Grasim Industries Ltd

NSE:GRASIM

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Grasim Industries Limited Q1 FY '20 Earnings Conference Call. We have with us today from the management Mr. Dilip Gaur, Managing Director; Mr. E. R. Raj Narayanan, Group Executive President and SBU Head, Chlor Alkali; and Mr. Ashish Adukia, CFO; and other senior members of the management team. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Ashish. Thank you, and over to you, sir.

[Ashish Adukia, Chief Financial Officer]

Thanks, and good afternoon, everyone. Welcome all to our quarter 1 FY '20 results call. I'd like to start the call with some quarter highlights, and then I will follow it up with a few slides from the presentation. You may not have had the opportunity to go through it, but this will give you an opportunity to actually get oriented to the presentation, so that you have pointed questions on strategy and operational clarifications. This quarter, Grasim reported excellent growth in consolidated numbers with 31% year-on-year improvement in EBITDA, which was primarily contributed by UltraTech and ABCL performance. On this call, I'll focus more on stand-alone performance as you may have access to UTCL and ABCL call transcripts. The stand-alone performance witnessed growth in both VSF and chemicals volume, but overall financials were slightly muted due to softening of global prices in both VSF as well as chemicals. This was, in fact, after many quarters of consistent growth in our financial numbers.Let's take VSF to start with. While there has been softening of VSF prices, it continues to be fastest-growing fiber globally with 6% to 7% growth. And India demand continues to be buoyant with actually a double-digit growth. Another positive in VSF business is that pulp prices have been correcting meaningfully. We may see this benefit coming in the next quarter given the time lag of inventory purchase and consumption.Let's look at chemicals now. Caustic prices are impacted in Asia mainly due to demand slowdown in the end-use sectors. In this quarter, there has been some impact in India too due to increased supply from imports and addition in domestic capacity. Caustic production, while it was higher by 2%, it was also partly impacted due to monsoon delay and disruptions due to cyclones.Our VSF expansion projects are progressing well. We started production in our third-generation specialty fiber plant of 16 KTPA in Kharach, which is still -- based on in-house green technology. While third-generation fiber is a leap forward towards quality and sustainability, amongst many other initiatives on sustainability front, we have further reduced water consumption in our other VSF plants by over 15% in this quarter. With this, in last few years, we have achieved overall reduction of over 50% water consumption making us the lowest water consumer in viscose industry.Moving to some exceptional items. We have taken a write-down for our investments in Idea Payments Bank amounting to INR 238 crore which is net of taxes as they have decided to wind down the operations. Now we would like to just refer to the presentation, so maybe I'll give you a few seconds to pull that out. We will walk you through only select slides. So if you would want to just jump to Slide 9. On Slide 9, we have provided the capacity breakdown by plant for both VSF as well as caustic soda. In case of VSF, you can see the increase in FY '20 which is basically addition of specialty fiber capacity. By FY '21, we'll be completing both phases of our Vilayat expansion. Likewise, in caustic soda, as you can see we will be completing most of our expansion in FY '21.If you move to Page 12 now, you may note the decline in global prices across all fibers. VSF has witnessed similar pressure primarily due to capacity overhang, which by the way we've been talking about in all our quarterly calls. And this is further accentuated by the addition of capacity in Indonesia. U.S.-China trade war has also impacted the prices. As you may know, U.S. imports almost $50 billion worth of textiles from China.On Page 13, we have further inched up our domestic sales contribution to around 85%, which actually provides us some insulation to global prices. There's an interesting chart in the bottom left on pulp prices. If you may notice the red line, which is our own consumption price, is at a perfect lag to the orange line, which is the benchmark pulp spot prices. While in this quarter, we've not been able to see the benefit, which would have actually made our EBITDA look better, but in the subsequent quarter we should get the benefit of reducing pulp prices.On Page 5 (sic) [ 15 ], we have financials of viscose, and the EBITDA is better on Q1 -- Q-on-Q basis due to volume improvement and consistent effort on operational excellence. On a Y-o-Y basis, the business performance has been resilient, driven by volume growth and steady domestic realization. We have included VFY numbers as well for your analysis.On chemicals, if you come to Page 19, by the way, just a pause, on Page 17, we have a picture of our specialty fiber plant, which has been newly commissioned. Back to chemicals. If you come to Page 19, caustic soda prices have declined in Asia due to demand slowdown. But in India, it is only recently in the last quarter that it has got impacted due to increased imports and new capacity additions. The excess of supply over demand led negative chlorine realization, which has recently partly reversed.On Page 21, despite lower sales, we have improved EBITDA due to lower power cost amongst other factors. Our efforts to increase VAP continues. Today, VAP plus epoxy forms around 21% of chemicals EBITDA. Lastly, on Page 27, you will notice we have created lease liability of INR 73 crore on stand-alone basis on account of primarily the new lease accounting policy. This has a very small impact. It has improved the EBITDA by INR 5.5 crore on stand-alone basis and around INR 77.9 crore on consolidated basis.We'll be now open to questions. We have Raj and Dilip here. We should take benefit of their presence to focus on operational clarification and strategic inputs. If we are unable to resolve any of your queries immediately, you can feel free to reach out to us, to the IR team to seek clarifications.

[Operator]

[Operator Instructions] The first question is from the line Gunjan Prithyani from JPMorgan.

[Gunjan Prithyani, Analyst]

Firstly on the VSF business. Could you just give us some sense on how should we think about the next 12, 18 months? Because, clearly, the global VSF prices have seen very sharp decline, whereas if I really look at your numbers, we've been able to contain the price decline reasonably well. Is there more pressure you think with the lag, which could reflect in our realizations going forward? And how do you think -- do you think even globally VSF prices are bottoming out? What would be your view there? And within VSF, it seems that the margins are still held out well despite this price softening, and pulp hasn't contributed as you mentioned in this quarter meaningfully. So what are the other operational efficiencies that have driven the margin improvement here?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

Gunjan, that's a good observation. I think the global prices, to my mind, if you look at what is happening today, they are around $1.43, $1.44 per kg. They are well below the cash cost of what the Chinese are producing. In fact they are almost [indiscernible] cost of many producers. So to my mind, this is not the same. Now what has worsened the situation is the U.S.-China trade war. So there is a pressure because of overcapacity, and then the American buyers are not renewing the contract going forward for the Chinese suppliers. Now that is putting a pressure. So to my mind, I think this is a -- it can't get any worse than this. So the global prices should see some kind of recovery going forward, but very difficult to predict when. So I think it's very difficult to -- what will happen between U.S.-China trade relations. But I think latter half of the year hopefully should improve.In our case, yes, we have been able to contain it because we have been saying that we have 2 or 3 distinct advantages which will continue our business model because we are highly integrated. A lot of other people are not which -- second is our Liva brand still holds lot of strength in the marketplace. Third, why the margins are better is the pulp -- there is distinct improvements. We didn't get the benefit now, but going forward the pulp price has gone down to almost $100-plus per ton. There is a $0.10 per kg advantage, which should accrue over a period of time from the pulp. And there's softening in the price of other input as well. So the coal has improved. So I think, all together, yes some positive, some negatives, but very difficult to tell exactly how things will go. But to my mind -- yes. So that -- this is how the outlook looks. A good point is that demand is still very healthy. At least in India, demand is very healthy, whereas globally there is issue on demand, but India the demand is good. So as long as demand is good, I think we should feel optimistic about the business.

[Gunjan Prithyani, Analyst]

But going by the comments that you're saying and even I mean looking at what Lenzing also seems to be saying that prices have kind of reached the level from where it doesn't makes sense that they go meaningfully lower. So I'm just trying to understand do we see more pressure in your numbers to come with the lag? Or if, let's say, global prices hold on stable, then we should not see further deterioration in your realizations going forward?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

See, I already told you there will be some pressure if the global prices continue to be low. But I think in our case, the impact will be much lower than what happens globally. So -- which I've been saying in all my earlier calls as well.

[Gunjan Prithyani, Analyst]

And which is this Indonesia capacity, which you have indicated in the presentation? Is that in addition to what we were talking about Chinese capacities in the past conference calls?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

Yes. This is a Chinese guy who has put up a plant in Indonesia. We did speak about it earlier. So what happens, earlier so far China was the biggest exporter to the world. Now with this guy coming up with -- the Indonesian overhang is 55% of the capacity, and the Indonesian market has plummeted because they have become unrivaled on the yarn side. So the yarn side business is not doing well. Fiber capacity has become excess. So Indonesia is now in a much worse situation than China was. And China keeps importing into Indonesia in any case. So that's how the whole dynamics is working. So this is a suggestion [indiscernible] only. So he is a Chinese guy who has a plant in China but has invested through another company in Indonesia, the [ APR ].

[Gunjan Prithyani, Analyst]

And industry operating rates would have been down to 75% of the rate...

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

Right now, 65% also. See, that's the point. The OR has come down. Some plants either toned down or shut down, despite that the inventory went up to 31, 32 days which is 9 to 10 days. Today, as we speak, the inventory has come down to 18, 19 days. So based on that, the increase is coming in the market hopefully.

[Gunjan Prithyani, Analyst]

Okay. Just again a question I have on -- more on strategy perspective. Clearly on and off we do face these concerns from investors on how would Grasim look at capital allocation. And I know that you guys have already infused money in Idea, but these concerns do crop up very often. Is there anything that you can commit in terms of the capital allocation to subsidiaries will not be beyond a certain amount or whatever? Is there any clarity you can give to us how should we think about subsidiary investments over the next 12, 18 months?

[Ashish Adukia, Chief Financial Officer]

Sure. Sure. Gunjan, see I think on capital allocation front, if you see how we have done historically, okay, most of the CapEx is given priority over investment in subsidiaries. So all along, most of our investments has gone into the CapEx for the stand-alone businesses barring the exception of VIL investment that was done recently. Going forward, I think, the credit rating in this environment has become extremely important, and we are a highest-rated company. And we will -- we would want to protect that rating. So there will be no disproportionate investment done in subsidiaries to which may impact ratings of the business. So that's 1 guiding principle that we follow. The second guiding principle like I said that there will always be priority given to CapEx over investment into the subsidiary. So these are the 2 guiding principles that we would follow. It's very difficult to give an amount. The amount can be more linked to me maintaining my treasury to an adequate level as well as maintaining my AAA rating.

[Gunjan Prithyani, Analyst]

But is there any ratio you have in mind that where you would be very skeptical to breach, let's say, on a net debt to EBITDA level or on a net debt to equity level where you think it is -- this is where I am comfortable with and we are not going to infuse any money in businesses beyond the core operations?

[Ashish Adukia, Chief Financial Officer]

I think the comfort would be again linked to maintaining my highest rating and, again, making sure that I give priority to my stand-alone CapEx overinvesting into subsidiaries. And I have almost INR 6,500 crore, INR 7,000 crore of pending investment that needs to be made in my stand-alone CapEx itself.

[Operator]

The next question is from the line of Bhavin Chheda from Enam Holdings.

[Bhavin Chheda, Analyst]

Yes, sir, good set of numbers in a challenging environment all across. Sir, a few questions from the follow up to the presentation. Sir, in the chemical division, quarter-on-quarter, there was a volume decline due to some shutdown or something. So has that normalized, and are we back to the normalized volumes?

[Ashish Adukia, Chief Financial Officer]

Yes. So the chemicals we had this water shortage issues in south as well as in east unit. And since the onset of monsoon, those problems have been sorted out. It's got normalized now.

[Bhavin Chheda, Analyst]

Okay. Second thing on the VSF side, I think, as you mentioned, the speciality plant has already started. So what's the outlook on volumes from that plant and the overall volume outlook? Because as you said, the domestic market has been growing in double digits. So I don't think so there is a demand issue. It's the supply from your side, how much you can incrementally produce and sell. So if you can give some outlook on VSF volumes.

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

In fact, this product is different than the normal VSF. It's a very value-add product. So it is about 16,000-ton capacity, and we have achieved 100% utilization in the first quarter. And we are selling the entire quantity. And the premium of this product is more than $1 over the existing VSF prices. So it's a much better value-added product and running to full capacity. Part we have sold in India. Part is exported because it's a global market. It's a very high-value product.

[Operator]

The next question is from the line of Madhav Marda from Fidelity Investments.

[Madhav Marda, Equity Research Associate]

Sir, just in continuation to a previous question on the capital allocation bit, just want to understand that in case -- I understand you're prioritizing the stand-alone CapEx overinvestment in subsidiaries. But in case there is a requirement for further capital infusion in Vodafone Idea or Aditya Birla Capital in the future, will the policy remain the same that we invest in line with our shareholding in the company? Will that be the thought process? Or we could -- there could be a situation that we might not contribute money and ask they get diluted to whatever extent?

[Ashish Adukia, Chief Financial Officer]

Sure. I think I would like to differentiate between Aditya Birla Capital and VIL. Aditya Birla Capital is my consolidating subsidiary. And where I own 56%, and therefore -- and Aditya Birla capital gets the benefit of my rating as well. So therefore, I need to maintain the consolidating stake in Aditya Birla capital with some headroom as well because Financial Services business continuously looks to raise funds. So I need to make sure that I have some headroom of dilution in Aditya Birla Capital. So 56% is a good stake to have. Anywhere between 51% to 56% is a good stake to have. So there's some headroom out there. Nevertheless, we should also bear in mind that Aditya Birla Capital goes through certain cycles. And when there is a down cycle, when you can get an opportunity to raise funds out there through Grasim putting money at a good value, then it is value attributed to the shareholders. And when there's an upcycle, you can dilute to the third party. So you can do some -- which the group had articulated in the past as well. So therefore, you need to differentiate Aditya Birla Capital with VIL. In VIL, coming to that, it's not a consolidating -- it's a group investment rather than a subsidiary. And there, like we have done in the past, we are less likely to put disproportionate investment, more likely that it will be proportionate. But there is -- currently, there is no thought process. VIL raised the funds of INR 25,000 crore, and very clearly they articulated that for 2 years they would not require funding. So there's absolutely no proposal that has come to us, no thought process or no discussion that has happened with us on -- for the fund raise after the INR 25,000 crore that are already been raised.

[Madhav Marda, Equity Research Associate]

Understood. And just on the VSF business, what is the global operating rate right now? And how much has it declined by in the past year?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

Can you please repeat the question?

[Madhav Marda, Equity Research Associate]

No. In the VSF business, the global utilization for VSF, how much would it be currently? And how much is it declined by in the past years given the initial supply and the recovery?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

Previous years it is around 90%. And as we speak, it is 75%. But for most part of the -- what it was 65%. That's the global, but ours is 100% utilization.

[Madhav Marda, Equity Research Associate]

But where is the -- this big capacity? Indonesia, how much capacity have they added, sir, in the VSF?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

They have added -- no, no, no, 360 tpd is line. So they have got 2 lines of about -- so 720 tpd into 350. 720 into 350. So about 2.5 million.

[Unknown Executive]

262,000.

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

260,000 tons. Yes. So as I told you the Indonesia, the capacity versus local demand is 55% overcapacity now.

[Madhav Marda, Equity Research Associate]

Okay. No, understood. And any other new capacity which we envisage coming in the industry in the next 12, 24...

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

I see -- I mean there is something which has been in the pipeline. At best 200,000 to 400,000 tons can come globally, but that is not there, in a 6 million ton industry. So now I think we are going to see next 2 or 3 years of VFY investment. And as Ashish mentioned, because it's a very fast-growing fiber, hopefully it should equivalate sooner than later.

[Operator]

The next question is from the line of Prateek Kumar from Antique Stockbroking.

[Prateek Kumar, Analyst]

My first question is on this capacity again -- global capacity. So last year had -- like CY '18 had like around 1 million ton addition of capacity. So including this Indonesia expansion, which you talked about, total expansion now is at around 0.5 million ton to 0.6 million ton additional over the 1 million ton which was added last year. Is that correct or I mean just...

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

220,000 tons, over 1 million added last year, so it is 1.25 million tons. Another 200,000 may come. It's -- not very sure but there's something in the pipeline. May or may not. You can simply take 2 year, whole 1.5 million. You are right.

[Prateek Kumar, Analyst]

Okay. And sir, on VSF here, your realizations, just to verify. Your realizations dipped by around 2% to 3% quarter-on-quarter. Is that correct?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

Yes, 2%. That's it. Yes.

[Prateek Kumar, Analyst]

2%. Yes. Okay. And there's this chart of chemical caustic soda prices, where it shows that the prices are stable. This I guess is for India prices. But you mentioned that the caustic soda prices have also fallen. So is it happened in Q2?

[Raj Narayanan]

Yes. So I think what Ashish was mentioning was also about the domestic prices. So till Q4, we had -- domestic prices were rolling higher than the international prices because of the BIS certification requirements, et cetera. So post that, in Q1, domestic prices have dropped and primarily driven by some capacity additions.

[Prateek Kumar, Analyst]

But that reflects in our realizations also on domestic -- I guess it gets reflected?

[Raj Narayanan]

Yes. So our realizations have come down as well.

[Prateek Kumar, Analyst]

So -- but margins seem to be quite strong in this quarter at around 30% which was almost similar year-on-year despite -- I mean like quarter-on-quarter I think it went down to 26%, has come back to around 30% despite lower volumes. So what has helped the margins in chemical segment?

[Raj Narayanan]

Two things primarily. 1 is, of course, the cost -- of course, the power cost have come down compared to the previous quarters. Plus also we -- the speciality chemicals segment has done well. So the application-based approach to the market has helped us to improve the margins.

[Prateek Kumar, Analyst]

Despite -- I mean chlorine is also negative in 1Q? So despite that margins -- I mean the speciality has significant offsetting impact.

[Raj Narayanan]

Yes. So chlorine prices came down towards the end of the quarter. But the one thing which we're driving on speciality chemicals which are basically the chlorine derivatives is to delink the prices and see how we can put this product for the performance. So this requires lot of efforts on application knowledge and also taking the technical trials, et cetera, slowly. So we are moving away from selling a product to creating a solution for the customer.

[Prateek Kumar, Analyst]

Okay. And there is an increase in CapEx guidance also during the quarter from $78 billion versus $65 billion earlier. So -- and I see most of it related to modernization CapEx, but our capacity is not getting added due to this?

[Unknown Executive]

So most of the CapEx is the normal modernization CapEx at various plants. So we have almost 22 plants across country now. So that is annual CapEx -- modernization CapEx.

[Raj Narayanan]

And some of it improves sustainability performance, standup thing. So that gives you a positive in terms of your product platform. It may not be capacity but it gives you product platform.

[Prateek Kumar, Analyst]

So it says that this CapEx is for FY '20 to FY '22, like we would have similar number like, what, INR 6,500 crores was for FY '20 to '22. So there's an increase in number by around INR 1,000 crores during this period. Is that already to maintenance capability that you had not in the sizing in last quarter?

[Ashish Adukia, Chief Financial Officer]

Sorry. Can you please elaborate? You're referring to...

[Prateek Kumar, Analyst]

Am referring to last quarter's presentation where the number of stand-alone CapEx was around INR 6,500 crores, which -- that number has moved to INR 7,800 crores this quarter.

[Ashish Adukia, Chief Financial Officer]

Okay. So I see what you're saying now because I've pulled out the earlier presentation. So I think the increase is basically there in the normal CapEx plans that we've put out. So maybe more specific numbers we can talk offline and see what the breakup is. The point being made is that the nature of these CapEx are basically that of efficiency and modernization rather than anything else.

[Unknown Executive]

No capacity increase as such, but these are the normal modernization CapEx. Every year, we take additional approvals from the Board and that is how it is increasing compared to Q4.

[Ashish Adukia, Chief Financial Officer]

Yes. It can be environment related. It can be upgradations, et cetera.

[Prateek Kumar, Analyst]

Okay. And just on numbers -- segmental numbers, there seems to be a disconnect between reported EBITDA number of -- just a minute, of INR 930 crore which is a reported EBITDA number. But when we add up segmental EBITDA, it is becoming lower at around -- I mean there is -- so I mean when we add up the 4 segments, the numbers look different. So there's some adjustment in other segments which we have done this quarter?

[Ashish Adukia, Chief Financial Officer]

No, no, there is no adjustment at all. If you sum up the business EBITDA and if you compare that to INR 928 crore that we have reported, okay, the gap is generally what is not allocated income or expenses to the corporate. So for example -- and it is a mix of recurring and nonrecurring, mainly nonrecurring. Recurring can be like, for example, treasury that we maintain of about INR 2,500 crores at the end of this quarter. And we earn about, whatever, about 8% or so or 9% -- 8%, 9% income on that. So that also sits in the difference that you're seeing between summation of business EBITDA and the reported EBITDA. So it's just a mix of...

[Prateek Kumar, Analyst]

But typically that is a positive number every quarter, but this quarter it is looking like a negative number. So INR 930 crores is the reported EBITDA and segmental number adds up to INR 980 crore which is INR 442 crore plus INR 446 crore.

[Ashish Adukia, Chief Financial Officer]

Like I said, they may be nonrecurrings sitting out there for this quarter. Next quarter, it will normalize to positive number on the basis of treasury income, unless there is one-off or nonrecurring that may come in this one as well.

[Prateek Kumar, Analyst]

Sir, can you elaborate on this one-off which would be impacting this quarter's numbers?

[Ashish Adukia, Chief Financial Officer]

So this -- we will have to see the numbers offline separately. This can be some CSR that might be sitting there. They might be store repairs, maintenance, which are not allocated to the businesses that might be sitting there, legal costs, et cetera, which are more at the corporate level. So it's a bunch of things that could be there. We can have maybe Saket share with you some of those details offline.

[Operator]

The next question -- it is from the line of [ Abhishek Lika ] from [ Nesse Wealth Management ].

[Unknown Analyst]

Coming back to the capital allocation, you have talked much about Vodafone, Idea and control is also about the same because our investments are actually not giving the proofs. And yes, one of the points that you've highlighted is like maintaining of AAA which I think that it's a good decision. But still I'm not very sure of that -- because, say, you will get in product aggression. And whether our decision is actually -- because it may be like [indiscernible] like 2 years you are not required to put up any money. But it looks like on a year-on-year or quarter there, you may again have to put in money. So as shareholders are holding company discount or increasing by the day, are subsidiaries, other subsidiaries like UltraTech and Capital, they are doing excellent. Grasim stand-alone is doing excellent, but we are not getting the right valuations and -- because we are really actually eating into a lot of concerns for the shareholders. I just want your quick comments on that.

[Ashish Adukia, Chief Financial Officer]

So like I said, we note your point that you've made. I think we draw comfort that INR 25,000 crore has been raised out there, and that is their publicly status for 2 years there is no requirement. I think it's probably not for us to judge whether on quarter-on-quarter basis they will need funding because we've not been indicated that at all. So therefore it is very difficult for us to comment on their funding requirement, unless they change their public statement that they have made.

[Unknown Analyst]

And that said, ultimately, we have to look at the shareholders interest as well. And if the holding company discounts keep on increasing just like our investments into Idea and Vodafone. And as it is, I understand you're talking on that quarter-on-quarter we cannot judge our investments. But as a matter of one small request or probably one suggestion, if I may that if we can freeze our investments into Vodafone, so that is minimum [indiscernible] more fresh money into Vodafone, Idea. And that our investments prove to be worth.

[Ashish Adukia, Chief Financial Officer]

Yes. No, absolutely. I think I hear you, and we are also concerned about the holding company discount. We don't want -- capital allocation could be one of the reasons for that. But we will note that concern. And we are also mindful of shareholders' influence.

[Operator]

The next question is from the line of Tanuj Mukhija from Bank of America.

[Tanuj Mukhija, Associate]

I just had 1 accounting question. If I look at the write-off taken by Vodafone Idea this quarter on account of winding up of Aditya Birla Idea Payments Bank, it was INR 159 crores. However, the write-off taken by Grasim is higher than Vodafone Idea at INR 290 crores. Can you please explain the shareholding structure of Aditya Birla Idea Payments Bank?

[Ashish Adukia, Chief Financial Officer]

Sorry. I'm not too sure which page you're referring to, but let me just clarify a little bit. The investment that has gone into Idea Payment Bank from Grasim for fixed investment of 51% is INR 290 crore till date -- till basically the quarter end. And INR 290 crore we have written down. It will be written off basically when they finally wind up the business, but it has been written down in my books. I get the tax benefit of that because of this write-down of about INR 52 crore. So end of the day, the next write-off in my books is 238 crore on account of Idea Payments Bank. And on a consolidated basis, if you look at the same picture -- so this is on a stand-alone basis. On consolidated financials, if you look at the same picture, the Idea Payments Bank losses that were coming in the Idea Payments Bank was getting reported in the consolidated financials irrespective. So therefore, there was no requirement to them write off the same amount for which you have taken the losses already. So therefore the write-off amount in consolidated financials is much...

[Raj Narayanan]

INR 109 crore.

[Ashish Adukia, Chief Financial Officer]

Is smaller -- -- lower, yes, INR 109 crore.

[Tanuj Mukhija, Associate]

Okay. And just one more thing. Did Grasim directly invest into Aditya Birla Idea Payments Bank or was the investment routed through Vodafone Idea?

[Ashish Adukia, Chief Financial Officer]

No, no, no. It was a JV between Vodafone Idea and erstwhile ABNL which got merged with Grasim. So Grasim had direct holding in Aditya Birla Idea Payments Bank, while remaining stake was held by Vodafone Idea.

[Tanuj Mukhija, Associate]

Okay. And what was Grasim's stake in Aditya Birla Idea Payments Bank, direct stake?

[Ashish Adukia, Chief Financial Officer]

51%.

[Raj Narayanan]

51%.

[Ashish Adukia, Chief Financial Officer]

So it was a 51-49 JV between us and VIL.

[Operator]

The next question is from the line of Sanjay Parekh from Reliance Mutual Fund.

[Sanjay H. Parekh, Senior Fund Manager of Equity Investments]

I have one question. Because of this China-U.S. trade war, over a medium to long-term period, do you think that we would benefit at the end-use segment, and hence the demand for VSF can go up? Or you don't think so that will be the case? Like our exports of textiles can increase at the end-use which helps VSF demand to go up. Do you think that could happen or not?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

I think in the context of India, the U.S.-China trade war is a threat more than opportunity. The China exports $50 billion worth of textiles to U.S. If they are not able to export, God forbid, where do they go? They have the capacity. They have the equipment. They have got the labor with that. So they would even be willing to sell on a variable cost at the end of the day. So -- and what are the next markets? They have to go to Southeast Asia and India, their approximate markets. So I think -- and that's what we have been telling policymakers also because you have to understand. It's an opportunity only when you are the lowest cost producer. And in garment, India is not lowest cost. If you see, there are Vietnam. There is -- Ethiopia has come also. Many people have come up. So to that extent, I think we have to make sure that -- long term I think it will be there, but short term there could be a stretch.

[Sanjay H. Parekh, Senior Fund Manager of Equity Investments]

Okay. Fine. And one more suggestion on the same Vodafone thing. Clearly, as you'd appreciate that the holding company discount has gone up because of Voda Idea. So 1 suggestion could be that there could be a vertical split in a sense that you have in 1 entity a core business holding UltraTech and ABCL. And another entity which -- and, of course, you could have small investments in Hindalco and ABFL are in the same entity. But the other entity could have the insulator business, the fertilizer business, the Vodafone Idea. There is a vertical split. Each one of them has given a share. And maybe even at the cost of putting some cash player for needs. That would actually go a long way and everybody gets a vertical split. So each of the shareholders will get shares of both, and that may solve the problem of the discount going higher. And if at all there are capital needs in Voda, eventually as fertilizer and insulator is not core area that can be sold. I am saying even to the extent of giving INR 1,000 crores there for some needs that may happen in 2 years that can also be given. But that could dramatically reduce the discount because I think the concern comes around Voda Idea and not so much about investment that you may have to do in ABCL. That's just a suggestion if you can consider.

[Ashish Adukia, Chief Financial Officer]

Sure, sure. No, I've understood what you've highlighted as the structure. So we will certainly look into it.

[Operator]

The next question is from the line of Manish Agarwall from Edelweiss.

[Manish Agarwall, Analyst]

Sir, I just wanted to know about what is the current price trend of VSF and caustic soda compared to last quarter?

[Ashish Adukia, Chief Financial Officer]

In India or globally?

[Manish Agarwall, Analyst]

In India, domestic.

[Ashish Adukia, Chief Financial Officer]

So Raj, do you want to go first?

[Raj Narayanan]

Yes. In quarter 1, we normally talk about the consolidated number of chlorine, caustic, et cetera. So compared to last quarter, we would be down by about -- between 10% and 15%.

[Manish Agarwall, Analyst]

I didn't catch the answer properly.

[Raj Narayanan]

Yes. So did I miss out something?

[Manish Agarwall, Analyst]

Sir, I was just asking like 10% to 15% caustic price is down from you're saying Q1 average?

[Raj Narayanan]

That's right. So I am not only talking about caustic prices. We generally do a consolidate number, what we call ECU. So it is a number -- composite number of caustic and chlorine. So I am talking about the consolidated number, the ECU number.

[Manish Agarwall, Analyst]

Correct, sir. And sir, the same for the VSF segment?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

It's very difficult to give VSF price because it has multiple products. There is Modal. There is viscose [indiscernible]. But...

[Manish Agarwall, Analyst]

Blended basis for the company yes?

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

But what we are saying is that drop is 53%. It is not -- and that's what might continue kind of a thing.

[Manish Agarwall, Analyst]

Sorry, sir. I didn't get you, sir. What was...

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

3%.

[Manish Agarwall, Analyst]

Okay, 2% to 3%. And sir, you were talking about the debt [indiscernible] that we are concerned about. I mean we are like maintaining that. So do we have a particular total gross debt or a net debt number in picture that will be a maximum screen that we can go up to?

[Ashish Adukia, Chief Financial Officer]

So -- no, there is -- we don't -- hopefully we will continue like this, and we won't have to track that number at all because we're not concerned about our net debt at all. I think we have enough headroom to maintain our highest rating. So I think the focus is on highest rating. And today, I can tell you that we've done some NCDs in March and April and June, and we have got excellent rates in those NCDs that we have done only because we demand an excellent credit profile in the market. And we want to not lose that benefit at all, both UltraTech and us, our benchmark pricing that we get in the market.

[Manish Agarwall, Analyst]

Okay. And sir, already a lot of discussion has happened on that part, but I just wanted to get a clarity on that. Recently Aditya Birla Group in itself has been -- the promoter group has been buying stake in Vodafone. I think that would be towards the shareholder agreement with Vodafone International to bring the stake -- promoter stake as equal in a couple of years, 2 to 3 years. So will there be any pressure from that perspective that would come on us as well?

[Ashish Adukia, Chief Financial Officer]

It's nothing to do with Grasim. I think that discussion is best had with my predecessor actually, Mr. Sushil Agarwal.

[Operator]

[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Ashish for closing comments. Thank you, and over to you, sir.

[Ashish Adukia, Chief Financial Officer]

Thanks a lot for everyone on joining this call. I think they were excellent questions. We thoroughly enjoyed them. Some of them which were more accounting, et cetera, we were not able to give you the specific details, happy to provide that offline. And we look forward to any queries that you may have. I'll be available. I'll make -- Dilip, Raj will be available to make sure those queries are resolved. So great talking. Thanks, a lot.

[Dilip Singh Gaur, MD, Business Head of Fibre & Pulp and Director]

Thank you.

[Raj Narayanan]

Thanks.

[Operator]

Thank you very much. Ladies and gentlemen, on behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.