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After make a splash in the paint industry, Aditya Birla Group flagship, Grasim Industries plans to develop a business-to-business e-commerce platform for selling building materials, with an investment of ₹2,000 crore over five year.
The investment adds a new high-growth engine with clear adjacencies within Grasim’s standalone businesses and its subsidiaries and associate companies.
This platform will be operated by a newly recruited leadership team from the digital ecosystem. The overall building materials procurement segment in India has grown at a Compounded Annual Growth Rate of 14 per cent over the last three years. This industry, which is estimated at $100 billion, has a digital penetration of just two per cent.
Strategic portfolio
Kumar Mangalam Birla, Chairman, Aditya Birla Group, said the foray into B2B e-commerce is yet another strategic portfolio choice as it crystallises the intent to invest in the new-age, high growth digital space.
The building materials segment presents a huge scalable business opportunity with a proven path to profitability. With this foray, Grasim would be able to leverage the large B2B ecosystem within the Aditya Birla Group. This move will also catalyse the growth of the MSME universe in India and provide an impetus to the Government’s vision of Digital India, he added.
Last March, Grasim ventured into paints business with an initial investment plan of ₹5,000 crore which was doubled in May. It plans to commission paint production capacity of 1,332 MLPA by the fourth quarter of FY24.
Grasim’s digital platform will address various challenges within the existing supply chain, said the company. Grasim’s online platform will target to sell cement and aluminium products produced by its Group companies UltraTech Cement and Hindalco Industries.
The platform will primarily focus on MSMEs in the Building Materials segment with the potential to further extend to other relevant categories. The key value proposition would be an integrated procurement solution including on-time delivery and a superior product range at competitive pricing.
Growth opportunity
The company believes that B2B e-commerce is a high growth opportunity with attractive long-term returns and will be highly value accretive to its stakeholders, it added.
Interestingly, Sajjan Jindal-led JSW Group last November announced plans to invest ₹250 crore in an e-commerce venture JSW One Platforms, which will sell steel, cement and paint products. The Group ventured into paints business in 2019 to tap the synergy with steel in the building material space.
The platform is targeting an annual gross market value run-rate of ₹500 crore by March 2022.
Under its B2B category, JSW is also setting up JSW One MSME, a platform which will offer an e-commerce marketplace for small and medium-sized manufacturers and contractors including facilitating online transactions, order fulfilment and tracking.
Tata Steel has an online platform, Ashiyana, for the B2C segment, primarily targeted at individual home builders. The company said that about 20-25 per cent of the sales come through its online platform.
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