Grasim Industries Ltd.’s profit rose for the fourth straight quarter to beat estimates on the back of higher prices of viscose staple fibre used by apparel makers.
Net profit rose 8.2 percent year-on-year to Rs 347 crore in the April-June quarter. That’s higher than the Rs 326 crore consensus estimate of analysts polled by Bloomberg. Revenue of the Aditya Birla Group company increased 12.8 percent to Rs 2,987 crore, beating street estimates by Rs 247 crore.
Grasim has a near-monopoly in the viscose staple fibre, a biodegradable cotton-like fibre. VSF prices have gone up globally as inventory in China nearly halved to 6-6.5 days in the last couple of months, helping in better price realisation, Dilip Gaur, managing director of pulp and fibre business at Grasim, told BloombergQuint.
The company entered the branded consumer segment with Liva, an apparel brand that uses viscose fibre. Liva clothes are now available in over 3,000 stores, said Gaur. It has helped the VSF segment grow at 12-13 percent against the 4-5 percent growth of the textile industry, Gaur said.
In the quarter ended June, Grasim’s earnings before interest, tax, depreciation and amortisation increased 5.2 percent to Rs 555 crore. EBITDA margin contracted 150 basis points to 20.3 percent.
The company merged with Aditya Birla Nuvo Ltd. effective July 1 as part of the group restructuring. This business will add close to Rs 5,000 crore in revenue and Rs 600 crore in EBITDA on an annualised basis, said Sushil Agarwal, whole-time director and chief financial officer of Grasim.
Debt
Grasim had a cash surplus of Rs 2,900 crore at the end of June. The merger with Aditya Birla Nuvo will add a gross debt of Rs 2,000 crore. UltraTech is expected to add another Rs 11,000 crore on a consolidated basis, being a subsidiary of the company. Grasim is in talks with financial institutions to refinance the debt of plants acquired from Jaypee Cement, said Agarwal.
Aditya Birla Capital
The demerger of Aditya Birla Capital Ltd. was completed on July 4 and the company is transferring shares to Aditya Birla Nuvo investors.
Aditya Birla Capital issued 4.8 crore preferential shares at Rs 145.4 apiece to PI Opportunities Fund, an affiliate of PremjiInvest, in June. The stake in Aditya Birla Capital will cost Azim Premji’s family fund around Rs 700 crore.
The deal will be completed only after Aditya Birla Nuvo and Grasim merge and the financial services business is hived off into Aditya Birla Capital. The financial arm is expected to list on the stock exchanges in the next six weeks, said Agarwal.
Idea-Vodafone Merger
The merger has received approval from the Competition Commission of India and the Securities and Exchange Board of India. The company is seeking approval from the National Company Law Tribunal, said Agarwal. Grasim will hold 28 percent in the merged entity, but will not be impacted by the debt of the combined entity.
Shares of Grasim ended 5 percent higher after the results were announced compared to a 0.75 percent gain in the benchmark S&P BSE Sensex.
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