Grasim Industries Limited announced its financial results for the quarter ended 30th September 2024 (Q2FY25). The company posted 59 per cent drop in its consolidated PAT at Rs. 473 crore in Q2 FY25 as compared to Rs. 1,164 crore in Q2 FY24.

However, consolidated revenue during Q2 FY25 stood at Rs. 33,563 crore, up by 11 per cent YoY, driven by the superior performance of Financial Services, Cellulosic Staple Fibre and Specialty Chemicals businesses. Consolidated EBITDA declined by 10 per cent at Rs. 4,042 crore, as a result of lower profitability in the cement business and initial investments in the paints business under brand ‘Birla Opus’. The results are in line with our plan to build a strong consumer-facing business. Further, higher interest and depreciation charges on account of investments in the Building Materials and Renewables businesses has led to lower PAT.

Chemicals (Chlor-Alkali, Chlorine Derivatives and Specialty Chemicals)  

Caustic Soda international average spot prices (CFR-SEA) recovered for the fifth consecutive quarter to $471/ton in Q2FY25, up 13 per cent YoY. Domestic realisations also improved, however ECU realisations declined by 4% YoY to Rs. 30,650/ton mainly due to increased negative chlorine realisations on account of continued oversupply conditions.

The Chemicals business revenue stood at Rs. 2,054 crore, up 3 per cent YoY. Caustic soda sales volume was down by 4 per cent YoY due to lower production on account of maintenance shutdown of the captive power plant at Vilayat. EBITDA for the Chemicals segment stood at ₹273 Cr. up by 16% YoY driven by higher profitability in Chlorine Derivatives and Specialty Chemicals businesses.

Building Materials (Cement, Paints and B2B E-commerce)

Building Materials segment reported revenue of Rs. 16,683 crore, up 3% YoY driven by Paints and B2B E-Commerce businesses. EBITDA stood at Rs. 1,886 crore, down 28% YoY, mainly due to lower realisations in cement business and initial investments in building a consumer facing brand ‘Birla Opus’ in the Indian decorative paints market.

Consolidated sales volumes of the Cement business (UltraTech) were up by 4% YoY to 27.84 MT and ready-mix concrete sales volumes grew by 19 per cent YoY to 3.01 Mn m3. UltraTech Building Solutions (UBS) outlets increased to 4,236, contributing 19.4 per cent of total sales. During the year, UltraTech added 9.9 Mn TPA of grey cement capacity (till Oct’24) with a target to reach total grey cement capacity of 162.4 Mn TPA in FY25.

In the paints business (Birla Opus), production is steadily ramping at its three plants - Ludhiana, Panipat and Cheyyar commissioned in Q1 of this financial year. Trial production has started at Chamarajanagar and Mahad plants. The product availability has increased to 129 products with 900+ SKUs already placed in the distribution channel. The product reach has increased to 4,300+ towns being serviced from 114 depots operational across India. The total Capex for the business is ~Rs. 8,470 crore till September 2024, ~85% of the planned Capex outlay.

Birla Pivot, the B2B E-Commerce business revenue continues to grow in-line with the plan and remains on track to achieve revenue of $1 billion in three years as announced in FY24. The business has expanded its product offerings across 35 product categories comprising 40,000+ SKUs sourced from 300+ Indian and International brands. Birla Pivot continues to expand its geographical reach with delivery to 375 cities across 26 states and union territories.

Cellulosic Fibres (Cellulosic Staple Fibre - CSF and Cellulosic Fashion Yarn - CFY)

China operating rates averaged at 86% in Q2FY25, higher compared to 82% in Q1FY25. Additionally, inventory levels reached its lowest levels of 8 days. Improving demand scenario in China has led to the third consecutive quarter of price improvement in CSF prices from an average of $1.51/kg in Q3FY24 to $1.65/kg in Q2FY25.

CSF business achieved its highest ever quarterly sales volume at 219 KT up 4% YoY led by stable domestic demand. EBITDA Margins improved on the back of higher sales volume and improving trend in global prices. Volume growth in CFY business was driven by festive demand, however realisation remains under pressure due to Chinese producers’ aggressive pricing for the Indian markets. Cellulosic Fibres segment reported revenue of Rs. 4,125 crore and EBITDA of Rs. 494 crore, marking a YoY increase of 6% each.

Capital Expenditure

Capital expenditure for H1FY25 stood at Rs. Rs. 1,884 crore. The budgeted standalone capex for FY25 is Rs. 4,691 crore, of which ~Rs. 3,000 crore, is towards new growth businesses. Additionally, the Board has approved an investment of Rs. 287 crore (Rs. 118 crore  to be spend in FY25) for additional pulp capacity at Harihar and Rs. 20 crore for Textiles business.

Sustainability

For FY24, Grasim has achieved its highest ever S&P Global ESG Score of 71 by Dow Jones Sustainability Index (DJSI), recognising our sustainability initiatives. The Company remains committed to increase the adoption of renewable energy and water recycling across manufacturing units. On a standalone basis, the proportion of recycled water consumption to freshwater consumption improved to 52 per cent. The share of renewable power consumption on Standalone Businesses stood at 11 per cent.

Outlook

Grasim Industries Limited with its significant presence across businesses is well positioned to capitalise on the opportunities in diverse sectors of the fast-growing Indian economy. The Government’s continued focus on infrastructure & housing, manufacturing, financialisation and thrust on increasing economic prosperity of the large section of people augurs well for the company.