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.