretched corporate balance sheets low capacity utilization(at only 72.5% in the organized industrial sector) and competition from imports. Slowglobal output and trade growth will continue to impact exports. There is also the overhangof non-performing assets in the banking sector. Much more also needs to be done to"monsoon-proof" the Indian economy.

The growth in the manufacturing sector has been subdued including a decline in theoutput of capital goods. UltraTech too has faced headwinds. Construction activityincluding the housing sector has been running in slow gear. Regardless VSF and theChemicals sector have posted impressive results.

Your Company recorded consolidated revenues of US$ 5.6 billion (' 36637 crore) andEBITDA of US$ 1.1 billion (' 7025 crore) a rise of 24%.

Strategic initiatives

To ensure growth in both revenue and earnings a slew of strategic initiatives werelaunched during the year.

Aditya Birla Chemicals (India) Limited (ABCIL)

To strengthen your Company's existing portfolio of viscose staple fibre caustic sodaand allied chemicals Aditya Birla Chemicals (India) Limited (ABCIL) a leading ChlorAlkali Company was merged into Grasim. Consequently the Company's installed capacity ofcaustic soda has risen from 453K TPA to 804K TPA. Importantly the merger has resulted inthe geographical diversification of the Chlor Alkali business of the Company. It alsoenables the business to capitalize growth opportunities backed by Grasim's inherentstrengths. Grasim is the leading manufacturer of caustic soda in India - an input in themanufacturing of viscose staple fibre which is a major business of your Company.

Composite Scheme of Arrangement

The Boards of Directors of your Company Aditya Birla Nuvo Limited (ABNL) and AdityaBirla Financial Services Limited approved the merger of ABNL into your Company and thesubsequent demerger & listing of its financial services business through a compositescheme of arrangement.

The proposed restructuring will create one of India's largest well-diversifiedcompanies with a healthy mix of businesses with steady cash flows and long-term growthopportunities. With diverse businesses spanning manufacturing and services the combinedcompany provides a play on India's growth story. The demerger and listing of the financialservices business will unlock value for shareholders.

The proposed restructuring will create one of India's largest well-diversifiedcompanies with a healthy mix of businesses with steady cash flows and longterm growthopportunities. With diverse businesses spanning manufacturing and services the combinedcompany provides a play on India's growth story.

The demerger and listing of the financial services business will unlock value forshareholders.

Cement Business continues to march on growth path

UltraTech Cement Ltd. (UltraTech) the subsidiary of your Company entered into adefinitive agreement with Jaypee Group for the acquisition of Cement plants with anaggregate capacity of 21.2 Mn. TPA at an enterprise value of Rs. 16189 crore.

The proposed transaction is essentially a geographic market expansion which will leadto your Company's entry into growing markets of India. These include the Satna cluster inUttar Pradesh (East) and Madhya Pradesh (East) Himachal Pradesh Uttarakhand and coastalAndhra Pradesh. The operations will be strengthened by the consequent technologicalupgradation and enhancement in capacity utilization on a year-on-year basis. It will leadto creating synergies in manufacturing distribution and logistics. As a resultadvantages such as economies of scale and creation of efficiencies by reducing lead-timeto markets will be attained. Alongside it will enhance competitiveness benefitingconsumers and in turn creating value for shareholders by acquiring ready-to-use assets.

The transaction is subject to the approval of shareholders and creditors high courtsand all other regulatory approvals as may be required. We expect it to be consummatedwithin the next 12 months. Your Company's cement capacity then will stand augmented to91.1 Mn. TPA including its overseas operations.

It is with great pride I record that UltraTech is the largest cement player in Indiaand the 5th largest on the world stage.

Pulp & Fibre Business

Let me now move on to the Pulp & Fibre business' record this year. The businessachieved revenues of US$ 1.2 billion (' 7656 crore) up by 15% with an EBIDTA of US$ 167million ( Rs. 1093 crore).

The 120K TPA greenfield plant at Vilayat has been fully ramped up. Consequently salesvolumes have risen by 16% from 403K TPA to 467K TPA. Yet another success story is that ofthe LIVA brand. The response to LIVA has been extremely encouraging.

Chemical Business

The merger of ABCIL into Grasim has been a value accretive move. Revenue doubled to US$525 million (' 3436 crore) while EBIDTA soared by 156% to US$ 114 million (' 747 crore)buoyed by higher volumes and favourable markets.

The 120K TPA greenfield plant at Vilayat has been fully ramped up. Consequently salesvolumes have risen by 16% from 403K TPA to 467K TPA. Yet another success story is that ofthe LIVA brand. The response to LIVA has been extremely encouraging.

Going forward our growth plans include a 30% capacity expansion to scale up to 1048KTPA through brownfield expansion at your Company's Vilayat plant and partly through thedebottlenecking process. Additionally the thrust will be on veering our product portfoliotowards value-added products which deliver greater returns.

Cement

Your Company's cement business continues to move forward. The year witnessed yourCompany's cement capacity rising up to 6770 Mn. TPA with the commissioning of new assets.In response to the growing demand for building material your Company has commissionedcement grinding units at Jhajjar in Haryana and Dankuni in West Bengal. A cement bulkterminal went on stream at Pune in Maharashtra.

Furthermore with the addition of 26 MW waste heat recovery systems during the yearthe total waste heat recovery capacity is now 59 MW. Besides this your Company has a 717MW thermal power capacity both of which cater to more than 88% of its total powerrequirement.

In Chemicals the thrust will be on veering our product portfolio towards value-addedproducts which deliver greater returns.

Outlook

India is moving on to a higher growth trajectory and to that extent all of yourCompany's businesses: VSF chemicals and cement are all poised for a further pick-up ingrowth in FY 2016-17 Your Company has robust plans to proactively ride this next phase ofgrowth in India.

A big thank-you to all of our employees

We have achieved good results. This has been largely due to deft cost management aconcerted move towards on-streaming of new capacities focus on efficiency improvementproductivity and customer-centricity. Our employees have unflinchingly rallied around us.And for this I would say a big "thank you" to all of them.

The Aditya Birla Group: In perspective

At the Group level we have done well both in terms of revenue and earnings. As amatter of fact the EBIDTA attained has been the highest ever.

Having worked extensively on the people front for over a decade I am happy to statethat our leadership processes are now mature. At the management level we have builtquality bench strength.

The Chairman's Series launched last year for senior leaders in the areas of businessstrategy finance and personal leadership saw 150 of our senior most leaders recourse tothese learning interventions.

To create a leadership pipeline to the Business Head roles within the next couple ofyears we have created the Aditya Birla Fellows programme. The managers who have won thisrecognition are put in charge of critical Groupwide projects under my personal oversight.Up until now we have named 14 managers who have tremendous potential to rise to thestature of Business Heads going forward.

A slew of other initiatives have been set afoot to grow leaders from within. To do sowe have announced a hiring freeze at the middle and senior management levels for the next3 years. It paves the way for accelerated talent growth.

In this context I am happy to state that our accelerated leadership programme CuttingEdge which prepares high potential leaders for P&L positions across our Group isgaining traction. It was launched last year. Up until now 20 of the 35 graduates of thisprogramme have already moved roles to take on higher responsibilities.

Furthermore the 250+ youngsters who joined us over 6 years ago as Group ManagementTrainees in our Leadership Associate Programmes (Lead) and Leadership Programme forExperienced youngsters (Leap) are shaping well. In the last 2 years nearly a 100 fromthis slot have moved across functions and businesses. Additionally we have 25 midcareerparticipants who have joined us in the Group Manufacturing Leadership Programme.

They too are making significant contributions in our manufacturing business units.

The first batch of 14 participants in "Spring Board (a programme designedspecially for high calibre women) graduated commendably to higher roles. The second batchof 39 women leaders is making good progress on their way to greater responsibilities. Asof now we have nearly 5000 women - 14 per cent in the managerial cadre.

In the last 3 years we have had more than 1100 inter-business and over 1000intra-business transfers of employees across levels.

At Gyanodaya the Aditya Birla Global Centre for Leadership Learning over 2000managers enrolled for learning programmes. With a mix of academics and live case studiesthese programmes enable our people to keep abreast of the developments in their area andstay contemporary. Side by side the Gyanodaya Virtual Campus hosts more than 500e-learning modules in multiple languages. During the year over 25000 employees chose toaccess these programmes.

The Aditya Birla Group Leadership Programme aimed at securing young talent from the toptier Business Schools of India has become aspirational. I am happy to record that ourGroup's brand attractiveness has taken a quantum leap across 35 top B-Schools in India.Our Group features among the formidable Top- 5 in the AC Nielsen - CRI Campus RecruitmentIndia Index 2015.

In sum

All these moves are a testament to our commitment to accord a World of Opportunity forour people and they are leveraging it. Our people are fully aware of what business needsto succeed. They are committed to contribute their best to our value-based performancedriven meritocratic culture. We are future ready.

Yours sincerely

Kumar Mangalam Birla