Grasim India Ltd. is part of the Kumar Mangalam Birla group and is among the top two producers of Cement in India. Grasim’s business comprises of Cement, VSF, Sponge Iron, Chemicals and Textiles. Other then being one of the largest players in Cement Grasim is the world’s largest producer of VSF with a global market share of over 10%. Grasim also owns a 53% stake in Ultratech Cement, which formed after the demerger of L&T’s Cement division.

Grasim India Ltd. - Key Points

Cement – Core Profitability Driver: Grasim along with its subsidiaries have an installed capacity of 31mn tonnes thus making Grasim the second largest producer of Cement in India after the Holcim Group (ACC and Ambuja Cement). In FY07 Cement contributed to almost 75% of the topline and over 80% of the EBDITA. Over the past few years Cement has been witnessing robust demand and has been the key growth driver for the company. The company is in an aggressive capex mode and is looking to expand the group capacity (including subsidiaries) to 48mn Tonnes per annum by FY09. This would place Grasim amongst the top 10 cement manufacturers in the world.

VSF Margins Moving Up: Grasim is the worlds largest producer of VSF with an installed capacity of 270,000 Tonnes as of Mar’07. The company is looking to expand its VSF capacity to 453,000 Tonnes over the next couple of years. VSF has been a steady performer for the company and of late margins have been moving up due to firm international prices. In Q3FY07, the VSF business contributed around 21% to Grasim’s consolidated revenue and 24.6% to consolidated EBITDA. Moreover Grasim is a fully integrated player in VSF and the company sources over 70% of its pulp requirement and 100% of its caustic soda requirement in house.

Improving Performance of Sponge Iron Division: Grasim has an installed capacity of 0.9mn Tonnes and is the largest merchant producer of sponge Iron in India. The performance division has been improving on the back of firm scrap prices. The sponge iron division is currently operating at ~ 65% capacity utilisation due to unavailability of gas. We expect the division to perform well with further improvement in scrap prices coupled with expected improvement in gas availability.

Textiles and Chemicals Improved a Bit: Textiles and chemical divisions have reported improved performance in Q4FY07 with EBITA in chemicals moving up by 188% to Rs. 389.8mn and textiles to Rs. 0.1 mn from a loss of Rs. 28.7mn. We expect the segments to report flattish performance for the rest of FY08 and FY09.

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