Grasim Industries Limited (GRASIM) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q2FI27 earnings call hosted by Grassham Industries. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need a session during the conference call, please signal an operator by pressing star and then zero on your touchstone phone. I now hand the conference over to Mr. Ankit Panchmatia, Head Investor Relations of Grassham Industries.

Thank you, and over to you. Yeah, hi. Good evening and Diwali wishes to everyone. Thank you for joining Grasim's second quarter financial year 2027 earnings call. The quarterly earnings collaterals are already uploaded on the website of stock exchanges and our website for your reference. For safe hour, kindly refer to cautionary statement highlighted in the last slide of our presentation. Today, we have with us our management team, which is represented by Mr. Hemanshu Kampanya, Managing Director, Grasem Industries, and we have with us Chief Financial Officer, Mr. Hemansh Kedil. Also, we have with us joining Mr. Jayan Doble, Business Head of Chemicals, Cellulosic, Fashion, Yarn, and Insulator Business, Mr. Wadiraj Kulkarni, Business Head of Cellulosic Fibers Business. Mr. Sachin Sahai, CEO of Villa Opus, and Mr. Sandeep Komraveli, CEO of Villa Pivot. Let me now hand over the call to Himacho, sir, for his opening remarks. Over to you, sir.

Thank you, Ankit, and good evening, ladies and gentlemen. A very warm welcome to all present on the call, and thank you for joining us today. Before we begin, on behalf of the entire Grassland Industries team, I would like to wish all our investors, analysts, and stakeholders a very happy Diwali and a prosperous New Year. May the new summer bring good health, happiness, and continued prosperity to all of you. As we begin summer 2083, let me take a few minutes to share our perspective on prevailing global and domestic macroeconomic environment. The global economy continues to demonstrate resilience despite navigating a challenging environment characterized by geopolitical tensions, energy market disruption, and evolving trade dynamics. According to IMF's October 2026 outlook, global GDP growth is projected at around 3.1% in 2026, with inflation expected to remain elevated at approximately 4.7%. The ongoing tensions in West Asia have added to energy... What is the volatility and supply chain uncertainties, while concerns around elevated sovereign debt and tighter financial conditions continue to wait on the global outlook. At the same time, investments in artificial intelligence, digital infrastructure, and technology-led productivity improvements are providing important growth opportunities. Overall, the global environment remains cautiously optimistic about uncertainty and volatility. Thank you. The RBI has responded by increasing the policy repo rate by 25 basis points to 5.5% in the October policy review, while continuing to balance growth and inflation considerations. Thank you. And continued policy support provide a meaningful cushion against global volatility. Overall, while the global environment remains uncertain, we believe India's structural growth opportunity remains intact. The government's focus on Vixit Bharat infrastructure development, manufacturing, urbanization, and rising consumption. Add Graspin with our diversified presence across cellulose pipers. We remain focused on strengthening our competitive position and creating sustainable long-term growth. This diversified portfolio is exactly what is powering our numbers. On a consolidated basis, revenue for quarter 2 FY27 stood at the highest ever of Rs. 50,105 crores. On a trailing 12-month basis, consolidated revenue stood at 1,94,234 crores, already up 11% compared to FY26 numbers. We are now at a striking distance of Rs. 2 lakh crores. The same story is visible in the standard-owned business, where portfolio works as a balance engine of poor and growth businesses. Standard-owned revenue for quarter to do faster by 33% year-on-year, reaching an all-time high of Rs. 12,747. In a sense, this is how our diversified model creates value. Our core businesses provide resilience and steady cash flow, while our growth engines add scale and future earning potential. Together, this allows us to deliver consistent performance through cycles and builds sustainable, long-term value for all our stakeholders. With that, let me now move to the performance and key developments across our businesses. Let me now start with our paint business. In the market shaped by the case of brand loyalty and deeply established relationships, presence is the first milestone. Preference is the next. Execution is the ultimate game changer. Over the past two years, we have worked relentlessly to establish builder offers in the market, not just through scale of our manufacturing, but by building Pan-India solutions, sustained brand investment, expanding our product portfolio across each category, and engaging more deeply to dealers, contractors, painters, architects, builders, and engineers, and many more. Today, these investments are beginning to come together. Our products are reaching more markets. Our brand is becoming more salient. Our distribution network is expanding. Our engagement with people who influence purchase decisions is getting stronger. We are creating the foundation for business that can compete, not just on availability, but on consumer preference and trust. The work of the past two years have been about establishing our presence. The next phase is about converting that presence into stronger market share, accelerating growth, and building a portfolio of profitable, sustainable, and enduring business. For H1 FY27, the revenue stood at one shot of Rs. 3000 crore, growing 50% year on year. This quarter, Villa Opus recorded a revenue of Rs. 1,337 crores with a year-on-year growth of 35%. The H1 volume grew by 33% and quarter 2 volume by 20% on a year-on-year basis. As confidence on brand and product quality grew, we took a bold work to reduce our price versus market leader in a step-by-step process. We believe that in the month of September, our prices are within 2% to 4% distance, excluding 10p impact versus the monopoly player. The company intends to fight the market leader, leveraging its own ongoing efforts in distribution brand, product quality, exclusive franchise setup, customer and influencer engagement, and 10p. Quarter 2 is traditionally a softer quarter for decorative paints industry, as the monsoon impacts painting activity and dealer stocks higher inventory of existing market leaders rather than newcomers. Below offer strength is retailing, not wholesaling, and therefore company's dealer inventory stock is lower than the market leaders. This year was no different, with broader industry also witnessing a seasonal slowdown resulting in intense competitive activities on scheme and almost flat quarter-on-quarter rate realisation despite higher dealer price increase. But our focus is not on seasonality of a quarter. Our focus is on the strength of the business we are building and on how effectively we are building. We have already demonstrated that we can build a meaningful presence in a highly competitive market in a remarkably short time. Combined market share, including villa offers and villa white booty, at early peak reaching the distance with existing number two. Our mission now is to take the progress further. with a clear focus on reaching double-digit revenue market share in H2 FY27 with Villa Open and the work you get there is in progress. This test is a competitive position. Even in quarter two, more than 44,000 dealers build our product as a present product. Thank you. Our exclusive branded franchise network continues to expand with approximately 300 locations during the quarter with our operational franchise network at 1760 plus stores strengthening our service commitment to market. Every franchise outlet offers additional services including company-promoted painting services, paint craft, EMI services Opus assurance and warranty. Every new dealer expands our reach. Every franchise store strengthens our visibility. And every productive channel partner brings us closer to the consumer. To support this expanding distribution footprint, we have built a robust supply chain network of nearly 150 depots across the country, offering just-in-time and high-service standards delivery to the diggers. Besides strong trade channel, our institutional channel, which took longer to take off, has grown 59% year-on-year, with nearly 10,000 project sites built during the quarter. The company has 60,000-plus project sites at various stages of work, including in pipeline, and we expect institutional volume to accelerate in H2. We are not building distribution for numbers alone. We're building distribution to win market one dealer, one town, and one customer at a time. The next phase is to deepen productivity across this expanding network and ensure that our presence translates into stronger sales, greater consumer pool, and profitable growth. Distribution gets us to the market, but it is our product that must win the consumer's confidence, which brings us to our second focus area, which is product innovation. During Q2, we introduced 11 new products and 360-plus SQs, taking our portfolio to 239 products and 2300-plus SQs, almost filling most gaps across categories of trade and institutional channels, including emulsion, enamel, waterproofing, wood finish, wallpaper, etc. range of products. Our pipelines continue to develop with Focus on differentiating offering superior product performance and premiumization. Importantly, our growth is not limited to two categories. We are seeing encouraging traction across the portfolio, with premium and luxury portfolios still contributing approximately 63% of our sales value despite a weak quarter. Our waterproofing portfolio has been particularly strong. This brings me to the third focus area, building Villa Office brand as a consumer first-choice preference while painting their homes. A strong brand is not built through a single campaign. It is built through a consistent presence, and we maintain an uninterrupted advertising presence every single day, building not only a salience, We are consistently building unique brand proposition, the brand proposition of Naya Zamanaya, Ka Naya Paint, and Duniya Ko Rang Do. We continue to invest aggressively in strengthening brand bid-law offers with aided brand awareness reaching enviable 92% and unaided brand awareness at 59% in quarter two. A satisfied outcome for the last two years' enduring campaigns. As per internal study, Pirla offers, in a very short period of time, rose to the second most loved brand in the decorative paints industry. Our advertising is now shifting from brand advertising to blend of product-led campaigns and brand-led campaigns, like the recent Mabee. We promoted our first product-led campaign using style. Our sub-brand of economy, which is deployed across Hindi heartlands, especially for markets of UP, Bihar, Rajasthan, and Madhya Pradesh. This campaign demonstrates the power of Willow for superior coverage in the interior economy range of products. Also to build cultural connect with community, we chose to associate the power of Willow for colors strongly with festivals of India. In quarter two, we launched emotionally endearing campaigns for O&M, Ganpati, and Zuka Pooja. These are deepening consumer connect by bringing the brand closer to local festivities and celebrations. We also decided to advertise 10% free paint proposition, reinforcing our strong value proposition for consumers and influencers, and confirming that this promotion will be run for a longer period. We are now taking the next step in our communication journey from establishing the brand and its promise to showcasing our products and their benefits to the consumer. In these series, second campaign has just been introduced in November 2026, the Opus All Dry Sub-Brand Campaign, series of three different advertising promoting wide range of interior, exterior, and roof. We want them to know. Not only brings us closer to consumers, but also boosts our confidence in our R&D efforts and superior quality as we have direct contact with consumers. Nearly 12,000 plus pain craft sites have been executed not only in the metros and larger towns, but also in mid and small towns, giving a whole new experience to small town citizens. Last but not the niche is our fourth focus area, the influencers. Our contractors and painters, as they have the power to shift consumers' final choice. In the paint industry, the final decision is shaped not only by what consumers see, but also by whom consumers trust. The painter's recommendation can make a real difference to the brand that ultimately gets applied on the wall. That is why contractor engagement is central to our strategy. Using product demonstrations, on-ground interactions, events, and sustained engagements, and through our digital-first, contractor-friendly platform, Opus ID, we are working to make Villa Opus more familiar, more trusted, and more frequently recommended by this community. We are happy to report that nearly 1 million contractors and painters have applied Villa Opus products at least once in the time Opus launched. In Q2, over 3 lakhs of these contractors were applied to Opus Pains, and the reported secondary volume through contractor filter scans grew by 34% year-on-year versus primary sales volume, which grew by only 20% as reported in revenue briefing earlier. This indicates that the inventory of our dealers is fast depleting and the same as was therefore reflected in a strong October sales. We want Bilal Opus to be more than a brand that consumers recognize. We want it to be a brand that painters recommend with confidence. When our distribution is the leader, our brand is the consumer, our products deliver value, and our contractors advocate for us, the entire growth engine begins to work together. That is the business we are building. And we are beginning to see encouraging signs that these efforts are translating into market momentum. The capabilities that we have been building are meeting a more favorable market environment and October is giving us strong reasons to be optimistic about quarter 3. Volume growth this October is far higher than the average Y&Y growth in H1. Our focus now is execution, making our products better. We are widely available by activating more dealers and contractor networks, sustaining consumer engagement, and converting the festival season opportunity into business performance. We ought to carry this momentum through the quarter and hope to deliver a strong quarter three, both in volume and value terms, because winning market share matters, but winning market share ultimately leads to a building a sustainable, profitable business, and the same matters even more. Let me leave you with three thoughts. First, we have built the foundation of a serious challenger. Our distribution network is expanding, our brand is gaining recognition, our product portfolio is developing, and our engagement with contractor and printers is easy. Second, we are moving from building capabilities to extracting greater value from them. The next stage is about turning reach into productivity. And third, the early signals from October gives us confidence as we enter H2. The ambition remains unchanged to become India's second largest decorative paint company and Brand by exit of FY28. We know the scale of that ambition. It will be earned through the choices we make every day in our product, in our distribution, in our brand, our customer relationship, and above all, quality of our exhibition and operational excellence. We're building more than painstills. We're building a brand with ambition to lead, capabilities to compete, and a determination to win. Now coming to B2B e-commerce business, let me start with a question. When you think about the biggest shift in how India does business over the next 15 years, what comes to your mind? Maybe it is UPI, maybe it is manufacturing. Today I want to talk about something that sits underneath all of it and that most people are still underestimating how businesses in India buy and sell from each other. That is right online. I would share why we think that B2B e-commerce is one of the great opportunities of this decade and why Bill of Pivot is built to be part of it. India's B2B trade pool is about 4 trillion US dollars. That is 4 trillion dollars of business buying from other businesses. And how much of that happens online today? Roughly 2% in fiscal 2026. Now look at where others are. Online share of B2B sales is 25% in China. 20% in UK, 18% in USA. We believe that India is at the very beginning of this curve, and the beginning of that curve is exactly where Villa Pivot is standing. We expect India to cross 5% by the year 2030. That alone is $200 billion for B2B e-commerce market. Villa Pivot is steadily evolving into a scale-digital B2B format. Thank you. Continued improvement in operational execution, particularly on time in full deliveries, in short, OTIF, supply chain reliability, and customer experience are expected to support the stronger customer retention and higher transaction volumes. The platform is witnessing increasing traction across its customers and suppliers' ecosystems, supported by a rapidly expanding product portfolio, deeper customer relationship, and growing participation across the building material and industry supply chain. Its growth is being driven by a combination of project-led and manufacturing demand alongside an expanding retail proposal. Thank you. Good month and month. It is a priceable customer and supplier ecosystem. Retail is developing as an attractive, complementary growth in general, broadening Brilla pivots' participation beyond larger project-led transactions and creating opportunities for more frequent customer engagement. Retail business is already profitable at the beta level, providing an encouraging validation of the underlying model. Another important differentiator is the integrated financing ecosystem being developed through Pivot Vault and partnerships with leading banks and NBFCs. By combining credit-linked commerce with procurement and fulfillment capabilities, Villa Pivot is addressing one of the key constraints faced by dealers, contractors, and MSME customers, access to working capital. These financing solutions are expected to improve purchasing capacity, facilitate large transactions, enhance customer stickiness, and unlock incremental business opportunities across these ecosystems. With a scale now established, Bill of Pivot is ready for its next phase of growth. The focus will be increasingly on translating this scale into stronger economics. Through deeper customer engagement and expanding supplier ecosystem, improved margin, tighter working capital management, and greater operating leverage, gross margin continued to improve. However, quarter two, FY27 EBITDA was affected by one-time employee-related expenses. The business remains on track to reach break-even.

Thank you, Imansu, sir. Good evening, everyone, and thank you for joining us today. Before I go through the business-wise performance, let me first explain the exceptional charts related to AV Group NB, our dissolving grade PULP joint venture in Canada. It has affected our reported PAD, and we have given the details in the notes to accounts in reported results. After a careful review of market conditions and plant running, the board of the joint venture entity has decided to idle the operations of the pulp mill located at NACWIC. As a result, in Q2 FY27, we have recognized a total charge of Rs. 825 crore in standalone results and Rs. 767 crore in consolidated results, shown as an exceptional item. Excluding this charge, consolidated PED was Rs. 536 crore and standalone PED was Rs. 3132 crore. Consolidated PED was also affected by tax on higher dividend income. While consolidated PBT grew 34% year-on-year, adjusted PED declined 10%. Also to share that stand-alone business now contributes 24% of overall consolidated revenue earnings. We believe for the current quarter, stand-alone results reflect actual underlying performance. The dividend from Ultratech of nearly 4000 crore is cash received, which is accounted in stand-alone, however gets eliminated in consolidated results. Talking about standalone numbers, revenue for the quarter stood at all-time high of 12,747 crore, up 33% year-on-year, outpacing the consolidated revenue growth. The main drivers of this growth were cellulosic fibers, chemicals, and textiles. EBITDA was higher by 2.6 times at Rs. 4,615 crore led by dividend income from Ultratec. Also to share that cash profit for the quarter stood strong at 3,968 crore up 2.5 times or year-on-year basis. Now let me start updating on business-wise performance. Starting with the cellulosic business. Let me begin with Global Cellulosic Fibers Market. China's CSF market in quarter 2 of 5.27 remained strong with operating rates of 93% and inventory days now at 6 days signaling a healthier demand supply balance. Subsequently, Global CSF price have now risen for 4 consecutive quarters. With the Q2 FY27 average at $1.85 per kg, up 23% year-on-year. The structural opportunity here is that cellulosic fibers are the fastest growing part of textile baskets. Cotton constraints have created a gap. The cellulosic fibers are the best placed to fill it. Cellulose fibers are also biodegradable and environmental friendly, which makes them one of the most sustainable options. Given its growth opportunities, we are expanding here, specially in specialty fiber segment with a plant capacity of 165,000 ton per annum in two phases. Phase 1 of 55,000 cent per annum has nearly completed all the procurement deliveries. For phase 2 of 110,000 tons per annum, the environmental clearance application is at advanced stage of transmission. Overall, cellulistic fiber segment revenue grew by 29% year-on-year to Rs. 5,344 crore, supported by volume growth, favorable product mix, and stable domestic realization, despite geopolitical issues and higher input and logistics cost. Coming to chemicals business segment, which has three parts, caustic soda, chlorine derivatives, and specialty chemicals. Revenue grew 15% year-on-year to Rs. 2759 crore. The growth was broad-based across all the three parts. We are India's largest Pan-India. We are India's leading pan-India chloralkali player with total capacity of nearly 2.6 million tons per annum. Split between 1.5 million tons of caustic capacity and 1.1 million tons of chlorine derivatives. The caustic business serves varied manufacturing segments like alumina, organic and inorganic chemicals, textiles, FMCG, and others. In chlorine derivatives, two key projects at VLAG came on stream recently. The 50,000 tons of CPVC plant was commissioned in August 2026 and 50,000 tons apichlorohydrin plant was commissioned in October 2026. As capacity ramp up across these projects, our chlorine integration is expected to improve to 67%. Caustic prices were soft this quarter. CFR South East Asia prices stood at 5-year low level of $390 per ton. However, stable domestic demand and rupee depreciation resulted in some firmness in domestic prices. Coming to cement business. Ultratech witnessed higher-than-industry volume growth, posting total sales volume of 38.2 million tons, up nearly 13% year-on-year, despite challenges around seasonality, higher fuel and input cost. Ultratech demonstrated resilience with stable pricing and efficiency gains on power. While fuel and metro material costs remained elevated, Ultratech delivered strong performance with EBITDA growth of 17% year-on-year, supported by healthy volume growth, improved capacity utilization, and operating efficiencies. The business remains firmly on track to achieve 242.9 million metric tons of capacity by exit of March 2028. Financial investor subsidiary, Ajitipila Capital delivered a strong performance during Q2 FY27, with revenue as consolidated in Grasim was higher by 32% year-on-year to Rs. 13,990 crore. The growth was broad-based across lending, insurance, and asset management businesses. Which underscores the strength of ABC's diversified franchise and its ability to capitalize on expanding opportunities in India's financial service sector. The business is accelerating investments in distribution, technology, data, and AI, which are increasingly become integral to its operating model across underwriting, customer engagement, risk management, and operational efficiency. Talking of Other businesses brings together textiles, insulators, and renewables that benefit from structural trainwins, criminalization in apparel, and India's push on electrification, clean energy, and road crop and CI solar adoption. The segment revenue grew by 16% year-on-year, and EBITDA By 14% year on year. The renewable business capacity expanded by 269 MW on a year-on-year basis and total capacity now stands at 2.2 GWP. Happy to share that we have got CCI approval on acquisition of Spring and we remain committed to close the transaction in the current calendar year. Post acquisition, the total capacity, operational and under construction would reach about 10 GW of peak capacity. The business now aims to reach 20 GW of capacity and we would be happy to share more information on this once the Spring deal is consummated. Sustainability remains the key strategic priority for Grasim, with a continued focus on reducing dependency on conventional energy sources, improving resource efficiency, and strengthening responsible manufacturing practices across its businesses. Our renewable power share has increased significantly from 11% in FY25 to 26% in H1 FY27. Reflecting the progress made in transition towards clear, cleaner energy, we are also driving greater water efficiency with recycled and reused water continuing to remain above 50% of fresh water withdrawal in H1 2027. On the capex front, we continue to make strategic investments to strengthen our core and growth businesses. At the same time, we remain opportunistic while investing in our key subsidiaries to maintain our shareholding and maximize long-term value creation. For FY27, we earmarked a standalone capital expenditure of 3,157 Crore, of which 1,022 Crore were invested in H1-2027. Now we open the floor for question and answer.

Thank you. We will now begin the question-answer session. Participants who wish to ask a question may press star and 1 on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Rahul Gupta from Morgan Stanley. Please go ahead.

Yeah, hi. Thank you for taking my questions. Two questions, both on paint. First, you've talked about October revenues are trending better than the growth that we saw in the first half. Now, can you help us understand what kind of revenue growth are you targeting in the second half when you say you look to get a double-digit market share in the second half? Is it fair to say that your revenue growth would be more than 50% like we saw in the first half? That's my first question.

I'm going to give it to Satya. Okay, thanks, Raul. Historically, when you look at business, H2 is obviously favoring the season on the back of having gone away and marriages. So, we do expect H2 to be significantly better than H1, and that should help us reach our arbitration. So, as of now, to my mind, we see a very healthy H2 performance trending up, and October is, from what we have seen, October is certainly helping us delete that H2.

Yeah, so just a follow-up. I understand that sequentially, second half is better, but do you expect the growth to accelerate in second half? I'm just trying to understand how seasonally adjusted growth is looking in the second half.

I'll just repeat what has been our guidance. He has said on a year-on-year basis, we will deliver 50% growth. We maintain that. That guidance. And you can do the math based on that. Got it.

So my second question is, is there some slippage in Paints, Capex? Because we see that earlier you had year mark, 10,000 crore, and by the end of the year, you are already clocking around that number, but there is another 4 or 5 billion rupees year mark for this year. So just trying to understand if there is any change over here.

Our overall capex spend was 10,000 crores. I think we've little short, 3 to 4 billion, little short we have spent up till now. The current capex is primarily for building a franchise model and tinting machines to certain part. So those are the broad capex. So the overall number remains at 10,000 crores, 1% this side of that side.

Got it, got it. Thank you so much. I wish you all the best.

Thank you.

We have the next question from the line of Jai Doshi from Kota. Please go ahead. Jai Doshi can hear us. As there is no response, we move on to the next speaker. I now invite our next speaker, Sanjeev Singh from Motilera, sir. Please go ahead.

Thank you for the opportunity, sir. My first question is on VSF business. So, we have seen that there has been a steep decline in profitability on a sequential basis and you have mentioned that there was a steep increase in cost item. So, now I believe that there have been the reduction in sulfur prices, BSA prices are also trending a bit higher. So, how do you see the profitability moving into 3Q or second half of FY27?

Yeah, the sequential drop in profitability from Q2 to Q1 was primarily because of a surge in the sulfur prices, and some increase in the pulp prices too. Why have we been able to pass on significant part of that increase into the prices? But there is a certain limit to how much we can increase because the value chain has to absorb and pass it on to the next stage. As you know, textile value chain has multiple value chain players, and it is very difficult to pass on the prices despite the increase in the costs. As far as Q3 is concerned, I can fairly say that, yes, the prices have been, in fact, the entire Q2, we maintain price stability. Q3 also, we believe, we will be able to maintain. And we have seen a slight moderation in the sum of prices from October onwards. So, I think we are trying to just hold on to Q3 as good as Q3.

But on a year-on-year basis, there have been significant profitability improvement. I hope Sanjeev you noticed that.

Yes, sir. Yes, I have seen that. Second question is on capex. So, our full year capex guidance is around 3000 crores. And in first half, we have spent around 1000 crores. So, do you maintain that capex guidance of 3000 crores plus in FV27?

Yeah, we maintain this guidance. Normally, first half is slower, because we get approvals and work starts, and also monsoon effect. Second half, this will be done.

Okay, sir. Thanks a lot. I will come back in the queue. Thank you.

Thank you. We have the next question. We're lined up. Nirav Jimudia from Anvil Wealth. Please go ahead.

Yes, sir, thanks for the opportunity. Two questions, both on the chemical side. Sir, when we see our segmented revenue breakup, I think WAP has seen a substantial growth of close to around 40% on a ROI basis, and with ECU almost same, and we have mentioned that the power costs also being on the higher side. Which of the products on the website has done well for us, thereby improving the profitability, and how do we see this momentum continue in the coming quarters? Also, if you can share your thoughts on the chlorine, like we have seen the prices forming up. Is it because of the fact that it becomes relatively easy to increase the chlorine prices, given its domestic nature, than the caustic prices, which is more governed by the international prices? So this is the first question.

Thanks, Neera. I will take your second question first because that is most straightforward. So look, chlorine does not travel easily, right? Not only internationally, but it also doesn't travel easily in India. It costs a lot of money to move it. So we have seen an improvement in chlorine prices, particularly in the Gujarat market, where, you know, you could even argue that it is almost, you know, Not negative anymore, or maybe just slightly, slightly negative or slightly positive. Across India, that's a different picture, because... So basically, chlorine prices have improved and possibly will remain improved because of local demand and supply. And of course, it's not possible to have international chlorine prices in India. By the way, international prices are higher, right, if you look at domestic market in China or U.S. Caustic, as you correctly pointed out, internationally continues to remain under pressure. This is mainly because of Turing. One is because of the outage of many aluminium refineries in the Middle East, which have been affected by the war, taking away a large source of caustic demand, and more production out of China because they came out of their turnaround cycle, etc. So that is why caustic has been under pressure. Equal then the, I think, resulting net balance of all these types. So, I would not say it's easier to increase chlorine prices, because, you know, if that was the case, we would have done it many years ago. Why would we wait till this quarter to increase chlorine prices? So, it is ultimately supply and demand of how it is playing out globally and globally. Now, the second question you asked on chlorine derivatives is frankly very complicated. I will try and tell you one or two major factors. For example, CPW, chlorinated paraffin bags, is a large chlorine derivative market. We make our own. We also supply to a lot of chlorinated paraffin wax manufacturers, but there the dynamics is mainly driven by paraffin availability, paraffin price, and at what price would the plastic industry be ready to buy CPW? Now, this industry has its own seasonality. Typically, you know, it's used less before the monsoon, demand picks up after the monsoon. So... You know, that is one chlorine derivative, you know, that is directly connected to international markets. Then if you look at another one, for example, the entire water treatment chemistry, which is a very big part of what we do, that's very much linked to the monsoon cycle. So that demand picks up during the monsoon period. Once monsoon goes off, that demand goes down. Then if you look at the chloromethine family, A lot of it depends upon what happens in methanol. And as you know, Middle East has affected methanol quite a bit. So across the chlorine derivative portfolio, there are many moving parts. You know, I'm very frank. And it's very difficult to give one answer at chlorine derivative level. I have to actually, you know, look at it at individual level.

Correct. So, no, my question was more specific to whether phosphate, phosphoric acid, and hydrogen peroxide, I think the prices were formed up during the quarter. So, it was because of this, our profitability was better, and B, on the specialty chemical side, we have been seeing the profitability getting impacted, probably because of finished products not increasing in line with the stock prices. So, what could be our strategy A in terms of improving volumes, B improving the specialty mix, and C either targeting new geographies or applications where possibly we would have a lesser presence.

So I'll again take your second question first. So the epoxy value chain is under compression of margin because BPA ECS prices have gone up and demand is sluggish, right, for multiple reasons, you know, across different sectors, which means that, you know, if we try to pass through the price increases, we are not necessarily getting the demand in the market. So we are busy trading off volume margin at this stage. I would not call this a long-term topic to worry about. This is typical at this point of time in the cycle. As far as growth is concerned, we have two major elements of growth. We continue to focus on the specialty side of our epoxy resins. We believe that we have a much higher percentage of epoxy sales in specialty. Compared to many other players in the industry, you know that we are very careful, we don't disclose the exact percentage, but that forms a significant portion of our sales. We are also, of course, continuing to focus on the export market, but we see this as a part of the nature of the commodity cycle. There will be a time when epoxy-based resin demand will also pick up pretty quickly. Some of it was constrained because of availability of carbon fiber from China for our end users and things like that. So, it's very cyclical. There is no structural change, actually, in the end industry. Automotive demand is growing. You know, wind turbine installations will grow from, I think, something like 50 gigawatts now to 100 gigawatts in the next four years. So the demand drivers have not changed. It's just that you get a particular quarter when demand is sluggish, and then you have to play this price volume game. In the meanwhile, you know, our specialty share is still, you know, higher compared to our competition.

Thank you so much, sir. Thank you.

Thank you. We have the next question. We have Rashi from Citi. Please go ahead.

Thank you. I think the line was a little unclear in the beginning when you were giving your pains commentary. Just to understand, on a sequential basis, your revenues have declined 20%. How do you break the curve between volumes and realizations, one? Second is that the competitive intensity that you've talked about in the second quarter, how is that changing? How is that changing in October? How is that changing going forward to be with the confidence of the, you know, the increase in market share going forward? That's one question on pink, and second is, how should we think about the chemical margins going forward?

So, there is a, Kent, you want to talk about chemicals margins going forward?

Yeah, so, going forward, it's always difficult to estimate. Caustic pricing remains under pressure. We do believe that chlorine demand supply dynamics will improve. I don't see the epoxy volume change changing significantly this quarter, but I suspect that fourth quarter will be a bit better. But you know, who am I to forecast? Something may happen somewhere geopolitically and it will change the dynamics of the industry, right? So, please take any kind of statement here with a big dose of caution. Some of these drivers are not in the hands of manufacturers, right? There are bigger factors at play.

So, Rajshri, as far as Page is concerned, we had mentioned on a year-on-year basis, our growth is 35%, which is broken into 20% by volume, and you can do the maths, it will come to a 9% to 10% on a rate basis. Your question specifically was on a quarter-on-quarter basis, as we mentioned in our commentary. Even though the dealer selling price has been increased, the net realization was flat on a quarter-on-quarter basis. So you can do the math on the decline of revenue on the volume decline on a quarter-on-quarter basis. But the larger question is, how does it go going forward? Okay, this is our second year where we've done quarter two. And last year also we had a weak quarter, and this year also has been a weak quarter. Our ratio is very unique to the industry. We do about between 57 to 58 percent of our revenue in H2, and 42 to 43 percent of our revenue in H1. Why does that unique revenue come in? Because we are a hardcore retail organization. There are, in quarter two, by and large, consumer demand is low, but primary sales could be high for companies who have ability to stock up the dealers. We are not very good at on an overall basis. As a model. We started in October, and consumers came in with large votes, so did contractors came in, and that is why we saw volumes growing faster than the volumes that we have seen in the past, and we gave us the confidence of reminding you that our guidance on a year-on-year basis is we will grow revenue by 50% against last-year revenues. So, I hope I've answered your question. I'm going to hand it over to Satyen if you're incrementally going to ask me.

Yeah, I just wanted to... Yeah, go ahead, go ahead.

No, no, you go ahead.

Okay, so I just wanted to give you another perspective in addition to what Himanshu just said. While there's been a 20% volume growth in quarter two, One of the other elements which he talked about in the beginning in his address was the fact that there has been a very strong, solid work which has been done with the influencers, which is the contractor ecosystem, and that has led to our secondary volume, which is volume sellout from the dealers to the consumers, which is 34%, which really indicates a very strong growth in consumer acceptance of the brand, and that puts us in a very, very solid portfolio. Same with respect to as we enter into quarter three and then moving on to quarter four. Yeah, go ahead.

Just following up, your revenue market share was about 10% or so, right, in the last quarter. Is that correct, that number? And so what was that number in this quarter?

Revenue market share has to be measured, depends on what all you take as the number of players. You can measure a revenue market share. Of all listed players, you will get one number. There are no regulatory bodies around which gives an absolute number. We have to split the revenue into decorative and industrial revenue. What has happened as far as industrial revenue is concerned is, you know, the input costs have gone up. Industrial revenues have been able to pass on the input cost increase. We have an overall revenue available. We have overall industrial revenue available. Decorative is a derived number. So we have an internal derived number. Which we can share on an outside this call, but those are, and we also have to also add those companies who currently don't report revenues on overall basis. So, if your question is, more question is, did we gain revenue market share in quarter two, answer is no, we did not gain revenue market share, which is one of the reasons is that the primaries of certain companies were higher than we anticipated. But we remain confident in our guidance that we will be a double-digit revenue market share in the H2 on our standard-owned basis only with Willow offers and also with Willow White, including we already had teams and that will continue to grow. But this is a, this is not a clean answer, but this is the reality of the information. It's not something, in certain industries, regulator provides information or there are much more clear information available. Here, it is too much of a derived.

Yes, thank you. And institutional sales on a sequential basis, could you share that number? Year on year it's going 59% sequentially.

It is again fallen if you had a overall revenue fall. So yes, institution fallen and institution as you understand.

Participants are requested to kindly restrict your questions to one per participant. Participants are requested to kindly restrict your questions to one per participant. We have the next question of the line of Naveen Sahad here from ICSA Securities. Please go ahead.

Yeah, thank you. Thank you for the opportunity. My question was around this AB NACWIC provision, which I understand is made. I wanted to understand the rationale for the additional 625 crore fund infusion, and if you could also remind what is the benefit that Grassims receives in terms of pulp, either in percentage terms or cost. I mean, how exactly does this funding fusion going to help Grasin as an entity? If you could just throw some light on that.

Thank you, Navin, for the question. This electric mill we have bought in 2007 as a paper-grade pulp, and then we converted it into DG-grade pulp, and this meal has served its purpose for a very long time. Post or around COVID period, we are seeing there are issues in terms of reliability, plant maintenance, as well as the cost is increasing, which is giving negative cash flows in the bulk bill. We have also studied the future prospects and estimates of this meal, and then the decision is to keep the plant in an ideal capacity, and the operations are started closing from October 27, in another month or so, October 26, the plant will be idle. Thank you. So this provision is towards estimated liability for meeting our contribution to the entity, and the contribution should give a payback of within four years.

And in addition to that, Grassim was sourcing around 20% of the pulp from this mail. And to that extent, we have pulp security covered from other sources, which have come up in the recent past. So, it's more about cutting down the losses for future part, equivalent to Grassim's share.

Right. So, just to summarize, four years.

Sorry to interrupt you, Mr. Naveen. I'm back in the queue for follow-up questions.

Okay. Let me summarize. Go ahead. Please summarize.

Yeah, sorry. I understand we have passed the time. My simple point was, to summarize, 625 crore to be spent over four years for winding up and no further cash infusion required. That's it?

No, four years is a payback for this investment of 625 crore so that we don't keep on incurring losses, and this investment will help us to pay off the liabilities and cut down the losses. So, this is a payback period. So, if we continue to operate these meals at this level, we will continue to have losses. So, to avoid those losses, we are taking a one-time contribution and closing the meal.

Thank you.

Thank you. We have the next question, Ryan, of Amit Purohit from Ilara Capital. Please go ahead.

Yeah, sir. Thank you for the opportunity and happy Diwali to you all. Sir, just I wanted to know your thoughts on the industry growth because the assumption that the ask rate for the 50% growth in the second half seems to be pretty high. So what is your view on industry growth and what segments will help you to achieve that if you could, given the price increase taken by the industry is almost like 15%. What do you expect the industry growth to be?

Thank you. I will give my view, and then I will hand it over to Satya to get his view. The first half has surprised us. As far as industry is concerned, it's between 16% to 17% industry is growing on H1 this year versus last year, H1, which has a consequence of about 8% to 9% by rate and remaining 7% to 8% by volume. Higher marketing activities by organized paint sector has resulted in there is almost a 25% of the decorative paint was with the unorganized sector. That ratio is changing over the years, and there is a fast unorganized sector. Well, some of that is coming to organized sector. This is the first part. This is obviously a rate improvement. No doubt on the listed price. Increase is 14 to 15 percent announced at various stages, but retained price increase is between 9 to 10 percent. So we expect the industry to continue to have this degree of growth between 15 to 18 percent, or I will give a slightly wider range of 15 to 20 percent in H2. We are... We are estimating to grow by 50%. And that is the reason why we are also giving an estimate that we will reach a double-digit market share at the end of H2. Sachin, you want to add?

So, the entire proposition of why we believe Willow Opus will continue to grow. In the H2O part of the year, it is really built up on three broad pillars. As we continue to grow our availability, the entire reach expansion and throughput expansion that we have seen from the existing dealers who have been working with us is certainly enabling that belief in us. When we look at the contractor ecosystem, which is a very, very large set of influencers, With more advocacy and a continuous increase in the coverage for not only the brand Vidla Opus, but also the product range within Vidla Opus, which is continuing to grow. And finally, when we look at the consumer proposition of not only driving top of fund, but also a very strong regional connect that we've rolled out, be it the Durga Pujo, Pranir Pada, or the Pukulam activity which we did in Kerala. These are just some examples which I'm quoting, or even the Ganpasi Bapa. Activity that we, you know, carried out in Maharashtra. We have a very, very strong regional cultural build-up, which we strongly believe that the brand is continuing to gain momentum, and that holds us the promise and the belief that H2 should be equally good as compared to H1. Sure. Thanks a lot.

Best wishes.

Thank you. We have the next question on the line of Prateek Kumar from Jefferies. Please go ahead.

Hello. Yeah. Good evening. My question is on the same and B2B commerce. So, as you said, this is relatively a slower sales trajectory in Q2 versus Q1 versus peers, and you explained the reason. Despite that, you are maintaining very strong guidance for 27. Can you also tell about how do you think about profitability trajectory as business enters into second half, including the impact of size hikes with industry as taken in October-November? And what is the quantum of ESOP expense impact in B2B commerce segment?

So I'm going to give it to Sandeep who will talk about B2B+.

Yeah, predict impact is around 10 crores.

Got it, Pratik. Let me move on to Pains. You are asking about, one question is about the confidence. Why would H2 be different from quarter 2? Is that a broad question? Just to clarify. So, I'll repeat what we said. This is our second quarter two. We had a low quarter two as a percentage of overall revenue in last year, and we witnessed the same this year. We have also tried to analyze the same, and analysis shows that in quarter two, primarily the consumer demand is low, but there is a primary sales which the organized sector is able to do because they have a larger ability to wholesale and get the dealers to stock up. Newcomers are not so good in getting the materials stocked up by the dealers. We rely more on throughput. To the consumers and to the contractors, where the volumes and secondaries are lower there, which is the reason why we always keep quoting the October example, where once the season has started, we're seeing our throughput faster than the 50% norm that we are suggesting. And that is why it gives us the confidence that as the retail season will continue through the next five months, we will be able to achieve the guidance. As far as profitability is concerned, the profitability factor has got dramatically impacted by products which are linked to crude. And crude has had a scenario which has moved from 65-70 pre-war to as high as 110, and then has been toggling between 90-95 to 110. The raw material companies have not been changing their prices after having reached to levels at 110. So we are buying our raw material at a much higher price than what we had originally anticipated. In my commentary, We will be profitable.

Thank you.

Thank you. We have the next question line of Harsh Mittal from MK Global. Please go ahead.

Yeah, thank you for the opportunity. So, my first question is on the VSF margin. So, we did around Rs.22 per kilo this quarter. Assuming the, since given that the polyester prices should fall down on lower crude prices, and assuming your VSF realization prices remain range-bound, and given your inventory of sulfur and wood pulp, do you see margins to remain in the similar Thank you.

Yeah, see, you know how dynamic the situation has been. When we started the year, we didn't expect the cotton prices and polyester fiber prices to really shoot up at 20-40%. And that also helped us to, if you see the global operating rates of VSF plants have gone up because of that. The demand has been very, very good. But India has been a slightly muted demand because of a lot of other factors in terms of the final consumption that is not really increasing. So, of course, SMT is to keep good margins, but I think it should be around, I mean, even the margins should be around range amount. As we have experienced in Q2. Q4, I don't want to give any guidance, you know, or any promises, because I'm not very sure, you know, how the situation changes. If the crude prices really significantly come down, polyester fibers will come down, the global freight next quarter will come down, pulp prices are not showing any moderation, whereas helper inventory, normally our inventories are not very large. There will be less than two weeks of inventory. So, that should get corrected from December onwards. So, I think I would say quarter three would be also range bound, but I can't give you an exact number.

Understood. Thank you. Just one small question on your MOU.

Don't interrupt you, Mr. Harsh. I request you to come back in the queue for follow-up questions.

Sure.

We have the next question. I have Siddharth Mehatra from Court of Securities. Please go ahead.

Thank you for the opportunity. Just a small question, sir. We alluded that there were some issues at the power plant in Vilayat. So, it seems that the volumes have recovered in both our legacy segments. So, are we largely past the power issues there? Just wanted your clarity on this.

Yes, yes. What we have done is, one is we have improved the reliability practices, working with the OEMs to fix some issues in the power plant. So, that has helped. So, in Q2 we have very limited impact. That has a minor impact in terms of production, countries. Both for chemicals and visible fiber. And we are also commissioning another boiler now for redundancy, which is just got commissioned as we speak. And that should give us further, you know, improvement in terms of power plant availability. We also got the grid line, you know, connection, you know, significant capacity through that. So, I think most of the power plant issues are resolved and we are in a much better situation now.

So, nothing in two, actually.

Sorry, can you repeat the question?

No, no impact anticipated in 2H1 volumes, at least, right? No, significant. Okay, thank you, sir. I'll come back. Thank you.

We have the next question. Line of Jai Doshi from Kotak. Please go ahead.

Hi, thanks for the opportunity. By the back of the envelope calculation indicates there is about 100 basis point drop in market share from Q1 to Q2. The question is, have you deliberately, you know, attempted to reduce channel inventory? Or is there a deliberate or is there any reduction in meaningful reduction in trade schemes or discounts that you give, which has probably resulted into this? And, you know, you responded to one question earlier where you mentioned QoQ basis realizes it's flat, even though you have increased dealer price list or, you know, narrowed the gap versus market leader. So, does it mean that trade discounts and schemes are actually higher in Q2 versus Q1? So, if you can help us understand these two aspects. Thank you.

Yeah. First and foremost, I'd like to confirm that if you were to read the results of top two and three organized player operators, you'll see almost for everybody, and you can do the match based on their annualized volume growth and rate growth that they've sent, that the rate has been flat for most of the industry players. Around there. So your deduction is, has that competitive intensity resulted in higher trade discounts? Answer is yes. Now we give lesser trade discount. Then what the market has given is in the second point. And that can be indicated by my commentary saying we started the year with a much higher difference. And by the end of September, by around September, the difference was brought down to 2 to 4%. So our discounts have been lower. And on overall basis, the discounts in quarter two were on a higher side. Which brings me to the whole commentary of the logical deduction that we've given. The reason for high discounting is when you give to certain large dealers, For storing larger inventories and wholesaling, that you tend to do larger schemes for the market, which is not the model that we operate. We operate a model which is more retail-led, widespread consumer and contractor-led model, which was much lower. Secondary was concerned. And we are, as a company, not worried about it because this is not the first time that we've seen it. This is the second year running on what we see. That's the model which industry runs. And we are now reconciled to the fact that quarter two will not be great whenever the wholesaling model happens. Okay, so outcome of that is a derivative of market share, but we are not over worried about it. These are blips in our longer term journey around there. That's why our commentary is not to focus on quarter and quarter, but focus on a long term program. And all effort is there to build brand, to build distribution, to make product available, ensure quality, and to have engagement with influencer.

Thank you very much. Very clear. Thank you very much.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question. On behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us, and you will now disconnect your lines.

Thank you.