Grasim vs TATA CONSUMER PRODUCTS Q3 FY24

Grasim's Q3 FY24 consolidated revenue grew 12% YoY to INR 31,965 crore, with EBITDA up 34% to INR 5,150 crore, driven by volume growth in VSF (34%) and caustic soda (5%), though realizations remained weak due to global oversupply. Standalone revenue was INR 6,400 crore (+3% YoY). The paints business (Birla Opus) is on track for launch in Q4 FY24 with trial production at three plants, targeting pan-India distribution by FY25 end. B2B e-commerce Birla Pivot achieved INR 120 crore monthly revenue run-rate. VSF margins are expected to bottom out, while chemicals remain stable to gently improving. Risks include continued pressure from cheap Chinese imports and Red Sea disruptions impacting export trade.

Guidance read

Paints launch in Q4 FY24 with pan-India distribution by FY25 end: Birla Opus will launch in Q4 FY24 starting with North and South India, targeting national distribution by end of FY25. Net debt-to-EBITDA to reach 3-3.5x post paints capex: Management guided net debt-to-EBITDA of 3-3.5x after completing paints capex and rights issue proceeds. Capex guidance of INR 5,900 crore for FY24: Management reiterated plant capex guidance of about INR 5,900 crore for FY24, with 76% allocated to paints.

Risk read

Key risks include Cheap Chinese imports impacting VSF realizations — VSF realizations declined 2% QoQ due to cheaper imports from China, pressuring margins.; Red Sea disruptions affecting global trade — Red Sea disruptions are impacting 12-15% of world trade, including 30% of container traffic, creating uncertainty for export markets.; Chlorine pricing remains negative due to agrochem slowdown — Chlorine realizations worsened by INR 2,000 sequentially to negative INR 4,000, driven by slow agrochem demand.; Paints business losses increasing ahead of launch — Paints EBITDA losses increased QoQ as uncapitalized expenses rise; profitability timeline remains uncertain..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

Tata Consumer Products delivered a strong Q3 FY24 with consolidated revenue growth of 9% and EBITDA expansion of 190 bps. India beverages saw tea volume growth of 2% (fourth consecutive quarter of positive volume), while India foods grew 5% volume and 13% revenue. Growth businesses (Sampann, NourishCo, Soulfull, Yumside) surged 42%, now contributing 17% of India business. International business recorded 11% revenue growth with EBIT up 23%. The company closed the Capital Foods acquisition and expects to close Organic India within 45-60 days, targeting integration within 100 days. Management guided for NourishCo to reach INR 900-1,000 crore for FY24 and aims to grow the contribution of growth businesses to 30% with 30% growth post-acquisitions. Risks include U.S. coffee category softness and volatility in coffee prices, which could pressure international margins.

Guidance read

NourishCo to achieve INR 900-1,000 crore revenue in FY24: Management remains confident of delivering INR 900-1,000 crore for NourishCo in FY24, despite Q3 being seasonally weak. Growth businesses contribution to reach 30% growing at 30%: With the addition of Capital Foods and Organic India, management targets growth businesses to contribute 30% of India business, growing at 30%. Integration of Capital Foods and Organic India within 100 days: Capital Foods front-end integration substantially complete; Organic India expected to close in 45-60 days, with full integration within 100 days. International margins to be accretive to India business: Management expects international business margins to improve and become accretive to overall margins, with U.S. showing progress in 6-12 months.

Risk read

Key risks include U.S. coffee category softness and price volatility — The U.S. coffee category is under demand pressure, and coffee prices remain volatile, impacting the branded coffee business.; Portfolio complexity from multiple brands — Analyst raised concern about overlapping brands (e.g., Sonnets vs Sampann, Himalayan vs Sonnets honey) potentially causing confusion and bandwidth drag.; Integration risks from recent acquisitions — While integration is progressing, there could be hiccups in distributor transition and inventory cleanup for Capital Foods and Organic India..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.