Grasim Industries Limited (GRASIM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Grasim Industries Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head, Investor Relations. Thank you, and over to you, sir.

Yes. Thanks, Yashashvi. Hi. Good morning, everyone. Wish everyone on the call a happy 2024. Thank you for joining us today to discuss Grasim's third quarter financial results of financial year 2024. The financial statements and presentations are available on the exchanges and as well as on our website. For safe harbor, kindly refer to our cautionary statement highlighted in the last slide of our presentation. Our leadership team is present today on this call to discuss our results. We have with us Mr. H. K. Agarwal, Managing Director; and Mr. Pavan Jain, Chief Financial Officer, Grasim Industries. Also joining the call with me is Mr. Jayant Dhobley, Business Head of Chemicals, Fashion Yarn & Insulators business; and Mr. Himanshu Kapania and Mr. Rakshit Hargave, Business Head and CEO of Paints division. Let me now welcome Mr. Pavan Jain for his opening remarks, post which we will open the floor for Q&A. Over to you, sir.

Good morning, everyone. First and foremost, wishing you all a very happy and prosperous 2024 on behalf of Grasim. It is always a pleasure to be with you for discussing our quarterly results. Looking at reflections, I'm happy to share that we have ended 2023 and started 2024 on a satisfactory note across multiple fronts. To start with the latest one, we have successfully completed our rights issue with an oversubscription of nearly 2x. This reflects the support and belief of all our stakeholders who have and would participate in Grasim's growth journey. Let me now share key developments on the ongoing growth initiatives and projects. We have completed expansion of our specialty chemicals capacity, which is epoxy polymers and curing agents, doubling to 246 KTPA versus 123 KTPA earlier. This would enable us to meet our valued customers' growing demand and further solidify Grasim's foothold in India's growing demand for specialty chemicals. Further, project implementation of world's largest single-site capacity for CPVC resin facility has also commenced in arrangement with Lubrizol at our Vilayat site. We are also progressing in line with regards to our 50,000 tonnes per annum capacity of ECH, which is expected to be completed by Q4 of next financial year. Post completion, all these initiatives would improve chlorine integration to around 70% from current level of about 63%. In Viscose, we continue with our debottlenecking activities at Nagda, Vilayat and Kharach. The current installed capacity stands at 842,000 tonnes per annum. Our Viscose business is making new strides in the area of sustainability. The business has received first rank in Canopy's 2023 Hot Button Report with the rating of Dark Green Shirt. The business has implemented EU BAT technology at Kharach, the second plant to achieve this feat. As piloting circular solutions in our fashion industry, the business has made first shipment of its lyocell fiber produced with recycled cotton waste for use in textile value chain, and the response has been very promising with repeat orders. Our Paints business has started trial production at 3 plants, which is Ludhiana, Cheyyar and Panipat. Brand architecture under Birla Opus is complete, and we will be launching a full range of products in FY '25. Birla Pivot has grossed INR 120 crores of monthly revenue run rate in December '23. The private label Birla Pivot Tiles is gaining good response and is now launching private label in plywood and doors categories. Moving on, I would like to share key global trends having bearing on our different businesses directly or indirectly. Given U.S. economy has entered calendar year '24 on a stronger footing, which reported Q3 CY '23 GDP of 3.3% against the estimates of 2%, federal reserve in its latest meet left the key policy rate untouched at 5.25% to 5.50%. The U.S. composite purchasing management index, output index has increased to 52.3% this month, the highest level since last June. In contrast, Eurozone and China are facing headwinds in their economies. Eurozone's manufacturing PMI shows that output contracted at a slower pace in January '24 as the index rates rose to 46.6% from 44.4% in December '23. Two major economies of Eurozone, Germany and France, reported slowdown in pace of growth in their manufacturing activities. China's official manufacturing PMI inched up at to 49.2% in January '24 compared to 49% in December [ '23 ]. In efforts to put support real estate sector that underpins consumption and household wealth, People's Bank of China announced 50 bps cut, the biggest in past 2 years, effective from 1st February 2024. This is expected to inject about CNY 1 trillion in the banking system. Given such developments, IMF has also revised its global growth forecast for 2024 to 3.1% from earlier forecast of 2.9%, with improved outlook for U.S., China and India. However, the current Red Sea disruptions, which manage about 12% to 15% of world trade, including 30% of container traffic, appears to be adversely impacting the outlook on global trade. Adding to this uncertainty is super election year '24, which would see more than 1/3 of the world population across 60-plus countries undergoing national elections. All these uncertainties post challenges and also possibly new opportunities in 2024. Switching the context to Indian context, the first advanced estimates published by NSO in January 2024 show real GDP to grow by 7.3% in FY '24, better than revised growth estimate of multiple agencies like RPI around 7%, IMF forecast of 6.7%. Available high-frequency indicators like IIT, vehicle sales, growth in bank credit, real estate sales, GST collections, et cetera, appear to support NSO's growth estimates. We at Grasim expect to resemble India's growth story given our presence across sectors. Coming to our financial performance for the quarter ended discussion, the consolidated revenue struck at highest level of INR 31,965 crores, recording growth of 12% Y-o-Y. The TTM revenue, trailing 12-months revenue, which is indicative of FY '24 revenue, crossed milestone of INR 1.25 trillion, growing at CAGR of 14% over FY '20. Consolidated EBITDA grew by 34% Y-o-Y to INR 5,150 crores. The TTM EBITDA is nearing a milestone of INR 20,000 crores, posting CAGR of over 9% since FY '20. Conglomerate structure with diversified businesses has enabled consistent growth in revenue and profitability. Cement and Financial Services businesses under UltraTech and Aditya Birla Capital are on an accelerated growth journey, fulfilling its infrastructure and financial needs of our country. Our stand-alone performance continues to exhibit stability despite vagaries of global commodity cycles. Both our key businesses at stand-alone level, Viscose and Caustic, currently in down cycle, continue to remain profitable. Our established risk management mechanisms and cost leadership enable us to ride global price volatility optimally and deliver industry superior performance. Stand-alone revenue for the quarter stood at INR 6,400 crores, recording a growth of 3% Y-o-Y. The revenue growth was largely driven by volume growth of 34% in VSF and 5% in Caustic Soda business. However, the profitability was impacted with global weakness in Chemicals segment, led by oversupplied market and sharp decline in realizations. For simplification, we have made some changes in our results presentation with regard to segmental disclosure. We have combined our textiles, insulators, paints, B2B e-commerce adjusted for intersegment elimination and unallocated income under one head name, Other businesses. Such categorization aligns the disclosure with our published results. Viscose business growth took strong on a Y-o-Y basis, partially on the back of markets reverting to normalized levels post exceptionally weak Q3 FY '23. Part of VFY volume, which finds its applications in embroidery and georgette and home furnishing, has lower demand pull during the quarter. The realizations were further impacted by cheaper imports from China. The sharp Y-o-Y decline in caustic prices appear to bottom out at current levels of about $400 to $450 level. However, the market remains oversupplied due to large capacity additions in FY '23. Our Paints business, Birla Opus, is on track for launch in current quarter with trial production already on at 3 plants, namely Panipat, Ludhiana and Cheyyar. We have already completed brand architecture under our paints brand, Birla Opus. The sub-branch portfolio across multiple categories of luxury, premium and economy segments and development work for design, package, artwork, consumer communication, et cetera, is complete. The supply chain, logistics and distribution network is also in place to support the launch as stated earlier. We would offer complete range of high-performance superior products in the premium, mid-range and mass markets favorably placed across multiple price points. The dealer onboarding has already commenced, and you would certainly hear out more from us on this over the calendar year '24. As highlighted in the last quarter, B2B e-commerce business under brand name of Birla Pivot has already crossed monthly revenue run rate of INR 100 crores. The quarterly revenue run rate is now inching towards INR 300 crores. Private labels under Birla Pivot Tiles is garnering good response. We have already initiated in-store branding initiatives also and now widening our coverage for private labels, adding plywood indoors. The geographical front of Birla Pivot has now extended to cover about 20 states. CapEx for quarter stood at INR 1,425 crores with 76% allocation to Paints business. We remain on track to achieve planned CapEx guidance of about INR 5,900 crores in FY '24... [Technical Difficulty]

Ladies and gentlemen, we've lost the management connection. Please stay connected while we rejoin them. We have the management team back on the call. Please go ahead, sir.

Hello?

Yes, sir. We can hear you.

Yes. So we can take the questions.

[Operator Instructions] We have a first question from the line of Tejash Shah from Avendus Spark.

A couple of questions on paints. So you spoke about dealer onboarding, which has started. Just wanted to know, and if you are in a position to share, is there any target that we are running with in terms of dealer onboarding for this year? A. And b, are these dealers existing paint dealers? Or are we getting new dealers in the ecosystem?

So let me answer this question. So obviously, we have target for dealer onboarding for every month, every quarter. So that goes without saying. And when we are onboarding, to begin with, we are largely onboarding existing paint dealer, but there could be also some who are new to the paints business.

Sure. And second and last question. So you have been very transparent on the expansion plan and also on the status of the expansion that we are doing in paints on the plant side. Just wanted to know, any similar update or details you can share on depot network that needs to be created around the plant infra?

So obviously, the depot network goes along with. So we have an aggressive target to set up depots by the end of this financial year. We are already signing agreement and leases, and depots are already operational to take in some of the trial production. And obviously, we also have a target for next financial year. So we are in line with whatever we have set up. As you would have also read in some reports, which have come out, is that our objective is to have a pan-India national distribution by the end of financial year. So our network expansion, ambition and execution is in line with that.

We have a next question from the line of Nirav Jimudia from Anvil Research.

Sir, I have 2 questions. So one on VSF and one on chemicals. Sir, based on our presentation, is it safe to conclude that our VSF EBITDA on a quarterly basis based on a Q-on-Q number is flat on a per kg basis and the fall in the numbers is predominantly because of the VFY?

To some extent, your analysis is in line, but also, like it's very dynamic, so we cannot assume. Like selling price has come down in this quarter, whereas raw material prices have also reduced and volumes have gone up. So there are 3 levers operating always in this equation. But yes, overall, the VFY was a little bit less in this quarter compared to previous quarters.

So because, sir, the fall in profit is close to INR 62 crores. So 75% to 80% is a safe assumption to take for the fall in the VFY business out of this INR 62 crores fall?

Not exactly, Nirav. But yes, there is -- see, VFY has been seeing some demand slowdown in some particular segments as mentioned. Then there is a problem of some cheaper imports from China also, that is also impacting. But the numbers may not be exactly what you are trying to say.

Got it, sir. And sir, if you can just share your view on the premium on the value-added VSF vis-a-vis the gray VSF. So if you can just share, what sort of blended level premiums we used to or we are currently getting on over and above the gray VSF?

So this one ranges -- cumulative is about 20% over the gray price in general. But sometimes it is more depending on which product volume is more, and there are many products in VSF category.

Yes, yes. Because, sir, earlier we used to share like for Excel, it was close to $0.40, $0.50. For modal, it was slightly less and then dope-dyed was even lesser. So what is the current broad range, if you can share, on these 3 products?

So I think I will not be able to give you that specific product price. But in general, like cotton prices have come down. So Excel prices have also come down in line with cotton prices. So it has reduced. And in general, China also Excel -- lyocell prices have come down in last full year. But it keeps on changing depending on the mix of products in the market.

Got it, sir. Sir, second question is on the chemical side. So we have seen a sequential improvement there. So last quarter, you mentioned that we had a shutdown at the VAP plant. So this entire improvement is in the profitability could be attributed to the swing in profits from the VAPs or has some improvement on the cost side happened on the caustic side and because of which the profitability has improved?

So I'm Jayant Dhobley. I'll take the question. Maybe I'll also add a bit of color on the VFY discussion. So just going back to your VFY question, look, our VFY portfolio consists actually of 3 types of fibers: spool spun yarn, continuous spun yarn and pot spun yarn. And they go in different segments ultimately in yarn, they have very different properties. Our spool spun and continuous spun segments have been doing quite well. Demand has been maintaining stable. The problem is essentially around the pot spun yarn segment. There are certain areas of garments are not picking up or did not have the seasonal pickup that we would normally have seen, which affected that particular quarter's result. And we had one operational disruption at our Kalyan plant. Having said that, we see already, going forward, the situation becoming slightly more normal on the pot spun yarn side. I think when you look at the drop in the VFY business, remember that it's a portfolio of filament yarns. Some of that portfolio is still doing quite well. It's one specific part of the portfolio and an operational issue that we had in the Kalyan site which...

Got it, sir. And sir, on...

Question on chemicals. Of course, look, the raw material -- the cost side has helped us. Coal prices have gone down, electricity prices have gone down, et cetera. But what has really helped us on 2, 3 areas is firstly our utilization. Our utilization, which we have reported at about 88%, we believe, is best in the peer group today or this quarter. That's, of course, one big element. Secondly, our specialty chemical -- specialty part of our chemical business has done better. We have called out the revenue percentages. We don't call out those EBITDA numbers, but that is for sure a part which has done better. And as you correctly pointed out, we had some operational stoppages in one of our chlorine derivative plants, which have not been fully resolved. But production on those chlorine derivatives has been better than before. Some work is still going on. So a combination of factors, a better cost position on coal, power sort, that's one. For sure, better utilization than our peer group, a much better performance in the specialty part of our portfolio, the [indiscernible] and somewhat better performance in chlorine.

Got it, sir. And last question, Mr. Dhobley Ji, if you can share your outlook on the Epoxy business. So what's the current industry size in India? And on the liquid epoxy, which we manufacture, how much value addition which are currently doing on?

Yes. So look, I would not want to answer the value addition question very directly. I will answer it indirectly. So we -- if you look at how typically these epoxy businesses create value, and the Epoxy businesses range between, let's say, 8% to 12% in terms of EBITDA sales, we would be in some better quarter in the top quartile of certain industries. We sell our entire capacity out, and we believe that we have higher market shares. So we are in the top quartile performer of this epoxy industry. We have basically the larger market share, whether you look at composites, whether you look at coatings, whether you look at corrosion protection. And we have recently expanded our facility, we have announced to you, where we have gone with a somewhat richer portfolio. So we have now also added products like reactive diluents, polyamide hardeners, polyester hardener. So we believe that we have the largest and also the biggest specialty portfolio in the Indian market on epoxy resins and all.

[Operator Instructions] The next question is from the line of Navin Sahadeo from ICICI Securities.

Also, let me give my best wishes to the entire team, Grasim, for the upcoming formal launch of the Paints business. So couple of questions on the paints were that if you could just clarify, what is the exact capacity that is coming up for launch? And also then in the same breath, if you could just also give details about how the time line will look for the balance capacity?

Okay. So like we told earlier that the total capacity of the 6 manufacturing locations is about 1,332 million liters. Currently, trial production is on at 3 locations. And each of these factories has a capacity of about 200 million liters. One of the factories also has a capacity of 30 million liters of solvent range. So the 3 factories under trial cumulatively has about 630 million liters of capacity. Obviously, how we utilize it and how it grows is a separate issue. On the second part, your question in terms of how are we planning to roll out. So we will roll out gradually starting with the North and some areas of South. And gradually, we will speed up to roll out nationally in a certain period of time, which would be very, very ambitious. That's how we see the rollout plan. And that's our take on the capacity, which is being tried at the moment.

Understood. So in Q4, you will actually see, Rakshit, products on the shelf in North and South markets?

Yes. So we said that when we introduced, we will start with certain areas of North India and certain areas of South India. Yes, your second question about the other plants, we will expectedly start trialing the next financial year in the first quarter, hopefully, the next one in the second quarter and the last one would be probably in the last quarter of next financial year.

Understood. Understood. This is helpful. My second question then was about the VSF segment. So we were looking at some VSF pricing points in China. And please correct me if my reading is wrong, but I thought from mid of August or early September is when the prices in China bottomed out, and there has been almost a very handsome 8%, 10% kind of a recovery in that market. But the presentation that you have shared does not really show any trend of pickup. It's actually more flattish to a marginal decline trend, if I'm reading that correctly. Of course, as you mentioned, even the exited, 1% lower than the quarter average. So is there anything that we are missing here in the sense that are the prices you're saying are unlikely to see any -- have not seen a recovery and, hence, the outlook remains subdued or there is some recovery that we can expect?

So the VSF prices in China have remained very narrow range bound. So if you see even quarter 3 of last year and quarter 3 of this financial year, there is hardly any change in the prices in China, China domestic prices. That is one part. And China is the largest producer and consuming country for VSF in the world. But export prices have reduced significantly during these last 12 months. Export prices have come down as much as almost 15% during this year, these 12 months. So that is the picture on -- the export is a smaller part for China and most of the producers because most of the producers sell a major part of their output in their domestic markets. Does that answer your query?

Yes. So just to confirm, it's -- you're saying export prices being weak is what's impacting the realizations for us. Otherwise, in China, local prices per se, spot prices in China could be on an uptrend or that's not correct?

So there is no clear -- this thing recently, they posted higher prices, but that was just before the Chinese New Year vacation. So that is a tactic every year, for every long holiday period, they will post higher prices. But they will -- before that, they will conclude the transactions for the holiday period. So those prices are very nominal, and the real impact is seen only after the holidays open again for business. So we should not read too much on the nominated prices. But as of now, the prices are just stable, like not showing any big increase, except international prices because of Red Sea crisis, the shipping costs have gone up. So to that extent, the producers have adjusted for export prices.

We have a next question from the line of Raashi Chopra from Citigroup.

Just on the VSF before I move on to paints, what -- on your realizations, was there a decline sequentially?

Yes.

Would you quantify that?

It's about 1%, 2%.

Okay. And the loss, the -- we can make out the total loss coming from the Paints business and the B2B business, the e-commerce platform. So what was actually the paints contribution to the EBITDA loss in this quarter, the expenses that we capture?

So I think we are not giving the specific numbers for these businesses. Possibly, once we start reporting separate segments in next financial year, we'll come to know. But as the business is, I mean, increasing the size of manpower, et cetera, the uncapitalized expenses which have been charged to P&L are also increasing. Once the, I mean, the plants complete their trial run, et cetera, so then it will -- whatever is being capitalized will also come to P&L. So that is the status. But yes, quarter-on-quarter, the losses for Paints businesses have increased as also in B2B business.

Okay. Lastly, on your stand-alone balance sheet, what is the net debt/EBITDA as of now on a stand-alone basis? And following the rights issue and with the commissioning of the paint plant, et cetera, where do you expect this to be by FY '25, end of FY '25?

Yes. So as on 31st of December, we said our net debt-to-EBITDA is about 1.7 as on 31st December. Post that, we have, of course, received part proceeds of rights issue that is about INR 1,000 crores. Our complete -- when we complete our paints CapEx and other ongoing CapEx, et cetera, we have given guidance that our net debt-to-EBITDA should be about 3 to 3.5 once we complete our -- all the rights issue, et cetera. But that will all depend upon the performance of the existing businesses as well.

Okay. And just, sorry, lastly, on that, where do you -- I mean, for the next few quarters or so, how do you expect the margins to move for both your VSF as well as the Chemicals division?

I think the VSF business's margins are stable. Chemicals is still -- the realizations are on decline. We feel while globally, maybe the prices have bottomed out, but India remains oversupplied. I will request Mr. Jayant for this. Yes, please.

Yes. So we should track chemicals and I'm sure you track all the chemical industry. A lot of downstream demand actually is driven by agrochem in India. And -- sorry, just a sec, there is some disturbance in the line. So a lot of demand is actually driven by agrochem in India. And as you must have noted from the transcripts of many of these agrochem companies, which are driving the end demand for basic chemicals, they are projecting that the worst is behind us, right? And if we go by those reports, and I'm sure you guys are following those companies, then correspondingly, suppliers like us who provide caustic chlorine, et cetera, into that industry will, of course, follow suit. The other area, of course, is the industrialization in the area of renewables, automotive, et cetera, continues. So the demand for epoxy resin continues. So I think it's fair to say that we are probably at a situation where we are stable to gently starting to improve.

So stable to gently starting to improve, you said?

Yes. But I would strongly encourage you to follow also the larger agrochemical complex here because those will be a better lead indicator for whatever assumption you want to make.

The next question is from the line of Sumangal Nevatia from Kotak Securities.

My first question is on VSF, you've partly answered. But I mean, overall, so if you see operating rates, inventory in China, all are moving in the right direction, but we don't see a sustainable increase in realizations and margins. So if you could just share what is your outlook on prices and expectation in the next 6 to 9 months? And can we assume that the margins for our division is kind of at the bottom and we should see some bit of an uptrend there?

I hope you are absolutely right that margins are at the bottom and they will improve, and we also wish for that. And so it is very difficult to predict very precisely or accurately because things are very volatile. But there is no reason to be pessimistic, and we hope that slowly things should start to steadily improve, but that will be very gradual. It cannot -- I don't expect it to be very sharp turnaround.

But I mean, if you look at the operating rates touching 90% and even inventory levels are quite low, in the past, I mean, have you seen these kind of leading towards better profitability and better pricing strength for the industry?

Yes. The operating rate and inventory levels do indicate that the industry profitability should improve. But then sometimes, like Red Sea crisis has suddenly come out of nowhere. And that has affected the entire export rate from China, which is not just VSF, but the entire textile, even finished products also. So all these things have a lot of implications on the profitability. So barring such things, your normal interpretation of high operating rate and low inventory is correct. And within VSF, also now lyocell fiber is low, from a very low base, but is increasing more rapidly. So there are certain undercurrents from there also.

Understood. And is there any new supply which is getting added, new capacities in any of the regions by our competitors?

Not in the normal VSF side. But on the lyocell side, yes, some capacities are being added. Some have been added and some are under construction to the extent of about 125,000 tonnes or so. So -- but not new capacity on the traditional VSF side.

Okay. Understood. Second question is with respect to chlorine integration level, there is a good upfront, gradual run over the years. Is it possible to quantify what sort of benefits we get out of every, say, 1% increase in integration, I mean, just some thumb rule? And what is our target for, say, over the next 2, 3 years to increase it to what level?

Yes. So you have to look at it in 2 ways, right? So chlorine sells today in India at negative prices. So the first benefit we get, of course, from chlorine integration is those negative prices have evaporated. These negative prices are in the range of, let's say, INR 4,000 right now. So that would be one input. And second is depending upon the chlorine derivative itself, for example, stable bleaching powder will have a different contribution margin percentage, if I take one extreme example versus, let's say, the chloromethanes would typically have a different contribution margin percentage, so they will also correspondingly have different CapEx. So it's not a very straightforward question. The first step in chlorine integration is to extinguish the loss of profit, which happens through a negative chlorine price. And then subsequently, depending upon the CapEx intensity and complexity of the molecule, we get different contribution margins for the particular product. But it's a -- we have the largest chlorine derivative portfolio in India, and we continue to grow our chlorine derivatives. For example, you will see that this quarter, we are going to be mechanically complete with our monochloroacetic acid plant in the eastern part of India. It's a small part, but there are not that many manufacturers of monochloroacetic acid. So that will have, of course, a nicer profitability profile than, for example, chlorinated paraffin. So I wish I could give you a simple 1% answer, but it's not really that straightforward. But I think the general rule is chlorine integration is the way to go for us.

Yes. So you said minus INR 4,000. So on an average, the derivatives, what would be the realization be?

Yes, that's a huge diversity of product profiles there, as I mentioned. Everything from stable bleaching powder to chloromethanes, so that realization number will not give you any meaningful effect.

[Operator Instructions] The next question is from the line of Latika Chopra from JPMorgan.

I have a few questions on your paints story, and thanks for sharing a few slides on that in your presentation. The first one was, I heard your comments on the dealer base rollout. I wanted to check the cities that you are targeting in North and South to begin with. Would you first focus on the larger cities or the plan is to go wider in the next few quarters even in the smaller towns? That was the first part. And the second bit was, if you could share some thoughts on your advertising plans? You've talked about that advertising concepts have been finalized. But when do we see you -- would you wait to roll out whole of your product portfolio, SKU portfolio through the course of FY '25? Or you would probably likely target the peak summer or the peak festive season to go all out on the advertising front?

Okay. So on the cities where we're going to roll out first, so I wouldn't want to give exact details, but like we said that we want to roll out fast. So we will probably cover them pretty soon. Obviously, the first attack will be on the bigger cities, bigger towns, but because we have national ambitions to grow very fast... [Technical Difficulty]

Ladies and gentlemen, we've lost the management line again. Please stay connected while we rejoin them. Yes, sir, you may please go ahead.

So like I was saying that, obviously, we will cover the bigger towns first. But very soon, we will also go down the towns straight up. And like I said that we will start with North India and some parts of South India in this quarter. So you can see it's only about 1.5 months left for that. Secondly, on our advertising plan, so we have all around 360 plan. We have -- we will have below-the-line digital, top-of-the-line consumer promotions. All that we'll start rolling out. And obviously, they will follow a sequence. But I don't think that we are trying to focus on the summer or anything like that because we want to roll out as fast as possible. So our advertising and media spend will follow the distribution, which will keep going on.

Sure. And any feedback or your experience of wood finishes that you launched? It is available now in almost 60 cities. Any initial thoughts on how the product is faring? What are you learning from contractors, workers on this product? How is it placed versus competition? Any initial thoughts there?

Yes. So obviously, it has been a good learning exercise, and the sales team has also got practice of actually working in the market. The feedback is very positive. Firstly, it's only a limited range. So if you take a look at the imported wood finishes that we have launched, we have not launched the full range. The full range will also follow suit. But the feedback from contractors and painters is excellent. The product quality is excellent. The acceptance is very high. And obviously, we've got some learnings in terms of what do we need to adjust for the main launch. So we are taking all that into account.

Sure. And the last bit from my side was on paints, any thoughts on how are you looking at B2B versus B2C? B2C is loud and clear, I guess, but will B2B also be a meaningful part of focus for the company in the initial phase? Or...

So both B2C and B2B will start parallelly. So the institution business or the project business, as people call in the paints business, is an absolute part of our portfolio. We also have products designed for that, and it will start in tandem with the retail business.

We have a next question from the line of Mudit Agarwal from Motilal Oswal Financial Services.

Sir, my question is related to the tax expense during the quarter, the tax expense was significantly low. So is there any adjustment or what would be the run rate going forward?

So Mudit, the tax for the quarter also had some write-back of the provisions in the quarter. So on an overall basis, you can assume that our tax -- effective tax rate would be about 14% to 15%. So considering that, whatever adjustment was required has been done in this quarter. It includes the write-back also, a small part, which is based on certain cases, et cetera, we have written back that provision. On the annual basis, you can assume the tax rate to be around 14%, 15%.

Okay. And sir, the second question is on the chemical business, captive power plant capacity, how much is the captive power share as well as the renewable share in the chemical business?

Mudit, can you please mute your line when you're not speaking? There is background noise coming from your line.

So about half of our power is captive, about 13%, 14% is renewable and the rest comes from grid.

We have a next question from the line of Ronald Siyoni from Sharekhan.

I had one question with respect to the insulator business. Can you share the revenues and the EBITDA number from insulator business?

No, what is your question? Can you please repeat?

Ronald, please use your handset mode, you're not very clear.

Now I'm audible?

Yes, yes, audible. Yes.

So I wanted to ask about insulator business. Can you share the revenues and EBITDA numbers for insulator business?

You mean the ones we have consolidated now, right?

Right, right.

Yes, [ we absolutely consolidated ]. First of all, I think it is a very small part of stand-alone itself. And if you look at the consolidated numbers, it is almost negligible. But let me share the number which you are, I mean, looking at. So revenue for the quarter is about INR 111 crores in Q4 -- Q3 this year. EBITDA is marginally negative, very small number, minus INR 1 crore.

Minus INR 1 crore. Okay. And in terms of cotton, viscose and polymer differential, whether it has reduced or it has a correlation with viscose demand or prices also?

Sorry, I didn't understand your question. Can you please repeat?

The differential between the prices of cotton, viscose and polyester. So that spread has reduced? Or still there is difference -- wide difference between this demand and prices because of the 3?

So it has reduced during the quarter, quarter-on-quarter. And the polyester prices also reduced, and all the fiber prices reduced during the quarter. But viscose prices reduced much less than the reduction in the cotton prices. So this one is a very complex interfiber dynamics of this thing. So for example, international cotton prices reduced quarter-on-quarter by 4.6%. India prices also reduced by same amount, but Chinese prices reduced much more. On year-on-year basis, international cotton prices reduced by almost 10%. Indian cotton prices reduced by 15%, but China cotton prices increased by 10%. So it all depends on many other factors in addition to simple market dynamics. But mostly, they move in tandem. The extent can be varied, but mostly, they move in the same direction. And this quarter, the prices have reduced marginally for all the fibers.

We have our next question from the line of Nirav Jimudia from Anvil Research.

Sir, you mentioned that our chlorine realizations were [ INR 4,000 ] negative this quarter. So what was it last quarter? So whether it has further worsened in Q3 or it was at the similar levels as compared to Q2?

Compared to Q2, it has worsened by about a couple of thousand rupees. And as I mentioned earlier, it is basically the slow pickup in the agrochem sector, which has affected this in a big way. Having said that, I think the chlorine pricing dynamic across the country is quite different. So you have very different dynamics depending upon which region you are. But at the end, it's agrochem and, to a certain extent, dye intermediates which drives the chlorine prices.

Got it, sir. So the improvement in profitability could be also attributed to our flake business because I think we have been producing flakes out of our lye. So has that helped this quarter in terms of the stable ECU realizations on a sequential basis despite of chlorine worsening sequentially?

Yes. So we are always optimizing between lye and flakes. That is absolutely correct. And we see what is the best way that we can approach the market for maximum input. Similarly, we focus a lot on utilization as well. So you're right, we have been always optimizing between lye and flakes depending upon the price delta between the 2 forms of this.

Is it possible to share the capacity of MCA, which we are going to commission very shortly? Because you mentioned in one of the discussions that we are...

It's a small capacity, to be very frank with you. For us, it's very important to set this plant up as a demonstration of going further into complex chemistries in our Chlor-Alkali business. But you can say the capacity, it will be about 7 KT per annum.

Got it, sir. Got it. Sir, out of our pipeline sales -- sorry, out of our total chlorine integration like 63%, what would be the contribution through the pipeline? Because earlier, we used to share some figures of chlorine going to VAP close to 85,000, 86,000 tonnes on a quarterly basis, but I think that is now stopped. So can you just give some sense in terms of...

This is in the range of 12% to 14%, depending upon how the customers pick the product.

Okay. Okay. And sir, last question is on the maintenance CapEx for the chemical business as well as for the VSF business on a yearly run rate basis.

So Nirav, it will be around INR 350 crores, INR 400 crores.

So Nirav, see, it will depend upon -- I mean, you cannot take a standard number for every year. But roughly, you can assume about INR 300 crores to INR 400 crores as maintenance CapEx for both these businesses, each of the business, yes.

For each of the businesses?

Yes, yes. We have a number of plants, locations, and I mean we continue to invest in the cost optimization also.

Got it. So Pavan Ji, is it possible to share how much through the debottlenecking we'll be adding the capacities on the VSF? I think you mentioned 3 sites where we are currently undergoing a debottlenecking. So is it possible to share what sort of capacity additions could happen out of this?

Okay. So we have done a small debottlenecking in our lyocell plant during this year. That will take our capacity to 31,000 to 44,000 tonnes per year. On small debottlenecking, we have done at our Kharach plant for the VSF also. And then in the course of this quarter as well as coming year, we will be also trying to further improve the productivity at all of our VSF plants also, like the new lines at Vilayat and more, because the plants have been now running for almost 1.5 years, 2 years. So we are getting better performance slowly, slowly.

So some capacity additions could happen there also through debottlenecking?

Without much CapEx.

We have a next question from the line of Suryansh from Bizx Enterprise LLP.

I was asking -- my question was regarding Birla Pivot. So what are our plans there? And like are we planning to move into B2C and opening retail fronts? Or like what are the plans and can you answer this one?

So as already spelt out earlier, we are extending the coverage in B2B only across country now covering almost 20 states. There's no plan of B2C as of now. We are also getting into private labels. So Birla Pivot Tiles have been already launched. Plywood and doors are also in the process, we are in the process of launching. That is the status. I hope that answers.

We have a next question from the line of Lakshminarayanan K G from Tunga Investments.

Sir, as you are entering into paints, do you see the industry-wide compression in terms of gross margins or operating margins for the next 5 years, whether the profit pool would actually shrink in terms of percentage?

So when you say for the next 5 years, it is very difficult to answer. Our objective is to, in a reasonably expected short period of time, become the #2 player and also turn profitable at the earliest possible. So I think if we follow the principle, the answer will lie there.

Would you be -- would you expand the dealer margins? Or would you actually sell at a cheaper price? Like how do you intend to do this?

So we are not disclosing anything on our pricing. I think when we launch in the market, you will come to know.

And the launch is slated for the next month?

So we have disclosed that we will launch it in this quarter. So it has to happen either in February or March. Like I said, it's only a question of few weeks.

Thank you. Due to time constraints, this was the last question for today. On behalf of Grasim Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.