Grasim Industries Limited analyst Q&A

Thank you very much. We will now begi n with the question -and-answer session. The first question is from the line of Mihir Shah from Nomura. Please go ahead.

Hi, sir. Thank you for taking my question. Sir, first question is on paints. Wanted to check on your sales momentum in the recent months. My back of the calculation suggests that you've grown about 20% in this quarter on a QoQ basis. But just in the recent months, I wanted to check the momentum. The context of the question is generally brands in the initial phase of the launch see high demand and then it moderates down in some time as it consolidates before starting again to gain traction, if at all. There are views that Opus is now consolidating and dealers are going back to their old brands. I wanted to know your side of the narrative and which phase are you in currently? So, that's my first question.

So, thank you, Mihir. Let me answer the first question. So, like we have also declared quarter- on-quarter growth is in double digits, and the fact is that the growth for us continues. So, growth, as you said, comes also from dealers who are being added, but more from dealers who are now giving us more business as counter share. On your query, that there is feedback that there is dealer attrition and dealers are going back, I am not able to comprehend that easily because firstly, let me tell you that apart from the franchises that we have majority of our dealers are multi brand dealers. We are not the first brand in the shop. We are either the second , third or fourth brand. And most of those dealers continue to be with us and continue to expand our portfolio and sell us more. If one or two dealers have gone back, that should not be taken in the other calls where we have heard that we are having dealer attrition. The fact is the larger universe and majority of them continue to grow with us and giving us more counter share . On your question, where are we on the page? We are purely on the growth phase. So, while you might say classically there is a growth phase and there is a consolidation phase, we are growing and consolidating both. Because when we say that our throughput per dealer is going up as a function of deeper penetration, more products and more range, that obviously means consolidation. But the fact that we are still adding some more dealers and increasing our range in each d ealer says that we are also growing. So, that's where we are.

Got it, Rakshit. Thank you for that. That's quite helpful. Secondly, I wanted to know if you can share how is your traction between the category A, B, C dealers? Where have you seen the most acceptance and what kind of hurdles are you facing to make inroads in the other ones that you have not been able to get through? And a sub part to it is, earlier even you had highlighted during the launch that you will cross 6,000 towns. I see you've crossed already 8,000 towns now. Even your SKU and product mix has crossed the earlier number that you had shared during the launch. Any updated dealer reach or any of the updated numbers that you would like to share? That's my second question.

Like we said, we have shared the dealer reach. As we said that we had a target of 50,000 dealers in the first year and we were very close to that. And like we said, we are still adding dealers but consolidating more on existing dealers. You rightly said we had talked about 6,000 towns, but we are close to 8,000 towns. So, for us, growth continues in this way. We are not sharing any other numbers, but I think these are fair indicators that business is progressing on all fronts in all the geographies.

The next question is from Rahul Gupta from Morgan Stanley. Please go ahead.

Two questions. So, first, just continuing on the previous question, can you help us understand how competitive landscape has evolved vs. last quarter? I remember you mentioned that the economy segment had relatively higher competitive intensity. So, just some color on this will be very helpful. That's my first question. Thank you.

Yes. So, like we said, the competitive intensity remains and we see that from competition side, the intensity has been increased on the value or the economy segment. The level of discounting has gone up and you can also see from all the other companies that while volume growth is there, but the value growth is much lesser than that. So, obviously, the action on discounts on the economy segment has been taken up by competition. But like we said, we continue to play very strongly in all the t hree segments, as you say, luxury, premium and economy. Himanshu also ratified in his opening speech that the contribution of luxury products, if you assume the full portfolio for us is close to 65%, which is very, very good, even for an established player, leave aside a new player like Birla Opus.

So, if you noted on a Q oQ annual basis, the market has grown only at 5% . And if you remove Birla Opus, then the market is actually minus one or zero. So, obviously, Birla Opus has taken a lion's share of the growth, which has happened on an annual basis. Now, if you take a look at this year, yes, the market is still slow. The advancement of rains does not work well for paints business because the exterior business, you know, gets affected. And this time in monsoon, even if at a lower intensity continues for a longer period, which would mean that the slowness because of monsoon would still be there. Now, how would the volume growth move ahead in the following quarters? Difficult to predict. But yes, you are right that this time Diwali is earlier. And corresponding to that, the so-called high sales season period, which has relevance in paints will come before. And that should start happening towards the end of August or September. And as Birla Opus, we are fully prepared to tackle that success fully. And we see that we should be able to grow well on a continuum basis. As far as competition is concerned, it is for them. How do they want to play the coming season?

Great. Thank you so much. Just one book keeping question. Our math suggests that your reported revenues was around ₹11 billion versus ₹9 billion last quarter. Can you help us understand what kind of revenues was in CWIP?

So, we appreciate your, doing your maths on your books. But like we said, we will disclose the maths at the right moment as Pavan had promised in the last call also.

Let me flip this question. Is CWIP revenues this quarter materially different versus last quarter?

See, what is CWIP? For factories which have not been capitalized and which are manufacturing as per accounting laws, the sales from that has to be put in CWIP. So, yes, there is our factory Mahad, which was manufacturing. It had products which were manufactured before capitalization. So, they would go in CWIP. I would not like to comment on the value. But the fact is as per accounting standards on a timescale, it does impact our reported numbers.

Got it. Thank you and all the very best.

Thank you very much. Next question is from line of Nirav from Anvil Wealth. Please go ahead.

Yes, sir. Thanks for the opportunity. Two questions on chemicals. Sir, one, when we see our YoY numbers for chemicals, our EBITDA has gone up by close to around ₹112 crores. And based on the ECU realizations, we are higher by around ₹3.40. So, which translates to a benefit of close to around ₹103 crores. So, I just wanted to check here like the benefit from ECU as well as from the renewable share was higher than this ₹103 crore and there was a degrowth in the profits from the epoxy division, your thoughts here?

Yes, I am not completely sure I understand your math. But the end question that you have was there a degrowth in epoxy profits. That is the question you are leading to. So, I will answer very directly instead of indirectly. So, as you know, feedstocks for epoxy basically BPA, ECH have been hardening for particularly ECH. You also know that there is an antidumping duty on ECH. At the same time, you also know that epoxy comes into India through different countries, particularly Korea through FTA arrangements, which basically puts pressure on the epoxy chain. Our approach has been to find the right balance between maintaining mark et share and maintaining margins. We do hope that the process that is now running with the Government to review different FTAs and the industry representations aro und that will lead to some positive. So, yes, within the epoxy chain, the industry is in a margin compression between hardening raw material prices, antidumping duty on one hand and duty-free imports on the other hand. And we are making the right balance trade-offs between retaining our margin and ensuring that we don't spoil our market position.

Correct. So, in one of the interactions in the earlier calls, you mentioned that the steady state or the normalised margin for the epoxy business should be anywhere between 15 % to 18%. But I think with all the factors, what you mentioned above, the margins in this business possibly would have come closer to 10% or let's say anywhere between those bands. So, is it correct?

I would not like to comment on that because you know that we also have a large portfolio of specialty epoxy’s. We make a large number of products, uniquely tailored for automotive, for wind, for anti -corrosion, etc. So, I would not like to comment on the current state of margins because it's competitively sensitive.

Correct. S ir, second question is on the power requirement. I think based on some back -end calculations; I think our power requirement for the chemical business is close to around 350 megawatts. So, if you can just help us understand what is the mix between captive renewables and grid and also if you can share the capacity utilization for the chlorine derivative business.

The capacity utilization has been slightly above 80% for chlor-alkali. That is the one that you're asking?

No, sir. I am specifically asking about VAP.

That is a difficult number to give because it's a very complex portfolio, with more than 20 product lines. So, that's a difficult one to give. Maybe I don't want to disclose that number.

No, worries. And sir, the breakup of 350 megawatts or whatever may be the number.

My renewable has reached about 15% exit. Which is, I think, the number that you were looking for.

Correct. And what would be a captive mix?

Captive and grid would be roughly equal.

Thank you. Our next question is from the line of Prateek Kumar from Jefferies. Please go ahead.

Yes, good evening. My first question is on your B2B e -commerce segment. The segment has a scale to almost over ₹5,000 crore of revenue run rate. What is the kind of profitability the segment is doing and or any output if you can share on the same? Also, the second was, I mean, we envisaged around 2,000 crore of CAPEX when this segment was launched. How is the, I mean, how do we see CAPEX in the segment now? That is my first question.

So, on your first question, the revenue growth has been pretty good, and it continues quarter-on- quarter. As was remarked in the opening comments, we are seeing high single digit growth sequentially when you compare Quarter 4 to Quarter 1. You had asked about profitability. We had earlier mentioned it in our previous quarter calls as well at a scale of $1 billion, which is what we are estimating that we hit in FY '27. We are confident that we will break even at that scale. And all our indications and our trends right now are pointing towards that, if not so oner. Regarding your second question, Prateek, which is on CAPEX and how much have we spent out of the ₹2,000 crores that was announced when we launched the business? Look, our business is a technology business. We are fundamentally investing in building a technology platform and making sure that all the parts of our value chain are visible to our buyers, our sellers and everyone else who is participating in the ecosyst em. So, most of our CAPEX so far has largely been in building that technology stack. Without going into the details of how much has been spent, we are well within track as per what we budgeted for and we still remain in that growth phase and we still continue to invest in building the right technology, which will solve for the needs of this B2B universe.

Thank you. My other question is on pain t business. Any one-year target or we had a great start to the financial year. Any one-year target we now have for this business in terms of revenue or any other metrics which you think is important?

We talked about, we gave some metrics for the first year and then we have anyway given our intention to be what we want to be in full-scale operation after 3-years. So, we do not really have specific targets to share with you for a one-year period, but the journey continues and we are on track, give or take a few things here, plus or minus. That is how we would want to put it.

Sure. Thank you and all the best.

Thank you. Next question is from Nishant from Temasek Holdings. Please go ahead.

Hi. Just one question on the pain ts business. What is the credit policy difference that we have versus peers? Do we have a higher indexation to dealers for more credit funded versus short cycle credit?

If you take a look at the overall market and if you take a look at the top 3 or 4 players, our credit policy will fall somewhere in the center. So, we are with the market. It is not that we are giving less or more, but the different players have slightly different policies starting from A to B. So, our policy would fall somewhere in the average in terms of credit.

Understand. And the second one is in terms of just as you go through the brand evolution, how do you track evolution from a transactional business pull through to a brand driven business pull through? How would you sort of assess that evolution?

So, we have taken some initiatives. One of them is also first time in the paint industry is that we have availability of RMS data, which actually gives us a lot of insight into what is the share that we have across different geographies. Secondly, we also have a good brand tracking mechanism, which shows where are we in terms of total awareness, unneeded awareness, spontaneous awareness, and how are we progressing versus competition on a quarter-to-quarter. Very soon, we will also get into what you call is the consumption funnel and reason, from awareness to usage and why are they drop out. So, like a classical good consumer brand, we are putting these practices into play and access to this kind of data helps us understand how we are moving better.

Understand. And any color that you can share on current sort of awareness data that you may be able to share today?

Yes. So, I'll share with you, if you take a look at total awareness, we are already there with the top three brands. And if you talk about spontaneous awareness, as per my data, I am already number two and equal to the number two player.

Understand. Okay. Sorry. Spontaneous is unaided awareness.

Spontaneous is you ask someone, which is the one brand that you would want to say?

Understand. Okay. Got it. Thank you.

Thank you. Next question is from line of Amit Purohit from Elara Capital. Please go ahead.

Yes, sir. Thank you for the opportunity. Just one on the overall industry demand. You clearly highlighted that the incumbents have not grown much. And how do you see this going forward as we enter into festive season? Any outlook that you think would find it challenging for us to maintain the growth momentum because the industry demand remains muted? That was my first question. And second is on PaintCraft. I just wanted to know, this service would be available to all our dealers and normally in a typical dealer, what is the share of painting service? I know not for all dealers, it may be, but at least the top dealers that we in their sales, how do we think about it, this as an enabler to drive further growth?

So let me answer the first question regarding how do we see the demand in the upcoming season? So you see, the season is slightly advanced this time as compared to the last few years. So you should see the festive upswing starting towards the end of this m onth and September should be a big month. Difficult to say how the other players will play out because currently the focus is a lot more on economy segment and discounting. And that is going to get you some volume, but that might not get you so much of value. As far as we are concerned, we will play the market as it should be. We have a very exciting luxury premium portfolio also. We will focus on that. We are quite confident that we will be able to reap good benefits and continue our quarter-to-quarter growth. For the others, I think it's up to them as to how they want to focus on themselves and play. On PaintCraft, see we were offering PaintCraft as a direct service, as a kind of test market in some cities through service partners. We are now going to take it broader. And in the first phase, we will take it to about 100 towns and we are going to offer it to our franchise dealers. But obviously during a certain period of time, we will cover a large number of dealers who work with us. Now, how much contribution does come from painting service? We will have to learn that ourselves. As Himanshu said, we have created a good tech stack in terms of lead generation, in terms of fulfillment, transparent pricing, tax compliant. And we will also promote it that way. We are quite confident that the consumer will be excited because there will be many benefits here. And we hope that it contributes a decent volume for the partners who are working with us. But we will have to see how it evolves. But good preparations and good plans have gone into that.

Thank you. Next question is from line of Raashi from Citi. Please go ahead.

Thank you. Just two questions on the paint side, I think I missed the point that you mentioned that excluding Birla Opus, you said that the industry growth was flat? Is that what you said?

If you take this year and if you take Q1 of FY'25 and if I remove Birla Opus from both left and right hand side, the market growth is marginally negative.

And with Birla?

With Birla, we said it's about over 5%.

I understand. And what is your general estimate for the industry growth? I mean, I understand that a seasonally strong period is coming up. But on average for the year, how are you thinking about this?

I think too early. It's just been one quarter. There are three more quarters left. We will have just to wait and see. We will play a good game.

Raashi, I think you are the fourth asking the same question. Let me address this. This is Himanshu. I will just address this. It's dependent on the industry players. There is volume in the market. Now, whether you want to convert that volume into value is now left to the industry players. That is to us is what we are repeatedly saying. Okay, there's enough in the market. The market has huge opportunities. Consumers want to do painting services. They can take it and discount it and still get volume and not get value. Or they can keep the value with them. That is where the current industry is. So that's why we are waiting.

Understand. And any update on the whole CCI investigation?

Yes, I would like to share that. Grasim has filed information with CCI regarding the practices found in the market with respect to the abuse of dominance by the dominant player. CCI saw merit in information and evidence shared by Grasim and has ordered DG for investigation on 1st July 2025. The order is available for public on the website of CCI. We have to wait to see the results of the investigation. As this is a matter of subjudice and with the regulator, we will not be able to comment anything further on the investigation.

Okay, understood. Thank you. And just last question for me. You mentioned that the B2B business will break even in FY'28. Is that what you said?

When we reach this $1 billion revenue topline, we said we will be EBITDA positive.

Thank you.

Thank you. Next question is from the line of Shreya from Oaklane Capital. Please go ahead.

Thanks for the opportunity. My question is related to chemicals business. So, you mentioned that the chlorine integration level for the quarter was 63%. So, could you give some sense or color on what portion of it was to the dedicated customers and what was for the internal consumption?

The breakup of the chlorine sales, I think internal consumption, I will give you a range because I do not want to give you an exact number. You can assume that about 30% to 40%, it is a range which we are giving, will be in the internal consumption. Rest goes to the pipeline customers.

Okay, understood. And any sense on , si nce we will be having our ECH plant and as you mentioned earlier that because of the ECH prices going higher, our epoxy margins were compressed. So, as and when we have our ECH plant, where do you see our epoxy margins going forward?

Yes, wouldn't that also not depend on the ECH price at that moment in time in that quarter? As you know, ECH is a volatile commodity. So, we would have to make an assumption on either propylene or glycerine or whatever. So, that is a difficult one to predict.

Yes, thank you, sir.

Yes, thanks. So, I guess on paints, you indicated premium revenue share of premium paints is 65% is that the correct number?

So, it is not revenue share. Revenue contribution to the total contribution of premium plus luxury is 65%.

Okay, understood. So, this premium paint is calculated means any price and above like ₹200 per litre or ₹250 per litre. Means, how do you define that?

Market defines premium and luxury products , in waterproofing segment, in wood finish ed segment, in emulsion segment and enamel segment and the same is the definition. It varies from each category wise. It is very well defined. We have a brand, we have three broad brands. Style is a brand for economy, Calista is a brand for premium and One is a brand for luxury. So, primarily, when I combine Calista plus One, wherever applicable, otherwise, whatever is market defined in a particular category. It is very well defined.

Okay, sure, sir. And additional details means what would be the geography wise revenue break- up if you can indicatively share East, West, North, South, even if you share in FY '25, that is enough.

We have also told in the past that we are generally performing well across pan India and we also said that the range between maybe my best performing region and my so called slowest performing region is also in 80 to 120. So, that continues. So, by and large, w e have good acceptance and like we said, we are growing and consolidating across all markets. This is also changing a bit dynamically.

And our aspiration is pan India, not regional aspiration. So, we want to grow and lead in every market.

So, some other businesses of other competitors who have focused on particular states or have very disproportionate revenue from few states, we want to be all India, all rounder where we are doing well across all geographies.

Okay, sure, sir. Last question. So, we keep hearing from Channel checks that the 10% extra grammage scheme is withdrawn in some markets. Is that understanding correct or it's incorrect?

So, I am very happy that you raised this because if you were not going to raise, I would have anyway given a clarification. We have also heard from other analysts calls that people know more about our business than us ourselves. So, let me put this record on straight that the 10% offer on 20 liters and 10 liters for majority of emulsion packs as we are giving fully continues. Okay. So, this puts the record straight.

Thank you. Next question is from line of Sucrit Patil from Eyesight Fintrade. Please go ahead.

Thank you very much. My question is specifically to Mr. Himanshu.

Yes. Go ahead.

Yes, sir. I had a forward-looking question on your emerging platform. With Birla Opus entering the decorative paints segment and Birla Pivot scaling in the B2B E-commerce, how is Grasim thinking about cross -platform data monetization, predictive data, predictive demand mapping, or AI-led SKU optimization across these verticals in the next 2 to 3 years? And in your view, could this create a differentiated ecosystem advantage versus standalone peers?

So, to be able to, if I was in an environment which did not have privacy applicable to me, I would have given a very different answer. But today, the privacy laws of the country are very, very strong. And doing cross -sales from different platforms, in my mind, is not permitted. I am currently the Chairman of the FICCI Privacy Board and clearly that's not permitted. We have to go back to the customer to do cross -sales, which is of a customer -available in one platform to the other platform. And that is itself is a humongous task. Both the new businesses are in the process of getting their act together. And we are not going to cross this bridge for a certain period of time. That's our current position.

Thank you very much. Sir, The next question is from the line of Sakshi, an individual investor. Please go ahead.

Hi, good evening. So, my question is regarding chemical business. How much is the chlorine price for this quarter?

For the quarter that we just reported, chlorine was trading at about 6,000-6,500 negative.

Sir, while calculating ECU, are we considering flakes and hydrogen realization?

So, everything that relates to the actual electrolysis process is considered in the ECU realization. That's the industry standard.

Actually, like if you see, some industries are by calculating ECU, they are considering flakes. And some are like both flakes and hydrogen. So, what we are following in Grasim?

So, ECU stands for electrochemical unit. So, every realization I get related to my electrochemical unit is in my ECU realization. So, I can only tell you what my definition is.

Okay. Got it. And the second thing for extension plan, we reported like ECH is 50 and CPVC is 50 KTPA. However, with chlorine derivative, we are getting 79 KTPA plan for extension. So, may I know like what's the difference between 100 and 79? Is it like partly commission or what exactly it is?

So, we, as you know, the market conditions are a little bit uncertain right now. So, certain projects, on chlorine derivatives, we have deferred for better market conditions. So, that's the difference between what we indicated last quarter and this quarter. But those are smaller chlorine derivatives. The two main ones are ECH and CPVC and those are proceeding as planned. The rest, we may accelerate or delay based on the market conditions.

Okay. And what is the plan for extension of caustic to 25KTPA? Is it same as Quarter 3 Financial Year '26 or what exactly it is?

That is again market timing dependent. It's a very small expansion. So, when we believe the conditions are favorable, we will execute.

Okay. And as we know, sir, like Adani and Reliance is coming into picture, what we are thinking like it will impact our domestic market or?

So, we have been getting this question a couple of times, right? And look, the domestic business, for sure. And their project is related to PVC. There is a lot of changes also that happen in the global caustics scenario. So, if PVC demand adds in one area, it subtracts from another area. So, it's a somewhat complicated question to answer. The Indian market is not insulated from the global market, either on PVC or on Caustic. So, just looking at the picture from an India perspective only may not give us the full answer. Just look at the total PVC production capacity in Asia. Then put that in context of whatever Indian capacity is coming.

Thank you very much. Ladies and gentlemen, due to time constraints, we will take that as a last question. With this, we conclude today's conference call. On behalf of Gras im Industries Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.