Grasim reports spike in viscose business in Q3 earnings

 

Grasim’s Q3 FY21 profit after tax jumps twice on Y-o-Y basis.

·       Key Businesses outperform pre-COVID operational levels, leveraging the
synergy of a conglomerate and the energy of focused businesses.

·       Consolidated EBITDA and PAT are up 52 and 103 per cent YoY respectively;
Standalone EBITDA and PAT are up 53 and 95 per cent YoY respectively.

·       Board earlier announced foray into the paints sector with initial capex
of Rs 5,000 Cr. over the next 3 years.

·       Fertiliser Business sale is on track with CCI approval and Stock
Exchange NOC received.

           

Excluding Revenue and EBITDA of the discontinued operations of
Fertilisers Business (Indo Gulf Fertilisers-IGF) consequent to board approval for
divestment of the same.

Consolidated Revenue for Q3FY21 stood at Rs 20,986 Cr. up 13 per cent
Y-o-Y basis and 17 per cent Q-o-Q. Consolidated EBITDA was Rs 4,476 Cr. jumped
52 per cent Y-o-Y and 24 per cent Q-o-Q. The Consolidated PAT for Q3FY21 soared
103 per cent Y-o-Y and 43 per cent Q-o-Q at Rs 1384 Cr.

Standalone performance witnessed a remarkable improvement. Revenue stood
at Rs 3,672 Cr. and EBITDA stood at Rs 709 Cr. compared to Rs 3,858 Cr. and Rs
465 Cr. respectively in Q3FY20. PAT nearly doubled to Rs 359 Cr. in Q3FY21
against Rs 185 Cr. in Q3FY20.

Revenue and EBITDA from the discontinued operations (Fertiliser
Business) for Q3FY21 stood at Rs 597 Cr. and Rs 57 Cr. (Q3 FY 20: Rs 638 Cr.
and Rs 30 Cr.) respectively not included in the financials above.

The Government’s far sightedness in providing timely stimulus in the
aftermath of COVID-19 has provided support to multiple sectors leading to a
broad-based economic recovery. The recovery in the demand has been accelerated
by greater consumer confidence on the back of the launch of the vaccination
program across the world.

Viscose Business

VSF demand in India and overseas markets recovered from the sharp
decline caused by the deceleration in the economic activity witnessed during
the earlier part of FY21. The VSF demand In India recovered to pre-COVID-19
levels leading to 28 per cent revenue growth sequentially. Consequently the
share of domestic sales in the sales mix grew from 82 per cent in Q2FY21 to 91
per cent in Q3FY21and the share of value added product in the overall sales mix
improved to 22 per cent in Q3FY21 from 15 per cent in Q2FY21.

The Viscose business performance has steadily improved since Q1FY21 on
the back of robust demand growth led by consumer spending picking up with the
onset of festive and wedding season. The capacity utilisation of the VSF
business reached 100 per cent through Q3FY21 and the capacity utilisation of
the VFY business also increased to 76 per cent in Q3FY21 from a low of 12 per
cent in Q1FY21.

The VSF prices in China bounced back from their historic lows driven by
a strong revival in domestic demand and favourable inter fibre dynamics with
widening gap between cotton and VSF prices. This led to a dramatic reduction in
VSF inventories in China even as the operating rates went up.

The Net Revenue for the Viscose segment (including VFY) stood at Rs
2,145 Cr., EBITDA at Rs 482 Cr. improved substantially on the back of higher
sales volumes, better product mix and lower cost even though the YoY
realisations were lower. Like all commodities, pulp prices have also firmed up
and are likely to increase further going forward.

Chemical Business

The domestic caustic soda business witnessed an upsurge in demand during
the quarter, driven by higher usage from textile, alumina and paper industry,
recording capacity utilisation levels of 89 per cent in Q3FY21, an improvement
of 9 per cent on a sequential basis. While Caustic soda prices (CFR) in Asia
recovered from the lows of $239/MT to hit the $270/MT level towards the end of
the quarter on the back of lower operating rates caused by unplanned outages,
the ECU realisation continues to be muted, though volume has picked up.

The demand for Advanced Material (Epoxy) business improved led by demand
from Auto and Consumer durables. The capacity utilisation of the business
witnessed a significant improvement sequentially.

The Net Revenue for Q3FY21 stood at Rs 1,281 Cr. and EBITDA stood at Rs
177 Cr. close to pre-COVID levels.

Entry into the Paints Sector

The Board of Directors of Grasim has approved a foray into the paints
business. The Board has also approved initial capital expenditure of – Rs 5,000
Cr. over the next 3 years.

The entry of Grasim in the paints sector will offer a wide choice to
Indian consumers as the Company plans to introduce the latest range of paint
products in line with global mega-trends. The Company’s entry into this high
growth sector will help painters / applicators and all traditional and emerging
channel partners across India to expand their existing business and grow. This
move will also provide an impetus to the Government’s vision of ‘Atmanirbhar
Bharat’ and supports the supplier ecosystem of MSMEs by helping them expand
their existing raw material manufacturing capacities.

The company believes that this sector is likely to be value accretive to
its stakeholders.

Capex Plan

Capex spend on VSF and chemicals capacity expansion was revived post
lockdown and is progressing as per the revised plan, besides the ongoing
modernisation capex at various plants. The total capex spend for 9MFY21 stood
at Rs 799 Cr.

Sustainability

The Pulp & Fibre Business has been declared the Winner of ‘Golden
Peacock Global Award for Sustainability’ for the year 2020.

The Company was ranked No.11 in the S&P Dow Jones Sustainability
Indices (DJSI) of the global list of participating companies in its sector in
2020, and improvement of 6 positions.

Grasim released its maiden integrated report in Dec’20. The purpose of
embracing integrated reporting is to make our stakeholders aware of how six
capitals come together at Grasim to create greater value.

In the latest WBCSD report, Grasim Industries featured at the top among
the list of Companies procuring renewable power through corporate renewable
PPAs in India.

Cement Subsidiary – UltraTech Cement Ltd

UltraTech’s Consolidated Revenue was at Rs 12,254 Cr., EBITDA of Rs
3,362 Cr. and PAT of Rs 1,584 Cr. for Q3FY21. The consolidated sales volume
stood at ~23.88 MTPA.

UltraTech reported robust operating margins at 26 per cent. The
company’s strong quarterly performance is on the back of operational
efficiencies and tight cost control.

The net debt stands reduced to Rs 9,436 Cr. down Rs 7,424 Cr. in last 9
months driven by effective working capital management and other factors. The
Net Debt/LTM EBITDA at consolidated level stood at 0.84x (Dec-20).

The UltraTech board approved Rs 5,477 Cr. towards capacity expansion of
12.8 MTPA through a mix of greenfield and brownfield expansion. This is in
addition to the 6.7 MTPA capacity addition exercise which is underway. Upon
completion of both rounds of expansion the capacity will expand to 136.25 MTPA.

Financial Services Subsidiary – Aditya Birla Capital Limited (ABCL)

The Consolidated Revenue of the Company for the quarter grew 17 per cent
YoY to Rs 5,026 Cr. ABCL through its subsidiaries, continued its consistent
performance with its diversified business model. The consolidated profit after
tax for the quarter (after minority interest) grew 16 per cent year on year to
Rs 289 Cr. This is the highest ever consolidated quarterly profit reported by
the company, with strong growth across businesses.

The NBFC and Housing Finance lending book stood at Rs 57,522 Cr. in
Q3FY21. The Gross disbursement in lending businesses stood at ? 5,097 Cr.,
higher than pre-COVID levels with 18 per cent Y-o-Y growth with focus on retail
and SME segments.

The Net Interest Margin (Incl. Fee Income) for the NBFC business is up
18 bps Y-o-Y at 5.24 per cent in Q3FY21.

Overall Domestic AAUM increased to Rs 2,55,458 Cr. (Q3FY21) from Rs
2,49,926 Cr. (Q3FY20). The PBT/ AAUM increased from 27bps (Q2FY21) to 30 bps in
Q3FY21.

In Life Insurance, Individual First Year Premium (FYP) for 9MFY21grew 6
per cent YoY to ? 1,336 Cr. There was a healthy reduction in opex to premium
ratio to 14 per cent in 9MFY21 from 17.6 per cent in the same period last year.

In the Health Insurance business, Gross written premium for 9MFY21
increased to Rs 859 Cr., up 57 per cent YoY.