Grasim Industries Q2 FY27 Earnings Call: Record Revenue Rises 26% YoY, Birla Opus Guides 50% Growth

Record Revenue, But Exceptional Charge Weighs on PAT

• Consolidated revenue of Rs.50,105 crore, up 26% YoY — a record for Q2 FY 2026-2027; trailing 12-month consolidated revenue was Rs.1,94,234 crore, up 11% versus FY 2025-2026.
• Standalone revenue hit an all-time high of Rs.12,747 crore, up 33% YoY — standalone EBITDA rose 2.6x to Rs.4,615 crore, led by roughly Rs.4,000 crore of UltraTech dividend income (eliminated on consolidation); standalone cash profit was Rs.3,968 crore, up 2.5x.
• Exceptional charge of Rs.825 crore standalone / Rs.767 crore consolidated — linked to the board of the Canada pulp JV (AV Group NB) deciding to idle its Nekvik pulp mill; excluding the charge, consolidated PAT was Rs.536 crore and standalone PAT Rs.3,132 crore.
• Adjusted consolidated PAT declined 10% YoY — consolidated PBT grew 34%, but tax on higher dividend income also weighed on consolidated PAT. Standalone strength masks softer consolidated profitability.
• Macro backdrop cited by MD Himanshu Kapania — IMF's October 2026 outlook projects ~3.1% global GDP growth in 2026 with ~4.7% inflation, and raised India's FY27 GDP growth projection to 7%; the RBI raised the policy repo rate by 25 bps to 5.5% in its October policy review.

Paints Scaling Fast; Market Share Dip Framed as a "Blip"

• Birla Opus H1 FY 2026-2027 revenue of ~Rs.3,000 crore, up 50% YoY — Q2 revenue of Rs.1,337 crore (+35% YoY) with volume up 20% and rate up roughly 9-10%; secondary sales grew 34% in Q2, which CEO Sachin Sahai linked to contractor-ecosystem engagement.
• ~100 bps market share drop from Q1 to Q2 FY 2026-2027 (per Kotak's Jay Doshi) — Kapania attributed it to higher trade discounts across the industry driven by large dealers wholesaling inventory; Grasim gave lower discounts than the market. He called Q2 wholesaling cycles "blips" in a long-term journey and said this is the second year of the pattern.
• Price gap with the market leader narrowed to 2-4% — from a much higher level at the start of FY 2026-2027 to 2-4% by end-September 2026; net realization was flat QoQ despite dealer selling price increases.
• Management guides 50% YoY revenue growth for Birla Opus in FY 2026-2027 — Kapania declined to split a separate H2 growth rate; Sahai expects H2 FY 2026-2027 to be "equally good as compared to H1," helped by seasonality, dealer availability, contractor ecosystem, and regional campaigns (Durga Puja, Onam Pookalam, Ganpati).
• Double-digit revenue market share targeted by end of H2 FY 2026-2027 — across Birla Opus and Birla White on a standalone basis; long-term ambition is a Rs.10,000 crore brand by exit of FY 2027-2028 and becoming India's second largest decorative paints company.
• Birla Pivot Q2 revenue grew 66% YoY to Rs.2,785 crore — annualized run rate crossed Rs.11,000 crore; the business aims to cross Rs.12,000 crore for FY 2026-2027 and remains on track for break-even in H2 FY 2026-2027, with retail already EBITDA-positive. Q2 EBITDA was hit by one-time employee-related expenses; ESOP expense impact in B2B commerce is ~Rs.10 crores (period unspecified).
• Kapania cited India's B2B e-commerce underpenetration — online share of B2B sales was ~2% in FY 2025-2026 vs 25% in China, 20% in the UK and 18% in the USA; he expects India to cross 5% by 2030, equating to a $200 billion B2B e-commerce market.

Cost Pressures Cap Margins; Range-Bound Near Term

• Cellulosic fibers revenue grew 29% YoY to Rs.5,344 crore in Q2 FY 2026-2027 — driven by volume growth, favorable product mix and stable domestic realization.
• VSF margins of ~Rs.22 per kg in Q2 FY 2026-2027 (cited by MK Global's Harsh Mittal) — Wadiraj Kulkarni said cotton and polyester fiber prices rose ~30-40% during FY 2026-2027, lifting global VSF plant operating rates; global CSF prices have risen for four consecutive quarters, averaging $1.85 per kg in Q2, up 23% YoY, with China operating rates at 93% and inventory at 6 days.
• Margins expected range-bound in Q3 FY 2026-2027 — Kulkarni said a similar range to Q2 should hold; he declined guidance for Q4 FY 2026-2027, citing uncertainty on crude, polyester and freight. Demand is slightly muted in India as final consumption has not been increasing.
• Input costs should correct from December 2026 onwards — pulp prices are not showing moderation, but sulfur inventory is under two weeks; sulfur prices have moderated slightly from October 2026 onwards.
• Specialty fiber capacity expansion of 165,000 tons per annum in two phases — Phase 1 (55,000 tons) has nearly completed procurement deliveries; the environmental clearance application for Phase 2 (110,000 tons) is at an advanced stage of submission.

Chlorine Improving, Caustic Under Pressure; Power Plant Issues Largely Resolved

• Chemicals revenue rose 15% YoY to Rs.2,759 crore in Q2 FY 2026-2027 — growth broad-based across caustic soda, chlorine derivatives and specialty chemicals; capacity stands at ~2.6 million tons per annum.
• Chlorine prices improved, particularly in Gujarat — Business Head Jayant Doble said Gujarat prices are "almost, you know, not negative anymore, or maybe just slightly negative or slightly positive," and they "possibly will remain improved" on local demand-supply; caustic internationally "continues to remain under pressure," citing outages at Middle East aluminum refineries affected by the war and higher Chinese production post-turnaround.
• Caustic soda CFR Southeast Asia at a five-year low of $390 per tonne in Q2 FY 2026-2027 — stable domestic demand and rupee depreciation lent some firmness to domestic prices.
• Epoxy value chain under margin compression — BPA and ECH prices have risen while demand is sluggish; the company is "trading off volume margin" and does not view this as a long-term concern. Doble does not expect a significant change in Q3 FY 2026-2027 but suspects Q4 FY 2026-2027 will be a bit better, cautioning that geopolitical factors could change the outlook. He cited wind turbine installations rising "from, I think, something like, 50 gigawatts now to 100 gigawatts in the next 4 years" as an unchanged demand driver.
• Two Vilayat projects commissioned — a 50,000-ton CPVC plant in August 2026 and a 50,000-ton epichlorohydrin plant in October 2026; management expects chlorine integration to improve to 67% as these ramp up (period unspecified).
• Vilayat power plant issues largely resolved — improved reliability practices and OEM-linked fixes resulted in only a minor impact on Q2 FY 2026-2027 production for both chemicals and viscose fiber; an additional redundancy boiler was just commissioned and significant additional grid connection capacity secured. Kapania said any 2H FY 2026-2027 volume impact would be insignificant.

UltraTech Dividend Boosts Standalone; Canada Pulp Mill to Close

• UltraTech Q2 FY 2026-2027 sales volume of 38.2 million tons, up nearly 13% YoY — EBITDA up 17%; UltraTech remains on track to reach 242.9 million metric tons of capacity by exit of March 2028 (FY 2027-2028).
• Aditya Birla Capital revenue (as consolidated in Grasim) rose 32% YoY to Rs.13,990 crore in Q2 FY 2026-2027; other businesses (textiles, insulators, renewables) grew revenue 16% and EBITDA 14% YoY, with renewable capacity up 269 MW YoY to 2.2 GW peak.
• CCI has approved the acquisition of Spring — management is committed to closing it within calendar 2026; post-acquisition renewable capacity would be ~10 GW peak, with a stated ambition to reach 20 GW (period unspecified).
• Canada pulp JV (AV Group NB) Nekvik mill to be idled — CFO Hemant Kadel cited reliability and maintenance issues, rising costs and negative cash flows since around the COVID period; the mill will be idle from "October 26" after operations begin closing from "October 27." Grasim holds a 45% stake and recorded a Rs.625 crore provision in Q2 FY 2026-2027 for its contribution to the entity's capital raise.
• Payback within 4 years (period unspecified) — Kadel said the contribution is a one-time payment to stop ongoing losses, covering cash losses and borrowings over the last 2-3 years plus closure costs; Grasim previously sourced ~20% of its pulp from the mill, now covered from other sources developed recently.
• Standalone capex for FY 2026-2027 earmarked at Rs.3,157 crore — of which Rs.1,022 crore was invested in H1 FY 2026-2027; Kadel maintained full-year FY 2026-2027 capex guidance of about Rs.3,000 crore, noting H1 spending is typically slower due to approvals, work-start timelines and monsoon, with a pick-up expected in H2 FY 2026-2027.
• Sustainability metrics — renewable power share rose from 11% in FY 2024-2025 to 26% in H1 FY 2026-2027; recycled and reused water stayed above 50% of fresh water withdrawal in H1 FY 2026-2027.

Paints Season Tailwind; Profitability Hinges on Crude and Cost Pass-Through

• Decorative paints industry grew 16-17% in H1 FY 2026-2027 vs H1 FY 2025-2026 — per Kapania, with 8-9% from price and the balance from volume; industry announced price increases of 14-15% but retained increases were 9-10% in H1 FY 2026-2027. He expects industry growth of 15-18% in H2 FY 2026-2027, with a wider range of 15-20%.
• October 2026 volume growth "far higher" than the H1 FY27 average — paints throughput has run faster than the 50% norm since the season started in October, giving management confidence in achieving FY 2026-2027 paints guidance over the next 5 months of retail season; management expects a strong Q3 FY 2026-2027 in volume and value.
• Paints profitability hit by crude-linked raw materials — crude moved from 65-70 pre-war to as high as 110, toggling between 90-95 and 110, and suppliers have not reduced prices after reaching those levels. R&D and optimization efforts are ongoing to improve profitability.
• Paints profitability commitment tied to the Rs.10,000 crore revenue mark — Kapania said the company has guided it will be profitable once it reaches the Rs.10,000 crore mark and remains committed to that.
• Paints capex envelope remains Rs.10,000 crore (period unspecified), within about 1% either way — Kapania said about 3 to 4 billion rupees is "little short" of that envelope spent to date; current capex is primarily for building a franchise model and tinting machines.
• Unorganized sector shift is a demand tailwind — Kapania attributed strong industry demand partly to organized players' higher marketing activity and unorganized-to-organized volume migration; the unorganized sector holds about 25% of decorative paint.