Ladies and gentlemen, good day and welcome to Q1 FY 'twenty two Earnings Conference Call of Draseen Industries Limited. We have with us today from the management Mr. Dilip Goh, Managing Director Mr. Jan Doble, CEO, Global Chemicals and Group Business Head, Fertilizers and Insulators Mr. Jen Dua, Chief Executive Officer, Chemical Division and Mr.
Ashish Adhukia, Chief Financial Officer. After the presentation concludes. 10 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr.
Rishadukha, Chief Financial Officer. Thank you, and over to you, sir.
Good afternoon to all the participants. We are only a couple of days away from the start of the celebration of Independence Day, which is going to be the 75th Independence Day. It's a proud moment for us at Grasim as the company got incorporated 10 days after the independence. And we'll actually be celebrating alongside With the country, the start of the 25th anniversary of our existence as well. The So going back to the performance, the first wave of COVID created a new learning experience for all of us, a challenge which was never faced and tested in the last 2021 was even more severe, but our learnings from wave 1 helped us to counter the effect of 2nd wave.
For example, in VSS Business, we switched our market mix to in favor of export market to cushion our sales volume impact in the domestic markets. We also advanced our maintenance shutdown of 1 of our plants, the Hariyat plant, to May 2021 from September 2021. Let me share with you some of the key highlights of the quarter. Let me start with ESG. As the first in India, our VSF site at VELAYAS became EU Patch compliant.
As part of this compliance, we successfully commissioned carbon disulfate absorption plant, which is commonly called the CAP plant and achieved the stringent level of sulfur to air emission norms stipulated by EU batch references for the viscose manufacturing process. At Willai plant, the sulfur to air emission is expected to reduce by 85% by calendar year 2022. EU VAT is referred to as EU rather, European best available technology reference, and it's one of the most stringent and comprehensive norm for VSL production. It is globally acceptable and it sets out A strict range of consumption and emission limits. We'll be replicating that for other VSF facilities as well.
Another world leading initiative is in ESG is that NASDAQ VSF plant will be first to achieve 0 liquid discharge in viscose industry globally. The commissioning is expected to be completed by quarter 2 FY 2021. This year, we have shared our integrated annual report with all our investor. And in this report, we have covered a lot of details on our ESG practices and initiatives. And in this investor presentation, we have a Snapshot of sustainability indicator performance for Grasim for FY 2021 and also the environmental targets and performance against the targets for both the businesses.
Our endeavor has been to improve the reporting standards on the ESG front. As a company, we are evaluating climate change risks and opportunities As per task force on climate related financial disclosures, the TCFD disclosures and their recommendation. Outcomes of this study will be integrated with the long term business strategy, risk management and business planning. Let me cover the financial performance now. Our VSF downfield project at Voliath is progressing well and is scheduled To meet the commissioning time line of quarter 2 and quarter 3 for the two phases that we have in this project this year itself.
This project will bring down the cost of production for overall VSF business. This quarter with Retail being shut during the limited lockdowns, the sale of textile products suffered and led to an accumulation of inventory in the value chain. To cushion the impact of slowdown in the domestic textile sector. The company proactively increased the share of VSF exports to 31 percent in quarter 1 FY 2022 from 11% in quarter 4 FY 2021. And like I said, we also advanced the Hariharu shutdown by a few months to May 21.
The company is committed to increase the share of value added products in the overall sales mix. The share of VAS mix And the overall sales increased to 26% in quarter 1 from 22% in the entire Financial Year 2021. The VSF prices in China corrected in quarter 1 and have stabilized at the current level of about RMB 13 RMB 1,000. China's VSF inventory at plants increased to 24 days in June 2021 from 13 days in March 2021, leading to readjustment of production levels by the Chinese VSF players to take care of the inventory buildup And to lend stability to the prices. The net revenue from the VSS segment, including VFI, stood at INR 2,103 crore and EBITDA was at INR 488 crore.
VFI volumes were also impacted due to Weak demand condition. The domestic fiber demand recovered swiftly post easing of the lockdown And is now nearing the pre COVID levels. The revenue and EBITDA for VFY were INR 340 crore and INR 43 crore, respectively, in quarter 1. In our chemicals business, international caustic soda prices maintained an upsurge in quarter 1, driven by certain supply outages due to maintenance shutdown and it was also backed by improving demand outlook. The rise in domestic caustic prices, however, was subdued, owing to weak demand from textiles, organic chemicals, coupled with the excess supply situation.
The caustic soda capacity utilization stood at about 85% in quarter 1, which was higher than the industry average. During FY 2022, we expect significant commissioning of capacities at our chlor alkali business. In quarter 2 of FY 2022, we expect commissioning of Prahhela plant with a capacity of about 91 Ktpa. And as our strategy of increasing WAP, we'll be implementing the CMS plant at Willyad with a capacity of 55 KTP in the same time frame. In the second half of FY twenty twenty two, we expect the commissioning of Phase 1 of Willard expansion and Balapatirum The Advanced Materials business, I.
E, the epoxy business reported its best ever performance in quarter 1. This was driven by strong demand scenario and a better pricing environment both globally and in India. The The demand continues to be driven by the wind and auto segment. The key input costs like ECH and BPA witnessed a significant increase during the quarter primarily due to sorry, primarily due to supply constraints in those Materials. The revenue and EBITDA for Chemicals business was INR 14.36 crores and EBITDA was INR 2 Our solar business, Aditya Peralta Renewable Energy Limited, which is a wholly owned subsidiary of the company, We plan to commission about 38 megawatts of new capacity, which is group captive in The first half of this year.
Our consolidated revenue overall Q4 1 rose to INR 19,919 crores, which was up 53% y o y. The consolidated EBITDA was at INR 4,736 crores, which was up 86% y o y. The pack was up 6 times on a year on year basis. On standalone basis, excluding the discontinued operations of Fertilizer, our revenues were for the 4th quarter ones to that INR 3763 crore. The revenue and EBITDA from the discontinued operations of fertilizer was INR 6.87 crore as revenue and INR 56 crore as the EBITDA.
These are not included in the published results as part of the continuing business. The fertilizer business disinvestment process is on track and we are expecting it to complete in Quarter 2 of the year itself. Overall, on the debt side, the consolidated net debt Stands reduced to INR 8,982 crore in quarter 1, closer to the March 21 levels. On a standalone basis, the net debt increased From INR 9.14 crore in March to INR 18.17 crore in as of the end of June 2021. This was primarily on account of working capital change and some CapEx.
So if you look at overall FY 2022, we are excited about The company because mainly because some of our projects will be coming on stream. Of course, the benefit of those projects will be partly in this year and hopefully fully next year. And this would help us in both bringing down the cost because these are low cost new facilities and of course increasing the volume. So over to you for questions now. Thank you.
Thank you very much. We will now begin the question and answer session. The first question is from the line of Navin Sahidio from EDUWAI. Please go ahead.
Yes. Good evening,
I have a couple of questions on the VSF front. So recently, VSF has been in the news. My first question there is the what is the current price of VSF in India? And how does that like for a comparable grade, how does that compare to the landed parity? What I'm basically trying to refer is the removal of antidumping And in that context, just trying to understand what can be the potential impact of this duty going away?
That's my first question. Please.
Yes, please. I think we don't share the specific numbers, but of course, I We will be able to give the idea to Nomi.
But as we speak, Our price the local price right now is very competitive with a very important price because in fact it is little better. And that is not the case now only because for last few quarters, it has been like this. And if you may recall, In this investor call, I've always been maintaining that our pricing and domestic pricing has not linked to is linked to many factors, which are Local, like it depends upon the health of the local value chain, the price of imported yarn, which has no antidumping duty, because that governs the fiber price And the entire fiber dynamics with the cotton pie in India different than cotton pie elsewhere. So based on these factors, as we speak, The current price is very, very competitive with the result of price is important. And that has been the case for quite some time.
I completely agree with you and historically also have seen it's been mixed. I mean, and as you say, there are various factors at play, Including the yarn prices and competing, like, you know, the margins and stuff like that. But I was also trying to just put in context here that since there was heavy lobbying by various associations, be it the textile industry association or the spinners association to get this Duty removed. So from that context, since our new capacity is coming on board, while we are, of course, very competitive and I fully agree with you As we speak, but what is there a risk to the volume ramp up because we are expanding volumes at a time when these end consumers in a way We're demanding this sort of anti dumping duty to go.
So is there do you
see some sort of a risk to the volume ramp up because of this?
Let's understand, There is a price and there is a demand. The demand for this course is growing. In fact, as we have always been saying, the demand growth is exceedingly good. And the Indian market is 1 of fastest growing markets in the world. So we don't foresee any problem in terms of the demand part of it because the market last 4 or 5 years ago, it has been growing at 14% CAGR, right?
The pricing must understand antidumping duty becomes relevant. It's not an incentive. It's a penalty if somebody dumps. So anti dumping is not relevant, somebody is dumping. Otherwise, these are global price dynamics, and I think the industry is in a pretty healthy phase.
We don't foresee any major impact as long as the dumping doesn't happen. If dumping happens, then there are limited measures available for that.
Understood. Understood. And just one clarification, because typically imports Happen more for the gray yarn fiber. So when we say value added products in our overall volume mix, that value added product Is the dyed yarn, which is our specialty, like, which does not face much risk of imports. Is that a correct statement to make?
The value added products are Daida, Motal, Lyocell. So these are the value added products and they don't because not many guys make it, as I told you, Motal. There Only 2 established players in the world, Vee and Lending, which is a Europe based company. And you know the Europeans I have a fair record of pricing discipline. The second product is so bad, we are the world leaders.
It's not possible. So there is not in terms of the kind of color shades we made, not many guys nobody makes it that kind of a range. So we have a distinctive The third is lyocell. Again, you see the lyocell market is because the demand is outstripping the supply. So that also again is not a major issue.
Specialties are the that is a strategy we have been sharing with you in all the calls. The idea is to move To more and more to the specialty portfolio. And guys, when we have shared with you that we want to we have more than 150% of the portfolio as to specialty.
Understood. And just one last question, if I may. Global prices for the quarter on an average basis have been, I think, definitely a little soft. But we managed a realization increase, I think, largely with this huge surge in exports from 11% to 30% plus. And of course, I believe prices in European countries and Turkey and etcetera, they're far higher, and that's clearly benefiting.
My question is?
Yes. What will happen is if you see the water initiated, the global pricing dynamics is the ocean freights.
Correct.
So there is an issue disruption and there is no uniform case. There is a destination, here is destination B, there is a different rate than C2D. It depends upon what if you choose your market right, you will get better realizations. That's where a lot of optimization happens. So from the same country, One market may have a higher fit, other market may not have.
So there is a going to be in the difficult market, a lot of optimization has to be done in terms of your product and customer needs.
Appreciate. My question basically was when these exports come back because domestic demand is now reviving, Export comes back to its original level of normalized level of around 10%, 11%. So and with current prices being weak, this realization jump which we saw should get Reversed in the current quarter. Is that a safe directional statement to make?
The export never gives you more relation with the mistake because you always have the safe advantage. So that is not the case. The relation which you are getting is because of the share of specialties has gone up. Then what happened that you had last quarter, there were the prices went up gradually. So there was a carry forward benefit also of that.
So now the prices are broadly stabilizing at around 13,000 as Ashish mentioned So I think the rate system is now holding there.
Understood. That's really helpful. Thank you very much.
Thank you. The next question is from the line of Sinakin Parekh from JPMorgan. Please go ahead.
Thank you very much. So my first question is on the outlook for the VSF business because at this point of time, while prices have Stabilized, they have fallen. And this would partially be offset by higher volumes in the VSL business in the 2nd and third quarters.
So is it fair
to say that the current margins that we are seeing in the VSF business should be maintained over the next 2, 3 quarters? Or can the margins come out because of pricing pressure?
It's very difficult to predict on the pricing part of it. So I would not like to guess on the pricing part of it, but the trend issue see, The trends are showing that the demand is buoyant because the cotton prices are all time high. So if you recall, In the quarter 4, we got a very big boost in the demand and pricing because of cotton and viscose gap went beyond RMB 4000. Then this quarter started going up, the gap narrowed. Today, the gap is again widened to RMB5,000.
It is higher than what was in Q4. So we believe I mean, it's early days, but because of these kinds of gaps, the shift from quarter to viscose Should happen. And if that happens, demand should go much faster than what we're currently seeing.
Understood. And so my second question is on the Chemicals business. The ECU realizations have picked up because of the improvement that we are seeing in caustic soda prices. But clearly, the global caustic soda price Decrease has not yet been reflected in Klasim's realizations because of the COVID second wave. So is it fair to say that over the next 1 to 2 quarters as the domestic Demand starts picking up.
We should see overall the chemical business for the improved from here given where global prices are?
Directionally, what you're saying is absolutely right. There is an oversupply situation that Ashish mentioned in the country, That will always play a little overhang. But on a directional front, yes, you will see it's creeped up a little bit, so the creeping trend will
Understood. Thank you very much.
Thank you. The next question is from the line of Miras Gmodia from Anvil Research. Please go ahead.
Good afternoon, sir. Sir, I have two questions. So one is on VSF. Sir, I was just going through your presentations from FY 2018 to 2021, where approximately we have incurred something around 1,000 crores for modernization, maintenance CapEx, etcetera. And in some of the calls also you mentioned that we have been successful in reducing our Cost of production too.
So if you can just give us some understanding of this reduction in our Cost of production internally to Grasim and excluding external costs like freight or raw material costs, that would be helpful, sir. Yes. As you would appreciate, I can't share the specific numbers with you. But the reason if on a range basis, like, Let's say, if it was in a base of 100 in 2018, what is it now currently? Something of that understanding, sir.
So the debt towards the big things we have done. If you remember, we added a lot of capacity through debottlenecking. More than 10% of the capacity We added through debottlenecking by 12%. Now you all know when you add capacity through debottlenecking, the all you incur is variable cost. Krasil is currently amortized over the existing capacity.
So you get a huge amount of benefit because of the additional volumes which you have generated. So that brings down the overall cost of production from the same factory. The second we did is a huge reorganizing the manpower, which We shared
with you last time that
we have restructured our old factories and we saved more than 3,000 to 3,500 We can rationalize. Fixed costs have come down significantly in last 3 to 4 years. So the number could be anywhere between $0.03 to $0.05 kind of a thing. So we have these are intrinsic to the operations. There is no variable cost saving in terms of this.
The other thing we have done is we have done a lot of work On the variable cost side by reducing the caustic consumption. As I mentioned to you that we are our caustic consumption now is one of the lowest in the world. We have dropped them by almost about 15% to 17% through basic research. So a lot of R and D effort has gone into reducing for the consumption of various chemicals and utilities. And the third thing is a new plant which we are putting Right now, it is coming on the last and expansion.
That plant
has a cost
which is significantly cheaper than my existing plants. So overall, we believe across this plant alone will bring our cost by more than $0.05 to $0.06 across the Grasim base. So all put together, there are very ambitious cost reductions you have done, I think, which is going to help us going forward. Got it. And this 13,000 ton increase in the VSS capacity, which you have seen in the latest presentation is also an outcome of this modernization capacity.
That's right. Correct. And sir, the second question like what you mentioned to the other participant that we also we are seeing the demand outstripping the supply, But our nearest competitor is putting up some 1,000,000 plan, which will be commissioned by the end of 2021 And are expecting ramp fully ramp up also by H2 of CY 2022. So how do you see this development with respect to the global Pricing as well as impact to Grasim because and if you can give some understanding that whereas we are also expanding on the graphene capacity that would be helpful. Yes.
See, the thing is that if you see the same competitor, sales level, the world can absorb 100,000 tonne every year, 1000000 per year. So there is a rising demand for lyocell. And where does the demand come from? As I always told you that the lyocell is a great replacement of cotton. Okay.
Cotton costs are going up and up and availability is becoming a constraint. We have always been sharing with you, it is £25,000,000 plusminus. Now if that is the case, more and more and China particularly is very short on Quarter requirement versus demand. And they have to report. So a lot of liaisons will go into substituting cotton.
That can be a huge ocean because cotton is a 25,000,000 ton base. When you replace 5%, It does have 1,200,000 tons every year. So it is a market deal when you develop. It is not a market available to you Just to go and sell tomorrow, but that's all we all are working. We all are we are working in India, Chinese guys are working in China, Other companies are working in rest of the world, but we believe there is a huge opportunity to substitute part of the quarter.
Cotton will remain always, but the issue is we have to supply the natural supply demand. And lyocell is a so that's why there is room for everybody. There's room for viscose, there's room for diasl and there's room for cotton. Okay. So safe to assume that we are also expanding on yourself?
Yes. And we see what but we are trying to focus more on the specialty end of lifestyle going forward. There are 2 ends of lifestyle like viscose. One is, which can go for the quarter substitution, which is what we call a 300 grade. And just some The special variant which can go into different applications like non owned applications, which should relate less.
So our idea is to go to more than us on the specialty part of Okay. And for a small clarification on the epoxy statement which you mentioned, The last thing you told that in Q1, the profits have doubled on a quarter on quarter basis for epoxy. So how has been the situation in Q1 sorry, from Q4 in Q4, the profits have doubled from Q3. So what has been the situation in Q1?
Yes. So, see, epoxy story in Q1 has actually continued. So, it's more or less same as Quarter 4, what we achieved in epoxy. So that tailwind on the real I think on a little bit outlook side, the raw material prices have still gone up Because of supply constraints there. So now there will be more stabilization, and we don't anticipate it going up further, But some pressure will come through the raw material prices.
Okay. So in percentage terms, if you can mention like in this quarter, how much is the percentage increase in
In comparison to quarter 4, it is more or less in the same line, the same number. Thanks a
lot, sir, and I'll join back in the Q and A.
Thank you. The next question is from the line of Havan Cheta from INAM Holdings. Please go ahead.
Yes. Good afternoon, sir. Overall, good set of numbers and congrats on completing almost 75 years now on Independence We mentioned in the opening remarks. So my three questions. First is on the fertilizer deal.
If you can get the fertilizer debt, which is now included In the total debt number and I believe the original divestment was at EV of INR 2,649 crores, if I'm right. So by quarter 2, we will be the debt will be down by INR2500 odd crores?
Sure. Do you want to complete or maybe let me answer this question and then you can ask your other questions. So on fertilizer, the number that we had given up 2,649, That was obviously subject to the working capital adjustment and certain CapEx adjustments, okay. So those were the Couple of adjustments that needed to be made. Now what has happened since the time that we have announced the deal, Actually been releasing good amount of subsidy to the fertilizer player.
And likewise, we've also got more than expected subsidy Flow from the comments. So almost the subsidy amount that was outstanding at the time when we announced to now, It has come down by almost 1,000 crores or so, the subsidy receivable. So as we have received That amount from government already. So therefore, the value realization from the buyer will be that much less, right? So that itself brings down the number to and these are approximate numbers.
Just directionally, I
want to
give you a view.
It comes down to about
1600 or so, right, from 2,600 if I realized 1,000.
Yes. Yes.
And then there will, of course, be tax implication, etcetera, because of some sales, so there will be capital gains tax. So given all those So it will be
it will go
slightly lower than that number. So if you look at the net debt, which is at 1800 today, and if you realize Between $1,600,000 depending on the tax, etcetera, dollars 1200,000,000 to $1600,000,000 or whatever. So you will be very close to net debt number. That's the number calculation for you.
Yes, sure. 2nd was quarter 1, as I've seen, obviously, the VSF Inventory going up since the production volumes was much more than the sales volume. So and as you said, now the demand has picked up and the markets are opening up. So Will we see this inventory getting cleared in quarter 2?
Ashish, you want me to take a
Yes, please. So see, I think we can talk about quarter 1, where actually There has been an inventory buildup. I think going forward, we can only guess. So, Jilif, you may just explain what happened in quarter?
Yes, the rationale for this time was the learning we got from the last lockdown. Last lockdown, we had curtailed our production to match the market demand. And when the pent up demand came, we could not service, and there was a shortage. That happened across the industry. So this time, what we did was that we did not we believe that, look, there will be pent up demand because The underlines are very strong.
The European markets are very strong. The retailers in U. S. Are very strong. The orders for spring summer are going to be very good.
So we knew and the whole ValeGen knew that when the dog numbers have lifted, the demand will be more vertically recovered. So as a result of that, yes, we did produce. So, Pali, Haria, all the plants are running. We exported a lot of volume. So that way, our performance It's much better than what happened last time.
And whatever has been there, I think it should get warmed up For the quarter or maybe at least 1 more month beyond that. That's the plan. But as Ashish said, we can't predict anything.
Yes. We'll be back to normal inventory, I meant. Yes.
That's right. Yes.
Yes. And the last one, if you can update anything further on paint business, have you Spend anything or planning to spend anything in FY 2022 and some plans there?
Sure. So To give you an update, see, there are 3 phases To putting up our capacity in paint, right? It starts with, based on your business plan, where the locations of your plants are going And therefore, then going ahead and identifying the land for those plants. So we have actually identified Land parcels in most of our locations where you want to set up the plant. So that's already done, okay.
The acquisition of land itself after identification takes about 3, 4, 5 months or so Because you have to discuss with State Government, get their consent, etcetera, then sign the lease status Right. And all those things. So we are actually in the process of doing that process. And we're doing all locations in parallel. So It's not that it's sequential.
We'll be achieving all those locations together. So after that, there will be easy environmental clearance and requirement, etcetera, which can take 3 to 4 months or so. So right now, what we will look at in these two phases is mostly What will go towards land acquisition, the CapEx, right? And not
Any number there?
It's difficult to give any guidance on the number because in different regions, the land rates and everything is very different, the Incentives given by government, etcetera, also different. So it's tough to give one ballpark number for land. But land is more of a time line factor rather than a big cost factor, right? And of course, we are also starting you've appointed and we're starting the detailed engineering part so that as soon as the approval comes through, we are in the process, We can start ordering equipment, etcetera, for the facility. So which After that, it would take about to put up the facility about 18 months around.
So that's the time line that we are looking at.
Originally, sir, we were also looking at wherever we had excess land in our factories or In the Birla Group. So because are you looking at new land or new factory location only? I thought that
We would
like some of that also.
Yes, there is a lot of thoughts that goes into land acquisition. I think more important is whether it meets business objectives or not rather than it's just that if it is available with us, Okay. I think the infrastructure that is available, the availability of utilities, etcetera, plus More importantly, it's the access to the market, how close are you to the market so that your logistics cost is optimized. So we are looking at all those factors in identifying the land. And I think each state is actually very receptive of So as coming and setting up facilities in their state.
So as such, the incentives, etcetera, are also Pretty good for us to consider new land parcels.
Thanks a lot, sir.
Thank you. The next question is from the line of Pratik Kumar from Antique Stock Broking. Please go ahead.
So as you said, sir, that the Chinese players have responded to the current situation by dropping the operating rate. So have they been like generally so I mean, on a quarter basis, there's been a tough drop. Have they been generally so accommodative in the past as well Responding because we remember that they have been generally aggressively competing on Saibou. Is it a normal thing which we have seen in earlier period last year?
This is a change, we can only conjecture, but this is a change we have been seeing consistently in last 6 months. Because what will happen, the Chinese people, which we if you recall in the earlier discussion, Chinese people have been losing money in this course The last 18 to 24 months because of their pricing policies. So if you so there is a publication every month, they give you the how much R and D per
ton they have lost. And if
you look at 18 months publication, every month after month, they were losing money. I believe that China has tightened their liquidity system, the banking Accountability and all kinds of issues. So they are under pressure to now deliver positive results. And that perhaps has changed the Hold that close to the pricing policy. So I've never seen dropping like we went down as long as 69% OR.
It was not the demand. It was basically to try to control the inventory because inventory decides the pricing. And so I hope This should continue because this year we've been seeing for quite some time now.
But how come the inventory only went up because
What happened is always a whiplash effect. So when if you remember Q4, when we discussed, there were 2 factors happened. There was The underlying demand for this course and the pipeline restocking. So there was a huge restocking which happened in Q4 Because from the in the COVID time, people did not depend in the pipeline. So to service the With the restocking, the plant capacities have gone up and the ore went up to 84%.
By the time When the inventory the restockings got over, by the time it came back that what we call The lag effect was there and the inventory went up. Then this weather started cutting over. So So what you are seeing, 25 days has now come down to 22 days as we speak now, with OR going up to more than 76%, 77%. So the whole pattern has improved. So there's always been a supply chain in a bullish effect.
This happens now, but you can see it after some time. And that lag is always there. So the lag is getting corrected now.
And this drop in Chinese BFS has no relation to government local government crackdown on commodity prices in Let me know.
I think it was look at the Q4, by the way, we had told you were very unusual. I mean, dollars 2.1, dollars 2.2 was never It's not a sustainable price, but today also when we are saying price is low, it is $1.75 to $1.8 That has been a standard good price for visco historically. So that has been historical average if you look at it. So I think but today the only issue with them is the pulp price. So, when the pulp price start moderating, this should be good.
And one question on recent rise in COVID It is globally to have that as any impact on export market. And if you can express like what are the global VFS
The capacity additions are going to I think our answer is the biggest addition. The biggest is really our 210,000 out of 220,000. Give and take because there are a lot of unrivaled plants that are Closing down also. So we believe in next 18 months not more than 400,000 ton capacity will be added. So there is very minimal capacity addition in the next 2 years For this course, there could be more for Lyocell.
So there is a lot of announcements that happened in China on the Lyocell capacity addition. So this course, we don't build we don't foresee much What are the other question?
Regarding the any export market impact regarding the recent surge in cases globally?
Last month, everything was very hunky doy. So everything was looking very good. So retail sales were good, the demand, the order booking has been good. The COVID thing has just started happening, so we don't have to watch and see. But we don't believe that because now people have learned to live with it.
So I think the business may not get affected
I am sorry, just one last question. On this ECU realization, which
we have reported at 26,000, is the current quarter realization significantly higher from there? And is there any impact of negative chlorine realization also in
you want to so see, chlorine demand has been subdued as compared to The cost of demand from alumina and as Philip was talking about from the DSS sector has been very robust. But it is not so real in the case of textiles and organic chemicals. And chlorine demand, the largest thing for chlorine in India is a Product what we call as CPW, chlorinated paraffin bags. That has materially got impacted across the And in the textile demand offset is the dyes in the Tychem Industries. So chlorine is subdued, which has led to a pressure on Pricing on chlorine, as we speak.
Caustic at the moment with the lag is creeping up.
Sure, sir. I understand. Thanks.
Thank you. The next question is from the line of Amit Muralka from Mrinalo Swal. Please go ahead.
Yes. Hi. Good afternoon. Just on BSF, so I just wanted to understand like what would be the difference in
I think, Dilip, his question is domestic versus exports realization and margin.
See, in last quarter and this quarter, they are very, very close.
Very close, yes.
It is much better. Like Turkey as a market, just to give you an example, The freight from other producing countries to Turkey is much higher than the freight from India, where the pricing is always down the landed price from the competition. So we find that service in Turkey market today from India is far from other than any other thing to do.
So what do you think would be the significant level of domestic sales in the mix, particularly post Company.
Your voice is breaking. I can't hear you.
Philip, I think his question is What will be the share of domestic after the expansion of capacity?
Our projections are still we believe in The market grew at the current projection rate, about 85% to 90% will be domestic and 10% to 15% will be export. But there's enough room to play around. Okay. But Sorry. Yes, but the 85% to 90% target for domestic sales, that would be like 3, 4 years down the line or because the capacity This is now there's a lot of expansion happening in spinning capacity also.
So there are a lot of spinners who are investing as we speak. Those expansions have got slightly delayed because of COVID. Otherwise, there is a substantial increase in the spinning capacity as well happening in the country. So they will require extra fiber. Then the specialty consumption going up very high.
Our specialty sales growth has become quite good. And third is the ESG emphasis, Well, the Eco Fiber, the Nanshan is also shooting up in India. So wherever Viva Eco is going to grow well. So all put together, I think the domestic market also is going to grow faster than we expected in the past. Okay.
So why I ask is because your capacity is expanding by almost 40%, and that is happening Just around 12 to 15 months. I'll commission the plant end of this month. So it will take about a month or so to stabilize. So we will get 6 months for the line 1, only 6 months for the line 2. So we have based on these projections, what I'm sharing with you is our internal projection.
That's the kind of Our estimate is on the current market demand. If it changes, the ratio can change. But as I always tell you, in this business, volume is not a problem Because I think there is enough global market where you can sell.
Yes. So is it fair to say that maybe initially the share of exports will be higher and then Later on maybe stabilized to that 85% to 90% target then?
As for the current projection, we still believe we should be able to maintain the share I'm telling you, but it's only prediction.
I can't guarantee that.
And also, when you talk I can't guarantee that.
And also, when you talk about more spinning capacities coming on stream, We also keep reading that actually the imports of yarn has been rising consistently. So how do you think the spinners are positioned to kind of compete with those yarn imports?
That's why the way it is happening right now, there seems to be a sweet spot, the current pricing. Is there the imported yarn P. Vijay Kumar:] It's not viable. One advantage has been the high freight rates from China and other places. So today, at this price, your spinners are viable and the fiber price is also okay.
So there is a good balance right now. Limited. Okay. Sure. And this is going I think the straight markets are going to be like this in the foreseeable future.
Thank you. The next question is from the line of Vipul Shah from Sumangal Investment. Please go ahead.
Hi, sir. I just want to know what will be the share of specialty once entire expansion at Vila is completed In terms of volume percentage, as I mentioned to you that our expansion has a flexibility to make Commodity and some specialties. So we can always play around with our product mix. So our target, as I told you, irrespective of the expansion, We will try to target 40% specialties in next 2 to 3 years. And what type of value addition we are getting in specialty as Compared to commodities, sir?
It depends on different products like Modal is our highest value addition. Then comes Lyaceli, then comes Levi Eco, then comes NonVover. So we've got then comes DopeKite and then comes NonVover. So we've got this I can't share the delta exact number, but that's how it is. But it varies from $0.20 to $1.
It's basically there is more stability at the value added products pricing and grades that fluctuate. So it's not a fixed to Delta also, right.
And lastly, sir, we'll be self sufficient in pulp Even after the entire expansion program is completed at midline? If you remember, our policy has been about half we do captively and half we source So for the expansion, we already have lined up additional volumes with our strategic partner. They have already expanded in South Africa. So we have lined up the extra volume of pulp from our Strategic partner at one of those favorable terms, which we normally follow. On a long term contract, sir?
Yes, long term contract, yes. We have booked volume linked contracts, sir. Okay, sir. All the best and thank you.
Thank you.
Thank you. The next question is from the line of Murali Bhararehdi from RediM Family. Please go ahead.
Sir, thank you for the opportunity. Actually, I have Two questions. First one regarding operating profit margin or profitability for a standalone basis, not a consolidated basis. We used to be in the range of between 16% around 20%, but it is now it's been declined for last 2 years or so, something like 12%, 13% kind of stuff. What are the initiatives that we are doing on a standalone basis to Get back to the something like about 16%, 17% kind of your
I think I can give you an overall perspective. Okay. I think the way to so first of all, the prices have The realization corrections at some places has led to the margin coming down, Okay. So therefore, to take care of that, the two things that we do is that one is You bring down your cost overall, both the fixed cost as well as your variable cost. Variable cost, you bring it down by Having better consumption norms like Philip gave example of caustic consumption to produce VSF And then in the case of chemicals business, where power is the That forms 50% or so of the total cost.
So there you look at ways and means to bring down the power cost, which can be by adding captive capacity All by increasing the share of renewable capacity, which is actually today much cheaper than the conventional power. So that's on the cost side. The other thing that we are trying to do is that to increase the VAP portfolio across both the businesses. So in both the businesses, we want to target 40% share of WAP By 2025, okay. So that will give more stability and higher margin to the entire business.
We are also looking at many different ways to reduce the, call it, leakages or whatever. For example, We want to increase beyond 40% of WAP in chemicals. We want to increase the way we move chlorine. So rather than moving it by road, we want to move it by pipeline. That reduces the cost And it has many different advantages.
It has positive contribution there. Your customer is close by, you straight away supply to the As it is produced. So there are many advantages that you have when you have pipeline movement of chlorine. Yes. So these are the measures that we are constantly it's a journey over a period of time and it will continue to improve margin.
Dheeraj Jayant, you can even feel free to add anything if I missed.
So my second question, this is little bit We are entering to the renewable space, and it's been pretty new one for us. Is there any kind of revenues and EBITDA that You're looking not just for the next year, maybe for a 5 year period of kind of stuff. And just kind of the plan, it's not I know it's a forward looking, but just kind of a company's strategic plan.
Yes. See, I think it's not that it is new business for us. I think We've been very calibrated in growing that business because there is a lot of competition in that business. And constantly, The tariffs are going down and there is now you can see the module prices are going up. So The players who have recently bid and won can face that issue of module prices going up and thereby impacting their return.
So I think the counterparty risk that exists out here, who you deal with, your state discoms, which state are you dealing with, all those things become Extremely important. So therefore, we are quite careful on how we grow this business. So we've gone Slow rather than in comparison to some of the other players who have gone pretty grown pretty aggressively. So we are right now about 500 megawatts. We also have group captive business where the counterparties, Aditya Birla Group Companies Like Hindalco and Alta Tech and Grasim Businesses itself, that's about 160 megawatt right now.
So that will also is constantly growing. So we plan to reach 8.45 megawatt, like I had mentioned, by FY 2023. And this business, it's easy to calculate the revenues, EBITDA and cash flows depending on What you've bid at. So you'll get an idea of this business financials if you just back calculate the numbers. But that's really what our plan currently is.
We may look at some of the SECI projects, etcetera, as well, which are more secure projects, but of course, more aggressively fit projects.
Thank you for wish you all the best to your initiatives. Thank you so much.
Thank you. The next question is from the line of Santosh from Treasure Hunt. Please go ahead.
Good evening, sir, and thank you for the opportunity. Most of the questions have been already answered. I would like to know what is the CapEx so Because I could read from some of the newspaper that Chief Minister, Khuzaraj has announced INR 1,000 crores has been invested. So I would like to know on that line.
Sure, sure. So the CapEx So as of now, it has not been meaningful in pains because like We've said we've put a team in place. So we've put a business plan. We're identifying land. Now is when we will start paying for land, etcetera, and that's when CapEx will be slightly more visible.
On the clarification, in UP, we are indeed that region, I would say, not necessarily UP, but that region we are It's one of the identified location where we could have a plant that cater to that region So that's why we are looking at land and rectify the land in that region. It's not that we have spent the amount that has been publicly stated. It's intention If we put up a plant out there, then close to that number is what we may end up spending. But It's not that we have spent that money or have entirely tied up the plan.
And sir, when do you approximately expect to extend the production if everything goes well as per your plan? Yes. So we've not given that guidance. I think
if you like I said, if you look at Land acquisitions approval and then 18 months thereafter, so could be about 24 months or so. You may look at production starting, so but it's tough to say because we're still in the first stage of an in Thailand.
Thank you. Ladies and gentlemen, the design constraints that was the last question. I now hand the conference Over to the management for closing comments.
Thanks for all the questions that I think we covered pretty much all the details that we wanted to cover on the call. To cover on the call. Look forward to your participation in the next quarter. In the meantime, if you have any questions, clarifications, please feel free to reach out to So you can reach out to Saket or to me, no problem at all. Thank you.
Thank you. On behalf of Graseen Industries Limited, that concludes this