Grasim Industries - Fundraise, A Positive Step; To Alleviate Pressure On Balance Sheet: Motilal Oswal

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Grasim Industries Ltd. yesterday announced its plans to raise equity of up to Rs 4,000 crore through a rights issue. The promoters group has committed to fully subscribe to their entitlements and will also cover any unsubscribed portion, if applicable. The company has undertaken a substantial capex of Rs 10,000 crore to venture into a new growth sector, specifically the 'paints' business. Till Q1 FY24, the company had already invested Rs 3,640 crore in the paints business. The management has outlined a capex of Rs 5, 700 crore for FY24, which includes Rs 4,280 crore allocated for the paints business (Rs 1,050 crore spent in Q1 FY24)..Fundraise to be earnings per share accretive; leverage to be much better than our earlier estimates We believe that this fund-raise will be earnings accretive for the company and would result in an EPS increase of 0.6%/1.9% for FY24/25E. We have assumed an equity dilution of 3.1% for our assumptions. Post this equity issue, we expect net debt to be 66%/47% lower than our earlier estimates in FY24/25E, leading to interest expense savings of 18%/15% in FY24/25E. Net debt/Ebitda will be at 1.5 times in FY25E versus our earlier estimate of 2.7 times..Reiterate 'Buy' with a SoTP-based price target of Rs 2,380 Caustic soda prices have started to improve from their lows and should benefit in Q3 FY24. Additionally, viscose stable fibre prices in China have experienced an uptick in the last few weeks and we believe that the September 2023 exit price of VSF was ~4% higher than the average price in Q2 FY24. In light of these, we have adjusted our HoldCo discount for Grasim’s holding in subsidiary companies, reducing it to 35% from the previous 40% to factor in the anticipated improvements in the balance sheet following the fundraising activities. We value standalone business at seven times Sep-25E enterprise value/Ebitda and paints business at one time book value. Our SoTP-based price target is Rs 2,380, which gives an upside of 21% from current market price..Click on the attachment to read the full report:.Coal India - Earnings Set To Rise With Increasing Offtake: Systematix.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Grasim Industries - Fundraise, A Positive Step; To Alleviate Pressure On Balance Sheet: Motilal Oswal

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