Aditya Birla Nuvo Limited

Transcription

1 Aditya Birla Nuvo Limited

2 Mr. Aditya Birla We live by his values. Integrity, Commitment, Passion, Seamlessness and Speed.

3 Aditya Birla Nuvo Limited THE CHAIRMAN S LETTER TO SHAREHOLDERS Dear Shareholder, The Global Scenario Worldwide 2014 portends to be much more encouraging than 2013, with the forces driving the global economic recovery firmly entrenched. The IMF projects that global economic growth will rise from 3% in 2013 to 3.6% in 2014, and to 3.9% in This is largely due to a turn for the better in the developed economies - estimated to grow 2.25% in 2014, a full percentage point more than in US GDP growth for 2014 is projected at 2.8%, and in the Euro area at 1.2%, while China s economy is expected to grow at 7.5%. GDP growth in the emerging markets and developing economies is slated to increase from 4.7% in 2013 to 4.9% in 2014, as these regions step up exports to the developed markets. Continued fiscal easing, loose monetary policy in developed economies and stable commodity prices should boost the global recovery. The nervousness in the financial markets, particularly related to stability of the southern European economies, has abated considerably. Furthermore, we must be prepared for unforeseen geopolitical developments which may have disruptive ripple effects on the global economy. Annual Report i

4 THE CHAIRMAN S LETTER TO SHAREHOLDERS Aditya Birla Nuvo Limited For the Financial Year , your Company s consolidated revenues stood at USD 4.3 billion (` 25,893 Crore). EBITDA at USD 823 million (` 4,937 Crore) surged by 19%. After neutralizing the one-off items, net profit is up by 16% at USD 204 million (` 1,226 Crore). The Indian Economy moving on to a stable footing The outlook for the Indian economy has turned distinctly positive. The increasing traction of the global economic revival and plans to restore vim to India s economy through a slew of timely measures by the new Government by addressing fiscal imbalances and fast-forwarding investment activity should play out positively in the coming year. The RBI s deft moves to stabilize the Rupee, enabled it to recover from a low of around ` 68/$ to under ` 60/$. The current account deficit for the year has been contained at around 2.5% of GDP. Some progress has been achieved on clearing the backlog of large projects whose approvals had been held up. GDP growth is predicted at around 5.5% in However industrial production needs to accelerate with the IIP declining 0.1% year-on-year in the first 11 months of , vis-a-vis 0.9% growth in the same period last year. Inflation also remains a concern, with the wholesale and consumer price indices in March 2014 up 5.7% and 8.3% respectively year-onyear. Continuing inflationary pressures have been a constraint in reducing interest rates. In the medium term, the economy stands to benefit, if the Goods and Services Tax is rolled out. Further initiatives and reforms in areas such as land acquisition, allocation of natural resources, and taxation would help greatly to boost investor confidence and accelerate investment activity. Overall, the stage seems set for India to shift to a higher growth trajectory. These developments on the global and the domestic front have a telling effect on your Company s growth and end-results. ii Annual Report

5 Aditya Birla Nuvo Limited THE CHAIRMAN S LETTER TO SHAREHOLDERS For the Financial Year , your Company s consolidated revenues stood at USD 4.3 billion (` 25,893 Crore). EBITDA at USD 823 million (` 4,937 Crore) surged by 19%. After neutralizing the one-off items, net profit is up by 16% at USD 204 million (` 1,226 Crore). Your Company is competitively well placed in most of its businesses. Our Financial Services business has created a large presence in the Indian financial services industry, even as we are a non bank player presently. Today Aditya Birla Financial Services (ABFS) ranks among the top 5 fund managers in India, excluding LIC. Its assets under management soared by 14% to USD 20.4 billion (` 122,362 Crore). In terms of funds under management, we are among the top 5 private life insurers in India and the 4 th largest asset management company in the country. In the NBFC space, we are now a significant player. Our lending book rose by 44% to touch the USD 2 billion mark (` 11,550 Crore). Going forward, the financial services sector will be one of the prominent growth sectors driven by the expected improvement in the economic health and the investment climate of the country. ABFS attained earnings growth across most of the businesses, except the Life Insurance business, which remained affected given the macro-economic environment. ABFS clocked a revenue of USD 1.1 billion (` 6,640 Crore) and an EBITDA of USD 133 million (` 799 Crore). It generated a sound return on average capital employed of 25% per annum. Going forward, the financial services sector will be one of the prominent growth sectors driven by the expected improvement in the economic health and the investment climate of the country. Our Fashion & Lifestyle business, comprising of Madura, Pantaloons and Jaya Shree, is the largest branded apparel player in India. Its retail network has Annual Report iii

6 THE CHAIRMAN S LETTER TO SHAREHOLDERS Aditya Birla Nuvo Limited Our Fashion & Lifestyle business, comprising of Madura, Pantaloons and Jaya Shree, is the largest branded apparel player in India. Its retail network has reached to an unparalleled nationwide presence of 1,750 exclusive brand outlets / stores spanning 4.3 million square feet. reached to an unparalleled nationwide presence of 1,750 exclusive brand outlets / stores spanning 4.3 million square feet. The business posted a revenue of USD 1 billion (` 6,048 Crore) and an EBITDA of about USD 100 million (` 573 Crore). Driven by strong earnings and efficient working capital management, the business reported a notable return on average operating capital employed of 28% per annum. Madura achieved all round growth in top-line, profitability and free cash flows. Its flagship brands, Louis Philippe and Van Heusen are the best selling brands in India. Pantaloons is in the investment phase and is strengthening its retail presence, brand portfolio and merchandise to enhance sell through. To capitalize on the buoyant demand and to strengthen its domestic leadership position in the linen segment, Jaya Shree has expanded its Linen Yarn capacity from 2,300 tons to 3,400 tons per annum and Linen Fabric processing capacity from 7.3 million meters to 10.1 million meters per annum. The Fashion & Lifestyle business of your Company is all set to ride upon the consumption boom in India driven by the strong demographics of the country. Idea Cellular continued its journey as the fastest growing cellular operator in the Country. It has been the biggest revenue market share gainer in India since the past five years. Globally, Idea ranks as the 7 th largest cellular operator, in terms of subscribers based on operations in a single country. Carrying 1.75 billion minutes of usage every day, it is positioned as the 3 rd largest player in India. It is serving 136 million subscribers covering about 7,400 census towns and 345,000 villages. Mirroring the brand popularity and quality service experience of its customers, Idea has the highest active subscribers ratio in the industry. Growing at nearly double iv Annual Report

7 Aditya Birla Nuvo Limited THE CHAIRMAN S LETTER TO SHAREHOLDERS the industry growth rate, Idea recorded a top-line of USD 4.4 billion (` 26,432 Crore) and an EBITDA of USD 1.4 billion (` 8,560 Crore). With its strong free cash flows and healthy balance sheet, Idea is well placed to capitalize on the expanding spectrum profile and infrastructure to capture the emerging Voice and Wireless Broadband opportunities. The Agri business was impacted by the discontinuance of trading in imported P&K fertilisers and the 41 days maintenance shutdown. The urea plant resumed full operations on 8 th April In the current fiscal, the business will benefit from higher fixed cost reimbursement in line with the Government policy and the energy savings project. Idea Cellular continued its journey as the fastest growing cellular operator in the Country. It has been the biggest revenue market share gainer in India since the past five years. Globally, Idea ranks as the 7th largest cellular operator, in terms of subscribers based on operations in a single country. The Rayon business remained the largest Indian exporter of viscose filament yarn (VFY) for the ninth consecutive year. It has recorded its highest ever earnings. The new VFY Capacity using spool technology from ENKA, Germany is running at full capacity. The Insulators business has reported higher profitability, bolstered by an increase in volumes, improved realisation and enhanced yield. Considering the sector dynamics and to ensure greater focus on other businesses, your Company has divested the Carbon Black business w.e.f. 1 st April 2013 and the IT-ITeS business w.e.f. 9 th May The proceeds from the divestment of the Carbon Black business, the balance equity infusion by the promoters and release of net working capital has strengthened your Company s balance sheet. The proceeds from the divestment of the IT-ITeS business will further support its growth plans. Annual Report v

8 THE CHAIRMAN S LETTER TO SHAREHOLDERS Aditya Birla Nuvo Limited As a conglomerate, your Company mirrors the savings, consumption, infrastructure and agriculture led sectors of the Indian economy. Having a leadership position across its businesses present in these sectors, your Company is well placed to scale new peaks with the upturn of the economy. Outlook As a conglomerate, your Company mirrors the savings, consumption, infrastructure and agriculture led sectors of the Indian economy. Having a leadership position across its businesses present in these sectors, your Company is well placed to scale new peaks with the upturn of the economy. To our teams In the face of continuing external challenges, our teams across geographies have stayed focused and delivered performance. I thank all of our employees for their tenacity and commitment to sustain top line and bottom line growth year after year. The Aditya Birla Group in perspective Despite the tectonic shifts witnessed globally and in India, at the Group level we have managed to sustain our revenues at USD 40 billion. Much credit must go to the talent resident in our 1,20,000 committed workforce, spanning 36 countries and 42 nationalities. I would like to reiterate that we place big bets on our people. Let me elaborate on this aspect in some detail. As a high performance driven, meritocratic Group, we are constantly focusing on building our talent pool to support our business vision. As a high performance driven, meritocratic Group, we are constantly focusing on building our talent pool to support our business vision. To this end, substantive initiatives taken earlier have since materialized. These include focused endeavours to build a robust talent pipeline, building the employer brand of our Group beyond India, and achieving the distinction of becoming the most aspirational employer for manufacturing professionals also, besides augmenting talent on the technical side. vi Annual Report

9 Aditya Birla Nuvo Limited THE CHAIRMAN S LETTER TO SHAREHOLDERS Furthermore to support our long-term strategies, our business structures have been significantly bolstered. Our reputation as an employer of choice is again something we are incredibly proud of. We are recognized as an employer that offers a World of Opportunities and is concerned about the professional growth of its people. We continue to fast track our talent from our management cadre comprising of 38,200 colleagues, 13% have been promoted, 20% have changed roles and 12% have moved location during the year. Gyanodaya, our in-house world-class university, continues to be an important mainstay of our progress. Leveraging resources across geographies and partnering with leading global faculty, institutions and corporates, it ensure that our leadership and talent pool stays contemporary and is always in the learning mode. Our reputation as an employer of choice is again something we are incredibly proud of. We are recognized as an employer that offers a World of Opportunities and is concerned about the professional growth of its people. We continue to fast track our talent. To be a learning and growing organization is an ongoing endeavour. Ranked No. 1 in the Nielsen Corporate Image Monitor I am pleased to share with you that for the second year running our Group has been ranked No. 1 in the Nielsen Corporate Image Monitor Across the six pillars of corporate performance products and services, vision and leadership, workplace environment, financial performance, operating style and social responsibility, Aditya Birla Group emerges as the pace setter, way ahead of 40 corporates. Nielsen s Corporate Image Monitor measures the reputation of the 40 leading companies in India across sectors and serves as an important indicator of the strength of the corporate brand, they state. The companies were Annual Report vii

10 THE CHAIRMAN S LETTER TO SHAREHOLDERS Aditya Birla Nuvo Limited With the best of talent in our midst, our strong Balance Sheets, robust cash flows, the eye on the customer and unrelenting focus on delivering shareholder value, we are confident of the future. covered in the survey, using the Economic Times 500 and the Business Today 500 ranking of listed companies. Nielsen is among the most renowned global market research companies, headquartered in New York and operating in 60 countries. In sum With the best of talent in our midst, our strong Balance Sheets, robust cash flows, the eye on the customer and unrelenting focus on delivering shareholder value, we are confident of the future. The year ahead I believe will be the one when we consolidate and reinforce what we have achieved in recent years. And see the fruition of the several projects and initiatives in each of the businesses that are currently underway. Yours sincerely, Kumar Mangalam Birla viii Annual Report

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18 BOARD OF DIRECTORS Aditya Birla Nuvo Limited Annual Report

19 Aditya Birla Nuvo Limited CORPORATE INFORMATION KEY MANAGERIAL PERSONNEL/ SENIOR MANAGEMENT TEAM MANAGING DIRECTOR Mr. Lalit Naik [w.e.f. 1 st July, 2014] Dr. Rakesh Jain [upto 30 th June, 2014] DEPUTY MANAGING DIRECTOR Mr. Lalit Naik [upto 30 th June, 2014] WHOLE-TIME DIRECTOR & CHIEF FINANCIAL OFFICER Mr. Sushil Agarwal TELECOM Mr. Himanshu Kapania Business Head MANUFACTURING: AGRI & INSULATORS Mr. Lalit Naik Business Director Mr. Raj Narayanan Chief Executive Officer Dr. Rakesh Jain Business Director [upto 30 th June, 2014] RAYON Mr. Lalit Naik Business Director Dr. Bir Kapoor President COMPANY SECRETARY Mrs. Hutokshi Wadia FASHION & LIFESTYLE Mr. Pranab Barua Business Head (Branded Apparels) ADITYA BIRLA FINANCIAL SERVICES Mr. Ajay Srinivasan Chief Executive Officer Mr. Pankaj Razdan Dy. Chief Executive Officer MD & CEO, Birla Sun Life Insurance Co. Ltd. Mr. Thomas Varghese Mr. Ashish Dikshit Mr. Shital Mehta Mr. S. Krishnamoorthy Business Head (Textiles) Chief Executive Officer (Madura Fashion & Lifestyle) Chief Executive Officer (Pantaloons Fashion) President - Jaya Shree Textiles IT-ITeS [Divested w.e.f. 9 th May, 2014] Dr. Rakesh Jain Business Director Mr. Deepak Patel Chief Executive Officer AUDITORS Khimji Kunverji & Co. S. R. Batliboi & Co. LLP SOLICITORS Amarchand & Mangaldas & Suresh A. Shroff & Co. Mulla & Mulla and Craigie, Blunt & Caroe OTHER BRANCH AUDITORS K. S. Aiyar & Co. Deloitte Haskins & Sells CIN: L17199GJ1956PLC Annual Report

20 CONTENTS Aditya Birla Nuvo Limited 1 Notice 19 Aditya Birla Nuvo : A Snapshot 24 Financial Highlights 26 Management Discussion and Analysis 55 Directors Report 69 Business Responsibility Report 78 Corporate Governance Report 88 Shareholders Information 98 Social Report Towards Inclusive Growth 103 Environment Report Sustainable Development 105 Standalone Financial Statements 167 Consolidated Financial Statements 253 Form of Proxy Annual Report

21 Aditya Birla Nuvo Limited NOTICE NOTICE is hereby given that the FIFTY-SEVENTH Annual General Meeting of the shareholders of ADITYA BIRLA NUVO LIMITED will be held at the Registered Office of the Company at Indian Rayon Compound, Veraval , Gujarat, on Thursday, the 11 th September, 2014, at a.m. to transact the following businesses: ORDINARY BUSINESS: 1. To receive, consider and adopt the Audited Balance Sheet as at 31 st March, 2014 and the Statement of Profit and Loss for the year ended on that date, the Report of the Directors and the Auditors thereon. 2. To declare and sanction the payment of Dividend on equity shares and on preference shares of the Company for the financial year To appoint a Director in place of Mrs. Rajashree Birla (DIN: ), who retires from office by rotation and being eligible, offers herself for re-appointment. 4. To appoint a Director in place of Mr. B. L. Shah (DIN: ), who retires from office by rotation and being eligible, offers himself for re-appointment. 5. To appoint Joint Statutory Auditors of the Company to hold office from the conclusion of this Meeting until the conclusion of the fifty-eighth Annual General Meeting of the Company and to fix their remuneration and for that purpose, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT pursuant to the provisions of section 139 and other applicable provisions, if any, of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, M/s. Khimji Kunverji & Co. (Reg. No W), Chartered Accountants, the retiring Joint Staturoty Auditors, be and are hereby appointed as the Joint Statutory Auditors of the Company, to hold office from the conclusion of this Annual General Meeting until the conclusion of the fifty-eighth Annual General Meeting of the Company to be held in the year 2015 and that the Board of Directors of the Company be and is hereby authorised to fix their remuneration for the said period and reimbursement of actual out-of-pocket expenses, as may be incurred in the performance of their duties. 6. To appoint Branch Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of the fifty-eighth Annual General Meeting of the Company and to fix their remuneration and for the purpose, to pass the following Resolution as an Ordinary Resolutions: (i) (ii) RESOLVED THAT pursuant to the provisions of sections 139, 143 and other applicable provisions, if any, of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, M/s. Khimji Kunverji & Co. (Reg. No W), Chartered Accountants, the retiring Branch Auditors, be and are hereby appointed as the Branch Auditors of the Company to audit the accounts in respect of the Company s Insulators Division at Rishra and Halol, to hold office from the conclusion of this Annual General Meeting until the conclusion of the fifty-eighth Annual General Meeting of the Company to be held in the year 2015 and that the Board of Directors of the Company be and is hereby authorised to fix their remuneration for the said period and reimbursement of actual out-of-pocket expenses, as may be incurred in the performance of their duties. RESOLVED THAT pursuant to the provisions of sections 139, 143 and other applicable provisions, if any, of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, M/s. Khimji Kunverji & Co. (Reg. No W), Chartered Accountants and M/s. K. S. Aiyar & Co. (Reg. No W) Chartered Accountants, the retiring Joint Branch Auditors, be and are hereby, appointed as the Joint Branch Auditors of the Company to audit the accounts in respect of the Company s Indian Rayon Division at Veraval, to hold office from the conclusion of this Annual General Meeting until the conclusion of the fifty-eighth Annual General Meeting of the Company to be held in the year 2015 and that the Board of Directors of the Company be and is hereby authorised to fix their remuneration for the said period and NOTICE Annual Report

22 NOTICE Aditya Birla Nuvo Limited NOTICE reimbursement of actual out-of-pocket expenses, as may be incurred in the performance of their duties. (iii) RESOLVED THAT pursuant to the provisions of sections 139, 143 and other applicable provisions, if any, of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, M/s. Deloitte Haskins & Sells (Reg. No S), Chartered Accountants, the retiring Branch Auditors, be and are hereby, appointed as the Branch Auditors of the Company to audit the accounts in respect of the Company s Madura Fashion & Lifestyle Division at Bengaluru to hold office from the conclusion of this Annual General Meeting until the conclusion of the fifty-eighth Annual General Meeting of the Company to be held in the year 2015 and that the Board of Directors of the Company be and is hereby authorised to fix their remuneration for the said period and reimbursement of actual out-of-pocket expenses, as may be incurred in the performance of their duties. SPECIAL BUSINESS: 7. To appoint Auditor other than the retiring Auditor and in this regard to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT in place of S. R. Batliboi & Co. LLP., Chartered Accountants (Reg. No E), the retiring auditors of the Company who have expressed their inability to continue, and pursuant to the provisions of section 139 and other applicable provisions, if any, of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, S R B C & Co. LLP., Chartered Accountants (Registration No E), be and are hereby, appointed as the Joint Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting till the conclusion of the fifty-eighth Annual General Meeting of the Company to be held in the year 2015, and in respect of whom the Company has received a special notice from a Member, pursuant to the provisions of section 115 read with section 140 of the Companies Act, 2013, signifying its intention to propose the appointment of S R B C & Co. LLP as Joint Statutory Auditors of the Company and that the Board of Directors of the Company be and is hereby authorised to fix their remuneration for the said period and reimbursement of actual out-ofpocket expenses, as may be incurred in the performance of their duties. 8. To appoint Branch Auditor other than the retiring Branch Auditor and in this regard to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT in place of M/s. S. R. Batliboi & Co. LLP, Chartered Accountants (Reg. No E), the retiring Branch Auditors who have expressed their inability to continue, and pursuant to the provisions of sections 139, 143 and other applicable provisions, if any, of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014, S R B C & Co. LLP, Chartered Accountants (Registration No E), be and are hereby, appointed as the Branch Auditors of the Company to audit the accounts in respect of the Company s Jaya Shree Textiles (JST) Division, Rishra and Indo Gulf Fertilisers (IGF) Division, Jagdishpur, to hold office from the conclusion of this Annual General Meeting till the conclusion of the fifty-eighth Annual General Meeting of the Company to be held in the year 2015, and in respect of whom the Company has received a special notice from a Member, pursuant to the provisions of section 115 read with section 140 of the Companies Act, 2013, signifying its intention to propose the appointment of S R B C & Co. LLP as Branch Auditors of JST & IGF and that the Board of Directors of the Company be and is hereby authorised to fix their remuneration for the said period and reimbursement of actual out-of-pocket expenses, as may be incurred in the performance of their duties. 9. To appoint Ms. Tarjani Vakil (DIN: ), as an Independent Director and in this regard to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT pursuant to the provisions of sections 149 and 152, read with Schedule IV and other applicable provisions, if any, of 2 Annual Report

23 Aditya Birla Nuvo Limited NOTICE the Companies Act, 2013 (the Act), and the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), Ms. Tarjani Vakil (DIN: ), a Non-Executive Director of the Company, who has submitted a declaration that she meets the criteria for independence as provided in section 149(6) of the Act and who is eligible for appointment, and who has given a notice in writing under section 160 of the Act proposing her candidature for the office of a Director, be and is hereby appointed as an Independent Director of the Company to hold office for a term of 5 consecutive years from the date of this Annual General Meeting till 10 th September, To appoint Mr. P. Murari (DIN: ), as an Independent Director and in this regard to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT pursuant to the provisions of sections 149 and 152, read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 (the Act), and the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), Mr. P. Murari (DIN: ), a Non-Executive Director of the Company, who has submitted a declaration that he meets the criteria for independence as provided in section 149(6) of the Act and who is eligible for appointment, and who has given a notice in writing under Section 160 of the Act proposing his candidature for the office of a Director, be and is hereby appointed as an Independent Director of the Company to hold office for a term of 5 consecutive years from the date of this Annual General Meeting till 10 th September, To appoint Mr. Subhash Chandra Bhargava (DIN: ), as an Independent Director and in this regard to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT pursuant to the provisions of sections 149 and 152, read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 (the Act), and the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), Mr. Subhash Chandra Bhargava (DIN: ), a Non-Executive Director of the Company, who has submitted a declaration that he meets the criteria for independence as provided in section 149(6) of the Act and who is eligible for appointment, and who has given a notice in writing under section 160 of the Act proposing his candidature for the office of a Director, be and is hereby appointed as an Independent Director of the Company to hold office for a term of 5 consecutive years from the date of this Annual General Meeting till 10 th September, To appoint Mr. Gian Prakash Gupta (DIN: ), as an Independent Director and in this regard to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT pursuant to the provisions of sections 149 and 152, read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 (the Act), and the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), Mr. Gian Prakash Gupta (DIN: ), a Non-Executive Director of the Company, who has submitted a declaration that he meets the criteria for independence as provided in section 149(6) of the Act, and who is eligible for appointment, and who has given a notice in writing under section 160 of the Act proposing his candidature for the office of a Director, be and is hereby appointed as an Independent Director of the Company to hold office for a term of 5 consecutive years from the date of this Annual General Meeting till 10 th September, NOTICE Annual Report

24 NOTICE Aditya Birla Nuvo Limited NOTICE 13. To appoint Mr. Baldev Raj Gupta (DIN: ), as an Independent Director and in this regard to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT pursuant to the provisions of sections 149 and 152, read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 (the Act), and the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), Mr. Baldev Raj Gupta (DIN: ), a Non-Executive Director of the Company, who has submitted a declaration that he meets the criteria for independence as provided in section 149(6) of the Act, and who is eligible for appointment, and who has given a notice in writing under section 160 of the Act proposing his candidature for the office of a Director, be and is hereby appointed as an Independent Director of the Company to hold office for a term of 5 consecutive years from the date of this Annual General Meeting till 10 th September, To appoint Mr. Lalit Naik (DIN: ), as the Managing Director of the Company and in this regard to consider and if though fit, to pass the following Resolution as a Special Resolution: RESOLVED THAT pursuant to the provisions of sections 196, 197 and 203 read with Schedule V and all other applicable provisions of the Companies Act, 2013 (the Act), and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), approval of the Company be and is hereby accorded to the appointment of Mr. Lalit Naik (DIN: ) as the Managing Director of the Company for the period and upon the following terms and conditions including remuneration, with further liberty to the Board of Directors (hereinafter referred to as the Board, which term shall include any committee constituted or to be constituted by the Board) from time to time to alter the said terms and conditions, in such manner as may be agreed to between the Board and Mr. Lalit Naik and as may be permissible by law: A. Period: Five years w.e.f. 1 st July, 2014 with the liberty to either party to terminate the appointment on three months notice in writing to the other and neither party will have any claim against the other for damages or compensation by reason of such termination. The term of the office of the Managing Director of the Company shall be subject to retirement by rotation. Such reappointment shall not affect the tenure of Mr. Lalit Naik as the Managing Director of the Company, which shall continue to be for a period of five years commencing from 1 st July, B. Remuneration: a) Basic Salary: ` 7,79,200/- (Rupees Seven Lakh Seventy Nine Thousand Two Hundred) only, per month with such increment(s) as the Board may decide from time to time, subject, however, to a ceiling of ` 14,00,000/- (Rupees Fourteen Lakh) only, per month as Basic Salary; b) Special Allowance: ` 7,53,000/- (Rupees Seven Lakh Fifty Three Thousand) only, per month with such increment(s) as the Board may decide from time to time, subject, however, to a ceiling of ` 20,00,000/- (Rupees Twenty Lakh) only, per month. This allowance, however, will not be taken into account for calculation of benefits such as Provident Fund, Gratuity, Superannuation and Leave encashment; c) Variable Pay: Performance Bonus linked to the achievement of targets, as may be decided by the Board from time to time, subject to a maximum of ` 3,00,00,000/- (Rupees Three Crore) only per annum; 4 Annual Report

25 Aditya Birla Nuvo Limited NOTICE d) Long-term Incentive Compensation/ Employee Stock Option as per the plan applicable to the Senior Executives of the Company/Aditya Birla Group including that of any parent/subsidiary company as may be decided by the Board from time to time. C. Perquisites: (a) Housing: Free furnished accommodation or House Rent Allowance in lieu of the Company provided accommodation; (b) Reimbursement of expenses at actuals pertaining to electricity, gas, water, telephone and other reasonable expenses for the upkeep and maintenance in respect of such accommodation, as per the policy of the Company; (c) Medical Expenses Reimbursement: Reimbursement of all expenses incurred in India for self and family at actuals (including domiciliary and medical expenses and insurance premium for medical and hospitalization policy as applicable), as per the policy of the Company; (d) Leave Travel Expenses: Leave Travel Expenses for self and family in accordance with the policy of the Company; (e) Club Fees: Fees of one corporate club in India (including admission and membership fee); (f) Two cars for use for Company s business as per the policy of the Company for Executive Directors; (g) Reimbursement of entertainment, travelling and all other expenses incurred for the business of the Company as per the policy of the Company. Travelling expenses of spouse accompanying the Managing Director on any official overseas or inland trip will be governed as per the policy of the Company; (h) Leave and Encashment of Leave: As per the policy of the Company; (i) Personal Accident Insurance Premium: As per the policy of the Company; (j) Contribution towards Provident Fund and Superannuation Fund or Annuity Fund, as per the policy of the Company; (k) Gratuity and/or contribution to the Gratuity Fund of Company: As per the policy of the Company; (l) Other Allowances, Benefits, Perquisites: Any other allowances, benefits and perquisites as per the Rules applicable to the Senior Executives of the Company and / or which may become applicable in the future and/or any other allowance, perquisites as the Board may from time to time decide; and (m) Annual remuneration review is effective from 1 st July each year, as per the policy of the Company. D. Subject as aforesaid, the Managing Director shall be governed by such other Rules as are applicable to the Senior Executives of the Company from time to time; E. For the purposes of Gratuity, Provident Fund, Superannuation and other like benefits, if any, the services of Mr. Lalit Naik, Managing Director, will be considered as continuous service with the Company from the date of joining the Aditya Birla Group; F. The aggregate of the remuneration and perquisites as aforesaid in any financial year shall not exceed the limit from time to time under section 197, section 198 and other applicable provisions of the Companies Act, 2013 (the Act), read with Schedule V to the Act or any statutory modification(s) or re-enactment(s) thereof for the time being in force, or otherwise as may be permissible by law; G. Minimum Remuneration: Notwithstanding anything herein above stated, where in any financial year, the Company has no NOTICE Annual Report

26 NOTICE Aditya Birla Nuvo Limited NOTICE profits or its profits are inadequate, the remuneration including the perquisites as aforesaid will be paid to Mr. Lalit Naik in accordance with the applicable provisions of Schedule V of the Act, and subject to the approval of the Central Government, if required; H. The Nomination and Remuneration Committee will review and recommend the remuneration payable to the Managing Director during the tenure of his appointment; I. Though considering the provisions of section 188 of the Companies Act, 2013, and the applicable Rules and the Schedule of the Act, Mr. Lalit Naik would not be holding any office or place of profit by his being a mere director of the Company s subsidiaries/joint ventures, approval be and is hereby granted by way of abundant caution for him to accept the sitting fees/commission paid/payable to other directors for attending meetings of the Board(s) of Directors/Committee(s) of subsidiaries/joint ventures of the Company or companies promoted by the Aditya Birla Group. 15. To partially modify/amend the Special Resolution passed at the 54 th Annual General Meeting of the Company for appointment of Mr. Sushil Agarwal as the Whole-time Director of the Company, so as to make him a director liable to retire by rotation. Accordingly, to consider and if thought fit, to pass the following Resolution as a Special Resolution: RESOLVED THAT the Special Resolution passed at Item No. 11 at the 54 th Annual General Meeting of the Company held on 28 th September, 2011, for the appointment of Mr. Sushil Agarwal as the Whole-time Director of the Company for a period of five years with effect from 1 st June, 2011, be and is hereby partially modified/amended to the effect that the appointment of Mr. Sushil Agarwal shall be subject to retirement by rotation; provided further that such retirement shall not affect the tenure of his appointment as the Whole-time Director of the Company, which continues to be for a period of five years with effect from 1 st June, 2011, as provided in the said Special Resolution passed at the 54 th Annual General Meeting. 16. To re-appoint Mr. Sushil Agarwal (the Wholetime Director of the Company) (DIN: ) as a Director of the Company. Mr. Sushil Agarwal retires by rotation at this Annual General Meeting and being eligible, offers himself for being re-appointed as the Director of the Company liable to retire by rotation. Accordingly, to consider and if thought fit, to pass the following Resolution as an Ordinary Resolution: RESOLVED THAT pursuant to the provisions of section 152 and other applicable provisions of the Companies Act, 2013, Mr. Sushil Agarwal, the Whole-time Director of the Company, be and is hereby re-appointed as a Director of the Company, liable to retire by rotation. RESOLVED FURTHER THAT such re-appointment shall not affect the tenure of Mr. Sushil Agarwal as the Whole-time Director of the Company, which shall continue to be for a period of five years commencing from 1 st June, To approve the payment of remuneration to Non-Executive Directors of the Company and in this regard to consider and if thought fit, to pass the following Resolution as a Special Resolution: RESOLVED THAT in supersession of the resolution previously passed by the shareholders in this regard and pursuant to the provisions of sections 197 and 198 and all other applicable provisions of the Companies Act, 2013 (including any statutory modification(s) or re-enactment thereof for the time being in force), the Non-Executive Directors of the Company (i.e. directors other than the Managing Director and / or the Wholetime Directors) be paid, remuneration by way of commission, in addition to the sitting fee for attending the meetings of the Board of Directors or Committees thereof, as the Board of Directors may from time to time determine, not exceeding in aggregate one percent of the Net Profits or such other percentage of 6 Annual Report

27 Aditya Birla Nuvo Limited NOTICE Net Profits of the Company for each financial year, as computed in the manner laid down in section 198 of the Companies Act, 2013, or any statutory modification(s) or re-enactment thereof, for each relevant financial year for a period of five years commencing from 1 st April, RESOLVED FURTHER THAT the Board of Directors of the Company (including Nomination and Remuneration Committee) be and is hereby authorised to do all acts and take all such steps as may be necessary, proper or expedient to give effect to this Resolution. 18. To approve the offer or invitation to subscribe to Non-Convertible Debentures on a private placement basis, and in this regard to consider and if thought fit, to pass the following Resolution as a Special Resolution: RESOLVED THAT pursuant to the provisions of sections 42 and 71 and all other applicable provisions of the Companies Act, 2013 read with the Companies (Prospectus and Allotment of Securities) Rules, 2014 (including any statutory modification(s) or re-enactment thereof, for the time being in force), and subject to the provisions of the Articles of Association of the Company, the approval of the members be and is hereby accorded to the Board of Directors of the Company for making one or more offer(s) or invitation(s) to subscribe to Non-Convertible Debentures ( NCDs ) in one or more series/tranches, during a period of one year from the date of this Annual General Meeting, i.e. till 10 th September, 2015, within the overall borrowing limits of the Company as approved by the members from time to time, on a private placement basis, on such terms and conditions as the Board of Directors of the Company may, from time to time, determine and consider proper and most beneficial to the Company including as to when the said Debentures be issued, the consideration for the issue, utilization of the issue proceeds and all matters connected with or incidental thereto; RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to do all acts and take all such steps as may be necessary, proper or expedient to give effect to this Resolution. 19. To adopt new Articles of Association of the Company containing regulations in conformity with the Companies Act, 2013, and in this regard to consider and if thought fit, to pass the following Resolution as a Special Resolution: RESOLVED THAT pursuant to the provisions of section 14 and all other applicable provisions of the Companies Act, 2013 (the Act), read with the Companies (Incorporation) Rules, 2014 (including any statutory modification(s) or re-enactment thereof, for the time being in force), the draft regulations contained in the Articles of Association submitted to this Meeting duly initialed by the Company Secretary be and are hereby approved and adopted in substitution, and to the entire exclusion, of the regulations contained in the existing Articles of Association of the Company; RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to do all acts and take all such steps as may be necessary, proper or expedient to give effect to this Resolution. 20. To consider and if thought fit, to pass the following Resolution as a Special Resolution: RESOLVED THAT pursuant to the provisions of section 180(1)(a) and all other applicable provisions, if any, of the Companies Act, 2013 (including any statutory modification(s) or re-enactment thereof for the time being in force), the consent of the Company be and is hereby accorded, to the Board of Directors of the Company to create a mortgage and/or charge on such terms and conditions and at such time(s) and in such form and manner and with such ranking as to priority, as the Board in its absolute discretion thinks fit, on the whole or substantially the whole of the Company s undertakings or of all the undertakings, including the present and/or future properties, whether movable or immovable as may be agreed to in favour of the Banks/Financial Institutions/Trustees/Other Investors, hereafter referred to as lenders and/ or debenture trustees and/or trustees up to an NOTICE Annual Report

28 NOTICE Aditya Birla Nuvo Limited NOTICE aggregate amount not exceeding ` 1,500 Crore (Rupees One Thousand Five Hundred Crore) only, over and above the aggregate of the paid up capital and free reserves, to secure the term loan facility/debentures/bonds, to be issued in one or more tranches, other instrument(s) including foreign currency borrowings tied up/to be tied up by the Company together with interest on the principal amounts, compound interest, additional interest, liquidated damages, accumulated interest, premium on prepayment or on redemption, commitment charges, costs, charges, expenses, remuneration of agent(s)/trustee(s) at the respective agreed rates, if any, and all other monies payable by the Company to the concerned Banks/Financial Institutions/ Trustees/Other investors under the respective debenture trust deed/loan agreement/other relevant agreements entered into/to be entered into by the Company. RESOLVED FURTHER THAT the security to be created by the Company as aforesaid may rank prior to/pari passu/subservient with the mortgages and/or charges already created or to be created in future by the Company and as may be agreed to between the concerned parties. RESOLVED FURTHER THAT for the purpose of giving effect to this Resolution, the Board or any Committee thereof, or persons authorized by the Board/Committee, be and is hereby authorized to finalise, settle and execute such documents/deeds/writings/ papers/agreements as may be required, and to accept any modification(s) to, or to modify, alter, vary, the terms and conditions thereof and to do all such acts, deeds, matters and things, as it may in its absolute discretion deem necessary, proper or desirable and to settle any question, difficulty or doubt that may arise in regard to creating the mortgage/ charge as aforesaid or otherwise considered to be in the best interests of the Company. 21. To consider, and if thought fit, to pass the following Resolution as a Special Resolution: RESOLVED THAT supplemental to the Ordinary Resolution passed under section 293(1)(d) of the Companies Act, 1956, at the Extra-ordinary General Meeting of the Company held on 3 rd January, 1994, and pursuant to section 180(1)(c) and any other applicable provisions of the Companies Act, 2013 (hereinafter referred to as the Act) (including any statutory modification(s) or re-enactment thereof, for the time being in force), and the Articles of Association of the Company (hereinafter referred to as the Articles ), consent of the Company be and is hereby granted to the Board of Directors of the Company, to borrow for and on behalf of the Company, from time to time as they may consider fit, any sum or sums of money, in any manner and without prejudice to the generality thereof, by way of loans, advances, credits, acceptance of deposits or otherwise in Indian Rupees or any other foreign currency, from any bank(s) or financial institution(s), other person or persons and whether the same be unsecured or secured, and if secured, whether by way of mortgage, charge, hypothecation, pledge or otherwise in any way whatsoever, on, or in respect of all or any of the Company s assets and properties including uncalled capital, stock in trade (including raw materials, stores, spares and components in stock or in transit) notwithstanding that the monies so borrowed together with the monies, already borrowed, if any, by the Company (apart from temporary loans and credits obtained from the Company s bankers in the ordinary course of business) may exceed the aggregate of the Company s paid up capital and free reserves i.e. reserves not set apart for any specific purpose, provided that the total amount so borrowed and outstanding at any time shall not exceed ` 1,500 Crore (Rupees One Thousand Five Hundred Crore) only, over and above the aggregate of the paid-up capital and free reserves. 22. To approve the remuneration of the Cost Auditors for the financial year ending 31 st March, 2015, and in this regard to consider and if thought fit, to pass, with or without modifications, the following Resolution as an Ordinary Resolution: 8 Annual Report

29 Aditya Birla Nuvo Limited NOTICE RESOLVED THAT pursuant to the provisions of section 148 and all other applicable provisions of the Companies Act, 2013, and the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), the remuneration as set out in the statement annexed to the Notice convening this meeting plus service tax including cess as applicable and reimbursement of actual travel and out-of-pocket expenses for the Financial Year ending 31 st March, 2015, as approved by the Board of Directors of the Company, to be paid to the respective Cost Auditors, for the conduct of cost audit of the Company s manufacturing units, be and is hereby ratified and confirmed. RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorized to do all such acts and take all such steps as may be necessary, proper or expedient to give effect to this Resolution. Place: Mumbai Date: 26 th June, 2014 By Order of the Board Hutokshi Wadia Vice President & Company Secretary NOTICE Annual Report

30 NOTICE Aditya Birla Nuvo Limited NOTICE NOTES FOR MEMBERS ATTENTION: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE 57 th ANNUAL GENERAL MEETING ( THE MEETING ) IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. THE INSTRUMENT APPOINTING PROXY SHOULD, HOWEVER, BE DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANY NOT LESS THAN FORTY-EIGHT HOURS BEFORE THE COMMENCEMENT OF THE MEETING. Proxies submitted on behalf of limited companies, societies, etc. must be supported by appropriate resolutions/ authority, as applicable. A person can act as proxy on behalf of Members not exceeding fifty (50) and holding in the aggregate not more than 10% of the total share capital of the Company carrying voting rights. In case a proxy is proposed to be appointed by a Member holding more than 10% of the total share capital of the Company carrying voting rights, then such proxy shall not act as a proxy for any other person or shareholder. 2. Corporate Members intending to depute their authorised representatives to attend the Meeting are requested to send to the Company a duly certified true copy of the Board Resolution/ Power of Attorney authorising their representatives to attend and vote on their behalf at the Meeting. 3. The relevant explanatory statements pursuant to section 102 of the Companies Act, 2013 (the Act), in respect of the businesses under Item Nos. 7 to 22 of the Notice set out above, is annexed hereto. 4. The Register of Members and Share Transfer Books of the Company will remain closed from 30 th August, 2014 to 11 th September, 2014 (both days inclusive), for the purpose of payment of dividend, if any, approved by the Members. 5. The Annual Report of the Company for the year , circulated to the members of the Company, will be made available on the Company s website ( 6. Subject to the provisions of section 126 of the Companies Act, 2013, dividend as recommended by the Board, if declared at the Annual General Meeting will be paid to those equity shareholders whose names appear: (a) As Member in the Register of Members of the Company after giving effect to all valid share transfers in physical form which are lodged with the Company on or before 29 th August, 2014; and (b) In respect of the shares in electronic form on the basis of beneficial ownership furnished by National Securities Depositories Ltd. (NSDL) and Central Depositories Services (India) Limited (CDSL) for this purpose as at the end of 29 th August, Dividend will be paid within a period of 30 days from the date of approval by the shareholders in this meeting. 7. In terms of the provisions of the section 125 (2)(c) of the Act, the amount of dividend, which has remained unclaimed and unpaid for a period of 7 years from its due date of payment, is required to be transferred to the Investor Education and Protection Fund (IEPF), constituted by the Central Government. Further, the proviso to section125(3) of the Act provides that the persons whose amount has been transferred to IEPF shall be entitled to get refund out of the Fund in respect of such claims in accordance with the rules made under this section. 8. The details of unpaid/unclaimed dividend for the year onwards are as under:- Year Amount Due Date of in ` Transfer ,679, ,978, ,845, ,434, ,237, ,423, Unpaid / unclaimed dividend for the year amounting to ` 3,307,309 has been transferred to IEPF on 8 th May, The Ministry of Corporate Affairs (MCA) on 10 th May, 2012 notified the IEPF (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012 (IEPF Rules), which is applicable to the Company. The objective of the IEPF Rules is to help the shareholders ascertain status of the unclaimed amounts and overcome the 10 Annual Report

31 Aditya Birla Nuvo Limited NOTICE problems due to misplacement of intimation thereof by post etc. In terms of the said IEPF Rules, the Company has uploaded the information in respect of the Unclaimed Dividends in respect of the financial years from , as on the date of the 56 th Annual General Meeting held on 6 th September, 2013, on the website of the IEPF, viz. and under Investors Section on the Website of the Company viz Details under Clause 49 of the Listing Agreement with the Stock Exchanges in respect of the Directors seeking appointment/ re-appointment at the Annual General Meeting, forms an integral part of the Notice. The Directors have furnished the requisite declarations for their appointment/ re-appointment. 10. Electronic copy of the Notice of the 57 th Annual General Meeting of the Company inter alia indicating the process and manner of e-voting along with Attendance Slip and Proxy Form is being sent to all the members whose addresses are registered with the Company/ Depository Participants(s) for communication purposes unless any member has requested for a hard copy of the same. For members who have not registered their address, physical copies of the Notice of the 57 th Annual General Meeting of the Company inter alia indicating the process and manner of e-voting along with Attendance Slip and Proxy Form is being sent in the permitted mode. 11. Members/Proxies should bring their Attendance Slip sent herewith, duly filled in, for attending the meeting. 12. Members may also note that the Notice of the 57 th Annual General Meeting and the Annual Report for will also be available on the Company s website for their download. The physical copies of the aforesaid documents will also be available at the Company s Registered Office at Indian Rayon Compound, Veraval , Gujarat for inspection during normal business hours on working days, except Saturdays. Even after registering for e-communication, members are entitled to receive such communication in physical form, upon making a request for the same, by post, free of cost. For any communication, Members may also send requests to the Company s investor id: abnlsecretarial@adityabirla.com. 13. In compliance with the provisions of section 108 of the Companies Act, 2013 and Rule 20 of the Companies (Management and Administration) Rules, 2014, the Company is pleased to provide members, the facility to exercise their right to vote at the 57 th Annual General Meeting by electronic means. The instructions in this behalf are stated on the attendance slip and forms part of this Notice. By Order of the Board Hutokshi Wadia Vice President & Company Secretary Place: Mumbai Date: 26 th June, 2014 NOTICE Annual Report

32 NOTICE Aditya Birla Nuvo Limited NOTICE ANNEXURE TO THE NOTICE EXPLANATORY STAEMENT IN RESPECT OF THE SPECIAL BUSINESS PURSUANT TO SECTION 102 OF THE COMPANIES ACT, Item Nos. 7 and 8 S. R. Batliboi & Co. LLP, the retiring Joint Statutory Auditors of the Company and the Branch Auditors for Indo Gulf Fertilisers Division at Jagdishpur and for Jaya Shree Textiles Division at Rishra, have expressed their inability to continue as auditors/ branch auditors for the financial year A special notice has been received from a member holding 5 lakh shares under section 115 of the Companies Act, 2013 signifying its intention to propose resolutions for appointment of S R B C & Co. LLP as the Joint Statutory Auditors of the Company and Branch Auditors as aforesaid, from the conclusion of this Annual General Meeting to the conclusion of the fifty eighth Annual General Meeting to be held in the year S R B C & Co. LLP has provided their written consent and a certificate confirming their eligibility to be appointed as Joint Statutory Auditors/Branch Auditors of the Company in accordance with the provisions of section 139 (1) of the Companies Act, Accordingly, the resolution as set out in this item of the accompanying Notice is commended for the approval of the Members. None of the Directors or Key Managerial Personnel (KMP) or relatives of Directors and KMP is concerned or interested in the Resolutions at Item Nos. 7 and 8 of the accompanying Notice. Item Nos. 9 to 13 The Company had, pursuant to the provisions of Clause 49 of the Listing Agreement entered with the Stock Exchanges appointed Ms. Tarjani Vakil, Mr. P. Murari, Mr. Subhash Chandra Bhargava, Mr. Gian Prakash Gupta, Mr. Baldev Raj Gupta and Mr. Tapasendra Chattopadhyay (Nominee Director) as Independent Directors of the Company, in compliance with the requirements of the said Clause. Pursuant to the provisions of section 149 of the Companies Act, 2013 (the Act), read with the revised Clause 49 of the Listing Agreement which will be effective from 1 st October, 2014, every listed public Company, where the non-executive Chairman is a promoter of the Company, is required to have at least one-half of the directors as independent directors (not including nominee directors). On the recommendation of the Nomination and Remuneration Committee, the Board has subject to the approval of the members approved the appointment of Ms. Tarjani Vakil, Mr. P. Murari, Mr. S. C. Bhargava, Mr. G. P. Gupta, Mr. B. R. Gupta as Independent Directors of the Company for a term of five years from the date of this Annual General Meeting i.e. 11 th September, 2014 to 10 th September, These Directors are not disqualified from being appointed as Directors in terms of section 164 of the Act and have given their consent to act as Directors. The Company has received notices in writing from members along with the deposit of the requisite amount under section 160 of the Act proposing the candidatures of each of Ms. Tarjani Vakil, Mr. P. Murari, Mr. Subhash Chandra Bhargava, Mr. Gian Prakash Gupta and Mr. Baldev Raj Gupta for the office of Directors of the Company. The Company has also received declarations from Ms. Tarjani Vakil, Mr. P. Murari, Mr. Subhash Chandra Bhargava, Mr. Gian Prakash Gupta and Mr. Baldev Raj Gupta that they meet with the criteria of independence as prescribed both under subsection (6) of section 149 of the Act and under Clause 49 of the Listing Agreement. In the opinion of the Board, each of these Directors fulfil the conditions specified in the Act and the Rules framed thereunder for appointment as Independent Director and they are independent of the management. In compliance with the provisions of section 149 of the Act, read with Schedule IV of the Act, the appointment of these Directors as Independent Directors is now being placed before the Members for their approval. Brief resume of Ms. Tarjani Vakil, Mr. P. Murari, Mr. S. C. Bhargava, Mr. G. P. Gupta and Mr. B. R. Gupta, nature of their expertise in specific functional areas and names of companies in which they hold directorships and memberships / chairmanships of Board Committees, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is annexed to this Notice. 12 Annual Report

33 Aditya Birla Nuvo Limited NOTICE Copy of the draft letters for the respective appointments of Ms. Tarjani Vakil, Mr. P. Murari, Mr. S. C. Bhargava, Mr. G. P. Gupta and Mr. B. R. Gupta as Independent Directors setting out the terms and conditions of their appointment are available for inspection by the members at the Registered Office of the Company during normal business working hours on any working day, except Saturdays. This Statement may also be regarded as a disclosure under Clause 49 of the Listing Agreement with the Stock Exchanges. Ms. Tarjani Vakil, Mr. P. Murari, Mr. S. C. Bhargava, Mr. G. P. Gupta and Mr. B. R. Gupta are interested in the Resolutions set out respectively at Item Nos. 9 to 13 of the Notice with regard to their respective appointments. Save and except the above, none of the other Directors / Key Managerial Personnel of the Company / their relatives, is, in any way, concerned or interested, financially or otherwise, in these Resolutions. The Board commends the Ordinary Resolutions set out at Item Nos. 9 to 13 of the Notice for approval by the shareholders. Item No. 14 The Board of Directors of the Company (the Board ), at its meeting held on 26 th June, 2014 has, subject to the approval of members, appointed Mr. Lalit Naik as Managing Director of the Company, for a period of 5 (five) years with effect from 1 st July, 2014, as recommended by Nomination and Remuneration Committee of the Board. Mr. Lalit Naik satisfies all the conditions as set out in Part-I of Schedule V to the Act as also conditions set out under sub-section (3) of section 196 of the Companies Act, 2013 (the Act) for being eligible for his appointment. Mr. Naik is not disqualified from being appointed as a Director in terms of section 164 of the Act. Mr. Lalit Naik is a B. Tech. in Chemical Engineering from the Indian Institute of Technology (IIT) Kanpur and Master of Business Administration from IIM, Ahmedabad. He has been with the Aditya Birla Group since November, 2009 and has more than two-and-a-half decades of rich professional experience and has worked in leadership positions in many companies. Considering the background, competence and experience of Mr. Lalit Naik and also his association with the Aditya Birla Group for the last several years and compared to the remuneration packages of similarly placed personnel of other corporate bodies in the country, the terms of his remuneration as set out in the Resolution are considered to be fair, just and reasonable, Brief resume of Mr. Lalit Naik, nature of his expertise, names of companies in which he holds directorships and memberships / chairmanships of Board / Committees, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is annexed to this Notice. Mr. Lalit Naik may be deemed to be concerned or interested, financially or otherwise, as it relates to his re-appointment and remuneration payable to him. Save and except the above, none of the other Directors / Key Managerial Personnel of the Company / their relatives, are, in any way, concerned or interested, financially or otherwise, in the Resolution set out in this item of the Notice. The Resolution as set out in this item of the accompanying Notice is accordingly commended for the approval of Members. Item Nos. 15 & 16 Mr. Sushil Agarwal was appointed as Whole-time Director of the Company at the Annual General Meeting of the Company held on 28 th September, The resolution passed at the aforesaid Annual General Meeting in respect of the appointment of Mr. Sushil Agarwal provided that he is not liable to retire by rotation. The shareholders whilst approving the appointment and remuneration payable to Mr. Sushil Agarwal at the aforesaid Annual General Meeting also authorized the Board of Directors to revise the terms of such appointment and remuneration. As per section 152 of the Companies Act, 2013, at least two-thirds of the total number of directors of a public company shall be persons whose period of office is liable to determination by retirement of directors by rotation. As per the provisions of this section, independent directors are not included to ascertain directors liable to retire by rotation. NOTICE Annual Report

34 NOTICE Aditya Birla Nuvo Limited NOTICE The Board of Directors at its meeting held on 26 th June, 2014, took note of the aforesaid provisions of the Companies Act, 2013 and approved the modification in the terms of appointment of Mr. Sushil Agarwal to include him in the directors liable to retire by rotation. All other terms and conditions relating to his appointment and remuneration as approved at the said Annual General Meeting of the Company shall remain unchanged. Mr. Sushil Agarwal is required to be re-appointed as a Director, as his appointment is now subject to retirement by rotation. Accordingly, a resolution to approve the re-appointment of Mr. Sushil Agarwal as Director of the Company is proposed as Item No. 16 of the Notice. Save and except Mr. Sushil Agarwal and his relatives, to the extent of their shareholding interest, if any, in the Company, none of the other Directors / Key Managerial Personnel of the Company / their relatives are, in any way, concerned or interested, financially or otherwise, in the resolution set out at Item Nos. 15 and 16 of the accompanying Notice. The resolutions as set out in these items of the accompanying Notice are accordingly commended for the approval of the Members. Item No. 17 The members of the Company at the 55 th Annual General Meeting held on 9 th August, 2012 approved by way of a Special Resolution under section 309 of the Companies Act, 1956, the payment of remuneration by way of commission to the Non-Executive Directors of the Company, of a sum not exceeding one percent per annum of the net profits of the Company, calculated in accordance with the provisions of the Companies Act, 1956, for a period of five years commencing 1 st April, In view of sections 197, 198 and other relevant provisions of the Companies Act, 2013 coming into effect from 1 st April, 2014 and taking into account the roles and responsibilities of the directors, it is proposed that remuneration by way of commission be paid to the Non-Executive Directors of the Company, of a sum not exceeding one percent of the net profits or such other percentage of net profits of the Company as may be permissible from time to time, calculated in accordance with the provisions of the Companies Act, 2013, for each relevant financial year for a period of five years commencing from 1 st April, The quantum of remuneration payable to each of the Non- Executive Directors shall be fixed and decided by the Board of Directors considering attendance, type of meeting, preparations required, etc. This remuneration shall be in addition to the sitting fees payable to the Non-Executive Directors for attending the meetings of the Board or Committee thereof or for any other purpose whatsoever as may be decided by the Board, and reimbursement of expenses for participation in the Board and other meetings. Accordingly, a fresh approval of the Members is sought by way of a Special Resolution under the applicable provisions of the Companies Act, 2013, for payment of remuneration by way of commission to the Non-Executive Directors as set out in the Resolution at Item No. 17 of the Notice. Non-Executive Directors may be deemed to be concerned or interested in this resolution to the extent of the remuneration that may be received by them. Save and except the above, none of the other Directors / Key Managerial Personnel of the Company / their relatives is, in any way, concerned or interested, financially or otherwise, in the Resolution set out in this item of the Notice. Item No.18 Section 42 of the Companies Act, 2013, read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, deals with private placement of securities by a company. Subrule (2) of the said Rule 14 states that in case of an offer or invitation to subscribe for non-convertible debentures on private placement basis, the company shall obtain the previous approval of its shareholders by means of a special resolution only once in a year for all the offers or invitations for such debentures during the year. In order to augment long-term resources for financing, inter alia, the ongoing capital expenditure and for general corporate purposes, the Company may offer or invite subscription for secured / unsecured redeemable non-convertible debentures, in one or more series / tranches on private placement basis, issuable / redeemable at par. 14 Annual Report

35 Aditya Birla Nuvo Limited NOTICE Accordingly, consent of the members is sought for passing a Special Resolution as set out at Item No. 18 of the Notice. This resolution enables the Board of Directors of the Company to offer or invite subscription for non-convertible debentures, as may be required by the Company, from time to time for a year from the conclusion of this Annual General Meeting. The Board commends the Special Resolution set out at Item No. 18 of the Notice for approval by the members. None of the Directors / Key Managerial Personnel of the Company / their relatives are, in any way, concerned or interested, financially or otherwise, in the Resolution set out at Item No. 18 of the Notice. Item No. 19 The existing Articles of Association (AoA) of the Company are based on the Companies Act, 1956, and several regulations in the existing AoA contain references to specific sections of the Companies Act, 1956 and some regulations in the existing AoA are no longer in conformity with the Companies Act, 2013 (the Act). With the coming into force of the Act, several regulations of the existing AoA of the Company require alteration or deletions in several articles. Given this position, it is considered expedient to wholly replace the existing AoA by a new set of Articles. The new AoA to be substituted in place of the existing AoA are based on Table F of the Act which sets out the model articles of association for a company limited by shares. The proposed new draft of AoA is being uploaded on the Company s website for perusal by the shareholders. None of the Directors / Key Managerial Personnel of the Company / their relatives are, in any way, concerned or interested, financially or otherwise, in the Special Resolution set out at Item No. 19 of the Notice. The Board commends the Special Resolution set out at Item No. 19 of the Notice for approval by the members. Item No. 20 In view of the significant growth in the operations of the Company and in order to meet the requirement of working capital (including by way of non-fund based limits, such as limits for letter of credit and limits for bank guarantees), the Company has sought the approval of shareholders to borrow over and above the aggregate of paid-up share capital and free reserves of the Company. It is considered necessary to pass an enabling resolution to authorise the Directors to create a mortgage and / or charge on the properties of the Company in favour of Banks, Financial Institutions, Trustees and Other Investors etc. for securing the requisite finances. Since mortgaging and / or charging of the assets, properties and / or undertakings of the Company may be regarded as disposal thereof, consent of the members of the Company is sought under section 180(1)(a) of the Companies Act, 2013, as set out in Item No. 20 of the Notice. None of the Directors / Key Managerial Personnel of the Company / their relatives are, in any way, concerned or interested, financially or otherwise, in the Special Resolution set out at Item No. 20 of the Notice. The Board commends the Special Resolution set out at Item No. 20 of the Notice for approval by the members. Item No. 21 The members of the Company at their Extra-ordinary General Meeting held on 3 rd January, 1994, approved by way of an Ordinary Resolution under section 293(1)(d) of the Companies Act, 1956, borrowings over and above the aggregate of paid-up share capital and free reserves of the Company, provided that the total amount of such borrowings together with the amounts already borrowed and outstanding at any point of time shall not be in excess of ` 1,500 Crore (Rupees One Thousand Five Hundred Crore) only over and above of the aggregate of the paid-up capital of the Company and its free reserves. Section 180(1)(c) of the Companies Act, 2013 effective from 12 th September, 2013 requires that NOTICE Annual Report

36 NOTICE Aditya Birla Nuvo Limited NOTICE the Board of Directors shall not borrow money in excess of the Company s paid up share capital and free reserves, apart from temporary loans obtained from the Company s bankers in the ordinary course of business, except with the consent of the members accorded by way of a special resolution. It is, therefore, necessary for the members to pass a Special Resolution under section 180(1) (c) and other applicable provisions of the Companies Act, 2013, as set out at Item No. 21 of the Notice, to enable to the Board of Directors to borrow money in excess of the aggregate of the paid up share capital and free reserves of the Company. Approval of members is being sought to borrow money up to ` 1,500 Crore (Rupees One Thousand Five Hundred Crore) only, in excess of the aggregate of the paid-up share capital and free reserves of the Company. None of the Directors and Key Managerial Personnel of the Company and their relatives is concerned or interested, financially or otherwise, in the Resolution set out at Item No. 21. Item No. 22. The Board, on the recommendation of the Audit Committee, has approved the appointment and remuneration of the Cost Auditors to conduct the audit of the cost records of the Company for the financial year ending 31 st March, 2015, as per the following details: In accordance with the provisions of section 148 of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, Name of the Unit Product Proposed Fees Auditors ( ) (`) M/s. Ashwin Solanki Indian Rayon, Veraval VFY 60,000 & Associates Chemicals 60,000 M/s. R. Chakraborty Jaya Shree Textiles, Textiles 60,000 & Co. Rishra M/s. K. G. Goyal & Indo Gulf Fertilisers, Fertilisers/ Associates Jagdishpur Chemicals 85,000 (Argon Gas & Surplus Ammonia) M/s. G. N. V. & Madura Fashion and Ready Made 1,10,000 Associates Life Style, Bengaluru Garments M/s. S. S. Puranik & Aditya Birla Insulators - Insulators 1,10,000 Associates Halol & Rishra Units remuneration payable to the Cost Auditors has to be ratified by the members of the Company. Accordingly, consent of the members is sought for passing an Ordinary Resolution as set out at Item No. 22 of the Notice for ratification of the remuneration payable to the Cost Auditors for the financial year ending 31 st March, None of the Directors / Key Managerial Personnel of the Company / their relatives are, in any way, concerned or interested, financially or otherwise, in the resolution set out at Item No. 22 of the Notice. The Board commends the Ordinary Resolution set out at Item No. 22 of the Notice for approval by the members. Place: Mumbai Date: 26 th June, 2014 By Order of the Board Hutokshi Wadia Vice President & Company Secretary 16 Annual Report

37 Aditya Birla Nuvo Limited NOTICE Details of the Directors seeking appointment / re-appointment in the Annual General Meeting to be held on 11 th September, Name of the Director Mrs. Rajashree Birla Date of Birth Mr. P. Murari Mr. S.C. Bhargava Ms. Tarjani Vakil Mr. G. P. Gupta Mr. B. R. Gupta Mr. Lalit Naik Mr. Sushil Agarwal Mr. B. L. Shah NOTICE Date of Appointment Qualification Expertise in specific Functional Area List of Public Limited Companies (in India) in which outside Directorships are held B.A. Industrialist 1. Grasim Industries Limited 2. Hindalco Industries Limited 3. Idea Cellular Limited 4. Essel Mining and Industries Limited 5. Aditya Birla Health Services Limited 6. UltraTech Cement Limited M.A. (Economics) IAS (Retd.) having rich administrative experience 1. Aban Offshore Limited 2. Adayar Gate Hotel Limited 3. Xpro India Limited 4. HEG Limited 5. Great Eastern Energy Corporation Limited 6. Bajaj Auto Limited 7. Bajaj Holding and Investment Limited 8. Fortis Malar Hospital Limited 9. Idea Cellular Limited 10.Pantaloons Fashion and Retail Limited B.Com. (Hons.), F.C.A. Ex- Executive Director (Investment) of LIC, having rich experience in investments, treasury management, finance and accounts. 1. A. K. Capital Services Limited 2. OTCEI Securities Limited 3. Escorts Limited 4. Swaraj Engines Limited 5.Jaiprakash Associates Limited 6. Cox & Kings India Limited 7.Jaiprakash Power Ventures Limited 8. Asahi Industries Limited 9. Swaraj Automotives Limited 10.Industrial Investment Trust Limited M.A. Former Chairperson of EXIM Bank and is recognised as one of the distinguished Indian Banker. 1. Birla Sun Life Insurance Co. Limited 2. Alkyl Amines Chemical Limited 3. Idea Cellular Limited M.Com. Rich experience in the areas of general management, banking, industrial and financial restructuring 1. Swaraj Engines Limited 2. Birla Sun Life Insurance Co. Limited 3. Emkay Global Financial Services Limited 4. Landmark Property Development Co. Limited 5. Idea Cellular Limited 6. Emkay Investment Managers Limited 7. Dighi Port Limited 8. Aditya Birla Retail Limited M.A. (English), LL.B., FIIII Ex-Executive Director (Investments) of LIC, having rich experience as an Investment Consultant 1. HOV Services Limited 2. JBF Petrochemicals Limited IIT (Kanpur), IIM Business Executive 1. Aditya Birla Chemicals (I) Limited 2. TANFAC Industries Limited 3. Aditya Birla Science and Technology Limited M.Com. C.A. Business Executive 1. ABNL Investment Limited 2. Aditya Birla Insurance Brokers Limited 3. Aditya Birla Money Mart Limited 4. Aditya Birla Power Company Limited 5. BGH Exim Limited 6. Pantaloons Fashion & Retail Limited B.Com. Retired Business Executive 1. Aditya Birla Health Services Limited 2. Trapti Trading and Investments Limited Chairman/ Member of Committee(s) of Board of Directors of the Company 1. Chairman of Investor Relations and Finance Committee and 2. Member of Audit Committee Chairperson of Audit Committee Member of Audit Committee Member of Audit Committee Member of Investor Relations and Finance Committee Annual Report

38 NOTICE Aditya Birla Nuvo Limited Details of the Directors seeking re-appointment in the Annual General Meeting to be held on 11 th September, (Cont) NOTICE Name of the Director Chairman/ Member of the Committee(s) of Board of Directors of other Companies in which he/ she is a Director a) Audit Committee b) Investors Grievance/ Relations Committee Mrs. Rajashree Birla Mr. P. Murari Mr. S. C. Bhargava As a Chairman 1. Aban Offshore Limited 2. Adayar Gate Hotel Limited As a Member 1. Great Eastern Energy Corporation Limited 2. Xpro India Limited 3. Fortis Malar Hospitals Limited 4. Pantaloons Fashion & Retail Limited As a Chairman Bajaj Holdings and Investment Limited As a Chairman Industrial Investment Trust Limited. As a Member 1. Swaraj Engines Limited 2. Cox & Kings Limited 3. Asahi Industries Limited 4. Jaiprakash Associates Limited 5. Escorts Limited As a Member 1. Cox & Kings Limited 2. Escorts Limited Ms. Tarjani Vakil As a Member 1. Idea Cellular Limited 2. Birla Sun Life Insurance Co. Limited Mr. G. P. Gupta As a Chairman 1. Swaraj Engines Limited 2. Idea Cellular Limited 3. Birla Sun Life Insurance Co. Limited 4. Landmark Property Development Co. Limited As a Member 1. Emkay Global Financial Services Limited 2. Aditya Birla Retail Limited Mr. B. R. Gupta As a Chairman 1. HOV Services Limited 2. JBF Petrochemicals Limited As a Chairman HOV Services Limited Mr. Lalit Naik Mr. Sushil Agarwal As a Member Aditya Birla Money Mart Limited Mr. B. L. Shah Note: Pursuant to Clause 49 of the Listing Agreement, only two committees, viz., Audit Committee and Shareholders/Investor Grievance Committee, are considered. 18 Annual Report

39 Aditya Birla Nuvo Limited A SNAPSHOT VISION & MISSION Vision To be a premium conglomerate building leadership in businesses and creating value for all the stakeholders A SNAPSHOT Mission Investing in the promising sectors Building leadership in businesses A platform to drive synergy of resources Delivering best value to all the stakeholders To be a responsible corporate citizen TRANSFORMATION FROM A MANUFACTURING COMPANY TO A PREMIUM CONGLOMERATE 2013 : Acquisition of Pantaloons 2006 : Became largest shareholder in Idea 2005 : Merger of Agri and other Financial Services in ABNL 2001 : Foray in Life Insurance business through JV with Sun Life, Canada 2000 : Foray in Fashion & Lifestyle business Invested about USD 1.5 billion over these years to support growth Annual Report

40 A SNAPSHOT Aditya Birla Nuvo Limited A SNAPSHOT A USD 4 BILLION PREMIUM CONGLOMERATE NUVO Financial services Telecom $# (23.63%) Fashion & Lifestyle Manufacturing Life Insurance^ (74%)@ Madura* Agri* Asset Management^ (51%)@ Pantaloons^ # (67.95%) Rayon* NBFC^ Jaya Shree* Insulators* Private Equity^ Broking (75%)^ # Wealth Management^ General Insurance Advisory (50.01%)^ Leadership position in India Leader Top 3 Top 5 *Represent Divisions ^Represent Subsidiaries $ Represent Joint JV with Sun Life Financial, Canada # Listed Note: Percentage figures indicated above represent ABNL s shareholding in its Subsidiaries / JV s CONSOLIDATED FINANCIAL SNAPSHOT Revenue (` Crore) EBITDA (` Crore) Net Profit (` Crore) 15,523 18,188 CAGR 14% 21,840 25,490 25,893 1,686 2,685 CAGR 31% 3,259 4,142 4, CAGR 65% 890 1,059 1, Earnings are growing at a robust CAGR. 20 Annual Report

41 Aditya Birla Nuvo Limited A SNAPSHOT STRONG STANDALONE BALANCE SHEET SUPPORTED GROWTH Cumulative Investments from Standalone Net Debt Standalone Ratios Standalone Balance Sheet (` Crore) ( to ) ~ ` 5,500 Crore A SNAPSHOT Capex ~ ` 1,650 Crore Net Working Capital ~ ` 850 Crore Long Term Investments ~ ` 3,000 Crore ,460 3,142 3,854 3,630 3, Net Debt/EBITDA (RHS) Net Debt/Equity (LHS) Driving strong growth across businesses while sustaining net debt level. More than 2/3rd of standalone capital employed is deployed in long term investments. With Idea and Birla Sun Life Insurance declaring dividend, ABNL has started generating return on its long-term investments. In , the standalone balance sheet supported capital outlay of about ` 2,500 Crore while achieving reduction in net debt by ` 434 Crore. Capital infusion, slump sale of the Carbon Black business and release of net working capital contributed. Going forward, cash flow from the divestment of IT-ITeS business will support the growth plans of ABNL. CONSOLIDATED EARNINGS MIX Segment Revenue ` 25, 893 Crore Segment EBIT ` 2,498 Crore Return on Average Capital Employed Manufacturing 14% IT-ITeS 1 11% Fashion & Lifestyle 23% Financial Services 26% Telecom 26% IT-ITeS 1 11% Manufacturing 12% Fashion & Lifestyle 14% Financial Services 29% Telecom 38% Financial Services -Ve 25% Fashion & Lifestyle -Ve 28% Telecom 8% 12% Manufacturing 31% 10% Note 1 : Considering the sector dynamics and to ensure greater focus on its core businesses, Aditya Birla Nuvo divested the IT-ITeS business with effect from 9th May Annual Report

42 A SNAPSHOT Aditya Birla Nuvo Limited A SNAPSHOT ROBUST REVENUE GROWTH ACROSS THE BUSINESSES Financial Services 1 6,304 6,542 6,378 6,640 Revenue (` Crore) Telecom 2 26,432 5,860 22,407 19,489 15,438 12, Fashion & Lifestyle 3 6,048 Manufacturing 4 3,281 4,930 3,255 4,155 3, , ,988 2, Note 1 : Including full figures of Asset Management business. As per AS-27, Asset Management business has been proportionately consolidated at 50% in ABNL's financials, being a 50:50 Joint Venture till 9 th October Thereafter, it is consolidated as a subsidiary since Aditya Birla Financial Services holds 51% w.e.f. 10 th October Note 2 : Full financial numbers of Idea Cellular. Being a Joint Venture, Idea Cellular has been consolidated at 27.02% from 12 th August 2008 upto 1 st March 2010 and at ~25.3% thereafter, as per AS27. Note 3 : Represents Branded Apparels & Accessories (Madura Fashion & Lifestyle and Pantaloons Fashion & Retail Ltd.) and Textiles businesses. In , nine months financials of Pantaloons are included pursuant to its acquisition, w.e.f. the appointed date 1 st July Note 4 : Represents Agri, Rayon and Insulators businesses. Note 5 : Revenue degrowth is due to discontinuance of trading in imported P&K fertilisers. 22 Annual Report

43 Aditya Birla Nuvo Limited A SNAPSHOT SOUND GROWTH IN PROFITABILITY ACROSS THE BUSINESSES Financial Services 1 EBITDA (` Crore) Telecom 2 A SNAPSHOT , ,091 5, ,621 3, Fashion & Lifestyle 3 Manufacturing Note 1 : Including full figures of Asset Management business. As per AS27, Asset Management business has been proportionately consolidated at 50% in ABNL's financials, being a 50:50 Joint Venture till 9 th October Thereafter, it is consolidated as a subsidiary since Aditya Birla Financial Services holds 51% w.e.f. 10 th October Interest cost of NBFC business, being an operating expense as per AS17, is deducted from EBITDA. Note 2 : Full financial numbers of Idea Cellular. Being a Joint Venture, Idea Cellular has been consolidated at 27.02% from 12 th August 2008 up to 1 st March 2010 and at ~ 25.3% thereafter, as per AS27. Note 3 : Represents Branded Apparels & Accessories (Madura Fashion & Lifestyle and Pantaloons Fashion & Retail Ltd.) and Textiles businesses. In , nine months financials of Pantaloons are included pursuant to its acquisition, w.e.f. the appointed date 1 st July Note 4 : Represents Agri, Rayon and Insulators businesses. Note 5 : Profitability impacted mainly due to 41 days shutdown in the urea plant for annual turnaround. Annual Report

44 FINANCIAL HIGHLIGHTS - CONSOLIDATED Aditya Birla Nuvo Limited FINANCIAL HIGHLIGHTS PROFIT AND LOSS ACCOUNT USD Million 13 ` Crore ` Crore ` Crore ` Crore ` Crore Financial Services 1,107 6,640 6,283 6,384 6,121 5,714 Life Insurance 784 4,702 5,037 5,691 5,534 5,309 Other Financial Services ,948 1, Elimination (2) (11) (12) (8) (10) (10) Fashion & Lifestyle 1,008 6,048 4,930 3,281 2,576 1,825 Branded Apparels & Accessories 793 4,759 3,802 2,243 1,811 1,251 Textiles (Linen Yarn & Fabric, Worsted Yarn & Wool Tops) 217 1,300 1,144 1, Elimination (2) (11) (16) (8) (9) (2) Telecom 2 1,111 6,669 5,662 4,933 3,918 3,331 IT-ITeS ,898 2,466 2,082 1,692 1,530 Manufacturing 613 3,678 4,155 3,255 2,327 1,988 Agri (Fertilisers, Agro-Chemicals & Seeds) 385 2,313 2,924 2,107 1,244 1,022 Rayon (Viscose Filament Yarn, Caustic Soda and Allied Chemicals) Insulators Carbon Black 4 2,036 1,943 1,588 1,161 Inter-segment elimination (7) (39) (42) (37) (34) (25) Revenue 4,316 25,893 25,490 21,840 18,188 15,523 EBITDA 823 4,937 4,142 3,259 2,685 1,686 Less : Depreciation and Amortisation 268 1,609 1,295 1, EBIT 555 3,328 2,847 2,167 1, Less : Finance Costs related to NBFC Less : Other Finance Costs Earnings before Tax and Exceptional Items 294 1,767 1,526 1,330 1, Add : Exceptional Gain / (Loss) (104) (104) Less : Tax Expenses Net Profit / (Loss) before Minority Interest 204 1,222 1,184 1, Less : Minority Interest and Share in (Profit) / Loss of Associates (111) Net Profit / (Loss) 190 1,143 1, BALANCE SHEET USD Million 13 ` Crore ` Crore ` Crore ` Crore ` Crore Net Fixed Assets (Including Capital Advances and CWIP) 2,174 13,045 10,677 9,354 8,840 6,942 Goodwill 830 4,982 4,825 3,177 3,042 2,939 Life Insurance Investments 4,127 24,764 22,929 21,110 19,760 16,130 Long term Investments NBFC Lending 1,925 11,550 8,000 3,425 1, Cash Surplus & Current Investments ,089 2,415 1,518 1,261 1,243 Net Working Capital ,773 1, Total Funds Utilised 9,428 56,569 50,974 40,399 35,493 28,985 Net Worth 1,865 11,189 9,384 7,517 6,678 5,475 Life Insurance Policyholders Fund 7 3,926 23,557 21,576 19,964 18,977 15,652 Total Debt 1,816 10,893 11,778 9,328 7,763 6,710 NBFC borrowings 1,608 9,647 6,867 2,973 1, Minority Interest Deferred Tax Liabilities (Net) Total Funds Employed 9,428 56,569 50,974 40,399 35,493 28,985 RATIOS AND STATISTICS Unit Interest Cover (EBITDA 8 / Finance Costs 9 ) x Net Debt to Equity (Net Debt 10 / Net Worth) x Net Debt to EBITDA (Net Debt 10 / EBITDA 8 ) x ROACE (EBIT 11 / Average Capital Employed 12 ) % ROAE (Net Profit / Average Net Worth) % Basic Earnings Per Share (Weighted Average) ` 92.1 (USD 1.5) Book Value per Equity Share ` 860 (USD 14.3) No. of Equity Shareholders Number 142, , , , ,163 Closing Share Price as on 31 st March (NSE) ` 1,091 (USD 18.2) Market Capitalisation (NSE) ` Crore 14,196 (USD 2.4 billion) 11,727 10,723 9,244 9,336 Note 1 : Include Asset Management, NBFC, Private Equity, Broking, Wealth Management & General Insurance Advisory. Asset Management business has been proportionately consolidated at 50%, being a 50:50 Joint Venture till 9th October 2012 and thereafter consolidated as subsidiary since Aditya Birla Financial Services holds 51% w.e.f. 10th October 2012 Note 2 : Represents ABNL s share. Being a joint venture, Idea has been consolidated at 27.02% from 12th August, 2008 upto 1st March, 2010 and at ~25.3% thereafter, as per AS-27. Note 3 : ABNL IT & ITES Ltd., a wholly owned subsidiary of ABNL, divested Aditya Birla Minacs w.e.f. 9th May 2014 Note 4 : The Carbon Black business has been divested through slump sale w.e.f. 1st April 2013 Note 5 : Exceptional Gain / (Loss) in includes loss of ` 19 Crore on impairment of goodwill relating to investments in broking and wealth management businesses and gain of ` 24 Crore on slump sale of Carbon Black business. Note 6 : Cash Surplus & Current Investments include cash & bank balances and fertilisers bonds Note 7 : Including Fund for Future Appropriations Note 8 : EBITDA less finance costs related to NBFC Note 9 : Excluding finance costs related to NBFC Note 10 : Total Debt (excluding NBFC borrowings) less Cash Surplus & Current Investments Note 11 : EBIT less finance costs related to NBFC Note 12 : Capital Employed excluding Life Insurance Policyholders Fund and NBFC borrowings Note 13 : 1 USD = ` 60 ; 10 Million = 1 Crore 24 Annual Report

45 Aditya Birla Nuvo Limited FINANCIAL HIGHLIGHTS - STANDALONE PROFIT AND LOSS ACCOUNT USD Million 5 ` Crore ` Crore ` Crore ` Crore ` Crore Revenue 1,337 8,020 9,754 8,433 6,447 4,827 EBITDA 208 1,246 1,116 1, Less : Finance Costs Earnings before Depreciation and Tax Less : Depreciation and Amortisation Earnings before Tax and Exceptional Items Add : Exceptional Gain/ (Loss) (104) Earnings before Tax Less : Tax Expenses Net Profit Less : Dividend (Including Corporate Tax on Dividend) Retained Profit FINANCIAL HIGHLIGHTS BALANCE SHEET USD Million 5 ` Crore ` Crore ` Crore ` Crore ` Crore Net Fixed Assets (Including Capital Advances and CWIP) 311 1,866 2,226 1,976 1,858 1,815 Long Term Investments 1,325 7,952 5,857 5,598 5,424 5,436 Cash Surplus & Current Investments Net Working Capital 262 1,574 2,556 2,117 1,433 1,049 Capital Employed 1,992 11,949 10,992 10,398 8,862 8,480 Share Capital Share Warrants Reserves and Surplus 1,330 7,978 6,510 5,565 5,287 4,416 Net Worth 1,351 8,108 6,854 5,679 5,401 4,662 Total Debt 626 3,753 3,983 4,561 3,287 3,640 Deferred Tax Liabilities (Net) Capital Employed 1,992 11,949 10,992 10,398 8,862 8,480 RATIOS AND STATISTICS Unit Interest Cover (EBITDA / Finance Costs) x ROACE (EBIT/ Average Capital Employed) % ROACE 3 (Excluding Long Term Investments) % ROAE (Net Profit/ Average Net Worth) % Net Debt to Equity (Net Debt 4 / Net Worth) x Net Debt to EBITDA (Net Debt 4 / EBITDA) x Dividend per Equity Share ` 7.0 (12 Cents) Dividend Payout including Tax (as % to Net Profit) % Basic Earnings Per Share (EPS) (Weighted Average) ` 54.3 (91 Cents) Cash EPS (Weighted Average) ` 64.9 (USD 1.1) Book Value per Equity Share ` 623 (USD 10.4) Capital Expenditure (Net) ` Crore 401 (USD 67 million) Note 1 : Book gain of ` 24 Crore has been recognized in w.r.t. the slump sale of the Carbon Black business w.e.f. 1 st April Note 2 : Cash Surplus & Current Investments include cash & bank balances, fertilisers bonds and short term ICDs. Note 3 : (EBIT excluding Dividend Income) / (Average of Capital Employed less Long Term Investments) Note 4 : Total Debt less Cash Surplus & Current Investments. Note 5 : 1 USD = ` 60 ; 10 Million = 1 Crore Annual Report

46 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Indian economy: GDP growth slows down During fiscal , the Indian economy witnessed many challenges, mainly by way of persistently high inflation and high interest rates, which led to slow down in consumption and investment demand. The steep depreciation of the Indian Rupee added to the problem. Having grown at high single digit over the past few years, India s GDP growth slowed in CY2013 to a decade s low of 4.4%. The Reserve Bank of India hiked the repo rate by 75 bps over the past 8 months to contain the persistently high inflation. WPI inflation moderated to 5.2% in April However, CPI inflation remained high at 8.6%. During the year, the Government of India and the Reserve Bank of India have taken substantive measures to narrow the external and fiscal imbalances, tighten monetary policy, move forward on structural reforms and address market volatility. The current account deficit has been lowered, following a pick-up in exports in recent months and measures to curb gold imports. Going forward, India s GDP growth is expected to improve to 5.4% in CY 2014 (Source: International Monetary Fund). A stable government, strong global growth, improving export competitiveness and implementation of recently approved investment projects are expected to be the key contributing factors. Aditya Birla Nuvo Ltd.: A USD 4 billion conglomerate It has been more than a decade since Aditya Birla Nuvo Ltd. ( ABNL or the Company ) commenced its transformational journey from a small manufacturing company to what is now a USD 4 billion premium conglomerate. With its presence across the Financial Services, Fashion & Lifestyle, Telecom and Manufacturing businesses, ABNL s portfolio is truly a mirror image of Indian economy. Most of the businesses of ABNL are leaders in their respective sectors. In fiscal , the Company made significant strides in the following key focus areas: Fortifying leadership position across the businesses, Exiting from sub scale businesses to ensure greater focus on other businesses, Strengthening of the balance sheet. Fortifying leadership position across the businesses In line with the Aditya Birla Group s philosophy of attaining a leadership position in the sectors in which it operates, the Company has strengthened its leadership position across most of its businesses. The business wise highlights are as follows : Aditya Birla Financial Services Ranks among the top 5 fund managers in India, excluding LIC. Funds under management at USD 20.4 billion (` 122,362 Crore), grew year-on- year by 14%. Lending book in the NBFC business reached USD 2 billion (` 11,550 Crore) mark registering a 44% year on year growth. Reported revenue at USD 1.1 billion (` 6,640 Crore) and Earnings before Tax at USD 124 million (` 745 Crore). Generated return on average capital employed of 25% per annum. Trusted by about 5 million customers, ABFS has a strong nation-wide presence through about 1,500 branches / points of presence and around 130,000 agents / channel partners. Fashion & Lifestyle (Madura, Pantaloons and Jaya Shree) ABNL s Fashion & Lifestyle business is the largest branded apparel player in India selling two branded apparels every second. Reported revenue at USD 1 billion (` 6,048 Crore) and EBITDA at about USD 100 million (` 573 Crore). Launched new stores at the run rate of one store per day. The nation-wide reach of Madura, Pantaloons and Jaya Shree, combined together, stands expanded to 1,750 exclusive brand outlets / stores spanning across 4.3 million square feet. Generated return on average operating capital employed of 28% per annum driven by strong earnings and working capital management. Note : USD 1 = ` 60; 1 billion = 100 Crore Note : The financials in the Management Discussion and Analysis have been rounded off to the nearest ` 1 Crore. 26 Annual Report

47 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Telecom (Idea Cellular) Idea has been the biggest revenue market share gainer in India over the past 5 years. Idea is the seventh largest mobile telecommunications company in the world (based on operations in a single country) in terms of the number of subscribers (Source : WCIS, December 2013). It ranks 3 rd in India in terms of revenue market share which grew from 15.7% to 16.6% 1 in past one year. Serving a large customer base of million subscribers as on 31 st March Idea is a USD 8 billion company by market cap (` 48,038 Crore as on 26 th June 2014) and USD 4.4 billion (` 26,432 Crore for ) company by revenue size. Idea is generating strong cash profit, is distributing dividends and has a sound balance sheet to support its growth plans. ROACE grew from 10% per annum to 12% per annum. Manufacturing (Agri, Rayon and Insulators): Generated combined revenue of USD 615 million (` 3,678 Crore) and EBITDA of USD 64 million (` 383 Crore). Earnings in the Agri business were impacted by the discontinuance of trading in imported P&K fertilisers and a 41 day shutdown of the Urea plant for annual turnaround. The urea plant resumed full operations on 8 th April In fiscal , the business will benefit from higher fixed cost reimbursement, as per the Government policy, and from energy savings initiatives. The Rayon business recorded its highest ever earnings led by expanded capacity and improved VFY and ECU realisations. The new superfine unit attained full capacity utilisation in the last quarter of fiscal The complete benefit of the new capacity will accrue in fiscal Driven by increased volumes, higher realisation and enhanced yield, the Insulators business posted improved earnings. Exit from sub scale businesses to ensure greater focus on other businesses Considering the sector dynamics, and in order to ensure greater focus on other businesses, your Company has divested the Carbon Black business with effect from 1 st April 2013 and the IT-ITeS business with effect from 9 th May 2014 at the Enterprise Value of approx. USD 240 million and USD 260 million respectively subject to working capital adjustments. The divestment proceeds have and will support the balance sheet and the growth plans of ABNL. Strengthening of the balance sheet The standalone balance sheet supported an investment and capex outlay of about ` 2,500 Crore in , yet achieved a reduction in net debt by ` 434 Crore. The divestment of the Carbon Black business and the equity infusion by promoters strengthened the Company s balance sheet. Dividend income / buy back proceeds of about ` 320 Crore received from Birla Sun Life Insurance and Idea cellular coupled with the release of net working capital mainly in the Agri business also contributed. Standalone Net Debt to EBITDA improved year-on-year from 3.3 times to 2.6 times and Net Debt to Equity from 0.53 times to 0.39 times. Proceeds from the divestment of IT-ITeS business will further support the growth plans of the Company. Robust earnings growth Even under the testing macro-economic environment, ABNL has posted strong earnings growth, despite earnings pressure in some of its businesses. This reflects the strength of its conglomerate model. Posted consolidated revenue of ` 25,893 Crore. Attained highest ever consolidated EBITDA at ` 4,937 Crore growing year on year by 19%. Consolidated Net Profit at ` 1,143 Crore grew by 8% over the previous year. Before one-off items, net profit rose by 16% to ` 1,226 Crore. MANAGEMENT DISCUSSION AND ANALYSIS Note1: Based on gross revenue for UAS & Mobile licenses, for January-March 2014 quarter, as released by Telecom Regulatory Authority of India ( TRAI ) Annual Report

48 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited Consolidated Earnings MANAGEMENT DISCUSSION AND ANALYSIS Revenue (USD 4.3 billion) EBITDA (USD 823 million) (` Crore) 25,893 (` Crore) 4,937 25,490 4,142 21,840 3,259 19% 2% Net Profit (USD 190 million) (` Crore) 1,143 1, % Consolidated Profit and Loss Account (` Crore) Revenue 25,490 25,893 EBITDA 4,142 4,937 Less: Depreciation and Amortisation 1,295 1,609 Earnings Before Interest and Tax (EBIT) 2,847 3,328 Less: Finance Costs related to NBFC Less: Other Finance Costs Earnings Before Tax and Exceptional Items 1,526 1,767 Add: Exceptional Gain/(Loss) 1 5 Earnings Before Tax 1,526 1,772 Less: Tax Expenses Less: Minority Interest and Share of (Profit)/Loss of associates Consolidated Net Profit 1,059 1,143 Consolidated Net Profit (before exceptional items and one-time CCDs interest charge) 1,059 1,226 Note 1 : Exceptional items represent loss of ` 19 Crore on impairment of goodwill relating to investments in the broking and the wealth management businesses and gain of ` 24 Crore on slump sale of the Carbon Black business. The financial results are not strictly comparable with the previous year on account of the slump sale of the Carbon Black business with effect from 1 st April 2013 and consolidation of the Pantaloons business with effect from 1 st July Annual Report

49 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Consolidated revenue at ` 25,893 Crore grew year-on-year by 2%. Ex-Carbon Black, which was divested w.e.f. 1 st April 2013, revenue grew by 10%. The private sector s total new business premium de-grew by 5%. Given the adverse macro-economic environment and product transition to meet regulatory guidelines, sales growth was impacted across the industry. BSLI s revenue de-grew by 7% to ` 4,702 Crore. Revenue of other financial services surged by 55% to ` 1,948 Crore led by the NBFC business. The revenue of NBFC business grew by 68% to ` 1,203 Crore in line with growth in its lending book. The combined revenue of the Fashion & Lifestyle business soared by 23% to ` 6,048 Crore led by Madura Fashion & Lifestyle. Driven by stores expansion and like-to-like stores sales growth, Madura s revenue rose by 28% to ` 3,226 Crore. Pantaloons Fashion & Retail Ltd. reported revenue at ` 1,661 Crore. The revenue of Jaya Shree Textiles grew by 14% to ` 1,300 Crore driven by expansion led volume growth and higher realisation in the linen segment. In the Telecom business, a strong 11% growth in total minutes on network and a 7% rise in average realisation per minute led to an 18% growth in the top-line at ` 26,432 Crore (ABNL s share : ` 6,669 Crore). The IT-ITeS business posted 18% revenue growth driven by both existing and new clients and favourable currency movement. The combined revenue of the manufacturing businesses (Agri, Rayon & Insulators) de-grew by 11% to ` 3,678 Crore mainly due to the discontinuance of trading in imported P&K fertilisers and a 41 day shutdown of the Urea plant for annual turnaround. Consolidated EBITDA rose by 19% from ` 4,142 Crore to ` 4,937 Crore. The Fashion & Lifestyle and Telecom businesses were the largest contributors posting EBITDA growth of 23% and 41% respectively. Consolidated depreciation grew by 24% to ` 1,609 Crore largely in the Telecom business on account of network expansion and in the Pantaloons business on account of stores expansion and refurbishments. MANAGEMENT DISCUSSION AND ANALYSIS Consolidated Revenue - Segmental (` Crore) Financial Services 6,283 6,640 Life Insurance 5,037 4,702 Other Financial Services 1 1,258 1,948 Elimination (12) (11) Fashion & Lifestyle 4,930 6,048 Branded Apparels and Accessories 2 3,802 4,759 Textiles 1,144 1,300 Inter-segment Elimination (16) (11) Telecom 3 5,662 6,669 IT-ITeS 4 2,466 2,898 Manufacturing 5 4,155 3,678 Carbon Black 6 2,036 Inter-segment Elimination (42) (39) Consolidated Revenue 25,490 25,893 Note 1 : Other Financial Services include Asset Management (proportionately consolidated at 50%, being a 50:50 JV till 9 th October, 2012, and thereafter consolidated as subsidiary since Aditya Birla Financial Services holds 51% w.e.f. 10 th October, 2012), NBFC, Private Equity, Broking, Wealth Management & General Insurance Advisory. Note 2 : Represents Madura Fashion & Lifestyle (division of ABNL) and Pantaloons Fashion & Retail Limited (subsidiary of ABNL). In , nine months financials of Pantaloons business are included pursuant to its acquisition with effect from the appointed date, i.e., 1 st July, Note 3 : Represents ABNL s share in Idea s earnings. Being a joint venture, Idea is consolidated at ~25.3% as per AS-27. Note 4 : Divested w.e.f. 9 th May Note 5 : Manufacturing includes Agri, Rayon and Insulators businesses. Note 6 : Divested through slump sale w.e.f. 1 st April, Annual Report

50 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Consolidated EBIT surged by 17% from ` 2,847 Crore to ` 3,328 Crore. In the Life Insurance Business, segment EBIT de-grew from ` 542 Crore to ` 371 Crore. Higher profitability in other Financial Services was driven by AUM growth in the Asset Management business and expansion of the lending book in the NBFC business. In the Fashion & Lifestyle business, strong 28% sales growth of Madura and 23% revenue growth in the linen segment of Jaya Shree augmented earnings. Pantaloons is in the investment phase and hence reported a loss at the segment EBIT level. In the Telecom business, segment EBIT grew by 51% to ` 3,814 Crore (ABNL s share: ` 962 Crore) led by robust voice and data usage, improved voice realisation, scale benefits and cost efficiencies. Revenue growth and favourable foreign exchange movement improved profitability in the IT-ITeS business. In the manufacturing businesses, segment EBIT of the Rayon business grew by 12% to ` 172 Crore driven by expansion led volume growth and higher realisations in the VFY and the Chemicals segments. Lower profitability in the Agri business was on account of planned annual maintenance shutdown for 41 days and discontinuance of trading in imported P&K fertilisers. Segment EBIT of the Insulators business grew by 54% to ` 61 Crore on account of increased volumes, higher realisation and enhanced yield. (` Crore) Segment EBIT as per Accounting Standard ( AS ) Financial Services Life Insurance Other Financial Services Fashion & Lifestyle Branded Apparels and Accessories Textiles Telecom IT-ITeS Manufacturing Carbon Black 6 93 Segment EBIT as per AS 17 2,270 2,498 Add: Unallocated Income/(Expenses) (Net) 8 19 Add: Finance Costs related to NBFC Add: Consolidated Interest Income (Excluding Interest Income of NBFC) Consolidated EBIT 2,847 3,328 Note 1 : Note 2 : Note 3 : Other Financial Services include Asset Management (proportionately consolidated at 50%, being a 50:50 JV till 9 th October, 2012 and thereafter consolidated as subsidiary since Aditya Birla Financial Services holds 51% w.e.f. 10 th October, 2012), NBFC, Private Equity, Broking, Wealth Management & General Insurance Advisory. In accordance with AS-17 on Segment Reporting, finance cost of NBFC business is reduced from segment EBIT. Represents Madura Fashion & Lifestyle (division of ABNL) and Pantaloons Fashion & Retail Limited (subsidiary of ABNL). In , nine months financials of Pantaloons business are included pursuant to its acquisition with effect from the appointed date, i.e., 1 st July Represents ABNL s share in Idea s earnings. Being a joint venture, Idea is consolidated at ~25.3% as per AS-27. Note 4 : Divested w.e.f. 9 th May Note 5 : Manufacturing includes Agri, Rayon and Insulators businesses. Note 6 : Divested through slump sale w.e.f. 1 st April, Note 7 : In accordance with AS-17 on Segment Reporting, finance cost of NBFC business is reduced from segment EBIT, hence, added backto-arrive at Consolidated EBIT. In accordance with AS-17, interest income (excluding interest income of NBFC business) is not included in segment EBIT, hence, added back-to-arrive at Consolidated EBIT. 30 Annual Report

51 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Finance costs related to the NBFC business increased in line with the growth in its lending book. Other finance costs was lower from ` 865 Crore to ` 820 Crore mainly on account of the divestment of the Carbon Black business and release of net working capital in the Agri business owing to the discontinuance of trading in imported P&K fertilisers. This was partly offset by a one-time interest cost of ` 88 Crore relating to the compulsory convertible debentures (CCDs) of Minacs. To aid the balance sheet of Minacs, a sum of ` 250 Crore was raised through CCDs in January Owing to the divestment of Minacs, these CCDs have been redeemed in March 2014 along with net redemption interest outgo (mainly pertaining to earlier years) of ` 88 Crore. This one-time Consolidated Balance Sheet interest charge has been recognized in the consolidated financials of ABNL in Exceptional items represent a gain of ` 24 Crore from the slump sale of the Carbon Black business. This was partly offset by a loss of ` 19 Crore on impairment of goodwill relating to investments in the broking (Aditya Birla Money) and the wealth management (Aditya Birla Money Mart) businesses. Tax expenses increased mainly on account of improved profitability in the standalone financials, Telecom and NBFC businesses. ABNL s consolidated net profit grew by 8% from ` 1,059 Crore to ` 1,143 Crore. Adjusted net profit (before exceptional gain/loss and one-time interest cost of ` 88 Crore) is up by 16% at ` 1,226 Crore. (` Crore) March March Net Worth 9,384 11,189 Total Debt 11,778 10,893 NBFC Borrowings 6,867 9,647 Minority Interest Deferred Tax Liabilities (Net) Capital Employed 29,397 33,012 Life Insurance Policyholders Funds (Including Funds for Future Appropriation) 21,576 23,557 Total Funds Employed 50,974 56,569 Net Fixed Assets (Including Capital Advances & CWIP) 10,677 13,045 Goodwill 4,825 4,982 Long term Investments Life Insurance Investments 22,929 24,764 Policyholders Investments 21,559 23,435 Shareholders Investments 1,371 1,329 NBFC Lending 8,000 11,550 Net Working Capital 1, Cash Surplus & Current Investments 1 2,415 1,089 Total Funds Utilised 50,974 56,569 Book Value per Equity Share (`) Net Debt 2 /EBITDA (x) Net Debt 2 /Equity (x) MANAGEMENT DISCUSSION AND ANALYSIS Note 1 : Note 2 : Include cash, cheques in hand, remittances in transit, balances with banks, fertilisers bonds and current investments. Total Debt (excluding NBFC borrowings) less Cash Surplus & Current Investments. Annual Report

52 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Consolidated balance sheet Net worth is up by ` 1,805 Crore to ` 11,189 Crore led by capital infusion of ` 671 Crore by the promoters and profit earned during the year. Net debt excluding NBFC borrowings increased from ` 9,363 Crore to ` 9,804 Crore mainly due to the Telecom business while the standalone balance sheet achieved a reduction in net debt by ` 434 Crore. Net Debt in the Telecom business rose by ` 7,358 Crore (ABNL s share: ` 1,857 Crore) to fund the spectrum acquisition cost of ` 10,424 Crore during the recently concluded auctions in the 900 MHz and 1800 MHz bands. Borrowings related to the NBFC business grew in line with its lending book growth. Deferred tax liabilities have increased primarily in the Telecom business. Minority interest decreased from ` 940 Crore to ` 778 Crore mainly on account of purchase of an additional 17.87% stake in Pantaloons from minority shareholders during the open offer. Net fixed assets have increased due to capital expenditure primarily in the Telecom, Manufacturing and Fashion & Lifestyle businesses. Goodwill is higher resulting from the acquisition of an additional stake in the Pantaloons business. The increase in long-term investments represents the sponsor commitment of ABNL towards Aditya Birla Private Equity Funds. Lending book of the NBFC business has grown by 44% to ` 11,550 Crore. Net working capital is lower mainly on account of the divestment of the Carbon Black business and discontinuance of trading in imported P&K fertilisers in the Agri business. Cash Surplus and Current Investments are lower mainly due to utilization of current investments of ` 800 Crore lying in the books of Pantaloons subsidiary as on 31 st March 2013 for repayment of its debt in April Standalone Balance Sheet To meet its growth capital requirements, the Company had issued 16.5 million warrants in May 2012 to Promoters / Promoter Group on a preferential basis after being approved by the shareholders. Of the planned equity infusion of about ` 1,500 Crore, a sum of ` 832 Crore was received in fiscal as 25% application money and on conversion of 6.7 million warrants. During , the balance 9.8 million warrants were converted into equity shares for ` 671 Crore in November Led by the equity infusion and the divestment of the Carbon Black business, standalone balance sheet supported an investment and capex outlay of about ` 2,500 Crore in , yet achieved reduction in net debt by ` 434 Crore. Standalone Net Debt to EBITDA improved from 3.3 times to 2.6 times and Net Debt to Equity improved from 0.53 times to 0.39 times. Over the past five years, ABNL has invested more than ` 5,500 Crore as long-term investments, Capex and working capital to fund the growth of its businesses. However, the net debt has remained at a similar level while earnings have grown multifold leading to healthy balance sheet and financial ratios. A report on the business-wise performance and outlook follows. FINANCIAL SERVICES (ADITYA BIRLA FINANCIAL SERVICES) The economic environment in was characterized by persistently high interest rates and inflation coupled with a decline in the GDP growth rate. This had an adverse impact on demand and growth of financial services and products in the country. Lower consumer confidence along with weak financial markets affected the customer s ability to commit for the long term. The volatility in the macro-economic scenario may continue in the short run. However, the long term growth prospects of the financial services sector remains intact. India has one of the highest household savings rates in the world. Household savings in India as a percentage of GDP have been rising. A large proportion of financial savings is being deployed in bank deposits. This offers a huge potential market for non-bank financial services and products. In addition, favourable demographics viz., a large growing young population, an expanding middle class and rising per capita income signal robust long-term growth prospects for the Indian financial services sector. 32 Annual Report

53 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Financial Services ( ABFS ) has created a significant presence in the Indian financial services industry and is well positioned to tap sector growth opportunities. Even though it is a non bank player at present, ABFS ranks among the top 5 fund managers in India, excluding LIC. Its assets under management surged year- on-year by 14% to USD 20.4 billion (` 122,362 Crore). It is among the top 5 private life insurers in India in terms of funds under management. Its asset management business is the 4 th largest in the country. It is a large player in the NBFC space having a lending book of about USD 2 billion (` 11,550 Crore) and growing. Anchored by about 13,000 employees and trusted by about 5 million customers, ABFS has a nation-wide reach through about 1,500 points of presence and around 130,000 agents / channel partners. Additionally backed by a large customer base, a talented human resource pool, proven track record of product innovation, customer centric approach and superior investment performance, Aditya Birla Financial Services also enjoys a strong parentage brand equity. In , Aditya Birla Financial Services attained growth in most of its business segments, except the Life Insurance business. Its consolidated revenue at USD 1.1 billion (` 6,640 Crore) grew year-on-year by 4%. Revenue of the NBFC and the Asset Management businesses rose by 68% and 24% respectively. However, the life Insurance business witnessed a de-growth in premium income. Earnings before tax of ABFS were marginally lower from ` 761 Crore to ` 745 Crore consequent to lower profitability in the Life Insurance business. The NBFC and the Asset Management businesses recorded an impressive growth in profitability. It generated a healthy return on average capital employed of 25% per annum. To expand its financial services offerings, Aditya Birla Nuvo had applied for a banking license under the recent RBI guidelines. RBI has presently given licenses to only two players but has proposed a framework for universal as well as differentiated banking licenses. The Company believes that the banking sector will be a strategic fit for the financial services business as the sector will be both a contributor and a beneficiary of the economic growth in India. Aditya Birla Financial Services will continue to evaluate future growth opportunities in the financial services space including banking. (` Crore) Aditya Birla Financial Services Revenue Birla Sun Life Insurance 5,037 4,702 Aditya Birla Finance 715 1,203 Birla Sun Life Asset Management Aditya Birla Insurance Brokers Aditya Birla Money Aditya Birla Money Mart Aditya Birla Capital Advisors Others / (Elimination) (20) (13) Total Revenue 6,378 6,640 EBITDA Earnings Before Tax Net Profit MANAGEMENT DISCUSSION AND ANALYSIS Note 1 : Note 2 : Note 3 : Above financials include full financial figures of partly owned subsidiaries, viz., Life Insurance, Asset Management, Broking and General Insurance Advisory. Finance cost of NBFC business, being an operating expense as per AS-17, is deducted from EBITDA. Before exceptional loss of ` 19 Crore on impairment of goodwill relating to investments in broking and wealth management businesses. Annual Report

54 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Life Insurance (Birla Sun Life Insurance Company Limited) Industry Overview The Indian Life insurance industry currently comprises 23 life insurers and one public sector life insurer LIC. The top 7 out of 23 private players contributed to 74% of the private sector s total new business premium 1 in In , the industry s new business premium 1 was up by 3% to ` 59,041 Crore. LIC grew by 8% while private players de-grew by 5%. Consequently, the share of private players in the total pie declined from 40% to 37%. In terms of Individual Life new business 1, private life insurers as well as LIC de-grew by 3%. (Source: IRDA, Given the macro-economic environment and product transition to meet regulatory guidelines, sales growth across the industry was impacted. Following major regulatory changes in 2009, there has been a perceptible slowdown in the industry. However, this has given an opportunity to existing insurance players to review their operating models to drive towards higher efficiencies and focus on more balanced growth objectives. Performance Review Birla Sun Life Insurance ( BSLI ) completed its 14 th year of successful operations against the back drop of a challenging sector environment. It ranked 7 th among private players with 7.6% market share in terms of new business premium 1 for [Source: IRDA, As of 31 st March 2014, BSLI s nationwide reach encompassed over 560 branches, an agency force of over 81,500 empanelled agents, tie-ups with more than 150 non-bank corporate agents & brokers and 4 key bancassurance partners. BSLI recorded gross premium income at ` 4,833 Crore vis-a-vis ` 5,216 Crore earned in the previous year. New business premium income de-grew by 8% to ` 1,697 Crore. While new business premium income from the Group segment witnessed a growth of 4%, the individual life segment de-grew by 16%. Renewal premium at ` 3,136 Crore de-grew year on year by 7%. Earnings before tax and Net Profit de-grew from ` 542 Crore to ` 371 Crore primarily due to decline in new business and the in-force book. Indian Life Insurance Industry : Growth in new business 1 (` Crore) Individual Life New Business Total New Business Premium Y-o-Y Growth Premium Y-o-Y Growth Private Players 17,244-3% 21,657-5% LIC 28,185-3% 37,384 8% Total 45,429-3% 59,041 3% Source: IRDA, Birla Sun Life Insurance: Robust Growth in AUM (` Crore) 24,775 16,130 19,760 21,110 22,929 Debt Birla Sun Life Insurance: Growth in Premium Income (` Crore) 5,506 2,960 5,677 2,080 5,885 1,926 5,216 1,837 4,833 1,697 New business premium 44% 46% 45% 41% 42% Equity 2,546 3,597 3,959 3,380 3,136 Renewal premium March 2010 March 2011 March 2012 March 2013 March Note 1 : Weighted new business premium = 100% of regular first year premium + 10% of single premium (Source: IRDA, 34 Annual Report

55 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Assets under Management grew by 8% to ` 24,775 Crore. The equity and non-equity assets contributed to 42% and 58% of the total AUM respectively. BSLI continued to deliver superior investment returns to its policyholders, consistently beating the benchmarks. The Company has been focusing on disciplined expense management as a result of which other expenses and overheads reduced year-on-year by 10%. The Opex to Gross Premium ratio (excluding commission) improved from 22.3% in to 21.6% in (` Crore) Birla Sun Life Insurance Assets Under Management ( AUM ) 22,929 24,775 Individual First Year Premium 1, Group First Year Premium First Year Premium 1,837 1,697 Renewal Premium 3,380 3,136 Premium Income (Gross) 5,216 4,833 Less: Reinsurance Ceded and Service Tax (313) (307) Premium Income (Net) 4,903 4,526 Other Operating Income Revenue 5,037 4,702 Earnings Before Tax Net Profit Capital 2,450 2,450 Net Worth 1,248 1,257 ABNL s Investment 1,814 1,751 BSLI has taken a number of initiatives for customer retention and for managing underwriting and claims effectively. The conservation ratio of the individual life segment improved from 65% to 70%. Surrenders as a percentage of Policyholder s AUM declined year-on-year by about 150 bps. BSLI distributed a final dividend of ` 118 6% of share capital. BSLI also distributed ` 280 Crore to the shareholders through a buy back of shares. ABNL received ` 295 Crore for its 74% shareholding. MANAGEMENT DISCUSSION AND ANALYSIS 120 Capital Infusion and Profitability Trend of Birla Sun Life Insurance since Inception (` Crore) Capital Infusion 725 Net Profit/(Loss) Annual Report

56 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS No capital infusion has been required in the past four years as the business is generating adequate internal accruals to fund its requirements. The mix at the industry level is currently skewed towards non-unit linked insurance plans (non- ULIPs). In line with the trend in the industry, during the past four years, the contribution of non-ulip portfolio in Individual new business sales of BSLI has increased from about 5% to 60%. During the year under review, BSLI launched several new products to strengthen its product portfolio and to meet the regulatory product guidelines. BSLI has focused on a multi-distribution strategy to offer its wide range of life insurance products to numerous customer segments. Agency continues to be the largest distribution channel for BSLI contributing to over two-third of its individual life new business sales. Over the past few years, a strong franchise network has been created in the Corporate Agent and Broker segment. Outlook The challenging macro-economic environment including high interest rates and high inflation has deterred the insurance industry from gaining a larger share of the total savings pie. The preference for gold and real estate as investment vehicles has also impacted the sector. However, India has several structural advantages in terms of favourable demographics and a high financial savings rate. This promises bright prospects for the life insurance industry over the long term. The recent easing of inflation and the bearish trend in gold and real estate is expected to augur well for the industry. Greater certainty of regulations, improving macro-economic environment, increasing product offerings and evolving distribution channels will further enhance growth and profitability of the industry. Birla Sun Life Insurance has identified the following key areas to strengthen its competitive and financial position. Gaining market share through quality sales. Enhancing profitability through balanced channel mix, improved distribution productivity and efficient expense management. Increasing efforts towards customer retention and better persistency. Asset Management (Birla Sun Life Asset Management Company Limited) Industry Overview The Indian mutual fund industry comprises 46 asset management companies. The top 10 asset management companies command 78% of the industry s domestic average AUM. The industry AAUM 1 rose year on year by 11% to cross ` 900,000 Crore (USD 151 billion) mark. The growth was driven by Debt and Liquid assets which grew by 10% to USD 76 billion and by 28% to USD 42 billion respectively. The industry s equity AAUM 1 de-grew by 3% to USD 33 billion on account of negative net sales. Share of equity AAUM in industry s AAUM de-grew from 25% to 22%. [Source : Association of Mutual Funds in India ( AMFI ), Performance Review Birla Sun Life Asset Management Company ( BSAMC ) completed 19 years of its journey towards offering wealth creation solutions to its customers. During the year, BSAMC outperformed the industry and registered 16% year-on-year growth in domestic AAUM 1 - the second highest Market Share in terms of quarterly average AUM (Q4 FY ) HDFC 12.5% Others 22.2% 66,461 67,668 13,559 15,285 15,539 52,902 52,383 Q4 FY09-10 ICICI 11.8% Growth in BSAMC s Total AAUM (` Crore) 96,429 Q4 FY10-11 DSP 3.5% Source: AMFI 66,082 50,543 Kotak 3.7% Q4 FY11-12 IDFC 4.6% Reliance 11.4% 83,451 Equity & 18,843 Alternate Assets 2 17,167 66,284 Q4 FY12-13 Franklin 5.0% 77,586 Q4 FY13-14 SBI 7.2% UTI 8.2% Birla Sun Life 9.8% Debt & Liquid Note 1: Average AUM for the quarter ended 31 st March. Note 2: Equity AAUM (Domestic + Offshore) + PMS + Real Estate Fund. 36 Annual Report

57 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS (` Crore) Birla Sun Life Asset Management Average Assets under Management 1 Equity 10,860 11,550 Debt and Liquid 66,284 77,586 Domestic 77,144 89,136 Offshore 4,600 5,921 Real Estate Onshore Fund 1,063 1,061 PMS Total 83,451 96,429 Revenue Earnings Before Tax Net Profit Net Worth Note 1 : Average AUM for the quarter ended 31st March of the respective year. among the top 5 players. BSAMC maintained its market position as the 4 th largest asset management company in India, touching its highest ever market share at 9.85% up from 9.43% a year ago. Total AAUM 1 of BSAMC surged by 16% to reach ` 96,429 Crore (USD 16.1 billion). Debt and liquid funds were the largest contributors to the growth followed by offshore AAUM. Offshore AAUM is gaining momentum and rose by 29% to reach USD 1 billion mark. BSAMC s share in industry s equity AAUM rose from 5.3% to 5.8%. Its AUM crossed the ` 100,000 Crore mark in May Led by strong growth in AUM, BSAMC posted sound earnings growth. Revenue rose by 24% to ` 502 Crore. Earnings before tax rose by 31% to ` 140 Crore. Net profit surged by 29% to ` 95 Crore. BSAMC is serving its large investor base through a strong distribution network of 110 branches and over 37,500 financial advisors. As an acknowledgement of BSAMC s strong investment performance, the following awards were conferred on BSAMC at various forums: Most Admired AMC of the year in BSFI category by Star of India Awards supported by ABP News. The Best Debt Fund House of the Year at Morningstar Awards, 2013 and Outlook Awards, Outlook The long term outlook for the mutual fund industry remains attractive backed by lower mutual fund penetration, growing incomes and savings level. Mutual fund AUM as a percentage of India s GDP is very low compared to 50%-90% in the developed countries. With furthermore regulatory changes the increasing focus of asset management companies is on raising retail participation in smaller cities. With its eye on profitable growth, BSAMC will focus on enhancing distribution capacity and productivity across channels, improving customer engagement and rationalisation of costs. Having a strong brand name, experienced management and a proven record of investment performance, BSAMC is well positioned as a leading player in the Indian mutual fund industry. NBFC (Aditya Birla Finance Limited) Industry Overview The role of non-banking financial companies (NBFCs) as effective financial intermediaries has been well recognized as they have an inherent ability to take quicker decisions, assume greater risks, and customize their services according to the needs of the clients. Aditya Birla Finance Limited (ABFL) is one of the leading NBFCs in India. Incorporated in 1991, ABFL offers specialized solutions in the areas of Capital Market and Corporate Finance, Project & Structured Finance and Mortgages. Headquartered in Mumbai, ABFL has a wide network of branches and associates across the country. MANAGEMENT DISCUSSION AND ANALYSIS Annual Report

58 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Performance Review The lending book of ABFL grew year-on-year by 44% to reach the USD 2 billion (` 11,550 Crore) mark as on 31 st March The Corporate Finance and Mortgage segments were the largest contributors. The Capital market book, comprising promoter funding, loan against shares etc., rose by 16% from ~` 2,750 Crore to ~` 3,200 Crore. The Corporate Finance book surged by 64% from ~` 1,650 Crore to ~` 2,700 Crore. The Infra financing book grew by 20% from ~` 2,100 Crore to ~` 2530 Crore. The Mortgages book comprising loan against property and lease rentals discounting more than doubled from ~` 1,400 Crore to ~` 2,970 Crore. The business is focusing on growing the lending book while keeping risk under control. As on 31 st March 2014, ABFL had a healthy loan book with gross NPA at 1.3% (Previous Year: 1.2%) and net NPA at 0.6% (Previous Year: 0.8%). Driven by strong growth in the lending book and fee based income, revenue of ABFL soared by 68% from ` 715 Crore to ` 1,203 Crore. Its earnings before tax rose by 71% from ` 147 Crore to (` Crore) Aditya Birla Finance Revenue 715 1,203 Operating Profit Earnings before Tax Net Profit Net Worth 1,079 1,769 Note 1 : Finance cost, being an operating expense for NBFC business, is deducted from EBITDA to arrive at operating profit. Aditya Birla Finance : Book Size (` Crore) ~11,550 ` 251 Crore. Growth in the lending book and an improved opex ratio contributed. Net profit surged by 65% from ` 100 Crore to ` 166 Crore. With its focus on retail footprint expansion, ABFL expanded its network from 12 cities to 18 cities through addition of 11 new points of presence. ABFL received a capital infusion of ` 525 Crore during the year (Previous year : ` 350 Crore). This supported the growth while keeping leverage at optimum levels. Its net worth increased from ` 1,079 Crore to ` 1,769 Crore led by capital infusion and internal accruals. The business is growing at a good pace and will require more capital to support future growth. The long term credit rating has been upgraded from AA to AA+ by CARE. Outlook The outlook for the NBFC sector remains positive backed by the lower credit penetration and the huge capital formation requirements of the country. Aditya Birla Finance: Key Business Metrics Net Interest Income (incl. fee income) (%) 5.4% 5.1% Opex to Net Interest Income Ratio (%) 32% 29% Return on average Net Worth (p.a.)(%) 14.3% 13.1% Return on average Assets (p.a.) (%) 1.9% 1.9% Gross NPA (as % of total loans & advances) 1.2% 1.3% Net NPA (as % of total loans & advances) 0.8% 0.6% Fee Income (` Crore) Borrowings (` Crore) 6,867 9,647 Leverage (x) 6.4x 5.5x Break-up of Lending book as on 31 st March 2014 CAGR 89% ~8,000 Infra Financing 22% Mortgages 26% ~900 ~1,850 ~3,425 Others Corporate 1% Finance 23% Capital Market 28% March 2010 March 2011 March 2012 March 2013 March Annual Report

59 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS However, in the short term, the macro-economic environment marked by a sluggish economy, volatile capital markets and high interest rates, may prove challenging for growing a quality book.. ABFL aims at scaling up its book size in the existing segments and through the extension of its portfolio, while keeping risk under control. The strong parentage brand and an experienced team that has seen more than two decades of business cycles, will help ABFL in reaching towards its goal. Private Equity (Aditya Birla Private Equity) Industry Overview The investments in the Private Equity ( PE ) industry continued to be subdued. The fundraising during calendar year (CY) 2013 for investments into India continued to remain depressed due to regulatory uncertainties and a depreciating Indian rupee. The total value of investments (excluding Realty Funds and Infrastructure Funds) by PE investors in India in CY 2013 at USD 7.5 billion was lower by about 19% compared to USD 9.2 billion in CY There was an enhanced shift towards secondary deals where an existing PE investor exits by selling its stake in the portfolio company to another PE investor, as fewer companies raised additional private capital in the absence of new investments in the industry. [Source: Venture Intelligence]. Performance Review Aditya Birla Private Equity (ABPE) is managing ` 1,156 Crore of corpus under two sector-agnostic funds, i.e. Aditya Birla Private Equity Fund I, (providing growth capital to established companies across sectors) and Aditya Birla Private Equity Sunrise Fund (providing growth capital to emerging companies in sunrise sectors). ABPE-Fund I, is managing corpus of ` 858 Crore and has invested 74% of its deployable corpus in Anupam Industries, Bombay Stock Exchange, Credit Analysis and Research Ltd., GEI Industrial Systems, Alphion India Pvt. Ltd., Trimax IT Infrastructure & Services Ltd., Ratnakar Bank Ltd. and Coffee Day Resorts Pvt. Ltd. ABPE-Sunrise Fund, is managing corpus of ` 299 Crore and has invested 43% of its deployable corpus in SMS Paryavaran Ltd., Olive Bar and Kitchen Pvt. Ltd. and Tree House Education and Accessories Ltd. Aditya Birla Capital Advisors Private Limited ( ABCAP ) provides investment management and advisory services to Aditya Birla Private Equity Trust, a venture capital fund registered with SEBI. During , revenue of ABCAP remained flat at ` 23 Crore. It posted a 3% rise in net profit at ` 6 Crore. Outlook According to a study by Venture Intelligence, a leading research firm focused on Private Equity and Mergers & Acquisition activities in India, PE and Venture Capital backed companies are rising significantly faster than non-backed peers as well as market indices. This underscores the importance and potential of the PE industry in India. Backed by its strong investment management team and salient parentage brand, Aditya Birla Private Equity is well positioned to tap the opportunities in the private equity space. Broking (Aditya Birla Money Limited) Industry Overview During the first half of , the capital markets volumes continued their downward trajectory, however, they recovered smartly in the second half. Retail investor participation continued to remain low, while FIIs dominated the markets. The product mix in equities market continued to favor the low yielding derivatives segment. The share of derivatives in fiscal stood at around 90%. The daily cash volumes declined by 5% to ` 13,420 Crore accounting for merely 8% of the total market volume, down from 10% in the previous year. The structural shift, from high yield cash delivery to low yield derivatives market, is resulting in prolonged earnings pressure on the broking industry. Performance Review Aditya Birla Money Ltd. (ABML) continued to focus on the retail investor segment, cost reduction and improvement in market share. Its market share grew from 0.94% to 1.37% in the retail equity F&O segment and from 0.48% to 0.54% in the commodity broking segment. However, in the retail cash equity segment, the market share of ABML declined from 1.5% to 1.4%. While ABML has shown improvement in its market share, the decline in overall market volumes in the commodity broking and retail cash equity MANAGEMENT DISCUSSION AND ANALYSIS Annual Report

60 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS segments affected earnings across the industry. Revenue of ABML de-grew by 11% to ` 75 Crore. Driven by cost rationalization initiatives, net Loss has reduced year on year from ` 15 Crore to ` 12 Crore. Outlook The market growth over the short to medium term will depend on the direction of the financial markets and investors confidence in equities as an asset class. There are various triggers viz., stable government, lowering CAD, structural reform etc. which are signaling a revival of the Indian economy which will lead to a boost in the financial markets. The highly under penetrated Indian securities market provides ample growth opportunities over the long run. ABML s thrust is on increasing its market share by creating product and service differentiators across all the segments. Efficient use of technology to drive cost efficiencies will also be a key focus area. It will continue to drive client acquisition and cost rationalization, besides providing efficient trading tools and value added research advice to its clients. Wealth Management (Aditya Birla Money Mart Limited) Industry Overview While there are a few large wealth management players in India; the mutual fund distribution industry is very fragmented. Aditya Birla Money Mart Limited (ABMM) is one of the largest corporate distributors in terms of assets under advisory (AUA). During , the introduction of direct plan for mutual fund investments impacted assets under advisory across the industry. The closing AUA of ABMM de-grew from about ` 11,200 Crore to around ` 7,900 Crore as on 31 st March The market share of ABMM in terms of AUA stood at 1.04 %.(Source: CAMS) Performance Review Owing to lower AUA, revenue of ABMM de-grew year on year by 13% from ` 76 Crore to ` 66 Crore. Consequently, the net loss increased from ` 2 Crore to ` 6 Crore. Since its launch in June 2012, Aditya Birla Money MyUniverse has registered over 7,00,000 customers on its portal. MyUniverse is an innovative and unique brand agnostic online money management portal that enables customers to aggregate their various financial relationships in a highly secured environment. It provides customised and automated advice based on the financial management and helps customers manage all the four aspects related to money i.e., income, expense, asset and liability, in a holistic manner. Outlook The high rate of savings in India implies a huge opportunity for financial intermediation services. The long term fundamental growth outlook for the manufacturing and distribution of life insurance, mutual funds and equity broking products and services remains strong. Besides, increasing preference towards investment with the help of professional advisors suggests a positive outlook for the wealth management sector over the longer run. ABMM s thrust will be on asset growth and quality customer addition by providing value added wealth management solutions to its client backed with product innovation and technology support. General Insurance Advisory (Aditya Birla Insurance Brokers Limited) Industry Overview Gross premium underwritten in the general Insurance segment has grown by 12% from USD 11.5 billion (` 69,089 Crore) to USD 12.9 billion (` 77,538 Crore) (Source: IRDA). Aditya Birla Insurance Brokers Ltd ( ABIBL ) is one of the leading general insurance brokers in India. Performance Review Premium placement by ABIBL surged by 42% from ` 634 Crore to ` 898 Crore. Its market share in non-life industry premium enhanced from 0.92% to 1.16%. Driven by the strong growth in premium placement, ABIBL posted its highest ever earnings. Revenue grew by 44% from ` 57 Crore to ` 82 Crore. Earnings before tax rose by 29% from ` 16 Crore to ` 21 Crore and net profit surged by 25% to ` 14 Crore. Outlook Lower general insurance penetration in India is likely to boost growth of general insurance industry. ABIBL will focus on reaching a larger customer base in a cost effective way to grow the business. 40 Annual Report

61 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Fashion & Lifestyle (Branded Apparels & Accessories and Textiles) ABNL s Fashion & Lifestyle business, comprising Madura, Pantaloons and Jaya Shree, is the largest branded apparel player in India, selling two branded apparels every second. It is also the largest Indian manufacturer of linen yarn and linen fabric. Having an annual revenue size of USD 1 billion, it has an unparalleled nationwide presence through 1,750 exclusive brand outlets / stores spanning across 4.3 million square feet. Revenue of the Fashion & Lifestyle business crossed ` 6,000 Crore, growing year-on-year by 23%. Its EBITDA rose by 23% from ` 466 Crore to ` 573 Crore. Madura recorded an all round growth in its earnings and Jaya Shree reported its highest ever earnings while Pantaloons was in the investment phase. Driven by strong earnings and efficient working capital management, the Fashion & Lifestyle business reported a sound return on average operating capital employed of 28% per annum. (` Crore) Fashion & Lifestyle Revenue EBITDA Madura 2,523 3, Pantaloons 1 1,285 1, Jaya Shree 1,144 1, Total (net of elimination) 4,930 6, Note 1 : Pursuant to its acquisition, Pantaloons business was consolidated w.e.f. 1st July Hence, previous year financials are not comparable to that extent. EBITDA in is net of interest income of ` 62 Crore on current investments. Fashion & Lifestyle: Revenue mix ( ) USD 1 billion (` 6,048 Crore) Jaya Shree 21% Pantaloons 28% Madura 51% Branded Apparels and Accessories Industry Overview In the organised retailing market, clothing and fashion retailing is the largest and the most penetrated segment. The organised apparel market is growing at a faster pace than the overall apparel retail market driven by multiple factors including significant growth in discretionary income and changing lifestyles. Easy availability of credit and use of plastic money have contributed to a strong and growing consumer culture in India. Expansion in the size of the upper middle class and higher advertisement outlays have led to high brand consciousness and more spending on luxury products. Within the organized apparel market, men s category is the largest segment with more than 50% share. Menswear will continue to dominate the market in the years to come, however, the womenswear and kidswear are expected to grow faster and enhance their share in the overall expanding pie. (Source Industry Research Reports) In fiscal , persistently high inflation coupled with a slow down in the economy had a bearing on the clothing and fashion retailing segment too due to subdued consumer discretionary spending. Performance Review Madura Fashion & Lifestyle Madura Fashion & Lifestyle ( Madura ) is the largest premium branded apparel player in India. Its premium brands Louis Philippe, Van Heusen, Allen Solly and its popular brand - Peter England, are leaders in their respective categories. Louis Philippe and Van Heusen are the best selling apparel brands in India. Madura also retails international brands like Armani Collezioni, Hugo Boss, Versace Collection, and many more under one roof The Collective. It has also launched Hackett s mono brand stores. Madura has also Madura Fashion & Lifestyle: Retail Channel MANAGEMENT DISCUSSION AND ANALYSIS Number of EBOs Carpet Area (Million Sq Ft) Fashion & Lifestyle: Retail Presence Business EBOs/Stores Retail Space (million sq. ft.) Madura 1, Pantaloons Jaya Shree , March March ,129 March ,272 March ,541 March 2014 Annual Report

62 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS (` Crore) Madura Fashion & Lifestyle Revenue 2,523 3,226 EBITDA Segment EBIT Capital Employed ROACE (%) 29% 64% launched an online shopping portal which is a one-stop online shopping destination for Madura brands, catering to both men and women. The retail channel comprising 1,541 Exclusive Brand Outlets (EBOs) and spanning across 2.2 million square feet, accounts for 44% of Madura s revenue. Besides these EBOs, Madura is reaching customers through a widespread network of MBOs, Department Stores and its e-commerce portal Madura posted all round growth in top-line, profitability and free cash flows. Its revenue surged by 28% from ` 2,523 Crore to ` 3,226 Crore. Its retail channel posted 27% sales growth led by stores expansion and 7% like-to-like stores sales growth. Sales from the MBOs and Department Stores channel grew by 34%. During the year, Madura added 364 new EBOs. Driven by the strong sales growth across the brands and channels, EBITDA rose by 58% from ` 245 Crore to ` 388 Crore. Led by sound profitable growth and improved working capital management, return on capital employed grew significantly from 29% to 64%. Madura generated pre-tax operating cash flows of about ` 325 Crore during the year. Pantaloons Fashion & Retail Limited In the previous financial year , ABNL, through its wholly owned subsidiary Indigold Trade and Services Ltd. (ITSL), acquired the Pantaloons Fashion business; post its demerger from Future Retail Ltd. under a court approved Scheme of Arrangement. On the scheme becoming effective on 8 th April 2013, all the net assets and operations pertaining to the Pantaloons Fashion business have been transferred, on a going concern basis, along with debt to Pantaloons Fashion & Retail Limited (PFRL) (earlier known as Peter England Fashions & Retail Ltd.). On receipt of necessary approvals, the equity shares of PFRL have been listed on the National Stock Exchange of India and the Stock Exchange, Bombay on 17 th July Pursuant to the open offer, ITSL acquired an additional 17.87% stake in PFRL for ` 290 Crore. Post open offer, the holding of ABNL, through ITSL, in PFRL increased to 67.95%. The new management took over the control of the Pantaloons Fashion business w.e.f. 8 th April 2013, i.e., on the scheme becoming effective. To make Pantaloons a future ready organisation, the following key focus areas were identified by the management. Re-building the organisation: Pantaloons hired executives at key positions across the critical functions viz., designing, merchandising, finance, human resources etc Expanding customer reach: It launched 14 new Pantaloons stores and 1 factory outlet taking the total count to 81 Pantaloons stores and 26 Factory Outlets. In fiscal , PFRL is targeting to launch 18 to 20 stores to reach the 100 stores mark. Enhancing productivity of existing stores: With an objective of improving customer footfalls, 22 stores were refurbished through an upgrade of infrastructure and assortment. (` Crore) Pantaloons Fashion & Retail Ltd. Revenue 1,285 1,661 EBITDA Segment EBIT 13 (75) Goodwill 1,168 1,168 Net Fixed Assets Cash & Current Investments Net Working Capital 19 (50) Capital Employed 1,700 1,630 Net Worth Debt ,050 Note 1 : Pursuant to its acquisition, Pantaloons business was consolidated w.e.f. 1 st July Hence previous year results are not comparable to that extent. Note 2 : EBITDA in is net of interest income of ` 62 crore on current investments. Note 3 : Net of current investments of ` 800 crore as on 31 st March Annual Report

63 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Pantaloons: Revenue mix ( ) Pantaloons: Customer Reach Non-apparel 17% Kidswear 9% Womenswear 29% Menswear 35% Strengthening the brand portfolio: To strengthen the high margin private labels portfolio, three new brands were launched Byford in men s sportswear category; Alto Moda in plus-size category, and Chirpie Pie for infants. To widen its menswear segment, Pantaloons has also started retailing the country s leading brands viz., Louis Philippe, Van Heusen, Allen Solly and Peter England. Optimising finance costs: The average interest cost of the debt portfolio was reduced from 13% to about 10.4% for the fiscal Today, Pantaloons is among the top 3 large format fashion retailers in India. Pantaloons has 4.3 million loyal customers, amount the largest in the country. PFRL reported revenue at ` 1,661 Crore in fiscal Like-to-like stores sales declined by 1.6%. Merchandise availability issues and subdued consumer sentiment impacted sales growth. Gross margin improved due to better product mix and pricing. However, the bottom line was strained, reflecting the full impact of organisation building costs, compared to allocation of costs until last year. The moderation in sales growth also affected profitability. Owned and licensed brands contributed to 48% of PFRL s sales in These include brands owned by Pantaloons viz., Akkriti, Rangmanch, Ajile, Annabelle, Trishaa, Honey, Chalk, Alto Moda, Chirpie Pie, as well as brands licensed on a perpetual basis viz. Bare, Byford, Rig, Lombard, JM Sports. Pantaloons has a diversified customer base with Menswear and Womenswear contributing to 35% and 39% share respectively. Outlook Number of Stores (including factory outlets) June 2012 High inflation levels coupled with slow GDP growth impacted consumer sentiments and spending during the year. Consumer spends on discretionary categories like branded apparels is likely to remain moderate in the near term. With the inflation projected to stabilise at lower levels and an expected improvement in GDP growth going forward, consumer spending is set to improve in the medium term. The long-term outlook for the domestic apparel industry remains positive on the back of favourable demographics viz., rising disposable income, a burgeoning and aspiring middle class, a large young and working population and an increasing shift towards branded apparels Madura s thrust will be on leveraging its brand leadership, expanding retail space and strengthening channel relationships. Pantaloons growth strategy includes scaling up its retail presence, improving productivity of existing stores, augmenting its merchandise by adding new product categories, strengthening its brand portfolio and building a strong vendor base. The strengthening of the balance sheet will also be a key thrust area. Jaya Shree Textiles Industry Overview March 2013 Carpet Area (Million Sq Ft) March 2014 Jaya Shree operates in two business segments viz., Linen and Wool. The Linen industry registered strong growth in demand. The wool industry witnessed sluggish demand worldwide due to highly volatile wool prices and a crisis in Europe, one of the largest wool consumers MANAGEMENT DISCUSSION AND ANALYSIS Annual Report

64 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS (` Crore) Jaya Shree Revenue 1,144 1,300 Linen Segment Wool Segment EBITDA Segment EBIT Capital Employed ROACE (%) 97% 57% Performance Review Jaya Shree is the largest manufacturer of linen yarn and linen fabric in India. To tap the sector growth and strengthen its market leadership, Jaya Shree expanded its Linen Yarn capacity from 2,300 tons per annum (TPA) to 3,400 TPA and Linen Fabric Processing Capacity from 7.3 million meters per annum to 10.1 million meters per annum. Jaya Shree retails linen fabric under the well-known brand Linen Club Fabrics. It is a leading manufacturer of wool tops and worsted yarn in India with a capacity of 8 carding machines and 26,112 spindles respectively. In , Jaya Shree achieved its highest ever earnings. Revenue grew by 14% to ` 1,300 Crore and EBITDA rose by 12% to ` 172 Crore. Expansion-led volume growth in the linen segment coupled with improved realisation contributed. Jaya Shree is operating at a sound ROACE of 57%. It is lower year-on-year mainly due to a rise in capital employed on account of expansion, the full benefit of which will accrue in Jaya Shree is focusing on the high margin Linen Fabric OTC segment. It added 26 new Linen Club Fabrics EBOs during the year taking the total to 102. Linen Club is also being retailed through more than 3,400 MBOs. Telecom (Idea Cellular Limited) Industry Overview The mobile telecommunications industry in India is divided into 22 Service Areas three metro Service Areas, and 19 other Service Areas. As of March 31, 2014, India had a total reported subscriber base of million and a VLR (active) subscriber base of million. As of March 31, 2014, mobile tele-density was at 72.9% based on reported subscriber and 63.8% based on VLR subscribers. In fiscal , the gross revenue 1 of the Indian wireless sector grew year-on-year by 10% to ` 1,651 billion (USD 28 billion). The top three cellular operators in India, Bharti Airtel, Vodafone and Idea Cellular, garnered 70% revenue market share 1 up from 68% a year ago. (Source : TRAI). The competitive intensity in the industry has decreased since the quashing of the licenses and the associated spectrum by the Supreme Court of India in February Small operators are forced to exit or reduce their presence in India. The number of licensees has therefore decreased to 6-10 mobile operators per Service Area. In addition, increasing losses have forced operators to start rationalizing tariffs to protect their investments. As a result, realizations have started to improve. Performance Review Idea Cellular is the 7 th largest cellular operator in the world in terms of number of subscribers and based on operations in a single country (Source: WCIS, December 2013). Carrying 1.75 billion minutes of usage every day, Idea was serving a large customer base of million subscribers Indian Wireless Sector: Revenue Market Share 1 (January-March 2014) Airtel 30.5% Others 3.7% Vodafone 23.4% Aircel 5.6% Outlook Increasing awareness about linen coupled with wider usage will drive higher volumes in the domestic market. At Jaya Shree, the creation of world class design and development facilities for linen fabric is under implementation. Demand revival is expected in the wool segment. BSNL & MTNL 6.4% Tata 6.7% Reliance 7.2% (Source: TRAI, Idea Cellular 16.6% Note 1 : Based on gross revenue for UAS & Mobile licenses only, as released by Telecom Regulatory Authority of India ( TRAI ) 44 Annual Report

65 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS (` Crore) Idea Cellular Revenue 22,407 26,432 EBITDA 6,091 8,560 Segment EBIT 2,527 3,814 Net Profit 1,011 1,968 Cash Surplus 1, Net Worth 14,305 16,527 Total Debt 14,044 20,635 Capital Employed 28,349 37,162 ABNL s Investment 2,356 2,356 ABNL s shareholding in Idea at the year end (%) 25.27% 25.23% spread across about 7,400 census towns and 345,000 villages as on 31 st March The large base of subscribers provides a great platform to Idea for upgrading pure voice customers to wireless data services in future. In India, Idea is the 3 rd largest cellular operator by revenue market share. Idea s Pan India revenue market 1 share during the fourth quarter rose year on year from 15.7% to 16.6%. Idea Cellular has been the biggest revenue market share gainer in India over the past five years. Idea contributed to 28% of the industry s incremental mobile revenue in fiscal Mirroring the brand popularity and quality service experience of its customers, Idea s active subscribers ratio at 101.5% as on 31 st March 2014, is the highest in the industry. Idea is the leading net subscribers gainer in the Mobile Number Portability program, a strong indicator of the popularity of Idea s mobile services. Idea s market capitalisation was USD 8 billion (` 48,038 Crore) as on 26 th June Idea is listed on NSE and BSE. In the recent spectrum auction, which got concluded in February 2014, Idea won 5MHz spectrum in 900 MHz frequency band in the Delhi service area, LTE compatible 1800 MHz spectrum in 8 service areas along with top-up GSM spectrum in 7 service areas. Idea generated 588 billion minutes of usage (MoU), registering a strong 11% year on year growth. Following the rationalisation of tariffs at the industry level, Idea s average realisation per minute (ARPM) rose by 7%. Data volumes more than doubled to 79.4 billion megabytes. MANAGEMENT DISCUSSION AND ANALYSIS Idea Cellular: Growth Trend Idea Cellular: Revenue Market Share 1 Minutes on Network (billion) Subscribes (million) % 13.6% 15.0% 15.7% 16.6% Q4 FY Q4 FY Source: TRAI, Q4 FY Q4 FY Q4 FY Note 1 : Based on gross revenue for UAS & Mobile licenses only, as released by Telecom Regulatory Authority of India ( TRAI ) Annual Report

66 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Led by strong growth in MoU and ARPM, the topline of Idea grew by 18% to USD 4.4 billion (` 26,432 Crore), nearly double the growth rate of the wireless industry. EBITDA surged by 41% to USD 1.4 billion (` 8,560 Crore). EBITDA margin stands expanded by about 500 bps. Net profit almost doubled from ` 1,011 Crore to ` 1,968 Crore. ROACE improved from 10% per annum to 12% per annum. Idea generated standalone 1 cash profit of ` 6,435 Crore (USD 1.1 billion) recording a 37% growth over previous year. During the year, Idea incurred a capex of ` 3,528 Crore and spectrum acquisition cost of ` 10,424 Crore. Supported by strong cash profit generation, Idea s standalone 1 Net Debt to EBITDA is comfortable at 2.6 times. The Capex guidance for fiscal stands at ` 35 billion, excluding any spectrum related payments. Led by strong cash flows and a healthy balance sheet, Idea is well placed to support its growth plans. To further support its growth plans, Idea raised ` 3,000 Crore through qualified institutional placement in June 2014 at an issue price of ` 134 per equity share. Post the issue, ABNL s holding in Idea was reduced to 23.63%. Idea plans to raise another ` 750 Crore through preferential allotment of equity shares to Axiata Investments 2 (India) Limited at an issue price of ` per equity share, subject to the shareholders approval. Idea has proposed dividend at 4% of share capital. The overall payout including dividend distribution tax will be ` 155 Crore. Outlook India is primarily a voice market and voice will continue to dominate the Indian mobile sector over the next few years. There is still a lot of potential in the voice market as rural penetration is low. Having said that, with the roll of 3G operations, data is growing rapidly and data growth will outpace voice growth in the coming years. Idea is one of the few companies in the world, which is able to run high quality telecom services at the world s lowest price points and yet deliver stable Cash Profits. Idea will continue to capitalise on the brand!dea, strong cash flows and expanding spectrum profile and infrastructure to capture the emerging Voice and Wireless Broadband opportunities Note 1 : Standalone = Idea Cellular and its wholly owned subsidiaries MANUFACTURING BUSINESSES Aditya Birla Nuvo has a strong market position across its manufacturing businesses viz. Agri, Rayon and Insulators. All the manufacturing businesses are among the leaders in their respective sectors, in terms of size as well as profitability. Aditya Birla Nuvo is: The second largest producer and the largest exporter of Viscose Filament Yarn in India The 8 th largest manufacturer of Urea in India India s largest and the world s fourth largest manufacturer of Insulators The manufacturing businesses, combined together, generated revenue of USD 615 million (` 3,678 Crore) and EBITDA of USD 64 million (` 383 Crore) in Agri (Indo-Gulf Fertilisers) Industry Overview Urea consumption in India grew marginally from 30.2 million metric tons (MT) in to 30.4 million MT in India is heavily dependent on urea imports for meeting the domestic consumption requirements. Urea imports have surged in the past few years leading to rising subsidy burden on the exchequer. In , urea imports at about 7 million MT accounted for 23% of total demand in India. No new urea capacity has come up in past 14 years and the gap between indigenous production and demand continues to widen. To reduce the mounting urea subsidy bill, the Government of India notified the New Investment Policy (NIP) for Urea on 2 nd January, The objective of the policy is to reduce urea imports by promoting indigenous capacity expansion. Industry is awaiting approval from the Department of Fertilisers for brown field projects under the new investment policy. During , the industry witnessed slower recovery of fertiliser subsidy from the Government due to inadequate budgetary provision. This led to a steep rise in working capital, with consequent impact on profitability. Performance Review Indo Gulf Fertilisers is the 8 th largest urea manufacturer in India. The goal of the business is to become a total agri solutions provider offering a full range of agri inputs fertilisers, seeds, agrochemicals and specialties from sowing to harvesting. 46 Annual Report

67 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS (` Crore) Agri Revamped Capacity (MTPA) 1,072,500 1,072,500 Urea Production (MT) 1,085,358 1,033,184 Manufactured Urea Sales (MT) 1,090,505 1,034,135 Revenue 2,924 2,313 Manufacturing (Urea, Customised Fertilisers) 1,859 1,995 Trading (Imported Fertilisers, Agri-inputs etc.) 1, EBITDA Segment EBIT Capital Employed 1,854 1,616 ROACE (%) 12% 3% Birla Shaktiman Urea Neem coated and Gold continued to remain the products of first choice, for the farmers. Birla Shaktiman enjoys a market leadership position in entire zone of Uttar Pradesh, Bihar, Jharkhand and West Bengal, through excellent product quality and customer servicing. The business of Birla Shaktiman Seeds, Agrochemicals & Specialties continued to have a healthy growth a reflection of its strong brand equity, good product quality and in-depth trade channel reach. Indo-Gulf s customized fertiliser Birla Shaktiman Vardaan which is manufactured with in-house patented technology, has been successfully launched on target crops - wheat, paddy, potatoes and sugarcane in Uttar Pradesh. Sales of manufactured urea at 1.03 million MT de-grew year-on-year by 5% mainly on account of lower production owing to 41 days shutdown in the urea plant for annual turnaround. The Urea plant resumed full operations on 8 th April Revenue de-grew year on year by 21% from ` 2,924 Crore to ` 2,313 Crore. Revenue from manufacturing operations grew by 7% to ` 1,995 Crore. Pass through of the rise in natural gas prices reflected in higher urea prices while manufactured urea sales volumes de-grew by 5% due to urea plant shutdown. Trading revenue fell from ` 1,065 Crore to ` 318 Crore on account of the discontinuation of trading in imported P&K fertilisers. EBITDA declined from ` 197 Crore to ` 77 Crore mainly due to discontinuance of trading in imported P&K fertilisers and a 41 day urea plant shutdown. Higher energy costs and consumption also impacted profitability. The business implemented energy savings and debottlenecking project during the shutdown, the benefit of which will accrue in The business will also benefit from higher fixed cost reimbursement as per the Government policy. The capital employed was lower year-on-year due to release of net working capital following the discontinuance of trading in imported P&K fertilisers. The outstanding subsidy and receivables reduced from ` 1,632 Crore in March 2013 to ` 1,176 Crore in March Outlook Agriculture continues to be a key focus area for the Government. The focus is on improving agricultural productivity, to meet the growing demand for food. Modern technology in farming, in areas such as soil science, plant breeding and genetics and crop protection are critical in this endeavour. This has opened up new business opportunities for value added products and services in the agri space. Indo Gulf Fertilisers, with its strong farmer connect and customer centric approach is well positioned to take advantage of these opportunities. It s location at Jagdishpur in the middle of the agricultural heartland of the Indo-Gangetic plains, gives it access to a large and growing market. MANAGEMENT DISCUSSION AND ANALYSIS Annual Report

68 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Rayon (Indian Rayon) Industry Overview Indian Rayon, a unit of ABNL, manufactures and sells viscose filament yarn, caustic soda and allied chemicals. Viscose filament yarn ( VFY ) is a manmade natural filament yarn having the comfort of cotton and the lustre of silk. It is used in georgette and crepe fabrics, home textiles, embroidery etc. During , domestic consumption of VFY grew by 2.1% to 56,453 MT. Domestic VFY production has increased by 2.6% to 44,006 MT. VFY exports de-grew by 7% to 5,837 MT. Imports increased by 18.5% to 20,209 MT during the year. The VFY Yarn market in India continues to move towards fine / superfine denier leading to improvement in realisations. Wood pulp prices are softening due to oversupply on account of recent capacity additions. Despite an anti dumping duty, imports from China has increased due to competitive prices in view of stagnant Chinese domestic demand and softening wood pulp prices. This has adversely affected the sales volume of domestic manufacturers and led to an increase in yarn inventory. (` Crore) Rayon VFY Capacity (MTPA) 19,800 19,800 Production (MT) 16,621 17,962 Manufactured VFY Sales (MT) 16,806 17,423 Revenue (Including allied chemicals) Chemicals Caustic Soda Capacity (MTPA) 91,250 91,250 Caustic Soda Production (MT) 88,334 86,771 Caustic Soda Sales (MT) 87,565 86,758 Chemicals Revenue Total Revenue EBITDA Segment EBIT Capital Employed ROACE (%) 26% 24% Gross Block (including CWIP and Capital Advance) 1,081 1,136 VFY Chemicals (including Captive Power Plant) Caustic Soda is a versatile alkali. It is used mainly in the manufacturing of pulp and paper, alumina, soaps and detergents, petroleum products and chemical production. Other applications include water treatment, food, textiles, metal processing, mining, glass making etc. Caustic Soda production in India witnessed a growth of around 4%. Performance Review Indian Rayon is the 2 nd largest manufacturer of VFY in India with a 41% share in the industry s production. It remained the largest Indian exporter of VFY, for the ninth consecutive year, with a 51% share in VFY exports from India. In , Indian Rayon recorded its highest ever earnings. Revenue from the VFY segment grew by 16% to ` 659 Crore. Improved VFY realisation led by product mix and higher VFY volumes driven by the new superfine yarn capacity contributed. Revenue from the Chemicals segment de-grew by 3% to ` 201 Crore due to decrease in caustic soda volumes. Total revenue of Indian Rayon grew by 11% to ` 860 Crore. EBITDA soared by 18% to ` 222 Crore led by improved VFY and ECU realisation coupled with higher VFY sales volume. Higher capital employed is the outcome of an increase in working capital requirements on account of new superfine yarn capacity. Having reached full capacity utilisation in the fourth quarter of , the complete benefit of the superfine unit will accrue from The business is operating at a sound ROACE of 24% per annum Outlook The growth in superfine and fine deniers in the domestic VFY market is likely to remain stable. With the ramp up of the superfine yarn unit and leveraging of the Enka trademark, Indian Rayon is well positioned to improve its market share and earnings. Higher yarn imports are likely to remain a challenge for the domestic manufacturers. Caustic Soda demand in India is expected to grow on the back of the commissioning of new Alumina and fibre capacities in the country. Chlorine demand should remain firm, although higher Chlorine production in the West may affect the demand and supply balance. 48 Annual Report

69 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Insulators (Aditya Birla Insulators) Industry Overview The power generation, transmission and distribution sector is the key growth driver for the insulators industry. India s power sector has been affected by multiple factors. Over the past few years, deferment of projects and dumping from China have adversely affected the domestic manufacturers by shrinking the market size as well as adding to the pricing pressure. The slowdown in planning and execution of projects, due to liquidity crunch and issues related to environment clearance and fuel linkages, has also impacted. Some of these challenges continued in as well. Though imports from China reduced year on year by 28% from 65,424 MT to 46,973 MT due to the imposition of safeguard duty, the domestic sales volume of the Indian insulators industry de-grew by 6% owing to accelerated imports in the previous year in anticipation of the duty. The exports markets also witnessed sluggish demand due to the slowdown in the global economy. The benefit of the safeguard duty levied last year reflected in the volumes and realisation growth during the second half of fiscal The safeguard duty was effective till 31 st December The industry is pursuing the Government for imposition of Anti-Dumping duty against cheaper Chinese imports. Performance Review Aditya Birla Insulators is India s largest and the world s fourth largest manufacturer of porcelain insulators. Domestic sales volume of Aditya Birla Insulators grew year-on-year by 9% as against decline of 6% witnessed by the domestic industry. (Source : IEEMA). (` Crore) Insulators Capacity (MTPA) 45,260 45,260 Production (MT) 36,138 36,317 Sales Volumes (MT) 35,889 36,913 Revenue EBITDA Segment EBIT Capital Employed ROACE (%) 10% 15% Revenue grew year-on-year by 11% to ` 505 Crore. EBITDA surged by 37% to ` 83 Crore. The growth in sales volume and improved realisation contributed to the earnings growth. Enhanced yield also added to the bottom-line. ROACE stands enhanced by 450 bps to 15% per annum. Outlook The slowdown in the execution of projects and the liquidity crunch may continue to impact the sector growth in the near term. The revival of the power sector depends on the Government addressing key sector issues and implementing reforms including the bailout of state electricity boards. Aditya Birla Insulators will continue to focus on yield improvement and cost rationalisation in order to enhance its cost competitiveness besides exploring new geographies in the exports market. Divestment of the IT-ITeS business ABNL entered the ITeS sector in 2003 through the acquisition of TransWorks. Later in 2006, to provide scale to the business, TransWorks acquired Minacs for USD 125 million. Committed to its turnaround and growth, ABNL supported Minacs over the years, to attain revenue of USD 483 million (` 2,898 Crore) and net profit of USD 23 million (` 139 Crore) in fiscal Aditya Birla Minacs rose to the stature of a global business solutions provider that partners with global corporations through its 35 centers in 10 countries across 3 continents. To expand its scale, enhance its competitive advantage and move to the next level of growth, Minacs required capital investments. Being a conglomerate, ABNL constantly evaluates its capital allocation strategy and reviews its business portfolio. Given the multiple growth opportunities and capital commitments at ABNL, the Company decided to divest Minacs to a strategic financial investor, one with extensive domain experience, who can ensure that Minacs continues to progress on its strategic roadmap. Pursuant to a share purchase agreement with a group of financial investors led by Capital Square Partners and CX Partners, ABNL IT & ITES Ltd., a wholly owned subsidiary of ABNL, divested Aditya Birla Minacs w.e.f. 9 th May 2014 at an Enterprise Value of USD 260 million, subject to working capital & other adjustments. MANAGEMENT DISCUSSION AND ANALYSIS Annual Report

70 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Cash flows from the divestment will support the growth plans of ABNL and enable greater focus on its core businesses. The divestment proceeds to the tune of about ` 400 Crore, net of debt repayment, were received in May Further, a sum of ~USD 15 million is receivable in , subject to the working capital changes. A deferred grant of ~USD 7 million is receivable over the next 3 years and will be accounted for on actual receipt. Divestment of the Carbon Black business Considering the sector dynamics and in order to ensure greater focus on other businesses, ABNL divested the Carbon Black Business, having received the shareholders approval, through slump sale w.e.f. 1 st April 2013 at an enterprise value of ` 1451 Crore, subject to the adjustment for net working capital. The cash inflow from the divestment of Carbon Black business strengthened the Company s balance sheet and supported its growth plans. Financial Review and Analysis Standalone Financials (` Crore) Standalone Profit and Loss Account Revenue 9,754 8,020 EBITDA 1,116 1,246 Less: Finance Costs Earnings before Depreciation and Tax Less: Depreciation and Amortisation Earnings before Tax and Exceptional Items Add: Exceptional Gain/(Loss) 1 24 Less: Tax Expenses Net Profit Note 1 : Exceptional Gain represents gain of ` 24 Crore w.r.t. the slump sale of Carbon Black business w.e.f. 1 st April Standalone revenue de-grew by 18% to ` 8,020 Crore on account of the divestment of the Carbon Black business and discontinuance of trading in imported P&K fertilisers. Standalone EBITDA is up by 12% to ` 1,246 Crore. The Fashion & Lifestyle and the Rayon businesses were the largest contributors to the growth in operating profits. The profitability in the Agri business was impacted due to the 41 days urea plant shutdown. The dividend income of ` 320 Crore from Birla Sun Life Insurance and Idea Cellular also added to the bottom-line. Finance costs decreased from ` 360 Crore to ` 267 Crore mainly on account of the exit from the Carbon Black business and release of net working capital in the Agri business following the discontinuance of trading in imported P&K fertilisers. While depreciation increased in the Rayon and the Textiles businesses on account of expansion, standalone depreciation reduced from ` 219 Crore to ` 199 Crore due to the divestment of the Carbon Black business. Standalone tax at ` 130 Crore is net of the tax credit of ` 41 Crore received w.r.t. the slump sale of the Carbon Black business. Standalone Net profit grew by 59% from ` 423 Crore to ` 674 Crore. The Board of Directors of the Company have recommended a final equity dividend of 70% (` 7 per equity share) for the financial year entailing a total outgo of ` 98 Crore including dividend distribution tax of ` 7 Crore. The standalone balance sheet supported an investment and capex outlay of about ` 2,500 Crore during the year, even while achieving a reduction in net debt by ` 434 Crore. The divestment of the Carbon Black business, an equity infusion of ` 671 Crore by promoters on conversion remaining warrants and the release of net working capital has strengthened the Company s balance sheet. Standalone Net Debt 50 Annual Report

71 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS (` Crore) Standalone Balance Sheet March 2013 March 2014 Net Worth 6,854 8,108 Total Debt 3,983 3,753 Deferred Tax Liabilities (Net) Capital Employed 10,992 11,949 Net Fixed Assets (Including Capital Advances & CWIP) 2,206 1,845 Goodwill Long-term Investments 5,857 7,952 Net Working Capital 2,556 1,574 Cash Surplus & Current Investments Book Value per Equity Share (`) Net Debt 2 /EBITDA (x) Net Debt 2 /Equity (x) Note 1 : Include cash, cheques in hand, remittances in transit, balances with banks, fertilisers bonds, short term ICDs and current investments. Note 2 : Total Debt less Cash Surplus & Current Investments. to EBITDA improved year-on-year from 3.3 times to 2.6 times and Net Debt to Equity improved from 0.53 times to 0.39 times. In , standalone balance sheet will support investments to the tune of ` 350 Crore in the Financial Services business. Capital expenditure guidance for the standalone businesses stands at around ` 460 Crore. Proceeds from the divestment of Minacs will support these growth plans. MANAGEMENT DISCUSSION AND ANALYSIS (` Crore) Standalone Cash Flow Cash Flow from Operations (Net of Tax) 707 (Increase)/Decrease in Net Working Capital 281 Net Cash from Operating Activities 988 Capital Expenditure (Net) (401) Investments in Subsidiaries / Joint Ventures / Associates (Net) (2,133) Proceeds from buyback of shares by Birla Sun Life Insurance 207 Proceeds from slump sale of Carbon Black business (Net) 315 (Increase) / Decrease in Inter-Corporate Deposits to Subsidiaries (Net) (9) Interest / Dividend Received and Profit on Sale of Current Investments 165 Net Cash from / (used in) Investing Activities (1,855) Proceeds from / (Repayment of) Borrowings (Net) 730 Proceeds from Issue of Equity Shares and Conversion of warrants 674 Dividend Paid (78) Interest Paid (271) Net Cash from / (Used in) Financing Activities 1,055 Increase / (Decrease) in Cash Surplus & Current Investments 188 Add : Opening Cash Surplus & Current Investments Add : Current Maturity of Non-current investments 16 Closing Cash Surplus & Current Investments Note 3 : Include cash, cheques in hand, remittances in transit, balances with banks, fertilisers bonds, current investments and short term ICDs Annual Report

72 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited Net Cash from Operating Activities Net Cash from/(used in) Financing Activities MANAGEMENT DISCUSSION AND ANALYSIS Cash Flow from Operations Net cash flow from operations stood at ` 707 Crore. The Fashion & Lifestyle business was the largest contributor followed by the Rayon business. Working Capital Net working capital stands reduced by ` 281 Crore. Debtors and other trade receivables decreased by ` 241 Crore mainly due to the discontinuance of trading in imported P&K fertilisers. An increase of ` 257 Crore in inventory was compensated by a rise in Trade Payables by ` 271 Crore largely in the Fashion & Lifestyle business on account of sales growth. Net Cash from/(used in) Investing Activities Capital Expenditure A capex of ` 401 Crore was spent during the year. Project capex includes scaling up of the retail channel in the Fashion & Lifestyle business through opening up of exclusive brand outlets, capacity expansion in the linen segment and energy savings and debottlenecking project in the Agri business. The balance capital expenditure was incurred on upgradation, modernisation and maintenance of plants and other assets across the businesses. Investments ABNL invested a sum of ` 607 Crore in its wholly owned subsidiary Aditya Birla Financial Services Private Ltd. to fund the growth capital requirement of the NBFC business and towards sponsor commitment in Aditya Birla Private Equity funds. ABNL invested ` 1,113 Crore in Indigold Trade and Services Ltd., towards funding the acquisition of the Pantaloons business and for purchasing an additional 17.87% stake in Pantaloons Fashion & Retail Ltd., pursuant to the open offer. Proceeds from / Repayment of borrowings ABNL raised term loans aggregating to ` 59 Crore by way of Rupee term loan towards capital expenditure commitments. ABNL also raised Non Convertible Debentures (NCDs) worth ` 200 Crore. Commercial paper and other short term debt of ` 952 Crore (net) were raised during the year. Term Loans aggregating to ` 281 Crore and NCDs of ` 200 Crore were repaid during the year. Risk Management Governance, Risk Management and Compliance processes form an integral part of the Company s planning and review mechanism. The Company s risk management framework establishes risk management processes at each business, helping in identifying, assessing and mitigating risks that could materially impact the Company s performance in achieving its stated objectives. The components of risk management are different for different businesses and are defined by various factors including the business model, business strategy, organisational structure, risk appetite and available dedicated resources. The Company s structured Risk Management process provides confidence to the stakeholders that the Company s risks are known and well managed. The risk management framework ensures compliance with the requirements of amended clause 49 of listing agreement. Since the Company is a diversified conglomerate, the risk events are identified, assessed, mitigated and monitored for each business separately. The risk management approach comprises three key components: 52 Annual Report

73 Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS (1) Risk identification: External and internal risk events which could affect the profitability, competitiveness, brand value, reputation and / or image of the Company are identified in the context of the strategy and specific objectives of each individual business. (2) Risk assessment and mitigation: The identified risks are further evaluated by the senior management team of the respective business to assess the potential severity of their impact and the probability of occurrence. Based on the assessment, they develop and deploy mitigation strategies. (3) Risk monitoring and assurance: The Risk Management Committee ( RMC ) is the apex body taking all the decisions regarding risk management activities. The overall role of RMC is to review the risk management process and the implementation and effectiveness of risk mitigation plans. The committee comprises of three independent directors, the whole time directors and the business heads. The proceedings of the meetings of RMC are discussed at the meetings of the Board of Directors from time to time. Business Risks Business risks are classified into Strategic, Operations, Financial and Knowledge risks, which are further drilled down to market structure, process, systems, legal compliance, corporate governance and people culture. Environment, Health and Safety ( EHS ) The company is conscious of its strong corporate reputation and the positive role it can play by focusing on EHS issues. Towards this, the Company has set very exacting standards in EHS management. The Company recognises the importance of EHS issues in its operations and has established comprehensive indicators to track performance in these areas. The Company values the safety of its employees and constantly raises the bar in ensuring a safe workplace. Internal Control System The Company has adequate internal control systems for business processes across various profit and cost centres, with regard to efficiency of operations, financial reporting, compliance with applicable laws and regulations, etc. The internal control system is supplemented by extensive audits conducted by the Corporate Audit Cell. Clearly defined roles and responsibilities for all managerial positions have been institutionalised. Regular internal audits and checks ensure that responsibilities are executed effectively. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements. MANAGEMENT DISCUSSION AND ANALYSIS External Risks Apart from the internal business risks, the Company is exposed to external risks on account of regulatory changes and fluctuations in interest rates, foreign exchange rates, commodity pricing etc. The Company has well defined policies / mechanism to mitigate foreign exchange and interest rate risks. The Company reviews these policies/mechanism periodically to align with the changes in market practices and regulations. The Management Information System is the backbone of the Company s control mechanism. All operating parameters are monitored and controlled regularly. Any material change in the business outlook is reported to the Board of Directors. Material deviations from the annual planning and budgeting, if any, are reported on a quarterly basis to the Board of Directors. An effective budgetary control on all capital expenditure ensures that actual spending is in line with the capital budget. Annual Report

74 MANAGEMENT DISCUSSION AND ANALYSIS Aditya Birla Nuvo Limited MANAGEMENT DISCUSSION AND ANALYSIS Human Resource Management The Company had about 20,250 employees on its rolls as on 31 st March, Including its subsidiaries and joint ventures, the manpower strength is about 49,000 employees. This intellectual resource is integral to the Company s ongoing operations and enables it to deliver superior performance year after year. The Human Resource processes of the Company have been covered in depth in the Director s Report. To Sum up Aditya Birla Nuvo has posted sound earnings growth despite a challenging business Disclaimer environment. This is an outcome of its enhanced focus on profitable growth across the businesses. With a leadership position across its businesses that mirror the growing sectors of the Indian Economy, ABNL is a uniquely positioned conglomerate. ABNL remains focused on capturing opportunities across its businesses to achieve the next level of growth. The Company s strength lies in its strong balance sheet, an experienced and focused management team, strong brand equity, leadership position across businesses and its committed employees. These are the key drivers that will support the growth of ABNL and create value for all the stakeholders. Certain statements in this Management s Discussion and Analysis may not be based on historical information or facts and may be forward looking statements within the meaning of applicable securities laws and regulations, including, but not limited to, those relating to general business plans & strategy of the Company, its future outlook & growth prospects, future developments in its businesses, its competitive & regulatory environment and management s current views & assumptions which may not remain constant due to risks and uncertainties. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company s operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the Company s principal markets, changes in Government regulations, tax regimes, competitors actions, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any statement, on the basis of any subsequent development, information or events, or otherwise. This Management s Discussion and Analysis does not constitute a prospectus, offering circular or offering memorandum or an offer to acquire any shares and should not be considered as a recommendation that any investor should subscribe for or purchase any of the Company s shares. The financial figures have been rounded off to the nearest Rupee one Crore. For currency conversion, one USD is considered to be equal to ` Annual Report

75 Aditya Birla Nuvo Limited DIRECTORS REPORT TO THE SHAREHOLDERS Dear Shareholders, We are pleased to present the 57 th Annual Report together with the Audited Accounts of your Company for the financial year ended 31 st March, MACRO-ECONOMIC SCENARIO During the calendar year 2013, India s GDP growth slipped to the decade s low of 4.4%. Inflation and interest rates remained at high levels, hampering consumption demand and investments. During past few months, India has taken substantive measures to narrow fiscal imbalances, to tighten monetary policy and to move forward on structural reforms. The pick-up in exports in recent months and measures to curb gold imports have contributed to lowering the current account deficit. In the calendar year 2014, as projected by IMF, India s GDP growth is expected to improve to 5.4%. A stable government, strong global growth, improved export competitiveness and implementation of recently approved investment projects are expected to be the key contributing factors. CONSOLIDATED FINANCIAL PERFORMANCE Your Company has posted strong earnings growth and is competitively well positioned in most of its businesses. Consolidated revenue grew by 2% to ` 25,893 Crore. EBITDA surged by 19% to ` 4,937 Crore. Net Profit before one-off items rose by 16% to ` 1,226 Crore. Fashion & Lifestyle and Telecom businesses were the major contributors. Key highlights : a) Funds under the management of Aditya Birla Financial Services grew year on year by 14% to reach ` 122,362 Crore. Lending book in the NBFC business expanded to ` 11,550 Crore, registering a growth of 44%. While profitability in the Life Insurance business remained subdued, Asset management and NBFC businesses contributed to the bottom-line. ROACE remained strong at 25% per annum. b) Fashion & Lifestyle business launched new stores at the run rate of one store per day to expand its retail presence to 1,750 exclusive brand outlets / stores spanning across 4.3 million square feet. Jaya Shree Textiles expanded its linen capacities to tap the sector growth while Pantaloons remained in the investment phase. The business has posted a sound ROACE at 28% per annum. c) For over 5 years now, Idea Cellular has remained the biggest revenue market share gainer in India. Led by earnings growth and healthy cash profits, its balance sheet stands strong and ROACE stands improved to 12% per annum. d) In the manufacturing businesses, Rayon business posted its highest ever profitability. While Agri business was impacted by the 41 days maintenance shutdown in the urea plant, profitability in the Insulators business improved. The urea plant resumed full operations from 8 th April, STANDALONE FINANCIAL PERFORMANCE Your Company s standalone revenue de-grew by 18% to ` 8,020 Crore on account of the divestment of the Carbon Black business and discontinuance of trading in imported P&K fertilisers. EBITDA is up by 12% to ` 1,246 Crore. Fashion & Lifestyle and the Rayon businesses were the largest contributors. Profitability in the Agri business was impacted due to the shutdown. The dividend income from Birla Sun Life Insurance and Idea Cellular also added to the bottom-line. Net profit surged by 59% from ` 423 Crore to ` 674 Crore. NEW INTIATIVES/MAJOR ACTIVITIES Divestment of Carbon Black and IT-ITeS businesses To ensure greater focus in its core businesses, your Company has divested its Carbon Black business with effect from 1 st April, 2013 and its holding in IT-ITeS business with effect from 9 th May, The divestment proceeds have been and will be utilised to support the balance sheet and the growth plans of your Company. Linen Capacity Expansion To tap sector growth and strengthen its market leadership in the linen segment, Jaya Shree Textiles has expanded its linen yarn capacity from 2,300 to 3,400 tons per annum and linen fabric processing capacity from 7.3 to 10.1 million metres per annum. Capital Infusion The shareholders, at their meeting held on 25 th April, 2012, approved the issue of DIRECTORS REPORT Annual Report

76 DIRECTORS REPORT TO THE SHAREHOLDERS Aditya Birla Nuvo Limited 16,500,000 warrants to the Promoters/ Promoter Group in accordance with the SEBI Guidelines for an aggregate sum of about ` 1,500 Crore. A sum of ` 376 Crore was received as 25% application money in May 2012, on allotment of the aforesaid warrants. In March 2013, a sum of ` 456 Crore was received, being 75% amount FINANCIAL PERFORMANCE payable on the conversion of 6,680,000 warrants into equal number of equity shares. In November 2013, Promoters further infused a sum of ` 671 Crore on conversion of the remaining 9,820,000 warrants. The capital infusion has not only strengthened the financial position of the Company but has also supported its growth plans. (` in Crore) DIRECTORS REPORT Consolidated Standalone Profit Before Depreciation / Amortisation, Interest and Tax 4, , , , Depreciation and Amortisation Expenses 1, , Finance Costs 1, , Profit Before Exceptional Items and Tax 1, , Exceptional Items Profit Before Tax 1, , Tax Expenses Net Profit Before Minority Interest 1, , Minority Interest Profit for the Year 1, , Opening Balance as per last audited financial statement (298.69) Amount Transferred on Stake Change/ Amalgamation of Subsidiaries/Joint venture (0.76) (0.44) Demerger Expenses (8.98) Minority Interest Adjustment of Demerger Expenses 4.48 Profit available for Appropriation 1, Appropriations : Debenture Redemption Reserve Special Reserve General Reserve Corporate Tax on Interim Dividend Proposed Dividend on Preference Share Proposed Dividend on Equity Share Equity Dividend relating to Previous period Corporate Tax on Proposed Dividend Closing Balance of Surplus in the Statement of Profit & Loss Annual Report

77 Aditya Birla Nuvo Limited DIRECTORS REPORT TO THE SHAREHOLDERS DIVIDEND For the financial year ended on 31 st March, 2014, the Directors of your Company recommend for your consideration a dividend of: i. ` 7.00 per Equity Share of ` 10/- each (last year ` 6.50 per Equity Share); and ii. ` 6.00 per Preference Share of ` 100/- each (last year ` 6.00 per Preference Share). The said dividend, if approved by the shareholders, would involve cash outflow of ` Crore (including dividend distribution tax of ` 6.67 Crore) compared to ` Crore (including dividend distribution tax of ` NIL) paid for the year FINANCE During the year , your Company, Raised long-term loans, aggregating to ` 59 Crore by way of Rupee Term Loan and ` 200 Crore by way of issue of Non- Convertible Debentures (NCDs); Repaid term loans (including foreign currency borrowings) aggregating to ` Crore and NCDs of ` 200 Crore; and Refinanced foreign currency borrowings aggregating to ` Crore to get the benefit of lower interest cost. HUMAN RESOURCES Your Company strives to foster a culture for high performance. Ongoing learning, aligning HR systems in line with global bench-marks, aligning rewards and recognitions with performance have enabled your Company to sustain its reputation of being a meritocratic organization. The Group s Corporate Human Resources function continues to play an integral role in the Company s talent management programme. CORPORATE GOVERNANCE Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by the Securities and Exchange Board of India (SEBI) and has complied with all mandatory provisions of Clause 49 of the Listing Agreement with the Stock Exchanges. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. Statutory Auditors Certificate confirming compliance with Clause 49 of the Listing Agreement is annexed (Annexure A) and forms part of the Directors Report. BUSINESS RESPONSIBILITY REPORT SEBI, vide its circular CIR/CFD/DIL/8/2012 dated 13 th August, 2012, has mandated inclusion of Business Responsibility Report (BRR) as part of the Annual Report for certain listed entities describing the initiatives taken by the company from Environmental, Social and Governance perspective. BRR is attached and forms part of the Annual Report. DIRECTORS RESPONSIBILITY STATEMENT As required under section 217(2AA) of the Companies Act, 1956, the Directors confirm that: i) in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures if any; ii) 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 at the end of the financial year and of the profit of the Company for that period; iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and iv) the Directors have prepared the Annual Accounts on a going concern basis. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL RESULTS During the year, following changes have taken place in the Subsidiary Companies: In the previous year ended 31 st March, 2013, pursuant to the Scheme of Arrangement ('the Scheme') under sections 391 to 394 of the Companies Act, 1956, the fashion retail business called the 'Pantaloons Format' of Pantaloon Retail (India) Limited (PRIL) has been transferred by way of demerger to Pantaloons Fashion & Retail Limited (PFRL) on a going concern basis w.e.f. 8 th April, The Scheme was operative from the Appointed Date, DIRECTORS REPORT Annual Report

78 DIRECTORS REPORT TO THE SHAREHOLDERS Aditya Birla Nuvo Limited DIRECTORS REPORT i.e. 1 st July, Post demerger, the holding of your Company, through its wholly owned subsidiary Indigold Trade and Services Ltd. (ITSL) in PFRL became 50.09% Post - implementation of the Scheme, ITSL has made an Open Offer to the public shareholders of PFRL at a price of ` 175/- per share and acquired additional 17.87% of the issued and paid up capital of PFRL. As a result of this, your Company's holding through ITSL in PFRL increased to 67.95%. ABNL IT & ITES Limited, a wholly owned Subsidiary of the Company, on receipt of requisite consents and approvals has divested its IT & ITeS business to a group of financial investors led by CX Partners and Capital Square Partners. As a result of the above divestment, Aditya Birla Minacs Worldwide Limited and its subsidiaries ceased to be subsidiaries of the Company with effect from 9 th May, Further, Aditya Birla Minacs BPO Pvt. Limited has become a direct subsidiary of ABNL IT & ITES Limited. Consolidated Financial Statements, pursuant to Clause 41 of the Listing Agreement, entered into with the Stock Exchanges and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, are attached for your reference. In line with the General Exemption granted by Ministry of Corporate Affairs vide, Circular 2/2011 dated 8 th February, 2011, from attaching the Balance Sheet of subsidiaries subject to certain conditions, the Balance Sheet, the Statement of Profit and Loss, Report of the Board of Directors and Report of the Auditors of the subsidiary companies have not been attached to the Balance Sheet of the Company as at 31 st March, The annual accounts of the subsidiary companies and the related detailed information are available to shareholders. The annual accounts of the subsidiary companies are kept open for inspection by any shareholder, at the Registered Office of the Company and of the concerned subsidiary companies. Any shareholder, who desires to obtain a copy of the said documents of any of the subsidiary companies, may send a request in writing to the Company Secretary at the Registered Office of the Company so that the needful can be done. EMPLOYEE STOCK OPTION SCHEMES 2006 & 2013 (ESOS 2006 & ESOS 2013) At the Annual General Meeting of the Company held on 6 th September, 2013, the shareholders of your Company approved the formulation of ESOS Details of the Stock Options issued under ESOS 2006 & ESOS 2013, up to 31 st March, 2014, and the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure B to this Report. A certificate from the Auditors of the Company, confirming that the ESOS 2006 & ESOS 2013 have been implemented in accordance with the SEBI Guidelines and the resolutions passed by the shareholders shall be placed at the Annual General Meeting, for inspection by members. PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956 Information relating to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required under Section 217(1)(e) of the Companies Act, 1956, is set out in a separate statement attached to this Report (Annexure C) and forms part of it. In accordance with the provisions of Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are to be set out in the Directors Report, as an addendum thereto. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and accounts as therein set out, are being sent to all shareholders of the Company excluding the aforesaid information about the employees. Any member, who is interested in obtaining such particulars about employees, may write to the Company Secretary at the Registered Office of your Company. DIRECTORS During the financial year 2014, there were no changes in directorship of your Company. Pursuant to the provisions of Section 149 of the Companies Act 2013 read with revised Clause 49 of the Listing Agreement (w.e.f. from 58 Annual Report

79 Aditya Birla Nuvo Limited DIRECTORS REPORT TO THE SHAREHOLDERS 1 st October, 2014) the Directors, have subject to the approval of shareholders, appointed Ms. Tarjani Vakil, Mr. P. Murari, Mr. B. R. Gupta, Mr. S. C. Bhargava and Mr. G. P. Gupta as Independent Directors. Your Company has received declarations from the Independent Directors confirming that they meet the criteria of independence as prescribed under section 149(6) of the Companies Act, 2013 and under Clause 49 of the Listing Agreement. In accordance with the provisions of section 149(4), section 160 and proviso to section 152(5) of the Companies Act, 2013, these Directors are being appointed as Independent Directors to hold office as per their tenure of appointment mentioned in the Notice of the ensuing Annual General Meeting of the Company. Your Directors commend the resolutions for your approval. The shareholders at the AGM held on 10 th July, 2009 had appointed Dr. Rakesh Jain as the Managing Director of the Company, w.e.f 1 st July, 2009 for a period of 5 years ending on 30 th June, Due to his personal commitments, Dr. Jain has requested the Board to relieve him from the office of Managing Director as well as Director of the Company, effective from the close of business hours on 30 th June, 2014 when his current term as Managing Director of the Company expires. Based on the recommendations of the Nomination and Remuneration Committee, the Board accepted the request of Dr. Jain to relieve him from the office of Managing Director as well as the Director of the Company, effective from close of business hours on 30 th June, The Directors have placed on record its deep appreciation for the valuable services rendered by Dr. Rakesh Jain during his association with the Company. Subject to the approval of the shareholders, Mr. Lalit Naik, the Deputy Managing Director of the Company has been appointed as the Managing Director, w.e.f. 1 st July, The resolution, seeking Mr. Lalit Naik s appointment has been included in the Notice of the ensuing Annual General Meeting together with his brief details. Your Directors commend the resolution for your approval. In order to comply with the provisions of the Companies Act, 2013, read with rules framed thereunder, it was proposed to make the term of each of the Executive Directors of the Company, liable to retire by rotation. Mr. Sushil Agarwal was appointed as the Wholetime Director of the Company at the Annual General Meeting of the Company held on 28 th September, 2011 and was not liable to retire by rotation. As authorised by the shareholders at the aforesaid Annual General Meeting, the Board of Directors approved partial modification in the terms of appointment of Mr. Sushil Agarwal to include him in the directors liable to retire by rotation. Since, the term of appointment of Mr. Sushil Agarwal has been amended to make it liable to retire by rotation, the resolution seeking Mr. Sushil Agarwal s appointment together with his brief details have been included in the Notice of the ensuing Annual General Meeting. Your Directors commend the resolution for your approval. Mrs. Rajashree Birla and Mr. B. L. Shah, Directors of your Company retire from the office by rotation and, being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting. Resolutions seeking their appointment together with their brief profile have been included in the Notice of ensuing Annual General Meeting. Your Directors commend the resolutions for your approval. AWARDS AND RECOGNITION Your Company has been the proud recipient of the following awards and recognitions: INDIAN RAYON DIVISION i) 3 rd Annual Greentech CSR Award-2013 in Chemical Sector, awarded by Greentech Foundation, New Delhi. JAYA SHREE TEXTILES DIVISION i) Performance Excellence Trophy IMC Ramkrishna Bajaj National Quality Award ii) Trophy for significant improvement in productivity CII Eastern Region Productivity Awards iii) Bronze Award in the Chairman s WCM Awards 2013 in the Business Category. MADURA FASHION AND LIFESTYLE Peter England: i) India s Second Most Trusted Brand Brand Equity Study ( ). ii) Most Desired Fashion Concept for PE-Oxygeans. iii) Best Store Front & Best Signage Retail Design Awards DIRECTORS REPORT Annual Report

80 DIRECTORS REPORT TO THE SHAREHOLDERS Aditya Birla Nuvo Limited DIRECTORS REPORT Louis Philippe: i) Best Apparel Brand Textile Ministry. ii) Champion CRM Program of the Year Loyalty Summit Van Heusen: i) Most Popular Youth Brand Women s formal wear Award, from Youth Marketing Forum. Allen Solley: i) Best Window Display 2013 VMRD Awards. ii) Best Formal Brand North East Consumer Forum. Planet Fashion: i) Awarded certificate for entering top 100 ranks for franchisee opportunities for the year ADITYA BIRLA INSULATORS RISHRA DIVISION i) Valued Customer Award by CPRI in Testing and Certification category. ii) Special Export Award by CAPEXIL in Export category. AUDITORS M/s. Khimji Kunverji & Co., Joint Statutory Auditor of the Company, retire and, being eligible, offer themselves for appointment, to hold office from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting. S. R. Batliboi & Co. LLP, Joint Statutory Auditor of the Company have expressed their unwillingness to continue as the Joint Statutory Auditors of the Company and Branch Auditors of Indo Gulf Fertiliser Division at Jagdishpur and Jaya Shree Textiles Division at Rishra, upon the conclusion of the ensuing Annual General Meeting. S R B C & Co. LLP have expressed their willingness to be appointed as Joint Statutory Auditors of the Company and Branch Auditors as aforesaid at the ensuing Annual General Meeting of the Company, to hold office till the conclusion of the next Annual General Meeting. A special notice has been received from a member holding five lakh shares in accordance with provisions of Section 140(4)(i) of the Companies Act, 2013 proposing appointment of S R B C & Co. LLP, as the Joint Statutory Auditors of the Company and Branch Auditors as aforesaid. Your Directors recommend the appointment of the Auditors as set out in the accompanying Notice of the Annual General Meeting. A Certificate from them confirming compliance of Section 115 of the Companies Act, 2013, has also been received by the Company. The observations made in the Auditors Report are self-explanatory and, therefore, do not call for any further comments under Section 217(3) of the Companies Act, COST AUDITORS The Company has appointed the following Cost Auditors for conducting the audit of cost records of the Company for the financial year : i) For Indian Rayon, Veraval - VFY & Chemicals - M/s. Ashwin Solanki & Associates iii) For Jaya Shree Textiles, Rishra - Textiles M/s. R. Chakraborty & Co. iv. For Indo Gulf Fertilisers, Jagdishpur - Fertilisers & Chemicals - M/s. K. G. Goyal & Associates v) For Madura Fashion and Life Style, Bengaluru - Ready Made Garments - M/s. G. N. V. & Associates vi) For Insulators - Halol & Rishra - Insulators - M/s. S. S. Puranik & Associates The Audit Committee has received a Certificate from the Cost Auditors certifying their independence and arm's length relationship with your Company. In accordance with the Company's (Cost Audit Report) Rules, 2011, the due date for filing the Cost Audit Report in XBRL for the financial year ended 31 st March, 2013 was 30 th September, 2013 and the same was filed before the due date. APPRECIATION Directors take this opportunity to express their sincere appreciation for the excellent support and co-operation extended by the shareholders, customers, suppliers, bankers and other business associates. The Directors gratefully acknowledge the ongoing co-operation and support provided by Central and State Governments and all Regulatory bodies. The Directors place on record their deep appreciation for the exemplary contribution made by employees at all levels, their dedicated efforts and enthusiasm has been pivotal to the Company s growth. For and on behalf of the Board Mumbai Kumar Mangalam Birla 26 th June, 2014 Chairman 60 Annual Report

81 Aditya Birla Nuvo Limited DIRECTORS REPORT ANNEXURE A Auditor's Certificate on Corporate Governance To The Members of Aditya Birla Nuvo Limited 1. We have examined the compliance of conditions of Corporate Governance by Aditya Birla Nuvo Limited ('the Company'), for the year ended on 31 st March, 2014, as stipulated in Clause 49 of the Listing Agreement of the Company with Stock Exchanges. 2. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. 3. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. 4. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company. For and on behalf of Khimji Kunverji & Co. Firm Registration Number: W Chartered Accountants For and on behalf of S. R. Batliboi & Co. LLP Firm Registration Number: E Chartered Accountants DIRECTORS REPORT Per Shivji K. Vikamsey Per Vijay Maniar Partner Partner Membership No Membership No Mumbai Mumbai Date: 26 th June, 2014 Date: 26 th June, 2014 Annual Report

82 DIRECTORS' REPORT - ANNEXURE 'B' Aditya Birla Nuvo Limited DIRECTORS REPORT Disclosure pursuant to the provisions of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOS ESOS Particulars Details of Employee Stock Options as on March 31, 2014 Details of Employee Stock Options as on Details of Restricted Stock Units as on March 31, 2014 March 31, 2014 Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5 Tranche 1 Tranche 2 Tranche 1 Tranche 2 (23 rd August, 2007) (25 th January, 2008) (20 th August, 2010) (8 th September, 2010) (7 th June, 2011) (7 th December, 2013) (29 th January, 2014) (7 th December, 2013) (29 th January, 2014) a) Number of Stock Options Granted 163, ,093 17,174 11,952 3, ,272 16, ,731 9,567 b) The Pricing Formula c) Options Vested 120,111 54,355 10,859 8,963 1,685 NIL NIL NIL NIL d) Options Exercised 57,150 11,692 4,799 NIL NIL NIL NIL NIL NIL e) The total number of shares arising as a result of exercise of options 57,150 11,692 4,799 NIL NIL NIL NIL NIL NIL f) Options forfieted/cancelled/lapsed 57, ,738 3,033 NIL NIL NIL NIL NIL NIL g) Variation in terms of options NIL NIL NIL NIL NIL NIL NIL NIL NIL h) Money raised by exercise of options 39,262,050 8,032,404 3,296,913 NIL NIL NIL NIL NIL NIL i) Total number of options in force 48,908 42,663 9,342 11,952 3, ,272 16, ,731 9,567 j) Employee-wise details of options granted The exercise price was the last market price on a day prior to the date of grant and discounting it by 8.5%. In accordance with the approval of the Boards of Directors and the Shareholders of the Company, the ESOS Compensation Committee had re-priced the options from ` 1,180 to ` 687/- per option on 20th August, The exercise price was the closing market price on a day prior to the date of grant. In accordance with the approval of the Board of Directors and the Shareholders of the Company, the ESOS Compensation Committee had re-priced the options from ` 1,802/- to ` 687/- per option on 20th August, 2010 The exercise price was determined by averaging the closing price of the Company s equity shares, for the immediately preceding 7 days from the date of issue, and discounting it by 15%. Exercise Price: ` 687/- per option. The exercise price was determined by averaging the closing price of the Company s equity shares, for the immediately preceding 7 days from the date of issue and discounting it by 15%. Exercise Price: ` 697/- per option. The exercise price was determined by averaging the closing price of the Company s equity shares, for the immediately preceding 7 days from the date of issue and discounting it by 15%. Exercise Price: ` 748/- per option The exercise price was the closing market price of the equity shares of the company a day prior to the date of grant.(on 6th Dec, 13) at N.S.E. being ` per share. The exercise price was the closing market price of the equity shares of the company a day prior to the date of grant. (on 28th Jan, 14) at N.S.E. being ` per share. RSUs be granted at an exercise price of ` 10/- each (i.e. at the face value of the Equity Shares of the Company on the date of Grant of RSUs). RSUs be granted at an exercise price of ` 10/- each (i.e. at the face value of the Equity Shares of the Company on the date of Grant of RSUs). i) Senior Managerial Personnel Mr. K.K. Maheshwari*: Mr. Vikram Rao*: NIL Dr. Rakesh Jain: NIL Mr. Sushil Agarwal : NIL Mr. Sushil Agarwal : Dr. Bir Kapoor : 20,200 43,400 6,730 26,230 9,443 1,790 Dr. Bharat K. Singh*: Mr. K.K. Maheshwari*: Mr. Sushil Agarwal: Dr. Rakesh Jain : Dr. Rakesh Jain : 20,200 43,400 5,222 52,459 18,887 Mr. Adesh Gupta*: Mr. Raj Narayanan : Mr. Pranab Barua : 8,420 10,944 16,997 Mr. Vikram Rao*: Mr. Ashish Dikshit : 20,200 7,012 Dr. Rakesh Jain: 13,470 Mr. Sushil Agarwal: 4,040 ii) Any other employee who received a grant NIL Mr. Ashish Dikshit Mr. Rahul Mohnot* NIL Dr. Bir Kapoor: NIL Mr. Shriram Jagetiya : NIL Mr. Shriram Jagetiya : in any one year of option amounting to 5% or 23,861 4,044 3,370 3,460 1,247 more of options granted during that year. Mr. Vishak Kumar* Mr. J. C. Laddha* Mr. Rajesh Shah : Mr. Rajesh Shah : 17,354 5,050 2,883 1,039 Mr. Satyajit R. Mr. Rahul Kohli* Ms. Meena Jagtiyani : Ms. Meena Jagtiyani : 17,354 4,040 6,226 2,243 Mr. Shital Mehta* Mr. Surendra Goyal* Mr. V. Venkatesan : Mr. V. Venkatesan : 17,354 4,040 1, Mr. Jasvinder Kataria : Mr. Jasvinder Kataria 1, Mr. Shashank Pareek : 642 Mr. Yogendra Raghuvanshi : 642 Mr. Shailendra Pandey : Annual Report

83 Aditya Birla Nuvo Limited DIRECTORS' REPORT - ANNEXURE 'B' Disclosure pursuant to the provisions of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOS ESOS Particulars Details of Employee Stock Options Details of Employee Stock Options Details of Restricted Stock Units as on March 31, 2014 as on March 31, 2014 as on March 31, 2014 Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5 Tranche 1 Tranche 2 Tranche 1 Tranche 2 (23 rd August, 2007) (25 th January, 2008) (20 th August, 2010) (8 th September, 2010) (7 th June, 2011) (7 th December, 2013) (29 th January, 2014) (7 th December, 2013) (29 th January, 2014) iii) Identified employees who were granted options Nil Nil Nil Nil Nil NIL NIL NIL NIL during any one year, equal to or exceeding 1% of the issued capital (excludind outstanding warrents and conversions) of the Company at the time of grant. k) (i) Weighted-average exercise prices and weightedaverage fair values of options whose exercise NA NA price equals the market price of the stock. (ii) Weighted-average exercise prices and weighted- Weighted-average Weighted-average Weighted-average Weighted-average Weighted-average Weighted-average Weighted-average Weighted-average Weighted-average average fair values of options whose exercise exercise price: ` 687/- exercise price: ` 687/- exercise price: ` 687/- exercise price: ` 697/- exercise price: ` 748/- exercise price: ` 1, exercise price: ` 1, exercise price: ` 10 exercise price: ` 10 price is less than the market price of the stock. Weighted-average fair Weighted-average fair Weighted-average fair Weighted-average fair Weighted-average fair Weighted-average fair Weighted-average fair Weighted-average fair Weighted-average fair value of options: value of options: value of options: value of options: value of options: value of options : value of options : value of RSUs : value of RSUs : ` ` ` ` ` ` ` ` 1, ` 1, (iii) Weighted-average exercise prices and weightedaverage fair values of options whose exercise NA NA price exceeds the market price of the stock. l) A description of the method and significant assumptions used during the year to estimate the fair Black - Scholes Merton Formula Black - Scholes Merton Formula values of options, including On the Date of Grant (i) Risk-Free Interest Rate (%) (ii) Expected Life (No. of Years) (iii) Expected Volatility (%) (iv) Dividend Yield (%) (v) The Price of the underlying share in market 1, , , , , , at the time of grant of options/rsus (`) On the Date of Re-pricing (i) Risk-Free Interest Rate (%) (ii) Expected Life (No. of Years) (iii) Expected Volatility (%) (iv) Dividend Yield (%) (v) The Price of the underlying share in market at the time of Re-pricing of options (`) * Ceased to be in employment of the Company Diluted earnings per share ` Differences between the employee compensation cost, computed using intrinsic value of the stock options, and the employee compensation cost that shall have been recognized if the fair value of the options was used. ` 1.78 Crore The impact of this difference on profits and on EPS of the Company. The effect of adopting the fair value on the net income and earnings per share for is as presented below: Particulars (` in Crs) Net Profit after Tax but before exceptional items Add: Compensation cost as per Intrinsic Value 1.49 Less: Compensation cost as per Fair Value 3.27 Adjusted Net Income Earning per Share (`) Basic Diluted As reported As adjusted DIRECTORS REPORT Annual Report

84 DIRECTORS REPORT ANNEXURE C Aditya Birla Nuvo Limited Information under section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31 st March, DIRECTORS REPORT A. CONSERVATION OF ENERGY a) Energy conservation measures taken : In line with the Company s declared commitment towards conservation of natural resources, all business divisions have continued with their efforts to improve energy usage efficiencies. The Company is engaged in the continuous process of energy conservation through improved operational and maintenance practices. Steps taken by various divisions of the Company in this direction are as under:- i) Rayon Division Reduced power consumption by doing Liquid chlorine filling in tonners through pump instead of Padding Air Pressure. Reduced power consumption by eliminating operation of Hypo Circulation pump. Reduced power consumption by eliminating Rectifier Pit Pump after replacement of conventional type Heat Exchangers by double tube heat exchanger. Reduced power consumption by providing VFD in Cooling Tower Fans of Cooling Tower 3 for Rectifier & VAM. Installation of plant condensate recovery system for water conservation. Replacement of HPMV lightings with LED type fixtures. Replacement of old induction motors with energy efficient motors. ii) Insulator Divisions Installation of waste heat recovery system (recuperator) in kiln k-2 for waste heat recovery which reduces the fuel consumption. Application of low density insulating motar on k-7 roof which arrest heat loss resulting in low fuel consumption. Optimized humidifier running by controlling its maximum speed through variable frequency drive. Administration block lighting voltage controlled through lighting transformer. Elimination of Compressed air in wiping section of Head Glazing Machine. iii) Fertilisers Division Replacement of 250 watt HPSV Street lights in plant area with 90 watt LED Light fittings. Replacement of 2 x 40 watt tube light fittings with 30 watt LED lights and of 250 watt HPSV lamps with 90 watt LED light in Township. Replacement of existing HT motor of Clear water pump in Sapthin plant by energy efficient LT motor. Recovery of MEA solution from reclaimer waste in CDR Plant. Replacement of 5 Nos. of Geyser with Solar Water Heater for Central Canteen. b) Additional Investments & Proposals, if any, being implemented for reduction of consumption of Energy. i) Rayon Division Conversion of Electrolyzer-D (Gen-IV) to Latest Generation Vb (39 KWH/T). Recoating & remembraning of elements removed from Electrolyzer-D & place on 2 nd Generation Electrolyzer-B. Remembraning of Electrolyzer-G (6 KWH/T). ii) Insulator Divisions Installation of recuperator in k-3, k-4, k-5, k-6 & five thermo pack. VFD for submersible pumps. Replacement of 2X40 watt tube lights with 20 watt LED Light fittings. iii) Fertilisers Division Replacement of 250 watt HPSV lights with 90 watt LED Light 64 Annual Report

85 Aditya Birla Nuvo Limited DIRECTORS REPORT ANNEXURE C fittings in Plant area. Replacement of 2X40 watt tube lights with 20 watt LED Light fittings in Plant area. Replacement of 250 watt Flood Light Fittings with LED Flood Light Fittings of 90 watt in township and farm house. Installation of Power Factor improvement panel at 11KV substation of UPPCL power supply. iv) Textile Division Installation of LED (15 watt) tubelight in place of conventional 36 watt tube-light. Replacement of 130 TR AC Plant as 1 kw/tr is high as 0.95 against Replacement of Transformer of 10MVA, 132/33 KV due to low efficiency. Percentage of Unburnt coal reduced from 12% to 5%. c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods: The energy conservation measures taken in Rayon Division have resulted/will result in energy saving and consequent decrease in the cost of production. Energy conservation measures taken so far have resulted in reducing the energy consumption in the Insulator Divisions. Besides this, Energy conservation leads to reduction in consumption of fossil fuel (natural gas / naphtha) and consequential reduction in CO 2 gas emission, a green house gas, thus abating global warming. Energy conservation measures taken in Fertilisers Division have resulted in reducing the energy consumption in the fertilizer complex. Besides this, energy conservation leads to reduction in consumption of fossil fuel (natural gas / naphtha) and consequential reduction in CO 2 gas emission, a green house gas, thus abating global warming. d) Total Energy Consumption and Energy Consumption per Unit of Production as per prescribed Form A (Schedule A) As per Annexure attached. B. TECHNOLOGY ABSORPTION Efforts made in Technology Absorption as per Form B given below : Form B 1. RESEARCH AND DEVELOPMENT (R & D) a) Specific areas in which R & D carried out by the Company. i) Rayon Division Developed product variants like 180/107, 160/80, 50/6, 600/10, 450/150, 600/150 etc. Yarn range like 50/24 and 60/24 in Super fine deniers developed in PSY. Coarser denier with low dpf (denier per filament) produced to enhance silky feel of yarn. Successfully implemented low temperature drying. Benchmarking studies carried out with competitors to identify the improvement areas. Process trials carried out to optimize spinning machine configuration for various deniers. ii) Insulator Divisions The thrust areas for R&D in the Insulators Divisions are in process improvement, formulation optimization and new product development. iii) Fertilisers Division The thrust areas for R&D in the Fertilisers Division are in new product and process improvement. The specific areas are development of process and product for customized fertilizers and specialty fertilizers as per FCO order. b) Benefits derived as a result of the above R & D. i) Rayon Division The research and development activities carried out in Rayon Division have resulted in: Improvement in process and productive capacity. Better quality and marketability of products. DIRECTORS REPORT Annual Report

86 DIRECTORS REPORT ANNEXURE C Aditya Birla Nuvo Limited DIRECTORS REPORT Development of new range of products. Value addition in the existing products. Enhancement of product range. Development of eco friendly products and reduction of cost of production. The research and development activity carried out in Insulator Divisions has resulted in optimizing all the resources and leading to:- Reduction of Metal Caps weight through redesigning; Introduction of New Products like HVDC Insulators; Small Level Automation and Process Modification. The research and development activities carried out in Fertilisers Division have resulted in: Production of value added product Neem Coated Urea for the farmers under the brand name KRISHIDEV. Customised Fertiliser was successfully launched in various districts of U.P. The usage by farmers in these districts showed an improvement in yield for paddy and wheat by an average of 12-15% and for cash crops such as potato and sugarcane by 20%. c) Future Plan of Action i) Rayon Division Introducing our yarn in new segments and markets. Development of specialty yarn namely fancy yarns, yarn with fragrance, Antimicrobial yarn etc. Enhance colour yarn quality. Improvement in intrinsic quality of yarn. New application development to introduce VFY in knit domestic market. Efforts towards reduction in energy consumption. ii) Insulator Divisions Development of Indian blended clay. High speed mixing process using new technology. Development of fast curing cement to reduce assembly cycle time. Development of 420 KN HVDC product range. iii) Fertiliser Division Technology for the manufacture of specialty fertilizers such as Bentonite Sulphur, Water Soluble Fertilizer and Soil adjuvant such as Zyme has been developed. Commercial production of these products has also been successful and plans to launch these products in Applied for approval of seeding Customised Fertilisers for Bengal, Punjab and Haryana from Jagdishpur. Soil analysis and formulation development work has been initiated for the above states, and various formulation studies are currently in progress in their respective state agricultural department. d) Expenditure on Research and Development Particulars ` (in Lakhs) Capital Expenses Nil Recurring Expenses Total Total R&D Expenditure as a percentage of Total Revenue 0.09% 2. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION a) Efforts in brief, made towards technology absorption, adaptation and innovation i) Rayon Division ENKA plant successfully commissioned; Various other initiatives taken viz.: a) Commissioning of CSY machines - "Refurbished" inhouse; 66 Annual Report

87 Aditya Birla Nuvo Limited DIRECTORS REPORT ANNEXURE C ii) b) Installation of Beam sizing; c) Installation of Mist condensers in spin bath area; d) Recycling of yarn wash water in after treatment department for reducing water consumption; e) Installed linear speed SSM make winding machine in Textile department for uniform winding tension and pressure; f) Twisters developed for SSY spool unwinding. Development of new shades for customers in premium segment. Trials carried out with various pulp blends in viscose pilot plant for optimizing yarn properties. Joint projects with customers carried out for yarn dyeing. Insulator Divisions Ongoing efforts are made with technology suppliers and technological institutes etc. for exploring the possibility of recovering low grade heat. This would lead to reduction in energy consumption and consequently reduction in CO 2 gas emissions, a green house gas, thus abating global warming. The high speed mixing technology for dough making has been designed to reduce process variations. This will deliver uniform mix of ingredients and moisture distributions across and between batches and will eliminate process steps such as ball milling, blunging, ratio mixing, filter pressing with reduced energy consumption. iii) Fertilisers Division Continuous efforts are made to prepare steam, power and material balances and to check on the actual performance against design. These measures have helped in increasing the productivity and reduction in overall energy consumption. Efforts are being made along with technology suppliers and technological institutes etc. for exploring the possibility of recovering low grade heat. This would lead to reduction in energy consumption and consequently reduction in CO 2 gas emissions, a green house gas, thus abating global warming. The CF production facility has been designed to produce multiple specialty fertilizer products ranging from CF to specialty products such as Water Soluble Fertilizers. Bentonite Sulphur and Organic Fertilizer blends. This is a significant technological innovation achievement as there are separate technologies and plants for the same. Continuous efforts are made to carry out formulation improvements and customize the solution to the farmer based on farmer assessment and feedback in each district. b) Benefits derived as a result of the above efforts Quality improvement in existing range, development of new market segments, improvement in process, productivity and cost control, increase in customer base and yield, improvement in energy consumption and energy efficiency and reduction in input material consumption. c) Information regarding Technology imported during the last years Technology : Spool Spun yarn imported technology from ENKA, Germany. Has Technology been fully absorbed : Yes d) Foreign Exchange Earnings and Outgo The information on Foreign Exchange Earnings and outgo is contained in Notes to Accounts as Note Nos. 27, 28 and 31. DIRECTORS REPORT Annual Report

88 DIRECTORS REPORT ANNEXURE C Aditya Birla Nuvo Limited DIRECTORS REPORT Form-A Form for disclosure of particulars with respect to conservation of energy. (A) Power and Fuel Consumption: * Previous year figures now include Madura Fashion and Lifestyle Division Units Current Previous Year Year* 1 Electricity (A) Purchased - Units KWH in Lacs Total Amount ` in Lacs Rate per Unit ` (B) Own Generation (i) Through Diesel Generator - Units KWH in Lacs Unit per Ltr. of Diesel Oil Units/Ltr Cost Per Unit ` (ii) Through Steam Turbine/Generator - Units KWH in Lacs Unit per ton of steam coal Units/Tonne Cost Per Unit ` (iii) Through Gas Turbine MWH Natural Gas + Naphta KWH/MCAL Cost per unit `/KWH Coal (Grade B, C and D) (used in Boilers) Quantity Tonnes Total Cost ` in Lacs Average Rate ` per tonne Furnace Oil Quantity K.Ltrs Total Amount ` in Lacs Average Rate ` per K. Ltr SKO/CP/PX Slop Quantity K.Ltrs Total Amount ` in Lacs Average Rate ` per K. Ltr Natural Gas (includes NGAPM/JVPMT/RLNG/SPOT) Quantity Sm Total Amount ` in Lacs Average Rate `/1000 Sm LPG Quantity MT Total Amount ` in Lacs Average Rate `/MT (B) Consumption Per Unit of Production: 1 Electricity (KWH) Viscose Filament Rayon Yarn MT Other Yarns MT Caustic Soda MT Fabrics Mtr Carbon Black MT Urea MT Insulators MT Customised Fertilisers SM Coal (Grade B, C and D) Viscose Filament Rayon Yarn (MT) MT Other Yarns (Kg) KG Furnace Oil (Kilo Ltr.) Viscose Filament Rayon Yarn MT Other Yarns MT SKO /C9 /PX Slop (Kilo Ltr.) Insulators MT Natural Gas (SM3) Insulators MT Urea MT LPG Insulators MT Annual Report

89 Aditya Birla Nuvo Limited BUSINESS RESPONSIBILITY REPORT Section A: General Information about the Company 1. Corporate Identity Number (CIN) L17199GJ1956PLC of the Company 2. Name of the Company Aditya Birla Nuvo Limited 3. Registered Address Indian Rayon Compound, Veraval, Gujarat , India. 4. Website ID 6. Financial Year Reported 1 st April, 2013 to 31 st March, Sector(s) that the Company is Name of the Sector Code engaged in (industrial activity Rayon code-wise) Textiles 0105 Fertilisers (Agri Business) Urea Liquid Argon Liquid Anhydrous Ammonia Customized Fertilizers Organic Manure Insulators (Power & Energy) 8546 Garments (Fashion & Lifestyle) List three key products/services that (i) Agri Business (Fertiliser, Agro Chemicals and the Company manufactures/provides Seeds) (as in the Balance Sheet) (ii) Fashion and Lifestyle (Garments) (iii) Rayon Yarn 9. Total number of locations where i. Number of International Locations business activity is undertaken (Provide details of major 5): 1 by the Company ii. Number of National Locations: Markets Served by the Company Local State National International Section B: Financial Details of the Company 1. Paid-up Capital (INR) ` 13, lakhs 2. Total Turnover (INR) ` 8,02,035 lakhs 3. Total Profit After Tax (INR) ` 67,395 lakhs 4. Total Spending on Corporate Social The total spending on Corporate Social Responsibility (CSR) as percentage Responsibility (CSR) is 0.84% of the average of Profit After Tax (%) Net Profit of the Company for the previous three financial years. 5. List of Activities in which expenditure Education, Healthcare, Sustainable Livelihood, in 4 above has been incurred Women Empowerment, Social Causes and Infrastructure Development. BUSINESS RESPONSIBILITY REPORT Annual Report

90 BUSINESS RESPONSIBILITY REPORT Aditya Birla Nuvo Limited Section C: Other Details 1. Does the Company have any Subsidiary Company/Companies? Yes. BUSINESS RESPONSIBILITY REPORT 2. Do the Subsidiary Company/Companies participate in the BR Initiatives of the parent company? If yes, then indicate the number of such subsidiary company(s): The Business Responsibility initiatives of the Parent Company apply to its subsidiaries. The Company encourages its subsidiary companies to participate in the community projects/programmes carried out under the aegis of the Aditya Birla Centre for Community Initiatives and Rural Development. 3. Do any other entity/entities (e.g. suppliers, distributors etc.) that the Company does business with, participate in the BR initiatives of the Company? If yes, then indicate the percentage of such entity/entities? [Less than 30%, 30-60%, More than 60%]: The Company does not mandate its suppliers/distributors to participate in the Company s BR initiatives. However, they are encouraged to adopt such practices and follow the concept of being a responsible business. Section D: BR Information 1. Details of Director/Directors responsible for BR a) Details of the Director/Directors responsible for implementation of the BR Policy/Policies DIN Number : Mr. Lalit Naik Dr. Rakesh Jain Name : Mr. Lalit Naik (w.e.f. 1 st July, 2014) Dr. Rakesh Jain (up to 30 th June, 2014) Designation : Managing Director b) Details of the BR Head Sr. Particulars Details No. 1. DIN Number NA (if applicable) 2. Units Indian Rayon, Veraval Jaya Shree Textiles, Madura Fashion & Insulators (Halol and Rishra Lifestyle Rishra) & Fertilizers, Jagdishpur Name Mr. Bir Kapoor Mr. S. Krishnamoorthy Mr. Ashish Dikshit Mr. Raj Narayanan 3. Designation Unit Head 4. Telephone /2600 Fertilizer, Jagdishpurnumber /39 Insulator Halol Insulator Rishra ID bir.kapoor@ s.krishnamoorthy@ ashish.dikshit@madura. raj.narayanan@ adityabirla.com adityabirla.com adityabirla.com adityabirla.com 70 Annual Report

91 Aditya Birla Nuvo Limited BUSINESS RESPONSIBILITY REPORT 2. Principle-wise (as per NVGs) BR Policy/Policies (Reply in Y/N) The National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business released by the Ministry of Corporate Affairs has adopted in nine areas of Business Responsibility. These are as follows: P1 P2 P3 P4 P5 P6 P7 P8 P9 Businesses should conduct and govern themselves with Ethics, Transparency and Accountability. Businesses should provide goods and services that are safe and contribute to sustainability through their life cycle. Businesses should promote the wellbeing of all employees. Businesses should respect the interests of and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized. Businesses should respect and promote human rights. Businesses should respect, protect and make efforts to restore the environment. Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner. Businesses should support inclusive growth and equitable development. Businesses should engage with and provide value to their customers and consumers in a responsible manner. Sr.No. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9 1. Do you have policy/policies for Y Y Y Y Y Y Y Y Y 2. Has the policy been formulated in consultation with the relevant Y Y Y Y Y Y Y Y Y stakeholders? 3. Does the policy conform to any National/International Standards? If yes, specify? (50 Words). 4. Has the policy been approved by the Board? If yes, has it been signed by MD / Owner / CEO / Yes. Signed by the MD. Appropriate Board Director? 5. Does the Company have a specified Committee of the Board/Director/ Official to oversee the Y Y Y Y Y Y Y Y Y implementation of the policy? 6. Indicate the link for the policy to be viewed online? View restricted to employees. 7. Has the policy been formally communicated to all relevant The policies are communicated to key stakeholders. internal and external stakeholders? 8. Does the Company have in-house structure to implement the policy/ Y Y Y Y Y Y Y Y Y policies? 9. Does the Company have a grievance redressal mechanism related to the policy/policies to address Y Y Y Y Y Y Y Y Y stakeholders grievances related to the policy/policies? 10. Has the Company carried out independent audit/evaluation of the Y Y Y Y Y Y Y Y Y working of this policy by an internal Internal Auditors of the Company from time to or external agency? time review implementation of these Policies. BUSINESS RESPONSIBILITY REPORT Annual Report

92 BUSINESS RESPONSIBILITY REPORT Aditya Birla Nuvo Limited 2a. If answer to Sr. No.1 against any principle, is No, please explain why: (Tick up to 2 options) BUSINESS RESPONSIBILITY REPORT Sr.No. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9 1. The company has not understood the Principles 2. The company is not at a stage where it finds itself in a position to formulate and implement the policies on specified Principles 3. The company does not have financial or manpower resources available for the task 4. It is planned to be done within next 6 months 5. It is planned to be done within the next 1 year 6. Any other reason (please specify) 3. Governance related to BR Indicate the frequency with which the Board of Directors, Committee of the Board or CEO assess the BR performance of the Company. Within 3 months, 3-6 months, annually, more than 1 year. The Management of the Company periodically assesses the BR performance of the Company. Does the Company publish a BR or a Sustainability Report? What is the hyperlink for viewing this report? How frequently it is published? Business Responsibility Report, Social Report on Inclusive Growth and Synergizing Growth with Responsibility (Sustainable Development) are part of the Annual Report. It is published every year. It is also available on the Company s website or Section E: Principle wise performance Aditya Birla Nuvo Limited (ABNL) is a part of the Aditya Birla Group, which has long standing policies on various aspects of doing business and managing its external interface. Principle 1: Businesses should conduct and govern themselves with Ethics, Transparency and Accountability. 1. Does the policy relating to ethics, bribery and corruption cover only the Company? Not Applicable Yes/No. Does it extend to the Group / Joint Venture / Suppliers / Contractors / NGOs/ Others? The Company s governance structure guides the organization keeping in mind the core values of Integrity, Commitment, Passion, Seamlessness and Speed. The Corporate Principles and Code of Conduct cover the Company and all its Subsidiaries and are applicable to all the employees of the Company and its subsidiaries. 2. How many stakeholder complaints have been received in the past financial year and what percentage was satisfactorily resolved by the management? If so, provide details thereof in about 50 words or so. In the FY , total 9 complaints were received, out of which 8 were satisfactorily resolved. Details in respect of Investor s Complaint have been provided in the Shareholders Information section of the Annual Report. Principle 2: Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle. 1. List up to 3 of your products or services whose design has incorporated social or environmental concerns, risks and/or opportunities. The Company is a responsible corporate citizen and is committed to sustainable development and looks at ways to preserve the environment and manage resources 72 Annual Report

93 Aditya Birla Nuvo Limited BUSINESS RESPONSIBILITY REPORT responsibly. Being aware of its obligations relating to social and environmental concerns, and risks, the Company s Customized Fertilizers Plant is designed for zero effluent. At various stages, emission control measures have been incorporated to keep environmental emission below the environmental norms. i. Our products Woollen Yarn, Wool Tops, Linen Yarn and Linen Fabric are made of natural fibre. ii. Customized fertilizers have been launched to improve the nutrient level efficiency and reduce environmental losses. Indo Gulf Fertilizers Unit has developed and manufactured neem coated urea which promotes slow release of nitrogen and consequential reduction in emission of green house gases. iii. To stop accident due to speed or to avoid any environmental release in the atmosphere, Indian Rayon Unit has installed GPS (Global Positioning System) in the trucks carrying hazardous gases. 2. For each such product, provide following details in respect of resource use (energy, water, raw material, etc.) per unit of product (optional): (i) Reduction during sourcing/production/ distribution achieved since the previous year throughout the value chain? Indo Gulf Fertilizers Unit has taken several initiatives to reduce consumption of energy and water during its uses. It has inbuilt processes to treat process condensate generated in manufacturing and condensate generated is recycled / reused. Madura Fashion & Lifestyle Unit uses organic cotton which requires less water and energy in making of the product. Jaya Shree Textile Unit has reduced its coal consumption by 13% in last 5 years and 76% reduction in furnace oil consumption. (ii) Reduction during usage by consumers (energy, water) has been achieved since the previous year? Madura Fashion & Lifestyle Unit In case of Sun Clean Denim for AW 14, organic stains gets decomposed when exposed to sunlight. At Indo Gulf Fertilizers Unit, use of customised fertilizers, neem coated urea and Municipal Waste/city composts has improved agricultural productivity by 10-15%, improved organic content of soil resulting in better nutrient uptake and also helped in reduction of environment losses. 3. Does the company have procedures in place for sustainable sourcing (including transportation)? (i) If yes, what percentage of your inputs was sourced sustainably? Also provide details thereof, in about 50 words or so. The Company has built up highly integrated horizontal and vertical integration processes in its operation. All the major inputs under the Company s control are sourced sustainably. At Indo Gulf Fertilizers Unit, there are inbuilt processes to treat process condensate generated in manufacturing and 93% of condensate generated is recycled / reused. Besides this, about 55% of total treated effluent water is utilized for irrigation purpose before its disposal. Municipal waste improves organic content of the soil resulting in better nutrient uptake. Natural Gas is used as major raw material for Ammonia / Urea manufacturing. 100% of Natural Gas is sourced on sustainable basis and is supplied by gas pipeline network of Gas Authority of India Limited (GAIL). Madura Fashion & Lifestyle Unit, to ensure that banned substances are not used in production does its sourcing from OEKO-TEX certified mills. Also, there has been a reduction in use of poly bags and instead, use of paper bags is encouraged. 4. Has the company taken any steps to procure goods and services from local & small producers, including communities surrounding their place of work? If yes, what steps have been taken to improve their capacity and capability of local and small vendors? To ensure a positive impact of sourcing of raw materials and other resources, as well as product distribution and to create employment for the populace, the Company gives priority to procure goods and services from local suppliers and service providers over outside suppliers. BUSINESS RESPONSIBILITY REPORT Annual Report

94 BUSINESS RESPONSIBILITY REPORT Aditya Birla Nuvo Limited BUSINESS RESPONSIBILITY REPORT At Indo Gulf Fertilizers Unit, HDPE bags are procured from local vendors. Local service contractors are employed for providing transport, civil, engineering, manpower supply, and other related services. At Aditya Birla Insulators Unit, R&D team has jointly worked with local vendors for supply of Cap/Pin/Security clips/ GI Spindles etc. for enhancing their capability. This also reduces pipeline inventory due to reduced transportation. 5. Does the company have a mechanism to recycle products and waste? If yes, what is the percentage of recycling of products and waste (separately as <5%, 5-10%, >10%)? Also provide details thereof in 50 words or so. The Company has taken various initiatives towards waste management and continuously monitors with a view to ensure reduction in waste generation. Company believes in 3-R Principles (Reduce, Recycle and Reuse). Ammonia / Urea manufacturing processed at Indo Gulf Fertilizers Unit is based on total recycling process and adequate measures are incorporated since design stage to recycle 100% of the unfinished / unconverted components back to process. For example: we have both dry and wet dedusting system to 100% recycle of Urea dust particle carried with air during bulk urea transportation. Besides this, we have installed system to reuse treated effluent for irrigation purpose thus reducing quantity of effluent discharge. Recently we have constructed a Recharge Pit to store rain water for recharging underground water table. At Madura Fashion & Lifestyle Unit, 100% of Sewage Treatment Plant water is utilized for gardening purpose. Principle 3: Businesses should promote the wellbeing of all employees. 1. Please indicate the Total number of employees. 27, Please indicate the Total number of employees hired on temporary /contractual/ casual basis. 10, Please indicate the Number of permanent women employees. 6, Please indicate the Number of permanent employees with disabilities Do you have an employee association that is recognized by management? Yes. 6. What percentage of your permanent employees is members of this recognized employee association? Practically all the non-supervisory permanent employees at manufacturing locations are members of recognized employee association. 7. Please indicate the Number of complaints relating to child labour, forced labour, involuntary labour, sexual harassment in the last financial year and pending, as on the end of the financial year. Sr. Category No. of complaints No. of complaints No. filed during the pending as at financial year end of the financial year 1. Child labour / forced Labour / involuntary labour NIL NA 2. Sexual harassment NIL NA 3. Discriminatory employment NIL NA 8. What percentage of your under mentioned employees were given safety & skill upgradation training in the last year? Sr. Category of Employees Safety Skill Up No. Training* gradation 1. Permanent Employees 100% 89% 2. Permanent Women Employees 100% 86% 3. Casual/Temporary/ Contractual Employees 100% 86% 4. Employees with Disabilities 100% 80% Principle 4: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized. 1. Has the company mapped its internal and external stakeholders? Yes/No Yes. 74 Annual Report

95 Aditya Birla Nuvo Limited BUSINESS RESPONSIBILITY REPORT 2. Out of the above, has the company identified the disadvantaged, vulnerable & marginalized stakeholders? Yes. 3. Are there any special initiatives taken by the company to engage with the disadvantaged, vulnerable and marginalized stakeholders. If so, provide details thereof in 50 words or so. The Company endeavors to bring in inclusive growth, are channelized through the Aditya Birla Centre for Community Initiatives and Rural Development. Several initiatives for differentlyabled people in local communities at various plant locations includes: Health camps, Vocational trainings, Community Health Care Centers. Undertaking specific health interventions at rural villages, along with reputed hospitals and NGOs, Rotary and Local bodies. Engaging with local community and underprivileged people surrounding the plant locations, through development projects being implemented for their social and economic well being. Supporting small farmers. Providing/supporting education through balwadis, adult education centres, scholarships, education to women and children through VIDYA VIKAS Programs. Providing education aid support like Uniforms, Notebooks, desk, etc and Skill development programs (computer and tailoring education) to the rural government school students. Tailoring Training Classes for the rural women in co-ordination with IGNOU and Local NGOs. Principle 5: Businesses should respect and promote human rights. 1. Does the policy of the Company on Human Rights cover only the Company or extends to the Group/Joint Ventures / Suppliers / Contractors/NGOs/others? The Company has put in place a Human Rights Policy which extends to Units and Subsidiaries of the Company. 2. How many stakeholder complaints have been received in the past financial year and what percent was satisfactorily resolved by the management? No complaints were received during the year. Principle 6: Businesses should respect, protect, and make efforts to restore the environment. 1. Does the policy related to Principle 6 cover only the company or extends to the Group/ Joint Ventures / Suppliers / Contractors/ NGOs/others? Company s Safety, Health and Environment Policy covers its Units and Subsidiaries. 2. Does the company have strategies/ initiatives to address global environmental issues such as climate change, global warming, etc? Y/N. If yes, please give hyperlink for webpage etc. Yes, the Company is committed to address issues of global warming and reduction of emission. Please refer to Environment Report of the Annual Report for environmental initiatives taken. The same is also available on the Company s website or 3. Does the company identify and assess potential environmental risks? Y/N Yes. 4. Does the company have any project related to Clean Development Mechanism? If so, provide details thereof in, about 50 words or so. If Yes, whether any environmental compliance report is filed? Yes. Since the projects undertaken by Indo Gulf Fertilizers Unit are monitored by United Nations Framework Convention on Climate Change no Compliance report is submitted. Indian Rayon Unit has obtained Environmental Clearance (EC) from Ministry of Environment & Forests, Government of India, (MoEF) to enhance production capacity of Viscose Filament Yarn. As per the EC conditions, the industry has to submit Conditions Compliance Report every six months to MoEF. The industry has submitted the six-monthly reports regularly to the office of MoEF. 5. Has the Company undertaken any other initiatives on clean technology, energy efficiency, renewable energy, etc. Y/N. If yes, please give hyperlink for web page etc. The Company has taken several initiatives on clean technology, energy efficiency and BUSINESS RESPONSIBILITY REPORT Annual Report

96 BUSINESS RESPONSIBILITY REPORT Aditya Birla Nuvo Limited BUSINESS RESPONSIBILITY REPORT renewable energy. Please refer to Annexure C of the Directors Report of the Annual Report Financial Year for energy conservation initiatives. The same is also available on the Company s website or 6. Are the Emissions/Waste generated by the Company within the permissible limits given by CPCB/SPCB for the financial year being reported? Yes, the Emissions/Waste generated by the Company are within the permissible limits given by CPCB/SPCB, and are reported. Number of show cause/ legal notices received from CPCB/SPCB which are pending (i.e. not resolved to satisfaction) as on end of Financial Year. NIL. Principle 7: Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner. 1. Is your company a member of any trade and chamber or association? If Yes, Name only those major ones that your business deals with: The Company is a Member of several associations viz. Fertilisers Association of India (FAI) Confederation of Indian Industry Federation of Indian Exporters Organisation Associated Chambers of Commerce & Industry of India Retailer Association of India Indian Merchant Chamber Alkali Manufacturing Association National Safety Council Association of Man Made Fibre Industry Federation of Indian Chamber of Commerce & Industry 2. Have you advocated/lobbied through above associations for the advancement or improvement of public good? Yes/No; if yes specify the broad areas (drop box: Governance and Administration, Economic Reforms, Inclusive Development Policies, Energy Security, Water, Food Security, Sustainable Business Principles, Others) Yes, the broad areas are Water, Food, Economic reforms, Environment and Energy issues and sustainable business. Principle 8: Businesses should support inclusive growth and equitable development. 1. Does the company have specified programmes/initiatives/projects in pursuit of the policy related to Principle 8? If yes, details thereof. Yes, the Company has formulated a well defined CSR Policy which focuses on the following major areas: Health Education Women Empowerment Sustainable Livelihood Development Infrastructure Support Social Reforms 2. Are the programmes / projects undertaken through in-house team / own foundation / external NGO /government structures/any other organization? The programmes/projects are undertaken through in-house teams/our foundation as well as in partnership with Non Governmental Organizations (NGOs) and governmental institutions to serve areas of community growth and sustainable development. 3. Have you done any impact assessment of your initiative? Yes. 4. What is your Company s direct contribution to community development projects- Amount in INR and the details of the projects undertaken? The Company has spent an amount of ` lakhs on CSR activities on Education, Healthcare, Sustainable Livelihood, Women Empowerment and Infrastructure Development. 5. Have you taken steps to ensure that this community development initiative is successfully adopted by the community? Please explain in 50 words, or so. Yes, the Company has taken steps to ensure that the Community Initiatives benefit the 76 Annual Report

97 Aditya Birla Nuvo Limited BUSINESS RESPONSIBILITY REPORT Community. Projects evolve out of the felt needs of the communities and they are engaged intensely in all of these. Principle 9: Businesses should engage with and provide value to their customers and consumers in a responsible manner. 1. What percentage of customer complaints/ consumer cases are pending as on the end of financial year. As at 31 st March, 2014 out of the customer complaints / consumer complaints received during financial year , 95% were resolved. 2. Does the company display product information on the product label, over and above what is mandated as per local laws? Yes/No/N.A. / Remarks (additional information) The Company displays product information as mandated as per local laws. 3. Is there any case filed by any stakeholder against the company regarding unfair trade practices, irresponsible advertising and/or anti-competitive behavior during the last five years and pending as on end of financial year. If so, provide details thereof, in about 50 words or so. NIL. 4. Did your Company carry out any consumer survey/ consumer satisfaction trends? Yes, Consumer Satisfaction Surveys are being conducted periodically to assess the consumer satisfaction. BUSINESS RESPONSIBILITY REPORT Annual Report

98 CORPORATE GOVERNANCE REPORT Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT Governance Philosophy The Aditya Birla Group is committed to adoption of best governance practices and its adherence in the true spirit, at all times. Our governance practices are a product of self-desire, reflecting the culture of trusteeship that is deeply ingrained in our value system and reflected in our strategic thought process. At a macro level, our governance philosophy rests on five basic tenets, viz., Board accountability to the Company and shareholders, strategic guidance and effective monitoring by the Board, protection of minority interests and rights, equitable treatment of all shareholders as well as superior transparency and timely disclosures. In line with this philosophy, Aditya Birla Nuvo Limited, one of the flagship company of the Aditya I. BOARD OF DIRECTORS (A) Composition of the Board Birla Group, is striving for excellence through adoption of best governance and disclosure practices. The Company, as a continuous process, strengthens the quality of disclosures, on the Board composition and its functioning, remuneration paid and level of compliance with various Corporate Governance Codes. Compliance with Corporate Governance Guidelines Your Company is in compliance with the requirements stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges with regard to corporate governance. Your Company s compliance with these requirements is presented in the subsequent section of this Report. The Company has a balanced Board, comprising of Executive and Non-Executive Directors which includes independent professionals. As on 31 st March, 2014, the Board comprises of 6 Independent Directors (including a Nominee of LIC), 3 Non-Executive Directors and 3 Executive Director. None of the Directors is a Director in more than 15 companies and member of more than 10 committees or acts as Chairman of more than 5 committees across all companies in which they are Directors. The Non-Executive Directors are appointed or re-appointed with the approval of the shareholders. All the Directors are liable to retire by rotation except the Executive Directors, whose term has been determined pursuant to the terms and conditions of their appointment. The Non-Executive Directors including Independent Directors on the Board are experienced, competent and highly renowned persons in their respective fields. The details of the Directors with regards to other directorships, positions in either Audit Committee or Shareholder s/investor s Grievance Committee as well as attendance at Board Meetings / Annual General Meeting are as follows: Name of the Director Category No. of Outside Committee No. of Board Attended Outside Positions Held 2 Meetings Last Directorship(s) AGM in other Public Member Chairman/ Held Attended Companies 1 Chairperson Mr. Kumar Mangalam Birla Non-Executive No Mrs. Rajashree Birla Non-Executive No Mr. B. L. Shah Non-Executive No Mr. P. Murari Independent No Mr. B. R. Gupta Independent Yes Ms. Tarjani Vakil Independent Yes Mr. S. C. Bhargava Independent No 78 Annual Report

99 Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT Name of the Director Category No. of Outside Committee No. of Board Attended Outside Positions Held 2 Meetings Last Directorship(s) AGM in other Public Member Chairman/ Held Attended Companies 1 Chairperson Mr. G. P. Gupta Independent No Dr. Rakesh Jain Managing Director Yes Mr. Lalit Naik Deputy Managing Director Yes Mr. Sushil Agarwal Whole-time Director Yes Mr. T. Chattopadhyay Independent No Notes: 1. Excluding Directorships held in private companies, foreign companies and companies under Section 25 of the Companies Act, As required by Clause 49 of the Listing Agreement, disclosure includes membership/chairpersonship of the Audit Committee and Shareholder s / Investor s Grievance Committee. 3. Mr. Kumar Mangalam Birla and Mrs. Rajashree Birla are related as son and mother, respectively. No other Director of the Company is related to any other Director on the Board. 4. Board at its meeting held on 26 th June, 2014, subject to the approval of the shareholders, has appointed Mr. Lalit Naik as Managing Director of the Company w.e.f. 1 st July, 2014, in place of Dr. Rakesh Jain, whose term as the Managing Director expires on 30 th June, 2014; Dr. Rakesh Jain will also cease to be the Director of the Company. (B) Non-Executive Directors Compensation and Disclosure:- Sitting fees for attending meetings of the Board / Committees is paid as per the provisions of the Articles of Association of the Company / Companies Act, Commission paid to the Non-Executive Directors is decided by the Board of Directors, within the limits approved by the shareholders. Details of sitting fees / compensation paid to such Directors are given separately in this section of the Annual Report. (C) Board s Functioning and Procedure:- The Company s Board of Directors plays a primary role in ensuring good governance and functioning of the Company. The Board s role, functions, responsibilities and accountabilities are well defined. All relevant information is regularly placed before the Board. The Board reviews compliance reports of all laws as applicable to the Company, as well as steps taken by the Company to rectify instances of non-compliances, if any. The members of the Board have complete freedom to express their opinion and decisions are taken after detailed discussions. The Board meets at least once every quarter to review the quarterly results and other items on the agenda, and also additional meetings are held when necessary. Seven Board meetings were held during the year ended 31 st March, The dates on which the said meetings were held are as follows: 29 th May, 2013; 9 th August, 2013; 6 th September, 2013; 13 th November, 2013; 30 th January, 2014 and 11 th February, The necessary quorum was present for all the meetings. (D) Code of Conduct:- In compliance with Clause 49 of the Listing Agreement, the Company has adopted a Code of Conduct for the Board Members and Senior Management (the Code ). The Code is applicable to all the CORPORATE GOVERNANCE REPORT Annual Report

100 CORPORATE GOVERNANCE REPORT Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT Board Members and Senior Management of the Company. All the Board Members and Senior Management Personnel have confirmed compliance with the Code. A declaration by Managing Director affirming the compliance of the Code of Conduct for Board Members and Senior Management is annexed at the end of the Report. The Code is available on the Company s website. II AUDIT COMMITTEE (A) Qualified Independent Audit Committee:- The Company has an Audit Committee at the Board level with powers and role that are in accordance with Clause 49 of the Listing Agreement and the Companies Act, The Committee acts as a link between the management, the statutory and internal auditors and the Board of Directors, and oversees the financial reporting process. All the members of the Company s Audit Committee are Independent Directors. (B) Meetings of Audit Committee:- The Managing Director and the Whole time Director & C.F.O. of the Company are permanent invitees to the meetings of the Committee. The statutory as well as internal auditors of the Company are also invited to attend the Audit Committee meetings. Prior to the start of the meeting, members of the Audit Committee hold independent discussions with the statutory auditors of the Company. The representatives of the Cost Auditors are invited to attend the Audit Committee meetings whenever matters relating to Cost Audit are considered. The Company Secretary acts as Secretary to the Committee. During the year, the Audit Committee met seven times to deliberate on various matters, and details of the attendance of the Committee members are as follows: Name of the No. of Meetings Director Held Attended Ms. Tarjani Vakil 7 7 (Chairperson) Mr. P. Murari 7 4 Mr. B. R. Gupta 7 7 Mr. G. P. Gupta 7 7 The scope of the Audit Committee is to review, from time to time, the internal control procedures, the accounting policies of the Company, oversight of the Company s financial reporting process to ensure that the financial statements are correct, sufficient and credible, and also such other functions as may be recommended from time to time by SEBI, Stock Exchanges and/or under the Companies Act, 1956, which inter-alia include the following:- 1. To monitor and provide effective supervision of the Management s financial reporting process, to ensure accurate and timely disclosures, with the highest levels of transparency, integrity and quality of financial reporting; 2. Management Discussion and Analysis of financial condition and results of operations; 3. Statement of significant related party transactions submitted by the Management; 4. Evaluation of internal financial controls and risk management systems; 5. Discussion with internal auditors of any significant findings and follow up there on; and 6. Reviewing, with the Management, performance of statutory and internal auditors, adequacy of the internal control systems. 80 Annual Report

101 Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT Other Board Committees: Names of the other Committee(s), and brief terms of reference of meetings held during the FY are as under:- Name of the Committee Members Terms of Reference ESOP Compensation Committee Mr. Kumar Mangalam Birla Mr. B. R. Gupta Mr. G. P. Gupta Formulating ESOS Scheme, its implementation, administration and supervision and formulating detailed terms and conditions in accordance with the relevant SEBI Guidelines. Corporate Social Responsibility Committee Investor Relations and Finance Committee Risk Management Committee Mrs. Rajashree Birla Ms. Tarjani Vakil Dr. Rakesh Jain Mr. P. Murari Mr. B. L. Shah Dr. Rakesh Jain Ms. Tarjani Vakil Mr. G. P. Gupta Mr. S. C. Bhargava Dr. Rakesh Jain Mr. Lalit Naik Mr. Sushil Agarwal To assist the Board in discharging its social responsibilities by way of formulating, monitoring and implementing the Corporate Social Responsibility Policy. To consider issues relating to shareholders as well as systems and procedures followed to track investor complaints and suggest measures for improvement from time to time. To review and reassess the risks of the businesses and to develop an effective risk mitigation plan. Respective Business Heads are invited to attend Risk Management meetings held to discuss their respective Businesses. CORPORATE GOVERNANCE REPORT Note: The meetings of the above Committees are held from time to time. III IV Subsidiary Companies The Audit Committee reviews the consolidated financial statements of the Company and investments made by its unlisted subsidiary companies. The minutes of the board meetings along with a report on significant developments of the unlisted subsidiary companies are periodically placed before the Board of Directors of the Company. Disclosures (A) Basis of Related Party Transactions: All the related party transactions are strictly done on arm s length basis. The Company places all the relevant details relating to related party transactions before the Audit Committee from time to time. Particulars of related party transactions are listed out in Note No. 42 to the Balance Sheet forming part of the Annual Report. (B) Disclosure of Accounting Treatment: The Company has followed all the relevant Accounting Standards while preparing the financial statements. (C) Risk Management: The Company has developed comprehensive risk management policy and it is reviewed by the Risk Management Committee and the Audit Committee, which, in turn, informs the Board about the risk assessment and minimization procedures. With a view to strengthen the risk management framework and to continuously review and reassess the risk that the businesses of the Company are confronted with, the Company has constituted a Risk Management Committee. Senior Executives of each of the businesses/units present the risk management process and implementation of risk mitigation plans. Annual Report

102 CORPORATE GOVERNANCE REPORT Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT (D) Proceeds from Public Issues, Rights Issues, Preferential Issues, etc.: The Company discloses to the Audit Committee, the uses/applications of proceeds/funds raised from public issues, private placement of non-convertible debentures, preferential issues, etc., as part of quarterly review of financial results. (E) Remuneration of Directors: The Company has a system where all the directors and senior management of the Company are required to disclose all pecuniary relationship or transactions with the Company. No significant material transactions have been made with the Non- Executive Directors vis-à-vis the Company. Besides sitting of ` 20,000/- per meeting of the Board or Committee thereof, the Company also pays commission to the Non-Executive Directors of the Company. For the F.Y , considering the financial performance of the Company, the Board has decided to pay commission of ` 4.50 Crore (Previous Year: ` 4.00 Crore) to the Non-Executive Directors of the Company, which is not exceeding 1% of the net profits of the Company, and pursuant to the authority given by the Shareholders at the Annual General Meeting of the Company held on 9 th August, The amount of commission payable is determined after assigning weightage to attendance, type of meeting and preparations required, time spent, etc. The Company also reimburses out-of-pocket expenses incurred by the Directors for attending the meetings. The Details of Remuneration Paid to the Directors for/in the FY are as follows: (` in Lakhs) Name of the Director Salary, Allowance, Performance-linked Sitting Fees Perquisites and Other Income/Bonus Paid/ Paid Benefits Commission Payable Whole-time Directors Dr. Rakesh Jain Mr. Sushil Agarwal Mr. Lalit Naik Others Mr. Kumar Mangalam Birla Mrs. Rajashree Birla Mr. B. L. Shah Mr. P. Murari Mr. B. R. Gupta Ms. Tarjani Vakil Mr. S. C. Bhargava Mr. G. P. Gupta Mr. T. Chattopadhyay Notes: 1. No Director is related to any other Director on the Board, except for Mr. Kumar Mangalam Birla and Mrs. Rajashree Birla, who are son and mother, respectively. 2. The Company has a policy of not advancing any loans to its Directors except to Executive Directors, in the course of normal employment. 3. The appointment of Whole-time Directors is subject to termination by three months notice in writing by either side. 4. Details of Options and RSUs granted to the Whole-time Directors during the year are set out below as also in Annexure to the Directors Report. 5. No severance fees are paid to any Director of the Company. 6. Performance Review System is primarily based on competencies and values. The Company closely monitors growth and development of top talent in the Company to align personal aspiration with the organisation s purpose. 82 Annual Report

103 Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT Details of Stock Options granted to the Directors under Employee Stock Options Scheme-2006 (ESOS-2006) are as under: Name of the Director 1 st Tranche 4 th Tranche No. of Vesting Exercise No. of No. of Vesting Exercise Options Date / % Period Options Options Date / % Period Granted (within) Exercised / Granted (within) Date Dr. Rakesh Jain 13, ,368 on 6, (25%) (25%) (25%) (25%) (25%) (25%) (25%) (25%) Mr. Sushil Agarwal 4, ,010 on 5, (25%) (25%) (25%) (25%) (25%) (25%) (25%) (25%) Details of Stock Options/Restricted Stock Units granted to the Directors under Employee Stock Options Scheme-2013 (ESOS-2013) are as under: Tranche 1 Name of the Director No. of *Vesting Exercise No. of **Vesting Exercise Stock Date/ Period Restricted Date/ Period Options % (within) Stock Units % (within) Granted Granted Dr. Rakesh Jain 52, years 18,887 All RSUs 5 years (25%) from each granted will from Vesting vest on Vesting (25%) Date 7 th December, Date (25%) (25%) Mr. Sushil Agarwal 26, years 9,443 All RSUs 5 years (25%) from each granted will from Vesting vest on Vesting (25%) Date 7 th December, Date (25%) (25%) CORPORATE GOVERNANCE REPORT * Subject to the satisfaction of performance target as determined by ESOS Compensation Committee for each of the Vesting. ** Linked to continued employment with the Company. Annual Report

104 CORPORATE GOVERNANCE REPORT Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT Details of Shareholding of Non-Executive Directors in the Company as on 31 st March, 2014, is as follows: Name of the Director No. of Shares Mr. Kumar Mangalam Birla* 4,609 Mrs. Rajashree Birla 127,634 Ms. Tarjani Vakil 177 Mr. S. C. Bhargava 233 Mr. G. P. Gupta 339 * Excluding 150 shares held as Karta of Considered only shares held singly or as first shareholder. (F) Management: Investor Relations and Finance Committee: The Management Discussion and Analysis Your Company has an Investor Relations and Report is prepared in accordance with the Finance Committee comprising of Mr. P. Murari, requirements laid down in Clause 49 of the Mr. B. L. Shah and Dr. Rakesh Jain as members. Listing Agreement and forms part of this Mr. P. Murari is the Chairman of the Committee. Annual Report. The Committee looks into various issues relating No material transaction has been entered to shareholders including transfer and transmission into by the Company with the Promoters, of shares as well as non-receipt of dividend, Annual Directors or the Management, their Report, shares after transfers and delays in transfer subsidiaries or relatives, etc., that may of shares. In addition, the Committee looks into have a potential conflict with interests of other issues including status of dematerialisation/ the Company. re-materialisation of shares as well as systems and procedures followed to track investor complaints, and suggests measures for improvement from time to time. (G) Shareholders: The Company has provided the details of new Directors and Directors seeking re-appointment in the Annual General Meeting Notice attached with this Annual Report. Quarterly Presentations on the Company results are available on the website of your Company ( / and the Aditya Birla Group website ( The Company also sends results / pressrelease by (wherever available) to shareholders immediately after the announcement of results. The hard and soft copies are also sent to the concerned Stock Exchanges simultaneously so as to enable them to put the results and press-release on their notice board/ website. A half-yearly declaration of financial performance including summary of the significant events in the last six-months, is being sent to each household of the shareholders. During the year under review, the Committee met twice to deliberate on various matters referred above. Details of attendance of Directors for the Committee meeting are as follows: Name of the Non-Executive/ No. of Director Executive Meetings Held Attended Mr. P. Murari Non-Executive 1 1 Mr. B. L. Shah Non-Executive 1 1 Dr. Rakesh Jain Executive 1 1 The Company Secretary acts as Secretary to the Committee. She is the Compliance Officer of the Company and also responsible for redressal of investor complaints. The Company s shares are compulsorily traded and delivered in the dematerialised form in all Stock Exchanges. To expedite the transfer in the physical segment, necessary authority has been delegated to officers, to transfer upto 5,000 shares under one transfer deed. Details of share transfers/ 84 Annual Report

105 Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT transmission approved by the officers are placed before the Committee from time to time. Details of complaints received, number of shares transferred during the year, time taken for effecting these transfers and the number of share transfers are given in the Shareholder s Information section of this Annual Report. V. CEO/CFO Certification: The CEO and CFO certification of the financial statements and the cash flow statement for the year is enclosed separately at the end of this report. VI. Report on Corporate Governance: A separate section on Corporate Governance forms part of the Annual Report. Certificate from the Statutory Auditors confirming compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement of the Stock Exchanges in India also forms part of this Annual Report. VII. General Body Meetings: Details of Annual General Meetings: During the preceding three years, the Company s Annual General Meetings (AGMs) and also the Extra Ordinary General Meeting (EOGM) were held at the Registered Office of the Company at Indian Rayon Compound, Veraval , Gujarat. The date and time of such meetings held during the last three years, and the special resolution(s) passed thereat, are as follows: Year AGM/EOGM Date Time Special Resolution Passed AGM 28 th September, :00 A.M. Yes EGM 25 th April, :30 A.M. Yes AGM 9 th August, :30 A.M. Yes AGM 6 th September, :30 A.M. Yes 4 1 For revision in limits of remuneration of Whole-time Director(s). 2 For the issue and allotment of Warrants to Promoter and/or Promoter Group on a preferential basis. CORPORATE GOVERNANCE REPORT 3 For payment of commission to Non-Executive Directors. 4 For approval of terms of Appointment and Remuneration of Whole-time Director(s) and approval of Employee Stock Options Scheme-2013 for the benefit of the employees of the Company and its Subsidiaries. Postal Ballot i) During the year, one resolution was passed through Postal Ballot to authorise the Board/ Committee of Directors to sell/transfer Company s Carbon Black business. ii) The procedure adopted for the above referred Postal Ballot is set out below: The Carbon Black Business Committee on 6 th April, 2013, approved the Postal Ballot process and appointed Mr. Bipin L. Makwana, Practicing Company Secretary, as Scrutinizer for conducting the voting process. Voting rights were reckoned on the paid-up value of the shares registered in the name(s) of the Member(s) on the cut-off date, i.e., 5 th April, The posting of the notice along with the Postal Ballot form to the Members got completed on 8 th April, Shareholders were provided an option of voting either through e-voting or by physical mode. The Postal Ballot forms were required to be tendered to the Company by 5:30 p.m. on 21 st May, The time of closure of the voting by electronic mode was 5:30 p.m. on 21 st May, The Scrutinizer submitted his report to Mr. Sushil Agarwal, Whole-time Director & CFO of the Company who was appointed as the Chairman for declaring the Postal Ballot out come, on 22 nd May, Based on the Scrutinizers report, the results of the Postal Ballot were declared on 23 rd May, 2013, at the Corporate Office of the Company. Annual Report

106 CORPORATE GOVERNANCE REPORT Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT iii) The details of voting results for the resolutions are set out below: Particulars No. of Postal No. of Equity % of Votes Ballot Forms Shares (Votes) Received Total Postal Ballot/Votes Received 2,497 77,044, Less: Number of Invalid Postal Ballot/Votes Received , Net Valid Postal Ballot/ Votes Received 2,454 76,894, Total Postal Ballot/ Votes with Assent 2,319 76,877, Total Postal Ballot/ Votes with Dissent , MEANS OF COMMUNCIATION Quarterly Results: Newspaper in which normally financial results are published in: Newspaper Cities of Publication Business Standard All editions Economic Times All editions Western Times Gujarati (Ahmedabad ) Website, where displayed the information : Whether it also displays official news releases : Yes Presentations made to investors/analysts : Yes General Shareholders Information : Published as a separate section in this report. Status of Compliance of Non-Mandatory Requirements: 1) The Company maintains a separate office for the Non-Executive Chairman. All necessary infrastructure and assistance are made available to enable him to discharge his responsibilities effectively. 2) For the financial year 2014, the Company did not have a Remuneration Committee except for ESOP. The remuneration of the Managing/Whole-time Director is fixed by the Board of Directors within limits approved by the Shareholders. 3) Performance update consisting of financial and operational performance for the first six months of financial year is being sent to the shareholders. 4) During the period under review, there is no audit qualification in the financial statement. The Company continues to adopt best practices to ensure unqualified financial statements. 5) The Company has established a policy for employees to report to the management, concerns about unethical behaviours, actual or suspected fraud or violation of the Company s Code of Conduct. 86 Annual Report

107 Aditya Birla Nuvo Limited CORPORATE GOVERNANCE REPORT CEO/CFO CERTIFICATION To, The Board of Directors Aditya Birla Nuvo Limited. 1. We have reviewed the financial results of Aditya Birla Nuvo Limited for the period ended 31 st March, 2014, and to the best of our knowledge and belief: I. These statements do not contain any materially untrue statement or omit any material fact or contain statement that might be misleading; II. These statements together present a true and fair view of the Company s affairs and are in compliance with the existing accounting standards, applicable laws and regulations. 2. To the best of our knowledge and belief, no transactions entered into by the Company during the period ended 31 st March, 2014, are fraudulent, illegal or violative of the Company s Code of Conduct. 3. We accept responsibility for establishing and maintaining internal controls for financial reporting and we have evaluated the effectiveness of the internal control systems of the Company pertaining to the financial reporting. We have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of which we are aware and the steps we have taken or proposed to be taken to rectify the deficiencies. 4. We have indicated to the Auditors and the Audit Committee: I. Significant changes in the Company s internal control over financial reporting during the period; II. Ill. Significant changes in accounting policies during the period; and Instances of significant fraud of which we have become aware and involvement therein, if any, of the management or other employees having a significant role in the Company s internal control system over financial reporting. CORPORATE GOVERNANCE REPORT Place: Mumbai Sushil Agarwal Dr. Rakesh Jain Date: 20 th May, 2014 (Whole-time Director & CFO) (Managing Director) DECLARATION As provided under Clause 49 of the Listing Agreement with the Stock Exchange(s), I hereby declare that all the Directors and Senior Management personnel of the Company have affirmed the Compliance with the Code of Conduct for the year ended 31 st March, Place: Mumbai Date: 20 th May, 2014 Dr. Rakesh Jain (Managing Director) Annual Report

108 SHAREHOLDERS INFORMATION Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION 1. Annual General Meeting Date and Time : 11 th September, 2014 at 11:30 a.m. Venue : Registered Office: Indian Rayon Compound Veraval Gujarat, India 2. Financial Calendar for Reporting Financial reporting for the quarter ending 30 th June, 2014 : August, 2014 Financial reporting for the half year ending 30 th September, 2014 : October/November, 2014 Financial reporting for the quarter ending 31 st December, 2014 : January/February, 2015 Financial reporting for the year ending 31 st March, 2015 : April/May, 2015 Annual General Meeting for the year ended 31 st March, 2015 : July/August, Dates of Book Closure : 30 th August, 2014 to 11 th September, 2014 (both days inclusive) 4. Dividend Payment Date : On or after 11 th September, Registered Office and Investor Service Centre : Indian Rayon Compound Veraval Gujarat, India Phone: (02876) / Fax: (02876) abnlsecretarial@adityabirla.com 6. Website : Corporate ID No. (CIN) : L17199GJ1956PLC Listing on Stock Exchanges at: Equity Shares and Debentures* (refer Note 1) Global Depository Receipts (GDRs) a) BSE Limited (BSE) Luxembourg Stock Exchange Phiroze Jeejeebhoy Tower Societe de la Bourse de Luxembourg Dalal Street Societe Anonyme, R.C.B 6222, B.P 165 Mumbai L-2011, Luxembourg b) National Stock Exchange of India Ltd. (NSE) Exchange Plaza, Plot No. C/1, G- Block Bandra Kurla Complex, Bandra (East) Mumbai Notes: 1. Debentures are listed at BSE Limited (BSE) only. 2. Listing Fees as applicable has been paid. 3. Annual custody/issuer fee for the year has been paid by the Company to NSDL and CDSL. 9. Stock Code: Stock Code Reuters Bloomberg Bombay Stock Exchange ABRL.BO ABNL IB National Stock Exchange ABIRLANUVO ABRL.NS NABNL IN Global Depository Receipts (GDRs) IRYN.LU IRIG LX ISIN No. of Equity Shares ISIN No. of GDRs INE069A01017 US Annual Report

109 Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION 10. Overseas Depository for GDRs : Citibank N.A., Depository Receipts 388 Greenwich Street, New York, NY 10013, USA Phone: , Fax: 212/ Domestic Custodian of GDRs : ICICI Bank Limited Securities Market Services F7/E7 1 st Floor, Empire Complex 414, Senapati Bapat Marg, Lower Parel Mumbai Phone: ( ) , Fax: ( ) / Debt Securities : The Wholesale Debt Market (WDM) segment of BSE 13. Debenture Trustees : IDBI Trusteeship Services Limited (for 29 th and 30 th Series of Debentures) Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai Phone: ( ) Fax: ( ) itsl@idbitrustee.com 14. Stock Price Data: Year/Month BSE Limited National Stock Exchange Luxembourg Stock Exchange High Low Close Av. High Low Close Av. High Low Close Volume Volume (In `) (In Nos.) (In `) (In Nos.) (In US$) Apr-13 1, , , , , ,51, May-13 1, , , , , , , ,07, Jun- 13 1, , , , , , , ,59, Jul- 13 1, , , , , , , ,89, Aug-13 1, , , , , ,51, Sep-13 1, , , , , , , ,53, Oct-13 1, , , , , , , ,35, Nov-13 1, , , , , , , ,01, Dec-13 1, , , , , , , , Jan-14 1, , , , , , , ,26, Feb-14 1, , , , , , , ,56, Mar-14 1, , , , , , , ,51, Stock Performance: Month ABNL NSE BSE ABNL NSE BSE NSE Closing Prices in ` CNX Nifty S&P Sensex Indexed Indexed Indexed Apr- 13 1, , , May-13 1, , , Jun- 13 1, , , Jul- 13 1, , , Aug-13 1, , , Sep-13 1, , , Oct- 13 1, , , Nov-13 1, , , Dec-13 1, , , Jan- 14 1, , , Feb-14 1, , , Mar-14 1, , , SHAREHOLDERS INFORMATION Annual Report

110 SHAREHOLDERS INFORMATION Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION 16. Stock Performance and Returns over past few years: Absolute Return (In %) 1 Year 3 Years 5 Years Aditya Birla Nuvo 11.87% 34.01% % BSE Sensex 18.85% 15.12% % NSE Nifty 17.98% 14.92% % Annualised Returns (In %) 1 Year 3 Years 5 Years Aditya Birla Nuvo 11.87% 10.25% 19.65% BSE Sensex 18.85% 4.81% 18.19% NSE Nifty 17.98% 4.74% 17.28% (Source: Registrar and Transfer Agents : In-house Share Transfer (For share transfers and other Registered with SEBI as Category II - Share communication relating to share Transfer Agent (Registration No. INR ) certificates, dividend and change Investor Service Centre of address, etc.) Registered Office: Indian Rayon Compound Veraval , Gujarat, India Phone: (02876) , Fax: (02876) abnlsecretarial@adityabirla.com 18. Share Transfer System : 97.80% of the Equity Shares of your Company are in electronic form. Transfers of these shares are done through the depositories with no involvement of the Company. As regards transfer of shares held in physical form the transfer documents can be lodged at the Investor Service Centre of the Company at the above address. Transfer of shares in physical form is registered normally within days from the date of receipt, provided that the documents are complete in all respects. Investor Relations & Finance Committee of the Board considers and approves transfers above 5,000 shares under one transfer deed. Further, certain officers of the Company have been authorised to approve transfers upto 5,000 shares under one transfer deed. The total number of shares transferred in physical form during the year was 21,237 (Previous Year: 20,203). Majority of transfers were completed within 5 days from the date of receipt. Details of Share Transfer during the Financial Year Transfer Period No. of Transfers No. of Shares % Cumulative (in Days) Total % , , and above 36 1, Total , No transfer of shares was pending as on 31 st March, Legal Proceedings on share transfer issues: No major legal proceedings relating to transfer of shares, during the year. 90 Annual Report

111 Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION 19. Investor Services: (a) The Investor and Secretarial services of your Company has been accredited with ISO 9001:2008 Certification for providing Investor and Secretarial Services by Intertek Systems Certifications, Ahmedabad. The certification has been further renewed with effect from 8 th August, 2013, for a period of three years. (b) Complaints received during the year: Sr. Nature of Complaints No. Received Cleared 1 Opening Pending Complaint 1 2 Relating to Transfer, Transmission, Duplicate Non-receipt of Dividend Annual Report Demat-Remat Non- receipt of Shares of IGFL, BGFL Others 1 1 Total Distribution of Shareholding as on 31 st March, 2014: No. of Equity No. of % of No. of % of Shares Held Shareholders Shareholders Shares Held Shareholding , ,841, , ,973, , ,821, , ,022, , ,275, ,115, and above ,035, Total 142, ,084, Categories of Shareholding as on 31 st March, 2014: Category No. of % of No. of % of of Shareholders Shareholders Shareholders Shares Held Shareholding Promoters and Promoter Group ,444, Banks, Mutual Funds, Financial Institutions and Insurance Companies UTI and other Mutual Funds ,757, Banks, Financial Institutions and Insurance Companies ,877, Foreign Investors FIIs ,054, NRIs/OCBs 5, ,068, GDRs* ,182, Corporates 1, ,240, Others - Individuals 134, ,459, Total 142, ,084, * GDRs includes 1,425,000 GDRs held by Promoters/Promoter Group SHAREHOLDERS INFORMATION Annual Report

112 SHAREHOLDERS INFORMATION Aditya Birla Nuvo Limited Category-wise Equity Shareholders Non-ins tu ons 12.88% GDR holders 2.45% Ins tu ons 27.44% Promoters 57.23% SHAREHOLDERS INFORMATION 22. Dematerialisation of Shares : Shares of your Company are required to be compulsorily and Liquidity traded in the dematerialised form. The shares of the Company are admitted for trading under both the Depository Systems in India-NSDL and CDSL. Equity Shares of your Company representing 97.80% of your Company's Equity Share Capital are dematerialised as on 31 st March, Details on use of public funds : No public funds have been obtained in the last 3 years. obtained in the last three years 24. Outstanding GDRs/Warrants and : GDRs Convertible Bonds, Conversion Outstanding GDRs as on 31 st March, 2014 are 3,182,052 date and likely impact on Equity amounting to 2.45% of outstanding paid-up equity capital of your Company. Each GDR represents one underlying equity share. Convertible Warrants Shareholders had approved issue of 16,500,000 warrants on preferential basis to Promoters and/or Promoter Group in the Extraordinary General Meeting of the Company held on 25 th April, These warrants, entitled the holder thereof to apply for and obtain allotment of one equity share of the face value of ` 10/- each within a period of 18 months from the date of allotment. On exercise of their option for conversion of the aforesaid warrants into equity shares and on receipt of payment thereof, the following Equity Shares have been allotted to the Promoter Group companies: Date of Allotment 26 th March, ,680,000 8 th November, ,820,000 No. of Equity Shares TOTAL 16,500,000 As on 31 st March, 2014, there are no outstanding convertible securities of the Company. 92 Annual Report

113 Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION 25. Secretarial Audit : As stipulated by Securities and Exchange Board of India (SEBI), a firm of qualified Practising Company Secretaries carries out the Reconciliation of Share Capital Audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), and the total issued and listed capital. This audit is carried out every quarter and the report thereon is submitted to stock exchanges, NSDL and CDSL and is also placed before the Board of Directors. 26. Plant Locations: Garment Division: Madura Fashion & Lifestyle Plot No. 5B, Regent Gateway Doddanakundi Village KIADB Industrial Area ITPL Road Bangalore Phone: (080) Fax: (080) Website: Textile Division: Jaya Shree Textiles P.O. Prabhas Nagar Dist. Hooghly, West Bengal. Phone: (033) Fax: (033) / Website: Rayon Division: Indian Rayon Veraval Gujarat. Phone: (02876) / Fax: (02876) irilveraval@adityabirla.com Fertiliser Division: Indo Gulf Fertilisers P.O. Jagdishpur Industrial Area Dist. Amethi Uttar Pradesh, India. Phone: (05361) Fax: (05361) and igfl@adityabirla.com Website: birlashaktiman.in Insulator Divisions: Aditya Birla Insulators, Halol P.O. Meghasar Taluka, Halol Dist. Panchmahal, Gujarat Phone: (02676) Fax: (02676) abi@adityabirla.com Aditya Birla Insulators, Rishra P.O. Prabhas Nagar, Rishra Dist. Hoogly , West Bengal. Phone: (033) Fax: (033) abi@adityabirla.com Website: SHAREHOLDERS INFORMATION 27. Investor Correspondence: Other than Secretarial Matters Chief Financial Officer Aditya Birla Nuvo Limited Corporate Finance Division A-4, Aditya Birla Centre, 4 th Floor S.K. Ahire Marg, Worli, Mumbai Phone: (022) / Fax: (022) / nuvo.cfd@adityabirla.com nuvo-investors@adityabirla.com Annual Report

114 SHAREHOLDERS INFORMATION Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION On Secretarial and Investor Grievances Matters 29. Corporate Benefits to Investors: Dividend Declared for the last 10 Years Financial Dividend Dividend Year Declaration Per Share Investor Services: 1. Equity Shares of your Company are under compulsory demat trading by all investors, with effect from 5 th April, Considering the advantages of scripless trading, shareholders are requested in their own interest to consider demateralisation of their Vice President & Company Secretary Aditya Birla Nuvo Limited Registered Office: Investor Service Centre Indian Rayon Compound Veraval , Gujarat, India. Phone: (02876) /248629/ Fax: (02876) abnlsecretarial@adityabirla.com Corporate Office: A-4, Aditya Birla Centre S.K. Ahire Marg, Worli, Mumbai Phone: (022) Fax: (022) / abnlsecretarial@adityabirla.com 28. Per Share Data: Net Earnings (` Crore) Cash Earnings (` Crore) Basic Earnings Per Share (EPS) (`) Cash EPS (`) Dividend Per Equity Share Dividend Payout (on Net Earnings) (%) Book Value Per Equity Share (`) Recommended by the Board for approval of the shareholders at the ensuing Annual General Meeting. shareholding so as to avoid inconvenience in future. 2. Non-Resident Shareholders: Non-resident members are requested to immediately notify the following to the Company in respect of shares held in physical form and to their DPs in respect of shares held in dematerialised form: Indian address for sending all communications, if not provided earlier; Change in their residential status on return to India for permanent settlement; Particulars of the Bank Account maintained with a bank in India, if not furnished earlier; ID and Fax No.(s), if any; and RBI permission with date to facilitate prompt credit of dividend in their Bank Accounts. 31. General Information: 1. Shareholders holding shares in physical form are requested to notify to the Company, change in their Address/Pin Code number with proof of address and Bank Account details 94 Annual Report

115 Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION promptly by written request. Beneficial Owners of shares in demat form are requested to send their instructions regarding change of name, bank details, nomination, power of attorney, etc., directly to their DP. 2. To prevent fraudulent encashment of dividend warrants, members are requested to provide their Bank Account details (if not provided earlier) to the Company (if shares are held in physical form) or to DP (if shares are held in demat form) as the case may be, for printing of the same on their dividend warrants. 3. In case of loss/misplacement of shares, investors should immediately lodge FIR/ Complaint with the Police and inform to the Company along with original or certified copy of the FIR/Acknowledged copy of Police complaint. 4. In accordance with the provisions of section 56(1) of the Companies Act, 2013, shares are required to be lodged within a period of 60 days from the date of execution of instrument of transfer. For expeditious transfer of shares in physical form, shareholders should fill in complete and correct particulars in the transfer deed. Wherever applicable, registration number of Power of Attorney should also be quoted in the transfer deed at the appropriate place. 5. Shareholders are requested to keep record of their specimen signature before lodgement of shares with the Company to obviate the possibility of difference in signature at a later date. 6. Shareholders of the Company, who have multiple accounts in identical name(s) or holding more than one Share Certificate in the same name under different Ledger Folio(s) in physical form, are requested to apply for consolidation of such Folio(s) and send the relevant Share Certificates to the Company. 7. Section 72 of the Companies Act, 2013, extends nomination facility to individuals holding shares in physical form in companies. Shareholders, in particular, those holding shares in single name, may avail the above facility by furnishing the particulars of their nominations in the prescribed Nomination Form, which can be downloaded from the website of the Company or obtained from the Investor Service Centre of the Company by sending written request through any mode including on abnlsecretarial@adityabirla.com 8. Shareholders are requested to visit the Company s website for information on: Investor services offered by the Company; Downloading of various forms/formats, viz., Nomination Form, ECS Mandate Form, Indemnity, Affidavits, etc.; Registering your ID with the Company to receive Notice of General Meetings, Audited Financial Statement, Directors Report, Auditors Report, etc., henceforth electronically. 32. NECS Facility: In terms of a notification issued by the Reserve Bank of India, with effect from 1 st October, 2009, remittance of Dividend through ECS is replaced by National Electronic Clearing Service (NECS). Banks have been instructed to move to the NECS platform. The advantages of NECS over ECS include faster credit of remittance to the beneficiary s account, coverage of more bank branches and ease of operations. NECS essentially operates on the new and unique bank account number, allotted by bank post-implementation of Core Banking System of inward instructions and efficiency in handling bulk transactions. To enable remittance of dividend through NECS, Members are requested to provide their new account number allotted to them by their respective banks after implementation of Core Banking Solution. The account number must be provided to the Company in respect of shares held in physical form and to the depository participants in respect of shares held in electronic form. 33. Updation of Permanent Account Number (PAN): As per Circular No. MRD/DoP/Cir-05/2009 dated 20 th May, 2009, issued by Securities and Exchange Board of India (SEBI), it is mandatory to quote Permanent Account Number (PAN) for participating in the securities market. Therefore, Members holding shares in dematerialised form are requested to submit the PAN details to their depository participants, whereas Members holding shares in physical form are requested to submit the PAN details to the Investor Service Centre, Indian Rayon Compound, Veraval SHAREHOLDERS INFORMATION Annual Report

116 SHAREHOLDERS INFORMATION Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION 34. Correspondence with the Company: Shareholders/Beneficial Owners are requested to quote their Folio No./DP and Client ID Nos., as the case may be, in all correspondence with the Company. All correspondence regarding shares of the Company should be addressed to the Investor Service Centre of the Company at its Registered Office at Indian Rayon Compound, Veraval. The Company has also designated an exclusive ID for effective investor s services where they can register their complaints/queries to facilitate speedy and prompt redressal. 35. Cost Audit Reports: Ministry of Corporate Affairs (MCA), vide its General Circular No. 8/2012 dated 10 th May, 2012 as amended on 9 th June, 2012, has mandated that all the Cost Auditors and their concerned companies shall file their Cost Audit Reports and Compliance Reports for the year onwards (including the overdue reports relating to any previous year) in XBRL mode. For this purpose, the applicable taxonomy, business rules, validation tools, etc., and also the Product Group classification required for preparing the Cost Audit Report and compliance reports as per the notified Cost Accounting Records Rules, 2011, and Cost Audit Report Rules, 2011, have been prescribed. Accordingly and in compliance with the above circular, the Company has filed the Cost Audit Report and Compliance Report for the financial year in XBRL mode on date vide SRN No.S and SRN No.S , respectively. 36. Unclaimed Shares in Physical Form: Clause 5A(II) of the Listing Agreement provides the manner of dealing with the shares issued in physical form pursuant to a public issue or any other issue and which remains unclaimed with your Company. In compliance with the provisions of the said Clause, the Company has sent three reminders under Registered Post to the Shareholders, whose share certificates were returned undelivered and are lying unclaimed so far. The details of product filed under the Cost Audit Report for the year is tabled below: Name and Address of the Auditor Product M/s. Ashwin Solanki & Associates Rayon & Chemicals D/104, Koyna, Shantivan, Viscose Filament Yarn, Caustic Soda, Near National Park, Borivali-East, Sulphuric Acid. Mumbai Reg. M. No M/s. K.G. Goyal & Associates, Fertilisers 8 Chitragupt, Jyoti Nagar Railway Urea, Customised Fertilisers and Electricity. Crossing, Jaipur Reg. M. No M/s. R. Chakraborty & Co., Textiles 18, N.S. Road, 3rd Floor, Room No. 10, Flax Yarn, Fabrics and Worsted Yarn. Kolkata Reg. M. No M/s. S. S. Puranik & Associates Aditya Birla Insulators FF-57, Suryakiran Complex Insulators Old Padra Road, Vadodara Reg M. No M/s. GNV & Associates Ready Made Garments #8, 1st Floor, 4th Main Road, Chamarajpet, Bangalore Reg. M. No Annual Report

117 Aditya Birla Nuvo Limited SHAREHOLDERS INFORMATION In terms of Clause 5A(II) of the Listing Agreement, your Company is taking appropriate steps on transferring and dematerialising unclaimed shares into one folio in the name of Aditya Birla Nuvo Limited Unclaimed Suspense Account. In case, your shares are lying unclaimed with the Company, you are requested to claim the same. Upon transfer and dematerialisation to the suspense account, the voting rights on such shares shall remain frozen till the rightful owner of such shares claims the shares. 37. Green Initiative in Corporate Governance: In order to conserve paper and save environment, the Ministry of Corporate Affairs ( MCA ), Government of India, has taken a Green Initiative in the Corporate Governance by allowing paperless compliances by companies, vide circular dated 21 st April, 2011 and 29 th April, 2011, in terms of which a company would have ensured compliance with the provisions of section 53 of the Companies Act, 1956, if service of documents have been made through electronic mode. Environment conservation and sustainable development are continuously on your Company s radar and therefore, your Company supports MCA in this initiative. Keeping in view of the aforesaid Green Initiative of MCA, your Company shall send the Annual Report to its shareholders in electronic form, to the address provided by them and made available to it by the Depositories. In case of any change in your address, you are requested to please inform the same to your Depository. Shareholders can avail e-communication facility by registering their address with the Company through any of the following options: Company s Website: By visiting the following link on the home page: Important message to Shareholders: Green Initiative (Refer to the link ) Or By sending an to abnlsecretarial@adityabirla.com and mentioning the Name(s) and Folio Number/ DP ID and Client ID. You will avail the following benefits by registering your address with the Company for availing e-communication: Enable you to receive communication promptly; Avoid loss of documents in postal transit; and Help in eliminating wastage of paper, reduce paper consumption and, in turn, save trees. Your Company will make available the said documents on its website Please note that physical copies of the above documents shall also be made available for inspection, during office hours, at the Registered Office of the Company at Indian Rayon Compound, Veraval , Gujarat. In case, you wish to receive the same in physical form, please write to our Investor Service Centre or send us an at abnlsecretarial@adityabirla.com. Upon receipt of a request from you, physical copy shall be provided to you free of cost. 38. Feedback: Members are requested to give us their valuable suggestions for improvement of our investor services to our Investor Service Centre or by visiting the website at the following link: Link for Green Initiative: downloads/request_annual_report.aspx Link for Investor Feedback: investor_centre/investor_feedback_form.aspx SHAREHOLDERS INFORMATION Annual Report

118 SOCIAL REPORT TOWARDS INCLUSIVE GROWTH Aditya Birla Nuvo Limited Our Vision To actively contribute to the social and economic development of the communities in which we operate. In so doing build a better, sustainable way of life for the weaker sections of society and raise the country s human development index Mrs. Rajashree Birla, Chairperson, Aditya Birla Centre for Community Initiatives and Rural Development SOCIAL REPORT Adds Mrs. Birla, over these decades through our committed engagement, largely around our plants, all of us have laboured hard to lift the burden of poverty, from the lives of thousands. Each one of our Group Companies such as yours has played a significant role to bring in change. And together, we have managed to make a difference. Today our Group is regarded as an exemplar in the CSR domain. Our work has been well recognised. Since its inception, we at Aditya Birla Nuvo Limited have been working towards inclusive growth. The Companies Act 2013 (Act), has been, primarily introduced, to bring in inclusive growth in totality, through roping as many corporates as possible. Our focus areas are healthcare, education, sustainable livelihood, infrastructure and social reform. The Act clubs several areas under different headings in 10 buckets given below. Consequently, we have reclassified our activities as well. The first is eradicating hunger, poverty and malnutrition, preventive health care and sanitation and making available safe drinking water. Second, education continues to be a major plank. Within education, the Act includes employment enhancing vocational skills and livelihood enhancement projects. The third plank is promoting gender equality, empowering women, setting up homes and hostels for women and orphans. This sits in well with our women empowerment programmes including SHGs. Fourth, on their list is ensuring environmental sustainability, inclusive of animal welfare, agro forestry. The projects that we do with BAIFintegrated livestock development and animal welfare, water harvesting structures, nonconventional energy programmes come within its purview. Fifth on their list is protection of national heritage, art and culture, as well as promotion and development of traditional arts and handicrafts. In this regard, over the years, in a small way we have been doing this. Maybe wherever possible you can scale it up. The sixth subject in which we are engaged to some extent is training to promote rural sports. The seventh, on their agenda is the rural development projects. All of our work, by and large falls within its ambit. Other areas that the Act has specified as CSR include- measures for the benefit of armed forces veteran, war widows and their dependents, contribution to the Prime Minister s Relief Fund and other funds set up by the Central Government and lastly contribution of funds to trusts for CSR engagement and to technology incubators within academic institutes approved by the Central Government. The Act also makes it mandatory to have a CSR policy and a CSR Board level Committee in every Company. The CSR board level committee of your Company comprises of: Mrs. Rajashree Birla, Chairperson Dr. Rakesh Jain (upto 30 th June, 2014) 98 Annual Report

119 Aditya Birla Nuvo Limited SOCIAL REPORT TOWARDS INCLUSIVE GROWTH Ms. Tarjani Vakil, Independent Director Dr. (Mrs.) Pragnya Ram, Group Executive President, Corporate Communications and CSR, Permanent Invitee The CSR policy can be accessed on adityabirlanuvo.com and adityabirla.com. Highlights We pursue a project based approach with a robust implementation structure, monitoring process and a team of professionals in place at the Company units. Your Company works in 190 villages (including 8 model villages and 26 urban wards) in proximity to your Company s 6 Units across 4 states of the country. We reach out to a rural populace of 8.02 lakh. Health Care We organised 936 Rural Mobile Camps and 45 speciality Medical Camps in remote villages at Veraval, Jagdishpur, and Rishra. At these camps, over 1,93,170 persons underwent free medical checkups, availed of medicines and other diagnostic/referral facilities. Eye check up camps and Intra Ocular Lens surgery covered 5,135 patients at Veraval, Rishra, Bangalore and Jagdishpur, 1,230 Spectacles were distributed by Madura Fashion & Lifestyle, Bangalore and Indo Gulf Fertilisers, Jagdishpur. We performed 1,472 cataract operations in these camps. The Company s Skin Care Centre at Jagdishpur attended to 6,347 patients. We are pleased to mention that 42 leprosy patients have been cured completely. At mass awareness camps on TB, Leprosy and AIDS conducted at Rishra, 50,760 people were examined. The patients detected with leprosy-58, TB-38 AIDS-1 and physically disabled 188, were treated/referred to hospitals. Madura Fashion & Lifestyle, Bangalore organised a Cancer Awareness and Screening camp in collaboration with Cancer Care India, and advised 88 people. The four day camp for the differently-abled persons at Jagdishpur provided 108 beneficiaries with artificial limbs, 99 persons with callipers and 24 crutches. Mother and Child Health Care In collaboration with the District health department, 7,20,895 polio doses were administered through 603 booths in Jagdishpur, Veraval, Rishra and Halol. Over 3,660 children were immunised for other diseases. In line with the National Rural Health Mission (NRHM), 603 couples opting for planned families were supported. More than 435 adolescent girls in schools in Jagdishpur were covered under our adolescent health programmes. Safe drinking water and sanitation This year 30 Hand Pumps were repaired, benefiting 4,839 individuals at Jagdishpur and Veraval. Our unit at Jagdishpur trained 1,000 children covering 9 schools through awareness sessions on personal hygiene particularly hand wash and sanitation habits. In a campaign to spread awareness on Malaria/dengue prevention, we covered around 920 households. We aided 130 individual households with toilets at Veraval and Jagdishpur. Education Rural schools were extensively supported in the campaign for enrolment and reducing dropout of students at Jagdishpur, Veraval, Rishra, Bangalore and Halol. In this, we reached out to 108 schools and 21,852 students. In addition merit scholarships were awarded to 1,850 students. For our English coaching classes and career counselling at Veraval and Jagdishpur the response has been encouraging with the enlistment of 565 students. Uniforms, books, notebooks, writing pads, bags and stationery were distributed to 23,555 children in proximity to our plants at Bangalore, Veraval, Jagdishpur, Rishra and Halol. At various competitions and cultural events conducted at Veraval and Rishra more than 2,150 students participated. SOCIAL REPORT Annual Report

120 SOCIAL REPORT TOWARDS INCLUSIVE GROWTH Aditya Birla Nuvo Limited SOCIAL REPORT The Adult Education Centres at Jagdishpur imparted basic literacy skills to 221 rural women. Vocational training, a major focus area at the Birla Shaktiman Vocational Training Centre saw 82 students qualify in the trades of electrical course, garments designing, electronics and auto mechanic with 56 of them selected for placement. For the coming year 102 students have registered. In our Girl Child education initiatives we continue to support Kasturba Gandhi Balika Vidyalayas Residential Schools, through identification and counselling for enrolment, uniforms and safe drinking water. Currently, we are engaged in 8 schools with 701 girls at Veraval, Bangalore, Jagdishpur and Halol. We also teach them life skills like first aid training, adolescent health care and enlist them in cultural events, towards their holistic development. Sustainable Livelihood Your Company s Units are running 22 tailoring centres, empowering and providing alternate livelihood to 960 rural women at Jagdishpur, Veraval, Bangalore and Rishra. At 10 other skills training centres, 471 people received technical training in jute bag stitching, nursing, mobile repairing, fitter training and beauty parlour courses at Jagdishpur, Veraval, Bangalore and Rishra. At Rishra, 45 women members supplement their family income substantially through Jute Bag production supported by our Unit. The marketing support for the jute bags is extended by More Megastore, an Aditya Birla Group Retail Company. choose activities like starting general stores, cycle repair shops, carpentry, rickshaw driving, etc. Livestock Development Program in collaboration with BAIF Our project on Integrated Livestock Development, which facilitates artificial insemination and vaccination in collaboration with BAIF for cattle breed improvement is being run in 12 villages of Veraval. This year 39 camps were organised, for 15,208 animals. For the cattle owners of Jagdishpur and Veraval, 19 veterinary camps were held, attending 23,569 animals. Farmers Clubs In our NABARD Collaborative Project on Agriculture, initiatives for augmenting farm income through formation of farmers club at Veraval and Jagdishpur, have gained momentum. We have formed 101 Farmers Club involving 1,098 farmers. In Jagdishpur, we have 76 Farmers Club with 848 farmers and at Veraval 25 Farmers Club with 250 members. Skill training centre in collaboration with CII Unnati under STAR scheme At Madura Fashion & Lifestyle, Bangalore, skill training programmes were organised in collaboration with IL&FS. The 100 percent placement facilities to train 385 rural women in tailoring was a big draw. At Bangalore 70 day skill training programmes in retail, hospitality, beautician, office maintenance drew 124 enthusiastic participants. Rehabilitation Programme at Jagdishpur At Jagdishpur, we identified and rehabilitated 30 leprosy, cured patients in an effort to integrate them in the main stream of society. The cured are given financial aid to start small enterprises so that they become self-reliant, and in turn lead their life with dignity. Under this scheme, we give out inventory worth ` 8,000/- each to the beneficiaries to start an income generating activity that they are interested in. The person is then supposed to return 50% of the total amount at the rate of ` 100/- per month in a two to three year time frame. The beneficiaries Self Help Groups and Income Generation Across ABNL, 24 Self Help Groups largely linked with the economic schemes of NABARD, empower 264 households financially and socially. Two training programmes benefiting 41 women were organized at Jagdishpur. Here we trained the women SHG members in making paper envelop and sweet boxes. At Jagdishpur 5 camps were organized covering 17 Self Help Groups with 197 members. The SHG members were given training in savings, book keeping and ledger maintenance, conducting regular meetings, establishing small enterprise 100 Annual Report

121 Aditya Birla Nuvo Limited SOCIAL REPORT TOWARDS INCLUSIVE GROWTH etc., which would enable them to run the self help groups more efficiently. Infrastructure Development Under Infrastructure Development we are engaged in water conservation/harvesting, renewable energy (solar lights), building roads, repair of school buildings and helping the communities in which we operate. Overall, our infrastructure development projects are a boon to 20,000 people across our units. At Jagdishpur cement sheets were provided to S.B.N. Public School at our Model Village Azadpur for roofing of the rooms. More than 350 children study here. At Sithauli village in Jagdishpur our team built 100 metres of road connecting the village to the main road, a facility gain for more than 2,000 people. Tree Plantation Our units planted 19,028 saplings as a gesture in environmental thoughtfulness at our project villages and schools. The Madura Fashion & Lifestyle team has set up ECO CLUBS at Schools to motivate students to look after the planted saplings. This has ensured 100 percent survival of plants at Schools. Solar lights have been installed at Rishra for the local communities. At Jaya Shree Textiles a Solid Waste Management programme has been initiated with the help of Rishra Municipality and Japan International Cooperation Agency. The objective is to better the daily household collection system followed by the storage, composting and disposal of the waste in a scientific manner. Espousing Social Causes Through our innovative interventions we try to address social ills which are a curse. These include child labour, illiteracy, child marriages, the marginalisation and abuse of the girl child and women among others. Our unit at Bangalore provided 38,247 clothes to under privileged people at various charitable organisations including Karunashraya, Goonj, Art of Living and Bosco Mane. Besides this, Karunashraya, a hospital for cancer patients and several old age homes receive our assistance. To promote dowry less marriages, our unit at Veraval organised mass marriages for 102 couples. Uttarakhand Flood Relief Operation Madura Fashion & Lifestyle, Bangalore, in collaboration with GOONJ a Delhi based NGO, organised a relief camp to help the flood victims in Uttarakhand. The MF&L team distributed food items and other rehabilitation material to 2,500 families. Over 18,925 garments were handed over to flood victims at Uttarakhand. Our Team members were in Uttarakhand to ensure the proper distribution of relief material to the flood victims. At a different level, to provide support for the education of the needy and the deserving children for pursuing Under Graduate and Post Graduate professional courses, we have set up the A World Of Opportunities (AWOO) Foundation. The intent is to provide scholarships for the courses that leads to employment. The AWOO is a charitable trust with a single minded focus on the social cause of education of children in India. The foundation will fulfill its commitment by providing scholarships to those children who wish and have the potential to pursue quality higher education but are unable to do so for lack of resources and means. Over 8,000 employees of the Aditya Birla Group have donated a sum of ` 4.2 crores (or ` 42 million) for this very noble cause. Accolades/Awards Golden Peacock Award - The CSR function of Madura Fashion & Lifestyle won the Golden Peacock Award for Corporate Social Responsibility for the year The Award was presented to the MF&L team by the Honourable Governor of Kerala Shri Nikhil Kumar during the 8 th International CSR conference held on 17 th /18 th January, 2014 at Bangalore. SOCIAL REPORT Annual Report

122 SOCIAL REPORT TOWARDS INCLUSIVE GROWTH Aditya Birla Nuvo Limited SOCIAL REPORT The Green Tech Award - Indian Rayon s CSR team won the 3 rd Annual Green Tech CSR Award in the Silver Category for the year 2013 for their Tailoring Training Project. Our Partners/Collaborators include District Rural Development Authorities at various locations District Health departments District Panchayatiraj Institutions District Live Stock Officers District Industries Centre NABARD Indira Gandhi Eye Hospital & Research Centre, Munshiganj, Amethi. Sri Bhagwan Mahaveer Viklang Sahayata Samiti, Malviya Nagar, Jaipur, Rajasthan The Leprosy Mission India WHO District Programme Officers Sarva Shiksha Abhiyan IL&FS UNDP Narayan Netralaya, Bangalore GOONJ Bosco Mane, Bangalore Rotary International BAIF Aroni Charitable Trust Our Investments For the period April March 2014, our CSR spend is ` lakh which is 0.48% of the Net Profit of the Company for the FY In sum Our CSR work is making a difference to the lives of thousands. In our own humble way we have helped lower the level of poverty in the villages and the urban slums in proximity to our plants reaching out to 13,02,000 people through healthcare interventions, 31,094 through education, sustainable livelihood 39,557, rural infrastructure 2,60,000 and for social causes 18,855. With all of us working so whole heartedly and the Government also fully committed to inclusive growth, transparency and good governance, we can hope for a holistic transformation of our country. At the end of the day, we look forward to a time when the word poverty will be struck off the lexicon and no mention of it will be made in relation to India avers Mrs. Birla. Our Self-Help Group in action 102 Annual Report

123 Aditya Birla Nuvo Limited ENVIRONMENT REPORT SUSTAINABLE DEVELOPMENT Synergizing Growth with Responsibility It is our responsibility to see sustainability becoming one of the defining attributes of our Group. I appreciate the commitment of our businesses and their teams to sustainable development. I believe that in so far as it relates to sustainability, there is no finish line. Because the goalpost will keep moving. Therefore, our endeavour should be to constantly raise the bar and strive to match the world s best on all the metrics of sustainability measurements. - Kumar Mangalam Birla Chairman, Aditya Birla Group Our Group s Sustainability Vision as articulated by our Chairman is that, By 2017, the Aditya Birla Group endeavours to become the leading Indian conglomerate for sustainable business practices across its global operations, balancing its economic growth with environmental and societal interests. This vision provides a common guiding principle as well as an operating framework for all our businesses. In line with your Chairman s vision, your Company s management has continued to move forward by taking positive steps to raise the standard of responsible stewardship of your operations. Indian Rayon Indian Rayon is among the leaders in its key businesses - Viscose Filament Yarn and Caustic Soda. Indian Rayon has adopted sustainable development as basis on which its business must be conducted. In this regard, the management has set up a sustainability department with specialists in health and safety, environment, legal, human resources and finance to plan, monitor, execute and comply with statutory related matters. The business has achieved ISO , ISO , OHSAS , SA compliance and is working extensively on safety culture transformation. Investing in established environmental pollution control and monitoring equipment is one example of the management s commitment to managing responsibly by lowering emissions and effluent that can now be treated to higher standards prior to disposal. Further, finding a productive use for process sludge, cellulose waste, charcoal slurry and coal ash has been a primary project this year and by working with UltraTech Cement, another of the Aditya Birla Group Companies, the waste has now become a source of fuel and cementitious material for their cement kilns. Indian Rayon was selected for the prestigious 14 th Annual Greentech Platinum Category Award in Jaya Shree Textiles Jaya Shree Textiles is also committed to managing in a responsible manner. In the past year, investments in better dust reduction equipment to improve air quality, improved wastewater treatment and solid waste handling have all improved your company s performance by reducing the impacts on the environment. Jaya Shree Textiles is certified to comply with ISO 14001: Indo Gulf Fertilisers At Indo Gulf Fertilisers, the management conducted in-house training programmes related to environment protection for all its employees, contractors and for local school children. Specific investments in energy saving projects have resulted in the reduction of green house gases by 40,000 metric tonnes of CO2e per year and the ENVIRONMENT REPORT Annual Report

124 MANAGEMENT S DISCUSSION ENVIRONMENT AND REPORT ANALYSIS SUSTAINABLE DEVELOPMENT Aditya Birla Nuvo Limited Company has installed solar heaters in the canteen and guest house complex to begin the process of changing the energy matrix towards renewable energy sources. Indo Gulf Fertilizers remains in compliance with ISO-14001: Aditya Birla Insulators (ABI) Halol At ABI Halol, rainwater harvesting has been the focus this year. Rainwater is now collected across the plant via the storm drains and then fed into the local aquifer to improve the level of the water table. By installing water meters greater visibility on the use of water has been created resulting in further savings. Investments in the change from furnace oil to gas as a fuel for the kilns have reduced the emission levels and that is contributing to a cleaner environment. Further, a project to improve waste management has resulted in five tonnes of sludge per day being reused in the operations process each day reducing the need for disposal and without reducing product quality ABI Halol continues to comply with ISO 14001:2004. Your Board and management team across all the operations remain committed to a sustainable future. 104 Annual Report