Grasim's acquisition of Terrace Bay Pulp Mill in Canada and Domsjo Fabriker in Sweden has been execution of a well thought strategy that the company chalked out post hiving off its cement division about two years back. The division was merged with subsidiary Ultratech and the company was left with only viscose staple fibre business (VSF) which rendered investors concerned about growth in earnings.
K K Maheshwari, a veteran of the group, who had earlier headed chemical and commodity trading businesses was entrusted with the task of developing and executing growth strategy for pulp and fibre business of the group that resides in Grasim and other group companies such as Thai Rayon and Indian Rayon. In an interview with Abhineet Kumar and Chandan Kishore Kant he speaks on how far the company is from achieving the set targets.
What has been the progress in the last two years since you took the reins of pulp and fibre business of the group?
We defined certain things two years ago; we are just implementing it now. Most recently we have got a new management structure for group’s pulp and fibre business. We have got two new chief operating officers (COOs) for two different geographies and one COO to head the pulp business. Besides a new chief manufacturing officer, chief technology officer, chief financial officer and chief people officer have been appointed. The structure has been designed to provide adequate attention to geographies as we expand through acquisitions.
What is the core of the strategy that you have been playing out for the last two years?
Two years ago we all sat down and said where do we want to be. We said we will take our production capacity to 1 million tonnes in five years (700,000 tonne now). That decision was based on steady growth of 4 to 5 % that industry has been seeing over the last ten years. And if we are the market leaders we should go proportionately.
So how did the inorganic route fit into the strategy?
For fibre business we wanted to grow organically and we have been debottlenecking some of our plants and ramping up production. But for pulp business it was tough to grow organically as setting up pulp plants is very long process. So it has been a conscious decision to grow in pulp production inorganically. And this is precisely what we have achieved through our acquisition of Terrace Bay Pulp Mill and Domsjo Fabriker.
What has been the strategy beyond production increase?
Our strategy is also focused on growing non-woven fibres for industrial use and specialty fibres for textile applications. We in fact aim to take the contribution of specialty fibre to 24% in the next three years from 18 % of total production now.
Besides, the group has always believed in the integrated value chain. Same thing we decided for pulp and fibre business to have integrated value chain. In all our fibre units we are unique in the world. We have our own CS2 plants, salphuric acid plant, captive power plants. Also as a group we also have our own caustic soda plant.
What is the progress on the various production ramp ups you are planning for fibre business?
The greenfield expansion at Vilayat in Gujarat for 120,000 tpa capacity and brown field expansions of 36,500 tpa at Harihar in Karnatka are on schedule. We expect half of the capacity at Harihar plant to be commissioned in July and August and rest of the half will be commissioned by end March. The plant in Vilayat we expect to be commissioned between January to March in phases.
Majority of the green field expansion at Vilayat will be to increase production for specialty products such a modal, micro modals and spun-dyed fibres.
Has the hive of cement business from Grasim helped the company concentrate on pulp & fibre businesses?
Our group's vision is to be global conglomerate with focus on each business irrespective of where a particular business resides. And this has been true for Grasim as well.
