Grasim Industries Debt jumped on 23.2% in 2015 and EBITDA increased on 5.1%

02-05-2015 • About Grasim Industries ($GRASIM) • By InTwits

Grasim Industries reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is declining: 15.9% in FY2015 vs. 16.9% in FY2014 vs. 23.4% in FY2011
Grasim Industries has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.8%. At the same time it's a lot of higher than industry average of 7.6%.
CAPEX is quite volatile: 32,992 in FY2015, 33,657 in FY2014, 60,010 in FY2013, 44,290 in FY2012, 16,719 in FY2011
The company has business model with low profitability: ROIC is at 8.1%
It operates with medium-size leverage: Net Debt/EBITDA is 2.3x while industry average is 2.0x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Grasim Industries ($GRASIM) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	213,183	249,836	276,447	290,037	324,287	11.8%
EBITDA	49,954	55,791	59,236	49,148	51,660	5.1%
Net Income	22,790	26,475	27,044	20,715	17,438	-15.8%
Balance Sheet
Cash	2,845	3,266	2,292	1,995	1,570	-21.3%
Short Term Debt	26,680	13,133	28,971	20,692	55,459	168.0%
Long Term Debt	41,148	57,245	66,531	76,120	63,843	-16.1%
Cash flow
Capex	16,719	44,290	60,010	33,657	32,992	-2.0%
Ratios
Revenue growth	-62.9%	17.2%	10.7%	4.9%	11.8%
EBITDA growth	-17.6%	11.7%	6.2%	-17.0%	5.1%
EBITDA Margin	23.4%	22.3%	21.4%	16.9%	15.9%	-1.0%
Net Income Margin	10.7%	10.6%	9.8%	7.1%	5.4%	-1.8%
CAPEX, % of revenue	7.8%	17.7%	21.7%	11.6%	10.2%	-1.4%
ROIC	14.9%	14.9%	13.3%	8.6%	8.1%	-0.5%
ROE	16.8%	16.7%	14.7%	10.0%	7.8%	-2.2%
Net Debt/EBITDA	1.3x	1.2x	1.6x	1.9x	2.3x	0.3x

Revenue and profitability

The company's Revenue surged on 11.8% in FY2015. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.6 pp from 9.0% to 10.6% in FY2015.

Net Income marign decreased slightly on 1.8 pp from 7.1% to 5.4% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 10.2% in FY2015. CAPEX/Revenue decreased on 7.6 pp from 17.7% in FY2012 to 10.2% in FY2015. It's average level of CAPEX/Revenue for the last three years was 14.5%.Grasim Industries invested a big chunk of EBITDA (63.9%) to CAPEX to secure its growth.

Return on investment

The company operates at low ROIC (8.12%) and ROE (7.79%). ROIC decreased slightly on 0.51 pp from 8.6% to 8.1% in FY2015. ROE decreased on 2.2 pp from 10.0% to 7.8% in FY2015.

Leverage (Debt)

Debt level is 2.3x Net Debt / EBITDA and 2.3x Debt / EBITDA. Net Debt / EBITDA jumped on 0.3x from 1.9x to 2.3x in FY2015. Debt surged on 23.2% in FY2015 while cash dropped on 21.3% in FY2015.

Appendix 1: Peers in Textiles

Below you can find Grasim Industries benchmarking vs. other companies in Textiles industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Olympia Industries ($OLYMPTX)	-99.6%	-58.0%	-96.6%	74,809.1%
Gujarat Cotex ($GUJCOTEX)	625.9%	-6.2%	-66.0%	176.2%
T T ($TTL)	-39.2%	-21.8%	28.7%	47.8%
Filatex India ($FILATEX)	-74.3%	-2.7%	158.7%	44.5%
Gtn Textiles ($GTNTEX)	-27.7%	-8.8%	51.2%	39.4%
Median (73 companies)	-32.7%	4.8%	9.3%	14.4%	10.4%
Grasim Industries ($GRASIM)		17.2%	10.7%	4.9%	11.8%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ruby Mills ($RUBYMILLS)	25.2%	28.3%	25.1%	28.6%
Vardhman Textiles ($VTL)	24.9%	13.8%	20.1%	24.3%
Welspun India ($WELSPUNIND)	13.3%	12.2%	16.8%	22.6%	24.1%
Nitin Spinners ($NITINSPIN)	23.7%	10.5%	19.7%	19.3%
Shri Dinesh Mills ($SHRIDINE)	24.7%	22.4%	18.5%	18.7%
Median (53 companies)	12.7%	6.3%	9.5%	9.5%	8.0%
Grasim Industries ($GRASIM)	23.4%	22.3%	21.4%	16.9%	15.9%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jindal Worldwide ($JINDWORLD)	3.6%	3.0%	10.5%	20.7%
SRF ($SRF)	0.0%	0.0%	18.7%	20.0%
Welspun India ($WELSPUNIND)	11.3%	5.6%	7.8%	16.4%	10.9%
Sel Manufacturing Company ($SELMCL)	54.2%	53.9%	25.1%	14.0%
Dcm ($DCM)	3.0%	2.7%	9.1%	11.6%
Median (20 companies)	4.5%	3.0%	5.3%	6.7%	7.6%
Grasim Industries ($GRASIM)	7.8%	17.7%	21.7%	11.6%	10.2%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Nitin Spinners ($NITINSPIN)	13.8%	6.0%	19.5%	21.5%
Sutlej Textiles & Industries ($SUTLEJTEX)	16.0%	9.5%	13.6%	19.8%
Vardhman Textiles ($VTL)	15.5%	6.6%	11.9%	17.3%
Maral Overseas ($MARALOVER)		4.6%	14.1%	16.0%
Rswm ($RSWM)	17.4%	2.2%	15.2%	15.5%
Median (126 companies)	10.1%	3.5%	9.0%	9.6%	14.8%
Grasim Industries ($GRASIM)	14.9%	14.9%	13.3%	8.6%	8.1%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jaybharat Textiles & Real Estate ($JAYTEX)	8.4x	10.9x	53.6x	23.8x
Sree Jayalakshmi Autospin ($SREEJAYA)	3.4x		9.7x	12.8x
Bombay Rayon Fashions ($BRFL)	5.9x	4.9x	4.9x	11.6x
Sel Manufacturing Company ($SELMCL)	5.6x	9.4x	6.6x	11.5x
Ruby Mills ($RUBYMILLS)	15.9x	12.6x	15.3x	10.8x
Median (69 companies)	3.9x	3.8x	3.2x	0.0x	2.2x
Grasim Industries ($GRASIM)	1.3x	1.2x	1.6x	1.9x	2.3x

Grasim Industries stock price chart

Grasim Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	573,985	213,183	249,836
EBITDA	60,607	49,954	55,791
Net income	30,955	22,790	26,475
CAPEX	14,780	16,719	44,290
Debt	55,992	67,827	70,378
Cash	2,370	2,845	3,266

About Grasim Industries

Grasim Industries Limited manufactures and sells viscose staple fiber, chemicals, cement, and textiles in India and internationally. The company operates through Fibre and Pulp, Chemicals, Cement, and Others segments. It provides viscose staple fiber, a man-made biodegradable fiber for use in apparels, home textiles, dress material, knitted wear, and non-woven applications; and wood pulp. The company also offers cement products comprising grey cement; white cement for floorings and exterior wall finishes under the Birla White brand name; ready mix concrete; and putty for wall finishing and various architectural applications. In addition, it provides chemical products, such as rayon grade caustic soda; stable bleaching powder used in water purification, sanitation, and as a bleaching agent; poly aluminum chloride used in water treatment, paper sizing, and effluent treatment; and chloro sulphonic acid used in vinyl sulphate, the raw material for dyes and intermediates, saccharin, drugs, and pharmaceuticals, as well as chlorine/hydrochloric acid and chlorinated paraffin wax products. In addition, it offers textile products that include fabrics, synthetic yarns, and worsted dyed yarn spun, as well as branded suitings under the Grasim and Graviera brand names. The company sells its textile products through a network of exclusive showrooms, as well as through wholesalers and multi-brand outlets. Grasim Industries Limited was incorporated in 1947 and is based in Nagda, India.