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Grasim Industries Ltd
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Ladies and gentlemen, good day, and welcome to Grasim Industries Q4 FY '21 Investor Conference Call. We have with us today from the management, Mr. Dilip Gaur, Managing Director; Mr. Kalyan Ram, CEO, Global Chemicals and Group Business Head, Fertilizers and Insulators; Mr. Jayant Dua, Chief Executive Officer, Chemical Division; Mr. Ashish Adukia, CFO. [Operator Instructions] I would now like to hand the conference over to Mr. Ashish Adukia, CFO. Thank you. And over to you, sir.
Thank you. Good afternoon to all the participants. I hope that you and your families are safe. The FY '21 was a year of 2 halves. We started on a very grim note in quarter 1, with low operating rates across all our plants, which was followed actually by a solid recovery from quarter 3 onwards. In this quarter presentation, we would like to start the discussion with highlighting the qualities of viscose as a green fiber. What makes viscose to green fiber is based on 3 tenets, which are green product, being technology and green ecosystem. These are highlighted on -- in the presentation on Page 4, which has already been uploaded. We have listed down 6 powerful credentials of viscose, which makes its superior product on the sustainability front. Viscose is based from ethically 100%-sourced wood and from sustainable -- sustainably managed forests. The land for viscose wood does not require added fertilizer or pesticides. Therefore, there's no use of chemicals for growing its raw material. Viscose needs very less amount of water as compared to other natural fibers during its life cycle, which makes it low on water consumption. Viscose is also fully biodegradable in 8 weeks. In comparison to that, the other fibers take much longer. Additionally, pre- and post-consumer waste can be converted into fiber again, resulting in circularity. Grasim is one of the companies which has all the 3 generations of fiber under one roof, which are viscose, Modal and lyocell. Lyocell technologies and -- closed-loop technology with an exceptional recovery rate of key chemicals such as NMMO by more than -- which is recovered by more than 99.7%, even the recovered water from the process is reused. We are currently implementing a closed-loop technology in all our viscose plants, which will lead to reduction in emissions to air and water, improve the working ambience, and so cut down on raw material consumptions. We also have unparalleled focus on adopting global standards and systems accepted and recognized globally. We have received Higg FEM 3.0 average scores for all our sites, and we are committed to achieve stringent EU BAT norm for all our sites by December 2022. Key to create ecological value is to use less. On Page 6, you will see how we have reduced the use of water, plastic and focused on reducing emissions. Moving on to the third tenet, which is a green ecosystem. It's about making an impact that goes beyond your own operations. The 3 pillars of green ecosystem are: responsible sourcing and the supply chain; valuable partnerships; and social responsibility. We ensure that our -- we source our wood pulp requirement for certified forestry that follows responsible practices. We work with our partners in the entire value chain to impart the importance of sustainability. We have partnered with GreenTrack that provides end-to-end supply chain feasibility for textile industry. We have also been a positive impact to the society around us for many years. As a company, we have actively engaged with more than 1 million people across several states. Our CSR spends are focused on education, supporting 25,000-plus students, health, sustainability livelihood supporting almost 14,000-plus farmers, infrastructure development and women empowerment. Our efforts towards sustainability has not gone unnoticed. Under responsible sourcing, VSF was ranked #1 in Canopy's Hot Button Report 2020 with Dark Green Shirt rating. The VSF received the prestigious Innovation and Sustainable Supply Chain Award from United Nations Global Compact Network India in 2021. The business was given the award for its pioneering innovation relating to recycled and circular fiber made with pre-consumer fabric waste based on in-house technology. Let me now switch to the operational and financial performance of the company. The Fertilizer business is -- divestment process is expected to be completed by quarter 2 FY [ '20 ] after receipt of NCLT approvals for the scheme of arrangements amongst other pending approvals. The reported financials has already classified it as discontinued operations. Grasim Premium Fabric Private Limited, the erstwhile Soktas India, which was a subsidiary of the company, has received the approval for merger with the appointed date of 1st April 2019. We are yet to file the final order with the ROC. But as substantial steps are already over, the financials of this subsidiary has been incorporated as part of textile business of the company. In the fourth quarter, all our businesses witnessed all-round improvement in operational performance on back of strong consumer sentiments due to receding COVID cases. The financial performance of VSF reporting textiles was much ahead of expectation in this quarter. The global textile fiber demand witnessed a sharp recovery in second half, led by support in consumer demand and restocking of the light supply pipeline. The growing consumer preference for comfortable cash flow and value for clothing -- value-for-money clothing has spurred demand for cellulosic fiber, and VSF has been key beneficiary of this shift. In India, our VSF plants operated at full capacity for 2 successive quarters. The domestic demand grew by 9% Y-o-Y in quarter 4. The share of value-added products in the overall sales mix also improved to 26% in quarter 4 as against 22% in quarter 3. The VSF prices in China traded at their multiyear high in China. The VSF prices rose from RMB 12,800 in Jan to RMB 15,800 in March 2021. This was driven by a strong consumer demand, restocking and rise in cotton prices during the last 12 months. China's VSF inventory at plants declined significantly from 45 days in April to 13 days in March. The VSF business reported one of the highest EBITDA of INR 548 crore during quarter 4. As part of VSF segment, the VFY business reported revenue of INR 465 crore and EBITDA of INR 77 crore in the quarter. The chloralkali capacity utilization touched 94% in quarter 4 from 89% in quarter 3. The international caustic soda prices improved sequentially, led by temporary supply disruption in the last -- sorry, the later part of the quarter. In the Chemicals segment, the Advanced Material business, that is Epoxy business, witnessed sales volume growth, driven by demand across segments, especially wind and auto segment. The sector witnessed the demand outstripping the supply due to raw material constraint, coupled with disruption at certain global manufacturers, leading to exceptional performance. Our consolidated revenue for quarter 4 rose to INR 24,399, up 26% Y-o-Y. And the EBITDA and PAT was INR 5,142 crore and INR 1,715 crore, respectively, jumping 62% and 14% Y-o-Y, respectively. On the stand-alone basis, excluding the discontinued operations of Fertilizer, as revenue and EBITDA for quarter 4 stood at INR 4,394 crore and INR 880 crore, respectively. EBITDA reported Y-o-Y improvement of 121%. The revenue and EBITDA from the discontinued operations of fertilizer for quarter 4 stood at INR 561 crore and INR 33 crore, and has not been included in the published financials. On CapEx, you may please refer to Page 14 of the investor presentation. The total CapEx spend for FY '21 stood at INR 1,508 crore. The CapEx plan for FY '22, excluding Paint and Fertilizer, is INR 2,604 crore, which includes the VSF expansion project at Vilayat, with Line 1 scheduled to be commissioned in quarter 2 of FY '22 and Line 2 can be commissioned in quarter 3 of FY '22. The other CapEx includes Grasim's plans to invest towards increasing its Advanced Material, i.e., Epoxy business capacity by 125 KTPA. This would be done through a brownfield expansion at the existing location at Vilayat, Gujarat. This will include standard and specialty epoxy products, along with curing agents. Being an industry leader, Grasim will continue to play a proactive role in growing and supporting the demand growth of epoxy. In Chlor-Alkali business, Grasim plans to invest in 200 TPD caustic brownfield expansion at Vilayat. This would take the total capacity to 1,400 TPD at its Vilayat site and will primarily meet the customers' requirement in the country's western region. Including that, the requirement of VSF business, which is -- which will also be commissioning its expanded capacity. The expansion will be commenced -- commissioned in 24 months post receipt of statutory clearances and approval. The expansion of chemicals swap, which is in various different swaps, will improve the overall chlorine integration to about 40% by FY '25. This is excluding what we plan to sell to our customers through pipelines. We have successfully commissioned 182 megawatt of new capacity in our Solar business during FY '21, taking the total capacity of solar to 502 megawatt. I would like to remind you that the Solar business is in our subsidiary. It's not a division. So it's not included in the CapEx slide that you're seeing. It's a subsidiary [indiscernible] capture. In next 2 years, we are scheduled to add another 343 megawatt of new capacities. Our balance sheet has stayed strong despite headwinds in the half 1. At the end of the year, the consolidated net debt stands -- reduced to INR 8,831 crore, 58% reduction from March '20 levels. At stand-alone level, the net debt reduced from INR 2,999 crore in March '20, which included the debt of erstwhile Soktas, which has got merged now, to only INR 914 crore in March '21. Based on our performance and comfortable liquidity position, the Board of Directors of Grasim has recommended a dividend of INR 5 per share for the year ended 31st March 2021. And in addition to that, a special dividend of INR 4 per share, taking the total dividend to INR 9 per share. The total outflow on account of the dividend would be INR 592 crore. In terms of outlook, we expect the second wave of COVID to impact the operational and financial performance during the lockdown due to the demand slowdown, but we expect the recovery to happen as much as last year after the lockdown is over. With our inherent financial strength, operational excellence and diverse product portfolio of cement, financial services, viscose and chemicals, we've always demonstrated the ability to be resilient and rebound quickly. So now I would like to hand back to the operator for Q&A.
[Operator Instructions] The first question is from the line of Prayatn Mahajan from Kotak.
This is Sumangal Nevatia from Kotak. Congratulations on a good set of numbers. First question is with respect to the VSF business. A very strong recovery. But starting April, we are seeing some softness in prices. And also, cost is expected to catch up as far as pulp is concerned. So is it possible to share some color, both on prices and costs in 1Q '21? How is it moving? And also, I mean, what is the recent volume trends given the recent lockdown and restrictions in the country?
Dilip, go ahead.
I couldn't hear the question properly. It is about Q4?
No. So Dilip, the question is regarding the second wave of COVID. How it has impacted price volume, both price and volume, yes.
It's -- and something pulp he wanted to know, right?
And yes, and the pulp price because of cost is going up, yes. Sorry.
If you look at the quarter 4 and as we -- during the quarter 4, the demand was very strong. I think India witnessed the highest ever financing of the [ score ] in the March quarter. And until the lockdown was imposed, the volume the pretty strong in the Indian market. The prices -- also, global prices has been at the peak during the quarter 4, but those prices were exceptionally high because of there was underlying demand, but there was a lot of restocking happening. So we expected rebalancing of the prices to happen. So to that extent, yes, there were some moderation in the pricing, but still the VSF fairly remained quite impressive in the quarter ended. With the lockdown, because as you know, a typical textile from fiber to garment at least move across 4 to 5 states. So now with the lockdowns, the entire value chain [ just stalled ]. To that extent, there has been demand bump and I think that the domestic demand has come down significantly because of lockdown. And particularly in south where [indiscernible] is hit very badly. And we -- and the April demand loss was about 25%, maybe even higher. So what we are doing -- but the underlying sense is demand was very strong. So when we talked to the [ value chains ], we believe that the day lockdown is lifted, there will be an offset and demand will pick up very fast. The good news is the global markets continue to remain very strong. People who have the export businesses are doing extremely well. So the export businesses are going [ full circle ]. And I think the U.S. economy is doing well, sales have done very well. U.S. sales are doing well. So to my mind, I think once the road bump of lockdown get lower, and demand will come back to healthy level. Yes, like all commodities, the pulp price also have run up, but that's overdue. The pulp prices [indiscernible] VSF because VSF has already -- if you look at the VSF prices, they've gone up 54% Y-o-Y. So pulp is now catching up. In our case, last year -- if you recall, last year, when the pulp prices are falling because our pricing is one quarter behind, we are always losing. But today, well at least for 2 quarters, we get a benefit. Our conversion cost of pulp is not going as far as I think market price is going up. So to that extent, [ there is advantage on our business side ]. Does that answer your question?
Yes. [ And if I can add ] as well. I think one more point, what has happened is that, of course, the spread of VSF pulp has gone up significantly. And it is gone beyond even FY '19 levels, which will normalize with the pulp prices also catching up.
Okay. Okay. So can I -- is it fair to conclude that fourth quarter, we hit the peak in terms of profitability, so in terms of margin, given the benefit of lead in VSF prices versus pulp? Is that a fair assessment?
I couldn't hear. Can you repeat your question? I'm sorry, the line is really bad here.
Yes. I think Dilip, what Sumangal is asking is that, is it fair to conclude that quarter 4 was a peak for viscose?
Obviously, because you see it was not only the demand growth, restocking happened. So if you think of a multiyear peak, yes. Absolutely.
Understood, understood. Second question is with respect to the CapEx. So Ashish, last year fourth quarter outstanding CapEx was somewhere around INR 5,000 crore. This year, we spent INR 1,500 crore and the plan is another INR 2,500-odd crore in FY '22. So from a design CapEx, around INR 1,000-odd crores is still pending, which would be spent in the following year? Is that the right understanding of our CapEx plan?
No, no. Sumangal, I don't think you should read it that way. I think earlier we used to give the sanctioned amount, right, which was more of an outstanding CapEx, and then we used to show year-wise breakdown, okay. I think to give better guidance to the market, because it was very difficult to give outlook of 2 years down the line what the CapEx would be. To give a better outlook, now we are giving 1 year outlook of CapEx, which is other than for Paint which is -- and Fertilizer it is INR 2,600 crores. So that's how you should be reading the chart. Don't calculate the balance amount and assume that, that would be the total amount.
Okay. But I mean in terms of all our ongoing projects, will we be -- I mean, completing all the expenditures for our goals in this year itself? Or there will be some leftover?
No. So the VSF, 600 TPD, what I talked about the 2 lines in Vilayat will complete in quarter 2, quarter 3. The chloralkali capacity expansion, which is ongoing in Vilayat, the current ongoing in Vilayat and Rehla, [ BIS ] and Balabhadrapuram. There has been some delay in these capacities to come because of the COVID, okay? So the local situation in, for example, Balabhadrapuram is not good. So therefore, we are having to push out CapEx commissioning. So there is some delay out there. In terms of Vilayat, new 200 TPD we are giving a guidance of 24 months after receiving the statutory approvals. Yes, so these are the broad time lines of the current plan that I talked about. Jayant, is there anything that you would like to add?
No. The only thing I would add over here [indiscernible] that will come up in Vilayat, again, early H2. So Rehla will come in early H2. Balabhadrapuram will come in early H2. And the 200 fresh expansion then will take another 24 months. So we have a fairly large set of projects which are going to be coming up in the Chlor-Alkali business this year, starting H2 early until the end of the year getting commissioned.
Understood, understood. Just one small clarification. So to the CapEx slide, [indiscernible] for Paint, so does it mean that this year, there will not be any start-up CapEx on the Paint business? Or it's still very early to share details on that business?
Yes, it's the latter. So there will be CapEx on -- in Paints business. But as you know that it's only about 3, 4 months back that we discussed about entering into Paints business. So we are still formulating our strategy and CapEx plan as we're going along. We're looking at land acquisition, et cetera, for the locations of our plant. So right now, it's too early to say what the CapEx guidance for the year would be. So therefore, we are just maintaining the earlier guidance that was given right now, which is INR 5,000 crore over 3 years of CapEx. And as we get more clarity, we will feed that to our investors.
The next question is from the line of Nirav Jimudia from Anvil Research.
Sir, I have two questions. So one is on VSF and then on Chemicals. So first, on VSF. Sir, VSF prices like in the presentation here, shown that it has moved up from the Grey VSF prices have moved from almost $1.2 a kilo to almost now $2 to $2.2 a kilo. So how does the premium moves for the value-added or the specialty vehicle? Because if I recall it correctly, in Q2 conference call, you have mentioned that premium for Modal is generally $1 premium to the Grey VSF prices. So if this Grey VSF prices were $1.2 in Q2 and now at $2, so how does the premium moves for the specialty? Because what I find from the numbers is, I think, the value-added premiums have slightly shrinked as compared to what we were earlier doing. So let's say, in H1 FY '21. So if you can give us some sort of explanation here. And a related question for specialty VSF is that, how is the market for specialty VSF in India? So how it is growing over the years. And if you can explain our market share in terms of the growth, what we have seen in the specialty VSF market in India. So this is about VFS, sir.
Good question. So I'll respond to first to your -- the premium part. If you recall our earlier conversation, I told you in the premium always goes up when the base VSF price is less.
Sir, your voice is slightly unaudible. Could you speak slightly louder, sir?
Can you hear me now?
Yes, yes. So now it is okay.
So if you recall our 2 -- our previous conversation on a couple of occasions, I have [ mentioned ] that the premium was up when the base VSF price goes down because there is a [ banned ] premium price works if you take a Modal price. If you read the [ 18,000 to 20,000 ] price. And when your base price goes down, you see our premium going [indiscernible] to $1-plus last time. You can review in the history when the prices were again $2 [indiscernible] gone down [ $2.6 ]. So there is already a healthy premium which stands at [ $0.61 ] And when the base price has gone up, the [indiscernible] shrunk to that extent. [indiscernible] the other thing with premium si the premium products are a mix of there is Modal, there is a [indiscernible], there is lyocell or [indiscernible]. The different products have a different premium. So you have to look at the each category. There is no [indiscernible] across the board. The third is one product, it is the lyocell or [ XL ] product. Here, there has been a bit of a structural change in the market because a lot of Chinese capacity has started being announced, basically. They have not come on the ground, but they are announced. We have been able to make not the quality of [ lyocell ] products we make or our Europe competition makes. But that is good enough for certain application to go in the blend. So that had lowered because in anticipation of the very huge capacity announcement. There was a temporary dip in the price of lyocell [ in the Chinese market ] [indiscernible]. For lyocell, one of the companies announced that lyocell has [indiscernible] R&D premium to disclose, without anything on the ground. So there are no [ sentimental ] responsibility now regarding that. So you did see a bit of transition on the premium part of it, right? So that means that in all these things, the market has been very strong. And [indiscernible]demand all along has been the demand for premium market. I think that Modal is doing extremely well. So there is a huge [indiscernible] across the [indiscernible] for the world. The second part of the premium market, which is it has [indiscernible] The eco-friendly [indiscernible] course. The brand hasn't really -- enthusiastic in receiving this brand. So a lot of [indiscernible] already is cost has been [indiscernible] into this cost. [indiscernible] premium. Now that is a premium for us, but there is no difference with fiber. What you do is you make it in a [ process ] [indiscernible] You make it [indiscernible] facilities. So that has been a very big change. So I think to that extent, the whole textile world is shifting more and more specialty fiber, the [indiscernible] fiber business. And have you seen our share of specialty, 100, 400 basis points [indiscernible] a big question in Indian market specialty is moving significantly because we have got a [indiscernible] of more than [indiscernible]. And that we had a kind of ambition of going into the specialty market in India with VSF products today. In our mind, I think specialty in India is taking off pretty well, and we have got the market leadership now [indiscernible] about 20%, 25% [indiscernible].
Okay, okay, okay. So sir, the second question is on the chemical side. So like if I see your quarter-on-quarter EBITDA, I think, it has not moved up much. So one of the statement in the presentation is that caustic has seen some cost pressures broadly. So the cost increases mainly because of the power cost or any other reason? So this is -- a related question is, sir, if we see for the epoxy, what you have rightly mentioned in your opening remarks also. What we have seen is that the percentage increase in the prices of earlier is more than probably all the raw materials put together, be it the [indiscernible] or Epichlorohydrin, I think. So -- but when we see the profitability, I think it has not moved up much on a quarter-on-quarter basis. So if you can help us understand that, is there any lag effect which would be visible in H1 of FY '22? And if you can give some understanding about our expansion also, because I think we have announced an expansion by 125,000 tons for epoxy. So are we also planning some backward integration like some of the players in India have announced stand-alone capacities for Epichlorohydrin? So are we also planning same sort of backward integration?
Jayant, would you like to comment from the cost side of the chemicals?
Yes. So I think it the larger impact on a flattish kind of situation on caustic is due to the international prices, which only started seeing a little bit of an uptick in the later part of March of the last quarter. While on the commodity side, I think each one of us know that the prices did go up. But I think that power management, we did a good job and actually we were quite -- we were not impacted too much on the power cost and given the coal increases which happened. But the results are more because of the caustic price movement rather than anything else on that particular front. I hope that answers your question.
Yes. Because I think this year, realizations were also higher on a quarter-on-quarter basis. I think...
Marginally higher compared to [indiscernible], not significantly higher. That's what I'm saying. The last part of the quarter, there was an uptick basically due to the winter storm in the U.S., which led to a little bit of a demand/supply situation, which did move or help to move the prices up.
Correct, correct. Makes sense.
So yes, so on the cost side, basically, there were some also repairs and maintenance, et cetera, of the plant, which was -- which increased the cost a bit more than quarter 3 -- in comparison to quarter 3.
On the Epoxy front, I'll request Kalyan to comment. I think there are a couple of questions out there on Epoxy. One is on the prices increase in -- realization had increased quite a bit. But [indiscernible] the margin is not reflective of that. Is it because of the cost increase?
Yes. So -- yes. So I'll take that, Ashish?
Go ahead.
So Epoxy as a business has always been an extremely steady business for us. We are a business where we are now more or less sold out on our epoxy capacities. And what happened in the last 6 months has been more with this [ phenomenon ]. Globally, this can only, for various reasons, initially force majeures, and later on, a real serious shortage through supply chains have not been very easily accessible, whereas the demand has been picking up for the end products, whether it is just as resins or in terms of our own formulations we offer up to the formulations, specialties as well as formulations. So when the -- this phenomenon became severely short, majority of epoxy players have actually not run their business plants 100%. They could only run at, say, 90%, 85%, 95%. What we have done is we look at it as product, as a formulation and as a solution within the raw materials that we have access because we had one of the better supply chains. So we could get majority of our raw materials which we had a plan for at least in the Vilayat plant. And we have used it for gaining the key customers and their requirements, mostly from both products as well as solutions. So in a way, they -- it's hypothetical, whether a [indiscernible] was low price or high price, it was not just available after a while. So it's about getting access, whereas once you get access, you would definitely be able to pitch it at a much higher price. What we expect in the next 1 or 2 months, this might slip slightly. We expect, at least for the next month or so up to June, this quarter should still be fairly strong. Still, the raw materials are fully not available. When the raw materials are fully available by second quarter, the prices might soften a bit, but still, we expect the market to be strong, because end of the day, all of the downstream, coatings, electricals, auto, wind, all are going strong. And that's also one reason for us we have sold out and we are looking at expansion.
On the [indiscernible], sir, if you can share.
Yes. So very obvious. If you can think of it, we are the largest chlor-alkali player. We are the largest epoxy player. And we are highly integrated across the board, and we are a chlorine derivative player. So it's very obvious that we should be putting the largest ECH plant, too. It is at an advanced consideration. It is being reviewed. It is being finalized. Maybe we will have something to tell you in a period of time -- in a short period in the future.
The next question is from the line of Chirag Sureka from DSP Mutual Fund.
This is [indiscernible]. I just wanted to know about the leverage policy because your net debt has come down significantly. And the way I see it is, even given your CapEx, funds from fertilizer sales and [indiscernible] growth will be probably net debt negative or you'll be cash positive in the month of a year or so. Could you please explain where would you like to take this?
Yes. Sure. I think -- see, I would not like to comment on it being net cash by end of the year because we have certain CapEx plan. We've not yet to discussed Paints' CapEx. But if you include Paints' CapEx, then it's possible that we will not be able to go back to the net cash position. But overall, if you look at the policy that we follow, it's to stay AAA for [ glass ]. And I think it's very important that we remain investment grade, both in the international as well as domestic markets because that's the leverage that I have in terms of my cost of debt and my ability to therefore undertake projects and implement projects. Our AAA balance sheet also helps our subsidiary like ABCL to get good cost of debt as well. So it improves the return for the equity holders because of their margins, NIM, et cetera, going up. And therefore, keeping that in mind of keeping a strong investment-grade balance sheet, we don't like to go definitely not beyond 3x on a debt basis, but that's on the -- really on the outer limit where I have to get worried and start doing things like selling a noncore, et cetera, to make sure you come back. But I don't anticipate our net debt-to-EBITDA ratio in the next 5 years going beyond 2, 2.5x, even with the implementation of our Paints' CapEx.
The next question is from the line of Prateek Kumar from Antique Stock Broking.
The first question is on your CapEx. Sir, last quarter -- while the numbers are not given very precisely, but you are producing segment CapEx of around INR 2,500 crores for next 2 years, '22, '23. Now we are saying at INR 2,600 crores for FY '22. So just wanted to understand what is the new CapEx which is around [indiscernible] this quarter, particularly on new expansion projects on epoxy and [ caustic ] and otherwise.
Sure. So without giving the numbers, like I said, the new CapEx that is there is Vilayat 200 TPD. So [ this core ] is no new CapEx, let me first clarify that, okay? In chemicals, we have taken Vilayat 200 TPD. And this is going to be an incremental CapEx is going to be very small because this is a brownfield expansion, the infrastructure utility, et cetera, are all there in Vilayat. So there is no question of a large CapEx out here, okay?Then there is -- there are a couple of value-added products, which is the chlorine derivatives, which we have also included. So you talked about chloromethane. So like that, there are a few more that we have budgeted for. We are not disclosing right now for competitive reasons of what those products are. But those are some of the products that is there in chemicals. Then I've talked about epoxy. Epoxy, while it is not a very large CapEx, but amongst the CapEx between chemicals and others other than VSF, which is pending, that is probably one of the larger CapEx that is there for epoxy. And other than that, in VFY, we are considering, and right now, we have budgeted for a small CSY expansion. So you have 3 products out there, PSY, CSY and SSY. And CSY and SSY are much better contribution products in comparison to PSY. So over a period of time, we want to make the VFY product mix more oriented to the higher margin products. So that's why the whole idea is to put up some capacity in CSY. So that's broadly what the overall plan in CapEx is.
Sure. And of course, if you're looking to go to [ INR 1,457 ] earlier. So that is complete [ pie ]? Let's say, earlier we're looking at [indiscernible] now that's [indiscernible].
So your voice was not very clear, so I missed what you asked.
The [indiscernible] caustic expansion where we were looking to have a caustic capacity to [ INR 57 ] KTPA.
Yes.
Impact was expected by 1Q '22. Now when do we expect that effect?
Yes. Sure, sure. So [ VAP ] capacity like Jayant mentioned is likely to come in second half -- in the early second half. So there is this -- it was supposed to have come in quarter 1, quarter 2, but it was delayed to second half because of COVID. And what you see out there in the chart is additional 200 TPD, which also saw another 80 -- 73 KTPA, which will take 24 months.
On VSF, profitable like -- the prices, I mean, based on our [ expense -- ] I mean, industry interactions, like pricing look very high Q-on-Q product go to profit, but cost also seems to have increased by 15% quarter-on-quarter. So has there been already impact of higher pulp during the quarter or is there some other cost in the quarter?
No. So on VSF, there is no impact of high raw material cost in this quarter.
Only one, sulfur price has gone up and coal price.
Okay. Sulfur and coal has gone up.
And pulp, while the market has gone [ above ] 60% [indiscernible] over 7%.
Yes. So the impact of -- the real impact of the raw material cost increase of -- due to pulp will come in only in quarter 2 perhaps. Quarter 2?
End of quarter 2, yes.
Yes.
And my last question on Soktas and [ Textiles ] division. Since when has been -- it has been a management [ formally ] -- I mean for FY '20, '21?
Yes, yes. So what you see in the financial is the entire year's financials of Soktas is included in the financials of Textiles. So what you see is 100% of Soktas.
No. I mean it's because for full FY '20 and '21?
Yes. That's right. Even the comparable figure. Absolutely, right.
The next question is from the line of Navin Sahadeo from Edelweiss.
Congrats for good set of numbers. Just one question -- and sorry if it's a repeat. Maybe due to bad audio, but what was the average pulp cost in Q4? And where are the prices currently?
So you want another market price?
Yes. I mean because I believe we are like largely, we are integrated. So if you could help us with our cost, as in what was the our cost for Q4 and...
We are integrated, we are [indiscernible] pricing. So we don't have -- so we buy pulp from our subsidiaries on [indiscernible] basis. It's a market driven price.
Understood. So what was the price for the average Q4?
Q4 average pulp price of the [indiscernible] [ $918 ] per ton, right? And spot price at the quarter end here [ $110 ] per ton.
Yes. So if I give you an indication -- so that's pulp spot price. In quarter 4, our consumption rate, right, would be -- because we are getting advantage of the earlier pulp prices in our contracts, et cetera, will be somewhere around [ 54,000 ] per metric ton?
That's right.
The consumption price.
[indiscernible]
But this will, as the times goes, likely [indiscernible] will go up?
Correct. So both from a pricing point of view, like because there is some cool off that has happened to the VSF prices also. I mean the presentation says that March prices are 13%, March exit prices are 13% higher over Q4. But thereafter, clearly, there is some easing of that has happened, if not more, at least RMB 1,000 to the China prices, and cost is also going up. So fair to assume that there can be a decent sort of margin pressure in the coming 1 to 2 quarters, right?
The other way to look at is [ Q4 was exception value ] project. So [indiscernible] Normally, you see a good VSF business as of VSF's pulp data [ 0.9 ]. And that delta went up to almost 1.3, 1.4 in Q4. So that was at a normal quarter. So I think we'll come back to the healthy margins [ this quarter ].
That's fair. I was just looking at a slightly longer term in the sense this current quarter margins were at 24%. And historically, like a peak has been even higher, upwards of 35% and so. So just from a longer-term perspective, given, let's say, China is acting up towards some of the environmental concerns, so a slightly broader question. And this is more from the feedback that even in metals, we're seeing China acting towards these environmental concerns and then shutting some factories. So is there anything that is happening on VSF front from a broader perspective, which you can see that margins can or prices can seem [indiscernible]?
There are 2 things in VSF what is happening. The biggest question, margin of cotton. China, this quarter in Shenzhen region with 85% of China's cotton comes from there. And that cotton has been banned by the U.S. and European brands because of the human right violations and major sanctions that are there. Now if that happens -- it is happening already. And that's why there could be a [ run up ] in the cotton prices. And the moment cotton prices go up, of course, that's the benefit. So the one big upside is what happens to the Indian cotton issue with the China, because there is no way China can substitute the Indian production if they have to win the export market. If we don't do it, standard [indiscernible] will benefit because of that. So either way, it could help the business. That's the upside. We will see how it unfolds. We can't predict how that will unfold. Cotton prices have gone up despite the fact that people thought it might come down. Today, cotton prices remains pretty high, though, the cotton [indiscernible]. And export of cotton will happen [indiscernible].
The next question is from the line of Prateek Kumar from Antique Stock Broking.
Question on -- given the very strong exit of caustic soda entry prices for March quarter, so are margins can be like sort of quite different in Q1, let's say, for '22? Or they should be like [indiscernible] here as well because of higher cost?
[ Kalyan ], would you like to take...
Well, so I think it's difficult to give us guidance for quarter 1. I mean, generally, I mean, we had a very strong margins in caustic segments also in FY '19 and FY '20 also first half, then it started to fall in line within the [indiscernible], I guess. But with now the improving prices, I'm not sure if they're sustainable. But should we see margins of Chemical segment improving going forward?
Yes. So maybe I'll take that, Ashish?
Yes, please. Go ahead.
Well, so I think the assumption, while clearly, even in terms of our aspiration for this year has been that it should be at least equal or higher than the previous year. And hence, we are expecting or we are hopeful of it. Two or three things which are concerning us. Number one, for -- in the first quarter, because of the second wave, we have some difficulty in certain segments for at least 6 weeks. The second concern we have is we were expecting certain projects to take off by end of first quarter, early second quarter, and then that's coming towards the later part of the year, the second half, as Ashish mentioned. So both will have a slight impact on the overall year ahead. What we are banking on is what was unexpected last year was the V-shaped recovery. If really the markets recover as well as last year, it's not -- I'm probable to imagine that we would at least partially recover base. But it is too early, as Ashish said, we can't really say it's going to be as good or better or worse. We're taking 1 quarter at a time. This quarter, I think we want to just see how May goes, and then June, how it recovers and we'll take it from there.
The next question is from the line Mr. Saket Kapoor from Kapoor & Co.
In continuation to as been remarked, when the first wave of COVID hit, it was all of a global phenomenon. But now as we see that the international markets are -- have opened up and the utilization levels there industry-wise are coming to their pre-COVID levels. So in terms of that scenario, sir, how well is this caustic market shaping up? And sir, what kind of imports have happened for the last year? And what should be the situation going forward this year, sir?
So let me take that, Ashish. I think, yes, you're right, at the end of the day, when we look at Q4, you had in the winter storm coming up a robust global demand on caustic, including India. And practically, all of us grew. And we did actually better than the Q4 of the preceding year on volume basis. At this point of time, I think caustic demand is actually linked with chlorine demand. And chlorine demand is largely globally linked with the [ Vilayat ] demand, which is doing very well. Whereas in [ Vilayat ] production of PVC production in India is not fair, and that's why the impact is significant over here plus it's a localized wave 2 that is impacting the situation currently. But even though last year, it took us about -- if you look at it from the renewal of [ well bands ] to getting back, it took about 60 days and the entire industry was up and running in [ late 18 ] with capacity utilization. And that is what I think Ashish and Kalyan has been alluding to, that if the situation changes, it will change very fast because the inherent underlying demand continues to be there. And globally, we also expect that the demand will be robust. And regarding import, I think the entire supply chain globally was disrupted. So we did see marginally about 10%, 15% less imports compared to last year. That is also because the Q1 literally was a washout for the whole industry as the large capacities were not up and running. We expect the imports to continue at the same pace as they were last year in the current scenario and largely to be in the eastern and western part of the country, which is coming from your Japan side or Northeast Asia. So not too much expected on the import side, we continue to be at the same pace at about [ 3, 3.5 lakh tons ] annually, [ which came in earlier and coming now ].
And -- but on the anti-dumping part front, something was initiated earlier a few months ago. So what is the update on that, sir?
So the update is, I think, with the entire COVID situation, the investigation pace has slowed down. We've had a couple of new things with the body, but I think until the investigation is not over, we will not be able to comment.
But taking these factors into account, the price trends in the caustic market are going -- are likely to be subdued only because if -- is the recovery in other chemical segment or other markets have not led to recovery in caustic soda realization, what factors would lead to recovery? I think so it is still hovering around that $300 band, something in that vicinity.
Yes. It's hovering in India at about $300 -- say, less than to $300 band.
[indiscernible] what would be the factor that will revert this downtrend in the ECU realization that is there for, I think, the last 2, 3 -- 2 years coming across.
So [indiscernible] caustic is the basic chemicals. So it goes into all the commodity applications. And at this point in time, any capacity which comes in it's like a [ step ] and the prices are very high, a lot of capacity additions took place. We expect that lately, the capacity utilization for the industry has gone up. And also, the recent trends in the last quarter, Q4, we did say that the price of caustic has moved up slowly. We expect that trend to continue. But it is a known assumption of the larger clarity coming when this COVID wave 2 that is down when we start seeing the industries and lockdowns lifting up. So it's very difficult at this point of time to say anything on that front. Also the current capacity in India is about 20% higher than the current demand, 20%, 25% of the current demand. So it's a combination of the lockdown and the capacity, which is keeping the caustic price. I would not call it subdued. It's basically been at this point of time, it's not being able to keep pace as like it used to keep pace in the past.
Sir, a very small point. And we are also coming up with new capacities, not only Grasim, other players also -- somebody -- someone has commissioned also and people have lined up fresh capacity 6 months, 1 year, 2 years down the line, including you. So in that case, sir, there has to be a demand push to keep up for these expanded capacities going forward and plants running at higher 90s. Otherwise, the fixed cost and the variable cost metrics will also dampen down the margins level. That assessment is correct, sir?
No. I won't be able to comment upon what the others are doing. I think everybody understands and looks at the market situation. They attract their own customer base and capabilities. And then arrive -- and it's not that you can set up a caustic plant, it takes you about 24 to 36 months in greenfield and about 24 months in brownfield. So all in all, we all believe that caustic has a great future, [indiscernible] chemical. And that's what is moving this industry forward. If you look at from our consumption scenario and our demand supply is just about not even 5 million ton capacity. But the good part, what is happening here is the chlorine story, which is improving quarter-on-quarter. And that is what we're also now balancing the [indiscernible] which is earlier mostly skewed towards caustic, towards caustic and chlorine as of now. So I think there is potential in this business to grow further. And that's what will be led by the entire industry, including us.
Right. And on the chlorine derivative part -- my concluding remark. On the chlorine derivative part, what percentage of our chlorine goes to the downstream? And how much is being a market sale?
So Ashish could in fact give you a figure. There are 2 parts we look at chlorine. One is the entire [ VAP ] story, which by 2025, we will be at 40%. And then there is a pipeline by which goes to industry along with us or our ancillaries or whatever you call it. If I would take it, by 2025, we will be somewhere around 65-ish odd percent, 60% to 65%, which will be [ convened by this particular mode ], and the balance will go to the market.
Yes. Right. So for -- just to repeat, 40% VAP, another 25% would be pipeline and the balance would be much the same.
That is for 2025, sir? I'm asking for current, 25%?
Yes. So currently, about 27% is VAP.
[ 27% ] pipeline, plus pipeline takes it to about 40%, and the balance, 40%, 45%. 50%, 55% goes to the market as [indiscernible].
Right. And sir, one of your competitors are developing the product hydrogen hydrate. They are coming up with the capacity. And as per their presentation and all, they will be the only player in the country. So have we looked into this product also and the demand scenario? So what are the metrics, including the [indiscernible].
Likely, it's been saying quite earlier because of competitive reason, we don't want to get into the discussion what we are analyzing in study. But let me assure you, 1/3, there are multiple products that we are analyzing and studying and looking at it in the appropriate time when we've reached the comfort level is when we get into announcements.
Just to add a couple of points.
Sorry to interrupt. May I please...
Sorry, he's only answering. Yes, Kalyan is only answering me and I have concluded. Please allow us to continue. Yes, sir, please continue.
Yes, I said what I had to say.
[indiscernible] was interrupted.
Yes, I can add one last point. I think first of all globally, there are no new chlor-alkali investments. They're just getting relocated. You might have heard there's been closures in U.S. and elsewhere. Each of the players in different countries are making choices. So there is a huge amount of relocation going on from West To East. So globally, as the demand is going up globally, the new investments are not actually coming globally. They are only getting relocated. India is actually seeing a growth.Second, I think we don't invest on a next 2-year basis. We invested based on next 30 years basis. And we see, as Jayant said, a very, very strong growth option there, and we will continue that. And the last one is, we'll fundamentally see -- unlike in the last 10 years, we'll fundamentally see chlorine being -- making a lot more leading product compared to caustic in the future. Just like what happens globally, we will see more of that and more of chlorine derivatives and chlorine pricing, which is going to determine the equal levels in future than before. So we've seen all types of products, again, when we look at derivatives. We look at derivatives where -- how much of chlorine intensity is going into these products. As Jayant said, I think we are doing a lot of calculation, but our scale is very large, unlike other competitors. So when we look at it, we will have a much more focused conversations on selective chlorine derivatives and all of that. Thanks.
The next question is from the line of Amit Murarka from Motilal Oswal.
Most of the questions have been answered. Just had one question on the time on the time line of Fertilizer business realization. So I believe for your guide of 1-year completion, so that comes to around September or December. So are you still confident of being able to receive the funds by then? And the second question to that, is it fair to say that the CapEx for the Paints will only start after the realization of the funds from the Fertilizer sale?
So the first question, you got it absolutely right. So I think by September, we'll be able to complete the process and receive the funds. On the second bit, Paints is irrespective of Fertilizer. So it's not that we will start. So we will, right now, the first dollars of Paints will go into acquiring land. So -- which is already we're actively looking at and we have started deploying that. And of course, I'm not talking about employee expenses and also that have already started. From the CapEx point of view, land will be the first one, which has already started growing.
The next question is from the line of Bhavin Chheda from Enam Holding.
So what was the FY top line and the EBITDA? I missed out from your presentation.
Yes. No, no. I had mentioned it in my speech. It is INR 465 crore of revenue and INR 77 crores of EBITDA.
INR 77 crore of EBITDA, okay. And the other thing, I think the voice was not clear, I missed out. Because of the quarter 1 lockdown, how are your factories operating currently, both chemical and VSF? And what would be the utilization level at both in the quarter 1 or current month?
I'll take on the VSF?
Yes, please.
So I think VSF, all of us are seeing right now running full capacity, except [indiscernible] because normally [indiscernible] take an annual shutdown for the pulp plant. It was supposed to be taken in the first week of June. So that we advanced to this month of May. So I think it is a good time to finish off all the shutdowns, so that when the demand comes back here, we have some capacity available to us. That's the only thing we have done so far. Let's see how the lockdown continues and then we'll review once again. One more thing we have done is, like last year, we did, as the lockdown happened, [ we focused on export ]. There is a lot of exports we are doing from the Indian market right now. So that our [indiscernible]. So export of fiber as well as we have converted 1 line [indiscernible] and then maybe 1 more and we convert. So we'll start making, again, [indiscernible], we will export to the Europe and U.S. market till the time India normalizes. That's why we are making sure that the plants are utilized fully.
The next question is from the line of Nirav Jimudia from Anvil Research.
Sir, continuing with the earlier questions. So like you mentioned that we are going for more of the exports of the specialty, what you mentioned about [indiscernible]. So sir, is it safe to assume that we are selling more of Modal and XL in the domestic market and other value-added products are exported? So the mix looks like more of Modal and XL sold here domestically, so the realizations are higher in the domestic market as compared to that of the export market for the specialty VSF, sir?
You are right. So see, Modal is sold in domestic market and exported both. About 30% to 40% is sold in local market and balance by export. Lyocell is, again, is sold in domestic market and export, but 30% domestic, 70% export. And the domestic is up slightly because of the [ advantage ] of what we have. The good thing what happened in [indiscernible] that is a quarterly contract. We are then able to sign highly -- high-priced content we negotiated in the last quarter. So that is a bit advantage. So I think the normal exposure will be a much better value than one would normally expect.
Okay. Okay. And sir, if you can because -- yes, sir. Yes, continue.
I would like to inform, we should make [indiscernible] that will be the equivalent of our [indiscernible] fiber [indiscernible] in Vilayat, the new project, the [indiscernible] commission. [indiscernible] export from the same [indiscernible] because [indiscernible] huge demand with the global brands, which we started product about 1.5 years than and we have almost manyfold [indiscernible] area. So that will start in the [ second half ].
Okay. Okay. And sir, in the presentation, you have given exit prices for China VSF as well as the starting prices also. But if you can tell us about our realizations for the Grey VSF, some sense and some idea about how we have been -- so our realization?
For Q4?
Yes, sir. For Q4 for Grey VSF.
Yes. So our -- you see the problem with our realization has been broadly in line with China, slightly plus/minus. The issue is we [indiscernible] as an indicative price. The Indian market is overwhelmed by the local conditions because -- how reality is in India. Now what -- because the buildup in the Indian market was slow, and we did some business in January, Feb, March, it went up full capacity. So our prices also went up gradually. [indiscernible] price almost like international price.
Okay. Okay. So the full catch-up happened in the month of March, correct?
That's right. That's right.
Correct. And sir, on the last...
[indiscernible]
Absolutely, absolutely. And sir, the last and final question is on the epoxy. So sir, if you can give some sense of the percentage growth in our absolute EBITDA on a Y-o-Y basis. So let's say, as compared to last year, last Q4 of FY 2020 and this Q4 of FY '21, how -- in what percentage terms how our EBITDA has grown for the epoxy?
So epoxy would be almost still a big growth actually. If you look at Q-o-Q, for example, okay? Q-o-Q would be almost still close to twice. Less than...
It's almost [ double ].
So yes -- and Q4 of last year was quite depressed because that was the quarter when you lost one week, sorry, of this one. So You could assume that 1.5x compared to quarter 3, 1.5x to 2x roughly. But much more than in comparison to Q4 of last year.
Thank you. That was the last question for today. I would now like to hand the conference over to Mr. Ashish Adukia, CFO, for closing comments. Over to you, sir.
Thanks. Thanks. See, I think we are all going through difficult times personally. So I hope everything is safe at your end. And please take care of yourself. Stay safe. And of course, we will connect again in the next quarter. Thank you.
Thank you. On behalf of Grasim Industries, that concludes this conference. Thank you all for joining. You may now disconnect your lines.