The Hindu BusinessLine
11 May 2016
Viscose Staple Fibre is a preferred fabric of designers and we anticipate good growth in this segment, says Dilip Gaur
Reporting strong volume growth in its key businesses of chemicals, cement and Viscose Staple Fibre (VSF) for the fourth quarter, Grasim Industries of the Aditya Birla Group clocked a consolidated revenue hike of 13 per cent at Rs.10,001 crore. The net profit grew 40 per cent to Rs.724 crore. Managing Director of Grasim Industries Dilip Gaur said that double-digit volume growth had resulted in increased topline and bottomline. In an interview to BusinessLine, Gaur shared the rationale for the growth numbers. Excerpts:
What has been the strategy for VSF, which has contributed tremendously to the earnings?
Along with new capacity for VSF, Grasim management devised a pull strategy around Liva fabric, which is made out of VSF. From 2010, the VSF market within India was stagnant. We worked around to increase the demand for Liva fabric. Since we are present at the backend of the textile value chain, we provided quality fibre, which could be used for making best fabrics. Fabrics made out of VSF are both fashionable and comfortable. This is a unique property of VSF, which we worked upon.
In FY2014-15 VSF grew at double digit when normal fibres growth was at less than five per cent. In the past two years, we worked on the demand and in anticipation we also ramped up our capacity at Vilayat plant in Gujarat. As the demand for VSF was picking up, our capacity was also ready, which tremendously helped the company. Today, VSF is a preferred fabric of designers, therefore, we anticipate good growth in this segment. To downstream textile producers, we are providing accreditation services along with Liva brand.
The Indian Spinners Association (ISA) has alleged that on VSF it is paying an ex-mill price of $2.15 a kg plus 12.5 per cent excise duty against an import price of $1.85 a kg. ISA has further said that Grasim itself is supplying the fibre to Indian companies' global competitors at an ex-mill price of $1.80 a kg.Why this discrimination between Indian mills and foreign mills?
We have met the office bearers of ISA and they agreed they have made a mistake while making the claim. We have shown to the ISA that over the list price of $2.15 a kg they get a lot of discounts. After discounts, it matches with the imported price of $1.80 a kg. There is no discrimination between Indian and other mills. Grasim's prices are competitive in the market plus ISA members get the benefit of sourcing VSF from a local supplier.
What has been the response to Liva brand within the country?
Liva is today available in 2,000 outlets across the country. Store sales have increased by 10 per cent after introducing Liva. In one year, more than seven million garments have been branded under Liva. Leading fashion designers are using Liva brand.
There is an oversupply of VSF from China. When do you expect this situation to ease?
Last year the capacity utilisation in China was 84 per cent. But many plants in China are not environmentally friendly, which are now being phased out. Therefore, soon the surplus capacity will come down and the volatility in prices will reduce.
Has the merger of Aditya Birla Chemicals with Grasim helped?
The positive effects of the merger are reflected in the quarterly earnings. If you look at the numbers of last quarter they show that chemical business EBITDA has also increased. Caustic soda and epoxy business also came in the fold of Grasim. The capacity of both these products was ramped up, which has led higher volumes and sales.