grasim project (3)

8/8/2019 Grasim Project (3)

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Case discussion on project formulation

Grasim Industries Ltd.,Staple Fibre Division, Nagda (M.P.)

Unit ProfileGrasim is a flagship company of the Aditya Birla Group and is today a dominant player in themanufacturing of Viscose Staple Fibre (VSF), an extremely versatile textile fibre that has characteristicssimilar to cotton. The unit was established in 1954 with production capacity of 15 TPD with Plant &Equipment imported from Dobson & Barlow of U.K.

The plant has grown organically with current installed capacity of 415 TPD. With use of entirelyindigenous resources including raw materials, know-how and equipment Grasim has emerged as one ofthe worlds most cost-efficient VSF producers.

The manufacturing facility is located close to river Chambal at Nagda(MP), a small town exactly mid wayon the rail route from New Delhi to Mumbai .

The company has also established an engineering division to manufacture the plant and machinery used

for producing VSF and is a major exporter to south east and far eastern countries.

The Company is committed to innovation and creativity and has significant strengths in Research &Development. In collaboration with the Birla Research Institute for Applied Sciences at Nagda, theCompanys R&D teams endeavour to make technology work. This is very important since VSFmanufacturing process is highly energy intensive and its contribution to total cost of production is approx.12.5%. The company has its own thermal plant for electricity needs.

Grasim today is a dominant player in the Viscose Staple Fibre (VSF) segment and this is particularlycommendable because of its use of entirely indigenous resources including raw materials, know-how andequipment. An innovative and research-oriented organisation, Grasim has emerged as one of the worldsmost cost-efficient VSF producers due to its integrated operations.

Grasim is also Indias largest producer of Sodium Sulphate a bye-product of VSF manufacture. Thischemical is used widely in paper & pulp, detergent, glass and textiles industries.

Pulp & Fibre Business contributes significantly to the National Exchequer by way of Excise duty and alsoto Indias foreign exchange reserves through export of Pure and Blended Yarn as well as fabrics andMade-ups based on VSF.

ProductVSF is an extremely versatile textile fibre that has characteristics similar to cotton. Next to cotton, VSF isthe best man-made fibre with durability and lustre. It can be used in blends with polyester and othersynthetic fibres. Its moisture absorption property renders it ideal for tropical countries like India.

Process Description

Rayon grade pulp is steeped in Caustic Soda solution and excess lye is drained in slurry presses toobtain a mat of Akali Cellulose. After shredding, Alkali Cellulose is reacted with Carbon-disulphide andthen dissolved immediately in dilute Caustic Soda solution to give Viscose which is de aerated filteredand ripened before extrusion through spinnerettes into a spinning bath containing Sulphuric Acid, SodiumSuphate and special additives. Cellulose is regenrated in the form of fine filaments and Sodium Sulphateis produced with the liberation of Carbon-disulphide, part of which is recovered for reuse. The filamentsare cut into the required staple length, washed, desulphurised, bleached, soft finished and dried to obtainViscose Staple Fibre.

Manufacturing


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VSF production by the Business has recorded a production/sales growth of 7.5% CAGR over last 46years.The Company is committed to innovation and creative solutions and has significant strengths in Research& Development. In collaboration with the Birla Research Institute for Applied Sciences at Nagda, theCompanys R&D teams endeavour to make technology work. Fruits of these efforts are manifested indevelopment of speciality fibres, quality improvement, lower costs, optimal use of energy and otherscarce inputs, minimal wastage and environmental conservation.

MarketingThe markets for regular and various speciality fibres were concurrently developed through a variety ofpromotional steps and technical services to the value chain. Yet selling of VSF was not a problem, sinceVSF was in the growth phase of its product life cycle and the cheapest amongst all textile fibres.However, the situation changed totally after 1995 with two structural changes taking place in the TextileIndustry. The first structural change resulted in easy and cheap availability of competing textile fibres i.e.cotton and polyester, as a result of which VSF, which used to be the cheapest of all textile fibres becamethe costliest.The second structural change took place in 1997 when polyester texturised yarn became cheaper thanpolyester-viscose blended yarn.

On account of these structural changes, VSF sales, which had been growing continuously until 1997

started getting affected and now pose a major challenge for growth.

Business DimensionsThe business comprises of:

a) Manufacturing activities atStaple Fibre Division, Nagda, M.P.Engineering & Development Division, Nagda, M.P.Harihar Polyfibres Pulp Unit at Harihar, KarnatakaGrasilene Division VSF Unit at Harihar, KarnatakaBirla Cellulosic VSF Unit at Kharach, Gujrat

b) Research & Development activities atBirla Research Institute for Applied Sciences, Nagda, M.P.

Grasim Forest Research Institute at Harihar, KarnatakaTechnical Reasearch & Application Development Centre at Kharach, Gujarat

c) Centralised Marketing activities atMarketing Head Office, Mumbai, for VSF.Staple Fibre Division, Nagda for Sodium Sulphate

d) Business Cell atNagda for consolidation of all business activities.

Key Statistics for Grasim Staple Fibre Division, Nagda FY 2005-06

1 Installed Capacity Tonne 151,4

2 Production Volume

GreyDyed

Tonne 77,54

53,56

3 Turnover VolumeGreyDyed

Tonne 83,9055,15

4 No. of M/c (Mfg. Lines No. 11

5 Power Plant Capacity MW 103

6 No. of Employees No. 3003


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7 Turnover Value Gro Rs. Cror 1253

8 PBDIT Rs. Cror 294

Key Challenges

i) Manufacturing

How to produce international quality VSF from indigenous Pulp and oldmanufacturing plants. How to cater to changing customer requirements for a multitude of productspecifications

ii) Environmental issues Detailed Study and Specific Action Plan, if any, arising out of latest GazetteNotifications

iii) Marketing Volume : How to enlarge existing markets, which are stagnant and develop new

usage/applications. Pricing realisation: How to take care of substitution dynamics on account ofcompeting fibres having become substantially cheaper.

iv) Global positioningHow to penetrate the stagnant global markets and take advantage of therestructuring taking place in the Industry to grow the business.How to develop Lyocell Technology for commercial adoption.

Profile of Employees

S.No. Particulars 2004 2005

1 No. of Employees

2 Regular 3622 3301

3 Contractors 1802 1987

Man-hours worked (including Overtime)S.No. Particulars 2004 2005

1 Man-hours worked

2 Regular 7164409 6563304

3 Contractors 3991800 4252640

Discuss the various aspects of this project from the following angles:

1) Why this product would have been chosen by its promoter the great industrialist and

visionary, Late Mr G.D. Birla

2) What could have made him choose an obscure town like Nagda as the location

3) What impediments the company must have faced in setting up the unit


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4) What elements must have been considered in the cost of project

5) What would have been the pattern of Means of Finance

6) How was the plant imported and what mode of finance must have been used

7) Which raw materials are required by the plant and from where they are procured

8) What could have been the constraints in implementing the project.

9) What are the critical requirements of this project

10) Do you think any vertical integration exists in the project

11) What could have been the merits/demerits to the society from the projects

12) Present a SWOT analysis of this project.

grasim project (3)

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