According to newspaper reports, Grasim Industries Limited plans to focus on the readymade garments segment in exploiting its brand and distribution assets.
Grasim (FY99 Turnover Rs 34.13 bn), part of the Aditya Birla Group of companies, has interests in viscose staple fibre, cement (28% of sales), textiles and sponge iron.
Grasim, which is primarily engaged in commodity businesses, plans to increase shareholder value by pushing value-added products through its existing network. Although the company already has a presence in the textiles business, it plans to become more aggressive in the future.
A successful entry into the readymade garments business will help the company in shoring up its margins. Moreover, as the company already has an existing distribution network, the cost of launching new products is minimised to a large extent. Apart from this, the readymade garment business will act as a hedge in times the commodity cycles turn for the worse.
However, the readymade garments business is very competitive and requires a lot of marketing and advertising initiatives, which will involve large sums of money. This could put pressure on the bottomline of the company in the near term. Moreover, Grasim lacks adequate experience in operating in the more competitive branded goods segment.
Analysts have rated the stock as a 'BUY' mainly on account of the turnaround in the cement industry and various other commodity businesses the company operates in.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407