Good afternoon to all the participants. Now year 2020 was a dramatic year with businesses witnessing a sharp dip followed by an equally sharp recovery, which was led by monetary and fiscal stimulus coupled with the rebound in consumer confidence, and this is also reflected in our results. But before I get into the results, I would like to highlight certain significant developments that we have already announced. GratSim is on its path of a strategic transformation. In the last few quarters, we announced Strategic decisions like sale of fertilizer business, partnership with Luprisol and entry into the paints business.
We are very excited as we potentially imbibe more growth, which makes us positive about the future direction of the company. Let me briefly update you about the progress on these initiatives. On fertilizer, we have received CCI approval and NOC from stock exchanges. We have filed our scheme with NCLT and we are well within the timeline of consummating the transaction that we indicated earlier. On Paints, For the benefits of volumes, I'll reiterate what we said in the previous call that our foray into Paints is a strategic portfolio choice, Entry into this B2C business will provide scale and growth to the existing portfolio of the company and at the same time reduced cyclicality.
Within Paints, decorative paints will be our focus area. We've committed to an initial CapEx amount of INR 5,000 crores over a 3 year period. We are in the process of seeking shareholder approval and key steps in executing our strategic plan in paints will commence thereafter. We will share updates with you periodically post completion of materials milestones. As of now, I would direct you to refer to the transcript of our previous investor call for further details as there's no further update from
that point of call.
On our CapEx of Current businesses, all our CapEx are progressing well and we are scheduled to meet the commissioning timeline of BASF project in two phases in quarter 2 and quarter 3 of FY 2020. For chemicals, all the 3 projects will commence by quarter 1 FY 2020 In terms of operational performance, Q3 FY 2021 has been a strong quarter with all our key businesses reporting robust, Operational performance and financial performance and we have simultaneously deleveraged our balance sheet. At consolidated level, the company reported best ever EBITDA and PAC numbers. Likewise, our standalone financial performance demonstrated a strong rebound. Our VSF plants operated at 100% capacity utilization throughout Q3 and the utilization of Via 5 plants touched 89% in December 2020 and for the quarter it stood at 77%.
The BSF demand in India recovered to pre COVID levels with the share of domestic sales in the overall sales mix expanding to 91% in quarter 3 from 82% in quarter 2. The share of value added products in our overall sales mix improved to 22% in quarter 3 from 15% in quarter 2. The uptick in the BSF price has been driven by strong revival in domestic demand, primarily in the Tier 2 and 3 towns and rural areas supported by festive and wedding seasons. The Chinese VSF realizations maintained an upward trend and averaged RMB 10,500 in quarter 3, up 23% sequentially. And in Jan, the prices have further climbed to about $13,800 level.
Favorable inter fiber dynamics with widening gap between cotton and VSF led to production sorry, reduction in inventory levels and higher operating rates. The BFS plant inventory in China moderated from 23 days in September to about 10 days in January. The viscose business reported best ever financial performance in the last too many quarters with revenue of INR 2,145 crores and EBITDA of INR 4.82 crores in quarter 3. The viscose EBITDA witnessed a significant 89% increase Y o Y. For the VFY business within the viscose segment, the revenue was INR 4.36 crores and EBITDA was INR 97 crores in quarter 3.
The chlor alkali capacity utilization touched 89% in quarter 3, a 9% improvement in utilization rate sequentially. Revenue and EBITDA of Chemicals business touched the pre COVID levels with pickup in sales volume and supported further supported by lower input costs, especially in Power. The continued weakness and equal realization impacted the EBITDA. The caustic soda prices in CFR terms in Asia, However, we recovered a tad from the lows of $2.39 per metric ton to about $2.70 per metric ton. The demand for chlorine WAP value added products witnessed some weakness from the Health and Hygiene segment along with some softness in the realization.
But at the same time in the Chemicals segment, the Epoxy business witnessed a strong demand from forest products from auto and consumer durables. On the standalone basis, Excluding the discontinued operations of fertilizer as we have signed the agreement out there, Our revenues and EBITDA for quarter 3 stood at INR 3,672 crores and INR 709 crores, respectively. EBITDA reported an improvement of 53% YOY. Our path for the quarter nearly doubled, Y o Y basis to INR 3.59 crore in quarter 3. The revenue and EBITDA from the discontinued operations of fertilizer for Q3 at stood at INR 597 crore.
So if you had Theoretically added INR 57 crores of fertilizer EBITDA to the standalone EBITDA, our EBITDA would have been at INR 766 Corrall. But the accounts is all adjusted for fertilizer being excluded line by line and only included before at as a specific item. Owing to lower CapEx and better cost Management, we have been able to significantly delever our balance sheet during the 9 month period at both consolidated and standalone level. The consolidated net debt stands reduced to 12,000 of INR 7.67 crores, a 39% reduction from March levels. At a standalone basis, the net debt reduced from INR 2,975 crores in March to INR 2,093 crores in December.
And this will get further strengthened with the proceeds coming from the fertilizer sale. Our focus on sustainability related initiatives are getting recognized at the global level. We are committed to improve our non financial reporting standards further going ahead. In December 2020, GratSim released its maiden integrated report. The purpose of embracing integrated reporting is to make our stakeholders aware of how All six capitals come together at Grasim to create greater value.
Recently, Grasim won Investor Relations award being organized by Investor Relations Society in collaboration with BSE and KPMG under the category ESG disclosures. Our BASF business won the Global Golden Peacock Award for Sustainability 2020. Our Dow Jones Sustainability Index score also witnessed with an improvement in calendar year 2020. We moved 6 ranks to 11th position in our sector. In the latest WBCST report, Grasim Industries featured at the top among the list of companies procuring renewable power through corporate renewable PPAs in India.
Viscose's business sustainability achievement has been showcased in a case study, Verla Cellular Spearheading Sustainable Fashion, which is the title published by world's renowned Ivy Publisher and it is now available on HBS website. Finally, in terms of outlook, we expect strong tailwinds for viscose business with improved demand outlook, although various input costs have also started to firm up. The demand outlook for chlor alkali and epoxy remains positive for the quarter. The ecu realization continued to remain weak, driven by softness in the global caustic soda prices. Our inherent strength lies in our operational excellence, financial progress, our resilient growth and our customer centricity.
And if you see the cover of our Presentation for this quarter, as a strong moderate, we combined the synergy of a conglomerate and energy of focused businesses. So back to you for Q and A.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer year. Year. Our first question is from the line of Gunjan Pratyani from Morgan Stanley. Please go ahead.
Yes, hi. That's Gunjan from JPMorgan. I just wanted to clarify on the CapEx thing. I see that there is a balance of about 1,000 crores yet to be That is all for Q4 we'll be spending. Is that understanding correct?
Yes. So, Gunjan, that's why it's INR 18 100 crores or INR 1825 was what was approved by the Board. And for 9 months Q1, we didn't spend any 9 months, we spent approximately INR 800 growth. So balance remaining approved is $10.25 There is a high likelihood that some of this So it will spill over to quarter 1 of next year. So it's quite possible that we May not be able to spend the entire 1,000, but there might be some spillover to quarter 1.
And have we put have we Do we have an assessment of how much we are looking to spend next year? I mean, keeping the pain for it aside for the core VSF and the Caustic business?
So this time of the year, as some of you may know, We go through our CapEx planning cycle. So by next quarter, We should be able to give you guidance of what will be the budget for the year that will be approved by the Board. So as of now, it's under planning and then we'll take it to the Board and get it approved. And that should include all the businesses, including paints.
Okay. But is it fair to assume that the magnitude of INR 1800 crores, a large part of CapEx in the core business is being done now incrementally. A dominant part of CapEx is going to be on the newer venture. And if I mean, just on that line only, if you can also Tell us the consummation of this deal fertilizer, when do we expect the money to come in?
Sure. So on the first part, Gunjan, my unfortunately, at this stage, we are in the planning stage. So For me to give any guidance on the CapEx will be very difficult as we are collecting all the figures and then we will internally Go through them and then take it to the Board and there may be changes there as well. So I won't be able to give you that guidance. The major CapEx of VELAYAD, of course, from VSF perspective will be done.
So there is no major CapEx in VSF after that. In Chemicals, there are multiple projects, as you know, that goes on unlike which is one large project that we were putting up. So in Chemicals, it's always difficult to give the CapEx such CapEx guidance. On the fertilizer sale, when we announced the transaction, we gave a guidance of about 9 months. So somewhere around June, July is what we expect it should get over.
And we are expecting the time line to be around that looking at the development of what has happened with the regulatory approvals. So as of now, fingers crossed, We are hoping that June we should be able to culminate the transaction and therefore we will get our funds as well.
Okay. The second question I had was on the industry, VSF industry now. Clearly, very, very sharp pricing improvement after a long time. I just wanted to understand how much of it is also the supply, which had gone off the market. I mean, Is there any risk that some of the capacities which were taken out of the market start to come back given The demand environment is improving.
I mean, just general sense on how should we think about the whole demand supply over the next 12, 18 months?
William, if you look at the numbers, in fact, what you're saying has already happened. The operation rate in China, which used to be We said the low of 65% in Q2 is now already at 80%. 80%, 81% is a healthy utilization rate. So even at that operation rate, the inventory is coming down consistently. So what this is telling you is the demand is far outstripping the of supply.
And the reason for that being twofold. 1 is the viscose demand per se has gone up and second, The cotton yarn prices shot up significantly globally and everywhere else. So there is a shift from cotton to viscose. And China, as you know, The news about 8,500,000 tonnes of cotton and produced only 6,000,000 tonnes of cotton. And then they import about 2,200,000 tonnes of cotton yarn.
We are under huge pressure because of the growing size of yarn to use more and more discourse. So and that is what is driving the entire pricing So the prices are moving exponentially. Like if you like, Ashish mentioned, it was It is 1.885 as we speak in China in January. In December end, it was 1.45 that kind of a number. So I think we are now coming to almost pre COVID level of prices and the demand because inventory has come down to 10, 11 days, which is historic Low.
And this is something we have a healthy inventory. So I think this is more demand driven than supply constraint.
And there is no big capacity Expected to commission on
Yes. There's nothing coming. I think 200,000, 300,000 tonnes that is you're routinely bottlenecking people to the biggest one to come on stream is our capacity only, which I mentioned to you is only India for India.
Got it. Okay. Got it. I'll join back with you. Thank you so much.
Thank you. Our next question is from the line of Sumangal Navetia from Kotak Securities. Please go ahead.
Yes, thanks for the opportunity and congratulations on very strong quarter. First question is on the leisure business. So one is you said $1.8 versus $1.4 price, so that is the Jan and Seth, just wanted to confirm that. And the second is On the you see the cost is also catching up and we benefit out of the lag. So if we factor in the spot prices and the spot cost, What sort of margin change or a spread change we will see at least directionally from what we have seen in 3Q of around INR 32 per kg.
If you can give some sense on that, it will be very helpful.
Sure, I think specific guidance on spread, we will not be able to give. But we can give you directionally the pulp price and how it has actually gone up in line with VSF price. So that, Dhilif can give you some idea
on. Keith, you have seen the quarter three results. What you have seen, the pulp It hasn't started running up the way so most of the increase happened after the quarter 3. So pulp today as we speak is almost at 8.90 Dollars per tonne. Now pulp always follows the viscose.
So unless viscose can pay, pulp cannot go up. So So while you are right, the input prices are going up, but at quarter 4, we'll also see a rising price in risk. So to my mind, Delta will still remain favorable. Understood. Understood.
And second, with respect to the Chemical business, which is still struggling, so is it possible to share some more outlook in Asia, how we see FY 'twenty two is shaping up. Have we anticipated close to the bottom as far as cycle is concerned and either should move sideways or up in the coming quarters, especially given there's so much of capacity addition happening and the pipeline is also quite filled up. So let me just say that The last couple of months what we've been seeing is more lateral movement on the caustic prices and marginally goes up, marginally comes down. So until this significant demand supply scenario changes, I think we're kind of at the bottom of the cycle. Now as you put it very correctly that there is a substantial demand supply gap at this point of time.
So we really don't see and that even exists today. So I think the picture would be either it will do a lateral movement or it will do a marginal upward movement. I don't really see it going down subsequently until and unless the demand side significantly changes. Understood. This is very helpful.
Thanks and all the best.
Thank you. We'll take our next question from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi, thanks for taking my question. So firstly, on Chemicals, any outlook on what's happening on the duties which got expired? Is it going to be reinstated? Any color on that? And From what you talked about that it appears that it has bottomed out on margins.
What exactly one should try to understand that Beyond this contribution margin, it will not make sense to increase supply automatically, the rebalancing of demand supply will happen. So let's put it this way that we're still trying to assess Yes, because now if we have to go back towards the Korea, China, which expired the sunset review, we have to go through the entire process of figuring out does it Again, lead to injury margin when they were not supplying earlier in the past. So that's a long run process, which will take its own at a time. I think We are working towards it to see what they do next on that. To your point on the margin front, I think the picture is going to be as in more and more Capacity utilization increases in the industry also as it is today has gone above 80% capacity utilization.
I think the margins are expected to only increase because there is enough demand in the market both on the caustic side as well as the chlorine lab side Plus chlorine consumption per se. So while it's a very delicately poised position at this point of time, Any demand decrease could have marginal deterioration of margins and any upside coming could lead to an increase in margin. So It's fairly fine tuned at this point of time. I won't get into margin guidance at this point of time because we're still in the process of ascertaining what we'll do for next year. Just to add, globally as chemicals, I think there is a huge rebound.
I think majority of chemicals overall have recovered. We expect coming year to be significantly on a bullish side. And Jen said that demand is looking strong. I think we will still see that we are at the bottom end of the cycle and we will continue to have a similar level of kind of lower level pricing for the coming few months. But one thing you need to know is there has not been any significant capacity increase anywhere else in the world.
Predominant capacity increases have been in India only. So as Jain said, as and when the Capacity starts to be utilized further. We should see both from a global perspective as well as an India perspective, we will start to see a rebound. So I think we are waiting. That's just like we are waiting for the coming months.
Sure. Secondly, on VSF, given that the margins are so lucrative, Prices have gone up so much. Do you think that there can be new supply which can come in? And even if it happens, How long does it take for the new supplier to really come in and get commission and start producing output in the market? If you're talking of looking for new plant, it is anywhere between 24 to 30 more than like 30 months to 36 months, 2.5 to 3 years.
Okay. And lastly, a question on capital allocation for Ashish. Work of the organic CapEx will get funded by internal approvals given the cycle is turned. Maybe we'll lever up the balance sheet to fund the investments in the paint business. From a medium term 2 to 3 year perspective, are there any potential investments over and above the paints which one should keep in mind either from a group company's point of view or any other Organic investments?
Thank you.
Yes. So see what we see Today, as we stand, there is capital demand from viscose continuing. There is chemicals. And when I say chemicals, it's chemicals and some of the other sectors like insulator and VFI. So our standalone businesses, paints will be another one.
Now given all the capital demands from all these, okay. It is substantial enough for RASM to take care from its internal accruals and we'll of course take that to meet the requirement. So it's highly unlikely that there will be capital or Investments into any of the subsidiaries or JVs or associates or anything of that sort. Except of course solar as we increase the capacity, the equity infusion is done by JASM and equity is always a smaller portion out there, which generally funded through what we went out there. So that would be the broad capital allocation plan for Gresham.
So Ashish, does it also include the outlook for Financial Services like from a more requirement from a subsidiary or joint venture when you mentioned?
Yes, as of now, as we stand Financial Services, we've already infused to Equity a year back. So we don't anticipate a requirement to come for some time. But Financial Services needs to be treated differently than other associate companies, etcetera, because it's a growing entity, it's delivering double digit growth in its financials. And we would like to maintain consolidating stake out there. So if it's a big dilution event out there and if you want to maintain the stake so that it is value accretive for Grasim shareholders as well.
We may infuse capital there. But that's a very, Let me put it a framework that I'm talking about, okay. There is absolutely no plan and there has been no proposal from Financial Services also that has come to us for any capital infusion.
Sure. Thank you.
Thank you. We'll take our next question from the line of Amit Muraka from Ooyala Oswal. Please go ahead.
Yes, hi, thanks. Good afternoon. So I just wanted to check on the expansions like the caustic 300 ktpa and Even the VSF about 200, 220 kpts. What is the expected commissioning now of these expansions? On the caustic side, like Ashish put it, we expect by the end of quarter 1 of next financial year, A large portion of the caustic capacity would be more or less up.
Okay. And how will be the ramp up of the sales? So it will be a slow ramp up. You can make any manufacturing process. I think by the time it reaches the industry level capacity utilization, it will take the balanced part of the year.
So end of FY 2022, you're saying that it will be your normal utilization level? Yes, yes, yes, yes, yes. And also the VSF? VSF, the first line will come in quarter 2 and the second will come in quarter 3. And normally, it takes about 3 to 4 months for a full ramp up.
So the reason the demand is there. It's all up to us to how fast we stabilize the plant. So based on the past experience, Should be doable in 3 to 4 months' time. So when taking the VSF ramp up, will the export share go off? Or you As we speak, the domestic demand is really very high.
We are not able to service all the demand. That's why we have to cut exports. So keeping the healthy level of exports that you have always been keeping, I think we should be able to sell quite a bit of it in domestic market. As we speak, there's a lot of yarn still gets imported to India, which is slowly coming down. And that demand will come through with the fiber.
So we expect a very healthy demand for the fiber at least in FY 2022. And just one more question on China, like With 2 years back when Saperi had done that big expansion, what I understand that there was a plan to expand that further actually later. So have you heard of any development on that second phase of expansion there? No, I think the maybe your information, it's all hearsay, it's not acting on the Piece of paper. But the announcement they have made about a lyocell.
Suddenly, Safiri is saying that they will put up a 500,000 tonnes lyocell plant in China. If you look at the number, lending, which has started last year 30 years back, is right now at about 250,000 tonnes per annum. So he is saying I'll become double the size of Lending in next 3 to 4 in next 4 to 5 years. So to my mind, their focus right now is a lyocell plant in China. And they are trying to debottleneck like all of our existing plants.
That everybody will do. When the market goes well, everyone starts to debottleneck their pipelines. So a few tonnes you can always get from existing pipelines existing production line. Okay, sure. Thank you very much.
Thank you. We'll take our next question from the line of Nirav Jamodia from Anvil Research. Please go ahead.
Good afternoon, sir. Sir, I have a 2 part question. So one is on the chlorine VAPS, which you mentioned in the presentation that The EBITDA has improved by almost 45% on a y o y basis. But if you can give some sense in terms of how it has performed on a on Q basis given the weakness in the realizations that would be helpful. And if you can give some sense in terms of even the epoxy side, so how it has Performed on a Q on Q basis in terms of some percentages, that would be helpful.
So this is the first question, sir.
Jayant, would you like to give some direction of that first?
Yes. So on the See, let me put it this way, the chlorine consumption in India at the moment is fairly robust. I think that's a big positive for us. The chlorine demand is now growing at a fairly rapid clip. It is actually growing faster than the cost of demand, which again gives it a positive tick mark going forward.
Now in the early part of the pandemic year, year. You had a huge surge of requirement of VAPS, particularly on the hygiene and sanitation part, which gave a very robust EBITDA growth To be wrapped products in that segment of which we are the leaders. Now as the pandemic has slowly, slowly got into control, The demand for those apps have now come back to the earlier levels, which is business as usual and obviously has led to certain softening of prices, Although still maintaining a positive EBITDA. So our VAPS EBITDA is very healthy. I will not get into numbers on that particular front.
And we expect that they will continue to remain healthy as we go forward Because there is an intrinsic behavior change of sanitation which is coming to the country and the world's first day. Okay. So if I would tick mark, I would say chlorine demand great, doing very well, doing at a good clip. VAP on hygiene, sanitation have upped their base level and are doing well. And the balance comes with seasonal lapse, particularly as the rainfall comes, so the water sanitation demand goes up, as the aquaculture comes, then those product goes up.
So I think we are fairly well placed on our website to continuously see a robust growth, Both on the volume side and a healthy EBITDA. Okay. And sir, on epoxy, like last quarter, we have given some indications in terms of our performance, Some quantitative numbers also. But even if you can't describe the quantitative numbers, can you give some percentage growth in EBITDA or something like that, that would be helpful?
So see, I think epoxy business, first of all, in the last quarter was still on a ramp up phase, okay, coming out of COVID, etcetera. But in quarter 3, you enjoyed the benefit of volume and that came from auto sector as well as consumer sector. So there were actually 3 advantages really that Epoxy business had. One is the volume pickup that happened in quarter 3. 2nd, the realization also went up in Epoxy.
And the third is that Epoxy is in a way a pass through business, okay. So the raw material that they import, most of it, okay, it's mainly a pass through to the customer. So it has to be looked at from conversion basis. So if you make volume, you make that contribution per ton. But there is some advantage that we got in Epoxy due to the lag again of raw material of prices.
So we still had the inventory of some older inventory of ECH and BPA, which is at lower cost, which helped us with that small timing gap benefit that we had out here. So Epoxy has actually performed much better than Q2 as well as on Y o Y basis. And Hopefully, it will continue to do so in this quarter as well.
Okay. So second is on a slightly strategic one. So In terms of if we see our sales of VSF, it's like around 1,000,000 tonnes as we have mentioned in the presentation. So if we make some breakups in terms of value added as well as the gray value added, we have sold almost close to 31, 32,000 tonnes. So as per what We have been trying to calculate it based on some record numbers.
It seems like out of our broad category of value added products like Model, XL, flame retardant, optite, It seems that less premium products as compared to gray is sold more in this quarter. So if you can give some sense in terms of how this Mix moves in this quarter as well as on a yearly basis, if you can give some sense on that.
You want me to respond? Yes, Shodhil, please.
I think in a way you are right. So there are 4 value add products we have. Then we had Modal. Yes. We have XL.
Yes. And we have got the recent one, Levi Okay. Now in a way, the doped diet, which goes in uniforms and office wear. Thank you. That's all you all know because of the COVID and the work from home, that segment is totally dead because the schools are Close, the children are not going to the schools.
So that segment is where the consumption has come down and then that's a large consumption segment. Correct. If you look at Modal is a high delta, high value added product, but low volume. Correct. Dovdeit is a high volume, but low value added product.
So you may make 20.25 but the volume is 200 tonnes per day. Okay. So the multiplier is much bigger. Correct. Now that is now reviving.
As we speak now, Now after the opening, people have started going out. What has been told now with the schools opening around the corner, the country will need 4 crore uniforms. Okay. We're going to be sure certain demand for the globe light fiber for the uniform. Okay.
So we believe that is coming back. Okay. Nava has done very well. Nava has done exceedingly well. It has grown back where we are going.
Nava Eco is a great success Yesterday, I've told you again and again because the first time we have got a premium on our commodity risk costs because of the eco pending. Okay. So that's compensating to a large extent the dopedite loss. Otherwise, I would have had a much bigger loss. Okay.
4th form was a large sale, which got impacted in China because Once the Sateri announced this plan for 500 tons per day 500,000 tons per year plan, and he said I will bring down the price, the same story. So the Lyocell pride and demand suffered in China. On that, it was more emotional response to Sartheri's announcement. Got it. We realize that it doesn't happen like this.
It takes years to build those kind of volumes. So you are recovering back. Correct. So we are now seeing in Q4 quite a good uptick in higher sales demand. So I think the number what you have computed is an upward trend.
So as Ashish said 13% went to 22%, went to go much further up in Q4. Absolutely. So a related question to this. So It is safe to assume that we sell more of Modal XL in the domestic market more than in the export market? Because Modal and Exane is largely export markets.
Domestic is doing it now. We have grown very well in last 3 to 4 months. I tried to shift lot of Domestic users were reporting to our product. Correct. And cotton shifting from cotton to lyocell because the price today is very favorable.
Correct. We have done that role. Dope that is a largely India driven. That we we are the biggest in the world. Okay.
Okay. That's how it is. So okay. And sir, in terms of our competition also, if you see like our biggest competitor is having some 2, like 80,000 tons of model capacity, 2, like 60,000 tons of loyalty Yes, sir. 200,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 But I think we can make good amount of what are now.
So, sir, when they try to penetrate in Indian market and when we try to fight against them, so what are parameters So like one is like if we try to rate them in terms of, let's say, 1st is the distribution network, 1 is the post Same services which we provide to the customers. 3rd is the quality and 4th is the price. So which all parameters we would like or we actually compete with them in the domestic market when they come and sell their When they come and sell their products into India. See specialty, there are different ballgame. There are only 3 parameters there.
That's it. Foremost is a qualifying parameter, which is a nomination. Okay. Because most of the specialty goes into brands. Okay.
The brand nominate that I want of this they certify fabric. Okay. Because they do trials, they make garments because they don't want the customer to have a different experience. Okay. So every time you make a speech sound like commodity risk, you can buy from X, Y, Z, but a specialty modal, even if my quality may be as good as my competition.
Yes. But that customer has to first use my model, make the product, try with the customer, get the feedback and then nominate me. Okay. So the whole effort, while it takes time is the nomination cycle, which can be anywhere from 6 months to 2 years. Okay.
So that is where the biggest differentiator. So because lending, The competition had a head start. They had more nominations because they're European customers. We are getting those nominations and as we get the nomination, our volume keeps going. That's the biggest change.
Once the nomination is there, quality is a qualifying condition, it's all same. So they're all the same quality. Okay. The price becomes number 2. Even if I offer a lower price, if there is a combination, nobody will buy it.
So these are the parameters. Okay, okay. And for sale services also a parameter because probably you would have more distribution network in India than the competitor and that also helps. Yes, these are by nature niche products. Less low volume, high price.
So certainly it's more important for a product like viscose. Okay. The healthy I mean you can't default on the Customer orders, you have to supply in time, but it's not that key element. Okay, okay. Thanks very much.
Very important element for the March fiscal, yesterday we score over. And you're a local producer, you're supplying local customers, you give just in time, you give technical service, you help them troubleshoot their plants, you help them improve their productivity. It's a big differentiator for the month, of course. Okay, okay. Thanks a lot, sir.
Thanks for all the explanations. Very helpful. I'll do very best, sir.
Thank you. Our next question is from the line of Sanjeet Kumar Singh from Systematic Shares. Please go ahead.
Thanks for the opportunity, sir. So my question is related to the previous question. So, somewhat, what I'm saying is that in BASF, Our real life cycle growth is only 9% QoQ. When in international markets, the prices are up by 20%. So is it because of Higher payer of sales in the domestic market?
Or can we expect higher prices increases going forward?
I don't know. Would you like to
No, actually, see, this is little bit competitive sensitive permission to talk about how much increase is expected in the domestic prices from now. I think The it's suffice to say that there has been increase in the global prices. And in line with that, India prices have also gone up. It may not have gone up as much as the international prices. We have to take care one of our ingredients and inherent strength that I talked about Earlier is our customer centricity.
We have to discuss and make sure that we react to price increases in a calibrated way along with the customer. So, Dilip, if you want to add anything to
I think you're rightly said because I think we have been saying this on the time and again on the call, we do not blindly follow the global prices. It's our We believe that the health of the value chain is very important, domestic value chain. You can take a price increase as long as the Dramatic value chain, the reaver in the system, the spinner in the system can withstand that. So we are we always the global price of the venture is a base. But what you actually do is also to make sure that there is a health of the value chain is maintained.
So what was happening, there's a lot of yarn imports happening into the country in quarter 3 and quarter 2. So to make sure that the import don't happen and our spinners get the opportunity to service that market, We had we decided on the price increase in sync with that principle. So it's a It will follow, but it follows in a calibrated manner.
Yes. Okay,
sir. Got it. Thanks a lot.
Thank you, Sandeep.
Because you see here 2, the price and volume. You can get one and you just the other doesn't help make sense. So you must have both the multipliers with you. Right, right, right. Thanks.
Thank you. Our next question is from the line of Pratik Kumar from Antique Stock Broking. Please go ahead.
Hi, good evening. Thanks for the opportunity.
My first question is on CapEx. So I
mean couple of years back, we announced the start CapEx Plan of INR 7,500 crores or INR 7,800 crores which we used to mention in our presentation. So how much of that Like in FY 2020 2021, I believe around 4,700 CapEx would have been done
to another 3,000 left. And are there
significant savings which we have done on that number which we gave like a couple of years
back? No, so see,
I think when we gave a number of 7,500, okay, it was multiple projects. And since then, the estimates have undergone change. Broadly, it remains the same, but it's The estimate can be few dollars here and there, okay. But broadly, my guidance to you on CapEx would be to actually focus on what we give in the next still quarter rather than trying to figure out through the balance figure that is left. Though my guess is that the number that may come out We'll be around the balance figure over next 2 years, right?
So that's what it should come out. That's been the If you see of Klasim where the numbers of CapEx tends to be around $2,000,000 $2,500,000 somewhere around that range. But very, very like I told, I think in the earlier question as well, it's best to wait until the Plan is approved by the Board.
Okay. And secondly, on fixed
Of course, we had like several of savings on fixed costs in Q2.
So have that all like And
in some of those which are not sustainable, have they all come back or some of them can still come back in Q4?
So I think our approach to fixed Cost was different. We attacked fixed costs to actually have sustainable savings in the fixed costs rather than just because of COVID, everyone enjoyed fixed costs, so we also did so. So the fixed Cost saving has continued in quarter 3 as well. And if y o y basis, there is a double digit reduction in the fixed cost savings as well. So there are conscious programs that we've run to reduced the fixed cost.
And just one last question on
the BSS spread. So Our spreads like the way we have exited this quarter. So Kenneth, I mean, likely across our previous highs, we did in Q1 2019 in Q4, given the I think even Q4 trend.
But all one can say is the demand is healthy
And trends are good, that's all. Thank
you. Our next question is from the line of Bhavan Chheda from NAM Holdings. Please go ahead.
Yes, good afternoon gentlemen. Good set of numbers. Just on the CapEx since there is a bit confusion. So, yes, sir, we are largely completing 800,000 by first half and Chemicals also we are largely completing by quarter 1, Except for that 73,000 Phase 2, which will take time. And your slide says your pending CapEx is INR 1,000 crores.
So over and above this for completing this VSF and Chemical announced expression, there will be some number in FY 2022, that's the number only left, right? And is this a substantial number or it is less than 2,000 crores?
So again, I said that it's difficult to give that guidance. What see, in terms of Expansions in VSF, it will be over. So unlikely that the number will be large CapEx coming out of VSS. In Chemicals, there are multiple projects that are VIP projects that There are power saving projects, which they may want to take. And it's a multi locational business, okay.
So it's always difficult to say what the CapEx there would be. So I would still encourage that. And then we have to also look at paints, etcetera, right? So we have to
No, I'm seeing it's a non paint business, only the current business, VSF and Chemical, which is getting largely completed in first half. Paints, we understand there was a separate call and it would be broader
Gavin, my point is different. My point is that now we have commitment towards Paints as well. So we have to look at the overall picture and overall number as well. So we can't keep looking at things individually because then we have to see how much the balance sheet of Grasim can support without us breaching certain levels of net debt to EBITDA, etcetera. So therefore, I'm suggesting that Let's look at the number in the next quarter for the CapEx.
And earlier, you said that this Incremental capacity, which is coming in, just takes 3 to 4 months to overall stabilize. So this incremental over 2,000,000 19,000 should have a full blow in Second half of FY 2022 because based the demand situation is the market is already there, it's how much you churn out from your Production line. So if all goes well that incremental 2 lakh 19 can be available at optimum in second half, is Sir, assumption correct?
No, it will come in phases. The first line is coming in quarter 2, so that can possibly be available If all goes well for 2 quarters, but the second is coming in quarter 3. So if all goes well, you will get 1 quarter full block. That's all will be partial.
Okay. Thank you, sir.
Thank you. Our next question is from the line of Madhur Mathur From Fidelity Investments. Please go ahead.
Hi, good evening and thank you so much for your time. I just wanted a quick Update from you on the CPVC project that we had announced. Any updates on the time line there? And I understand that the CapEx there will be quite limited Too negligible from Datin side. But in terms of the management fees for however the contract would be, how much of an EBITDA contribution can one expect from that project?
So on the CapEx front, Kalyan, would you like to give that update? I think on EBITDA front, we've said last time also that it will Part of the VAP EBITDA, we're not giving out a specific number out there, like we don't give for each component in Chemicals what number is. So but I had also said and I'll repeat that the what we get as EBITDA per tonne of chlorine, If you look at that measure out there, then it is likely to be better than the blended EBITDA per tonne of chlorine that we get today from our VAPS that we produce. So that may give you that idea that it is better and it's high in terms of for profitability. Kalyan, would you like to confirm the results?
Yes. So When we established this alliance partnership, I think we had 3 things in mind. 1 was a full fledged Clouderm integration with player of world class players. We wanted to bring world class technology and we would then Automatically have a certain fixed margin to others. And 3, we will be indirectly linked to a Leading to a segment which is growing fastest and environmentally friendly.
I think those are the 3 criteria. So as Ashish already said the chlorine integration and then related other utilities, affluence and related byproducts that come in, There is a value to it. We can't share in that sense because each product is quite different and we don't go into that kind of that level of detail. We also have within the partnership and alliance a certain fixed margins and that is another one which we take value from. As of now, the project discussions have started.
I think the teams are working on layout and designing. I think We are on track with what we said we would do in terms of the time line, yes. Anything else, Jain, you want to add? No, I think you're right, summed it up, Pallav. But in terms of the project time line, there is a lot of back and forth which is happening in terms of how to Expedite and the gendering is happening in the back end and discussions are happening like on the layout to see How soon can we get the plants running up and running?
But yes, if you ask me, it will take another about 24 to 30 odd months before we will see The contraction, the spec of anything. I think one thing which I want to leave with is these are the types of Alliance with some partnerships, you would see more of from Grassland, where world class technologies come in, we will leverage on The capabilities of manufacturing in India and Bhatnur and Bharat. And we also want to Invest in capacities, which is not for India alone, but for globally and hence, even these capacities that we are investing is the globally the largest So that intent will continue more off and this is the I believe and hopefully, if all goes well, the starting point of many. Thanks.
Understood. Okay. Thank you so much for your time.
Thank you. Our next question is from the line of Sanjay Parekh from Nippon India Asset
So one of the questions that Kalyan answered which I had of, Can there be more of such alliances like the one that would be resolved? So that is answered. But In case you want to expand on that of what potential, whether it's wherein the flooring can be used for value added products, we get A fixed type of revenues and it reduces the cyclicality of the business. So that piece, if we can get more elaboration, it will help. If not, it's okay.
The second is for Ashish. I was just seeing so we could
get a debt right now
at INR 2,090 crores And we're supposed to get money for the fertilizer plant and 1,000 crores plus to be spent in 4th quarter. If I take the next 3 years broadly cash profit that we make and this is assuming that we make steady sales like what we will have in Q3, Q4, Him, even if we invest into the entire INR 5,000 crores, we would actually And we spent INR 2,000 crores CapEx, let's say, for INR 22,000 crores. Then in the next 3 year time frame, our debt would actually not go beyond INR 1,000 That's the calculation I'm coming through. Am I right? I mean, it does have one event sure that The EBITDA that we see would be steady, which is a big assumption.
But if that is the case, then the debt actually doesn't go up.
It will remain in the range
of 1,000 to 8.50 net crores for the next interim payment more, but higher margin remains in that plan in the next 3 years. Am I right in this or Amit will answer?
Yes. So just let me add one last bit regarding Overall capabilities, I think we have 2 large businesses in chemicals. 1 is Much more linked to petrochemicals like epoxy resins, we now call it advanced materials. And the other is chloralkylane, which is the foundation and a core raw material inorganic segment. But overseas, these petrochemical inorganic and organic Complexes are integrated.
We haven't yet leveraged. So we are thinking how the next stage of things, how These things become more of integrated complexes. So that in that area, we see a lot of potential for partnership and alliances. We also not only think of alliances and partnerships on that end, but also integrating chlor alkali and advanced materials and then downstream. So we see a lot of opportunities.
So hopefully some things will materialize in future. Over to you, Ashish.
Yes. So I think the calculation It seems it's again difficult to say what the debt level 3 years down line will be because it has basically, you can say, 3 components to it, right? 1 is EBITDA, okay, for the next 3 years. So I can give you a directional view of how you can calculate. So EBITDA, You have to make an assumption that to aggressive EBITDA this year is not so relevant because you lost 2 quarters, right?
But quarter 3, quarter 4 would be more representative of EBITDA out here. And then there's an expansion that will finish next year for both. So you can take second half for both expansions to come through. So there's an expanded EBITDA of Grasim that should be taken. Then there is GratSim's own CapEx, right, which You can take maintenance plus the projects that we will tell you about, but you can take a broad number out there, okay, for your that's your own assumption because we are not giving any guidance there.
Then it comes to sparkle Sorry, the paints EBITDA, which can be negative for few initial years, okay. And this paying CapEx, right, that we have given as of now. So these are the 3, 4 components you have to put together. Now after EBITDA also there are tax outflows, there are dividend outflows, There are other things also that go out, interest, etcetera, which probably you've not taken into your account. So
if you
do this broad calculation, you should be able to get some idea of your own estimate of what the debt level would be.
Sure, sure. No, no, I did look at cash profit and of course the dividend. But what I'll do is I'll call you offline and give them. Thank you. Thank you very much.
But Ashish, your biggest guidance is that your debt EBITDA is controlled. So you've never let the debt go beyond the limit.
Yes. Absolutely right. And we gave that guidance last time also that We maintain a threshold that we focus on, which should be 3 to maybe 3.25 or something of that sort. We don't want to we wouldn't like to breach that.
Sure, sure. Thank you, Iain.
And one more thing, which can be quantified, but we have been Saving lot of cash on the working capital side. It is an ongoing exercise. It keeps on happening year on year. Yes.
There's a
lot of cash business flows to working capital control also.
Thank you. Our next question is from the line of K. Y. R. Asher from PNB MetLife.
Please go ahead.
Yes. Thanks for this opportunity. I think most of my questions have been answered. So just if you could offer any comment on Any potential investment that could be required on the telecom side of the business?
No, nothing at all. We've caught our priorities at the standalone business so for which funds are required.
So we don't end with any near term investment on that side? No. Okay. Thank you.
Thank you. As there are no further questions from the participants, I now hand the floor back to Mr. Ashish Adhukia for closing comments. Over to you, sir.
Yes. Thanks a lot. Great questions on back of an excellent performance in Q3. We hope that this continues. So We'll connect with you guys with more clarity on CapEx and things, etcetera, perhaps in the next quarter.
Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of