Grasim Q2 FY24 Results: Implementing the Next Phase of Transformational Growth Journey

• Consolidated: Revenue up 10% and EBITDA up 19%; driven by performance of cement and financial services businesses
• Standalone: Lower realisations in Caustic Soda business in line with sharp decline in global prices impacted the Standalone performance
• Viscose: Quarterly sales stood at 210KT, growth of 24% YoY
• Chemicals: Caustic Soda business recorded sales volume growth of 3% YoY though lower realisations impacted performance
• Birla Opus: Paints Business unveils brand name

Grasim Industries Limited today announced its financial results for the quarter and half year ended 30th September 2023. Consolidated Revenue is up by 10% YoY to ₹30,221 Cr. driven by the performance of key subsidiaries: UltraTech Cement and Aditya Birla Capital. However, softening of realisations in Caustic Soda impacted the standalone performance.

Viscose Business

China operating rates (OR) averaged 85% in Q2FY24; a slight increase compared to 82% in Q1FY24. Additionally, inventory levels have seen a gradual decrease during Q2FY24. Given the macro-economic situation, demand in global consuming markets like the US and Europe remains muted, though festive season led to an uptick in domestic demand. Domestic prices remained under pressure due to the softening of international VSF prices by 7% from an average of $1.67/kg in Q1FY24 to $1.55/kg in Q2FY24.

The Company’s VSF volumes grew by 24% YoY and over 12% QoQ to reach 210KT. The Viscose business reported revenue of ₹3,889 Cr. and EBITDA of ₹468 Cr. for Q2FY24, making a sequential increase of 9% and 20% respectively. EBITDA margins improved on the back of higher sales volume and a reduction in input prices. However, the Viscose Filament Yarn (VFY) business margins faced pressure as China’s aggressive pricing policy led to necessary price adjustments in the domestic markets.

Chemicals Business 

International Caustic Soda spot prices (CFR SEA) remained relatively stable at ~$417/tonne in Q2FY24 ($415/tonne in Q1FY24). Prices declined to $383/tonne in July 2023, but recovered later in the quarter, reaching $470/tonne in September 2023.

Caustic soda sales volume increased 5% QoQ and 3% YoY to 306KT in Q2FY24. ECU for the quarter stood at ₹32,008/MT, down 8% QoQ and 35% YoY. Chemicals Business revenue stood at ₹1,988 Cr., down 7% QoQ and 27% YoY, primarily due to lower caustic soda realisations. EBITDA stood at ₹236 Cr., down 34% QoQ and 61% YoY.

Speciality Chemicals (epoxy polymers and curing agents) business margins were impacted by lower realisations as compared to Q1FY24.

Textiles Business

Textiles business has reported a revenue of ₹560 Cr. and EBITDA of ₹41 Cr. A sharp increase in flax fibre prices has impacted profitability of the Linen business. Upon review of existing anti-dumping duty (ADD) on linen yarn imports from China, the Government of India has levied ADD on Linen Yarn imports from China in the range of USD 2.29/kg to USD 4.83/kg for a period of five years w.e.f.12th October 2023.

Birla Opus - Paints Business

The company has announced “Birla Opus” as the brand name for the paints business. The sub-branding and marketing strategies are progressing according to the estimated timelines. We have received consent to operate plants at three locations: Panipat, Ludhiana and Cheyyar. During the quarter, the company launched a painting service offering under the name “PaintCraft” across 8 major Indian cities.

B2B E-Commerce Business - Birla Pivot

Birla Pivot has launched a private label called “Birla Pivot Tiles” in the tiles segment. The business is experiencing repeat orders from direct buyers. The Company is working towards meeting the incremental demand for scaling up its credit programme offering Financing Solutions to MSME customers.

Capex

The total capex outlay for Q2FY24 stood at ₹1,650 Cr., of which ₹1,269 Cr. was for Paints Business. The Board has approved Capex of ₹144 Cr. for different businesses and has approved rephasing of spending of earlier approved Capex entailing additional spend of ₹138 Cr. in current Financial Year. The budgeted spend for FY24 stands revised at ₹5,929 Cr.

Cement Subsidiary - UltraTech Cement Limited (UltraTech)

Cement Sales volume stood at ~26.69 MTPA, up 16% YoY in Q2FY24. Consolidated Net Sales increased by 15% to ₹16,012 Cr. over the corresponding period of the previous year. EBITDA was up by 35% to ₹2,718 Cr. compared to ₹2,013 Cr.

UltraTech has announced the third phase of growth with an investment of ₹13,000 Cr. towards increasing the capacity by another 21.9 MTPA with a mix of brownfield and greenfield projects. The expansion also includes investments in setting up an additional 39 MW WHRS capacity contributing towards the Company’s commitment to reduce carbon emissions.

On the sustainability front, UltraTech commissioned 30 MW of WHRS capacity during the quarter. Green power now contributes 22% of the total power requirement with 262 MW of WHRS and 429 MW of renewable energy.

Financial Services Subsidiary – Aditya Birla Capital Limited (ABCL)

ABCL reported a consolidated revenue for Q2FY24 up 13% YoY at ₹7,721 Cr. ABCL reported PAT growth of 44% YoY at ₹705 Cr. The momentum across businesses led to a 41% YoY and 8% sequential growth in the overall lending portfolio (NBFC and HFC) to ₹1,08,961 Cr. as on 30th Sep-23. Mutual fund quarterly average assets under management (QAAUM) increased by 10% YoY and 5% sequentially to ₹3,10,899 Cr. with equity mix at 41.9%.

Clean Energy Solutions Subsidiary – Aditya Birla Renewables Limited (ABReL)

ABReL reported a revenue of ₹86 Cr. for Q2FY24, marking a 55% YoY jump. Quarterly EBITDA grew by 49% YoY to ₹56 Cr. ABReL is offering a range of solutions encompassing solar power, wind power, hybrid power and is also planning for storage projects.