Grasim Industries Limited

Ladies and gentlemen, good day and welcome to Q3 FY22 Earnings Conference Call of Grassland Industries Limited. We have on the management, Mr. H.K. Agarwal, Managing Director, Mr. Jayan Doble, CEO, Global Chemicals and Group Business Head, VFY and Insulators, Mr. Jayan Dua, Chief Executive Officer, Chemical Division, and Mr. Ashish Adhukia, CFO. As a reminder, all participant lines will be in the listen-only mode. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Adhukia, CFO, Thank you and over to you, sir.

Thank you and good afternoon to all the participants. So, FY22 till now has been a defining year for the company as the company accomplished 75 successful years of its incorporation. We are privileged to continue with legacy of our founding fathers of the company and thankful to our fellow colleagues, shareholders, customers, and all the other stakeholders who have been part of this wonderful journey. One of the pillars of our 35 years of existence has been resilience. That has come about from our commitment to the growth. We have continuously invested in our capacity expansion, technology advancement, and process improvement in our core businesses. Today, when India Inc., is making new capital commitments. India is well ahead of the curve as we had planned our capacity additions in core businesses ahead of time and now nearing completion. So one of the important themes in this quarter is project commissioning. Starting with VSF Reliance plant of 600 TPD VSF capacity at Reliance, 300 TPG was commissioned in November 21, and the balance 300 TPG has been commissioned just this week. So the total BSF capacity has increased by 37% to 810 kTPA from 591 kTPA. With the growing domestic demand in BSF, we are confident of fast ramp-up of this capacity to make additional capacity available to our customers. In the chloralcholine business, as of Q3 FY22, 91 kTPA caustic soda plant at Rehla is fully commissioned and Balbadra Puram Phase 1 plant is partially commissioned with 26 kTPA. The total capacity will augment, will get augmented to 1,530 kTPA by quarter 1 of FY24, because there are a few more commissionings that will take place, from 1,147 kTPA today. The chlorine value-added plant, chloromethane plant of 55 kTPA at Williott was also commissioned in quarter 3 of FY22. The total capex amount budgeted for the entire year was 2,604 crore, and that was excluding paints. For nine months FY22, the actual amount spent stood at 1,476 crore. We will certainly close the year well within the budgeted capex amount. For the paints business, we have received two environmental clearances for two parcels of land. So the capex in those two sites will get accelerated. The capex spent amount is at 505 crore till now on paints, which is mainly towards acquisition of land parcels. We completed disinvestment of fertilizer business on 1st of Jan. At the time of announcement of the transaction, which was more than a year back, the enterprise value for the disinvestment of fertilizer was at 2,649 crore, which included the outstanding subsidy amount at that time, which was part of the working capital. The final consideration amount received by the company on 1st Jan 2022 was at 1,860 crore, and this is after adjusting for subsidy already received from the government during the year and has been small adjustments on account of capex and working capital with this sale the company has turned net cash positive on standalone basis again after a gap of 12 quarters performa net debt adjusting The December end net debt with the proceeds of fertilizer comes to negative 432 crores. Sustainability has been another key area of focus for the company, and we have incurred more than 500 crores in the last five years, and this is in VSF, and they have earmarked a total amount of 1,000 crores towards achieving global standards. The BASF business has taken the target to achieve net zero carbon emissions across all its operations by 2020. Gratham participated for the first time in Carbon Disclosure Project, CDP, in 2021, and has received management band score B-. At Gratham, our commitment to improve the quality of ESG data reporting is increasingly being recognized by the external world. In another major achievement, the company has received Gold Shield Award for integrated reporting and excellence in financial reporting. So these are two awards from the ICAI. Another theme emerging in the quarter was unprecedented growth in prices of crude and derivatives and coal, et cetera, which emanated from demand supply imbalances logistical challenges created by countries' specific COVID restrictions, and these have continued unabated. The BSF business has witnessed almost 400 crore plus of cost escalation sequentially. Gratian's backward integrated model will provide relief at the time of such extreme volatility in the prices, as the rise in caustic prices, for example, There are business-wise initiatives like improvement in consumption norms, improvement in share of renewable energy, which will all benefit in the long run. I'll briefly touch upon the key performance, operational and financial performance. Strong operational performance of ESF has been induced by strong demand for textile products in India during Q3 FY22, despite state-specific restrictions. The domestic textile trade chain has been operating close to its peak capacity, which is led by demand uptick and is evident in the share of domestic sales, which increased to 91% in the quarter from 84% in the last quarter. The share of value-added products in the overall VSF sales mix has increased to 29% on a sequential basis from 27%. In terms of volume, the WAP volume has gone up from 41 KT to 46 KT, an increase of 11% to QOQ and 46% to YOY. And why volume becomes more important than volume The percentage is because the gray capacity has gone up due to the last expansion. BFI Business also reported a strong operational and financial performance on a sequential basis driven by strong growth in demand and improvement in realization despite the cost pressures. The viscose business reported net revenue including VFY of 3,335 crore and EBITDA of 401 crore. The VFY business reported a revenue and EBITDA of 574 crore and 80 crore respectively. The international caustic prices witnessed an upward trend for the fourth straight quarter. The domestic caustic soda prices went up on back of domestic demand and higher international prices. The caustic soda capacity utilization touched multi-year high of 93% in Q3, up 7% sequentially. The EQ is at all-time high with revenue increase more than offsetting the cost increase due to power cost. Map performance suffered from cost pressures and weak demand as well. The advanced materials, i.e. epoxy business, have also witnessed a YOY improvement in the operational and financial performance, driven by a better product mix on the back of strong demand from the wing segment. However, epoxy segment is witnessing some cost pressures, which may impact margins going forward, mainly due to timing differences. The revenue and EBITDA for chemicals with divisions to that 2,338 crore and EBITDA of 528 crore respectively. The stand-alone performance overall for Grasm for Q3 was strong with revenues up by 56% to 5,785 crore and back up 46% to 522 crore on a YOY basis. At the consolidated level, the same figures were that revenue was up 16% to 24,402 crore and fat up by 26% to 1,746 crore for the quarter on YOY basis. With this, I would like to hand over the call back to the operator to take a comment.

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Anyone who has a question at this time may press star and 1 on your phone. We have the first question from the line of Naveen Fahadio from Edelweiss. Please go ahead.