Grasim Industries: Firing On All Cylinders
It is a leading global player in viscose staple fibre (VSF) and the only VSF producer in India. It is also the largest producer of caustic soda and its subsidiary ,UltraTech Cement, makes it the largest producer of white cement too. The company’s name is Grasim Industries and it bagged the Dun & Bradstreet Corporate Award for stellar performance in the textile sector in 2018. Also in 2018 Grasim’s Harihar Polyfibers Unit won the Golden Peacock Award for sustainability.
With a consolidated net revenue of Rs 56,200 crores in the 2017-18 financial year, Grasim Industries is a private sector giant with interests in VSF, textiles, chemicals, cement, financial services and telecommunications. The Aditya Birla Group company earned a consolidated net profit of Rs 3,700 crore in FY 2018.
A Motilal Oswal report on Grasim is optimistic about the company’s prospects. It points out that Grasim’s “standalone revenue increased 27 per cent y-o-y” to Rs 5,120 crore (better than the estimated Rs 4,250 crores) in the second quarter of FY19, led by Viscose Fibre (VSF) (+23 per cent y-o-y) and chemical (+38 per cent y-o-y) segments.
The biggest challenge to the company in the year gone by was the reduction of its equity holding in Idea Cellular, which dwindled to 11.55 per cent from 23.13 per cent with the merger of Vodafone India Limited and Vodafone Mobile Services Limited with Idea Cellular Limited. The merger became effective on 31 August, 2018. The merged entity has been named Vodafone Idea Limited (VIL). At Grasim Industries’ annual general meeting (AGM), Aditya Birla Group Chairman, Kumar Mangalam Birla said, “Despite the challenging environment, your company recorded an impressive revenue of Rs 57,338 crore, with EBITDA of Rs 10,881 crore in FY 2017-18 on a consolidated basis”.
So how did the company, of which VSF is an important and essential product, fare during the first anniversary of the GST, which severely pinched the textile trade? “One of the worst hit sectors was textiles,” laments the President of the Textile Association of India, T. K. Sengupta. “It is mainly because of the unorganised sector, which comprises almost 80 per cent of the entire trade,” he points out. The Motilal Oswal report assesses the prospects for viscose staple fibre as good. While Grasim’s volume of VSF production increased by 10 per cent y-o-y, its revenue from VSF jumped up by 23 per cent to Rs 2600 crore. Grasim Industries’ chemicals business saw volumes jump up by 18 per cent y-o-y, while utilisation during the second quarter of FY 19 was 93 per cent. Grasim’s revenue from chemicals was Rs 1600 crore.
Grasim’s global operations and joint ventures also reached new heights in the financial year gone by. Birla pointed out that the company had “strategic investments in pulp units in Canada and Sweden. These cater to 50 per cent of our pulp requirement. These JVs ensure consistency in the supply of prime quality pulp to our Indian operations”.
Addressing shareholders, Kumar Mangalam Birla said, “The prevailing sense of optimism accentuates India’s continuing economic growth in the future as well. It is attributable to the country’s solid fundamentals, such as deleveraging by corporates, resulting in much stronger balance sheets, better capacity utilisation with consumption demand becoming stronger, and insolvency and bankruptcy process weeding out non-performing assets, among others.”
“The government’s unwavering push for infrastructure projects – Bharatmala Pariyojana, airports, metros, affordable housing, urbanisation, smart cities and digitisation are excellent stimulators for the economy’s growth in the medium-term,” Birla went on to say. It is amply clear from the Chairman’s address that expansion is at the core of Grasim’s growth strategy. Birla emphasised that “The company’s leadership position in viscose and chemicals segments will get further strengthened by the new expansion plans.”
