Grasim Industries, a part of Aditya Birla Group, on Friday announced it has entered into the paints business, which is currently dominated by established players like Asian Paints and Nerolac. The company will make an initial investment of 5,000 crore over the next 3 years, primarily towards capital expenditure.
The textile manufacturer says that its entry in the paints sector will add size, scale, diversity and stability to cash flows of the existing business portfolio of the company. The Aditya Birla Group flagship company believes that this sector is likely to be value accretive to its shareholders.
"The Board at its meeting held today, inter alia, considered and approved, entering in paints as a new line of business and subject to the approval of the shareholders, alteration of the Object Clause of the Memorandum of Association of the Company to include the new line of business," Grasim Industries said in a regulatory filing.
Grasim will seek the approval of the shareholders at the ensuing Extraordinary General Meeting to be held on February 22, 2021, for alteration of the Object Clause of the Memorandum of Association of the company.
The entry of Grasim in the paints sector will offer a wide choice to Indian consumers as the company plans to introduce the latest range of paint products in line with global mega-trends. The company's entry into this high growth sector will help painters, applicators and all traditional and emerging channel partners across India to expand their existing business and grow, it said.
Grasim said that this move will also provide an impetus to the government's vision of 'Atma Nirbhar Bharat' and supports the supplier ecosystem of MSMEs by helping them expand their existing raw material manufacturing capacities.
Commenting on the development, Kumar Mangalam Birla, Chairman, Aditya Birla Group said: "The foray into paints is a strategic portfolio choice for Grasim as it looks to identify new growth engines. Grasim's strong balance sheet will facilitate this entry, which will add size, scale and diversity to its existing portfolio of established standalone businesses. The company endeavors to invest in businesses that have the potential to be a leader in their addressable markets; have the ability to achieve scale and generate consistent and attractive returns in the long term. The paints industry presents a high-growth option for Grasim."
The sector has registered a revenue CAGR of around 11 per cent during FY14 to FY19, and given the value migration from the unorganised to the organised market, the outlook remains robust, providing the space for a quality new player
Incorporated in 1947, Grasim Industries started as a textiles manufacturer in India. Over the years, it has evolved into a leading diversified player with leadership presence across many sectors. It is a leading global producer of Viscose Staple Fibre, the largest Chlor-Alkali, Linen and Insulators player in India. Through its subsidiaries, UltraTech Cement and Aditya Birla Capital, it is also the India's largest cement producer and a leading diversified financial services player.