Grasim Industries Limited

Ladies and gentlemen, good day and welcome to Gratham Industries Limited Conference Call. As a reminder, all parts and 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 touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head, Investor Relations. Thank you and over to you sir.

Yes, thank you. Good morning and thank you all for joining this call. The financial statements, press releases and presentations are uploaded on the exchanges and are available on our website. For safe harbors, kindly refer to the conference statement highlighted in the last line of our presentation. Our leadership team is present today on this call to discuss our results. We have with us Mr. H.K. Amarwal, Managing Director, Mr. Bhavan Jain, Chief Financial Officer, Graphic Materials. Also joining them, we have our business team, which is Mr. Jayal Logre, Business Head for Chemicals, Passion Yarns and Insulator Business. Mr. Himanshu Kampanya, Business Head and Mr. Lakshmi Khargave, CEO of Mirna Pupas, our team's division. and Mr. Sandeep Kumar Reddy, CEO of Vrila Pivot, our B2B e-commerce business. Now, I hand over the floor to Mr. Pawar Jain for his opening remarks, post which we will open the call for Q&A. Over to you, sir. Thank you, Ankit, and good morning everyone. Thank you all for joining us today to discuss our fourth quarter and full year financial year 24 performance. To begin with, I will share some key updates. And then we will discuss macro environment. And finally, we will cover the business and financial performance. Firstly, alignment of business segments reporting. As new businesses are on path to attain meaningful scale in due course, we believe simplified and transparent reporting of such segments should help you evaluate and analyze consolidated segmental financial performance. Also such reporting reflects underlying strengths of Gratian's conglomerate structure which command leadership across three components of fastest growing Indian economy. The disclosure would now include five business segments at consolidated financial level. First one is the cellulosic fiber which will include cellulosic staple fiber and cellulosic fashion yarn. This segment was earlier The second segment is chemical, comprising of our caustic soda, chlorine derivatives and specialty chemical businesses. Third segment is building material, which includes cement business carried through our subsidiary Ultratech, paint business and B2B e-commerce businesses, which are business divisions at tender loan level. Fourth segment is financial services business, which is housed in our subsidiary, Agitabila Capital. And the fifth segment, others, comprises of textiles, renewables, and insulators businesses. The second update is that we have issued our first ever sustainability-linked non-convertible venture of Rs. 1,250 crore during this quarter. International Announce Corporation, a member of World Bank Group, has invested in these entities of the country. The investment by IFC is a testament to our commitment to build long-term sustainable businesses, creating value for our stakeholders. The third one is a one-time charge of Rs. 716 crores at standalone level and Rs. 497 crores at consolidated level on account of impairment provision against current investment and provision against expected exposure in our AV terrace day. As informed earlier through our stock exchange filing, AV terrace day, our joint venture with 40% holding, is operating paper-grade functioning and has now stopped its operations due to non-liable operations and adverse market conditions. The company has recognized an installment charge of Rs. 280 crore against steadying value of equity investment in AV Terrace Day and additionally Rs. 436 crore has been provided towards estimated exposure in AV Terrace Day. AV Terrace Day, as you know, has acquired a paper-grade pulse mill in Canada in year 2012 with a view to convert the same into DC-grade pulse which could not materialize. Paper gate pulp manufacturing is not core to our business interests and its continuous losses with no visibility of turnaround has led to the decision of idling the operation and to explore the possibility of exiting this business. This is a one-time charge to P&L and has been disclosed as exceptional item with the decision of shutting the operations at AB2B and now there will be no more losses of AB2B TB to be consolidated in Rajinikanth. Coming to macroeconomic environment, on global front, central banks are though discussing about possible trimming of interest rates, but there are no timelines being put. There is a dichotomy within central banks. On one hand, cutting rates too soon could accelerate current pace of growth with increasing inflationary pressures. On the other hand, cutting rates too late creates risk of gradual recovery getting surrendered. China's economy grew faster than expected in the first quarter with recovery in industrial production. Our consumption indicators like property investment and retail sales indicate that domestic demand remains frail, weighing on overall momentum. In the midst of geopolitical gifts forced by elections, polarization and conflicts, Indian economy remains in a robust growth trajectory. with the World Bank upgrading its economic growth forecast for fiscal 2025 by 20 basis points to 6.6%, driven by a poor reason to investment growth. The new fiscal has started on a strong footing with strong TMI numbers and all-time high GSE collections of 2.1 trillion in April 2024. Despite volatility in recent years, Grathen's revenue has more than doubled and EBITDA grew by 1.9 times since 2018. Leadership across diversified businesses provides underlying strength to such growth. We have ended the owned by financial year on a high note. Some achievements of the year are like this. We have achieved highest ever consolidated revenue. and EBITDA of Rs. 130,978 crore and Rs. 20,837 crore respectively. We have also achieved highest sales volume of cement, cellulose fiber and caustic soda businesses. During this year, we have launched Villa Opus, the decorative paints business with commencement of production at three green field plants in April 24. clock highest ever turnover of Rs. 580 crore in FY24 from textile retail business. B2B e-commerce revenues surpassed a milestone of Rs. 1000 crore in its first year of operations. I now briefly touch upon each business segment. Yes, in our cross cellulosic fiber business, our CSF volume stood at 208,000 tons with utilization level of over 95%. Realization in India was lower due to over supplies to Indonesia and decline in input prices, basically pumps and faucets apart from other raw materials. And the great effect of decline in input prices has been passed on to the Venetian partners. Growth momentum could have been better if not for the new regulations around the MSME demand which has reduced the demand from MSME segment to some extent. Domestic demand in China was stable which reflected in operating rates of around 85% and slight improvement in prices. However, majority of Chinese CSF players are still making losses at current levels. In chemical physics, forced correction from historic high level Global caustic soda prices appeared bottom as the rates have gradually improved for the third consecutive quarter. However, over-supply in domestic markets kept realizations under pressure. Caustic soda sales only continued to grow for up on YOY basis for straight 13 consecutive quarters. Our sales volume for this quarter stood highest above 838,000 tons. Lower toxic realizations and continued negative realizations of chlorine led to lower eco-realizations during the quarter. Chlorine derivatives performance spatially was subdued due to demand weakness, particularly in agrochemicals and over-supply in CMI. Building materials, the segment growth was gradually driven by superior performance of our cement business. which commands a pan-India leadership position. The utilization for the year stood at 85%, higher than all-India level of around 71%. Our volume growth at 11% was also higher than the industry estimates of 7-8%. In cement, we have added new capacity of 7.8 million tons into port, taking our domestic capacity to over 140 million tons. And global capacity for the company is 146.2 million tons. The incremental revenue in this segment is from claims and B2B e-commerce businesses. Bela Office, our claims business, has already commenced production at three plants at J.R., Panifat and Mediana. Dealer meets and exports are being held for pan-India product launch. Bela Office's grants and quality both are receiving positive response. Onboarding of dealers and placement of tinting machines is happening as per plan. Outreach activities to influencers like painters and contractors are also going on as per schedule. Advertising and brand promotion activities are also on track and build-up offers would be visible across the country in the current year. The revenue generation at Birla Pivot, our B2B e-commerce business, is gaining momentum, having crossed Rs. 1,000 crore revenue in its first year of operation. Currently, monthly run rate is of around Rs. 200 crore in Birla Pivot, with healthy repeat orders. Birla Pivot Tile and Flywood, which is our private label product, are gaining good response and we are also evaluating new product categories to increase the total addressable market. The business has aspirations to achieve $1 billion revenue in next three years. In our financial services business, lending portfolio, which includes MBSC and housing finance companies, has increased by 31% YOY for Rs. 14,124,000 crore. Total Assets under Management which includes AFC, Life Insurance, Health Insurance grew by 21% YOY as to be sold at Rs. 36,000 crore. The business has announced amalgamation of Aditya Prila Pinat with Aditya Prila Capital which is under process and it is subject to requisite approvals. Simplification of structure, improved financial stability, increased operational efficiency and likely stakeholder value creation are some of the key benefits of the proposed amalgamation. Other businesses segment, which has textile, renewable and insulator, has also done well. Textile business is moving from pure manufacturing to retail, with highest ever lead-to-speed business revenue of Rs. 180 crore for the year, recording a CAGR of 78% over past three years. Linen Club is now operating with 230 EVOs and available at 9000 plus MVOs. Renewable business continues to grow, gradually ramp up its operating capacity and remains on track to achieve 2GW level of capacity in current financial year. Insulator business remains self-sustaining, closing the current year with healthy order book. On the capex front, we continue to focus on growth capex with majority allocation on capacity expansion in building material segment. The consolidated capex for FY24 took a fee of Rs 20,199 crore, 83% of which goes into growth capex. We have invested over Rs 38,000 crore over past 5 years in growth capex. On the rights issue front, the Board has decided to take the first call of Rs. 453 per share, that is 25% of the issue price, against the shares issued on rights basis in January 2024. This will enable raising Rs. 1,000 crore into 2F24. The Board has recommended dividend of Rs. 10 per share of Rs. 2 per share. For Partly Paid of Share, dividend will be payable in proportion to the Paid of Value. The company has a dividend payment record of continuously now for over 60 years. I have covered the two basic updates and financial numbers and the details are available in the details. We can now go for Q&A.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only 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 Peter Shah from Evan Dispass. Please go ahead.

Hi. Thanks for the opportunity. My question pertains to paying division, and I'm going to try to keep it short. So can you provide an update on initial feedback that we would have got on quality on our final year launch day? If you can also share feedback on current dealer network that we have got in the first few months and what are we targeting for FY25? And also, if you can give a status and strategy update on depot network that we have today and what are we planning by the end of this year. Okay. Thanks, Tejas. This is Akshit. I will answer all the three elements. The feedback on product quality that we have got off the range in India is excellent. Dealers are extremely happy. Contractors are very happy, the ones who have used. And this is across all the product segments where they have launched. And we can already see users and we can see repeat users. Like we said in Panipat, we've also done a very large sampling exercise, which is making it very evident that the product quality is absolutely top notch. Secondly, your question on the dealer network and dealer adoption. So we said that our target in FY25 is to get 50,000 dealers onboarded. And we are actively on track in the first two months to be able to hit that number. So obviously, we are able to onboard and build large number of dealers every month. That will only enable us to reach that number, which is quite evident. In terms of depot network also, we had declared that our ambition and plan is to set up 150 operating depots by the end of the financial year. And we are very much on track. We would be very close to half that number all day. So, yeah. Thanks, thanks. And just one follow-up on that. Between the two geographies, North and South, that we have kind of launched initially, where are we seeing more traction as of now? So, you see, these are only first two months. While we said that we will start launching in North and South, but we also made a commitment that by July of this year, we will be available in all towns which have a population of 1 lakh plus. So effectively, by now we have virtually entered all the states of India where we have onboarded and built at least some dealers. We see pan-India attraction.

The product quality appreciation that we have done is independent of any region. So whether it is north, south, east or west. So I don't think that there is any differentiation in terms of a response in the first two months.

Perfect. Thank you. Thanks and all the best.

Thank you. The next question is from the line of Nirav Jamodia from Anvil Research. Please go ahead.

Sir, thanks for the opportunity. Sir, my question pertains to the chemical side. So, if we look at our ECU, it has come down by close to 1 rupee on a Q1Q basis which translates into an impact of 30 crores if we multiply by the caustic volumes which we have reported on. However, our EBITDA has fallen by close to 70 crores. So, was it because of the fall in the profits of either the specialty division or the VAP sales or some of the costs have gone up this quarter and because of which this fall has happened. Hi Nirav, thanks for the question. Your math is correct. It's not because of cost. In fact, our costs are better. As was earlier mentioned by Pawan Singh, the real issue really lies in profitability of chlorine derivatives which are used. largely used in agrochemical. As you know, the agrochemistry is not doing very well. So, a lot of the derivatives that go into agrochemical, whether that is carbon tetrachloride, methane chloride, lindychloride, those are under pressure. And that is why you see that that is catching. So, it is not because of cost going up. In fact, it is also not because of the specialty volume. It is mostly related to clothing derivatives. Because the falling EBITDA is close to 70 crores and I guess the VAP contribution to the EBITDA is not to that extent based on some calculations what I have done. So, possibly some one-time cost would have happened this quarter because of which this fall has happened and this should again restore in the subsequent quarters. How do you see this? So, there are two things. First of all, we maximize for contribution of EBITDA. As you know, we report some of the highest operating rates in the industry for utilization. What we typically do, we look at our total contribution margin across cross-state, chlorine, chlorine derivatives, and maximize that. So that is one impact. And that's why you can't get too bogged down by looking only at individual product lines. Now having said that, there are a couple of our plants, there in the last quarter, we have taken maintenance shutdowns for some repairs. and for some upgradations. So, there is some small impact of that. Got it. So, this won't happen next quarter. So, that would get corrected.

Yeah, yeah.

That is, you know, sometimes when you take a shutdown of your maintenance cost, etc., come in the long period. Got it. And, sir, we also commissioned a new epoxy plant in December. So, was there a volume growth in the epoxy division sequentially? And, along with it, if you can also share, any improvement which has happened on a sequential basis on the epoxy profits which you have reported in Q4? So, typically you know we don't break down the profitability of epoxy specifically. No, no, sir, just Valpak understanding in terms of any sequential improvement in percentage terms, that would also help. Yeah, so there is sequential improvement. What do you think is the percentage terms that you calculate? But the price is commissioned. The volumes have started to pick up. As you know, the epoxy business, you know, you have to get politicians and tech customers. So that takes a bit of time. But I would say the volume growth secretly has been, I'm just doing that math, close to the volume growth. Just a second. So, about 1450. Okay. Okay. And, sir, this would be predominantly the ADRs which we would be selling because initially that would be an easy material to sell on. So, how do we see the utilization rates picking up here? So, because we have expanded close to 1,23,000 times. So, how do we see the pickup in the utilization rates of ADR? And, secondly, do we need to create the downstream value-added products for this LER to get absorbed or we do have the sufficient capacities of the downstream products and as and when the customer requirement comes up, we can convert those LER into the value-added products and start selling those products in the market. So, as you know, our expanded capacity actually is a mix of LER, reactive diuret, polyester and polyamide hard bands. not an exact copy of the first 123 KT. What you have correctly also said is typically LER sells first and we do formulate further from the LER into many other products. I think it would be fair for you to assume that it will take us about minimum 24, maximum 36 months to sell the entire product. That would of course depend a lot upon how the end market develops. And we specialize in So as qualifications increase then more and more of our idea gets to get better. Got it. So just two last clarifications. So one, based on the presentations of Rishal as well as last year, our total capex in the epoxy is close to 326 crores. So is this the total capex what we have spent or was there any earlier capex is also which has happened and the total capex amount stands higher than this amount that's about all of the magnitude okay there is always some some maintenance etc I didn't actually understand the no capex it's the total capex total capex for the expansion of the epoxy plant yeah yeah so most of the capex plant has gone into expansion of the capex okay okay and the last bit is on the chlorine side so last time you mentioned that Q3 we had a negative realization of 3 rupees and the run rate was close to 4 rupees in Q4 so how that was on an average basis for Q4 and secondly we have seen some spending of the caustic soda prices in the current month so Is it fair to assume that Q1 would see some improvement in our equalization, don't you? Yes. So, for quarter 4, our negative floating was around 3.5, 3.6. Actually, it was worse. In Q1, you are right that there is some improvement in the market. slight improvement. Now, let's see whether that improvement holds. As you know, the chemical markets are quite volatile. But chlorine had become more negative in Q4 compared to Q3 by about 500. And it is getting somewhat better in the first quarter of this month. Got it, sir. Thank you so much and wish you all the best. Thanks. You do a very comprehensive analysis of the chemical business. Thank you so much, sir. Thank you so much.

Thank you. Before we take the next question, a reminder to all the participants that you may please press star and want to ask questions. The next question is from the line of Parthi Pantaki from IIFL Securities. Please go ahead.

Hi, Rashid. Good morning. My question is on the paint segment. So can you give some idea as to how many tinting machines have you placed till date? how are you doing first team no thanks for asking that so like we said we will be sharing the numbers at a later stage but what I can tell you is that we have a very aggressive plan of placing chipping machines and with a very high deal of penetration and we are on track right and to the previous question when you had mentioned that the target is 50,000 and we are on track to achieve that is it that the progression is linear or would it be exponential? I am just trying to figure out, I mean, at least at the ballpark, should I be taking 50,000 divided by 12 multiplied by 2 as the rough ballpark of dealers or that would be a wrong way to look at it? I think that would be slightly wrong. It would be slightly overweight towards the first half. towards the first half so you are saying the recruitment would be higher in the first half of the year than the second half of the year ok ok understood secondly I wanted to understand that in terms of your I mean your terms of trade with your dealers paying dealers how does that differ versus the large incumbents in terms of margins or schemes is it comparable are the schemes more volume based or are they sort of based on some other parameters what are the differences in terms of how you incentivize your dealers versus the other larger incumbents so you know we have been meeting dealers across India we have met the top 7000 dealers

And we have shared our commercial program which is out there in the public. So there is a certain benefit that the dealers get in terms of price. Then there is a certain benefit which the contractor community gets in terms of the rewards.

And then we have this offer for the end consumer which gives them 10% free volume on emergent purchases.

So if you look at the total package, at the dealer and contractor end, we would say about

7%, 7.5% better than the market. And if you work out the 10% for the volume, that's how it turns out to be. It has already been analyzed in the market before. But that's the commercial program that we have given. So versus the large incumbents, roughly how much would be the benefit that your dealers would get? Is it like a 3-400 basis points benefit? Not talking about the extra volume which is a benefit to the end consumer.

So, you know, that would be difficult to calculate because the large dealers have, the large players have various programs with other dealers.

But what he can say is that the adoption by larger dealers also for Birla Opals is basically attractive, which means that the proposition is voting for that. Okay. And last time we spoke, you had mentioned that you would be targeting to place tinting machines in 80 to 90% of your dealer network. Would I be right in assuming that that kind of percentage is already something that you are running at currently for whatever dealers you have recruited? Yeah, so like we said that we have an aggressive program. I don't recall whether I said 60 or 90 percent, but it's a number which is fairly high and we are running on track. Okay, okay. Yeah, that's all from me, Rashid. Thanks and all the best.

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

Hello. My first question is on VSF. So, in VSF, we are operating only at 98% utilization right from volume growth current year. How are we seeing, I mean, with utilization cap, how are we looking at growth in this segment over next two years? Also, we have exited this year of yet strongest unit EBITDA in the EBITDA segment. How are we looking at the unit EBITDA for the next two years in the segment? Yeah, so we have a good volume growth in the last financial year compared to previous one. Q4 was similar to Q3 in terms of volumes. And there was some hiccups because initially notifications for panels came into play from February onwards so the volume was disturbed a little bit. But currently the volumes are running at similar pace and we are trying to ramp up production as much as possible at our different lines. So we see some opportunity there to keep pace with demand. On the unit EBITDA, we benefited from the decline in raw material prices in the last year. And those prices are hovering some item increase, some item save, some item reduce. So it's limping along as a similar thing with slight increase in the last one or two months. But we have to see how it goes. Human prices have also softened a bit in last two months in China. we will see how it goes also just a related question so 824 KT which is the capacity of VSS in FI24 can it be debottled next to like 900 KT like eventually without doing much capex or like as a result we might have just like 3-5% volume growth in the segment next 2 years or the capacity can be seen in debottled next later on Yeah, we are trying our best, and there are some opportunities, but I would not like to give any confirmed figure of how much, but we have been working on that, and that is very much on our... So about 4-5% growth we should have compared to last year's full year, not last quarter's. And on this Canada business closure of pulp business, is this something which affects our raw material procurement in this business because that was captive unit and how is the captive raw material percentage now for the asset? So this unit which we have taken a decision to close was not producing resolving grade pulp. It was producing pulp, paper grade pulp. And that was one factor behind our decision to close the unit as the economics were not working, the wood cost has increased too much and this was not a result of that pulse mill. Our capital pulse mill, pulse procurement is around 35%. It has been in this range for quite some time and it remains at that level. And our procurement is stable. We have long-term contracts with some leading dissolving grade pulp producers, some for more than three decades, some for last four or five years, new players. And everybody is very keen to work with us. All the new dissolving grade players are very keen to work with us as long-term suppliers. So we are quite comfortable on that front. question on capex we haven't given any capex outlook in the presentation after FI 24 has been ended so any number which we should work with or a similar number for next two years you are talking about the whole or you are talking about any particular business as a whole maybe we can discuss if you have granular details also but as a whole as of now I am Yes, TPEX plan for next year would be about 4,500 crores piece for the company as a whole, which will mainly comprise the large amount going into TPEX business. The remaining part of the 10,000 crores TPEX announced for the TPEX. This is on the standalone basis. Yes, standalone.

Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the team. Thank you. We'll take the next question from the line of Satish Raji from ICICI Prudential Mutual Fund.

Please go ahead. Hello.

Yes, obviously.

Yeah, my question is regarding dividend policy.

So, the understanding was that ultra-tech dividend debts pass through.

So, in this financial year, that has not happened. So, how should we see that going ahead?

Yeah, so I think the policy was to defer to be ranging 25 to 45%. And within that range, we will try to part-own the dividend received from Tritec and other key subsidiaries. That is the policy. But we have also, the policy also says that looking at the capex plant of the company, etc. and other factors, there can be radiation to the extension. So, given the large ongoing capex plant of the company, especially in the paints business, we have not passed on fully the ultra tech dividend this year but that is I think specific to this year's situation going forward we can't comment now but I think it will be more prerogative but still the payout ratio is still quite high almost 40% which is much higher than the previous year when the full ultra tech dividend was passed on So, you should appreciate that while the operating profit is affected, but we are maintaining that every time.

Okay. And secondly, this capex for pains, this happened of 1067 crores.

So, given that commercial operations have started in April, there would be certain expenses which people are still capitalized for.

Can you just give some color as to how much capitalization of expenses happened in last quarter?

How much? So, we have put the commercial production from 29th of April. So, almost all the free operative expenses for three plants before that date. Now from 29th April, it's all three plants are for the commercial production. So, everything is going through income state.

Can you quantify the amount which has got capitalized?

No, no, no, it is not relevant. No, no, I think you must see how much, now there is, now how much. So that, you can, you can take all, you don't have that number ready to learn. Okay. Yeah, but first year of, full year of operation, paint operation, there will be a lot of investment in marketing, in branding, in advertisement. So, all those things will be first time and they will all go to income statement. Yeah, so you should be expecting that as a part of building a new business. Got it. Thank you, sir. Yeah, while it will go as a P&L job, but it is like an investment in establishing the new business.

Okay. Thank you.

The next question is from the line of Abish Roy from Nuwama. Please go ahead.

Yeah, thanks. I have a few questions on paints. So, this is the first quarter where the paint launch has happened. So, first question is when you see JSW paints, they have become put on course after five years of launch and there is captive demand also being present there. Second is, if you see the top two paint companies, they have given guidance of double-digit volume growth in FY25 and even in Q1. So, if you mix all this, where does your optimism now stand given launch has finally happened, but then the competitors seem to be still quite gung-ho in terms of demand, even in the first year. And the other player who has entered, he has done only 2,000 cores in 5 years. You have a 10,000 core target in the FY28. So, if you could tell us how does this all map up? Yeah. So, Amit, the way we look at it, JSW has done a certain turnover.

The other companies have given a certain guidance where they are talking about double-digit volume. If you take a look at the results which have come while the volume growth is high, the value growth is very low.

I think we are looking at it as a different case because we have come here to make some changes in the way we operate in the paint industry and the changes that we will bring and the disruption that we will bring that we disclosed in manifesto you will see that as the year goes on as far as we are concerned we are going to be gaining shares we can already see that we are onboarding dealers there is updates contractors are liking it so we are not so bothered about if competition is saying 10% and that should make me feel that okay how can they grow so much I am competing against the numbers and I have a solid plan and I am moving up for my business plan And to that effect, we are very optimistic about what we have said and we are on plan. That is how I would say. Sir, my second question will be on the disruptions which you had announced in Panipat. It was extremely detailed. Now, almost every paint company in the Q4 analyst call or analyst meet said all these disruptions have been tried earlier in terms of extra damage, in terms of extra warranty, in terms of free painting machines. So, to that extent, now because now you are there in the market, what is the user feedback? Because this is not really disruption. This has been tried earlier and it works to an extent. But is it really disruptive? Till now it hasn't been. Second is when you put the tinting machine, lot of the free tinting machines are put at the back of the dealer shop. So, if the tinting machine is at the back, then what is the response?

So, you know, as far as the disruptions are concerned, I think it is very early for even competition to say that it's too much, we have not seen anything. Because you will see how gradually we roll out and our success will also lie on executing those disruptions successfully.

And our organization is actually designed to do that.

As far as tinting machines are concerned, we are very confident that the tinting machines that are being put by Birla Opal are tinting machines which will actually get used. And we can already see usage of our tinting machines are happening. They are performing excellently. As we had announced, they are connected with our back end. We have live information of what is being printed in terms of basis and products on a daily basis. We can actually already withdraw that. No company can do that today.

So, what I would say is that giving pre-printing machine is a way of accessing the market and winning the dealer.

Our printing machine is also unique. It is about 40% smaller in terms of area. So, I think In terms of printing machines, I would not agree to the fact at all that there are a lot of printing machines which we put in the back yard. I think they are being already put to use. And on the disruption, like I said, very early for someone in two months to say that nothing has all these things have happened before. Please keep watching because we are also going to execute them successfully and our business model is designed to do that.

Which is why we have taken three years to prepare for it to come to the market. Thanks all the way. Thank you.

Thank you. The next question is from the line of Latika Chopra from JT Morgan. Please go ahead.

Hi. Thanks for the opportunity. Two questions, again, on paints. The first, you know, you said that the dealer feedback, the contractor feedback on paints, on quality is quite good. So just wanted to check, you know, does it imply that you're quite comfortable with your pricing strategy at this point? And, you know, you talked about, you know, 70-10% kind of a, you know, dealer margin or dealer benefit. And at this point, you do not see any reason, you know, to play around with that. And even in terms of different kind of paints that you launched, you know, premium, economy, and luxury. Any comments on that?

I think the first question on product quality, like we said, the acceptance of product quality across

all the segments that he has launched, whether it is exterior, interior, and within that luxury, premium or economy, or if you take a look at waterproofing, enamels, the feedback from contractors and dealers is extremely positive. They are actually very pleasantly surprised that in keeping with the Birla brand name, the product which has come out is exceptional, both in terms of performance and ease of usage.

So I would say that the acceptance of product quality is actually unanimously uniform across the whole segment. In terms of pricing, you know, what we have come out in the market, I think we are happy with what we have put and we are steady with what we have put and we are rolling it out across the country.

Sure. The second bit I wanted to check was, you know, and I think someone alluded to the fact that during the course of the year, you're going to step up advertising spends or above-the-line spends on the PINs category. So should we anticipate much of that is going to be seen in the second half, you know, probably closer to the festive season? And once you've kind of rolled out, you know, the portfolio to more data-based,

So, yes, you know, we will indulge in up-of-the-line advertising.

Probably you have not noticed, but we are already on with our outdoor plan in South India, Chennai, Bangalore, Tamil Nadu, Karnataka. The outdoor plan is up in Punjab already.

It is up in Delhi some today. Obviously, logically, it will follow also with television and other digital media as we rise up our distribution. So, as expected, we have announced that we will aggressively invest in building the brand, which is going to happen in the course.

Thank you so much.

Thank you. A reminder to all the participants to kindly limit their questions to two per participant. We'll take the next question from the line of Rashid Chopra from Citigroup. Please go ahead.

Thank you. Just coming back to the VSF and the chemicals business, any sort of outlook on the margins, profitability from here as well as pricing for both? VSF and chemicals. Oh, I thought you said VSF and chemicals anyway.

VSF and chemicals both. Okay, since I've started, so thanks for the question. See, look, we... Pricing, more or less, is range-barred. Whether you look in Bostik, whether you look in chlorine, or for that matter, you can look within epoxy. What you must have observed, if you have followed the chemical sector, is there is still a lot of such capacity in China, and their domestic consumption has not yet picked up, which means there is a lot of exports of all kinds of chemicals, which is affecting the chemical industry globally, including India. and including for example exports of Agrochem etc. from India. So we see at least this quarter to be range bound. There shall be some ups and downs and potentially the next quarter as well. What may help is if globally the Agrochem industry picks up. The monsoons in India have proven to be better. Let's see what happens in South America and the US. If we start to see good news coming out of the agricultural sector or we start to see good news coming out of the Chinese consumer, then I think that will be very quickly reflected across the chemical industry and including the chlorophyll. Yeah, so to add to what Jain has said about the macro factors, the global Business conditions still remain a little bit affected by high interest rates. Though inflation seems to be coming down but still interest rates are expected to remain high. That keeps on infecting the real consumer demand in West Europe especially. Of lately cotton prices have come down in anticipation of better crop in the coming crop season. Consumption remains good and raw material prices are also range bound. So, there will not be, I think, too much change either way in the profitability of chemically fiber business. At least in the near term. So, again, sir, back from the chemical business. So, maybe one more thing to add is we do observe whether in caustic or in chlorine derivatives or for that matter even in epoxy that The contribution margins are such that there is very limited scope or very limited possibility for prices to drop further. Unless something strange happens, for example, with free stock prices or energy prices, that could move it. But, you know, at the current level of free stock costs, there is actually very little playing room particularly in the Chinese industry to drop utilization rates below where they are today. So, we don't see much of a downside from there. It can't go worse. It can't get much worse unless, you know, crude suddenly drops or something like that. Then that changes the whole economy.

Thank you.

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

hello yeah thanks for the opportunity again my first question is on your b2b e-commerce are we looking to add like more value of target label products in the segment can you throw some light after a couple of products that we have talked about earlier yeah sir hi this is Sandeep here we have launched Tyus and Fly in this financial year where Our focus right now is to increase the penetration for both of these products across different channels, whether it is our channel which is developers and contractors or the retail channel. That is the focus for now. Next, we are evaluating a few categories, but nothing specific as of now. The focus will remain on increasing the penetration for both of these products or categories. Just one question on paints, while you have discussed enough during the call, but how has been the response from competition like in first maybe one, one and a half months of the product launch in the market? Well, the response from competition, the real ideal answer is all dealers are saying that competition which was relatively absent in the market has become extremely active and they are visiting us more regularly.

So, the way I would want to read it is obviously, you know, they are trying to defend their goals and they are doing what it takes, which shows that they are alert and maybe also apprehensive. But like we said, we are moving on with what our plan is and we are executing and, you know, we are meeting our benchmarks.

Related question, are there any increased discounts, pricing, or like margins that the competition also talked about? You have talked about aggressive ROIs for the dealers.

No, I think what we have seen in the last two and a half, three months, it's stated for what it was before.

You should go and visit the fans here. Yeah, you know, sometimes next month, we can arrange for visits to dealers for you to actually find out We can work on that schedule. Thank you, sir. That would be useful.

Thank you. The next question is from the line of Akash Goyal from Tara Capital Partners. Please go ahead.

Hello. Yes, please proceed. Hi.

Morning, sir, and congratulations on a good process. Sir, I just had one small clarification. Most of the other questions I didn't answer. Is that in the standalone business, then I'm seeing the employee cost that has come off sharply both quarter on quarter as well as year on year. So what exactly has happened there?

Because we are adding up with our paying business as well. So I was expecting that maybe the employee cost either hold up or increase some steady interest. So what exactly has played out for this business?

So, nothing very specific, any special item, but to see, as far as financial is concerned, the employee cost continues to be capitalized for the employees which are involved in the projects implementation. So, the charge will start from the correct quarter, post-capitalizing at the end of April, when we have commenced the commercial production. that will start to be ended from this quarter. Otherwise there are I think some year end adjustments like valuation of the retirement liabilities particularly which has gone down because of the higher discounting rates etc. And then some of the businesses have made I think some lower provisions of variable pay because of the current year's performance etc. So these are like year-end uh normal existence there have been some right breaks earlier in the earlier quarters understood understood got it thank you so much thank you the next question is from the line of praful kumar from diamond asia please go ahead hi sir good afternoon congratulations on a great launch question on paying business now first question is that if you look at the margins of a market leader clearly the gap that we thought in terms of launch in terms of our pricing versus theirs seems to have reduced that's what we are picking so just want to get your confidence in terms of market share gain given that you know the competition especially the market leader will not you know we would make it easy for us to gain market share as we as we go towards you know the expensing for the project cost. Hi, we didn't get the question. We are talking about project cost. So the question is, does the difference at the time of launch, when the product was launched, your main business was, say, 5% plus the margin of 10, 15%. So we were 15% cheaper than the market leader today, which after we saw the market leader's results, seemed to have been narrowed. The pricing gap between you and the number one player today. And that's what we are picking that the market share gains that, you know, you get a massage might be tough to come by given that, you know, the incumbent will not let the market share go very easily. So, your thoughts on that? So, you know, all incumbents will try and defend their market share, which is very obvious. If I was there in their place, I would do the same. But our market share hypothesis is built not only on pricing, which is just one of the factors, Our market share hypothesis is firstly based on excellent product quality, excellent market working with influencers, which is a very attractive program for them, excellent distribution build-up, being able to supply. We are building up our range. I have not thought about it today, but we are building up our range very successfully because what the dealers are looking at is assurance of supply. As we build up our range, as we open up depots, we are observing that the confidence in the last two months of the dealers to accept that when they place their order with Birla offers, they should buy and last get the product to improve it. It does take time to build up a range, but the way we have progressed, we are very happy. And obviously, the data that we are getting from the system, the track and trace that we implemented last mile, which is also going to come into play, we are doing several things.

So our market share hypothesis, while obviously what the dealer makes in terms of an ROI is important and I think we will also deliver on that.

Our market share hypothesis is based on several factors and I think they are very confident that in terms of executing it, we are as far as time. So, Paul, the second question you said in terms of market share over next three years, generally during the fact that, you know, it was a great launch, you are hiring so many people, the trajectory of market share gains has to be say significant in year one and then slowly getting, adding more every year or it should be slowly in year one and gradually picking up in year two and three?

I think the question itself has many different trajectories but what I can again re-emphasize that what we thought was funny first was that our ambition is to exit this financial year in high single digits and I think we are working towards that because we need to better it and we feel that we are on track in terms of indicates. So, I would actually suggest 200 in this case.

Okay. Thank you.

All the best. Thank you. The next question is from the line of Amit Sachdeva from HSBC.

Please go ahead. Hi. Thank you so much for taking my question. So, thank you so much for sharing your details on paid business. It's again a small detail I wanted. In that assumption of three-year target and and also given the pricing that you have, you know, sort of disclosed and the responses you've got and it seems like you're very comfortable with how things are shaping up. My question is on, in terms of capacity utilization assumptions that you sort of make in this hypothesis of high technology share by your end and perhaps, you know, teams can share in previous time. what sort of in your thinking and modeling what capacity utilization will get you there and is there any risk to that that you see so you know our installed capacity is 1332 million liters per hour right three of our three of our batteries are already operating and obviously they are operating at a certain capacity Now, what we have declared is that in first 3 years of full operation, we will get 10,000 crores. Obviously, the capacity which will be delivered by these 3 factories is more than that. But the factories also take time to scale up. And the scaling up of the first 3 factories is already up. We have also declared that number 4, 5 and 6 will also get operational later this financial year. So, the capacity utilization of the factories will keep on growing gradually and keep on rising our sales and we will be able to monitor the balance between what we are manufacturing and what we are selling.

Obviously, we want to utilize our factories better. We are also working in terms of how to make the factories work more efficiently and how to make sure that the right KPIs are driven.

But I don't see, I think What we have done is set up enough capacity to be able to take advantages of things and opportunities which might come so that we don't have to wait and be out of the market. So, I think that's a step. That was the building strategy that we should first develop enough capacity for us to go national in the first slot and not try regional strategy. So, that's why I don't want to pace it up. Sure, that's very helpful, sir. My question is that, can I just hazard a guess then, you know, my sense is 10,000 crore kind of revenue target, is it sort of safer to assume given the installed capacity would be, you know, 1.3 million kilometers and things, would be that 50% utilization is like your base number. To get there, you need about 50% utilization. Is it, because the reason I'm asking this is that if I also have a, you know, some pricing discipline being built into it as an assumption. So, my view is that how desperate are you to fill the capacity or are you okay to have 50% capacity utilization in three years? That sort of intent of how you want to develop this market. So, what I want is your, what is your first priority? To get the utilization to that certain number or you gradually build the capacity utilization. You don't care really about that. You want to build it organically in a disciplined manner how the business is progressing given the prices you have put in place and you are okay with that and you don't see any substantial response from competition as well. So it seems like a good foot in the door. And how do you, so the reason I'm asking is that how desperate you would be to fill that capacity at certain level? So you see, we also declared that when we do the third year business of 10,000 grows, we will also be looking at running profitable. And as you have done the math, and you know the realisation per million litre or per kilo litre from competition, most of the companies are in the same wallpark range. So, you would know that if 1332 million users is pulled, what turnover will be generated. Obviously, it is more than 10,000. So, the way I would put it is that we would be aggressive in terms of driving our distribution, in building our brand, in acquiring dealers. With that, you know, there is a certain volume share gain that we will keep on getting quarter and quarter and we will keep taking that. I would not want to use the word desperation because when we shared this number and the capacity that we have worked, we have already factored those marks in our business plan. Got it, sir. Thank you so much. That's very helpful.

I still get a good idea of how you're thinking about this. Thanks so much.

Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. Thank you, members of the management. On behalf of Prasim and his team, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.