GRASIM INDUSTRIES LIMITED
Know the Company
Grasim Industries Ltd (Grasim), flagship Company of the Aditya Birla Group, is a leading diversified company in India. Established as a textile manufacturer in 1947, Grasim has developed into the leading global producer of Viscose Staple Fibre. It also proudly stands as the largest producers in India for Chlor-Alkali, Speciality Chemicals (including Epoxy Polymers and Curing Agents), VFY, Linen Yarn and Fabrics producer as well as manufacturer of Electrical Insulators. Grasim is also recognized as the largest cement producer in India through its subsidiary, UltraTech Cement Limited, and a leading diversified financial services player through its subsidiary- Aditya Birla Capital Limited.
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In January 2021, Grasim made a strategic move by entering the decorative paints business, with a substantial capital investment of Rs 10,000 crore. This investment is allowed for establishing a production capacity of 1,332 million liters per annum (mlpa) spread across six plants strategically located throughout the country. Grasim also has a presence into the B2B e-commerce segment.
Business Divisions
Viscose Staple Fibre (VSF) unit
Grasim is the leading producer in India for VSF, a man-made, biodegradable fiber, which rapidly is gaining recognition as a sustainable alternative to cotton. This versatile fiber is utilized across diverse sectors encompassing apparel, home textiles, dress materials, knitwear, and non-woven applications. Grasim’s expertise in the VSF Business contributes to stands it as a prominent player in the global market also for this essential and sustainable fiber. Its Viscose Business encompasses a range of activities related to the production and management of viscose, widely used material, which derived from natural sources like wood pulp or cotton linters. For the Q3FY24, the Company’s Viscose business reported revenue of Rs 3,715 Cr. and EBITDA of Rs 402 Cr.
Chemicals Division
In 1972, Grasim started making caustic soda for its VSF unit. Now, it is one of India’s largest caustic soda makers and leads in the Chlor-alkali field. Grasim’s chemical business has grown a lot, offering various products like chlorine derivatives and epoxy. After merging with Aditya Birla Chemicals India Ltd with itself in 2016, Grasim’s caustic soda production rose from 452KTPA to 884 KTPA, making it the largest caustic soda producer in India. The Company uses cost-effective membrane cell technology and generate a substantial amount of power their own. The business has a range of chlorine derivatives, including Stable Bleaching Powder (SBP), Polyaluminium Chloride (PAC), Chlorosulphonic Acid (CSA), Chlorinated Paraffin Wax (CPW), Calcium Chloride (CaCl), Aluminium Chloride (AlCl), and Chloromethane (CMS).
Birla Opus – Paints Business
Grasim targets to become the second-largest player in the decorative paint business, with the commissioning of its six plants in a phased manner starting from March,2024. The trial run for Birla Opus’s three plants has already started. The sub-brand names have been finalised, and the development work for design, package artwork, and consumer communication has been completed. Supply Chain, Logistics and Distribution network also has been set-up to support the launch in the running quarter.
Grasim has invested almost 60% of the planned capital expenditure, totaling of Rs 10,000 crore, aimed at setting up six greenfield paint plants. Last fiscal, Grasim made its largest-ever capital expenditure of Rs 4,307 crore, including Rs 1,979 crore in the paints business alone.
Birla Pivot – B2B E-Commerce Business
Birla Pivot is a B2B e-commerce platform dedicated for the building materials industry. This digital marketplace facilitates seamless transactions and interactions within the business-to-business domain, catering to the specific needs of stakeholders involved in the procurement and distribution of construction-related materials. ’Birla Pivot’, is now operational and catering to customers in Madhya Pradesh, Maharashtra, and New Delhi. This division currently contributes nearly Rs 1,000 crore in annual revenue, and its growth is amazing.
Electricals- Aditya Birla Insulators
Aditya Birla Insulators holds the distinction of being the largest and widest electrical insulator manufacturer in India and is positioned among the top four globally. It is one of the largest manufacturers of full range of high-performance insulators (ceramic as well as composites). The Company’s products are catering to various applications such as transmission lines, substations, equipment, and railways. In 2019, Aditya Birla Insulators commissioned the Composite Hollow Core Insulators plant at Halol through a joint venture with Maschinenfabrik Reinhausen GmbH of Germany, now known as Aditya Birla Power Composites Limited (ABPCL).
Subsidiary Companies
Cement Subsidiary- UltraTech Cement Limited
UltraTech Cement Limited (UltraTech), Grasim’s 57.27% subsidiary (as on Dec 31, 2023), is the largest manufacturer of Grey cement, Ready mix concrete (RMC) and White cements in India. It is the third largest cement producer in the world, excluding China. With over 230 Ready Mix Concrete plants in more than 100 cities, UltraTech is the largest manufacturer of concrete in India. UltraTech has posted revenue of Rs 69,150 crore and net profit of Rs 6,415 crore in FY2023. Grasim has received Rs 628 Crore from Ultratech as dividend for the FY2023.
Financial Services Subsidiary – Aditya Birla Capital Limited (ABCL)
ABCL is a financial solutions provider that caters to the diverse needs of its customers across their life cycle, having strong presence across Protecting, Investing and Financing solutions. Presently, ABCL has a nationwide network of over 1,462 branches, more than 2,00,000 agents or channel partners including bank partners. As of December 31, 2023, ABCL managed aggregate assets under management of over Rs. 4.10 lakh Crore with a consolidated lending book of about Rs 1.15 lakh Crore through its subsidiaries and joint ventures.
Clean Energy Solutions Subsidiary – Aditya Birla Renewables Limited (ABReL)
Founded in 2011, ABReL provides five types of renewable energy solutions – solar, floating solar, solar-wind hybrid, wind, and battery storage. ABReL commissioned new capacity of 17 MWp taking the total capacity to 872 MWp as on 31st December 2023.
Joint Ventures- CPVC Resin Plant
Grasim and Lubrizol Corporation- an American provider of specialty chemicals – have already commenced the initial phase of construction for a 100,000 metric-ton CPVC resin plant. This facility is set to become the largest single-site capacity for CPVC resin production globally, which situated at the Grasim Industries’ site in Vilayat, Gujarat, India. Its strategic design aims to address the increasing demand for CPVC in piping applications not only in India but also in neighboring countries such as Nepal, Bangladesh, and Indonesia.
Strengths
Grasim has Leadership position in the VSF and various chemical businesses in the domestic market. It holds a substantial market share in the global man-made fiber market.
Grasim’s operations are complexly integrated, extending a pulp plant and caustic soda capacity in India, as well as two global dissolving pulp joint ventures and captive thermal power plants. This integrated approach ensures robust control over production costs. The company maintains its leading position with continuously adding capacities and widening market reach.
The Company also holds a prominent position in the caustic soda and epoxy resins segments in India. Strategic focus on expanding its portfolio of value-added products derived from chlorine, a by-product of caustic soda, enhances its overall realizations.
Strong housing demand on account of Government’s focus on “Housing for All” and market shifting trend from unorganized sector to Branded players are key growth drivers for decorative paints business.
Right issue of Rs 4,000 Crore fully subscribed
Grasim has opted for a rights issue, aiming to raise up to Rs 4,000 crore primarily to support the ongoing capital expenditure plan, specifically in the decorative paints segment and to retire existing borrowings. The company had set rights issue price at Rs 1,812 a share. On January 29, the company has reported that its rights issue was oversubscribed.
Huge Capex
Grasim already announced a Capex of Rs 10,000 crore towards the decorative paints business. Out of this, almost Rs 6,000 crore was spent till December,2023. The capex for the Q3FY24 alone stood at Rs 1,425 Crore, of which Rs 1,088 Cr. was for the Paints Business. It is setting up a cumulative capacity of 1,332 million litres per annum, that spread across six plants located in the country and is expected to commercially launch the paints business by end of fiscal 2024.
Grasim has also announced foray into the B2B e-commerce segment with total outlay of Rs 2,000 crore to be spent over the next five years. Birla Pivot – B2B E-Commerce Business- has received strong customer feedback for its private label tiles (building material) launched in the market.
The chemical division of the company has successfully commissioned additional 123,000 tons’ annual capacity of Advanced Materials (Epoxy Resins and Formulation) manufacturing capacity at Vilayat, Dist. Bharuch, Gujarat, recently. With this expansion, the total capacity of advanced materials stands at 246,000 tonnes a year. The company also inaugurated its Lubrizol CPVC resin project at Vilayat in Oct’23.
UltraTech cements is working on the second phase of 22.6 mtpa facility, announced in Jun’22 is in progressing and expected to commission during Q4FY24 itself, ahead of schedule. For the third phase of growth of 21.9 mtpa announced in October 2023, major orders to key technology suppliers have already been placed and civil work has commenced on a few locations.
Ultratech’s 24% of the power requirements are met through green power sources. During Q3FY24, the Company commissioned additional 26 MW of solar power taking its capacity of renewable power to 455 MW in addition to Waste Heat Recovery Systems of 264 MW.
Even though, borrowings are expected to increase to fund the proposed Capex, steady cash flow from the key business segments and strong balance sheet will keep the financial risk profile healthy. In January,2024 Grasim has raised Rs 4000 crore through right issue of shares and the company has repaid Rs 600 crore to investors of its commercial paper which matured on last week of January,2024.
Substantial Investments
Grasim has a huge balance sheet with equity capital base of Rs 132 crore, which set to increase by almost 3.35% on the recently concluded right issue of Rs 4,000 crore. The company has borrowings of around Rs 1,22,000 crore against a reserve of Rs 83,039 crore as of September30, 2023.
Grasim has strong financial flexibility as it is a holding company of two large, listed investments of the Aditya Birla group – UltraTech cement and Aditya Birla Capital Ltd (ABCL). UltraTech is the largest cement player in India, and ABCL is one of the largest financial services companies, both are listed on Indian bourses.
Grasim’s 57.27% stake in UltraTech is valued around Rs 1,64,400 crore as of now as well as Its 52.7% stake in ABCL, is valued around Rs 25,700 crore. It’s minority stake in Hindalco and Aditya Birla fashion retail also valued around Rs 7,500 crore. Grasim has a total market cap of Rs 1,44,480 crore only at present.
Financial Results
Grasim’s Q3FY24 revenue rose by 11.6% to Rs 31,965 crore, as compared with Rs 28,638 crore over the same period last year. However, the Company’s net profit fell 41.5% to Rs 2,603 crore in the October-December,2023 quarter from Rs 4455 Crore a year ago. Grasim’s results took a hit in Q3FY24 because of declining prices in the chemicals business. The company’s overall performance was adversely impacted by oversupply in the domestic market of caustic soda and lower realizations, aligning with a sharp decline in global prices.
Risk
Grasim has exposure in various business segments, especially Viscose Staple Fibre (VSF) and chemicals, which are highly sensitive in demand due to economic downturns. Furthermore, the cyclical nature of its subsidiary company’s business in cement adds this sensitivity to some extent. In short, Diversified companies, in general may face increased vulnerability during economic downturns, as difficulties in one industry may not be balanced by strengths in another. This scenario can result in heightened overall performance volatility.
As a diversified company, Grasim faces intense competition in each of their industries. If it is unable to maintain a competitive edge in each segment, overall performance may be compromised. In general, diversified firms may lack the depth of expertise and specialization seen in companies focused on a single industry. This can impact innovation and operational efficiency too.
Sector: Commodities
Market Price: Rs. 2180.05 as on today
FV: Rs 2/-
Stock Name: Grasim Industries Ltd
BSE Code: 500300, NSE Code: GRASIM
Market Cap.: Rs 144480 Cr
Book Value: Rs. 1222
Segment: Cement & Cement Products
Incorporation: 1947
Headquarters: Mumbai, India.
