22 Nov 2017
‘We’ve posted good results despite GST challenges’
The Hindu BusinessLine
The 69-year-old Grasim Industries, an Aditya Birla Group company, has made a new beginning post the merger of Aditya Birla Nuvo with itself and subsequent demerger of its financial services business. While the company’s standalone businesses have managed to fare well, the subsidiaries continue to face challenges. Grasim’s Managing Director Dilip Gaur and Chief Financial Officer Sushil Agarwal spoke to BusinessLine on the way ahead for the company. Excerpts:
How was the financial performance of the ‘new’ Grasim post merger?
Agarwal: The operating performance across our businesses was strong. Our holding in telecom has increased to 28 per cent post the merger of Aditya Birla Nuvo with Grasim. Viscose revenues are up 22 per cent while Ebitda increased 26 per cent. Similarly, chemicals and cement financials are up about 25 per cent. We cannot compare the financial services business performance with last year as Grasim never had it before. Even after the Jaypee Cement acquisition by UltraTech our consolidated net debt to Ebidta is 1.38. Our net debt on a consolidated basis is Rs.14,455 crore.
Gaur: The fact is that we have managed to post good financial performance despite GST challenges. Our sales volumes across business have also gone up. We continue to have a strong balance sheet and have a surplus of Rs.274 crore on standalone.
Why was the bottomline impacted?
Agarwal: Net profit is the combination of a variety of things. Since there was a reorganisation within the group we have to take a lot of one-time charges which has impacted the bottomline.
Is your fertiliser business on the block?
Agarwal: In the current context, fertiliser is a small part our business. It has no linkage with any other business. It is not significant given the entire size of the group. On an overall turnover of Rs.13,600 crore during this quarter, the contribution of fertiliser is just Rs.550 crore. So it is neither here nor there. From our point of view, this business is good as it gives steady cash flow but has no strategic linkage with other parts of the business. We continue to sweat this asset.
Gaur: Our fertiliser company is fairly competitive in the country. Its energy consumption is among the lowest.
Has the domestic demand for VSF (viscose staple fibre) gone up?
Gaur: The domestic demand has gone up by 5 per cent in volume terms. In October, the month-on-month exit rate was 10 per cent. Despite an increase in caustic soda prices we have managed to increase Ebitda. This has helped our chemical business as well. We had issues in chlorine prices. However, we were somewhat protected as 30 per cent of our chlorine production goes for producing PAC (polyaluminium chloride, a value-added product). Overall, we had 90 per cent higher ECU (electro-chemical unit) realisation and 34 per cent rise in Ebitda.
How have the VSF prices been for you?
Gaur: In the September quarter, global prices firmed up by 10 per cent as the production in China was low. VSF prices in India are still holding high as we speak. We have managed to get a premium for our products. It is in fact twice the prices we had got last year due to our brand building exercise and product mix.
Moreover, Canadian NGO Canopy has ranked Birla Cellulose as number one in sustainable forestry management. There are 105 global brands which work together to trace the source of fibre origin in their ‘forest to fashion’ initiative. In this case, the biggest thing is to source pulp from sustainable forestry and not from endangered forests.
Going forward, these brands will not buy VSF from non-certified suppliers. For instance, some of the pulp units in Indonesia are not certified. So some of the big brands will not use the VSF exported from this country. We grow 50 per cent of our pulp requirement by ourselves and the rest is sourced through long-term contracts from our strategic partner who gives us preferential prices.
Are you adding fresh VSF capacity?
Gaur: We are de-bottlenecking VSF production at some of our plants and will get additional revenue of Rs.750 crore. We are expecting to add three lakh tonnes of fresh caustic capacity through de-bottlenecking at Vilayat and two lakh tonnes will be added by the industry be the end of this fiscal.
Will you pump the surplus cash into your telecom business?
Agarwal: We have not thought about it. Moreover, the board of the telecom company has to first decide how to raise funds. At present, we are not aware of any fund raising plans of the telecom company and no such proposal has come to us.