VSF, chemical businesses will help maintain growth momentum: Dilip Gaur, MD, Grasim
Sushil Agarwal, Group Chief Financial Officer, Aditya Birla Group, and Dilip Gaur, Managing Director (Grasim), Aditya Birla Group, in an exclusive interview with Zee Business, said Viscose Staple Fiber (VSF) and Chemicals are two major drivers that will help the company to maintain its growth momentum in future.
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These comments came in the wake of Grasim Industries reporting its highest quarterly profit in nearly nine years, surpassing estimates. Here are the edited excerpts:
Q: Grasim has reported a healthy performance in its first quarter. Do you think that the firm will continue this momentum of growth? Also, let us know about the important growth drivers that helped you to achieve this good numbers?
Sushil Agarwal: I must say that this is the best quarterly results for Grasim at a standalone level and from all financial parameters point of view. At the consolidated level, the Ebitda (earnings before interest, taxes, depreciation, and amortisation) of Rs 3,200 crore that we presented is the highest ever in Grasim's history. Earlier you referred to AB Nuvo and said that the results are not comparable due to absence of Nuvo, than, I would like to inform you that the standalone results which stood at 80 per cent and 30 per cent would have stood at 29 per cent in terms of revenue and 66 per cent in terms of Ebitda on exclusion of Nuvo. So the number is really big from a growth perspective.
Q: What are the drivers that would help the firm to maintain this momentum of growth?
Dilip Gaur: We have two businesses that work as the growth drivers for us and they are Viscose Staple Fiber (VSF) and Chemicals. The growth drivers in VSF business are here to stay as there are three kinds of fibres, namely VSF, cotton and polyester, and there is a shortage of cotton due to unavailability of land on which it can be cultivated and this shortage is going to create a cellulose gap in time to come. VSF is a fibre that will be filling this gap and at present, Viscose is the fastest growing in the world and that too at a double rate in India. In fact, we have seen its growth at a CAGR of 12 per cent in the past 4 years. I would like to share about our Liva initiative and we are the first company to start fibre branding. In the process, we have branded Viscose and offered several solutions to customers and opened new avenues for VSF fabric. This is a reason due to which its consumption has gone up to 100 tonnes per day from 50 tones per day, and it has seen a growth of 31 per cent in this quarter when compared to previous quarter and I feel that this trend of growth in VSF fabric is here to continue.
When it comes to chemicals than we have caustic soda, the product that is mainly used in Alumina and VSF, a fabric whose demand is set to grow. There is also a rise in demand for alumina as all three companies engaged in the production of Alumina, namely Hindalco, Vedanta and NALCO, all are growing at a fast pace. This is a reason that we are hoping that caustic will also grow. Besides, we hope that chlorine, a chemical that is produced as a by-product during the production of caustic soda, will also support our growth as its market is also growing every day.
Q: Every business has its own challenges as there are certain things that move out of decided parameters may be due to global changes like volatility in input prices and other kinds of pressures. How will you beat these problems?
Sushil Agarwal: Yes, there is an increase in all businesses but as a company, we have a policy of concentrating on the cost and that is a reason that we have a focus on consumption and always try to reduce the consumption and this reduction helps us to increase the cost competitiveness. Interestingly, these initiatives and efforts help us to increase our cost competitiveness in the market.
Q: You are a traditionally conservative group that always makes a conscious approach to control costs. Petcoke price in the US is at its peak. What would be its impact on market margins of the company?
Sushil Agarwal: They hardly have any implication on our businesses. I would like to add that unit per ton comes down in case of expansion and increase of volume and we are expanding at present, as one of our companies has announced an expansion plan of Rs 7,500 crore and this expansion will be completed in next 2-3 years. This expansion will lead to an increase in production capacity and result in the reduction of per unit cost in both businesses of VSF as well as chemical.
Q: Next question is related to cement business. Can you let us know about the rise in the total capacity of the company after the latest acquisition and its outlook?
Dilip Gaur: The capacity is likely to go up to 112 million tonnes after all mergers and acquisitions are completed.
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Q: The existing price war in the market may have an impact on margins. What is your view on it when it comes to cement business?
Sushil Agarwal: In the cement business, we have posted a volume growth of 29 per cent and revenue growth of 28 per cent in the last quarter. And I feel, this growth is here to stay and will be supported by government's recent announcement related to an increase in spending in the infrastructure sector and increase in investment in low-cost houses.
