Consolidated profit before tax (PBT) skid 7.53% to Rs 1,872.76 crore in Q2 September 2020 as against Rs 2,025.39 crore in Q2 September 2019. Total tax expenses for the quarter surged 24.43% to Rs 687.64 crore as against Rs 552.62 crore paid in Q2 September 2019. The Q2 result was declared after trading hours today, 12 November 2020.
Consolidated EBITDA for Q2 FY21 increased to Rs 3,660 crore, registering a growth of 40% Q-o-Q (quarter-on-quarter) and 15% Y-o-Y (year-on-year) respectively. The company said that the economy has been on the recovery path post relaxation of COVID-19 induced lockdown. It has been a resilient September 2020 quarter for Grasim Industries due to strong recovery in demand and the Government working relentlessly to support home grown businesses by injecting doses of fiscal and monetary stimulus on a timely basis.
In Viscose business segment, the textile markets in India and overseas have been witnessing a turnaround with COVID-19 related restrictions being phased out by the respective State Governments. The unlock measures across the country have led to a steady increase in consumer spending, which is expected to get further uplifted with the onset of festive season. The export of Indian textile products by value has also recovered to near pre COVID-19 levels post a sharp downturn in Q1 FY21.
The Viscose business has been on the recovery path since the end of Q1 FY21 with operating rates rising month-on-month (M-o-M). The capacity utilization of the VSF business touched 88% in Q2 FY21 from 26% in Q1 FY21 and recorded near 100% capacity utilization exit Q2. The VFY business has also recorded a significant improvement in the operational performance in Q2 FY21.
The net revenue for the Viscose segment (including VFY) stood at Rs 1,679 crore after a sharp recovery in the sales volume of VSF and VFY. The EBITDA from Viscose segment for the quarter bounced back to Rs 193 crore driven by better sales volume, lower input costs and reduction in fixed costs.
In the chemical business, the chlorine derivatives products demand remained strong driven by higher sales of Hygiene products & Disinfectants, Organic intermediates, Agrochemicals and CP segment. The Caustic Soda production staged a strong recovery in volumes during the quarter, the capacity utilisation improved to 80% in Q2 FY21 from 49% in Q1 FY21 with end use industries also witnessing recovery in their demand.
The excess supply of caustic soda has resulted in prices weakening to below $250 level (South East Asia). The Net Revenue for Q2 FY21 stood at Rs 1,126 crore and EBITDA stood at Rs 187 crore. The EBITDA for chlorine derivatives witnessed a double-digit growth sequentially.
In its capex plan, Grasim Industries stated that: "Given the improvement in the business sentiment and the strong financial performance in the quarter, the company has received additional capex approval of Rs 237 crore for Chemical and VFY business. With this additional capex, the board has approved capex spend of Rs 1,852 crore for FY21. The capex includes raising capacities in VSF and Chemicals in FY22, apart from ongoing modernisation capex at various plants."
The board of Grasim Industries have on 12 November 2020 announced that the company has approved the divestment of its Fertiliser business, Indo Gulf Fertilisers (IGF), by way of a slump sale to Indorama India (IIP), a subsidiary of Indorama Corporation, Singapore. The transfer of the business will be for a lump-sum cash consideration of Rs 2,649 crore, to be paid by IIP to Grasim Industries. This consideration is commensurate to the strength and future potential of the business.
Indo Gulf Fertilisers is engaged in manufacturing, trading, and sale of urea and other agri-inputs with a 1.2 million tonnes per annum (TPA) urea manufacturing plant at Jagdishpur in Uttar Pradesh (India). The divestment of the Fertiliser business is a significant value unlocking exercise for Grasim Industries. It will further enable the company to pursue growth opportunities in its core businesses.
Speaking on the transaction, Dilip Gaur, the managing director (MD) of Grasim Industries, said that: "The divestment of the Fertiliser business by Grasim is a strategic portfolio choice and unlocks value for the shareholders. It is in line with the strategic thrust of the Company to focus on core businesses. Indo Gulf Fertilisers is synonymous with strong performance and high sustainability standards. To take it to the next level in size and value, the company is pleased to have found in Indorama Corporation, a credible fertiliser player to own IGF. IGF will benefit from synergies and expertise of Indorama Corporation's existing agri portfolio."
Shares of Grasim Industries advanced 2.97% to close at Rs 827 on BSE. Grasim Industries is a leading manufacturer in cement, viscose staple fibre and chemicals.