Grasim Industries Ltd, the diversified company of the Aditya Birla group, has decided to gradually phase out all regional cement brands, leaving only three national brands -- Birla Plus, Birla Super and Birla Ready Mix.
Alongside, the company has earmarked a capital investment of Rs 534 crore (Rs 5.34 billion) for the current and next financial years.
Of this, Rs 410 crore (Rs 4.1 billion) has been earmarked for the current year compared with the last year's Rs 236 crore (Rs 2.36 billion). In 2005-06, it will invest Rs 99 crore (Rs 990 million) for modernisation and expansion.
The capital investment proposal excludes the amount Grasim will have to chip in to acquire controlling stake in Larsen & Toubro's demerged cement business.
The decision to consolidate the cement business through three national brands, in lieu of the existing structure of having a few brands in each region, is aimed at leveraging company's brand equity.
"The three brands, beginning with the word 'Birla' will reckon the group's name. Most of the regional brands now don't have the 'Birla' tag and therefore one, if not properly informed, can't understand from the names of the brands that they come from the Aditya Birla stable," an expert said.
Cement business contributed 45 per cent to revenue and 30 per cent to profit before interest depreciation and tax last year. The company posted a revenue of Rs 5,233 crore (Rs 52.33 billion) and PBIDT of Rs 1,475.3 crore (Rs 14.75 billion) in 2003-04. Revenue grew by 13 per cent while PBIDT, by 30 per cent.
In addition to cement, Grasim is into viscose stable fibre, sponge iron, cement, textiles and chemicals businesses.
According to the capital investment plan, the company has earmarked Rs 177 crore (Rs 1.77 billion) for cement, Rs 272 crore (Rs 2.72 billion) for VSF, Rs 35 crore (Rs 250 million) for chemicals and Rs 50 crore (Rs 500 million) for other businesses.
The current financial year will witness investment of Rs 159 crore (Rs 1.59 billion) in cement, Rs 167 crore (Rs 1.67 billion) in VSF and Rs 49 crore (Rs 490 million) in other businesses. The balance amount would be brought in next year. The entire amount earmarked for the chemical business would be utilised this year.
Of Rs 236 crore (Rs 2.36 billion) the company invested last year, it had incurred a total capital outlay of Rs 127 crore (Rs 1.27 billion) on modernisation and capacity expansion through de-bottlenecking, resulting in a cement capacity hike to 13.12 million tonne. The VSF business witnessed a capital injection of Rs 74 crore (Rs 740 million), while the balance Rs 35 crore (Rs 350 million) was invested in other businesses.
