Pidilite Industries Limited (PIDILITIND) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Pedalide Industries Limited Q3 FY26 Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the lesson-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Arun Baird from ICICI Securities. Thank you, and over to you, sir.

Thank you, Mark. Good afternoon, ladies and gentlemen. On behalf of ICICI Securities, I welcome you all to the Q3F546 posters at on-call. From the management side, we have Mr. Swanshu Watts, Najin Director, Mr. Kavinder Singh, JMD, Mr. Sandeep Batra, EDN CFO, and Mr. Bhavar Shosi, Senior Vice President. And now I hand over the call to Mr. Patra for his opening remarks. Both speeches are florally open for Q&A. Over to you, sir.

Thank you. Thank you, Arun. And very good afternoon to all who joined the call today. I will keep my opening remarks brief so that we have enough time for Q&A. And I have great pleasure in taking you through our Q3 nine-month results, which were approved in the board meeting yesterday. Today, in the current quarter, our standalone revenue was 3,425 crores, nominal growth of 11%, but the underlying volume growth was 9.3%. Underlying volume growth for our consumer and bazaar business was 9.7%, with B2B business, underlying volume growth of 7.4%. I just also wanted to add a trend on the domestic business. If you look at our total domestic business, which is made up of both consumer bazaar as well as the B2B business, that reported underlying volume growth of 11%. I think the challenge that we faced in this quarter was on account of exports, probably the harshest quarter in terms of whatever is happening in the geopolitics world, and therefore our exports in totality declined by 13.5%, which resulted in an overall underlying volume growth of 9%. So the domestic franchise remains strong, and the underlying volume growth there have been inching up over the last eight quarters. Both in Q3 and in Q2, the UBG was in excess of 11%. The impact of exports in the second quarter was not as severe as in the third quarter. And therefore, the overall underlying volume growth may have been a bit lower than Q2. Our gross margins at a standalone level improved by about 200 basis points as input prices remained benign. Again, just for information, WAM consumption in the quarter was at about $830 as compared to $884 in the same period last year. However, this benefit in the material cost was offset because of a one-time provision that we took on account of the new wage code. Basically, for two elements, gratuity and leave-in cashment, we have recognized the impact because of the new OH code. That resulted in a one-time charge of 47 crores in standalone and about 52 crores in consolidated. We also stepped up our advertising and sales promotion spend in the quarter, something that we've been dialing up over the last couple of quarters. And despite all that, one-offs and increased ANSP spending, our standalone EBITDA margins improved by about 24 basis points and stand at 24.5%. Profit after tax grew by 12.5%. For the quarter, our domestic subsidiaries reported a sales growth of 4% with a marginal decline in EBITDA. International subsidiaries, however, grew top-line by 6% and EBITDA by 19%. Consolidated revenues, therefore, for the quarter, a shade under 3,700 crores, were up by 10.2%, and when you look at the nine-month period, the growth again in consolidated revenue is same at 9.2%. That's about it from the point of view of opening remarks, and open the floor for Q&A.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Novama. Please go ahead.

Thanks and congrats on a good set of numbers. My first question is on exports. So do you see even Q4 and Q1, the decline continuing? And could you elaborate what exactly you mean by the geopolitical challenges? Now, given U.S. tariff deal is done and dusted, although details are still awaited, do you think large part of the geopolitical is also behind, or there is more to it? That is my first question.

Abnish, first of all, great to hear from you, and good to have you on the call. I think last time around, we missed you, and definitely being the first, or overall missed you as well. So, very good to see you on the call. And I think good question. Let me first talk about exports. So see, first of all, for us, the share of business of this part of the business is not that significant. But having said that, as you know, there is our pigments business. In our pigments business, we have a direct exposure to US, as in we do export to US. And US is a large component of our pigment export. So I think that's the piece. This part got affected quite a lot in quarter three of the current financial. Quarter one had got affected a little, quarter two got affected a little bit more, but quarter three got severely affected, if I can use the word. I think so, therefore, and the second area where we got a little affected in our B2B business is in the indirect, you know, sources. So, in our other B2B businesses where, for instance, we supply to footwear, we supply to, you know, some other leather chemicals or even textile, some of these were affected because of their export getting affected. Our own sense is that this is largely behind us. We should see action based on the new tariff rate, hopefully, maybe by the turn of this quarter itself, but definitely as we move forward. We also feel that the impact on B2B per se in this quarter and future quarters will also be minimal because we've got other, because of this prolonged negotiation, we had also built a few other plan Bs, if I could say. So there are things which we have done which will also begin to fructify as we go forward. So I think, therefore, to that extent, this part is largely behind us, assuming the new tariff rate which has been announced is implemented. I think on the broader philosophical question of geopolitical uncertainty, Abneesh, we do live in a world where there is considerable geopolitical uncertainty. Even now, it's on, and to be fair, I think some of the wars are far from over. Russia-Ukraine is not over as yet. There is also the conflict in the Middle East. There is also the overall Iran question. And some of these, while they may be political and may be wars, but some of them are also very sensitively situated. So there are possibilities of any kind of commercial ramifications. So that comment which you were referring to, which was also a more broader point, stems from there. So the geopolitical uncertainty in general is there and is something which we have to learn to live with and we are learning to live with as you go forward.

Thanks, Sudhanshu. Two follow-ups. One is to understand correctly, you think in Q4 and Q1, a sharp decline in exports as we speak today? That seems unlikely, right? That was my first follow-up.

No, that seems unlikely. That seems, as I was telling you, I think we have other plans and all that. So overall, our B2B would be, we would continue to see back into, I would like to see our B2B. By the way, domestic B2B delivered mid-teens growth. You must have, I think it's part of a commentary as well somewhere, but they delivered mid-teens growth. So our domestic B2B has delivered mid-teens growth. This is something I want to tell you. Second is that we've got plans in place to therefore bring back our entire B2B back into at least mid-teams. So, you know, double-digit and mid-teams. So, I think those are...

And Sudhanju, second follow-up is, do we have clarity now almost reasonably on US, what kind of pricing rates, etc.? Because details haven't come. And any benefits from the EU trade deal or that doesn't change much for you?

No, no, EU trade deal benefits will accrue to us. But two things on EU trade deal, and perhaps maybe three. I think one is that EU trade deal, till the time it is ratified by the European Parliament and all that, is at the very least six months away, maybe nine months away. So, therefore, anything in that will, in terms of, when the rubber hits the road on the ground, will happen only towards the end of this year. So, it's sometime, sometime the next fiscal and all that, maybe taken off of next fiscal. But I think it benefits us. We have, we export to EU, so therefore, there will be correct, direct benefits there. Plus, also, as part of our planning for, you know, in general, which we were talking about in response to our earlier question on exports, We've been looking at other geographies, and EU is one of them. So, therefore, the business development work which has happened, which hopefully will be further accelerated and will give us better fillip as and when some of these things play out. So, therefore, we are in good position, but it's not going to impact us tomorrow, or definitely not in the quarter and maybe the quarter after.

Okay, and that's all. My last question is on basically your India consumer and bazaar extremely good growth and almost like a 9-10% very, very predictable growth, which is a great achievement given very few companies grow at this number. My question is basically if I see two parts. One is I was surprised to see mass media advertising by raw style cleaner. I see very good presence in e-commerce, e-commerce. The question here is how do you compete with multinational companies which have economies of scale, both in terms of raw material and finished products? Second, they have a team. So, how do you, again, do you set up a cool team here? So, do you have plans for more products? I do understand ROF has some level of right to win here. But Racket, Benkizer, Unilever, IPC, they have so many cleaning products. Why will a consumer buy a ROF cleaning product? That was first part. Second is, real estate slowdown is now quite real if you see the real estate stocks. Most of them are tier 1, tier 2 market, and you are pan-India consumption. So if you could address tier 1, tier 2, are you seeing some level of slowdown in the real estate? That's a subset of your overall C and D. But any level of slowdown you are seeing there, which is getting more than compensated. Your overall numbers are very good. But any anecdotal evidence you can share? Thank you.

So there's three questions there, and maybe I will answer two, and perhaps start on the third and ask Kavinder to build further. I think on the first question on Roth mass market, building the Roth brand, which is the advertising you talked about, I think that's our classic Pyrrolite playbook. I think Roth is our next big brand, and when we build a brand, we build a brand holistically. We don't say we are building the brand only for applicators or vice versa, only for consumers, because some of them are not strictly, in any case, bazaar brands are not strictly only, India is a D.I.F.M. country, so not strictly to be used by the consumers, but consumers are aware of them, they will ask for it, they know that, they trust them, and therefore, you know, so, therefore, that is a journey, and you will continue to see that. We have invested in the quarter gone by and quarter three considerably behind Roth, also on impact properties, including in specific geographies where we've actually been on some of the very strong impact properties like Big Boss and all that. You've seen us on Tricket and all that. So, therefore, we are building Roth brands. So, that's the first question. That's the journey which will continue. It will be, you know, like our other brands, Sevicall, Dr. Fixit, Sevicquake, Roth. These are brands which are like, you know, and you will see. So, we will be building some of these big brands which are going to be. So, therefore, that's very clear. And your second question was specifically to a product on Roth Cleaner, you know, so basically, our viewers should go, we are not competing directly with the CPG or FNCG companies, but there are certain products which are relevant to the, our area of operation sometimes, or where we have very distinct product superiority or advantage. So, when it comes to Raw TheraClean, you will see that people swear by the efficacy of Raw TheraClean, and, you know, there are other products, and I'm not commenting on them, but people are very happy on Raw TheraClean. It is also a clear adjacency to basically when you're doing tiling work or you're doing some of this work, you would like to, you know, clean it and that's the way you leave this, make the cleaning easier, educate our applicators. So I think that's an area where I think Ross had a clean definitely scores and it could be picked up by different things. And sometimes now consumers are also picking it up, but then so be it. So I think that's the second part. On the third part, I tell you, I'd like to just make one quick comment, and then maybe Kavindar can further develop on it. See, first of all, our portfolio is not only new construction dependent. Our portfolio has new construction, renovation, and repair. And renovation and repair account for maybe 70% plus, I would say 70-75%, and new construction is more like 25%, maybe a little higher, so depending on the cycle. So, that's the ratio. So, first of all, we are well equipped even if there is a downturn in new construction. That's the reason I'll now hand over to Kavinder to talk to you how we look at construction. It's not only a builder, which is one part, which is no doubt. And then within that also, last point, I want you to say that when you look at now new residential construction, you know, parts of it is slowing down, parts of it is not slowing down. So, I think India is, so therefore, it's a bit like a large elephant, which one are you feeling? So ultra, this thing, I see no slowdown. They are telling as if you are telling, they go off the shelf like very quickly, but I think they may be small. The second home construction or only going up, that is not slowing down at all. There is no this thing. So that piece you are not seeing, but I am looking at this entire piece now.

On residential sector, three, these three lines of business that we have, and we are, as we speak, and I think I mentioned earlier also, we are going segment out because our solutions span across segments. So for us, as of now, I can confirm to you that we haven't seen any slowdown whatsoever, even in residential. And by the way, within the industry, we keep talking to each other who are in the allied businesses. And as of now, we do not see any slowdown in any part of the construction segment. We are seeing right now business as usual. And if you look at what has been spoken in the budget very recently, whether it is the city economic regions that the government is trying to promote, tier 2, tier 3, whether it is the fact that there is a desire to focus on infrastructure and urbanization, I think the next three to five, maybe even seven years, and even if you were to look at a segment like hotels, there is significant construction going on as we speak. So when I span, you know, our businesses into multiple segments, I find that there are more that we can tap and we have a very clear go-to-market route through the architects, structural consultants into the projects route to offer them solutions across waterproofing, across tile addition and flooring and few other allied products. So, just to give you a bit of a reassurance that this is not a cause of worry to us at all at this moment of time.

So, thanks to both of you. A very detailed answer. That's all for my time. Thank you.

Thank you. The next question is from the line of Cure Pandya from ICICI Prudential Life Insurance Co. Ltd. Please go ahead.

Thank you for the opportunity. Two questions. First, on the growth side, I mean, while tremendous performance versus other consumer companies for the last many quarters, just one curiosity, as you are increasing or reinvesting your gross margin benefit into, say, ANP and other retail activities also, I'm sure, that you are doing, Why is it so that the volume growth is around 9% or 10%? Shouldn't it go up if you are spending more on, say, ATL, BTL? And if that is not the case, isn't it better to, say, increase the gross margin if it is not yielding the incremental volume growth? So that is the first question.

I think, you know, from where you are coming, it's a very good question, and I wouldn't deny that, but let me give you a little bit of context and color to this. I think, first of all, in businesses and in life, it's not a magical wand that I have increased my ANSP by so-and-so, and I should get, you know, results immediately. Although in e-commerce Performance marketing, you'd get it a little bit, but that's not what we do. I think when you are building the brand, therefore what happens is that it is for building it for a medium to long term, and I think that's also been our approach. Let me illustrate to your point as to what is happening. So if you look at, we've started dialing up at our ANSP, you know, for some time, let's last two or three quarters, you've seen that. If you look at our historical growth, or let's look at even last year growth, forget, I'm saying let's take last year number. So if you look at our last year growth at a consolidated level, was revenue growth of 6.1, our UVG was a bit better, there was a price, this thing which was coming in. This year, on the UVG, we have already dialed up about 100 bps. And revenue growth, we have dialed up even higher. Although that is some of it is because the pricing is coming up. So if you look at our nine months consolidated growth, that's around 10%. I'm saying so therefore, you are seeing a fillip in the growth. Now the question is, and our desire is to continue to maintain this growth. Because for us, the EBITDA corridor which we have shared is 20 to 24. We are also very conscious that we should have right profitability, at the same time focus on building capabilities, building brands, and leading to improvement in revenue growth, as you pointed out. So the question is, we are seeing improvement in top-line growth. We would like to continue to improve our UBG, and therefore the top-line growth as we go forward.

Understood. Just one follow-up on this. So you see, as an effort of all this, I mean, say, ANS3 or branding activity, volume growth can go up from here also, say, in next two, three quarters, I'm not saying next quarter, or this is an optimal level. That is one follow-up, and just second question, broadly, from the medium-term perspective, you have given breakup of all the brands which are under core growth and pioneer. You, I mean, many of these growth categories were, say, probably a couple of years back, were in the pioneer category and have moved up to growth. Do you think you have enough levers or enough funnels in this pioneer growth category which can continue to give double-digit kind of volume growth just from, say, next two years' perspective?

The growth has gone up by almost 100, 100 plus bits, you know, 100 to 150 bits in this period, and we would like to continue to sustain that momentum, and we will continue to grow it in the medium term and perhaps year on year. So, we see, we remain confident that we should be able to do this as we go forward. I think, by the way, let me also tell you, and I think, you know, because a lot of the people you may be hearing on the other company, analysts' phone calls and all that, usually refer to volume growth as simple, what you call total volume growth, what is the word we use, which is, and that number for us, that number for us is much higher, that number is further improving. So, therefore, overall, are we being able to do that? The answer is yes. Two is, do we have pipeline in our pioneering businesses and even in growth? So, I think there are two parts to this answer. I think, one, we would like our growth businesses to continue to grow better, and I think we are seeing some evidence there. So, if you look at Dr. Fixit's growth, this is a lot of starlight. I'm just giving you a few.

Noted. Thanks a lot for the detailed answer. All the very best. Sure.

Thank you. Participants who wish to ask a question may press star and one on their touchstone telephone. The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.

Hi, thanks for taking my question. My first question was after a long time, we are seeing some price growth in the standalone TNL, revenue growth being 2.5-3% ahead of volume growth, UVG. So, just wanted to understand, you know, what are the sources of this price growth? Is it sustainable? Given that input costs have been benign, is the growth giving you now confidence to also take some marginal pricing and can we expect that going ahead also?

No, I think we talked about this. Arnav, thank you for the question. First of all, I think Sandeep had last time also spoken about this. I think my view is that in the zone of about 100 to 150 bits in and around there, I think you should continue to expect, I think it would be our endeavor, but will it flow through as a formulate number quarter on quarter, year on year? Perhaps no. So, I would caution against that also. I think it's a combination of some of the times, but I think there is room, and we always keep exploring opportunities for wherever there is room for pricing, price laddering corrections, pricing, a little bit of pricing room. So, I think that's the way it is. Sanip, if you want to add a little bit more, I think.

No, I mean, just to add to what Sudhanshu said, that you're absolutely right, Arnab, that input costs have been benign at an overall level, but there could be a few categories where there could be input cost led or even otherwise an opportunity to take some tactical pricing, and that's something that given that we keep our ears very close to the ground, We always continue to identify such opportunities where we can take pricing without actually hurting the premium that we charge without the premium going way beyond our comfort corridor. So, this kind of gap that you saw in the third quarter, as Azanshu said, anywhere between 100 BIPs or so should get maintained.

Yeah, thanks so much for that. My second question was actually regarding waterproofing to your comment that you've seen definitely improvement in Dr. Fix-It Growth. I'm just correlating it with some of the paint companies' commentary that the repainting cycle has been extending and the industry demand seems very muted in paints. And this is one category which at least to us looks a little close to paints in terms of a lot of times it happens together, the waterproofing and the painting. So are you not seeing any impact of that? Or would you say that your portfolio is more remedial based or like new construction based where, you know, the repainting cycle may not be a big factor in waterproofing growth for you?

So, I wouldn't like to, I cannot comment on the other, on the commentary given by others, and maybe there is some merit, and they perhaps see it more closely. But what we see is, and I think I'm just building on to our earlier answer to, you know, we made this, we gave an answer to, I think, Amnish's question, both I and Kavindar. I think the point is, for us, waterproofing has got all three components. Repair, I think that's where there is maximum, this thing with, or some overlap with painting, or simple repair. I think that's where we become new construction, and I think as Kavinda was saying, you may have noticed that or heard that.

Thanks so much. Thank you for your elaborate answer. That's it for myself. All the best.

Thank you. The next question is from the line of Jai Doshi from Kotak. Please go ahead.

Hi, congratulations on the set of numbers and thanks for the opportunity. I just have a quick follow-up on the previous response. Do you think that you have started to gain market share in waterproofing once again? Maybe there was a phase of two or three years where you lost out to new entrants, largely decorative paint companies. Do you think we are seeing some reversal of the market share trends?

Yeah, yeah. Jay, just can you sort of very quickly repeat the question? I'm sorry I missed the question, but I think first of all, good to hear from you.

Sure, sure. Just to follow up on your previous response, do you think that you started to regain some market share in waterproofing? There was a phase between 2019-20 to 2023, maybe three years, where you may have lost market share to decorative paint companies. Are you seeing reversal of that trend in waterproofing?

I would like to say, okay, whatever you assume the market is growing, do that so that you are in the business of continuously gaining the share as we also build the market. We are all in both in waterproofing and even tile adhesives and all. There is a large job to be done to even develop the market. There is no debate about that. There is a lot of scope to be done. But in developing that market, we will continue to dwell. I'll also ask Kaminder to add on this.

Thanks, Sudhanshu. Just to build on your question, I think I'll just once again talk about what we are doing. And in a way, I think it'll answer your question, hopefully. So what's happening is that in waterproofing, we have two components. One is the retail component, and another is the projects component. The retail component, as Sudhanshu was saying, has started growing. That's where your question of gaining market share is probably even more valid. Again, these are early days. We are doing our bit to get our act together, both in terms of our reach distribution and solutioning that we are doing across waterproofing solutions that we provide, Including a few new products that we have launched, which are gaining some level of traction, but again in the waterproofing space. Parallelly, we are driving the projects business much more than probably we have been able to drive by following the segment out kind of an approach and solution out kind of an approach. You may remember we have talked about Pidilite Professional Solutions, which is doing a very good job in terms of getting ourselves specified for various solutions at various stages of construction for various segments, whether it is commercial, residential, etc., etc. So, one side we are going out on specifications, second side we are going out on solutioning, third side we are definitely gaining share in the project space probably faster than retail. The combined effect of presence and do and we are doing and therefore with regards to their situation, at least we are not seeing that situation for us in the space of waterproofing that your question was all about. So I hope this gives you a flavor as to what we are trying to do in waterproofing. And therefore, we believe that our own act of driving projects penetration, getting into markets where we have not been present, including the, you know, lower pop strata markets, that's where again we are seeing huge growth. And the fact that Dr. Fixit, the retail piece, even in urban, is beginning to look up again in terms of the various initiatives that we have taken with regards to the way we are going into the market. And there are certain things that we are doing which we believe, you know, are working. And as a result of which we are seeing the growth that we are seeing in Dr. Fixit. Obviously, when we talk of construction, while you have been talking about waterproofing, Thailand is another story, and of course, it is also linked to construction, largely new construction, and that's where, again, good growths are seen, because this is more like a category, creation activity that we are doing, and there, again, the trajectory is good, which, again, was mentioned earlier. I hope you have got the answer that you were looking for.

No, that's very encouraging to know, especially the retail piece of waterproofing. Now, my second question is on Rolf. Do you think that, you know, there is potential to double even from current levels? Or do you think that the current scale, the growth may start tapering off? And, you know, yes. Okay.

Let me just give you a bit of a perspective on tile adhesive category. I don't know, we may have talked about it earlier as well, but in case it's a repetition, then others should. This is where the category is a replacer of cement. Reasonably well in the vertical surfaces, the conversion on the, well, that may be some other time. But right now, it is important to know that the category creation is not happening automatically. There's a lot of work that needs to be done with the contractors, tiling contractors, and Pidilite, all of us are wedded to the idea of working very closely with the user. So, we are working with these contractors and actual tile layers to show them the advantage of how the tile adhesives improve the performance of, you know, a tile laying so that there is no debonding, etc. And, you know, we are in a position to do that through actual working on the ground. Paralleling, the work on building the brand as we have been talking, ATL spends have been reasonably good, which again Sudhan Chu was alluding earlier. So there is a focus on making tile adhesive as an important part of tile laying, which is category creation is what I am saying. But if you look at in India, the growth of tile business is about 8, 9, maybe 10 percent. So, it's not that tile laying is increasing dramatically. What is happening is the penetration of tile adhesive in tile laying is growing in terms of about 18-20%, roughly to that effect. So, it's a game of penetration opportunity for all the players in tile adhesive, not just us. And now here, I have a question of what each one of us do, which will help to open the category, meaning unlock the category even more. And also, what acts, you know, we do with regards to go-to-market, you know, and ensuring that we are able to deliver retail adhesive at a competitive cost. Because this is a very, very price-sensitive category. And here, if you do not play your cards well in terms of a distributed manufacturing, getting the product right in the first time, ensuring that the brand is sort of preferred. So, there's a lot of act that needs to be done. So, giving an answer to your question, whether it could double, I mean, very difficult to say. It's very important to note that this is a category which can be grown, and we are growing the category apart from growing our share, and that's what we keep doing, and whether we double or whatever the number is, I think there will be an outcome. In Petalite, we are very focused on what we do, and normally outcomes would follow, you know, in line with what we are aiming. So, I would say that that's the way to look at this category. Slightly long answer to your short question, but I thought I'd give you a bigger picture.

So let me ask a follow-up there. You know, you did mention that the category itself is growing at 18-20%. And that is broadly a 10% tile growth and the balance is penetration. Do you think that the category growth can continue at this rate for another two, three years? And I can understand if your growth market share will be a function of competitive landscape and how you play the portfolio. But are you confident that the category can grow at 18-20% for the next three years?

I think the answer to that is how the players play the game. The answer is yes. Sometimes when category is growing fast, sometimes you will see players coming and actually thinking that it's a cakewalk. And sometimes that can actually lead to a different kind of a situation where some players may not give the products that are, you know, let's say going to perform. And sometimes it hurts categories growth. So, I think it's important that, you know, all the players in this category are sort of playing their game right in terms of giving users a lot of satisfaction and a reason to invest more money in tile addition versus cement. We need to constantly give them the reason. So, that's the core sort of play that everyone must do to be able to grow the players.

I think the category is growing robustly, as Kavinder explained to you. Do we see this momentum in the category? Yes, I think so. That's clear. And within that, are we beginning to play this reasonably well? The answer is yes. Thank you.

The next question is from the light of Tejas Shah from Avengers Park Institutional Equities.

Thanks for the opportunity and congrats on good set of tempers in this environment. So my question pertains to VAM prices. Now, historically, we have been kind of, we have been programmed to say that or see that this commodity remains very volatile. So $800 per ton can actually jump to $1,600. And if my memory serves me right, it has gone north of that also. So, but last few years, the last few quarters, we are not, or the range of volatility has come down. So, just wanted to understand, are there any structural changes on the demand supply side globally that this commodity is not as volatile in this kind of, especially in this kind of macro environment as it used to be earlier?

Sure, Tejas, thanks for the question. So, VAM, I think, while it has always moved within a range, but the kind of spike that we saw post-COVID, I think one of it probably coincided with the Russia-Ukraine conflict, and there, of course, the prices went up, but it was for a very brief period of time because they corrected as fast as they had gone up. Historically, the range has been much narrower than what you saw during that disruption. And one of the reasons that you could ascribe to it is that there has been significant capacity expansion in China, and that capacity is not getting consumed locally. And maybe that's one of the reasons why overall prices remain a bit subdued. Plus, I think, the feedstock for VAM, which may be all oil derivatives, but the two key raw materials, being acetic acid, they have not seen any big upward movement. And likewise, even oil has remained kind of range bound. So that's why we see prices remaining at the kind of levels that they are. They could be, you know, 4-5% up or down. But, you know, VAM today is maybe even less than 10% of our raw material basket. So even movements are not going to be so impactful as far as our margins are concerned. Yeah, very helpful.

Our second question is on when we look at our distribution landscape, there's a lot of overlap between paints players and us, and looking at where the paint segment is going through the rough phase right now. Is it easier for us to, let's say, convert some of the paint players to house our products or convert in terms of pushing some of our products because they are not seeing that much growth in the existing line of the business?

We follow a distribution model to the market, and we go much deeper. Most print companies follow a direct-to-dealer model, and I think they are, if I could use the word, slightly more urban-centric by definition, a little bit more urban. So the two are different. I think we always believe to continue to play our game, to continue to do our things well, and to continue to basically focus on our product range and all that with the set of dealers which we visit. And some of them there is an overlap, as you rightly said. But I think to each of the dealers that we visit, we would like to grow our age. What I mean by that is to be able to sell more products to them, to be able to share with them the value which comes with premiumization and the quality of our products, and therefore continue to drive our sales in that way.

And if I may add, Tejas, the overlap that you mentioned is only in paints and hardware outlets. Our GTM is not 100% paints and hardware. Our GTM has about 7 or 8 different types. You have building material, you have tile outlets, you have plywood, which we call, and a large number of other GTM where paints products are not sold.

Our reach is order of magnitude higher to the paint leader in terms of director

for last many years on distribution-related initiatives, both in numeric footprint and reform. Any new project or any specific project you would like to call out?

So, basically, when we go deep down, we have been looking at what we have been talking about, Perilite Ki Dunia, PKD. I think there is continuous work happening on basically making sure that we go deeper in PKDs, and there is also violence happening on what we call super PKDs. So, therefore, how are we able to build greater depth and also better information and capability for demonstration as we go deeper? As in, by demonstration, I mean user education, trying to make sure that some of these things are available both. So, I would use the word digitally, some of it digitally, some of it physically. So, that's the next step in this distribution. So, therefore, making distribution and demand generation sort of go along even better than what they have been in the past. And that work is happening, as I speak to you. So, we are going deeper, but we are also going into this, what we call, super beginning.

So, if we have to look at, just one follow-up there, if we have to look at growth from the lens of distribution expansion and billing more from the same existing distribution, I know it's very difficult in your line of business, but what would be that rough breakup at how many new touch points or how many new, I would say, accounts you are adding versus you are going deeper with your portfolio innovation and more volume growth from the existing distribution?

So, I think bulk of it is from the latter, which is basically distribution from our existing points. Basically, so for our life-for-life growth, some of it is coming through paymentization, some of it is coming through range. A small component is through expansion. See, while we do both, because the other thing is also, Abhi, that basically we go deeper. But when we go deeper, you would realize that realization per unit, as you keep going deeper, is much lower. And that is to be built for the future as we go forward.

Very clear, sir. Thanks and all the best.

Thank you. Ladies and gentlemen, to ensure the management can answer all questions, please limit your question to one per participant. The next question is from the line of Latika Chopra from J.P. Morgan. Please go ahead.

Thank you for taking my question. You know, a lot of them have been largely answered, But I just wanted to get some follow-up from you on any updates that you could share on some of the new ventures on Haisha Payne and Leopold NSS. And also on the NSS portfolio, could you give us some color on how the experience for this portfolio has ended for you over the last few years, given, you know, Pioneer and who credit unions have continued to accelerate? Thank you.

Yeah, Latika, thank you. Thanks for the question. I just wanted to know, one was, what did you say, the second one, I missed the, is there anything else you talked about?

Electronic addresses, the new, yes, yes, yes, both these pioneering segments.

Yes, yes, both these pioneering segments. So on the Hainsha pains, I think what we have, we were present in Tau TK, as you would remember, and many of the people on the call perhaps would remember, is that we were present in what is most of the southern states, Telangana, Andhra, Odisha, and then Tamil Nadu and Karnataka, we call that Tau TK. We've gone to the eastern states as well, two or three of those states. We continue to progress well, but we are still not, and I keep saying this, sorry, it may seem like a repetition of what I said, but then that is the case. I think we are making steady progress, but we are not being able to ascertain for ourselves as to what our right-to-win model is. Actually, you know, what is this business model which will give us to Roorban? We want to sort of, you know, continue to build on that and we will sort of take our time to sort of strengthen this as we go forward. I think on electronics, as consumer electronics, we are also, as I speak to you, looking at some of the automotives and some of the other spaces. And I think we are beginning to do specification work there. But a lot of this work which we are doing here is quite laborious. And it takes time. And therefore, this will be a little bit, when and as we get it right, it will be a little bit more geometric in terms of the outcome that you will see. So, it's a bit like that, you know, keep working, keep working, and then we'll start, once we get those, some of the large orders. Some small commercial orders are coming, but large orders will need specifications. Testing in most of these spaces, whether it's consumer electronics, electronic autos, is very rigorous. It goes through a couple of rounds, but each of the rounds could be, you know, 12 months, 12 to 18 months. So, this is a rigorous process. We are at it, though. We are at it. There is a lot of work happening in this space as well. We continue to remain excited in this space, and there is a lot of work, you know. So, we are peddling very hard. You are not seeing it above the water, but we continue to do that. I think that's the piece.

Thank you, you know, for the very candid answers and the perseverance. Just last bit, Sudanshu was just trying to, you know, get some thoughts on support asset portfolio. You know, anything on, you know, how is the growth trajectory there? Is it more like, you know, high single digit? Is it very volume driven? Is it very mix driven?

Adidas's portfolio is, again, I think it's a very wide term because we have all kinds of Adidas, but I think, to be fair, a lot of it is core, as you rightly pointed out, our ferry call Adidas, our, you know, even our ferry call for the kids, MR, and all that. I think in all these places, we are seeing robust single-digit growth. I think, you know, more like 1.2 to 1.4x of the GDP. So, in the zone, could it be a bit better? Yes. I think that's an area we would like to continue to strive for, but I think that's the piece. But even here, what we are continuously doing is a lot more innovation, a bit more premiumization, a lot of projects and pilots are on. Unfortunately, I don't want to elaborate on this at this moment, but across the board, there is a lot of work on this. And in subsequent quarters, we'll be able to share with you also some really exciting work happening in this space as well, which I think will give us Philip as we go ahead in some of these areas as well. Some stuff is very exciting. That is what I can share with you, and you are piloting it as we speak to you. So I think, you know, and that gives us a lot of confidence to continue to maintain, more than maintain, interest.

Understood. Thank you so much, and all the best.

Thank you. Thank you. The last question is from the line of Avi Mehta from Acquire. Please go ahead. Yeah, I just

had one, you know, clarification, and just trying to understand, if I were to adjust for this one-off labor cost, labor code impact, and, you know, we are already at almost, what, 25.5% of a data margin, your input costs are benign, your demand momentum is actually doing very well, is it fair, or is it a possibility that near term we could kind of reach that 20 to 24% range?

I think if you look at our last few quarters we have, even last quarter, it was above the 24% rate. This quarter, again, because of benign input prices, and even if you adjust and after adjusting for the one-off, it was higher. But as I said, our objective is to drive for faster growth. So, we will continue to be on the lookout for opportunities where we can reinvest whatever gains we are getting for margin expansion. And again, just a word of caution, don't look at our numbers on a quarterly basis. Look at a slightly longer term, look at a full year as a basis. In this one quarter, yes, it may appear to be ahead of or above the comfort corridor. But if you look at full year, we are confident that we will be at the upper end of this 20-24% range. Got it, sir.

That's all for my time.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.

Thank you very much for your continued interest in BitLight, and wish each of you a very great evening. Thank you. Thank you.

On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your line.