Grasim Industries rose 1% to Rs 1,876.35 after the company's consolidated net profit jumped 40.7% to Rs 1,359.19 crore on a 25.7% surge in net sales to Rs 22,564.22 crore in Q2 September 2021 over Q2 September 2020.
Consolidated EBITDA grew 19% to Rs 4,282 crore in Q2 FY22 as against Rs 3,603 crore in Q2 FY21. The demand momentum picked up in Q2 FY22 and continued thereafter across all businesses. Realisation and volumes have improved in key businesses on account of strong demand, offsetting the cost increase.
The Chinese textile demand was impacted by weak business sentiment in the value chain. The Viscose Staple Fibre (VSF) prices in China moderated during the quarter, however, the prices have witnessed a considerable improvement since October 2021, driven by drastic operating rate cuts in fibre and yarn manufacturing. The demand for textile products in India witnessed a significant bounce back during Q2 FY22 with the onset of the festive season, phased reopening of schools, educational institutions, offices and increased textile sourcing from India by global brands as a part of the China+1 strategy.
Among its various businesses, the VSF business reported a strong operational and financial performance driven by demand momentum and better product mix. The VSF business recorded the highest ever total sales volume with domestic sales volume, back to the pre-pandemic level in Q2 FY22. The share of value-added products in the overall sales mix almost doubled Y-o-Y (year-on-year) to 27%. The VFY sales volume was also the highest ever, with demand recovery driven by inventory liquidation in the value chain and lower imports.
In chemical business, the caustic soda prices in India recovered from multi-quarter lows supported by the recovery in demand, tightness in supply led by production losses and higher export sales driven by better overseas realisation. The caustic soda capacity utilization stood at 86% in Q2 FY22, sequentially higher. The domestic demand for caustic soda was driven by the textile and pulp & paper sectors. Advanced Material (Epoxy Resins) business witnessed a significant improvement in the operational and financial performance on a Y-o-Y basis, driven by better realisation and strong demand. The demand for Advanced Materials in India is expected to remain strong with a pickup in the pace of construction activity, thrust on renewables, and thin inventory across product segments.
In paint business, the company had acquired land at 5 locations as part of its pan-India footprint for paints manufacturing. These locations have been identified in different regions, basis proximity to key consumption hubs across India. The process of Environmental Clearance is also underway for various project sites. The contracts for Basic Engineering and Detailed Engineering have been awarded. The Civil work at various sites shall commence post receipt of the Environmental Clearance.
Grasim Industries has made considerable progress in its commissioning schedule. VSF brownfield expansion at Vilayat (300 TPD) has been commissioned in November 2021, while the second line of 300 TPD will be ready for commissioning in Q3 FY22 as planned. In the Chlor-alkali business, Caustic Soda expansion of 170 TPD at Rehla (Jharkhand) and Chloromethane plant of 150 TPD at Vilayat (Gujarat) have also been commissioned in Q3 FY22. Additionally, Caustic Soda capacities at BBPuram (200 TPD) and Vilayat Phase I (200 TPD) will be commissioned in H2 FY22.
Grasim Industries is a leading global producer of Viscose Staple Fibre, the largest Chlor-Alkali, Linen and Insulators player in India. Through its subsidiaries, UltraTech Cement and Aditya Birla Capital, it is also India's largest cement producer and a leading diversified financial services player.
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