Annual Report - Aditya Birla Nuvo - 2008-2009

ADITYA BIRLA NUVO LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

TO
THE SHAREHOLDERS

Dear Shareholders,

We are pleased to present the 52nd Annual Report together with the audited
accounts of your Company for the financial year ended 31st March, 2009.

Financial year 2008-09 proved to be a challenging one for the corporate
world. The economies across the globe experienced demand slowdown and
liquidity crunch which led to sharp volatility in the financial markets as
well as commodity prices. The impact on Indian industry was visible in the
second half of the financial year.

Even under this testing scenario, 'Value' businesses of your Company,
combined together, have maintained their operating profits despite the
Carbon Black business being impacted severely by unprecedented volatility
in crude oil prices. The Fertilisers business achieved its highest ever
profitability. The Rayon, Insulators and Textiles businesses posted
satisfactory results despite higher input and fuel costs prevailing during
the major part of the year and the slowdown in the textiles industry.

The Telecom and Financial Services, the key 'Growth' Businesses have
outperformed industry and enhanced market share supported by strategic
initiatives taken. These businesses together account for over 50% of your
Company's consolidated revenues.

The Telecom business doubled its operating service areas from 8 to 16 in
just three years span. In last one year itself, Idea Cellular Limited
('Idea') added five new service areas with a clear focus to become a Pan
India player.

* As a result, subscribers' base increased from 24 million to 43.02 million
with an improved all India market share at 11% compared to 9.2% one year
ago.

* Cash inflows from TMI and Providence deals made Idea an almost debt free
company, which will cushion financing of its expansion plans going forward.

In the Financial Services businesses, the thrust on expanding customer
reach and launching innovative products has helped gain significant market
share amidst slowdown woes.

* Birla Sun Life Insurance Company Limited improved its market share from
6.6% to 9% supported by 44% growth in new business premium while industry
de-grew by 3%.

* Birla Sun Life Asset Management Company Limited enhanced its market share
from 6.8% to 9.5%, growing by 31% in terms of average domestic AUM while
industry de-grew by 7%.

* Your Company has entered new business segments in the financial services
space with a vision to become a leader and role model in the financial
services sector with a broad-based and integrated business.

* Your Company acquired 76% stake in Apollo Sindhoori Capital Investments
Ltd. ('ASCIL') - a retail broking company and bought balance 50.01%
shareholding in Birla Sun Life Distribution Company Limited ('BSDL'). The
large customer base of ASCIL offers a huge opportunity to derive synergies
through cross selling. Besides, nation-wide network of ASCIL and BSDL will
be leveraged as a common distribution platform offering a bouquet of
financial products and services.

In the BPO business, revenues growth in the 'North America' region was
impaired in the second half of the year due to global slowdown.The business
initiated site rationalisation and cost control measures to reduce the
impact. As a result, the business remained positive at EBITDA level despite
site closure costs, forex loss and higher manpower costs.

In the Garments business, while expansion of retail space supported growth
in revenues, bottom-line was impacted due to new store openings and launch
of new concepts The Collective'and 'Peter England People'. Garments exports
business suffered lower capacity utilisation and forex loss due to weak
order flow and cancellation of few orders led by global slowdown.
Substantial restructuring and cost control measures are being pursued to
curtail losses and bring back profitability.



FINANCIAL PERFORMANCE:

Your Company's consolidated net income from operations grew by 15% from
Rs.11,861.1 Crores to Rs. 13,643.2 Crores supported by the Life
Insurance,Telecom, Fertilisers, Carbon Black and Garments businesses.
Afore-mentioned key strategic initiatives pushed up the consolidated
revenues of your Company though with initial strain on profitability. The
growing size of new business premium in the Life Insurance business pulled
down consolidated profitability. One-time aberration in the Carbon Black
business, start-up costs incurred for the launch of new apparel retail
stores and loss incurred in the BPO business also impacted bottom line. As
a result, your Company reported a consolidated net loss of Rs. 430.5 Crores
against a net profit of Rs. 150.8 Crores achieved last year.

The standalone net income from operations of your Company grew by 21% from
Rs. 3,953.1 Crores to Rs. 4,786.2 Crores supported by the Fertilisers,
Carbon Black and Branded Garments businesses. However, the standalone net
profit de-grew from Rs. 243.1 Crores to Rs. 137.4 Crores, largely due to
lower profitability in the Carbon Black and the Branded Garments businesses
besides higher interest costs on borrowings taken primarily to fund capital
expenditure requirements of the standalone businesses, acquisition of ASCIL
and capital infusion in the Life Insurance business.

The afore-mentioned initiatives will lay a strong foundation for future
growth of your Company and pay back well in the long run. However, to
mitigate the short term effects of the slowdown, your Company has initiated
various measures in the areas of capital expenditure rationalisation,
working capital management, cost control and asset sweating.

The business-wise performance review, outlook and strategy have been spelt
out in depth in the Management Discussion and Analysis section, which forms
part of this Annual Report.

FINANCIAL PERFORMANCE:

Rs. Crores
A B C D

Profit before Depreciation /
Amortisation and Tax 148.35 676.24 328.26 454.93

Depreciation and Amortisation 695.94 524.94 165.96 141.10

ProfhV(Loss) before Exceptional
Items and Tax (547.59) 151.30 162.30 313.83

Exceptional Gain/(Loss) (2.23) 0.73 - 0.73

Profit/(Loss) before Tax (549.82) 152.03 162.30 314.56

Provision for Taxation (Net) 75.29 125.86 24.87 71.49

Net Profit/(Loss) before Minority
Interest (625.11) 26.17 137.43 243.07

Minority Interest in the Loss of
Consolidated Subsidiaries (194.59) (124.61) - -

Net Profit/(Loss) (430.52) 150.78 137.43 243.07

Balance Brought Forward (642.48) (565.84) 21.06 16.90

Amount Transferred on change in
stake in Subsidiaries/Joint
Ventures 50.37 18.41 - -

Profit Available for
Appropriation (1022.63) (396.65) 158.49 259.97

A = On Consolidated Current Year Ended 31.03.2009
B = On Consolidated Previous Year Ended 31.03.2008
C = On Standalone Current Year Ended 31.03.2009
D = On Standalone Previous Year Ended 31.03.2008

A B C D

Appropriations:

Proposed/Interim Dividend 41.01 56.28 38.00 54.63

Corporate Tax on Dividend 7.18 9.58 4.43 9.28

General Reserve 13.75 175.00 13.75 175.00

Debenture Redemption Reserve 16.28 - 16.28 -

Special Reserve 6.55 4.97 - -

Surplus/(Deficit) Carried to
Balance Sheet (1107.40) (642.48) 86.03 21.06

Total (1022.63) (396.65) 158.49 259.97

Exceptional Items:

VRS Expenses (1.18) - - -

Gain/(Loss) on Sale of
Undertaking/Subsidiary (1.05) 0.73 - 0.73

Exceptional Gain/(Loss) (2.23) 0.73 - 0.73

A = On Consolidated Basis Current Year Ended 31.03.2009
B = On Consolidated Basis Previous Year Ended 31.03.2008
C = On Standalone Basis Current Year Ended 31.03.2009
D = On Standalone Basis Previous Year Ended 31.03.2008

DIVIDEND:

Your Directors recommend for your consideration a dividend of Rs.4/- per
Equity Share of Rs. 10/-for the year ended 31st March, 2009.

The final outgo on dividend is as under:

Rs. Crores
Current Previous
Year Year

On 9,50,09,290, fully paid-up Equity Shares of
Rs. 10/- each, @ Rs.4.00/- per share. 38.00 -

(Previous Year: Final dividend on 9,50,08,050 fully
paid-up Equity Shares of Rs. 10/- each @ Rs. 5.75/-
per Share) - 54.63

Corporate Dividend Tax 4.43 9.28

FINANCE:

Your Company raised long-term loan aggregating to Rs. 259.8 Crores by way
of foreign currency borrowings, Rs. 500 Crores by way of Non-Convertible
Debentures and Rs. 220 Crores by way of Rupee loan.

Term Loan aggregating to Rs. 185.7 Crores were repaid during the year.

HUMAN RESOURCES:

Your Company, believes that our people give us our competitive edge. So
business priorities are aligned with the aspirations of employees,
culminating in the development of an empowered and responsive human
capital. Our work environment encourages innovation and creativity and
promotes a culture that facilitates entrepreneurial activity within the
organization.

Through our strong Employer Brand, we were able to attract more than 300
employees to the Company who have become part of our competent and
committed workforce.

Your Company's Fertilisers Division, Indo Gulf Fertilisers, Jagdishpur
(IGF) and Insulator Division Aditya Birla Insulators, Rishra (ABI, Rishra)
have entered into Long Term wage agreements.

For the first time, IGF's Wage Agreement clubs 3 separate and different
settlements into one single agreement that will be in operation for a
period of 4 years i.e. 31.03.2012.

ABI, Rishra, inked a productivity linked long term agreement for 5 years
with six recognized trade unions at a bilateral level without any loss of
man days.

Your Company continued to support learning and development initiatives to
enhance the functional as well as the behavioural competencies of our
people. At 'Gyanodaya' - The Aditya Birla Institute of Management Learning,
over 210 executives were enlisted for various high quality learning
interventions. These programs supplemented with a combination of
developmental assignments, classroom and web based training, have enabled
our people to continuously learn, develop and grow.

Our performance management system is primarily based on competencies and
values. We closely monitor growth and development of talent in your
Company, to align personal aspirations with the organisational purpose.

CONSOLDATED FINANCIAL RESULTS:

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.

CORPORATE GOVERNANCE:

Your Directors reaffirm their commitment to good corporate governance
practices and adheres to all the major stipulations laid down by the SEBI
Corporate Governance Practices.

This Annual Report contains a section on Corporate Governance highlighting
adherence to the SEBI Code on Corporate Governance.

Your Company's Statutory Auditors' Certificate dated 28th April, 2009 in
terms of Clause 49 of the Stock Exchange Listing Agreement is annexed to
(Annexure A) and forms part of the Directors' Report.

As required under Section 217(2AA) of the Companies Act, 1956, your
Directors confirm that:

i) In the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures;

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:

During the year, the following companies became subsidiaries of the
Company:

1) Aditya Birla Financial Services Private Ltd.,

2) Aditya Birla Capital Advisors Private Ltd.,

3) Aditya Birla Securities Private Ltd.,

4) Aditya Birla Customer Services Private Ltd.,

5) Aditya Birla Shared Financial Services Ltd.,

6) Apollo Sindhoori Capital Investments Ltd.,

7) Apollo Sindhoori Commodities Trading Ltd.,

8) Birla Sun Life Distribution Company Ltd. and

9) BSDL Insurance Advisory Services Ltd.

During the year, Aditya Birla Securities Private Ltd. and BGFL Corporate
Finance Private Ltd. ceased to be subsidiaries of your Company.

To provide a brand image of the Group in the retail business, the name of
Crafted Clothing Private Ltd. has been changed to MG Lifestyle Clothing
Company Private Ltd. and Minacs Worldwide Inc. was changed to Aditya Birla
Minacs Worldwide Inc.

The Company has made an application to the Central Government for seeking
exemption under Section 212(8) of the Companies Act, 1956, from attaching a
copy of the Balance Sheet, Profit and Loss Account, Report of the Board of
Directors and the report of the Auditors of all the subsidiary companies,
which will not be attached with the financial statements of your Company.
However, these documents will be made available to the investors of the
Company and of the subsidiary companies, who seek such information at any
point of time. The Annual Accounts of the subsidiary companies are open for
inspection by any investor at the Registered Office of the Company and of
the concerned subsidiary Company. Any shareholder of the Company, who
wishes 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 SCHEME (ESOS):

As mentioned last year, in terms of ESOS - 2006, the ESOS Compensation
Committee had granted 3,29,373 Stock Options to the Whole-time Directors
and employees, including 10,770 Options to some employees of the Subsidiary
Companies, in two tranches. Out of the total options granted, 20,190 and
43,400 options lapsed out of the options granted in first and second
tranche respectively. As on 31st March, 2009, 2,65,783 options are
outstanding, which are convertible into shares on exercise of option for
conversion as per schedule of vesting.

Details of the options issued under ESOS - 2006, as also the disclosures in
compliance with Clause 12 of Securities and Exchange Board of India
(Employees Stock Option Scheme) Guidelines, 1999, are set out in the
Annexure B to this Report.

FIXED DEPOSITS:

Your Company was accepting fixed deposits from the employees. During the
year, acceptance of such fixed deposits has been discontinued from January
2009 onwards. The total outstanding deposits are Rs. 3.51 Crores as at 31st
March, 2009.

The erstwhile Birla Global Finance Ltd. (since amalgamated with the
Company) had accepted deposits from the public till 24th July, 2000. Of the
total matured fixed deposits, as on 31st March, 2009, there were unclaimed
fixed deposits of Rs. 4.66 lacs.These unclaimed deposits are kept in a
separate earmarked bank account.

PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956:

The 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 members 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 the Company.

DIRECTORS:

Following are the changes in the Directorate of the Company:-

* Mr. Arun Maira was appointed on the Board of the Company as an Additional
and Independent Director, at the Board Meeting held on 4th August, 2008.
Dr. Bharat K. Singh was re-appointed as Managing Director of the Company
for a term of 1 year expiring on 31st October, 2009. He has expressed his
desire to retire from the service on 30th June, 2009.

* Dr. Rakesh Jain, Whole-time Director of the Company was re-designated as
the Joint Managing Director w.e.f. 17th December, 2008. The Board has re-
appointed Dr. Rakesh Jain as Managing Director of the Company w.e.f. 1st
July, 2009, on retirement of Dr. Singh.

* Mr. Vikram Rao and Mr. Adesh Gupta, Whole-time Directors of the Company
resigned w.e.f. 1st February, 2009 and 28th April, 2009, respectively.

* Mr. Pranab Barua has been appointed as Whole-time Director of the Company
in place of Mr. Vikram Rao.

The Board places on record its sincere appreciation of the valuable
services rendered by Dr. Bharat K. Singh as Managing Director and Mr.
Vikram Rao and Mr. Adesh Gupta as Whole-time Director(s) of the Company
during their tenure.

Mr. Kumar Mangalam Birla, Mr. B.L Shah and Mr. B.R. Gupta, retire from
office by rotation, and being eligible, offer themselves for re-appointment
at the ensuing Annual General Meeting.

Resolutions seeking your approval for the appointment of Mr. Arun Maira,
Dr. Rakesh Jain and Mr. Pranab Barua have been incorporated in the Notice
of the forthcoming Annual General Meeting along with brief details about
them.

AWARDS AND RECOGNITION:

Your Company has been the proud recipient of the following awards and
recognitions:

* INDIAN RAYON DIVISION

* National Energy Conservation Award in appreciation of achievements in
Textiles Sector from Ministry of Power, New Delhi.

* Gold Award in Chemical Sector for outstanding achievement in Environment
Management from Greentech Foundation, Goa.

* ISO 14001: 2004 Certificate for implementation of Excellent Environment
Management System awarded by Intertek Systems Inc.

* RC 14001: 2005 Certificate for implementation of Excellent Environment,
Health, Safety and Responsible Care Management awarded by Underwriters
Laboratories Inc.

* CIO 100 2008 Award for Information Technology Invocation awarded by IDG,
CIO Magazine.

* CIO Green Edge Award for Operational and Strategic Excellence in
Information Technology awarded by IDG, CIO Magazine.

* JAYASHREE TEXTILES DIVISION:

* IMC Ramakrishna Bajaj National Quality Award for 'Performance Excellence'
in the Manufacturing Category.

* CARBON BLACK DIVISION:

* ISO 27001 Certificate for the effective implementation of Information
Security Management System awarded by BSI Management Systems, India.

* Award for 'Par Excellence' awarded by Quality Circle Forum of India,
Kanpur Chapter.

* MADURA GARMENTS DIVISION:

* THE 'Global Youth Marketing Award' for Most Admired Youth Women's Wear
Brand for Van Heusen.

* Clothing Manufacturers'Association of India Awards:

> 'Allen Solly' was adjudged as the Best Women's Wear Brand under Western
Wear category.

> Madura Garments - Most Admired Company of the Year.

> Madura Garments - Clothing Company of the Year.

* Images Fashion Awards:

> 'Louis Philippe' was adjudged as the Most Admired Wrinkle Free Brand.

> 'The Collective' was adjudged as the Most Admired Fashion Concept.

> 'Allen Solly' was adjudged as the Most Admired Men's Wear Brand.

> 'Van Heusen' was adjudged as the Most Admired Women's Wear Brand.

* INDO-GULF FERTILISERS:

* ISO/IEC 27001:2005 Certificate for Effective Management Information
Security in overall operations.

* INSULATORS DIVISION:

* The Golden Peacock Environment Management Award-2008 in Environment
Category awarded by Institute of Directors.

* IMC Ramakrishna Bajaj National Quality Award-2008 in Quality Management
Category awarded by Indian Merchants Chambers.

* 'Excellent and Distinguished'Category Award-2008 in Quality Management at
National Convention on Quality Circle (NCQC) awarded by Quality Circle
Forum of India (GCFI).

* ISO 9001: 2000 Certificate for Quality Management System awarded by BSI
Management System, India.

* ISO 14001: 2004 Certificate for Environmental Management System awarded
by BSI Management Systems, India.

AUDITORS:

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, 1956.

Your Directors request you to appoint Auditors for the current year as set
out in the accompanying notice of the Annual General Meeting.

APPRECIATION:

Your Directors take this opportunity to express their sincere appreciation
for the excellent support and cooperation extended by the shareholders,
customers, suppliers, bankers and other business associates. Your Directors
gratefully acknowledge the ongoing co-operation and support provided by
Central and State Governments and all Regulatory bodies.

Your Directors place on record their deep appreciation for the exemplary
contribution made by employees at all levels. Their dedicated efforts and
enthusiasm have been pivotal to your Company's growth.

For and on behalf of the Board
Mumbai Chairman
28th April, 2009

ANNEXURE 'B'TO THE DIRECTORS' REPORT

Disclosure pursuant to the provisions of the Securities and Exchange Board
of India (Employee Stock Option Scheme) Guidelines, 1999.

Nature of Disclosure Particulars

a) Options granted 329,373

b) The pricing formula Tranche I:

The exercise price was determined by
averaging the daily closing price of the
Company's equity shares during the 7
days immediately preceding the date of
grant and discounting it by 10%.
Exercise price - Rs. 1,180 per option).

Tranche II:

The exercise price was the closing
market price, prior to the date of
grant. Exercise price - Rs.1,802 per
option.

c) Options vested 68,976

d) Options exercised NIL

e) The total number of shares
arising as a result of exercise
of options NIL

f) Options lapsed 60,230

g) Variation of terms of options NIL

h) Money realised by exercise
of options NIL

i) Total number of options in
force 2,65,783

j) Employee-wise details of
options granted:

i) Senior Managerial Personnel: 1. Mr. Vikram Rao* : 63,200
2. Mr. Rakesh Jain : 13,470
3. Mr. K.K. Maheshwari : 63,200
4. Mr. Adesh Gupta : 8,420
5. Dr. Bharat K. Singh : 20,200
* Transferred W.e.f. 1st
February, 2009
ii) Any other employee who
received a grant in any one
year of option amounting to 5%
or more of options granted
during that year NIL

iii) Identified employees who
were granted option, during
any one year, equal to or
exceeding 1% of the issued
capital (excluding outstanding
warrants and conversions) of
the Company at the time of grant NIL

k) Diluted Earnings Per Share NA

l) Difference between the Rs. 6.23 Crs.
employee compensation cost,
computed using the intrinsic
value of the stock options, and
the employee compensation cost
that shall have been
recognised, if the fair value
of the options was used.

The impact of this difference The effect of adopting the fair value on
on profits and on EPS of the the net income and earnings per share
Company below: for 2008-09 is as presented

Particulars Rs. Crores

Net Income 137.43

Add: Intrinsic Value 1.29
Compensation Cost

Less: Fair Value 7.52
Compensation Cost

Adjusted Net Income 131.20

Earnings Per Share Basic Diluted
(In Rs.) (In Rs.)
As reported : 14.46 14.46

As adjusted : 13.80 13.80

m) (i) Weighted-average exercise Options granted under Tranche II
prices and weighted-average fair
values of options whose exercise Weighted-average exercise price
price equals the market price of (Rs.): 1,802
the stock
Weighted-average fair value (Rs.):
825.67


(ii) Weighted-average exercise Options granted under Tranche I
prices and weighted-average fair
values of options whose exercise Weighted-average exercise price
price is less than the market (Rs.): 1,180
price of the stock
Weighted-average fair value (Rs.):
591.53

(iii) Weighted-average exercise Nil
prices and weighted-average fair
values of options whose exercise
exceeds the market price of the
stock

n) A description of the method
and significant assumptions used
during the year to estimate the
fair values of options,
including the following
weighted-average information:

(i) risk-free interest rate (%) 7.78

(ii) expected life (No. of years) 5

(iii) expected volatility (%) 38

(iv) dividend yield (%) 0.52

(v) the price of the underlying Tranche I : Rs. 1,283
share in the market at the time
of option grant Tranche II : Rs. 1,960

ANNEXURE 'C' TO DIRECTORS' REPORT:

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
31st March, 2009.

A. CONSERVATION OF ENERGY:

a) Energy Conservation Measures Taken:

In line with the Company's declared commitment towards conservation of
natural resources, all business units 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 the direction are as
under:

i) Rayon Division:

* Connected Coning Machine Motors of Textile Department to Star.

* Modified Cooling Water System to have same cooling effect with reduced
consumption of energy in Cooling Tower.

* Reduced compressed air pressure.

* Stopped loss of conditioned air from Textile Department.

* Reduced the running hours of vapour absorption machines by optimising the
process temperature.

ii) Carbon Black Division:

* Replaced single 700KW Process Air Blower (PAB) and single 1000KW PAB with
two 700KW PAB.

* Introduced new system of controlling the instrument air pressure.

* Replaced existing mixture with mixture of Weak Base Anion and Strong Base
Anion Resin.

* Conserved and Recycled effluent water from Demineralization Plant and
Cooling Tower for plant washing purpose.

iii) Textiles Division:

* Installed Variable Frequency Drive for Humidification Tower.

* Installed Condensate Water Recovery System in Process House.

* Installed of New Air Compressor in place of Old inefficient Air
Compressor.

iv) Insulators Division:

* Replaced existing HP motors with HP motors attached with AC Drives and
modified Running of Agitators and Pressure Switch in Slip House.

* Installed Variable Frequency Drives and implemented timer-based operation
of high energy consuming equipments.

* Fitted Electronics Ballast in tube lights, timers for street lights and
Level Controlling Switch.

* Installed AC Drives, Exhaust Fans and Ballast Air Fan at the plant.

* Utilised Hot Air from New Tunnel Kiln to Assembly Booth.

* Optimised the Compressor efficiency for Plant Process Air.

* Converted Kilns from Kerosene Firing and Oil Firing to Coal Gas Firing
and to Natural Gas Firing respectively.

* Replaced tube lights by CFL in staff colony.

v) Fertilisers Division:

* Initiated Performance Evaluation System for various manufacturing
equipments.

b) Additional Investments and Proposals, if any, being implemented for
reduction of consumption of Energy.

i) Rayon Division:

* Installation of Variable Frequency Drive in Air-washer fans.

* Installation of Energy Efficient Screw Chiller to stop reciprocating type
chillers.

* Installation of energy efficient FRP Fans in place of old/inefficient
Cooling Tower Fans.

* Installation of Energy Efficient Pumps in place of old/less efficient
Chilled and Cooling Water Pumps.

* Replacement of Diaphragm Valve with Ball Valve in After Treatment plant.

ii) Carbon Black Division:

* Installation of Energy Efficient Lighting.

* Introduction of Zero Water Discharge Project.

iii) Textiles Division:

* Conversion of Autoclave from oil to electrical heating system.

iv) Insulators Division:

* Installation of Electronic Ballast.

* Installation of timers for controlling running hours of the equipments.

* Installation of AC drives.

* Installation of Recuperator for Heat Recovery.

* Provision for installation of Solar Water Heating System.

* Steps to be taken for rationalisation of motor capacity.

* Undertaking of process of Gas Conversion.

v) Fertilizers Division:

* In process of finalising Energy Saving and Techno-Economic viable
schemes.

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 conservations measures taken in Rayon Division have resulted in
energy saving and consequent decrease in the cost of production.

The energy conservation measures taken in Carbon Black Division have
resulted into energy saving and consequent reduction in cost of production.

The above measures taken in Insulators Division have resulted into energy
saving, reduction in power consumption and power loss, and consequent
reduction in cost of production.

The Energy conservation measures taken by Fertilisers Division have
resulted in reducing the energy consumption in the fertiliser complex.
Besides these measures, have led to reduction in consumption of fossil fuel
(natural gas/naphtha) and consequential reduction in C02 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:

As per annexure attached.

B. TECHNOLOGY ABSORPTION:

Efforts made in Technology Absorption - as per Form B given below:

Form - B

1. RESEARCH AND DEVELOPMENT:

a) Specific areas in which research & development (R&D) is being carried
out:

i) Rayon Division:

* Introduced Project 'Lakshya' to establish capability in terms of plant
operations and fine tuned process parameters to achieve consistent quality.

* Initiated the process of identifying the key technical parameters of
different segments and joint projects with customers to improve upon the
intrinsic quality of the yarn.

* Experimented with different recipes for Viscose for improving quality and
optimising composition.

* Enhanced intrinsic properties of the yarn on pilot machine by optimising
the spinning machine configuration.

* Developed mono filament yarn by splitting of multi-filament yarn.

* Low temperature drying by dehumidification of the inlet air in Cake
Dryers of After Treatment Department.

* Installed 6 broken Filament Detector on trial positions on one of the
coning machines.

* Recovered Zinc and Sodium Sulphate through Nano Filtration.

ii) Insulators Division:

* Focused activities in area of New Product Development (High Rating
Product).

* Modified several product design.

* Unified body composition of Hollow and Solid Core Products.

* Introduced Pitcher in unified body.

* Developed Special Gaze for reglazing of insulators.

* Developed Cost Effective Commercial Body to cater lower value products.

iii) Fertilisers Division:

* Development activities towards Energy Conservation, Waste Recycling,
Pollution Control and Quality Improvement.

* Focused activities in the areas of new Product development, i.e.,
Zincated, Boronated and Sulfonated Urea.

b) Benefits derived as a result of the above R&D:

The research and development activities, carried out in Rayon Division,
have lead to Improvement in process and productive capacity, better quality
and marketability of products, development of new range of products, value
addition in the existing products, enhancement of product range, reduced
effluent load, improved process control, improved customer satisfaction,
development of eco-friendly products and reduction of cost of production,
improved Company's image and higher realisation.

The research and development activities Insulators Division have resulted
in better material and scrap movement, power consumption, increase in
mechanical strength and conversion of rejected/defect pieces to good pieces
and also in cost optimisation along with quality consistency.

In the year 2008-09, Indo Gulf Fertilisers produced of value added product,
Neem Coated Urea, for farmers and marketed 2.08 Lacs MT of Neem Coated urea
under the brand name'KRISHIDEV' In a very short time, the Company
established a leadership in the field of Neem Coated Area.

c) Future Plan of Action:

(i) Rayon Division:

* Enhance colour yarn quality.

* Efforts towards reduction of energy and consumption ratios of various
components of production.

* Improvement in intrinsic quality of yarn.

* Reduction in energy consumption.

* Development of specialty yarn.

(ii) Carbon Black Division

* Research & Development activities in the field of carbon black
application in industry like Ink, Paint and Plastics.

(iii) Insulators Division:

* Using ETP Cake in manufacturing of Ball Mill Lining.

* Using Coarse Alumina in order to reduce cost.

* Unification of brown and grey glaze to optimise firing atmosphere.

(iv) Fertilisers Division

* Continuous Research & Development activities in area of New Product
Development.

* To achieve excellence in producing and marketing value added products.

* Initiation of Project in association with NT, Kanpur, for the removal of
Ammonia, Urea and Carbon dioxide from Ammonia/Urea Process Condensate using
novel membrane techniques.

d) Expenditure on R&D:

i) Capital Expenditure - Rs. 17.00 Lacs

ii) Recurring Expenditure - Rs. 179.70 Lacs

iii) Total - Rs. 196.70 Lacs

iv) Total R&D Expenditure as a percentage of total turnover 0.04%.

2. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

a) Efforts in brief, made towards technology absorption, adaptation and
innovation:

i) Rayon Division:

* Activities carried out for Optimisation of spinning process to improve
the physical properties of the yarn through learning from other Spinners.

* Developed new dye combinations to improve the coloured yarn quality with
the help of Dye Suppliers.

* Experimented various recipes of Viscose on the Pilot Viscose plant and
Spinning Machines.

* Implemented various configurations on spinning Machines to improve the
intrinsic properties.

ii) Insulators Division:

* Installed of Humidification System during Blank Turning Operations.

* Installed necessary equipments and m/c for producing polymer insulators.

iii) Fertilisers Division:

* Initiated Project in association with NT, Kanpur, for the removal of
Ammonia, Urea and Carbon dioxide from Ammonia/Urea Process Condensate using
novel membrane techniques.

* Continued efforts in preparation of steam, power and material balances
and to check on the actual performance against design.

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 imported during last five years : NIL

* Has Technology been fully absorbed : Not Applicable

C. FOREIGN EXCHANGE EARNING AND OUTGO:

The information on foreign exchange earnings and outgo is contained in
Schedule 19 and the annexure thereto.

Form-A

Form for disclosure of particulars with respect to conservation of energy.

(A) Power and Fuel Consumption:

Current Previous
1. Electricity Units Year Year

(A) Purchased - Units KWH in Lacs 986.23 935.11

Total Amount Rs. in Lacs 4007.81 3889.26

Rate per Unit Rs. 4.06 4.16

(B) Own Generation:

(i) Through Diesel Generator -
Units KWH in Lacs 200.31 210.11

Unit per Ltr. of Diesel Oil - 2.30 2.56

Cost Per Unit Rs. 8.44 7.34

(ii) Through Steam Turbine /
Generator - Units KWH in Lacs 3859.43 3803.47

Unit per ton of steam coal - 0.80 0.77

Cost Per Unit Rs. 2.75 2.39

(iii) Through Gas Turbine MWH 177060.60 155673.10

Natural Gas + Naphtha KWH/MCAL 551.73 518.00

Cost per unit Rs./KWH 4.77 3.14

2. Coal (Grade B, C and D):

Quantity '000 Tonnes 261.82 262.69

Total Cost Rs. in Lacs 10626.06 8171.89

Average Rate Rs. per tonne 4058.59 3110.84

3. Furnace Oil:

Quantity K. Ltrs. 12032.96 12409.54

Total Amount Rs. in Lacs 3338.63 3102.39

Average Rate Rs. per K. Ltr 27745.73 25000.05

4. Others/Internal generation:

(i) LDO:

Quantity K. Ltrs. 175.00 92.21

Total Amount Rs. in Lacs 67.87 27.07

Average Rate Rs. per K. Ltr 38782.86 29356.58

(ii) NG APM/JV PMT/RLNG/SPOT
(Power & Steam):

Quantity '000 Sm3 111465.31 106898.02

Total Amount Rs. in Lacs 21505.03 13409.02

Average Rate Rs./1000 Sm3 19293.02 12543.75

(iii) Naphtha (Power & Steam):

Quantity MT 25511.95 10934.60

Total Amount Rs./Lacs 9615.98 3910.65

Average Rate Rs./MT 37692.10 35764.00

(iv) H.S.D:

Quantity MT 2633.99 8.92

Total Amount Rs./Lacs 1256.35 2.85

Average Rate Rs./MT 47697.58 31953.00

(v) SKO/C9P/FUELAD/PX SLOP /
Sludge Oil:

Quantity K. Ltrs 6721.55 8718.26

Total Amount Rs./Lacs 2138.97 2194.77

Average Rate Rs. per K. Ltr 31822.57 25174.40

(vi) Coal Gas:

Quantity Therm 650919.00 129167.00

Total Amount Rs./Lacs 317.70 56.02

Average Rate Rs. per Therm 48.81 43.37

(vii) Natural Gas:

Quantity SCM 182010.00 0.00

Total Amount Rs./Lacs 31.91 0.00

Average Rate Rs. per SCM 17.53 0.00

(B) Consumption per Unit of
Production: Production Current Previous
Unit Year Year

1. Electricity (KWH):

Viscose Filament Rayon Yarn MT 4102.00 4246.00

Other Yarns (Average) MT 6805.20 6803.00

Caustic Soda MT 2423.00 2419.00

Fabrics '000 Mtrs. 1889.20 1593.30

Carbon Black MT 451.90 442.50

Urea MT 162.65 168.07

Insulators MT 480.00 442.00

2. Furnace Oil (Kilo Ltr.):

Viscose Filament Rayon Yarn MT 0.20 0.19

Other Yarns MT 70.90 68.00

Insulators MT 0.28 0.32

3. Coal (Grade B, C and D):

Viscose Filament Rayon Yarn MT 3.17 3.46

Other Yarns MT 586.30 746.00

Fabrics '000 Mtrs. 8.40 4.80

4. Others/Internal generation:

(i) LDO:

Viscose Filament Rayon Yarn MT 0.01 0.01

(ii) HSD:

Urea Kg. 0.02 0.01

Insulators MT 0.24 0.00

(iii) APMG/JV PMT/SPOT/RLNG
(Power & Steam)@ Sm3 103.99 121.34

(iv) Naphtha (Power & Steam) @ Kg. 23.84 12.41

(v) SKO/C9 Plus/PX SLOP Oil # MT 0.65 0.81

(vi) Natural Gas # SCM 322.69 0.00

(vii) Coal Gas # MT 29.75 38.95

@ Relates to production of Urea by Indo Gulf Fertilisers, a division of the
Company.

# Relates to production of Insulators by Aditya Birla Insulators, a
division of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC OVERVIEW:

The financial year 2008-09 was marked with the advent of recession across
the economies around the world coupled with liquidity and credit crisis
which led to extreme volatility in the financial markets and the commodity
prices. Indian industry has been impacted by these macro-economic factors,
especially during the second half of the year, although the extent was
milder compared to the developed economies. Despite the global economic
slowdown, India's gross domestic product ('GDP') managed to grow at 6.7%
which remains one of the highest growth rates in the world.

STRATEGIC MOVES:

Your Company continued to pursue distinct strategic initiatives across its
businesses to fortify their presence and build a strong foundation for
future growth, in line with its vision to become a premium conglomerate
with market leadership across businesses delivering superior value to
shareholders on a sustained basis':

With the acquisition of Spice Communications Limited ('Spice') that
operated in Punjab and Karnataka service areas and with the roll out of
operations in Mumbai, Orissa and Bihar (including Jharkhand), Idea Cellular
Limited ('Idea') extended its operations to 16 service areas. Spice will be
merged with Idea after receiving the court order.

Besides gaining significant market share in the Life Insurance and the
Asset Management businesses, your Company expanded its footprint in the
financial services space (a) with the acquisition of 76% stake in Apollo
Sindhoori Capital Investments Limited ('ASCIL') - a retail broking company,
and (b) with an entry in the private equity business.

Your Company bought the balance 50.01% stake in Birla Sun Life Distribution
Company Limited ('BSDL'). Consequently, BSDL became its wholly owned
subsidiary w.e.f. 31(st) March, 2009. BSDL along with ASCIL will provide a
common distribution platform to the financial services businesses of your
Company to strengthen its position as an integrated and broad based
manufacturer and distributor of financial products.

Your Company launched two new apparel retailing concepts during the year.
Five family stores were opened under the brand Peter England People'
catering to menswear, womenswear as well as kidswear segments. One men's
exclusive store was launched under the brand The Collective' offering
various reputed international brands under one roof.

The BPO business is expanding its delivery capacities in India to serve the
growing telecom and financial services sectors.

To integrate IT services business as a back end solution provider for the
BPO business, PSI Data Systems has been de-listed from stock exchange after
getting required approvals.

To capture the power sector growth, your Company has expanded the
manufacturing capacity of porcelain insulators by 10,000 tons per annum
('TPA') in April 2009 to reach a total capacity of 48,800 TPA, besides
foraying in composite insulators. Both are currently under trial run.

The Rayon business raised its caustic soda manufacturing capacity from 225
tons per day ('TPD') to 250 TPD in December 2008.

The Carbon Black business is targeting to expand its capacity by 75,000 TPA
by March 2010.

As a significant step towards future growth, the Fertilisers business has
repositioned itself as a Complete agri-solution provider', offering
farmers a wide range of products and services right from sowing to
harvesting.

To enlarge size of high margin retail segment, the Textiles business
launched nine exclusive brand outlets under the brand Linen Club', without
incurring any capital expenditure under the buy and sell mode.

CONSOLIDATED FINANCIAL PERFORMANCE:

Rs. Crores
Profit and Loss Account 2008-09 2007-08

Net Income from Operations 13,643.2 11,861.1

Other Income 167.3 74.3

Operating Profit (PBDIT) 772.5 1,101.3

Net Interest 624.1 425.0

Depreciation 695.9 524.9

Profit/(Loss) before Tax and Exceptional Items (547.6) 151.3

Exceptional Gain/(Loss) (2.2) 0.7

Profit/(Loss) before Tax (549.8) 152.0

Provision for Taxation (Net) 75.3 125.9

Net Profit/(Loss) before Minority Interest (625.1) 26.2

Less : Minority Interest (194.6) (124.6)

Net Profit/(Loss) after Minority Interest (430.5) 150.8

Balance Sheet 2008-09 2007-08

Net Worth 5,894.4 4,032.9

Total Debts 8,894.0 6,647.9

Minority Interest 179.2 174.4

Deferred Tax Liability 214.0 226.2

Capital Employed 15,181.6 11,081.3

Your Company's consolidated net income from operations ('Revenues')
registered 15% year-on-year growth. The Telecom, Life Insurance, Carbon
Black, Fertilisers and Garments businesses were the major contributors.
Revenues from its subsidiaries and joint ventures, where your Company has
made substantial investments in the past, grew by 12% from Rs. 7,908 Crores
in the previous year to Rs. 8,857 Crores. The Growth' businesses
contributed 72% to the consolidated revenues.

The Investment phase of the Growth' businesses coupled with the impact of
economic slowdown on few businesses constrained profitability :

While the Company grew its consolidated revenues, profitability was
strained due to:

The gestating impact of the growth initiatives bunched together, viz.,

* Launch of new service areas in the Telecom business,

* Launch of large format Peter England People' and The Collective' stores
besides opening more than 90 exclusive brand outlets in the Garments
business, and

* Capital infusion to fund the growth of the Life Insurance business and
investments made for the acquisition of ASCIL.

Growing size of new business premium in the Life Insurance business:

* In accordance with the accounting policy in the life insurance business,
all costs relating to the acquisition of new customers are charged as an
expense in the year in which they are incurred, whilst premium income
accrues over the policy premium paying period. Therefore, the expenses
incurred in relation to the new business premium typically exceed the
income received from such premium during the first year.

The global economic slowdown impacting Indian industry and few of the
businesses of your Company as well:

* The carbon black industry was affected by the sharp volatility in the
crude oil prices and slowdown in demand from the tyre industry.

* The domestic garments industry witnessed lower consumer footfalls and
higher discounting while garments exports industry faced forex loss and
weak order flow.

* The BPO business of your Company was impacted by the site closure costs
and forex loss. To achieve savings in overheads through sites
rationalisation, three sites were consolidated in Canada by shifting their
business to more cost effective sites.

As a result, your Company reported a consolidated net loss of Rs. 430.5
Crores against consolidated net profit of Rs. 150.8 Crores attained in the
previous year.

While with the continuous pursuit of the strategic initiatives, your
Company is well positioned to emerge stronger in the long run; it has
initiated various measures to meet the short term challenges laid down by
the slowdown:

Your Company has re-aligned its capital expenditure plans to match the
growth outlook. In the Life Insurance and the Garments businesses, thrust
is on achieving improved sales from existing distribution set up. Besides
these, project activities for Greenfield expansion in the Carbon Black
business will be realigned to match commencement of production with the
demand revival.

Your Company has initiated tight working capital management and cost
control measures across the businesses.

The business-wise performance and outlook follows.

GROWTH BUSINESSES:

TELECOM (IDEA CELLULAR LIMITED):
Rs. Crores

2008-09 2007-08

Subscribers (Nos. in Millions) { 13 service areas 38.89 24.00
{ Punjab & Karnataka 4.13 -

43.02 24.00

Pan India Market Share (%) 11.0% 9.2%

Net Income from Operations 10,125.2 6,720.0

PBDIT 3,049.6 2,375.7

PBIT 1,645.7 1,498.8

PAT 900.9 1,042.3

Capital Employed 22,745.1 10,060.0

ROACE (%) 10.0% 18.2%

Nuvo's Investment 2,355.8 2,355.8

Nuvo's shareholding at the year end (%) 27.02% 31.78%

Moving towards Pan India Presence:

Idea Cellular Limited ('Idea') took a big leap towards achieving Pan India
presence. With the acquisition of 41.09% stake in Spice Communications
Limited ('Spice'), Idea added Punjab and Karnataka service areas during the
year. Idea has consolidated the financial operations of Spice at 41.09%,
w.e.f. 16(th) October, 2008. Spice will be merged with Idea subject to the
court order and other approvals.

Idea launched operations in Mumbai, Bihar (including Jharkhand) and Orissa
service areas in August 2008, October 2008 and April 2009 respectively.
Currently operating in 16 service areas and with spectrum allocated for
remaining service areas, Idea is targeting to achieve Pan India presence
through planned roll out of remaining six service areas by the end of the
calendar year 2009.

Financial Position Strengthened:

In August 2008, Idea garnered a sum of Rs. 7,294.5 Crores through issue of
464.73 million equity shares to TMI Mauritius Limited ('TMI') at a price of
Rs. 156.96 per share. Consequently, the shareholding of your Company in
Idea got reduced to 27.02% from earlier 31.78%. The Aditya Birla Group of
companies including your Company now own 49.13% stake in Idea.

Idea, through its subsidiary Aditya Birla Telecom Limited ('ABTL') entered
into a joint venture agreement with Bharti Infratel Limited and Vodafone
Essar Limited in a ratio of 16:42:42 respectively, to form Indus Towers
Limited, a company which will offer passive infrastructure services in 15
service areas in India to telecom operators. In December 2008, an affiliate
of Providence Equity Partners invested Rs. 2,098 Crores in ABTL by way of
subscription to compulsory convertible preference shares.

Cash inflows from TMI & Providence deals will act as a cushion for
financing roll out in the remaining service areas, expansion in the
existing service areas and participating in the proposed 3G spectrum
auction. As on 31(st) March, 2009, the net debt to equity ratio (net of
cash and cash equivalents of Rs. 5,131.6 Crores) stood at 0.27.

Performance Review:

Idea, one of the largest cellular operators in India, added more than 19
million subscribers to reach 43.02 million subscribers (including Punjab
and Karnataka service areas) as on 31(st) March, 2009. Idea improved its
all India market share considerably from 9.2% to 11%. In terms of combined
subscribers base in its eight established service areas - Andhra Pradesh,
Delhi, Gujarat, Haryana, Kerala, Madhya Pradesh & Chattisgarh, Maharashtra
& Goa, and Uttar Pradesh (West) - Idea ranks second with 19.5% market share
that truly reflect its brand strength. (Source: TRAI, www.trai.gov.in)

Idea's net income from operations grew significantly by 51% supported by
growth in its subscribers' base. Operating profit (PBDIT) rose by 28%
despite start-up losses and brand promotion costs in Mumbai and Bihar
(including Jharkhand) service areas. Depreciation and interest costs
increased substantially due to new roll outs, expansion in existing service
areas and proportionate consolidation of Spice and Indus Towers; the full
benefit of which will accrue going forward with the increase in
subscribers' base, revenues and profitability. As a result, the net profit
decreased to Rs. 900.9 Crores vis-a-vis Rs. 1,042.3 Crores earned in the
last year. Return on average capital employed ('ROACE') is lower at 10% due
to heavy capital employed towards new roll outs and spice acquisition; the
full benefit of which will accrue in the coming years.

Outlook:

The outlook for the telecom sector continues to be positive. The Indian
Cellular industry reached 391.76 million subscribers as on 31(st) March,
2009, growing year on year by 50%, one of the fastest growth rates in the
world. India, being the second largest population centre and the second
largest wireless network after China, has a potential to grow rapidly in
the telecom sector considering lower tele-density in India at 36.98%.
(Source: TRAI, www.trai.gov.in)

Idea is targeting to become a Pan India player by the end of the calendar
year 2009. With a strengthened balance sheet, Idea is well positioned to
fund its growth plans and participate in 3G auction. Pan India presence
will drive economies of scale and operational synergies for Idea, which is
equipped to emerge competitively stronger in the years to come.

FINANCIAL SERVICES:

The financial services sector in India has high growth potential. A fast
growing economy, large population, growing middle class, high rate of
savings, low penetration and increasing awareness towards financial
planning is expected to fuel the growth of the savings, protection and
investment products in India. Besides this, the growth in income of
households, particularly in tier II and III cities, offers ample scope for
financial services products.

The Financial Services business of your Company is not only improving its
market positioning in existing business segments, but also expanding its
footprint in new business segments with a vision to become a leader and
role model in the financial services sector with a broad based and
integrated business. Currently, your Company is operating in business
segments such as Life Insurance, Asset Management, Non-Banking Financial
Services, Private Equity, Retail Broking, Wealth Management and Insurance
Advisory. In each of these businesses, our aim is to improve market share
by building distribution reach, offering innovative products and services,
creating a unique customer service experience and strengthening management
teams.

LIFE INSURANCE (BIRLA SUN LIFE INSURANCE COMPANY LIMITED):

Rs. Crores
2008-09 2007-08

Branches (Nos.) 600 339

Direct Selling Agents ('000) 166 115

Assets Under Management (AUM) 9,168.4 6,892.7

Market Share amongst Private Players (%) 9.0% 6.6%

New Business Premium Income 2,823.9 1,965.0

- Individual Business 2,480.8 1,741.0

- Group Business 343.2 224.0

Renewal Premium 1,753.7 1,307.2

Less: Reinsurance Ceded and Service Tax (163.3) (49.1)

Total Premium Income 4,414.3 3,223.1

Net Income from Operations 3,743.6 3,710.4

PAT (702.1) (445.3)

Equity Share Capital 1,879.5 1,274.5

Nuvo's Investment 1,481.1 944.6

Gaining Significant Market Share:

Birla Sun Life Insurance Company Limited ('BSLI') ranked 5(th) in India
with a market share of 9% amongst the private players in terms of weighted
new received premium ('WNRP'). Its market share has grown strongly from
6.6% last year. During the year, while life insurance industry de-grew by
3% and private life insurers grew by 6%, BSLI posted 44% rise in WNRP,
achieving the second highest growth rate amongst the top ten life insurers
in the industry. (Source: IRDA, www.irdaindia.org)

Performance Review:

BSLI completed a successful 9(th) year of operation amidst a challenging
economic environment where the life insurance industry de-grew in terms of
new business premium for the first time since the sector was opened up for
private players. BSLI had started the financial year with a clear focus on
augmenting the agency reach, building-up alternate channel and launching
innovative products to optimise its product suite. It also focused on
building people and technology related infrastructure to support the sales
growth.

Driven by these initiatives, BSLI achieved 44% rise in new business premium
income. BSLI opened 261 new branches to reach 600 branches across about 500
cities and added more than 50,000 direct selling agents to reach over
166,000 agents. Alternate channel relationships grew from 229 in March 2008
to 426 in March 2009. BSLI extended its competitive product offerings
through launch of health plan, pension plan and traditional life plan. To
offer optimum returns amidst volatile equity market conditions, BSLI
launched Platinum Plus-II Fund and Income advantage fund. Products launched
during the last one and a half year have contributed a significant share in
the new business premium.

BSLI also focused on consistent fund performance and superior portfolio
quality. Majority of its equity AUM as well as debt AUM is invested in
fundamentally strong large caps and highest rated instruments respectively.
All funds of BSLI have performed better than their internal benchmarks,
thus fetching better returns against competition.

BSLI achieved the unique distinction of attaining zero percent' claims
outstanding ratio, that means, 100% of all the claims intimated in the
reporting fiscal have been processed. This is a live example of its
Customer First' approach and clearly speaks of the strong system &
processes it has set in.

A capital of Rs. 725 Crores was infused in BSLI during the year to fund its
growth, out of which your Company's share at 74% is Rs. 536.5 Crores.

Consequent to the growing size of new business premium and expansion of
distribution channel, net loss increased during the year. As per the
accounting policy, the cost of acquiring new business is charged as expense
in the first year itself, while premium income accrues over the premium
paying period.

Outlook:

India remains one of the fastest growing markets in the world in the life
insurance sector supported by long term economic growth, lower penetration
levels, high savings rate and rising awareness amongst the population on
the need of life insurance. The marketing efforts by life insurers are
increasing market size through mass education. The ratio of life insurance
premium to GDP in India is currently about 4% which is much lower compared
to 6% to 8% in developed countries. Specifically, the Indian health
insurance market is in its infancy. India will also need to provide for an
ageing population in the medium term, with barely 11% of the estimated
working population in India eligible for formal old-age social security
benefits.

BSLI is well positioned to capitalise on these opportunities with a vision
to be among top 3 life insurers. It will re-align its future branch
openings to match the growth outlook and devise newer channels to achieve
sustainable growth in future. BSLI also aims to optimise its product mix
through launch of contemporary products to suit market conditions and build
quality assets. It will also strengthen its information technology platform
to support growth. Further, it plans to achieve excellence in areas related
to persistency, brand saliency, customer experience, risk management and
compliance.

ASSET MANAGEMENT (BIRLA SUN LIFE ASSET MANAGEMENT COMPANY LIMITED):

Rs. Crores
2008-09 2007-08

Branches (Nos.) 115 78

Investors Folios (Nos. in Lacs) 22.6 18.9

Financial Advisors (000) 28.6 17.8

Market Share (%) 9.5% 6.8%

Average Assets under Management:

Equity 4,607 7,525

Debt and Liquid 42,489 28,381

Domestic 47,096 35,906

Offshore (Equity) 1,265 2,489

PMS 287 16

48,649 38,411

Net Income from Operations 177.9 119.3

PBIT 15.8 4.2

PAT 7.9 2.8

Capital Employed 92.1 84.2

ROACE (%) 17.9% 5.1%

Improved Market Positioning:

Birla Sun Life Asset Management Company Limited ('BSAMC') ranked 5(th) in
India with 9.5% market share as at 31(st) March, 2009, in terms of domestic
average Assets Under Management ('AUM') up from 6.8% as at 31(st)March,
2008. Industry's domestic average AUM de-grew year on year by 7% largely
due to down-turn in equity markets and redemption pressure in debt schemes
due to tight liquidity conditions prevalent for some part of the year.
Domestic average AUM of BSAMC grew year-on-year by 31% achieving the
highest growth rate amongst the top five asset management companies.
(Source: AMFI, www.amfiindia.com)

The average AUM for offshore equity funds and Portfolio Management Services
('PMS') stood at Rs. 1,265 Crores and Rs. 287 Crores, respectively, as on
31(st) March, 2009.

Performance Review:

BSAMC achieved 49% year-on-year growth in net income from operations in
line with the growth in average AUM. Despite being impacted by interest
costs incurred on temporary borrowings to meet redemptions in October 2008
per se, net profit rose to Rs. 7.9 Crores and ROACE to 17.9%.

To enhance its competitive strength, BSAMC expanded its distribution
network to reach 115 branches and over 28,600 financial advisors as on
31(st) March, 2009. The investor's base grew from 18.9 lacs folios to 22.6
lacs folios.

BSAMC became the first company to be adjudged as Mutual Fund House of the
Year' by CNBC TV 18 - Crisil for the second time in a row in 2009. This
reflects the strength of investment performance amidst both economic up-
cycle last year as well as down-turn in the reporting financial year. It
was also awarded Mutual Fund House of the Year - Debt' by CNBC TV 18 -
Crisil and Star Fund House of the Year - Debt' by ICRA in 2009. It has
also won India Onshore Fund House' award by Asian Investor in 2009. It was
a runner up in Best Mutual Fund House' category by Outlook Money NDTV
Profit Awards - 2008. Additionally, it won eight ICRA awards - 2009, three
CNBC TV 18 - CRISIL awards - 2009 and four Lipper awards - 2009 for
consistent fund performance across various asset classes.

Outlook:

The long term growth outlook of the Indian economy coupled with increasing
household financial savings and increasing awareness and preference towards
mutual funds with the help of professional fund management augurs well for
the mutual fund industry.

As your Company aspires to be among the top 3 asset management companies,
BSAMC will continue to augment relationships across channels besides
launching innovative products and enhancing brand loyalty through
consistent returns as well as superior customer service. BSAMC also aims to
increase share of high margin equity and PMS AUM along with expanding its
footprint in overseas markets and the real estate arena.

RETAIL BROKING (APOLLO SINDHOORI CAPITAL INVESTMENTS LIMITED):

Your Company acquired a 76% stake in Apollo Sindhoori Capital Investments
Ltd. ('ASCIL'), a retail broking company in February-March 2009. ASCIL is
one of the larger brokerage houses in India with about 14 years of
experience. ASCIL has a scalable business model based on a strong
technology backbone and a wide product mix which includes trading facility
in equity and derivative segments on the NSE (National Stock Exchange of
India Limited) and the BSE (Bombay Stock Exchange Limited), trading
facility in commodity segment through a subsidiary, depository participant
services of National Securities Depository Ltd. and Central Depository
Services India Limited at major locations, online bidding for IPOs and
distribution of Mutual Funds. ASCIL serves over 175,000 customers through a
nation-wide branch network of about 240 own and 840 franchisee branches.
ASCIL provides your Company an opportunity to capitalise on its nation-wide
reach and derive synergies through cross selling.

Performance Review:

Consolidated net income from operations of ASCIL decreased from Rs. 122.2
Crores to Rs. 83.3 Crores due to slow-down in retail broking activities
given the stock market turbulence. It reported net profit of Rs. 1.2 Crores
compared to Rs. 21.4 Crores attained in the previous year. Financial
operations of ASCIL have been accounted for in the consolidated financial
statements of your Company w.e.f. 6(th) March, 2009, when it became your
Company's subsidiary.

Outlook:

Currently, only around 5 per cent of the total Indian households invest in
equities. With the optimistic long term outlook for Indian financial
markets and increased participation of Indian households, there is a large
scope for brokerage houses.

DISTRIBUTION (BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED):

Rs. Crores
2008-09 2007-08

Branches (Nos.) 44 36

Assets Under Advice 9,525 12,242

Net Income from Operations 21.1 37.5

PBIT (8.8) 3.9

PAT (9.1) 2.7

Net Worth 4.8 13.9

In a strategic move, your Company acquired 50.01% stake in Birla Sun Life
Distribution Company Limited ('BSDL') owned by Sun Life (India)
Distribution Investments Inc. in March 2009. BSDL became a wholly owned
subsidiary of your Company w.e.f. 31(st) March, 2009. The move aims at
leveraging BSDL and ASCIL as a common distribution platform to strengthen
the position of financial services business of your Company as an
integrated and broad based manufacturer and distributor of financial
products.

Performance Review:

The assets under advice of BSDL de-grew largely due to the economic down-
turn and ensuing lesser demand for financial products. As a result, its net
income from operations de-grew and profitability impacted during the year.
BSDL has invested significantly in the people, process and technology
related infrastructure which also strained bottom-line. It has expanded its
distribution network to 44 branches with over 4,500 channel partners.

Outlook:

The long term outlook for the wealth management sector portends well
supported by high financial savings coupled with the increasing preference
towards investment with the help of professional advisors.

With a vision to be amongst the top 5 players in the wealth management
space, BSDL's thrust will be on leveraging the expanded set up of its own
as well as the branch network of ASCIL.

OTHER FINANCIAL SERVICES (BIRLA GLOBAL FINANCE COMPANY LIMITED AND BIRLA
INSURANCE ADVISORY AND BROKING SERVICES LIMITED):

Rs. Crores
2008-09 2007-08

Birla Global Finance Company Limited (BGFCL):
Net Income from Operations 120.3 97.0

PAT 29.6 22.7

Net Worth 211.2 200.3

Nuvo's Investment 127.6 102.6

Birla Insurance Advisory & Broking
Services Limited (BIASL):

Net Income from Operations 16.5 10.6

PAT 4.8 3.2

Performance Review:

BGFCL, a wholly owned subsidiary of your Company, is amongst the leading
Non-Banking Financial Companies (NBFCs) in India in IPO financing,
Corporate Bills discounting and Loan against securities segment. During the
year, BGFCL posted a commendable performance amidst testing economic
scenario. Its net income from operations grew by 24% and net profit rose by
31% despite sluggish IPO financing market. Better performance in the Loan
against Securities' segment supported growth. BGFCL achieved a net profit
margin of 25%.

BIASL has carved a leadership position for itself in the general insurance
broking space and has performed well amidst the challenging business
environment. With the removal of cap on discount for premium rates, most of
the general insurance companies started offering huge discounts. Despite
resultant drastic reduction in premium rates, BIASL placed a business of
over Rs. 170 Crores for the year with several general insurance companies
on behalf of its clients compared to Rs. 127 Crores placed during the last
year. Supported by this, BIASL posted significant growth in revenues and
profitability and achieved net profit margin of 29% during the year.

Outlook:

Increased volatility in the capital markets has slowed the pace of new
public offerings. This should revive soon with companies approaching the
capital markets to meet their long term fund requirements. The long term
prospects of the financial services sector remain optimistic.

BGFCL will drive its growth momentum by expanding its operations with a
vision to be amongst top 5 NBFCs by profitability.

BUSINESS PROCESS OUTSOURCING (ADITYA BIRLA MINACS WORLDWIDE LIMITED):

Rs. Crores
2008-09 2007-08

Operating Seats (Nos.) 8,326 9,089

Employees (Nos.) 11,621 12,908

Net Income from Operations 1,687.2 1,577.7

- North America* 1,444.7 1,395.4

- Asia Pacific 242.4 182.3

PBIT (61.0) (26.5)

- North America (48.7) (20.4)

- Asia Pacific (12.3) (6.1)

PAT (121.1) (88.9)

* Represents delivery centres located in United States, Canada and Europe.

Represents delivery centres located in India and the Philippines.

Performance Review:

Aditya Birla Minacs posted 7% growth in net income from operations. The
revenues growth in the North America' region was impacted due to the weak
order flow resulting from the global slowdown. Revenues from the Asia
pacific' region rose by 18% from USD 45.5 million to USD 53.6 million.

Aditya Birla Minacs is serving 54 clients including 27 Fortune 500
companies through 27 delivery centres across the globe with 8,326 seats and
11,621 employees.

Aditya Birla Minacs has undertaken various initiatives to mitigate the
impact of slowdown and improve operating efficiencies. Towards sites
rationalisation, three sites were consolidated by shifting their business
to more cost effectives sites. Cost control measures were initiated to
reduce overheads, the full benefit of which will accrue going forward. In
the direction of supporting new business from low cost locations, launch of
two new sites in India is on the cards adding over 1,000 seats.

Supported by cost control initiatives, business remained positive at
operating profit (PBDIT) level despite site closure costs of Rs. 27 Crores,
forex loss of Rs. 24.6 Crores and higher manpower costs. Net loss increased
because of the unabsorbed interest and depreciation costs.

The business is targeting to achieve profitability faster, under the
strengthened leadership, supported by the cost control efforts already
initiated.

Outlook:

The business process outsourcing sector is currently affected by slowdown
in global economies and margins are under pressure. However, a sharp
depreciation in the Indian rupee vis-a-vis the US dollar is expected to
stem the decline in margins. Also wage inflation and attrition are expected
to decline in the current environment providing some respite to players on
employees cost front.

Aditya Birla Minacs will continue to meet customers' expectations with a
thrust on excellence in execution. It will focus on achieving profitability
by building a robust sales pipeline, improving seats utilisation, off-
shoring support functions to low cost locations, increasing share of high
margin KPO segment and reduction in overheads.

IT SERVICES (PSI DATA SYSTEMS LIMITED):

After getting requisite approval from the shareholders, PSI Data Systems
Limited ('PSI') was de-listed from the BSE w.e.f. 6(th) April, 2009. As on
31(st) March, 2009, your Company held 76.89% stake in PSI, directly and
indirectly, through a wholly owned subsidiary.

PSI generated net income from operations of Rs. 95.4 Crores vis-a-vis
Rs.101.1 Crores attained in the previous year and reported a net loss of
Rs.6.8 Crores against a net profit of Rs. 2.5 Crores achieved last year.

Besides focusing on growing select verticals in the IT services business,
your Company is targeting to integrate PSI as a back end solution provider
for Aditya Birla Minacs.

GARMENTS:

BRANDED GARMENTS (MADURA GARMENTS):

Rs. Crores
2008-09 2007-08

Sales Volumes (Lacs Pieces) 117.5 109.7

Net Income from Operations 906.4 825.7

Operating Profit before Advertisement Expenses 50.6 115.5

Advertisement Expenses 48.9 48.4

Operating Profit 1.7 67.1

PBIT (48.5) 35.1

Capital Employed 411.6 471.2

Performance Review:

The apparel retail industry was severely affected by slowing economy and
lower consumer spending. Apparel retailers offered higher discount to clear
off their inventories. The wholesale channel was impacted due to de-
stocking by departmental stores to avoid inventory pile up.

Net income from operations of the Branded Garments business of your Company
(Madura Garments) grew by 10% year-on-year, supported by a 33% growth in
retail channel while the wholesale channel was impacted due to weak
consumer footfalls experienced across the industry. During the year, more
than 90 exclusive brand outlets ('EBOs') were opened to reach 342 EBOs
spanning across 7.1 Lacs square feet of retail space. Share of retail
channel in revenues jumped to 48% from 40% last year.

The operating profit was lower due to high lease rentals on expanded retail
space and prolonged discounting. Madura Garments has made investments and
incurred lease rentals in opening up of new stores, the full benefit of
which will accrue in coming years.

PETER ENGLAND PEOPLE AND THE COLLECTIVE:

Your Company launched two new concepts in the apparel retailing space
through two wholly owned subsidiaries. Peter England Fashions and Retail
Limited ('PEFRL') launched five family stores under the brand Peter
England People', catering to menswear, womenswear as well as kidswear
segments. Madura Garments Lifestyle Retail Company Limited ('MGLRCL')
launched one men's exclusive store under the brand The Collective',
offering international apparel and accessory brands such as Armani
Collezioni, Hugo Boss, Versace Collection, Adidas, Puma, Samsonite and many
more under one roof. The Collective' has won the prestigious Most Admired
Fashion Concept of the Year' award at the ninth Annual Images Fashion
Awards.

These subsidiaries posted combined net income from operations at Rs. 20.8
Crores. Start-up and brand promotion costs led to a net loss of Rs. 128.7
Crores. Substantial restructuring has already been done to make these
initiatives more cost effective and curtail losses in the coming year.

CONTRACT EXPORTS (MADURA GARMENTS EXPORTS LIMITED):

Madura Garments Exports Limited ('MGEL'), a wholly owned subsidiary of your
Company, reported a decline in sales volumes impacted by weak order flow
following global slow-down. Net income from operations de-grew by 5% from
Rs. 209.1 Crores to Rs. 198.8 Crores despite expansion of manufacturing
capacity during mid last year. The bottom-line was severely affected due to
lower capacity utilisation and forex loss resulting from reduced order flow
and cancellation of few orders. MGEL reported a net loss of Rs. 83.8 Crores
compared to Rs. 22 Crores incurred last year.

The business is looking forward to regain profitability, under the renewed
leadership, supported by cost control measures already undertaken.

Outlook:

Currently constricted by lower footfalls and higher discounting, the Indian
apparel retail industry is expected to make a come back with the revival of
consumer confidence in Indian economy and its growth outlook. In the short
term, industry margins are expected to improve with a correction in lease
rentals. Efforts towards restructuring like re-sizing and re-locating of
stores, etc. , are likely to drive down costs.

The branded garments business of your Company will leverage its expanded
retail channel to improve its sales per square feet. The business is also
laying thrust on achieving cost efficiencies through rent re-negotiation,
exit from unviable stores, manpower rationalisation, efficient supply chain
management, improving inventory turns and reducing overheads. Besides this,
new store openings will be re-aligned to match demand outlook.

The emphasis of contract exports business is on right-sizing the business
model and cost reduction to regain profitability.

VALUE BUSINESSES:

FERTILISERS (INDO-GULF FERTILISERS):

Rs. Crores
2008-09 2007-08

Re-assessed Urea Capacity (MTPA) 864,600 864,600

Urea Production (MT) 1,069,691 880,991

Urea Sales (MT) 1,072,891 870,305

Net Income from Operations 1,249.8 787.5

- Urea 1,135.2 722.3

- Agri-products Trading 114.5 65.1

Operating Profit 228.5 102.4

PBIT 209.7 84.5

Capital Employed 586.6 531.3

ROACE (%) 37.5% 18.1%

Performance Review:

The Agricultural sector reported good growth supported by the normal
monsoons and increase in the minimum support prices for most of the
agricultural output products. This has given a boost to the demand for
agricultural inputs - Fertilisers, Seeds and Agro-chemicals.

Indo-Gulf Fertilisers posted its highest ever profitability supported by a
23% growth in sales volumes. Indo-Gulf's urea Birla Shaktiman', which has
completed 20 years, and neem coated urea Krishidev' continued to be the
preferred choice of farmers.

Net income from operations rose by 59% backed by higher volumes of urea and
agri-products and increase in subsidies on account of rise in natural gas
and naphtha prices.

Revenues from agri-products trading almost doubled to Rs. 114.5 Crores.
Indo-Gulf has taken several initiatives to widen its product portfolio and
has repositioned itself as a Complete agri-solution provider', offering
farmers a wide range of products and services right from sowing to
harvesting. This is a significant step towards future growth. Under the
Birla Shaktiman' brand, a wide range of seeds and a complete package of
agro chemical formulations are offered. Birla Shaktiman' seeds are now
used by over 5 lacs farmers, sown in area of over 10 lacs acres, producing
almost 25 lacs MT of food grains per annum. Indo-Gulf is now the leading
supplier of agro-chemicals in its region.

The operating profit of Indo-Gulf Fertilisers more than doubled to Rs.228.5
Crores driven by growth in volumes of urea and agri-products along with
subsidy arrears. It also fetched higher subsidy incentives for achieving
higher than cut off production fixed under new policy. It earned Rs. 4.6
Crores from the sale of carbon credits. Indo-Gulf received fertilisers
bonds during the year, on which the mark to market loss of Rs.5.1 Crores
has been provided for. Indo-Gulf posted ROACE of 37.5%.

Outlook:

Department of Fertilisers, Ministry of Chemicals and Fertilisers,
Government of India, forecasts domestic urea demand to grow by 6% to 7%
annually to reach 35.4 million MT by 2011-12. Currently, over a quarter of
the country's fertilisers requirement is being met by imports.

The Government of India has announced a new policy to encourage new
indigenous capacity by offering import parity price linked pricing. This is
a positive measure which could facilitate higher investment into this vital
sector. The policy also provides for differential pricing of new customised
fertilisers, up to 20% of the total production. Availability of natural gas
from the Krishna-Godavari basin will also reduce the supply constraint of
natural gas, which is the key raw material.

Indo-Gulf is well positioned to derive benefits from production of neem
coated urea - Krishidev' under the differential pricing scheme as well as
higher capacity utilisation. Besides, it is focusing on scaling agri-
products trading segment for future growth.

CARBON BLACK (HI-TECH CARBON):

Rs. Crores
2008-09 2007-08

Capacity (MTPA) 230,000 230,000

Production (MT) 202,076 215,103

Sales Volumes (MT) 203,827 214,617

Realisation (Rs./MT) 51,521 38,485

Net Income from Operations 1,095.6 863.8

Operating Profit 49.7 152.6

PBIT 24.7 130.3

Capital Employed 753.1 667.5

ROACE (%) 3.5% 22.6%

Performance Review:

The carbon black industry worldwide was adversely affected due to the sharp
volatility in the prices of its key raw material - Carbon Black Feed Stock
('CBFS') - which moves in the direction of crude oil prices. International
crude oil prices reached to a peak of US dollar 145 per barrel in July 2008
and subsequently fell sharply to trade at as low as US dollar 40 in March
2009. The carbon black industry was also impacted due to lower demand from
tyre manufacturers resulting from slowdown in auto industry globally.

Indian carbon black industry was no exception and hence, delivered a sub-
optimal performance during the financial year.

The Carbon Black business of your Company (Hi-Tech Carbon), which is the
second largest manufacturer in India, posted a 5% decline in sales volumes
due to reduced demand from tyre manufacturers, particularly in the exports
market. However, realisation rose by 34% reflecting the rise in CBFS
prices. This supported 27% growth in net income from operations.

Operating profit of Hi-tech Carbon was severely impacted due to consumption
of high priced CBFS and subsequent steep fall in its prices, following the
decline in crude oil prices. Lower sales volumes also impaired
profitability. In the fourth quarter, the capacity utilisation has improved
to 79% from 67% in the third quarter reflecting signs of revival in the
demand.

Outlook:

The demand from the tyre industry is picking up after sharp decline in the
third quarter. With the replacement segment representing 60-70% of overall
tyre demand, it is expected that by the second quarter of the running
financial year the demand gap should eliminate. The carbon black industry
should also benefit from stable crude oil prices.

With the high priced CBFS inventories already liquidated, Hi-tech Carbon
will optimise its CBFS procurement going forward to improve margins. It has
received environmental clearance and other regulatory approvals for
Greenfield expansion at Patalganga and is targeting to expand its capacity
by 75,000 MTPA by March 2010 at a capital expenditure of Rs. 240 Crores.
Project activities will be re-aligned to match the commencement of
production with the revival of demand.

RAYON (INDIAN RAYON):

Rs. Crores
2008-09 2007-08

VFY Capacity (MTPA) 16,400 16,400

VFY Production (MT) 16,625 17,000

VFY Sales Volumes (MT) 16,792 17,923

VFY Realisation (Rs./Kg.) 203.7 173.3

ECU Realisation (Rs./MT) 22,671 19,999

Net Income from Operations 537.1 476.0

- VFY 342.1 310.6

- Chlor-alkali 195.0 165.4

Operating Profit 123.0 124.4

PBIT 89.8 91.5

Capital Employed 436.9 453.7

ROACE (%) 20.2% 20.2%

Performance Review:

Indian VFY industry witnessed lower sales volumes particularly in the
exports markets. Unprecedented rise in wood pulp and sulphur prices
impacted operating margins across the industry. This has led to suspension
of operations by two competitors during the year, which is likely to create
supply gap. Reduction in sulphur prices towards the end of the financial
year has bought some relief to the industry.

The VFY business of your Company (Indian Rayon), which is the second
largest manufacturer in India, showed satisfactory performance amidst a
challenging business environment. Net income from operations from the VFY
segment grew by 10% during the year. VFY sales volumes decreased as the
focus was on finer denier yarn. Improved product mix drove 18% growth in
VFY realisation.

Net income from operations from Chlor-alkali segment rose by 18% largely
due to higher caustic soda realisation and sales volumes. Caustic soda
sales volumes grew by 4% to 77,590 MT supported by capacity expansion of 25
TPD in December 2008 reaching a total of 250 TPD. ECU realisation rose by
13%.

Operating profit of Indian Rayon was marginally lower at Rs. 123 Crores.
The impact of lower VFY sales volumes and steep rise in wood pulp and
sulphur prices was offset by higher realisation in the VFY segment. In the
Chlor-alkali segment, higher sales volumes and realisation made up for
higher coal prices. ROACE remained flat at 20.2%.

Outlook:

The long-term outlook of VFY business is moderate, as demand is expected to
grow at a modest rate. In the short term, operating margins of VFY
manufactures should improve with sulphur prices cooling down. The Chlor-
alkali segment will benefit going forward from decline in the coal prices.

Besides increasing share of value added yarns, Indian Rayon will lay thrust
on technological upgradations to improve the intrinsic yarn quality. These
efforts will help the business to provide superior customer value, to fetch
a premium on our products and improve margins.

INSULATORS (ADITYA BIRLA INSULATORS):

Rs. Crores
2008-09 2007-08

Capacity (MTPA) 38,800 38,800

Production (MT) 32,904 32,921

Sales Volumes (MT) 32,561 32,304

Net Income from Operations 424.8 398.9

Operating Profit 122.8 136.3

PBIT 108.4 122.5

Capital Employed 264.3 240.0

ROACE (%) 43.0% 57.5%

Performance Review:

Net income from operations of Aditya Birla Insulators grew by 7% while
sales volumes almost remained flat. The focus on high rating insulators
fetched higher realisation. Operating profit de-grew by 10% due to higher
input and fuel costs. Aditya Birla Insulators is shifting to coal gas for
kiln firing at its Rishra plant and natural gas at its Halol plant to
reduce fuel costs. It achieved ROACE of 43% during the financial year.

Aditya Birla Insulators holds leadership position in India with the fourth
largest capacity worldwide. To extend its product offerings, a pilot plant
for composite insulators has been installed in March 2009 and is under
trial run. The business has also expanded its porcelain insulators capacity
by 10,000 TPA in April 2009 to reach a total capacity of 48,800 TPA, which
is currently under trial run.

Outlook:

The demand for energy in India exceeds its supply especially in the rural
sector. The peak supply shortage in India was 13.7% and energy deficit was
11.3% as of March 2009 (Source: Central Electricity Authority,
www.cea.nic.in). The Government of India plans to provide electricity
throughout the country by 2012 and plans to increase installed power
generation capacity by 78,577 MW in its 11th Five Year Plan (2007-12)
(Source: Ministry of Power, Annual Report 2007-08). The expansion of
India's power infrastructure is expected to increase demand for electrical
equipments and components including insulators. However, exports market may
remain affected for some period due to global recessionary trend.

To capitalise on the vibrant demand in the power infrastructure sector,
Aditya Birla Insulators aims to further expand its capacity by 4,000 TPA in
the running financial year. Focus on manufacturing high rating insulators
range and yield enhancement efforts would bolster its financial
performance.

TEXTILES (JAYA SHREE TEXTILES):

Rs. Crores
2008-09 2007-08

Net Income from Operations:

Linen Segment 183.0 169.7

Wool Segment 390.2 411.6

Synthetic Yarn* - 19.1

573.2 600.3

Operating Profit 54.2 67.9

PBIT 32.7 48.7

Capital Employed 345.1 359.3

ROACE (%) 9.3% 14.5%

* Jaya Shree Textiles existed synthetic yarn segment in FY 2007-08 as a
strategic decision to focus on niche linen and wool segments.

Performance Review:

Indian textiles industry witnessed substantial production cut across the
value chain due to overall slowdown in demand particularly from major
export destinations - the US and the European Union. Due to overall
reduction in volumes, exporters could not benefit much from the
depreciation of Indian Rupee against the US dollar.

Despite these headwinds, the Textiles business of your Company (Jaya Shree
Textiles) could keep the capacity utilisation in most of its segments at
100% for major part of the year. Nine exclusive brand outlets were opened
under the Linen Club' brand under the buy and sell mode without incurring
any capital expenditure.

Jaya Shree Textiles ('JST') posted lower net income from operations due to
lower linen fabric volumes. Operating profit decreased due to lower volumes
and high flax fibre prices. Usage of high priced stock impacted wool
industry and JST as well due to sudden fall in commodity prices. Besides
these, last year profit includes gain on sale of assets consequent to exit
from synthetic yarn segment and gain on sale of carbon credits.

Outlook:

China is the major player in global textiles trade. The appreciation of
Chinese Yuan against the US dollar will give a competitive edge to Indian
exporters against the Chinese exporters. Recent imposition of anti-dumping
duty by the Government of India on cheaper linen fabric imports from China
and the depreciation of Indian Rupee against the US Dollar will also accord
relief to the Indian textiles industry. Softening input prices and interest
rates shall be an enabler. The global slowdown remains a cause of concern.

To improve the overall profitability of the business, JST will be enlarging
its presence in high margin retail segment under Linen Club' brand besides
increasing share of value added products. The business will continue to
pursue aggressive cost control measures and working capital management to
enhance its competitiveness.

FINANCIAL REVIEW AND ANALYSIS - STANDALONE:

Rs. Crores
2008-09 2007-08

Net Income from Operations 4,786.2 3,953.1

Other Income 32.0 12.7

Operating Profit (PBDIT) 585.7 633.9

Net Interest 257.4 179.0

Depreciation 166.0 141.1

Profit before Tax and Exceptional Items 162.3 313.8

Exceptional Gain/(Loss) - 0.7

Profit before Tax 162.3 314.6

Provision for Taxation (Net) 24.9 71.5

Net Profit 137.4 243.1

The standalone net income from operations of your Company grew by 21%. The
Fertilisers business was the largest contributor to the revenues growth
supported by higher sales volumes and increase in subsidies on account of
rise in input and fuel prices. Higher realisation in the Carbon Black
business in line with high CBFS prices and growth in the Branded Garments
business also contributed to the revenues growth.

Other income increased due to dividend income of Rs. 11.6 Crores from BGFCL
and higher investment income on surplus funds.

Operating profit de-grew by 8% While the Fertilisers business posted its
highest ever profitability, the Carbon Black business was adversely
affected by high priced stock due to subsequent sharp fall in CBFS prices
linked to the movement in crude oil prices. The Branded Garments business
was affected by high lease rentals towards expanded retail channel and
prolonged discounting. The Rayon, Textiles and Insulators businesses posted
satisfactory performance.

Net interest expense increased due to increase in borrowings primarily to
fund capital expenditure and working capital requirements in the Carbon
Black and the Branded Garments businesses besides financing capital
infusion in the Life Insurance business and acquisition of ASCIL.

Depreciation grew largely due to new store openings in the Branded Garments
business.

The provision for taxation reduced due to creation of deferred tax asset of
Rs. 21.1 Crores in the current year against provision for deferred tax
liability of Rs. 25.2 Crores in the previous year. Excess tax provision of
Rs. 35.1 Crores related to earlier years was written back during the year
against write back of Rs. 35.7 Crores in the previous year.

As a result, your Company posted lower net profit during the year.

Your Company's Earnings Per Share (EPS) is at Rs. 14.5 against Rs. 26.1 in
the previous year. Cash Earnings Per Share (CEPS) is also lower at Rs 29.7
compared to Rs. 43.9 in the previous year.

Dividend:

The Board of Directors has recommended a dividend of 40% for the current
year entailing a total outgo of Rs. 42.4 Crores including dividend
distribution tax. Dividend payout ratio is at 31% compared to 26% last
year.

STANDALONE CASH FLOW ANALYSIS:

Rs. Crores
FY 2008-09

Cash Flow from Operations (Net of Tax) 481.8

(Increase)/Decrease in Net Working Capital (Net) (37.2)

Net Cash from Operating Activities 444.6

Capital Expenditure (Net) (268.8)

Investments in Subsidiaries/Joint Ventures/Group
Companies (Net) (1,073.1)

(Increase)/Decrease in Inter-Corporate Deposits (Net) 25.9

Interest Received 33.4

Dividends/Capital Subsidy Received/Profit on Sale of
Current Investments 25.3

Net Cash from/(Used in) Investing Activities (1,257.3)

Proceeds from/(Repayment of) Borrowings (Net) 1,755.8

Dividend Paid (63.9)

Interest Paid (254.6)

Net Cash from/(Used in) Financing Activities 1,437.3

Increase/(Decrease) in Cash and Cash Equivalents* 624.6

* Cash and Cash Equivalents include cash, cheques in hand, remittances in
transit, balance with banks and current investments.

Net Cash from Operating Activities:

Net Cash Flow from Operations:

Net cash flow from operations stood at Rs. 481.8 Crores. The Fertilisers
business contributed significantly to the operating cash flows.

Increase/decrease in Net Working Capital Net working capital increased by
Rs. 37.2 Crores.

Inventories decreased by Rs. 29 Crores and debtors and other receivables
increased by Rs. 151.6 Crores against an increase of Rs. 85.4 Crores in
creditors and other current liabilities.

Net Cash from/(Used in) Investing Activities:

Net Capital Expenditure:

The Carbon Black business incurred Rs. 54.3 Crores during the year for the
Greenfield expansion by 75,000 MTPA, which is targeted to be completed by
the end of the financial year 2009-10.

In the Rayon business, a sum of Rs. 28.8 Crores was invested towards
caustic soda capacity expansion by 25 TPD.

The Branded Garments business invested a sum of Rs. 51.3 Crores in
expanding retail space through opening up of exclusive brand outlets.

In the Textiles business, a sum of Rs. 6.7 Crores was spent for addition of
one carding machine in the wool combing segment.

The Insulators business spent Rs. 23.4 Crores during the year for capacity
expansion by 10,000 TPA which was installed in April 2009 and is currently
under trial run.

The balance capital expenditure was incurred on modernisation and
maintenance of plants across the businesses.

Investments in Joint Ventures, Subsidiaries and Group Companies (Net):

Your Company invested a sum of Rs. 536.50 Crores in BSLI to fund the growth
of the business. Your Company acquired 76% stake in ASCIL for Rs. 251.62
Crores. Additionally, Rs. 125.87 Crores was invested in the rights issue of
Hindalco Industries Limited.

Other major investments include purchase of preference shares to the tune
of Rs. 25 Crores in BGFCL, equity infusion of Rs. 9.95 Crores in PEFRL,
Rs.9.95 Crores in MGLRCL, Rs. 27.55 Crores in MGEL and Rs. 2 Crores in
Aditya Birla Financial Services Private Limited ('ABFSPL').

Your Company subscribed to fresh issue of preference shares of Rs. 10
Crores each by PEFRL and MGLRCL and Rs. 55.20 Crores by MGEL.

Your Company acquired the remaining 50.01% stake in BSDL for a sum of
Rs.7.64 Crores and an additional stake in PSI for a sum of Rs. 3.30 Crores.

Net Cash from/(Used in) Financing Activities:

Proceeds from Borrowings/Repayment of Borrowings:

Your Company raised long term loans of Rs. 479.8 Crores for financing
capital expenditure and general corporate purposes and Rs. 500 Crores was
raised as non-convertible debentures. Deferred Sales Tax loan increased by
Rs. 6.5 Crores net of repayment. Working capital borrowings increased by
Rs. 258.9 Crores.

IDEA specific borrowings of Rs. 78.3 Crores have been repaid. Additionally,
Rs. 91.4 Crores has been repaid towards borrowings taken to fund capital
expenditure and Rs. 11 Crores towards TUFS (Technology Upgradation Fund
Scheme) loans.

Commercial papers for a sum of Rs. 1,000 Crores were also raised during the
year.

RISK MANAGEMENT:

Your 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 each business and are defined by various factors including
the business model, business strategy, organisational structure, risk
appetite and available dedicated resources.

Your Company's structured Risk Management (RM) 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 your 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: (1) Risk
Identification: External and internal risk events are identified in the
context of the strategy and specific objectives of each individual
business. These risk events are assessed by senior management team of the
respective business on defined criteria and prioritised for development of
risk mitigation plans.

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.

(2) Risk Mitigation: This step comprises developing of a mitigation plan
for the risks identified and prioritising them.

(3) Risk Monitoring and Assurance: Your Company's Risk Management
Committee, which is headed by the Managing Director and consists of senior
executive officers from each business, is responsible for reviewing risk
management processes, implementation and effectiveness of our risk
mitigation plans. The Board of Directors reviews risk management processes
after such processes have been vetted by the Audit Committee. This process
is being improved year after year.

Apart from the internal business risks, your Company is exposed to external
risks on account of interest rate, foreign exchange, commodity pricing and
regulatory changes, which are being effectively monitored and mitigated.

Foreign Exchange Risk:

Your Company is exposed to fluctuations in exchange rates of Indian Rupee,
US Dollar, Japanese Yen, British Pound, Euro, Canadian Dollar and
Australian Dollar, due to revenues earned or expenditure incurred in such
currencies. Additionally, debt portfolio of your Company includes a mix of
foreign currency and rupee denominated debt, which carry risk of movements
in foreign currencies against Indian Rupee. Your Company uses various tools
such as forward contracts to periodically hedge currency risk in accordance
with its foreign exchange risk management policy.

Interest Rate Risk:

Your Company has a mixed basket of fixed and floating rate borrowings. Your
Company continuously monitors its interest rate exposures and enters into
currency and interest rate swap contracts to manage interest rate risk from
time to time.

Commodity Price Risk:

Your Company is exposed to the risk of fluctuation in the prices of raw
materials as well as finished goods in all its products. However, the risk
is mitigated well considering the inventory levels and normal correlation
in the prices of raw materials and finished goods.

INTERNAL CONTROL SYSTEM:

Your 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.

The Management Information System (MIS) is the backbone of your 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.

HUMAN RESOURCE MANAGEMENT:

Your Company had 10,121 employees on its rolls as on 31(st) March, 2009.
Including its subsidiaries and joint ventures, the manpower strength is
just over 50,000 employees. This intellectual resource is integral to the
Company's ongoing operations and enables the Company to deliver superior
performance year after year. Human Resource processes of your Company have
been covered in depth in the Directors' Report.

CONCLUSION:

In line with its vision, your Company has designed for itself a well-
diversified and balanced portfolio of Value' and Growth' businesses. Most
of the Growth' businesses are operating in the investment phase which has
caused strain on profitability in the short term. Your Company is dedicated
to ensure that ongoing growing initiatives achieve profitability faster.
Given the strategic thrust over achieving identified distinct vision in
each of the businesses, your Company is set to emerge stronger in the long
run.

CAUTIONARY STATEMENT:

Statements in this Management's Discussion and Analysis' describing the
Company's objectives, projections, estimates, expectations or predictions
may be forward looking statements' within the meaning of applicable
securities laws and regulations. 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 the Government regulations, tax regimes, economic developments
within India and the countries within which the Company conducts business
and other factors such as litigation and labour negotiations.