Ladies and gentlemen, good day, and welcome to the Q4 FY 2022 earnings conference call of Grasim Industries Limited. We have from the management, Mr. H.K. Agarwal, Managing Director, Mr. Himanshu Kapania, Business Head, Paints, Mr. Jayant Dua, Chief Executive Officer, Chemical Division, Mr. Rakshit Hargave, CEO, Paints Business, and Mr. Ashish Adukia, CFO. As a reminder, all participant lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Adukia. Thank you, and over to you, sir. Thank you, and good evening to all the participants. I hope you've been able to download and get the presentation. You know, as the company celebrates its 75th anniversary, this year, which has gone past, has actually been marked with a lot of large growth announcements, which will actually prepare Grasim for the next phase. The core areas where we have already expanded our capacity are VSF and chemicals. The recently commissioned 600 TPD VSF capacity operated at 83% utilization level within months from commissioning. We have also been able to find de-bottlenecking opportunities across three plants to increase our VSF capacity by further 48 TPD at a minimal CapEx. This increased supply was very well supported by the strong domestic demand. In chlor-alkali as well, we added capacity of 142 KTPA across Rehla, which was 91 KTPA, and Balabhadrapuram, which was 51 KTPA. In addition, we added VAP, including the chloromethane at Vilayat. In the paints business, we are currently focused on timely execution of our capacities. The civil construction has already commenced at two of our plant sites, Panipat and Ludhiana, and is expected to start shortly at Chamarajanagar. The remaining three plants are at different stages of government approval processes. Now, since the announcement of our entry into the paints business, the market dynamics of the decorative paints sector has become more attractive. We have accordingly decided to accelerate our capacity commissionings and accordingly updated our plan with a project cost of INR 10,000 crore by FY 2025. This acceleration with revision in plant configuration achieves economies of scale, comprehensive product offerings, improving lead time to service the market. The plant commissionings are expected to begin from Q4 of FY 2024, with capacity eventually reaching 1,332 MLPA. The inflation pressure on account of commodity prices increase has been mitigated by change in the plant configuration. We are very well capitalized for next phase of growth given our strong financial position. As on March 31st, 2022, the company at standalone basis had net cash of INR 553 crore. I will briefly touch upon the key operational and financial highlights for the quarter. The textile value chain in India operated at optimum capacity utilization given strong domestic demand. The VSF business reported sales volume increase of 30% YOY in FY 2022. Our domestic sales surpassed 500,000 mark in FY 2022 and accounted for 84% of the total sales volume. The share of VAP, the value-added products, increased 57% YOY, and the overall share increased to 26% in FY 2022 from 22% in the year before that. The demand for VSF has also been propelled by growth in Liva in garments. Our association with end consumer is expected to further strengthen with the launch of our sari brand, Navyasa, created by Liva. Our aim is to reposition sari as a garment of choice and to offer more contemporary print designs to Indian women. The sari segment in India consumes close to 1 million ton of different fibers, and the share of VSF stands at only 1%. We would like to catapult our share to 7% in next five years. The global VSF prices weakened sequentially owing to the spread of Omicron in China. However, the consistent rise in cotton prices have led to widening the gap between VSF and cotton. The financial performance of VSF business was impacted by rising cost pressures across all raw materials, right from pulp, caustic, and other input forms. Separately, the B&F business reported a revenue of INR 572 crore and EBITDA of INR 63 crore for quarter four, FY 2022. Coming to chlor-alkali business, it reported another quarter of stellar performance despite mounting cost pressures in power and other costs. This was driven by sequential improvement in ECU. This was highest ever EBITDA for chlor-alkali, backed by all-time high ECU. The sales volume increased 16% YOY to more than 1 million ton in FY 2022. The rise in the global caustic soda prices was driven primarily by the supply chain disruptions. The domestic caustic soda prices also increased in line with global caustic soda prices and, consequent to the increased demand in domestic market as well. In Q4 FY 2022, the chlorine consumption in VAP was 40%. The advanced materials business also witnessed a 17% YOY sales volume improvement, driven by a better product mix on the back of strong demand from the wind power segment. However, this segment is witnessing normalization of margins, pulling down the EBITDA from all-time highs. On an overall basis, we have outperformed our pre-COVID levels of FY 2020. At a standalone basis, overall Grasim, our revenue for FY 2022 was up 14% CAGR over FY 2020. EBITDA was up 24% CAGR, which ended at INR 4,111 crore. This quarter, on a standalone basis, we reported profit after tax of INR 1,068 crore, which included certain exceptional items. These include profit from sale of fertilizer business of about INR 540 crore pre-tax. There were certain write-backs of tax provisions amounting to INR 321 crore as a result of favorable order of sales tax subsidy being allowed as capital received. There's additional reversal of deferred tax liability amounting to INR 197 crore. As you're aware, we have been focusing on improving the quality of ESG reporting standards. Grasim recently featured as number one in the Capri Global Capital Hurun list of India's most sustainable company. In the latest ESG rating released by CRISIL, Grasim was assigned a score of 63 with strong rating. Lastly, based on our performance, the board of directors of Grasim has recommended a dividend of INR 5 per share for the year ended March 31st, 2022, and a special dividend of another INR 5, taking the total to INR 10 per share. The total outflow on account of the dividend would be INR 658 crore. I'd like to now hand over back to the operator for Q&A. Thank you. Thank you very much, sir. Ladies and gentlemen, we will now begin the question -and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Anyone who has a question may enter star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Navin Sahadeo from Edelweiss. Please go ahead. Yeah. Good evening. Hello. Yeah, we can hear you. Yeah. Right. Great. Thank you for the opportunity. Couple of questions. First I'll take the paints. Here you have doubled the CapEx, like, you know, to INR 10,000 crore. Can you now give us the breakup between the debt and equity component of it? Just a clarification that this 1,332 MLPA capacity, is it the expanded capacity for the INR 10,000 crore CapEx, or it was the earlier capacity which will now be doubled? I'll start off, and then I'll request Himanshu to jump in to clarify some of these points. First of all, the earlier announcement that we had given was not linked to a capacity. We just said that the initial CapEx will be that of INR 5,000 crore over next three years. Now we're coming with a little bit more specific guidance that we are going to have a project cost, okay, which includes CapEx, non-plant CapEx, etc., you know, the pre-operative and all those kind of elements that go into it, by FY 2025. Okay? The commissioning of this 1,332 MLPA that we're talking about will start sometime around quarter four, early quarter four of FY 2024. That's how we are. It will come in a staggered way, and it will complete over, you know, next few months. That's really what the plan is. Great. The two are not comparable. To answer your question, 5,000 and 10,000 are not comparable. Fair. Just a clarification. This 1,332 capacity is what, INR 10,000 crore CapEx will consume, right? Yes, that's right. Roughly, that's the right number. Yeah. Correct. Just a clarification regarding the same thing that how do we then look at funding this? Is it going to be entire equity or it's going to be a debt component as well here? No. See it's funded on the balance sheet of Grasim itself, right? It's a division of Grasim. It's not a subsidiary. Therefore, the way we will look at funding is a mix of internal accruals and debt, depending on other capital needs, et c. Understood. Fair. My second question was regarding this VSF and all the best for the new brand launch in the sari segment that you've done. A few years back, if I recollect, there was also this foray into VSF denims as such. If you can just help us, is that product or is VSF is used in denim and is that product getting acceptance or that's not really taken off? Just to get some sense there. Okay, this is H.K. Agarwal. See, VSF is used in many applications, including denim. Denim is not the most common or most popular application for VSF. We did not launch any brand or anything like that for VSF application in denim. We have a new generation of man-made cellulosic fiber under our brand Birla Excel, which is produced by Lyocell process, and that is preferred material for use in denim along with cotton. That is not. We don't have any brand for denim product range. This initiative for Navyasa sari, we have started a brand for saris by ourselves. The idea is that now VSF is used only about 1% in sari application, and we want to increase it to at least 6%, 7% in next three, four years. That is the whole idea. Understood. Just one quick question, if I may, slip in please. Recently, UltraTech took a stake in this Middle Eastern entity called RAK White Cement, and they have also on the con call confirmed plans to further like, you know, take full control of it if possible. My question was if white cement is like, you know, a good fit or a decent integration with the paint business, would it not be better had Grasim looked at it and get it under its fold rather than keeping it in a different entity? Thanks. Thank you. This is Himanshu. Yes, you are absolutely right. White cement has multiple applications. Over the years the white cement application has tended towards to be more towards the paint side, especially towards the undercoat side. The fact remains, Birla White is a division of UltraTech, and it's a very strong brand, and it has its independent set of shareholders. Grasim has chosen to launch its paint services through the Grasim vehicle. UltraTech remains focused on the cement side of the business, including the white cement side of the business. Both the shareholders at an appropriate point of time will work out a necessary arrangement to work on synergies so that both UltraTech and Grasim profit from the growth of or entry of Grasim into the decorative paints business. That's helpful. Thank you so much. Thank you. Our next question is from the line of Niraj Jimudia from Anvil Research. Please go ahead. Yeah, good afternoon team. I have two questions. One on the VSF side. If we see your presentation, in between Q3 and Q4, our volumes have improved by 22,000 tons. While if we see the breakup in terms of exports, I think they have gone up by just 9,000 tons. This gives an additional 19,000 tons of volume, which I presume must have been sold in the domestic market. If you can just help us explain that. Is this because we have replaced some of the imports which were coming to India and our domestic market share has gone up to that extent o r is this because the market has expanded by such an extent that we've been able to garner these sort of additional volumes? Yeah. Actually both things are. Market has expanded. As you know that cotton prices are at all-time high and there is more tendency among spinners to spin VSF rather than cotton because of the CSF substance. Also to some extent imports have also come down because of the logistics issues. Yes, we have been able to place more volume in domestic market in the Q4. If you can help us explain what is the normal run rate of VSF imports coming to India in a quarter o r if you can guide even for FY 2022, that would be helpful, sir. The total import in FY 2022 have been around 90,000 tons. Something like 7,500 tons per month w hich is roughly about 10%-11% of the total market. Okay. 10%-11% of the total market. Okay. Predominantly we have garnered those incremental market share because we have replaced those imports coming into India in Q4. No, major part is because of the increase in the market b ecause our customers have been also installing more equipment. They have been installing more MVS machines, which is new technology for yarn spinning. Yeah, demand has been good. Got it. Sir, my second question is, from last almost two, three quarters, we have seen our specialty volumes in the range of 42,000-45,000 tons. Last two quarters they are almost same. Is this the optimum utilization at what we can operate for specialty or is there a further room of increasing our volumes with the current capacity? I n VSF business, the specialties there are, I can make it in two groups. There is one or two products which have to be made in a special purpose plant, especially our Birla Excel plant. Other products we can have more flexibility. Sometimes there is a seasonal element, like one of our product, Revay 4, there was a seasonal issue which demand was much less in Q4. Excel fiber has improved. Modal was more or less same. We have flexibility and we are also debottlenecking our Excel capacity. By next February also we will have debottlenecked to the extent of about 30% our existing Excel capacity. It's a very small. Okay. Sir, apart from that, let's say are we doing some more CapEx on the specialty side b ecause eventually we want to grow up to 40% of our total volumes from specialty. If you can share your roadmap for increasing those volumes to 40%, and what sort of CapEx would be required in order to reach those volumes? We have inbuilt capacity which can take our specialty volume to almost 33%, 35% without much CapEx. Some products we have flexibility to produce even on the existing lines where we make gray fiber. Like white fiber we have capacity, but demand. We are exporting also significant white fiber. If the Indian demand increases then we will serve Indian demand on priority basis. It is not necessarily only CapEx which is required for growing the wet volume. Yes, Lyocell, beyond 30% debottlenecking, if we want to do, then we will have to think and plan significant CapEx, because then we will like to install a size of large size plant which is internationally economical size. Correct. Sir, just a small clarification in terms of this 33%, 35% is on our expanded capacity, right? No, no. From the existing capacity. Existing capacity of Lyocell. No, sir, you mentioned, no, we can go up to 33%, 35% o f the total e xpand. Yeah, expanded. Got it, sir. Sir, the last question would be in terms of, sir, if we see the financials. I think this quarter VSF margins have come under pressure. You rightly mentioned that this is because of the increase in the raw material cost. Has, apart from the raw material cost, are there any pressures on other costs also like freight or power or up, or any other costs related to that? Or, and adding to that, are the premiums on the specialty VSF come under pressure this quarter because of which we have seen some subdued margins on the VSF side? With like pulp, caustic, sulfur, they are all raw materials. Coal has also increased, and coal is a significant cost. Energy cost, steam and power is almost 16%-17% of the cost of production. Transport cost has also increased. There was some extra export during Q4 because of Omicron in India. We did not want to take risk of having high inventory in the last quarter. All these things combined, but yes, once the cost, input costs come to normal level, then we will see our profitability improve to the normal levels. Sir, have we taken some sort of price increases because in order to compensate for the cost? I think in between the quarters our margins have come down significantly. Have we taken some sort of price increases on the VSF in India in line with the international prices? Of course. Since September, we have increased our gray fiber prices to the extent of 27% until March. We adjust the prices on a monthly basis, and we compare the landed cost of imports and all other factors. We adjust the prices. We can't survive if we don't increase the prices in this environment. Correct. Got you. Thank you, sir. Thank you for answering the questions in detail and all the best. Welcome. Thank you. We'll take our next question from the line of Sanjeev Kumar Singh from Motilal Oswal Financial Services. Please go ahead. Thanks for the opportunity, sir. Just one. I want to understand this increased CapEx on the paint segment in a better way. Mr. Singh, sorry to interrupt. If you're in a speaker mode, can you use a handset and speak? I'm audible now? Better, sir. Thank you. Sir, I want to understand this increased CapEx on paints in a better way. When we had given a plan of INR 50 billion of CapEx in three years, what was the target capacity that was in our mind, and then suddenly we have increased it to around INR 10,000 crores. What had led to this change, and what is driving this confidence? Can you give some better sense on this? Yeah. Himanshu will take that question. Hello, Sanjeev. You can hear me? Good evening. Yes, sir. Yes, sir. Good evening, sir. You're absolutely right. In FY 2021, when we last met in January, we had announced a three-year plan of INR 5,000 crore, and we are revising that plan to INR 10,000 crore. There was obviously pressure from inflation, commodity inflation on the CapEx side. We also observed that the market growth in the paint sector was far higher than what our original estimation. We had drawn up our original business model, and in the original business model, we had made an estimate of our capacity, which would have taken much longer to bring in the 1,336. What we have done now is accelerated that 1,336 MLPA capacity, which would have taken us up approximately six to seven years to bring in, and we are trying to bring that in three years because the market at this point in is extremely buoyant. Also, by accelerating our investments, we were able to optimize our existing plants that we had originally planned for, which resulted in that the inflationary cost was compensated significantly with economies of scale. The acceleration has helped us in bringing our economies of scale, so the cost per MLPA has remained similar levels, allowing us to be able to participate in the market in a much more aggressive manner. I just want to remind you, at the time of January 2021, we had shared our ambition that we want to be a profitable number two player. Current market share of operators is closely linked to their capacity share. With this capacity, we will be able to achieve our ambition and guidance to the market of being a profitable number two. I hope it answers your question. Looks like Mr. Singh's line has dropped. In the meanwhile, we'll take our next question. That's from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead. Good evening. My questions are more on the balance sheet side. Number one, we saw an increase in inventories as well as payables. Is it because of the increased size of business and the cost of materials, or is it one-off? H ow do you expect that to correct itself over the next quarter? The second question is on the CapEx plan and is related to the first question. Given the fact that you're going to spend INR 10,000 crore over the next, let's say four years, in terms of debt profile, how do you expect in terms of, you know, your control over debt to EBITDA or any of these ratios, which is actually currently excellent, but how do you expect that to move over the next, three to four years? Thank you. Sure. Overall, you know, this increase in current assets that has taken place is mainly on account of inventory, and that is on account of the price increase. The prices of all inventory, the rates basically, while the days may not have changed, the rates have gone up, and therefore the inventory levels have gone up. That's a factor of price. If the price come off, then you'll see the inventory levels also coming off. On your second question on the debt profile, see, right now we've not, as you may have noticed in this presentation, we've not given the guidance on the CapEx for this year, so it's difficult to say where we land in terms of our debt profile. Of course, you know, I can say one thing that, you know, this net debt position or net cash position is transitory, and we will get into a net debt situation again, given the CapEx that we have over next, you know, one, two years. It's a little premature for me to comment on exact number of the debt profile. I just want to reiterate, our underlying, you know, thesis of retaining investment grade doesn't go away. Okay. At AAA, I presume. All the best and look forward to hearing the debt guidance in the next call. Thank you. Thank you. Our next question is from the line of Pinakin from JP Morgan. Please go ahead. Thank you very much, sir. Sir, a few question on the paints business. So just trying to understand, at this point of time, is the INR 10,000 crore CapEx number more or less, the you know captures the entire investment, or can this number see a very substantial revision higher like we have seen from INR 5,000 crores- INR 10,000 crores? Thank you. We need for investments both plant and non-plant for the next three to five year time period. Once our capacity utilization crosses 80% would be the next phase of investment. For a current phase, this fully almost captures our need. Sure. My second question is that at this point of time, should we expect that the paints business CapEx will be 100% funded out of Grasim o r would the company look to de-risk and bring in some kind of strategic partner into the paints business? No, no plan of getting any strategic partner. We fund it through that. Sure. Lastly, can you give us a sense of what are the expected IRRs that the company expects from this business, and by when does the company expects to hit those IRRs? We had, in the last announcement, when we gave our announcement of INR 5,000 crore, indicated our IRR for this project, in the range of 20%. Even though we are expanding our investment, we have reworked our business model and reaffirmed that this project will be at around 20% IRR levels. By when, sir? Because given that it will be commissioning in FY 2025, should we expect this over what number of years? No, this is IRR of a project. I'm talking of a project IRR. Typically, you carry out the project IRR over 10-15 years, and then you do as you do a normal finance project financing model. Understood. Thank you very much, sir. Thank you. Our next question is from the line of [Mohit Salee from Axonate Advisory]. Please go ahead. [Mr. Mohit Salee], could you please go ahead with your question? There seems to be no response from this line. We will move to our next question. That's from the line of Prateek Kumar from Jefferies. Please go ahead. Yeah. Good evening, sir. A few questions. Firstly, on VSF versus cotton. While we keep mentioning about this and we keep charting it out as well, but there seems to be no real correlation of it, what we have seen, and we are really struggling to even pass through basic cost. Like, that has crashed like anything, like got 140 in past four quarters. Can you just explain a bit on how is this cotton versus VSF dynamics really playing out and not really helping us or anyone else in the global industry? Normally, in the past, price of VSF and cotton would move more or less in tandem, but like correlation was 0.75, kind of. Lately, cotton has been in a very tight situation, and there has been I think some financial speculation also because cotton is the oldest commodity on the exchanges. Supply chain concerns also have pushed the cotton prices very far. These are not normal price increases in the sense. VSF being an industrial commodity, there is a different supply-demand dynamic. This time, VSF prices have not been able to keep pace with the cotton price increase. Cotton crop again, there are different estimates, and people estimate that cotton crop will be less this year. Demand will increase. There is lot of psychological and speculative bullishness on cotton prices. This one is the main reason for VSF is not that speculative, and there is no forward available, like what is available on cotton. That explains the divergence for the time, this time. Are these not the real prices which consumer of cotton or VSF is buying, and, that's why, I mean, we are not able to increase our prices? I mean, is VSF really replacing cotton at such high prices? For cotton. To some extent, yes. We are seeing additional demand from people who used to spin cotton. Now they want to stop cotton and spin more VSF because cotton is too expensive or it is not available or some similar reasons. It is not that at these prices the transactions are not happening. The transactions are happening. We are selling VSF at the current prices. We have been adjusting VSF prices also to the extent we can do. But there is an import possibility, and we have to calculate the landed cost of imports and charge whatever price we can do. In cotton, there is no import available. Import is of very high variety. Even government has reduced the import duty, abolished import duty, but still the prices have not come down. There is different kind of dynamics playing out there. Okay. Regarding pulp pricing, which was also expected to sort of come down, how has that been in terms of inventory position? Is any of the three, four cost line items, key cost line items for VSF expected to moderate over the next six months? Like, pulp prices have been going up in last two, three months. In Q4, pulp prices were little bit down, but of late they have been going up. They should stabilize now because there is a new pulp plant commissioning in Brazil. The increase should not continue for too long. Supply chain issues are also creating the shortage, and the buyers have to buy in desperation, so sometimes that affects the price. Assuming that global geopolitical situation doesn't escalate any further and supply chain comes back, starts to improve as we have seen in some sections, so the prices should not continue to increase like they have done in the last quarter. That will bring more reasonable situation in the market. For FY 2023, modeling purpose, second half of FY 2022 margins in VSF segment are more reasonable. Like first half was like and even last year fourth quarter was maybe an aberration in terms of. Second half of FY 2022 was also a time of aberration because the input prices increased very steeply. Both were unreasonable, I think. The average of both the situations would give a better workable model. Right. You know, you have to also appreciate that overall we're going through certain disruptions in logistics, supply chain, et cetera, which is creating certain price mechanisms which are breaking from the trend. That also we have to bear in mind. I think if you look at the VSF price premium over pulp, okay, that broadly we've been able to maintain. It's also the factor of some of the other costs like caustic, et cetera, which has led to erosion in the margins. The fundamental VSF to pulp premium VSF, yeah, absolutely. That has continued to maintain. Especially in the case of Grasim, although the caustic high price comes at a cost in VSF, but at the Grasim level is interdepartmental, inter-division, so that really is not an extra cost in that sense. On caustic segment, while our absolute EBITDA seems a bit lower on a sequential basis there as well. On caustic chlor-alkali segment would have done better, but that has been offset by advanced material epoxy segment weakening on a quarter-over-quarter basis. What's the question? I couldn't figure. Is that the right assessment? Epoxy has particularly weakened. That has resulted into QoQ drop in because prices of caustic clearly are higher, and that's what is also hurting VSF. Yeah. As I said in my opening statement, chlor-alkali has actually delivered the highest ever quarterly EBITDA for in Q4. The chlor-alkali EBITDA for Q4 is higher than Q3. It's because of epoxy which has corrected significantly that your total EBITDA is looking lower for chemical segment in comparison to Q3. Yeah. To clarify, Jayant is also clarifying that epoxy has normalized. They got a run of almost, I think, 3 or 4 quarters of s uperb, yeah, profit because of the, you know, high realization and low raw material. The last question on paint segment. Is there anything on revenue? I mean, because we are looking to start from Q4 FY 2024 in terms of plants. Anything we are looking at in terms of first year of revenue in that segment? No, that's a premature. I think we are focusing on commissioning the plants right now. Difficult to say exactly when we're going to launch and start the revenue stream. One thing we have clarified earlier is that, you know, we do not follow any outsource model. We just do it through our manufacturing system. Sure, sir. These were my questions. Thanks and all the best. Thank you. Our next question is from the line of Alok Shah from Ambit Capital. Please go ahead. Yeah. Hello, sir. Thanks for the opportunity. My first question is, when you speak about the improving market scenario in the paints business, just wanted to check because, you know, basis our understanding, you know, this optimism is also because of not only the paints but also the ancillary segments. You know, the plan is also hence to cater to that part of the growing segment or, you know, the focus would largely be in the core decor segment. Just wanted to hear your views on that. No, our focus is only on the decorative paint segment. Just for clarity, decorative paint segment includes both the emulsion side of the business a s well as the enamel side of the business, the waterproofing side of the business, as well as wood finish. These are the broad categories which are all constitutes to a decorative range. We are not getting. Got it. Okay, got it. Sir, the second question is, when you talk about the CapEx of INR 10,000 crore, you know, what part of that would be largely gross block? Because, you know, if I heard correctly, you said it's a mix of CapEx plus non-CapEx items. What part of that would be gross block, roughly? Clarifying, it is all of it is gross lock. It is broken into plant and non-plant, and the large portion of it is plant. Got it. Actually, INR 10,000 crore is the gross lock that we are looking at. Against that we will get around 1,300 odd MLPA. You know, while, you know, during the call I was just confirming, you know, Asian Paints or even the leader is at around 1,700 odd MLPA because they denote it a little differently. Just to reconcile the numbers. Yeah. To our mind, there would be a slightly higher number by the time we are launching our services. Got it. Okay. Thank you very much for those questions. Thank you. Thank you. Our next question is from the line of Anshuman Atri from Premji Invest. Please go ahead. Thank you. Good evening. My question is on the paints business. I have three questions. One is, you're announcing a size which is almost double of the current number of players. By when do you see this 1.3 getting fully commissioned? And what would be the timeline in terms of the capacity utilization reaching this 80%? Okay. As Ashish mentioned in his opening statement, we expect to start launching our services by the fourth quarter of FY 2024, which is next financial year. In a phased manner over the next 12-15 months, we would have the entire capacity available. From quarter four of FY 2024, we will go for a nationwide launch. We are hoping to be able to have our product available on a nationwide basis. Generally we are seeing, whenever Birla launches a capacity, within one, two years you are almost close to full utilization. Can we expect something similar in the paint business? I think it's very premature yet. There are plans on a piece of paper, but I think we will wait to see our execution. Sure. Another question is on the environmental assessment reports. If I look at your environmental assessment reports, you are doing a lot of backward integration in terms of the epoxy and in terms of the emulsion and other things. What kind of cost advantage can you have versus the existing players? Different players are in different stages of their backward integration. As far as we are concerned, there are the two key components of raw material are titanium dioxide and emulsion or resins, as may be applicable for water-based paints or solvent-based paints. Both emulsion and resins we'll manufacture in-house and titanium dioxide is one which is a bought out item for us. I won't be able to give you a generic answer. Different competitors are at different stages and at different percentages. Our entire requirement of emulsion and resins will be done from in-house production. Sure. One last question is on the decorative side, on these putty and other ancillaries, this will be done by UltraTech and whereas the paint part will be done by Grasim. I'll actually give you a sense on the putty side of the business. I don't know how much you follow on the undercoating side. Birla White is a market leader and has been strengthening its position. It improved last year its market share, volume market share by 2%. But it currently commands about 10% premium over the next player, and over paint major it commands 20% premium. On a revenue market share, it has close to 33%-35%. This is one statistic and continue to strengthen its position. Reason why it continues to strengthen position because its quality and brand acceptance is significantly higher than what all is available. Why is that? Because it is among few companies which manufacture its product, does the entire R&D and manufacturing in-house rather than number of paint manufacturers who do a lot of portion in outsourcing. You'll find that also in the paint side of the business where we are trying to do it all in-house. The research and development is done in-house, backward integration done in-house, and quality of manufacturing is completely controlled in-house. Going forward, they will, as I mentioned, to be able to get synergy and cost control, both the shareholders of both the companies will enter into some sort of agreement and which will not only be able to make available the putty for the paints business, but also be able to have multiple other synergies. At an appropriate point of time, we'll discuss that. Sure. This kind of expansion is unprecedented, so wish you all the best. Thank you. Thank you. Our next question is from the line of [Saket Kapoor from Kapoor & Company]. Please go ahead. Yeah. Mukesh sir, thank you for the opportunity. As being clarified by you, if we take the segmental result and under the chemical segment, caustic soda and allied chemicals, the dip in the profitability Q-o-Q is only on account of Epichlorohydrin prices trending lower, sir. That is the only reason why this INR 451 crore has moved down to INR 390? Yeah. At a conceptual level, you understood it right, except that, within chemical segment there's chlor-alkali and there is the epoxy business. The epichlorohydrin, what you're talking about, is a input. It's a raw material for the epoxy business. One of the reasons for epoxy business not or normalizing the margin is because the ECH prices have remained high while the realization for epoxy has come down. At a conceptual level, your understanding is correct. The QOQ number has come down because of, only because of epoxy. Chlor-alkali has gone up. Sir, the factors in your presentation you mentioned about the strong trend in the caustic chlor-alkali prices is also because on account of the shutdown at China. Other than that, sir, what kind of capacities globally has been mothballed? Any understanding on the same or are these shutdowns temporary then? What should we take home because of this? How sustainable is the trend going forward? Whether it is a demand-led trend or is it mainly because of the outage in the capacity? I think it's [Jayant Dua] side. Let me put it this way, that it's not about mothballing of capacities. Yes, I think one or two capacities in U.S. specifically have been mothballed because they were not into the membrane technology itself. They are fixed in their technology, which is effectively not there. But any disruption in the prices is being largely due to the supply chain disruptions, which the current Russia-Ukraine war has led to the product movement being quite controlled from Europe, not happening too much. Europe has got into a shortage because of that. We have had a couple of outages, both planned and unplanned. China due to COVID. I think there is a current global disruption which is now getting sorted out. I think going forward you will start seeing a more normalized caustic prices maybe in another month or two. Unless something new happens, which is, I'm not going to worry about that. Right. Post this March quarter exit, the realizations, the trend has remained upward or has maintained, or are you seeing the softening of prices as the factors you have articulated, sir? The normalization. If you look at the global indices which get normally reported, there is a marginal uptrend, but it varies week to week depending upon how the supply chain moves. It's not materially changed much. Because I think the input costs have definitely softened. I think so the energy prices have definitely softened or there is no relief there also, sir? No, their energy prices also continue to be in the same range at this point of time. Actually, post-March, you're not seeing too much of a significant delta on either of the two sides. Hello? Yeah. I said on post-March, you're not seeing a significant delta movement on either side, on both the cost front or on the realization front. Right. On the other major raw material, salt, sir, are we self-sufficient or backward integrated? By what portion are we dependent on the market and how are the price trends shaping up there, sir? Salt per se, no, we are not backward integrated or we are not self-dependent. We largely buy maybe about 90% of our salt from outside the market. Salt market actually will get governed by how the crop comes up post this monsoon. We get affected if there are a lot of cyclones in the area, then crop shortage happens, prices shoot up. I think it'll be premature because I don't think I can predict the weather patterns which could happen. But currently, compared to last year, the price is continuously at the same level, which are at the elevated level because of the cyclones of last year. Correct. Thank you. Thank you for the answer, sir. On the value-added product part, sir, what is our target? By what percentage are we going to the internal loading consumption is going to go up, say, two, three and five years down the line, sir? Currently we are at about 30%-odd. With the current set of projects which are we are looking at, which I think at an appropriate time we will talk about, you will start seeing, you know, about 3%, 4% increase annually, which is going to go up over the next five years' time. Between, let's say three years' time, you could see from 30% to 40%, is where the target will be. It'll be a gradual increase. You will not see, you know, sudden spike there. Okay. If I may squeeze just one small point. Sir, for this year, for the last financial year, what has been the import of the caustic soda in the country? For this current year, what are the new capacity additions that are expected here in the country? You see what has interestingly happened, and I think that's one change which has happened in the Indian caustic industry, which is India has become a net exporter, which used to be earlier kind of a balance. I won't have the exact number, but somewhere around 2-2.25 lakh tons would be the import. It's 2 lakh tons, which has happened in this year of import, which is going to happen. I think going forward, there are new capacities which have got announced. I really don't know when they're going to come on stream, but India would maintain its net exporter status at least for the next year or two years. Earlier, sir, we were the net importers only. When has this trend changed from net importer to l ast two years. Last year. Last year it changed. Correct. Thank you for the elaborate answers and all the best to the team. Thank you. Thank you. Our next question is from the line of Jiten Doshi from Enam Asset Management. Please go ahead. Hi, Ashish. Many congratulations on a good performance. I just wanted to find out that what is the CapEx over the next three years apart from paints, and what is the peak turnover you expect on the CapEx from paints? At this stage, we can't give the guidance on both these numbers. When we get the CapEx approved for this year by the board, at that time we'll immediately announce it to the market for this year CapEx, which is other than paint business essentially. Because if one just does some simple math, your next four years cash flow should be about INR 8,000 crores-INR 9,000 crores, which includes UltraTech payout, et c., which should be nearly INR 6,000 crores of dividends declared by them, as well as, you know. What would be your dividend policy over this period of paying out to shareholders? We are following our dividend policy. We've passed through this time today as well. We've passed through the UltraTech dividend to the shareholders. Would that continue into the future? See, I think every year we have to look at the situation, right? If there is a huge CapEx demand that comes through, okay, which is unlikely, but I'm just theoretically saying, okay, then we may have to discuss at the board level. But as of now, the plan is to pass through the UltraTech dividend. Because it's simple math. If you can sustain your current year's operating profit and, or increase it over the next three to four years, then actually you should remain debt free in four years. I think it's difficult for us to comment on that, I think. Actually, you will be swimming in a lot of cash, so will the dividends you, whatever you get from L&T, I mean, sorry, from UltraTech, you will pass on that dividend to Grasim shareholders? Yes. That we've done it for last two years, and the idea is to continue doing that. Okay. Any idea on monetizing your renewable portfolio? No, right now we are growing the portfolio. There is no such plan to monetize it currently as we speak. Okay. All right, fine. Thank you so much. Thank you. Thank you. Our next question is from the line of Bhavin Chheda from Enam Holdings. Please go ahead. Yeah, good evening, sir. Just a continuation of the previous question on CapEx. Since you have not announced the broader figures, I just wanted to know how much would be the pending CapEx of the VSF and chemical divisions which were announced earlier and which would be ongoing and pending? That we'll announce it along with the CapEx figures that we announce for this year. There isn't much of a pending figure that is there. If you look at the slide of CapEx, you'll find that there is about INR 650 crore of budget, but not spent. It will definitely be within that. Can be lower than the difference as well. Sure. Because I think earlier some chemical division date was postponed earlier, and that CapEx was slightly postponed. Chemical division, was there a higher number because I have earlier modeled higher number for 2023 or you are saying just INR 600 crore is pending for chemical division to reach a capacity of 1.53 million? No. That is the CapEx that is given on that slide is CapEx for that last year, FY 2022. F or a project, there can be additional amount in FY 2023 or FY 2024. You know, don't confuse that. Yeah, yeah, probably. For chemical division, earlier plans of reaching capacity of INR 15.3 lakh, roughly 1.53 million. There would be around INR 1,000 crores-INR 1,200 crores pending to reach that number, right? No, it won't be that much. We'll come back on that number. There will be CapEx towards that. See, I think chemicals you have to understand slightly differently. Chemicals has already got eight sites. Unlike VSF, which has got four sites and large projects, chemicals is number of sites and number of vats that they keep doing. Its number of projects are large, so it comes in a staggered way in different timelines. Ticket size is smaller, yeah. Sir, maintenance CapEx is roughly INR 500 crores across both divisions. That has been the historic run rate of VSF plus Chemicals plus others. That's fine. That number should be ballpark plus/minus that, right? No. Let me clarify one point without giving a number. INR 500 crores used to be the case earlier, so one, number of sites has gone up. Secondly, there is inflation and there is also environment related CapEx which is increasing across all businesses. You know, it's a good CapEx to have because this makes your business more resilient and future ready. We believe that next, you know, two, three, five years as we're taking targets for sustainability, those CapEx should also be counted towards sustainability, sustenance. I would say there are three categories of CapEx, right? One is just what we always traditionally call maintenance CapEx. Second is the sustainability related CapEx, which is kind of not necessarily going to generate revenue for you, but it makes you more future ready. The third piece is your growth projects. Sure, sure. Okay. Sir, second question, particularly on the VSF division. You have given annual number of exports there is 13%. If I try to backward calculate with the earlier quarter, which means export this quarter was almost zero. No, there was some export. It was a minuscule figure because I have earlier three quarters, and I was trying to match with the annual number, so I'm getting almost a nil VSF exports in quarter four. For quarter four also we had, I think about, 10% or so export. Because in India that time we were expecting this Omicron thing to happen. It was happening, so we wanted to secure our volume. Now, yeah, more and more volume is going to domestic. Okay. Quarter four also, as per your number, MIS numbers, around 10% in volume term was in export in VSF. Yeah. Yeah. Okay. I missed out on the point on the VSF margin pressure. You have mentioned this substantial cost increases in pulp, caustic soda, coal and others. Is anything reversed there or price increases have offset it? Because the margins have been substantially down. What should we look at it over next two, three quarters then? Yeah, we expect these prices will not continue to go up for all these inputs, t hey cannot continue to go up in one direction all the time. We are also seeing that Chinese prices have started increasing because there is a tremendous pressure on Chinese producers also. Accordingly, that trend, international prices will also increase. We expect that we will be able to recover more of the cost increase going forward. Thank you, sir. Thank you. Yeah. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference back to Mr. Ashish Adukia for closing comments. Over to you, sir. Thanks to everyone for joining and basically listening to our answers. If there are any further clarifications that you may have, you may please reach out to Saket, who heads IR for Grasim. Otherwise to me as well. Thank you. Thank you, members of the management. Ladies and gentlemen, on behalf of Grasim Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.