Grasim Industries today surged almost 8% to hit a record high at Rs.1082.45, with a 3.5-times rise in volumes. It continues to figure among the top five gainers on the BSE since morning.
The company announced on Saturday that it plans to diversify into manufacture of paints and its Board has approved the initial capital expenditure of Rs.5000 crore, over the next 3 years.
This entry into paints, Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group said that it was a strategic portfolio choice for Grasim as it looks to identify new growth engines.
He said, “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% during FY14 to FY19, and given the value migration from the unorganized to the organized market, the outlook remains robust, providing the space for a quality new player.
The company plans to introduce the latest range of paint products in line with global mega-trends and believes that this sector is likely to be value accretive to its stakeholders.
Following this news, Asian Paints is today in the red despite having posted a very set of earning for Q3Y21 as the market fears competition.
Putting these fears to rest, our Editor, Mr.SP Tulsian is of the opinion that there is nothing to fear as Asian Paints is a giant and a market leader and does not see Grasim as any competition; he has infact given a buy call for Asian Paints.