The Hindu Business Line : Grasim net climbs 50% on surge in VSF demand

Mumbai, Oct. 27 A surge in global demand for viscose staple fibre (VSF), coupled with higher demand for knitted fabric, helped Aditya Birla Group company Grasim report an increase of 49.75 per cent in its second quarter consolidated net profit at Rs 620 crore compared with Rs 414 crore in the same period last year.

“An upsurge in global VSF demand based on comfort fabric enabled us to post a record high operating profit of Rs 316 crore, up 81 per cent from the corresponding quarter last year from this segment alone,” said Mr D.D. Rathi, Wholetime Director of the company.

The company exports about 30 to 35 per cent of its VSF production.

The consolidated net revenue increased by 25 per cent to Rs 3,973 crore from Rs 3,186 crore in the same period last year. The turnover of chemical business was reported at Rs 108 crore and sponge iron at Rs 209 crore.

Grasim, which is into textile, cement, chemicals and sponge iron sectors, has drawn up a capital expenditure programme of Rs 10,000 crore across all its businesses, part of which has been spent. The company plans to invest about Rs 4,085 crore in its cement business, which envisages expansion of its capacity by 10.2 million tonnes at a cost of Rs 3,480 crore, setting up of two new thermal power plants of 75 MW each and 27 RMC plants in different locations across the country.

Capex programme

On the outlook for the cement industry, Mr Rathi said the additional capacity of 90 mt announced by the industry could result in a surplus scenario due to which realisations could be under pressure from end 2008-09. “Any price rise will have to be passed on to the consumers. Our capacity expansion in cement is also posed to go up by 50 per cent in the next nine months,” he said.

The company has lined up a Rs 692-crore capacity expansion programme for its VSF division, apart from a Rs 840-crore Greenfield facility at Vilayat (Gujarat) and Rs 217-crore expansion of its Harihar and Khrach units.

The company will fund the expansion plans through internal accruals, but does not rule out external debt, according to Mr Rathi. “The interest rates have been high this quarter and depending on market dynamics, we might go for debt to fund our plans,” he said.

The company exports 32-35 per cent of viscose but rupee appreciation did not affect the margins as it was offset by import of VSF pulp, he said.

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