GRASIM - Grasim Industries Ltd Share Price

Management Outlook: Grasim Industries anticipates continued growth driven by India's strong economic expansion (6.5% in 2025/26), supported by infrastructure development and favorable monetary policies. The company remains focused on scaling its diversified portfolio, including cement, paints, and specialty fibres, to align with long-term demand.

Major Points:

1. Cement (UltraTech): Targets 200 MTPA capacity by FY27; domestic volume rose 11% YoY (Q3). Integration of Kesoram Cement pending approvals.
2. Paints (Birla Opus): Rapidly gaining market share with 50,000+ dealers; 5 plants operational, 6th (Kharagpur) by Q1 FY26. Exiting FY25 with high single-digit market share.
3. B2B E-commerce (Birla Pivot): Expanding private labels (tiles, bathware) and digital adoption in building materials.
4. Cellulosic Fibres: Lyocell expansion (55K TPA by mid-2027) to capitalize on premium demand; stable global demand with improving prices.
5. Chemicals: EBITDA up 25% YoY (Q3) on higher caustic soda prices; chlorine remains a drag.
6. Financial Services (Aditya Birla Capital): Loan book grew 27% YoY; NIMs pressured by competition.
7. Renewables: Capacity to reach 2 GW by FY25-end; 37% supply to group companies.

Challenges: Input cost pressures in fibres, chlorine pricing headwinds, and paint market sluggishness. Management remains confident in strategic investments (paints, Lyocell) and maintaining net debt/EBITDA below 3.5x.

Question 1: "My first question is on the CSF division. If one can elaborate what sort of cost pressures are we looking at in this quarter and in the coming quarters, some guidance? And we are running at almost rated capacity. What sort of capital allocation are we looking at in this division given the return profile has been very subdued over the last few years. So should we expect steady-state limited investments in future, focus on paints and other divisions? Or we would look to see some brownfield attractive expansion opportunities here as well?"

Answer: Input costs (pulp, caustic soda, sulphur) rose significantly (>10%), outpacing CSF realization gains. Specialty Lyocell expansion (Rs.1,350 crore for 55K TPA by mid-2027) is prioritized for higher margins. Existing CSF capacity utilization remains high, with price improvements expected as demand stabilizes.

Question 2: "My second question is on one of our small division, Pivot. So, I just wanted to understand what, how is the competitive landscape in that building products and sales market? And how is our positioning different from a few of our peers because we do keep hearing aggressive growth plans by competition like Infra.Market, JSW One, etcetera. So just some details on these will be very helpful."

Answer: Birla Pivot focuses on end-to-end B2B digital solutions for building materials, targeting a Rs.1 trillion+ market. It emphasizes user experience, private-label expansion (e.g., Bathware), and resolving fragmented supply chains. Competition remains limited due to low digital adoption and category complexity.

Question 3: "So I mean, just a quick one on the Paints division, looks like a very impressive growth for another quarter. So I just wanted some color on operating losses. I mean, can we expect, going forward, the losses to further increase at least for some time or the peak is behind and some operating leverage to start reflecting on be moving towards breakeven. So one on that. And then, I mean, next year looks like all our plants will be firing. So after our high single-digit exit for this year, some color on how we are looking at penetration and market share increase in FY '26, would be very useful, sir."

Answer: Operating losses align with plans; breakeven targeted within 3 years of full-scale operations. FY25 exit expected at high-single-digit market share. FY26 will focus on expanding dealer network (50,000+), improving throughput, and brand visibility. Plants (Chamarajanagar, Mahad, Kharagpur) will drive capacity to 1.3B liters, aiding market penetration.

Question 4: "So, my first question was in the paints and B2B E-commerce segment. Now it's really great to see that sequentially, there is a material revenue jump, excluding UltraTech, of course. Also, heartening to see that the EBITDA losses have also reduced quarter-on-quarter despite the sales going up by almost like Rs.543 odd crores combined segment, excluding cement, of course. So my question was to get some understanding on this. Can we say that as sales ramp up in the coming quarters, this absolute loss number or as a percentage of sale will only narrow, and we have like -- we have peaked out in terms of losses in this segment. Is it a way to look at it? As you said, it's a journey, but at least directionally, are we on that part of reducing losses? Or it's too early to say that?"

Answer: Losses are part of planned investments; heavy initial spending will taper. Paints' EBITDA losses are offset by scale gains (distribution expansion, brand campaigns). Directionally, losses will reduce as operational leverage improves, but full breakeven remains on track for Year 3 post full-scale operations.

Question 5: "For the Epoxy business, how have been seeing the ramp-up of the newly expanded capacities or let's say, if you can say at what level of utilization, the newer capacity is operating at. Also, if you can share like how we are seeing the demand both on the liquid epoxy side and the specialty side of the business? and was Q3 seen a margin getting impacted because of volatility in the prices of bisphenol and higher prices of caustic soda?"

Answer: New epoxy plants ramped to 25% utilization due to customer qualifications and teething issues. Margins were pressured by rising BPA/ECH costs (13% QoQ) and Korean FTA imports. Domestic demand remains stable; specialty epoxy growth expected to offset liquid segment challenges.

Question 6: "So firstly, on Paints business, congrats, there seems to be a material step-up on sales in third quarter versus what we saw in the second quarter. Can you talk a bit on how much of this would be from sell-outs? And what would be the dealer reach now? Also, if you can share your geographical split, i.e., contribution from North, South, West, East? And lastly, traction from exclusive dealers or large dealers and from small dealers."

Answer: Sell-out rates are strong (65"“70% of sales), with healthy dealer inventory. Distribution spans 5,500+ towns, evenly split across regions. Dealership growth (~50,000 target) includes balanced traction across large, mid-sized, and small dealers. Product acceptance is uniform despite recent category launches.

Question 7: "Given there are so many capacities coming up in caustic soda, how do we place ourselves being the largest player in the industry? And secondly, on the epoxy resin, so if you could give your view on the tariffs that are being considered in the U.S. on epoxy resin from the Asian countries."

Answer: Caustic soda demand growth aligns with new capacities; Grasim's long-term focus and integration mitigate risks. U.S. epoxy tariffs (if lower for India vs. China/Korea) could boost exports (~10% of epoxy sales). Domestic demand remains primary driver.

Question 8: "On a relative basis, where are you doing better in terms of the town tier class? Is it the large towns where you have a higher market share? Or is it the smaller towns? And also similarly, in the tiering of the paints by value, so is it the top tier where your market share is relatively higher than the mid or bottom tier? Or is it the other way around?"

Answer: Market share gains are uniform across town tiers (metros to smaller towns). Product performance drives traction across price segments, including economy and luxury tiers. Recent launches (e.g., luxury products) are gaining momentum as distribution scales.

Question 9: "Are we sharing the capex guidance for FY '26, please?"

Answer: FY26 capex guidance will be shared during the Q4 FY25 earnings call. Current focus is completing ongoing projects (paints, Lyocell) while maintaining net debt/EBITDA guidance of 3"“3.5x.

Question 10: "With this chlorine negative rating expanded, how has our VAP portfolio performed? Because there, it's a direct beneficiary of whatever what we produce on the VAP side. So have we seen the profitability on the VAP side improved in Q3 vis-a-vis last quarter last year or even on a sequential basis, if you can share your view?"

Answer: Chlorine derivatives (VAP) profitability improved in Q3, offsetting chlorine's negative realizations (-Rs.7,000"“7,500/ton). Higher caustic prices (+80% YoY) and VAP gains drove Chemicals EBITDA up 25% YoY. Integration benefits and demand recovery in agro/pharma sectors will further support margins.