Grasim's margin drops 3.62 percentage points despite revenue growth
Costs grew faster than revenue sequentially, while a 61.82% tax rate and negative other income weighed on consolidated profit.
Filed 13 Nov 2026, 15:39 IST · after market close · Grasim Industries Ltd (GRASIM)
Key takeaways
- Sequential margin compression was the quarter's main issue: expenses rose 7.28% while revenue rose 2.85%, cutting operating margin by 3.62 percentage points to 12.33%.
- Net profit fell 73.24% QoQ to Rs 1,029.42 cr as the tax rate rose 36.03 percentage points to 61.82% and other income turned negative.
- Year-on-year revenue rose 25.58% and operating margin improved 0.12 percentage points, but net profit fell 31.28%.
Price around the results
Sequential cost growth erased operating leverage
Grasim's consolidated revenue grew 2.85% QoQ, but expenses rose 7.28%, so operating profit declined 20.49% and operating margin fell to 12.33%. The result marks a sharp reversal from the 15.95% margin in Q1FY27. Year-on-year, however, revenue and operating profit increased 25.58% and 26.85%, respectively.
Tax and other income weakened profit conversion
The tax rate rose to 61.82% from 25.79% sequentially, contributing to the 73.24% fall in net profit despite revenue growth. Interest expense also increased 16.37% QoQ and 23.05% YoY. Other income was negative and represented -13.78% of profit before tax, so it did not support reported profit quality.
Margin recovered year-on-year but slipped from the recent peak
Operating margin was 0.12 percentage points higher than in Q2FY26, when it stood at 12.21%, but it was 3.62 percentage points below Q1FY27. The margin had risen from 12.21% in Q2FY26 to 15.95% in Q1FY27 before this quarter's decline. At 12.33%, Grasim was 0.06 percentage points below the 12.39% median among 150 Commodities peers that had reported.
Management points to expansion and new-business milestones
Management said Birla Opus was confident of reaching double-digit revenue market share in H2FY27, while the company said Birla Pivot aims to cross Rs 120 billion of FY27 revenue and remains on track for break-even in H2FY27. Management attributed Birla Pivot's Q2FY27 EBITDA impact to one-time employee-related expenses. The presentation said Lyocell Phase 1 capacity of 55K TPA was nearing procurement delivery after Rs 420 cr of cumulative capex, and that a 50K TPA CPVC project at Vilayat was commissioned in August 2026.
Market reaction is pending, with a mixed history
The consolidated results were filed after market close, so there was no post-result market reaction yet. In the last eight result reactions, the stock rose three times and fell five times, with a median absolute move of 0.74%. Recent moves included +6.17% and -6.31%, both materially larger than that median.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹50,105 cr | ₹48,716 cr | +2.85% | +25.58% |
| Other income | ₹-372 cr | ₹318 cr | — | — |
| Expenses | ₹43,926 cr | ₹40,944 cr | +7.28% | +25.40% |
| Operating profit | ₹6,179 cr | ₹7,772 cr | -20.49% | +26.85% |
| Operating margin (%) | 12.33% | 15.95% | — | — |
| Interest | ₹1,069 cr | ₹919 cr | +16.37% | +23.05% |
| Depreciation | ₹2,043 cr | ₹1,988 cr | +2.73% | +7.58% |
| Profit before tax | ₹2,696 cr | ₹5,183 cr | -47.99% | +7.40% |
| Tax | ₹1,667 cr | ₹1,337 cr | +24.66% | +64.67% |
| Net profit | ₹1,029 cr | ₹3,846 cr | -73.24% | -31.28% |
| EPS (₹) | ₹-3.45 | ₹31.64 | — | — |
Operating margin of 12.33% compares with a Commodities sector median of 12.39% across 150 peers that have reported Q2FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
Guidance & outlook
- Birla Opus is confident of reaching double-digit revenue market share in H2FY27.
- Birla Pivot aims to cross ₹120 billion in revenue for FY27.
- Birla Pivot is on track to achieve break-even in H2FY27.
Expansion
- Lyocell Phase 1 capacity of 55K TPA is nearing procurement delivery completion after ₹420 crore of cumulative capex spending.
- Lyocell Phase 2 capacity of 110K TPA has its environmental clearance application at an advanced stage of submission.
- A 50K TPA CPVC project at Vilayat was commissioned in August 2026.
- FY27 standalone capex planned for capacity expansion, including debottlenecking, is ₹1,100 crore.
Competition
- Birla Opus is the third-largest player in the Indian decorative paints industry by internal estimates.
Problems & risks
- Birla Pivot's Q2FY27 EBITDA was impacted by one-time employee-related expenses.
What to watch
- Whether operating margin recovers from 12.33% after the 3.62-percentage-point QoQ decline.
- Whether the tax rate moves down from 61.82% after rising 36.03 percentage points sequentially.
- Progress on the 55K TPA Lyocell Phase 1 project after Rs 420 cr of cumulative capex.