Grasim Industries’ acquisition of Terrace Bay Pulp Mill in Canada and Domsjo Fabriker in Sweden has been the execution of a well-thought strategy that the company chalked out after hiving off its cement division about two years back. The division was merged with subsidiary Ultratech and the company was left with only viscose staple fibre business, which rendered investors concerned about growth in earnings. K K Maheshwari, managing director of Grasim, was entrusted with the task of developing and executing growth strategy for pulp and fibre business of the group that resides in Grasim and other group companies such as Thai Rayon and Indo Bharat Rayon. In an interview with Abhineet Kumar and Chandan Kishore Kant, he speaks on how far the company is from achieving the set targets.
What has been the progress in the last two years since you took the reins of the pulp and fibre business of the group?
We defined certain things two years ago; we are just implementing them now. Most recently, we have got a new management structure for the group’s pulp and fibre business. We have got two new chief operating officers (COOs) for two different geographies and one COO to head the pulp business. Besides, a new chief marketing officer, chief technology officer, chief financial officer and chief people officer have been appointed. The structure has been designed to provide adequate attention to geographies as we expand through acquisitions.
What is the core of the strategy that you have been playing out for the last two years?
Two years ago we all sat down and said where do we want to be. We said we will take our production capacity to 1 million tonnes in five years from 700,000 tonnes at that time. That decision was based on a steady growth of four to five per cent that the industry has been seeing over the last 10 years. And, if we are the market leaders, we should grow proportionately.
Som, how did the inorganic route fit into the strategy?
For the fibre business, we wanted to grow organically and we have been setting up new plants, de-bottlenecking some of our plants and ramping up production. But for the pulp business, it was tough to grow organically, as setting up pulp plants is a very long process. So, it has been a conscious decision to grow in pulp production inorganically. And this is precisely what we have achieved through our acquisition of Terrace Bay Pulp Mill and Domsjo Fabriker.
What has been the strategy beyond production increase?
Our strategy is also focused on growing non-woven fibres for industrial use and specialty fibres for textile applications. We, in fact, aim to take the contribution of specialty fibre to 24 per cent in the next three years from 18 per cent of total production now.
Besides, the group has always believed in the integrated value chain. Same thing we decided for the pulp and fibre business to have an integrated value chain. In all our fibre units, we are unique in the world. We have our own CS2 (carbon disulphide) plants, salphuric acid plant, captive power plants. Also, as a group, we also have our own caustic soda plant.
What is the progress on the various production ramp-ups you are planning for fibre business?
The greenfield expansion at Vilayat in Gujarat for 120,000 tonnes per annum (tpa) capacity and brownfield expansions of 36,500 tpa at Harihar in Karnatka are on schedule. We expect half of the capacity at the Harihar plant to be commissioned in July and August and the rest will be commissioned by March-end. The plant in Vilayat is expected to be commissioned between January and March in phases. Majority of the expansion at Vilayat will be to increase production for specialty products such a modal, micro modals and spun-dyed fibres.
Has the hiving off of cement business from Grasim helped the company concentrate on pulp and fibre businesses?
Our group's vision is to become a global conglomerate with focus on each business irrespective of where a particular business resides. And this has been true for Grasim as well. We are sure we will continue to deliver superior performance in both the VSF business and through UltraTech our subsidiary in the Cement business.