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Ladies and gentlemen, good day, and welcome to the Q3 FY '20 Earnings Conference Call of Grasim Industries Limited. We have with us today from the management, Mr. Dilip Gaur, Managing Director; Mr. Jayant Dua, CEO of Chemical business; Mr. Ashish Adukia, CFO; and other senior management team. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Adukia. Thank you, and over to you, sir.
Thank you, and good afternoon, everyone. I welcome you all to the Q3 FY '20 results call. Let me start the call with a few financial highlights, and then I'll follow it up with select highlights on the presentation that has already been uploaded.On consolidated basis for the quarter ended December 2019, Grasim reported a revenue of INR 19,205 crores and EBITDA of about INR 2,968 crores. On a standalone basis, revenue and EBITDA for the quarter stood at INR 4,499 crores and INR 495 crores, respectively.The business performance for both Viscose and Chemicals was impacted by weakness in realization. The global viscose industry was impacted by factors, such as large-capacity addition of about 1.3 million tons in Asia last year, the ongoing U.S.-China trade war and RMB depreciation, which contributed to the drop in global VSF prices.The current prices are near the variable cost of production for a significant part of the industry, possibly indicating that the prices should be bottoming out. The domestic VSF prices witnessed a continuing decline in line with the global prices. Import of cheaper yarn further impacted the viability of some homegrown spinners.On the cost side, pulp prices fell below $650 per ton. We correspondingly gained with pulp consumption costs coming down from INR 62,620 per ton in the September quarter to about INR 60,524 per ton in this quarter.For VFY, the revenue and EBITDA for the quarter stood at INR 446 crores and INR 82 crores, respectively. The decline primarily is on account of lower sales volume, which was 9% down Y-o-Y primarily due to Tyre cord slump in automotive sector.The domestic VSF prices may witness some improvement due to improving sentiments post phase 1 deal. There may be some near-term relief due to current supply constraint from China, given the ongoing issues there.The prices of caustic soda declined significantly during the quarter to $350 in Asia on back of demand slowdown. In India, the caustic soda prices are getting impacted by new caustic capacity addition and increase in imports.Our caustic soda sales volume of 261 KT has improved sequentially as well as Y-o-Y. We've been able to maintain our market share of 27% despite capacity additions by industry players. In India, ECU in short-term is likely to remain under pressure till new capacities are absorbed by new demand generation.In our value-added products, performance has been reasonably okay, given the current economic conditions. The chlorine consumed in VAPs has improved to 30% in Q3 from 27% in Q3 FY '19. Value-added product sales growth in volume terms reported an improvement of 18% Y-o-Y.The EBITDA from epoxy, which is part of Chemicals business, was marginally higher as the weakness in realization was offset by softening of input costs.Sustainability has been the core focus area for the company. The VSF business recently released its sustainability report. We would like to just highlight a few key points covered in this report. We continue to be one of the lowest water consumers globally. Secondly, Canopy Hot Button Report has ranked us #1 VSF producer. This report ranks the world's top rayon and viscose producers on their progress in eliminating endangered forests from their supply chain. More than 200 leading global brands, retailers and designers are part of the CanopyStyle initiative.Let me briefly cover a few targets that we have taken up in this sustainability report for the VSF business: Reduce sulfur released by 70% by 2022, and this is for all the VSF sites; reduce water intensity by 50% by 2025; and reduce the loss time injury frequency rate below 90%.Now on the CapEx front, I would like to reiterate that our project team is committed for timely execution and commissioning of the project. If you notice on Slide 7, the CapEx earmarked to be spent for FY '20 as a whole has come down by INR 500 crores in comparison to the estimate that we had given in quarter 1. We have primarily phased out certain payments, and we will see some savings as well, but it is a little early to state what that amount of savings would be.Our disciplined cash flow approach has yielded results this quarter as well as if I look at the 9-month financials. For the 9 months FY '20 standalone operating cash flow, the generation before CapEx has been INR 3,438 crores. A large part of the cash generation has been on account of reduction in working capital.So that's it from my side, we are open to questions. So I'll hand over to the operator. Please feel free to reach out to us on any queries that you may have during this call or if they are unresolved then post the call.Thank you.
[Operator Instructions]The first question is from the line of Amit Murarka from Motilal Oswal.
Just on the margins, so if I really look at the pricing side, so the pricing has slid quite sharply in the past couple of months. What we have been discussing on the call is that like we have reached nearly the bottom, but seems like the prices has continued to slide. So can we now finally say that the margins, which we have seen in this quarter, is clearly the bottom now, and going ahead the margins are expected to be better?
So we don't give guidance as such, but I think some of the points that I mentioned about VSF, for example, the price reaching -- it's almost reached the variable cost of the global players. So it's highly unlikely that it will go down further. It's expected to, in fact, bounce back. Because of the whole Coronavirus issue, there is no supply coming out from China. So there could be some temporary relief that we may see in the VSF price. Dilip, would you like to add at any point, and then we can hand over to Jayant for Chemicals?
Yes. I think it is very difficult to predict which way the prices go. But as Ashish mentioned, every Chinese player is right now losing up to CNY 1,500 per ton on the production there and the sales they are making. So I think you can't sustain this for very long, and it is reflecting in the OR, the operating rate, on the Chinese part, which has come down to 75%. Today, it has come down to 66% as we speak. So the stress is being felt by the industry. And I think there has to be some bit of discipline coming in. And as -- with this whole Coronavirus thing, it is -- short term issue is there. Yes, the market will see some kind of upstream. But that -- long term, ultimately, the demand/supply balance has to match, then only the stability will come.
Ashish, short...
Very similar on the chlor alkali side that currently, I think, the only difference is that India has got a fair amount of capacity in the slump over the last 1 quarter, which is getting absorbed by the market, and we expect that absorption to get completed by another 2 or 3 quarters. The imports have gone up regularly from Northeast Asia and also from the Middle East part, both sanctioned and nonsanctioned countries. We've started seeing a slight reduction in the intensity of the drop. But the drop of prices continues to be a challenge as of now.
Sure. Generally, what, there is a 2-month lag, right, between the pulp prices reflecting into the P&L?
The -- about -- it is -- our system is, see, we take the previous quarter price and then the inventory also, there's about a 3-to 6-month gap it becomes. But depending upon -- surprisingly last quarter, but the consumption happens in subsequent quarters, which is about -- so the whole lag story at this quarter also had a huge amount of lag, about INR 120 crores has been the lag impact?
INR 120 crore.
Yes. So what I think going forward, now we are seeing an end of it because the prices are now flattening out of pulp. So put it, Q4, we should see the end of the price lag.
And also, just 1 more question on the CapEx. So you have a fairly large CapEx program. And given that the industry profitability is so weak, is there any thought around delaying some of the CapEx and wait for a recovery in the industry?
I don't think it makes sense to delay the CapEx at this point in time because I think the demand is there. And it's -- by the time our first-line goes onstream by the last -- by third quarter -- third and fourth quarter, I think by the time this plant stabilizes, the market should see an uptick, hopefully. And even if it doesn't, this plant, we are putting up, is far more efficient than the existing plant, so I had a lower cost of production advantage and more flexibility, because we can do more value-added products. So I think we don't want to delay the project right now. We should be there in time. When the market looks up, we should have the capacity ready and take the advantage of the market.
Just to add to that point, there are -- these CapEx are quite strategic. So if you look at VSF, for example, there is a large commitment that has already happened. And we see a demand uptick growth to serve that market from our capacity as well. And if you look at chlor alkali, the major CapEx that has come is on account of, say, Balabhadrapuram, okay, which is, again, in the region -- eastern region, which is a deficit market. Today, that market actually imports caustic. So it's a ready market for us to serve. So therefore, both these big CapEx are strategic in nature. And then there are other CapEx, which are in value-added products side in Chemicals, which are strategic.
And you should go back to history when we have put up a Vilayat plant in 2014, '15, it was exactly the same time cycle there. And the commodity cycle, the down cycles last about 18 to 24 months. So hopefully, I think, the timing should be fine.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
Sir, my first question is on your domestic VSF segment. So what would be the industry growth in this quarter? Because it seems that our growth is flat during this quarter in VSF segment?
The industry growth should come back. See, I don't know whether you picked up the point. What happened in last quarter because of the VSF prices became very low globally and VSF -- because we are defending our market for the fiber, a lot of cheap yarn started coming into India. So if you see between June to August and September, the yarn import became 259 tons per day, almost 20% of market was there by the yarn import. And so the demand actually here -- so if you ask me for VSF fabric, the demand did not go down. But part of the demand was made up by the imported cheap yarn. That is the reason why we had to drop our VSF prices to make sure that our spinners -- I always have been telling in this call, it's our policy to price our product to help the value chain, to keep them healthy. And because the Indian value chain came under a lot of pressure because of the cheap imports, and we dropped the VSF prices to do that. And as we see, the imports have virtually stopped. So I think that the demand should go back -- come back. So hopefully, there is no shrinkage of demand in Indian market, there is enough demand. I think if that yarn import had not happened, we would have grown by about double digit, sorry. Am I making myself clear?
Yes, it's clear. So actually, I joined the call late, I think it was discussed earlier in the call. So on regarding this impact of Coronavirus, so I think Chemicals segment, caustic or value-added specialty segment, did any of these segments get benefits from the prices? I mean, we understand that it is temporary, but like the specialty segment, does it benefit significantly from the ban on -- I mean, the closure of capacities in China?
Currently, no such indicator is available, which gives us any confidence to say that, that could happen. But the flip side of the situation can be, there are a lot of pigment and diester manufacturers, who are dependent on a lot of imported stuff from China. Now normally, they carry an inventory of anything between 30 to 45, 60 days, depending upon the lead times. If this thing doesn't settle down, you could actually have some of the value-added products prices going up because of shortage of raw material for their entire feedstock. But it's too early to comment on that. We need to wait and watch and see what happens. On the caustic side, we don't see any impact at all.
So caustic is not related, only the specialty segment, as you mentioned, might benefit. Okay. Basically -- yes, and regarding our net debt position in standalone business has gone up sequentially by around INR 700 crores. Is it related to that investment we had it in like AB -- Aditya Birla Capital?
Yes. So you have to look at it from overall company's point of view of cash inflow and outflow during the quarter. So yes, that is the investment that was made of INR 770 crores into Aditya Birla Capital that led to increased cash outflow. And that's one of the reasons for the debt to go up. However, like I mentioned, there is a good amount of cash that has got generated as well due to release of working capital in this quarter as well as for 9 months, which was -- which was used to obviously meet the requirement of the business.
Okay. And just 1 question on CapEx. So 9-month CapEx is around INR 2,000 crores in standalone business here. Envisaging INR 1,200 crores in fourth quarter, is that the right figure I am looking at?
Yes. So the total comes to about INR 3,200 crores for the entire FY '20. And what we had given initially was somewhere close to INR 3,700 crores, INR 3,800 crores as an estimate. So it's lower by INR 500 crores.
But that just spills over to -- I mean, in fact, some of this INR 1,200 crores might also be splitted over to next year and total CapEx -- because total CapEx number remains the same?
Yes. So right now -- so like I said in the beginning of the call, as of now, we're not changing the estimate of the total CapEx that will be spent over the next 2 to 3 years. So that estimate is not changing. But we have seen signs of some savings that can be made in some of these CapEx, like Dilip was also mentioning. It's a little early for us to give any kind of an amount for what that saving could be. But there may be some savings that we will see in these CapEx.
Okay. And on ECU realizations, I understand it is under pressure. So how the chlorine realizations, continue to remain negative for third quarter straight?
So the chlorine realizations, the intensity of negatives has gone down. So it went as high as about INR 1,500 negative in the early part of the year. It's down to now just about INR 100 negative as of now. It's also because the chlorine demand, particularly in Gujarat area, which is a very large capital -- consumption area for chemicals, has been fairly stable. We expect chlorine to remain at -- specifically the last quarter in similar ranges.
So is this something also we import chlorine, so which could also benefit?
Chlorine does not travel at all. Chlorine being hazardous the way it is, it does not travel at all. We tend to do either by pipeline or very limited movement through tunnels in small liters.
The next question is from the line of Gunjan Prithyani from JPMorgan.
On the VSF, I just needed a clarification now. For the last many quarters, we've been able to kind of keep our realizations more steady, given the various initiatives we were taking on branding side or also improving the mix. It somehow seems that in this quarter, the decline that you guys have had is much steeper than what global VSF prices would have seen. So what really changed in this quarter for the realization to see such an acute pressure in a quarter that the catch-up happens?
See as I mentioned to you, this was a strategic intervention we did to make sure that our spinners continue to remain viable. Because their viability -- so they were bleeding at the -- because they had to match the imported price of viscose yarn. Viscose yarn, which was coming at INR 148 a kg, at that pricing, the spinners were losing money. So we had to kind of support them, and that is why the prices came down disproportionately. But even now also, we still -- we're at a premium to the landed prices of viscose in India. But as we speak, by the end of the quarter, the global price came down to $1.20 per kg.
But the premium, sir, would have compressed, like, can you give some sense, how much was the premium, maybe, let's say, earlier into the year and what is the premium now?
It is difficult to give a number there, but I think broadly it depends upon...
So premium is broadly maintained. It has not come down. In fact, the premium in the earlier quarter had expanded when the correction in the price was not as much as the global prices, it had actually expanded. In this quarter, it is more or less you could say that it has come down, but it's not shrunk from an average.
Okay. And is this -- this is basically a strategic intervention, I understand, you've made in this quarter. But is there anything, which suggests that the domestic prices could be at a disconnect with the global prices in the next couple of quarters or now from here on, we continue to follow how the global price is on?
See, look, I always told you the domestic prices will follow the trend. But the delta will depend upon how -- what the value chain can take. So we -- the delta comes only depending on how healthy the value chain is. Otherwise, there are some inherent barriers and protection. That is what is the -- what will also get in the system. So the biggest issue was the loss of demand to the cheap imported yarn and that -- once that stops, I think the whole value chain becomes more healthy and things should start looking up.
And on the specialty...
That's why you see imports have come down thus far.
Sure. And on the specialty side, I thought this mix has come down for the last 2 quarters. I mean, I'm not so sure. I think last year, the levels of specialty contribution was higher, right? What has changed on that front?
This, sure, happens. One thing is, this quarter is better than last quarter, there is slight improvement in the specialty contribution. Second is, how do you define specialty. We have got 4 big products of specialty; modal, excel, dope dyed and non-woven. Actually, the top 3 in terms of margins are dope dyed, modal and excel, which have grown significantly. The non-woven, which is a specialty, but not with a high margin. So that part here kind of defocused in India because that's not a big market in India. It's a export market, and there was not much value in that market. So that we are not making. In India, we have diverted that volume to grey market. So the grey in India is far more attractive than the non-woven in India. So that's the difference. So if you look at the real -- if you differentiate specialty into value-added specialty, our growth will be much higher. It will be higher than last year, we can share the numbers with you.
And the 2% increase that you see is primarily in the dye -- dope dyed market.
Okay. Got it. And the other question I had was on the caustic side. You mentioned about the capacity. Could you give us some sense on where we are as an overall industry in terms of the total capacity and the consumption? So where are we in the operating rate for the domestic industry?
So the average operating rate of the industry is somewhere between 80% to 85% across different geographies. And our operating rate is also in a similar trend depending upon the geography the plant is located in. The current growth rate is muted at about 3% to 4%, and we expect that we will -- this is the kind of growth rate, which will be in the way forward also.
But what is the total installed capacity now? I mean, whose was the big commissioning that you saw in the last 6 months?
So I think the total installed capacity that we have at this point of time is approximately -- India is near about 4 million tons of capacity as of now. The large capacity addition which took place was of DCM, which was 128 KT, that's about 350 tons per day. You had the GHCL, which was about another 800 tons per day, which is there. Meghmani has not yet finished, it will -- probably before the end of this financial year will commission its capacity.
How big is that, sir?
That is probably taking it up by another 350 tons per day. We'll get to know real numbers once we commission it, but that's what we...
And which is why your guidance on the ECU pressure -- on the pressure on the realization is still with us.
With the growth rate between 3% to 5%, it will take about 12 to 18 months for this capacity to get absorbed.
Okay, got it. And last question on the capital allocation besides the CapEx, is there anything that is -- we should keep in mind as you're looking for the next couple of quarters? Because I know the Aditya Birla Capital thing has happened. But is there anything else besides the standalone CapEx commitment that we should have keep in our mind?
Currently, no, Gunjan.
The next question is from the line of Sumangal Nevatia from Kotak Securities.
Just continuing on the previous question on caustic. And initially, sir, you mentioned that the price reduction continues, only the pace has reduced. So just wanted to understand your sense of where the margins bottom? And at what level do we start seeing some supply reaction similar to what we are seeing in VSF in China?
Unfortunately, we don't have any such clarity as of now in terms of guidance until we see it because, clearly, the major market -- import area for us was not China, it is more of Japan and Middle East. So the China play on import of caustic in India is not actually insignificant as of today because it doesn't come. So we cannot comment on that. But to say that when will it bottom out, I think time will tell us because it is also a function of how the demand uplift starts taking place in the country.
Yes. But in terms of domestic cost curve, do you have a sense where are we versus our competitors?
I think you will have to look at it in terms of our power control because power approximately is around 65% to 70% of our variable cost. We've got about 55% of our capacity where we control the power. And that number is significant -- will steadily going up with both renewable and other assets, which are coming up through capital deployment. So without getting into numbers, I would say that we are significantly much better off as compared to practically all the competition in India.
Understand. And sir, next question is with respect to VSF. This 1.3 million ton capacity addition what you're seeing, I mean, how is the ramp-up there happening? And how will that new capacity fit into the overall cost curve, if you have any intelligence there?
The 1.3 million has already happened -- the 1.3 million, that happened in last year. And 1 plant got commissioned just end of December, early January at 250 KT. Further capacity coming in the year, only 150,000, 200,000 tons. So the capacity addition at least for the foreseeable future has stopped or tapered in this cost. So I think we can see -- so this year another 150,000 to 200,000 tons capacity might come up. It depends upon who is putting the capacity. So fundamentally, all the latest VSF plants like the one we are putting in the lab and what people are putting on are similar cost structure there. They're more efficient than the existing plants. But the real value comes from the pulp costs. So I think the entire -- now people are looking at the integrated value chain, which is pulp and fiber. So it depends upon how well you're integrated and how much of the captive pulp comes from your own units, besides your total competitiveness.
Understand. But this last year's 1.3 million ton capacity addition, has that ramped up to the quarter?
Yes, good question. 50% of that capacity is only used right now. So all the surplus -- if you see between last year and now, the operating rate which used to be 90% last year came down to 75% before the lower prices started. Despite that, we had the inventory building up. So the inventory which was 10 days went up to 21 to 22 days. Today, as we speak, it has gone to 35 days. So issue is until the operating rate comes to a stage where demand and supply match or the trade war impact starts showing up. And as the China demand picks up, you can see an uptick. So when -- so sustainable improvement will only happen when the demand side improves.So right now, the demand side and supply side, there's still an imbalance. So to get the balance back, we require about less than 65% operating rate as we speak today, which has happened today because of the Corona issue. But otherwise, the normal course is 75%.
Understand. And with this -- and the Corona issue, I mean, is it the impact, I mean, only theoretical as of now or we are seeing any tailwinds flowing in prices or any high-frequency data, which you are tracking?
See, Corona, as we said, it is a benefit -- immediate term, you are seeing a positive. But ultimately what happens, because we are producing and not able to dispatch, inventories are going up. So when the market normalizes, again, you'll have an issue of lower prices. So I think it's only a phasing issue. You may have a short-term advantage, but long term, it will even out.
Understand.
Yes. Or may get worse also, you don't know.
The next question is from the line of Gaurav Rateria from Morgan Stanley.
Sir, a couple of questions. Firstly, in China, we have seen some disruption in production capacity at the various end user industries of caustic soda like aluminum. Has there been any adjustment of the capacity of caustic soda there? Or do you think there can be a situation which can lead to surpluses from China market, which is not there as of now from India perspective?
The China threat continues to be there. I think it's a fair point you're talking about. However, in India, particularly, we have the ADD on China at a fixed rate of about $40 per ton, which is there till the third quarter of this current financial year. So I don't see China impacting us as of now in the Indian context of price scenario. But to an extent that does China have spare capacity of caustic, I think that's a fair point it turns out.
Okay. Secondly, sir, just wanted to get a color on what the exit ECU will look like compared to the average of the last quarter?
Yes, again, you're asking us to give a guidance, which would not be possible at this point of time. But I think we made a statement earlier that we are seeing a kind of slowing down of the drop. So hopefully, it should stabilize soon.
Sure. Two last questions. Possible to quantify the benefit of reduction in pulp cost in the financials over the coming quarter? And secondly, the INR 4,500 crores of CapEx from fiscal '21 onwards. What is the time frame for that CapEx one should keep in mind?
So in terms of pulp, we try to give some indicative -- indication through the gap that exists between the dollar cost. So if you see on Page 11, we've given that INR 60,500 per ton is the consumption cost and current prevailing cost is $640 per ton. And given that 3-month lag that we talked about, depending on December, what we've purchased the inventory at, okay, that will be consumed somewhere towards the end of the March. So end of the March, you may see, say, around $650-plus, plus, plus as a landed cost and during the quarter, it might be what we purchased towards September -- September, October, somewhere around that time.
And on the CapEx, sir?
Yes. Sorry, can you please repeat your question on CapEx?
So you put INR 4,500 crores something from fiscal '21 onwards. So is that for fiscal '21? Or how should one keep in mind any time frame for that CapEx?
So -- yes, sure. So out of INR 4,566 crores, and of course, we will closely review this CapEx as we do that every year. But you can assume somewhere around INR 500 crores to INR 700 crores to be spilled over to FY '22. And the balance will be in FY '21. Because, see, if you see the big CapEx, your VSF -- your capacity-enhancing CapEx, which is VSF, VFY and Chemicals, INR 2,795 crores, all those projects are actually pretty much completing in FY '21 itself.So what you need to focus on is that, that CapEx is going to get incurred in FY '21. The balance, which is more modernization in nature, there is some flex that exists out there. So some of that will spill over to the following year.
The next question is from the line of Navin Sahadeo from Edelweiss.
In your slide, you've mentioned the exit VSF price for the December quarter at about $1.26. Sorry if this is a repeat, but the current level is, how much for the like-to-like variety?
In China, the market is closed now after the -- this was the price before the Chinese New Year, it has not opened after that. So there are more and more exports happening on China right now.
Understood. So I understand, as you explained, that the spreads of the spinners or the yarn manufacturers as what are more important, and that's where we have to like oblige them, so that they survive. But just to get a sense, those spreads, because this Corona and these issues are more January and February-related issues. So any sense where are those spreads? Have they worsened versus the December quarter now. How should we look at it?
[ We can't say that ] spreads have improved in India [indiscernible] yes.
So that means, obviously, there is some improvement that has happened in VSF prices also? Is that safe to assume?
Yes, hopefully, let's see. If that is sustainable, we don't know, but short term, yes.
Okay. Okay, so fair. So I was just trying to get the sense, but any indication because there is -- first of all, there is more capacity?
It's difficult to -- it depends upon when China starts. Today, 10th February, some places have started. If it starts fast, things will normalize much faster. It's very difficult to predict at this point in time. We do not know what is happening there. And all the offices are supposed to start today, they -- I think they have started some skeletal staff only. They are not allowing all the industries to start, they're prioritizing it. So we'll have to watch and see therefore.
Okay. And just a last question. Is there any trend at the global yarn prices? I know China is probably, you said those prices -- I mean, you may not have those current spot prices, but is there any other indication of global yarn prices to get a sense, how have they faired? Or China is the only thing we have to keep in mind?
We don't monitor the global yarn prices, I can't comment right now. It's too short a time. But it depends upon 2 silk players, Indonesia and China. So depending on how the -- and it is VSF price plus delta become yarn price. So I think it will all follow, difficult to give a correlation at this point.
Just 1 clarification I would like to make on the previous question on CapEx, I just relooked at the numbers. So FY '21 onwards, so FY '22 is more like INR 1,750 crores. And FY '21 will be the balance writeoff.
The next question is from the line of Saket Kapoor from Kapoor Company.
Firstly, sir, as discussed also, sir, had there been any change in the pattern of consumption of caustic soda by the key aluminum player? Has there been any change, which you are observing? Any specification has changed?
No specification has changed, but I think there is a trend, which is there in terms of the bauxite, which comes from Guinea, where the consumption of caustic reduces marginally. But it is not yet very material in the country as of now to make any substantial impact.
Right, sir. And sir, what has been the capacity addition in the 9 months of this current fiscal in the domestic industrial?
Given that number out...
Okay, I'm very sorry.
Total capacity addition, which have come up is approximately...
800 tons.
About 800 to -- yes, about 1,500 tons per day is what has come in the first 9 months.
Okay. And sir, what has been the import quantity for the 9 months?
So it's about 250,000 tons, which has been the import quantity in the last 9 months.
Last 9 months. And what was the figure for the last preceding year, sir?
Last preceding year figure is not relevant because there was a BIS [ brand-related ] certification, which was required. So those figures are not comparable as of today.
Okay, sir. Now every country producing caustic soda has complied to it and the import can happen from everywhere?
Whoever takes the certification only he can apply -- import it to India.
So the one I was -- what I'm trying to say is that, whoever is the producer which can import, they have taken that certificate. And that is now import can be received from any of the countries. There is no pending country who will go apply for BIS and then they can also start dumping, that was the reason.
BIS is never on a country, it is on producer. So all the relevant producers have taken their BIS...
Have taken, okay. And sir, how the case for an anti-dumping could happen going forward? Does it make a strong case, sir?
I think as of now, we are still reviewing it. We probably will get more clarity after another 1 or 2 quarters, if there is any case at all.
And sir, very short point, sir. In the budget period, the honorable Finance Minister did mention about the safeguard duty's part coming effective on a much faster way. So all the safeguard is very different to the anti-dumping. So any color or any thought process you people have worked out, how can the safeguard duty -- automatic application of safeguard duty can come into effect?
No, I think at an industry level, things haven't -- we haven't yet discussed it at that length. But you have to look at for any of the duty structures to come in. We tend to look at today's results, whereas the decision happens in the past for that. So you have to always have a look at that view. What's happening today, you need sufficient evidence for any of them to work for it to go forward. So it takes time for any of these to actually materialize.
Okay. And sir, lastly, for that, are the prices in the band of $320 for January?
No. What prices are we talking about? Are they...
I'm talking about the caustic soda...
[indiscernible] the customer side, you'll have to be a little bit more specific there.
You were talking about $350, you have -- in that specification, if you could give what is the price?
Prices, at the moment, let me give you a band because it's very difficult to give you the exact prices. If you look at Northeast Asia export, the band is about from $250 to $280, add the freight plus the local, and when it delivers, it's somewhere around $350 by where it will reach. If you look at Southeast Asia, the band is about $290 to $320, add the duty, add the freight and then the local freight to take it up over there. If you look at Mediterranean, or let's call it as Middle East or -- it's about $260, $270. Europe and U.S. don't sell anything to the India, so their prices are not relevant for us to monitor.
And lastly, sir, you said that it will take 18 months -- 18 to 24 months for this additional capacity that is in commercial production today to get absorbed.
I'm just doing a simple math of around 3% to 5% growth rate on these new capacities. What I also mentioned is the current industry is, as it is running, at about 80% plus capacity utilization. And I think that's a fairly significant number, which we don't see dipping going down.
Right, sir. And in the value-added segment, sir. What has been the percentage for this -- for the 9 months? And what are we envisaging for the next year?
If you look at, our value-added products are growing at double-digit for these 9 months. The last quarter, it's been an 18% growth for us. We expect to end the year with a double-digit growth in the value-added products.
And sir, we will be recovering almost all the products that our competitors are selling? Or we are also going for some import substitutes, which your competitors are also not selling?
We are looking at projects, which will have an import substitution. Currently, we are also -- we're also looking at in terms of filling up the gaps. So there are some assessments that is going on and some projects, which are going on.
In turnover, sir, can you give very last point in turnover? Can you give how much has been evaluated for that contribution for the 9 months and for this quarter?
I would not have that number readily available with me. And then, it's a basket. For Chemical, we look at it more like a basket rather than getting into individual product categories.
Right, sir. And for the raw material part, sir, can you give the color how are -- how well are we going to control our cost if the prices remain in this band? I'm talking about the caustic soda segment.
I just mentioned that earlier that 65% to 70% of our cost is power.
Correct.
And in power, we all know how the government duty structure works. So how much we can control and not control is public knowledge at this point of time. But 55% of our cost is actually controllable, both as a combination of our own thermal power plant, group captive and renewable, which we are planning and have plan to inch it up to maybe 60% next year.
And for the salt part.
Salt part, we've got about 20% coverage. We're looking at various business models to see how we can take it up to around 35%.
And what the salt contributes, sir, toward the raw material basket?
Salt at the moment would be about 10% to 12% at this when we...
Yes, under 10%. Under 10%, and the price has come down on salt, but because it constitutes only about 8%, so it doesn't really make much of a difference. I think what makes the difference is, like Jayant has been repeating is power cost.
Right, right. And the point under this Sabka Vikas, this legacy scheme, sir, it is mentioned here that UltraTech has provided a onetime expense of INR 133 crores. So sir, what was the exact dispute amount? I mean what is the benefit we have derived? Onetime expense, we have booked for INR 133 crores. What was the absolute amount involved? So just wanted to gauge how much haircut, if I can use the language, with all due respect, the government has allowed?
Yes. So what -- can I suggest that if you go through the details of UltraTech call as well as their presentation, I think they have given the amount of litigation that they have resolved. In Grasim's case, it was -- we did not have many cases and -- but we did make use of the scheme. We had a cost of only about INR 1 crore that we had to give to the government to solve almost about 60 cases, constituting about INR 11 crores, INR 12 crores. So we didn't have many cases in our contingent liability any which ways in case of redundant taxes.
Right, sir. And any idea about how are we viewing our investment or further investment in our -- Idea, the associate company, taking into account...
So we think the case is still sub judice. We have to wait for the final Supreme Court judgment on this. And on the basis of that, what VIL decides as the next course of action, when we come to know that, then only we'll be able to take any decision on this.
That means we can put further clarity if and when needed [indiscernible] in the shareholder? If the deal is materialized, you can go for our share after paying it or what is the thought process behind it?
It's early to have any thought process on this. I think in the previous calls, I have repeatedly mentioned the philosophy that we are following on VIL investment. So since then, nothing has changed, and there's no further development.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
Sir, can you give the VFY segment revenue and EBITDA for the quarter?
Yes. So the revenue was INR 446 crores and EBITDA was INR 82 crores. That's including both our facility of Veraval as well as Century, Prateek.
Sorry, how much, INR 82 crores?
INR 446 crore revenue, INR 82 crores EBITDA.
Right. And sir, I think this was discussed in the previous question. So you had mentioned on Page 15 of your presentation, this ECU prices of INR 27,800 for Q3. What was the exit prices in -- for ECU for Q3?
Exit prices of ECU for Q3?
Q3 ECU, like we have mentioned, was INR 27,805. That was for the quarter.
Right. The exit prices, I'm asking.
So the exit price in December itself for the month.
So the exit price for December is somewhere in the range of around INR 27,500 odd is the -- approximately, the December price.
So, yes, no, actually it -- yes, so it was INR 28,500 roughly. So it had improved a little bit.
Oh, it had improved. Okay. And regarding the slide on pulp. So we have seen this -- Slide #11, the orange line represents what is the consumption factor prices what we have for our operations. So that price has -- what we are consuming has already slid from INR 67,000 to INR 60,000 this quarter on an average. So the impact of savings related to pulp are already there in our numbers. Is that correct?
Further sliding -- the market price is much lower right now. That's what it suggests. Pulp has been steadily declining price over the quarter. But we have been having a lag because of the, I would explain, due to the inventory and the previous quarter pricing. But today, as we speak, the price in the global market is $640 per ton. You have to add our import duty on that and add some local freight on that. So I think there's still room for prices to go down.
So I mean, what this orange line suggests is our purchase price or consumption price?
So ultimately they should match. Right now, your market price is lower than the consumption price, and orange line is the consumption price.
I mean consumption price, which we have already -- I mean, we would have purchased at some price and just for falling further...
Going along, somewhere these 2 have to merge when then inventory get normalized and the prices become flat.
Okay. And just regarding this, sir, you mentioned about 1.3 million ton capacity. So this includes the capacity, which got commissioned in December as 0.2 million ton as you said?
No. This 1.3 million was January last year. Another 250 got commissioned this year, 250 KT.
So it's -- fall in January.
Yes, yes, yes.
And sir, regarding your CapEx, which -- I mean large CapEx, the number which you said INR 1,750 crores will spill over to FY '22, which means INR 2,700 crores will be spent in FY '21. So what is the -- which quarter we should expect the VSF capacities to hit markets, new VSF capacity?
We are seeing that first line will come in...
Q3.
First line will come in Q3. The second will come in Q4.
Right. And regarding this closure of capacities in China. So there was this yesterday there -- yesterday or over the weekend, there was this news flow that the ban has been extended to 1st March. Is that correct? Or I mean, as you said, they have started opening capacities on...
On the costs, this is their finding, which has a vulnerable area. Depending upon -- there are like some areas, they opened today. But for namesake only. So they are saying that, okay, people can come to the office, pick up their laptop, et cetera, and go back and work from home. Some factories, they are allowing only the local people to come in to work. The upcountry guys can't come. People who had gone on holiday cannot come in to work, they will be quarantined. So there's a lot of things happening. So I think it is -- they want to tell the world that we are starting, that's all. Now how much time will that take is all to be found out.
The next question is from the line of Gaurav Rateria from Morgan Stanley.
Sir, a little bit of a hypothetical question. Given next year is a peak CapEx year for us, at the current profitability, do we hit the threshold mark of leverage ratios, which are required to maintain rating -- credit rating profile of the company or become closer to that mark?
We have -- we'll be well within the mark. I don't think we'll have any issue in terms of credit rating because of the leverage that will go up due to the CapEx.
Sir, can I ask a little differently. In other words, does it mean that room for making investment in group or associate companies will be limited given our priority will be to maintain the credit rating profile? And at the current profitability, that room automatically becomes very less because our debt ratios will increase further.
Yes. I think you're right that our room does reduce. And because we want to maintain the rating, there will be limited appetite to put money.
Thank you. Ladies and gentlemen, that was the last question. On behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Thank you, everyone.
Thank you.