Grasim Industries jumped 4.54% to Rs 1050 after the company's board approved a foray into the paints business with an initial capital expenditure of Rs 5,000 crore over the next three years.
Commenting on the development, Kumar Mangalam Birla, chairman of Aditya Birla Group said, "The foray into paints is a strategic portfolio choice for Grasim as it looks to identify new growth engines. Grasim's strong balance sheet will facilitate this entry, which will add size, scale and diversity to its existing portfolio of established standalone businesses. The company endeavors to invest in businesses that have the potential to be a leader in their addressable markets; have the ability to achieve scale, and generate consistent and attractive returns in the long term. The paints industry presents a high-growth option for Grasim.
The paint sector has registered a revenue CAGR of around 11% during FY14 to FY19, and given the value migration from the unorganized to the organized market, the outlook remains robust, providing the space for a quality new player.
Grasim said its entry in the paints sector will add size, scale and diversity to the existing business portfolio of the company. The company believes that this sector is likely to be value accretive to its stakeholders.
The company's entry into this high growth sector will help painters / applicators and all traditional and emerging channel partners across India to expand their existing business and grow. This move will also provide an impetus to the Government's vision of 'Atmanirbhar Bharat' and supports the supplier ecosystem of MSMEs by helping them expand their existing raw material manufacturing capacities.
Shares of other paints manufacturing companies took a beating. Asian Paints declined 2.3% to 2536.95, Berger Paints slumped 3.42% to Rs 747.20 while shares of Kansai Nerolac fell 3.6% following the announcement.
Grasim Industries is a leading diversified playerwith leadership presence across many sectors. It is a leading global producer of Viscose Staple Fibre, the largest Chlor-Alkali, Linen and Insulators player in India.
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