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BSE: 500300ISIN: INE047A01021INDUSTRY: Diversified

BSE   ` 1000.20   Open: 982.00   Today's Range 982.00
1007.30
+12.10 (+ 1.21 %) Prev Close: 988.10 52 Week Range 915.00
1299.90
Year End :2017-03 

TO THE MEMBERS OF GRASIM INDUSTRIES LIMITED

The Directors are pleased to present the 70th Annual Report of your Company along with the Audited Financial Statements for the financial year ended 31st March 2017.

FINANCIAL HIGHLIGHTS

(Rs. in Crores)

Consolidated

Standalone

2016-17

2015-16

2016-17

2015-16

Revenue from Operations

40,247.17

38,535.01

11,252.95

9,778.40

Earnings Before Interest, Depreciation/ Amortisation and Tax (EBITDA)

8,332.91

7,066.05

2,628.70

1,851.13

Less: Finance Costs

702.40

718.09

57.62

147.40

Less: Depreciation and Amortisation

1,807.59

1,833.79

446.14

444.89

Profit Before Share in Profit/(Loss) of Equity Accounted Investees, Exceptional Items and tax

5,822.92

4,514.17

2,124.94

1,258.84

Share in Profit/(Loss) of Equity Accounted Investees

129.40

193.02

-

-

Exceptional Items

-

(27.85)

-

(29.19)

Profit Before Tax (PBT)

5,952.32

4,679.34

2,124.94

1,229.65

Tax Expenses

1,706.71

1,224.60

564.94

259.01

Profit After Tax including Share in Profit/(Loss) of Equity Accounted Investees

4,245.61

3,454.74

1,560.00

970.64

Attributable to:

Shareholders of the Company

3,167.30

2,468.14

1,560.00

970.64

Non-Controlling Interest

1,078.31

986.60

-

-

Other Comprehensive Income (Net of Tax)

963.44

221.69

1,011.53

91.82

Total Comprehensive Income for the Year

5,209.05

3,676.43

2,571.53

1,062.46

Attributable to:

Shareholders of the Company

4,118.78

2,678.12

2,571.53

1,062.46

Non-Controlling Interest

1,090.27

998.31

-

-

Retained Earnings: Opening Balance

2,109.82

914.34

2,604.32

1,938.58

Transferred from ABCIL as on 1st April, 2015 pursuant to the Scheme of Amalgamation

-

362.33

-

362.33

Profit for the Year

3,167.30

2,468.14

1,560.00

970.64

Re-measurement of Defined Benefits Plan

(18.17)

(0.11)

(8.61)

2.52

Loss on sale of Non-Current Investments transferred to Retained Earnings from Equity Instrument through Other Comprehensive Income

(1.02)

(1.02)

Other adjustments related to an Associate

(52.65)

(2.72)

-

-

Dilution of Stake in a Subsidiary and Associate

(1.86)

-

-

-

Surplus Available for Appropriation

5,204.44

3,740.96

4,155.71

3,273.05

Appropriations:

Reserve Fund

0.69

0.34

-

-

General Reserve

1,704.56

1,405.10

500.00

500.00

Dividend Paid (including Corporate Dividend Tax)

253.20

198.77

220.84

168.73

Debenture Redemption Reserve

(53.77)

26.93

-

-

Legal Reserve

0.63

-

-

Retained Earnings: Closing Balance

3,299.13

2,109.82

3,434.87

2,604.32

The financial statements have been prepared in accordance with Ind AS, notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended by the Companies (Indian Accounting Standards) (Amendment) Rules, 2016, the relevant provisions of the Companies Act, 2013 (‘the Act’), and guidelines issued by the Securities and Exchange Board of India (‘SEBI’). The date of transition to Ind AS is 1st April 2015.

DIVIDEND

Your Directors have recommended a dividend of Rs.5.50 (Rupees Five and Paise Fifty Only) per equity share of Rs.2 each of the Company for the financial year ended 31st March 2017. The dividend, if approved by the members, would involve a cash outflow of Rs.401.47 Crore (inclusive of Dividend Distribution Tax).

In terms of the provisions of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, your Company has formulated a Dividend Distribution Policy. This Policy is given in Annexure ‘A’ to this Report and is also accessible at your Company’s website, www.grasim.com.

TRANSFER TO RESERVES

Your Company proposes to transfer Rs.500 Crore to the General Reserves.

PERFORMANCE REVIEW

Your Company recorded Standalone Revenue of Rs.11,253 Crore, 15% higher from Rs.9,778 Crore in the previous year. Net Profit for the year at Rs.1,560 Crore, increased by 60.71 % from Rs.971 Crore in the previous year.

With improved performance of all the three businesses, EBIDTA grew by 18% to Rs.8,333 Crore from Rs.7,066 Crore in the previous year. Your Company’s Consolidated Revenue increased to Rs.40,247 Crore from Rs.38,535 Crore in the previous year. Net Profit increased to Rs.3,167 Crore from Rs.2,468 Crore in the previous year.

Globally, the demand for Viscose Staple Fibre (VSF) has been growing at a faster rate as compared to other fibres, and is expected to continue to grow at healthy pace. In India, high value currency replacement programme temporarily impacted down stream players in textile value chain. Thus, the demand for VSF witnessed a slowdown, particularly from power loom sector. However, your Company was able to do higher export sales of VSF to mitigate the slowdown in domestic off take.

Sales volume of the Company increased by 6%, led by higher share of speciality fibre, which increased from 33% in FY 16 to 36% in FY 17. Improved productivity at various plants led to reduction in consumption of power, steam and caustic soda. Higher realisation and improvement in operating efficiencies resulted in surge in EBITDA, which went up by 56% from Rs.923 Crore to Rs.1,439 Crore, negated to some extent by increase in pulp cost. EBITDA margin was 20% in the current financial year as against 15% in the last financial year.

Sustainability is the key focus area for the Company Significant reduction of more than 20% in water consumption was achieved by Quarter 4 compared to average consumption of FY 16.

The Company’s Liva brand for VSF-based products is making strong foothold in women’s wear market. Liva Creme, a premium version of brand Liva, was launched during the year, to cater to the niche market. It has established strong market presence with leading customers, and is helping expand market for speciality fibre in India.

The joint venture companies (JVs) engaged in Pulp and Fibre business, reported considerable improvement in financial performance. As against a PAT (Grasim’s share) of Rs.63 Crore in FY 16, these JVs have contributed a PAT of Rs.138 Crore during the current year. Higher pulp realisation and volumes coupled with improvement in consumption norms of various inputs led to rise in operating profit.

Chemical business reported an increase of 11% in sales revenue and EBITDA increased by 13% over the previous year. Capacity utilisation was high at 93%. Sales volume was up by 2%. The impact of higher energy cost was offset by reduction in power consumption and decline in salt and other raw material cost. Steady growth of chlorine derivative products eased the pressure on chlorine offtake to a great extent. The chlorine derivatives business also provides good growth opportunity in the exports market. Business achieved significant progress in the areas of water treatment chemicals, plasticisers and other industrial products.

In Cement business, UltraTech Cement Limited (UltraTech), a subsidiary of your Company, has completed the acquisition of the cement plants of Jaiprakash Associate Ltd. and Jaiprakash Cement Corporation Ltd., located in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh, with a total capacity of 21.20 MTPA at an enterprise value of Rs.16,189 Crore, in June 2017. During the year under review, cement capacity was augmented to 66.25 MTPA, following the commissioning of the grinding unit at Patliputra in Bihar. Cement production improved marginally from 47.56 MTPA in the previous to 47.91 MTPA. Capacity utilisation clocked 72% on a higher capacity base. Domestic sales volume rose marginally from 47.13 MMT to 47.62 MMT vis-a-vis a marginal dip in industry volume for the year.

STRATEGIC INITIATIVES

The Management Discussion and Analysis Section, which forms part of the Annual Report, focuses on your Company’s strategies for growth and the performance review of the businesses/operations in depth.

COMPOSITE SCHEME OF ARRANGEMENT

Vide its Order dated 1st June 2017, the National Company LawTribunal, Bench at Ahmedabad (NCLT), has sanctioned the Composite Scheme of Arrangement between your Company and Aditya Birla Nuvo Limited (ABNL) and Aditya Birla Financial Services Limited (now known as Aditya Birla Capital Limited) (ABCL) (Scheme). With effect from 1st July 2017 (the Effective Date 1), ABNL along with its assets, liabilities, contracts, employees, etc., stands amalgamated with and be vested in your Company, as a going concern so as to become the assets, liabilities, etc., of your Company, in the manner provided in the Scheme. With effect from 4th July 2017, (the Effective Date 2), the financial services business of your Company stands transferred to and vested in ABCL.

With the amalgamation becoming effective, ABCL and its subsidiaries have become the subsidiary companies of your Company.

The restructuring, in terms of the Scheme, has enabled your Company to extend its presence to the fast growing sectors such as financial services and telecom, and enhance longterm value for the shareholders. This will also enable ABCL to grow faster under your Company’s strong parentage, and is expected to improve its credit profile and reduce its cost of borrowings, thereby enhancing its competitive positioning. The merger has also led to consolidation of similar businesses of your Company and ABNL.

Your Company and ABCL are in the process of completing the formalities relating to allotment of shares of their respective Companies and listing the same.

CORPORATE ACTIONS PLANS IMPLEMENTED/ INITIATED DURING THE YEAR ENDED 31ST MARCH, 2017

The following developments/actions have taken place during the year ended 31st March 2017:

a. Sub-division of equity shares of your Company from one equity share of the face value of Rs.10/- each fully paid up to five equity shares of the face value of Rs.2/each fully paid-up;

b. Increase in investment limit for registered foreign portfolio investors/foreign institutional investors from 24% to 30% in your Company. (Approval received from Reserve Bank of India on 13th April 2017, for increase in the limit to 49%).

c. The Board of Directors of your Company has adopted Dividend Distribution Policy.

d. The Board of Directors of Idea Cellular Limited (Idea) had at their meeting, held on 20th March 2017, approved the merger of Vodafone India Limited and Vodafone Mobile Services Limited with Idea, subject to receipt of necessary approvals.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act, 2013 (Act), read with the Companies (Accounts) Rules, 2014, SEBI (LODR), and Ind AS 110 - Consolidated Financial Statements and Ind AS 28 - Investment in Associates and Joint Ventures, the Audited Consolidated Financial Statements are provided in this Report. The Consolidated Financial Statements have been prepared on the basis of the Audited Financial Statements of the Company, its subsidiaries, joint ventures and associate companies, as approved by their respective Board of Directors.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

a. With effect from 1st April 2016, AV Cell Inc. and AV Nackawic Inc., the joint venture companies of your Company amalgamated and formed a new company, namely, AV Group NB Inc., Canada. Your Company holds 45% of the paid-up equity share capital of AV Group NB Inc., same as it held in each of AV Cell Inc. and AV Nackawic Inc.

b. With effect from 15th July 2016, the paid-up share capital of Aditya Birla Elyaf Sanayi Ve Ticaret Anonim Sirketi, Turkey, stood reduced to TL 5,00,000 from TL 6,00,00,000. The Company received a sum of Rs.56.20 Crore, on account of such reduction. Your Company continues to hold 33.33% of the paid-up share capital of Aditya Birla Elyaf Sanayi Ve Ticaret Anonim Sirketi.

c. On 20th March 2017, your Company executed Agreements, as Promoters of Idea Cellular Limited, in respect of the proposed merger of Vodafone India Limited and Vodafone Mobile Services Limited with Idea Cellular Limited.

With effect from 1st July 2017, the subsidiary companies of the erstwhile Aditya Birla Nuvo Limited have become the subsidiaries of your Company.

In accordance with the provisions of Section 129(3) of the Act, read with Rule 5 of the Companies (Accounts) Rules, 2014, a report on the performance and financial position of each of the subsidiaries, associates and joint venture companies is given in Annexure ‘B’ to this Report.

In accordance with the provisions of Section 136(1) of the Act, the Annual Report of your Company, containing inter alia the audited standalone and consolidated financial statements, has been placed on the website of the Company, www.grasim.com. Further, the audited financial statements, along with related information and other reports of each of the subsidiary companies, have also been placed on the website of the Company, www. grasim.com.

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

SHARE CAPITAL

During the year 2016-17:

- Your Company sub-divided each equity share of the Company of face value of Rs.10/- fully paid-up into 5 (five) Equity Shares of face value of Rs.2/- each fully paid-up as on the record date fixed on 8th October 2016, pursuant to the resolution passed by Members in the Annual General Meeting held on 23rd September 2016.

- Your Company allotted 106,580 equity shares (postsub-division adjustment to the number of equity shares) of Rs.2/- each pursuant to the exercise of stock options.

As on 31st March 2017, the paid-up equity share capital of your Company stood at Rs.93.37 Crore, consisting of 466,862,190 equity shares of Rs.2/- each.

During the year 2016-17, the Company has not issued shares with differential voting rights and sweat equity shares.

DEPOSITS

During the year under review, your Company has not accepted or renewed any deposit within the meaning of Section 73 of the Act, read with the Companies (Acceptance of Deposits) Rules, 2014, and, as such, no amount of principal or interest was outstanding, as on the date of the Balance Sheet.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Pursuant to Section 186 of the Act and Schedule V of SEBI (LODR), disclosures on particulars relating to loans, advances and investments are provided as part of the Financial Statements. There are no guarantees issued or securities provided by your Company in terms of Section 186 of the Act, read with the Rules issued thereunder.

MANAGEMENT’S DISCUSSION AND ANALYSIS REPORT

The Management’s Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 of SEBI (LODR), forms an integral part of this Report.

CORPORATE GOVERNANCE

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

In terms of Regulation 34 of SEBI (LODR), a separate report on Corporate Governance, along with a certificate from the Auditors on its compliance, forms an integral part of this Report and is given as Annexure ‘C’.

BUSINESS RESPONSIBILITY REPORT

As per Regulation 34(2)(f) of SEBI (LODR), a separate section of Business Responsibility Report, describing the initiatives taken by the Company from environmental, social and governance perspective, forms an integral part of this Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

With effect from 1st October 2016, Mr. R. C. Bhargava, an Independent Director (DIN: 00007620) resigned from the Board and Committees of the Board of Directors of the Company. The Board places on record its deep appreciation and gratitude for the valuable contribution and advice offered by Mr. R. C. Bhargava during his tenure as Director on the Board of the Company.

Mr. K. K. Maheshwari, Non-Executive Director (DIN: 00017572), resigned from the Board of Directors of the Company w.e.f. 27th December 2016, due to precommitment. The Board places on record its deep appreciation and gratitude for the substantial contribution and valuable advice offered by Mr. Maheshwari during his tenure as Director on the Board of the Company.

In accordance with the provisions of the Act and the Articles of Association of the Company, Mr. Kumar Mangalam Birla (DIN: 00012813), Director of the Company, retires by rotation at the ensuing Annual General Meeting (AGM) and, being eligible, has offered himself for reappointment. Resolution seeking his appointment has been included in the Notice of the AGM. Your Directors commend the Resolution for your approval.

A brief resume of the Director being re-appointed forms part of the Notice of the ensuing AGM.

In terms of the provisions of Sections 2(51), 203 of the Act, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Mr. Dilip Gaur, Managing Director, Mr. Sushil Agarwal, Whole-time Director and Chief Financial Officer, and Mrs. Hutokshi Wadia, President and Company Secretary, are the Key Managerial Personnel of your Company.

During the financial year 2016-17, Mr. Dilip Gaur, Managing Director, and Mr. Sushil Agarwal, Whole-time Director and Chief Financial Officer of the Company, have not received any commission/remuneration from your Company’s holding or subsidiary Companies.

FORMAL ANNUAL EVALUATION

The evaluation framework for assessing the performance of Directors of your Company, inter alia, comprises of contributions at the meetings, strategic perspective or inputs regarding the growth and performance of your Company.

Pursuant to the provisions of the Act and SEBI (LODR) and in terms of the Framework of the Board Performance Evaluation, the Nomination and Remuneration Committee and the Board have carried out an annual performance evaluation of its own performance, the performance of various Committees of the Board, individual Directors and the Chairman. The manner in which the evaluation has been carried out has been set out in the Corporate Governance Report, which forms an integral part of this Annual Report. The details of the programme for familiarisation of the Independent Directors of your Company are available on your Company’s website, www.grasim.com.

MEETINGS OF THE BOARD

During the year ended 31st March 2017, five Board Meetings were held on 7th May 2016, 11th August 2016, 28th October 2016, 30th January 2017 and 13th February 2017. Further details on the Board Meetings are provided in the Corporate Governance Report, forming part of this Annual Report.

DECLARATION OF INDEPENDENCE

Your Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under the Act, read with Schedules and Rules issued thereunder and the SEBI (LODR).

DIRECTORS’ RESPONSIBILITY STATEMENT

The audited accounts for the year under review are in conformity with the requirements of the Act and the Accounting Standards. In terms of Sections 134(3)(c) and 134(5) of the Act, in relation to the Audited Financial Statements of the Company for the year ended 31st March 2017, the Directors of your Company hereby state that:

a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures, if any;

b) the Directors have selected such accounting policies and applied them consistently, and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at 31st March 2017 and of the profit of your Company for the year ended on that date;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company, 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 the Company, and that such internal financial controls are adequate and were operating effectively; and

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

AUDITORS AND AUDIT REPORTS

Presently, M/s. G. P Kapadia & Co. and BSR & Co. LLP are the Joint Statutory Auditors of the Company. Pursuant to the provisions of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, M/s. G. P Kapadia & Co. will be retiring as one of the Joint Statutory Auditors of your Company at the ensuing Annual General Meeting of the Company.

At its meeting held on 19th May 2017, the Board has appointed S R B C & Co., LLP, Chartered Accountants (ICAI Firm Registration No. 324982E), as one of the Joint Statutory Auditors of the Company in place of M/s. G. P Kapadia & Co., Chartered Accountants (Registration No. 104768W), the retiring Joint Statutory Auditors, for a period of five years, i.e., to hold office from the conclusion of this Annual General Meeting till the conclusion of Seventy-fifth Annual General Meeting of the Company, to be held in the year 2022, subject to the approval of the Members, at such remuneration as may be mutually agreed between the Board of Directors of the Company and S R B C & Co, LLP BSR & Co. LLP will continue to hold office till the conclusion of the Seventy-fourth Annual General Meeting of the Company, to be held in the year 2021, subject to the ratification by the Members in each Annual General Meeting.

Consent of the Auditors and certificate u/s 139 of the Act have been obtained from each of the Auditors to the effect that their appointment/ratification, if made, shall be in accordance with the applicable provisions of the Act and the Rules issued thereunder. As required under the SEBI (LODR), BSR & Co. LLP and S R B C & Co, LLP have confirmed 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 M/s. G. P. Kapadia & Co., Chartered Accountants, during their tenure as one of the Joint Statutory Auditors of your Company.

The observations made by the Statutory Auditors on the Financial Statements of the Company, in their Report for the financial year ended 31st March 2017, read with the explanatory notes therein, are self-explanatory and, therefore, do not call for any further explanations or comments from the Board under Section 134(3)(f) of the Act. The Auditors’ Report does not contain any qualification, reservation or adverse remark.

COST AUDITORS

Pursuant to the provisions of Section 148 of the Act, read with the Companies (Cost Records and Audit) Rules, 2014, as amended, Notifications/Circulars issued by the Ministry of Corporate Affairs from time to time, your Board at its meeting held on 19th May 2017, has, on the recommendation of the Audit Committee, re-appointed M/s. D. C. Dave & Co., Cost Accountants, Mumbai, as the Cost Auditors to conduct the audit of the cost records of the Company for the financial year 2017-18 at a remuneration not exceeding Rs.10,00,000/- (Rupees Ten Lakh Only), plus applicable taxes and reimbursement of actual out-of-pocket expenses in connection with the audit. Your Company has received consent from M/s. D. C. Dave & Co., Cost Accountants, to act as the Cost Auditors of your Company for the financial year 2017-18 along with a certificate confirming their independence.

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 has reappointed M/s. BNP & Associates, Company Secretaries, Mumbai, to conduct the secretarial audit for the financial year 2016-17. The Secretarial Audit Report, issued by M/s. BNP & Associates, Company Secretaries for the financial year 2016-17, forms part of this Report, and is set out in Annexure ‘D’ to this Report. The Secretarial Audit 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 the Annual Return of the Company for the financial year ended 31st March 2017, is given in Annexure ‘E’ to this Report.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

During the financial year under review, all contracts/ arrangements/transactions entered into by your Company with Related Parties were on arm’s length basis and in the ordinary course of business. There are no material transactions with any Related Party as defined under Section 188 of the Act, read with the Companies (Meetings of Board and its Powers) Rules, 2014. All Related Party transactions have been approved by the Audit Committee of your Company. Omnibus approvals are taken for transactions which are repetitive nature. Your Company has implemented Related Party transaction manual and Standard Operating Procedures for the purpose of identification and monitoring of such transactions.

Since all the contracts/arrangements/transactions with Related Parties, during the year under review, were in the ordinary course of business and at arm’s length and were not considered material, disclosure in Form AOC-2 under Section 134(3)(h) of the Act, read with the Companies (Accounts of Companies) Rules, 2014, is not applicable. The details of contracts and arrangements with Related Parties of your Company for the financial year ended 31st March 2017, are given in Note 4.5.4 to the Standalone Financial Statements, forming part of this Annual Report.

The Policy on Related Party Transactions, as approved by the Board, is available on your Company’s website, www. grasim.com.

RISK MANAGEMENT

You Company recognises that risk is an integral part of business, and is committed to managing the risk in a pro-active and efficient manner. Your Company’s Risk Management Committee periodically assesses the risks in the internal and external environment, along with the cost of mitigating risk and incorporates Risk Mitigation Plans in its strategy, business and operation plans. Your Company has a comprehensive risk management policy/ framework, which is reviewed by the Risk Management Committee. More details on risk management are covered in the Management Discussion and Analysis forming part of this Annual Report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

Your Company has established a robust Vigil Mechanism for reporting of concerns through the Whistle Blower Policy of the Company, which is in compliance with the provisions of Section 177 of the Act, read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, and SEBI (LODR). The Policy provides for framework and process, for the employees and directors to voice genuine concerns or grievances about unprofessional conduct without fear of reprisal. Adequate safeguards are provided against victimisation to those who avail of the mechanism, and access to the Chairman of the Audit Committee in exceptional cases is provided to them. The details of the Vigil Mechanism are also provided in the Corporate Governance Report, and the Whistle Blower Policy has been uploaded on the website of the Company, 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 your Company has a Corporate Social Responsibility (CSR) Committee, which is chaired by Mrs. Rajashree Birla. The other Members of the Committee are Mr. B. V. Bhargava, Mr. Shailendra K. Jain and Mr. Dilip Gaur. Dr. Pragnya Ram, Group Executive President, Corporate Communication and CSR, is a permanent invitee to the Committee. The Corporate Social Responsibility Policy (CSR Policy), indicating the activities to be undertaken by the Company, is available on your Company’s website, www.grasim.com.

The Company is a caring corporate citizen and lays significant emphasis on development of the host communities around which it operates. The Company, with this intent, has identified several projects relating to Social Empowerment and Welfare, Infrastructure Developments, Sustainable Livelihood, Health Care and Education, during the year, and initiated various activities in neighbouring villages around its plant locations. The work on several initiatives has picked up momentum during the year, resulting in a spend of Rs.18.06 Crore (2.29% of the average net profits of the last 3 years, as defined for the purposes of CSR). The Company has identified promotion and development of handloom, handicrafts, and related projects, the work which was started in earlier years will be intensified in the current year.

The Annual Report on CSR activities is given in Annexure ‘F’ to this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information relating to the conservation of energy, technology absorption and foreign exchange earnings and outgo, as stipulated under Section 134(3)(m) of the Act, read with the Companies (Accounts) Rules, 2014, is given in Annexure ‘G’ to this Report.

INTERNAL FINANCIAL CONTROLS

Your Company has in place adequate internal financial control system commensurate with the size of its operations. Internal control systems comprising of policies and procedures are designed to ensure sound management of your Company’s operations, safe keeping of its assets, optimal utilisation of resources, reliability of its financial information and compliance. Systems and procedures are periodically reviewed to keep pace with the growing size and complexity of your Company’s operations. During the year under review, no material or serious observation has been received from the Auditors of the Company, citing inefficiency or inadequacy of such controls.

REMUNERATION POLICY

The Remuneration Policy of your Company, as formulated by the Nomination and Remuneration Committee of the Board of Directors, is given in Annexure ‘H’ to this Report.

COMMITTEES OF THE BOARD AUDIT COMMITTEE

With Mr. R. C. Bhargava ceasing to be a Director on the Board of your Company, the Audit Committee has been re-constituted and now comprises of Mr. Arun Thiagarajan, Mr. B. V. Bhargava, and Mr. M. L. Apte, all Independent Directors, as its members. Mr. Dilip Gaur, Managing Director, and Mr. Sushil Agarwal, Whole-time Director and Chief Financial Officer, are the permanent invitees to the meetings of the Audit Committee.

With effect from 30th January 2017, Mr. Arun Thiagarajan has been appointed as Chairman of Audit Committee in place of Mr. B. V. Bhargava, who continues to be a member of the Audit Committee.

Further details relating to the Audit Committee are provided in the Corporate Governance Report, forming part of this Annual Report.

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

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee comprises of Mr. M. L. Apte, Mr. Cyril Shroff and Mr. Kumar Mangalam Birla as its members. Further details relating to the Nomination and Remuneration Committee are provided in the Corporate Governance Report, forming part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Corporate Social Responsibility Committee comprises of Mrs. Rajashree Birla, Mr. B. V. Bhargava, Mr. Shailendra K. Jain and Mr. Dilip Gaur as its members. Further details relating to the Corporate Social Responsibility Committee are provided in the Corporate Governance Report, forming part of this Annual Report.

STAKEHOLDERS’ RELATIONSHIP COMMITTEE

The Stakeholders’ Relationship Committee comprises of Mr. B. V. Bhargava, Mr. M. L. Apte, Mr. Cyril Shroff and Mr. Sushil Agarwal as its members. Further details of the Stakeholders’ Relationship Committee are provided in the Corporate Governance Report, forming part of this Annual Report.

RESEARCH AND DEVELOPMENT

The portfolio of technology projects continues to aim at addressing competitive market challenges in the areas of product quality, cost reduction and new product offerings. In addition to pursuing step-change technologies during FY 2016-17, your Company is increasingly focused on taking developments from the laboratory through scale-up and plant implementation.

PULP AND FIBRE BUSINESS

The centralised Clonal Production Centre (CPC) produced 75 Lakh clonal plantlets for use in various planting programmes like farm forestry, agroforestry, and social forestry. Emphasis was on distribution of site specific, high yielding and diseases resistant clonal plants, to encourage plantation to support wood supply to pulp plant in future years.

The Pulp R&D capabilities are relatively small, and, until recently, have focused on local Domsjo speciality product developments. They have had significant successes in this area with the commercial demonstration of higher priced, speciality pulp products for high strength filament rayon applications and food casing products. The group has also been expanding their work, in conjunction with the Pulp CTC and local contract R&D resources, co-located at different sites, to improve viscosity control during pulp manufacture. Improved viscosity control is a key to further VSF quality enhancements. The Pulp R&D group has also worked across the network of pulp sites to improve the application uniformity and cost of additives critical to viscose manufacturing performance. Key additional areas of focus for future work include: quality enhancements through continued advances in viscosity control and reductions in pulp contaminant levels, cost reduction through process developments lowering chemical costs, improving wood yields, increasing plant productivity and improvements, leading to more uniform viscose processing, technologies for improved environmental performance.

With an objective of guiding improvement in product quality towards global benchmark quality levels, a Quality Initiative based on Six Sigma techniques starting with monitoring of the First Pass Yield (FPY) was launched in the year 2012-13. While customer experience has improved with implementation of FPY across all lines, a classification criteria based on customer experience is being developed for distinguishing fibre production lines that still need further improvement. This will involve relating process capability of customer and fibre production processes. Further, an Uptime metric has been designed to focus on equipment reliability that determines consistency of material flow, impacting both the fibre properties and the plant effectiveness.

Further, the pulp and fibre plants are being connected seamlessly through digitisation initiative. Such access to the feed pulp quality data will help the fibre plants to accordingly adjust the processes in real-time. While this will help enhance product consistency at fibre plant, knowledge of this will provide as feedback to pulp plant to further enhance customer critical attributes.

For VSF fibre production facilities, raw material and energy consumption reductions are the prime focus areas for improving production costs in existing processes. Commercial implementation of technologies previously developed have allowed us to meet the improvement targets we set last year. Technology advances, in further reducing raw material utilisation, have been demonstrated at the Fibre Research Centre (FRC) facility, thereby laying the groundwork for implementing new targets for next year. Value-added product developments continue to fill and move through our pipeline. New programmes aimed at improving fibre quality and performance are leading to advances for these more environmentally friendly products, which reduce waste effluent and water consumption down the value chain.

The Textile Research and Applications Development Centre (TRADC) continues as an important contributor to the business development process across the fashion seasons. TRADC creates and fabricates new product concepts and styles highlighting the unique values that VSF offers, enabling Marketing to create ongoing excitement for these products. Increased knowledge of these properties has been used to design and position with customers, new offerings for sportswear and home textiles. The launch of Modal Liva Creme, one of these developments, was supported with a technical bulletin, which communicates the quantitative benefits of this concept to customers and down-stream value chain partners, which supports their marketing programmes.

Progress was made toward the in-house technology development initiative for the Excel® project. Optimum pulp characteristics and process parameters for improving the fibre mechanical properties were also identified. In addition, basic data were developed to achieve step-change improvements in the solvent recovery area.

Enabling Capabilities

In Pulp and Fibre Business, significant laboratory, semiworks and commercial scale-up capabilities have been put in-place. A very capable group of research professionals from multiple disciplines have been hired and developed into an effective team able to carry out independent development projects. The business is now beginning to realise significant benefits from this innovation capability through the recent commercialisation of new Pulp and VSF technologies. The continuing development of basic data supporting existing and future Excel production facilities provides the basis for this step-change technology capability. We continue to improve our programme portfolio and its execution in collaboration with the Operations and Marketing teams to better support the business objectives.

CHEMICAL BUSINESS

Your Company’s Chemical business puts equal focus on performance engines and innovation initiatives. To ensure right balance, dedicated resources are deployed for innovative initiatives whereever required and shared, resources are deployed where it is necessary to have interdependencies.

Performance engines focus on business performance for growth and competitive advantage through rigorous and robust review mechanism for improvements on energy, environment and resource conservation. These include:

i) technology upgradation to 6th generation electrolysers

ii) timely replacement of key spares through predictive and pro-active maintenance practices;

iii) resource conservations and water through the usage of washer and super washed salt a major raw material; and

iv) improving the efficiencies of ethical drives and mechanical drives and utilities, such as water through recycling and steam by installation of CPUs (Condensate polishing units)

Innovation initiatives focus on new product developments based on market intelligence and market feedback, prospectively, and product variants based on specific segments of customers feedback. These include Chlor Alkali as well as valued-added products from Chlorine

i) recovery of product from Liquid wastes of phosphoric acid such as calcium chloride;

ii) elimination of barium carbonate and recovery sodium sulphate from brine stream and developing;

iii) PAC, SBP and Chlorine gas for new applications for handling water and waste water for dye industry, pulp and paper industry, sewage treatment and municipal waste waters; and

iv) product variants of chlorinated paraffins to meet different segments and specific customers based on the specific quality requirements.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR, TO WHICH THE FINANCIAL STATEMENT RELATES, AND THE DATE OF THE REPORT

Except as disclosed elsewhere in this Report, no material changes and commitments, which could affect the Company’s financial position, have occurred between the end of the financial 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) Rules, 2014, the names and other particulars of employees drawing remuneration in excess of the limits, set off in the aforesaid Rules, are to be set out in the Board’s Report, as an annexure thereto. In line with the provisions of Section 136(1) of the Act, the Report and Accounts, as set out therein, are being sent to all the Members of your Company, excluding the aforesaid information about the employees. Any Member, who is interested in obtaining these particulars about employees, may write to the Company Secretary at the Registered Office of your Company. The aforesaid addendum is also available for inspection by the members at the Registered Office of the Company 21 days before the AGM and upto the date of the ensuing AGM, during business hours on working days.

Disclosures pertaining to remuneration and other details, as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in Annexure ‘H’ to this Report.

EMPLOYEE STOCK OPTION SCHEMES (ESOS)

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

The Shareholders have approved ESOS-2006 through postal ballot on 20th January 2007, and 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 Employee Stock Options and RSUs granted pursuant to ESOS-2013, as also the other disclosures in compliance with the provisions of the Securities and Exchange Board of India (Employee Share Based Employee Benefits) Regulations, 2014, are available on the Company’s website, www.grasim.com.

A certificate from M/s. G. P Kapadia & Co., Chartered Accountants, the Statutory Auditors, on the implementation of your Company’s Employee Stock Option Schemes will be placed at the ensuing AGM for inspection by the Members, and a copy will also be available for inspection at the Registered Office of the Company.

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 ongoing focus is on attracting, retaining and engaging talent with the objective of creating a robust talent pipeline at all levels. Value-based HR programmes have enabled your Company’s HR team to be strategic partners for the business. Your Company laid stress to build a women-friendly workplace by introducing various initiatives around development and progression of women employees in the organisation. Your Company has focused on internal talent and nurture them through the culture of continuous learning and development, thereby building capabilities for creating future leaders. Your Company continues to work to strengthen the ‘World of Opportunities’ employee positioning initiatives like a hiring freeze at some levels, robust talent review, career development conversations and best-in-class development opportunities, which will help to enhance the employee experience at your Company.

The Group’s Corporate Human Resources plays a critical role in your Company’s talent management process.

AWARDS AND ACCOLADES

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

- Oeko-Tex Certificate for Eco-labelling of Fibre by M/s. British Textiles Technology Group, England;

- Frost & Sullivan’s Sustainability 4.0 Awards, 2016, for excellence in Sustainable Development for Safety Excellence & Challengers Category;

- Accreditation from Energy Management System as per EnMS ISO 50001:2011 Standards by TUV Nord, Germany;

- Manufacturing Today Awards - 2016 under the category of “Large - Excellence in Technology”

- ”Certificate of Recognition” by Regulators & Policymakers Retreat under the category of “Innovation - 2016-2017”

GENERAL

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

1. Issue of equity shares with differential rights as to dividend, voting or otherwise;

2. Issue of shares (including sweat equity shares) to employees of the Company under any Scheme save and except ESOS referred to in this report;

3. There were no revisions in the financial statements;

4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company’s operations in the future; and

5. No cases or complaints were filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

ACKNOWLEDGEMENTS

Your Directors express their deep sense of gratitude to the banks, financial institutions, stakeholders, business associates, Central and State Governments for their cooperation and support, and look forward to their continued support in future.

We very warmly thank all of our employees for their contribution to your Company’s performance. We applaud them for their superior levels of competence, dedication and commitment to your Company.

For and on behalf of the Board

Kumar Mangalam Birla

Chairman

(DIN: 00012813)

Mumbai, 8th July 2017