Without any further description of what your grandfather did during the war or what the picture purports to show there is not much to say. There certainly are photos of Bismarck during her final battle in existence, but I'm not aware of many.

Those photos that are known to exist were taken by the crews of the British vessels present for the final battle. Of these only four - King George V, Rodney, Norfolk and Devonshire - were really close enough for pictures to show any kind of detail. Unfortunately both the conditions in which the battle was fought (the weather was quite poor) and the nature of the chase leading up to it (most of the British vessels were very low on fuel, and so had to leave the area even before the Bismarck had actually sunk) contribute to the lack of photos.

The only ship left on the scene to actually witness the Bismarck slip under the waves was HMS Dorsetshire. She was also probably the ship that got the closest to Bismarck during the engagement, having edged to within 2500 yards in order to fire torpedoes towards the end of the engagement (although the other three British ships also got close to this range before turning for home). Thus the only photos of the Bismarck going under were taken from this ship and from around this distance. There was also one or more British aircraft in the vicinity witnessing the end of the Bismarck, but I'm not aware of any photos taken from these.

It is extremely unlikely that any picture from the German side of the engagement (if any were even taken) survived the sinking. Dorsetshire and Maori only managed to pluck just over a hundred survivors from the sea after the battle. German vessels managed to rescue a handful more in the days after the even. The chance of any of these survivors having had the chance of taking a photo, let alone securing the film and carrying it in a readable condition onto one of the rescuing ships is next to negligible.