Covid impact: Grasim puts off ₹3,880-cr capex

Suresh P Iyengar Mumbai | Updated on April 16, 2020 Published on April 16, 2020

A view of Grasim's caustic soda plant in Vilayat, Gujarat.

Grasim Industries, an Aditya Birla group company, has put on hold its capital expenditure plan of ₹3,880 crore this fiscal on the back of bleak demand outlook. Most of the company’s plants are operating at a very low utilisation level.

It currently operates only one of the four viscose staple fibre plants and two of the 13 chemical plants at 30-40 per cent capacity utilisation, the company said in an conference call on the impact of Covid pandemic.

Grasim will reinstate the capex and execute the projects in a staggered manner when the demand improves. It expects production to return to normal levels by April-end and has tied up all the raw material required to restart production in 3-4 days after the lockdown is lifted.

While the long distance logistics continues to remain hampered, the company expects things to fall in place once the lockdown is lifted.

The company has a gross debt of ₹4,856 crore as of December-end.

Interestingly, yarn prices were not impacted much in March as Chinese VSF plants never stopped production even at the peak of Covid outbreak in their country. There has been an oversupply of VSF in China due to lack of demand. With inventory levels increasing, few plants may shut down permanently.

VSF demand is currently weak with all textile centres shut globally, said Amit Murarka, Research Analyst, Motilal Oswal.

Given the lack of visibility on demand, it is difficult to assess the VSF price outlook, he said.

Published on April 16, 2020

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