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Grasim Industries Ltd.

BSE: 500300 Sector: Industrials
NSE: GRASIM ISIN Code: INE047A01021
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OPEN 1200.00
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VOLUME 304952
52-Week high 1299.90
52-Week low 639.67
P/E 48.04
Mkt Cap.(Rs cr) 77,248
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1200.00
CLOSE 1158.70
VOLUME 304952
52-Week high 1299.90
52-Week low 639.67
P/E 48.04
Mkt Cap.(Rs cr) 77,248
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Grasim Industries Ltd. (GRASIM) - Director Report

Company director report

Your Directors are pleased to present the 69th Annual Report of your Company along withthe Audited Financial Statements for the financial year ended 31st March 2016.

FINANCIAL HIGHLIGHTS

Rs. in Crores

consolidated

Standalone

2015-16 2014-15 2015-16 2014-15
Revenue from Operations (Net) 36636.88 32838.36 8979.60 6332.58
Earnings Before Interest Depreciation/Amortisation and Tax (EBITDA) 7025.49 5683.42 1860.47 1013.04
Less: Finance Costs 751.34 66739 147.40 39.33
Less: Depreciation and Amortisation 1910.96 1563.22 447.14 262.55
Profit Before Exceptional Items and Tax 4363.19 3452.81 1265.93 711.16
Exceptional Items (27.85) (9.46) (29.19) (26.24)
Profit Before Tax (PBT) 4335.34 3443.35 1236.74 684.92
Tax Expenses 1211.13 1015.92 283.47 155.02
Profit After Tax (PAT) 3124.21 2427.43 953.27 529.90
Add: Share in Profit/(Loss) of Associates 145.46 154.23 - -
Less: Minority Interest 910.52 83786 - -
Profit for the Year 2359.15 1743.80 953.27 529.90
Balance brought forward from Previous Year 552.75 166.46 1696.95 1545.04
Amount transferred from Aditya Birla Chemicals (India) Limited (ABCIL) as on 1st April 2015 pursuant to the Scheme of Amalgamation 362.33 362.33
Dilution of Stake in Joint Ventures/Associates - (6.26) - -
Depreciation Charged to Surplus* - (58.71) - (9.25)
Surplus Available for Appropriation 3274.23 1845.29 3012.55 2065.69

p Your Company's Standalone Revenue stood at Rs. 8980 Crore vis-a-vis _ Rs. 6333Crore in the previous year. g Net profit was at Rs. 953 Crore as against Rs. 530 Crore.

Consolidated

Standalone

2015-16 2014-15 2015-16 2014-15
Appropriations:
Special Reserve Fund 0.34 0.37 -
General Reserve 1405.10 954.52 500.00 200.00
Debenture Redemption Reserve 26.26 130.29 - -
Proposed Dividend 210.06 165.50 210.06 165.37
Dividend Distribution Tax 40.42 33.61 10.78 3.37
Legal Reserve - 0.15 - -
Share of Appropriation related to Associates 6.26 8.10 - -
Balance carried to Balance Sheet 1585.79 552.75 2291.71 1696.95
3274.23 1845.29 3012.55 2065.69

* Carrying value of the assets whose useful life is already exhausted as on 1st April2014 has been recognised in Surplus as per the Statement of Profit and Loss (Net ofDeferred Tax) as per Schedule II of the Companies Act 2013.

DIVIDEND

Your Directors have recommended a dividend of Rs. 22.50 per Equity Share of Rs. 10 eachfor the financial year ended on 31st March 2016. The dividend if approved by themembers would involve a cash outflow of Rs. 220.81 Crore (inclusive of DividendDistribution Tax).

TRANSFER TO RESERVES

Your Company proposes to transfer Rs. 500 Crore to General Reserves for the financialyear ended on 31st March 2016.

PERFORMANCE REVIEW

Your Company's Standalone Revenue stood at Rs. 8980 Crore vis-a-vis Rs. 6333 Crore inthe previous year. Net profit was at Rs. 953 Crore as against Rs. 530 Crore.

Your Company's Consolidated Revenue rose by 12% from Rs. 32838 Crore to Rs. 36637Crore. All the businesses have recorded good growth in volumes led by capacity expansionsand acquisitions. EBIDTA grew by 24% at Rs. 7025 Crore with improved performance from allthree businesses. Net profit for the year was at Rs. 2359 Crore as against Rs. 1744Crore in the last year.

In Viscose Staple Fibre (VSF) Business the demand for VSF has been growing at fasterrate in the last couple of years compared to overall fibre consumption globally. Growingprosperity in Asian countries and stagnant demand for cotton has contributed to thegrowth.

Vilayat plant which was commissioned in the FY 2014-15 attained full utilisation fromthe second quarter onwards. As a result sales volume rose by 16% as compared to theprevious year.

Your Company launched brand 'LIVA' for VSF-based products during the previous yearwhich met with good response from consumers. Your Company has been working closely withpartners across the textile value chain through LIVA Accredited Partner Forum (LAPF).These initiatives have led to higher usage of VSF in domestic market. Growth in exportmarkets was equally strong.

Revenue of VSF business increased by 21% from Rs. 4974 Crore to Rs. 6022 Crore;EBITDA doubled from Rs. 465 Crore to Rs. 924 Crore with higher volume stringent costcontrol and improvement in market conditions.

Pulp Joint Ventures (JVs) reported considerable improvement in financial performance.As against loss of Rs. 25 Crore (your Company's share) in the FY 2014-15 at EBITDA levelyour Company's share of profits (EBITDA) from these JVs was Rs. 158 Crore in the currentyear. Increase in realisation driven by depreciation of Canadian Dollar decline in woodcost and other input cost benefited the JVs.

In Chemical Business the demand for Caustic Soda in domestic markets grew by 8%during the year mainly on account of increase in demand from Alumina Paper and Textiles(Fibre) industries. There were no major capacity additions during the year leading tohigher capacity utilisation for the Chemical industry. Sales volume increased by 86% withadditional volumes on account of merger of erstwhile Aditya Birla Chemicals (India)Limited (ABCIL) with the Company. EBITDA grew by 156% from Rs. 292 Crore to Rs. 747 Croredriven by volumes and improved market condition. On a Like-for-Like basis EBITDA was upby 47% from Rs. 292 Crore to Rs. 428 Crore with increase in volume and realisation.

In Cement Business UltraTech Cement Limited (UltraTech) a Subsidiary of your Companyhas produced 50.57 Mn. Tons of cement against 46.71 Mn. Tons in the previous year. Cementand clinker combined sales volume increased by 7% from 48.17 Mn. Tons to 51.33 Mn. Tons.White cement and putty volumes were 13.12 LMT (12.24 LMT). UltraTech's net revenue was Rs.25552 Crore vis-a-vis Rs. 24340 Crore in the previous year. EBITDA for the year at Rs.5109 Crore is higher by 7% over the previous year. The operating margin remained rangebound.

STRATEGIC INITIATIVES

Your Company's strategic intent continues to be strengthening of its leadershipposition in the Viscose Staple Fibre (VSF) Chemical and Cement businesses.

In this regard significant progress has been made on its expansion/acquisition plans.

As the Management Discussion and Analysis Section which forms part of the AnnualReport focuses on your Company's strategies for growth and the performance review of thebusinesses/operations in depth we are providing only a brief overview of these matters inthis Report.

COMPOSITE SCHEME OF ARRANGEMENT

In line with the Group's philosophy of consolidating similar businesses yourdirectors at the Board meeting held on 11th August 2016 have approved a CompositeScheme of Arrangement between your Company Aditya Birla Nuvo Limited and Aditya BirlaFinancial Services Limited and their respective shareholders and creditors. The Scheme issubject to necessary statutory and regulatory approvals including those of the respectiveHigh Courts the Stock Exchanges SEBI and approval of the shareholders andlenders/creditors of each of the companies involved in the Composite Scheme ofArrangement.

The proposed restructuring will create one of the India's largest well diversifiedcompany with a healthy mix of businesses with steady cash flows and long term growthopportunities. The demerger and listing of the financial services business shall providethe shareholders of our company exposure to the fast growing financial services sector.The shareholders shall also benefit from the larger free float and enhanced liquidity ofthe combined company.

GROWTH PLANS IMPLEMENTED/INITIATED DURING THE YEAR ENDED 31ST MARCH 2016

AMALGAMATION OF ADITYA BIRLA CHEMICALS (INDIA) LIMITED WITH THE COMPANY

The Scheme of Amalgamation of Aditya Birla Chemicals (India) Limited ("ABCIL')with your Company was approved by the Shareholders the Hon'ble High Court of MadhyaPradesh the Hon'ble High Court of Jharkhand and other regulatory authorities and witheffect from 1st April 2015 (the Appointed Date) ABCIL stands merged with your Company.The Scheme has been made effective on 4th January 2016. With the merger of ABCIL withyour Company the Company's caustic soda capacity stands enhanced from 453 KTPA to 804KTPA. During the year ABCIL had also completed acquisition of Chlor Alkali Plant(capacity of 59 KTPA) of Jayshree Chemicals at Ganjam Odisha.

SALE OF CONSUMER PRODUCTS DIVISION

Your Company sold its Consumer Products Division (the Division) to Future ConsumerEnterprise Limited on a slump sale basis for a total consideration of Rs. 10.03 Crorew.e.f. 16th July 2015. The Division was engaged in the manufacture of Face Care WipesBaby Wipes and other products in the Baby/House Care segments and for the financial year2014-15 its net sale was at Rs. 9.53 Crore.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Companies Act 2013 (Act)read with the Companies (Accounts) Rules 2014 Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 [SEBI (LODR)] andAccounting Standard (AS)-21 on Consolidated Financial Statements read with AS-23 onAccounting for Investments in Associates and AS-27 on Financial Reporting of Interest inJoint Ventures the Audited Consolidated Financial Statements are provided in this Report.The Consolidated Financial Statements have been prepared on the basis of the AuditedFinancial Statements of your Company its subsidiary and associate companies as approvedby their respective Board of Directors.

SUBSIDIARIES ASSOCIATES AND JOINT VENTURE COMPANIES

The Board of Directors of UltraTech Cement Limited a Subsidiary of your Company("UltraTech") had approved acquisition of cement units of Jaiprakash AssociatesLimited ("JAL') in Bela and Sidhi in Madhya Pradesh having an aggregate capacity of4.9 MTPA. The effectiveness of the Scheme was inter alia subject to the sanction of theHon'ble High Court Bombay ("the High Court"). Accordingly a petition seekingsanction of the Scheme was filed by UltraTech in the High Court. During the course of thehearing the High Court indicated that based on existing provisions of the Mines andMinerals (Development and Regulation) Amendment Act 2015 ("the MMDR Act 2015)''only mining leases granted under an auction could be transferred. Since the mining leaseswhich form part of the business to be acquired by UltraTech from JAL were allotted to JALand not granted under an auction the same could not in terms of the MMDR Act 2015 betransferred to UltraTech. Under the circumstances UltraTech applied for the withdrawal ofthe Scheme filed before the High Court which was permitted.

The Central Government has since amended the MMDR Act 2015 which now provides anexception by permitting the transfer of mining leases used for captive purposes whichwere granted otherwise than through an auction.

In a separate development the Board of Directors of UltraTech at its meeting held on31st March 2016 approved the signing of definitive agreement(s) for the acquisition ofidentified cement plants of JAL in Madhya Pradesh Uttar Pradesh Himachal PradeshUttarakhand and Andhra Pradesh representing an aggregate capacity of 21.20 MTPA at anEnterprise Value of Rs. 16189 Crore. The transaction will be consummated by way of acourt-sanctioned scheme to be formulated at a later date. The acquisition is expected totake around 12 months to fructify as it is subject to applicable statutory/regulatoryapprovals.

During the year UltraTech commissioned the following assets and capacities:

- 26 MW Waste Heat Recovery Systems at different locations;

- 4.5 MTPA cement grinding capacity this includes Greenfield cement grinding capacityat Jhajjar in Haryana and Dhankuni in West Bengal and a 1.6 MTPA cement grinding unit atPataliputra in Bihar in April 2016; and

- 2.0 MTPA cement packing terminal at Pune in Maharashtra.

Aditya Birla Chemicals (Belgium) BVBA (ABCB) a subsidiary of erstwhile ABCIL hasbecome a subsidiary of the Company w.e.f. 1st April 2015 consequent to the merger oferstwhile ABCIL with the Company.

ABCB was incorporated on 24th December 2014 as a subsidiary of erstwhile Aditya BirlaChemicals (India) Limited with the objective to be involved in the process of packingrepackaging loading unloading refilling and the processing of all sorts of chemicalschemical products and their derivatives of any kind.

Being in the first year of operations ABCB has started making in-roads in the Europeanmarkets. ABCB will provide a base for further penetration of products like AluminiumChloride PAC CPW etc. in the European market.

AV Cell Inc. and AV Nackawic Inc. your Company's joint ventures amalgamated to form anew corporation i.e. AV Group NB Inc. with effect from 1st April 2016.

In accordance with the first proviso to Section 129(3) of the Act read with theCompanies (Accounts) Rules 2014 a statement containing salient features of the financialstatements of the subsidiaries associates and joint venture companies in Form AOC-1 isgiven in Annexure 'A' to this Report.

In accordance with the third proviso to Section 136(1) of the Act the Annual Report ofyour Company containing inter alia the audited standalone and consolidated financialstatements has been placed on the website of the Company www.grasim.com. Further the audited financialstatements along with related information and other reports of each of the subsidiarycompanies have also been placed on the website of the Company www.arasim.com.

In accordance with Section 136(2) of the Act the financial statements of thesubsidiary companies and related information are available for inspection by the Membersat the Registered Office of your Company during business hours upto the date of theAnnual General Meeting (AGM). Any Member desirous of obtaining a copy of the saidfinancial statements may write to the Company Secretary at the Registered Office of yourCompany.

During the year 2015-16 your Company has funded its subsidiaries from time to timeas per the fund requirements through loans and other means to meet working capitalrequirements.

In accordance with Regulation 30(4)(ii) of SEBI (LODR) the Company has framed a Policyfor Determining Material Subsidiaries which has been uploaded on the Company's website www.arasim.com.

SHARE CAPITAL

During the year 2015-16 your Company has allotted Equity Shares as under:

• 1461657 Equity Shares to the eligible shareholders of erstwhile ABCIL in theratio of 1 (one) Equity Share of Rs. 10/- each of the Company credited as fully paid upfor every 16 (sixteen) Equity Shares of Rs. 10/- each of ABCIL held by them on 15thJanuary 2016 (Record Date); and

• 32264 Equity Shares of Rs. 10/- each to the eligible employees pursuant to theexercise of stock options granted in terms of the Employees Stock Option Schemes of theCompany.

Consequently the paid up Equity Share Capital of the Company stood at Rs. 93.36 Crore.

During the year 2015-16 your Company has not issued shares with differential votingrights and sweat equity shares.

SUB-DIVISION OF EQUITY SHARES

The Board of Directors of your Company at its meeting held on 11th August 2016 hasapproved the sub-division of each Equity Shares of the Company having face value of Rs.10/- each fully paid-up into five Equity Shares of face value of Rs. 2/- each fullypaid-up.

The sub-division of shares which shall be subject to approval of the shareholders inthe ensuing AGM will result in change in the Authorized Share Capital of the Company from119500000 Equity Shares of Rs. 10/- each to 597500000 Equity Shares of Rs. 2/- each.Such sub-division has been undertaken with the view to increase the liquidity and enhancethe affordability of the Equity Shares of your Company. Consequently the existing Clause5 of the Memorandum of Association and Article 3 of the Articles of Association of theCompany will be amended to reflect the change in face value of each Equity Share from Rs.10 each to Rs. 2 each. Your Directors commend the Resolutions included in the Notice ofthis AGM for your approval.

DEPOSITS

During the year under review your Company has not accepted or renewed any Depositwithin the meaning of Section 73 of the Act read with the Companies (Acceptance ofDeposits) Rules 2014. Hence the requirement of furnishing details of deposits which arenot in compliance with Chapter V of the Act is not applicable.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

Pursuant to the provisions of Section 186(4) of the Act and SEBI (LODR) disclosures onparticulars relating to loans advances and investments are provided as part of theFinancial Statements. There are no guarantees issued or securities provided by yourCompany in terms of Section 186 of the Act read with the Companies (Meetings of Board andits Powers) Rules 2014.

MANAGEMENT'S DISCUSSION ANDANALYSIS REPORT

The Management's Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2)(e) of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 forms an integralpart of this Report.

CORPORATE GOVERNANCE

Your Directors re-affirm their continued commitment to best practices of CorporateGovernance. Corporate Governance principles form an integral part of the core values ofyour Company.

In terms of Regulation 34(3) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a separate report on CorporateGovernance along with a certificate from the Auditors' on its compliance forms anintegral part of this Report. Auditors' Certificate on Corporate Governance is set out in Annexure'B' to this Report.

BUSINESS RESPONSIBILITY REPORT

As per Regulation 34(2)(f) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a separate section on BusinessResponsibility Report describing the initiatives taken by your Company fromenvironmental social and governance perspective forms an integral part of this Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review the Board accepted the request of Mr. Adesh Kumar Guptafor an early retirement from the office of the Whole-Time Director and Chief FinancialOfficer with effect from the close of business hours on 30th June 2015. The Board placedon record its deep appreciation for the valuable contribution and services rendered by Mr.Gupta during his association spanning over three decades with the Group. During the yearunder review Mr. Gupta was paid sitting fees of Rs. 2.30 Lakh and commission of Rs. 1.00Lakh by UltraTech for attending its Board meetings. Barring this none of the managerialpersonnel of the Company is in receipt of remuneration/commission from the subsidiarycompanies of the Company.

As approved by the shareholders at the Annual General Meeting (AGM) held on 19thSeptember 2015 Mr. Sushil Agarwal (DIN: 00060017) was appointed as the Whole-TimeDirector and Chief Financial Officer of the Company for a period of five years witheffect from 1st July 2015. Mr. Sushil Agarwal joined the Group 27 years ago and has madesignificant contributions to the Group through his superior financial acumen unmatchedability to lead complex business issues ability to de-construct complexities andstimulate exceptional performance. Mr. Sushil Agarwal was conferred the Chairman'sOutstanding Leader Award in the year 2013.

Pursuant to the Group's Policy of rotation of senior leaders Mr. K. K. Maheshwari(DIN: 00017572) ceased to be the Managing Director of your Company with effect from theclose of business hours on 31st March 2016 and moved to UltraTech as its ManagingDirector with effect from 1st April 2016.

Mr. K. K. Maheshwari is a long-serving member of the Aditya Birla Group and has held avariety of roles across the Group and has multi-business multi-geography and hasmulti-cultural exposure. Over 31 years with the Group he has built extensive profit andcost centre experience in more than one Business. The Board placed on record its deepappreciation for the substantial contribution and services rendered by Mr. K. K.Maheshwari during his tenure with the Company as Managing Director.

Considering Mr. K. K. Maheshwari's (DIN: 00017572) immense contribution to the Companyover the years and in the interest of the Company the Board on the recommendation of theNomination and Remuneration Committee appointed him as an Additional Director of theCompany with effect from 1st April 2016. Mr. K. K. Maheshwari being an AdditionalDirector holds office upto the date of the ensuing Annual General Meeting (AGM) and iseligible to be appointed as a Director of the Company. The Company has received a noticefrom Mr. K. K. Maheshwari along with the requisite deposit signifying his candidature forappointment as a Director at the ensuing AGM. The resolution seeking Mr. K. K.Maheshwari's appointment has been included in the Notice of the AGM. Your Directorscommend the Resolution for your approval.

Subject to the approval of the shareholders the Board has on the recommendation ofthe Nomination and Remuneration Committee appointed Mr. Dilip Gaur (DIN: 02071393) as anAdditional Director and Managing Director of the Company for a period of five yearsw.e.f. 1st April 2016. As an Additional Director Mr. Dilip Gaur holds office upto thedate of the ensuing AGM and is eligible to be appointed as a Director of the Company. TheCompany has received a notice from Mr. Dilip Gaur along with the requisite depositsignifying his candidature for appointment as a Director at the ensuing AGM. Theresolutions seeking the appointment and remuneration of Mr. Dilip Gaur as Director andManaging Director w.e.f. 1st April 2016 have been included in the Notice of the AGM.Your Directors commend the Resolutions for your approval.

Mr. Arun Kannan Thiagarajan (DIN: 00292757) was appointed as an Additional Director andan Independent Director of the Company for a period of five consecutive years with effectfrom 7th May 2016 subject to the approval of the Members. Mr. Arun Kannan Thiagarajanbeing an Additional Director holds office upto the date of the ensuing AGM and iseligible to be appointed as a Director of the Company. The Company has received a noticein writing from Mr. Arun Kannan Thiagarajan along with the requisite deposit signifyinghis candidature for appointment as a Director at the AGM. The resolution seeking Mr. ArunKannan Thiagarajan's appointment has been included in the Notice of the AGM. YourDirectors commend the Resolution for your approval.

In accordance with the provisions of the Act and the Articles of Association of theCompany Mr. Shailendra K. Jain (DIN: 00022454) and Mrs. Rajashree Birla (DIN: 00022995)Directors of the Company will retire by rotation at the ensuing AGM and being eligiblehave offered themselves for re-appointment. Resolutions seeking their appointment havebeen included in the Notice of the AGM. Your Directors commend the Resolutions for yourapproval.

A brief resume of the Directors being appointed/re-appointed forms part of the Noticeof the ensuing AGM.

In terms of the provisions of Sections 2(51) and 203 of the Act read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 Mr. DilipGaur Managing Director Mr. Sushil Agarwal Whole-time Director and Chief FinancialOfficer and Mrs. Hutokshi Wadia President and Company Secretary are the Key ManagerialPersonnel (KMP) of your Company. The appointment and remuneration of Directors and KMPsare as per policy of your Company.

FORMAL ANNUAL EVALUATION

Pursuant to the provisions of the Act and SEBI (LODR) and in terms of the Framework ofthe Board Performance Evaluation the Nomination and Remuneration Committee and the Boardhave carried out an annual performance evaluation of its own performance the performanceof various Committees of the Board individual Directors and the Chairman. The manner inwhich the evaluation has been carried out has been set out in the Corporate GovernanceReport which forms an integral part of this Report. The details of the programme forfamiliarisation of the Independent Directors of your Company are available on theCompany's website www.arasim.com.

MEETINGS OF THE BOARD

During the year ended 31st March 2016 six Board Meetings were held on 2nd May 20157th August 2015 29th October 2015 18th December 2015 4th January 2016 and 30thJanuary 2016. Further details on the Board Meetings are provided in the CorporateGovernance Report forming part of this Annual Report.

DECLARATION OF INDEPENDENCE

Your Company has received declarations from all the Independent Directors of theCompany confirming that they meet the criteria of independence as prescribed under Section149(6) of the Act read with Schedules and the Companies (Appointment and Qualification ofDirectors) Rules 2014 and the SEBI (LODR).

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Sections 134(3)(c) and 134(5) of the Act in relation to the AuditedFinancial Statements of the Company for the year ended 31st March 2016 the Directors ofyour Company hereby state that:

a) in the preparation of the Annual Accounts the applicable accounting standards havebeen followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that period;

c) proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;

d) Annual Accounts have been prepared on a 'going concern' basis;

e) proper internal financial controls laid down by the Directors were followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

f) proper systems to ensure compliance with the provisions of all applicable laws arein place and that such systems were adequate and operating effectively.

AUDITORS AND AUDIT REPORTS STATUTORY AUDITORS

Presently M/s. G. P Kapadia & Co. Chartered Accountants (Registration No.104768W) and Deloitte Haskins & Sells LLP Chartered Accountants (Registration No.117366W / W-100018) are the Joint Statutory Auditors of the Company. Pursuant to theprovisions of the Act and the Companies (Audit and Auditors) Rules 2014 both theStatutory Auditors are due for rotation in the next AGM; i.e. 70th AGM. The Board ofDirectors on recommendation of the Audit Committee has decided to follow the rotation ofauditors in such a manner that both of the joint auditors do not complete their terms inthe same year.

At its meeting held on 7th May 2016 the Board has appointed BSR & Co. LLPChartered Accountants (ICAI Firm Registration No.101248W/W-100022) as the Joint StatutoryAuditors of the Company in place of Deloitte Haskins & Sells LLP Chartered Accountants(Registration No. 117366W/W-100018) the retiring Joint Statutory Auditors for a periodof five years i.e. to hold office from the conclusion of this AGM till the conclusion of74th AGM of the Company to be held in the year 2021 subject to the approval of theMembers at such remuneration as may be mutually agreed between the Board and BSR &Co. LLP M/s. G. P Kapadia & Co. will continue to hold office from the conclusion ofthis AGM till the conclusion of the next AGM of the Company. The Resolutions seeking theappointment and remuneration of the Statutory Auditors have been included in the Notice ofthe AGM. Your Directors commend the Resolutions for your approval.

Consent of the Auditors and certificate u/s 139 of the Act have been obtained from eachof the Auditors to the effect that their appointment/re-appointment if made shall be inaccordance with the applicable provisions of the Act and the Rules issued thereunder. Asrequired under the SEBI (LODR) M/s. G. P Kapadia & Co. and BSR & Co. LLP haveconfirmed that they hold a valid certificate issued by the Peer Review Board of ICAI.

The Board places on record its appreciation for the contribution of Deloitte Haskins& Sells LLP Chartered Accountants during their tenure as the Joint Statutory Auditorsof your Company.

The observations made by the Statutory Auditors on the Financial Statements of theCompany in their Report for the financial year ended 31st March 2016 read with theexplanatory notes therein are self-explanatory and therefore do not call for anyfurther explanation or comments from the Board under Section 134(3)(f) of the Act. TheAuditors' Report does not contain any qualification reservation or adverse remark ordisclaimer.

COST AUDITORS

Pursuant to the provisions of Section 148 of the Act read with the Companies (CostRecords and Audit) Rules 2014 as amended your Board at its meeting held on 7th May2016 has on the recommendation of the Audit Committee appointed M/s. D. C. Dave &Co. Cost Accountants Mumbai as the Cost Auditors in place of M/s. R. Nanabhoy &Co. Cost Accountants Mumbai to conduct the audit of the cost records of the Company forthe financial year 2016-17 at a remuneration of Rs. 750 Lakh (Rupees Seven Lakh FiftyThousand Only) plus applicable taxes and reimbursement of out-of-pocket expenses. YourCompany has received consent from M/s.D. C. Dave & Co. Cost Accountants to act asthe Cost Auditors of your Company for the financial year 2016-17 along with a certificateconfirming their independence.

As required under the Act the remuneration payable to the Cost Auditor is required tobe placed before the Members at the AGM for their ratification. Accordingly a Resolutionseeking Members ratification for the remuneration payable to Cost Auditors is included inthe Notice convening the AGM. The Members are requested to ratify the remuneration payableto the Cost Auditors for 2016 -17

Your Company has filed the Cost Audit and Compliance Report for financial year 2014-15with the Government.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hadappointed M/s. BNP & Associates Company Secretaries Mumbai to conduct thesecretarial audit for the financial year 2015-16. The Secretarial Audit Report issued byM/s. BNP & Associates Company Secretaries for the financial year 2015-16 forms partof this Report and is set out in Annexure 'C' to this Report. The SecretarialAudit Report does not contain any qualification reservation or adverse remark.

DISCLOSURES

EXTRACT OF ANNUAL RETURN

In accordance with the provisions of Section 134(3)(a) of the Act an extract of theAnnual Return of the Company for the financial year ended 31st March 2016 is given in Annexure'D' to this Report.

RELATED PARTY TRANSACTIONS

During the financial year under review all contracts/ arrangements/transactionsentered into by your Company with Related Parties were on arm's-length basis and in theordinary course of business. There were no transactions with Related Parties whichqualify as material transaction under the SEBI (LODR). Prior approval of the AuditCommittee of your Company has been obtained for all Related Party Transactions.

Since all the contracts/arrangements/transactions with Related Parties during the yearunder review were in the ordinary course of business and at arm's-length and were notconsidered material disclosure in Form AOC-2 under Section 134(3)(h) of the Act readwith the Companies (Accounts of Companies) Rules 2014 is not applicable. The details ofcontracts and arrangement with Related Parties of your Company for the financial yearended 31st March 2016 are given in Note 4.5 to the Standalone Financial Statementsforming part of this Annual Report.

The Policy on Related Party Transactions as approved by the Board is available onyour Company's website www.arasim.com.

RISK MANAGEMENT

Your Company recognises that Risk is an integral part of business and is committed tomanaging the risk in a pro-active and efficient manner. Your Company's Risk ManagementCommittee periodically assesses the risk in the internal and external environment alongwith the cost of mitigating risk and incorporates Risk Mitigation Plans in its strategybusiness and operation plans. Your Company has a comprehensive risk managementpolicy/framework which is reviewed by the Risk Management Committee. More details on riskmanagement are covered in the Management Discussion and Analysis forming part of thisAnnual Report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

Your Company has established a robust Vigil Mechanism for reporting of concerns throughthe Whistle Blower Policy of the Company which is in compliance of the provisions ofSection 177 of the Act read with Rule 7 of the Companies (Meetings of Board and itsPowers) Rules 2014 and SEBI (LODR). The Policy provides for framework and processwhereby concerns can be raised by its employees against any kind of discriminationharassment victimisation or any other unfair practice being adopted against them.Adequate safeguards are provided against victimisation to those who avail of themechanism and access to the Chairman of the Audit Committee in exceptional cases isprovided to them. The details of the Vigil Mechanism are also provided in the CorporateGovernance Report and the Whistle Blower Policy has been uploaded on the website of theCompany www.grasim.com.

CORPORATE SOCIAL RESPONSIBILITY

In terms of the provisions of Section 135 of the Act read with the Companies(Corporate Social Responsibility Policy) Rules 2014 the Board of Directors of yourCompany has constituted a Corporate Social Responsibility (CSR) Committee which ischaired by Mrs. Rajashree Birla. The Committee has formulated and recommended to the Boarda Corporate Social Responsibility Policy (CSR Policy) indicating the activities to beundertaken by the Company which has been approved by the Board and the same is availableon your Company's website www.grasim.com.

The Company is a caring corporate citizen and lays significant emphasis on developmentof the host communities around which it operates. The Company with this intent hasidentified several projects relating to Social Empowerment and Welfare InfrastructureDevelopments Sustainable Livelihood Health Care and Education during the year andinitiated various activities in the neighbouring villages around its plant locations. Thework on several initiatives has picked up momentum during the year resulting in a spendof Rs. 15.05 Crore (1.90% of the average net profits of the last 3 years as defined forthe purposes of CSR). The Company has identified promotion and development of handloomhandicrafts and related projects which were started last year and will be intensified inthe current year.

The Annual Report on CSR activities is given in Annexure 'E' to this Report.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

Information relating to the conservation of energy technology absorption and foreignexchange earnings and outgo as stipulated under Section 134(3)(m) of the Act read withthe Companies (Accounts) Rules 2014 is given in Annexure 'F' to this Report.

INTERNAL FINANCIAL CONTROLS

The Internal Financial Controls designed and implemented by the Company arecommensurate with the size of its operations. During the year under review no material orserious observation has been received from the Auditors of the Company citing inefficiencyor inadequacy of such controls.

REMUNERATION POLICY

The Board has on the recommendation of the Nomination and Remuneration Committeeformulated the Remuneration Policy of your Company which is given in Annexure 'G' tothis Report. This Policy is available on the Company's website www.arasim.com.

COMMITTEES OF THE BOARD AUDIT COMMITTEE

The Board has constituted an Audit Committee comprising of Mr. B. V. Bhargava Mr. R.C. Bhargava Mr. M. L. Apte and Mr. Arun Kannan Thiagarajan as its members. The ManagingDirector and Whole-time Director and Chief Financial Officer are the permanent invitees tothe meetings of the Audit Committee. Further details relating to the Audit Committee areprovided in the Corporate Governance Report forming part of this Annual Report.

All the recommendations made by the Audit Committee during the year were accepted bythe Board of Directors of the Company.

NOMINATION AND REMUNERATION COMMITTEE

The Board has constituted a Nomination and Remuneration Committee comprising of Mr. M.L. Apte Mr. Cyril Shroff and Mr. Kumar Mangalam Birla as its members. Further detailsrelating to the Nomination and Remuneration Committee are provided in the CorporateGovernance Report forming part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Board has constituted a Corporate Social Responsibility Committee comprising ofMrs. Rajashree Birla Mr. B. V. Bhargava Mr. Shailendra K. Jain Mr. K. K. Maheshwari(upto 31st March 2016) and Mr. Dilip Gaur (w.e.f. 1st April 2016) as its members. Dr.Pragnya Ram Group Executive President Corporate Communication and CSR is a permanentinvitee to the Committee. Further details relating to the Corporate Social ResponsibilityCommittee are provided in the Corporate Governance Report forming part of this AnnualReport.

STAKEHOLDERS' RELATIONSHIP COMMITTEE

The Board has constituted a Stakeholders' Relationship Committee comprising of Mr. B.V. Bhargava Mr. M. L. Apte Mr. Cyril Shroff Mr. Adesh Kumar Gupta (upto 30th June2015) and Mr. Sushil Agarwal (w.e.f. 7th August 2015) as its members. Further details ofthe Stakeholders' Relationship Committee are provided in the Corporate Governance Reportforming part of this Annual Report.

RESEARCH AND DEVELOpMENT

While continuing to build our technology capabilities during the financial year2015-16 your Company turned most of its efforts to executing a portfolio of technologyprojects aimed at addressing competitive market challenges in the areas of productquality cost reduction and new product offerings.

PULP AND FIBRE BUSINESS PROGRAMME PORTFOLIO

The state-of-the-art clonal sapling facility has produced in excess of 5 millionsaplings during the year and expects to double the output in the next year. This willcontribute to ensuring pulpwood availability for long-term sustainability and meeting theever growing demand for high quality saplings from the farming community. It also aids inmaking farm forestry an attractive and sustainable land use option to improve theproductivity and profitability of pulpwood plantations.

All Pulp and Fibre lines have shown continuous process improvements as reflected inFirst Pass Yield (FPY) parameters introduced as part of the Six Sigma-based techniques toimprove product quality. FPY measurement systems are being further strengthened and plansare being developed to initiate statistical process control for several FPY parameters.This effort has resulted in the continuous improvement of our customers' processingexperience. Uptime metrics are being institutionalised at all units to provide nameplatecapacity at intended design conditions and to identify chronic mechanical deficiencies.

Reducing raw material and energy consumption continue to be the focus areas forreductions in overall production costs in the existing processes. Implementation of theimprovements such as R&D-led advances in raw material utilisation developed using thenew Fibre Research Centre (FRC) facility has been strengthened across all Plant sites.Ongoing efforts to utilise waste heat and reduce steam consumption are expected to lead tosignificant savings in coal consumption. Technical support to the new plant at Vilayat wasinstrumental in stabilising the production capacity and product quality. Development ofvalue added products has been a new focus area and initial candidates are being scaled-upfor commercial implementation. Development of new additives and finishes are enhancingproduct fibre friction behaviour leading to improvements in yarn spinning performance. TheTextile Research and Applications Development Centre (TRADC) has significantly enhancedits business development support through its creation of innovative new fabric collectionssupporting today's fashion trends.

The in-house technology development initiative for the Excel project an alternativefibre process concept with superior environmental performance gained significantmomentum. Several new technology components were demonstrated at pilot scale to upgradethe current process and significantly improve the product quality and operationalefficiency. The learnings from in-house development work and collaboration with externalknowledge networks are being continuously implemented in the existing operations toachieve improved business performance and growth.

ENABLING OAPABiLiTiES

At your Company's joint venture Domsjo's Pulp R&D Team is improving process andpulp performance. New additive technologies and their delivery systems are expected toimprove viscose uniformity and lower costs. In addition new production grades are leadingto increased sales to high value diversified applications. The Pulp and Fibre InnovationCentre (PFIC) at Taloja and the Birla Research Institute (BRI) are continuing to developtheir bench-scale capabilities to expand the pipeline of new high-value product conceptsand improved processes. Collaborative support from Aditya Birla Science & TechnologyCompany Private Limited (ABSTCPL) has enabled the programmes by drawing on their advancedfacilities and skills in areas such as analytical science materials process and designengineering modelling and control technologies. The TRADC organisation at Kharachdrawing on their fibre processing capabilities and outside partnerships with technicalinstitutes are expanding their work to develop new applications for cellulose fibres insupport of continued market growth.

The technology talent pool has been increasing with the addition of skilled R&Dprofessionals with diverse backgrounds capabilities and experience. Your Company now hasa core team of R&D professionals contributing to important technology programmes andinitiatives. External knowledge networks continue to be expanded to complement internalcapabilities and are actively contributing to advanced technologies in the areas ofcellulose pulp and novel new fibres. In summary significant contributions are beingrealised from the technology investments made over the last 3-4 years and work continuesto further improve the programme portfolio and its execution to fully support theoperations and marketing objectives for the Pulp and Fibre business.

CHEMICAL BUSINESS

The Company's Chemical business is committed for the development of technology newproducts processes improvements energy conservation and environment protection. Theobjective is to address competitive market challenges in the areas of Product QualityCost Reduction and new Product Offerings.

VALUE ADDED PRODUCTS FROM CHLORINE IN THE FIELD OF WATER AND WASTE WATER TREATMENT:

The Company is making various blends of PAC like high basicity PAC PAC tabletscationic absorbent etc. based on customer requirement. Also the Company is developingnew applications for handling waste water from dye industry pulp and paper industry andcoal washery.

In Chlorinated Paraffin range of products the Company has developed Viscosity modifierto bring down viscosity without compromising on other performance parameters which helpedin penetrating new markets.

CHEMICAL DISTRIBUTION BUSINESS:

In the newly established specialty chemicals distribution business the Company hasundertaken product development/ application development activities in various segmentsalong with customers. In Insulators segment the Company has completed trials on Siliconesfor latest generation of polymeric insulators used in transmission and distribution. InTelecommunication segment the Company has developed Silicone gel with low viscosity forreducing air entrapment used in telecommunication cables. In medical segment the Companyhas commercialised medical insoles for customers with very low hardness which helps todistribute the weight and gets recommended for diabetic patients. In automobile segment wehave also commercialised anti-blooming additive for coolant hoses.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICHHAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THE FINANCIAL STATEMENTRELATES AND THE DATE OF THE REpORT

Except as disclosed elsewhere in this Report no material changes and commitmentswhich could affect the Company's financial position have occurred between the end of thefinancial year of the Company and the date of this Report.

PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 197(12) of the Act read with Rules 5(2)and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the names and other particulars of employees drawing remuneration in excess of thelimits set off in the aforesaid Rules including any statutory modification(s) orre-enactment(s) thereof for the time being in force are to be set out in the Board'sReport as an annexure thereto. In line with the provisions of Section 136(1) of the Actthe Report and Accounts as set out therein are being sent to all Members of your Companyexcluding the aforesaid information about the employees. Any Member who is interested inobtaining these particulars about employees may write to the Company Secretary at theRegistered Office of your Company. The aforesaid addendum is also available for inspectionby the members at the Registered Office of the Company from 21 days before the AGM tillthe date of the ensuing AGM during business hours on working days.

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are given in Annexure 'H' to this Report.

EMPLOYEE STOCK OPTION SCHEMES (ESOS)

The Company has Employee Stock Option Scheme-2006 (ESOS-2006) and Employee Stock OptionScheme-2013 (ESOS-2013) which provides for grant of Stock Options and/ or Restricted StockUnits (RSUs) to eligible employees of the Company.

The Shareholders have approved ESOS-2006 through postal ballot on 20th January 2007and ESOS-2013 at the 66th Annual General Meeting of the Company held on 17th August 2013.

The details of Employee Stock Options granted pursuant to ESOS-2006 and the EmployeeStock Options and RSUs granted pursuant to ESOS-2013 as also the other disclosures incompliance with the provisions of the Securities and Exchange Board of India (EmployeeShare Based Employee Benefits) Regulations 2014 are available on the Company's website www.arasim.com.

A certificate from the Statutory Auditor on the implementation of your Company'sEmployees Stock Option Schemes will be placed at the ensuing AGM for inspection by theMembers.

HUMAN RESOURCES

Your Company believes that its knowledge capital will drive growth and profitability.Your Company enjoys a strong brand image as a preferred and caring employer. The ongoingfocus is on attracting retaining and engaging talent with the objective of creating arobust talent pipeline at all levels. We also worked to strengthen the 'World ofOpportunities' employee positioning initiatives like a hiring freeze at some levelsrobust talent review career development conversations and best- in-class developmentopportunities will help enhance the employee experience at your Company.

The Group's Corporate Human Resources plays a critical role in your Company's talentmanagement process.

AWARDS AND ACCOLADES

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

Birla cellulosic Kharach (Pulp & fibre)

• "Best-in-Class - Manufacturing" category Award by World QualityCongress & Awards in July 2015

• "Manufacturing Today" Award (Runner-up) for Excellence in Operations2015 in September 2015.

• Prestigious Sustainability-focused Green Manufacturing Excellence Awards 2015challengers award large business by Frost & Sullivan in May 2015

• 5th Annual Green-Tech CSR Award 2015 — Gold Award in Chemical Sector forOutstanding Achievement in CSR

Marketing and Business Development Division Vadodara (Pulp and Fibre)

• The Synthetic Rayon Textiles Export Promotion Council — Export Award —Silver Award for Overall Exports Performance

• Make-in-India Award for Excellence in the Textiles Category renukoot(chemical)

• National Energy Conservation Award for Energy Conservation in the Chlor AlkaliSector in 2015 by Ministry of Power New Delhi

• Gold Award in Chemical Sector for Outstanding

Achievement in Environment Management at 16th Annual Greentech Environment Awards 2015

• Gold Award in Chemical Sector for Outstanding

Achievement in CSR at 5th Annual Greentech CSR Awards 2015

Rehla (chemical)

• FACE (Foundation for Accelerated Community

Empowerment) Rastra Vibhushan Award (Gold Category)2015 in Community Development onOutstanding Contribution for National Economic & Social Development

GENERAL

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

- Issue of equity shares with differential rights as to dividend voting or otherwise;

- Issue of shares (including sweat equity shares) to employees of the Company under anyScheme save and except ESOS referred to in this report;

- There were no revisions in the financial statements;

- No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and the Company's operations in thefuture; and

- No cases or complaints were received pursuant to the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013.

ACKNOWLEDGEMENTS

Your Directors express their deep sense of gratitude to the banks financialinstitutions stakeholders business associates Central and State Governments and allregulatory bodies for their co-operation and support and look forward to their continuedsupport in future.

We very warmly thank all of our employees for their contribution to your Company'sperformance. We applaud them for their superior levels of competence dedication andcommitment to your Company.

For and on behalf of the Board

Kumar Mangalam Birla
Chairman
Mumbai 11th August 2016 (DIN: 00012813)

AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE

TO THE MEMBERS OF GRASIM INDUSTRIES LIMITED

We have examined the compliance of the conditions of Corporate Governance by GrasimIndustries Limited for the year ended on March 31 2016 as stipulated in Chapter IV ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 ("SEBI Regulations") and Clause 49 of the Listing Agreementof the said Company with Stock Exchanges.

The compliance of the condition of Corporate Governance is the responsibility of theManagement. Our examination was limited to procedures and implementations thereof adoptedby the Company for ensuring the compliance of the conditions of Corporate Governance. Itis neither an audit nor an expression of opinion on the financial statements of theCompany.

In our opinion and to the best of our information and according to the explanationsgiven to us and the representations made by the Directors and the Management we certifythat the Company has complied with the conditions of Corporate Governance as stipulated inthe provision as specified in Chapter IV of SEBI Regulations and Clause 49 of the ListingAgreement of the said Company with Stock Exchanges.

We state that such compliance is neither an assurance. as to the future viability ofthe Company nor the efficiency or effectiveness with which the Management has conductedthe affairs of the Company.

For G. P Kapadia & Co.

Chartered Accountants

(Registration No. 104768W)

Atul B. Desai

Partner

Membership No. 30850

Place: Mumbai

Date: 11th August 2016