Berger Paints (I) Limited (BERGEPAINT) Q1 2027 Earnings Call Transcript

Mohit Dodeja: Hi, good evening, everyone. This is Mohit Dodeja from Emkay Global. I would like to welcome all to the Berger Paints India Limited 1Q FY27 Result Conference Call. I thank Berger Paints management for allowing us to host. We have with us today Mr. Abhijit Roy, Managing Director and CEO, Mr. Kaushik Ghosh, CFO,

36 00:08:18.200 --> 00:08:28.660 Mohit Dodeja: Mr. SAYANTAN SARKAR, GM, Finance and Accounts, I shall now hand over the call to the management for the opening remarks, post which we will proceed with the Q&A session. Over to you, sir.

37 00:08:29.460 --> 00:08:31.900 Abhijit Roy: Thank you, Mehta, and good evening, all of you.

38 00:08:32.100 --> 00:08:39.340 Abhijit Roy: Let me start with the presentation first. This is the first quarter result.

39 00:08:40.510 --> 00:08:42.820 Abhijit Roy: Why is this not moving forward now?

40 00:08:44.310 --> 00:08:46.800 Abhijit Roy: Okay, the volume growth…

41 00:08:46.920 --> 00:08:51.889

Abhijit Roy: That was there, in the standalone results. It was in high single digits.

42 00:08:52.290 --> 00:08:57.080 Abhijit Roy: Value growth, as you have seen already, is at 12.7%.

43 00:08:57.470 --> 00:09:05.390 Abhijit Roy: decorative business… Outperformed, with nearly 13.5% value growth.

44 00:09:05.850 --> 00:09:10.389 Abhijit Roy: And nearly 20% in terms of operating profit growth.

45 00:09:10.920 --> 00:09:16.979 Abhijit Roy: The protective GI and powder coatings divisions recorded relatively lower growth.

46 00:09:17.160 --> 00:09:23.999 Abhijit Roy: Largely due to the fact that, you know, the price increases were taken more towards the end of the quarter.

47 00:09:24.280 --> 00:09:33.149 Abhijit Roy: after protracted, you know, battle in the field, and then it will come through more in the second quarter. The decorative performance

48 00:09:33.330 --> 00:09:38.109

Abhijit Roy: Was supported by calibrated price increases implemented through the quarter.

49 00:09:38.790 --> 00:09:47.149 Abhijit Roy: Gross margin moderated marginally, primarily due to delayed and partial pass-through of input cost increases in industrial business.

50 00:09:47.360 --> 00:09:52.740 Abhijit Roy: In decorative, the full price increases were e ective only for part of the quarter.

51 00:09:53.280 --> 00:09:58.439 Abhijit Roy: Decorative business delivered nearly 20% growth in operating profit.

52 00:09:58.640 --> 00:10:04.599 Abhijit Roy: And the consolidated PBDIT margin expanded by 40 basis points year on year.

53 00:10:04.950 --> 00:10:11.069 Abhijit Roy: Standalone and consolidated PAT increased by 26% and 29%, respectively.

54 00:10:12.960 --> 00:10:24.579 Abhijit Roy: If we look at the figures, volume, about 8.4, as I said, income from operations, 12.7, PBDIT IT growth, 12.6, and PAT growth, 25.5.

55 00:10:25.090 --> 00:10:28.500

Abhijit Roy: HomeShield and wood coatings delivered strong growth.

56 00:10:28.780 --> 00:10:36.489 Abhijit Roy: Exterior emulsants did well, while the newly launched Color Plus interior emulsion gained strong traction in the premium segment.

57 00:10:36.880 --> 00:10:41.270 Abhijit Roy: Automotive Coatings reported healthy double-digit value growth.

58 00:10:41.630 --> 00:10:49.350 Abhijit Roy: And protective GI and powder, as I mentioned, the growth rates were relatively lower due to delayed price increases in these categories.

59 00:10:50.900 --> 00:10:56.410 Abhijit Roy: Gross margin comparison, more or less in that band of 39 to 42.

60 00:10:56.650 --> 00:10:59.510 Abhijit Roy: And this time, it was at 39.3.

61 00:10:59.740 --> 00:11:10.210 Abhijit Roy: It could have been higher, but largely due to the industrial business lines, as we said, you know, the increases were more towards the end of the quarter, and…

62 00:11:10.360 --> 00:11:17.380

Abhijit Roy: Not full increases have been received there. Some of it is happening in July, some will happen furthermore in August.

63 00:11:17.720 --> 00:11:26.579 Abhijit Roy: So, it is always a little bit delayed in the industrial segment, which is why the gross margin is at that level.

64 00:11:27.110 --> 00:11:33.920 Abhijit Roy: Operating profit margin, however, was a strong 17.4%.

65 00:11:34.130 --> 00:11:46.150 Abhijit Roy: In that range, which we have always indicated of 15 to 17, typically in a quarter one, it goes higher because of the higher value sales.

66 00:11:46.200 --> 00:11:57.959 Abhijit Roy: So, the operating margin tends to be, you know, slightly higher in the first quarter. That is true in every year. If you look at quarter one, financial year 25 or 26,

67 00:11:58.200 --> 00:12:02.789 Abhijit Roy: At 27 also at similar levels. So that's how it is.

68 00:12:03.030 --> 00:12:09.730 Abhijit Roy: And it sustained at those levels, even though there was a little slippage, as we saw, in the gross margin.

69 00:12:10.340 --> 00:12:21.540

Abhijit Roy: Standalone, we grew at 12.7, PBDIT IT at 12.6, and Pat at 25.5%.

70 00:12:22.480 --> 00:12:35.049 Abhijit Roy: The decorative business line, highest growth in the last 12 quarters, with Deco delivering 13.5% value growth, nearly 20% operating profit growth, with margin expansion.

71 00:12:35.350 --> 00:12:42.629 Abhijit Roy: Exterior emulsions outperformed, while Color Plus continued to gain strong traction in the premium interior emulsion segment.

72 00:12:43.260 --> 00:12:48.029 Abhijit Roy: Construction chemicals and waterproofing delivered robust volume and value growth.

73 00:12:48.230 --> 00:12:51.429 Abhijit Roy: Roof pool and seal continue to gain momentum.

74 00:12:51.580 --> 00:12:55.239 Abhijit Roy: Wood coatings reported strong double-digit volume growth.

75 00:12:55.570 --> 00:13:02.369 Abhijit Roy: Store footprint expanded, taking the total count to 1,900 plus stores as on date.

76 00:13:02.590 --> 00:13:07.540

Abhijit Roy: With, urban stores alone, around 900 plus, and growing.

77 00:13:08.040 --> 00:13:13.760 Abhijit Roy: Tinting machine installations crossed 2,100 plus for the quarter.

78 00:13:14.210 --> 00:13:25.950 Abhijit Roy: Because of the price increase, there was a lot more attention there in terms of sales. Otherwise, we could have done even better, but this is a good number in the first quarter.

79 00:13:26.720 --> 00:13:33.439 Abhijit Roy: In Luxol Metallics, this was another range which we had introduced recently and is doing very well.

80 00:13:34.930 --> 00:13:39.820 Abhijit Roy: These are the stores which we have set up across many markets.

81 00:13:40.830 --> 00:13:47.989 Abhijit Roy: The consolidated revenue grew 12%, with slight moderation versus standalone performance.

82 00:13:48.200 --> 00:13:53.990 Abhijit Roy: Primarily due to the muted revenue growth in wholly owned subsidiaries, Bullix and STP,

83 00:13:54.140 --> 00:14:04.330

Abhijit Roy: Bolex, because primarily it is a week, seasonal quarter, always Jan, Feb, March, which gets consolidated, in this period.

84 00:14:04.440 --> 00:14:08.280 Abhijit Roy: Is a weaker quarter there, because of snow, etc.

85 00:14:08.580 --> 00:14:11.769 Abhijit Roy: An STP, because of the Jam Siddhpur plant, which…

86 00:14:11.900 --> 00:14:16.829 Abhijit Roy: Has now come back to normalcy, but in the first quarter, remained a little bit disturbed.

87 00:14:17.070 --> 00:14:29.510 Abhijit Roy: So overall, these two had flattest growth, and therefore the growth got pulled down a bit, but they are back in action. In this quarter… in quarter two, this will be fine.

88 00:14:29.820 --> 00:14:31.940 Abhijit Roy: Operating profit increased.

89 00:14:32.430 --> 00:14:40.200 Abhijit Roy: by 15% on the console level, with consolidated PBDIT margin expanding by 40 basis points.

90 00:14:40.550 --> 00:14:46.979

Abhijit Roy: PVT and PAT grew by 18.1% and 28.6%, respectively.

91 00:14:47.370 --> 00:14:54.849 Abhijit Roy: The joint ventures continue to deliver, actually, very strong growth in both revenue and profitability.

92 00:14:56.430 --> 00:14:59.700 Abhijit Roy: This is the consolidated result.

93 00:14:59.860 --> 00:15:09.040 Abhijit Roy: 12%, 15%, 16.1… And then if you go all the way down to PAT, at 28.6%.

94 00:15:10.840 --> 00:15:15.600 Abhijit Roy: Bijih and Nepal… Registered double-digit value growth.

95 00:15:16.240 --> 00:15:28.270 Abhijit Roy: Bolex reported flattest revenue, as I mentioned, during the quarter due to seasonal factors. However, profitability improved, driven by gross margin expansion. UK operations remained subdued.

96 00:15:28.740 --> 00:15:37.449 Abhijit Roy: STP delivered improved profitability, supported by favorable product mix, calibrated price increases, and gross margin expansion.

97 00:15:37.960 --> 00:15:42.510

Abhijit Roy: BNPA Joint Venture posted robust growth in revenue and profits.

98 00:15:42.660 --> 00:15:49.459 Abhijit Roy: Margins moderated slightly as the full benefit of price increases is yet to o set higher input costs.

99 00:15:49.780 --> 00:15:54.539 Abhijit Roy: But there was very strong performance as far as this JV was concerned.

100 00:15:54.640 --> 00:16:01.400 Abhijit Roy: Of course, the revenue doesn't get added to, you know, our sales, because this is a…

101 00:16:01.960 --> 00:16:15.270 Abhijit Roy: 49% JV for us, and therefore, you know, both Becker and B&P sales doesn't get, you know, added to our… or, you know, it's not included in our consolidated sales.

102 00:16:17.240 --> 00:16:28.050 Abhijit Roy: Berger Becker JV maintained its strong performance. Again, a very robust growth was registered, registering healthy revenue growth, along with higher operating profits.

103 00:16:29.640 --> 00:16:39.620 Abhijit Roy: Growing cash surplus from 992 to $11.98 to now to 1424 crores as of end June financial year 27.

104 00:16:39.920 --> 00:16:44.539 Abhijit Roy: Large part of it will, of course, be used for the two factories, which will…

105 00:16:44.660 --> 00:16:50.469 Abhijit Roy: be coming up, one in Panagar and the other in… Orisa near Johanshwar.

106 00:16:51.350 --> 00:16:58.900 Abhijit Roy: We had a very interesting campaign, which we have just introduced, you know, a corporate one, which is on Berger.

107 00:16:59.840 --> 00:17:03.180 Abhijit Roy: Jaise Hodin, Rangan.

108 00:17:03.280 --> 00:17:10.969 Abhijit Roy: is the campaign which we have launched. It has received very positive feedback from the market.

109 00:17:11.220 --> 00:17:28.899 Abhijit Roy: And this will be a major focus area and help us in building the brand Berger more strongly in the near future. So this is something which we are very upbeat about, and it's a nice, interesting campaign for those of you who haven't seen it.

110 00:17:29.230 --> 00:17:38.619 Abhijit Roy: You can go to YouTube and see it for yourself, but it's a campaign which has received, so far, good feedback from the marketplace.

111 00:17:40.210 --> 00:17:50.589 Abhijit Roy: Business outlook for financial year 27, double-digit revenue growth expected to sustain, supported by the full quarter impact of price increases in quarter two.

112 00:17:51.140 --> 00:17:58.919 Abhijit Roy: So we had delayed, as I said, in industrial business line, you know, the price increases were lagging.

113 00:17:59.200 --> 00:18:02.670 Abhijit Roy: That full impact will come in in this quarter.

114 00:18:02.950 --> 00:18:07.099 Abhijit Roy: Plus, festive demand and distribution expansion should help.

115 00:18:07.190 --> 00:18:24.499 Abhijit Roy: in expanding sales, and as well as operating margin from what it was last year, definitely. Operating margins are expected to remain within the guided range, which we have always said, that is between 15% and 17%.

116 00:18:24.640 --> 00:18:29.630 Abhijit Roy: This quarter, of course, was beyond 17 in the standalone.

117 00:18:29.880 --> 00:18:34.910 Abhijit Roy: And within… just short of 17 in the consolidated.

118 00:18:35.070 --> 00:18:39.260 Abhijit Roy: Our expectation is that in quarter two.

119 00:18:39.440 --> 00:18:46.369 Abhijit Roy: The results will be good in, you know, possibly slightly better than quarter one.

120 00:18:46.690 --> 00:18:56.370 Abhijit Roy: Well-progressing monsoon may support rural sentiment. Market competitiveness, however, is expected to stay elevated.

121 00:18:56.530 --> 00:19:03.580 Abhijit Roy: Sustained investments in brands, innovation, and retail activation to strengthen consumer base.

122 00:19:04.010 --> 00:19:12.689 Abhijit Roy: Macroenvironment remains dynamic, with crude oil, currency, and geopolitical developments being closely monitored.

123 00:19:14.130 --> 00:19:18.760 Abhijit Roy: And we end with, on every wall, in every heart, Rangan.

124 00:19:19.110 --> 00:19:20.170 Abhijit Roy: Thank you.

125 00:19:20.800 --> 00:19:22.770 Abhijit Roy: We can go to the questions.

126 00:19:22.770 --> 00:19:33.429 Mohit Dodeja: We will start with the Q&A session now. Those of you who have questions can raise your hand now. We will announce your name and unmute your line.

127 00:19:37.820 --> 00:19:41.490 Mohit Dodeja: The first question from the line of Abneesh Roh, please go ahead.

128 00:19:42.580 --> 00:19:59.969 Abneesh Roy , Nuvama: Sure, thank you, and congrats on decent numbers. First question is on the outlook slide. You have said that the monsoon is progressing well, and you expect a benefit out of that. I wanted to understand that, because this is the El Nino year, and currently we are having around 13% deficit.

129 00:20:00.070 --> 00:20:19.740 Abneesh Roy , Nuvama: So are you saying that, because of, more, dry days, as in, the, less rains will lead to more painting opportunity, are you saying to that, respect, or because this time the Diwali is, delayed, so we'll get enough, time, before the rain ends? I could not understand, because this time.

130 00:20:19.740 --> 00:20:32.080 Abhijit Roy: No, so that's a fair question. You know, I think the first part is where I would like, you know, because last year it had rained very heavily, from mid-May to right up to October.

131

00:20:32.150 --> 00:20:49.369 Abhijit Roy: And hence, you know, the painting season also was very short because the Riwali was prepawned. So both of these factors are relevant here. In this case, you know, since it has not rained as heavily, and it has been seeing more dry days.

132 00:20:49.700 --> 00:21:06.080 Abhijit Roy: So the o take, therefore, has been much better than last year, in terms of exterior paint, you know, which is one of the major segments, along with, you know, some of the other paint categories, because typically, if it rains very heavily, it becomes a problem. So that's what we mean.

133 00:21:07.020 --> 00:21:14.599 Abneesh Roy , Nuvama: Understood. Second is the 2100, tinting machines, so what will be the annual number? And,

134 00:21:14.620 --> 00:21:29.950 Abneesh Roy , Nuvama: Are you essentially entering, areas where you had an underindexation? So, say, South India or Western India, are bulk of these machines going there? And second, related question is, the new player who entered, around one and a half years back.

135 00:21:29.950 --> 00:21:38.829 Abneesh Roy , Nuvama: They claim that their tinting machine is small, talks to the headquarter live, and is more modern-looking, etc.

136 00:21:38.830 --> 00:21:44.009 Abneesh Roy , Nuvama: How is now your latest tinting machine when I compare with our new player?

137

00:21:44.680 --> 00:21:50.679 Abhijit Roy: Right, you know, to answer the first question, you know, our aspiration is to try and touch 10,000 machines.

138 00:21:50.760 --> 00:22:05.700 Abhijit Roy: For the year. Last year, we were very close to that figure. This year, we expect that we should be able to again touch 10,000 numbers. That's a number which will be equal or more than the new entrant event.

139 00:22:05.700 --> 00:22:23.949 Abhijit Roy: So, and most of these machines are getting installed in our under-indexed markets. We have, you know, a list of such indexed, under-indexed, pin code-wise, where we would like the machines to be installed, so the vast majority of that is getting installed in those places.

140 00:22:24.040 --> 00:22:42.130 Abhijit Roy: So that's how it is. As far as the second answer to your question, you know, of the size of the machine and talking and all that, this has been there for most companies, almost all companies, you know. I don't think those really matter too much.

141 00:22:42.690 --> 00:23:01.350 Abhijit Roy: The size, of course, you know, makes some di erence, you know, especially in congested city areas. Up country, though, it makes no di erence, almost. But our size is pretty good, you know, maybe a few inches here and there, it won't make too much of a di erence anyway.

142 00:23:01.480 --> 00:23:09.089 Abhijit Roy: And connectivity is established, you know, from… we get… do get all the information.

143 00:23:09.480 --> 00:23:21.150 Abhijit Roy: from the machine into our, you know, o ice as well, you know, so that we know which are the products, what are the shades which are getting tinted. So, nothing new there as far as

144 00:23:21.490 --> 00:23:23.420 Abhijit Roy: Technology is concerned.

145 00:23:24.930 --> 00:23:30.309 Abneesh Roy , Nuvama: And total universe of the paint shops is around 1,10,000. How much is the total universe now?

146 00:23:30.310 --> 00:23:39.040 Abhijit Roy: Abneesh, that depends, you know, how you look at paint shops, you know, because if, you know, it depends on the size of the paint shop, you know, it will be much more, actually.

147 00:23:39.690 --> 00:23:45.209 Abhijit Roy: But, those are very small ones, which crop up, you know, seasonal ones.

148 00:23:45.600 --> 00:23:56.679 Abhijit Roy: if you call them paint shops also, they are paint shops, you know, but they sell also hardware. As is the case in many of the upcountry markets, they sell a lot of other products along with paint.

149 00:23:56.720 --> 00:24:06.390

Abhijit Roy: So, the total universe will be higher, but if you look at, you know, those which are meaningful paint shops, maybe 1,20, 1,30 will be the meaningful ones.

150 00:24:07.550 --> 00:24:13.459 Abneesh Roy , Nuvama: Yeah, so this, 10,000 printing machine is going into that, 1,20, right? Thousand universe?

151 00:24:13.690 --> 00:24:16.829 Abhijit Roy: Yes, mostly the objective is that, yes.

152 00:24:17.640 --> 00:24:28.459 Abneesh Roy , Nuvama: Last quick question, if you could talk about some of the nonpaints. Other paint companies are aggressively going into waterproofing, tile adhesives, construction chemicals. Any update on that?

153 00:24:29.230 --> 00:24:43.699 Abhijit Roy: So, we are there, you know, Abneesh, as you know, you know, we have a pretty strong presence in the waterproofing construction chemical, and the growth has been quite robust there. And that will continue, you know, I think we have a fairly good presence.

154 00:24:44.480 --> 00:24:58.249 Abhijit Roy: the products are well established now, the quality is good. We are, you know… I think the growth rate that we see is much higher than paint in these categories, and it will continue in that way.

155 00:24:58.800 --> 00:25:00.160 Abneesh Roy , Nuvama: Event tile edits?

156 00:25:00.520 --> 00:25:09.169 Abhijit Roy: Toilet receives also, yeah, we sell, you know, a decent quantity. Not as much, but, you know, we would like to, you know, probably do more.

157 00:25:10.400 --> 00:25:12.410 Abneesh Roy , Nuvama: Sure, thank you. That's all from my side. Thank you.

158 00:25:12.410 --> 00:25:13.170 Abhijit Roy: Right.

159 00:25:14.430 --> 00:25:19.169 Mohit Dodeja: Thank you. The next question is from the line of Miha. Please go ahead.

160 00:25:22.320 --> 00:25:37.410 Mihir P Shah: Hi, sir, good evening, thank you for taking my question, and congrats on a good set of numbers. So firstly, on demand front, wanted to just check the dealers, ideally, would have stocked up before the price increases that happened over the last couple of months.

161 00:25:37.660 --> 00:25:41.280 Mihir P Shah: Which eventually should have some impact in July.

162 00:25:41.380 --> 00:25:52.059

Mihir P Shah: Can you share how much would be the volume growth for July, or how is it shaping up, and where do you think we will land in terms of the second quarter? So that's my first question.

163 00:25:52.610 --> 00:26:01.860 Abhijit Roy: Right, you know, so you're right, you know, there has been some amount of stocking up, obviously, you know, but the secondaries also have been much better than last year. As I said, the rains have been…

164 00:26:02.240 --> 00:26:08.220 Abhijit Roy: Less intense compared to last year, and therefore the secondary sales has moved quite well.

165 00:26:08.330 --> 00:26:11.079 Abhijit Roy: July growth was reasonable.

166 00:26:11.140 --> 00:26:21.259 Abhijit Roy: You know, so we would expect that, you know, the second quarter revenue growth might be slightly ahead of first quarter revenue growth.

167 00:26:21.300 --> 00:26:40.080 Abhijit Roy: The volume growth will be somewhere around similar levels as, quarter one, slightly below, maybe, you know, so we were at 8.5%, maybe it will be 7.5% to 8%, approximately, and a price increase which is there of, you know, varying from 7.5% to 8.59%.

168 00:26:41.570 --> 00:26:45.100 Mihir P Shah: Okay, so this quarter, the price increase was 7.5,

169 00:26:45.100 --> 00:26:47.560 Abhijit Roy: No, this quarter was about 5%.

170 00:26:47.560 --> 00:26:47.930 Mihir P Shah: Okay.

171 00:26:47.930 --> 00:26:54.240 Abhijit Roy: And it is going to increase to about, you know, 8… 7.5% to 8% possible.

172 00:26:55.090 --> 00:26:56.970 Mihir P Shah: Okay, and,

173 00:26:57.290 --> 00:27:03.790 Mihir P Shah: I thought the price increases were to the tune of closer to 12-13%. Was that,

174 00:27:04.160 --> 00:27:12.519 Abhijit Roy: That is the DPL increase which was taken in stages, you know, so you got only part of the price increase in the first quarter.

175 00:27:12.520 --> 00:27:13.050 Mihir P Shah: Yeah.

176

00:27:13.050 --> 00:27:31.189 Abhijit Roy: You know, so the impact, net impact for us was that it also depends on the mix that we have, you know? So, on a typical mix, if you look at it, you know, various companies will have di erent percentage increases, right? You know, if you sell certain kinds of products.

177 00:27:31.300 --> 00:27:38.010 Abhijit Roy: Which have lesser price increase, then you will have, obviously, an impact which is slightly lesser than

178 00:27:38.180 --> 00:27:46.200 Abhijit Roy: Some of the other products where the raw material prices would have gone up, and therefore the price increase has also happened proportionately much higher.

179 00:27:47.330 --> 00:27:58.460 Mihir P Shah: Understood. And, would you say the, the pricing growth of, 7.5, 8.5 that you indicated can increase in 3Q, 4Q as the mix changes?

180 00:27:58.650 --> 00:28:00.910 Mihir P Shah: Because Tokyo will have, lower mix.

181 00:28:00.910 --> 00:28:11.379 Abhijit Roy: It can, or it can go down, it depends on the totally on the mix, as I said. You know, for example, just to give you an example, suppose, you know, in essence, the raw material prices had gone up slightly lower.

182 00:28:11.530 --> 00:28:22.540

Abhijit Roy: Whereas in thinners and solvents, you know, it had gone up much more. So the price increases in some of these products might be higher. In some of the other products, it might be lower.

183 00:28:22.590 --> 00:28:34.620 Abhijit Roy: Right? And therefore, if your mix changes more towards luxury emulsion, the overall impact in terms of, you know, revenue growth due to price increase might be lower.

184 00:28:34.860 --> 00:28:44.489 Abhijit Roy: Whereas, you know, if you have a much higher concentration in those type of products where the price increases have been much higher, you might see a more impact of the price increase.

185 00:28:45.180 --> 00:28:57.950 Mihir P Shah: Understood, understood. That is clear, Sidh. So, secondly, I wanted to… you did indicate on the margins that it will be better, but when… when it looks at the margins in 2Q of last year, it had some impact.

186 00:28:57.950 --> 00:29:05.490 Mihir P Shah: So, on a normative level, what is the level of margin that one should think about, for the second quarter, for this year?

187 00:29:06.340 --> 00:29:22.420 Abhijit Roy: Yeah, so, you know, as I said, there will be some improvement. Of course, the bases are in favor, slightly, because of the, as you said, that, you know, there were impacts there in the second quarter. But in spite of that, there will be some impact there.

188

00:29:22.420 --> 00:29:32.080 Abhijit Roy: In terms of, both two advantages. One is the operating leverage, which will be there, because the value sales is expected to be at a decent level.

189 00:29:32.140 --> 00:29:45.190 Abhijit Roy: And at the same time, you know, the mix will probably improve, because the rains, have not been as intense, and so we will have possibly more sale of exterior emulsions this quarter than what we had last year.

190 00:29:47.140 --> 00:29:48.800 Mihir P Shah: Understood, understood.

191 00:29:49.070 --> 00:30:02.090 Mihir P Shah: Sir, lastly, other expenses seems to be lower. Would you say that this is lower because of lower ad spends? And some comment on Sabu Coatings, if you can just share.

192 00:30:03.610 --> 00:30:23.589 Abhijit Roy: Anyway, first question is, you know, as far as other expenses are concerned, there has been no cut in the ad spends as such. It hasn't gone up substantially, but there has been no cut. But we have saved, certain, savings have been there in some areas which we are working hard on.

193 00:30:23.730 --> 00:30:35.250 Abhijit Roy: And that's something which will continue, possibly, going forward as well. You know, so… some areas of savings in the operational expenses that we have.

194 00:30:36.840 --> 00:30:40.910

Mihir P Shah: Understood, understood. Got it, sir. Okay, thank you, and wishing you all the very best.

195 00:30:40.910 --> 00:30:41.780 Abhijit Roy: Thank you.

196 00:30:42.700 --> 00:30:48.779 Mohit Dodeja: The next question is from the line of Percy Panthaki. Please go ahead.

197 00:30:54.310 --> 00:30:55.690 Percy: Hi, am I audible.

198 00:30:56.080 --> 00:30:56.970 Abhijit Roy: Yes.

199 00:30:57.710 --> 00:31:15.020 Percy: Yeah, sir, I just wanted to understand the mix e ect, this quarter. Like, Akshen Paints said that, the mix for them is positive 3%, which was, like, after, many, many quarters, they've seen a positive mix e ect.

200 00:31:15.020 --> 00:31:19.660 Percy: so how much is our mix e ect, this quarter?

201 00:31:20.200 --> 00:31:23.839 Abhijit Roy: Yeah, because, you know, fortunately.

202 00:31:24.190 --> 00:31:38.819 Abhijit Roy: One part of it is, of course, you know, of the price increases, you know, which has been taken, which has resulted in some amount of stocking up of, you know, good products, which are more profitable, I would say.

203 00:31:39.060 --> 00:31:42.189 Abhijit Roy: The second is that, you know…

204 00:31:42.560 --> 00:31:53.140 Abhijit Roy: Overall, if you look at it, the mix has improved, you know, for the first quarter, and is likely to improve even in the second quarter as well.

205 00:31:55.080 --> 00:31:59.730 Percy: Okay. So, would it be in similar region of 2-3% positive?

206 00:31:59.730 --> 00:32:06.700 Abhijit Roy: similar, you know, I haven't measured exactly what percentage it is, but it is… it should be close to that.

207 00:32:07.170 --> 00:32:07.790 Abhijit Roy: Slight back!

208 00:32:07.790 --> 00:32:19.510 Percy: Fair enough. So, if I, if I split up your overall 13.5% deco growth, you said, 8.5% is volume, right?

209 00:32:19.510 --> 00:32:20.260 Abhijit Roy: I think…

210 00:32:20.570 --> 00:32:25.739 Percy: Then let's say another, 2.5% would be price, so that would bring it to 11%.

211 00:32:25.740 --> 00:32:28.050 Abhijit Roy: No, no, the price is almost…

212 00:32:28.050 --> 00:32:35.459 Percy: Sorry, mix. Mix would be 2.5%, so that would bring it to 11, so that means that the pure pricing impact is only 2.5%.

213 00:32:35.460 --> 00:32:39.560 Abhijit Roy: No, no, no, no, no. It is 8.4% is the volume growth.

214 00:32:39.810 --> 00:32:43.840 Abhijit Roy: Until 5% is the price increase impact.

215 00:32:43.940 --> 00:32:44.429 Abhijit Roy: The meme.

216

00:32:44.430 --> 00:32:44.780 Percy: Yeah?

217 00:32:44.780 --> 00:32:59.689 Abhijit Roy: ENGs included in that, you know, overall volume growth. If you look at it, you know, possibly normal circumstances, if you had gone seen last year, it would have been much higher in terms of volume growth. Value growth was coming out lower, right?

218 00:33:00.030 --> 00:33:06.929 Percy: So that 8.5% includes mix e ect, is it? Because that 8.5%, I thought, is just the pure tonnage growth that we are.

219 00:33:06.930 --> 00:33:17.769 Abhijit Roy: Without tonnage growth, that's right. And in the price increase, that includes the mixed change also of about 5%, which has happened so far.

220 00:33:18.720 --> 00:33:26.850 Percy: Correct. So, therefore, if that 5% is, let's say, 2-3% mix, then the pure pricing change is only 2-3%, right?

221 00:33:26.850 --> 00:33:32.530 Abhijit Roy: Which doesn't improve by 2% to 3%. You know, I don't know what ASM Paints has told you.

222 00:33:32.790 --> 00:33:37.129 Abhijit Roy: Our… normally, the mixed changes is about 0.4 to 0.5%.

223 00:33:37.130 --> 00:33:37.520 Percy: Okay.

224 00:33:37.520 --> 00:33:39.080 Abhijit Roy: Improvement in mix.

225 00:33:39.370 --> 00:33:47.180 Percy: Okay, got it. Now, this 5% which has happened this, quarter is because it is timeweighted, right?

226 00:33:47.180 --> 00:33:47.630 Abhijit Roy: Mostly.

227 00:33:47.630 --> 00:33:48.899 Percy: If I look at Q2…

228 00:33:48.900 --> 00:33:57.569 Abhijit Roy: More of it is because of the industrial business lines, where it is a timeweighted, you know, more in… because we got it more towards the end of the quarter.

229 00:33:58.480 --> 00:34:12.669 Percy: Okay, okay. But, what do we, expect this number to be, the pricing e ect to be in, Q2? Because it will be there for 100% of the quarter, so will it be, like, a double-digit number?

230 00:34:12.670 --> 00:34:21.710 Abhijit Roy: No, it will… that's what I was saying, around 7.5% to 8.5%, probably 7.5% to 8.5, depending on the mix that we have.

231 00:34:23.130 --> 00:34:32.569 Percy: Okay. So, sir, why is this so di erent? Because when we talk to dealers in 3 tranches, the actual price increase has been to the extent of 12-13%.

232 00:34:32.739 --> 00:34:43.209 Abhijit Roy: That's… that if you take a straight, you know, product by product without any weightages to any product, that may be true, right? You know, but…

233 00:34:43.209 --> 00:34:52.759 Abhijit Roy: For di erent companies, di erent products have got di erent price increases. For example, in a luxury product category, we have had an increase of, say, 6%.

234 00:34:52.759 --> 00:35:08.669 Abhijit Roy: In the case of enamel, it might be 12%. In the case of some other product, it might be only 3%. In some other product, it might be 14%. So, it depends on the mix that you are selling. So, it's very di icult to tell exactly, pinpoint.

235 00:35:08.689 --> 00:35:21.759 Abhijit Roy: That this is the mix, per se, and therefore, this will be the percentage, because every quarter, depending on the seasonality, product mix changes, and therefore, the impact of this revenue increase will be di erent.

236 00:35:22.510 --> 00:35:39.659 Percy: Understood, very, very clear, sir. Just one last question. So, just wanted to understand, I mean, if any insight as to why our decorative growth this quarter is a little lower than what the industry leader has posted.

237 00:35:40.130 --> 00:35:42.899 Percy: Despite the tinting machine additions, etc.

238 00:35:43.010 --> 00:35:52.289 Abhijit Roy: That's true, you know, so the explanation is simple, because the base e ect kicks in, you know, the industry leader had degrown, you know, in last year. We had grown.

239 00:35:52.370 --> 00:36:00.870 Abhijit Roy: And therefore, there was a 300… 3.6% di erential in terms of the, you know, value growth.

240 00:36:00.890 --> 00:36:15.269 Abhijit Roy: In the base itself, and at the same time in the profit, there was an 8.6% di erential between the industrial lever and us, because they had degrown last year, and, you know, therefore the base impact was there. So, that's the reason, primarily.

241 00:36:16.080 --> 00:36:23.280 Percy: Very clear, very clear. And lastly, sir, on margins, you mentioned Q2 margins can be better than Q1.

242

00:36:23.280 --> 00:36:36.090 Percy: Assuming that crude sort of fluctuates in the mid-80s, would you say that Q3 and Q4 margins would also be similar to what we see in Q2?

243 00:36:37.670 --> 00:36:50.899 Abhijit Roy: So, you know, it all depends. It's very di icult to say what margins will be. It depends on Mr. Trump than anyone else, because the raw material prices, you know, keeps shifting up and down. So, but as far as we can say.

244 00:36:50.900 --> 00:36:59.730 Abhijit Roy: I can say with, you know, a degree of certainty as far as Q2 is concerned, that the Q2 operating profit will be decent, the growth will be good.

245 00:36:59.760 --> 00:37:06.270 Abhijit Roy: And, you know, we can expect a good top line and, you know, operating profit growth in Q3.

246 00:37:07.330 --> 00:37:10.150 Percy: Okay, sir, okay, that's all from me. Thanks, and all the best.

247 00:37:10.330 --> 00:37:17.170 Mohit Dodeja: Thank you. The next question is from the line of Avi Mehta. Please go ahead.

248 00:37:17.730 --> 00:37:30.829 Avi Mehta: Yeah, hi sir, this is Avi here from Aquarie. Sir, I just wanted to, you know, conceptually understand. See, for fourth quarter also, on a secondary basis, we saw high single-digit volume.

249 00:37:30.830 --> 00:37:50.250 Avi Mehta: Now we've also seen high single-digit volume, and what you're suggesting, and if… correct me if I'm wrong, you said 7.5 to 8 is what you could possibly do, even in 2Q. What I'm trying to appreciate is, for the year as we see, and as we go into the second half, would it be fair that despite this high single-digit pricing that is kind of flowing through.

250 00:37:50.380 --> 00:38:00.120 Avi Mehta: We are able to maintain for the year also a high single-digit volume growth, or can it… just… and… or is… because pricing has… or… or will pricing have some…

251 00:38:00.250 --> 00:38:06.640 Avi Mehta: do you see a risk on that volume growth? So, just wanted to get your thoughts on how should we look at volume impact because of pricing.

252 00:38:07.170 --> 00:38:13.559 Abhijit Roy: Understood, you know, so I think we should be able to maintain that. We have, as we said, you know, we are taking many initiatives

253 00:38:13.630 --> 00:38:28.450 Abhijit Roy: From our side as well, to grow the volumes. One is, of course, the expansion in network itself. The second is the branding campaign, which, you know, we hope that it will have also some energetic e ect on the ground as well, you know.

254 00:38:28.510 --> 00:38:36.769 Abhijit Roy: for the team, as well as the consumers, as well. So, overall, you know, some new product introductions.

255 00:38:36.880 --> 00:38:39.790 Abhijit Roy: A combination of all of these factors

256 00:38:39.850 --> 00:38:57.219 Abhijit Roy: should help us to maintain the volumes, you know, that we are talking about, and that's the objective, you know. Along with there, you know, there is this price increase, which should get absorbed, therefore, and we don't see a downside risk there in terms of volume growth.

257 00:38:58.230 --> 00:39:11.470 Avi Mehta: Got it, sir, very clear. And sir, secondly, on this, margin front, now, my understanding is that we saw flattish margin YOY in 1Q. We are arguing for it should kind of expand.

258 00:39:11.560 --> 00:39:30.260 Avi Mehta: you know, we obviously don't know where crude is volatile, but assuming this current scenario continues, would it be fair to argue that operating margin profile expansion is what we should be able to drive for the full year? Is that what it implies? And is that reading accurate?

259 00:39:30.260 --> 00:39:34.990 Abhijit Roy: Yes, if it holds true at these prices, the raw material, and if…

260 00:39:35.280 --> 00:39:47.169 Abhijit Roy: the prices don't get dropped, you know, subsequently. Then, you know, in terms of selling price drops, then, of course, yes, you know, the operating margin possibly will expand.

261 00:39:47.360 --> 00:39:56.269 Abhijit Roy: That is why I'm saying there are too many ifs and buts, but in the second quarter, I expect that the operating margin will grow at a decent pace.

262 00:39:57.370 --> 00:40:09.679 Avi Mehta: So, okay, so what you're saying is, contrary to what has been pricing, inflationary scenarios actually helped, because the impact on volumes has been limited. Is that a correct reading, sir?

263 00:40:09.680 --> 00:40:16.390 Abhijit Roy: So far, it looks like that it has been observed that the volume growth has been more or less intact.

264 00:40:16.680 --> 00:40:28.399 Abhijit Roy: And yet, you know, the entire pricing… price increase has been absorbed, and, you know, therefore the value growth is coming at a decent level in double digits.

265 00:40:29.100 --> 00:40:38.770 Avi Mehta: Got it, sir. And last, sir, just a bit of understanding on bollocks, which is a reasonable kind of share from an international business. Sir, just wanted to understand…

266 00:40:38.770 --> 00:40:53.159 Avi Mehta: you know, what… there has been, you know, for the last some quarters, growth has been a little volatile because of factors. What is the, you know, concern, or is there a concern there? Is it just macro, or something has to be changed?

267 00:40:53.620 --> 00:40:54.859 Avi Mehta: Any thoughts about this?

268 00:40:54.860 --> 00:41:13.869 Abhijit Roy: You know, there's no concern as such, you know, as you know, those parts of the world are not growing really, fantastically well or something, you know, there are very moderate, very muted growth rates there overall in the economy itself. But we are doing reasonably well, you know, we have…

269 00:41:13.980 --> 00:41:17.110 Abhijit Roy: Product line, which is slightly di erent,

270 00:41:17.650 --> 00:41:34.629 Abhijit Roy: which we… which we see as a possible profit enhancer for us, you know, certain lines, certain kinds of products. Specifically the Bolex panels, there are certain panels, which… one of them which we are going to introduce in India as well.

271 00:41:34.680 --> 00:41:51.769 Abhijit Roy: Those are, you know, doing well and is quite profitable. So, what you see currently is, one is the economy itself, which is why, you know, slightly on the slower side, and the UK operations, you know, which have been there.

272 00:41:52.080 --> 00:42:04.069 Abhijit Roy: Where we are taking some corrective measures, which we took, you know, where less profitable businesses, we have reduced, so the top line is not growing, but the bottom line is fairly growing.

273 00:42:05.540 --> 00:42:18.969 Avi Mehta: Got it, sir. But geography expansion now is no longer the principle, at least from a Europe perspective, because at some point of time, you were considering that as well. The focus now is essentially getting profitability on track. Is that a right.

274 00:42:18.970 --> 00:42:19.400 Abhijit Roy: Got it.

275 00:42:19.400 --> 00:42:20.160 Avi Mehta: I agree.

276 00:42:20.160 --> 00:42:21.180 Abhijit Roy: That's right.

277 00:42:21.520 --> 00:42:23.909 Avi Mehta: Thank you very much, sir. That's all from my side. Thank you, sir.

278 00:42:26.040 --> 00:42:39.519 Mohit Dodeja: Just a reminder, for management to be able to answer most questions, I request participants to limit the number of questions to two. The next question… the next question is from the line of Pratik Gothi. Please go ahead.

279 00:42:41.390 --> 00:42:42.210 Pratik Gothi: Hello?

280 00:42:43.600 --> 00:42:44.120 Abhijit Roy: Goodbye.

281 00:42:44.120 --> 00:42:48.240 Pratik Gothi: Hi, thank you for taking my questions. This is Pratik Gothi from HSBC.

282 00:42:48.480 --> 00:42:51.049 Pratik Gothi: I have one question, please.

283 00:42:52.010 --> 00:42:53.190 Pratik Gothi: Excuse me.

284 00:42:53.460 --> 00:42:54.320 Abhijit Roy: Yeah, good.

285 00:42:54.320 --> 00:43:00.649 Pratik Gothi: So on, on dealer inventories, you mentioned that there could be some dealer destocking in Q2.

286 00:43:00.810 --> 00:43:15.639 Pratik Gothi: And Q2 is typically a seasonally weak quarter. I understand year-on-year, the backdrop is better because of longer monsoons, but, can you please elaborate on why Q on Q, as well, you will see better, mix and better margins?

287 00:43:16.660 --> 00:43:36.360 Abhijit Roy: So, you're right that, you know, there was some amount of stock up which has happened, and typically that should have put a little bit pressure in July, August, September. But as I said, you know, much of it is also that the sellouts will be far better this year, which we saw in July also, the sellout was much better than last year.

288 00:43:36.460 --> 00:43:47.240 Abhijit Roy: And we expect that August also should be on similar lines. Keeping these factors in mind that, you know, last year was a, you know, quite a…

289 00:43:47.660 --> 00:44:00.309 Abhijit Roy: prolonged rainfall had depressed the sales. This time, that will be more than made up. Whatever little upstocking has happened will be overcome by the extra sellout which happens in the marketplace.

290 00:44:01.320 --> 00:44:04.630 Abhijit Roy: It's far healthier this year compared to last year.

291 00:44:06.200 --> 00:44:07.249 Pratik Gothi: Understood, thank you.

292 00:44:08.660 --> 00:44:10.819 Mohit Dodeja: I'm guessing.

293 00:44:11.560 --> 00:44:15.289

Mohit Dodeja: The next question is from the line of Aniruddha Joshi. Please go ahead.

294 00:44:17.680 --> 00:44:24.970 Aniruddha Joshi: Yeah, thanks for the opportunity. So, two questions, generally you speak about market shares.

295 00:44:25.140 --> 00:44:29.410 Aniruddha Joshi: So, if you can indicate how the market share would have

296 00:44:29.500 --> 00:44:33.920 Aniruddha Joshi: been in Q1, especially in, eastern part of India.

297 00:44:33.960 --> 00:44:50.640 Aniruddha Joshi: That is question one, and if you can elaborate a bit more on the, market shares at top end of the market, as well as bottom end of the market, waterproofing, what are details you can share? Because I guess the mix is changing for most of the companies.

298 00:44:50.740 --> 00:44:54.500 Aniruddha Joshi: So, that will be better. Yeah, yeah, sorry, sir, please.

299 00:44:54.500 --> 00:44:56.760 Abhijit Roy: Aniruddho, you know,

300 00:44:57.470 --> 00:45:06.330

Abhijit Roy: detailing in, whether in East or up, I don't know, in the premium or luxury, what we have done, the figures are not available, so it's di icult to…

301 00:45:06.400 --> 00:45:17.880 Abhijit Roy: tell about the market share, and whatever I say will be conjecture, but based on figures which are available today, you know, and which is what we… when we talk about market share, we talk with figures.

302 00:45:18.010 --> 00:45:31.839 Abhijit Roy: You know, there we would have gained market share in quarter one, once again. It will sound strange that, you know, the leader has actually grown faster, and we haven't, you know, grown as much.

303 00:45:31.860 --> 00:45:46.760 Abhijit Roy: But our… we will gain market share, actually, a little bit, because our proportion of base of the first quarter is always much higher. So if you do mathematics, you will find that in quarter one, you would have gained a little bit of market share.

304 00:45:46.760 --> 00:46:01.320 Abhijit Roy: And there will be other players who will declare. Ago is coming in next, and no, Kansai has already declared. So there is a little bit of a gain in market share for us in the first quarter.

305 00:46:03.900 --> 00:46:13.400 Aniruddha Joshi: Okay, sure, so that's great to hear. And second question, we keep hearing that there is a possibility of price cuts post-Diwali, and

306 00:46:13.400 --> 00:46:25.830

Aniruddha Joshi: a lot of dealers, etc, seem prepared for that. So, is that a possibility, considering the, revival or increase in crude prices again?

307 00:46:25.840 --> 00:46:35.329 Aniruddha Joshi: And, do we see a big, in a way, a reduction in trade inventory at, if the price cuts happen at that time?

308 00:46:35.530 --> 00:46:49.959 Abhijit Roy: So it all depends on the raw material prices, as you rightly said just now. The prices climbed back again a little bit, you know, so every time it goes down, there is some statement from Mr. Trump saying that, you know, he won't bomb

309 00:46:49.960 --> 00:46:56.379 Abhijit Roy: And the price is correct, right? And then the raw material prices also move downwards a little bit.

310 00:46:56.380 --> 00:47:10.939 Abhijit Roy: But again, he starts bombing, and again, the whole thing gets confused, and then the prices go up again. So, you know, it's very volatile, and very di icult to comment at this stage. Depending on what the… where the raw material prices, if they do go down.

311 00:47:11.400 --> 00:47:13.890 Abhijit Roy: Substantially, and there is peace.

312 00:47:14.350 --> 00:47:26.500

Abhijit Roy: And finally there. Then, of course, you know, one can look at that price cut, you know, going into the second half, because then the margins would have gone up substantially, and it won't make sense to…

313 00:47:26.500 --> 00:47:35.579 Abhijit Roy: Then there will be, again, discounting and price wars, which is not desirable. So, therefore, there might be some sort of a drop in prices at that point of time.

314 00:47:35.690 --> 00:47:45.389 Abhijit Roy: But as of now, very, very di icult to say, and I don't think anyone should comment at this stage what will happen in the second half is too far o .

315 00:47:47.470 --> 00:48:03.280 Aniruddha Joshi: Okay, sure, sir. Last question from my side, now, backward integration, most of the players seem to be doing, Akshen has already announced, even Kansai is doing some backcore integration as far as regions are concerned. So, will that be the next,

316 00:48:03.350 --> 00:48:18.599 Aniruddha Joshi: In a way, important factor to look at profitability, as most of the players get into backward integration, and what will be Berger's strategy, towards… and investments towards, backward integration. Yeah, that's it for my side. Many thanks.

317 00:48:18.890 --> 00:48:26.230 Abhijit Roy: Thanks, Anirud. And yes, you know, backward integration wherever possible and feasible, and which makes economical sense for us.

318

00:48:26.390 --> 00:48:43.840 Abhijit Roy: We definitely look at those, you know, like, for example, in emulsants, the entire emulsants are made, you know, by us in our factories. Similarly, most of the raisins are made by us. There were some which were imported. Those are also now being made mostly by us.

319 00:48:43.930 --> 00:49:01.850 Abhijit Roy: Like that, there are other products, like thickeners, etc, which we have started producing in our own factory. Recently, we had a tie-up with Dow, for one of the Monsens, which we were buying from them, and now we are going to manufacture the same in our unit in Sandhilla, in Lucknow.

320 00:49:01.850 --> 00:49:06.830 Abhijit Roy: So, like that, you know, there is always a lookout for

321 00:49:06.830 --> 00:49:17.450 Abhijit Roy: Improving the profitability and e iciency and reducing the cost wherever it is feasible and possible. And that's what we keep doing every time.

322 00:49:20.860 --> 00:49:23.150 Aniruddha Joshi: Yeah, sure, sir. Many thanks.

323 00:49:23.150 --> 00:49:23.630 Mohit Dodeja: Upstairs.

324 00:49:23.630 --> 00:49:24.200 Abhijit Roy: Thank you.

325 00:49:24.200 --> 00:49:30.840 Mohit Dodeja: The next question is from the line of Anurag Dayad. Please go ahead.

326 00:49:32.170 --> 00:49:43.260 Anurag Dayal: Yeah, hi, sir, thank you for the opportunity. One quick clarification first, that EBITDA margin, we are talking about, you know, likely to be better in second quarter. So it is sequential, we're expecting this to improve.

327 00:49:43.610 --> 00:49:45.110 Anurag Dayal: Or a UI basis, sir?

328 00:49:45.270 --> 00:49:54.420 Abhijit Roy: No, no, not sequentially, obviously, you know, because second quarter, the value sales will be on the lesser side, so the operating margins are typically on the lower side.

329 00:49:54.420 --> 00:49:54.910 Anurag Dayal: Yes.

330 00:49:54.910 --> 00:49:55.480 Abhijit Roy: cognitively.

331 00:49:55.480 --> 00:49:56.370 Anurag Dayal: button.

332 00:49:56.370 --> 00:49:58.590 Abhijit Roy: It is year-on-year that I am talking about.

333 00:49:58.590 --> 00:50:10.170 Anurag Dayal: Yeah, sure, sure, that makes sense. Second, on the, you know, I just wanted to understand the regional demand trends, if you could share something, because rainfall has also been uneven, you know, at di erent places.

334 00:50:10.170 --> 00:50:20.550 Anurag Dayal: Is there any geographical variance we have observed in demand? Particularly, related to East India, where, you know, there's a competition, plus now there's an opportunity with the new government in

335 00:50:20.550 --> 00:50:39.720 Anurag Dayal: Have you started seeing, you know, some growth there? Another link to this regional demand trend is the markets where we are in the indexed, especially in the south market, where we are, you know, growing aggressively. How substantial this business has become for us, and is it mostly the project business, or we are getting, you know, retail demand as well? So that's three parts of the regional demand.

336 00:50:39.720 --> 00:50:57.429 Abhijit Roy: Right, so to answer the third question first, it's mostly retail, and project is similar. Project is slightly higher, not substantially higher, 1-2% higher than the retail growth rate. So, it's essentially much more of retail, and also some project growth, which is coming through.

337 00:50:57.510 --> 00:51:11.589

Abhijit Roy: Second question, answer is, you know, that, overall, you know, the growth rate has been higher, possibly in the south and the north, to some extent west. East has actually been a little bit muted.

338 00:51:11.610 --> 00:51:18.279 Abhijit Roy: Northeast, there's been, as you know, floods and, you know, a lot of issues there in Assam is in very bad shape.

339 00:51:18.310 --> 00:51:26.989 Abhijit Roy: So it has been impacted to a large extent there. We are a very strong player in Northeast, we are a clear leader in that market in Northeast.

340 00:51:27.160 --> 00:51:31.289 Abhijit Roy: And therefore, you know, it has impacted, to some extent, sales there.

341 00:51:31.370 --> 00:51:46.269 Abhijit Roy: As far as West Bengal is concerned, there is a change in government. Things should become positive, but as of now, in transition period, it is always a little bit of confusion. The decision-making has to happen

342 00:51:46.270 --> 00:52:04.560 Abhijit Roy: the government contracts has to start, restart, you know, sort of, you know, so it takes some time, 3-4 months of settling in time, typically, before things start looking up. So, as of now, nothing, you know, substantial has happened, but we expect the market to grow faster there.

343 00:52:05.370 --> 00:52:18.790

Anurag Dayal: Okay, very clear, sir. And just one quick thing. See, earlier we used to share that volume growth breakup between, you know, pure decorative prints in terms of emulsions, enamels, etc, versus the construction chemicals and the waterproofing segment.

344 00:52:18.790 --> 00:52:25.420 Anurag Dayal: You know, so is there any, you know, breakup at this 8.4% or 8.5% growth which has come?

345 00:52:25.420 --> 00:52:35.239 Anurag Dayal: The more contribution is still coming from the pure decorative, or it's more from the construction chemicals. And how large it has become as a share of, you know, decoratives.

346 00:52:35.780 --> 00:52:48.260 Abhijit Roy: Yeah, so, you know, as far as paint is concerned, for almost every company now, you know, the construction chemical, because on a lower base, it will possibly register higher growth rate.

347 00:52:48.350 --> 00:52:58.410 Abhijit Roy: Right? You know, as far as the, you know, percentage is concerned, it is in now, about 10-12% level.

348 00:52:58.410 --> 00:53:08.429 Abhijit Roy: varies from month to month, quarter to quarter, but somewhere around that level of 12 watt percentage, and growing at a slightly higher pace, or

349 00:53:08.450 --> 00:53:15.490

Abhijit Roy: I would say, significantly higher, you know, rate than the paint growth rate. That's how it is.

350 00:53:16.440 --> 00:53:18.220 Anurag Dayal: Very clear. Thank you so much.

351 00:53:18.870 --> 00:53:26.790 Mohit Dodeja: Just a reminder, for the management to be able to answer most questions, request participants to limit the number of questions to two.

352 00:53:27.280 --> 00:53:33.000 Mohit Dodeja: The next question is, the next question from the line of Akshen Thakkad. Please go ahead.

353 00:53:36.970 --> 00:53:52.490 Thakkar, Akshen: Yeah, sorry, most of my questions have been answered. Just wanted to get your perspective on the competitive intensity. How has Challenger brands reacted to, how the volatility in raw material is? Have you seen

354 00:53:52.600 --> 00:53:56.250 Thakkar, Akshen: Discounts or dealer margins go down, and…

355 00:53:56.560 --> 00:54:04.629 Thakkar, Akshen: when there are periods where crude comes o , have you seen some of that go up? Just wanted to get your perspective over there. Thanks.

356

00:54:05.500 --> 00:54:18.990 Abhijit Roy: No, so the competition remains intense, you know, as far as the Challenger brand is concerned, though they have raised their prices in… dealer price list has been now equated to the industry at large.

357 00:54:19.100 --> 00:54:23.969 Abhijit Roy: But the rebating, To some of the bigger dealers have gone up.

358 00:54:24.070 --> 00:54:32.969 Abhijit Roy: And at the same time, you know, the 10% free material continues in most of the packs, other than the economic category.

359 00:54:33.040 --> 00:54:45.550 Abhijit Roy: lower end of the spectrum. So, it remains intense, and it remains challenging, in terms of the, intensity of competition.

360 00:54:45.630 --> 00:54:58.599 Abhijit Roy: Except for that fact that, as I said, you know, they have now… that there was a 5% gap between the dealer price list itself, between them and us, and that has been neutralized, so that prices have gone up to that extent.

361 00:54:58.780 --> 00:55:17.739 Abhijit Roy: Even in the case of painters also, the extraordinary spend levels which was there has now been normalized to a level where, you know, it is quite comfortable for everyone. So, overall, therefore, the intensity is reduced, but it still remains at an elevated level.

362 00:55:20.240 --> 00:55:22.960

Thakkar, Akshen: Okay, thanks. One, one last question.

363 00:55:24.010 --> 00:55:29.099 Thakkar, Akshen: You know, if we think about industry growth in the last 2 years, We've had…

364 00:55:29.500 --> 00:55:32.389 Thakkar, Akshen: You know, volume growths, which were middling, and then…

365 00:55:32.580 --> 00:55:35.760 Thakkar, Akshen: Obviously, last two to three quarters, you've seen a sharp pickup.

366 00:55:36.170 --> 00:55:41.450 Thakkar, Akshen: You know, even if you discount for the fact that some of it could be… Dealer inventory buildup.

367 00:55:41.710 --> 00:55:49.130 Thakkar, Akshen: outside of that, also, underlying demand seems to have done well. What's your level of confidence on… on this demand?

368 00:55:49.270 --> 00:55:53.349 Thakkar, Akshen: Recovery and continuing, because, you know, prices have gone up.

369 00:55:53.550 --> 00:55:57.579 Thakkar, Akshen: And just more generally, one would assume that discretionary spends

370 00:55:57.740 --> 00:56:01.279 Thakkar, Akshen: would come under pressure, so I'm just trying to understand where this…

371 00:56:01.420 --> 00:56:05.629 Thakkar, Akshen: sort of recovery in demand in Painters coming through from. Thanks.

372 00:56:06.490 --> 00:56:20.129 Abhijit Roy: Yeah, so, you know, overall, actually, earlier also, the volume growth was there, but, you know, in those days, there was a price decrease which had happened, and therefore the value growth used to be much lower.

373 00:56:20.170 --> 00:56:32.009 Abhijit Roy: Now, the situation has reversed. So, you see a volume growth, and there is a much more stronger value increase happening because of the price increase happening. So.

374 00:56:32.010 --> 00:56:44.770 Abhijit Roy: I don't see a major change has happened. Of course, there has been some improvement over last year in the volume growth as well, and that volume growth improvement is on the back of two factors.

375 00:56:44.990 --> 00:56:53.440 Abhijit Roy: this quarter and last quarter, you know, June, possibly, last year was an absolute disaster because of

376

00:56:53.510 --> 00:56:59.320 Abhijit Roy: excessive rains, you know? So now, that situation is not there. That impacts

377 00:56:59.340 --> 00:57:12.809 Abhijit Roy: painting, definitely, and hence, you know, large part of the painting cycle was impacted. Last year, the other problem was that the Diwali was much earlier. Typically, people tend to paint

378 00:57:12.810 --> 00:57:27.139 Abhijit Roy: before Diwali, and they got no opportunity because it kept raining right through, almost up to Diwali, so it was a very, very short Diwali. So we expect this year that the sellouts will be much better, and hence.

379 00:57:27.160 --> 00:57:39.569 Abhijit Roy: In all possibility, even though the prices have gone up, and it should have impacted the volume growth, that impact will be more or less neutralized by these favorable weather conditions.

380 00:57:42.110 --> 00:57:43.560 Thakkar, Akshen: Okay, thank you, sir.

381 00:57:46.010 --> 00:57:50.500 Mohit Dodeja: Thank you. The next question is from the line of Aditha Bhartia. Please go ahead.

382 00:57:57.640 --> 00:57:58.380 Aditya Bhartia: Hi, so…

383 00:57:58.640 --> 00:58:12.080 Aditya Bhartia: So Asian Paints had indicated that, in Q1, they also partly got the advantage of, low-cost inventory, and, some of that advantage will not be, coming in in second quarter.

384 00:58:12.210 --> 00:58:24.719 Aditya Bhartia: But your commentary around margins appears to be a lot more optimistic, wherein we are speaking about, a year-on-year expansion in second quarter as well. So just wanted to understand where is the di erence

385 00:58:24.720 --> 00:58:40.160 Aditya Bhartia: And isn't it the case that higher cost inventory will also start, will also start contributing? And in that context, the price entries that we have taken will largely be o set by that higher cost inventory.

386 00:58:40.760 --> 00:58:55.549 Abhijit Roy: Also, the essential di erence is that we have a higher percentage of industrial business than them. It's almost 20% for us, and in their case, it might be much lower. It's primarily a decorative play for them.

387 00:58:55.590 --> 00:59:02.589 Abhijit Roy: So, what happens, therefore, is that, you know, there was a significant delay in the price increases that we got.

388 00:59:02.710 --> 00:59:13.939 Abhijit Roy: on the industrial business lines. And that will come into e ect in the second quarter. So that's an advantage which we should have in quarter two.

389 00:59:14.180 --> 00:59:17.930 Abhijit Roy: Compared to what the leader has told you in the commentary.

390 00:59:19.020 --> 00:59:21.360 Aditya Bhartia: That's very clear, so thank you so much.

391 00:59:22.640 --> 00:59:28.740 Mohit Dodeja: Thank you. The next question is from the line of Amit Purohit. Please go ahead.

392 00:59:31.730 --> 00:59:36.399 Amit Purohit: Yeah, hi sir, thank you for the opportunity, and congrats for a good second.

393 00:59:36.400 --> 00:59:37.760 Abhijit Roy: Can't hear you, Amit.

394 00:59:39.900 --> 00:59:41.749 Mohit Dodeja: come close to the headset and speak.

395 00:59:42.600 --> 00:59:44.400 Amit Purohit: Yeah, am I audible now, sir?

396

00:59:44.400 --> 00:59:45.250 Abhijit Roy: Yes, yes.

397 00:59:45.250 --> 01:00:00.080 Amit Purohit: Yeah, yeah. Sir, thanks for the opportunity, and congrats. Most of the questions are answered just on the subsidiary part. You, while the growth has been muted, but the margin expansion has been, decent, across most of the businesses.

398 01:00:00.270 --> 01:00:06.759 Amit Purohit: Do you expect over medium term and even this year, the margin improvement story should continue?

399 01:00:06.910 --> 01:00:07.450 Amit Purohit: Inspire.

400 01:00:07.450 --> 01:00:08.560 Aditya Bhartia: Bijo India?

401 01:00:09.560 --> 01:00:10.120 Amit Purohit: Hello?

402 01:00:10.120 --> 01:00:11.870 Abhijit Roy: Yeah, we can hear you, carry on.

403 01:00:11.870 --> 01:00:23.170

Amit Purohit: Yeah, so, despite the volatility or the increase in RM cost, you don't think so that the subsidiary business margins could come under pressure?

404 01:00:23.920 --> 01:00:27.240 Amit Purohit: For this year, or the… or next one or two years.

405 01:00:27.530 --> 01:00:37.430 Abhijit Roy: No, I think the margins will be pretty okay, you know, as far as the subsidiaries are concerned. They had, you know…

406 01:00:37.710 --> 01:00:46.640 Abhijit Roy: I think, you know, the businesses are now looking good. In fact, you know, we have taken some corrective measures, as I mentioned, to correct.

407 01:00:46.670 --> 01:00:47.270 Amit Purohit: the problem.

408 01:00:47.270 --> 01:00:57.559 Abhijit Roy: profitability angle of both Bullocks and STP, and I think, you know, it should yield very good results, you know, in this quarter and going forward in Q1.

409 01:00:57.560 --> 01:00:58.190 Amit Purohit: 3…

410 01:00:58.470 --> 01:01:05.750

Abhijit Roy: I can see only up to that. After that, you know, it'll all depend on how the raw material prices behave and what… what happens.

411 01:01:06.950 --> 01:01:08.720 Amit Purohit: Sure, thank you. Thanks.

412 01:01:13.110 --> 01:01:17.879 Mohit Dodeja: Thank you. The next question is from the line of Kyu. Please go ahead.

413 01:01:26.060 --> 01:01:28.500 Mohit Dodeja: Can you please unmute your mic and go ahead.

414 01:01:32.910 --> 01:01:35.910 Mohit Dodeja: Since the current participant is not responding,

415 01:01:36.160 --> 01:01:40.439 Mohit Dodeja: We can go ahead with Mihisha. Please, unmute your mic, and I'll take o .

416 01:01:41.510 --> 01:01:57.080 Mihir P Shah: Hi, sir, thank you for my follow-up. So, just one question on the mix that is changing, this year, versus if you see the historical years, the di erence between the volume and value gap used to be, you know, minus 5…

417 01:01:57.210 --> 01:02:06.029

Mihir P Shah: average, which is now reducing this, you know, in this quarter. We also saw that for the market leader as well.

418 01:02:06.150 --> 01:02:10.919 Mihir P Shah: Should one thing that this year, given the raw metal prices are high.

419 01:02:11.320 --> 01:02:19.430 Mihir P Shah: the mix probably will remain at a much lower level. The impact of mix will remain at a lower level, like a minus 2,

420 01:02:19.530 --> 01:02:27.270 Mihir P Shah: Zone, like, minus 1, 2 zone, or you think it can go back to minus 5-6 zone, in the coming quarters?

421 01:02:28.000 --> 01:02:39.859 Abhijit Roy: No, I didn't get it, you know, because, you know, if you look at the earlier figures, you know, the volume growth used to be 8-9%, and the growth used to be 34%, right? Correct. That's what you are indicating.

422 01:02:39.860 --> 01:02:42.399 Mihir P Shah: So the di erence was, minus 3, 4, 5.

423 01:02:42.400 --> 01:02:58.119 Abhijit Roy: Primarily not because of the mix, but because of the price decreases that had happened. Now, if you look at it, it is reversed, you know, because we are getting an 8-9% volume growth, but a 13-16%, 14%, 15% value growth, largely because of the

424 01:02:58.120 --> 01:03:10.579 Abhijit Roy: price increase which is there, right? So, the essential di erence is in terms of the price increase or price decrease, more and less so to do with the mixed percentage change which has happened.

425 01:03:12.140 --> 01:03:16.039 Mihir P Shah: Understood, understood. Okay, no, because if I'm referring to.

426 01:03:16.040 --> 01:03:27.839 Abhijit Roy: So there is a degree of mix which is changing, Mihir. You are right, that, you know, there's some amount of construction chemical products we sell, and the growth of those categories are much higher than,

427 01:03:27.880 --> 01:03:39.489 Abhijit Roy: say, you know, normal products, say, admixture, or, you know, tile adhesive, these are low-value products, but high-volume products. So, they are growing at a faster pace.

428 01:03:39.490 --> 01:03:56.299 Abhijit Roy: And hence, sometimes the volume growth is running ahead of the value growth. So, to that extent, there might be a di erential of 2-3%, but the balance is, you know, in terms of almost like 3-4%, 5% of price drop, which was happening regularly earlier.

429 01:03:56.310 --> 01:04:11.710 Abhijit Roy: Now that situation has reversed, with the price increase going up by, you know, 7-10%, a 10% price increase is eaten away by… the di erential should have been, therefore, 10% in terms of, or 8%, say, in terms of.

430 01:04:11.720 --> 01:04:30.659 Abhijit Roy: the price increase, which should have reflected, but it doesn't reflect fully, because, you know, it depends on, you know, two factors. One is this, that, you know, the mix is changing, and these are the type of products we sell, in which case, instead of 8, it will show only 5 or 6 percentage.

431 01:04:30.660 --> 01:04:43.650 Abhijit Roy: So, that's the reason why you don't see the full extent of the volume-value gap, which otherwise should have reflected, you know, with the type of price increase that has happened.

432 01:04:45.340 --> 01:04:52.130 Mihir P Shah: Understood, got it, got it. And last question on the, other income side, just wanted to check,

433 01:04:52.430 --> 01:04:56.329 Mihir P Shah: What has led to the, sharp bump-up in other income?

434 01:04:56.700 --> 01:04:59.319 Mihir P Shah: Both on console and standalone, actually.

435 01:05:00.640 --> 01:05:04.339 Abhijit Roy: Yeah, you can mention, you know. I Mihir Koshikhil.

436 01:05:04.340 --> 01:05:05.340 Mihir P Shah: Hi, Josh Cutch.

437 01:05:05.340 --> 01:05:08.750 Abhijit Roy: Yeah, so this is largely on account of, if you see our

438 01:05:08.950 --> 01:05:10.600 Abhijit Roy: Cash balances have gone up.

439 01:05:11.770 --> 01:05:12.900 Abhijit Roy: Right.

440 01:05:12.900 --> 01:05:14.569 Mihir P Shah: that, right? I mean, and

441 01:05:14.750 --> 01:05:18.919 Abhijit Roy: So, it's out of our Treasury incomes.

442 01:05:19.340 --> 01:05:23.089 Mihir P Shah: Okay, and Capex for the year, how should we think about that?

443 01:05:23.090 --> 01:05:32.870 Abhijit Roy: I mean, the KPIX, roughly, is at… I mean, as we had predicted earlier, it's faced somewhere around… because our Panagar project will start at the end of this fiscal.

444

01:05:35.350 --> 01:05:39.460 Abhijit Roy: So, roughly it will be 600 to 800 rupees for the year.

445 01:05:39.460 --> 01:05:41.300 Mihir P Shah: For the year. Understood.

446 01:05:41.450 --> 01:05:42.999 Mihir P Shah: Gotta, sir. Okay, thank you very much.

447 01:05:43.000 --> 01:05:43.840 Abhijit Roy: dimension.

448 01:05:43.840 --> 01:05:44.890 Mihir P Shah: Thank you, wishing you all the best.

449 01:05:45.860 --> 01:05:50.830 Mohit Dodeja: Thank you. The next question is from the line of Jay Doshi. Please go ahead.

450 01:05:54.940 --> 01:06:11.140 Jay Doshi (Kotak): Hi, Abhijit. So my… I don't have any question, I just have a request. Would it be possible for you to move to UVG instead of volumes? You know, Pedilight, all other FMCG companies, they, you know, disclose UVG, which is valueweighted. And, you know, if you…

451

01:06:11.140 --> 01:06:14.200 Abhijit Roy: You know, if you can just explain the concept?

452 01:06:14.200 --> 01:06:27.339 Jay Doshi (Kotak): underlying volume growth, it's value-weighted, so right now, you know, the issue of mix that you explained earlier, that will be eliminated. So UVG is basically price, you know, volume plus mix.

453 01:06:27.690 --> 01:06:29.760 Jay Doshi (Kotak): I'll probably take it o line, but.

454 01:06:29.760 --> 01:06:38.579 Abhijit Roy: Yeah, okay. Just explain to me, you know, we can do it, you know, that's not a problem. But, you know, then everyone has to do the same thing, then only you can compare one with the other.

455 01:06:38.580 --> 01:06:43.110 Jay Doshi (Kotak): So, I'm hopeful that if you start, others may also sort of, you know…

456 01:06:43.110 --> 01:06:43.649 Abhijit Roy: No, no, no.

457 01:06:43.650 --> 01:06:44.010 Jay Doshi (Kotak): Follow.

458

01:06:44.010 --> 01:06:50.719 Abhijit Roy: problems, you know, in explaining in that way, but let me know what this is all about, the concept, and we can do it. That's not a problem.

459 01:06:51.110 --> 01:06:54.170 Jay Doshi (Kotak): Sure, sir, I'll, write to you separately. Thank you so much.

460 01:06:54.860 --> 01:07:04.079 Mohit Dodeja: Thank you. In the interest of time, we consider that as the last question for the day. I hand over the call to the management for the closing remarks.

461 01:07:05.190 --> 01:07:08.840 Abhijit Roy: So thank you, you know, for coming and attending this session, you know.

462 01:07:09.860 --> 01:07:18.680 Abhijit Roy: Hopefully, you know, we can have a slightly better quarter two, you know, from the current levels as well, and all the best. Thank you. Thanks, Joe.

463 01:07:20.010 --> 01:07:26.949 Mohit Dodeja: Thank you. On behalf of Emkay Global Financial Services, that concludes this conference call. Thank you all for joining us.