Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head Investor Relations. Thank you, and over to you, sir.
Yeah, thanks, Ashish. Hi, good morning, everyone. Wish everyone on the call Happy 2024. Thank you for joining us today to discuss Grasim's Third Quarter financial results of financial year 2024. The financial statements and presentation are available on the exchanges and as well as on our website. For Safe Harbor, kindly refer to our cautionary statement highlighted in the last slide of our presentation. Our leadership team is present today on this call to discuss our results. We have with us Mr. H. K. Agarwal, Managing Director, and Mr. Pavan Jain, Chief Financial Officer, Grasim Industries. Also joining the call with me is Mr. Jayant V. Dhobley, Business Head of Chemicals, Fashion Yarn and Insulators Business, and Mr. Himanshu Kapania and Mr. Rakshit Hargave, Business Head and CEO of Paints Division.
Let me now welcome Mr. Pavan Jain for his opening remarks, after which we will open the floor for Q&A. Over to you, sir.
Good morning, everyone. First and foremost, wishing you all a very happy and prosperous 2024 on behalf of Grasim. It is always a pleasure to be with you, for discussing our quarterly results. Looking at reflections, I'm happy to share that we have ended 2023 and started 2024 on a satisfactory note across multiple fronts. To start with the latest one, we have successfully completed our rights issue with an oversubscription of nearly two times. This reflects the support and belief of all our stakeholders who have and would participate in Grasim's growth journey. Let me now share key developments on the ongoing growth initiatives and projects. We have completed expansion of our specialty chemicals capacity, which is epoxy polymers and curing agents, doubling to 246 KTPA versus 123 KTPA earlier.
This would enable us to meet our valued customers' growing demand and further solidify Grasim's foothold in India's growing demand for specialty chemicals. Further project implementation of India's largest single-site capacity for CPVC resin facility has also commenced in arrangement with Lubrizol at our Vilayat site. We are also progressing in line with regards to our 50,000 tons per annum capacity of ECH, which is expected to be completed by Q4 of next financial year. Post completion, all these initiatives would improve chlorine integration to around 70% from current level of about 63%. In this course, we continue with our debottlenecking activities at Nagda, Vilayat, and Kharach. The current installed capacity stands at 842,000 tons per annum. For our VSF business, it is making new strides in the area of sustainability. The business has received first rank in Canopy's 2023 Hot Button Report with a rating of Dark Green Shirt.
The business has implemented EU BAT technology at Kharach, the second plant to achieve this feat. As pioneering circular solutions in the fashion industry, the business has made first shipment of its lyocell fiber produced with recycled cotton waste for use in textile value chain, and the response has been very promising with repeat orders. Our Paints business has started trial production at three plants, which is Ludhiana, Cheyyar, and Panipat. Brand architecture under Birla Opus is complete, and we would be launching a full range of products in FY 2025. Birla Pivot has grossed INR 120 crore of monthly revenue run rate in December 2023. The private label Birla Pivot Tiles is gaining good response and is now launching private label in plywood and doors categories. Moving on, I would like to share key global trends having a bearing on our different businesses directly or indirectly.
Given the U.S. economy has entered calendar year 2024 on a stronger footing, which reported Q3 CY 2023 GDP of 3.3% against the estimates of 2%. Federal Reserve, in its latest meeting, left the key policy rate untouched at 5.25%-5.50%. The U.S. Composite Purchasing Managers' Index output index has increased to 52.3% this month, the highest level since last June. In contrast, Eurozone and China are facing headwinds in their economies. Eurozone's manufacturing PMI showed that output contracted at a slower pace in January 2024, as the index rose to 46.6% from 44.4% in December 2023. Two major economies of Eurozone, Germany and France, reported slowdown in pace of growth in the manufacturing activity. China's official manufacturing PMI instead registered 49.2% in January 2024 compared to 49% in December 2023.
In efforts to support real estate sector debt underpins consumption and household wealth, People's Bank of China announced a 50 basis points cut, the greatest in the past two years, effective from 5 February 2024. This is expected to inject about CNY 1 trillion in the banking system. Given such developments, IMF has also revised its global growth forecast for 2024 to 3.1% from earlier forecasts of 2.9%, with improved outlook for the U.S., China, and India. However, the current Red Sea disruptions, which manage about 12%-15% of world trade, including 30% of container traffic, appears to be adversely impacting the outlook on global trade. Adding to this uncertainty is the super election year 2024, which would see more than a third of the world population across 60+ countries undergoing national elections. All these uncertainties pose challenges and also possibly new opportunities in 2024.
Switching the context to the Indian context, the first advanced estimates published by NSO in January 2024 showed real GDP to grow by 7.3% in FY 2024, better than the revised growth estimate of multiple agencies like RBI, around 7%, and IMF's forecast of 6.7%. Available high-frequency indicators like IIP, vehicle sales, growth in bank credit, real estate sales, GST collections, etc., appear to support NSO's growth estimates. We at Grasim expect to resemble India's growth story given our presence across sectors. Coming to our financial performance for the quarter under discussion, the consolidated revenue struck at the highest level, of INR 31,965 crore, recording growth of 12% YoY. The TTM revenue, trailing 12 months revenue, which is indicative of FY 2024 revenue, grossed a milestone of INR 1.25 trillion, growing at a CAGR of 14% over FY 2020. Consolidated EBITDA grew by 34% YoY to INR 5,150 crore.
The TTM EBITDA is nearing a milestone of INR 20,000 crore, posting a CAGR of over 9% since FY 2020. Conglomerate structure with diversified businesses has enabled consistent growth in revenue and profitability. Cement and financial services businesses under UltraTech and Aditya Birla Capital are on an accelerated growth journey, fulfilling the infrastructure and financial needs of our country. Our standalone performance continues to exhibit stability despite vagaries of global commodity cycles. Both our key businesses at standalone level, VSF and Caustic, currently in down cycle, continue to remain profitable. Our established risk management mechanisms and cost leadership enable us to ride global price volatility optimally and deliver industry-superior performance. Standalone revenue for the quarter stood at INR 6,400 crore, recording a growth of 3% YOY. The revenue growth was largely driven by volume growth of 34% in VSF and 5% in Caustic Soda business.
However, the profitability was impacted with global weakness in the chemical segment, led by an oversupplied market and a sharp decline in realizations. For simplification, we have made some changes in our results presentation with regard to segmental disclosure. We have combined our textiles, insulators, paints, B2B e-commerce adjusted for inter-segment elimination, and unallocated income under one head named "Other Businesses." Such categorization aligns the disclosure with our published results. VSF business growth stood strong on a YoY basis, partially on the back of markets reverting to normalized levels post the exceptionally weak Q3 FY 2023. Part of VFY volume, which finds its applications in embroidery and georgette and home furnishings, has lower demand pull during the quarter. The realizations were further impacted by cheaper imports from China. The sharp YOY decline in VSF prices appeared to bottom out at current levels of about $400-$450 level.
However, the market remains oversupplied due to large capacity additions in FY 2023. Our paints business, Birla Opus, is on track for launch in the current quarter, with trial production already on at three plants, namely Panipat, Ludhiana, and Cheyyar. We have already completed brand architecture under our paints brand, Birla Opus. The sub-brand portfolio across multiple categories of luxury, premium, and economy segments, and development work for design, packaging artwork, consumer communication, etc., is complete. The supply chain, logistics, and distribution network is also in place to support the launch as stated earlier. We would offer a complete range of high-performance superior products in the premium, mid-range, and mass markets, favorably placed across multiple price points. The dealer onboarding has already commenced, and you would certainly hear more from us over the calendar year 2024.
As highlighted in the last quarter, the B2B e-commerce business under the brand name of Birla Pivot has already crossed a monthly revenue run rate of INR 100 crore. The quarterly revenue run rate is now inching towards INR 300 crore. Private labels under Birla Pivot Tiles are garnering a good response. We have already initiated in-store branding initiatives also, and now widening our coverage for private labels, adding plywood and doors. The geographical front of Birla Pivot has now extended to cover about 20 states. CapEx for quarters to date is INR 1,425 crore, with 76% allocation to paints business. We remain on track to achieve plant CapEx guidance of about INR 5,900 crore in FY 2024. With the existing.
Ladies and gentlemen, we've lost the management connection. Please stay connected while we rejoin them. Thank you. We have the management team back on the call. Please go ahead, sir.
Hello?
Yes, sir. We can hear you.
Yeah. So, we can take the questions.
Okay. 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 touchscreen 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. We have a first question from the line of Tejas Shah from Avendus Spark. Please go ahead.
Hi. Thanks for the opportunity. A couple of questions on paints. Y ou spoke about dealer onboarding, which has started. Just wanted to know, and if you are in position to share, is there any target that we are running with, in terms of dealer onboarding for this year? A and B, are these dealers existing paint dealers, or are we getting new dealers in the ecosystem?
Let me answer this question. O bviously, we have targets for dealer onboarding for every month, every quarter. T hat goes without saying. W hen we are onboarding, to begin with, we are largely onboarding existing paint dealers, but there could be also some who are new to the paint.
Sure. S econd and last question, so you have been very transparent on the expansion plan and also on the status of the expansion that we are doing in paints, on the plant side. Just wanted to know any similar update or details you can share on the depot network that needs to be created around the plant infra?
Obviously, you know, the depot network goes along with. W e have an aggressive target to set up depots by the end of this financial year. We are already signing agreements and leases, and depots are already operational to take in some of the trial production. O bviously, we also have a target for next financial year. W e are in line with whatever we have set up. As you would have also read in some reports which have come out, our objective is to have a pan-India national distribution by the end of financial year. O ur network expansion ambition and execution is in line with that.
Great. Thanks and all the best for that. I'll come back in the queue if needed. Thanks.
Thank you.
Thank you. We have a next question from the line of Nirav Jimudia from Anvil Research. Please go ahead.
Yeah. Good morning, sir. Thanks for the opportunity, sir. I have two questions. O ne on VSF and one on chemicals. Sir, based on our presentation, is it safe to conclude that our VSF EBITDA on a quarterly basis, based on the Q1 FY numbers, is flat on a per-kg basis, and the fall in the numbers is predominantly because of the VFY?
To some extent, your analysis is in line. A lso, like, it's very dynamic, so we cannot assume, like, selling price has come down in this quarter, whereas raw material prices have also reduced, and volumes have gone up. T here are three levers operating in always in this equation. Y es, overall, the VFY was a little bit less in this quarter compared to previous quarters.
Because, sir, the fall in profit is close to INR 62 crore, so, 75%-80% is a safe assumption to take for the fall in the VFY business out of this INR 62 crore fall?
Yeah. Not exactly, Nirav, but, yeah, there is a see, VFY has been seeing some demand slowdown in some particular segments, as mentioned. Yeah. Then there is a problem of some cheaper imports from China also. That is also impacting. T he numbers may not be exactly what you are trying to say.
Got it, sir. Sir, if you can just share your view on the premium on the value-added VSF, vis-à-vis the gray VSF. i f you can just share what sort of blended-level premiums we used to or we are currently getting on over and above the gray VSF?
This one ranges; it's estimated about 20% over the gray price. Okay. VSF in general. S ometimes it is more depending on which product volume is more. T here are many products in VSF category.
Yeah, yeah. Because sir, earlier we used to share like for Excel it was close to $0.40-$0.50. For Modal it was slightly lesser and standard was even lesser. w hat is the current broad range if you can share on these three products?
I think, I will not be able to give you that specific product price. I n general like cotton prices have come down so Excel prices have also come down in line with cotton prices has reduced and i n general, in China also Excel VSF prices have come down in the last full year. I t keeps on changing depending on the mix of products in the VAP basket.
Got it sir. The second question is on the chemical side. W e have seen a sequential improvement there. L ast quarter, you mentioned that we had a shutdown at the VAP plant. T his entire improvement in the profitability could be attributed to the swing in profits from the VAPs, or, has some improvement on the cost side happened on the caustic side and because of which the profitability has improved?
Jayant Dhobley, I'll take the question. Maybe I'll also add a bit of color on the VFY discussion. J ust going back to your VFY question, look, our VFY portfolio consists actually of three types of fibers. Okay. Spool spun yarn, Continuous spun yarn, and Pot spun yarn. T hey go in, you know, different segments ultimately in garment. They offer very different properties. Our Spool spun and Continuous spun segments have been doing quite well. Demand has been maintaining stable. The problem is essentially around the VSF Spun yarn segment, where certain areas of garments are not picking up or did not have the seasonal pickup that we would normally have seen, which affected that particular quarter's results. W e had one operational disruption at our Kalyan plant.
Having said that, we see already, you know, going forward, the situation becoming slightly more normal on the VSF Spun yarn side.
Okay.
I think, you know, when you look at the drop in the VFY business, remember that it's a portfolio of filament yarns.
Okay.
Some of that portfolio is still doing quite well. It's one specific part of the portfolio and an operational issue that we had in the Kalyan site, which.
Got it, sir, a nd, sir, on.
The question on chemicals, of course, look, the raw material, the cost side has helped us. Coal prices have gone down. Electricity prices have gone down, etc. W hat has really helped us on two, three areas is, firstly, our utilization, which we have reported at about 88%, we believe, is best in the peer group today. That's what, of course, one big element. Secondly, our specialty chemical part of our chemical business has done better. You know, we have called out the revenue percentages. We don't call out those EBITDA numbers, but, that is for sure a part which has done better.
A s you correctly pointed out, you know, we had some operational stoppages in one of our chlorine derivative plants, which have not been fully resolved, but production on those chlorine derivatives has been better than before. Some work is still going on. A combination of factors. A better cost position on coal, power, salt, that's one. For sure, better utilization than our peer group. Much better performance in our, the specialty part of our portfolio, the material side of it. S omewhat better performance in chlorine derivatives.
Got it, sir. L ast question, Mr. Dhobley, if you can share your outlook on the epoxy business. W hat's the current industry size in India? O n the liquid epoxy which we manufacture, how much value addition which are currently doing on?
Yeah. L ook, I would not want to answer the value addition question very directly. I will answer it indirectly. I f you look at how typically these epoxy businesses create value, and, you know, the epoxy businesses range between, let's say, you know, 8%-12%, in terms of EBITDA sales, we would be in the better quarter, the top quarter of the industry. We sell our entire capacity out, and we believe that we have, you know, high market shares. W e are in the top quartile performer of this epoxy industry. We have basically the larger market share, whether you look at composites, whether you look at coatings, whether you look at corrosion protection. Y ou know, we have recently expanded our facility. We have announced the openings, where we have gone with a somewhat richer portfolio.
We have now also added products like reactive diluents, polyamide hardeners, polyester hardeners. W e believe that we have the largest and also the biggest specialty portfolio, you know, in the Indian market on epoxy resins and hardeners.
Got it, sir. Got it. Thank you so much, sir, and wishing you all the best.
Thank you. Before we take the next question, would like to remind participants to press star and one to ask a question. The next question is from the line of Navin Sahadeo from ICICI Securities. Please go ahead.
Yeah. Good morning, and thank you for the opportunity. Also, let me give my best wishes to the entire team Grasim for the upcoming formal launch of the paints business. A couple of questions on the paints were that if you could just clarify what is the exact capacity that is coming up for launch? In the same breath, if you could just also give details about how the timelines look for the balanced capacity?
Okay. L ike we told earlier, that the total capacity of the six manufacturing locations is about 1,332 million liters. Currently, trial production is on at three locations. Each of these factories has a capacity of about 200 million L. One of the factories also has a capacity of 30 million L of solvent paints. T he three factories under trial, cumulatively, have about 630 million L of capacity. Obviously, how we utilize it and how it grows is a separate issue. On the second part, your question in terms of how we are planning to roll out? W e will roll out gradually, starting with, you know, the north and some areas of south.
Gradually, we will speed up to roll out nationally in a certain period of time, which would be very, very appreciated. That's how we see the rollout plan. T hat's our take on the capacity which is being tried at the moment.
I understand. I n Q4, you will actually see material product on the shelf in north and south markets?
Yes, sir. Yeah, yeah. W e said that, when we introduce, we will start with certain areas of North India and certain areas of South India. Yeah, yeah. Your second question about the other plants, we will expectedly start trialing them next financial year, in the first quarter, hopefully the next one in the second quarter. T he last one would be probably in the last quarter of next financial year.
Understood. Understood. This is helpful. My second question then was about the VSF segment. W e were looking at some VSF pricing points in China. P lease correct me if my reading is wrong, but I thought from mid of August or early September is when the prices in China bottomed out, and there has been almost a very handsome 8%-10% kind of a recovery in that market. T he presentation that you have shared does not really show any trend of pickup. It's actually more flattish to a marginal declining trend, if I am reading that correctly. Of course, as you mentioned, even the exit is 1% lower than the quarter average.
Is there anything that we are missing here in the sense that are the prices, you think, are unlikely to see any have not seen a recovery, and hence the outlook remains subdued, or there is some recovery that we can expect? Thank you.
The VFY prices in China have remained very narrow range bound. I f you see even quarter three of last year and quarter three of this financial year, there is hardly any change in the prices in China, China domestic prices. That is one part. And China is the largest producer and consuming country for VFY in the world. E xport prices have reduced significantly during this last 12 months. Export prices have come down as much as almost 15% during this year, these 12 months. T hat is the picture on, but export is a smaller part for China and most of the producers because most of the producers sell major part of their output in their domestic markets. Does that answer your query?
Yeah. J ust to confirm, it's using export prices being weak is what's impacting the realizations for us. Otherwise, in China, local prices per se, spot prices in China could be on an uptrend, or that's not correct?
There is no clear distinction. Recently, they posted higher prices, but that was just before the Chinese New Year vacation. T hat is their tactic. Every year or every long holiday period, they will post higher prices. T hey will before that, they will conclude the transactions for the holiday period. T hose prices are never very nominal. T he real impact is seen only after the holidays open again for business. W e, we should not read too much on the nominal prices. A s of now, the prices are just stable, like not showing any big increase trend except international prices, because of Red Sea prices. The shipping costs have gone up. T o that extent, the producers have adjusted the offers for export prices.
Understood. This is helpful. Thank you so much.
Thank you. We have a next question from the line of Raashi Chopra from Citigroup. Please go ahead.
Thank you. Just on the VSF, before I move on to paints, what about your realizations, was there a decline essentially?
Yes.
Would you quantify that?
About 2%.
Okay. Thank you. The loss, you know, we can make out the total loss coming from the paints business and the B2B business, the e-commerce platform. W hat was actually the paints contribution to the EBITDA loss in this quarter, the expenses that you captured?
I think we are not giving the specific numbers for these businesses. Possibly once we start reporting separate segments in next financial year, we'll come to know. S s the businesses, I mean, increasing the size of manpower, etc., the uncapitalized expenses which are being charged to P&L are also increasing. Once, I mean, the plants complete their trial run, etc., then whatever is being capitalized will also come to P&L. T hat is the status. Y eah, quarter-on-quarter, the losses for paints businesses have increased, as also in B2B business.
Okay. Lastly, on your standalone balance sheet, what is the net debt EBITDA as of now on a standalone basis? F ollowing the rights issue and with the commissioning of the, you know, the paint plant, etc., where do you expect this to be by, you know, by 2025? End of 2025.
Yeah. A s on 31st of December, we have said our net debt to EBITDA is about 1.7, as on 31st December. Post that, we have, of course, received part proceeds of rights issue. That is about INR 1,000 crore. Once we complete our paints CapEx and other ongoing CapEx, etc., we have given guidance that our net debt to EBITDA should be about 3-3.5 once we complete our all the rights issue, etc. T hat will all depend upon the performance of the existing businesses as well.
Okay. J ust, sorry, lastly, on that, where do you expect, I mean, for the next few quarters or so, how do you expect the margins to move for both your VFY as well as the chemicals division?
I think the VFY business's margins are stable. chemicals is still the realizations are on decline. We feel while globally, maybe the prices are bottomed out, but India remains oversupplied. I'll request Mr. Jayant Dhobley to address this. Yeah, please.
Yes. I f you track chemicals and I'm sure you track all the chemical industry. A lot of downstream demand actually is driven by agrochem in India. S sorry, just a sec. There is some disturbance on the line. A lot of demand is actually driven by agrochem in India. A s you must have noted from the transcripts of many of these agrochem companies which are driving the end demand for basic chemicals, they are projecting that the worst is behind them, right? I f we go by those reports and you I'm sure you guys are following those companies, then correspondingly suppliers like us, you know, who provide caustic chlorine, etc., into that industry will, of course, follow suit. The other area, of course, is the industrialization in the area of renewables, automotive, etc., continues. T he demand for epoxy resin continues.
I think it's fair to say that we are probably at a situation where we are stable to gently starting to improve.
Sorry, stable to gently starting to improve, you said?
Yeah. I would, I would strongly encourage you to follow also the larger agrochemical complex here because those would be a better lead indicators for whatever assumption you want to make.
Right. All right. Thank you.
Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah. Thank you for the chance. My first question is on VSF. You've partly answered. I mean, overall, so if you see operating rates, inventory in China, all are moving in the right direction. W e don't see a sustainable increase in realizations and margins. I f you could just share what is your outlook on prices and expectation in the next six, nine months, and can we assume that the margins for our division is kind of at the bottom, and we should see some bit of an uptrend there?
I, I hope you are absolutely right that margins are at the bottom, and they will improve. W e also wish for that. I t is very difficult to predict very precisely or accurately because things are very volatile. T here is no reason to be pessimistic. W e hope that slowly things should start to steadily improve. T hat will be very gradual. It cannot. I don't expect it to be very sharp turnaround.
I mean, if you look at the operating rates touching 90% and even inventory levels are quite low, in the past, I mean, have you seen these, kind of leading towards better profitability and better pricing strength for the industry?
Yes. The operating rate and inventory levels do indicate that the industry profitability should improve. T hen, sometime, this like Red Sea prices have suddenly come out of nowhere. T hat has affected the entire export rate from China, which is not just VSF but the entire textile, even finished products also. A ll these things have a lot of implications on the profitability. B earing such things, your normal interpretation of high operating rate and low inventory is correct. W ithin VSF also, now lyocell fiber is goes from a very low base but is increasing more rapidly. T here are certain undercurrents from there also.
Understood. I s there any new supply which is getting added, new capacities in any of the regions by a competitor?
Not in the normal VSF side. O n the lyocell side, yes. Some capacities are being added. Some have been added, and some are under construction, to the extent of about 125,000 tons or so n ot new capacity on the traditional VSF side.
Okay. Understood. Second question is, with respect to chlorine integration levels, there is a good uptrend and a gradual one over the years. Is it possible to quantify what sort of benefits we get out of every, say, 1% increase in integration? I mean, just some thumb rule and what is our target for, say, over the next two, three years to increase it to what level?
Yeah. Y ou know, you have to look at it in two ways, right? C hlorine cells, today in India, are at negative prices. T he first benefit we get, of course, from chlorine integration is those negative prices that evaporated. You know, these negative prices are in the range of, let's say, INR -4,000 right now. T hat would be one, one input. S econd is depending upon the chlorine derivative itself. For example, you know, a stable bleaching powder will have a different contribution margin percentage if I take one extreme example, versus, let us say, the chloromethanes would typically have a different contribution margin percentage. I t they would also correspondingly, you know, different CapEx density. I t's not a very straightforward question. The first step in chlorine integration is to extinguish the loss of profit which happens through a negative chlorine price.
Then subsequently, depending upon the CapEx intensity and complexity of the molecule, we get different contribution margins for the particular product. I t's a you know, we have we have the largest chlorine derivative portfolio in India. W e continue to grow our chlorine derivative portfolio. For example, you will see that, you know, this quarter, we are going to be mechanically complete with our monochloroacetic acid plant in the eastern part of India. It's a small plant, but, you know, there are not that many manufacturers of monochloroacetic acid. T hat will have, of course, a nicer profitability profile than, for example, chlorinated paraffin wax. I wish I could give you a simple 1% answer, but it's not really that straightforward. I think the general rule is chlorine integration is the way to go for us.
Yeah. Y ou said -4,000. O n an average, the derivative, what would be the realization be?
Yeah. That, that's a huge diversity of product profiles there, as I mentioned, right? Everything from stable bleaching powder to chloromethanes. Y ou know, that realization number will not give you any meaningful insight.
Okay. Got it. All right. Thank you, and all the best.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead. Ms. Latika? Hi. Yes. Please go ahead.
Yeah. Hi. Can you hear me?
Yes.
Yeah. Okay. Thank you. Thank you for the opportunity. I had, you know, a few questions on your paints for you. T hanks for sharing, you know, a few slides on that in your presentation. The first one was on. I heard your comments on the dealer base rollout. Wanted to check, you know, the cities that you are targeting in North and South to begin with. Would you first focus on the larger cities, or the plan is to go wider, you know, in the next few quarters, even in the smaller towns? That was the first part. T he second bit was, you know, if you could share some thoughts on your advertising plans. You know, you've talked about that advertising concepts have been finalized. W hen do we see you?
Would you wait to roll out the whole of your product portfolio, SKU portfolio, through the course of FY 2025, or you would probably likely target the peak summer or the peak festive season, you know, to go all out on the advertising front? Thank you.
Okay. O n the cities where we're going to roll out first, so, you know, I wouldn't want to give exact details. L ike we said, that we want to roll out fast. W e will probably cover them pretty soon. Obviously, the first attack will be on the bigger cities, bigger towns. B ecause we have national ambitions to roll out very fast.
Ladies and gentlemen, we've lost the management line again. Please stay connected while we rejoin them. Thank you. Yes, sir. You may please go ahead.
Yeah. L ike I was saying, that obviously, we will cover the bigger towns first. V ery soon, we will also go down, you know, down the towns straight up. L ike I said, that we will start with North India and some parts of South India, in this quarter. Y ou shall see. It's only about, you know, 1.5 months left. Secondly, on our advertising plan, so we have an all-round 360 plan. We have, you know, we will have below-the-line digital, above-the-line, consumer promotions. All that will start rolling out. Obviously, they will follow a sequence. I don't think that we are trying to focus on the summers or anything like that because we want to roll out as fast as possible. O ur advertising and media spend will follow the distribution, which will keep going on.
Sure. Y ou know, I any feedback or, you know, experience, of, wood finishes that you launched? You know, it is available now in almost 60 cities. Any initial thoughts on, you know, how the product is faring? What are you learning from contractors, workers on this product? How is it placed, you know, versus, competition? Any initial thoughts there?
Yes. O bviously, it has been a good learning exercise. T he sales team has also got practice of actually working in the market. The feedback is very positive. Firstly, it's only a limited range. I f you take a look at the imported wood finishes that we have launched, we have not launched the full range. The full range will also follow suit. T he feedback from contractors and painters is excellent. The product quality is excellent. The acceptance is very high. O bviously, we've got some learnings in terms of what do we need to adjust for the main launch. W e are taking all that into account.
Sure. T he last bit from my side was, you know, on paints, any thoughts on, you know, how are you looking at, you know, B2B versus B2C? B2C is loud and clear, I guess. W ill B2B also be a meaningful part of focus for the company in the initial phase, or?
No. B oth B2C and B2B will, you know, start parallel. T he institution business or the project business, as people call it, in the paints business, is an absolute part of our portfolio. We also have products designed for that. I t will start in tandem with the retail business.
Sure. Thank you so much.
Thank you. We have a next question from the line of Mudit Agarwal from Motilal Oswal Financial Services. Please go ahead.
Yeah. Hi. Good morning, sir. M y question is related to the tax expense. During the quarter, the tax expense was significantly low. I s there any adjustment or, or could be the run rate going forward?
Mudit, the tax for the quarter also has some write-back of the provisions, the current quarter. O n overall basis, you can assume that our effective tax rate would be about 14%-15%. C onsidering that, whatever adjustment was required has been done in this quarter. Of course, it includes the write back also, a small part, which is, based on certain cases, etc., we have, written back that provision. On the annual basis, you can assume the tax rate to be around 14%-15%.
Okay. Okay. S ir, the last, second question is on the, chemical business, captive power plant capacity. How much is the, captive power share as well as the renewable share in the chemical business?
Mudit, can you please mute your line when you're not speaking? There's background noise coming from your line.
About, half of our power is captive. About, 13%-14% is, renewable, and the rest comes from the grid.
Okay. Okay. Got it, sir. Thank you.
Thank you. We have a next question from the line of Ronald Siyoni from Sharekhan. Please go ahead.
Yeah. Good afternoon, sir. I had one question with respect to the Insulator business. Can you share the revenues and EBITDA number for Insulator business?
No. What is your question? Can you please repeat?
Ronald, can you please use your handset? You're not very clear.
Now I am audible? Yes.
Yeah. Yeah. Audible. Yeah, please.
I wanted to ask about I nsulator business. Can you share the revenues and EBITDA numbers for Insulator business?
You mean the ones we have consolidated now, right?
Right. Right.
You're asking us to be consolidated. Again.
First of all, I think it is a very small part of standalone itself. I f you look at the consolidated numbers, it is almost negligible. But let me share the number which you are, I mean, looking at. R evenue for the quarter is about INR 111 crore, in Q4, Q3 this year. EBITDA is marginally negative, very small number, INR -1 crore. INR -1 crore.
Okay. Thank you very much, sir. I n terms of cost, cotton, viscose, and polymer differential, whether it has reduced or, you know, it has any correlation with viscose demand or prices also?
Sorry. I didn't understand your question. Can you please repeat?
The differential between the prices of cotton, viscose, and polyester. T hat spread has reduced, or still there is, you know, you know, a difference, wide difference between this demand and prices because of these three?
Reduced during the quarter, quarter-on-quarter. T he polyester price has also reduced. A ll the fiber price has reduced during the quarter. V iscose price has reduced much less than the reduction in the cotton prices. T his one is a very complex interfiber dynamic of this thing. F or example, international cotton price has reduced quarter-on-quarter by 4.6%. India price has also reduced by the same amount. C hinese price has reduced much more. On year-on-year basis, international cotton price has reduced by almost 10%. Indian cotton price has reduced by 15%. C hina cotton price has increased by 10%. I t all depends on many other factors in addition to simple market dynamics. M ostly, they're moving in tandem. The extent can vary, but mostly, they move in the same direction. T his quarter, the prices have reduced marginally for all the fibers.
Okay. Thank you very much, sir. Thank you very much.
Thank you. We have a next question from the line of Nirav Jimudia from Anvil Research. Please go ahead.
Thanks for the opportunity, sir. Sir, you mentioned that our chlorine realizations were -INR 4 this quarter. W hat was it last quarter? W hether it has further worsened in Q3, or it was at the similar levels comp as compared to Q2?
No. Compared to Q3, Q2, it has worsened by about 2,000 INR. A s I mentioned earlier, it is basically the slow pickup in the agrochem sector, which has affected this in a big way. H aving said that, I think the chlorine pricing dynamic across the country is quite different, you know? Y ou get very different dynamics depending upon which region you are.
Got it. Got it.
Again, you know, it's agrochem, and to a certain extent, dye s and dye intermediates , which drives chlorine pricing negative.
Got it, sir. The improvement in profitability could be also attributed to our flakes business because I think we have been producing flakes out of our lye. Has that helped this quarter in terms of the stable ECU realizations on a sequential basis despite chlorine worsening sequentially?
Yes. We are always optimizing between lye and flakes. That is absolutely correct. We see what is the best way that, you know, we can approach the market for maximum scope. Similarly, we focus a lot on utilization as well. You are right. We have been always optimizing between lye and flakes depending upon the price delta between the two forms of caustic.
Is it possible to share the capacity of MCA, which we are going to commission very shortly because you mentioned in one of the discussions that we are?
S mall capacity, to be very frank with you. If you know, for us, it is very important to set this plant up as a demonstration of going further into complex chemistry in our chlorine business. Y ou can say the capacity it will be about, you know, 7 KT per annum.
Got it, sir. Got it. Sir, out of our pipeline sales sorry. Out of our total chlorine integration, like 63%, what would be the contribution through the pipelines? Because earlier, we used to share some figures of chlorine going up close to 85,000 tons-86,000 tons on a quarterly basis. I think that has now stopped. So can you just give some sense in terms of pipelines?
Pipeline sense is, you know, in the range of 12%-14%, depending upon how the customers pick the product.
Okay. Okay. S ir, last question is on the maintenance CapEx for the chemical business as well as for the VSF business on a yearly run rate basis?
Give us a moment. I'll do it. VSF will be around INR 350-400 crore. Nirav, I see it will depend upon I mean, you cannot take a standard number for every year. Yeah. R oughly, you can assume about INR 300 crore- INR 400 crore, as maintenance CapEx for both these businesses. Yeah. Each of the businesses. Yeah.
Okay. For each of the businesses? Yeah.
Yeah. We have a number of plants, all locations. Yeah. I mean, we continue to invest in the cost optimization of.
Got it. Pavan Jain, is it possible to share how much, through the debottlenecking, we'll be adding the capacities on the VSF? I think you mentioned three sites where we are currently undergoing the debottlenecking. I s it possible to share what sort of capacity additions could happen out of this?
Okay. W e have done small debottlenecking in our lyocell plant during this year. That will take our capacity from 31,000 tons-44,000 tons per year. Okay. Then, small debottlenecking we have done at our Kharach plant for the VSF also. Then in the course of this quarter as well as coming year, we will also be trying to further improve the productivity at all of our VSF plants also, like the new lines at Vilayat.
Yeah.
More because the lines have been now running for almost 1.5 years, 2 years. W e are getting better, better performance, slowly, slowly.
S ome capacity additions could happen there also through debottlenecking?
Without much CapEx.
Got it, sir. Thank you, sir, and wishing you all the best.
Thank you. We have a next question from the line of Suryansh from BizX Enterprise LLP. Please go ahead.
Yeah. Thanks for the opportunity. I was asking big; my question was regarding Birla Pivot. W hat are the plans there? L ike, are we planning to move into B2C and opening retail fronts? Or, like, what are the plans there? Can you answer this one?
As already I mean dealt out earlier, we are extending the coverage in B2B only across the country now, covering almost 20 states. There's no plan of B2C as of now. We are also getting into private labels. Birla Pivot tiles have been already launched. Plywood and doors are also in the process. We are in the process of launching. That is the status. Hope that answers.
Yeah. Thanks. Thanks. Thanks for my question. Taking my question. Thank you.
Thank you. We have a next question from the line of Lakshmin arayanan K G from Tunga Investments. Please go ahead.
Thank you. I f you are entering into paints, do you see the industry-wide compression in terms of gross margins or operating margins for the next five years? Whether the profit pool would actually shrink in terms of percentage?
You know, when you say for the next five years, it is very difficult to answer. Our objective is to, you know, in a reasonably acceptable short period of time, become the number two player and also turn profitable at the earliest possible. I think if we follow the principles, the answers will lie there.
Now, would you expand the dealer margins, or would you actually sell at a cheaper price? Like, how do you intend to do this?
You know, we are not disclosing anything on our pricing. I think when we launch in the market, you will come to know.
The launch is dated for the next month?
You know, we have disclosed that we will launch it in this quarter. I t has to happen either in February or March.