GRASIMNSEq3fy25February 11, 2025

Grasim Industries Limited

7,959words

73turns

15analyst exchanges

0executives

Key numbers — 40 extracted

3.3%

world in 2025. As per the latest IMF World Economic Outlook report, global growth is projected at 3.3% in 2025 and in 2026, both below the pre-COVID historical current century's average of 3.7%. Advan

3.7%

ted at 3.3% in 2025 and in 2026, both below the pre-COVID historical current century's average of 3.7%. Advanced economies are projected to grow at 1.9% in 2025 and 1.8% in 2026. And within the advanc

1.9%

e-COVID historical current century's average of 3.7%. Advanced economies are projected to grow at 1.9% in 2025 and 1.8% in 2026. And within the advanced economies, the U.S. is expected to grow a littl

1.8%

l current century's average of 3.7%. Advanced economies are projected to grow at 1.9% in 2025 and 1.8% in 2026. And within the advanced economies, the U.S. is expected to grow a little faster with pro

2.7%

he advanced economies, the U.S. is expected to grow a little faster with projected growth rate of 2.7% in 2025 and 2.1% in 2026. Diverging growth and inflation dynamics could result in varied moneta

2.1%

mies, the U.S. is expected to grow a little faster with projected growth rate of 2.7% in 2025 and 2.1% in 2026. Diverging growth and inflation dynamics could result in varied monetary policy approac

4.2%

to widening rate differential. Emerging markets and developing economies are projected to grow at 4.2% in 2025 and 4.3% in 2026, with India leading the projected growth rate at 6.5% in 2025 and 2026.

4.3%

differential. Emerging markets and developing economies are projected to grow at 4.2% in 2025 and 4.3% in 2026, with India leading the projected growth rate at 6.5% in 2025 and 2026. Since September

6.5%

ojected to grow at 4.2% in 2025 and 4.3% in 2026, with India leading the projected growth rate at 6.5% in 2025 and 2026. Since September 2024, Chinese policymakers continue to focus on delivering a se

rs,

ent, is also creating environment for boosting consumption. Further, after a gap of nearly 5 years, RBI has unanimously decided to reduce the benchmark repo rate by 25 basis points to 6.25%, deliver

25 basis point

, after a gap of nearly 5 years, RBI has unanimously decided to reduce the benchmark repo rate by 25 basis points to 6.25%, delivering a less restrictive monetary policy. Coming to our company, we continue to l

6.25%

arly 5 years, RBI has unanimously decided to reduce the benchmark repo rate by 25 basis points to 6.25%, delivering a less restrictive monetary policy. Coming to our company, we continue to leverage ou

Guidance — 20 items

Pavan Jain

opening

“As highlighted by our Chairman in his visionary reflections for 2024-25, we will be embracing a U3 world, which is uncertain, unpredictable, and unorthodox world in 2025.”

Pavan Jain

opening

“Emulating this growth momentum, we are happy to share that Grasim's consolidated revenue grew for the 17th consecutive quarter on Y-o-Y basis, registering a CAGR of 13.5% over the past 4 years.”

Pavan Jain

opening

“UltraTech remains on track to achieve domestic gray cement capacity of over 200 million tons per annum by FY '27.”

Pavan Jain

opening

“The first phase of 55K TPA will be executed by mid-'27 at an investment of ₹1,350 crores.”

Sumangal Nevatia

“If one can elaborate what sort of cost pressures are we looking at in this quarter and in the coming quarters, some guidance?”

Sumangal Nevatia

“So should we expect steady-state limited investments in future, focus on paints and other divisions?”

Pavan Jain

“The total capacity increase will be about 110,000 tons involving 2 phases, first phase 55,000 and second, another 55,000.”

Sumangal Nevatia

“So just some details on these will be very helpful.”

Sandeep Komaravelly

“From our point of view, well, I can't comment on competition, from our point of view, we remain committed to building a very comprehensive end-to-end B2B E-commerce platform that fundamentally resolves for all the use cases there are, whether it is a retail customer or whether it is a project customer.”

Sumangal Nevatia

“I mean, can we expect, going forward, the losses to further increase at least for some time or the peak is behind and some operating leverage to start reflecting on be moving towards breakeven.”

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Risks & concerns — 12 flagged

As we enter 2025, rising policy, uncertainties, protectionism and geopolitical tension signal a more volatile and fragmented global economy.

— Pavan Jain

As highlighted by our Chairman in his visionary reflections for 2024-25, we will be embracing a U3 world, which is uncertain, unpredictable, and unorthodox world in 2025.

— Pavan Jain

However, there was sequential decline due to production loss at Excel plant in Kharach and seasonal demand weakness during the quarter end post festival season.

— Pavan Jain

So I think as regards to cost pressure, the key input prices, which is pulp and caustic soda and sulphur, all these prices have moved up almost more than, I mean, in the higher double digit, more than 10%.

— Pavan Jain

Of course, the CSF realisations have also improved, but the impact of input price hike is more than the impact of the gain in the realisation prices.

— Pavan Jain

So, our margins have been under pressure, partly also because of the FTA, our country has with the Korean producers, who are able to bring in LER duty free.

— Jayant Dhobley

If you ask me to put a number, difficult for me to put through, but I will say that if the best region is 110, then maybe the slowest region is 90.

— Rakshit Hargave

So, if a domestic producer for PVC comes in, correspondingly, there will be pressure on operating rates of PVC plants in other parts of Asia.

— Jayant Dhobley

So there may be a couple of years of pressure there.

— Jayant Dhobley

You called out that unlike peers, you are not seeing macro slowdown.

— Tejash Shah

Just wanted to know, would you still say that versus where we started the year, the macros are slightly difficult where we would have thought it will play out?

— Tejash Shah

And the prices continue to be under pressure.

— Jayant Dhobley

Q&A — 15 exchanges

My first question is on the CSF division. If one can elaborate what sort of cost pressures are we looking at in this quarter and in the coming quarters, some guidance? And we are running at almost rated capacity. What sort of capital allocation are we looking at in this division given the return profile has been very subdued over the last few years. So should we expect steady-state limited investments in future, focus on paints and other divisions? Or we would look to see some brownfield attractive expansion opportunities here as well?

Pavan Jain

Yes, Sumangal. So I think as regards to cost pressure, the key input prices, which is pulp and caustic soda and sulphur, all these prices have moved up almost more than, I mean, in the higher double digit, more than 10%. Of course, the CSF realisations have also improved, but the impact of input price hike is more than the impact of the gain in the realisation prices. As far as caustic soda prices are concerned, while the CSF business gets impacted by the higher cost, higher price, but we gain more than that in our chemical business because more than 50%, 60% goes to the other customers, caust

Yes. So, my first question was in the paints and B2B E-commerce segment. Now it's really great to see that sequentially, there is a material revenue jump, excluding UltraTech, of course. Also, heartening to see that the EBITDA losses have also reduced quarter-on-quarter despite the sales going up by almost like ₹543 odd crores combined segment, excluding cement, of course. So my question was to get some understanding on this. Can we say that as sales ramp up in the coming quarters, this absolute loss number or as a percentage of sale will only narrow, and we have like -- we have peaked out in

Rakshit Hargave

So I think the way we will put it is we have to break even after the first full 3 years of full-scale operation. Obviously, there is going to be a parachute that will fall. And in that, first year is going to be the heaviest year of investment. So I think if you look at it this way, the journey continues, and we know in which direction we will proceed. That's how I will say. Fair point. My second question then was on CSF. So, we have announced a capex of ₹1,350 crores. Now we are yet to deploy or complete the capex in Paint and we have taken the CSF expansion. I know that segment was demanding

I have 2 questions, sir, on chemicals. So for the Epoxy business, how have been seeing the ramp- up of the newly expanded capacities or let's say, if you can say at what level of utilization, the newer capacity is operating at. Also, if you can share like how we are seeing the demand both on the liquid epoxy side and the specialty side of the business? and was Q3 seen a margin getting impacted because of volatility in the prices of bisphenol and higher prices of caustic soda?

Jayant Dhobley

Nirav, this is Jayant. So, I'll start with your last question first. Look, BPA and ECH prices have both been going up, as you know. Between the 2, I think average increase over the quarter has been about 13% weighted average. And we have been able to pass on not all of the price increase. So, our margins have been under pressure, partly also because of the FTA, our country has with the Korean producers, who are able to bring in LER duty free. And as you know, as an industry, we are hoping that the government will address this. Volume-wise, there has been marginal growth. We are trading off vol

So firstly, on Paints business, congrats, there seems to be a material step-up on sales in third quarter versus what we saw in the second quarter. Can you talk a bit on how much of this would be from sell-outs? And what would be the dealer reach now? Also, if you can share your geographical split, i.e., contribution from North, South, West, East? And lastly, traction from exclusive dealers or large dealers and from small dealers. That will be my first question.

Rakshit Hargave

Okay. So I think you have multiple points in your question. So if I take the first one, so our sellouts are excellent. So when I say we have a system where we know exactly how many kiloliters of products were scanned by our contractors on the previous day. We actually get live data. And if I take a look at that, literally 65% to 70% of what we have sold and have sold out. And actually, the inventory that we have lying at the dealers is very healthy compared to other companies where you have a lot of inventory line. Our inventories are nice, and the dealers are happy because then the correspond

My questions would be regarding the Chemical division. So given there are so many capacities coming up in caustic soda, how do we place ourselves being the largest player in the industry? And secondly, on the epoxy resin, so if you could give your view on the tariffs that are being considered in the U.S. on epoxy resin from the Asian countries. These would be my 2 initial questions, sir.

Jayant Dhobley

So I'll answer your question in the reverse order. So while both U.S. and Europe are looking at tariffs on epoxy resins, there are other jurisdictions such as Korea and China, which are likely to be more severely impacted if you look at what type of a grant filing has been done. So, it's a little bit of, you know, if India gets a little bit lower tariff compared to what the other 2 major producers get, in net, it may benefit us. But this is a speculative amount because the final tariffs are not yet announced. Secondly, Grasim focuses mainly on the domestic market. which we believe is healthy,

I understand you're doing well across the board. But if you can give some flavor in terms of, on a relative basis, where are you doing better in terms of the town tier class? Is it the large towns where you have a higher market share? Or is it the smaller towns? And also similarly, in the tiering of the paints by value, so is it the top tier where your market share is relatively higher than the mid or bottom tier? Or is it the other way around?

Rakshit Hargave

So, like I said, the response that we have is more or less uniform across all town classes. To begin with, maybe in the first few months, we had a very strong takeoff in the mid- and upper mid-tier towns. But now in the last quarter 4, we see that we also have excellent reach in the metros. And like I said, we are already available in more than 5,500 towns. So, offtake measurement as we see, which is the true parameter of how the product is moving, we see that the product is moving across all these town segments. Obviously, maybe in the longer term, some developments might happen, which show t

My first question is on CSF Chemicals segment. So, the 2 segments combined EBITDA has like been largely range-bound at ₹600 crores to ₹700 crores for a while. Recently, I mean, particularly in CSF, leadership position and high operating rates of China, why the company is unable to pass this higher cost, which came as a big change on a quarter-to-quarter basis. And on Lyocell, particularly, we are like going ahead with this large capex. So, what is the EBITDA contribution of Lyocell in this ₹330 crores-odd EBITDA, which we had in this for this segment?

Vadiraj Kulkarni

Yes. One, I think as far as why we're not able to pass on the cost increase to the customers, you see it's a demand and supply equation which also plays out in the global market. And that is true for, I think, many segments. Sometimes we can pass on much more than the increase in the cost because the demand has been very, very high. Two, in terms of current Lyocell capacity for us is very limited. While we have a very large market share in the country today, it's a very small capacity compared to what's happening globally and compared to the traditional CSF capacity. So, I think, yes, in fact,

My question pertains on paints. You called out that unlike peers, you are not seeing macro slowdown. Just wanted to know, would you still say that versus where we started the year, the macros are slightly difficult where we would have thought it will play out? And second, if there's any truth to that, would you consider going moderate on your capacity expansion? Or will it be as you had planned earlier?

Rakshit Hargave

So Tejash, let me clear. So I said the market has been flat or marginally negative. So obviously, it is slower than what it was anticipated. But what I meant is that some other companies have talked about the market being minus 5, minus 4. So what I'm saying the market is not that negative. The market is flat. But obviously, the market was growing in single digits before that. So, there is a slowdown. As far as our capacity expansion is concerned, I think we are fully committed to starting our 6 factories. So there is no question on that. With Chamarajanagar's commercialization, 866 million li

My question is around paints. So sir, just wanted your comments on the recent trends that you have seen probably for the industry growth, say, maybe in Jan and Feb. And second, just wanted to get insights on if you could share probably our penetration level in the dealers. The idea is to understand maybe a dealer was appointed maybe 6 months or 3 months back, any data point on that just to understand how the ramp-up is happening for old dealers getting appointed, if possible.

Rakshit Hargave

So, your first question was about the market growth and something about category that you mentioned? I think Jan, summer has come on the markets. I mean the skies have opened up. So maybe Jan was, as I hear from the dealers, a bit better, but very early to say how will it go, whether the quarter is going to be significantly better or similar like last quarter. But yes, when the skies open up and then there is a lot of activity starts happening is what we heard. As far as dealer type, talking about A class, B class, C class, the way whatever we define the dealers. So as compared to 4 or 5 month

Sir, my question is regarding CPVC. So we are getting total capacity of 100,000 tons. And along with that, Epigral is also doubling the capacity to 150,000 and DCW also has 50,000. So, my first question is I wanted to know what is the current demand in terms of tons in India and outside of India? And what will be the demand scenario in next 2, 3 years?

Jayant Dhobley

Yes. So firstly, this business actually is done together with Lubrizol. So what will be sold in the market is the Lubrizol CPVC under the brand name TempRite. Grasim has a certain business model with them, which is covered by an NDA. Lubrizol has committed to India, the largest CPVC plant that they have anywhere in the world, and that is actually at our location in Grasim at Vilayat. From what I can tell you, and I can only disclose very limited because this business is together with somebody else, is that they see healthy demand for this. CPVC is a material of choice for plumbers in India. Lu

Our estimate is that your market share may have improved by about 200 basis points in paint segment from September to December quarter. So is this improvement driven entirely by the B2C business? Or have you seen a good scale up in the projects institutional B2B business?

Rakshit Hargave

So obviously, the retail business, as you say, has ramped up. And the institutional business is also picking up in the last 3 months. So for me, to say if to come upon to 200 basis points that you are talking about has come from which segment, I would say, obviously, it's a total share gain. But retail is obviously running ahead of institution for the reasons that I gave in the last answer. And when you mentioned that secondary sales, retail sales is about 65% of primary sales. So if you exit the year with, let's say, exit the month of March with high single-digit growth, so we should understa

Sir, are we sharing the capex guidance for FY '26, please?

Pavan Jain

So Navin, our budgeting process is on. So, we will be sharing the FY '26 capex guidance most likely in our Q4 call, but depending upon whether we will be able to complete, but not before that. Sure, sure. And if I could just ask one question related to Paint that will it strategically make sense to have putty business under us either acquire it from the subsidiary or maybe create a new one for a better synergy and a coordination with the business? Or do you think the current arrangement is good enough and needs no change? So you see putty comes under UltraTech and it is doing well, and we woul

Sir, my question is on the chemical side. So like if you can share how much was chlorine negative this quarter vis-a-vis last quarter?

Jayant Dhobley

So, for the reporting quarter, chlorine was about ₹7,000-7,500 negative. And the prices continue to be under pressure. So, as you know, caustic prices globally went up by about something like 80% y-o-y, whereas about half of that was eaten up by negative chlorine. Until demand in the chlorine consuming sectors like agro, pharma, etcetera, pick up, we do expect chlorine to continue to be negative. I would not call out a specific price for this quarter, as you know, that is sensitive. But if you are in the market, you know that Q4 chlorine is more negative than Q3 chlorine. My question is that w

Sir my question is same on CPVC. As we can see CPVC resin price has came down from $200 to $135. So first wanted to know the reason behind this and how it will impact us?

Jayant Dhobley

Yes. So our project with Lubrizol is in execution phase right now. We expect mechanical complete and commissioning to start somewhere in Q2 FY '26. So at this moment, we do not have direct impact to CPVC price. And having said that, as I mentioned earlier, this business is in partnership with Lubrizol. Lubrizol is the lead partner who is going to be in the front for selling the CPVC. The arrangement between us is confidential, but what I can say is we would not be affected by the volatility in CPVC prices. Grasim would not be affected by the volatility in CPVC prices. But we will have the favo

Thank you.

Management

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Speaking time

Moderator

Rakshit Hargave

Jayant Dhobley

Pavan Jain

Navin Sahadeo

Nirav Jimudia

Sumangal Nevatia

Percy Panthaki

Prateek Kumar

Vadiraj Kulkarni

Opening remarks

Ankit Panchmatia

Good morning and thank you for joining Grasim's Third Quarter Financial Year 2025 earnings call. The financial statements, press release and presentations are already uploaded on the website of stock exchanges and our website for your reference. For safe harbor, kindly refer to cautionary statements highlighted in the last slide of our presentation. Our management team is present on this call to discuss our results and business performance. We have with us Mr. Pavan Jain, Chief Financial Officer Grasim Industries, Mr. Jayant Dhobley, Business Head of Chemicals, Cellulosic Fashion Yarn and Insulator Business; Mr. Rakshit Hargave, CEO of Birla Opus, our Paint division; Mr. Vadiraj Kulkarni, incoming Business Head of Cellulosic Fibres division; and Mr. Sandeep Komaravelly, CEO of Birla Pivot, our B2B E- commerce business. Let me now hand over the call to Mr. Pavan Jain for his opening remarks, post which, we will open the call for Q&A. Over to you, sir.

Pavan Jain

Good morning, everyone, and I wish you all a very happy 2025, which marks halfway point in the current decade and quarter century mark of the 21st century. Let me start with macro commentary, and then I will talk about our businesses and financial performance across each segment for the quarter ended 31st December '24. The year 2024 was largely characterized by positive developments like disinflation, resilient growth and improving corporate profits. Elections and rate cuts dominated second half of 2024, which are expected to influence the global economy shaping market dynamics for the foreseeable future. As we enter 2025, rising policy, uncertainties, protectionism and geopolitical tension signal a more volatile and fragmented global economy. As highlighted by our Chairman in his visionary reflections for 2024-25, we will be embracing a U3 world, which is uncertain, unpredictable, and unorthodox world in 2025. As per the latest IMF World Economic Outlook report, global growth is proje

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