Grasim Industries Limited

I now hand the conference over to Mr. Ankit Panjnathia. Head, Investor Relations. Thank you and over to yourself.

Yes, thank you, Sandeep. Thank you all and good afternoon to everyone for joining us today to discuss grapheme financial results for quarter 4 and full financial year ended 31st March 2023. Trust everyone got chance to look at the financial statements and quarterly presentation uploaded on the exchanges and also available on our website. As you are aware, we don't provide specific earnings guidance. Anything said on this call which reflects our outlook for the future or which could be constructed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. The same is also highlighted in the last line of our presentation. Additionally, for reference purposes, the recording and the transcript would be available on the site. We welcome our leadership team on this call to discuss and share key updates on our financial results, business, and segment-wise performance. We have with us today Mr. H.K. Agarwal, Managing Director, and Mr. Bhavan Jain, Chief Financial Officer. Also joining the call, we have leadership team from key businesses. We have Mr. Himanshu Kapanya, Business-Ed-Based Division, Mr. Jayan Robles, Business Health, Chemicals, Packing and Intuitors Business and Mr. Rashid Hargave, CEO of Paints Business. I now hand over the call to Mr. Pawan Jain for his opening remarks, post which we will open the floor for Q&A. Over to you, sir. Thank you, Ankit. And good afternoon, everyone. We welcome you to discuss our annual performance as well as quarter 4 results discussion. First, I would like to give some highlights on our annual numbers and then we would cover three aspects for the quarterly performance. As you are aware, the macro-global environment of our businesses has been very volatile in the years gone by due to various factors such as energy prices and inflation rates shooting up globally, demand flow down across global markets, supply chain disruptions, etc. The results for Trans-Sibir 23 are to be seen in this background. Despite the challenging macro environment, FY23 is a momentous year for Gratin. We have achieved various milestones and we hope to continue this momentum in FY24. We have constantly demonstrated growth on YOY basis and achieved highest ever consolidated revenue of over Rs. 1 lakh crores in this year. The CAGR in consolidated revenue and EBITDA over FY20 to FY23 stood at 16% annually. The consolidated level, Ultratech, Aditya Billa Capital and Aditya Billa Renewables have added to the strong growth of the underlying standalone businesses. A key point to highlight is the reported PAT vis-a-vis the comparable PAT of the previous period. The strength alone as well as consolidated pay for last financial year, that is FY22, needs to be adjusted for the exceptional items, tax-related write-backs and profit from discontinued operations accounted in the last year. Working of these adjustments has been shared in our presentation. Also, costs in the current year are elevated significantly. due to the initial costs of our high growth new businesses which impact the overall profitability. On standalone basis as well we have achieved highest ever revenue for FY23 of Rs. 26,840 crore. Standalone EBITDA for the year stood at Rs. more than Rs. 4,200 crore over the same period of FY20 to FY23 The same alone, revenue recorded a growth rate of 19% CAGR and 18% PAT. Furthermore, over the past decade, we have multiplied revenue by 5.6 times and EBITDA have multiplied by 4.2 times. The growth under dynamic macroeconomic conditions clearly demonstrate driving forces of the unified approach of five pillars of our strategy. namely leadership across businesses, constant product and process innovation, increase our sustainability quotient, capital allocation to build high-growth businesses, and constantly work for and maintain cost leadership. The highest cover revenue at standard oil level is largely driven by strong growth in two large segments, which is viscose and chemicals. Viscose business achieved highest ever sales volumes during the years on the back of strong domestic demand. Chemicals also posted its best-ever years on the back of stable demand and historically high realizations. Textile business has achieved its highest ever revenue again, largely driven by linen business. Linen Club, which is India's premium linen brand, has been increasing its presence across India. with 210 exclusive brand outlets, versus 186 in FY21 and 168 in FY22. The presence across ambios also increased now to over 8,000 touchpoints. The premium fabric brands under Soctas and Giza House are other scalable opportunities on the retail side. Furthermore, on the brand side, we would like to highlight that there are multiple brands which we have created across various categories of viscose, chemical and will be now doing so for grains. In viscose, we were able to create the full demand position, Leewa as a premium sustainable under cost-sufficiency creation category. Leewa is also associated through co-branding with some of the finest brands across the world. There are also well-established brands like Ultratex and Aditya Birla Capital which are created by our key facilities which play big in your life. Responsible corporate has been key motive where Grasim continues to work and amplify its efforts through its sustainability goals and agenda. Given the complex and intensive manufacturing processes, we highlight Grasim has been able to make a tangible impact in R523. We have been able to reduce fresh water consumption intensity by 15% compared to FY22. The GLG emissions intensity has been also reduced by 6% compared to baseline year of FY19. This is despite the increased capacity over the same period and contribution from renewable energy improved by 3 percentage points from 5% in FY22 to 8% in FY23. On the innovation side, we continue to provide markets with differentiated, sustainable solutions to drive its goals to our conscious session. For instance, there has been continuous progress on developing MMCF, that is, man-made cellulosic fiber, from the textile waste. Commercial production of Leva Revival viscose from 30% textile waste was achieved on one of the large USF lines. Likewise, commercial production of live cell fiber was achieved with up to 31% of raw material being textile waste. Now, coming to performance of quarter 4 of the year, consolidated revenue stood at its highest level of Rs. 33,462 crore, recording a growth of 16% biowise. Revenue from significant subsidiaries, UltraTech and Archipelago Capital, grew by 20% and 23% respectively. We believe that our key subsidies are direct beneficiaries of India's expanding infrastructure, growing financialization, and growing demand for renewable energy. Consolidated EBITDA stood at Rs. 4,873 crore. Record is a growth of 5% YOY, largely due to performance from Ultratech and Agitabular Capital. Standalone businesses revenue was up by 7% at 6,646 crore compared to 6,196 crore in Q3 of this year. Standalone EBITDA de-grew 6% QOQ to 542 crore compared to 580 crore in previous quarter. At segmental level, this course has sequentially recovered at a faster pace and we have exited the exited the quarter at the month high level, quarter high level. The effective Q4 EBITDA was impacted by exceptionally subdued conditions of Q3 which continued in the initial period of current quarter. However, there remains a continuous improvement month over month in the quarter gone by. The utilization levels are near to highest levels. Demand recovery has also resulted in China inventories reaching below the previous average of 23 days, which reflects well-balanced demand-supply situation currently. With course, revenue during the current quarter grew by 18% QOQ to Rs. 3,760 crore, while combined EBITDA forced the VSF and VS5 businesses put together, showcased sharp sequential recovery due to VSF now reverting back to the profitability, compared to EBITDA loss in Q3. Global caustic market remains oversupplied due to higher operating rates and lower demand. On similar lines, Indian Clore Alkali market also remains oversupplied due to incremental capacity. The CFR SEA prices of caustic soda corrected by 25% QOQ and 28% YOY during the quarter for and these are the lowest prices since September 2021. While the impact of the same could come with a delay, the current quarter revenue de-grew by 4% YOY to Rs. 2,397 crore compared to Rs. 2,487 crore in Q4F by 2022. The mix has further changed in favor of the chlorine derivatives with an increased revenue contribution of 100 BPS QOQ and YOY. To further enhance our focus on chlorine derivatives, we have acquired the required land at Velayat adjacent to our existing plant for setting up manufacturing facilities in due course. In next three years, chlorine integration would be 72% compared to 60% for R5-23. Contribution from specialty chemicals segment improved significantly. based on improved demand and softening raw material prices. Revenue performance from textile remains stable at Rs. 520 crore for this quarter, recording a growth of 8% YOY, largely driven by strong underlying demand from the wool and linen businesses. However, the profitability for the current quarter was impacted due to exceptional rise in the flex prices, which is the raw material for our linen business. The B2B e-commerce opportunity is big and scalable. We aim to be a meaningful player in due course of time in the segment of marketplace for building materials. We are on track to launch full-scale operations in C2FI24 beginning from cities in the state of Maharashtra and MP and plan to cover major part of the country in due course. The excitement is at peak. across with regards to long tower paint business which is now just three quarters away. The segment is big whereby it can accommodate multiple players where we aim to be a second largest player in Indian organized decorative paint market. The capex paint is also progressing on expected lines and would be at peak of its requirements in the current and next year. Simultaneously, activities for business plan implementation are also progressing well for commercial lawns in Q4 FY24. Coming to the balance sheet, the capex for FY23 was largely towards chemicals and tanks. Next year, there would be accelerated capex which would be undertaken for future accelerated growth of the company. To fund the same, the company has already entered into long-term loan agreements of Rs. 5,000 crore. As of 31st March 2023, companies earned the loan to date Rs. 1,780 crore. Excluding our investments in the high-growth businesses, the existing businesses continue to remain free cash flow positive. We will share the capex plan for the current financial year that is FY24 once the same is finalized and approved by the board. I would stop here. Thank you very much.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Naveen Sarding from ICICI Securities. Please go ahead.