Full Year 2017 Grasim Industries Ltd Earnings Call
May 19, 2017 AM EDT
GRASIM.NSE - Grasim Industries Ltd
Full Year 2017 Grasim Industries Ltd Earnings Call
May 19, 2017 / 10:30AM GMT
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Corporate Participants
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* Sushil Agarwal
Grasim Industries Limited - Group CFO
* Dilip Gaur
Grasim Industries Limited - MD
* Raj Narayanan
Grasim Industries Limited - COO, Chemical Business
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Conference Call Participants
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* Gunjan Prithyani
JP Morgan - Analyst
* Amit Maskara
Carrhae Capital - Analyst
* H.R. Gala
Panav Advisors - Analyst
* Sanjeev Singh
Emkay Global Financial Services Ltd - Analyst
* Ajit Motwani
Bharti AXA Life Insurance - Analyst
* Rishabh Parekh
Sunidhi Securities & Finance - Analyst
* Prateek Kumar
Antique Stock Broking - Analyst
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Presentation
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Operator [1]
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Ladies and gentlemen, good day and welcome to the Grasim Industries Limited Q4 FY17 earnings conference call. The Company will be represented by Mr. Dilip Gaur, Managing Director; Mr. Sushil Agarwal, Group CFO; Mr. Raj Narayanan, COO, Chemical Business; and other senior management.
As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. (Operator Instructions) Please note this conference is being recorded. I now hand the conference over to Mr. Sushil Agarwal, Group CFO. Thank you and over to you, sir.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [2]
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Thanks. And good afternoon and welcome to all the participants. At the start, I would like to kind of touch upon the progress on the merger of Aditya Birla Nuvo with Grasim and listing of the financial services business.
As you are aware, the scheme has been approved by the shareholders and creditors of the Company as well as that of Aditya Birla Nuvo and Aditya Birla Financial Services, in the process to receive sanction from the National Company Law Tribunal. We expect both the phases of the schemes to be completed by Q2 FY18, including the listing.
Since we have completed the financial year 2016-2017, it's time to stand back and look at the performance beyond the quarterly numbers. All-round growth trend has been witnessed in financial year 2015-2016 continued in financial year 2016-2017 too. Standalone net profit for the year at INR1,560 crores is up by 56%.
At the same time, over two years EBITDA has increased by 2.5 times from INR1,013 crores to INR2,629 crores led by speedy ramp-up of capacities in both VSF and Chemicals business, merger of ABCIL, ABCIL's better operating efficiencies, and improvement in margins. PAT multiplied almost 3 times during the same period from INR556 crores to INR1,560 crores.
At the consolidated level, EBITDA has moved up by 47% from INR5,688 crores to INR8,333 crores over last two years. PAT has soared by 80% from INR1,753 crores to INR3,167 crores.
Now I would like to highlight the quarterly performance for the business. The VSF business have reported strong performance on the back of strong sales volume supported by improved business environment. Domestic market have recovered from effect of demonetization and our share of domestic volume in total volumes has recovered to earlier level.
Despite increase in pulp and energy cost, EBITDA increased by 30% at INR345 crores led by higher realization and operating efficiencies. EBITDA margin increased to 18% in current quarter compared to 15% in Q4 last year. In the Chemical business, lower chlorine offtake in industry has restricted its caustic production. As a result, our caustic volumes were down by 6% on YoY basis at 1.94 lakh tons. On the positive side, chlorine volume value-added product volumes have recorded a sharp increase of 33% led by our continuous focus on these products. As a result, EBITDA fall was restricted to 8% to INR211 crores on like-to-like basis.
Civil work is in full swing for the brownfield expansion project at Vilayat. It is expected to complete by Q4 FY18. We are also expanding capacities of phosphoric acid, which is a value-added product. Capacity is said to be doubled from 25,000 metric tons to 54,000 metric tons in second half of FY18.
In the cement business, demand was subdued as the industry witnessed one of the weakest quarters. Nevertheless UltraTech, our cement subsidiary, continued its focus on reducing cost and improving efficiency. On a like-to-like basis, EBITDA for the quarter was at INR1,439 crores as against INR1,605 crores in corresponding period of previous year. UltraTech recorded a PAT of INR726 crore in Q4 FY17.
Coming to overall financial performance, consolidated revenue for the quarter crossed INR11,000 crore mark and increased by 5% to INR11,140 crores. EBITDA was up 4% at INR2,142 crores as against INR2,051 crore in previous year. Net profit for the quarter increased by 2% to INR775 crore as against INR758 crore in Q4 last year. Standalone net profit increased by 49% at INR315 crores. It continues to contribute upward of 40% plus of the consolidated PAT of Grasim.
Going forward in VSF business, we'll continue to focus on expanding uses in India. Simultaneously, we are in the process of debottlenecking our plants to meet the growing demand. In Chemical, our volumes see another round of growth in medium term with capacity expansion under implementation from 840,000 TPA to 1,048,000 TPA.
In Cement, continued government spending on infrastructure development and affordable housing will be the key demand driver. UltraTech is well positioned across the country to cater the growth in demand. Grasim is poised to enter into new era of growth upon completion of the merger of Aditya Birla Nuvo as it will have fast growing sectors such as financial services and telecom under its hold. Additionally, listing of financial services business will unlock value for all the shareholders. Grasim's portfolio will span manufacturing and service businesses with leadership position across the cement, financial services, telecom, textile, and chemical sectors.
Now, we will open the forum for discussion. Thank you.
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Questions and Answers
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Operator [1]
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Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Gunjan Prithyani, JP Morgan.
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Gunjan Prithyani, JP Morgan - Analyst [2]
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Firstly on the VSF business, there's clearly been a margin pressure versus last quarter. Could you give us some sense on such sharp reduction in the margins on this business and how are we looking at things because from what I understand, realizations have continued to stay firm so how should we look at this? And secondly, on the capacity expansion, if you can give us the timeline when we should see VSF and Chemical coming through because on VSF, we're already at peak capacity utilization so, when does the volume growth start to come through there?
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Dilip Gaur, Grasim Industries Limited - MD [3]
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I'll take this question. You're right. There has been pressure on the margin, but the fact is the realization has gone up, the volumes have gone up. The margin came under pressure because there has been an increase in the pulp prices and all the input prices in terms of energy and sulfur, they have gone up. So, that has led to the higher erosion of the margin. But going forward, the good thing is in case of pulp, there's always a time lag. So, what we have seen in Q4 is the carryover prices from the previous quarter. Going forward, the price of pulp have already come down so again $925. The ruling price right now is $860.
So I think going forward, this will be restored again and the realizations are still at a healthy level and the demand is good. So I think that was a temporary aberration, but it's more because of pace lag. We got the benefit in the earlier quarter, which was seen in this quarter.
In terms of the capacity debottlenecking, we have applied for the environmental clearances. It depends upon when we get the environment clearance. The EIA has been completed, the public hearings have to be done. So hopefully by the end of the year, we should be able to get the approval and once that happens, the debottlenecking should happen. The Chemicals will happen in Q4 2018 as per our plan.
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Gunjan Prithyani, JP Morgan - Analyst [4]
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So the entire from 840,000 TPA to 1,048,000 TPA comes through by Q4 2018 or it's going to be staggered?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [5]
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No, it will come by end of the last quarter.
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Gunjan Prithyani, JP Morgan - Analyst [6]
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Okay. And just lastly if I can on the VSF prices, how are you looking at it in terms of are there any big capacity additions coming through globally? What's the outlook there for the next 12, 18 months?
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Dilip Gaur, Grasim Industries Limited - MD [7]
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Next 12 to 18 months, we expect a stable outlook because there is no major capacity coming onstream. The expected rise in capacity is about 3% to 4% in 2017. I think so in 12 to 18 months should be fairly.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [8]
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And Gunjan, I think just to add one more point. The cotton prices have remained little firm and consumption of cotton has been higher than the production and generally I think the stocks of cotton is coming down. It has come down from 22 million tons to 17 million tons at a global level. So my sense is that if cotton prices remains firm because of lower acreages as well and the production is lower than the consumption, I think directionally it gives an impression that the VSF prices should remain firm. And as Mr. Gaur was saying that we are unlikely to see major capacity addition coming in next 12, 18 months. I think to some extent during this period we believe that prices should remain stable.
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Operator [9]
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(Operator Instructions) Amit Maskara, Carrhae Capital.
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Amit Maskara, Carrhae Capital - Analyst [10]
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On a quarter-on-quarter basis between last and the previous quarter, there's a big move in the working capital and the finished good in progress for the standalone business. Just want to get a sense of what that is?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [11]
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I'm not sure which numbers are you --.
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Amit Maskara, Carrhae Capital - Analyst [12]
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It's in the COGS number. In your cost of goods sold, there's like almost INR250 crores more versus negative INR98 crores. This is expense of INR148 crores in the buildup of inventories and finished goods.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [13]
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It is decrease in working capital. Basically if you look at it, we have sold more VSF in quarter four compared to what we have produced so as a result, the inventories have gone down and that is why the INR148 crores [or 0.86] is positive in the Q4 column.
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Operator [14]
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(Operator Instructions) H.R. Gala, Panav Advisors.
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H.R. Gala, Panav Advisors - Analyst [15]
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Congratulations for a very good set of numbers. Can you just tell me what kind of capital expenditure we had in FY17 and planning for FY18-FY19?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [16]
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For the current year, we will have at a standalone level of roughly INR1,565 crores is what we have as a spend.
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H.R. Gala, Panav Advisors - Analyst [17]
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That was in 2016-2017 I presume, INR1,555 crore. Okay.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [18]
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No. So, last year what we have spent is around INR438 crores.
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H.R. Gala, Panav Advisors - Analyst [19]
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How much?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [20]
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INR438 crores.
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H.R. Gala, Panav Advisors - Analyst [21]
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INR438 crore in FY17.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [22]
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That was the spending which we have done. And for the current year, we are targeting roughly INR1,045 crores as the overall CapEx. Out of which, it gets spent over a period of next 24 months so not necessarily the entire money will be spent in FY18. As we talked about, there is a large CapEx on account of caustic soda capacity which is being added and there's a small CapEx which is taking place on VSF debottlenecking and then there are usual normal CapEx which is taking place.
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H.R. Gala, Panav Advisors - Analyst [23]
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Can you give me broad breakup between caustic soda and VSF, how much it will be from INR1,045 crores?
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Dilip Gaur, Grasim Industries Limited - MD [24]
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So out of INR1,045 crores, we have around INR600 crore plus on the chemical side and the balance is on the VSF cost.
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H.R. Gala, Panav Advisors - Analyst [25]
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VSF and normal CapEx?
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Dilip Gaur, Grasim Industries Limited - MD [26]
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60/40, yes.
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H.R. Gala, Panav Advisors - Analyst [27]
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Okay. So roughly say INR445 crores or something?
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Dilip Gaur, Grasim Industries Limited - MD [28]
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Yes.
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H.R. Gala, Panav Advisors - Analyst [29]
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And this will be spent over 24 months, you say?
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Dilip Gaur, Grasim Industries Limited - MD [30]
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Yes, broadly.
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H.R. Gala, Panav Advisors - Analyst [31]
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Broadly 24 months, okay. That was my first question. The second question is after from AB Nuvo, this VFI business comes into our fold, what kind of synergies can we have between our VSF and VFI businesses?
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Dilip Gaur, Grasim Industries Limited - MD [32]
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Not really in a crude way, but I think both have input costs as a common item, like they consume pulp, they consume caustic soda. So to that extent when you buy some of these products would be some efficiency, but I don't think in a crude way we should assume lots of synergies around with VFI coming with VSF.
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H.R. Gala, Panav Advisors - Analyst [33]
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And you will have a different set of customers for both I believe?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [34]
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Yes. Actually because what viscose fiber does is it goes to the spinners and filament in some form kind of spinning is done on the process itself.
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H.R. Gala, Panav Advisors - Analyst [35]
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Okay. Now another thing is about Idea, we have mentioned that the result has not been included in this year's result?
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Dilip Gaur, Grasim Industries Limited - MD [36]
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You see if you recall when we published our quarter three results, at that point of time, the Idea results were not published. Two, our Grasim share in the Idea's net profit was not included. Now when we are publishing this quarter four result, we have included that share of Idea loss in the quarter three column. So, that is what we are communicating from the input in our result.
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H.R. Gala, Panav Advisors - Analyst [37]
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So that is in item number six I believe, share in profit loss of equity accounted invested?
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Dilip Gaur, Grasim Industries Limited - MD [38]
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Yes.
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H.R. Gala, Panav Advisors - Analyst [39]
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Okay. That is why it is coming negative?
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Dilip Gaur, Grasim Industries Limited - MD [40]
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Yes.
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H.R. Gala, Panav Advisors - Analyst [41]
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Okay. So overall outlook for the Company looks quite okay based on whatever comments you have made. How do you see the cement behaving?
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Dilip Gaur, Grasim Industries Limited - MD [42]
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Cement, as you know, if you have to believe that this entire common focus on infrastructure and affordable housing really takes place the way we all have visualized and the way government is quite focused on; I think we as a company clearly kind of have a presence across the country and if this does take place, I think we would be a big beneficiary and be able to take benefit of increase in the demand on cement side.
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Operator [43]
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Sanjeev Singh, Emkay Global.
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Sanjeev Singh, Emkay Global Financial Services Ltd - Analyst [44]
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First, I want to understand that in global markets I believe VSF prices have come down by around 12%, 13% in last two months. So, is it because of a decline in pulp prices or some other factors have led to a decline in prices?
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Dilip Gaur, Grasim Industries Limited - MD [45]
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Actually the VSF prices, there is ethnicity in that. So if you see, the summer spring has gone. Now the first quarter normally is not as strong. So in China, the prices have indeed come down; but in India, the prices are holding. So it depends upon which market you are, what kind of demand is there, so you can't have one general thing for entire world.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [46]
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And I think if you recall and if you have been tracking, I think on most of our Investors call we have been making this statement that Indian prices are not really kind of fully linked with the international prices because we neither increase or decrease prices based on what's really happening in the international market although from a slightly longish point of view, it will attract appropriately. But we want to kind of give an experience to our domestic users and we don't really change our pricing very often. So to that extent, I think some change in international market at a short level may not necessarily change the domestic prices.
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Sanjeev Singh, Emkay Global Financial Services Ltd - Analyst [47]
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Okay. And second thing is that you have written that operations at captive pulp plant at Harihar was suspended. So, how much increase in operating cost has been because of this reason?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [48]
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So, I think there are two issues. One because pulp actually gets consumed as you know in fiber capacities at Harihar itself. So to that extent, the logistic costs and including the difference between cost of production and the imported cost, there is an impact on our profitability. So roughly around INR45 crores is what got impacted during this quarter on account of pulp capacities which you are saying.
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Sanjeev Singh, Emkay Global Financial Services Ltd - Analyst [49]
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So you mean to say that if this would not have happened, then EBITDA should have been higher by INR45 crore?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [50]
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That's right.
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Sanjeev Singh, Emkay Global Financial Services Ltd - Analyst [51]
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Okay. And you mentioned that in domestic market, our share has reached back to normal level. So in last con call, I believe that you had said that the share was at 64% against 71% in Q2. So, have we reached to around 71% level?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [52]
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Yes, we have gone back to that same level.
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Operator [53]
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Ajit Motwani, Bharti AXA Life Insurance.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [54]
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Sir, just wanted to understand the fact that in Nagda plant, we used to have some issues and some was because of reservoir levels there. But last time around (inaudible) were pretty okay. So, would the Nagda plant face any shut down this summer as well?
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Dilip Gaur, Grasim Industries Limited - MD [55]
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I think we are keeping our finger crossed and as of now the plants are running. And what we hear from the meteorological department that country level, the monsoon is slightly ahead of schedule. So hopefully if monsoon comes on time, we don't expect any challenges in the Nagda plant.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [56]
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Okay. And the Harihar plant, the pulp production still is suspended till the time the monsoon arrives -- maybe saying about couple of week times, right?
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Dilip Gaur, Grasim Industries Limited - MD [57]
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That's right.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [58]
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Okay. Sir, one on the viscose expansion. You alluded to the fact that the chemical expansion from 840,000 TPA to 1,084,000 TPA will be completed and ready for production by 4Q18. On viscose at Vilayat, can you also give details on how much was the capacity expansion and by what time we can expect that capacity to be up and running?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [59]
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So on the viscose side, we were talking of debottlenecking and broadly around 161 TPD is what we were adding due to debottlenecking. Out of which, around 57 TPD has already been kind of put into action and remaining 100 odd TPD will come in the third, fourth quarter of this financial year. But as Mr. Gaur had made a statement in other question that we are currently kind of waiting for our environmental approval process. So, eventually this whole capacity coming onstream would be dependent on our environmental approval.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [60]
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So, 57 TPD is already up and running?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [61]
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That's right.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [62]
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From the time you get approval for the 100 TPD till the time it becomes operational, how much time usually it will take?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [63]
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We are broadly progressing together so I think by Q4, it should be up and running. We've had one more quarter to get that permission.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [64]
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Okay. Sir, one last question on once the merger gets completed -- because I guess NCLT hearing was yesterday for us, right?
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Dilip Gaur, Grasim Industries Limited - MD [65]
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Yes.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [66]
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So, has the NCLT approval come?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [67]
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So typically as you know and I think I did mention it in some form, NCLT is a new setup for restructuring and there are new sets of people. I think they typically are taking slightly longer than normal. So I do not know when can we have an order, but typically my sense is it will take three, four weeks before we get an order from them. So from our point of view, the one big piece has been done. But until we have order in hand, we can't process the rest of the things.
And just to complete this too because some other investor also would be kind of keen to know from a timing perspective although I've kept saying that second quarter of this financial year. But as a process, once we have an order, it will go to the BSE, NSE, and SEBI for their final round of approval; then we go to ROC which is where the thing gets affected and then we have a listing process. So, there is a bit of a process which is involved and hopefully we believe that second quarter of the current financial year we should be able to kind of complete this entirely.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [68]
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So first the merger of ABNL and Grasim will happen and between that and the listing of ABFS, how much time will be lapsed?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [69]
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So, I think my sense is it should not take more than three, four weeks additional time. So, there would be a process by which listing of new Grasim will take place where the shares to ABNL shareholders will be issued and the listing will take place and simultaneously, we will be working towards the listing of ABFS. So, maybe four weeks' timeframe broadly my sense is that second listing should take place.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [70]
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So, similar to the timelines of how the Samruddhi listing and subsequent delisting happened?
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Dilip Gaur, Grasim Industries Limited - MD [71]
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Yes, that's right.
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Operator [72]
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Rishabh Parekh, Sunidhi Securities.
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Rishabh Parekh, Sunidhi Securities & Finance - Analyst [73]
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Since the VSF capacity is already full, where do you find EBITDA expansion coming in in FY18? How should we think about it since there will not be much volume led growth?
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Dilip Gaur, Grasim Industries Limited - MD [74]
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There are two or three things you can do. One is we spoke about the debottlenecking so that is a --.
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Rishabh Parekh, Sunidhi Securities & Finance - Analyst [75]
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But that will come in Q4, right, sir?
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Dilip Gaur, Grasim Industries Limited - MD [76]
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Yes. Second is the larger share of specialties, we are going to increase the higher specialties. And third is what we are doing with the Liva initiative, we are growing in the Indian market. So what we are doing is the domestic volumes are going to go up significantly so we are again trying to grow the Indian market much faster than it has happened in the past. So, these three will be our value drivers for the value creation in FY18, till the time --.
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Rishabh Parekh, Sunidhi Securities & Finance - Analyst [77]
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And sir, what about the chemical business in FY18? How should one think about that?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [78]
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So the chemical business, our focus would be on operational excellence where we would continuously work on cost reduction initiatives. We are also working on expansion of value-added products. So as you know that there are some investment coming by the quarter three on phosphoric acid. So, a new capacity as we are coming towards the end of Q4. So, all these three would help at various levels.
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Rishabh Parekh, Sunidhi Securities & Finance - Analyst [79]
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So, should we expect the EBITDA margins for FY18 to be maintained in the same range of about 20% to 22% for both the businesses?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [80]
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I would think so, but broadly I think the way you should see particularly on chemical business, if you look at this quarterly result, although the overall volume have been down because of new chlorine capacities which have come in the country, there is a value-added product, there is a sharp increase of around 33% in the volume which obviously has a higher margin and we have created a specific thrust towards the export side which also is helping. So, I think the point we are making is on a value-added product, there is an extra focus which will also help kind of maintaining our profitability.
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Rishabh Parekh, Sunidhi Securities & Finance - Analyst [81]
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Okay. And sir, in the standalone balance sheet we have a net surplus of how much, sir, if you can just tell us?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [82]
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So we have a gross treasury of around INR2,500 crores odd as of March, INR2,550 crore, and we have a debt of around INR700 crores so INR18 crores odd is our treasury on net basis. So INR2,550 crores is the gross, INR700 crores of debt, and INR1,850 crores is our net cash on the balance sheet.
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Operator [83]
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(Operator Instructions) Prateek Kumar, Antique Stock Broking
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Prateek Kumar, Antique Stock Broking - Analyst [84]
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Sir, my question is on VSF profitability. As you mentioned that there's revival in domestic share during the quarter. So, is this change in product mix have had some impact on margins during the quarter? And my second --.
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Dilip Gaur, Grasim Industries Limited - MD [85]
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Like I was telling there's a specialty called Modal, the high weather product. We have grown that to almost 70% this year. So yes, the product mix makes a difference and the geography you sell it makes a difference.
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Prateek Kumar, Antique Stock Broking - Analyst [86]
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So, export is a higher margin in geography?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [87]
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Main thing which we talk about is the cost reduction. We have got almost INR1 billion of cost reduction this year in VSF. So, all this adds to margins.
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Prateek Kumar, Antique Stock Broking - Analyst [88]
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Sir, I'm talking about specifically this quarter not for full year.
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [89]
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For Q4?
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Prateek Kumar, Antique Stock Broking - Analyst [90]
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For Q4 I'm talking about.
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [91]
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So, I think that one was my domestic volumes went up by 20% so that led to an extra contribution and the specialties share went up to 36%. So, these two added to the delta.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [92]
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And as we talked about, there are some one-timers which got booked during this quarter particularly on account of Harihar pulp capacities, which were shut which had an impact of around INR45 crores. So I think some of these things if you consider (inaudible).
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Prateek Kumar, Antique Stock Broking - Analyst [93]
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And sir, because of now we are seeing like as you mentioned lower caustic prices so we should see the impact of the same coming from let's say next or next to next quarter. So, we should expect the spread for VSF like in the range of [30] plus or is that optimistic?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [94]
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First of all, I'm not sure on caustic prices. We've talked about lowering the caustic prices. I think what Mr. Gaur was referring in some form was pulp prices. So, caustic prices still kind of remains firm. I think on the chemical business, Raj did talked about there are issues which we faced during this quarter and about our focus on value-added product in some form did help and that will continue to kind of help our profitability. And hopefully the chlorine use, which had disrupted bit of volume of caustic, should settle down in coming quarters.
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Prateek Kumar, Antique Stock Broking - Analyst [95]
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Sir, my question was actually on pulp prices. So, pulp prices have started to come down you mentioned. So because it went higher so it had a lag impact in terms of profitability during current quarter. So in VSF businesses, so we should expect a spread of INR30 per kg from like next quarter -- again, like it was in Q3?
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Dilip Gaur, Grasim Industries Limited - MD [96]
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So, I think as you would have noticed that we don't actually kind of guide on the prices and some of these stuff, we broadly kind of give you a sense of what's happening around the business. I think it's too specific a question to kind of answer for us on the call.
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Operator [97]
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Ajit Motwani, Bharti AXA Life Insurance.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [98]
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Couple of question on the chemical business. In your presentation you have said ECU realization have broadly maintained; you meant quarter-on-quarter or this quarter over last year's?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [99]
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So YoY we are talking for ECU realization, Ajit.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [100]
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Okay. Sir, in a sense also I wanted to know that the realization seems to have been impacted by the chlorine negative carry. So, has that bottomed out now? You see that happening going forward or do you think that chlorine negative impact will continue to impact the ECU realizations?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [101]
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So, we have not yet seen stabilization in the chlorine market. The main reason is some new capacities have come in the West. The caustic growth rate is much more than the chlorine growth rate and that has caused the temporary destabilization. We are still not seeing it is coming out of the situation yet.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [102]
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Okay. Would it still be negative INR8 a kg or has it worsened further?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [103]
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So, the market is quite dynamic. Even now I won't say it is minus INR8, but the market is quite dynamic and we are still having an impact due to chlorine prices.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [104]
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Okay. And in terms of capacity addition which you alluded to, can you mention which were the capacities added and what are the capacities likely to be added further in FY18 for the caustic business?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [105]
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So we are adding in Vilayat, the capacities will be expanded about 40% and we are also doing some debottlenecking in our Ganjam facility in Orissa. We are also expanding in south in Karwar. So, these are the three expansion plans we have.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [106]
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That's your expansion from 840,000 TPA to 1,048,000 TPA.
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [107]
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Yes.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [108]
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That is one which has come in. You mentioned that some of the capacity in caustic have come now and even there would be other apart from you, which will be expanding capacities this year. So, I'm referring to that data.
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [109]
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So at this moment for this financial year, we don't see any new capacities coming beyond the ones which have already come in the last financial year.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [110]
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Okay. So, you're saying whatever addition apart from you has to be done has been done this year?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [111]
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Yes.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [112]
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Okay. Last question on the export share. Sir, in the viscose business, the export share as a percentage of total in Q4 versus Q317 if you can?
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Dilip Gaur, Grasim Industries Limited - MD [113]
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Ajit, your question on the capacity increase, was it on Grasim or you're talking about the industry?
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [114]
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Industry, sir. So I was alluding to the fact that which were the capacities that have commissioned in FY17 and I know that in FY18, ours is one which is coming and any other which is coming in the industry?
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Raj Narayanan, Grasim Industries Limited - COO, Chemical Business [115]
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So, that I've answered already. The capacities whatever has come, they have come already in FY16-FY17. In FY17-FY18 our capacities will be coming, only our capacities. As per the information we have, we don't see any other new capacities coming.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [116]
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And the export share, sir, please? Export share between viscose volumes this quarter and the third quarter going back?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [117]
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So Ajit, 30% is the export in this quarter. And you're talking for Q3 now or you want --?
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [118]
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So, Q4 was 30% and December quarter was how much?
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Sushil Agarwal, Grasim Industries Limited - Group CFO [119]
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Close to 35%, 36%.
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Ajit Motwani, Bharti AXA Life Insurance - Analyst [120]
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Okay. So, the export share has come down this quarter.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [121]
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Yes.
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Operator [122]
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(Operator Instructions) As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
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Sushil Agarwal, Grasim Industries Limited - Group CFO [123]
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Thank you to all the participants. And if there is any further queries, you can reach out to Sharad and Saket at the Group level. Thank you so much.
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Operator [124]
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Thank you very much, sir. Ladies and gentlemen, on behalf of Grasim Industries Limited, that concludes this conference. Thanks for joining us. You may now disconnect your lines.
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