Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grasim Industries Ltd (BOM:500300, Financial) reported consolidated revenues of INR 33,861 crores and EBITDA of INR 4,076 crores for Q1 FY '25.
- The cellulosic fiber business saw high CSR volumes and revenue, with the highest quarterly number of 200 tonnes.
- The specialty chemicals unit achieved its highest ever sales volume and revenue, contributing 30% to the chemical business revenue.
- UltraTech added 8.7 million tonnes of capacity in Q1 FY '25, crossing the milestone of 150 million tonnes per annum.
- The Paints business under Birla Opus started commercial production at three plants in April 2024, with more than 80% of planned products placed in distribution channels.
Negative Points
- The cellulosic fiber business faced challenges due to inventory corrections and oversupply in Indonesia, impacting India realizations.
- The caustic soda market in India remains in an oversupply situation, affecting domestic market realizations.
- The Paints business reported that a significant portion of sales from trial production went to CWIP, not reflecting in net sales.
- Chlorine prices remain under pressure due to increased capacity from competitors, impacting the eco realizations.
- The textile business profitability was impacted by high input costs in the linen business.
Q & A Highlights
Q: How has the progress been so far in the paints business versus your internal expectations? Can you provide some data points or more color?
A: Rakshit Hargave, CEO of Paints Business: We are in line with our expectations. Three plants are commercialized and running steadily, and the fourth is under trial production. Over 80% of our planned products are already in the market. We have reached 102 depots and are on track to hit 50,000 active dealers by the end of the year. The reception of our product quality has been excellent, and our initial brand campaign has garnered significant attention.
Q: Can you clarify the sales figures for the June quarter in the paints business?
A: Pavan Jain, CFO: The actual sales are more than the back-of-the-envelope calculation of INR 80 crores. A large part of sales has been out of the trial run production, which has gone to CWIP.
Q: What is the pushback from the trade, if any, and how are you addressing it?
A: Rakshit Hargave, CEO of Paints Business: Many dealers see us as a strong viable alternative and are confident in the Aditya Birla brand. Some dealers are waiting for the full range of products before committing fully. Overall, there is no significant pushback, and many dealers are adopting us willingly.
Q: Can you explain the strategy and outlook for the B2B e-commerce business?
A: Sandeep Komaravelly, CEO of B2B E-Commerce Business: Our revenue growth is in line with expectations, aiming to reach $1 billion in three years. We are focused on increasing geographical reach and the number of customers. The business is not CapEx-heavy, and our primary investment is in building the team, technology platform, and increasing reach.
Q: What are the plans for the renewable business?
A: Pavan Jain, CFO: We aim to double the capacity to 2 gigawatts by the end of this financial year and add 1 gigawatt every year for the next 2-3 years, depending on successful bids. There are no current plans to take this business out; it is housed in a wholly-owned subsidiary of Grasim.
Q: Can you provide an update on the chemicals business, particularly regarding hydrogen and chlorine derivatives?
A: Jayant Dhobley, Business Head of Chemicals: Approximately 10-25% of our hydrogen is sold externally, with the rest used internally. We are prioritizing chlorine derivatives over hydrogen derivatives for now. Chlorine prices remain under pressure due to increased capacity from competitors.
Q: What is the outlook for the VSF and Chemicals businesses?
A: Hari Agarwal, Managing Director: The VSF business is expected to remain stable with a slight increase in raw material prices. For the Chemicals business, caustic prices have improved slightly, and we maintain a mildly positive outlook. Chlorine prices are under downward pressure, but chlorine derivatives and epoxy volumes are expected to grow.
Q: Can you clarify the impact of CWIP on the paints business revenue and expenses?
A: Pavan Jain, CFO: Revenue from trial production goes to CWIP, while all other expenses are included in the P&L. The majority of the revenue has gone into CWIP, and we will consider disclosing this in future quarters for better clarity.
Q: What are the plans for future mass media campaigns and brand ambassadors for the paints business?
A: Rakshit Hargave, CEO of Paints Business: We will continue to have campaigns addressing the whole of India, including regional languages and various media. Specific strategies and brand ambassadors will be revealed in future campaigns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
