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    Grasim Inds

    GRASIMGood
    Construction Materials·15 Nov 2024
    Management Summary

    Grasim posted its 16th consecutive quarter of YoY revenue growth but consolidated EBITDA declined 10% due to cement pricing weakness and Birla Opus launch investments. The paints business showed strong ramp-up with 55-70% sellout rates and healthy dealer economics. Management confirmed high single-digit market share exit target for FY25. Chemical business benefited from caustic price improvement and chlorine derivatives, though chlorine remained negative.

    Highlights

    8

    • Consolidated revenue grew 11% YoY to ₹33,563 crores; 16th consecutive quarter of YoY revenue growth

    • Standalone revenue at record ₹7,623 crores; consolidated EBITDA at ₹4,042 crores, down 10% YoY

    • Birla Opus on track to exit FY25 with high single-digit market share; 4,300+ towns, targeting 50,000 dealers

    • Cellulosic fibres achieved highest ever quarterly sales volume of 219,000 tons

    • Chemical EBITDA up 16% YoY led by chlorine derivatives and specialty chemicals despite 4% caustic volume decline

    • UltraTech capacity additions of 9.9 MTPA in H1 FY25; targeting 200+ MTPA by FY27

    • Birla Pivot expanding to 375+ cities, 35 categories, 40,000+ SKUs; targeting $1 billion revenue in 3 years

    • FY25 revised capex at ₹4,700 crores; rights issue second call of ₹2,000 crores approved

    Concerns

    1

    • Consolidated EBITDA declined 10% YoY due to cement pricing and paint investments

    What Changed1

    vs Q3 FY25

    Risks discussed4 → 5 (+1)

    Key financials

    Single quarter

    03 metrics
    1. 01Consolidated Revenue₹33,563 Cr+11%YoY
    2. 02Standalone Revenue₹7,623 Cr
    3. 03Consolidated EBITDA₹4,042 Cr-10%YoY

    Segment breakdown

    Cement (UltraTech)
    9.9 MTPA Capacity Added H1 FY25200 MTPA Target Capacity by FY27
    Chemicals
    16% EBITDA Growth-4% Caustic Volume Growth
    Cellulosic Fibres
    2,19,000 tons (record high) Sales Volume6% China CSF Price Growth YoY
    Financial Services (ABC)
    19% NBFC Revenue Growth42% Housing Finance Revenue Growth₹1.4L Cr Lending Portfolio₹5.6L Cr AUM
    Renewables
    1 GW+ Installed Capacity
    Birla Opus (Paints)
    129 products Products Launched900 SKUs SKUs114 depots Depots Operational4,300 towns Towns Covered
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Paints
    Market share exit FY25
    High single-digit by March 2025
    		High
    Paints
    EBITDA breakeven
    Within 3 years of full-scale operation
    		High
    B2B E-commerce
    Revenue target
    $1 billion in 3 years from FY24 launch
    		High
    Balance Sheet
    Net debt to EBITDA
    3x to 3.5x ceiling
    		High
    Capex
    FY25 revised capex
    ₹4,700 crores (64% growth capex in new businesses)
    		High

    Risks & concerns

    9
    RiskSeverity

    Consolidated EBITDA declined 10% YoY due to cement pricing and paint investments

    Cement realization declined while elections, heat and prolonged monsoon impacted demand. Birla Opus operating losses as planned. — Management acknowledged

    high

    Paint industry demand slowdown with ex-Birla Opus growth flat to slightly negative

    Management says headwinds exaggerated by competition; adding Birla Opus numbers puts industry in green. But aggregate listed company ex-Grasim growth only 1% YoY. — Both downplayed

    medium

    Chlorine oversupply leading to higher negative realization offsetting caustic gains

    Caustic volume also declined 4% YoY due to Vilayat power plant maintenance shutdown. — Management acknowledged

    medium

    Epoxy margin pressure from FTA with Korea enabling duty-free LER imports

    BPA and ECH prices up ~13% weighted average; not fully passed through. Industry hoping for government FTA review. — Both acknowledged

    medium

    Paint revenue and financial details deliberately withheld creating information asymmetry

    Multiple analysts pressed for revenue numbers; management refused citing competitive sensitivity. CWIP treatment continues to obscure actual revenue. — Analyst deflected

    low

    Areas of Evasion(4)

    • Paint revenue numbers
    • Birla Pivot quarterly revenue
    • Paint EBITDA losses quantum
    • Dealer count specifics

    Q&A highlights

    3

    “more than 55% - 70% of stock is already sold out... none of our dealers is holding more than a certain couple of weeks or 3 weeks of stock”

    Validates genuine consumer pull vs channel stuffing; confirms 10% free offer fully on pan-India, contradicting competitor claims of withdrawal

    asked by Manoj Menon (ICICI Securities)

    2 min read4 chapters

    Detailed Narrative

    01

    Birla Opus: Strong Ramp-up with High Sellout Validation

    Birla Opus showed strong momentum with 55-70% sellout rates and dealer inventory of only 2-3 weeks, demonstrating genuine consumer pull. Coverage reached 4,300+ towns with 114 depots operational and on track for 50,000 dealers by FY25 end. 129 products and 900 SKUs launched (~85% of planned portfolio). Tinting machines placed at large scale with some dealers replacing competitor machines. The 10% free offer on emulsions confirmed as fully operational pan-India. Management emphasized market share gains came from competitor displacement, not new demand creation.

    02

    Chemical Business: Caustic Recovery Offset by Chlorine Negativity

    Chemical EBITDA grew 16% YoY led by chlorine derivatives and specialty chemicals. Caustic prices improved with CFR Southeast Asia marking fifth consecutive quarter of improvement. However, caustic volume declined 4% YoY due to Vilayat power plant maintenance shutdown. ECU gains partially offset by chlorine oversupply creating negative realizations. Epoxy business saw monsoon-related seasonal weakness. ECH project for next year commissioning will provide 80% integration. Land acquired for capacity doubling with environmental clearances already in place.

    03

    Industry Competitive Dynamics: Disruption Playing Out as Planned

    Birla Opus entry has materially disrupted the decorative paints industry. Listed incumbent growth averaged only 1% YoY excluding Grasim. Trade discounts across industry have increased beyond price hikes, visible in competitor P&Ls. Management noted the previously low competitive intensity in paints (market leader followed by all) has been broken. Competition focusing on economy segment discounting while Opus maintains broad portfolio approach across all price tiers and geographies uniformly.

    04

    Capital Allocation and New Business Investments

    FY25 revised capex at ₹4,700 crores with 64% (~₹3,000 crores) allocated to new growth businesses. Paint capex nearly complete with 5 plants done and 6th expected in Q1 FY26. Net debt-to-EBITDA guided at 3-3.5x ceiling. Rights issue second call of ₹2,000 crores approved. Birla Pivot expanding rapidly across 375+ cities with 35 product categories; targeting $1 billion revenue and EBITDA breakeven by FY27. Renewable capacity crossed 1 GW milestone targeting 2 GW by FY25 end. Financial services showed robust growth with lending portfolio at ₹1,38,000 crores.

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