💰 Financial Performance

Revenue Growth by Segment

Standalone revenue for Q2 FY26 was INR 9,610 Cr, representing a 26% YoY growth from INR 7,623 Cr. Financial Services (ABCL) revenue grew 3% YoY, while the Textile segment grew 6% YoY to INR 586 Cr. Standalone business now contributes 24% to overall consolidated revenues as of Q2 FY26.

Profitability Margins

Standalone EBITDA margin for Q2 FY26 was 16%, a decline from 18% in Q2 FY25. FY2025 standalone PAT margin was 0.7%, down from 3.6% in FY2024, primarily due to initial costs related to the paints and B2B businesses and low realizations in core segments.

EBITDA Margin

Standalone EBITDA for Q2 FY26 was INR 1,786 Cr, up 10% YoY from INR 1,619 Cr, though the margin compressed by 200 basis points to 16% due to ramp-up costs in new ventures.

Capital Expenditure

Grasim incurred a significant capex of INR 10,000 Cr for decorative paints between FY2023-FY2025 (INR 9,352 Cr spent by March 31, 2025). Planned FY2026 capex includes INR 839 Cr for Cellulosic Fibres and INR 668 Cr for Chemicals. Total standalone capex for FY2025 was approximately INR 3,500 Cr.

Credit Rating & Borrowing

Grasim maintains a strong credit profile with a CRISIL AAA/Stable rating. Interest coverage ratio stood at 3.4 times in FY2025, a decline from 6.8 times in FY2024 due to increased debt for capex and margin pressure.

⚙️ Operational Drivers

Raw Materials

Core raw materials include wood pulp and salt (for Cellulosic Staple Fibre and Chemicals). These materials are critical as they form the primary cost base for the core standalone businesses.

Capacity Expansion

Current installed capacity for Caustic Soda is 1,505 KTPA and Cellulosic Staple Fibre (CSF) is 879 KTPA. Decorative paints capacity is 1,332 MLPA across six plants. ECH and CPVC plants are expected to be mechanically complete by Q3 FY2026 and contribute to profits from Q1 FY2027.

Raw Material Costs

Raw material and initial setup costs for the paints and B2B businesses led to a moderation in standalone operating margins to 5.2% in FY2025 from 9.2% YoY. Procurement strategies focus on cost leadership and integrated operations to manage cyclicality.

Manufacturing Efficiency

Manufacturing efficiency is driven by volume growth and realization improvements. Q2 FY26 saw volume-led growth in the chemicals segment, which helped offset lower realizations.

Logistics & Distribution

Lower logistics costs were a key driver for margin improvement in the chemicals business during Q2 FY2026, enhancing the cost-to-serve efficiency.

📈 Strategic Growth

Expected Growth Rate

14%

Growth Strategy

Growth will be achieved through a large-scale foray into decorative paints (Birla Opus) targeting INR 10,000 Cr turnover by FY2028 and the B2B e-commerce segment (Birla Pivot) targeting USD 1B revenue by FY2027. The company is also expanding into return-accretive segments like ECH and CPVC.

Products & Services

Cellulosic staple fibers (CSF), caustic soda, decorative paints, linen yarn, insulators, cement (via UltraTech), and financial services (via Aditya Birla Capital).

Brand Portfolio

Birla Opus (Paints), UltraTech (Cement), Aditya Birla Capital (Financial Services), Birla Pivot (B2B E-commerce).

New Products/Services

Decorative paints (Birla Opus) and B2B e-commerce platform (Birla Pivot). Birla Opus aims to be the number two player and profitable within three years of full-scale operation.

Market Expansion

Expansion into the decorative paints market with six plants nationwide and a foray into the B2B e-commerce segment for building materials.

Market Share & Ranking

Largest caustic soda manufacturer in India (1,505 KTPA) and a global leader in CSF (879 KTPA). Aiming for the #2 position in the Indian decorative paints market.

Strategic Alliances

Investment of up to INR 1,000 Cr in ABRen (Renewables subsidiary) to support the group's green energy transition.

🌍 External Factors

Industry Trends

The industry is shifting toward sustainable fibers and urban aspiration-led demand in decorative paints. Grasim is positioning itself as a leader in sustainable cellulosic fibers and a major player in the high-growth paints sector.

Competitive Landscape

Intense competition in the core CSF and chemical segments; the paints segment is characterized by established incumbents where Grasim is aggressively expanding to gain market share.

Competitive Moat

Grasim's moat is sustained by its status as a flagship holding company with strategic investments in UltraTech (INR 1.9 Lakh Cr value) and ABCL, providing massive financial flexibility (Debt/Market Value < 0.05x) and steady dividend inflows.

Macro Economic Sensitivity

High sensitivity to economic downturns, which directly impact the demand for CSF in the textile industry and caustic soda in industrial applications.

Consumer Behavior

Urban aspiration is driving demand for decorative paints, while global demand for sustainable and natural fibers is supporting the CSF business.

Geopolitical Risks

Susceptible to global capacity additions (particularly from international competitors) and weak global macroeconomic conditions that can lead to intense competition and margin pressure.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to environmental regulations regarding water and soil emissions and hazardous waste disposal. State-level regulations on renewable energy banking and billing impact the feasibility of green energy targets.

Environmental Compliance

Focus on reducing carbon emissions by increasing renewable power usage to a target of 40% within three years. ESG practices are well-defined at both the standalone and subsidiary levels.

Taxation Policy Impact

Standalone tax expense for Q2 FY26 was INR 276 Cr. The company is subject to standard corporate tax rates and fiscal policies affecting the chemical and textile sectors.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the ability to profitably expand and gain market share in the decorative paints segment following a significant INR 10,000 Cr investment outlay.

Technology Obsolescence Risk

The foray into B2B e-commerce (Birla Pivot) is a proactive step to mitigate the risk of digital disruption in the building materials supply chain.

Credit & Counterparty Risk

Liquidity position is strong with unencumbered cash and liquid investments of ~INR 4,229 Cr as of March 31, 2025, ensuring high receivables quality and meeting short-term obligations.