Grasim Industries Limited

Ladies and gentlemen, good day and welcome to Grasm Industries Q4FI21 Investor Conference Call. We have with us today from the management, Mr. Dilip Gaur, Managing Director, Mr. Kalyan Ram, CEO, Global Chemicals and Group Business Head, Fertilizers and Insulators. Mr. Jayan Duva, Chief Executive Officer, Chemical Division. Mr. Ashish Adhukia, CFO. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. I would now like to hand the conference over to Mr. Ashish Adhokia, CFO. Thank you and over to you, sir.

Ashish Adhokia Thank you. Good afternoon to all the participants. I hope that you and your families are safe. The FI21 was a year of two halves. We started on a very grim note in quarter one with low operating rates across all the plants, which was followed actually by a solid recovery from quarter three onwards. In this quarter presentation, we would like to start the discussion with highlighting the qualities of viscose as a green fiber. What makes Viscose the green fiber is based on three tenets, which are green product, green technology, and green ecosystem. These are highlighted in the presentation on page four, which has already been uploaded. We have listed down six powerful credentials of Viscose, which makes it superior product on the sustainability front. Viscose is made from ethically 100% sourced wood and from sustainably managed forests. The land for viscose wood does not require added fertilizer or pesticides. Therefore, there's no use of chemicals for growing its raw material. Viscose needs very less amount of water as compared to other natural fibers during its life cycle, which makes it low on water consumption. Viscose is also fully biodegradable in eight weeks. In comparison to that, the other fibers take much longer. Additionally, pre- and post-consumer waste can be converted into fiber again, resulting in circularity. RASM is one of the companies which has all the three generations of fiber under one roof, which are Viscose, Modal, and Lysol. Lyocell technology is a closed-loop technology with an exceptional recovery rate of key chemicals such as NMMO, which is recovered by more than 99.7%. Even the recovered water from the process is reused. We are currently implementing a closed-loop technology in all our discourse plants, which will lead to reduction in emissions to air and water, improve the working ambience, and also cut down on raw material consumptions. We also have unparalleled focus on adopting global standards and systems accepted and recognized globally. We have received HIC FEM 3.0 average scores for all our sites, and we are committed to achieve stringent EU BAT norm for all our sites by December 2022. Key to create ecological value is to use less. On page six, you'll see how we have reduced use of water, caustic, and focused on reducing emissions. Moving on to the third tenet, which is green ecosystem, it's about making an impact that goes beyond your own operations. The three pillars of the ecosystem are responsible sourcing and the supply chain, valuable partnerships, and social responsibility. We ensure that we source our wood pulp requirements for certified forestry that follows responsible practices. We work with our partners in the entire value chain to impart the importance of sustainability. We have partnered with Green Tracks that provides end-to-end supply chain traceability for textile industry. We have also been making a positive impact to the society around us for many years. As a company, we have actively engaged with more than a million people across several states. Our CSR spends are focused on education, supporting 25,000 plus students, health, sustainability livelihood supporting almost 14,000 plus farmers, infrastructure development, and women empowerment. Our efforts towards sustainability has not gone unnoticed. Under responsible sourcing, VSF was ranked number one in Canopy's short-button report 2020 with dark green short rating. The VSF business received the prestigious Innovation and Sustainable Supply Chain Award from United Nations Global Compact Network India in 2021. The business was given the award for its pioneering innovation relating to recycled and circular fiber made with pre-consumer fabric waste based on in-house technology. Let me now switch to the operational and financial performance of the company. the fertilizer business decision divestment process is expected to be completed by quarter two after receipt of nclg approvals for the scheme of arrangements amongst other pending approvals the reported financials has already uh classified it as discontinued operations grass and premium fabric limited The erstwhile Soktas India, which was a subsidiary of the company, has received approval for merger with the appointed date of 1 April 2019. We are yet to file the final order with the ROC, but that substantial steps are already over. The financials of this subsidiary has been incorporated as part of textile segment of the company. In the fourth quarter, all our businesses witnessed all-around improvement in operational performance on back of strong consumer sentiments due to receding COVID cases. The financial performance of BSF epoxy textiles was much ahead of expectation in this quarter. The global textile fiber demand witnessed a sharp recovery in second half, led by a spurt in consumer demand and restocking of the dry supply pipeline. The growing consumer preference for comfortable casual and value for money clothing has spurred demand for cellulosic fiber and VSF has been key beneficiary of this shift. In India, VSF plants operated at full capacity for two successive quarters. The domestic demand grew by 9% YOY in quarter four The share of value-added products in the overall sales mix also improved to 26% in quarter four as against 22% in quarter three. The VFF prices in China traded at their multi-year high in China. The VFF prices rose from 12,800 RMB in Jan to 15,800 RMB in March 2021. This was driven by strong consumer demand restocking and rise in cotton prices during the last 12 months. China's VSF inventory at last declined significantly from 45 days in April to 13 days in March. The VSF business reported one of the highest EBITDA of 548 crore during quarter four. As part of VSF segment, the VFY business reported revenue of of 465 crore and EBITDA of 77 crore in the quarter. The fluoralkali capacity utilization touched 94% in quarter four from 89% in quarter three. The international caustic soda prices improved sequentially led by temporary supply disruption in the large, sorry, the later part of the quarter. In the chemical segment, the advanced material business, that is epoxy business, witnessed sales volume growth given by demand across segments, especially wind and auto segment. The sector witnessed demand outstripping the supply due to raw material constraint coupled with disruption at certain global manufacturers leading to exceptional performance. Our consolidated revenue for quarter four rose to 24,399, up 26% YOY, and the EBITDA and PAT was 5,142 crore and 1,715 crore respectively, jumping 62% and 14% YOY respectively. On the standalone basis, excluding the discontinued operations of fertilizer, our revenue and EBITDA for quarter four stood at 4,394 crore, and 880 crore respectively. EBITDA reported an YOY improvement of 121%. The revenue and EBITDA from the discontinued operations of fertilizer for Waterforce to that 561 crore and 33 crore and has not been included in the published financials. On CapEx, you may please refer to page 14 of the investor presentation. The total capex spent for FY21 stood at 1,508 crore. The capex plan for FY22 excluding paints and fertilizer is rupees 2,604 crore, which includes the VFF expansion project at Goliath with line one scheduled to be commissioned in quarter two of FY22, and line two will be commissioned in quarter three of FY22. The other capex includes Grassland's plans to invest towards increasing its advanced material, i.e. epoxy business capacity, by 125 kTPA. This will be done through a brownfield expansion at the existing location at Williott Gujarat. This will include standard and specialty epoxy products, along with curing agents. Being an industry leader, Grassin will continue to play a proactive role in growing and supporting the demand growth of epoxy. In the chloralkyly business, Grassin plans to invest in 200 TPD caustic downfield expansion at Reliant. This will take the total capacity to 1,400 TPD at its relied site and will primarily meet the customer's requirement in the country's western region, including that the requirement of VSS business, which will also be commissioning its expanded capacity. The expansion will be commissioned in 24 months post receipt of statutory appearances and approval. The expansion of chemicals WAP, which is in various different WAPs, will improve the overall chlorine integration to about 40% by FY25. This is excluding what we plan to sell to our customers through pipelines. We have successfully commissioned 182 megawatt of new capacity in our solar business during FY21, taking the total capacity of solar to 502 megawatt. I would like to remind you that the solar business is in our subsidiary. It's not a division, so it's not included in the CAPEX slide that you're seeing. It's a subsidiary, so it's separately captured. In next two years, we are scheduled to add another 343 megawatt of new capacities. Our balance sheet has stayed strong despite headwinds in half one. At the end of the year, the consolidated net debt stands reduced to with these 8,831, 58% reduction from March 20 levels. At standalone level, the net debt reduced from 2,999 crore in March 20, which included the debt of Earthwise Softas, which has got merged now, to only 914 crore in March 21. Based on a performance and comfortable liquidity position, the board of directors of Ratsim has recommended a dividend of rupees five per share for the year ended 31st March, 2021. And in addition to that, a special dividend of rupees four per share, taking the total dividend to rupees nine per share. The total outflow on account of the dividend would be 592 crore. In terms of outlook, we expect the second wave of COVID to impact the operational and financial performance during the lockdown due to the demand slowdown, but we expect the recovery to happen as much as last year after the lockdown is over. With our inherent financial strength, operational excellence, and diverse product portfolio of cement, financial services, viscose, and chemicals, we've always demonstrated the ability to be resilient and rebound quickly. So now I would like to hand it back to the operators of Q&A.

Thank you very much. Ladies and gentlemen, we will now begin the session. Anyone who wishes to ask a question may press star and on the telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the questions you send in. The first question is from the line of Priyant Mahajan from Kota.