Joint cooperation between Grasim and Rieter

Grasim Industries limited, a flagship company of Aditya Birla Group (ABG), which ranks amongst India’s largest private sector conglomerate and a global player in Viscose Staple Fibre (VSF), has added Rieter’s latest air-jet spinning machine J 26 at Textile Research and Development Centre (TRADC) in Kharach, Gujarat (India). This leads to a joint cooperation to explore the production of best quality air-jet spun yarns and fabrics made from VSF of Grasim and its blends.

The joint co-operation between Grasim and Rieter will provide benefits both in downstream processing and in the fabric. The conducted trials and development work results in distinct end products with yarns spun from mature technologies and sustainable fibres.

The state of the art TRADC is a pilot plant involved in addressing the downstream textile value chain and to provide comprehensive Research and Development (R&D) for all the VSF manufacturing units belonging to the ABG conglomerate. The technology centre helps upholding ABG’s strong commitment towards contributing technological advancements and producing eco-sustainable products. TRADC’s Lifestyle Studio, which displays fabrics and garments primarily made of VSF of Grasim, is an additional highlight in the technology centre.

The Rieter air-jet spinning machine J 26 includes unique characteristics that differentiate it from other air-jet machines. This machine coupled with industry benchmark autoleveler draw frame RSB-D 50 guarantees the perfect combination of spinning preparatory and end spinning system. The unique Com4®jet yarn structure that excels by its low pilling tendency, high washing resistance and dimensional stability offers great potential in the development of new, innovative products.

Rieter is the world’s leading supplier of systems for short-staple fibre spinning. Based in Winterthur (Switzerland), the company develops and manufactures machinery, systems and components used to convert natural and manmade fibres and their blends into yarns. Rieter is the only supplier worldwide to cover both spinning preparation processes and all four end spinning processes currently established on the market. Furthermore, Rieter is a leader in the field of precision winding machines. With 16 manufacturing locations in ten countries, the company employs a global workforce of some 5150, about 20 % of whom are based in Switzerland. Rieter is listed on the SIX Swiss Exchange under ticker symbol RIEN.

A USD 44.3 billion corporation, the Aditya Birla Group is in the League of Fortune 500, anchored by an extraordinary force of over 120000 employees, belonging to 42 nationalities. Over 50 % of its revenue flows from its overseas operations spanning 34 countries. The Group’s businesses are spread across a swath of industries. These include aluminium, copper, cement, textiles (pulp, fibre, yarn, fabric and branded apparel), carbon black, insulators, natural resources, power, agribusiness, telecommunications, financial services, retail and trading.

Grasim reports strong financial results for FY19

  • Consolidated Revenue: Rs.72,971 crore up 31 % YoY; EBITDA: Rs.12,820 crore up 18 % YoY
  • Standalone Revenue: Rs.20,550 crore up 30 % YoY; EBITDA: Rs.4,639 crore up 31 % YoY
  • Consolidated PAT (Before Exceptional Items): Rs.4,112 crore up 36 % YoY
  • Standalone PAT (Before Exceptional Items): Rs.2,574 crore up 30 % YoY
  • Standalone Cash Profit: Rs.3,457 crore up 31 %

Viscose Business

The net revenue for FY19 stood at Rs.10,325 crore up by 23 % YoY and EBITDA at Rs.2,052 crore up by 22 % YoY driven by better sales volume and realisation. The net revenue for Q4FY19 are at Rs.2,625 crore up by 18 % and EBITDA at Rs.413 crore, is up by 3 % vis-à-vis the comparable quarter of the previous year.

The VSF business reported record production and sales volume of 541KT in FY19 up 8 % and 6 % YoY, led by capacity debottlenecking. For Q4FY19 the production and sales volume of 130KT and 139KT respectively recording an increase of 15 % and 13 % YoY. The share of the domestic sales in the overall sales rose to 86 % in Q4FY19 from 83 % in Q4FY18.

The company’s popular VSF brand ‘Liva’ for the VSF business has been extended, to home textile category with launch of “LIVA HOME”. Today, Liva partners with over 40 retail brands and is available across 3500 outlets in Exclusive Business Outlets and Large Format Stores in addition to many more MBOs in 250 cities of India. This has resulted in doubling the viscose fibre consumption in the country over past four years. Viscose business has been registering a double digit growth in the last few years and market share of Viscose in overall fibre basket has gone up from 3.5 % to 5 % in the last four years.

Value added Speciality Fibre line of 16 KTPA capacity based on in-house technology has been commissioned at Kharach in May 2019.

The Brownfield capacity expansion plan of 219 KTPA at Vilayat is progressing well with construction work in full swing, scheduled to be commissioned in FY21

Chemical Business

The net revenue for FY19 stood at Rs.6,436 crore up by 29 % YoY and EBITDA at Rs.1,827 crore up by 40 % YoY driven by higher sales volume and better realisation. The net revenue for Q4FY19 are higher at Rs.1,688 crore up by 17 % and EBITDA at Rs.434 crore, up by 5 % vis-à-vis the comparable quarter of the earlier year.

The caustic soda sales surpassed one million tonne mark in FY19, a first in the country by any company and is a significant milestone achieved by the business. For Q4FY19 the production and sales volume of 254KT and 261KT respectively recording an increase of 16 % and 21 % YoY. The company recently launched four new brands of chlorine VAPs for consumer facing products in line with the management focus on increasing the volume of speciality products.

The acquisition of under construction Chlor-Alkali plant in Andhra Pradesh (with a potential capacity of 365 KTPA) for Rs.253 crore during the Q4FY19 is aimed at strengthening the operations on the east coast of India, a major caustic soda consumption hub.

The company is in the process of implementing approved capacity expansion plan from 1,147 KTPA to 1,457 KTPA at multiple locations and the same are in different stages of execution.

Capex Plan

The total capex plan of Rs.6,454 crore (at standalone level) is under execution for raising capacities in both the VSF and Chemical businesses, apart from ongoing modernisation capex at various plants. This capital expenditure will be incurred over FY20-FY22 and will be majorly funded from internal accruals. The cash profit generated in FY19 is over Rs.3,400 crore at standalone level.

Dividend

The Board of Directors of Grasim has recommended a dividend of Rs.7.00 per share as against Rs.6.20 per share in the previous year. The total outflow on account of the dividend would be Rs.516 crore (inclusive of the corporate tax on dividend).

Cement Subsidiary – UltraTech

UltraTech reported Consolidated Sales Revenue of `10,905 Cr. up 17% (YoY) and EBITDA of `2,459Cr. in Q4FY19 up 30% (YoY). The consolidated sales volume registered an increase of 16% on YoY basis to ~22 MTPA.

The consolidated sales revenue and EBITDA of UltraTech for FY19 stood at Rs.37,379 crore up 21 % (YoY) and Rs.7,226 crore up 7 % (YoY). The consolidated sales volume registered an increase of 17 % on YoY basis to ~76 MTPA.

The Scheme of Arrangement amongst Century Textiles and Industries Limited (“Century”), UltraTech and their respective shareholders and creditors (“the Scheme”), is now awaiting the approval of the National Company Law Tribunal and other regulatory authorities as may be required.

Upon completing this acquisition and with the on-going capacity expansions, UltraTech’s cement manufacturing capacity will stand augmented to 113.4MTPA, in India, strengthening its position as the 3rd largest cement player globally (excluding China).

Financial Services Subsidiary – Aditya Birla Capital Limited (ABCL)

  • The revenue and net profit after minority interest for FY19 (as reported by ABCL) are at Rs.15,164 crore and Rs.871 crore up by 32 % and 26 %.
  • The revenue and net profit after minority interest for Q4FY19 are at Rs.4,730 crore and Rs.258 crore up by 32 % and 52 %.
  • The NBFC Lending book (including housing finance) grew 23 % YoY to Rs.63,119 crore (FY19)
  • The average assets under management at Rs.2,65,109 crore (FY19) are up 6 % YoY.
  • In Life Insurance business, the individual first year premium are up 41 % to Rs.691 crore in Q4FY19.
  • The persistency ratios also witnessed a consistent improvement, to 78 % (FY19) up 3 %.
  • In the Health Insurance business, gross written premium increased to Rs.497 crore (FY19), 2x over the previous year.

Acquisition of Soktas India Pvt. Ltd. (SIPL)

The acquisition of 100 % equity of SIPL by the company for Rs.135 crore is aimed at expanding its leadership in premium fabric, complementing its existing linen business. SIPL has since been renamed as Grasim Premium Fabric Pvt. Ltd. The Board has approved merger of this subsidiary with the company subject to regulatory and other approvals.

Outlook

The VSF business will continue to focus on expanding the market in India by partnering with the textile value chain, achieving better customer connect through its brand LIVA, extensions into new categories and enriching the product mix through a larger share of specialty fibre. However, the new capacities recently commissioned in Asia may create short-term demand supply mismatch and resultant pressure on prices.

The VSF business will continue to focus on expanding the market in India by partnering with the textile value chain, achieving better customer connect through its brand LIVA, extensions into new categories and enriching the product mix through a larger share of specialty fibre. However, the new capacities recently commissioned in Asia may create short-term demand supply mismatch and resultant pressure on prices.

The Government’s thrust on infrastructure development viz. construction of cement concrete roads, metro rail networks, airports, DFC, irrigation projects and increase in the pace of execution under the low cost housing program, supported strong volume off-take. With stabilisation of RERA, pick-up in urban housing is also being witnessed. All of these are expected to result in sustained demand growth for cement going forward. This augurs well for the industry. UltraTech, with its expansions in the last three years is very well placed to participate in the growth of the economy.

In Financial Services, ABCL is in a unique position of being able to provide Universal Financial Solutions to meet customers’ money needs for life. ABCL’s focused customer-centric approach under a single brand “Aditya Birla Capital” enables it to chart a differentiated and disciplined path to growth.

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