Grasim Industries Limited

Good afternoon to all the participants. The 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 a 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. Gratium is on its path of a strategic transformation. In the last few quarters, we announced strategic decisions like sale of fertilizer business, partnership with Lubrizol, 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 audience, I'll reiterate what he 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, reduce cyclicality. Within paints, decorative paints will be our focus area. We've committed to an initial capex amount of 5,000 crore over a three-year period. We are in the process of seeking shareholder approval and key steps in executing our strategic plan in Pains 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 call. On our capex of current businesses, all our capex are progressing well, and we are scheduled to meet the commissioning timeline of PSF project in two phases, in quarter two and quarter three of FY20 group. For chemicals, all the three projects will commence by quarter one FY22. In terms of operational performance, Q3 FY21 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 five plants touched 89% in December 2020, and for the quarter, it stood at 77%. The VSF demand in India recovered to pre-COVID levels with the share of domestic sales in the overall sales mix expanding to 91% in Q3 from 82% in Q2. The share of value-added products in our overall sales mix improved to 22% in Q3 from 15% in Q2. The uptick in the VFF 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 Q3, up 23% sequentially, and in Jan, the prices have further climbed to about 13,800 levels. Favorable inter-fiber dynamics with widening gap between cotton and VFF led to production, sorry, reduction in inventory levels and higher operating rates. The VFF 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 2,145 crore and EBITDA of 482 crore in quarter three. The viscose EBITDA witnessed a significant 89% increase YOY. For the VFY business within the viscose segment, the revenue was 436 crore and EBITDA was 97 crore in quarter three. The chloracally Capacity utilization touched 89% in quarter three, a 9% improvement in utilization rate sequentially. Revenue and EBITDA of chemicals business touched the pre-COVID levels with pickup and sales volume and further supported by lower input costs, especially in power. The continued weakness in equal realization impacted the EBITDA, The caustic soda prices in CFR terms in Asia, however, recovered a tad from the lows of $239 per metric ton to about $270 per metric ton. The demand for chlorine 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 chemical segment, the epoxy business witnessed a strong demand for its 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 three stood at 3,672 crores, and 709 crore respectively. EBITDA reported an improvement of 53% YOI. Our FAT for the quarter nearly doubled YOI basis to 359 crore in quarter three. The revenue in EBITDA from the discontinued operations of fertilizer for Q3 stood at 597 crore and 57 crore. So if you had, you know, theoretically added 57 crore of fertilizer EBITDA to the standalone EBITDA, iEBITDA would have been at 766 crore. But the accounts is all adjusted for fertilizer being excluded line by line and only included before that as a specific item. Owing to lower capex and better cost management, we have been able to significantly de-level our balance sheet during the nine-month period at both consolidated and standalone level. The consolidated net debt stands reduced to 12,767 crore, a 39% reduction from March levels. At a standalone basis, the net debt reduced from 2,975 crore in March to 2,093 crore 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, Grassim 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 Grassim to create greater value. Recently, Grassim won Investor Relations Award being organized by Investor Relations Society in collaboration with BSE and KPMG under the category ESG Disclosures. Our BSF business won the Global Golden Peacock Award for Sustainability 2020. Our Dow Jones Sustainability Index score also witnessed a significant improvement in calendar year 20 we moved six ranks to 11th position in our sector. In the latest WBCST report, Gratham Industries featured at the top among the list of companies procuring renewable power through corporate renewable PPAs in India. Wisco'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 VSCO's business with improved demand outlook, although various input costs have also started to firm up. The demand outlook for chloralkali and epoxy remains positive for the quarter. The eco-realization continues to remain weak, driven by softness in the global caustic soda prices. Our inherent strength lies in our operational excellence, financial prowess, our resilient growth, and our customer centricity. And if you see the cover of our presentation for this quarter. As a conglomerate, we combine the synergy of a conglomerate and energy of focused businesses. So back to you for Q&A.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Anyone who has a question may press star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Gunjan Prithyani from Morgan Stanley. Please go ahead.

Hi, that's Gunjan from JP Morgan. I just wanted to clarify on the CAPEX thing. I see that there is a balance of about 1,000 crore yet to be spent. That is all for Q4 we'll be spending. Is that understanding correct?