Grasim Q2 Profits Dip 17.6%, UltraTech's Robust Growth Signals Industry Resilience

Grasim Industries Ltd, a key player in the Aditya Birla group, announced a 17.6% YoY decline in standalone net profit, totalling Rs 794.7 crore for the quarter ending September 30, 2023. The corresponding quarter last year witnessed a net profit of Rs 964.3 crore, as reported in the regulatory filing. The company's revenue from operations also saw a dip of 4.5%, standing at Rs 6,442 crore compared to Rs 6,745.2 crore in the same period of the previous fiscal.

At the operating level, the Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) for Grasim Industries witnessed a substantial drop of 37.9%, settling at Rs 594 crore for Q2 of FY24. The EBITDA margin also declined, standing at 9.2% as compared to 14.2% in the corresponding period of the previous fiscal.

Grasim's viscose business faced challenges with China's operating rates averaging 85% in Q2 of FY24, slightly up from 82% in Q1 of FY24. Despite a slight improvement, the global consuming markets, particularly in the US and Europe, experienced muted demand. However, there was a notable uptick in domestic demand during the festive season. The pressure on domestic prices persisted due to a 7% softening of international VSF prices from $1.67/kg in Q1 of FY24 to $1.55/kg in Q2 of FY24.

In the chemicals business segment, international caustic soda spot prices remained relatively stable at $417/tonne in Q2 of FY24. Caustic soda sales volume increased by 5% quarter-on-quarter and 3% year-on-year, reaching 306KT in Q2 of FY24. However, the revenue for the chemicals business dipped by 7% quarter-on-quarter and 27% YoY to Rs 1,988 crore, primarily due to lower caustic soda realizations. EBITDA for this segment stood at Rs 236 crore, marking a 34% decline quarter-on-quarter and 61% year-on-year.

On a brighter note, UltraTech Cement, another significant player in the Aditya Birla group, showcased robust growth. Cement sales volume surged by 16% YoY, reaching 26.69 MTPA in Q2 of FY24. Consolidated net sales witnessed a 15% increase, amounting to Rs 16,012 crore over the corresponding period of the previous year. The EBITDA for UltraTech Cement soared by 35%, standing at Rs 2,718 crore, compared to Rs 2,013 crore.

UltraTech Cement has announced its third phase of growth, with a substantial investment of Rs 13,000 crore aimed at increasing capacity by another 21.9 MTPA. This expansion includes a mix of brownfield and greenfield projects, indicating the company's confidence in the sector's future prospects.

Aditya Birla Capital, the financial arm of the conglomerate, reported consolidated revenue for Q2 of FY24, up 13% year-on-year at Rs 7,721 crore. The company reported a 44% YoY growth in Profit After Tax (PAT) at Rs 705 crore. The lending portfolio (NBFC and HFC) experienced a robust 41% YoY and 8% sequential growth, reaching Rs 1,08,961 crore as of September 30, 2023. The mutual fund quarterly average assets under management (QAAUM) increased by 10% YoY and 5% sequentially, totalling Rs 3,10,899 crore, with an equity mix of 41.9%.

The financial results were disclosed after market hours, and shares of Grasim Industries closed at Rs 1,922.00 on the BSE, down by Rs 24.25, or 1.25%. The diverse performance across the conglomerate's business verticals highlights the nuanced challenges and opportunities in the current economic landscape. While some sectors face headwinds due to global economic factors, others, like cement and financial services, continue to demonstrate resilience and growth potential.