Grasim Industries Limited

Ladies and gentlemen, good day and welcome to the Grantham Industries Quarter 1 FY25 Earnings Conference Call. As a reminder, all participant lines will be in business-in-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should any distance be during the call, please signal an operator by pressing star then zero on your pass-on phone. Please note that this conference is being recorded. I now have the conference over to Mr. Ankit Panchpandya, Head, Investment Relations from Gahar.

Thank you and over to you.

Thank you. Good evening and thank you all for joining this call to discuss our first quarter FY25 performance. Our leadership team is present today on this call to discuss our results. The financial statements, press release and presentation are uploaded on the exchanges and are also available on our website. For safe hour, kindly refer to cost of the statement highlighted in the last slide of our presentation. From the management side, we have Mr. Hari Krishna Agarwal, Managing Director and Mr. Pawan Jain, Chief Financial Officer, Custom Industries. Also joining the call, we have Mr. Jayan Doble, Business Head, Chemicals, Fashion Yarn and Inflator Business. Mr. Himanshu Kampanya, Business Head. Mr. Rashid Hargave, CEO of Birla Opas, our Bains Division. And Mr. Sanjeev Komarani, CEO, Birla Pivot, our B2B Key Commerce Business. Let me now hand over the call to Mr. Bhavan Jain for his opening remarks. Post which, we will open the call for the Q&A. Over to you.

Thank you Ankit and good evening everyone. Heading into 2024, all of us talked about a lot of uncertainties and had built expectations on how new economic realities would take place. Some of these were elevated geopolitical risks, higher interest rates for longer durations impacting growth rates and megatrends rapidly transforming industries. As we cross the midpoint of the year, all such expectations are playing out. Conflict escalation in the Middle East and Ukraine remain major risks. Inflation persistence is leading to continued high interest rates and major central banks. Secular megatrends from artificial intelligence to sustainability are reshuffling economies and industries. The recent data points from U.S. on manufacturing PMI and unemployment rate has increased the probability of the U.S. rate cutting rate in the coming affirmative. Bank of England has already expected its first interest rate cut in more than four years, taking the key rate to 5%. In China, despite Beijing's surprise rate cut, which is set for 35.1 billion yuan into the financial system, There are current global economic environment coupled with heightened geopolitical conditions indicate that the path to normalization is likely to be a longer one. At the same time, Indian economy has seen a star performer. On 21st May, India became the fifth country to join a explosive $5 trillion market transfer alongside the US, China, Japan and Hong Kong. Two months from there, we have hit $5.5 trillion on July 30th. With 7.8% growth in the GDP in Q4 FY24 and 6.8% expected in current year, India is expected to continue to its title of fastest growing large economy as per the growth position by IMS. Further, the budget 2024 has laid down focus on capex spending in sectors such as road transport and highways, railways, rail estates, etc. Secondly, supporting consumption through higher allocation for rural economy, welfare schemes, and agriculture and job creation are one of key focus areas. India's long-term economic fundamentals appear robust, buoyed by government commitments for fiscal prudence, aiming for a reduced fiscal deficit of 4.9% in FY25 and 4.5% in FY26. In latest MPC meeting, RDA has maintained status quo on repo rate of 6.5% and affirms the projections of 7.2% GDP growth and inflation target of 4.5% for FY25. I now come to our company's performance for the quarter gone by. Consolidated revenue soon aged to be Rs. 33,861 crore and EBITDA for the quarter was Rs. 4,076 crore. Talking about segmental performance in cellulosic fiber business, consumer buying has increased up in major textile consuming economies i.e. US and EU. due to heavy discounts offered by retailers and supported by easing inflation. This has led to some inventory corrections, increase in cotton MSP and volatility in global oil market due to geopolitical instability has resulted in lower preference for cotton and polyester fibres, making cellulosic fibre as preferred choice of fibre for brands globally. Moreover, better sustainability credentials would continue to drive growth of cellulosic fibres in the long term. Globally, CSF prices have been on an upward trend since Q3 of 2024. India realizations remain impacted by oversupply in Indonesia and decline in input prices, that is pulp and caustic soda, benefits of which were passed on to the religion partners. Our CSF volume is to the highest level of quarterly number of 200,000 and revenues stood at highest level since past seven quarters. The CFI business remains impacted by low consumption phase across the user value chain, though there are some signs of recovery in the current quarter. In chemicals, global caustic soda prices marked fourth consecutive quarter of improvement and are now at highest level since June 2013. While domestic markets have also followed some of these positive realization trends, India caustic soda market continues to remain in oversupply situation. Our caustic soda sales volume were lowered by 4% YY partially impacted by Reliant plant shutdown for new capacity hookup. Improved caustic realization coupled with uptick in demand and realization for chlorine derivatives had led to improvement in EQ realization which stood 8 rupees 32,529 for Q1F525, highest since Q2F524. The vamp up in production post recent expansion at specialty chemical unit remains on track. We have clocked highest ever sales and revenue for the specialty chemical business which now contributes 30% to the chemical business revenue. Coming to building material segment, Ultratech continues to grow bigger. The country saw new capacity addition of 41 million tons during the last financial year, 32% of which has come from Ultratech. For this year, out of planned 16 million tons capacity, we have already added 8.7 million tons in Q1 of 2025, crossing milestone of 150 million tons per annum, reaching a total capacity of with the domestic and overseas totaling to 155 million tons per annum. The recent acquisition deal with Kesaram and controlling stake in India Cement would strengthen our position in fragmented South India market. For India Cement, the board of directors of Ultratech approved purchase of 32.72% equity stake of the promoters and their associates in India Cement Limited. Ultratech has earlier made a financial investment in India Cement to acquire 22.77% equity in June 2024. Post signing of share purchase agreement and obtaining regulatory approvals for the purchase of equity stake in ICL, UltraTech will pay Rs. 3,954.08.90 per share for buying this 32.72% stake in ICL from the promoters and their associates. This has triggered a mandatory open offer at Rs 390 per share which should be done after obtaining all regulatory approval. Paints business under Birla Opus has started commercial production at three plants in April 2024 and more than 80% range of 145 plant products have been placed in the distribution channel. Trial run production has also started at Shamra Nagar. and commercial production is expected to commence from Q3 FY25. Construction at other two plants is progressing as per plans and remains and expected to be completed in budgeted sanctioned project course. On branding and distribution, I am sure you have seen our media campaign under Make Life Beautiful. The ad has successfully captured the customer's imagination and it is heartening to see a good response from the entire ecosystem. The first flagship experience center store in Mumbai is already operational, with our plans to add more such centers in FY25. Revenue of our B2B e-commerce business, Villa Pivot, is gradually amping up. The current quarterly run date of revenue is over 550 crore rupees, with increasing trends in total number of buyers. Private labels are now available across three product categories which is fly, door and tiles. We are also working on building a retail distribution channel for these private labels along with sales support for better penetration. In our financial services business under Adityabila Capital, this also remains on track of its transformational growth journey. The company has successfully built a franchise for omni-channel architecture of distribution delivering steady growth with prudent risk management and focus on return on capital. As the company continues to expand its digital footprint, a total of over 1,500 branches across businesses, the endeavour remains on digital first, of course. Under this line, Aditya Birla Capital has commercially launched its D2C platform, the Aditya Birla Capital Digital offering over 20 products and services catering to each facet of financing positions such as payments, loans, insurance and investments. Total lending portfolio and average affairs under management have also surpassed milestones of Rs. 1,25,000 crore and Rs. 5,000 crore respectively in the current quarter. In the other businesses, our renewable business has increased the capacity to almost 1GW in the current quarter and remains on track to double the capacity to 2GW by end of this year. The business has strong anchored clientele with other group companies representing 43% of its existing portfolio. During the quarter, textile business profitability was impacted by high input costs in linen business. The retained presence of our textile business is expanding under our brand Linen Club Cavallo and Sautas. On the CapEx front, we continue to focus on growth CapEx for FY25 budget capital expenditure is over Rs.4,500 crore of which growth CapEx in new businesses is planned at Rs.3,000 crore which is 6% of the total capital expenditure. Thank you very much.

We will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on their 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Jai Doshi from Kotak. Please go ahead.

Yes. Hi. Thanks for the opportunity.

I've got a couple of questions on your paint business. One is, you know, how has the progress been thus so far versus your internal expectations? And if you could respond with a few data points, it would give us some more coverage. So, Jai, this is Lakshya here. Let me take your question. So, you know, when we had launched Paints in February 24 from Panipat, we had shared a few data points which we would want to reach by the end of the financial year. And we are in line with all our expectations. So, firstly, from a manufacturing point of view, three of our plants are, you know, commercialized and running steady. The fourth in Chamraj Nagar is under trial production, which was what we had committed. We have been able to place out of the 125 odd products we talked about, more than 80% is already there in the market. We have talked about reaching 150 depots by the end of the year. We are already beyond 102. We have talked about reaching 50,000 dealers. We are in sync with the plan to hit 50,000 active dealers by the end of the year. Qualitatively, the reception of a product, product quality has been excellent. Painters and contractors in the whole ecosystem who have used it are coming back to use it repeatedly because they not only see a quality differential with what exists in the market, but from a usage criteria also, they find it to be very easy. We have also been very successful in our initial brand campaign, which we launched along with the start of the Kittredge World Cup. So the Make Life Beautiful campaign has garnered till now close to 70 crore Indian eyeballs. And in terms of the feedback that we have from the market, both from contractor, painter and consumer queries, it definitely seems to have made a big, big impact. So all in all, both from the supply side, and both from the demand side, we see that we are on track with what we have committed in financial. Understood. A follow-up there, if we do some back-off-the-end-of-the-calculation, it looks like June quarter net sales was around 80 crores. Is that understanding right, or am I missing something?

So, Jed, actual sales would be more than that. See, large part of sales has been out of these trial run production for the three plants which got commercial production started in April 24. So prior to that, some trial production was achieved out of those plants. That sales has gone to CWIP.

Understood. Would you be able to call out that number? Or would you like to call out that number?

No, I don't think we are...

So, we will not call out the number, but a major part does not. Let's say the number that we are looking at after, you know, back of the envelope calculation is not an accurate number.

Yeah, it will not be. It is the net of what has gone to CWIP.

I understand. Lastly, you know, what is the pushback that you are getting, if any, from the trade? And what steps are you taking to address the gaps, whatever be, on the distribution side? So, Let me first say what is the pull that we are getting from the trade. So the pull that we are getting from the trade is that many dealers see us as a very strong viable alternative to the existing strong market players. They are very confident about the house of Aditya Birla. The quality of the paints has been excellent. So we see large scale adoption across small, mid-sized and large dealers. Which is why I am able to tell you confidently that Of the target of 50,000 dealers that we have there, we are very much on the reach. Secondly, there are many dealers who are very, very interested in dealing with us and are just waiting for some more time because in many markets, the full range of products that they want to commit themselves to do business with us is still a couple of months away, as you would realize. We had promised 1250 SKUs. we are in that journey and we have covered a major part. But as you would understand, many paid dealers want to wait for some more time because they don't want to commit to clients if they are not confident that the full range of Birla Opals would be available. But even there, we are making very rapid progress. So, you know, I would want to put it this way. Apart from that, there is no really pushback from dealers. So, there are dealers who are saying that we want to deal with you. Just give us some more time. And then there are many dealers who are adopting us very, very willingly. Just one last bookkeeping. This 100 depots, what part of the country gets covered with this depot? Essentially, what's your reach today in national coverage from a geographic standpoint? That will be all from my side. Thank you. So, in Panipat, we have promised that we will cover 6,000 towns by the end of the financial year. I think we cropped 3,800 as we have discussed in July itself. So, you could imagine that with the 102 depots which is operational as of July end, And in the last two weeks, we actually had another six depots. We basically cover literally the whole of India. We are present in all states. Every state or every part of India, including Northeast, has some operational depots. And with more depots, we will only improve the intensity of coverage and end up covering some parts which at the moment are not being covered. So basically, we are already a pan-India player.

Understood. Thank you and good luck.

Thank you. Before we take the next question, a request to participants to please limit your questions to two per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from Rahul Gupta from Morgan Stanley. Please go ahead. Hi, thank you for taking my question. So my first question is on B2B business. Can you just help us understand what your strategy is on b2b business in terms of pnl i know you'll continue to add products and you want to explore or expand in the retail network as well but last quarter you said that the monthly remit was around 2 billion revenues this quarter you have said that the quarterly remit is around five and a half billion so how

Hello. Hello.

We seem to have lost the line for Rahul Gupta. We'll move to the next question. The next question is from Ajit Motwani from Diamond Asia. Please go ahead. Yes. Just, you know, like we were saying that a large part of the revenues in the games business is has gone to GWIP, would you be able to give us some details on the capitalization of, let's say, the expenses that have been, which you have not booked into the payment?

No, see, as per the accounting requirements, the expenses for the plants under construction which are directly related to the construction activities or planning activities that goes to the capitalization ok so as already discussed three plants are already commissioned and commercial shorting started so for those three plants the everything is going to the P&R for rest three of the plants the expenses relating to those three plants under construction are getting capitalized I don't think we are disclosing these numbers separately, but this is the conceptual answer for that.

Okay, so if I have understood that correct, that whatever the three plants have produced, the revenues from there have gone to P&L, the operating expense has gone to P&L for the three. Other three who are doing trial runs, that has gone, the revenue from that has gone to CWRP and index pensions also related to them has been capitalized. Is that a fair understanding?

So, for other three plants, this trial run has just commenced at one plant out of the three under construction. Okay. So, there is hardly any production from that. So, basically the three plants which are still not, I mean, commissioned all the expenses relating to those three plants are getting capitalized.

And I think from a revenue point of view, you see the first three plants, Manipur, Ludhiana and Shaiyar, they were capitalized only in April. Yes. So, at the end of April, whatever was manufactured from those plants till then, and these plants were manufacturing, you know, actually a bit from trial manufacturing was happening in February, March and April, whatever of that manufacturing has been sold in the market has not come into the next phase. Correct. Has gone to CWI, CWI. Which is right. Only two, only two months of operations, operational revenue has come from those replants into the P&L.

Yes. Yes. Yes. In the P&L. Yes.

Got it. And, and the, And let's say whatever are the launch expenses, you know, let's say if the dealer needs that, he would have done the new campaign which we saw in the World Cup. That is sitting in the P&R or that is also being apportioned?

No, no, all that is in P&R.

Okay, so the launch cost, the dealer cost and, you know.

Yeah, that's not based on construction, so therefore it is going to P&R.

got it um any i know it might be a bit early but you know what could be the the losses that you will sort of you know have budgeted for fiscal 25 and you know um that we should look forward to you know that could be one parameter to judge for the next quarter see i don't think we are giving yearly guidance of the laws etc but see this is the uh

the production is ramping up, our marketing and brand building activities are ramping up, we will have these losses continuing for this year.

So, you know, we are in investment mode and like we said, we are looking at a three-year picture where after the third year of full operation, we will be positive. So, I think that's what we should continuously aim for and as I answered in the first question, All the KPIs and, you know, checkpoints that we had looked at, after four months, we are running online.

I think we are in investment mode, which is obviously acknowledged in the moment.

Yes.

Thank you. Before we take the next question, a reminder to participants to please limit your questions to two per participant.

The next question is from Rahul Gupta from Morgan Family. Please go ahead. Yeah, hi. Can you hear me now? Yes, yes, please go ahead. Yeah, hi, thank you for taking my question. I have just one question. I want to understand, I know you have talked about your strategy around B2B business, but can you just help us understand how should we look at this business from a revenue and profitability perspective over the next few quarters and maybe next couple of years? I remember you talked about around 200 crores monthly revenue in the last quarter. which in this quarter you have talked about around 550 crore per quarter so just want to understand how you are looking at this business it helps us model better thank you Hi Rahul this is Sandeep here thank you for the question so as we mentioned during the last quarter results and even this quarter our revenue growth continues to be in line with what we had expected you know our aspiration that we had announced in the last quarter was to reach $1 billion in three-year time span. Our internal markers are pointing towards that and we are in the right direction in achieving that goal. And as we scale up, of course, our profitability will also be in line with that and we will aim to achieve profitability at that scale. So far, we are focused on increasing our geographical reach and also our number of customers who are transacting on the platform across different categories and we are well on our way to become like the one shop shop for all categories within construction and building material. So that's the goal. Thank you so much. That's great. Can you just help us understand what kind of losses you will be making in this business right now?

These are not very large numbers. See the Gross margins, as we have earlier said, will be in the range of about 1.5 to 4% in different product categories. Okay. So that is the situation as far as gross margins are concerned. But yeah, since the team building and the business investment activities and all, so initially there are losses. Not very large numbers to be, I mean, discussed here.

Yeah, look, and as a business, This is not a cap-ex heavy business.

So our primary investment is predominantly in building the team, building the technology platform and increasing our reach. Those are the activities that we are currently focused on. And given that it's a thin margin business, our focus will continue to be scale up of revenue. But we are also aware that, you know, it will take time for us to sort of enter profitability. But as C.F. had mentioned, this is the losses are not very big. Thank you so much. I have just one final question. I know you are looking to scale up your renewable business. Any idea over here whether you will call out as a different business or are you looking for any additional investment? How should we look at this business from two, three, four years perspective?

So, I think we have already shared this that we aim to First of all, we aim to double the capacity by this financial year. And the projects are already under implementation. From 1 gigawatt to 2 gigawatt in this financial year. And then our aim is to add maybe 1 gigawatt every year for next 2-3 years. Depending upon the changes or the bids which we can successfully bid for. That is the idea. And as of now, there is no, I mean, nothing on table to take this business out, etc. It is already housed in a subsidiary company of Gratim, which is a wholly owned subsidiary currency.

Great, that is from my side. Thank you so much. Thank you.

The next question is from Neeraj Simudia from Amble Research. Please go ahead.

Thanks for the opportunity sir. I have two questions on chemicals. So one on the hydrogen part of our business.

So let's say whatever hydrogen that we produce from our caustic plant after using it captively for the flaker, how much we are currently selling in the market and does it form a part of our ECU calculation?

So thanks Lero for the question. You always have an interesting one on chemicals. Right, right, right. So, of course, we have multiple uses of hydrogen, right? And as you correctly said, we use it captively, we sell it, but also a certain amount of process cementing is required to maintain the stability of the plant.

I think you can roughly assume that approximately, you know, 10% to a quarter of our hydrogen is actually toward external space and rest is towards either captive consumption or maintaining process cementing. Correct. And so, once we expand our caustic capacity, we have some selective hydrogen also available with us.

So, are we planning any downstream products of hydrogen which we are not having currently? So, any thoughts on this?

Yes. So, in the medium term, the answer to your question is yes. You know, we are looking at hydrogen derivatives. But as you know, the chemical industry very well mirrors. Our priority right now is chlorine derivatives. Mainly because for hydrogen, we do have opportunity to do both, you know, sales at good price as well as use it internally for our energy. So, it's not off the table, but between hydrogen derivatives and chlorine derivatives, our priority is chlorine derivatives for now.

So, my second question is on that derivatives only. Sir, last quarter you mentioned that our chlorine was having something close to 3.5 rupees to 4 negative in the overall EQ.

So, how has those chlorine prices moved this quarter? Yes, so this quarter it kind of remains at that level but under pressure and as you know our competitor has recently added capacity so that has put a lot of extra chlorine on the map.

Correct.

So the 3,500 assumption is roughly correct but with downward pressure.

Correct. And when we analyze our VAT, so

If you can help us like within our VATS portfolio in terms of the user industries between let's say agro, PVC, water treatment and the industrial side, how our volumes of chlorine moves around this user segment?

Just to say that I know the part for that. So, I will give you a rough assumption breaker, right? So, assume around 40% for water treatment. Okay. Between 30-35% treatment for 30-35% for what we would call the industrial users. Okay.

We have about a quarter in plasticizers and PVC additives.

And then maybe close to 10-15% in, you know, really specialty things like refrigerants, pharma, hydrochemicals.

Got it, got it. So, last bit from my side is we have seen some of the downstream VAPs, the prices have been improved specifically on the CMS side of the business.

So, one we have seen an improvement in our EBITDA this quarter from 195 to 310.

If you can just help us break down between let us say how much we have seen improvement in our VAP side of the business sequentially and Was something being contributed also by the epoxy side where our volumes of solar corona up this quarter over and above what we have dropped in last quarter?

So both our chlorine derivative portfolio and epoxy portfolio has grown and contributed. But as you must have noticed from our results, we had a plant turnaround in the first quarter.

We were hooking up some new electrical items, we were doing a lot of overdue maintenance and that turnaround basically took let us say about 18 days of effective capacity away and that is the part that got subtracted so that should help you kind of figure out the main gap from what you would see let's say you know if we did not have the turnaround this would be our eighth consecutive quarter of volume growth you did not see it this time because of that that point turnaround and that was in July because about what let's say So, combining EQ and the power cost benefits what we have accrued, is it safe to assume that 75 to 80 percent of this improved profitability is just because of the costly business? No, the improvement has been in all three categories, Nirav. It's been in cost check, but it has also been in epoxy as well.

Got it. Thank you so much, sir, and wish you all the best.

Thank you. Thank you. The next question is from Agnes Roy from Nuwama. Please go ahead. Yeah, thanks for the opportunity. My first question is on your initial remarks on Payne's business. So this question is to the Bigelow first team. You mentioned that there is a CWIP component. So my specific question is, given you will have three more factories which will keep coming up till the Q4, Will the CWIP component continue to be there in Q2, Q3, Q4? That is the first clarification I wanted. Second is, your factories are world-class, extremely large, extremely modern. So, when you mention that the full breadth of the products haven't reached some of the dealers, what do you mean by that? Because paint logistics is fairly quick. And your demand is much lower than the current capacity. So, why the products have not reached fully to the dealers? Could you explain these two? I'll just take up, this is Mansoor, I'll just take up the CWIP and then give it back to Rashid to talk about the range of products. I think just for clarity, in month of February, we've announced the production, the trial and cartel in three factories. On 30th April, we went into commercial production. The total quantity that was produced between February to 30th of April was material available for sale in the months of April-May-June and that is the number that is happening. The same will continue to happen for whichever new factory comes up during soil production. Every soil production period is going to be 3-4 months. We have to make sure the we are satisfied, we stand out in the marketplace and we have to get the whole, all the elements of the machinery and product ready. That's why they will be for every factory about 3 to 4 months of time production. So, I hope that was clarified for a CWIP. No, it doesn't. So, does it mean that Q3, Q4 and Q2 will have the impact. I understood you said 3 to 4 months before the launch there is the testing of the product. But could you clarify that all 3 quarters will have this issue? Every plant which is launched will have a 3 month period of trial production. I have averaged. I am just giving average. So that is the only number that we have to see. So the 3 plants which were 30th of April that was announced, most of their production which has happened after 30th of April are on commercial production. Their sale has already started to take place in quarter 2 and quarter 3. Chamraj production which is currently in trial, their sale will continue to be part of the CWI. So, just to add, for every factory, before it is commercialized, whatever is manufactured in the factory and sold in the market, we will not be booking that revenue that will keep on going into CWIC. Henceforth, what you will see every quarter, because we have Chamraj Nagar, we have Mahad and we have Kharagpur, when they start manufacturing through the financial year, part of their production will keep on getting into CWIC. So, effectively, you will not be seeing the full turnover which is actually sold in the market. Am I clear on that? So, sir, only request and I think Jay also asked on this, given we want to ensure we understand this business better, my only request is in the coming quarters if you could clarify what is the CWIC because you then continue to struggle what exactly is the performance because this quarter Q1 it seems as Jay also suggested and my own math suggests it is around 80-90 crores. But if we don't know the CWIC number, How can any sell side or buy side understand what is the total number? So, humble request to give that clarification in the coming quarters also, if possible.

Yeah, we will consider that. I think, let's hope we will try to make it more clearer to you.

Sure, thanks. If you could address the second part. Yeah. So, on the second part, let me be very clear. All the depots where we are, we are able to serve the dealer within 4 hours. or the next year depending on the protocol which the market leader and the other competitor have. What we meant that we don't have the full range is that we talked about 125 products to begin with. They come with a large number of formulations and as you would understand that when you start manufacturing a factory there is a changeover and we also want to give all SKUs to all part of India. We have already manufactured more than 80% of those products which are potentially capable of fulfilling more than 92-93% of the market's turnover. So, the products which are left are the small, the lesser-telling fringe, the C-class or the D-class, if you use the character classification, which are only left, which will also be covered. So, we have manufactured the bulk of the important products which make the market, which are already there in the depots and which are effectively being ordered by dealers. Does that clearly answer? Yes, that's quite useful. My second and last question is on the mass media campaign. So your advertisement was quite differentiated and most people definitely liked the use of the cartoon and overall I think very pleasant as. and very good visibility during the cricket world cup. My question is in terms of campaigns going ahead if you could tell us did you also target say Olympics for example what are the other the GECs which you are targeting currently the regional GECs the Hindi GECs and what will be the plan in terms of brand ambassador I am not asking for specifics because lot of these will evolve based on competition based on your own target. But some priorities you can give. Do you know what has happened in the mass media and what's the plan on brand ambassadors? Okay. So let me first tell you what has already happened. So we are still on television with the brand campaign which is Make Life Beautiful. We have done national outdoors. We are there on radio. We are there on social media. So basically, the first part of our campaign is what is will out? What? So you could see that Birla Opus is in paint and we have come with a differentiated way of communicating. Our feedback is that consumers are 100% able to connect the brand Birla Opus, the fact that it is in paint. Because there used to be a lot of misattribution because all the other paint companies advertise in a similar manner. So people were confused whether it is from brand A or brand B. Our current campaign has been present in all regional languages, in all the major regional languages on all regional channels. We are a pan-India player. In the future, we will continue to have campaigns which will also be of a slightly different type but we will keep on addressing the whole of India which means we will always come with language translation and we will be there on all media including press, including print, including social media. In terms of final strategies of what am I going to communicate, for that you will have to wait and watch. But as you can see that we have a very effective way at least in the first campaign and we hope to continue that tradition. So thanks. Nothing on brand ambassador, right? No. Everybody asks about brand ambassador but like I said, you have to just keep watching what happens. And I think the animation was done very well and thank you for that feedback. Thanks. That's all from my side. Thanks a lot. Thank you. Next question is from Prateek Kumar from J&P. Please go ahead. Hello. Yeah. Pramika, my question is on a couple of questions in this segment. So, is there a way to identify or you learn like how is the retail acceptance while you are pushing volumes to dealers? How are customers, let's say, buying the products? Because we have talked about tinting machines being able to track your business, how it has been sold. So, do we learn that? Also, question on like this 80 crore runnage that's been discussed. So, how the exit like let's say number for June and maybe shall we look at like 80 into 3 kind of number for second quarter and just in terms of direction for the payment. Okay. So, let me repeat on the second question. Like you said that 80 crores that has been booked for the quarter is only a part of the actual sale that we have done. And like Pawan said, we will consider what to disclose, say, from next quarter onwards. We will discuss it in the afternoon. But it's only a part of the sale that we have done. The obvious part is that the real retail sales is much more. Your first question, in terms of, obviously, dealer acceptance is good and people are buying in. We have also been continuously doing our retail audits and also bases the information that we have from the printing machines in what is selling off and we are very happy that the sellout rate from the dealers is exceptional. So our retail audit of stores where we have gone and seen stocks sold till date and taken inventory of stocks lying in the store suggests that The inventory line in the store is a small part of what we have sold till now which means majority of it has been sold out. Also, like we said, we have a unique printing machine where online I am able to see what is being printed by the dealer. I now am getting access to a lot of insightful information about what product is being based, how much is being printed which is probably not there with any other player which is giving me more idea of what is selling out which is also going to help me in the near future in doing my demand test. is what I would like to put. So, we are very happy with the offtake of middle office of the retail store. Thank you. My other question is on like your depreciation interest has hardly changed on a quarter to quarter basis despite capitalization of the C plan. How is this or is this the trend that we should expect for like for the next couple of quarters also or is it like major portion is not getting factored here?

So interest depreciation, the addition is only for three plants and only for two months to be ended. So that is the only difference. As we capitalize upon plants going forward, then this will go up.

Okay, and last question on a basic segment, are we looking at, because we are operating at I think very high operation, any growth case in that business like once in a week for two hours, pain case in this year?

Yes, we are studying different options and for the time being we are trying to maximize production from our existing hardware and there are some opportunities we will exploit and definitely we are studying the next phase of our growth.

Thank you, sir, and all the best. Thank you. Thank you. Next question is from Rajeev Chopra from City Group. Please go ahead.

Thank you. Just a couple of bookkeeping questions as well as on your outlook for both the DSS and the chemical business before I ask the others. From here.

Outlook for DSS instead. So, for the DSS business, it's a cyclical business. Textile demand... like we start with the retail as we all know retail sales has not been very great in India so far we all hope that this coming festival season and wedding season will boost the retail sales even in the west people are expecting interest rate cut and that should also improve the consumer sentiment having said that there is a rotation among the fibers so for the time being VSF is being preferred over cotton and the polyester in the textile industry. So that is helping the VSF consumption. And we expect it to be the case for some time to come. Some material prices are mixed. Some items are increasing. Some prices are stable and some prices are decreasing. So overall it is more or less stable with slight increase in density. So, we hope that outlook will be stable.

Okay. So, you are expecting margins to remain at these levels?

Rain-bound. That is what the best assessment.

Okay. And your domestic prices, sorry, global prices were up sequentially. Domestic prices during this quarter, were they also up?

Yes. Yes, in line with the international prices, yes.

Okay. Okay.

Rashi, can I speak about chemicals? Outlook was always a difficult one to predict, right? Anything I say, please take with a pinch of salt. But you will recall that I think in the last quarter I indicated that we were potentially seeing a bottoming out of caustic prices, given that some of the players globally were at marginal costing.

That has played out, so caustic prices have improved a bit.

Chinese domestic consumer demand is not getting worse. The government is trying hard to get that ticked up. So I do maintain a mildly positive outlook and the key word here is mildly positive not a sudden change on coffee.

Chlorine is a somewhat different story because chlorine is more domestic as you know one of our competitors has added significant capacity in Gujarat without any integration.

So, chlorine for sure is under downward pressure. So, eco could be flat to slightly right. Then, if you look at chlorine derivatives, the outlook is slightly favorable, mainly because you see a pickup in the global chemical industry, whether it is agrochem, whether it is pharma,

But again, a lot of it depends on what happens in China. That's the difficult part of this problem.

In our specialty chemical epoxy business, volume growth will continue to remain strong. We see good favorable tailwinds in all sectors where epoxy is used. Of course, we battle topics like free trade agreements with other countries. inverted duty structures etc. which puts a limit on our margins but we do expect that there will be stronger volume growth.

So, I would say that I am cautiously optimistic on chemicals as a sector with the disclaimer that a lot will depend upon what happens with the Chinese consumer and nothing funny should happen either in the global supply chain because of the crisis in the Middle East.

That's very helpful. And just one last bookkeeping question, only if paint, the remaining two plants, what are the timelines?

Remaining?

Which timeline, Rashi? The Mahad on the paint side, Mahad and the Kharagpur plants, what are the timelines for both?

So Mahad and Kharagpur will be somewhere in Q3 and Q4. So first Mahad in Q3 and then in Q4 the Kharagpur plants.

Okay.

Shyam Raj Nagar has already commenced trial run production so I think in Q3 we should be capitalizing that.

Are you still maintaining the high single digit market share exit target for 2025?

Yes.

Okay. Thank you.

Thank you. Next question is from Naveen Sadeo from ICICI Securities.

Please go ahead. Yeah, good evening and thank you for the opportunity. So, just to clarify, since you mentioned and this is a current change that you said revenues are not fully represented because of the series of trials and production going into series of IP. But again, the back of the envelope calculation for the EBITDA law and I believe including B2B e-commerce, it comes to roughly around 296 crores. And as you said, B2B commerce need not be a very large portion. So, hence I assume that significant portion of this 296 crore is related to claims, anywhere between 250 to 290 crore, some number between that. So, just wanted to clarify if that is fully representative of the sales that have happened and not the revenue, just to understand that how should one look at losses also in the same way.

So, yeah, the expenses don't represent fully the revenue because of the large marketing related activities going on, lots of dealer meets across the country, the branding campaign, etc. So, that is a kind of investment. It will not match with the revenue for the quarter. So, that part is, yeah, I think you are right. and roughly what numbers you are saying possibly yes those will be the kind of rowdy numbers but yeah I mean it the building material segment includes as we have already explained is cement and b2b and the paint so you know I what I meant is if

So, the way to look at it is, revenue is not fully represented correctly, but the expenses related to that is represented. Is that correct?

Yeah, that is correct. So, part of revenue has gone to the CWIP, yes.

And the losses related to those CWIP revenues, I mean... Are they included in this 296 or?

No, no, no. So, the CD, what has got capitalized is only the plant construction related expenses. So, all other expenses are coming to P&R, which is from this question.

In the P&R. Let me just help you. Our large expense is as the phone clarified to be able to to activities in the ground at the dealer level and the consumer level and contractor level. All those expenses have been part of the P&L element. As far as plants are concerned, from an operating level, their expenses are small and that small expenses have been put into CWIP. That's a very small component of the large expense property.

Can you clarify, suppose there is a loss on the material which is

produced during the commissioning or trials and there is no that so if there is any loss or profit that goes to CSWI yeah that is what I think he is trying to I mean is that your question yeah yeah that's that's that's helpful so my second question was around the working capital and the net debt part of it so for the paying business you have already spent 7800 odd crore and balance between the difference between the 10,000 odd is to be spent this year. So, this is entirely excluding the working capital, right? As in 10,000 crore is a CAPEX that we were looking at only from a broad block and the other support system for the change business. It does not include the working capital number. Is that?

Yes, yes.

So, 10,000 109 crore as the exact number is the capex only which of course includes the IDC, the tinting machines, the IT system, everything.

Right. So, sir, I am just noticing one more.

Capital is not included. Okay. Yeah.

So, your, sequentially the net debt has gone up by roughly 330 crore rupees. So, I am just trying to understand this because in this quarter we were a little under 6000 crores and this in Q1 we have already spent close to 1000 crores right and operations Q1 did not generate much cash as such. So, and then the working capital requirement for the businesses that we have I mean for the pay-ins and all. So, just wanting to understand that how should one look at because the increase quarter on quarter in the net debt is much lesser than what could have ideally happened. Is there anything that I am missing? Only the clarification.

Thanks. Yes, so working capital management of our existing businesses has been able to generate some cash flows that has led to the lower debt increases. Okay, so in this quarter Q1 specifically, our operating cash flows are much higher than the EBITDA for the quarter. because of the working capital management. Of course, that is not a permanent kind of thing. It will get reversed in the Q2. But that is the, I mean, short answer for that.

Thank you, sir.

Thank you so much. Thank you. Next question is from Rishi Modi from Mastered Investment Managers. Please go ahead. Rishi Modi, please go ahead with the question.

Hi, am I audible?

Yes, please.

Yeah. So, sorry if I missed this, but what amount of revenue in the Pains business has gone into CWIP in this quarter?

So, you know, I think this is the third time this question is being asked. So, we'll say that majority has gone into CWIP.

Okay. So, it would be to the tune of 100 CR in CWIP.

I'm just saying majority...

Okay. And so on the sales incentive front, right, on the incentives for the dealer, the contractor, the painter, if you could just give some qualitative comments on how we are differentiating ourselves against the market leaders, these action or merger, if you could just give us an idea there.

So, you know, we are doing many things. which are similar to the market but also different from the market so we have a very attractive franchisee proposition for large dealers and many dealers have adopted and many of our stores are coming up in terms of the way we look at putting the tinting machine you know as you would know we have distributed a large number of tinting machines the dealers are very happy with that package In terms of what we are doing with contractors, both in terms of intensive training, the kind of training which we are getting from us for the first time, the app and the commercial benefits of scanning and reward program is very unique. I don't think any other paying company in the market has as many tokens and coupons on all sizes of packs that we have given, which is the first time in the market and the market really likes it. So there are many things which we have done, both at the dealer level, and at the contractor, painter, influencer level. To give you an example, nobody is giving tokens for painters on solvent products like enamels. We are giving it and painters are very happy. So, as you would find from your own research in the market, there are things which we have done which are very different and there is good appreciation. Also, I am not even talking about product features but we have product features and you know there are several communication developed for contractors and painters which you might have got access to because all of them have on their phones. There are product features also which are unique. There are, you know, whether it is coverage, whether it is hiding, whether it is cuffing, and the market, including contractors and dealers, which is very much. There are some features which are purely for the benefit of painters and contractors also, you know, in terms of batter, in terms of, you know, just dirty, which painters and contractors they actually they are saving half an hour every day which they have to spend on other brands by simply they don't have to clean up because you know well obtained does not matter so I am just giving you certain examples of how there are multiple differentiators at the contractor painter and trade level which is actually finding a lot of resonance thank you very much due to time constraints we will take that as the last question on behalf of craft industry that concludes this conference Thank you for joining us, ladies and gentlemen. We will now disconnect your lines.

Thank you. Thank you.