Grasim Industries Limited (NSE: GRASIM) Q1 FY23 Earnings Concall dated Aug. 12, 2022
Corporate Participants:
Saket Shah — Head of Investor Relations and ESG Reporting
Pawan Jain — Incoming Chief Financial Officer
H.K. Agarwal — Managing Director
Ashish Adukia — Chief Financial Officer
Jayant V. Dhobley — Business Head and Chief Executive Officer of Global Chemicals, Fashion Yarn & Insulators
Rakshit Hargave — Chief Executive Officer, Paints Business
Analysts:
Nirav Jimudia — Anvil Research — Analyst
Navin Sahadeo — Edelweiss Securities — Analyst
Prateek Kumar — Jefferies — Analyst
Bharat Sheth — Quest Investment Advisors Private Limited — Analyst
Unidentified Participant — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Q1 FY ’23 Earnings Conference Call of Grasim Industries Limited. [Operator Instructions]
I now hand the conference over to Mr. Saket Shah, Head of Investor Relations and Head of ESG Reporting. Thank you. And over to you, sir.
Saket Shah — Head of Investor Relations and ESG Reporting
Hello, good afternoon, everyone. Let me just introduce you to the management team over here. We have Mr. H.K. Agarwal, the Managing Director. We have Mr. Jayant Dhobley, CEO of Global Chemicals and Business Head of FY and Insulators. We have Mr. Jayant Dua, CEO of Chemical Division. We have Mr. Rakshit Hargave, CEO of Paints. We have Mr. Ashish Adukia, CFO. And we have Mr. Pawan Jain, the Incoming CFO of the company.
Let me just pass on the call to Mr. Pawan Jain for his remarks.
Pawan Jain — Incoming Chief Financial Officer
Thank you, Saket. Good afternoon to all the participants. It is my pleasure to speak with you all as the Incoming CFO of the company. I’ve been part of the management team of Grasim for more than 20 years. And I have handled, Corporate Finance and Risk Management and other related matters of the company. I’ll be now closely associated with the investment community. This month marks the completion of 75 years of the company’s incorporation. And more importantly, the birth of our beloved nation. As we start on our next phase of growth journey, the company is well positioned to take a leaf out of from its legacy and reflect the same.
As you are aware, the company had sown seeds of the two new businesses, namely, Paints and B2B E-Commerce. I would like to reiterate the newly added Paints business will be an engine of growth to the existing portfolio of businesses. The B2B E-Commerce foray is again a high growth business with less capital intensity. Both these businesses complement the existing lines of businesses within the Grasim umbrella, catering to large market and adding new set of customers. We started FY ’23 on a very strong note with record EBITDA generation at the consolidated and standalone level during the first quarter.
Let me now share some key highlights from our businesses. Our Chlor-Alkali and Textile businesses reported highest ever quarterly EBITDA driven by better realization and sales volume. The VSF business reported a double-digit growth in the sales volume during the quarter on the back of strong domestic demand. The ongoing expansion in Chemicals business are progressing well with Balabhadrapuram Phase 2 likely to be commissioned by Q4 ’23 — Q4 FY ’23 and the epoxy capacity of 123 KTPA at Vilayat will be commissioned by Q1 FY ’24. The 50 KTPA ECH capacity also at Vilayat will get commissioned by Q1 FY ’25.
As we had promised in the previous quarter, we are sharing the capex spend guidance for FY ’23, which stand at INR3,117 crores for the existing lines of businesses. The capex for Paints and B2B will be in addition to this. In the Paints business, we are currently focused on the timely execution of our capacities. The civil work has commenced at four of the total six sites.
I will briefly touch upon the key operational and financial highlights for the quarter. The VSF business reported strong sales volume growth 10% Q-o-Q and 76% Y-o-Y to 197 KT on back of India-centric demand. We recently commissioned 600 TPD VSF plant at Vilayat, has contributed 51 KT to this quarter’s sales volume. The global textiles demand is currently on the weak footing given the lockdown imposed in major cities in China and reduced ordering by the U.S. and European retailers. On the pricing front, the cotton prices peaked in May ’22 and have softened thereafter. Just to remind you, the global cotton prices had gone up 2.5 times in the time period of 25 months ending May ’22. The VSF business reported a revenue of INR3,728 crores and EBITDA of INR406 crores for Q1 FY ’23. The VFY business reported a revenue of INR583 crores and EBITDA of INR94 crores for this quarter.
Moving to Chlor-Alkali business, the business reported best quarterly EBITDA driven by highest ever ECU realization of 53,560 per tonne on the back of multiple tailwinds like strong global caustic soda prices, weak INR and the stable demand environment. The global caustic soda prices averaged higher at $769 per MT in Q1 2023 — Q1 FY ’23 against $719 per MT in Q4 FY ’22 driven by factors like supply chain disruption and higher energy prices. Chlorine realization remained in the negative territory with weakness in certain chlor users industrialized dyes and pigments.
On the other hand, the demand for our captive chlorine VAP increased Y-o-Y by 32% in Q1 FY ’23 from 28% in Q1 FY ’22 on the back of higher sales of chloromethane and water treatment and other sanitization products. In addition to the captive chlorine integration percentage, we also wish to share the total chlorine integration percentage including the pipeline sales to our dedicated customers, which stands at 60%.
The Advanced Material business reported a sequential improvement in financial performance on the back of better realization and some easing of cost pressures. As highlighted earlier, the company reported strong quarter one FY ’23 financial performance, driven by multiple factors despite cost pressures. The consolidated revenue for the quarter are up 41% Y-o-Y to INR28,042 crores and EBITDA is up by 10% Y-o-Y to INR5,233 crores. While at the standalone level, revenue is up by 23 — 93% Y-o-Y INR7,253 crores and EBITDA is up by 69% Y-o-Y at INR1,364 crores.
On the ESG front, the company is working in a focused manner and making continuous progress. The company has adopted task force for climate-related financial disclosures that is TCFD Framework in FY ’22 to reflect its commitment to improve the quality of ESG disclosures. Taking cognizance of our ESG-related work, which is in line with the global standards, the company has been included in the FTSE4Good Index. I would like to reiterate that given our strong balance sheet and strong portfolio mix of cash flow businesses, we are well positioned to harness the potential of our new businesses.
I would like to wish you a very Happy Independence Day in advance. And now hand over back to the operator for Q&A.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] We have a first question from the line of Nirav Jimudia from Anvil Research. Please go ahead.
Nirav Jimudia — Anvil Research — Analyst
Yeah. Good afternoon, team, and congratulations on very good set of numbers. Sir, I have two, three related questions on VSF and then one on Chemicals. So I’ll start with VSF. Sir, in your presentation, you have mentioned that China VSF prices have improved almost 14% sequentially, though they are on spot basis. So just wanted to understand, because our blended realization this quarter for the VSF division has also improved by almost INR10 a kilo, if you can share, how much of this price increase in the China or in the international market is already being captured this quarter? And further to that, whether we have taken any price hikes in Q2 as well? So this is one.
Second on the VSF side is, sir, whenever we will operate our capacities at the optimum levels, at around 8,24,000 tonnes, how much pulp is already integrated? And how much we are more planning to integrate? If you can share your thought process on the same.
Sir, third question on the VSF side is our specialty volumes is down sequentially. So last quarter we did something around 44,750. This quarter, our specialty volumes is almost around 37,500. So any particular reason for the same? Has the premiums narrowed down and we decided to switch towards more of the VSF production? So these are the three questions on the VSF side.
H.K. Agarwal — Managing Director
So first question on price increase in China in the Q1 and also a corresponding increase in our India realization also. So yes, these are related to some extent, because VSF is an international product and all the markets are connected in many ways. China being the largest producer and the consumer of VSF has big influence on the international prices. So we have to be in line with what is happening in the biggest market.
Now since end of last quarter or even in June itself, the prices started correcting in China also. So if you are monitoring them, you will notice that VSF prices have softened in China also. In India, we have to adjust a little bit, but not to the same extent because we also don’t increase to the same extent as price increase happens in China. So that was on the prices. And also the cotton prices have influence on the all other fibers prices. So cotton prices in forward have come down significantly and they will also have some influence on the VSF demand and price to some extent, not large, but — because VSF price did not increase in the same proportion as cotton prices.
Moving to specialty volume, yes, there was some reduction in the month in the first quarter compared to previous quarter. Some extent — some products are seasonal. So that one is one aspect. Second, to some extent, we had more demand for standard VSF in India. So we adjusted our product mix to cater to the India demand. And in international market, there were some more competitive situation or some demand adjustment or inventory adjustment at our customer’s place. So in the export market of specialty, there were some reduction in volume. So this was on the specialty.
And in the coming — going forward, there will be some adjustment period because now recessionary fears are prevailing in Europe. And with the cotton Uncertainty and volatility, the international retail and brands are sitting on huge inventory because of supply chain disturbance. And they are now trying to optimize their inventory levels and optimizing the orders also to the new orders to the valuation. So this adjustment period will last this quarter and perhaps some. So we have to sit through this adjustment period and then the normal sales should return to the value chain in textile industry. It is on the specialty.
What was your third question?
Nirav Jimudia — Anvil Research — Analyst
Pulp integration.
H.K. Agarwal — Managing Director
So we are now almost 35% integrated with our captive. We have lined up long-term supply arrangement with our regular suppliers. We have also developed some new sources. And there was some disturbance in the pulp supply because of the force majeure reason. At one of our suppliers’ plant there was a fire and at another place there was serious flooding, serious flooding and storm. So there was some disturbance in the line, but now things are getting back to normal. So we will — we are working in the long-term how to increase this pulp integration, but this is a long-term issue and we are fine with the current arrangement.
Nirav Jimudia — Anvil Research — Analyst
Okay. So sir, based on what you just mentioned, is it safe to assume that probably out of the CNY1,800 price increase, which have happened in China and probably some corrections over that, some portion or maximum portion of that has already been captured in Q1 and probably we haven’t taken any price hike after our Q1 numbers?
H.K. Agarwal — Managing Director
Yeah. It’s like it doesn’t happen exactly RMB1,800 in China, so we have also exact corresponding thing. It doesn’t work out like this. More or less, like we cannot expect price increase in the current environment, because in China, the correction is quite severe.
Nirav Jimudia — Anvil Research — Analyst
Got it. Sir, one more question on the VSF side is in the presentation, in the opening slide we have mentioned that we are debottlenecking our VSF capacities and we are intending to spend something around INR587 crores. So from 8,24,000 tonnes, which is our current capacity, how much addition we are intending to plan? And how much time it will take to complete this debottlenecking?
H.K. Agarwal — Managing Director
So this entire amount is not for the debottlenecking. Most of it is part of the residual capex commitment for our Vilayat expansion, which has already happened and stabilized, and in July we achieved 100% of the nameplate capacity for the expansion. But there are some commitments, which are not directly related with the fiber production, but ancillaries like environment-related items, cash recoveries, etc., they are pending. So I think almost INR350 crores or INR400 crores is on those accounts. And the debottlenecking is a small, very light, capital-light thing. And we expect to get something around 80 TPD for investment of about INR200 crores or so. So this is not baked on the debottlenecking and production also is not expected to increase a lot. This is our normal thing. We keep doing these things wherever we can find opportunity to improve production from existing assets, we try to maximize that. So this is not going to be a big game changer like Vilayat expansion.
Nirav Jimudia — Anvil Research — Analyst
Got it. If one last question if I can ask on Chemical side, and then again I’ll join back on the queue. Sir, our annual report mentioned that we are planning to add something around 390 megawatts of renewable capacities for our Chemical business. So similarly, if you can say or explain us that whenever we will hit the peak production for our Chemical business, predominantly caustic side, how our mix of power would look like, let’s say, in terms of our own captive thermal in terms of our own captive renewables? And how much then we have to be reliant on the outside power for sufficing our power requirements?
Ashish Adukia — Chief Financial Officer
Okay. So I think what that report mentioned is our long-term planning, where as you know, in renewable, we really have to look at from an aspect of majority of regulatory aspects, which are still unfolding. From a desired output, yes, we are looking at reaching renewable to somewhere around 30% of our total requirement. Now the mix will continuously keep on changing as the regulatory environment unfolds in front of us. So I think it will be very difficult for us today to really quantify what will be the final mix. I think maybe over the next two or three quarters as the regulatory environment becomes more clearer in terms of how renewable play will happen then we will be able to get a much clearer picture of that. But from a desire aspect we expect about 30% is what we are looking at.
Nirav Jimudia — Anvil Research — Analyst
30% by 2025?
Ashish Adukia — Chief Financial Officer
Again, I’m not getting into a timeframe. The reason is very clearly it will be all a function of how regulations come across. Post-regulation, then you have to look at it from how you want to conceive the whole picture. So it might be 2025, it could be 2030, it could be ’27, I think we’ll keep the timeframe very nebulous as of now.
Nirav Jimudia — Anvil Research — Analyst
Okay. But sir…
Ashish Adukia — Chief Financial Officer
As a target, we’ve taken that we would like to achieve 30% by ’25.
Nirav Jimudia — Anvil Research — Analyst
Got it, sir. Thank you, sir. Thank you for answering the questions in detail, and I’ll join back in the queue.
Operator
Thank you. We have our next question from the line of Navin Sahadeo from Edelweiss Securities. Please go ahead.
Navin Sahadeo — Edelweiss Securities — Analyst
Yeah. Good evening, sir. And once again, heartiest congratulations on such a record high profitability. My questions were about the margins as we see at least in the near-term perspective. So as you said, prices have been trending down. So if I just look at some of the VSF prices in China from RMB15,500, they have gone down to almost RMB14,500 or so, especially off late from, let’s say, mid-July to now as we speak, but we don’t see that kind of a similar decline in the pulp spot prices. So wanted to understand that is it fair to say, at least from a near-term perspective, that the peak margins are probably behind and at least for the next one, two quarters VSF may see some sort of softness in the margins?
H.K. Agarwal — Managing Director
So you are very up-to-date on the international prices of VSF. You bought on at RMB14,500 and RMB15,500…
Operator
Sir, I’m sorry to interrupt, but the volume is little low.
H.K. Agarwal — Managing Director
So you are very up-to-date on the international VSF prices. And yeah, so this is the reality and we cannot go against the tide. At this time, pulp prices are important. Pulp prices are not reducing in that extent. But we believe that if the VSF market show so much of softness then pulp prices also will have to adjust, it’s a matter of time. And there have been some different regions for pulp market, like supply-related issues were more, there were some force majeure situations at major merchant pulp suppliers. And as they get resolved and the VSF market softness, then pulp prices should also respond to some extent.
But here, other things are — other than pulp also, there have been other inputs which have gone up very high, like caustic, sulfur, coal. And those are in the adjustment more to some extent like sulfur prices have come down, coal prices are also trending down. So margins will remain under pressure. It will not be same like we enjoyed in some favorable quarters. But yes, this adjustment has to play out.
Navin Sahadeo — Edelweiss Securities — Analyst
Fair, and appreciate. But for Chemicals then, because your press release also says like June exit is at $650 versus the average of $760-odd which we recorded for the quarter. So similar trend in Chemicals also of a sequential margin decline is expected or there the cost relief is probably much more, and hence, the decline in margins may not be that severe? How should we look at those, sir?
Jayant V. Dhobley — Business Head and Chief Executive Officer of Global Chemicals, Fashion Yarn & Insulators
This is Jayant [Technical Issue] I think particularly in the chlor-alkali being electrolyzers we are largely dependent on power as our largest source of cost. And while we have seen on the fuel side energy prices getting little soft, particularly on the crude side, but we haven’t seen that material change yet on the coal. The expectation is as you were talking about how the world is moving along, we could see that. So that will have a material gain on our cost side front on us.
On the international front, I think there is a little bit of — the entire prices which shot up had couple of global events of the Ukraine, the entire supply chain becoming very, very distort and tight and also the COVID impact in China. COVID impact in China is reduced, China started producing a lot more material and started getting it to international market. And, yes, you’re right, at this point of time, currently, we are seeing a declining trend in the international market. But the volatility is so much that at this point of time I think it would be very difficult to predict on the caustic side what would could be the margin decline for the quarter. The trend looks that it will be tapering downwards, but to quantify becomes a very difficult challenge at this point of time.
Navin Sahadeo — Edelweiss Securities — Analyst
Yes, appreciate it, sir. Thank you. Just my last question on the capex bit. Two parts to it. Of course, you’ve given a very nice break-up to the overall capex, total that we’re planning to spend this year is over INR3,100-odd crores. How much should we pencil in including Paint as well as the B2B E-Commerce for ’23 and ’24?
Pawan Jain — Incoming Chief Financial Officer
So we are not — see, it’s very difficult for a paints project, ongoing project to give year-by-year guidance, because it depends on different — at what stage it is, right? There is land acquisition followed by environmental clearance. The new order for equipments, a lot of equipments are actually imported. So there is lead time to that. So — and the spend on that is generally dependent on — and these are big spends, right? So if something spills over to next year, it will be a wrong guidance to give.
So we are — we have given you guidance of INR10,000 crores of project cost for Paints and likewise for B2B as well as, as a total cost. So it will be spread over that period. Till now, we have spent about, as we’ve mentioned, INR825 crores till June end and quarter one was INR212 crores. And if you see quarter-on-quarter figure, it’s not obviously evenly spread. So it’s difficult to say what that break-up would be. But of course, it will be — from now on, it will be front-loaded because we’ve started ordering for equipment, etc., the construction is started in full swing in almost four sites.
Navin Sahadeo — Edelweiss Securities — Analyst
Okay. But safe to assume that a chunk of it, like regardless of the guidance, but a significant chunk may come in per se, let’s say, second half of ’23 and ’24?
Pawan Jain — Incoming Chief Financial Officer
Absolutely right. I think that is good to assume because of given our target that we’ve given for commissioning of the capacities.
Navin Sahadeo — Edelweiss Securities — Analyst
That’s helpful. Thank you so much, sir.
Operator
Thank you. [Operator Instructions] We have our next question from the line of Prateek Kumar from Jefferies. Please go ahead.
Prateek Kumar — Jefferies — Analyst
Yeah, good evening, sir. My first question is on VSF segment. We have operated utilized capacity at close to 95% this quarter. So is it something like we like [Indecipherable] and we mentioned that in June we operated 100%. So a next level of — I mean major expansion in terms of brownfield — I’m not talking about bottlenecking, but major brownfield expansion maybe lined up again in parallel with the Paint capex which we are already executing?
Pawan Jain — Incoming Chief Financial Officer
You’re talking about caustic expansion?
Prateek Kumar — Jefferies — Analyst
VSF expansion.
H.K. Agarwal — Managing Director
Yeah. We would love to do that, Prateek, but for the time being, that is not immediately on the drawing board. So we have to see. At Grasim, we have to optimize and balance the capex, debt equity, debt EBITDA and other new businesses. And this is a capital allocation challenge or strategy. So yeah, we are aware of this situation and we are continuing to develop our market and at appropriate time, definitely, we will close the plants.
Prateek Kumar — Jefferies — Analyst
And in general, like we operated like — I mean, we operated like 95% and for the whole year we should assume now we should have like a 95% utilization for VSF capacity 22,000 for the segment?
H.K. Agarwal — Managing Director
Yeah, we would love to do that. But there may be some in-between headwinds like we had this pulp supply situation which affected production at some of our plants for few days or week or something like that. But barring such unforeseen situations, there are some severe market thing because we are living in such volatile conditions. So if things remain normal, then yes, we have been always operating in high-90s or like above 90s. So that is our attempt and our target for sure.
Prateek Kumar — Jefferies — Analyst
Sure, sir. And on capex, one more follow-up. So like we have given for Paint, INR10,000 crores, it will get INR2,000 crores, but for other ongoing businesses — I mean, while you mentioned that is the capital allocation question but towards FY ’23 to ’25, what kind of capex which we may want to do over FY ’23 to ’25? And maybe what is the kind of net debt to EBITDA we may want to have as like…
H.K. Agarwal — Managing Director
In terms of a particular business, your question is…
Jayant V. Dhobley — Business Head and Chief Executive Officer of Global Chemicals, Fashion Yarn & Insulators
You are talking about other than Paints and B2B?
Prateek Kumar — Jefferies — Analyst
No. So — I mean frankly — I mean, while FY ’23 capex number was not announced till now in terms of because it was not approved as what we have seen last call, but it appears like bit high towards at least. So like standalone capex, if you see over next three years besides the capex on Paints and B2B, what kind of capex which we might be doing over I mean the VSF, Chemical and other businesses?
Ashish Adukia — Chief Financial Officer
Sure. I think — let me first explain the capex that we’ve given out for this year. I think in terms of guidance we’ll continue to give the annual capex rather than trying to give next two, three year guidance, but you asked about this year guidance. Now Mr. H.K. Agarwal had highlighted the three categories of capex that we have in VSF, which is debottlenecking a small portion, the spillover of Vilayat expansion and then the balance is modernization and maintenance capex. Modernization and maintenance capex also includes some of the projects that we are going to take up, which are not going to be annual, everyday recurring capex. It will be one-time. For example, in the past, we’ve talked about carbon absorption plant, etc., to be put up in all our four sites of VSF. So those are large capex, but that will not recur after once it has been put. So therefore, that figure is slightly on the higher side.
In Chemicals, you have eight sites. And in all those sites, you keep putting up either chlor-alkali which we have announced. Then there are VAP projects, chloromethane, etc., that we have already announced and ECH. Then the third is power, both renewable as well as in some places where it is critical you need to put up something to enhance the capacity. So we are doing that. So those are the three categories in the main strategic capex and then there is maintenance capex. So these are the things that are forming part of the INR3,000-odd crores that you’ve seen.
Prateek Kumar — Jefferies — Analyst
And our annual maintenance capex is how much?
Ashish Adukia — Chief Financial Officer
Yeah. I think it will be — it varies, like I said, that environment-related capex can be — may not be recurring once you’ve put up a particular type of equipment. But somewhere around INR1,500 crores — INR1,000 crores to INR1,500 crores that range you can assume for Grasim.
Prateek Kumar — Jefferies — Analyst
I mean, just for — I mean, it’s a question on this — I mean, we are anticipating a very large capex in FY ’24 for Paints because we assuming that in FY ’25 we should launch our product. And we have like INR1,000 crores, INR1,500 crores capex which we should have anyway. So next year also pretty much we should have like a INR6,000 crores kind of capex for Grasim standalone operations?
Ashish Adukia — Chief Financial Officer
Early for us to comment. When the board approves the numbers, we’ll be definitely share with you. Directionally, yes, there will be large Paints capex next year along with other capex.
Prateek Kumar — Jefferies — Analyst
Sure, sir. These are my questions, and all the best.
Operator
Thank you. [Operator Instructions] We have a question from the line of Bharat Sheth from Quest Investment Advisors Private Limited. Please go ahead.
Bharat Sheth — Quest Investment Advisors Private Limited — Analyst
Hi, sir. Thanks for the opportunity. Sir, first question is on taking on this VFY — sorry VSF margin. With the — in this quarter, value-added product was relatively lower and you said that one of the factor was also softer seasonality. So coincide with if we improve this value-added product, so how much can it — I mean, give support to our profitability?
H.K. Agarwal — Managing Director
See, we have accounts for roughly 20% of our total sales in this quarter and we’ll — our attempt is to always increase the VAP volume and percentage share in our total product number. And normally on an average on the premium in terms of pricing about 12% to 15% were normal standard. So — but still it will take time, it is not that we can increase that volume or VAP shares overnight. It is a very slow process, because approvals by the branch and then value chain and all these things. And there is a competition. It is not that VAPs are without any competition. So it’s a long process and we have been working on developing our VAPs. And this is a — directionally, we will continue to increase VAP. So the effect will be slow, but it will be slower and steady.
Bharat Sheth — Quest Investment Advisors Private Limited — Analyst
Okay. But some extent, I mean, in quarter-over-quarter, in this quarter, particularly our volume was low vis-a-vis Q4. So again, as to last year normal this year there will be some addition will be there?
H.K. Agarwal — Managing Director
This year we are seeing a lot of volatility in international markets where also like from Grasim point of view, almost 50% domestic, 50% export-oriented and international markets are seeing more headwinds in overall textile business. So difficult to say with specific thing that how much will be the increase or what will be the volumes this year.
Bharat Sheth — Quest Investment Advisors Private Limited — Analyst
Okay, sir. And coming on the chlorine — I mean, chemical side. In chlor-alkali, we said that prices are declining. But I understand this year — I mean, in this quarter, our captive consumption has increased. So chlorine which used to contribute little negative margin, so how do we see this quarterly — I mean, from [Indecipherable] for the current year?
Jayant V. Dhobley — Business Head and Chief Executive Officer of Global Chemicals, Fashion Yarn & Insulators
See, our chlorine — our caustic integration is largely our internal consumption is caustic side. Chlorine is on which is either used in our VAPs or producing hydrochloric acid or filled to our ancillary or sent out to the market. And chlorine at this point of time is trending on negative, has been for the last two or three quarters now. And interestingly, our chlorine integration if I look at as a sum total of all three is 60%-odd today and 40% is what we call is a merchant sale of chlorine.
So on chlorine prices, you’ve got segments like pigments and dye stuff which are impacted because of the European situation where large export happens. Also there are — so there are some positives which happened in some industries, the pulp and paper has gone up because of the school opening, pigment and dye stuff went down, water seasonality is there. So in monsoon, you will see large more of sanitization product sales go up, post-monsoon they start coming down. So that’s a continued business operation cycle. But currently, I think the way we look at it is 60% chlorine integration internal, 40% is merchant sale. Currently, chlorine is running negative. And the trend is at the moment that it continues to run negative because of the entire chlorine demand, which probably needs to pick up more than what it is today.
Bharat Sheth — Quest Investment Advisors Private Limited — Analyst
Thank you, and all the best, sir.
Operator
Thank you. [Operator Instructions] We have our next question from the line of [Vihang Subramanian from Gawa Capital] [Phonetic]. Please go ahead.
Unidentified Participant — — Analyst
Yes, hi. Thanks a lot for taking my question, and apologies if it’s been asked before. I just got disconnected in the middle. So on the Paints side of the business, just wanted to understand on a broad strategy perspective, what will be the strategy there like? Because I mean, given that we have already two large incumbents, like would our strategy be based on pricing?
Pawan Jain — Incoming Chief Financial Officer
Rakshit, you’re on the call. Would you like to take the question?
Rakshit Hargave — Chief Executive Officer, Paints Business
Yes, I am on the call, and I would like to answer that. Obviously, when we have thought to enter this market, we have a specific plan. But you would appreciate that at the moment we would not want to share anything about it and it is confidential. But the team is obviously constantly working on it.
Unidentified Participant — — Analyst
Yeah. I mean, any details you could give which would be like…
Rakshit Hargave — Chief Executive Officer, Paints Business
No, I would really want to avoid any forward-looking statement on our strategy in terms of what we are going to do to keep it very top-up. But obviously, we have a plan and it is well thought out.
Unidentified Participant — — Analyst
Sure. And just from a timeline perspective, like if I understand correctly, FY ’25 is when we would be looking at some kind of revenues come through, is it?
Rakshit Hargave — Chief Executive Officer, Paints Business
Yeah. Like we disclosed last time, the last quarter of next FY.
Unidentified Participant — — Analyst
All right. So 4Q FY ’24 then?
Rakshit Hargave — Chief Executive Officer, Paints Business
Yeah.
Unidentified Participant — — Analyst
Got it. Sure. That’s it from my side. Thank you.
Operator
Thank you. [Operator Instructions] I would now like to hand the conference over to Mr. Ashish Adukia for closing comments. Over to you, sir.
Ashish Adukia — Chief Financial Officer
Yeah, sure. Before the closing comment, I just want to clarify one comment I mentioned on renewable. So renewable, our target is 25% by FY ’30 and not 30% by FY ’25. So apologies for that confusion.
So this is my last call. And as I hand over to Pawan, I wish him all the luck. I’ve had great three years. We did some good strategic improvements. We launched — not launched, but we incubated Paints. We sold fertilizer. We have — we are in the process of incubating B2B E-Commerce. We’ve stepped up the dividend. So hopefully, we’ve made you happy. And we’re always here to listen to you and see how we can improve and address your concerns. So thanks a lot.
Operator
[Operator Closing Remarks]
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