PRESS RELEASE

29 April 2008

	Rs. crore	Per cent
Consolidated net profit (before extraordinary gain)	644	15
Consolidated net revenues	4,715	15

Grasim Industries Limited has performed well during the quarter ended 31 March 2008. Revenues increased by 15 per cent from Rs. 4,090 crore to Rs. 4,715 crore. Net profit (before extraordinary gain) was higher by 15 per cent at Rs.644 crore (Rs. 558 crore).

The FY 2008 results have been impressive. Revenues crossed US$ 4 billion mark, at Rs.17,037 crore (Rs.14,142 crore), a rise of 20 per cent. Net profit (before extraordinary gains) rose appreciably by 35 per cent at Rs. 2,655 crore (Rs. 1,967 crore).

Dividend
The board of directors of Grasim has recommended a dividend of 300 per cent (last year: 275 per cent). The total outflow on account of dividend, including corporate tax on dividend, would be Rs. 316 crore, vis-à-vis Rs. 287 crore for FY07, an increase of 10 per cent.

Viscose Staple Fibre (VSF) business
Macro economic factors impacted the VSF business during the quarter. The deceleration in demand was primarily due to the slowdown of textile demand in USA and liquidation of inventory in the value chain. Additionally, the anti-dumping investigation by Turkey on import of VSF based yarn and the substitution effect on account of high VSF prices contributed to the subdued performance.

The performance of VSF business for the financial year as a whole was however, impressive. Production increased by 13 per cent at 279,901 tonnes. Sales volumes were higher by 8 per cent at 269,781 tonnes.

During the quarter under review, the company expanded its VSF capacity at Kharach (Gujarat) by 63,875 tonnes. The company’s VSF capacity thus stands increased at 333,975 tonnes. To meet the growing demand, the company plans to increase its capacity at Harihar (Karnataka) by 31,000 tonnes at an outlay of Rs. 335 crore, which is expected to be operational in Q3FY10. Also, an 88,000 tpa greenfield project is being pursued at Vilayat (Gujarat). The conversion of the AV Nackawic plant from paper grade pulp to rayon grade pulp is expected to be completed in Q2FY09.

Margins in VSF business are expected to remain depressed in the short to medium term due to rising prices of sulphur and pulp, coupled with softening of VSF prices.

Chemical plant
The chemical business posted a moderate performance during the quarter. Production was marginally lower at 46,491 tonnes. Sales volumes were lower by 6 per cent at 44,872 tonnes on account of inventory buildup for planned partial shutdown.

For the year under review, the performance has improved. Production, which was affected in the corresponding year due to breakdown of a captive power plant, grew by 38 per cent at 188,537 tonnes. Sales volumes too rose by 36 per cent at 187,356 tonnes. It's performance would have been better but for the cost pressure on key inputs and fall in realisation.

Cement business
The cement business has recorded good performance during the quarter. Higher capacity utilisation resulted in production increasing by 8 per cent at 4.20 million tonnes. Sales volumes were up by 9 per cent at 4.27 million tonnes. The performance for the year was equally encouraging. Both production and sales volumes grew by 7 per cent at 15.36 million tonnes and 15.54 million tonnes respectively. However, the sharp increase in fuel cost led to lower operating margins. The company continued its efforts to achieve over 100 per cent capacity utilisation to meet the growing demand. Sequentially, the realisation remained flat despite increase in cost, leading to lower operating margins.

RMC (Ready mix concrete) volumes expanded by 62 per cent in Q4FY08 and by 36 per cent in FY08, buoyed by the rapid expansion in RMC network.

Cement subsidiaries
UltraTech Cement Limited (UltraTech), a subsidiary of Grasim, performed well. Domestic cement sales during the year were higher at 14.25 million tonnes, an increase of 7 per cent. However, exports of cement and clinker were down by 25 per cent from 3.48 million tonnes to 2.61 million tonnes.

During the quarter under review, Grasim sold its entire holding of 75,816,681 equity shares representing 53.63 per cent of the capital of Shree Digvijay Cement Company Limited (SDCCL) to Cimpor Inversiones S.A., Spain at Rs. 42.50 per share.

Cement capex plan
During the quarter under review, the company commissioned its following plants:

• 3.3 million tpa clinkerisation plant at Shambhupura (Rajasthan)
• 1.3 million tpa grinding unit at Panipat (Haryana)
• 23 mw captive thermal power plant at Jawad (M.P.)

UltraTech too commissioned its 3.3 million tpa clinkerisation plant at Tadpatri (A.P.) during the quarter. Debottlenecking at existing locations saw both Grasim and UltraTech increasing their respective capacities by 2.40 million tonnes and 1.20 million tonnes during the year.

The expansions at Shambhupura and Tadpatri will be operational in H1FY09, while the Kotputli (Rajasthan) plant of Grasim is expected to go on stream in Q3FY09. Upon completion, the company’s aggregate cement capacity (including that of UltraTech) will stand augmented at 48.7 million tonnes.

The significant increase in input costs will have an adverse impact on margins. Besides, the industry will experience a surplus of supply over demand on account of additional capacity of 118 million tonnes during the XIth plan period which is expected to have an impact on domestic price in CY09. However, the strong momentum in demand would help in absorbing the increased supply in the long term.

Sponge iron business
Inadequate supply of natural gas coupled with the high prices of alternate fuels resulted in production being curtailed by 20 per cent during the quarter at 134,490 tonnes. Sales volumes, as a result, declined by 18 per cent at 140,317 tonnes. The surge in global scrap prices led to improved realisation. However, the gains on this account were offset by increase in prices of iron ore, naptha and propane.

Production of sponge iron during the year increased by 7 per cent at 562,000 tonnes. Sales volumes were lower by 2 per cent at 557,187 tonnes.

The outlook for the business is expected to improve with increased availability of natural gas by Q2FY09.

Outlook
Going forward, VSF and cement will continue to be the growth enablers. Shoring up of its leadership position in the VSF and cement sectors, cost optimisation, maximisation of asset productivity and prudent financial management will continue to be the company’s hallmarks. The prospects for the company continue to be positive.