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.

By using a zinc-free manufacturing process for the manufacture of VSF at its Nagda and Harihar plants, the company has been able to reduce costs. It has also ensured the constant supply of quality rayon grade wood pulp, a raw material for VSF, at attractive prices through its joint venture with AV Cell Inc of Canada.

Cement
Operating profit at Grasim's cement division improved to 11.2 per cent in 1998-99 to from per cent in 1997-98. The company managed to reduce its coal and power consumption per unit of output during 1998-99. Operating profit rose despite the increase in the limestone royalty, electricity charges and transportation costs.

Grasim is currently the third largest cement player in the country. In 1998-99, the company consolidated its cement operations by taking over the cement division of Indian Rayon, another A V Birla group company. Indian Rayon's cement division helped increase Grasim's revenues.

Grasim also took over a 64.42 per cent stake in Shree Digvijay Cements, giving itself access to the latter's captive port in Sikka, Gujarat. Through the port, Grasim can import a better variety of coal for its cement business than is available in India. That should improve energy as well as cost efficiencies.

With the housing and construction sectors looking up again, Grasim's cement division is also expected do well during 1999-2000.

also see : Go to Grasim in figures