Ticker: 500300/ Grasim
ISIN: INE047A01013
Grasim Limited. The company is in the news nowadays due to its Merger with AB Nuvo. The share price may look high. But the valuation tells a different story. I was trying to study the Cement Sector, but for some reason, I couldn’t concentrate on the company. Now due to the Merger, it is coming into the limelight.
In the Blogpost, I will try to write about the Company and the Expected Effect of Mergers.
Industry analysis: Textile
Textile is one of the oldest businesses in India. Today it ranks second in manufacturing after China. It is one of India’s most significant contributors, accounting for around 11% of exports and earning US$ 41.4. Even before the British rule, Indian clothing and Indian cotton were Famous. After the industrial revolution, significant changes take place. Handloom and the dress on it were replaced by industrial clothing. The textile sector was one beneficiary of the process in Chemistry and the development of related things like Petrochemicals. Today is an essential part of consumption. As the income increase, the expenditure on clothing increases, which is helpful for many companies. Why think domestically? Indian clothing is famous all around the world.
Cement sector analysis :
Infrastructure is a core for any Develop economy. But it is more critical for developing economies like India. Due to many reasons, Infrastructure development was ignored. When the need for Infrastructure is realized, the Govt is doing its job. Recently Govt passed many road projects. Nearly 2 trillion RS from Uttar Pradesh, 7.44 Billion Rs in Tamil Nadu. Not only that, there are many more all around the nation. It is part of the 12th 5-year plan in which it is planning to invest US$ 1 trillion in Infrastructure. So many developments are Supporting the Sector.
Plus, many Govt companies holding big land Banks also need money. So it is expected that the Govt will permit them to sell. The big reason is Govt is trying hard to give the home to everyone by 2022.
The biggest booster for the cement industry will be the Smart Cities development project under which the Govt planning to develop 98 Cities around the nation, including their Infrastructure.
And all of this, Cement is essential material as it is a beneficiary of all the development in Infrastructure and real estate.
India is the second-largest producer of Cement in the world; since the deregulation in 1982, the Sector has been growing through significant change.
Many big MNC companies are setting up the plant in India, and the domestic companies are also growing. Like Heidelberg, Holcim-laffarge, ULTRATECH etc. Demand for Cement is expected to be around 500 million tonnes in 2025. In FY 17, it is likely to increase by 9.8%
Grasim is operating in the Sector via subsidiary UltraTech. Fourth largest Cement Manufacturing company after the acquisition of JP Group Cement business and Recent Greenfield Expansion.
Company overview :
Grasim Limited was a Textile company. But now the company is diversified as there are many businesses under the company. Ninety of the revenue comes from Cement and Textile. The company is also in the business of Chemical as backward integration for Textile. The company is also holding a Stake in UltraTech Cement, where the stake’s value is more than the Market capitalization of the whole company.
The recent Expected Merger with AB Nuvo will make it holding the company of Aditya Birla Group. However, as it’s impossible for any holding company to Trade its holding, the market hardly gives its value to the company.
SHAREHOLDING PATTERN: BSE Data
Finance and Ratio :
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Prospects
For the last, some Years, ROE, ROCE, and ROA have been reduced, but the company is giving more percentage of Profit as the dividend, so it’s clear it is a Holding company now, so invest only if you are investing for a dividend. So if you want to invest in Cement, then invest in UltraTech If you want to invest, there is a company named Arvind limited.
