GRASIM INDUSTRIES LIMITED

1 GRASIM INDUSTRIES LIMITEDC M YKMr. Aditya BirlaWe live by his , Commitment, Passion, Seamlessness and CMYKG rasim INDUSTRIES LIMITED - Annual Report 2012-2013 THE CHAIRMAN S LETTER TO SHAREHOLDERSDear Shareholders,The global scenarioAcross the world in 2012, the economyremained a worry. Global GDP fell to to 4% in 2011. Many of the systemicvulnerabilities continued. Among these werefiscal fragility, hidden and unknown risks offinancial derivative instruments and theproblems of the weaker Eurozone increasing instances of political gridlockaggravated the these are not totally left behind, thereare strong positives. The unwinding offinancial leverage, several rounds of liquidityinjections, with Japan also joining in augur wellfor the global economy. Alongside, continuinglow interest rates, sharp corrections incommodity and energy prices, and a modestrecovery in the US housing market ring in adegree of optimism.

2 Furthermore, the privatecorporate sector seems on the path tostepping up investment outlays. Thankfully,the worst case outcomes have been US has not fallen off the fiscal cliff. And,despite the recent financial shocks in Cyprus,the government bond yields have fallen. Theglobal economy has clearly shown a lot global economy is now moving on to asurer recovery mode. The IMF projects growthat in 2013, increasing to in GDP growth in emerging markets anddeveloping countries is placed at in 2 CMYKG rasim INDUSTRIES LIMITED - Annual Report 2012-2013 THE CHAIRMAN S LETTER TO SHAREHOLDERS2013, increasing to in 2014. The US GDP is expectedto grow in 2013, rising sharply to in will remain a laggard, with de-growth at thisyear, and inching to just over 1% in 2014.

3 China s growthwill scale back from its recent double digit levels to 7-8%,which is still on the global front undeniably dentedIndia s growth level, besides the issues at Indian economy ongoing resilienceSlow growth, investor diffidence, the rupee falling to an alltime low, power outages and a poor monsoon added to thecountry s woes. High commodity prices and supplyconstraints of critical raw material, such as coal and naturalgas, further compounded the problem. Unsurprisingly then,India s GDP growth slowed markedly in 2012-13, to 5%,down from in the previous year. The manufacturingsector recorded a growth of only in 2012-13, downfrom in 2011-12. Export growth in 2012-13 was ,compared to in the previous are good signs, as we move into the fiscal 2013 have been some positive policy developments inrecent months.

4 These include a decline in interest ratesand a move towards market-based pricing for diesel andpetrol. If this pricing flexibility persists, it could make aconsiderable dent in the subsidy bill. The expectation of anormal monsoon is a positive, going the FY 2013-14, the GDP growth is projected to risemodestly to around with much of the improvementlikely only in the second half of the year. Industrial activitywill continue to be adversely affected by regulatorybottlenecks. The recent decline in commodity prices,particularly of crude oil, and continuing buoyancy of FIIsinflows will pave the way for greater exchange ratestability, and a moderation of inflation. The RBI projects increase in the wholesale price index in theFY 2013-14, down from in the previous developments affect your Company s growth the face of all theseodds, for the FinancialYear 2012-13, yourCompany s consolidatedrevenues stood at` 27,904 crore(US dollar billion)up by 11%, vis- -vis` 25,245 crore(US dollar billion)in the previous attained a net profitof ` 2,704 crore(US dollar billion),inclusive of ` 204 crore(US dollar 38 million)accrued throughselling off unrelatedinvestments.

5 Net profitfor the earlier year was` 2,647 crore (US billion).3 CMYKG rasim INDUSTRIES LIMITED - Annual Report 2012-2013 THE CHAIRMAN S LETTER TO SHAREHOLDERSIn the face of all these odds, for the Financial Year2012-13, your Company s consolidated revenuesstood at ` 27,904 crore (US dollar billion) up by 11%,vis- -vis ` 25,245 crore (US dollar billion) in the previousyear. It attained a net profit of ` 2,704 crore (US dollar ), inclusive of ` 204 crore (US dollar 38 million)accrued through selling off unrelated profit for the earlier year was ` 2,647 crore (US billion).Terrace Bay acquisition a strategic moveThe acquisition of the Terrace Bay Mill, in Ontario, Canada,in a JV with one of our Group companies was a majorstrategic move during the year. The mill is in the processof being converted into a dissolving grade pulp mill.

6 In theViscose Staple Fibre (VSF) business, we enjoy globalleadership. To sustain the ongoing growth, we have anintegrated business model, spanning the entire value chainfrom plantation to pulp to fibre. The Terrace Bay Mill, uponconversion, will be geared to provide superior quality pulpfor our VSF up capacities 334k tpa to 498k tpaYour Company s VSF expansion plans are on Vilayat in Gujarat, the 120k tpa Greenfield plant will goon stream in the current year. Besides bolstering volumes,the plant will augment your Company s presence inspecialty fibres, such as modal and micro modal. At Hariharin Karnataka, the 36k tpa Brownfield expansion has beencompleted, with Phase-II going on stream in May commissioning of the ongoing projects, ourcapacities scale up to 498k the allied Chemicals business, with the commissioningof the 182,500 tpa Vilayat plant, your Company s causticsoda capacity has been enhanced to 440,500 , 51,500 tpa Epoxy plant is being set up atVilayat, and should be operational in September the Cement sector, our growth plans are indeedaudacious.

7 By 2015, our goal is to scale our cementYour Company s VSFexpansion plans are oncourse. At Vilayat inGujarat, the 120k tpaGreenfield plant willgo on stream in thecurrent year. Besidesbolstering volumes,the plant will augmentyour Company spresence in specialtyfibres, such as modaland micro Harihar in Karnataka,the 36k tpa Brownfieldexpansion has beencompleted, with Phase-IIgoing on stream inMay 2013. Uponcommissioning of theongoing projects, ourcapacities scale up to498k tpa. 4 CMYKG rasim INDUSTRIES LIMITED - Annual Report 2012-2013 THE CHAIRMAN S LETTER TO SHAREHOLDERS capacity to million tpa from the million the year, the projects commissioned include million tpa Clinkerisation plant at Rawan inChhattisgarh; a million tpa grinding unit at Hotgi,Maharashtra, and an increase of million tpa in thecement grinding capacity at the Gujarat commissioning of these projects has raised yourCompany s cement capacity by over million tpa, takingthe total cement capacity to million other projects are underway, such as million tpa clinkerisation plant in Karnataka, slated togo on stream in Quarter-1 of the FY 2013-14.

8 At AdityaCement Works in Rajasthan, a million tpa capacityexpansion is on the anvil. It includes the setting up of twogrinding units. We expect to flag off the new expansionby March 2015. This expansion entails a capital outlay of` 2,000 crore (US dollars 369 million).Capital OutlayIn the VSF and related Chemical business, your Company scapex stands at ` 4,200 crore (US dollars 774 million).This is primarily towards the Greenfield and Brownfieldprojects at Harihar and the Cement business, we have provided for a capitaloutlay of over ` 11,400 crore (US dollars billion). Thecapex is earmarked for capacity expansion, captive powerplant, waste heat recovery system, ready-mix concreteplants, strengthening of logistic infrastructure believe, we will be able to consolidate our leadershipposition in both the VSF and Cement sectors, backed byour robust capex plans.

9 Their prospects are indeedencouraging in the long term. In the short term, given theprevailing global economic conditions, coupled withsurplus capacity in China, the VSF industry will be the VSF and relatedChemical business,your Company s capexstands at ` 4,200 crore(US dollars 774 million).This is primarily towardsthe Greenfield andBrownfield projectsat Harihar and the Cement business,we have provided for acapital outlay of over` 11,400 crore(US dollars billion).5 CMYKG rasim INDUSTRIES LIMITED - Annual Report 2012-2013 THE CHAIRMAN S LETTER TO SHAREHOLDERSOur entrepreneurial DNAalso encourages risktaking which includestaking risks with people,of course with safetynets. We believe thatpeople are endowedwith immense capability our task is to spotthem, early in theircareers and providethem with suitableopportunities to try theirhand at and test theirskills.

10 Our investment inpeople processes hasenabled us have arobust bench-strengthof talent. Our entirefocus is on ensuringthat we always remaina the Cement sector, housing, infrastructure and alliedspending are the need of the hour. The Government isfully cognizant of issues relating to these sectors. It hasallocated US $ 1 trillion towards bridging the gap. Thisaugurs well for the growth of the , on a note of optimism and given your Company ssingle-minded focus on growth both top-line and bottom-line, I do believe that we will scale new our TeamsI thank all of our teams. For most of our employees, I cansay with certitude that their commitment towards theirresponsibility to give results has been incrediblyoverwhelming. They have enriched your Company anddetermined its course over the years.