Investors on Monday gave a thumbs-up to Grasim Industries’ plan to foray into the paints segment.
On the BSE, the Grasim share zoomed 6.44 per cent, or Rs 64.65, to end at Rs 1,069.05. During intra-day trade, the counter hit a high of Rs 1,122.65, a gain of almost 12 per cent over its previous close.
Last week, the Kumar Managalam Birla-led firm has said that it will invest Rs 5,000 crore in this business over the next three years. Grasim justified its entry into this segment, saying the move will add size, scale and diversity to its existing business portfolio. Grasim also feels that the new business is likely to be value accretive to its stakeholders.
“The foray into paints is a strategic portfolio choice for Grasim as it looks to identify new growth engines. The company endeavours 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,” Birla said.
According to the company, the high growth sector has registered a revenue CAGR of around 11 per cent during 2013-14 to 2018-19, and given the value migration from the unorganised to the organised market, the outlook remains robust, providing space for a quality new player.
