Grasim Industries seems on a comeback trail as the market reckons that the company's consolidation in L&T will hold it in good stead.

The scrip of the A V Birla group cement and VSF maker rose 1.5% to Rs 373 on BSE in early trades today. The stock hit a high of Rs 374.40 earlier, a fresh 52-week high for it. Volumes were strong, at 43,700 shares, in one hour of trading.

Grasim had tumbled to a 52-week low of Rs 280 on 17 December 2002 at a time when there was much uncertainty regarding the consolidation of holding in L&T. Sebi had then put on hold the company's open offer for acquiring 20% stake in L&T pending investigation regarding voilation of the Takeover Code. But with Sebi eventually giving a clean chit to Grasim over the issue, the stock came good, boosted also by the strong financial performance of the company.

Cement analysts say Grasim's acquisition of stake in L&T would augur well for the company in the long term given the latter's voluminous capacity of 16 million tonnes. Grasim has already acquired 15% stake in L&T and it has made an open offer for acquiring an additional 20% stake at Rs 190 per share.

At the time of announcing its Q4 and FY 2003 results late last month, Grasim expressed optimism about the company's future. Grasim's outlook continues to be bright with all its major businesses contributing to the improved performance, it said. The company's focus on operational excellence, cost optimisation, effective financial management, continuous restructuring of business processes together with the expected improvement in cement sector should bode well for the company in times ahead, it said in a statement.

On the back of the improvement in operating efficiencies, Grasim reported a 25% growth in profit before tax (PBT) to Rs 194.63 crore on the back of a 9% growth in sales to Rs 1,211.34 crore. For FY 2002-03, PBT surged 45% to Rs 719.12 crore on a 5% growth in sales to Rs 4,626.29 crore.

VSF and cement are Grasim's two key businesses. VSF has been a money spinner for Grasim, it being a leading player in the VSF business in India and among the top players in the world. The company's drive towards  developing new applications and superior quality VSF in terms of feel, comfort, fashion and hygiene have paid rich dividends for it. To intensify these efforts, the company is setting up a VSF Research and Application Centre in Kharach involving a capital outlay of Rs 27 crore. The center is expected to be fully operational by 2005.

However, the cement sector is witnessing problems as cement prices remain weak due to a supply overhang. However, analysts see FY 2003-04 as a much better year for the cement sector with no new major capacity expansions in the offing.