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Grasim Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Grasim Industries Limited Q2 FY '23 Earnings Conference Call. We have with us today Mr. H. K. Agarwal, Managing Director, Grasim Industries Limited; Mr. Pavan Jain, CFO, Grasim Industries Limited; Mr. Jayant Dua, Chief Executive Officer, Chemical Division; Grasim Industries Limited; Mr. Rakshit Hargave, CEO, Paints Business, Grasim Industries Limited. [Operator Instructions] Please note, this conference is being recorded.
It is now my pleasure to introduce your host. And I would now like to hand the conference over to Mr. Pavan Jain, CFO. Thank you, and over to you, sir.
Yes. Good evening, and a very warm welcome to all of you to this earnings call of Grasim Industries for Q2 FY '23. As you all know, the global macro environment is passing through difficult times. We are witnessing inflation levels, especially in the developed economies, not seen in the tickets. Tightening of monetary policies by central banks across countries is leading to recessionary market conditions in many parts of the world.
The ripple effects of the ongoing Ukraine-Russia war and COVID-induced lockdowns by China are aiding to the challenging situation across the world. On the positive side, the Indian economy is showing resilient supported by the domestic consumption and expected to be the fastest-growing large economy.
Coming to the company level initiatives as shared earlier, Grasim is investing for building its new growth engines in the form of 2 new high-growth businesses, mainly paints and B2B e-commerce. With our script, we are on track for commissioning of our first paint plant by Q4 FY '24, and remaining plants by FY '25 in a phased manner. Construction is in progress at 5 of the total 6 sites for the paint business. The statutory approval is expected to be enhanced soon for the remaining one plant. Other activities for the launch of business are progressing parallelly.
Progress on the B2B e-commerce business is also on track for commercial launch of the minimum viable product one that is MVP-1 by Q2 FY '24. Product categories to be covered by the platform includes cement, steel, doors and windows, kitchen and electrical, paints, sanitaryware, plumbing, and tiles. The leadership team hiring is ongoing, and expected to be in place by Q4 this year. Simultaneously, technology partners for the platform are being finalized.
In our existing businesses, the Board has approved an additional CapEx of INR 565 crores, out of which approximately INR 382 crores is expected to be spent in current financial year, and remaining will be rolled over to the next year. The additional CapEx is mainly towards land purchase for chemical business for chlorine VAPs expansion and debottlenecking in our pulp plant at Harihar that will take the capacity of the pulp to ° TPD, making the Harihar unit a fully integrated VSF plant. The debottlenecking will marginally increase the pulp integration by 2%, taking it to approximately 37%.
On the ESG front, in line with our commitment to cut carbon emissions, the chemical business now sources about 10% of its power requirements from renewable power, which will increase to 14% by Q1 FY '24. Advanced material business is implementing a plan for sourcing 100% of its power requirements from renewable energy by Q1 FY '24. The textile business has increased its -- the share of renewable power to 15.7% in H1 FY '23. If we compare with FY '20, which was 0.8%, it is a significant increase. VSF business has consecutively for 3 years maintained its leadership position in Canopy's Hot Button report 2022 by securing highest category that is Dark Green Shirt.
Grasim's focused approach to our sustainability initiatives has led to a substantial improvement in Standard & Poor's DJSI score at 88 percentile for FY '22 compared to 76 percentile of previous year.
I will now briefly touch upon the key operational and financial highlights for the quarter. This quarter has not been good for the MMCF industry globally, and we have been no exception to this. VSF business reported revenue of INR 3,241 crores and EBITDA of INR 210 crores. EBITDA declined by 59% Y-o-Y. The decline in EBITDA is majorly because of lower demand due to subdued market conditions in the developed economies on account of inflationary recession and increase in cost of key inputs such as pulp, caustic soda and coal.
The high cost of caustic soda is reflected in offset by the higher profit of the chemical business of the company. The VSF sales volume dropped by 14% on Q-o-Q basis due to demand slowdown and cheaper imports from Indonesia and China. Grey VSF September '22 exit prices were down by 9% compared to June exit prices.
Cotton prices declined by 24% in comparison of quarter end exit prices. Considering the prevailing demand conditions in the VSF business, the company has rationalized the capacity utilization at approximately 70% for VSF [indiscernible]. The FY business reported a strong performance for increased sales volume, recording a growth of 31% Y-o-Y. High consumer demand in the domestic market, supported by the festivals and wedding season has ordered well for the VFY business.
On the positive side, the chemical business reported yet another quarter of robust performance, recording an EBITDA of INR 609 crores in Q2 FY '23 on the back of higher caustic soda sales volumes, which increased by 17% with a stable demand environment and better ECU realizations.
International caustic prices have declined on Q-o-Q basis due to increased availability on account of easing of supply chain disruptions. ECU for Q2 FY '23 stood at INR 49,503 per MT, which is an 89% increase on Y-o-Y basis but an 8% decline on Q-o-Q basis, in line with the global trend. Oversupply and low downstream demand impacted chlorine realizations, which continues to be in the negative territory. The total chlorine integration percentage, including pipeline sales to our dedicated customers, now stands at 61%, which was 56% in Q2 FY '22.
Reaping the benefits of being a conglomerate on a stand-alone level, revenues for Q2 FY '23 stood at INR 6,745 crores, which is an increase of 37% Y-o-Y, and the quarterly EBITDA of INR 1,712 crores and paid before exceptional items at INR 1,052 crores are 14% and 11% up on a Y-o-Y basis.
Here, I would also like to say that both EBITDA and PAT for the quarter at stand-alone level the highest ever quarterly numbers for the company. Consolidated revenue for the quarter is up by 22% Y-o-Y at INR 27,486 crores, led by robust revenue growth for both key subsidiaries that is Aditya Birla Capital and UltraTech Cement. Consolidated EBITDA at INR 3,783 crores was down by 12% Y-o-Y mainly due to cost pressure at UltraTech Cement.
As of 30th September 2022, the company continued to be net zero debt with a net surplus of about INR 230 crores. With the large growth investment plan, the company is well positioned to participate in the high-growth trajectory of the country.
I would like now to hand over the call back to the operator for Q&A. Thanks a lot to all of you for joining this call today.
[Operator Instructions]
We have a first question from the line of Sumangal Nevatia with Kotak Securities.
And my first question is with respect to this increase in CapEx. So there was INR 380-odd crore increase this year, both under the head of existing capacity increase. So if you could just explain where is it basically -- what is the capacity increase and debottlenecking, incrementally happening with this CapEx, both in VSF and Chemical? I mean there was some discussion in the opening remarks, but if you could just elaborate on that, it would be very helpful.
So the new CapEx proposal approved by the Board are for 2 main projects. One is the expansion of our pulp capacity, which we have -- a pulp plant at Harihar. So from 210 TPD current capacity, it will be increased to 260 TPD. With this, our Harihar VSF plant will be fully integrated in the sense, we will have full pulp requirement met by our own pulp plant. So that is one part.
The second part is we are acquiring a large piece of land at Vilayat location to take care of our plants for the value-added product expansion in the chemical business. See our currently Vilayat land is almost fully utilized, and we will need the new land parcel for the plants under our VAPs business. So these are the 2 major products, latest projects, the capacities will take time to come up. The spending will start happening from this year. But like VSF, the pulp plant will take about 2 years to this 50 TPD increase.
Understood. Sir, for the Chemical Division, this INR 250 crores, INR 260 crores kind of increase in FY '23, it's entirely the land acquisition, which we are building, right?
Yes. This is Vilayat site -- our Vilayat current land parcel is fully utilized. And we have acquired -- we will acquire this land for all our future expansion requirements.
Okay. And for the VSF for the pulp, what is the total expenditure? I mean, so INR 100-odd crores, if I see an increase in FY '23, but what would be the total expenditure towards this increase in capacity for pulp?
So total [indiscernible] out of which current year spending will be about INR 85 crores, INR 90 crores.
In total, you said? Sir?
INR 227 crores.
INR 227 crores. Got it. Got it. That's helpful. My second question is more from a longer-term perspective on the VSF versus cotton prices. Now if you see last 6 months, VSF prices are outperforming cotton in the downfall. But before that, VSF prices under performed, the cotton rally for a period of 18 months to 24 months. So going forward, if you could just share some perspective as to how should we see the normalized spreads between cotton and VSF? And our expectation for VSF prices in the coming quarters?
So cotton and VSF prices are directionally correlated. They generally, move in the same direction, but the extent of increase in one does not necessarily reflect in the same increase in the other. So as you said, last 1.5 years cotton prices were rising much faster or much more compared to VSF. So VSF has its own dynamics of capacity and demand, and cotton has its own dynamics. So this time, cotton prices are corrected much sharply, but VSF prices are not corrected to the same extent. So similar situation is expected to continue. We don't expect VSF prices to correct in the same proportion or same extend as coupon prices. Cotton is more speculative, more volatile.
Okay. So can we conclude that the demand-supply prospects and the market balance prospect of VSF currently is appearing to be much stronger than the cotton market?
All the -- this is not just a demand-supply situation, but also a play of market expectation. So now everybody, the brands are expecting the prices to be more volatile, but they are having their inventory of garments. So they are not releasing orders. And people are expecting prices to go down more or remain soft. And in this high interest regime, people are very careful in building up inventories, now that inventory correction is happening. So there are many factors in saying it is not just simple demand and supply alone.
We have next question from the line of Navin Sahadeo with Nuvama Institutional Equities.
Just taking on the previous question about VSF, while your presentation and, of course, even the global data suggested that VSF prices are on a decline. But is the understanding correct that for us, the net realizations are actually slightly higher, sequentially?
Essentially, the realization is mostly flat. But for internationally, prices have come down, but Indian rupee depreciation has also helped to nullify that, but that international prices and the general tendency of the prices is towards softening.
Understood. So even then, we have outperformed largely -- I think the realization for us have outperformed the global prices largely because of currency depreciation. Is that the correct understanding?
Yes.
And on this, that I think the current spot prices are much weaker than even the exit prices, which your presentation sales were down by about 4-odd percent. So is it again safe to really expect that -- of course, medium term can be good. But the immediate quarter, which is, let's say, the December quarter can see further margin compression sequentially because the way the spot prices are?
Yes, this is a very reasonable expectation and interpretation of the current situation. Yes.
Understood. My second question was on the paint segment. And this was more to get like a conviction or confidence in that business since it's a new business for us. So when you say that the pilot plant has started, can you give more color as to what exactly does it mean? Are you doing like test marketing in certain regions? Or what exactly does this mean? What is the capacity of this pilot project? And when we say Q4 commercial production -- Q4 FY '24, the commercial production is expected to start. What would that capacity be?
Rakshit, would you like to take this?
Okay. So as far as the pilot plant is considered, obviously, it is a small plant expected to make test quantities because launching for the first time, we would want to validate all the products in the market. And as far as the first factory that we are talking about going online in December '23, as we have disclosed that we are setting up 1.3 billion milliliters per annum capacity. But first factory would be in the range of about 200 million to 220-odd million liter per annum.
Understood. That's helpful. But are we also then, when we say, testing the product -- are we then also saying that we'll be starting appointing dealer and the brand rollout also happens now to see the test success of it? Or how exactly do we get confidence on this?
No. So like we have said that the launch can only happen once when the actual factory is commercialized, so we can follow the time line -- the time lines likewise.
Yes. But when you say pilot project, I think we are going to set the viability of the project -- products you are saying?
No. The pilot plant is for testing the product performance and validity, it is for that purpose. It has got nothing to do with the commercialization.
We have next question from the line of Pinakin Parekh with JPMorgan.
My first question is on the CapEx. So the press release mentioned CapEx roughly of INR 6,500 crores to INR 6,700 crores versus first half spend to INR 1,500 crores. So that implies second half of roughly INR 5,200 crores. Now Grasim standalone was a net cash balance sheet of just INR 500 crores. So in the second half of the year, would it be fair to say that there could be additional borrowings to fund this CapEx? Or will basically Grasim run down its existing treasury operations to fund the second half CapEx?
That will depend upon the speed of spending. But we will look at the opportunities if there are good opportunities to borrow we will do borrowing. And if there is -- the current volatility in the interest rates are good enough to liquidate some part of the treasury, we will do that. So net-net, we don't expect to be net zero debt by year-end. We will have some net debt on the balance sheet by year-end.
Sure, sir. So just trying to understand that the second half CapEx implies more than a tripling of the first half CapEx. So in terms of the spending, what are the downside risks to this actual to the budgeted program because this is a very sharp step-up in spending that the company proposes.
So there is a possibility of some slowdown in the spending, but there may not be any material difference because what happens so generally, the approvals and ordering, et cetera, take place in mostly Q1 and Q2. The actual work starts now in the second half.
Understood, sir. And sir, just a clarification on the paints business. So the pilot plant is scheduled sometime this year, and the first plant gets commissioned in Q4 FY '24. In terms of the launching of the brand for the paints business and the marketing and the brand building, should we expect that to happen after the first plant is commissioned, so that would be more like FY '25. Or would that start in the next 2 quarters before the first plant gets commissioned? Just trying to understand the sequencing of that part of the launch.
Yes. Rakshit, so...
Yes. If I might add, the brand launch can only happen with the proper launch, which will start with the factory, and we will adhere to that schedule.
Okay. So it's fair to say it will happen only after the first plant gets commissioned in the fourth quarter FY '24.
Yes.
We have next question from the line of Nirav Jimudia with Anvil Research.
So I have a question on the chemicals. Sir, your presentation says that we have been able to increase our VAP production substantially because of the commissioning of CMS capacity, which happened in October 2021. So if you can just let us know what is the capacity utilization of the CMS plant in Q2 FY '23? And along with that, if you can help us explain what was the increase in the EBITDA of VAP in H1 FY '23 versus H1 FY '22? Even if a percentage margins would help.
So the CMS plant was actually a vertical startup. I think we reached 85% capacity within the first quarter of its launch, which is of -- by December or January of the production, we were able to hit about 85% mark. And we've been hovering at that capacity utilization ever since depending upon market reactions between 90% to 80% is what we wanted. That's prior to your first question.
The second one in terms of the differential in your margin of VAPs. Give me a minute and I'll just pull the data out. So if we, at the end of the day, we got about -- let's say, we've got about 20% odd -- 20% to 30% odd jump on our EBITDA on the VAP side. Because the VAP side actually runs into multiple products. It's actually down by around 20% to 30%. Sorry, I set it up for a simple reason that chlorine has been highly impacted in the quarter 2 on its negative pricing.
Got it. But sir, when we transfer the chlorine from the caustic to the VAP side, that happens on a transfer pricing, I believe. So because in Q2, we have seen chlorine prices going as negative up to INR 9, INR 10, also. So wouldn't that have been captured in the incremental VAP profits?
Your point is absolutely fair. See what happens is with the caustic running on a high realization in the market. We -- everybody has been producing caustic at the cost of chlorine being sold at a high negative -- while you might be in a situation where you are transferring at the market price, the chlorine negative price to your product, so are the others doing at the same level, and there has been a lot of intensity and competition on the chlorine derivative side along with that of chlorine. So both of them have seen a subdued margin compared to Q1.
Got it. Sir, what you mentioned is as compared to last H1, this H1, we have seen actually 20% to 30% decline in VAPs profits. This is what you have been trying to say?
While our volumes have gone up, our margins have come down, but it gets more than adequately compensated with the caustic prices...
Yes. Sir, second question is on the epoxy as well as the ECH CapEx. So if you can just let us know the time line of the commissioning of both the projects? What is the total CapEx for both of them? And how much we have spent till date?
And now a related question is because you have mentioned that we have seen the specialty share of Epoxy going up in the overall portfolio this quarter. So if you can just help us explain what's our current share of specialty epoxy in our overall epoxy sales? And once our new capacities will be commissioned, how that mix would look like?
So let me give you the commissioning time of the epoxy and ECH separately. For epoxy, it will be Q1 of FY '24. And for ECH, it will be Q1 of FY '25. That's what the time line is. At the moment, I think in largely both the plants are just at the moment closing on their negotiations of capital equipment. So not a lot of material amount of CapEx has been spent. And as Mr. Jain was saying, largely, the CapEx trends will come in the H2 part is when the 2 ordering will be happened where you are mostly closing the negotiations and the technology alignments.
Correct. And sir, but if you can just run up on the total CapEx that needs to be spent on both the projects cumulatively, that would be helpful?
So epoxy, if we total spending probably with doubling of the capacity would be about INR 360 crores. And we see it through...
It will be somewhere around INR 450 crores plus.
Okay. INR 454 crores. This is what you mentioned, right?
Yes, yes.
Got it. And sir, my question on the specialty epoxy. If you can just give some understanding on the same, that would be helpful.
If I -- the specialty part of the epoxy is doing very well. It is in the range of about 30%, 35%...
Okay. And is it safe to assume that once we double our capacity that mix would continue to remain at those levels or that mix would see an upper peak once those incremental capacities would be in place?
So I think it's a question, a little premature to answer at this moment. Logically, yes, the peak would be on the positive side but very difficult to put a number or a figure today on it.
Your next question is from the line of Prateek Kumar from Jefferies.
My first question is a bookkeeping question. Can you give data on the VFY segment revenue and EBITDA for the quarter?
So see, we are not doing separately numbers of VFY EBITDA and any, et cetera. But as I told you, the VFY revenue, VFY volumes are doing great. VFY volumes are up by 31% this quarter on Y-o-Y basis. And the cost increase in the VFY, we have been able to pass on because of the good demand condition [profitable].
So this quarter onwards, we will not be giving VFY data because in last quarter we were giving the data?
No, we are not -- I don't think we have separately given any VFY data.
So we were giving every quarter this data since our...
Okay. So we will possibly share that, I think let us recheck that. So the VFY business -- on the -- directionally, let me share with you the VFY business has done well during this quarter. Their EBITDA is up, and the volumes are up. The prices they are able to pass on the cost increase in the realization.
Sure. Okay. My second question is on CapEx. So second half, if -- hypothetically, if we see some lower CapEx versus projected CapEx of over INR 5,000 crores. Would that impact the time line for first plant of paints in FY '24 or is that related -- it could be related to some other projects?
No, no. See, the paints we have already told you that the first plant will be commissioned in Q4 next year. So that we are on track. For the existing businesses, especially on the modernization and normal maintenance CapEx is, there may be some slowdown or some delays and which actually gets sold out to the next year. But there may only be a large difference between what we have already projected versus actual.
And one question on VSF profitability. It probably has slipped to below INR 15 per kg this quarter up closer to INR 10 per kg. This seems to be that the second lowest or third lowest kind of profitability in past many quarters leaving aside the COVID quarter of Q1 '21. How should we like sort of look at this profitability like, let's say, beyond [indiscernible], which is expected to be much weaker. But like beyond 3Q, how should we look at the profit within the segment?
See VSF profitability is expected to remain under pressure for the time being because input prices remain elevated. And in line with the cotton, the sentiments are depressed and VSF price is also affected by continuous lockdown in China and slowdown of demand in Europe and USA, which are the major textile consuming country center. So for the time being, VSF margins will most likely remain subdued.
We have next question from the line of Vipul Shah with Sumangal Investment.
So my question is, sir, how do we calculate ECU per tonne? On the -- only chlorine is included in the byproduct, means 1 tonne of caustic soda produce is how much chlorine?
So ECU is calculated as a function of the caustic, both liquid and solid, also chlorine and then hydrochloric acid. And the formula for -- the formula for chlorine production is 1 tonne of caustic generates 0.89 tonnes of chlorine.
Okay. So there, we are carrying negative chlorine [indiscernible] today, right?
Chlorine [indiscernible] 1 tonne produces close to 0.9, that's running in positive. And one is running at INR 9 to INR 10 negative, as stated in our listing that you can figure out.
Okay, sir. And my second question is we are totally self-sufficient as far as pulp is concerned for our VSF business? Or we hope to purchase any pulp from the market?
So we do have to purchase pulp from market. Our integration is in the range of about 35%. And we have long-term arrangements with some relative known suppliers. We have formula based pricing. So we do have to purchase pulp from outside to that extent about [two-third].
Okay. Sir. So only 35% we are integrated.
Yes. But here I would like to add, see, we have our pulp JV, it's one of the JV plant is paper-grade pulp, they manufacture paper-grade pulp. So we also sell the paper-grade pulp in the market and at the same time, we buy [TDC] grade, our VSF grade pulp. So if we add that, then our integration grows to about 35%. We are kind of hedging. When we have the paper-grade pulp, which goes to the market, and we buy the VSF grade pulp.
So any plan to increase our pulp integration over medium term, sir?
So we are doing a small debottleneck in that area, but of course this is a small thing. And then we are working on some plans for circularity where we will have plans to use garment -- cotton garments that is still some time away. So that is the way to increase or reduce the virgin pulp.
We have next question from the line of Shalini Vasant with DSP Mutual Fund.
We have next question from the [indiscernible] with DAM Capital Advisors.
Just one question. I wanted an update on your tie-up with Lubrizol to manufacture CPVC resin. The tie-up was announced in late 2020, and the first phase was supposed to start by end 2022. So what is the status on this one now?
So there was a change in management at Lubrizol, that has led to a delay. So there was about 12 to 18 months of -- while the new management settle down and delay. Now things are back on track, and we expect that in about 24 months the execution will be kind of overhead there. And that's the communication we received.
24 months from today, right?
Yes.
And that would be for the first phase or for the entire plant?
First phase. We're only talking first phase.
First phase. And just lastly, we are not spending anything over here, right? It's entirely their capital.
No. There is no capital burden on Grasim at all for this particular functions.
We have a next question from the line of Jiten Doshi with Enam Asset Management.
I would like to ask you about your paint business. What is the capitalized loss that you're projecting just before commencement or what sort of interest losses would you capitalize prior to commencement?
So the interest till this the plant commissioning will be capitalized. I don't have ready numbers at this moment. Rakshit, do you have that interest capitalized number readily available with you?
No, I don't have it readily available.
We will share with you separately.
Sure. And sir, I wanted to ask you that at full capacity, what do you really estimate the paint business turnover because you are putting this CapEx with some calculation. So roughly going by whatever CapEx that you're putting in, what should be your output in terms of top line at full capacity?
So the way I would want to answer this question is that we have declared that we are setting up 1.3 billion liters capacities. And you would know what is the percentage utilization -- capacity utilization in major paint companies, and then it becomes a function of pricing. So I don't think that I want to disclose anything on how would the pricing in the market develop once when we come here and after a few years.
But I think the answer lies in putting those dots together. So that's how -- so we would not want to share in terms of what have been our assumptions on our business plan at the moment. But these are how the building blocks will look like.
No. So I assume that there will be some sort of a calculation, which will be a return on capital employed number that I'm looking for, not really your strategy in terms of how we are with the price, et cetera. I'm just saying what sort of return on capital employed. Can we expect, let's say, in year 3? not in year 1.
Okay. So the way we are looking at is I would put is that we are looking towards keeping the EBITDA losses to a reasonable amount and to become a profitable business as soon as possible.
Okay. So I mean just to get it, would -- at full capacity, would you be doing a 3x of the gross block? Or what number can we factor in from the gross asset base?
I think Pavan, maybe you could [invite] separately in terms of clearing these calls with whatever numbers we can share with them.
Yes. So as of now, it is very uncertain to, I mean, give any kind of numbers of year 3, year 4 or year 5. So I mean we are still away from the actual -- I mean the product coming to the market and how the -- for example, input prices will behave and all that. So it is not a year 1, 2 or 3 kind of stories. We are in plans for the long haul. So I think let us come to a stage where we can give you some kind of numbers on the paints business.
We have next question from the line of Shalini Vasanta with DSP Mutual Funds.
This is Vivek Ramakrishnan. Sorry, I got cut last time. My question, if you do a rough cut mathematics, the net debt goes up to about INR 2,000 crores as at March '23, I just wonder now whether that number is correct. And is there a debt-to-EBITDA guidance that you have for longer period of time as you undertake this large CapEx, it's question number one. And question number 2 is whether there is any working capital release that you anticipate in the second half, given the fact that prices have come down and the supply chain constraints have become less. That's it from my side.
So on the net debt to EBITDA, we will -- at the peak of the CapEx once we are done with the paints CapEx, everything then we may have about 2.73 kind of net debt to EBITDA. That is our current estimate. But it will all depend upon how the -- I mean the profitability pans out over the VSF. That is 1 part.
And the second question was about -- your question was about what?
On the working capital release sir, whether there is because supply chain constraints have come down. Any working capital release to anticipate.
Not any large amount. We are already working in the VSF business, for example, on a net negative working capital basis. And some kind of inventory data is possible because of the demand slowdown in VSF business, for example. So not any large working capital release is expected in the current year. we are actually already doing a negative working capital level in our 2 businesses one Textiles and VSF.
We have next question from the line of Nirav Jimudia with Anvil Research. .
Sir, my question is on the Chemical side. So I have 2 questions on the same. Sir you mentioned that we have been increasing our CapEx on the Chemical side for increasing the capacities of the VAPs. So once this land based purchase and we keep on adding those products on that infrastructure, how much are chlorine integration would go up on the increased capacity of caustic soda?
So let's let me take that question. So I think we announced earlier in last year in one of our calls that we are expanding our capacity from 1,000 tonnes to 1,400 tonnes of -- at Vilayat. The purchase of land would only come, get used for the chlorine consumption of Vilayat plant. So Vilayat plant has full capacity utilization, let's say, at a 90% capacity utilization of 1,400. And with this new land, we will be able to reach -- I can't give an exact number because you need to [tie] between 70% to 75%, 77% of total chlorine consumption.
Okay. And this includes the pipeline sales, also.
Actually, yes, this includes the pipeline sales also. This is the way our chlorine definition was.
And sir, when we see our VAP sales, I think from 2016 to 2020, we see the chlorine integration. I think it has almost doubled. So from 162,000 tonnes to now, a run rate of almost 330,000 tonnes. So once we come up with the new products at our land what you mentioned, is it fair to assume that the margins on a per kg basis would be higher for the new product vis-a-vis the existing basket of products we manufacture?
I may not go into any guidance of that at this point of time. I think as and when we formulate our plans and put it up to the Board, the approvals will come through, I think this will be a more pertinent question at that point of time because what we will be -- otherwise, what we'll be sharing with you would be our own internal discussions rather than an approved discussion plan. So that they would be -- we'll come to that question when we come to those approvals.
Got it. And sir, one more question if you allow and if you can share with us so. What was the average coal cost for us in Q2 FY '23 vis-a-vis Q4 of FY '22. So if we take Q4 of FY '22 as a base, what was the coal cost for us in Q2 of FY '23 for the Chemical business? Even a percentage increase or the decrease would also help us.
So I wouldn't know the coal cost because at the end of the day, we look at it from [indiscernible] value and in consumption. But from a Q4 of last year to Q2 of this year, my estimate would be that we would have -- the coal costs have kind of jumped by on a year-over-year basis, about 130% to 140% depending upon the country. And if you look at it from a quarter-to-quarter, it's between 6% to 10%. So it's a fairly high volatile scenario on the coal front as of now.
Okay. And sir, a small clarification on the VSF sales and the EBITDA, what you mentioned in your opening remarks. So what you mentioned is INR 3,241 crores of sales and an operating profit of INR 210 crores. This is what you mentioned in your opening remarks.
Yes, yes.
We have next question from the line of Shawn[Indiscernible] with [Products] Research.
Just some questions focused around the VSF business. Just in terms of the comments you made earlier about VSF capacity going to be rationalized. And I think you said around 70%. I'm just considering that number? And then secondly, I guess, you must already sort of answered this, but more confirmation that it's been fairly like to be up this for a couple of quarters, given your comments around margins being subdued. That's my first question.
Yes. So the current capacity utilizations are rationalized at about 70%. And we expect the demand to be back sometime maybe in next couple of quarters. Till then, we will continue to monitor the situation, and we will align the products in [indiscernible] accordingly.
Okay. Very clear. And I just look at your current full year capacity. That's sitting at about 824,000 tonnes. With the some planned CapEx into the modernizations and anything else, is that capacity going to increase further? And if so, by when and how much?
So there are small increases in the specialty products, which is about 13,000 tonnes. But these are like third generation of VSF fiber. And that is all about the capacity increase. There is not much capacity increase in the normal VSF. It's small debottlenecking.
Okay. Great. Excellent. That's great. And then your comment around DP, dissolving wood pulp integration into the VSF business. Earlier, I think you said it's around 35%. Is that sort of pre or post the current debottlenecking that you got planned?
It is at the full capacity.
So once the debottling is done, the 35% integrated. Is that you're saying?
Yes. At the current capacity level, it is about 35% integration, and we are increasing the capacity as we shared that one of the -- our Indian pulp plant that will take the integration to about 37% of the capacity.
We have next question from the line of Abhimanyu Kasliwal with Choice India Limited.
Most of my questions have been answered. So I have just 2 specific queries. Number one was regarding the platform business, the B2B business. What can you expect? How do we forecast this business? Will this be a game changer in terms of revenues, in terms of margins, what is the company's expectations? And my second question, sir, the other income, I have noted for the pattern, that is the September quarter, there is a substantial jump up -- and this -- is this the case? Or is it that the past 3 Septembers for some reason they just jumped up. So how do we forecast the other income? What is the reason? So these are my 2 questions, sir.
So the first one is about the B2B platform. So the B2B e-commerce platform is expected to be a high-growth business in terms of revenue. And since it is an e-commerce business, the margins are not going to be very large margins where -- but the top line could be very significant. So -- and we -- our aim is to be the -- one of the largest e-comm players in B2B segment, especially in the building materials segment. So that is the -- I mean, B2B e-commerce segment.
Sorry to interrupt, would it be like an IndiaMART for building material? Is it a correct way to look at it?
Yes. IndiaMART, that's I think industrial products, we are of building material segment. We have the ecosystem for the building material businesses in the growth. So we have large kind of customers who are buying cement from us or -- now they'll be buying paints from us. So the sale ecosystem will be available for the B2B platform business.
Okay. So we're expecting [indiscernible] on the board from this one actually.
[Indiscernible] about your other income -- see other income is Q2 will be significantly higher every quarter because we get the dividends from our subsidiaries and other investments. So the large dividend income comes from UltraTech. So for example, in this quarter, about INR 618 crores has come from -- dividend from UltraTech.
Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the conference back over to Mr. Pavan Jain for closing remarks. Over to you, sir.
So thank you all for joining us for this call today, and we'll meet next quarter again.
Thank you very much, sir. Ladies and gentlemen, on behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining with us, and you may now disconnect your lines.