Ladies and gentlemen, good day and welcome to Grasim Industries Q4 and FY 2023 year-ended conference call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head, Investor Relations. Thank you, over to you, sir.
Yes. Thank you, Tanvi. Thank you all. Good afternoon to everyone for joining us today to discuss Grasim Financial results for Q4 and full financial year ended 31st March 2023. Everyone got chance to look at the financial statements and quarterly presentation uploaded on the exchanges and also available on our website. As you are aware, we don't provide specific earnings guidance. Anything said on this call which reflects our outlook for the future or which could be constructed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces. The same is also highlighted in last slide of our presentation. Additionally, for reference purposes, the recording and the transcript would be available on the site.
We welcome our leadership team on this call to discuss and share key updates on our financial results, business, and segment-wide performance. We have with us today Mr. H.K. Agarwal, Managing Director, and Mr. Pavan Jain, Chief Financial Officer. Also joining the call, we have leadership team from key businesses. We have Mr. Himanshu Kapania, Business Head, Paints Division, Mr. Jayant Dhobley , Business Head, Chemicals, Speciality and Insulators Business, and Mr. Rakshit Hargave, CEO of Paints Business. I now hand over the call to Mr. Pavan Jain for his opening remarks, post which we will open the floor for Q&A. Over to you, sir.
Thank you, Ankit, and good afternoon, everyone. We welcome you to discuss our annual performance as well as quarter four results discussion. First, I would like to give some highlights on our annual numbers, and then we will cover key aspects for the quarterly performance.
As you are aware, the macro global environment of our businesses has been very volatile in the year gone by due to various factors such as energy prices and inflation rates shooting up globally, demand slowdown across global markets, supply chain disruptions, et cetera. The results for financial year 2023 are to be seen in this backdrop. Despite the challenging macro environment, FY 2023 is a momentous year for Grasim. We have achieved various milestones, and we hope to continue this momentum in FY 2024. We have constantly demonstrated on YoY basis and achieved highest ever consolidated revenue of over INR 1 lakh crore in this year. The CAGR in consolidated revenue and EBITDA over FY 2020 to FY 2023 stood at 16% annually. The consolidated level, UltraTech, Aditya Birla Capital, and Aditya Birla Renewables, have added to the strong growth of the underlying standalone businesses.
A key point to highlight is the reported PAT, which are the comparable PAT of the previous period. The standalone as well as consolidated PAT for last financial year, that is FY 2022, needs to be adjusted for the exceptional items, tax-related writebacks, and profit from discontinued operations accounted in the last year. Working of these adjustments has been shared in our presentation. Costs in the current year are elevated due to the initial costs for our high growth new businesses, which impact the overall profitability. On standalone basis, as well, we have achieved highest ever revenue for FY 2023 of INR 26,840 crore. Standalone EBITDA for the year stood at more than INR 4,200 crore.
Over the same period of FY 2020 to FY 2023, the standalone revenue recorded a growth rate of some 19% CAGR and 18% PAT. Furthermore, over the past decade, we have multiplied revenue by 5.6x , and EBITDA have multiplied by 4.2x . The growth under dynamic macroeconomic conditions clearly demonstrate driving forces of the unified approach of five years of our strategy, mainly leadership across businesses, constant product and process innovation, increase our sustainability quotient, capital allocation to build high growth businesses, and constantly work for and maintain cost leadership. The highest over revenue at standalone level is largely driven by strong growth in two large segments, which is Viscose and Chemicals. Viscose business achieved highest ever sales volumes during the year on the back of strong domestic demand.
Chemicals also posted its best over year on the back of stable demand and historically high realizations. Textile business has achieved its highest ever revenue, again, largely driven by linen business. Linen Club, which is India's premium women brand, has been increasing its presence across India with 210 exclusive brand outlets versus 186 in FY 2021, and 168 in FY 2022. The presence across MBO also increased now to over 8,000 touchpoints. The premium fabric brands under SÖKTAŞ and Giza House are other scalable opportunities on the retail side. Furthermore, on the brand side, we would like to highlight that there are multiple brands which we have created across various categories of Viscose, Chemical, and will be now doing so for Trends.
In Viscose, we were able to create that full demand positioning Liva as a premium, sustainable under consciously fashion category. Liva is also associated through co-branding with some of the finest brands across the world. There are also well-established brands like UltraTech and Aditya Birla Capital, which are created by our key subsidiaries, which play big in your life. Responsible corporate has been key motive, where Grasim continues to work and amplify its efforts through its sustainability goals and agenda. Given the complex and intensive manufacturing processes, we highlight Grasim has been able to make a tangible impact in FY 2023. We have been able to reduce fresh water consumption intensity by 15% compared to FY 2022. The GHG emissions intensity has been also reduced by 6% compared to baseline year of FY 2019.
This is despite the increased capacity over the same period, and consumption from renewable energy improved by 3 percentage points, from 5% in FY22 to 8% in FY 2023. On the innovation side, we continue to provide market with differentiated, sustainable solutions to drive its goals towards conscious fashion. For instance, there has been continuous progress on developing MMCF, that is man-made cellulose fiber, from the textile waste. Commercial production of Liva Reviva Viscose from 30% textile waste was achieved on one of the large VSF lines. Likewise, commercial production of Lyocell fiber was achieved with up to 31% of raw material being textile waste. Coming to performance of Q4 of the year, consolidated revenue stood at its highest level of INR 33,462 crore, recording a growth of 16% YoY.
Revenue from significant subsidiaries, UltraTech and Aditya Birla Capital, grew by 20% and 23% respectively. We believe that our key subsidiaries are direct beneficiaries of India's expanding infrastructure, growing financialization, and growing demand for renewable energy. Consolidated EBITDA stood at INR 4,873 crore, recording a growth of 5% YoY, largely due to performance from UltraTech and Aditya Birla Capital. Standalone businesses revenue was up by 7% at INR 6,646 crore, compared to INR 6,196 crore in Q3 of this year. Standalone EBITDA de-grew 6% QoQ to INR 542 crore, compared to INR 580 crore in previous quarter. At segmental level, Viscose has significantly, sequentially recovered at a faster pace, we exited the quarter at the month high level, quarter high level.
The effective Q4 EBITDA was impacted by exceptionally subdued conditions of Q3, which continued in the initial period of current quarter. However, there remains a continuous improvement month-over-month in the quarter gone by. Utilization levels are near to highest levels. Demand recovery has also resulted in China inventory reaching below their three-year average of 23 days, which reflects well-balanced demand supply situation currently. Viscose revenue during the current quarter grew by 18% QoQ to INR 3,760 crore, while combined EBITDA for the VSF and VX five businesses put together showcased sharp sequential recovery due to VSF now returning back to the profitability compared to EBITDA loss in Q3. Global caustic market remains oversupplied due to high operating rates and lower demand. On similar lines, Indian chlor-alkali market also remained oversupplied due to incremental capacity.
The CFR China CA prices of caustic soda corrected by 25% QoQ and 28% YoY during the quarter four. These are the lowest prices since September 2021. While the impact of the same could come with a lag, current quarter revenue de-grew by 4% YoY to INR 2,397 crore, compared to INR 2,487 crore in Q4 FY22. Mix sales further changed in favor of the chlorine derivatives, with an increased revenue contribution of 100 BPS, QoQ and YoY. To further enhance our focus on chlorine derivatives, we have acquired the required land at Reliance adjacent to our existing plant for setting up manufacturing facilities in due course. In next three years, chlorine integration will be 72% compared to 60% for FY 2023.
Contribution from specialty chemical segment improved, based on improved demand and sourcing raw material prices. Revenue performance from textile remains stable at INR 520 crore for this quarter, recording a growth of 8% YoY, largely driven by strong underlying demand from the wool and linen businesses. However, the profitability for the current quarter was impacted due to exceptional rise in the flex prices, which is a raw material for our linen business. The B2B e-commerce opportunity is big and scalable. We aim to be a meaningful player in due course of time in the segment of marketplace for building materials. We are on track to launch full-scale operations in Q2 FY 2024, beginning from cities in the state of Maharashtra and MP, and plan to cover major part of the country, of course.
The excitement is at peak across, with regards to launch our paints business, which is now just three quarters away. The segment is big, whereby it can accommodate multiple players, where we aim to be a second largest player in Indian organized decorative paint market. The CapEx spend is also progressing on expected lines and would be at peak of requirement in the current and next year. Simultaneously, activities for business plan implementation are also progressing well for commercial launch in Q4 FY 2024. Coming to the balance sheet, the CapEx for FY 2022-2023 was largely towards chemicals and paints. Next year, there would be accelerated CapEx, which would be undertaken for future accelerated growth of the company. To fund the same, the company has already entered into long-term loan agreements of INR 5,000 crore.
As of 31st March 2023, company's standalone net debt stood at INR 1,780 crore. Excluding our investments in the high-growth businesses, the existing businesses continue to remain free cash flow positive. We will share the CapEx plan for the current financial year, that is FY24, once the same is finalized and approved by the board. I will stop here on the update side and would like to open the floor for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Navin Sahadeo from ICICI Securities . Please go ahead.
Hello.
Yeah, Navin. Yes.
Yeah. Good evening, sir. Good evening. Thank you for the opportunity. Sir, my first question was in the visco segment, wherein slide 17 of your presentation says that price movement for grade VSF is up 4% quarter-on-quarter, and even the March exit is nearly 2% better as compared to the average for Q4. When I do the same arithmetic for the reported revenues and the volumes, sequentially, I see a drop of almost 5%. If you could just help us understand the reconciliation as to are we missing anything, this particular point here? Thank you.
Navin, this is H. K. Agarwal. This slide what you are referring is the China index price, the VSF, reported by CCFEI, China, agency, which publishes weekly information on various fibers. In China, it is Q on Q, but at many times, the price is not reflected exactly the same way in all the markets. There were many things happening in the Indian market or in export market because of various other macro factors. This did not reflect in the same way. Actually, you are right in your analysis that there is a slight reduction in the price realization in the quarter four. Your analysis is right in that sense.
Obviously, my question then would be, in the current quarter also, do we continue to see that lag versus global prices? It can then have the tendency to reverse back or come back to mean that much faster?
In China also, prices have corrected to some extent, and in India also, prices have moved to some extent, convergent. These are dynamic things. Prices are now more or less in the similar direction as tip of the time, the current period.
I just want to ask a slightly longer, like, you know, I mean, horizon question here. I look at your EBITDA, let's say, visco's EBITDA per kg from FY 2003, okay? Until 2023, if I look at average is more like, you know, INR 25 or over definitely INR 22-INR 25 per kg. I think currently we are more averaging like INR 5 or INR 6 if I'm not wrong, for the latest quarter or in the, in that range of INR 5-INR 7. When can we expect the, like, you know, the average EBITDA per kg go back to those long-term average of, if not, 20, at least, INR 15-INR 17 from the current levels, please?
It is going to take some time. I don't want to sound very statistic or optimistic. Those levels are different, era, and current era is very different. In those periods, we had import duty, we had antidumping duty in India, but China had not had so many players. The capacity has been added and so many things. The current situation is distorted by another side of the equation that is cost inputs of export material like pulp, caustic, sulfur, coal, all have gone up very high. Slowly, slowly, these things are getting corrected, so that will help to restore the margins. Prices are also going to increase in due course, but currently, the macroeconomic factors, the demand and all these things are greatly disturbed, so these are not normal times.
We also work to get those kind of margins back, that will be wonderful, but, I think it will be not practical to expect INR 25,000 kind of margin in the immediate near future.
Clearly, I think the removal of antidumping duties is playing, is having an impact in the domestic market, hence profitability versus the past could see challenges to get back to the longer-term average.
Oh, yes. There were a lot of disturbances. Shipping rates were very high, imports were expensive, now shipping rates have come back to normal. Many moving pieces in the whole game. This is very cyclical business. The cost, the prices, move very fast, the cycles will continue to operate. Cotton prices also were very high last until May last year, cotton prices crashed, that affected all the fiber prices also. In due course, cotton prices will also get back to normal levels. They will pull up all the fiber prices also. There are many, many factors influencing the port price as well as the cost side, which determine the margin.
Just to add, Navin, you see, these are very, I mean, challenging times since the global developed markets have the negative consumer sentiments, the, I mean, the inflation rates shooting up, affecting the consumer sentiments, et cetera. You also have to see that all the Chinese players are currently making losses in VSF business. That situation cannot continue for long. If you look at the numbers, I mean, even if we say Q1 of FY 2023, our margins are very good, right? Will be in excess of 23%.
Yeah.
The situations are very volatile currently. It is not that we will not achieve those numbers or, I mean, the current cycle is a kind of difficult cycle in the sense energy and the input prices are up and realizations are down. We have the double whammy kind of situation. We don't think that this is a permanent kind of situation.
Get it. Thank you so much.
Thank you. The next question is from the line of Nirav Jimudia from Anvil Research . Please go ahead.
Yeah, good afternoon, sir, and thanks for the opportunity. to just continuing with the earlier question, if you rightly explained on the realization side for the VSF, but if you can just, explain on the raw material side, because we have seen the pulp prices correcting sharply from March onwards. If you can explain us, what were the average pulp cost for us in Q4, and, when can the benefit of this, reduced pulp prices could accrue to Grasim Industries from? B, on the caustic soda side also, because caustic soda prices have further corrected in from March, April onwards. How does the contract for caustic soda happens for the VSF division, within Grasim? Third would be the premium for the value-added VSF.
What I could find is that the premium from last one or two quarters have shrink. It has further shrinked in Q4. Was that one of the reason why the profits per kg had an impact in Q4? This is on the VSF side, sir.
Okay. I will touch the premium on that first. There was some reduction in the VADs premium, but it is within the very small range, so that is not really a big factor. The main thing was the VADs demand was also impacted because of the macro, global macro situation. The Europe, America, all those places, the consumer spending, discretionary consumer spending has been impacted very severely. The VADs showing more expensive kind of garments, so their demand was impacted by value brands.
Okay.
The premium on VADs was little bit down, but not significantly. That is not a matter of great concern.
Okay.
The caustic transfer prices are based on the market prices, so we use month, market, average market price, and that is the transfer price for the next coming month. That is done on a consistent basis for all the caustic transfer. That is market driven. We get the one month lag from the current spot prices. Yes, caustic prices are coming down, so that is reflecting in the lower cost of production on the fiber side. That is true.
Got it. On the pulp side?
Pulp side, see the highest pulp prices have gone to about $1,200 per sometime last year.
Mm-hmm.
Now they are holding at about $900. Our cost of pulp is at $900 now currently.
Correct. Was it the same level in Q4 also? From Q4 till now, the prices have not further fallen?
No, see, we have some long-term agreements where we follow previous quarters, price. Those we have now made some adjustments to reflect the current prices quicker than one month, one quarter lag. Currently, quarter four, I will say from now onwards, prices will reflect, one month lag.
Okay. Yeah. Second is on the Chemicals side. If you see on the Chemicals profitability, I think our EC was down close to INR 4.5 . Similar is the fall in our profitability if we do some reverse calculations. Just wanted to understand on the cost part. If you can just help us explain what was the average cost of power for us for the caustic business in Q4 and for FY 2023. And has that cost coming down because now coal cost has fallen? Even if you can just help us explain our external power cost, what we purchase from the grid.
Because just wanted to understand from you that because the realizations have fallen, how much of the cost savings we can work with going forward based on our cost of power metrics?
Maybe a couple of points, right? The biggest impact on profitability really has to do with the caustic price.
Yeah.
Earlier, Pawan, you mentioned that the international prices have dropped by a significant amount.
Yeah
Has the domestic prices, right?
Correct.
That is the main reason, actually, why the caustic profitability has dropped.
Mm.
Second most important reason it has dropped is actually lower demand in downstream clothing industries. A lot of downstream clothing industries are dependent on textiles, on agrochem, on aluminum refining, and all these industries are actually, you know, slowing down, which is resulting in a higher negative growth. These are actually the two most significant factors for drop in our caustic profitability. The power rate, to be very honest with you, is a marginal issue here. You know, our blended rate has not really changed much between the last several quarters, except the rate of, you know, maybe INR 7.3-INR 7.5 per kWh .
Okay.
I think it would be somewhat more detailed to get into, what is captive, what is not. Because, you know, one of our value proposition to the market is we are a pan-India player, right?
Yeah.
We are a key player in India that can supply caustic in the east, in the west, in the south. Each of these areas have their own coal costs, they have their own transport costs. To look at power in isolation doesn't really give the full picture, right? If you really want to understand our business, you have to understand that we serve caustic across multiple segments in all geographies. We are a leader, for example, in providing caustic to the mining segment in the east, right? Those are more important for us drivers. I would say power costs we manage. We continue to focus on renewables and changes in that is actually not a significant impact for us.
Got it. Thank you for answering the questions in detail, and I'll join the next question.
Thank you. The next question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Hello. Yeah, good morning. Good evening, sir. My first question is on your paint segment. With now 25% of the CapEx behind and, like, commodity cost generally coming down globally. Is this INR 10,000 crore of CapEx plan, which we have for paint, is this the firm CapEx, or is there some revision which could be possible in this number? A related question is on you have earlier in couple of calls back, you indicated your peak net debt to EBITDA at 2.7x for the overall business, including potential losses in early years for paint segment. With the significantly slower improvement in stand-alone business ongoing, is there a revised number which we can look at for peak net debt to EBITDA for ongoing CapEx?
Good afternoon, Prateek, this is Himanshu. There is no change in guidance as far as CapEx of paint business is concerned. We maintain the same numbers. I hand it over to Pavan.
This net debt to EBITDA, you know, you see, it will depend upon the actual CapEx spend and the EBITDA, how it performs over the quarters. This 2.7x or whatever number we have shared is not a static number. Yes, the, 31st, March 2023 is 0.4x is net debt to EBITDA, which of course, will move up as the CapEx spending goes up and we borrow for CapEx going forward.
... ballpark, it should ideally be higher from here, right? From 2.7x, because the profitability has, an ongoing business seems significantly more subdued and prolonged.
Right now, we can say, yes, today it looks like that, yes, it will go up, but we don't know after two quarters how the business will perform. If suppose VSF and our chemical businesses are back to normal levels, then it may not change significantly.
Right. On other segment question, VSF and Chemicals, both the segments have clearly seen decline in cost environment.
Yes.
VSF is also, as you said, improvement in pricing also and demand internationally. Both of these segments should have seen sort of a bottom profitability in this quarter or next, going forward. VSF seems like a bottom, but is the Chemicals profitability should also revert somewhere?
Again, see, I think that will depend upon how the global prices move, et cetera. Only. See, what is in our control is the cost. What we are doing is that, see, we are increasingly sourcing more and more renewable power, which is cheaper power. Wherein we are possible, we are enhancing our power capacity. In Reliance, we are enhancing our effective power plant capacity. On the cost front, we are doing various initiatives. Chlorine side, we are taking initiatives where we are increasing the chlorine integration level. All those things are there. One additional aspect is like phosphoric acid plant, which was not operational in the Q4, is now operational.
Possibly, yes, we can say that it is bottomed out, but everything again depends upon the global prices as well as the impact of the same in the Indian markets.
Jayant Dhobley, here I want to add further on what Pawan ji said. Look, you know, Chemicals is a portfolio, right? Example, if you look at quarter four, our specialty business, mainly based on epoxy resins and hardeners, actually doubled in profitability, year-over-year, right? You can hardly call a bottom there, right? Similarly, if you look within caustic, we also have a large chlorine derivative portfolio. As Pawan ji mentioned earlier, our phosphoric acid plant, we had to take a shutdown that has restarted. I think it would be somewhat difficult to predict the bottom or a top for the Chemicals business, given the portfolio impact that is there. I think what we can say is that demand continues to remain subdued broadly across the portfolio.
There are certain bright spots in it, maybe there are certain less bright spots in it. It is, it's not correct to call a bottom, and it's also not correct to say that, you know, it's going to dramatically drop through, right? That's also not the case.
In VSF's case, is there any update on anti-dumping duty review by government?
The DGTR had recommended imposing anti-dumping duty on import from Indonesia and China, but the finance ministry did not accept or they did not act on that, so that recommendation lapsed after 60 days period. As a matter of fact, as a result of that, there is no anti-dumping duty on VSF currently.
Okay. Basically, it's not moving forward, review is not moving forward. It's gone back to.
Immediately.
Where it was.
Yeah, they will not do it immediately, and we also do not have any new information to submit immediately. DGTR can only recommend, and then that is somewhat policy matter on the finance ministry, looks at the thing. The Ministry of Textiles has introduced quality standards for VSF imports. For the time being, like, until and unless they certify all the exporters, those exporters cannot bring VSF to India. That is kind of reducing the imports of VSF into India for the time being.
Okay, sir, this last question...
Sorry to interrupt, sir. Please join the queue back.
Okay. Thank you.
Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah, good evening, sir. Thank you for the opportunity. First question is on the volumes of both the divisions. In the past, we've operated both the units at more than 95% utilization. This year, both the units are in the 80%s. We are also having this expansion at the Chemicals division. Sir, from a volume growth and utilization point of view, any direction you would like to give for FY 2024?
For VSF, we are now operating at high nineties or mid-nineties. Mid-nineties, 93%-94% capacity utilization. We believe that we should be able to maintain at that level going forward. Again, the market remains very uncertain. Macro level uncertainty on energy price, Ukraine-Russia war, China-US issue, U.S. banking crisis. Everything has some bearing on the textile market in general. We are all subject to all those things. For the time being, we are operating at 90+ capacity level.
For me, to Chemicals business, we have reported 89%. By the way, I do believe that our utilization is still better than most of our peers. I think that is what we need to compare against. You mentioned about the new investments. I would just like to kind of remind you that the investments, for example, which are coming up in the next couple of quarters, frankly, are related to epoxy business in Vilayat, which is not only completely utilized, but actually, you know, making good profit. There are some ground field expansions coming, as we have reported, for example, on our Viluppuram site, which is in the south of India, which is a market that is undersupplied from a caustic perspective. A lot of caustic moves from west to east.
We don't really see utilization challenges due to demand side on caustic. Some of our investments actually are coming in our epoxy business. We do see that the end market for chlorine downstream industry needs to pick up, and it will pick up. Many of them supply to a lot of basic industries, such as dye intermediates, pharma, et cetera. We don't see significant downside risk to our capacity utilization.
Okay, got it. Sir, second question is with respect to CapEx. Now, this year also we spent somewhere around INR 2,000 odd crore in the existing VSF and Chemicals business. I mean, pending CapEx for, I mean, the brownfield and debottlenecking is left, which would be spent in FY 2024. VSF, are we considering any upstream expansion, brownfield or anything, given we are reaching high utilization for the plastic function?
The major part of VSF business CapEx was completed with the completion of our Vilayat expansion. Some investments are going on with the debottlenecking of our extra lyocell fiber capacity. That will be complete in the coming quarter, by the end of this quarter or mid of next quarter. That is not a big CapEx anyway. There are certain other environment related and cost improvement projects. As we are utilizing high capacity, we still will work to increase the productivity of our existing plants. We will try to produce certain assets harder. We are also planning some capacity addition for lyocell fiber plant, but still it is at the planning stage, but we will finalize our plan soon.
The number that I just mentioned in the, in the previous call is now that the main CapEx in the short term that is coming up is in fact our epoxy expansion in Vilayat. Next to that is our brownfield expansion for caustica to the Viluppuram site. Then there are some other smaller projects in chlorine derivatives, whether that's polyaluminum chloride or monochloroacetic acid and those types.
Sir, I missed the number. Did you share any number?
We are still working out for numbers of all the businesses for the current financial year. As I mentioned in the opening remarks, we will come back to you with the numbers once the overall number, CapEx number for the company level numbers are finalized.
Sir, just some clarification on the Paints division. With INR 7,500 approximately there, you said we'll accelerate. This pending CapEx will be spent over what period? Is it 2.5 years?
We are on track on the project. We will consistently maintain that, we'll be launching our services of, in, quarter four, and we are on track of building our six plants. Our initial guidance, we are on track on the initial guidance.
The plant, all the plant, CapEx will be done for Paints in next financial year, by next financial year.
By next financial year.
By FY 2025. The major CapEx will be done by end of FY 2025. The small leftover items may be carried forward in the next year.
2024.
2024 and 2025 will be the larger part will be completed.
Got it, sir. Thank you, and all the best.
Thank you. The next question is from line of Shyam Sundar Sriram from Franklin Templeton. Please go ahead.
Yeah. Hi, sir. Good evening. Hope I'm audible. Thanks for the opportunity.
Yeah, please. Go ahead.
Yes, sir. On my question is on paints. Given that Asian Paints is more strong in west and the south region, from a go-to-market approach, how do you plan to take it up market, region by region? Just any flavor that you can share. To that end, have you started building your network and dealer empowerment? As well, any comment on the progress would be helpful.
This is Rakshit. Let me take this answer. We have obviously studied all competition, including the market leader, and we have a clear view of what are our key tasks, whether it is east, west, north, and south. As you would understand, like we are giving updates on our CapEx progress, obviously the work in terms of meeting the trade, meeting the dealers, trying to understand, collecting data, is also all going on track in line with our proposed launch.
Thank you. The current participant is not in the queue. We'll move to the next participant. The question is from the line of Sarfraz Bhimani from JP Morgan. Please go ahead.
Hello. Yeah, am I audible?
Yeah, please, go ahead.
Yeah, sure, sir. My question was in continuation of the Paints discussion that we are having. First clarification I wanted is in terms of CapEx that you said. The plants CapEx will get done in FY 2025, but we are launching the product in FY 2024, fourth quarter of FY 2024. This means we will not have a pan-India or like, you know, a big entry per se? I mean, can you please give some clarity on this side?
We'll repeat what we've been saying consistently. We are in the process of building six plants, which is a large capacity, but. We will be starting our services around quarter four, and in a phased manner, we'll reach pan-India. But we will have sufficient capacity to reach pan-India as more and more plants get launched. We don't have to wait for all plants to be ready for a pan-India launch.
Okay, this pan-India launch would happen subsequently. Any target that you have in mind, sir, for this? Any particular region, as you were just saying, to the previous participant, that you already have all these discussions going on with dealer networks, et cetera. Any particular region that you're looking for first entrance?
No specific region. We are a pan-India player. Our ambition remains pan-India. It is whatever is realistically possible, we will move in a very systematic manner. There are no further guidance on specific geography at this stage.
Okay. Okay, those were my questions. Thank you so much.
Thank you. We have Shyam Sundar Sriram reconnected from Franklin Templeton. Please go ahead with your question.
Yeah. Hi, sir. Sorry, I got disconnected. Just continuing on that paint question, we understand in the initial couple of years, the paint business will need some amount of cash infusion. Now, I have two parts of the question. As per our internal estimates, when do you expect EBITDA breakeven and cash breakeven for this business? One part, can the paint business be cash breakeven by FY 2026 or 2 027? Is that a fair understanding? Secondly, the second part of the question, if you think of re-tensing the existing cash flows to the other businesses, how much maximum cash losses should we take in from this paint business from an out-of-bound perspective over a period of two years? If you can share some perspectives on these lines, that would be very helpful.
I think that's very myopic way of looking at our overall Paints business. I think you have to see the big picture, and I will take a minute to try to explain you the larger picture as the Paints business is concerned. Just like Grasim is a very strong player in the textile market, we are intending to become a strong player in the building materials market. I'm sure you must have seen building material market or our overall sector is the second largest sector, which constitutes about 9% GDP of the country. On overall basis, it's about $300 billion, and currently, Paints is about $9 billion in size.
The building material industry is growing at about, it's doubling at about seven to eight years time period, Paints is growing almost at 1.6x the building material industry. With multiple changes in trends on Paint, our expectation is the market will continue to grow, there is a sufficient gap in the market for a strong national player, which can consistently supply material as well as make sure its presence is not only in urban but in rural markets. We are very optimistic of our results, we are not giving any guidance as regards to specific cash losses. We believe that the market is ripe enough for a second player and large enough to be able to accommodate the capacity that we're building.
Sure, essentially, you are saying I mean, we would be breakeven, EBITDA breakeven quite early on than I was saying. I mean, that is what it comes out, because the market is large enough for another player, it means that we would not have cash, much cash losses, that is on my mind. I think, more, breakeven could be much more nearer than what I would think at this point of time, correct? Is that, is that a fair understanding?
I'll repeat what we have said consistently. Our team is a profitable number two player. We will make every attempt to meet our objectives and missions that we have started to build our business on.
Thank you very much, sir. Best wishes on the new initiatives. Thank you. Thank you.
Thank you. The next question is from the line of Mudit Agarwal from Motilal Oswal Financial Services. Please go ahead.
Hello. Good evening, sir. I'm audible?
Yeah, yeah. Yes, please go ahead.
Just one question regarding the B2B e-commerce business. Like we have about to launch full-fledged business in Q2 FY 2024. Can you throw some light, like what is the current status, and what kind of revenue and profitability we are expecting for FY 2024? Just a broad-based number, sir.
In regards to plan is, stated in the opening remarks, we will launch the full scale platform in Q2 of this financial year. Okay? It will be in phases. In the sense, in the first phase, we will cover two states, which is MP and Maharashtra. Based on the experience, we will scale it up, and then it will go for a pan-India launch in a phased manner. In regards to the profitability, as we have initially shared, it is not going to be profitable in the year one.
I mean, it is a gestating period for the business, but the opportunity is very large in the sense the total market for building material is more than INR 100 billion. The digital share today is less than 4%. Large opportunity. We have the kind of network available or the required strategy for the market to tap through this B2B e-commerce stream.
Okay. Thank you, sir. Just one bookkeeping question. Can you share the BFSI EBITDA number absolute for the quarter?
BFSI EBITDA, we I don't think we give the BFSI, VSF separate numbers. We for Visco business total number we have already shared in our.
Yes, yes. The, that's, full VSF number is there, but earlier we used to say.
I will repeat that VSF, which was negative EBITDA in Q3, is now positive EBITDA in Q4.
Okay. Okay. Thank you, sir. That's it from my side.
Thank you. The next question is on the line of Navin Sahadeo from ICICI Securities. Please go ahead.
Yeah, thank you for the repeat opportunity. Just two quick questions. One is on the working capital side, see a huge increase in inventories, not so much in receivables, not so much in payables. Is it a temporary thing, or is it anything specific more got to do with increase in raw material prices, or what could be the reason for the almost INR 500 crores rupee increase, sir?
Q4, there has been some demand slowdown, as we have said earlier also. The inventory built up is a temporary situation. We hope that this should be on back to normal in Q1 or Q2.
Understood. It's largely in finished goods inventory, which is just temporary.
Yeah, temporary.
Second, I'm sorry, there is so much more interest in paint, so I couldn't help but ask this. Is it fair to assume that by Q4 we'll start seeing the buzz, be it advertisements, be it, like, you know, to make it more sound like a large nationwide player is coming? Is it fair to say that by Q4 we'll see a buzz around that, or it could be before that as well? Thank you so much.
You know, like we said, that we will start rolling out our products in the market from Q4, and we will do what it takes at the right time in terms of creating the buzz. Obviously, our intent is to create a lot of pull in the market, and whatever it takes from, you know, all angles of sales and marketing will be done. Q4, you know, we will just start the products in Q4, so we will have to time our activities accordingly.
Sure. Sure. Look forward to all of that buzz. Thank you so much.
Thank you. The next question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Yeah, thanks for the opportunity again. Just a couple of follow-up questions. Firstly, on B2B e-commerce, we are looking to have a website, launched by Q2 2024, which will serve to customers in Maharashtra and MP. Is that correct?
The website will be a universal website. It's not limited to the MP and Maharashtra, but our services we will start in phases. In the Q2 of this year, we will start with MP and Maharashtra.
Hello, universal website, as in, you are both vendor and customer, I mean, both sides, of that platform?
Yeah. We will have the
Will be-
I mean, basically, the vendors will be available, whoever wants the material will be able to get whatever the product categories we are offering. They will get the, all the details. The customer segment, as we have told earlier, will be the MSME contractors and the retailers.
MSME customers and retailers would largely be located in Maharashtra and MP to start with, and vendors, from where basically the sellers could be anywhere in the country?
Yes. Sellers will be and whoever can service them will be available on the platform.
When you say that they have already started to launch, like, customer support, logistics and lending, in these markets?
We have almost closed the suppliers kind of contracts in some categories. The service providers, like logistics also, that is also going on. The final agreements will be reached somewhere in this quarter.
Okay. It will also consume your, like, CapEx or working capital in a way.
CapEx is not very large amount. It will be, of course, there is a CapEx going on right now. We have partnered with six technology partners already on board. They are executing the required technological solutions for the platform. There will be CapEx, but it is not going to be. The e-commerce business is not a CapEx-oriented business, CapEx-intensive business. We will have the inventories only for the part where the servicing is kind of very, I mean, critical situation. Otherwise, inventories will be with the sellers only.
That is it.
Okay.
Any other question?
Yeah. Just one question on VSF demand, and exit of FY 2024. FY 2023, you said it has been stronger than the quarter average. Would it be possible to quantify the same? I mean, your, like, last quarter was like a quarterly loss in VSF segment. Did it turn, like, positive only in March month, that way?
Not that-
Yeah.
Every month of the quarter, there is a lot of seasonal seasonality involved in VSF business, in the, in terms of demand also. Like Chinese New Year and the seasons and the spring, all those things play a very important role. Demand was good in the fourth quarter, and currently demand is little bit weaker but not too much difference. Not a big deal.
Our volumes have actually increased more in domestic segment, as our domestic mix have increased to 91%.
Domestic, but from the export also.
Okay. Thank you, sir. These are my questions.
Thank you. Next question is on the line of Rajesh Gajra, Informist Media . Please go ahead.
Yeah. Hi, sir. Can you please share the EBITDA margin, the total standalone EBITDA margin for the March quarter as well as the year ago quarter and the Q4? Thank you.
EBITDA margin for the March quarter. Just a minute. For this quarter, Q4 of this year is 0.4% at the overall company level.
I'm sorry, I did not catch that clearly. What is the number?
Six point four. Six point four percent.
Okay. Okay, okay, 6.4%.
Yeah.
Got it. Year-ago quarter, and the year-ago, for the whole year?
Year ago.
No, no, no, not the whole year. The March quarter of 2022.
Yeah, yeah, just a minute. hello?
Yeah.
For FY 2022, 2023 Q4, that is the quarter gone by.
Mm-hmm. Okay.
Okay. EBITDA margin, total EBITDA margin is 8%, and for-
Okay.
Q4 last year was 13%.
Q, Q4, 13%.
Yeah.
Okay. Okay. Thank you very much.
Thank you. As there are no further questions, on behalf of Grasim Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.