03 grasim industries ltd

License to use for IBS Campuses only. Sem IV, Class of 2012-14
BSTR/214
IBS Center for Management Research
Grasim Industries Ltd. and VSF: Expanding a Commodity Market
through Branding and CRM
This case was written by V.Namratha Prasad, under the direction of Sachin Govind, IBS Center for Management Research.
It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate
either effective or ineffective handling of a management situation.
 2006, IBS Center for Management Research. All rights reserved.
To order copies, call +91-8417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally,
Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: info@icmrindia.org
www.icmrindia.org

1
BSTR/214
Grasim Industries Ltd. and VSF: Expanding a
Commodity Market through Branding and CRM
“There is no such thing as decline. When markets are not moving, there are two things that you
can do — take on competition and see that your offering is better in all ways, and the other way is
to grow your market.”1
- Shailendra K. Jain, President of Grasim Industries Ltd., in 2004.
“Viscose has been underutilized because of a lack of awareness among fashion designers and end-
users. Internationally viscose blended fabrics are extensively used in apparels. This is not the case
in India.”2
- M P Joseph, Secretary General, Association of Man-made Fiber Industry of India
(AMFII)3
, in October 2005.
INTRODUCTION
In March 2006, Grasim Industries Ltd. (Grasim) announced plans to establish an integrated
plantation cum pulp plant in Laos to source raw material for its Viscose Staple Fiber (VSF) (Refer
Exhibit I to Know More about VSF) production units in India, Thailand and Indonesia as well as
for future production facilities. The announcement came as a surprise, indicating to industry
watchers that Grasim had not just succeeded in arresting the decline in its sales of VSF, but was
confident of future growth too.
Grasim started production of fabric using imported VSF in 1950. VSF was then the cheapest
available fiber and was referred to as ‘the poor man’s cotton’. In 1963, Grasim adopted a vertical
integration strategy and started producing its own VSF. As a cost-saving measure, the company
even began producing major raw materials (wood pulp and caustic soda) for VSF in-house. It also
developed a more eco-friendly process for manufacturing VSF. These measures, though successful
in increasing its sales, were not sufficient to reverse the gradual loss of market share of its VSF to
its substitutes - cotton and polyester fibers.
By the 1990s, a combination of increasing raw material costs and low polyester and cotton prices
made VSF the costliest fiber. As a result, demand for VSF declined rapidly. In 1999, Grasim
embarked on an aggressive marketing campaign to salvage its VSF business. The campaign did
succeed in increasing the demand for VSF to some extent. However, in 2002, with the fall in
cotton prices, demand for VSF fell again. It was at this juncture that Grasim chalked out a strategy
to reduce the impact of price fluctuations of substitute fibers on demand for its VSF, while at the
1
“Test of Fiber,” www.grasim.com, 2004.
2
“Product Development Key to Growth of Viscose in India,” www.expresstextile.com, October 31, 2005.
3
AMFII, headquartered at Mumbai, was formed to represent the various companies in the man-made fiber
industry.

Grasim Industries Ltd. and VSF:
2
same time moving to increase its share in the fiber market. The strategy involved several product
development initiatives and is believed to have helped create value for the company and its
customers.
BACKGROUND NOTE
Grasim was part of the Aditya Vikram (A.V) Birla Group founded by Shiv Narayan Birla (SN) in
the late 19th century. A member of the Marwari4
community in Pilani, Rajasthan, SN started
trading in cotton in Bombay (Mumbai). The cotton business expanded swiftly. In 1919,
Ghanshyam Das Birla (GD), SN’s grandson, went to Kolkata, to set up a jute business. GD later
set up units in aluminium, cement, chemicals, textiles, and fiber industries. He was also actively
involved in India’s freedom struggle and was a close confidante of Mahatma Gandhi.
Grasim was established on August 25, 1947 at Gwalior in Madhya Pradesh by G.D. The company
was set up to manufacture fabrics. During that period, most textile mills used cotton fiber. When
British India was partitioned, most of the cotton-producing areas went to Pakistan, with the result
that the Indian textile industry faced a serious raw material shortage. Grasim looked for
alternatives to cotton, and chose to use VSF, which was also the cheapest fiber available at the
time. It commenced production of fabrics using VSF imported from Europe. In 1954, Grasim set
up a plant to produce VSF in India for the first time at Nagda in Madhya Pradesh, thus achieving
considerable backward integration.
In 1962, Grasim started a separate engineering division to manufacture plant and machinery for
VSF production. In later decades, Grasim built all its plants using indigenous technology and
equipment. In 1963, Grasim set up a VSF plant at Mavoor, Kerala which became the first to use
bamboo as raw material. Production at the plant commenced in 1968. In 1972, a completely
indigenous plant was built at Harihar, Karnataka that made use of pulp from eucalyptus trees. The
plant employed in-house technology for producing wood pulp through an innovative oxygen
bleaching process which reduced the use of chlorine. In the same year, Grasim commenced
production of caustic soda at Nagda. These two ventures together ensured, Grasim’s self-
sufficiency in VSF production to a significant extent.
GD’s grandson, Aditya Vikram Birla (AV) was responsible for expanding Grasim’s VSF business.
He made Grasim a global company, much before the word globalization had become the buzzword
it is today. He established VSF production bases in some of the South East Asian countries. In
1974, the Thai Rayon Public Company Ltd was established, and a VSF plant was built in Thailand.
With the establishment of P.T. Indo Bharat Rayon in 1982, Grasim started VSF production in
Indonesia as well. Under AV’s leadership Grasim became one of the world’s largest producers of
VSF.
After AV’s untimely death in October 1995, his son Kumar Mangalam Birla (K.M) took over the
chairmanship of the company. Over the years, Grasim had diversified into cement, sponge iron and
chemicals (Refer Exhibit II for Details of the Companies under Grasim Industries). In 1995-
96, Grasim was brought under the Aditya Vikram Birla Group5
which included many companies in
diverse sectors.
4
A community originally from the Marwar region of Rajasthan who lent money against pawned items.
5
After the death of A.V.Birla, the Aditya Birla Group was created with Grasim, Hindalco, etc (earlier part
of the Birla empire), brought under the newly formed group.

3
In 1996, the construction of Grasim's fourth VSF plant at Kharach, Gujarat began. The plant
incorporated the latest technology and was intended to cater mainly to overseas customers. In
1998, Grasim purchased the Atholville Pulp Mill in Canada through a joint venture with Tembec6
.
The Atholville Pulp Mill, which was Grasim’s first overseas acquisition, was expected to provide
wood pulp for its VSF plants.
As of 1999, Grasim was India's largest producer of VSF, having about 90% share in the domestic
market and a 12% share (together with the group’s overseas units) in the global VSF market. It
was cost competitive when compared with VSF manufacturing companies located abroad and was
striving to attain self-sufficiency in power generation to reduce its cost of production. With its
indigenously developed process technology, Grasim was able to completely eliminate zinc from its
production processes in 1999-2000. In 2001-2002, it even obtained the prestigious Oeko-Tex
standard 100 certification7
which indicated that the fiber manufactured by it was environment
friendly.
By 2005, Grasim had a total VSF production capacity of over 300,000 tons per annum (tpa) spread
across three countries - India, Thailand and Indonesia (Refer Exhibit III for VSF Production at
Various Plants). It exported VSF to the US, South Korea, Australia, Philippines, China, Mexico,
Bangladesh, Sri Lanka, and various other countries. As of 2005, global revenues from the VSF
businesses were around Rs. 45 billion. Grasim was also the largest producer of sodium sulphate, a
by-product in the production of VSF.
VSF: FLUCTUATING FORTUNES
Historically, the prices of substitute fibers had often had an impact on the demand for VSF. The
demand for VSF was at its peak in the 1960s, when it commanded a market share of 20% in the
global fiber market. Over the years, this had declined gradually. Over the decades, the production
cost of VSF had risen steadily, owing to soaring raw material (especially wood pulp) costs and the
highly power intensive nature of the production process. In the 1990s, the low price of cotton and
falling polyester prices made VSF the costliest fiber, causing a decline in its market share. In the
1990s, VSF’s global market share had shrunk to 4%. In the same period, the Reliance Group,
which was the market leader in the Indian PSF market, was rapidly expanding production and
selling its PSF at very competitive rates. This, too, affected the demand for VSF (Refer Exhibit
IV A for Production, Consumption and Prices of Major Fibers, and IV B for Import &
Export figures).
Though VSF was its major source of revenue, Grasim had not hitherto taken significant steps to
promote this business. But as the demand for VSF plummeted, the company was forced to act. In
1999, it decided to go in for greater market penetration and development for VSF. It also planned
to support the market development initiative with low-cost promotion efforts. Grasim derived
6
Tembec is a leading integrated forest products manufacturer. It is principally involved in the production
of wood products, pulp and papers. It has extensive operations in North America and France. Tembec
markets its products worldwide and has sales offices in Canada, the United States, the United Kingdom,
Switzerland, China, Korea, Japan, and Chile.
7
A global testing and accreditation scheme for the screening of harmful chemicals in textiles and was
developed in 1992 by a group of European textile institutes. It put strict limits on the usage of banned or
restricted-use substances in textile manufacture.

4
inspiration from the consumer awareness campaigns of Cotton Inc8
and Woolmark9
that were quite
successful in creating a larger market for cotton and wool respectively.
Until 1999, Grasim had never branded its VSF, viewing it as a commodity. But that year, the
company branded its VSF as Birla Viscose and promoted the fiber on its unique qualities of feel
and comfort. Aiming for long term growth, the company positioned its VSF at the high-end of the
market as a fashion fiber. It encouraged VSF users to increase the percentage of VSF in blends10
. It
initiated plans to increase deemed exports i.e. it supplied VSF to companies seeking to import the
fiber. Grasim’s major domestic competitor – SIV Industries11
- had to close down in 1999 due to
environmental concerns and financial problems. This proved advantageous to Grasim, which was
able to use this development to increase its market share.
In May 1999, as part of the group’s restructuring efforts12
, Grasim closed down the VSF unit at Mavoor
stating the non-availability of raw material as the reason for the closure. However, the company
compensated for the closure by increasing production at its other plants. The closure of the Mavoor
plant was considered a good move as the plant was believed to be expensive to operate.
In January 2000, in order to increase its VSF sales, Grasim planned to enter into strategic alliances
with textile houses. For this purpose, it even shifted its marketing head office from Nagda to
Mumbai. It also opened six regional offices and several other branch offices in various parts of the
country in order to increase market reach.
In August 2000, Grasim introduced Grasi-soft13
– a new variant of VSF created exclusively for the
knitwear market – to take advantage of changing consumer preferences towards 'smart casual'
knitwear; the demand for knitwear was growing both domestically and in export markets. Grasi-
soft could be used to make 100 per cent VSF fabric, or it could used in blends with other fibers,
including cotton, polyester and acrylic. Grasim manufactured the new product at its plant at
Kharach in Gujarat and specifically targeted the Tirupur14
knitwear export industry to increase the
usage of Grasi-soft in their products. At that time, the knitwear sector was looking for new fiber
options to increase the quantity and value of knitwear exports. In order to showcase the versatility
and applicability of Grasi-soft, Grasim, in association with Hyderabad-based Suryalakshmi Cotton
Mills Ltd., developed a range of garments using the product and displayed them at Knit Fair Show
held at Tirupur.
8
Cotton Incorporated, established in 1970, was funded by cotton growers in USA. It aimed to increase the
demand for and profitability of cotton through research and promotion. The company is seen as the force
behind the resurgence of cotton. It has successfully helped increase the global market share of cotton in
fabrics through branding (“Seal of Cotton”), promotion and improved technology.
9
Woolmark was a certification mark granted by the Australian Wool Services, the world’s leading wool
textile organization. It is seen as a sign of quality and performance worldwide. Woolmark also developed
newer processing technologies and products in wool.
10
Blends are composite mixes of yarn in various ratios.
11
South Indian Viscose (SIV) Industries based at Coimbatore, Tamil Nadu produced VSF for more than
four decades. It had to be closed down because of a failure to adhere to the pollution norms set by the
Tamil Nadu Pollution Control Board (TNPCB) as well as because of financial problems.
12
In 1998-2000, the Aditya Birla Group initiated a restructuring exercise, which included closing down
unviable businesses and transferring businesses from one company to another within the group for greater
management ease.
13
Grasi-soft is a type of micro fiber. A micro fiber is a fiber that is less than one denier (a measure of
fineness) per filament. Micro fibers are the thinnest and finest of all man-made fibers.
14
Tirupur in Coimbatore district of Tamil Nadu is a key global supply center for knitwear. It is a growing
export center and is expected to have an export turnover of Rs 100 billion by 2009.

5
In association with its group company Madura Garments15
, Grasim experimented with the use of
Grasi-soft fiber in the woven garment segment. Grasim also worked with Chennai-based
ColorPlus16
in developing fabrics made of Grasi-soft fiber. The company also promoted the fiber at
other knitwear and woven garment centers in India, such as Ludhiana.
According to Company officials these marketing efforts were successful. Aggressive selling by the
company along with a fortuitous increase in polyester prices led to an increase in the demand for
VSF. The company even affected a price hike of Rs2/kg in the period 2000-01. The company
posted an increase in revenue for 1999-2001. The increase in cash flows from its VSF business
helped Grasim fund its expansion plans in the cement industry17
.
In 2001, anticipating an increase in demand for VSF, the company increased the production
capacity of its Kharach and Nagda plants by 50 and 15 tons per day (tpd) respectively. However,
immediately after the expansion, there was a drastic fall in the prices of cotton, with the result that
textile manufacturers started using more cotton in their products. Consequently, Grasim struggled
to find a market for the higher output in 2002.
In 2002, Grasim decided to make a concerted effort to reduce the impact of fluctuations in the
prices of cotton and polyester on the demand for its VSF and increase the usage of the product. To
this end, a strategy called ‘Service beyond VSF’ was formulated, which involved the delivery of
several value added services to its direct customers – the spinning mills and other entities in the
textile value chain.
SERVICE BEYOND VSF
In 2002, Grasim began implementation of its ‘Service beyond VSF’ strategy. The company had the
following objectives:
– to provide complete solutions for its customers’ fiber related needs,
– to ensure maximum customer satisfaction resulting in higher customer retention,
– to achieve higher sales by making customers increase the usage of VSF in their yarn,
– to fully utilize its production capacity, and
– to gain market share from cotton and polyester.
The strategy also had the explicit goals of increasing average sales of Birla Viscose to large
customers from 240 tpd in FY 2001-02 to 297 tpd by FY 2003-04 and generating added revenues
of Rs. 1.47 billion and profits of Rs. 380 million.
In order to identify the right customers for the implementation of its strategy, company officials
studied customer related data like field reports, textile committee reports, buying trends, export
15
Madura Garments was acquired by A.V.Birla Group in 2000. It is the largest branded apparel company in
India. It offers a wide range of ready-to-wear clothes for every market segment. Its brands include Van
Heusen, Louis Philippe, Allen Solly, Peter England and San Frisco.
16
ColorPlus was a leading premium menswear branded apparels company. The company commenced
operations in 1993 and in 2002 it was taken over by Raymond’s – India’s leading manufacturer of
worsted suiting fabric.
17
Grasim started concentrating on developing its cement business form 2000-01. It acquired two cement
companies, Sri Digvijay Cements and Dharani Cements and commenced several greenfield projects. It
was also keen on acquiring the cement business of L&T.

6
profiles, etc. The data revealed that out of its 311 active customers, 29 customers accounted for
55% of Grasim’s VSF sales. Of these 29 customers, the company selected 24 as its key customers,
based on their attitude towards further development and their marketing ability. These key
customers were invited to form the Viscose Club. In order to better provide value added services to
the key customers, a separate team was formed within the organization.
The team consisted of members from various levels and departments in the company, including
senior management, sales, application development, and supply chain management. A five-
member core team - which was responsible for formulation of plans - was created within the team
and was trained with the help of an external consultant at Gyanodaya, Grasim’s Management
Training Centre. The core team, in turn, trained the other team members. Grasim then appointed
four key customer management champions called ‘Viscose Club Champions’ – one for each of the
four trading zones18
- to monitor the execution of the strategy.
The value added services offered were intended to help key customers to increase their
profitability. Grasim assisted them in their efforts to improve productivity, quality, and asset
utilization levels, and to reduce costs associated with labor, power, packaging, etc. The value
added services were grouped as technical care, pricing, supply chain management, marketing
support, and new product development services.
As a first step, Grasim attempted to address the key customers’ concerns about technical issues
regarding fiber. These issues were classified as aesthetic (having to do with the appearance of the
fiber), logistic (having to do with the delivery aspects) and intrinsic (having to do with inherent
fiber properties like strength, etc). Grasim formed systems, processes and web-based methods to
resolve customer queries and complaints regarding the technical issues.
To take things further, Grasim provided technical assistance to its customers to improve their
production processes. The process began with data19
collection. This data was analyzed against
industry benchmarks using gap analysis. After the analysis, Grasim would come up with plans to
improve its customer's production process, which on approval by the mill management, was
implemented at the concerned mill. Subsequently, Grasim would audit the efforts and continue to
work with its key customer till the plan yielded results and there was a tangible addition of value.
Globally, price fluctuations were a recurrent feature of the fiber market. In order to bring in some
stability and predictability to its revenues, Grasim introduced quarterly pricing (prices were fixed
for a quarter) for its key customers. It also introduced segmental pricing, where the prices were
fixed after a comprehensive review of its key customer's profitability and scale of operations. This
initiative allowed the key customers to become cost competitive.
Grasim also sought to improve the supply chain management processes for its key customers. By
making adjustments in production at its several plants, it strove to ensure undisturbed supply of VSF to
its key customers. It introduced measures like online order processing and quality line mapping20
.
In order to ensure that the key customers derived the maximum benefits from Birla Viscose,
Grasim formulated educational programs to train them on the best and most cost-effective
18
The four trading zones of Grasim were North zone, South zone, West zone and East zone in the northern,
southern, western and eastern regions of India respectively.
19
Data was collected on the production capacities, product mixes, process parameters and ambient conditions.
20
Quality line mapping involved the allocation of fiber production lines to its key customers for a year,
which guaranteed stable production schedules and minimized variations in machine settings for them.

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techniques of VSF usage. The aim of these training programs was to enhance the customers’
productivity and product quality. The program involved one-to-one presentations, technical
seminars and conferences. It invited owners and technical staff of spinning mills to these
educational programs to familiarize them with the best practices in spinning VSF.
To ensure that its customers’ product – yarn - was up to defined quality standards, Grasim took the
initiative of testing and certifying its customers’ yarn. Yarn which met the required standards was
stamped with the ‘Aditya Birla’ brand which gave its customers an edge over their competitors. Grasim
also helped its key customers enter into marketing tie-ups with Indian as well as international buyers. It
promoted the key customers’ products with other entities (weavers and knitters) in the VSF value chain
and at international exhibitions. It also brought out a newsletter called ‘Viscose Naturally’ which was
also used as a medium to promote its key customers’ products.
Grasim assisted its key customers who were exporters of 100% VSF yarn (mainly used for
women’s wear products in the European markets) to increase the value of their exports. In this
regard it also helped the non-key customers whose output catered solely to exports. In September
2002, it organized a meet where these exporters could come together to discuss improvements in
spinning techniques, in order to increase exports. Grasim also partnered with several spinning
mills21
to develop new applications for its VSF.
OFFERING VALUE-ADDED SERVICE TO THE ENTIRE VALUE CHAIN
Grasim believed that the market could be enlarged only if it worked with every segment of the
VSF value chain. Therefore, the company implemented the ‘Service beyond VSF’ strategy to
cover the entire VSF value chain (See Exhibit V for the VSF Value Chain). It encouraged the
usage of VSF by disseminating information regarding the key attributes of the fiber. It provided
several services to the various entities in the textile value chain which included garment
manufacturers, weavers, knitters, fabric finishing/garmenting units, textile technical consultants,
dealers/agents, processors, and major buying houses/agents who sourced fabric/garment supplies.
As part of ‘Service beyond VSF’, Grasim launched the ‘Focus VSF Fabric Production’ campaign,
where it offered five market-support systems for weavers and knitters. These included product
development/design, technical support, logistics, marketing, and market information. The market
support systems were expected to improve the fabric production capabilities of weavers/knitters,
which in turn were expected to ensure higher demand for VSF fabrics in the domestic and export
markets. If the campaign worked, it was expected to enable the weavers/knitters to absorb more of
Grasim’s VSF production.
Grasim teamed up with several value chain partners to develop new products and enlarge the market
for VSF. It entered into strategic alliances with various entities on various fronts: to conduct research,
to launch new products, to promote and distribute jointly, and to co-brand. Grasim formed partnerships
with garment manufacturers22
to develop innovative products. In January 2002, Grasim entered into a
strategic and technical alliance with the Pantaloon group23
to market fabrics made using VSF. As a part
21
Some of the spinning mills were Chenab Textiles, Rajasthan Spinning & Weaving Mills, HEG, GSL and
Sangam.
22
Some of them were Morarjee Mills, Mudra Fabrics Ltd and Supreme Non Wovens.
23
Pantaloon Group is owned by Kishan Biyani and is a pioneer of organized retailing in India. The group
operates spinning, weaving and stitching facilities. It has garment-making facilities as well and sells its
readymade garments through its own retail outlets and discount stores.

8
of the alliance, both the companies decided to work together to develop fabrics using a high proportion
of VSF. While Grasim was to provide its expertise in producing VSF fabrics, Pantaloon was to
manufacture the VSF fabric. Pantaloon also agreed to market the garments made with the fabric. In
August 2002, Grasim also tied up with Dhanam Group of Companies, Tirupur- a leading innovator in
knitted fabrics - to promote its VSF in their collections. Grasim undertook these initiatives to bring
about a ‘reverse blend’, which in industry parlance meant the manufacture of garments using blends
with more of VSF and less of polyester.
In February 2003, Grasim chose the three major VSF-using weaving centers in Tamil Nadu –
Erode24
, Salem (famous for yarn dyed fabric production) and Karur (made-ups25
production center
which used polyester/cotton/viscose blends) – to initiate its offer of value added services. It
organized seminars at these centers for the local textile weavers whose product offerings were not
of a high standard.
Grasim conducted research about the working conditions of the VSF weavers at Erode and other
centers. It found that the VSF fabric production at Erode was mediocre as compared to other VSF
weaving centers in the country. The weavers lacked fabric design skills and used outdated weaving
machines. Due to the absence of any design/production development facility, the weavers at Erode
produced a basic grey VSF fabric that had very low demand. Also, the fabric produced at Erode
had more defects compared to fabrics manufactured at other places. At the garment making stage,
this led to greater wastage. The fabric also had a low width, which limited its usage by garment
makers. Moreover, the VSF fabric weavers at Erode lacked marketing skills and depended on
agents/brokers to sell their goods. These agents too found it difficult to sell the dull fabrics to
garment manufacturers. The weavers were also losing out on the lucrative export market due to
their lack of marketing skills.
To help create value, Grasim devised production benchmarks for these weavers. Through its
designers and specialist consultants on fabric finishing techniques, the company provided
information about the latest trends and value-added fabric production methods, etc. to the weavers.
Through its links with major garment producing units, it arranged for the sale of their finished
fabrics. It also acted as an interface for the weavers with textile machinery dealers who sold looms
of leading global brands so that they could improve their productivity and quality standards.
In addition to the efforts at Erode, Grasim also formed a market support directory consisting of
various units in the 35 main VSF fabric production centers across the country. It made a study of
the problems and offered services to weavers in these places too. Grasim held seminars to update
the weavers about developments in technology and in the markets. It also exposed them to new
possibilities in VSF fabric production.
Grasim’s efforts also covered the knitting community. It formed a forum called ‘Clubknits’ for the
knitting units that wanted to use its VSF and offered them several support services. In partnership
with its key customers (spinning mills), Grasim offered the knitters an assured supply of high-
quality VSF yarn as per their requirements vis-à-vis quantity and time. Grasim provided technical
support to knitters relating to the processing of VSF yarn through manuals, and also through
24
Erode is an important sourcing center for VSF yarn for the European and US markets. It has a 30% share
in the export market of VSF yarn. Belgium, Italy, Germany, Japan and Taiwan are the major countries
sourcing pure VSF yarn from the Erode spinners.
25
These are value added items that are higher than yarn and fabric in the textile value chain. These include
caps, cloth handbags, rugs, mats, etc.

9
physical demonstrations at select process houses. The company also offered to produce special
blended yarns for knitting (with a minimum of 25 kg lots) based on product ideas suggested by the
knitters. Grasim also proposed to showcase the knitter’s products to various leading buying houses
and export houses. Grasim also continued to promote its VSF at major knitting centers like Tirupur
and Ludhiana.
In 2003, Grasim organized seminars in Sholapur (Maharashtra) and Panipat (Haryana) in order to
bring together buyers and sellers of VSF-based products. The seminar was attended by 150
garment manufacturers, exporters, yarn merchants, traders and seven local spinners. The spinners
were given an opportunity to display their complete range of VSF yarns to buyers. The seminar
was also used to provide information about the latest developments in the markets and best
techniques in VSF production.
Grasim strove not only to increase its own exports but also the exports of its value chain
partners. It promoted VSF fabric at several international exhibitions. In October, 2003, it
participated in the Heimtextile exhibition26
held at New Delhi. The exhibition, which it
attended along with its value chain partners, was organized to strengthen contacts with the
exporting community. Reportedly, the exhibition was well attended by international buyers,
representatives of buying houses, Indian manufacturers and traders, and resulted in an
overall increase in business for Grasim's value chain partners.
PRODUCT DEVELOPMENT INITIATIVES
Grasim recognized that its efforts to enlarge the market for its VSF would be futile unless new
applications and products were brought out regularly. Product development in VSF was virtually
nonexistent as compared to other fibers which regularly came out in newer versions. Therefore,
along with its provision of value added services, Grasim made efforts to introduce newer variants
of VSF. In 2002, Grasim set up the Textile Research and Application Development Center
(TRADC) at Kharach in Gujarat at an estimated investment of Rs.260 million. Earlier, the
company had developed new products (yarn, fabric) through strategic alliances with various
partners. But because of the fragmented nature of the textile chain, sample production by alliance
partners was a long-drawn out process. Grasim realized that it needed to have a facility of its own
so as to speed up the development of new products.
The Kharach center had spinning, weaving and garment making facilities all under one roof. This
arrangement allowed it to produce small samples quickly. It was able to supply these samples to
the trade to promote their adoption. Grasim was also experimenting with the creation of new
products for the global market at its research center.
Grasim's research facility helped it provide VSF-based product solutions to the knitwear, woven
fabric/processing and garmenting units who were in a position to use the VSF fiber. Explaining the
reasons for setting up the facility, Thomas Varghese (Varghese), Executive President (Marketing),
Grasim, said, “The idea behind setting up the Kharach product development centre is to handle
supplying new VSF product sampling — right from yarn to fabric ranges to cater to leading ready-
26
Heimtextile is an annual exhibition of home interiors and fashion textiles organized by Messe Frankfurt
GmBH.

10
made garment units or the buying houses. This is because not even the best of units would be able
to give small order supplies of specific yarn/fabric/garment at short notice.”27
Grasim initiated new product development at two levels: proactive - internal (R&D innovation)
and proactive - external (customer-led). Under proactive - internal development, Grasim
experimented with new blends, counts28
, construction29
, etc., based on the latest fashion and color
forecasts gathered from textile exhibitions and designers. In proactive - external development,
Grasim made alterations to the fiber based on customer or other value chain partner
recommendations. The center was working on applications of VSF fabric in various areas like
home textiles, suiting & shirting, knitwear, uniforms, non-woven and dress materials.
Grasim believed that by developing new products and applications in VSF, the annual sales growth
of its VSF could be maintained at 4-5 per cent. “New product development and promotion of new
application areas for VSF will be our future focus”30
, said Varghese. Grasim focused its attention
on product development in the non-woven textiles and fashion knitwear sector as they offered the
maximum growth potential in its view. The company was successful in developing new products
like flame retardant viscose, hollow VSF31
, spun dyed viscose called spun shades32
, anti-bacterial
viscose fiber and viscose fiber for non-woven application.
OTHER EFFORTS
In 2002, Grasim unveiled plans to create a new brand identity for VSF by replacing the brand Birla
Viscose with Birla Cellulose. The re-branding efforts took months of discussions with its
marketing consultants, Quadra Advisory33
and its ad agency Lemon34
. Grasim wanted to create an
identity which denoted naturalness, and a feeling of comfort and softness, and which would help it
compete against imports as well as other fibers. The logo, in a vibrant green, was intended to
underline the fashion element for which VSF was admired among some of the world’s leading
designers (See Exhibit VI for the Birla Cellulose logo). Birla Cellulose encapsulated Grasim’s
other VSF sub-brands - Birla Viscose Plus, Birla Modal and Birla Excel. These sub brands
symbolized different versions of VSF developed by Grasim. The company spent Rs.60-80 million
on brand building in the years 2003 and 2004.
Grasim followed a brand building campaign which was application-specific. ‘Birla Viscose Plus’
was developed with ‘anti-bacterial qualities’ and was marketed as the fiber most suitable for the
non-woven and the home textile markets. ‘Birla Modal’ fiber was marketed as a fiber specifically
27
“Grasim pursues new product lines for Birla Viscose”, www.blonnet.com, February 02, 2002.
28
A number indicating size and thickness of yarn to specify if it is coarse or fine.
29
This term describes the organization of the various yarns in a fabric.
30
“Grasim pursues new product lines for Birla Viscose”, www.blonnet.com, February 02, 2002.
31
Hollow fiber has at least one void enclosed within the fiber and running through the whole length of the fiber.
Hollow fiber is generally used for its thermal insulation properties due to the trapped air inside the void.
32
Spun Shades is the brand name used by Grasim for its spun dyed VSF. The fiber is obtained using a
unique pigment injection process and is available in over 5000 shades. This fiber is a value added service
because it reduces the need for dyeing the fabric at a later stage and also gives a higher quality product.
33
Quadra Advisory is an integrated strategic marketing consultancy owned by the world’s leading
communications services group - WPP.
34
Lemon, an ad-agency started in 2001, is headed by one of India’s leading advertisement consultants Ravi
Deshpande.

11
created to provide added value to the knitting and weaving community. ‘Birla Excel’ was
marketed as a solvent spun fiber targeted at the fashion industry.
Grasim sponsored the collections of fashion designers who used VSF fabrics at various fashion
shows held in India. This strengthened the image of VSF as a high-fashion fiber. In 2003, Grasim
sponsored one collection each at the SRTEPC35
Award function and the NIFT36
Fashion show.
Grasim and its group companies had a significant presence in the fabric and garment markets as
well. Grasim’s plant in Bhiwani, Haryana, with an annual processing capacity of 17 million
meters, made fabrics using blends of viscose and polyester, wool and silk. It sold its fabrics under
several brands such as Uncrushables, Ice Touch, Purista, CleanFab, Aquasoft, and E-stretch.
Madura Garments, a group company, used Grasim’s fabrics made with VSF blends to make
garments. Grasim targeted other garment manufacturers as well. The company established
relations with major fabric sourcing and garment buying houses in Delhi, Bangalore, Chennai and
Mumbai to encourage them to use fabrics with larger percentages of VSF in the garments they
manufactured. A Grasim official said, “We would not be restricting ourselves to our group
companies to get recognized through their brands. The purpose is to have cross-branding across a
range of textile manufacturers, including the likes of Siyaram and Raymonds.”37
Grasim was keen on leveraging the strengths of its VSF- cost competitiveness and environment-
friendliness - to boost its exports. It opened a central export organization for VSF at Bangkok to
increase exports from Grasim and from the group’s overseas units. Grasim won the prestigious
Deming prize38
in 2003, which helped it to create an international image as a high-quality
manufacturer. In 2004, Grasim also won the prestigious Stockholm Industry Water Award39
for
significantly reducing its water usage and limiting the negative impact of its operations on the
environment. Grasim had reduced water consumption by 85 per cent, processed steam usage by 51
per cent and electricity usage by 43 per cent between 1980 and 2004. These awards helped Grasim
make inroads into the quality conscious European and US markets and helped increase its exports
to countries like Spain, Germany, Greece, Belgium, etc.
Grasim also attempted to increase exports from its overseas units through various initiatives. In
February 2003, Thai Rayon entered into a strategic alliance with Korean Non-Woven Industry Co-
operative (KNIC)40
. Through the arrangement, Thai Rayon would supply VSF to the 54-member
South Korean co-operative for the next 10 years. Thai Rayon also promoted its “chlorine free”
environment friendly fiber to leading non-woven41
manufacturers in the Middle East and Europe.
35
Synthetic Rayon Textiles Export Promotion Council (SRTEPC) is an apex organization set up by the
Government of India to promote exports of Indian synthetic and rayon textile items.
36
National Institute of Fashion Technology (NIFT) set up by Ministry of Textiles, Government of India, is
a premier institute in fashion education in India.
37
“Grasim to brand its viscose fiber”, www.blonnet. com, April 20, 2002.
38
The Deming prize is given by the Union of Japanese Scientists and Engineers (JUSE) for exemplary
quality control and quality management initiatives.
39
The Stockholm Industry Water Award was established in 2000 by the Stockholm Water Foundation in
collaboration with the Royal Swedish Academy of Engineering Sciences and the World Business Council
for Sustainable Development.
40
KNIC, formed in 1981, aims to promote the development of the non-woven industry in Korea.
41
Non-woven applications generally included wipes, personal hygiene, baby care, sanitary items and
household usage.

12
Thai Rayon also entered into business arrangements with ‘spunlace’42
manufacturers in Egypt,
Turkey, Syria, and several European countries.
Grasim realized that it could sell more of its VSF if it could break the dominance of ‘100 per cent’
cotton fabrics and apparel (Refer Exhibit VII for Comparison of the Properties of VSF, Cotton
and Polyester). Therefore, it made efforts to popularize cotton/VSF blends. It also strove to
replace cotton with its VSF in many blends like cotton/elastane43
, cotton/spandex44
, etc. It also
promoted newer blends of VSF with fibers like acrylic45
, acetate46
, etc.
THE IMPACT OF ‘SERVICE BEYOND VSF’
According to company sources, the “Service beyond VSF” strategy was a remarkable success. The
strategy was believed to be directly responsible for increasing its key customers’ asset utilization
by 18%, and their fiber to yarn recovery by 1%, and for bringing about a 40% improvement in
quality in their products.47
The product development initiatives generated about Rs. 1.71 billion in
revenues in 2003-04 for Grasim's key customers, and they were also able to save Rs 32 million as
a result of the value addition initiatives. They also experienced marked improvements in
performance in the spinning process (Refer Table I for details of the Improvement in
Customers’ Productivity).
Table I
Improvement in Customers’ Productivity
Department Speeds – Before Speeds – After
Carding 120 Mtrs/ Minutes 170 Mtrs/ Minutes
Draw Frame 350 Mtrs/ Minutes 550 Mtrs/ Minutes
Speed Frame 850 RPM 1,050 RPM
Ring Frame 16,500 RPM 19,500 RPM
Source: www.birlaviscose.com.
The “Service beyond VSF” strategy also helped Grasim itself to increase its domestic sales. The
sales growth was mostly due to an increase in sales to key customers. It was also observed that
from a 46 per cent share of total domestic sales in 2002 the share of key customers had risen to 52
per cent in 2004. The company noted that while the domestic sales grew at a rate of 15 per cent (in
the years 2003 & 2004), the growth from key customers was almost double this, at 29 per cent. For
the same period, the growth in sales to non-key customers was only 4 per cent.
42
Spunlace is a type of non-woven fabric, in the manufacturing process of which small jets of water are
used to apply pressure and help bind the fiber- usually VSF.
43
Elastane is a fiber that stretches easily and has a high rate of recovery.
44
Spandex is a synthetic fiber made from a polymer containing polyurethane and is used in the manufacture
of elastic clothing.
45
Acrylic fiber is made from a special group of vinyl compounds. The fabrics made from acrylic are bulky,
easy to wash and resistant to bleaches, acids, microbiological attacks, etc.
46
Acetate is produced from cellulose acetate and is basically a continuous textile yarn.
47
According to information on www.grasim.com.

13
Another encouraging result for Grasim was the fact that it was able to increase the share of VSF
among the total fibers consumed by key customers from 33 per cent to 38 per cent, which it
considered to be a major victory in the competition against substitute fibers. The strategy also led
to increase in customer satisfaction and helped the company achieve greater capacity utilization.
The market share of VSF in the Indian fiber market was pushed up from 4 per cent in 2002 to 5 per
cent in 2004.
Grasim’s efforts to develop a commodity into a branded product, was appreciated by industry
observers. The efforts were all the more commendable because the product – VSF – was an
intermediate product, several stages away from the final product that reached the consumer -
garments. Through the “Service beyond VSF” strategy Grasim achieved higher sales and profits. It
successfully reversed the declining trend in the demand for its VSF and brought it back to growth.
In two years it had achieved a growth rate of 8-9% in sales (Refer Exhibit VIII for Production &
Sales of Grasim’s VSF).
Buoyed by the success of its “Service beyond VSF” strategy, Grasim identified and added new
customers to the Viscose Club. In 2004, the company had a 98% share of the domestic VSF
market, and 21% of the global market (together with its overseas companies). The VSF business
also provided Grasim’s highest ROCE (Return on capital employed).
OUTLOOK
In 2004-05, in order to cater to the rising demand for its VSF, Grasim increased the installed
capacity of VSF by 3,650 tpa to 257,325 tpa through de-bottlenecking.48
Grasim’s factories, which need large quantities of water for VSF production, faced problems due
to water scarcity at several locations. The problem was particularly acute at Nagda. This
diminished the ability of its factories to meet demand. To overcome this problem, Grasim
increased the height of its water reservoir at the Nagda plant in 2004, and also implemented
several schemes for water conservation. In addition, Grasim increased production at other plants
and also maintained high levels of inventory.
The beginning of 2005 saw the end of the MFA49
era for the global textile and apparel industry
(Refer Exhibit IX for Major Players in the Fiber Market). As the markets in the developed
countries opened up further, the end of the trade restrictions were set to usher in exceptional
business opportunities for companies in developing countries.
Grasim also expected to profit from this. The key to success in the new era was efficient
production and integrated operations along with world class quality. The company, with its large
production capacity and superior product offering was hoping to capitalize on the favorable
changes and become a global leader in the market for VSF. Grasim planned to further increase
production capacities to meet the anticipated rise in exports. In 2005, the company announced that
it would be expanding its VSF business to Pakistan and Bangladesh.
Grasim generally sourced 45% of its raw material requirement from its own wood pulp plants and
purchased the rest externally. The supply of wood pulp was generally highly cyclical with frequent
48
De-bottlenecking means replacing those parts of production lines that constrain increases in production.
49
Multi Fiber Agreement (MFA) is a quota system followed by the global textile and apparel industry,
under which exports can be made as per the quotas allotted. The MFA restrictions were lifted on January
1, 2005 in keeping with the World Trade Organization (WTO) agreements.

14
price fluctuations. Grasim decided that in order to meet its rising raw material requirements, it
would need access to good quality pulp on a regular basis and at reasonable prices. Therefore it
attempted to strengthen its competitive edge in the VSF business by integrating operations from
the ‘Forest to Fabric stage’. The company therefore, drew up plans to set up greenfield pulp plants
globally. Of this strategy, KM said, “Our strategy to maintain our edge dictates the setting up of
holistic backward integration from the plantation to the final VSF production."50
In April 2005 Grasim signed a Framework Agreement with the Province of New Brunswick in
Canada for the acquisition of the St. Anne Nackawic Pulp Mill, in partnership with Tembec. The
St. Anne Nackawic Pulp Mill was a paper grade pulp mill. Grasim intended to upgrade it to a mill
producing pulp for fiber production. The upgraded mill was likely to commence its operations
from the third quarter of FY’06.
Though Grasim enjoyed a virtual monopoly in the Indian VSF market, its position as the
undisputed leader was expected to come under attack by Lenzing51
- which reportedly had plans to
enter the Indian market (Refer Exhibit X to know more about Lenzing). Lenzing’s Modal fiber
already enjoyed strong demand in India and the company was planning to build on it by
establishing a subsidiary company in India. In September 2005, Lenzing announced plans to set up
60,000 tpa VSF plant in China to cater to the demand for VSF in the Asian region, especially
China and India.
In January 2006, Grasim set aside Rs.5.33 billion towards capacity expansion and modernization at
its VSF plants. This was expected to increase Grasim’s VSF production capacity from 257,325 tpa
to 306,950 tpa. In March 2006, Grasim also announced plans to set up a Rs. 7 billion greenfield
VSF plant in Andhra Pradesh. In the same period, it also announced plans to set up an integrated
plantation cum pulp plant at Laos with the help of its overseas group companies Indo Bharat
Rayon and Thai Rayon. The company’s investment in the project was expected to be around Rs
1.18 billion (by way of equity participation) over a period of seven years and it had taken 50,000
hectares of land on lease for a 75 year period from the Laos government to plant eucalyptus trees.
The project, with the capacity to produce 200,000 tons of wood pulp every year, was planned to
meet Grasim's raw material requirements from future expansions.
In February 2006, the Government of India reduced the excise duty on VSF and brought it on par with
cotton. The high excise duty of 16% was brought down to 8%. The customs duty was also cut from
15% to 10%. Also, because of the rise in global petroleum prices there seemed little likelihood of any
fall in polyester prices in the immediate future. These events were expected to increase VSF’s
competitiveness in comparison with cotton and polyester, and thereby spur demand.
Grasim was also preparing to enter the technical textile segment52
which was believed to have
enormous growth potential. It planned to produce new types of VSF like Lyocell53
as well. In
50
“Aditya Birla Group to invest $350 mn in plantations and pulp plants at Laos,” www.grasim.com,
March 17, 2006.
51
Lenzing is one of the world’s largest VSF manufacturing companies and has integrated plants in Austria
and Indonesia. It produces three types of cellulosic fiber- viscose, modal and lyocell.
52
Technical textiles are used by defense, automobile, construction and other sectors for manufacturing of
automobile covers, fiber-nets, woven hoses for pipeline reconstruction, geo-textiles, fire protection
equipments and bullet-proof jackets for defense personnel, among others.
53
Lyocell fiber (a man made fiber from wood pulp) has excellent strength in wet or dry state. It has the
natural absorbency and comfort of cotton and the strength and ease of care of a synthetic. It also blends
easily with all other fibers.

15
March 2006, Grasim announced that it was partnering with Neva Garments Ltd54
(Neva) to
introduce a range of inner wear, thermal wear and towels under the brand name ‘Nevamod’. As
part of the arrangement Grasim would provide the fibre - Birla Modal - while Neva would
manufacture and market the products especially in large format stores and malls. Grasim was also
in talks with other companies for co-branding and selling products made with VSF fiber/blends.
“We should see some of these co-branded products of Birla modal in the market by the end of
fiscal 2006-07,”55
said Vijay Kaul, Chief Marketing Officer (Fiber division), Grasim.
Grasim’s initiatives like introduction of new products and provision of value added services to its
customers had succeeded in increasing the company's market share, in spite of low cotton prices in
2004 and 2005. The company was confident of capitalizing on its quality and expertise to continue
growing in the domestic market, even in the years ahead, with an annual growth rate of 4-5%.
Grasim was also keen on building its position in the global VSF market and planned to attain a
40% global market share by 2010. To fulfill its ambition of being the top global player in VSF it
was setting up new pulp plants and VSF production plants across the world. However, it remains
to be seen how far Grasim's efforts to stave off the threats from rival fibers and companies will be
successful, and whether it would realize its goal of securing 40% of the global market for VSF.
54
Neva Garments Ltd was a subsidary of the 1.5 billion Duke Fashions Ltd, a Ludhiana, Punjab based
company which mainly manufactured men’s readymade garments.
55
“Grasim in talks for co-branding Birla modal fiber”, www.business-standard.com, March 30, 2006.

16
Exhibit I
About Viscose Staple Fiber (VSF)
VSF, a man-made fiber (MMF), is made from wood pulp and is hence completely
biodegradable. The other major raw material used in VSF production is caustic soda. On an
average, the yield56
of VSF per acre of land is seven times that of cotton.
The process of manufacturing VSF is called the ‘viscose process’. In this process, purified
cellulose (derived from wood pulp) is chemically converted through the addition of caustic soda
into a soluble compound. This is then forced through a spinneret, a multi-pored device (each
pore forms one fiber), to form soft fibers.
VSF possesses several useful qualities. VSF’s moisture absorption ability, which is nearly twice
that of cotton, and softness, make garments made with VSF comfortable to wear. Its drape and
luster make it a high-fashion fiber and a favorite among international fashion designers. VSF is,
by nature, resistant to static charge build-up57
. Uniformity of yarn and efficient loom operation
allow spinners and weavers hassle-free production. Since VSF is a man-made fiber, its
specifications can be engineered as per requirement. However, fabrics made from 100% VSF
stretch or shrink when wet. Dry cleaning is generally recommended to avoid such a situation.
The shrinking problem is why VSF is blended with other fibers with high wet strength like
polyester, etc. VSF blends are well-accepted.
VSF is blended with natural and synthetic fibers like cotton, wool, silk, acrylic, nylon, spandex,
acetate, etc. VSF is also blended to form PV yarn with Polyester Staple Fiber (PSF) in PSF-VSF
proportion of 65:35 or 70:30 and the proportion of polyester in the blend is increased when the
price of VSF rises and vice versa. VSF is used to manufacture a wide variety of products like
shirts, dress materials, trousers, diapers, tissues, knitwear, towels, carpets, and bed linen.
Compiled from various sources.
56
If one were to grow trees on one acre of land, it would yield wood pulp to produce seven times as much
VSF as cotton that could be produced on the same land.
57
VSF’s natural resistance to static build-up allows fabric made from VSF to maintain their drape and
silhouette and not cling to the wearer’s body.

17
Exhibit II
Grasim Industries
Product Company Revenue Share (In %)
Viscose Staple Fiber
(VSF)
Grasim Industries - Nagda, Harihar,
Kharach,
35
Cement Rajashree Cement, Vikram Cement,
Grasim Cement, Aditya Cement, Cement
Division South, Shree Digvijay Cement
46
Sponge Iron Vikram Ispat 9
Chemicals Grasim Industries - Nagda 5
Textiles Grasim Industries - Bhiwani, Malanpur 5
Source: www.grasim.com.
Exhibit III
Production at Various VSF Plants of the AB Group
Name of the Plant Country Production (Tpa)
Staple Fiber Division, Nagda Madhya Pradesh, India 1,42,350
Grasilene Division,Harihar Karnataka, India 40,150
Birla Cellulosics,Kharach Gujarat, India 69,350
TOTAL 251,850
Thai Rayon Public Company Ltd. Thailand 80,000
PT Indo Bharat Rayon Indonesia 300*
*tpd

18
Exhibit IV
A. Production, Consumption and Prices of Major Fibers
Production
(in ‘000 tons)
Consumption
(in ‘000 tons)
Prices
(in Rs)
Cot. VSF PSF ASF Cot. VSF PSF ASF Cot. VSF PSF ASF
1999-00 2652 202 551 79 2941 200 n.a n.a 48 78 47 67
2000-01 2380 236 566 99 2941 220 566 105 47 80 65 80
2001-02 2686 185 551 94 2907 190 550 114 43 n.a 42 n.a
2002-03 2312 224 582 105 2856 225 572 115 44 69 61 n.a
2003-04 3043 221 612 117 3009 222 596 119 45 83 66 95
2004-05 4131 247 644 127 3298 222 614 127 46 84 66 106
N.A – Not Available. All figures are approximate.
B. Imports and Exports of VSF, PSF & ASF
In tons
Imports Exports
VSF PSF ASF VSF PSF ASF
1999-2000 975 13,830 14,374 1,597 51,065 728
2000-2001 1,168 21,309 14,066 2,423 29,238 461
2001-2002 1,717 26,947 9,669 1,516 17,902 321
2002-2003 2,712 25,812 21,719 5,896 29,320 5,176
2003-2004 2,672 12,057 12,754 9,287 31,746 13,832
Source: www.texmin.nic.in.

19
Exhibit V
Birla Cellulose
Fibers from Nature
Leaves fall and grow all over again. It's a renewable source of nature. Like Birla VSF. In this
logo, it is symbolized by the three leaves. ‘The Floating Leaves’ give a feel of comfort and
lightness. The vibrant colors indicate that Birla Cellulose can take on bright colors. And the
circle signifies the cycle of nature.
Source: www.thairayon.com.
Exhibit VI
Value Chain of VSF

20
Exhibit VII
Comparison of Properties of Cotton, Viscose (VSF) & Polyester
Parameters
Comparative Rating
Cotton Viscose Polyester
Comfort
Moisture Regain Good Very good Poor
Thermal protection Good Very good Poor
Air permeability Very good Good Poor
Softness Good Very good Poor
Smoothness Poor Good Very good
Static dissipation Good Very good Poor
Aesthetic
Drape Good Very good Poor
Luster Poor Very good Very good
Crease recovery Poor Poor Very good
Uniformity Poor Very good Good
Utility Performance
Anti-pilling Good Very good Poor
Wash & wear Good Poor Very good

21
Exhibit VIII
Production and Sales of Grasim’s VSF
Year
Production
(In Tons)
Turnover
(In Tons)
1995-96 162,470 161,993
1996-97 155,385 151,838
1997-98 174,281 171,148
1998-99 164,355 164,130
1999-2000 188,002 192,452
2000-01 218,847 203,854
2001-02 176,462 181,520
2002-03 224,610 227,900
2003-04 221,005 229,110
2004-'05 247,952 231,533
Exhibit IX
Major Players in the Fiber Market
COTTON The production of processed cotton is dominated by the unorganized sector.
VISCOSE
STAPLE
FIBER
Grasim dominates the Indian VSF market with a 98% market share. In the
global market, Grasim, together with the AV Birla Group’s VSF units in
Thailand and Indonesia, command a 22% share; Chinese units, predominantly
in the unorganized sector, hold 37%; Austria-based Lenzing has 17%,
Equifibres another 4% and the remaining 20% is held by small players.
POLYESTE
R STAPLE
FIBER
The leading player in the Indian PSF market is Reliance with a 39% market
share, followed by Indo Rama Synthetics Ltd with 19%, and Apollo Fibers Ltd
with 7.9%. The rest is produced by a large number of smaller players (39.1%).
The global market consists of several large players like South Korean majors
Huvis (a joint venture between SK Chemicals and Samyang Corp), Hyosung,
Saehou, etc; Taiwan-based Shinkong Synthetic Fiber Corp; and companies in
the US and Japan.
ACRYLIC
STAPLE
FIBER
The Indian acrylic market has players like Consolidated Fibres and Chemicals,
Indian Acrylic, IPCL, Pasupati Acrylon and Vardhman Acrylics. The
international market is dominated by a few companies in USA and Taiwan.

22
Exhibit X
Lenzing AG
The Lenzing group was started in 1892, when Emil Hamburger set up a pulp mill in the town of
Lenzing in Austria. In 1938, a company by the name Zellwolle Lenzing AG was formed. It
started manufacturing pulp and viscose fibers. It launched the Modal fiber in 1964. In 1984, the
company was renamed Lenzing AG.
The company ended 2004 with 414,000 tons in fiber production, sales worth €871 million and
retained earnings of € 328 million. In January 2005, Lenzing built a viscose fiber production
plant in China. The plant, located near the town of Nanjing in the south-east Jiangsu province,
has an annual capacity of about 60,000 tons of viscose staple fiber for textile and non-woven
applications.
Lenzing‘s fiber products include Viscose, Modal, FR, and Lyocell. Lenzing Viscose has been
produced by the company for around 70 years. Lenzing Modal, first introduced in the 1960s, is
sort of a wonder fiber. The fiber, made from beech wood, blends well with cotton and has high
demand. Owing to a natural softener, garments made with Lenzing’s modal fiber stay soft and
smooth even after repeated washing. Another important feature of the fiber is its resistance to
hardening (the result of limestone deposits and traces of detergent). Lenzing FR is a flame
resistant fiber. It is used to make protective apparel for the fire service, military, petrochemical
industry, electrical utilities, etc. Lenzing Lyocell is a new type of cellulosic fiber that has
properties of softness and moisture absorbency of Viscose and the high wet strength of a
synthetic.
Source: www.lenzing.com.

23
Additional Readings & References:
1. Geoff Fisher, “Viscose Producers call for a ‘Rayon Inc’ to Boost the Fibers Sagging
Fortunes,” www.ifj.com, December 1999, Volume 14, Issue 6.
2. G. Gurumurthy, “Grasim forms new strategy for VSF fabric production in TN,”
www.blonnet.com, February 20, 2003.
3. Purvita Chatterjee, “Grasim to brand its viscose fiber,” www.blonnet.com, April 20, 2002.
4. “Grasim pursues new product lines for Birla Viscose,”www.magindia.com, February 02, 2002.
5. Shubha Madhukar, “Indian garments in a brave new world,” www.domain-b.com,
December 29, 2004.
6. “Grasim aims for Application Development Center,” www.newsnmuse.com, February
13, 2002.
7. “Cheap cotton prices weave pressure on VSF yarn producers,”
www.universalgarments.com, March 09, 2005.
8. “Grasim buoyed by VSF exoansion plans,” www.blonnet.com, October 06, 2004.
9. Reena Mittal, “Strengthening our partners has helped in building the domestic base for
viscose,” www.expresstextile.com, October 23, 2002.
10. “Aditya Birla group goes to Laos, to set up wood pulp plant,” www.blonnet.com,
March 18, 2006.
11. G.Gurumurthy, “Lenzing eyes woven segment,” www.blonnet.com, September 06, 2005.
12. Sumit Khanna, “Grasim weaves viscose fiber spread,” www.dna-money.com, March 10, 2006.
13. Ratana Singh, “Grasim plans to set up rayon plant in AP,” www.textileandapparel.com,
November 14, 2005.
14. Reena Mittal, “Product development key to growth of viscose in India’,
www.expresstextile.com, 16-31 October, 2005.
15. Test of fiber, www.grasim.com
16. www.adityabirla.com
17. www.myiris.com
18. www.birlaviscose.com
19. www.bharattextile.com
20. www.fibersource.com
21. www.fibernyarn.com
22. www.lenzing.com
23. www.indiainfoline.com
24. www.universalgarments.com
25. www.textileandapparel.com
26. www.inteletex.com
27. www.thairayon.com

03 grasim industries ltd

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03 grasim industries ltd