Analyzing...
Thank you so much, sir. We will now open the call for the Q&A session.
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Thanks. I have two questions. First is on the demand side and competition.
On the demand side, you have mentioned some green shoots in urban which some of the other FMCG companies are also highlighting. But when you see that against the 12,000 job cuts by TCS and maybe other IT companies will also soon follow and overall job market, do you see some reversing of the earlier green shoots because IT jobs will be one small subset for you because you cater to every sector. So, would you be concerned on that and from a competition, the second subset to the first question now this is now fifth quarter of the new competition. The other large legacy player has said that the last 3-4 months for the new player the sales is stagnating. What will be your comment on that. And on the premium and mid segment, how is the response to the new player from the customers? And here I'm talking about the secondary sales, the primary sales is a number which is initially doable. But if you could comment on the secondary sales in terms of the premium and comment for the new player, you are the number one player. So, you will have a very good sense. Thank you.
Okay, great Abneesh. So, overall, when we look at from a demand perspective, you're right, we are seeing a quite a bit of tussle happening in the environment with the recent announcement in the job scene. However, what we see very clearly is when we look at from a point of view of demand, our demand is divided into two, three kinds of segments. First is the repainting segment. So, the repainting segment is either a maintenance led, or an occasion led. So, principally, I don't think so that gets really affected because it's a need-based thing which comes in, it only gets deferred sometime, but it doesn't really get affected from a point of view of consumption. The second area is the new construction, new homes. Yes, that is something which possibly can get affected. But you know a large part of some of these segments, especially the IT segments are in rental homes. And therefore, we feel that possibly the new homes, especially the premium and the luxury homes is something which should not get affected too much looking at how it is going.
Obviously, it remains to be seen that whether it becomes really a large-scale movement overall in terms of the way it is going. But I think what we are confident is that today whatever shoots we have seen in demand should continue because the paint industry has anyway not seen very high demand to that extent. And I think in a way some of these things that bottomed out. So, I think we are still seeing that the demands conditions should not go worse than what we have seen in this quarter.
That's point one. Second area which you mentioned about new competition. Overall, I've been always saying that new competition is always very exciting. It keeps us on our toes, new things, innovation what we want to bring. Overall, what we see is everyone in the competition would really make the best efforts of what they can do going forward. Because today, as I said, the competitive intensity has gone up. So, whether it is new players, whether it is existing players, we expect that the intensity of competition will remain to that extent. And therefore, what we are channelizing in terms of our ways is very clear that as we go ahead, we will look at possibly very strong ways to keep on growing, looking at innovation, brand saliency, looking at very different ways of what we can look at various regions. Regionalization is a strategy which I spoke of. So, therefore we are very committed to saying that we wanted to pursue the whole business of looking at growth going forward.
You also mentioned about a point in terms of the mid-level, and you know other premium level in emulsion. As I see it today, I think in some of these segments possibly the consumers consideration to buy is very strong. And the work which we keep on doing, whether it is digital, whether it is ATL, whether it is BTL in terms of really exciting the consumer with innovations is remaining quite strong.
Our share of search even in the digital medium is strong. So, I feel that till the time, we have the
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consumer with us, and we have the retailer supporting us in taking some of these areas. I think we should not see too much of possibly, interference happening in terms of how we see the growth in these segments. But at the same time, we are very clear the best brands should always win. So, if competition does good stuff, possibly they will get results.
Sure thanks. One quick follow up on that. So, the 10% extra grammage, how big is that a deterrent and how are you responding to that specifically? Is it that the four-year warranty which you are now giving, which new competition is also giving plus the regionalization which you mentioned, which FMCG does quite well and now you are seeing benefit. How are you specifically responding to the 10% extra grammage which the new player is giving?
So, see from a customer's point of view, some of these areas sometimes also become blind spots because the customer is just not looking at saying what is that extra will give the customer in per square feet or how the customer will benefit. Sometimes it is the intermediary who benefits a little bit more in terms of looking at what extra the person is getting because that might result in a higher margin for the intermediary which could be a contractor, which could be a dealer.
So, to some extent it is in a way like a discount is what we see and not too much of a consumer proposition what we are seeing because sometimes it is the intermediary which is making a decision in pushing it in some manners. So, I think that according to us will not really matter too much in this thing you have seen almost a year plus, that thing going in the market, and we see it as a discount in what possibly the new competition is giving.
You called out that higher rebates were also one of the reasons for lower reported net sales this quarter. So, just wanted to know was it in respond to the broader competitive strategy and YoY how that number would have turned out?
So, overall, you know we have upped our sales and marketing expenses the way we have gone in the market. Because as I said very clearly, we are looking at growth as we go ahead. And that is something which is the largest strategy at base. And as we see it, that is something which we adjust according to regions of how we need to look at on which segment how we want to go about.
Because one thing which we are looking very strongly in some of these areas is that it has to be a sustainable growth. It's not something which is a flash in the pan that you can just increase some discounts here and there and there you got something in the short term and then you say that the number which you're getting. So, we are definitely not in that business and that is something which we have looked very clearly. So, it is strategic in the way we are looking, it comes from a point of view of region, product segments overall and with a strong marketing push in terms of what we want to do.
Just one last question. So, can you share some reasonable nuance on the demand side and any specific observation why premium end of the demand has not done that well in this quarter?
Overall, when we look at various geographies, we feel that the Northwest and Eastern geographies have been still done definitely better. I think the southern geographies got affected little bit from a point of view of a demand. But this is something which we are thinking is a little bit of a short-term phenomenon in the way it is going. And from the point of view of overall premium and
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luxury, I think the premium segment has still done better it is the luxury which has little bit come down as such the luxury segment is not very big. It is a smaller segment because the larger emulsions market is overall dominated by more the eco as well as the premium segment. So, luxury we feel that there is an element of downtrading also which is happening which is possibly due to either liquidity or it is with respect to some constraints which are there. And I think it is a matter of time what we should see in terms of some spending because some of the other sectors, if you see whether it is auto and other areas even housing, we don't see that people are really cringing in terms of looking at down trading. But in the luxury segment at Asian Paints, we definitely saw that this is something which is a phenomenon which is happening.
Hi sir, thank you for taking my question. So, firstly, I wanted to check if you can share some more color on the demand front. Firstly, how has July shaped up and this year festive season seems to be early and historically we've seen that usually reduces the number of painting days post monsoon and impact is usually there. So, do you foresee any impact because of that? And by when do you expect double digit volume growth to come back? Will it be this year, next year? So, some color on that, that's my first question.
Okay. So, when I look at, from a point of view of demand, I think June definitely the exit was not very great in what we were seeing because of early monsoons. The intensity of the monsoons was much higher of what we would have expected in terms of buildup. And so, we have seen in July as well that the rainfall has been overall strong. However, I think we have seen a little bit of a similar pattern in July as well as we have been seeing in Q1 in terms of demand. So, I think there are no adverse and not very positive things what is there. So, overall, demand seems to be going in that same direction. When you look at from a point of view of the overall quarter, I think it is quarter three which might be affected a little bit more because we have lesser number of retail days in quarter three, which is October. Given the fact that Diwali is around 20th of October, I think the larger retailing season comes into September when there is a shorter Diwali. So, we are still hopeful that possibly a larger retailing season should be September as we go ahead and look at this quarter unless rains really play a spoiler as we see it this quarter.
Got it. Thank you for that sir. Secondly, you did mention on the anti dumping duty and also you're seeing some lowering of raw material costs. How should one tie up both because I think anti dumping duty was up by about 20% versus the earlier duty structure. Will this impact our margins in the coming quarters? Will it trigger any price change, when looking at both the raw materials and the rise in anti dumping? And I have one last bookkeeping question, CapEx for the year, if you can share and when should we expect the backward integration benefits to kick in from?
That's all from my side. Thank you very much. All the best.
Okay. When we look at the overall raw material, we are looking at various raw materials which are also crude derivatives. There we have seen some softening as we have said in quarter one as well should continue in quarter 2. However, you are right in terms of TiO2 the anti dumping duty will have an impact because TiO2 is a very critical ingredient in the paint industry. So, given this some of that impact will start coming this quarter how we see, it might initially balance with some of the deflation what we are seeing, we'll have to see it very closely. So, the options of any pricing change would depend on how the elements of deflation balance out the elements with the increase in TiO2.
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So, we would watch it very carefully over the next month as well and then take calls of what we need to do in the pricing decision.
Secondly, from a CapEx point of view, we have committed closer to 700 crores of CapEx this year.
We've spent about 100 crores this year already on that. When I look at from a larger commitment in the backward integration initiatives, our white cement plant is near commissioning. So, we should start soon seeing the benefits of the white cement outputs to start coming in the next quarters or so.
When we look at the VAM VAE plant, some of the activities around that possibly will come to fruition in quarter one of next year as we see it today. So, I think quarter one and quarter 2 of next year, you should start seeing some implications from the VAM VAE facility, which is being put up.
Hii, good evening. Two questions from me. Firstly, on the sort of luxury demand, just to follow up on that, you mentioned that obviously it's not impacting some other categories. Is it a function of your own products like Apcolite which are obviously higher quality products, relatively new launches impacting luxury demand as they take up some of the volumes?
And the second question would be from your perspective, what is sort of a fair growth given the competitive environment and the general weakness and overall demand that Asian paint should target in the short term, medium term, I understand the sort of construct of 1.5 times GDP and so on?
When we look at from a luxury point of view, as I said very clearly that one luxury is not a very big category in the overall pie. But if you combine premium and luxury, then that becomes a larger segment. So, if I put premium and luxury together, it's not bad how it is doing. However, in luxury we have seen some down trading, and it is not just because of the quality, but we have put in a decent bit of excitement there in terms of some of the new products we have introduced Royale Glitz which is there, Royal Glitz Reserv which is another product, Nilaya Arc which we have introduced.
So, there is umpteen excitement in what we have put in the luxury as well. So, it's not that there's no excitement or the quality is not something which is great. It's just that at this point of time possibly we are saying that a big element of the downloading is resulting which possibly we'll see that as we get closer to the festival time how does it really pan out of going ahead.
When you talk from a near term growth, We are still looking at basically a single digit growth in how it would pan out in overall numbers in terms of both value and volume as we go ahead. And that is something which possibly is a more realistic way how we see given the current way how the demand is panning out.
Hi, thanks for the opportunity When you talk about green shoots on demand, is this largely, pertaining to Asian Paints given that your base is fairly favorable as we move into 2Q and 3Q? Or do you expect the same for overall industry as well?
So, when you look at last year for the full industry, the industry has not grown. So, whatever is true for Asian Paints is true for everyone to that extent. So, it's not something which is going to be very different for anyone as we see it going ahead. So, that is very realistic in how we see, how this base pans out.
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But two-year CAGR basis also, do you think we should expect some improvement as we move forward? Last year 2Q, 3Q were exceptionally weak for Asian Paints, right, 6-7% decline, so if you look at the year before on that based on two-year CAGRs, do you expect this to improve?
Yeah, if you analyze it even today the CAGRs, have still been decent, and I think they should be decent as we go ahead.
Okay. Thank you so much.
My first question is on the raw material deflation of around one percentage point that you spoke in this quarter. Despite that, if we look on a quarter-on-quarter basis, we have seen a bit of a gross margin erosion and quarter one we understand typically tends to be a better mixed quarter with more exterior paints getting sold and therefore it generally has better margins. So, is this a reflection of high rebating that we are seeing in the industry? That's my first question, sir.
While there has been some deflation, you're right in terms of what we have seen.
Overall we have seen gross margins largely consistent in the band of about that 43 to 43.5% kind of a zone and that has been consistent over the several quarters. So, I don't think that there is too much of an impact. But yes, from a mix point of view, we would have preferred the mix to be much better overall. While we have done well in eco and premium emulsions the mix is still inferior from our expectations in terms of what we wanted. So, that is one reason where it has impacted. The other thing which I said is that you know, whatever we look at from a point of view of discounting and other things, there is nothing disproportionate which is not sustainable. So, that is something which is a reasonable push in what we will continue to give as we have looked at possibly going forward.
Understood sir. sir my second question is on the anti-dumping duty on imports of TiO2 from China. Now this I understand is only from imports that are happening from China. What is the implication that it may have on our overall cost structure? And is it fair to assume that in this particular quarter we would not have suffered at all given that we were operating with higher than usual inventory?
Yeah, that you're right. So, I think in the current quarter, obviously the inventory has helped us in looking at biding over this whole anti-dumping duty which has come in.
Overall as I see it, as I said, the anti-dumping duty will definitely have an impact, although what we have seen is that some of the Chinese manufacturers have already decreased their prices further.
But they won't be able to compensate for the whole duty impact which is going to come in because of the ADD coming in. So, in net, net, I think it would look at increase in raw material prices because TiO2 is something which is a very important ingredient. From the point of impact of ADD alone, the impact would be anywhere from 1.5% to 2.5% in the overall raw material cost index level.
Can you please give an indicative split of your standalone business how much is core decor retail business, how much is waterproofing putty business? Anything else that I might have missed?
We don't talk of any splits as of now in looking at where it is to that extent. But definitely both emulsions and waterproofing are a very important part of the overall business and contributes in a strong way in our standalone business.
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Just one thing on the margin you indicated, one on the TiO2 pressure. And 2nd, you highlighted a point that you would like to focus on growth. So, are we looking to revisit our guidance of 18 to 20% or do you think that you have enough levers to clear?
So, as of now, we will keep the guidance on in terms of our 18 to 20% guidance. We continuously work on lot of areas from a overall cost excellence perspective looking at that we have enough ammunition of how we need to really look at the market conditions and how we want to go in the market. So, we look at formulation efficiencies, sourcing efficiencies. The materials are a very big part of the paint industry. So, that is possibly the more you work, the better cost effectiveness you get. So, that is one focus which possibly continues to guide us that we should maintain this guidance going forward. But having said that, today it is not only one way that you can approach the market, you can approach the market in several ways in what you can do. So, we look at innovation in a very strong way. We look at how you can entice the customer from a point of view of a preposition which comes in. And we look at possibly in saying that there could be some initiatives which could really give you a lot of step jump in area which you're working. For instance, we feel the whole area of even B2B projects is a big area in what we are working, which would come in looking at growths coming from that sector as well. So, it's an all-round growth which we are considering and in terms of mechanics, as I said, which are far more sustainable, which keeps us possibly in the zone of guidance in terms of what we have given from a point of view of our PBDIT margins.
Okay. And sir one last thing, you indicated that your focus is on one industrial and B2B segment. Is it medium term or would you say that these segments will probably do better than the decorative segments beyond FY26?
So, as I see it and I have been speaking about it that given the industrialization of what we are seeing, we are seeing a large part of CapEx coming into the market and people investing into expanding businesses, new businesses, new technologies coming into India. And that's the flavor which we have seen overall. If you look at the entire infrastructure, whether it is the road networks, the airports, the railway station, we see a very strong investments coming in from the government also, which is a very prime consumer in looking at the overall paints and coatings. So, to my mind, industrial and the B2B business both would be strong proponents in propelling the growth as we go ahead.
And volume value gap should maintain right for the year.
Yeah. So, the gap has come down in the decorative range as I said, and that is what we are looking at in maintaining as we go ahead.
Okay, thanks sir. Thank you so much.
Thank you so much everyone for all your questions. With that, we come to an end with the Q&A session. I now hand over the call to Mr. Amit Syngle for his closing comments. Over to you, sir.
Thank you everyone for joining us today for the Q1FY2026 results. Wishing you all the best as we kind of look forward to an exciting quarter.
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: On behalf of Asian Paints Limited, this concludes today's conference. Thank you for joining us. You may now disconnect your line and exit the webinar. Thank you so much everyone.