Grasim To Take Rs 60 Cr Hit As Vsf Unit Deal Falls Through

Grasim Industries' deal with Moonlight Canfabs to transfer its ailing viscose VSF division at Mavoor, Kerala, has fallen through due to labourers' resistance to the transfer.

As a result, the Aditya Birla group flagship has decided to take a one-time hit of Rs 60 crore towards retrenchment costs for closing down the division.

Grasim, senior group sources said, could recover part of the expenditure through sale of assets, but declined to quantify any figure.

Last year, Grasim had decided to hive off its ailing pulp and paper division at Mavoor and transfer it Moonlight Canfab for a consideration of Rs 21.5 crore. At that point of time, the 1,700 workers were planned to be given the option of either joining the new company or opt for a voluntary retirement scheme.

Severe water problems and other "inefficiencies" at the Mavoor unit had earlier forced Grasim to absorb losses of around Rs 30 crore annually. The transfer was expected to contribute towards the company's bottomline.

Following resistance from workers, Grasim has now entered into a pact with all the workers' union of the Mavoor unit for its closure. The workers would be paid retrenchment compensation apart from other terminal benefits.

The company, however, has continued to pay its employees during the past two years when the operations at the pulp and fibre units were shut.

This is the second time that the Aditya Birla group has closed down a unit and taken a one-time hit. Earlier, Indian Rayon's sea water magnesia unit was closed down following which the company had taken a Rs 300 crore one-time loss, forcing Indian Rayon to report a loss in that year.

Grasim's other pulp unit is located at Karnataka, its staple fibres units at Madhya Pradesh, Karnataka and Gujarat. The cement units of Grasim are situated in Madhya Pradesh and Tamil Nadu, textile units in Madhya Pradesh and Haryana and sponge iron units in Maharashtra.