Economy normalising, Grasim businesses operating at 80% capacity: Kumar Mangalam Birla

He said both viscose staple fibre (VSF) and chemicals businesses of Grasim are now operating at about 80% of pre-Covid capacity, after a low of 23% witnessed in April. “We expect to be back to pre-Covid capacity by Q4,” Birla said.

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Across the businesses, the company's fixed costs have reduced by 35 per cent, which amounts to savings of Rs. 256 crores compared to the FY20 quarterly average
Mumbai: India’s economic activity levels are normalising after a steep fall in the first quarter due to Covid-19 setback, underlining that the country’s long-term growth potential remains intact, Aditya Birla Group chairman Kumar Mangalam Birla said on Monday.

“Both the Reserve Bank of India (RBI) and the Government of India have announced several policy measures to provide relief to the affected sections of the economy and to support the process of recovery,” Birla told shareholders of Grasim Industries at the group flagship’s 73rd annual general meeting held through videoconference.

He said both viscose staple fibre (VSF) and chemicals businesses of Grasim are now operating at about 80% of pre-Covid capacity, after a low of 23% witnessed in April. “We expect to be back to pre-Covid capacity by Q4,” Birla said.


He said the company has decided to go ahead with its Rs 3,523-crore VSF brownfield expansion in Gujarat with revised timelines. “The company’s capex plan for FY21 has been calibrated to Rs 1,615 crore as of now,” he said.

India’s gross domestic product (GDP) contracted a record 23.9% year on year in the first quarter ended June when most of the country was under lockdown to contain the spread of the Covid-19 pandemic. Birla, however, pointed out that the economic activity levels have been gradually normalising since then.

“The IMF (International Monetary Fund) also has estimated that the Indian economy will rebound to 6% in FY22,” he said. “The government’s move to promote domestic champions through the Atmanirbhar Bharat programme is commendable.”
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To overcome the slowdown in the economy, Grasim has initiated measures to optimise operations across plants, reduce fixed costs and conserve cash to overcome the slowdown in business activity.

“Given the uncertain business environment, Grasim’s current strategic focus is built on four pillars – demand creation through innovative products, cost rationalisation, agility, and cash flow focus,” Birla said.

Across the businesses, the company's fixed costs have reduced by 35%, which amounts to savings of Rs 256 crore compared to the FY20 quarterly average, he said.

The company has businesses as diverse as cement, chemicals and VSF.
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Grasim had reported a 72% year-on-year decline in its consolidated net profit for the quarter ended June at Rs 353 crore against Rs 1,294 crore a year earlier.

“Based on your company’s performance and future outlook, your directors have recommended a dividend of Rs 4 per equity share of face value of Rs 2 each for FY20. This entails a cash outgo of Rs 263 crore," Birla told the shareholders.
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Its consolidated revenue from operations stood at Rs 77,625 crore for 2019-20 while its consolidated Ebitda was at Rs 13,846 crore.

Almost all of Grasim’s plants and corporate offices were shut for several weeks in compliance with the government directives as part of a national lockdown starting from the last week of March to contain the spread of the pandemic.

The Indian economy delivered a subdued performance in the last fiscal year when GDP growth slipped to 4.2% from 6.1% in 2018-19, primarily led by manufacturing and construction sector weakness.

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