PRESS RELEASE

19 May 2009

Grasim, an Aditya Birla Group company, today announced its results for the fourth quarter ended 31 March 2009.

Its consolidated revenues for the quarter rose by 5 per cent to Rs.5,020 crore (Rs.4,765 crore). Cash profit for the quarter at Rs.1,114 crore (Rs.781 crore), was substantially higher by 43 per cent, due to the impressive performance of the cement business and the benefit of lower current tax. Net profit was however lower by 5 per cent at Rs.569 crore (Rs.599 crore), given the higher interest cost and substantially higher depreciation on account of commissioning of several new projects, the full benefit of which is expected to accrue only in the current year. Profit was also depressed due to the impact of economic slowdown.

Grasim's consolidated net revenues for the year grew by 9 per cent, at Rs.18,603 crore (Rs.17,141 crore). Cash profit for the year at Rs.3,938 crore (Rs.3,729 crore) was higher by 6 per cent, consequent to lower current tax. Net profit at Rs.2,187 crore (Rs.2,609 crore) was lower by 16 per cent due to higher interest cost and substantially higher depreciation, as various new projects were commissioned. Profitability was also impacted because of the increased input costs and economic slowdown.

Viewed in the backdrop of the current economic environment and its impact on the company's VSF business (one of the company's key businesses) and sponge iron business, the overall performance has been satisfactory.

Grasim's stand-alone revenues for the quarter stood at Rs.2,932 crore (Rs.2,764 crore). Cash profit for the quarter at Rs.619 crore (Rs.466 crore) was substantially higher by 33 per cent due to the impressive performance of the cement business and benefit of lower current tax. Net profit was however lower by 13 per cent at Rs.385 crore (Rs.441 crore) due to higher interest cost and substantially higher depreciation on account of commissioning of several new projects.

Stand-alone net revenues for the year grew by 6 per cent, at Rs.10,940 crore (Rs.10,325 crore). Cash profit for the year was sustained at Rs.2,362 crore (Rs.2,365 crore). Net profit at Rs.1,648 crore (Rs.2,002 crore) was lower by 18 per cent due to higher interest cost and substantially higher depreciation.

Dividend
The board of directors of Grasim has recommended a dividend of Rs.30 per share, at par with the dividend paid last year. The total outflow on account of dividend, including corporate tax on dividend, would be Rs.316 crore.

Cement business
Cement business reached a new milestone during the quarter recording a turnover of over Rs.2,000 crore. Volumes were up by about 13 per cent supported by new capacities, vis-à-vis industry growth of less than 9 per cent. Operating profits grew as a result of higher volumes and increased productivity gains.

Volumes in FY2009 increased only by 6 per cent, as the benefit of new capacities became available only towards the later part of the year. The average power and fuel cost registered a steep increase of 21 per cent, due to the unprecedented increase in prices of imported coal and petcoke, putting pressure on margins.

Cement subsidiary
UltraTech Cement Ltd. (UltraTech), a subsidiary of Grasim, reported PAT of Rs.312 crore as against Rs.285 crore in the corresponding quarter. Net revenues improved by 17 per cent at Rs.1,929 crore, driven by a volume growth of 13 per cent.

Cement capex plan
The company's major projects are nearing completion. At Shambhupura (Rajasthan), one of the two cement mills was commissioned in the fourth quarter. The second cement mill at Shambhupura and split grinding unit at Aligarh (Uttar Pradesh) are expected to be commissioned in Q1 FY10. The Clinker production unit which had commenced in Q2 FY09, has been satisfactorily ramped up. The 3.3 Mn. MT clinkerisation unit at Kotputli (Rajasthan) was commissioned in March 2009. The grinding facility at Kotputli plant is expected to go on stream by H1 FY10. The grinding unit at Dadri (Uttar Pradesh) with a capacity of 1.3 Mn. MT, also became operational during the year.

Thermal power plants with a total capacity of 144 MW were commissioned at four locations, including a unit of 23 MW at Kotputli which was commissioned in April 2009. With this, the total thermal power generation capacity stands enhanced at 268 MW. This will meet around 80 per cent of the business' total power requirement.

During the year, a total amount of Rs.1,467 crore was spent on capex. The company plans to invest a sum of over Rs.1,300 crore on capex in FY10 for the completion of the existing projects and modernisation.

UltraTech too commissioned two of its three cement mills at Tadpatri (Andhra Pradesh) in the fourth quarter. The remaining cement mill will be commissioned in Q1 FY10. UltraTech has also commissioned thermal power plants of 192 MW at four locations, resulting in doubling of captive power to 80 per cent. Its total thermal power generation capacity now stands at 236 MW.

The combined cement capacity of Grasim and UltraTech increased from 35.0 million tpa at the commencement of the year to 41.6 million tpa. The capacity will further stand augmented at 48.8 million tpa upon completion of all the projects presently under implementation.

Cement outlook
The economic growth and its impact on industry growth are dependent on a good monsoon and increased infrastructure spending. Any slowdown in the economy will aggravate the inevitable surplus in production capacity. The commissioning of over 20 million tpa of new capacity by the industry in FY09 and the expected commissioning of much larger capacities in FY10 may result in a reduction in capacity utilisations, with adverse impact on margins. However, both Grasim and UltraTech should see a spur in volumes upon commissioning and stabilisation of new capacities. Going forward, the cement business will continue to focus on sustaining plant performance and optimising efficiencies.

Viscose staple fibre (VSF) business
In VSF business, sales volumes during the quarter were higher by 6 per cent, largely due to restocking by customers, though production was curtailed to liquidate inventory. The sharp fall in realisation and cost push effect on imported inputs resultant from the weakening rupee, impacted margins.

The performance of VSF business for the financial year was affected by the low demand and prices on account of the global financial crisis and recession. This, coupled with the slowdown of yarn exports from India to certain key markets like Brazil and Turkey, led to a significant reduction in sales and production volumes. The low demand for VSF and reducing prices of competing fibres have led to significant pressure on realisation.

Although the VSF business improved its performance in Q4 FY09 as compared to Q3 FY09, the outlook for the business is expected to remain subdued. Though there has been a marginal recovery in prices in Q1 FY10, the long term outlook remains uncertain due to VSF overcapacity in China and relative prices of competing fibres. Margins may improve slightly with the reduction in pulp cost.

Production at Nagda will have to be stopped from end May, 2009 till the onset of monsoon, due to water shortage. This would, however, not impact the profitability of the business, as adequate inventory has been built-up to ensure that the customers' demand is met.

Chemical plant
During Q4 FY09, caustic soda volumes rose by 16 per cent. ECU realisation was higher by 10 per cent, but this was more than offset by the increase in salt and power cost, resulting in lower margins.

During the year gone by, the business recorded historically its highest production and sales volumes. Caustic prices ruled firm as its production was restricted by the lower off take of chlorine. However, the steep increase in salt and power cost impacted margins. Production will have to be curtailed in June, 2009 till the onset of monsoon, due to water shortage.

Going forward, caustic prices may witness pressure due to the fall in International prices and increase in imports.

The consideration of Rs.1,030 crore payable by VSIL to the company is to be funded by Welspun Power and Steel Limited ("Welspun"), through a combination of equity and debt. On such funding by Welspun and upon the Scheme becoming effective, Welspun will own almost the entire stake in VSIL. The transaction for sale is expected to be completed in the current quarter.