Grasim: Sponge iron on the block - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Grasim: Sponge iron on the block

Jun 12, 2001

According to unconfirmed reports, Grasim has put its sponge iron unit on the block. The move is in line with the company’s stated objective of focusing on its key areas – cement and VSF. The sale of the unit will bring in more focus in its operations, apart from the cash that it will generate. The sponge iron unit of the company, which has a capacity of 900,000 tonnes, has at best turned in a mixed performance in recent years. The reason for this has been that the performance of the division has been dependent on the supply of feedstock from GAIL. This has been erratic and in short supply. As a result, the unit’s performance over the last few years has been very volatile.

The decision to put the unit on the block is beneficial to the company from two main standpoints. First, iron is not a competency of the group and in view of the liberalized import scenario the division could see a sustained rise in competition. This could take its toll on margins.

Second, and more importantly, this deal could raise much-needed funds for the company, which is in process of expanding its cement capacity by undertaking the debottlenecking and modernisation of several plants. The company has invested over Rs 7 bn in this unit so far. Even if it were to recover this, it would more than meet its total capital expenditure requirements for FY02 and FY03 (estimated at Rs 5.4 bn).

The stock currently trades at Rs 334, implying a P/e multiple of 6.4x based on FY01 earnings.

Equitymaster requests your view! Post a comment on "Grasim: Sponge iron on the block ". Click here!


More Views on News

GRASIM Announces Quarterly Results (1QFY21); Net Profit Down 65.6% (Quarterly Result Update)

Sep 10, 2020 | Updated on Sep 10, 2020

For the quarter ended June 2020, GRASIM has posted a net profit of Rs 6 bn (down 65.6% YoY). Sales on the other hand came in at Rs 136 bn (down 27.8% YoY). Read on for a complete analysis of GRASIM's quarterly results.

What's Behind ACC's Highest-Ever Revenue in March Quarter? (Company Info)

Apr 20, 2021

Key takeaways from ACC's March quarter (Q1CY21) results.

GRASIM Announces Quarterly Results (3QFY20); Net Profit Down 6.2% (Quarterly Result Update)

Feb 17, 2020 | Updated on Feb 17, 2020

For the quarter ended December 2019, GRASIM has posted a net profit of Rs 10 bn (down 6.2% YoY). Sales on the other hand came in at Rs 192 bn (up 4.3% YoY). Read on for a complete analysis of GRASIM's quarterly results.

GRASIM 2018-19 Annual Report Analysis (Annual Result Update)

Jul 30, 2019 | Updated on Jul 30, 2019

Here's an analysis of the annual report of GRASIM for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of GRASIM. Also includes updates on the valuation of GRASIM.

More Views on News

Most Popular

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

Top 3 Nifty ETFs to Buy Now (Fast Profits Daily)

Apr 20, 2021

In this video I tell you the three Nifty ETFs I think are the best.

A Stock with 700% Return Potential Comes with Additional Payoffs (Profit Hunter)

Apr 15, 2021

Narayana Murthy was one of the first unicorn founders to get the backing of this entity...

11x Bankruptcy to Bluechip Stock: A Rare India Revival Story (Profit Hunter)

Apr 16, 2021

There is no stopping this 11-bagger stock from significant upside.

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 22, 2021 (Close)