Grasim consolidating, improving efficiencies

01 October 1999

A bulk of Grasim Industries Ltd.'s turnover comes from its viscose staple fibre and cement divisions. About 37 per cent comes from VSF, and 31 per cent from cement. So these are the divisions in which the company will concentrate its cost control actions in an effort to improve profitability.

Grasim's other divisions include sponge iron, textiles and chemicals. Grasim is the world's largest manufacturer of VSF. Grasim Industries is a part of the A V Birla group of companies headed by Kumar Mangakam Birla.

Viscose staple fibre
Grasim's viscose staple fibre division is not doing too well. The company attributes the decline in operating profit in the year ended 31 March 1999 to lower sales volumes and poor margins in VSF.

Generally, local demand for textiles has been slack. To make matters worse, Grasim's exports of VSF based yarn and textiles have also declined, and imports of blended textiles into India have increased. The company's VSF meets stiff competition from substitute polyester staple fibre.

The VSF division had an operating margin of of 32.2 per cent in 1998-99, compared to 35.9 per cent in 1997-98. Grasim's average cost of VSF production rose 4.2 per cent in 1998-99.

With global oil prices rising, the prices of downstream products such as polyester are rising too. This rise in PSF prices should give Grasim some respite. The viscose staple fibre it makes uses wood pulp as raw material.