Analyzing...
Thank you, sir. We will now open the call for the Q&A session. The first question is from Mr. Abneesh Roy from Nuvama.
Yeah, thank you. Thanks for the opportunity. My question is on overall competition. I see that your gross margins are up, both QoQ and YOY. I do understand that the raw material side is favorable and outlook also looks good. My specific question is in terms of the 10% free grammage in the different SKUs by a competitor, what has been your reaction? And the new players, what we are hearing is they are now withdrawing it from many of the SKUs. So, if you could comment on that. Also, I picked up that in terms of the tail of the distribution, there was some loss for you because of the new players coming in. So, if you could comment, how are things there? And from an advertising perspective also I see Asian Paints now being much more aggressive in terms of all the key events of cricket. So, if you could comment, how is your market share in terms of the media presence? I'm not asking about volume market share, I'm asking about the overall media market share.
So, thanks Abneesh. In terms of some of those incisive questions, in terms of what you placed, I think when we look at from the point of view of the whole area of additional grammage, the whole area of free, which kind of comes along with paint, we think it's something which is an area which has been tried and, you know, worked upon by various players earlier as well. It's something which is nothing new. It also basically reduces the turnover of the retailers from what they will be able to sell. And it is very difficult to keep focused in terms of where that benefit goes from the point of view of consumer-painter-dealer. So, I feel that possibly that's one area which is a strategy which some of the competitors might take, but it is something which they will see the benefit in terms of what they are getting out of it. From the point of view of our perspective, what we are very clear is that our work on fundamentals, our work on execution, our work on brand building, our work on innovation will continue and we keep on doing this work. This will definitely give us some gains in the market as we are seeing in this quarter. We are very clear that possibly it is not a game of just discounting alone. It is a game of how you look at placing your brand, how you look at upping the category from the point of view of premium luxury finishes. And that's something which we have been really looking at. From a point of view of building the brand equity, above the line media has been very strong and we have used it effectively for reaching not only the entire country, but also at a regional level very strongly. As we see it in terms of a share of voice, we would be definitely much higher today than the overall competition. And that is something which we have upped from a national level, at a regional level.
And for us, I think that augurs well because one, it really affects the top-of-the-mind awareness and secondly, the whole area of the consideration to buy of the customer is getting influenced. And therefore, that is something which we have been taking very strongly. And that is why, you see, strong marketing spends in the second quarter.
Thank you. The next question is from Mr. Vivek Maheshwari from Jefferies.
Hi, good evening team. My first question is on volume growth. So, you know, you mentioned about the macro as well as your own efforts. We have seen a double-digit volume growth in this quarter from your side. There are two parts to this question. First is, you know, your presentation talks about improvement in consumer sentiments. Whereas what you articulated on the call, it looked like more of your internal, you know, internal factors which is driving this growth. Can you just clarify as to, you know, sentiments versus your own efforts, which was the bigger driver and how do you see this going ahead?
So, overall, the demand conditions we are all aware have been really average. We have not seen too much of an uptick. The overall industry, as I said, would not be growing more than about 3.5 to 4%. Therefore, we were very clear that we need to really shift our gear in terms of how we really galvanize the market, how do we look at playing to our strengths in a very strong manner. And that is something which we activated. The whole area of looking at aligning to the consumer, getting the consumer on the fore. And that is why you would have seen that we have kind of unleashed so many kind of initiatives from the point of view of media and new advertising across the range of products. And I think the bigger effort was to ensure and give a very strong whiff to our overall execution piece so that we could deliver the right kind of servicing, generate demand, and have the right kind of connect with people. And that has been a stronger focus in terms of executional excellence. The other area has been the area of regional initiatives. So, you look at micro marketing, you look at regional markets in a very strong way, you align to the markets and basically create empowerment and a flexibility so that we are able to perform much better at micro marketing and reaching out to the smaller places, much better. The other area which I think has been very important is that some of our innovations in terms of the new products have also galvanized the numbers for us. Also, uptick in premium and luxury has also helped us at really upgrading the consumer. So, I would say that it's a combination of overall factors in terms of what has worked well.
But I would also say that we saw some demand pick up in September for sure. And also I think the first fortnight of October has been strong due to festival being there and some uptick in the demand which has also helped us so that we could kind of take advantage of the demand uptick given our overall execution and consumer connect.
Thank you sir. The next question is from Mr. Avi Mehta from Macquarie.
Hi sir. Just two questions. First, you know, given how you're seeing your initiatives pan out and the demand improving, would love to get your thoughts on how you see the full year volume growth and value growth for us or for the industry to give us some sense. And second, we have historically seen this industry do double digit growth in value terms as well. What do you think is required or when do you see that panning out? Any thoughts over there would also. Thank you very much.
When we look at the next six months, we've already spoken about where we are looking at the overall year going. We are looking at mid-single-digit value growth for the full year. And as we kind of go-ahead volumes would be higher since we are now batting across the range of products right from undercoats to the economy to the mid-range and to the top end products. And therefore, we would anticipate that the gap between the volume and the value would remain in that zone of about 4-5%. So, I think if we are able to hit, mid-single-digit value growth, we would come closer to a higher digit value growth at the end of the year. So, I think that is the endeavor.
But as I said, a lot depends in terms of how possibly the market pans out, how things will kind of augur as we kind of go forward. But I think that is something which is what we think we can really aim for.
Thank you. The next question is from Mihir Shah from Nomura.
Hi sir. Thank you for taking my question. Congrats on an excellent set of numbers. Just wanted to understand the numbers a bit better. So, two questions here. Firstly, there has been a sharp improvement in volume growth despite the extended monsoon quarter. Was this aided by festive demand which was largely sitting in 3Q last year? And also, did you see any lost dealers coming back or restocking impact indicating that sustaining this double-digit volume growth in coming quarters can be challenging or do you see this double-digit growth, volume growth to sustain in the coming quarters? Secondly, the difference between your volume and value has been much lower versus historical trend. What drove that? And despite being a seasonally weak quarter, gross margins are a bit higher versus 1Q levels which ideally, are supposed to be down. Which means that you have seen some benefits from lower raw material prices. Can these benefits continue in second half and margin expansion that we've seen in this quarter, you know, continue in the coming quarters as well. These are my questions. Thank you.
Okay, as I said this has been the quarter where we approached the entire product category in a fairly holistic manner. So, that today, given the overall equity of Asian Paints, we leverage that and look at possibly batting at the retail with the full range of products. And I think that has given us leverage across the range of products, whether they are at the economy level or at the mid-level or at the luxury level. We have also seen \a clear focus on B2B segment, which has given us entire advantage in terms of exploring beyond the central theme of just the builders and CHS. As I said, I think we've looked at the government, the factory segment also very strongly. And I think those are stronger avenues which have also helped us sell a full range and really participate in the whole development story where government is spending a lot of money. And that is something which has been also supportive in terms of giving us benefits across the product range. And therefore, you see that the volume we have been able to expand because it has also been the consistency in terms of looking at the entire range and not looking at specific ranges. The second reason, you know, the September month was definitely much better. And it has definitely upped the overall volumes. I wouldn't say that from a point of view of festive season, because the difference between last year and this year was just 10 days in terms of the overall festive season. But nonetheless, the first 15 days were strong, a very good uptick at that point of time. So, that has also added to the overall volume growth. And that is why I think I see one of the reasons we are closer to this kind of a volume. As we go ahead, we have also looked at saying that we will maintain a 4-5% difference between volume and value. And we have been conscious of this, that we need to kind of shape up our product mix. So, therefore, we have looked at the premium and the luxury and far more strongly, as I said, a lot of energies went in terms of upgrading the consumer also so that we are able to showcase the benefits. And therefore, if you see a lot of our communications ran in terms of the premium and luxury emulsions in this quarter which has really elevated mix for us. And that is where the gap between the volume and the value stays in terms of this zone
Thank you, sir. The next question is from Latika Chopra from JP Morgan.
Hi. Thank you for the opportunity. Two questions from my side. The first one was on margins.
You've always maintained an 18 to 20% margin band for yourself. Given the raw material environment is benign, competitive intensity remains stable, though stiff, nothing incremental, hopefully, and clearly there are a lot of cost interventions. From your end, are you comfortable to see visibility that you can land at the higher end of this margin band instead of the lower end, which has been the performance in last few quarters. And the second question was at an industry level. We have seen introduction of consumer financing for painting services. What are your thoughts on this? This is very nascent, but is it a meaningful driver of consumer demand? And is it something that you could explore, or the industry players could explore in the future? And the third bit, just a clarification on your previous answer. You know, this gap between volume and value, you know, I understand over the next six months you are still looking at 4 to 5%, but when you frame your plans for FY27 in terms of mix and all the initiatives that you've taken, and also the salience of B2B which seems to be increasing, do you sense that this gap will reduce or there is a conscious effort to do that. Thank you.
From a point of view, overall margins, you know, at the standalone level, in Q2 we are at 18.5% at standalone level and at consolidated level, we are closer to 18%. Today, we are making some very meaningful investments in our marketing efforts, we are also looking at investing in technology a lot, we are looking at bringing in more innovation which we are adding in the market and are able to reach out to the consumer far more effectively as we go ahead. We also see higher competitive intensity in the market as we go ahead. Given all this, it is okay to maintain the whole guidance of 18 to 20% PBDIT margin band. I would not qualify whether it should be at an 18% level or a higher level. But it's good to maintain 18-20% margin as we go ahead. The second area which you raised in terms of consumer financing, I don't think it’s a new concept in the country. It has been tried and tested for a long time. In fact, we were the first ones to introduce financing about almost five years back. It is something which has got a little bit of a muted response because people are also wary about the fact that there are certain resultant charges which accrue to them. And therefore, it totally depends on the ticket size of painting and the ease of getting that level of finance. So, I feel that there is nothing new in the concept. It's been tried tested earlier. Possibly it will give only that much of connect with the consumer but cannot become a big game changer. The third question on the volume value gap which you spoke of, please remember that today when we reach out to the market, we are talking of reaching out to every segment of consumer, right from the segment at the economy level to the mid-level to the luxury level. And therefore, we would not like to see that we are losing out in any of these segments. And today the economy to the mid-level segments are fairly big segments. And therefore, what I would see is that as we keep on going ahead, this kind of volume-value gap will persist if we are looking at a far more holistic approach across the range of products. And that is something what would be our endeavor going forward.
Thank you. The next question is from Mr. Manoj Menon, ICICI Securities.
Hi team. Good to note, far higher disclosures on the activities which have been undertaken, and request please continue. Just one, one thing on those actions which you have taken, not really talking about macros and markets and industry growth, etc. If you could comment about anything which would have done in the last six months or one year with the dealers, you know, anything different versus in the past, that would be very helpful. That's one. The second question is any color over the last six, nine months in terms of your regional mix changes. What I'm trying to understand is in markets like Tamil Nadu, Karnataka, Kerala, where you are probably
over indexed versus your national average. So, let's say how do I think about these parts of India, the growth for you, is it closer to the overall growth or is there a regional divergence and also on the product. Thank you and good luck.
So, for us, the entire set of retailers are something which are core to us. I think what we have definitely looked at in the last six to nine months is the area in terms of building far more stronger relationships. I think that is something which is a very different thing in terms of what we have tried to do. Because for us, the relationships are much more important in terms of what we kind of really build up. So, that it really then adds up to the overall business. The second area which we have looked up is in terms of generating more business for the retailer. So, that it is something which is very different from the industry standpoint saying that today we get you better leads, we get you better business, so that today the retailer gets more interested in terms of doing business with you in terms of looking for a brand which is really supplementing his or her efforts from a point of view of selling more. And that is something which really matters to the dealer. I think the third area is to kind of really look at their earnings and basically, we look at two initiatives. One is from the point of view of giving them a strong ROI in terms of their overall business. And secondly, by the virtue of a lot of variants, a lot of differentiated propositions, we try to give them higher margins so that the entire return on his investment really amplifies a lot.
So, I think those are some of the key areas in terms of what we have looked at really building from strength to strength in the last nine months. When we look at, from the point of view of certain regions which you mentioned, especially the southern regions, we have looked at a lot of regional initiatives which are basically tuned to that region in a very strong manner. To give you an example, that if today we see that there is a region which is tuned to more in terms of looking at that they are excited in terms of looking at a certain finish in a certain category at a mid-level, we would kind of try to give more wings to that category and that finish in that market through various mechanisms, whether it could be through the architects through the interior designers or the painters, contractors, so that we could kind of play in that category, which is so good for that kind of a region. Similarly, I think the whole area of regionalization, which offers some areas like colors which suit that region, packs which suit that region, something which appeals to the art culture of that area, has been a strong galvanizing point in terms of what we are seeing, where people are looking at aligning with you. Because that is something which the customer is asking, and the customer is really enjoying. And that in the true sense is bringing joy and happiness to consumer lives. So, I think that is something which have been the strong differentiators there.
Thank you. The next question is from Mr. Amit Sachdeva, UBS.
Hi, good evening. Thank you for taking my question. Sir, my question is on the competitive intensity. I think last year we've seen, for lack of any better word, kind of bandwagon effect where a lot of dealers, joined competition, and competition built up some scale. Now, is this because some sort of fatigue has set in there as well, where dealers are going back and buying Asian Paints again and some sort of that effect is waning.
And also related to that is that the painter commission that you also gave you also accelerated quite a lot a bit, I believe. How do you record that commission? Is it part of the net pricing or it sits on in the other expenses. But I just wanted to your reaction to it, whether competitive intensity actually is waning from a dealer adoption point of view.
So, it's very good that you asked this question because if you look at it from a point of view of the
consumer, this is not an FMCG industry that you basically come in with a force and you look at possibly giving consumer a lot of goodies packed by, people who are kind of aligning in terms of giving and offering those areas. I think it is also a question in terms of saying that this is a cycle which keeps on visiting you once in five years, which means that every year you have a new set of consumers which possibly are coming into the market. And this is a continuous process that if you don't build bridges with this customer over a longer period of time, a shorter-term kind of invasion will really not help you in terms of getting to the consumer. Having said that, at the same time, I think it is important that you build in the consistency of brand spending to that extent, which can only happen if you do it over a larger period five years to 10 years, to that extent, so that you are able to get that customer, the newer customer, and then start basically getting a repeat from that customer as you can kind of look at your long term journey. So, therefore I would say that while there are ways of accelerating in terms of incentivization which can come in terms of looking at discounting. But I think the more important thing is the fact that are you building a connect in terms of ensuring that both the dealer and the contractor are able to get a continuity in terms of their business. And that is something which is very important that you work with the contractor in terms of one increasing his business and not only in terms of looking at either discounting or giving him a benefit per litre. I think some of those areas will have a little bit of a short term effect and it would kind of really call for really strong energy that you could kind of really leverage the areas of overall brand connect far more strongly along with relationships, which would really work for medium to long term.
Thank you, sir. The next question is from Mr. Tejas Shah of Avendus Spark.
Hi, thanks for the opportunity and congrats on recovery. So, just in your presentation, you called out that part of translation from volume growth to value growth is also missing because of rebates. Just wanted to know how are we tracking and how is the overall industry also tracking on that front? Has the intensity on that particular line item come down?
So, as I said, the important thing is that, when you look at the overall segments, there is a certain kind of balance you will have to really look at because it is a large product range today, and each segment has a large contribution, given the diversity of this country and the huge consumption. And therefore, possibly just blindly pursuing the fact that I need to just decrease the value volume gap might not be a great idea going forward.
What really matters is that in each of the segments, are you really scoring out with the consumer? Are you really giving consumer a different segmentation and are you really winning in each of the segments. The segment sizes vary to that extent in terms of what possibly economy contributes, what is the mid end contributing, what is the luxury contributing. And therefore, just saying that I need to concentrate only at the mid and the luxury end and kind of look at possibly increasing my value might not be a great choice when you are really traversing the entire range and reaching out to the entire country. And especially when you talk of your retailing and your distribution strength, which is both very strong towards the urban and the rural centers. So, therefore, I would say that possibly a balanced approach, is a good option in terms of maintaining volume and value parity going forward.
Thank you. The next question is from Mr. Jaykumar Doshi, Kotak Securities.
Yeah, hi, thanks for the opportunity and congratulations on good performance. My question is on premium and luxury part of the portfolio. Could you give us some indications in terms of what has been the growth rate relative to the company? And the question comes primarily because the new entrant has indicated that for
them 65% of the portfolio is premium and luxury. And if that is the case, mathematically it appears that either the market is growing at a super normal rate, like 25, 30% plus in value terms of premium luxury, or maybe they are gaining share from others. So, I would like to know your thoughts on that aspect.
So, I can speak for Asian Paints here that today, when you look at the luxury and medium category today, it's not that large a category in terms of what we see. The larger, bigger category obviously is the economy category. And therefore, we have reason to believe that every new entrant who comes in basically tries to get a larger peep into the area of the economy segment. Because it takes a lot of effort in terms of brand building, a lot of effort in terms of product differentiation to start making forays from a mid-level to a luxury level. And therefore, what we believe is that the economy segment will still be the largest segment in terms of the market. And therefore, I think our endeavor is to look at upgradation, which is a very strong initiative what we take, in terms of how we upgrade people who are using distempers to the economy emulsions, from economy emulsions to the mid-level immersions and from there onto the luxury emulsions. We keep on prodding that pyramid far more strongly, but the larger base of that pyramid is the economy segment.
Thank you. We will take the last question from Mr. Pratik Gothi, HSBC Securities.
Thank you for the opportunity. I have a quick question on the mix again. Any color in terms of interior, exterior performance in terms of mix.
The interiors would have done much better this quarter, given the fact that there was extended monsoon. And please remember, in the monsoon, the exterior painting suffers. Especially large, big sites, especially in the B2B business. It takes a toll in terms of the exterior painting because no one wants to risk painting at a time when there was incessant rain. So, I would say that this quarter has been much stronger from the point of view of all the interior finishes.
And just a quick one, if I can squeeze it in on the waterproofing category or the construction chemicals category in general. Any commentary there?
That category has done very well for us. Overall, we are looking at growing more than double digits in that category. And there are lot of innovations in terms of what we are bringing from the kind of products and really offering consumer a proposition, which is a strong waterproofing proposition. And, in the B2B business, it is basically foundational to get into the waterproofing first and then start supplementing it with the top coats. So, I think it's been one category which has been doing very well for us over a period of time.
I thank everyone for their questions. With that, we come to an end of the Q and A session. On behalf of Asian Paints Ltd. 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.