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.