A worker moves large spools of rayon yarn in the spinning area at a factory. (Photographer: Dadang Tri/Bloomberg)  

Grasim’s Viscose Fibre Business Has Outgrown Capacity

Grasim Industries Ltd.’s viscose fibre business is growing but the billionaire Kumar Mangalam Birla-controlled maker of fibre derived from pulp faces a challenge: its factories are running at more than the full capacity.

“Our plant is fully stretched with 102 percent of capacity utilisation,” Dilip Gaur, managing director at Grasim Industries, told BloombergQuint. “As we speak, we are investing Rs 4,500 crore in expansion at our Vilayat, Gujarat plant, which will add to the capacity by 60 percent by 2020 second half.”

That would take its production ability to 788,000 tonnes a year. The latest expansion comes after adding 50 percent capacity in recent years, according to a JPMorgan report.

The viscose staple fibre market was stagnant between 2000 and 2012. Grasim Industries’ fibre portfolio, led by Liva which it launched in 2015, is growing at 12-14 percent a year. It faces competition from cotton and polyester staple fibres, but the demand for them is growing at less than 1 percent and 2-3 percent, respectively, the company said.

Nearly 45 percent of fibre volumes are contributed by the brand at 300,000 tonnes a year to clients. It will double in the next few years, said Gaur.

The company’s strategy of Liva branding garments that uses its fibre and client engagement is yielding positive results in terms of increased acceptability of the VSF fibre in the domestic market, JPMorgan said. This should also result in a pricing premium over time for the company, it said.

“We have end-to-end tracer in the fibre so that the garments can be traced back to where the fibre was made and where the pulp has come from, whether the pulp has indeed come from sustainable forestry,” said Gaur about Liva Eco.

The growth in the domestic market meant Grasim had to move some of its exports to overseas production facilities. “We had a product mix where we had 70 percent domestic supply and 30 percent exports,” Gaur said. “We can feed the export market from our companies overseas. Over 86 percent of the local demand is being serviced now by local manufacturing.”

The company eventually wants to transition all its fibre to Liva in the next four to five years, he said. It is working with the fabricators and garment maker for categorisation to bring in premium, he said.

Prices of pulp, the main input for VSF, have risen in recent months. The company has a captive supply of 55-60 percent of its pulp, which keeps it largely insulated from pulp prices.