The Aditya Birla Group

Taking India to the World

By

Kumar Mangalam Birla

Chairman, The Aditya Birla Group

February 2006
The Aditya Birla Group: An introduction

• Amongst the largest and most reputed business groups in India

• Domestic market leaders in most of our product areas

• Cost leaders in most of our global businesses

• Aggregate revenues of US$7.9 bn; Net Profits of US$ 820 mn*

• Group Market capitalisation of over US$ 10bn* *

• Anchored by 72,000 employees; Trusted by 800,000 shareholders

• Group companies
Grasim - Cement & Viscose Staple Fibre

Hindalco - Metals

Aditya Birla Nuvo - Apparels, Insurance, IT / ITeS, Carbon Black, Fertilisers & VFY

UltraTech - Cement

Idea Cellular - Telecom

Essel Mining - Mining & Power

______________
• 9M FY06 Annualized Data
** As on 31st Jan 2006 2
 The Group Today

International
International Joint
Joint
Operations
Operations Ventures
Ventures

M.Cap: US$3.0bn M.Cap: US$4.3bn M.Cap: US$1.3bn

• Aluminium • VFY • Telecom • Thailand

• Copper • Carbon Black • Indonesia
• Textiles
M.Cap: US$1.5bn • Malaysia
• Cement • Garments
• Philippines
• VSF • IT/ ITeS
• Insurance • Egypt

• Financial services • Canada

• Fertilisers • Australia

• China

Strong Global operations with successful joint ventures

3
Key themes going forward

• Significant Growth aspirations

• Global Size and Scale in each operation

• Global cost competitiveness

• Organizational Development

4
Key themes going forward

• Significant Growth aspirations

• Global Size and Scale in each operation

• Global cost competitiveness

• Organizational Development

5
Increasing growth momentum

Strong growth in Revenues Increasing Market Capitalisation

8 ($ bn) Group M Cap

(as on Jan 2006 )
($ 10.2 bn)
7 Sensex Group Mkt. Cap

CAGR
30%
6
.4%
5
=1 %
R
1.7
5 G
A
=2

C
GR

Group M Cap
(as on Jan 1999) CAGR
CA

4 ($ 1.5 bn) 18%

Sensex
3 (as on Jan 2006)
Sensex 9920
(as on Jan 1999)
3060
2

3
9

4
1
00

05
99

04
*
99

00

01

02

03

04

05

-0
-9

-0
-0
l-0
06

p-

p-
n-

n-
ar
ay
ov

ov
FY

FY

FY

FY

FY

FY

FY

Ju
FY

_______________________
Ja

Ja
Se

Se
M
M
N

N
Source: Bloomberg, Company data * -FY06 data annualized

Superior value creation in the past

6
Strategy for growth in the future

Inherent Strengths + Market Opportunities = Growth

Core strengths India Potential

‰ Strong balance sheet and ‰ Consumption led growth

Cash flows The next phase
‰ Increasing urbanization
Manufacturing cost Fortune 500
‰ Cost Leadership and ‰

Efficiencies advantage aspiration

‰ Resource base
‰ World- Class Quality
+
‰ Streamlined Systems & Regional market
Processes opportunities

‰ Corporate Governance ‰ Shifting of manufacturing

towards Asia
‰ Principle of Trusteeship ‰ Regional demand potential

7
Fortune 500 aspiration: In the global league
Aggregate Group Turnover
$18-20bn
At the threshold
of Fortune 500
Entry*

20 AGR
3%
-2
C
GR $7.9bn
CA %
15

International
$3.1bn
Domestic Others

Aditya Birla Nuvo

Hindalco

Grasim
FY99 FY06e FY10e
____________________
EBITDA - $522mn EBITDA - $1,540mn EBITDA - $3,400mn • Based on Fortune 500 study in 2004
Gearing – 37% Gearing – 36% Target Gearing – 40% • Threshold Sales - $12.4bn
• Median Sales - $22.5bn

Restructuring & Consolidation Growth Phase

Shifting gears
8
Key themes going forward

• Significant Growth aspirations

• Global Size and Scale in each operation

• Global cost competitiveness

• Organizational Development

9
Moving beyond boundaries
Canada
• Overseas operations contribute over 30% of Group revenues
• Successful operations in 18 countries across 4 continents
Egypt
– Manufacturing across 9 countries

• Successful recent ventures

China
– Acquired St. Anne Nackawic Pulp Mill in Canada
– VSF expansion in Indonesia making it the world single largest VSF plant
Thailand
– Expansions in Carbon Black across units in Egypt, Thailand and China
– Acrylic fibre in Egypt
– Copper mines in Australia Malaysia

Philippines

Indonesia

Australia

10
 Building Global businesses: Viscose Staple Fibre
Strong growth in production (Indexed) Global VSF market share
200

175 AVB Group

AVB Group Total 22%
Others
World 20% Grasim (3 units)
150 12%

Chinese Group overseas units

Producers (Thailand & Indonesia)
125 (Fragmented) 10%
37%
Lenzing
17%
100

75
EquiFibres
4%

50
Total Revenues = $ 761 mn
Total EBITDA = $ 230 mn
91

93

95

97

99

01

03
FY

FY

FY

FY

FY

FY

FY

_______________________
Source: Company data, Fiber Organon

Attained size and scale in a profitable niche segment

11
VSF: Integrating upstream to control factor costs

• Pulp facilities in Canada for VSF

– Atholville Pulp Mill (127,000 TPA) – a JV with Tembec Inc., USA
– Strategic investments in St. Anne Nackawic Pulp Mill in New Brunswick province
– Leading to 50% backward integration

• Plans for fully integrated operations in Laos

– Plans to develop plantations over the next 7 years (US$ 50mn)
– Proposed Greenfield pulp facility (180,000TPA) during 6th and 7th year (US$ 300mn)

Tembec St.Nackawic

Proposed new plantation facility (Laos)

VSF Plants

12
Building Global Businesses: Carbon Black
Group’s Capacity Growth in Carbon Black Global Carbon Black Market Share

617,000
(TPA) Columbian Aditya Birla
Chemicals Group
Degussa 11.0% 6.4%
14.5%
CAGR = 8% China
Synthetic
Rubber
355,000 6.2%

Cabot China (various)

22.2% 11.6%

Others
28.1%

FY99 FY06e Total Revenues = $ 306 mn

India Thailand Egypt China Total EBITDA = $ 76 mn
_______________________
Source: Company Data, Freedonia Carbon Black Report 2005

4th largest and amongst the fastest growing Carbon Black operations
13
 Carbon Black: Proximity to key growth markets

Carbon Black demand

5.3% 4.9%

2.2% 2.4%
8.4% 7.5%
2003-08 2008-13
2.5% 2.5% E Europe
2003-08 2008-13
W Europe

2003-08 2008-13
N. America
2003-08 2008-13
China
4.3% 4.1% 5.2% 4.9%

3.9% 4.1% 6.6% 6.2%

2003-08 2008-13
Africa / M. East 2003-08 2008-13
Other Asia / Pacific
2003-08 2008-13
Group’s Carbon L. America
Black operations 2003-08 2008-13
India

_______________________
Source: Freedonia Carbon Black Report 2005 14
Key themes going forward

• Significant Growth aspirations

• Global Size and Scale in each operation

• Global cost competitiveness

• Organizational Development

15
Global cost competitiveness

• Tight control over costs

– Through upstream integration
– Continuous benchmarking
– Innovative cost control efforts
• Use of alternative fuels in cement
• Energy sales in Carbon Black

• Results encouraging across the Group

– Amongst Top-15% low cost producers in alumina and aluminium
– Cost leadership position in VSF
– Moving towards Top-25% amongst custom copper smelting costs
– One of the most energy efficient urea plants in the world
– Cost competitive in Carbon Black

16
Key themes going forward

• Significant Growth aspirations

• Global Size and Scale in each operation

• Global cost competitiveness

• Organizational Development

17
An Organization built on Values

• Integrity – Honesty in every action

• Commitment – Deliver on the promise

• Passion – Energized action

• Seamlessness – Boundary less in letter and spirit

• Speed – One step ahead always

18
People – The backbone for Growth
• Diverse culture
– Operations across 4 continents
– Employ 20 different nationalities

• Favourable organization demographics

– 48% of employees are below 38 years

• ‘Talent Management’ efforts

– Lateral inductions & Global recruitments
– ‘Gyanodaya’ and e-learning programmes

• Performance Management Systems’ towards building meritocracy

– Individual variable pay across business
– Job evaluation by international experts

19
People – Encouraging progress

Internal satisfaction External appreciation

73

Overall Satisfaction 72

69

68

Awards in 2005 for Best Employers

Thailand – Thai Rayon
India – Aditya Birla Management
OHS III OHS IV
– PSI Data Systems
Birla Group Gallup India Avg Gallup Mfg. Avg

20
Building strong brands

Cement

Metals

Fibres/Textiles

21
Building strong brands (Contd..)

Garments

Financial Services

Telecom Fertilisers

UREA DAP

22
Significant restructuring in recent times

Consolidation Hindalco’s Acquisition of

PSI Data Metals business Hindalco’s Aditya Birla Nuvo
of cement Acquisition of Aditya Birla Nuvo
System restructured - acquisition of Formed through
businesses of controlling - Substantial
From Group Bull Hindalco Mt. Gordon in merger of IRIL
Grasim and stake in Indal acquisition in
SA, France acquires Copper Australia with Birla Global
Indian Rayon Idea Cellular
and Indo Gulf

$225mn $22mn $1.5bn $1.0bn $150mn

1998 1999 2000 2001 2002 2003 2004 2005

$65mn $95mn $15mn $500mn $12mn

Grasim’s Foray into the

Grasim’s Grasim’s
Acquisition of Life Insurance Hindalco’s BPO sector
Acquisition of Acquisition of Acquisition of
Sri Digvijay Joint Venture acquisition of through the
Madura L&T Cement St. Anne
and Dharani with Sun Life, Nifty Mines in acquisition of
Garments (UltraTech) Nackawic Pulp
Cement Canada Australia Transworks
Mill in Canada

23
Achieving global aspirations

Emerging metals major

Hindalco : A metals powerhouse with integrated
operations
Hindalco

Aluminium Copper

Upstream Metal Downstream Upstream Metal By-products

Rolled Products
170 ktpa

Alumina Aluminium Copper mines Cathodes Gold

Wire Rods 20 tpa
1160 ktpa 425 ktpa Reserves 2,458 kt 500 ktpa
50 ktpa

Foils
33 ktpa
Copper Rods Silver
Power 97.2 ktpa 75 tpa
987 MW Extrusions
21.7 ktpa

Alloy Wheels DAP

300,000 Nos. 400 ktpa
25
 Aluminium: Amongst largest and lowest cost
producers
Global Aluminium Producers Aluminium Cash Costs
4,098
(‘000 TPA) 2400 (US$/Ton)

3,394

2100
2,780

1800
Hindalco (Renukoot)
1,832 Cash Cost
Asian Majors 1500
1,347
1,221
1200
768 752 735

425
900

600
BHP Billiton

Rio Tinto
RusAl

Hindalco
Alcoa

Alcan

Hydro

Chalco

Alba

Dubal

0 25 50 75 100
(% of Production)
________________ ______________________________________________
Source: CRU – Oct 2005 Source: CRU Aluminium Production Costs 2004

In the first quartile of global costs in Alumina as well

26
 Domestic leadership in a high growth sector

Domestic market share Domestic demand

90% (KTPA)

1000
CAGR=9 %
(2001-05e)
63% 800

CAGR=3.6 %
46% 600 (1991-2000)

33%
400

21%
200

0
Spl. Metal Rolled Foils Extrusion

e
91

92
93

94

95
96

97

98

99
00

01

02
03

20 4
05
0
Alumina Products
19

19

19
19

19

19
19

19

19

20

20

20

20

20
________________
Source: Company data, Aluminium Association of India

Domestic demand has surged in recent times with nearly

22% of current market size being created in last 2 years 27
 Regional markets are growing rapidly

Word Alumina Consumption World Aluminium Consumption

90,000 (‘000 TPA) (‘000 TPA)
40,000

Rest of World Asia Rest of World Asia

80,000
35,000

70,000
30,000

60,000
25,000
50,000

20,000
40,000

15,000
30,000

10,000
20,000

10,000 5,000

0 0
2001 2002 2003 2004 2005e 2006e 2007e 2008e 2009e 2001 2002 2003 2004 2005e 2006e 2007e 2008e 2009e

CAGR (2001-2009e) CAGR (2001-2009e)

Asia: 12.8% Asia: 9.2%
Rest of World: 2.8% Rest of World: 3.7%
28
Aluminium: Growth plans charted out
Alumina Growth Plans Aluminium Growth Plans
(‘000 TPA)
4,500 (‘000 TPA)
1,400
4,110
4,000 Alumina capacity Metal capacity
500 325 1,186
to grow 3.7 times 1,200 to grow 2.8 times
3,500 3,610

1,000 1,000
3,000
825
2,500 800 65
Current 796
Current Capacity
Capacity 260
2,000
640 600 81
1,500 65
345 45
460 400
1,000
685
200
500

0 0
Renukoot Muri & Blg Muri & Blg Utkal 55% Aditya Total Rkt Blg / Hirakud Hirakud Aditya Rajbar Total
Current Current Expansion Current Alupuram Current Expn

_____________________________________
* Source: Company Data

Hindalco to reach global Top-10 in both alumina and aluminium by 2010

29
Copper: Global sized and cost competitive already
Global Top-10 Producers Copper Cash Costs
(‘000 TPA)
(US¢/lb)
1582 35

30

25
937
870 870

Dahej
645
20
644 At 250 KT
563 549
500 Dahej
At 500 KT
15

10
Gmexico

AngloAmerican
Mitsubishi
Xstrata

Hindalco
BHP
Codelco

Rio
PhelpsDodge

5
0 1000 2000 3000 4000 5000 6000 7000
Cumulative Production ('000MT)
__________________________________________
________________
Source: CRU Copper Smelting Costs 2003, Company Data
Source: CRU 30
 Copper: Regional Demand and Deficit to Grow

Regional Copper Demand Regional Copper Deficit

(kt) (kt)
12,000
0
CAGR 5.5%
(2005-09e)

-726
10,000

-922
-500

-1,217

-1,223
-1,303

-1,294
-1,387
CAGR 7.9%

-1,411

-1,679
(2001-05)
8,000

4,883
4,751
-1,000

4,673

-910
4,529
4,405

6,000
4,422

-1,236
4,176

-1,500

-779
4,074

-796
-1,225
3,775

-752
-985
4,000
-2,000

-1,444

-850
5,238
4,827
4,449
4,128
3,763
3,468

2,000
3,040
2,557
2,256

-2,500

0
2001 2002 2003 2004 2005e 2006e 2007e 2008e 2009e -3,000
2001 2002 2003 2004 2005e 2006e 2007e 2008e 2009e
China Rest of Asia
China Rest of Asia

____________________ ____________________________
Source : CRU Quarterly October 2005 Source : CRU Quarterly October 2005
31
Copper: Focus on value extraction

• Sweating assets and attaining cost competitiveness

• By–product value addition
– Precious metals demand remains firm
– Fertiliser (DAP) demand too buoyant
• Captive port provides further advantages
• Strong prevailing TcRc margins to aid profitability
• Significant locational advantages
• Moving up the value chain through mines
– Mt Gordon output remains firm
– Shipments from Nifty to begin by end FY06
• Addition of further mines remains key priority

32
Achieving global aspirations

A Cement and VSF major

 Cement: Aggressive growth towards attaining global
size
Grasim Capacity additions (FY91-05) Leadership position in domestic market

Capacity Growth hNo 1 in 7 states with 24% of demand

(Mn Tonnes) CAGR – FY91 to FY05
35 hNo 2 in 6 states with 32% of demand
Industry 7%
30 hNo 3 in 4 states with 20% of demand
Grasim Consolidated 23%
Zonal
25 Grasim (standalone) 18% Grasim Combine
Distribution
UltraTech Zone
20 Mkt. Rank Industry Grasim
Share % Combine
15 15 2nd North 33 24
20 2nd East 16 16
10
17 2nd South 27 23
5
33 1st West 18 28
0
30 1st Export 6 9
91

93

95

97

99

01

03
FY

FY

FY

FY

FY

FY

FY

20 2nd Total 100 100

______________________________________________
Source: CMA 9m FY06, Company Data

Amongst Top-10 producers in the World

34
Cement : Domestic demand potential remains strong

Rising demand & per capita consumption Per capita consumption still low

(Mn Tonnes) (Kgs)

1200
140 Demand 120

Per capita consumption S. Korea

Cement Consumption (Kg per capita)

120 1000
100
Spain
Ireland
100
%
=8 80 800
Taiwan

80 AGR
C
60 600 Japan
Belgium
60 Malaysia
Turkey
China US
40 400 France
40
Thailand
Mexico Norway
Denmark
20 200 Brazil Russia UK
20
Philippines
Sweden
India
0 0 0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Y92 Y94 Y96 Y98 Y00 Y02 Y04
F F F F F F F GDP per capita (US$, Purchasing Power Parity)

________________ ________________
Source: CMA Source: Citigroup Research
35
Buoyant end user sectors to keep demand growth
robust
Housing shortfall Unfolding of the capex cycle

No of Households (LHS)
(Mn) (Rs. bn)
250 Housing Shortfall 23.4 700
21.8
19.4 19.8 600
200
500
14.6
150 13.5
400

300
100

200
50
100

0 0
1961 1971 1981 1991 2001 2005 FY00 FY02 FY04 FY06e
___________ ___________
Source : NBO Source : Citigroup estimates

Grasim to maintain market share in the fast growing cement business

36
Backed by sustained cash from VSF

VSF Operating Earnings (PBIDT) • Significant Competitive strengths

(US $ mn)
139 – Enviable domestic market leadership

124 127 – Cost leadership with integrated

operations
102
– Application development
89 89 91
competencies
71
• Proximity to key growth markets
– Firm domestic demand with the India
Textile Advantage
– Impressive exports prospects to
South Asian countries
• Concentrated efforts to increase
99 Y00 Y01 Y02 Y03 Y04 Y05 06e fibre exports to key regional textile
FY F F F F F F FY
____________________ hubs
Source: Company data

Grasim: On a sustainable growth path

37
Achieving global aspirations

Portfolio of value and

growth businesses
Aditya Birla Nuvo: Building a balanced portfolio

Value Businesses High Growth Businesses

Carbon Financial Telecom

VFY Textiles Fertilisers Insulators Garments Subsidiaries
Black Services JV JV (21%)

Mutual Fund IT
(50%) (70%)
Life Insurance ITeS
(74%) (100%)
Distribution
(50%)
39
Restructured to move on a high growth trajectory

Indian Rayon Indian Rayon Aditya Birla Nuvo

Revenue Mix – FY’00 Revenue Mix – FY’05 Revenue Mix – FY’08e

Financial Services
Tex tiles Textiles
Textiles Life Insurance
Insulators
Insulators
Others VFY
Softw are
Insulators Garments Carbon Black Fertilisers
BPO
Telecom Carbon
Carbon VFY Software
Black
Garments Black
VFY Garments
Telecom BPO

Value businesses High growth businesses

FY00 FY05 CAGR

Revenues $ 246 mn $ 413 mn 11%
Market Cap $ 75 mn $ 531 mn 48%

High growth businesses to contribute over 75% of revenues by FY08

40
IDEA Cellular : Strong growth prospects

• Group raised its stake to 50.2% India Cellular growth

In Mn

– Aquired 16.5% of Cingular’s stake for 160.1

$144 mn

– Aditya Birla Nuvo’s share 20.7%

CAGR – 45%
• Idea Cellular: 5th largest cellular
operator in India

– Nationwide presence with

52.2

operations in 11 circles
CAGR – 79%
– Plans to roll out in 3 new circles

• Strong presence in a high growth 0.9

sector

FY e

FY e
e
98

99

00

01

02

03

04

05
06

07

08
FY

FY

FY

FY

FY

FY

FY

FY
FY
__________________
Source: TRAI, Merrill Lynch estimates 41
 IDEA Cellular : Rising subscriber base and improving
financials
IDEA Subscriber growth (FY01 - FY06e) IDEA Revenue and EBITDA (FY01 - FY06e)

In Mn Revenue EBITDA EBITDA Margins

8
800 (US$ Mn) 40%
7
700 35%

6
600 30%

5 500 25%

4 400
3%

20%
–8
GR

3 300 15%
CA

2 200 10%

1 100 5%

0 0 0%
e
01

02

03

04

05

01

02

03

04

05

e
06

06
FY

FY

FY

FY

FY

FY

FY

FY

FY

FY
FY

FY
__________________
Source: Company Data 42
 Birla Sun Life Insurance: Promising prospects in a
high growth sector
Life Insurance market to triple to $45bn by 2013
• Exciting prospects in Life Insurance 50 US$ Bn
– High potential, given low penetration 40
– Demographic profile and economic 30
outlook predict rapid growth 20
– Private sector entry spurs product 10
and market development 0
• Birla SunLife, a strong player 1990 1993 1996 1999 2002 2005e 2008e 2011e

– Amongst leading private life insurers Birla Sun Life: Exponential Premium Growth
250
US$ mn
– Strong, expanding distribution
200
network
• Several first mover advantages 150

– Unit Linked Products 100

– Multi-Channel distribution 50

0
__________________ FY02 FY03 FY04 FY05
Source: Company Data ; Swiss Re, Kotak Research 43
Madura Garments: Leadership in a high growth
business
• Surging consumer demand provides Gross revenues
the opportunity…
160 US$ mn
– Branded menswear market to be
$3.3bn by 2010; growing 15% 140
annually
CAGR – 16%
– Womens wear & denim to reach 120

critical mass
100
• … for Nuvo to reap benefits
– Leadership backed by strong brands 80
– Transform to life style / full wardrobe
brands 60

– Strategic tie-ups with leading global

40
brands
FY01 FY02 FY03 FY04 FY05 FY06e
• Retail thrust to bolster leadership ____________________
Source: Company Data
– Retail space to double in 2 years
44
Current valuations

Current EV/
(In US$ mn) Revenues EBIDTA Net Profit PER
Mkt. Cap EBITDA

Hindalco
2,294 547 267 4,332 11.4 7.6
(Rs.165)

Grasim
1,434 334 178 3,017 14.1 10.3
(Rs.1,452)

UltraTech
653 104 25 1,462 36.8 11.6
(Rs.519)

Aditya Birla
489 71 28 1,314 27.0 11.3
Nuvo (Rs. 710)

_____________________
( month FY06 annualized data
Stock price, market cap and as on 31st Jan 2006
Valuations based on FY06 Bloomberg consensus estimates 45
Moreover; a caring corporate citizen

• Towards improving quality of life of the under-privileged

– Aditya Birla Centre for Community Initiatives and Rural Development
– Partnering with the Governments, SIFPSA, CARE India & BBC Worldwide, Leprosy
Mission, UNICEF and WHO

• Over 2 million beneficiaries, across several states in India

• Aditya Birla Group of Schools – The third largest chain of schools in India
– Presence in 12 states with over 40,000 students

• Reaching the poorest of the poor with key focus on

– Health care
– Mother and Child Care
– Education
– Sustainable livelihood Asian CSR Award 2003
Excellence in Poverty Alleviation
– Women Self Help groups & Social Welfare
Social Vision:
To actively contribute to the social and economic development of the communities in which we operate and beyond. In
so doing, build a better, sustainable way of life for the weaker sections of the society and raise the country’s HUMAN
DEVELOPMENT INDEX
46
Thank You