Grasim Q3: Company reports standalone net loss of Rs 168.7 crore as low fibre realisations, high paints capex hit balance sheet

Grasim Q3 Result: Net loss at Rs 168.7 crore

Aditya Birla Group flagship Grasim Industries Ltd reported a net loss of Rs 168.7 crore for the quarter ending December 31, 2024, as the company continued to face pressures in its cellulosic fibres and chemicals segments from Chinese imports, hurting realisations. The company has also continued to build up its paints business under the Birla Opus brand, on which it is spending around Rs 10,000 crore by way of capital expenditure, increasing its total expenses year-on-year.

The company's standalone revenues, however, grew by around 27 percent year-on-year to Rs 8,120 crore. Its earnings before interest, taxes, depreciation, and amortisation for the quarter were lower by more than 42 percent on-year to Rs 372 crore, the company reported.

On a consolidated basis, the company reported a net profit of Rs 899 crore, lower by 41 percent year-on-year, while its consolidated topline grew by 9 percent over the same period to Rs 34,793 crore. The consolidated earnings are marked by Grasim's 57 percent stake in UltraTech Cement, India's largest cement manufacturer, which reported its earnings last month.

Grasim's total expenses on a standalone level increased by around 35 percent during the reporting quarter to Rs 8,452 crore, with sharp increases in the cost of materials consumed, and under the "other expenses" head. For the paints business, Grasim has earmarked a capital expenditure of Rs 10,000 crore, of which it has spent around Rs 9,000 crore. The company plans to break even in the paints business over the next three years, even as investors have expressed concerns about the slow volume growth in the decorative paints business in India.

In an investor presentation, Grasim added that it has fully commissioned four out of the six paint manufacturing facilities, with another one, at Mahad in Maharashtra, undergoing trial production and is expected to be ramped up to commercial production in the ongoing quarter. At the last remaining plant under construction, located at Kharagpur in West Bengal, trial production is expected to begin in the first quarter of FY26.

The presentation also noted that its plans to ramp up its dealer base and increase the number of depots is afoot, with paints under the Birla Opus brand now available in more than 5,000 cities and towns, and 131 depots now being opened. While the company did not report actual paint volumes sold during the quarter, Grasim said that it has witnessed "good demand" from contractors and consumers at the dealers' end.

As for other operations in Grasim's core standalone operations - fibres and chemicals- the company reported a mixed picture. Grasim noted that while caustic soda prices increased on-year during the quarter and realisations improved, negative realisation for chlorine caused an impact on better realisations. Caustic soda sales volumes grew by a slight 1 percent year-on-year, the company reported.

For cellulosic staple fibre (CSF), sales volumes were flat year-on-year due to a production disruption, while it declined sequentially due to seasonality. Sales were slightly up on-year during the quarter for cellulose fashion yarn, although the company noted that the dumping of cheap Chinese products is hurting realisations.

The company has also decided to expand its fibres business, by setting up a 110,000 tonne per annum Lyocell facility at Harihar in Karnataka. The first phase, of 55,000 tonne per annum, will require a capital expenditure of Rs 1,350 crore over a two-year period, Grasim said in a press release.

On February 10, Grasim's shares on the National Stock Exchange closed at Rs 2,453 apiece.