Grasim to expand caustic soda, chlorine derivatives and textile business

Excerpt: Grasim Industries plans to invest Rs. 1,000 crore in expanding caustic soda and new chlorine value-added products and would generate additional revenues of about Rs. 1,200 crore per annum from it

Grasim Industries, an Aditya Birla group company, plans to invest Rs. 1,000 crore in expanding caustic soda and new chlorine value-added products and would generate additional revenues of about Rs. 1,200 crore per annum from it.

Sushil Agarwal, Director and Group CFO, said the brownfield expansion at various plants in Karnataka and Gujarat are expected to be commissioned in 18 months after receiving the environment clearances.

As it sources 80 per cent of its raw material from group companies, rising input cost in the viscose staple fibre business is not much of a concern for Grasim. The almost fully backward integrated operation has helped the company to stay ahead of the cost curve, he added. The company is fully integrated for caustic soda, carbon disulphide, power and carbon, which accounts for 30 per cent of production cost. It sources 60 per cent of dissolving grade pulp, which constitutes 55-60 per cent of the overall cost, through joint venture companies in Canada and Sweden.

Agarwal said though the pulp is sourced at market price, the cost benefit flows back in the consolidated account through profit from the joint venture company. Grasim has competitive advantage over others as 80 per cent of the cost is hedged through high backward integration.

Also to expand textiles business

The company plans to invest Rs. 6,400 crore in the textile business by the financial year 2021, he said. The company plans to fund the expansion largely through internal accruals. The net debt was Rs. 14,165 crore in the year ended March 2018 against a surplus of Rs. 2,438 crore in the same period last year. On a standalone basis, its surplus has come down to Rs. 384 crore from Rs. 2,260 crore, he said

Dilip Gaur, Managing Director, said while the demand for VSF (Viscose Staple Fibre) has been good in both the global and domestic markets, the fresh capacity of about one million tonne being added this year in China is a concern. However, he added the VSF capacity addition will not be more than half-a-million tonne as concerns over environment have been raised.

Grasim expects viscose filament capacity of 25,000 tonnes taken over on lease from BK Birla-owned Century Textiles to add an Ebitda of Rs. 450 crore this fiscal. The plant, which is located at Shahad near Thane, will save about Rs. 20 crore through the synergy with Grasim operations, he said.

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