Grasim Industries profit plunges 40% in Q3, despite revenue growth.

Grasim Industries, a leading Indian conglomerate, saw its net profit for the third quarter of the financial year 2024 (Q3 FY24) fell 40 per cent year-on-year (YoY) to Rs 1,514 crore, despite an 11.62 per cent increase in revenue from operations. This significant decline comes as a surprise, given the positive trajectory of the Indian economy and the broader textile industry.

The main reason behind the profit slump seems to be a combination of factors:

Weakening margins: While revenue grew, Grasim's profit margins across its main businesses – chemicals, paints, and fibers – shrunk due to rising input costs and increased competition. The viscose filament yarn (VFY) business, in particular, witnessed a decline in sales volume and realisations due to surging imports from China.

Chemical business blues: The chemicals business, a major contributor to Grasim's profits, saw a sharp 23 per cent YoY decline in revenue, primarily due to a steep fall in caustic soda prices.

However, there were some bright spots in Grasim's Q3 performance:

Viscose staple fibre (VSF) shines: The VSF business recorded a strong 34 per cent YoY growth in sales volume, driven by higher demand and a reduction in input prices. This resulted in a 535 per cent YoY jump in EBITDA for the segment.

Healthy EBITDA growth: Despite the profit decline, Grasim's consolidated EBITDA rose by 34 per cent YoY to Rs 5,150 crore, indicating operational efficiency improvements.

Industry experts believe that the current weakness in Grasim's profitability is temporary and linked to global market headwinds. The long-term outlook for the company remains positive, thanks to its strong brand presence, diversified business portfolio, and ongoing expansion plans.