Grasim Industries Limited

Ladies and gentlemen, good day and welcome to the Q1F524 earnings conference call of Graphene Industries Limited. 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 test tone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head Investor Relations. Thank you and over to you, sir.

Thank you, Jacob. Welcome everyone for joining us today for Gratins Q1 FY24 earnings call. Trust everyone got chance to look at the financial statements and presentation uploaded on the exchanges and also available on our website. For safe harbor, kindly refer to the cautionary statement highlighted in the last slide of our presentation. Today, we have with us Mr. S. K. Agarwal, Managing Director and Mr. Pavan Jain, Chief Financial Officer. Also joining the call, we have our leadership team from key businesses. Mr. Hemantku Kampanya, Business at Page, Mr. Jayanth Doble, Business at Chemicals, Fashion and Insulators and Mr. Vaxi Tharkave, CEO of Paint Business and Mr. Jayanth Dua, CEO of Cortex. I would now welcome Mr. Bhavan Jain for his opening comments, post which we will open for the Q&A. Over to you sir. Good afternoon everyone. It is a pleasure to share our quarter 1 performance with you. First I would like to give some highlights on the macro environment and then would cover financial performance of our company for the quarter in the description. Globally, interest rate hikes continued with U.S. head rates rising in July 23 by 25 BPS to 5.25 to 5.50, though RBI seems to have paused the rate hike for the time being. Fed has guided that the future interest rate decisions would depend on inflation data, and the inflation in U.S. is steady. Economy is growing at a faster than expected pace. Consumer sentiments are also indicating positive signs of recovery for second half of calendar year 23. China's expected reopening-led demand based on export growth and consumption revival has somewhat disappointed global expectations. The subdued domestic demand recovery has made China focus on exports to keep the economy growing at desirable levels. As the macro-global environment continues to remain volatile, the realizations are impacted across global businesses we operate in, like viscose and chemicals. On the Indian front, we have been on strong footing and there have been multiple upgrades to GDP estimates. According to RBI, India's Q1 FY24 GDP growth is expected to be around 7.9%. Given the current expectations around growth, multiple agencies have tagged their estimates of India reaching the position of third largest to dominant GDP by 2030. This is remarkable given its position of being among top 10 economies in 2010. Given majority of our revenues are from domestic markets, we remain confident of playing an integral part in India's long-term growth story. However, in the near term, global slowdown has directly impacted India's exports of textiles, which de-grew for the 12th consecutive month on YOY basis. During June 23 quarter, textile exports were lowered by 10% YOY and 9% QOQ, which has impacted the textile value chain from mills to garment manufacturers. The domestic demand for textiles and apparels is also exhibiting some sluggishness due to delayed festive season which is in the later part of the year. Cotton prices have also declined 41% YOY and 4% QOQ which to an extent impacts the demand for this course as well. Chemical industry is witnessing similar global demand slowdown impact which has hybridized in higher inventories. Least demand from end-user industries globally like textiles, packaging materials, constructions, etc., especially in the developed countries, is indicating subdued scenario in second half of calendar 23. Despite these headwinds, our standalone businesses' performance has improved for second quarter consecutively. The improvement was largely driven by strong recovery in the sports business, partially offset by subdued performance in chemical and textile businesses. Bio-wise performance comparisons are impacted due to unfavorable base impact compared to the peak of cyclicality in Q1 last year in respect of our GSS and chemical business. Our continued focus on cost and improving efficiency coupled with lower input prices have resulted in improved performance on QOQ basis. As already shared earlier, we are happy to share that we would be launching our two new businesses in the current financial year. The French business would commence its commercial offering from Q4 FY24. Of the six plants, at least two or more plants will be commissioned this year. Our long-term goal is to be second largest player in the Indian decorative paints market which is growing at a healthy double visit pace. We have launched our full-scale B2B e-commerce website this month under the name of Billa Pivot. Billa Pivot is a unique experience for MSMEs operating in construction business, giving them one-stop-shop solutions from generation of code to delivery and facilitating financing solutions. The platform is up and running in full-scale across regions of Maharashtra, M.P. and Delhi. We have onboarded 130 plus brands and going forward, we will also explore private label products in select categories. Initial response to Biola Pivot has been encouraging. On sustainability front, our efforts are well recognized in the industry and value chain. We constantly endeavor to reduce water consumption and emissions and increase the share of renewable power. This would be driven by process efficiency, new technology deployment and investment in the renewable power capacities. We have improved our share of renewable power to 11% compared to 8% in last financial year. Additionally, we have been recognized as one of the most sustainable organizations by two prestigious media publications that is the Economic Times and Business World. Now, highlighting some of the key financial parameters of Q1 FY24. Consolidated revenue grew by 11% YOY to Rs. 31,065 crore this quarter. Revenue from key subsidiaries, Ultratech, Ajit Diplala Capital, grew by 17% and 26% respectively. The performance was moderated by degrowth of 14%, at standalone level. Consolidated EBITDA de-grew by 5% IOI to Rs. 4,981 crore, largely due to softening of realizations at standalone businesses as well as at ultra-tax payment. Standalone businesses' revenue stood at Rs. 6,238 crore compared to Rs. 7,253 crore in the same period previous year. Stranglehold EBITDA Degrew by 42% YOY to Rs. 789 crore compared to Rs. 1364 crore. The high base impact from historically high rates of key products namely ESF and Corsic soda has led to this impact on profitability on YOY basis. EBITDA for the quarter is also net of pre-operative expenses of new businesses charged through P&L. Globally, this course is the fastest growing sustainable fiber compared to cotton and polyester. This course continues to sequentially recover since Q2 of 2023 with EBITDA for the quarter at Rs. 390 crore. Utilization level at 90% was affected partially by the plant shutdown of almost a month due to fire at our higher unit. International caustic prices are on declining trend from October 2022 onwards. The rates were $7.35 per tonne in October 2022, declining to $3.95 per tonne in June 2023. This is a correction of 46%. Quarterly average rates during the same period previous year stood at historic high level $769 per tonne, which makes YUY's comparison unviable. High operating rates with missing demand recovery in China led to oversupply, leading to global prices erosion. India imports and beats a lower base in case other add-ins to the capacity additions from domestic players. Our plurality business continues to maintain its market leadership, posting volume growth of 5% YOY at 292,000 metric tons. However, the revenue for the quarter decreased by 21% YOY to Rs. 2,146 crore compared to Rs. 2,733 crore in Q1 last year. The resultant revenue mix from COSIC declined from 61% to 55% and chlorine derivatives revenue increased from 17% to 20% on YYBC. There remains a sharp focus on developing products around chlorine derivatives. Partnership with Lubrizol is in the same direction. Thereby, the construction of Asia's largest CPVC resin plant at our July split is expected to commence this year and it would help to improve captive consumption of chlorine. Post completion of capacity expansion projects, the chlorine integration would be 72% compared to current 61%. The specialty chemicals, which is our epoxy resins business, posted another stable quarter leading to strong, led by strong demand for specialized products in key user industries. The product mix improvement in favor of specialty products and correction in raw material prices resulted profitability in this segment growing nearly two times YOY. Delayed festive season coupled with elevated flex prices impacted performance of our linen business in the textile segment, though wool segment performed well. Textile revenue grew by 11% YOY to Rs. 549 crore. Our focus has been to grow iconic brands like Linen Club, Socta and Giza House. We have been ramping up our retail presence and the grants are now available at 210 EBOs and over 8000 MBOs offering key grants. As we are making large investment in new businesses for next phase of growth, the net date is of 30th June 2023 to date Rs. 3515 crores. During this quarter, we have also participated in the preferential allotment by Aditya Kapila Capital, wherein we have invested Rs. 1000 crore. Excluding our investment in new businesses and the investment in Aditya Kapila Capital, our existing businesses continue to generate free cash flows and we have generated Rs. 256 crore for the quarter at 1.25.24. The board has approved CAPEX spending of Rs. 5,791 crores in FY24, including Rs. 4,283 crores for paint business. During first quarter, we have spent Rs. 1,380 crores towards CAPEX.

We now open the floor for Q&A. 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 the touchtone 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 in the line of Sumangal Nivetia from Kodak Securities. Please go ahead. Thank you, sir, for the opportunity.

My first question is on the VFL difference. So, clearly costs are dictating. So, if you can do details with all areas where we have seen cost dictation and also in the coming quarters as we can see prices are bit up on the pressure what all cost some outlook on the cost for the coming quarters if you could share.

Okay. So, on the discourse side

Obviously the main cost items where we have seen reduction are soil prices, toxic prices and coal prices. So all the important input prices have come down compared to last year significantly and also compared to the last quarter. So that is a very positive trend. Looks like the input prices do not have much further room to go down. But we have to see. It all depends on the macro level situation and especially in China. China now is going through a very difficult phase. Today in these reports, everybody read that China is going through deflationary pressure. So we have to see how the government and the Chinese economy perform in the coming months. and that will determine the input prices all over the world the realization also is in the decline trend and it depends on the pace of decline sometimes raw material prices decline faster sometimes final product prices decline faster depending on the inventory level depending on the macro global sales trend etc etc so these are the scenarios currently going through. On the floor alkali side, cost of prices have come down significantly. That helps this core cyber side but it again impacts us very badly on the floor alkali bottom line performance. Energy prices, particularly in terms of coal, they have come down significantly. Recently, that should reflect in our performance in the coming months also, but then it will again depend on how severe is the winter, coming winter, and that will determine the coal prices going forward. Okay, sir. So, I mean, as far as the spot rates are concerned, for the biggest cost item, which is already largely reflected in one figure, then you say there is not much further scope of reduction or there is some further inventory gains and you will see some benefits in the coming quarter? I think this is fairly reflected already. Small things will keep moving, but that will not be very big. And for the caustic business, given the pressure on prices, coming quarter, should we expect margins also to trend in line with the price weakness or there are some off-the-top variables? So, this was Jayant's view on this side. So, we believe that caustic, the way it is trending, we are nearly at the end phase of further reduction. There could be marginal changes which are obviously a function of local India movements and how the Indians But yes, the trend for this particular quarter will be lower as compared to the average of last quarter because the exit of last quarter is what we have seen today as the new stabilization Yes, to your question, will there be further margin erosion based on the exit of last quarter? It will be relative to, it will be equivalent to that, but from the average of last quarter, it will be a dip. Understood, understood. Sir, my second question is with respect to CapEx.

For the paint division, should we expect a large part of our 10,000 square capex to be concluded by FY25, given that the 24 also is a very significant capex as per the presentation?

Yeah, yes, you can assume that. So, a large part of capex will be done by FY25. Okay. And shall the B2B pivot center, it's a very low capex what we are spending this year.

Is there any other indirect way of financing in terms of locking capital etc. being a block in that business?

No, there is no indirect way as of now. I think, and CapEx, see, it is not a CapEx intensive business. We have spent on the technology side and of course, we will have to continue to spend on technology. So, that is all for CapEx.

So the peak of capex will be this intensity only in a capital like that or some years 525-525 will be increasing capex from what we are spending effectively for?

So for the board approved capex numbers if you look at this is I think one of the highest spending year, current financial year. So the next financial year we will have while the pending capex of bench business For the next financial year, we will have proposals to go to the board and get board approval, etc. So for next financial year, it is very difficult to say about the number. But as of now, yeah, this year looks like CapEx is very easy.

Okay, got it. Thank you so much, sir, and all the best.

Thank you. Thank you. The next question is from the line of Nirav.

Yeah, good afternoon sir and congratulations on very good set. Sir, I have few questions. So, one on the chemical side. Sir, if we see our ECU realizations in Q1, they have been far better than the other place reported numbers of in the caustic chlorine division. So, just wanted to have your thoughts here that was there any specific reason for our ECU realizations higher than our peers? If you can share your thoughts here. So, you know, I think the reason is that I think tactically we played couple of moves better than some of our competitors. Okay. From a long term, if you say, was there any, you know, repeated shift? No. I think one of the symptoms was that our VAP, or what we call as our fluorine derivatives, fed to Q4 of last year to Q1 of this year, our volumes have materially gone up. Okay. and other than that it was I guess more day-to-day active management correct and sir what proportion flex forms in terms of our total sales volumes for caustic soda division because I think it takes form to the tune of around 20 to 30 percent of our total caustic light production okay and has that proportion gone up this quarter yes it has gone up not significantly marginally correct related question to this like when we are expanding our caustic soda capacities does this newer capacities come at a lower power consumption per ton of production because what we have seen for lot of places when we interact that they say that it is possible to reduce the per ton consumption of power so that and whether it is possible to modify the equipment for the older capacity so that there also there is a some scope of power reduction so you see the power reduction in any gothic plant is a function of the generation of the electrolyzers you buy correct so if you go towards the generation five six you will be better off compared to your four so all our new capacities which are coming are coming with the latest generation of electrolyzers But on the grip side of it, we have a very robust program of also upgrading our old membranes and electrolyzer, which is a continuous process which happens. Correct. And sir, is the cost, is the power reduction could be to an extent of 15 to 20% with the installation of 6th generation membranes? It's not that material. or close to 40 or units per sack which you get from one generation to another. But your real power cost reduction comes from how you do your power buying or your power mix. It's not through material on the electrolyzer, while that's the largest consuming center. Correct. Your power cost saving comes from your power mix. I think that's what it is. And I think the material difference that we have in our cost structure is that today, on an expanded base, 14% of our power mix is on the renewable side, which is significantly lower in cost compared to the current grid cost or the thermal power plant cost. Got it. So, sir, if you can... As Mr. Agarwal was talking, the coal prices compared, he, I think, in our buying, he's done better than the index values of the coal buying. Correct. So, our power cost mix is lower than CW average. Got it. So sir, here if you can share what was our average power cost for Q1 and how much savings we could assume from Q2 onwards because last quarter you mentioned that our average power cost was close to 7.5 rupees a unit. So if you look at it as far as... Let me just go through the number. So if you look at it from... If you look at it, we are currently at approximately 7 odd rupees on power. So... but in between the cold prices have actually significantly also at points of time gone up. Today the biggest change is the way the grids are now increasing their price by letting off various stresses. Cold price is lower, power cost is radish for us. Correct. So second question is on the epoxy side. So last time we mentioned that we are in a range of 15 to 17% EBITDA margins for the epoxy business. added margins remain the same in Q1 FY24 also and if you can share your views in terms of the speciality volumes for our epoxy business so how much they are out of our total sales volume and your thoughts of venturing into the B2C business for epoxy whenever we will be keep on ramping those LER capacities on commissioning and then later on going into the value added product. Thank you so much. That was a lot of questions to ask at one point of time. The last one first. So, as of now, there is no immediate plan to enter into the B2C market. In fact, many of the large B2C players are our customers, right? And we do big volumes with them. Now, over time, that could change. As and when that changes, we will, of course, announce it. But as of now, there are no plans. We value all our B2C relationships with globally market customers such as, you know, Henkel, Mape, Heka, etc., etc., right? Then if you look at the actual margin, so, you know, we are confronted with a situation where we have free trade agreements with many countries and an inverted loop is structured in some of the basic opportunities. For example, the Korean players like Kupro, Kumho, etc. can supply duty-free into India. And at the same time, Europe has removed the GST benefit for equal period. We have managed to overcome these headwinds by actually increasing our specialty share, the one that you have mentioned. And we are particularly strong in the wind sector. So, compared to previously, quarters we have improved our specialty margin. I don't think we would like to disclose the exact number of the margin, but what I can disclose and confirm what was said earlier by our CFO, Mr. Kavanjian, is that our profitability of EPUB here significantly improved. We have doubled our quarter-on-quarter basis. But I would not like to give the exact number of specialty sales in the segment called EPUB. You mentioned on a quarter-on-quarter basis, we have doubled our... Sorry, YOYB. Okay, sir. Thank you so much, sir, and I'll join back in the... Thank you.

The next question is from the line of Naveen Sahadio from ICSS Liquorities. Please go ahead.

Thank you. Thank you for the opportunity. Very happy to see the sequential improvement in margins despite realizations correcting the way they did. First question on VSS. So I think this is again the second time that we are seeing that globally the prices are has gone up a little bit that's what the presentation says but our blended realization again has been a little soft or down rather qoq i'm assuming could be the similar reasons like last time because of let's say the importing import duty or anti-dumping duty i mean uh being abolished or some material coming in from other countries which is led to this impact and the cost of course helped us post a significant improvement quarter on quarter. The question is that I believe globally there has been a further some drop in prices in July and August so to that an extent assuming that there is a further fall or down slide in India prices will margins hold at these levels because of bulk prices and caustic prices going down further or you can see some directionally some pressure on margins in the coming quarter or year?

You have summed up it almost correctly. So there will be some pressure but it is all very marginal. There are not big movements either way. So yes prices, international prices have reduced since end of June and we also have to follow that's a trend in India also and there is a some reduction in the raw material prices also but everything moves there are so many moving parts and we have a pipeline in the tranches of raw materials and all these things so there will be small difference whatever way it is yes but largely can we say that this is

basis points here or there, but these margins are largely bottomed out. Is it a safe thing to say?

We would like to think so. And you never know, you know, there are always surprises from China or sometimes Europe. Like, things change so fast. Within one month, things can change. The global sentiment can change. Anything happens has its effect on everything. But Hardly, yes. You are right.

Sure. So, just on this, since you mentioned China and the global factors, and recently there were some news articles about spinning mills, like, you know, seeing some shutdown or temporary closure in Tamil Nadu of the textile hub. So, does that impact our volume outlook in any way?

See, globally, textile markets are not doing great, including in India. And not just in this course, but across all kinds of products, all kinds of things, whether it is cotton or polyester or linen or this kind. So, it's a global trend and exports from India have also declined. Q1Q also and Y1Y also. So, do you think it's under a little bit of slowdown?

So, there can be some hit on volumes is what you say from the current quarter like you know we did a pretty healthy utilization of 90% plus. So, are we expecting that?

We are trying our best to maintain the volume and also try to get more volume in export market. So, we try to maintain our volume as best as possible.

Understood. My second question was then on the chemicals business. Is there a delay in the capex of chloralkali conditioning because I think the capacity increased from 1.3 to 1.5. It earlier was guided as Q3-24. I think in the latest presentation it is Q1-25.

So, there is actually there is not a significant delay. There is about a delay because of the monsoon and all which has been factored in there but the cathetics are going as per the plan these capacities will come by you know Q1 25 could be Q4 exit 24 but there has been a fair amount of monsoon delays which have got into the system understood and since the speciality chemicals is just around the corner to double I believe capacity 123 further getting added I think Q2 24 again

as we speak probably so what kind of delta can we expect broadly if you can get some sense how should we consider the commissioning of this speciality chemical segment when you say delta you are asking me about the revenue ramp up curve some guidance as to like you know revenue will help broadly so look we will be doubling our capacity

And as you can imagine, these are all batch process units, right? So there are multiple underlying SKUs that need to be tested, qualified, etc. A typical ramp-up curve from start of commissioning to reaching full, let's say, you know, operational capacity after all the qualification steps is done is around 12 months, let us say. So you can assume that we will make incremental steps of 20-25% per quarter over a year period. In a worst case situation, it could become 5 quarters. That would be a good underlying assumption.

Understood. And just on this margin front, similar to VFF, here also cut prices are lower versus the previous quarter. But I believe cost is also, some probably seeing rest to get back. So, we are also, should we see margin stabilization or there is some pressure?

Margin profile won't significantly change. Of course, I think at that point, I have to say that, you know, when a new factory comes on, we are more likely to increase our share of basis and as compared to specialty. So, the product mix will change. But the inherent margin profile of the business will not change. We drive our business by spread over raw materials in this particular type of business. And sometimes there may be a time lag because of timing of purchase versus timing of sale, but that time lag also rarely exceeds a quarter given the length of our supply chain. So the margin profile won't change, the product mix will change because the newer capacities will probably

first be consumed in basis and before we restore our basis into special equipment.

Just one last question. In the initial comments, the publisher said that the performance is net of the operating expenses of these new businesses. I just wanted to understand what kind of impact is there because of the B2B business or even the paint that we have probably started some trials on as I know. So, what kind of impact are we seeing since the last one or two quarters to help us understand that these numbers are including the impact of the operating expenses?

So, not very significant numbers I mean but yeah I mean I think we are not separately disclosing these numbers but These numbers are not very significant considering our overall numbers.

Understood. Understood. Okay. That is from my side. I will come back in case you have more questions. Thank you so much.

Thank you. The next question is on the line of Pratik Kumar from Jefferies. Please go ahead.

Yeah. My first question is on the SL business. So, From the truck mix of domestic versus exports which you mentioned, it appears that domestic business was much weaker on an year-on-year basis versus international.

So, is the dumping from some of the Southeast Asian countries increased significantly because of global environment or how should it be treated?

So, the VSS imports are not happening much currently. But what is happening is a lot of viscose yarn is coming from China at very low prices and that is affecting the profitability of our customers big way. And that is creating pressure on everyone. And this is all because China's consumption is less than the production of viscose fiber yarn and all that thing. So China exports are also low to the West, US and Europe. So, these are all trade flows happening.

But as such, VFR imports are not very high.

So, we are not able to push our products to our yarn customers and that's why the domestic demand seems weaker now. domestic demand is anyway weaker even without this much import but that import also then dampen prices of yarn and the profitability of spinners so and they evaluate which fiber to run which product is profitable okay other questions or new results so can you highlight

How is the traction in the paid services business which you have started with your I think employees or friends and family in the paid segment?

How is the initial traction and what is the what is exactly the illusion there?

Just for the paid services business that you have started is a is a client service where you are addressing paid services solutions within friends and families of Aditya Birla Group. So obviously, this is to develop and improve on certain standing operating procedures that we have developed. And as we know that we don't have our products right now, we are using products from the market. So this is to develop better SOPs and prepare service teams for the future.

And your case is?

This year, this year we are expecting that it is 4200 crores over 2600 crores last year. So, remaining is only I guess around 3000 crores in this segment.

So, all of it is expected to get incurred in 2025 or some of it is like most more like working capital related expenditure.

So, it can become as an operating kind of CAPEX later in the FY26 or 27.

No, the overall paper expense till 30th June is 3638 crores. That's the correct number. So, I think you are having a different number. No, no. No, I think you are accumulating. You are accumulating 10,000 painted, 3,600. 3,600. 3,600. Yes. And 4,283 planned for this year. Balance of the 10,000 crores will be spent in 25. Some Small amounts may flow, like the performance guarantees, like payments, etc. That may go to SI26. But largely, everything will be spent by SI26.

Okay.

And on B2B e-commerce, now we have started with portal reporters. So, like initial expectation, what will be your gross revenues and the kind of take rate revenues which we are looking at in this segment and will this segment be reported separately in our earnings or how should we look at it?

I think this segment will not require separate disclosure considering the overall number but will, I mean, because this year I think only two quarters we will have the full scale businesses. So, as far as separate disclosure of revenue etc. is required we will go by the numbers for the year whether it will require separate disclosure or not. But for the current year we will have full scale operations only for two quarters kind of, two quarters plus some one month or something like that. But the segment would have like gross revenue which will get reported or just a overtake from the gross revenue?

No, no, gross revenue, gross revenue because the, the, the modern is that Ladies and gentlemen, we have lost the line for the management.

Please stay connected as we connect them. Ladies and gentlemen, thank you for being on hold. We have the line for the management reconnected now. Mr. Kumar, you may proceed with your question. Thank you.

Yeah, I was asking, so we would be reporting lost revenue in this segment and not the net revenue which we get as a take rate for the B2B e-commerce segment. No, so we will report the growth revenue because the billing needs to be addressed to the customer.

Yeah.

Can you mention, when you are opening the mask, we are looking at some private label products also in this segment. So, can you elaborate on this?

Like, we are looking at manufacturing contracts of carriers, etc.

We are still in the, I mean, not in the state of... final disclosures in this regard. We are exploring in different product categories, private level business. I think once we reach to the finalities, we will come out with the disclosures. So the idea of telling about this is that we will be looking at private level manufacturing and the idea is that that should help us in augmenting the housing.

Right. The last question on your debt, you have like 35 minutes through debt as of 2024.

What is the peak debt if you look at FI 24-25 with the conclusion of NKP?

FI 25 you are asking?

No sir, about 10,000. FI 25 you are asking or 24?

Yeah, during the capex of same business, so what is the peak rate we should look at versus 35 million crores for one case?

The peak rate, it will depend upon, I mean, how the existing businesses show cash flow. And see, capex part is certain, of course, but the debt requirement will be dependent upon how the cash flows are coming from the existing businesses. But of course, it looks like whatever perfect requirement is there, at least we have to meet that largely by the borrowing only.

Like the price would be somewhere in the range of 8 to 10,000 crores.

Yeah, at the peak of the growth rate could be that kind of level. But again, as I told you, the numbers will depend on how the cash flows are generated by the existing businesses and net debt of course will be lower net debt will be we continue to hold about 3000 crore plus as cash surplus so net debt of course will be lower thank you sir these are my questions all the way thank you thank you the next question is from the line of

Vipul Kumar Shah from Sumangal Investments is going.

Hi, sir. Thanks for the opportunity. So, what will be our main capacity at the end of this year when the first phase of that business gets paid? So, you know, we have announced a total capacity of 1.3 billion liters. By the end of this financial year, we will have a target of three units operational. So the total capacity of those three units put together would be approximately 630 million liters. That is the full scale capacity.

Okay, sir. Thank you. Thank you.

The next question is on the line of Ram Sundar.

Hi sir, good evening, thanks for taking my question.

The first question is on this Lubrizol CPVC plant per se.

You did mention about it in your opening remarks. We assigned about 1 lakh metric ton of CPVC capacities that should begin by in this 2023. So, this 708 crores of chemicals, capex, does that include the capex or Lubrizol or that would come later? If so, how much one should expect per se there, anything that you can provide there?

So, if you looked at when we made the Lubrizol announcement, first two corrections. One is that each plant startup will happen in this financial year. Construction will start up. It's not planned data. Yeah, yeah, sure. Which means construction will come to an end by FY25, middle to end. The second part was if you looked at the announcement when we did with Lubrizol, this is a zero capex investment for Grassim and the entire 600% investment is being done by Lubrizol. So, there is no capex impact on Grassim coming up.

Understood.

So, this is essentially an operational, so Grasim will lend their operational capabilities and provide the products. We will apply the chlorine to them by pipeline and we will do the operation management for them as well as So, entire traffic sales is their responsibility. It does not impact us.

So, we are actually protected from the vagaries of the market in this operation.

Understood. So, therefore, you will be compensated for the OPEX costs, essentially. We will not get into the disclosures of the costs, but we will be compensated to the OPEX costs plus our management fees. Operation management team. Understood. Understood. That's helpful. Sir, are there any more such products in the pipeline? How do we see the evolution here per se? So, this is the first one which is being attempted and I think as we proceed ahead, it will evolve as we go along. Today, very difficult to say anything beyond this.

Understood. Thank you, sir. Thank you for that. The other point is on capital allocation. We had invested in Aditya Birla's capital sometime back in June. Now, I just wanted to know, are there any such investments planned in our holdings per se over the next two years? Any perspective that you can share on the capital allocation?

So, as you know, all the financial services sector is doing very well currently. So, the capital requirement was higher at Aditya Bela Capital, of course. That is how we have done this 3000 crore equity raising in Aditya Bela Capital. we are of the view that for the time being at least for next 2-3 years they should meet their requirements but as of now there is no other plan other than whatever we have already invested 1000 crores understood no other plan as in no other outside of the whatever capex that we have outlined nothing else outside that from our visibility perspective

Yes, yes.

Okay, okay, okay. Thank you, sir.

That's it. I'll call back and meet you. Thank you very much. And best wishes. Thank you.

Thank you. The next question is from the line of Modis Agarwal from Motilal Hotel Financial Services. Please go ahead. Hello.

Hi, Gareen sir. Sir, my first question is on the like the dance and retail preferences are changing towards more on the sustainable product side. So, how they are collaborating with us on the product development and innovation?

So, I assume you are referring to the... Yes, sir.

Yeah.

So, a lot of... work is happening on the sustainability, especially circularity where the used garments or pre-consumer waste are converted back into textile, usable textile. So we have developed our capabilities for both mechanical recycling as well as chemical recycling of used textiles or industrial textile waste. We are also working very closely with some international grants where we use such raw material along with our virgin raw material and supplies the final fiber which has almost 30 percent recycle content and these are initial stages for this trend and we are well equipped to participate in this one as the things will develop and India is going to play important role in the entire international global textile value chain. So, this is I think very encouraging for Indian textile value chain also.

Okay, okay. And sir, just one bookkeeping question on the textile. This quarter tax rate comes out around 11.3%.

So, is there any adjustment or what was the effective tax rate for the quarter?

No sir, effective tax rate is 12% considering our intentions, whatever we have. So, we have already shifted to the new tax regime and this is the, I think, tax rate we will have considering the ATM deduction for the dividend income, etc. So, that is the expected tax rate for the current year.

Perfect. Good. Thank you. That's it from my side. Thank you.

The next question is on the line of Nirav Zamodia from Animal Research.

Thanks for the opportunity again, sir. So, one question on the pulp prices. So, last quarter our average pulp prices were close to $900 a ton. So, if you can share it for this quarter and What are the current rates for the pulp coming to us in Q2M? So, pulp prices, especially dissolving rate pulp prices are normally expressed in terms of PCF report. PCF reports pulp prices every week. So, currently the hardwood dissolving rate pulp prices are at 840 dollars. Top food dissolving rate pulp is $850. So there has been some reduction compared to previous month and this is the current price. And what was the average for Q1FI 24 sir? I do not know. We have our formula for procurement of pulp where we use the previous month's pulp price for shipment. There is a long shipment time. So, it's like a continuous thing. I will not be able to give you average figure for the quarter. It will be very similar to the moving trend of average of the previous month. Got it, sir. Sir, one question on the chemical side. So, if you can share like out of our total caustic sales, Is there any proportion of contractual sales into there also like out of let's say whatever we sell in the domestic market, what is the mix in terms of our contractual and our spot sales? So if you look at it, our entire plate sale is plastic. That's trade away about 20, 22 to 25% which is totally spot. Plates is entirely there. On the optic side, if you look at it, Approximately, I would say our contractual sales would be a larger proportion to be around 60%. On the liquid side, the balance 40 would be a combination of monthly contracts and spot contracts. So, if I were to look at the entire business level, you would say our contracts to contractual will be a ratio of 60-40. Correct. So, some proportion of higher issue could be because of this contractual arrangement also. Absolutely.

Generally, the flakes and the contractions, some of the long term contractions, they are factored in for the various, whatever the market allows it to contract.

Got it. And sir, last question from my side is on the amount of power what we purchase from the grid because you mentioned that the grid power has become costlier for most of the players in the industry. So, If you can share, how much is the power that we purchase from the grid for our total chemical fusion?

I think you got it. I mean, you did read it right. I said green power is cheaper than the grid power today.

It's not more expensive. And actually, green power also comes through the grid. But they are back-to-back contracts by which we work. But today, green power is 14%. Our overall, our own thermal power plants which run give us approximately 40 odd percent and the balance is what we are buying from this. And sir, last question if you allow. So, what is our capacity utilization for the WAPS division because I think we have some close to 8, like 91,000 tons of capacity there. So, capacity utilization hovers between, depending upon seasonality, because wafts sometimes actually have a large seasonality factor. For example, in the monsoon season, the polyamidium chloride liquid sells much more, whereas CPW, chlorinated paraffin wax, which goes largely into construction, comes out. If I were to look at the weighted average annually, we are somewhere between 73% to 75%. That's where we lie. Got it, sir. Thank you so much and wishing you all the best.

Thank you. Thank you.

The next question is on the line of Ronald Zioni from Shere Khan Limited. Please go ahead.

Yeah, thank you, sir, for taking my question. Sir, I wanted to just ask about, you know, about your market share, you know, in the wake of, if there is no anti-dumping duty, then if the competitors, you know, are increasing the capacity, how do we remain confident of maintaining our market share?

Which business you are talking about?

About, about yes, of course.

Yeah. So, currently, we have a market share of close to 95% because the imports are not taking place because BIS has introduced quality control orders. So the major sources of imports like Indonesia and China are not able to export. But we do expect to maintain our market share at high level even when this phase is gone. So this will again depend on the competitiveness and the relationship with the prices and services and all of that and in terms of your liaisal investment you know how what kind of you know if you can elaborate on you know what kind of capacity would you would incur say on the capacity concert and this is what kind of returns you are expecting you know the current current rate of realization in liaisal which investment you are talking So, we are not making any new big new investment in Liacel capacities immediately. We have existing Liacel capacities where we have done deep bottlenecking of existing lines with a very minimal capex. So, those lines are working well and the prices are quite stable and in line with the general market strength for all the fibers. And they are working well. So we will inform the market when we have plans finalized and approved for the new capacity.

Okay. Thank you very much.

Thank you. Thank you.

Due to time constraints, this was the last question. On behalf of the grassing industry that's involved in this concert, Thank you for joining us and you may now disconnect your lines.