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| Grasim eyes higher margin from viscose business |
| Abhineet Kumar / Mumbai Jan 27, 2010, 00:56 IST |
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Grasim Industries, which would be left with only the viscose staple fibre (VSF) business once its cement unit is merged with subsidiary company Ultratech, is aiming to grow the former operation by 27 per cent in the next two years.
The company operates its VSF business under the umbrella brand of Birla Cellulose. It has planned most of this growth through high-margin products such as speciality fibre in the woven segment and filters for car upholstery in the unwoven segment.
Grasim’s expects to de-merge its cement unit into a separate entity and then merge it with Ultratech by the end of this financial year. After this, Grasim’s holding in the cement business subsidiary would be between 55 per cent and 65 per cent. Investors of Grasim have been concerned about growth in earnings after the cement business goes to Ultratech.
Grasim reported Rs 2,529-crore revenue from the VSF business in the first nine months of the current financial year. For the full year, revenue should be about Rs 3,100 crore. Of this, about a tenth is expected from non-woven products. The 90 per cent of revenue from the woven segment should have about eight per cent from sale of speciality fibres.
“With the addition of a new plant, we are expecting Rs 800 crore growth in annual revenue in the next two years,” said Vijay Kaul, chief marketing officer of the VSF business at Grasim. The company is setting up an 80,000-tonne per annum unit in Gujarat. This would be focused on high-end speciality fibres, expected to contribute 20 per cent of total revenue in the next two years, from the current level of seven to eight per cent.
The company also plans to increase the contribution of the non-woven product in various uses, from car upholstery to baby diapers. The company already has a facial wet-wipes’ product under the brand name of Kara, beside glass cleaning and baby care products under the respective brand names of Prim and Purreta.
“Our personal and home care products are expected to grow with the growing consciousness on hygiene,” said Kaul. He expects this segment to contribute 20 per cent in the next two years, up from 10 per cent now.
The company’s VSF business reported operating profit of Rs 957 crore in the nine months of the current financial year and had an operating profit margin of 37 per cent. Kaul did not share his expectation on the operating profit margin once these high-end products reach the hoped-for revenue share.
Grasim stock was down by 1.9 per cent to Rs 2,607.6 a share on the Bombay Stock Exchange on Friday. The Sensex, the exchange’s benchmark index, was up by 1.12 per cent to 16,859.
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