Grasim - A Leading Player In Viscose Globally And In Chemicals In India: Motilal Oswal

Motilal Oswal Report

We hosted the top management of Grasim Industries Ltd. to discuss the core business dynamics (viscose, chemicals, textile, and insulator), entry into new high growth businesses, company structure and strategy, capital allocation policy, and sustainability initiatives.

Key insights from the discussion are highlighted below:

VSF – witnessing recovery in demand as well as pricing

There are three basic fibers available globally – cotton, polyester, and viscose staple. Globally, the share of cotton, polyester, and VSF stood at 24-26%, 65-70%, and 6-7%, respectively, in fiber production. VSF is fast emerging as a sustainable alternative to cotton. Made from wood pulp, it is renewable and is a 100% biodegradable product. VSF can be blended with all other kinds of fibers to give different textures and color to garments.

With a total capacity of 824 thousand tonnes per annum, Grasim is the largest VSF producer in India. VSF demand in India is anticipated to register a compound annual growth rate of 8-9% over the next 10 years. Grasim has developed and implemented an environment-friendly Lyocell technology in-house.

Chemical – Largest non-petrochemical and non-fertilizer chemical company

Caustic soda manufacturing was started with the intent of backward integration; however, in-house consumption (into VSF) now accounts for less than 30% of total caustic soda sale. Grasim has pan-India presence in the chemical segment. It is increasing its capacity to 1.53 million tonne from 1.3 mt and the expansion is likely to be commissioned in the next three months.

Paints and business-to-business e-commerce – new growth engines

Grasim announced its foray into the fast-growing decorative paints industry with an estimated overall capex of Rs 100 billion (including manufacturing as well as non-manufacturing capex, IT set-up cost, and initial working capital) by FY25.

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