The acquisition of Canadian wood pulp manufacturer Terrace Bay Pulp Mill had little impact on Grasim Industries performance in the stock exchange. The stock gained just 0.28 per cent to Rs 2,670 on Friday.
The volatility in viscose staple fibre prices in the last few months has impacted Grasim Industries profitability, though the company is considered global leader in the business.
Mr Kishore P Ostwal, Managing Director, CNI Research, said the market sees no short-term benefit accruing either in the way of revenue or raw material back-up from the acquisition.
Rs 605 cr outflow
On the other hand, he added, the deal will lead to an outflow of about Rs 605 crore ($110 million) and another Rs 1,375 crore ($250 million) for refurbishing the plant.
On Thursday, the Aditya Birla Group said that it acquired Ontario-based Terrace Bay Pulp Mill through two group companies — Grasim Industries and Thai Rayon. While Grasim will own 40 per cent in Terrace Bay, the remaining will be held by Thai Rayon.
The Group acquired Swedish-based speciality pulp maker Domsjo Fabriker for Rs 1,560 crore last year. Grasim had invested Rs 280 crore (Swedish Kroner 380 million) in Aditya Holding AB to complete Domsjo acquisition. Currently, Grasim has dissolving pulp capacity of 5,25,000 tonne through its plants in India, Canada and Sweden.
Even as the company has secured its raw material sourcing with series of acquisition, it had to shut down its main VSF manufacturing unit at Nagda in Madhya Pradesh almost every year in June-July due to water shortage. This year also, Grasim announced that its staple fibre plant in Nagda would be shut down from July 3 onwards due to delayed monsoon.
Grasim Industries’ standalone net revenue for the first quarter of this fiscal is expected to fall by 8.3 per cent to Rs 940 crore with VSF segment reporting decline of 9.2 per cent to Rs 820 crore, according to Emkay Research.
The chemical business revenue is expected to grow 4.3 per cent. Overall EBIDTA (earnings before interest, depreciation, tax and amortisation) at Rs 160 crore is expected to decline 54.3 per cent year-on-year, it said.