2002-03 - Grasim

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MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW It was another excellent year for Grasim. The Company reported impressive performance amidst a challenging economic and industrial environment. All our businesses have performed well, with productivity gains, growth in volumes and sustained margins notwithstanding rise in input costs. The Cement business was constrained on account of pricing pressure that prevailed throughout the year across regions. All the business units had shown smart productivity gains, which helped us to improve the margins against increase in input cost and substantial cost increase in power and fuel. Overall revenues have grown by an impressive 5% to Rs.4,626.3 Crores while operating profits have soared from Rs.936.8 Crores to Rs.1,141.7 Crores, reflecting a growth of 22% year-on-year (YoY). Benefiting from lower interest charges and modest rise in depreciation, pre-tax profits (before exceptional items) have jumped 45% to Rs.719.1 Crores in 2002-03 (FY03). Net profit after tax and exceptional items is higher by 21% YoY at Rs.367.6 Crores in FY03. Grasim’s superior performance even in a weak operating environment is the reflection of the success of significant business and financial restructuring carried out by the Company during the last four years. The business restructuring efforts included the closure of the Fibre and Pulp plant at Movoor, sale of the unviable Textile units at Gwalior, divestment of stake in the software subsidiary and discontinued operations of the Trading division. STRATEGIC MOVES Divestment of stake in MRPL The Company has sold 15,03,79,023 equity shares of Mangalore Refinery and Petrochemicals Ltd. (MRPL), being its entire holding in MRPL to Oil and Natural Gas Corporation Ltd for a total consideration of Rs.30.1 Crores against its investment value of Rs.238.7 Crores. The resultant loss of Rs.208.6 Crores was accounted for and shown as exceptional item. Strategic Investment in equity of Larsen & Toubro Limited As you are aware, the Company had acquired a 10.05% stake in Larsen & Toubro Ltd. (L&T) in FY02. During the year under review, the Company along with its wholly owned subsidiary Samruddhi Swastik Trading and Investments Limited (Samruddhi), augmented its holding to 14.53%. In line with regulatory requirements, on 14th October 2002, the Company made an Open Offer for acquisition of a further 20% stake in L&T at Rs.190/- per share. The wholly-owned subsidiary of the company then acquired an additional 0.83% stake in L&T through open market purchases, thus raising the aggregate holding of the Company and its subsidiary in L&T to 15.35% of the subscribed and paid up capital in L&T. However, through its order dated 8 th November 2002, the Securities and Exchange Board of India (SEBI) had advised the Company not to proceed with the Open Offer. While Securities Appellant Tribunal declined an interim relief, SEBI completed the investigations and cleared the Open Offer in February 2003. Consequently, the Open Offer for a 20% stake in L&T at Rs.190 per share opened on 7 th May 2003 and will remain open till 5 th June 2003. Commissioning of Thermal Power Plant at Aditya Cement, Rajasthan As part of a conscious strategy to further augment captive power capacity and reduce costs, the Company set up a Thermal Power Plant of 23MW at it’s Aditya Cement Plant in Rajasthan. The captive power plant was commissioned in March 2003 and operations have stabilized since then. (8)
SEGMENTAL REVIEW Cement 46% Sponge Iron 9% Cement 31% Sponge Iron 9% Others 4% VSF 35% Textiles 5% Chemical 5% Chemical 5% Textiles (1%) VSF 52% Revenue Mix - FY03 PBIDT Mix - FY03 VISCOSE STAPLE FIBRE (VSF) FY03 FY02 % Change Fibre Installed Capacity (TPA) 220,775 220,775 — Production (Tonnes) 224,610 176,462 27 Sales Volume (Tonnes) 227,900 181,520 26 Net Divisional Turnover (Rs. Crores) 1,642.8 1,328.5 24 VSF Realisation (Rs./Kg) 67.9 68.5 (1) Operating Margins (%)* 36 27 — (Before Employees Separation Cost) * Operating margins calculated on the Net Divisional Turnover, excluding pulp, which is used for captive consumption. Review of Operations The year under review has been a record year for the VSF business with capacity utilisation, sales volumes, profitability and margins reaching an all time high. Impressive volume growth, helped by exports/deemed exports Aggregate sales volumes grew by an impressive 26% to 227,900 Tonnes in FY03, driven by a quantum jump in deemed exports and an upturn in domestic volumes that reflected aggressive marketing efforts taken by the Company. A modest pick up in the global economy, which boosted textile exports from India led to a quantum jump in exports, up 52% YoY to 71,767 Tonnes. Aggressive marketing efforts, segmental pricing strategy and relentless focus on quality have been impressive export performance enablers. Domestic sales grew by 16% YoY. Value added technical service to yarn manufacturers as well as segment specific promotional and pricing strategies helped fuel growth. Matching sales, production too grew from 176,462 Tonnes in FY02 to 224,610 Tonnes in FY03, reflecting average plant utilization in excess of the rated capacity. (9)
Page 3 and 4: GRASIM INDUSTRIES LIMITED BOARD OF
Page 5 and 6: Wet Modulus (HWM) Fibres and specia
Page 7 and 8: “Our strategy dictates that we ge
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Page 13 and 14: CHEMICALS FY03 FY02 % Change Instal
Page 15 and 16: The white cement division sustained
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Page 21 and 22: REPORT ON CORPORATE GOVERNANCE CORP
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Page 29 and 30: To aid the performance of the farme
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Page 33 and 34: 6. (b) Overseas Depository for GDRs
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Page 39 and 40: DIRECTORS’ REPORT Dear Shareholde
Page 41 and 42: As stipulated in Section 217(2AA) o
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SCHEDULES Rs. in Crores Previous Ye
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SCHEDULES SCHEDULE 22 (Contd.) B b)
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CASH FLOW STATEMENT FOR THE YEAR EN
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AUDITORS’ REPORT ON THE CONSOLIDA
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CONSOLIDATED PROFIT & LOSS ACCOUNT
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SHREE DIGVIJAY CEMENT COMPANY LIMIT
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SUN GOD TRADING AND INVESTMENTS LIM
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SAMRUDDHI SWASTIK TRADING AND INVES
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SAMRUDDHI SWASTIK TRADING AND INVES
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GRASIM INDUSTRIES LIMITED Registere
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GRASIM INDUSTRIES LIMITED Registere
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Registrar of Companies - Madhya Pra
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Dear Shareholder(s) GRASIM INDUSTRI
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GRASIM INDUSTRIES LIMITED Details o
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2002-03 - Grasim

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