Turnover grows by 63.3%; EBIDTA grows by 36.4%;

PBT including extra-ordinary income shoots up by 167.8% to Rs.2082 crore;
PBT excluding EOI grows by 48.9% to Rs.1058 crore

The Murugappa Group ended the year FY2008-2009 with a Group turnover of Rs.15,646 crore (LY Rs.9582 crore) and EBIDTA of Rs.1,467 crore (LY Rs.1075 crore). Over the previous year, the turnover grew by 63.3% and the EBIDTA grew by 36.4%. Profit before tax (PBT) excluding extra-ordinary income grew by 48.9% over the previous year to Rs.1058 crore (LY Rs.711 crore). The Group maintained its pace of investment with a capital expenditure of Rs.850 crore during FY2008-2009. (LY Rs.580 crore)

2008-2009 key highlights

In the year 2008-2009 the Murugappa Group has bucked the trend of an overall slowdown in the economy with majority of its businesses registering strong growth in turnover and profitability. The year saw commodity prices reaching its peak and trough and most of our businesses being significantly dependent on input commodities like steel, phosphoric acid, alumina grains etc. got impacted to some extent on that front. However, businesses have shown significant resilience in coming out of these difficult times and are well poised to take up the challenges ahead.

Summary of gross sales and profitability (EBIDTA) is presented below:

Rs. crore
Group companies	Gross sales	Growth over last year	EBIDTA	Growth over last year
Coromandel Fertilisers Ltd. (CFL)	9422	148%	859	88%
Chola MS General Insurance Company Ltd. (CMSGICL)	685	31%	34	49%
Chola DBS Finance Ltd. (CDFL)*	879	-	-56	-
Carborundum Universal Ltd (CUMI)	1253	27%	198	22%
EID Parry (India) Ltd. (EID)	782	15%	212	1035%
Tube Investment of India Ltd (TII)	2219	15%	114	-22%
Other Businesses	406	19%	106	-20%
Total	15646	63.3%	1467	36.4%
* Represents only 9 months performance

Sustainable profitable growth amidst recessionary times

The year FY2008-2009 was one of the most difficult and challenging times witnessed across the globe. The impact of the global slowdown was felt even in India with sudden and unprecedented change in GDP, unanticipated liquidity crisis, sharp volatility in currency and a near collapse of the stock markets.

While the businesses across the Group were not spared of the onslaught, the impact could be minimized due to:

• Diversified nature of businesses within the Group

• Key strategic shifts undertaken and

• Well thought out geographical spread

Aggressive pursuit of these well thought out strategies have paid off, keeping our heads above water in difficult times.

Sectoral highlights - FY 2008-2009

The diversified businesses of Murugappa Group had a good year of performance with a few exceptions. Some of the businesses performed very well while some showed improvements over last year. A few businesses faced significant challenges owing to the unprecedented turbulence in the overall economy. Key highlights in each of the sectors are enumerated below.

Robust Performance of Agri Businesses (CFL, EID and Parry Agro)

The agri businesses viz Coromandel Fertilizers Ltd (CFL), EID Parry (India) Ltd and Parry Agro Industries Ltd. posted strong profitability and growth during the year and were not impacted by the economic slowdown.

CFL operated under the new subsidy policy announced last year, a year which was marked by violent fluctuations in input costs. However, our well crafted strategy of backward integration has paid off well resulting in efficient sourcing of raw materials and improved profitability.

The company embarked on an ambitious journey of aggressive growth by setting up a separate division "Specialty Nutrients Division" (SND). This division manufactures and markets specialty nutrients like micro nutrients, water soluble fertilizers and organic composts and intends to grow three-fold in turnover within three years from the current level. This strategic intervention plans to capture value addition and provide a direction for sustained growth.

CFL has kick started its retail operations by opening nearly 400 "Mana Gromor" centers across the mandal headquarters of Andhra Pradesh which caters to the needs of the farming community through farm inputs and farm productivity improvement services and few outlets also include lifestyle products. With rural economy having robust growth and demand indications, this venture is expected to create substantial value enhancement for the company from being a fertilizer manufacturer to "Complete Farm Solution provider".

The company strengthened its tie-ups for raw materials and also fostered technical and R&D initiatives. The company along with its Mauritius based wholly owned subsidiary increased its equity stake in Foskor Limited from 2.5% to 14%. This would enable CFL an assured supply of key raw material and also reap the benefits in the form of share of profits.

In furtherance of the company's objective of securing its back-end, an investment of USD29 million in a phosphoric acid plant in Tunisia with M/s Groupe Chimique Tunisien (GCT) has been made and the financial closure for the same was successfully completed last year and supplies would commence from second half of 2010.

The pesticides division of CFL also performed well with turnover and Ebidta growth of 23% and 25% respectively. In order to tap the huge opportunity in agro chemicals available in the Latin American market, CFL has opened a wholly owned subsidiary in Brazil that will engage in the sale of its own manufactured products as well as traded products.

In the sugar business of EID, with the cane crushing capacity of 19000 TCD in 2008-2009, it is progressing fast in its de-risking strategy by integrating the co-product facilities with 84.5 MW cogen capacity and 135 KLPD of distillery capacity.

Silk Road Refinery, a JV with Cargill, at Kakinada with a capacity of 600,000 tons is all set to go on stream and is expected to be a significant growth driver for business. With global sugar markets looking robust, the refinery is slated for timely commissioning.

Parry Nutraceuticals division is investing in the field of Life sciences and is in the process of setting up an R&D facility in IIT Madras Technology Park, Chennai. Further, it has acquired a strategic stake in Valensa International, a Florida based Nutraceuticals Company. This acquisition would leverage the strength of the company in marketing and distributing Parry Nutraceuticals products worldwide.

Parry America, a subsidiary of EID, is into marketing of neem based biopesticides, which have received good acceptance in the developed countries and is now a profitable business. It has launched 'AZAMAX' for the indoor garden segment and the product will be available in all the 50 states in the USA in 16 and 32 oz. squeeze and measure bottles. This is Parry Americas first foray into the retail segment.

Parry Agro Industries Ltd is well poised to take advantage of the global demand supply scenario and declining stocks. The company is focusing on value added products with the launch of Parry's Supreme and K-Chai. Significant investments are also planned to acquire new estates in the north eastern region that would support the growth envisaged.

Engineering Businesses (CUMI and TII): Managing the ups and downs

The performance of these businesses during the first half of FY 2008-2009 was exceptional. However, during the second half, the growth momentum could not be sustained due to the slowdown in economy, particularly in the auto sector.

CUMI continues to be the market leader in the domestic abrasive market, on the back of its diversified product portfolio, focus on niche product segment and development of customer specific products. The non-abrasive business lines, particularly electro minerals and refractories, continued on a strong growth trajectory. As a move towards vertical integration, CUMI forayed into power tools to provide complete solution to customers. This unit has spread its wings and is now present with 15 models in 10 states. CUMI has consolidated its position as complete solution provider for entire value chain of abrasives.

The state of the art metallised cylinders plant, with a capacity to manufacture 500,000 cylinders per annum, was commissioned in September 2008 and bulk supplies to certain major Indian/overseas customers have commenced. New facility for manufacture of super refractories and anticorrosive products in Vellore district will enhance CUMI's capability further. The company doubled its capacity for manufacture of micro abrasives for the photovoltaic industry in December 2008. CUMI is also proposing to invest in further increasing the capacity for this product in 2009-2010 to address the rapidly growing requirements of this sector. The company continued in 2008-2009, its exercise of divesting non-strategic assets to fund construction of strategic assets.

The abrasives facility at Uttarakhand, the wear resistant tiles plant at Hosur and the engineered ceramics unit at Aurangabad, which were the major investments last year, are stabilizing and scaling up production levels. Uttarakhand plant has kept adding newer products to its line of activity. Today it has the capability and efficiency of producing many varieties of DC and RFC wheels in bonded apart from coated.

In 2007-08, CUMI through its overseas investment subsidiary, had completed a major overseas acquisition in Russia - Volzky Abrasive works (VAW) - the world's second largest producer of silicon carbide, providing it the access to raw material and technology. VAW has registered a growth of 70% in PAT this year. An MOU with Volgograd Administration to set up a 100,000 ton SiC plant in Russia was signed in 2008-09. CUMI through its overseas investment subsidiary, acquired a 51% equity stake in Foskor Zirconia (Proprietary) Limited, South Africa, (FZL). With a 4200 tons per annum installed capacity for Zirconia, FZL is the 3rd largest producer of Zirconia in the world. This investment will further strengthen CUMI's position in the growing minerals business.

In Tube Investments of India Ltd., TI Cycles has taken a big leap and entered the super premium 'performance' bicycles category by partnering with international brands Bianchi and Cannondale. These brands of mountain, road and hybrid bicycles will be retailed through TI Cycles' niche retail format - 'Track and Trail'. These outlets would further enhance TI Cycles' positioning of 'Fun, Freedom and Fitness.' This business unit has adopted a strategic shift from 'selling cycles' to 'selling cycling' and towards attainment of this strategy, a host of initiatives like Cyclathon Concerts, association with large scale events like Chennai Open, Himachal MTB, service revenue through rentals and mobile servicing etc are underway.

The business unit has established a separate division, BSA Motors, for manufacturing and marketing the environment friendly electric bikes (E-Bikes/E-Scooters). The division has launched five models of battery operated E-Scooters.

TI Metal Forming, the market leader in door frame, has now enhanced its capability to cater to the growing railway wagon segment. It has made an investment in Uttarakhand to avail the fiscal incentives and create entry barriers by being an early mover in this segment. This is a significant diversification strategy considering that more than 30% of sales for this division is estimated to come from the railways vertical in 2009-10. This unit is also coming up with a plant in Sanand to supply doorframes and other components for Tata Nano.

To tap the huge potential in industrial and engineering class chain segment, TIDC India has invested in technology and resources which would provide opportunities for growth of its products in the global arena. The unit has set up an automotive chain manufacturing facility in Uttarakhand to service its key customers in the region.

TPI, which is a supplier of precision tubes for the auto industry, is pursuing to lock-in key customers through value added centers and Tubular Components Division. With increased competitiveness in this segment, business perceives this strategy to be a positive step towards long term sustainability.

Financial services (CMSGICL and CDFL)

Chola MS Insurance, which registered the second highest growth amongst private players in the industry, is firming up with bancassurance tie-ups and has entered into a 5 year agreement with IndusInd Bank. This would provide better sourcing opportunities for the business. The company has also made significant headway in Rural sector through Government RSBY scheme (health cover for "below poverty line" segment) in the states of Gujarat and Jharkhand.

It initiated aggressive branding campaigns during the year and expanded the branch network from 97 to 113, also strengthening its presence in east, west and south.

The company enhanced its capital base by infusing Rs.75 crore in April 2009 through a rights issue. With the industry growth largely coming from motor and health segments, this infusion is necessary to support the company's growth plans in these two growing segments.

Cholamandalam DBS profits declined primarily due to higher delinquencies in the personal loan portfolio and lesser disbursement due to slowdown in auto segment. The company had raised Rs.135 crore in September 2008 by way of conversion of warrants into equity shares. To further improve the capital adequacy and to meet the operating requirements, the Murugappa Group and DBS Bank Limited have infused a capital of Rs.300 crore in the form of fully convertible cumulative preference shares. The company has since been focusing on asset based lending.

Other businesses

• Coromandel Engineering Company Ltd. (CEC) is the property development and civil construction business of the group which is set to grow in size and scale in coming years. Foreseeing that the slow down in the real estate space would continue for some more time, the company has sought to diversify into related segments like infrastructure, construction of commercial buildings and also treading the path to grab big size projects in civil construction.

• At Laserwords, the acquisition and merger of Four Lakes Colorgraphics, Inc., Wisconsin and Pine Tree Composition, Inc., Maine in the last two years has helped business to grow its top line as well as bottom line considerably despite recession in the US economy. The addition of Four Lakes to Laserwords' fold got business one step closer to becoming the leading provider of global pre-press services.

• Parry Enterprise India Ltd (PEIL) successfully commissioned its green field project for flexible packaging laminates in Baroda. These laminates would be used as packaging material for personal care products, food products etc. With the growth of consumerism and retailing in India, this division throws up huge potential.

• Ambadi Enterprises Ltd and its subsidiary Parry Murray, which are in the business of exporting high end furnishing and floor covering mainly to Europe and America, had a reasonably good year even under difficult circumstances.

• Parry Infrastructure Pvt Ltd, a wholly owned subsidiary of EID was formed during the year to explore opportunities in property development, logistics, international expansions, mining and infrastructure sectors.

People paradigm

The Murugappa Group, with over 32000 employees, has been an employer of choice for decades now. The Group is also a leader in adopting excellent HR practices and tools that enable its people continue to learn and grow.

In 2008-09, the Group's HR practices won recognition in India and abroad.

• The Group's leadership development programs (Business Leadership Program and Emerging Leaders Program or BLP and ELP) won the 'Exemplary Practice Award' at the 10th Annual Awards for Excellence and Innovation in learning, organized by Corporate University Xchange, Pennsylvania

• During the year, senior management of the group had the benefit of an insightful interaction with the renowned business advisor, speaker and author, Prof. Ram Charan on the subject 'How to manage a large diversified group in turbulent times'

• Coromandel Fertilizers Limited (CFL) was ranked in the Top 20 Best Employers in the Business Today - Mercer - TNS survey. CFL also bagged the award for 'Most Engaged Workforce' from CNBC and the DMA - Erehwon National Award for 'Innovation in HR'

• Carborundum Universal (CUMI), another group company, was recognized at the Employer Branding Awards conducted by World HRD Congress at the national level, for 'Managing Health at Workplace'

Meanwhile, the Group continues to focus on refining and rejuvenating its HR practices.

As the portfolio of businesses and their geographical spread expands, the Group relies on its values and beliefs to provide the guiding principles of doing business. In 2008-2009, these values were contemporized and the spirit of the Murugappa Group was re-launched as 'The Five Lights', aimed at making its relevance more immediate to a new generation of employees.

Corporate social responsibility

• As part of the Group's ongoing corporate social responsibility initiatives, Rs.286 lakh was contributed last year to AMM Foundation and Murugappa Chettiar Research Centre (MCRC)

• The AMM Foundation is a strong network of service - oriented philanthropic institutions in the fields of school and technical education, health care and research

• AMM Foundation provides education to about 11,000 children and has set up four premier higher secondary schools in the city. The Foundation also runs an autonomous premier polytechnic institution that offers National Board accredited programmes

• In the Healthcare domain, the Foundation has set up four hospitals in Tamil Nadu, which treat close to 7.5 lakh patients annually, and nearly 1 lakh underprivileged patients receive free treatment in Pallathur, the hometown of the Murugappas.

Research being the building block of any growing economy, Shri AMM Murugappa Chettiar Research Centre (MCRC), puts considerable amount of effort and focus in conducting applied and useful research on energy, environment, bioresources and biodiversity, microbial and plant biotechnology, Sustainable aAgriculture and diverse fields including algae technology, organic farming, eco-friendly projects, bio-fuel technologies, etc. Sustaining the environment and depleting energy resources are considered as key areas, when the Foundation takes up research projects.

About the Murugappa Group

Headquartered in Chennai, the Rs. 15,646 crores (USD 3 billion) Murugappa Group is one of India's leading business conglomerates. Market leaders in diverse areas of business including Engineering, Abrasives, Finance, General Insurance, Cycles, Sugar, Farm Inputs, Fertilizers, Plantations, Bio-products and Nutraceuticals, its 29 companies have manufacturing facilities spread across 13 states in India. The organization fosters an environment of professionalism and has a workforce of over 32,000 employees. The Group has forged strong joint venture alliances with leading international companies like DBS Bank, Mitsui Sumitomo, Cargill and Groupe Chimique Tunisien has consolidated its status as one of the fastest growing diversified business houses in India.

For further information, please contact:
Chandrika Raman
Asst General Manager
Group Corporate Communications
Murugappa Group
Tel: 25306535 / 98400 71172
chandrikaR@corp.murugappa.com

Senthamil/ Neha
Hanmer MS&L Communications Pvt Ltd.
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senthamil@hanmermsl.com, nehadamani@hanmermsl.com