India’s new growth story: Grasim announces Q1FY19 results

Q1 FY19 financial performance

Rs. in crore

	Standalone			Consolidated
	Q1 FY19	Q1 FY18		Q1 FY19	Q1 FY18
75%	4,789	2,740	Net Revenue	16,857	9,846	71%
89%	1,176	621	EBITDA	3,212	2,419	33%
85%	643	347	EBITDA	1,116	890	25%

Grasim has reported an excellent performance for Q1FY19, recording all-round growth. For its Q1FY19, standalone revenue at Rs.4,789 crore was up by 75 per cent, compared to Q1 last year. Standalone EBITDA grew by 89 per cent at Rs.1,176 crore. The FCF for the quarter was ~ Rs.400 crore after a capex of over Rs.300 crore. At consolidated level, the revenue for Q1FY19 rose by 71 per cent to Rs.16,857 crore and EBITDA at Rs.3,212 crore was up by 33 per cent.

The results of the current quarter are not comparable with that of the corresponding quarter of the previous year. The previous year’s results do not include the results of the erstwhile Aditya Birla Nuvo Limited (ABNL) which was merged with the company with effect from 1 July 2017. On a like to like basis, the performance for the quarter ended 30 June 2018 was outstanding as standalone revenue at Rs.3,547 crore for the quarter was up by 29 per cent and EBITDA grew by 66 per cent.

Viscose business
The net revenue for Q1FY19 at Rs.2,480 crore was higher by 35 per cent and EBITDA at Rs.586 crore by 68 per cent. The VSF business reported its highest ever quarterly production and sales volume of 134KT and 132KT respectively. The share of the domestic sales in the overall sales rose to 82 per cent in Q1FY19 vis-à-vis 69 per cent in Q1FY18. This was primarily driven by expansion of the domestic market, aided by brand LIVA initiative of the company.

The debottlenecking of the VSF capacity at multiple plant locations is almost complete and is reflected in the production volumes of the current quarter (Q1FY19). Grasim is committed to achieve global benchmarks in sustainability through close loop production / European Union Best Available Technologies (EUBAT) technology.

The company’s overseas pulp JVs registered an improvement in operational and financial performance on the back of strong pulp realisation and a continued focus on cost optimisation. The recently announced brownfield capacity expansion plan of 219 KTPA at Vilayat is under implementation. Project related work has commenced with the placement of orders for long lead time equipments.

Chemical business
The caustic soda prices in India moderated during the quarter led by temporary softening in global caustic soda prices. The underlying demand from the user industry (alumina and textile) continues to remain buoyant. The 146 KTPA brownfield expansion of caustic soda at Vilayat was commissioned during the quarter.

Net revenue for the quarter rose by 46 per cent YoY to Rs.1,579 crore and EBITDA by 103 per cent YoY to Rs.495 crore. Better realisation and higher sales volume were the main drivers. The management focus on increasing the volume of speciality products (chlorine based value added products) continues.

The Board has approved the expansion plans for caustic soda and speciality chemicals at the existing locations entailing a total capex of Rs.1,112 crore. This would increase caustic soda capacity by 14 per cent to 1,310 KTPA by FY22.

Capex plan
The capex plan of ~ Rs.7,500 crore (at standalone level) is under execution for raising capacities in both VSF and chemical businesses, apart from capex earmarked for maintenance at various plants. A significant portion of our capital expenditure will be funded by internal accruals during FY19-FY21.

Cement subsidiary - UltraTech
UltraTech reported consolidated sales revenue of Rs.9,021 crore up 28 per cent (YoY) and EBITDA of Rs.1,763 crore in Q1FY19. The consolidated sales volume registered an increase of 29 per cent on YoY basis to 18.01 MTPA.

The acquisition of the cement business of Century Textiles and Industries Limited, in terms of a Scheme of Arrangement is in the process of requisite approvals. On completion of the said acquisition and ongoing capacity expansions, UltraTech’s total capacity will stand augmented to 111.1 Mn MTPA inclusive of its overseas capacity.

Financial services subsidiary – Aditya Birla Capital Limited (ABCL)
Revenue and net profit for Q1FY19 stood at Rs.2,978 crore and Rs.216 crore, an increase of 32 per cent and 26 per cent YoY respectively. All the key businesses have been the contributors. NBFC lending book grew 23 per cent YoY to Rs.44,408 crore, the housing finance book grew by 1.9x YoY to Rs.9,176 crore in Q1FY19.

Its asset management business ranked No.3 in India with the average assets under management up by 19 per cent YoY to Rs.2,67,176 crore. The business has registered an overall domestic market share of 10.7 per cent with Equity AUM (incl. a;lternate and offshore) at ~ Rs.1,00,000 crore in Q1FY19.

The life insurance business reported a 40 per cent growth in the individual first year premium to Rs.227 crore. It has improved its individual rank by two spots to No.7¹ amongst insurance companies. The health insurance business has reported a gross written premium of Rs.76 crore in Q1FY19.

¹Rank and market share amongst players (Excl. LIC) based on individual FYP: source IRDAI

Outlook

The VSF business will continue to focus on expanding the market in India by partnering with the textile value chain, achieving better customer connect through brand LIVA and enriching the product mix through a larger share of specialty fibre. However, new capacities likely to come on stream in China may impact the global VSF prices in the near term.

The chemical business is witnessing a healthy growth with the completion of its recent capacity expansion. Further growth is expected from the new capex plan for caustic soda expansion and new product lines for specialty chemicals.

In cement, with the cement industry now in its up-cycle, the demand is expected to be healthy. The key drivers being higher government budget allocation for infrastructure and rural development, increased rural housing demand consequent to increase in minimum support price for kharif crop and pre-election spending. With the additional capacities acquired by the company through the organic and inorganic route and its rapid ramp-up, UltraTech is very well placed to participate in the growth of the economy.

In financial services, ABCL is in the unique position of being able to provide universal financial solutions to meet customers’ money needs for life. ABCL’s focused customer-centric approach under a single brand “Aditya Birla Capital” enables it to chart a differentiated and disciplined path to growth.

Overall, the outlook going forward remains robust.

Cautionary statement
Statements in this “Press Release” describing the Company’s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities law and regulations. Actual results could differ materially from those express or implied. Important factors that could make a difference to the Company’s operations include global and Indian demand supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Company’s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.