Grasim prunes non-core trade to buttress working capital

Namrata Singh

Mumbai, Dec 10: In a move to release significant working capital, AV Birla group company Grasim Industries has scaled down its non-core trading business which was not adding much value.

A company official confirmed that Grasim has scaled down the trading business without effecting the company’s operations as it is a low-margin business. Trading was adding a negligible profitability to the company’s bottomline, the official justified.

According to sources, the company may eventually exit the trading business. However, no official confirmation is available on this.

The move will also enable Grasim to reduce inventory levels. Terming it as a positive development, industry analysts estimate that the cash involved in the trading business was about Rs 100 crore for the company. The company, however, did not confirm the figure.

As per Grasim’s balance sheet for 2000-01, the company conducted trading activities in spices, sulphur, coal, kerosene oil, coffee, rice, oil, sugar, etc. The total turnover from this business during this fiscal year was over Rs 300 crore, which was marginally higher than that in 1999-2000. The contributed about five per cent to the company’s turnover of Rs 5,582 crore.

The company official said that the move to scale down trading business is in line with Grasim Industries’ decision to focus on its core areas of operations — which are cement and viscose staple fibre. Further, the trading business was not adding much value.

While in cement, Grasim has consolidated its position with the merger of Indian Rayon’s cement division with Grasim, and the most recent move of taking a 10 per cent stake in Larsen & Toubro, in textiles, which suffered a setback last year, the company has kickstarted several proactive steps to turnaround the business. In addition to drawing up a customer-focused manufacturing and marketing strategy, Grasim has also endeavoured on a cost cutting initiative.