‘Aditya Birla Capital listing in six weeks’

Aditya Birla Group company Grasim Industries is on a strong wicket after wading through challenging times for the last 70 years. While Grasim has proved its mettle in the manufacturing sector, its venture into the telecom sector through Idea Cellular has faced rough weather. The company’s Managing Director Dilip Guar and Group CFO Sushil Agarwal spoke to BusinessLine on future prospects. Excerpts:

How do you see India Inc’s progress post India’s 70 years of Independence?

Sushil Agarwal: Incidentally, Grasim has also completed 70 years of operations. In fact, Grasim got incorporated exactly 10 days after India’s independence. The evolution of Grasim in a way reflects the progress of India. The company has reinvented itself at every opportunity thrown open by the country’s economic growth.

Dilip Guar: For a company in the textile sector to survive for so long itself is an achievement. From a 10-tonne per day unit in Nagda (Madhya Pradesh), Grasim has evolved as a true Indian global conglomerate with 26,000 tonnes per day capacity and generating 70 per cent of the revenue from overseas.

Sushil Agarwal: India’s growth was led by three big waves. First, was when the country got television, then evolution of the IT sector and last, but not the least, the telecom revolution. Efficiency has improved manifold because of the telecom sector, though the sector is in trouble right now. Idea Cellular, our group company, has 200 million customers of which 110 million are from rural India.

Dilip Guar: What the US has not achieved in 50 years we have achieved in 10 years. India has gained a lot of respect in the global forum as a quality manufacturing base. We are among the top cost quartile in each of our businesses. India, as a country, may not be there in cost quartile, but as a group we are there to represent India.

Has there been pricing pressure in the VSF business?

Dilip Guar: The VSF business has witnessed some cost push but realisation has been better. We have improved our efficiency to control cost. We had to export 9 per cent more in the June quarter due to destocking by dealers ahead of GST. Though margin in the domestic market is higher, we had managed to maintain our realisations through higher volume.

Will excess VSF capacity in China impact prices?

Dilip Guar: No. In fact, China is cutting down on production due to environment issues. With winter fast approaching there they are shutting down some of the inefficient polluting plants. There was a big fire in one of their plants and so supply of about one lakh tonne capacity got affected.

The global capacity utilisation has been 88 per cent. In China, it is at 85 per cent and at peak, it used to be 92 per cent. The VSF availability is low in the supply chain with inventory of just 6.5 days against the normal 10-12 days.

Is the VSF demand growing?

Dilip Guar: Demand has been healthy. That is exactly why we are planning to invest more in VSF. We plan to invest ₹680 crore to set up additional capacity near our existing facility at Vilayat in Gujarat, besides undertaking debottlenecking at the existing facility to add 38 lakh tonnes per annum, with an investment of ₹125 crore.

We will also expand caustic soda capacity at Vilayat with an investment of ₹450 crore which will go on stream by the March quarter.

In all, we will invest ₹1,500 crore between VSF and chemical business in the next 12-15 months. The investments and transfer of chemical asset from Aditya Birla Nuvo will push up annual capacity to 11.40 lakh tonnes from 8.40 lakh tonnes.

When will Aditya Birla Capital be listed on the exchanges?

Sushil Agarwal: We have already merged ABNL with Grasim and issued shares of Aditya Birla Capital to Grasim investors. We are in the process of seeking SEBI and stock exchange approvals. We are expecting to list it within six weeks.

What is the progress on setting up the payments bank?

Sushil Agarwal: We have firmed up plans on the financial services business including that of setting up a payments bank and an announcement will be made in a few days.

Is there change in the debt position of Grasim, post merger?

Sushil Agarwal: Post merger, we will add about ₹2,000-crore debt. Of this, 40 per cent is short-term loan through commercial paper.

Depending on the need we would repay them. As a company we are cash surplus and all businesses generate free cash, improving our ability to pre-pay loan. Even after adding Nuvo’s debt of ₹2,000 crore, we will remain a net surplus company.

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