Analyzing...
Thank you, Mr. Amit, for your opening comments. Participants in the ballroom. Please raise your hand to ask a question.
My first question is on the warranty which you discussed in the presentation. One is, is there a cost escalation because of this? Because I remember earlier it was more of a three-year warranty. Now you're talking about four years and in some products, you're talking about 25 year warranty on the rooftop. So, is there a cost escalation from a raw material perspective and from a claim perspective? Because obviously if from three years you move to four years. And how
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important is this from a consumer decision perspective given the competitive scenario and the new player was more on foreplay and now you're matching that. So, how important and how it will help in FY26?
When we have looked at seeing our warranties, we have looked at our formulations and the formulations have been done in such a manner that the overall margins which we derive out of the product, we don't have an impact from a cost perspective. So, it's more a chemistry marvel what we have put, looking at innovation which comes in the formulation. That's point one. Second, warranty becomes a de facto correlation to the quality of the product. So, it's not necessary that every customer will look at five years or ten years or fifteen years of repainting. But it becomes definitely a strong correlation with respect to how you perceive the quality of the product. And it gives you an assurance that if this product is going to be talking of this kind of a warranty, it's looking at possibly giving me this kind of durability over a period of time. So, we think the relationship of the customer with the warranty is very strong. And in fact, Asian Paints were the first one to introduce warranties about 20 years back when we started looking at all these warranties coming into picture.
That's how we look at - one cost neutrality and second from a point of view of looking at these warranties becoming a very strong signature of your trust on durability and performance.
One related question is in terms of advertising the new player which entered few quarters back, if I see their advertisement, they are talking that why continue with the legacy brand and they are trying to connect with the Gen Z and the new age customer. I understand the warranty bit helps from a quality perspective, but how are you addressing this aspect?
See overall, today when a customer is buying, customer is today relating to a lot of new stuff in terms of what we are doing. For example, we recently launched what is called Chromacosm which is the world's largest colour system, which offers more than 5,300 shades. This is today the world's best colour system what we have launched. Today we offer more than 1000 shops across the country which offers the best colour consultancy, which is what possibly any Gen Z or a millennial customer would really look at from the view of appropriation when they are looking at it today. I think the most important part is the visualization. The work we do on digital, whether it is with apps or whether it is on our website is absolutely led through artificial intelligence and looking at all the latest stuff, which comes in from the perspective of what influences the customer. I think saying is something, but people experiencing it is something very different. And as we know it today, possibly
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we invoke the latest and the best technology. So, one technology is signified by the innovation which we are bringing. For example, a product which can last on a terrace waterproofing for 25 years is a sign of innovation which connects with a modern age customer. Secondly, the work around colour consultancy what we do is something which is there. So, we believe that as a brand which has been there for so many decades, we don't have to go on the rooftop and shout that what we are not doing or what we are not changing. We believe we are bringing the customer the latest.
My next question is on the divestment, which you did in Indonesia.
Now in international markets, if I see Sri Lanka has been challenging in FY25 and Africa, Egypt, etc. have been challenging now for many quarters. Similarly in Home Decor, if I see you have listed 9 verticals and you have taken impairment losses this quarter and earlier quarters also in some of those. My question here is, are you evaluating more such divestment in international markets? And even in Home Decor would you now evaluate whether you need to exist in all those 9 verticals?
So, how we see it from a global perspective, right now we are looking at more at consolidation of what we want to do because now some of these units are not of a small size except for South Pacific operation which is a small operation. Our presence in Middle East is now big. Similarly, when you look at Bangladesh and Sri Lanka, the investments are big. We have made the entire foray to ensure that we are amongst the top two players in those countries, that is the belief in strengthening our position. Similarly, when we look at from a Home Decor perspective, I was just explaining the rational of why Home Décor, because as part of our corporate positioning we are the only paint player possibly who are into the whole area of home very strongly. There is no one who is appropriating home in such a way of what we are doing. Because we believe that if you are part of the Decor life cycle of the customer, then whether it is a rented home, or a first home, it’s a renovation, it’s a second home or even a kids home you're part of the Decor life cycle of the customer very strongly is what we believe. And therefore, I think there also what we are looking at consolidation. We want to say that in all the brand spaces, if you are not one or two looking at the businesses, we should not exist there going forward at this stage. I think the other foray is to offer a complete solution to the consumer so that we are able to say it is truly decor under one roof who comes in. And similarly, I think in the paint business also, we have looked at waterproofing, textures, tools to complete the overall offering of what we are able to make. But everywhere the endeavor is that if you have to exist, you have to look at number 1 or number 2 position being there.
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Hi sir, So, if we look at the current financial year gone by, it is by far like one of the worst financial years we've had in a long time. So, how much of this would you attribute to new competition and how much of this would you attribute to the broader economy? So, that's the first question.
If you look at over the last two decades and this is something which I had commented on last quarter as well, we have not seen possibly demand conditions like this in the paint industry ever. So, if you look at the overall organized paint growth, especially in the decorative sector, it is negative this year. And if you trace back for the last full 2 decades, there's not a single year where you have got a negative growth for the paint industry. So, I would say that one would largely attribute it to the slowing down of the market what has happened, demand conditions being very challenging both from the new construction, second from the repainting and third, while the B2B business is good, but it is not compared to what we have seen in the last five years. While we have always seen competition in the market, we've had newer players like JSW and Indigo and so on and so forth which have come into the market. Yes, this year we've seen about 3-4 new other players which have come in the market. I would say that possibly to some extent in a market which is already slow, the intensity of competitive action has been much more as well. I think it is a double whammy in combination of the market slowing down plus increased competition coming from both the existing and then new players.
Secondly, given what you said of increasing competitive intensity. So, what is our strategy going to be to defend market share, to defend profitability? So, if you can talk a little bit about how we plan to come out of this competitive environment in a positive way?
Our stand is very clear that we would look at playing to our strengths of what we would like to do in this environment. The whole area of Asian Paints, bringing a certain quality, certain kind of loyalty, certain value to the consumer which is very important because we believe if your value proposition is strong, the customer will buy into it. It's not the question of just discounting. It's not a question of offering something very cheap. It's the value which counts. And therefore, we would continuously play on the value proposition very strongly as to what we want to offer, whether it’s economy, whether it’s premium or luxury. The proposition is very important what we have been fighting on and which will continue to fight as we go ahead looking at the market. We also believe that we have a very strong network. I spoke about 1.69 lakh distribution points. And I think that's the other area which we
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will keep on expanding. As I see it, the moment the demand conditions are back, we would see a much better performance ahead. I think from a competitive intensity, some of it will continue, but it has to be countered only to an extent possibly that it doesn't go beyond a certain value in what we are able to offer to the consumer.
Just extending from the previous comment that you made, you know clearly that competitive intensity is going to stay high. Just want to get a sense do you see a downside to this 18 to 20% margin guidance that you have shared considering there is more need to spend in the market whether in terms of increasing the brand loyalty, visibility, improving the value proposition further, probably investing more in the market. Any thoughts on that how are you thinking about it?
There is no two ways about it that possibly you will have to spend more in the market very clearly. So, whether it is from building the brand or whether it is from seeing that you are present across the country, distribution spends of what you need to make. Or looking at elasticity of your pricing of how you want to behave vis- a-vis any other competition. And therefore, we are still very confident that today, as we are going ahead, there are series of things as an organization which we have taken up, whether it is a very big area of backward integration which we have built in. And as I said that we saw it coming earlier what was going to happen in terms of the competitive intensity and we invested earlier. So, not only this, but we have also unleashed three of the backward integration initiatives which are already in operation right now. Two I spoke of, which are going to kick in now and next year as we see it.
That is going to bring us a very strong cushion for some of the spend which we are going to make in the market. Second, we are constantly working around looking at sourcing purchasing efficiencies in what is there, given the fact that you are able to buy materials at scale. I think that is something which is going to be very important looking at as we go forward. And therefore, we are looking at definitely some saving which comes out of that to spend money in the market. And the third area is, that these times call for very strong cost efficiency measures, which would be in the way we spend, the way we look at our existing models and redefining our model. So, we've already kicked in an exercise to look at what we can do in that space. And the last area which is still getting comforting now is, we've seen a deflation in the last quarter.
We see in the current quarter also there would be a deflation of about 0.5% to 1% what would happen. I think all these are good arsenals to give us good spending power in the market at the same time maintaining the guidance which we have and are going to maintain.
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On demand, you gave 3 reasons why, FY25 was soft for the category, you know, new construction not being as much. Second was renovation, you know, intensity was probably not as much high, which is repainting. And the third one was you would have expected B2B to have done better. Now as you look through FY26 or sequentially, as you're going through this quarter or how you exited the March quarter, which of these three you sense is going to pick up first? And is there a hazard a guess, where you would land or the category lands in FY26 because FY25 was a negative year?
When we look at FY26, there are some good areas which are occurring of what we are seeing. First, what we are seeing from the last third and the fourth quarter is the government spending is coming back which was disrupted in the first half because of elections or otherwise. And that is a very big source today. I think as Asian Paints, we are looking at any other airport, tunnels, bridges what are happening. That is something which we look at in terms of contributing to that extent.
And we feel that is going to give us a good gain from our whole B2B business which is going to come up. That is one area which we are very confident and that is something which is going to increase. Second, we also see that the mid-to-luxury housing is going to flare up as we go ahead. We are already seeing second homes coming up in a very big way, this thing which basically gives flip to the premium and the luxury products in a very big way. And that is something which we see will go up. Third T3-T4 is a good indication while looking at some of the rural demand coming back. And given the fact that last year was a good monsoon and we are looking at a predictability of a good monsoon coming further that is another big bright spot which would auger well going ahead. Given these factors which are there, you know unless there is a geopolitical event which really looks at spoiling this trajectory, we think FY26 should definitely be much better. But obviously there is a caution till the time we really see demand really picking up. We are still being overall cautious in what we would look at. But the idea is to aim for single digit value growths for the year FY26.
And if I could squeeze one on CapEx, because you mentioned Rs 3000 odd crore, if I heard correctly on futuristic emulsion plant that you're putting up.
I think between FY26 and FY27, any colour on stand alone out and consolidated CapEx for FY26 and FY27 for Asian Paints?
Already about a year and a half back we had announced our overall consolidated CapEx which was about Rs9000 crores in what we were spending. f you look at it today, we have been able to spend a considerable portion out of that till
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FY25. As we look at FY26, our overall CapEx will be complete from a white cement perspective. It's only part of the VAM VAE plant CapEx which is going to go till FY27 which would be left out of Rs 3000 crores. I think that would be something which would come in this years. From a standalone and a console overall CapEx this year we would be.
We are expecting about Rs 700 to 800 crores outflow this year and probably a similar number next year.
Hi, was there a conscious decision to improve gross margin in this quarter because you know the sequential improvement is fairly impressive and on the other side you’re under performance versus market is also increased or maybe some of the companies are yet to report. Do you think you may have lost some market share because of this gross margin focus?
The gross margin improvement came at two levels. One was the deflation which happened in the market and second, what we see is that the raw material efficiencies which have been built in, with the work which we have done. So, I think the improvement came in from the point of view of looking at cost from a raw material perspective which basically jacked up. I think the bonus came in from the point of deflation which was there in the market, which gave us the overall gross margin improvement. I think from a overall share in the market as I said that we will have to wait for all the results which would come in for Q4. But given the fact that we are talking of market being negative, there could be the possibility of some loss which could have happened to some of the other existing players or some part to the new competition as well.
Sure, second is just clarification, single digit value growth for FY26 that is your outlook for the category overall industry or for Asian Paints?
For Asian Paints.
Okay. And you still maintain 18 to 20% consolidated EBITDA margin guidance?
That's right.
Finally, one year ago, most of us in this room would have probably expected Asian Paints to defend market share better when the new entrant came in.
And we would have not expected the consolidated EBITDA margin to drop below 18%.
So, I mean, when I look, at the end of the year with hindsight benefit, we feel that, you
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know, this entire thesis has not played out, maybe number two, number three player have defended market share better. So, what do you think has played out this year which you know resulted to these outcomes.
The factors which have been played are multiple as I said. First of all, given the fact that the overall market has not played up to that extent. We did not anticipate possibly the kind of competitive intensity which would have come up given the fact that demand was not there and everyone was fighting for the same share.
And given the fact that possibly you have a certain share, you were possibly coming under glare from all the competition. So, it’s not about one competition, it is about everyone really fighting for the same pie. Second, what we see is that possibly when you look at the price elasticity and when you look at from fighting the competition on a certain pricing level, you would be very clear that you would go to a certain level which is sustainable, and you will not go to a level which is unsustainable. I don't think so it is a year’s game. It is a game of looking properly at the next three years as well in how it pans out because I think some of those performances can be just a flash in the pan in what we can see of what is really happening. I think sustainability is more important. We could have guarded the share much better by spending some more money and so on and so forth. But one thing is very clear is that you are looking at possibly an area of sustainability, that you want to maintain the market share when you look at possibly even preventing your share erosion to some extent.
And this strategy will continue even going forward that you will not want to respond on pricing or because we are getting into a deflationary environment.
It's not that we are looking at saying that we have not responded on either on the pricing or in terms of the product innovation. As I said, we are focusing very clearly on looking at the value proposition. It will not be singularly only on the price to that extent. What is the price which the customer is willing to pay for a certain quality and for a certain brand which they have in mind. That is something which we are playing the card because there is a certain inherent strength in the brand. We also want to spend a lot of money with respect to building the brand further. From that point of view of either consideration to buy or from a share of search and that is strong and something what we want to maintain. Therefore, it will not be that you are not reacting, but you're reacting not in possibly a more predictable way what the market expects.
Just a fear we have been losing a lot of front-end mid level management teams. Is there somewhere I mean it's a perception which I'm
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developing that somewhere we are defaulting in execution and that is also creating a challenge for us that we have been losing I don't know whether it is key or better skill set, but is it that worry you at this point of time?
For any organization, it is important to keep on looking at saying whether your strategy and execution skills are syncing together in the right way. And as we are looking at in the market today, there are definitely areas which we are trying to strengthen, whether it is distribution or whether it is servicing or even from looking at how we want to build capabilities into our people going forward. So, I think that is all part of looking at how these execution skills will come in. What we are very clear is that given the fact that we know the market, we know our dealer relationships are strong, to that extent we are looking bringing in more technology. So, we've got a Salesforce.com what we've implemented as part of our technology so that we are able to service the market better. At the same time have an internal productivity what we can look at. Similarly, looking at dealer coverage, dealer opening, dealer servicing in a certain period what we can do, what are the pluses of what you can incorporate going forward. So, we definitely are re-looking at some of those full areas in terms of execution so that we don't lag in those areas as we go ahead.
In the new product contribution or innovation, you gave a number of 14% sales. It has three-part of questions. The first is that if you can elaborate, what is the entry mid economy premium split in terms of volume value? Second, is this overall mix 14% what is the deviation if our gross margin is 42% on average, what percentage of business is below that? And third is, is it really a conscious strategy we played to develop volume? And at some point, do we take a call that okay, now this new product has to come in Rs 300 plus or Rs 400 plus or Rs 2000 plus per litre a segment?
The innovation in terms of the new products happen across the economy premium and the luxury space. In fact, if you look at it the larger plethora of products, basically I think about 60% of the products will come in the premium to the luxury space what we will introduce. And therefore, even from a point of view of contributing to the gross margins, that would be similarly that same range of what they will contribute. From a division point of view, today like last year also we have looked at in terms of launching a plethora of luxury products what we have come in because there is a constant kind of foray in looking at premiumization, in terms of what we want to achieve. But at the same time, we introduced product called the Neo Bharat, last year, which was more at the bottom of the pyramid level. But the larger contribution definitely comes from premium to luxury. And that has been the kind of
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foray. And that is how the contribution also gets affected on how we would look at in maximizing the sale for premium luxury. It's just that last year we have seen a little bit of a down trading which has been happening. And that is why the mix has not been so great what possibly we would have really seen overall. And as we keep on going, I think the innovation comes in from identifying the consumer gaps in terms of what people are looking at. So, it's not that I will just pre decide that I'm going to launch a product at an X rupees per litre. What you clearly look at mapping is how the market gaps from a consumer kind of buyout, how it is kind of really panning out. And then you would look at possibly expanding that price point from a new product or innovation.
This 14%, how much percentage was interior or exterior?
Largely it would come from interiors about 65% would be interiors roughly.
Hi Sir, you talked about the distribution reach of 169,000 for us. As we go ahead, do we see any, I mean where I'm coming from is FMCG company says that the total reach possible is 12 million, with respect to paint sector what is the maximum potential we can get to? And you know earlier you have talked about expanding into markets like J&K. So, are we going for smaller dealers now versus what we have been doing in the past or smaller towns? Just want to understand the potential with respect to the distribution reach because everyone is talking about it.
We must remember that today the Indian market is expanding very fast.
The consumption levels today is across the length and the breadth. So, suddenly if you've seen that the kind of infrastructure which has come in Northeast, suddenly the whole market has exploded with newer touch points which have come in, which were never accessible earlier. So, those are all new touch points which have come in and there could be about thousand touch points which have come in. Similarly, if you look at markets like the Jammu and Kashmir now the moment the normalcy comes in, there are more touch points. Similarly, when you look at any of the metro towns, you know the suburbs keep on developing much more and so on so forth. Kerala is now like one city, there are largely not any differences between one city and other city. Then there are these whole smart cities which are coming out today. So, we feel that every year there are new touch points which are coming up given the fact that we keep on looking at towns with a certain population where the representation is not there. So, that is how we define the potential in terms of opening more towns and so
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on and so forth. Yes, a larger number of dealers which we are opening are smaller dealers given the fact that they are in smaller towns, smaller cities or in the suburbs.
But at the same time today if you know there are opportunities which come in like I mentioned about a Northeast or a J&K, we possibly even looking at counters who have never dealt with paint earlier. So, it could be just a cement counter for example today that itself offers you a huge potential because there might be 1,00,000 touch points of cement, paints, guys who have not even expanded or they never sold paint.
So, I feel that the potential today is immense and we ourselves look at possibly a very large number every year in what we are able to take on. So, if you ask me frankly saying that will it stop at 2.5 lakh? No it will not.
How do we decide the number of 5000 or 10,000 dealers in a year? Is it a function of incremental growth we get from them? I mean, how do we arrive at a number of how many dealers to add in a year?
We do a scientific cluster analysis in seeing a representation in terms of the reach to a particular consumer. So, in that way, we would really look at saying that these are the minimum counters we would really need to cater to a certain population of a customer in a certain cluster in how it comes up because it is essential that today's world when people don't want to travel and the whole area of saying that I want convenience at footstep, I think that's becomes a very big area in looking at that cluster analysis. And secondly, the newer towns are full opportunity areas where there is possibly no counter. We would like to open a counter so that we can give access to that town availing the set of paints. Consumer reach is something what we read take as a very finite parameter in looking at how many counters do we want. Because essentially, we would not also like to say that we keep on offering or improving the counters only in one cluster. Well then it will only distribute the sales.
It will not increase the sales going forward.
Sir, the second question is you've answered this question before also.
So, you talked about the organized sector not doing well, in fact negative growth for the organized paint industry. What in your estimate now, the size of the decorative paint market? If we include waterproofing, putty, everything, where are we now there and what would be the share of organized and unorganized?
Roughly the overall paint market size if we take waterproofing and putty everything would be about Rs 80,000 crores what we see in overall size. And I would say that from a value share today 75 to 78% is organized. So, that's how I put that as the size of the organized market.
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What's the whole idea behind Nilaya Anthology?
Okay. So, if you look at the whole germination of the paint industry, largely the presence has been more from a point of view of economy to mass premium to premium. Today if you look at luxury homes, if you look at possibly the top 500 HNI families in India, they would really look at getting a lot of things from outside India by either travelling to Italy or travelling to Germany and looking at really purchasing a lot of stuff from there or looking at seeking something which is exclusive, which is bespoke, which is limited collection kind of a thing. And it is really in the arena of super luxury in what it translates to. Similarly, if you look at from an architect interior design community, if you look at the top 300 to 500 architects’ designers today, they look at possibly seeing something which is very different, which is unusual, which is again limited in what it offers. And that is why we have looked at possibly saying that when it comes, both Surface Decor and Home Décor can we have something which comes in and sits at this place so that we are able to get these HNIs and these top architect and designers to come and get that feel of that luxury and purchase from there. With that intention we have looked at basically making it as international design destination for global luxury. So, I talk of confluence and design.
We have the best of the Indian decor items that we have put, it could be the kitchen, it could be a furnishing range, it could be the wallpaper range, texture, artifact what would be there. And from the best of the world. For example, this space harnesses the best from say, Denmark to Portugal to Japan to Italy. So, the best of the design, artifacts and the home decor items which come into this space. So, it's basically a confluence which seeks the best design and gets the right kind of people who are looking for very limited collection in the area of global luxury. Right from texture to furnishing to mosaics to kitchen to furniture to bath to Sabyasachi, everything is under one roof. And this is we think is the first time in the world someone has created an infrastructure like this.
One is on the competitive intensity while a lot of let's say the attention has been towards the newest entrant, would you say other players like let's say Jotun Paints, Nippon have you seen competitive intensity step up from them as well or would you attribute most of it to the newest entrant?
When you look at the players you just named, I think we are seeing definitely that they have been affected the most by the newer players. In fact, there was a time when they were possibly following the same route as some of the newer competition is following now. And as I said that path is sometimes not very sustainable. And after five to ten years of existence, they've realized that the path of
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just spending money and buying sales is not a great path. And that is how now they are really facing the crunch in terms of possibly not been able to grow the market to that extent. In fact, we have seen possibly in some of those brands the maximum battering down has happened this year. So, possibly it is a combination of existing players and some of the new players who have come in, which are adding to the competitive intensity, not these two.
You also mentioned down trading earlier. Would you attribute it more, let's say from customer shifting preferences from premium to economy or shifting brands completely?
How we are seeing is that there are some consumption trends which are changing also in the market which is there, people are now differentially possibly spending money, whether it is on travel, food and so on and so forth. There are much larger spends happening in some categories like hospitality and so on and so forth.
We are also finding that overall view of the market, there has been a liquidity crunch, especially when it comes to looking at some of the renovation businesses in Home Decor and the painting business and so on and so forth. Given the fact that there is a little bit of a crunch, there is a postponement which is happening. This year possibly on the repainting there has been a bit of a postponement which has also happened.
And given the fact that if some people are constrained to really do it because there is event at home or there is something which is there, I think possibly today some amount of down trading will happen from person saying that if not luxury I'll take into premium product or if not premium I'll buy into a good super economy product. So, I think that is the trend what we are saying that possibly given the liquidity, given the fact that there are also varying requirements where you are spending. I think that is what we are seeing as a little bit of a down trading which is happening across.
Sure sir. Just the last one on the industrial business on a full year basis, we've been able to maintain margins in the automotive segment, but we've lost some margins on the non auto side. And if you see the recent strategy briefing by Nerolac, they had spoken about structurally improving their industrial margins in the India business going forward. So, just wanted to understand where do you see margins standing for both of our PPG JVs and the overall mix of industrial going forward for us?
In fact, you know today the auto and the refinishes margins are the maximum of what we garner. And we cater to a lot many customers across. But I think our margins are very strong in both the auto and the refinishes. I think the margins basically come under some pressure when you look at categories like powder and
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protective paints or even a Road marking paint. Some of those categories are more prone to possibly lower margins as compared to auto and auto refinishes.
Thank you so much for your questions. We now further move on to participants who have joined us via Zoom video platform.
It's been about nine months since we've seen, very low volume growth in the industry or decor. How should one think about volumes going forward?
Do you see that it's been enough time for this week demand and should one expect double-digit volume growth to come back? Is it a possibility that you're thinking? Is it in your assumptions? Also, it can be supported by the lower base, or do you think that there is still high inventory in the channel? Or there are new stocks from other players in the market that can limit, possibility of double-digit volume growth in the coming year?
See, as I said, you know currently given the overall environment, I think we should be more practical in looking at what is the reality in the market today. I think today we are hearing across brands that demand conditions continue to be sluggish. We don't see really acceleration in the demand and particularly when we see the overall home, home construction segment, we are not seeing that a crazy demand is coming. It might be towards the infrastructure side, as I mentioned that we would see a more flurry of the overall demand and in consumption which will come in. From that point in view today, I don't think so that we should just say that we are gunning for double digit or something like that. I think we should really be watchful and look at possibly saying that what you are gaining, what is achievable and what you are kind of really targeting which is aligned to your strategies of going forward. So, I think from that point of view, I would still say that at this stage, I think single digit value growth would be a more good stronger imperative in how we would look at going ahead in the market.
Secondly on crude, has corrected quite a bit, what are your thoughts on the possibility of price cuts or making paints more affordable? Would you think that will be a factor that can drive up volumes or do you think higher dealer margins can lead to better volumes for you? Any study on the current situation on both these aspects that you can share will be very useful.
So, you're right today if you look at from the point of view of crude, the prices have come down and trading at one of the lower levels. Similarly, we have seen the rupee dollar parity which had basically gone to a certain level and now starting to
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come down. I think the whole volatility in the environment is very high now. At this moment I don't think it would be really appropriate to take stances in looking at either decreasing or looking at prices in very different ways. I think we need to have patience. We don't know what the second salvo of tariffs is which are going to come after 90 days of this reprieve which is going to happen. And we don't know how the geopolitical conditions will pan out. At the same time, there is also the talk of some anti dumping duties which are going to come in for some of the raw materials which is being spoken in the market. So, I think we'll have to wait and watch and see how these things pan out and maybe then take calls going forward, it's too early to say that you could take up price decrease going forward.
The difference between volume and value has increased from 8% versus 5% that we had seen in earlier years. Should one take this as a new normal until the high value growth, high value paint, category comes back?
I had commented last time also that we are aiming that this should not be more than 6%, as we see it this time it is between 7 to 7.5%. The endeavor is very clearly, as we look at our product mix very strongly and the intention would be to get it within that band of 6%.
Five years ago, if you were told that there will be sharp revival in urban housing and the K shaped recovery again favoring urban consumers and on top of that under your leadership our extra focus on participating in B2B business we would have thought a very strong scenario for Asian Paints in the next 5 years, or 20 to 25 years and also for the industry. So, all that macro indicators are very strong, but somewhere the paint industries have decoupled from some of those macro indicators?
See actually if you look it’s not only the paint industry right now, if you take the entire home industry, I think everyone is affected. It’s not just paint part you've seen today it’s also the cement business that’s resizing. We see steel where it is going. I think overall if you see components from construction categories to in home categories, we are not seeing any big amount of inflation. For example Bath, all the current players, whether it is Cera, Parry, all the other players are not looking at any big growth. What we are seeing is that it is pan home categories and construction categories which have not grown the way possibly we had anticipated. A lot of stuff which has gone into the infrastructure, for example, the number of airports which have come in or the consumption, which is going to happen at railways, defense, some of this sectors is something which we are looking at rather than just looking at the home segment. And that is why you are seeing the inflation from our industrial
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sales. But having said that, today I think the whole area of, the Awas Yojana, which the government had put for affordable housing and from the point of view of mid to luxury housing are some of those avenues which are going to come around as I see it from a cyclicity point of view. We are really banking in some of those parameters now kicking in, which possibly kicks in from the retail construction growing and then pepping up all the categories around home.
Have we done at our level or industry level, any studies where we compare per litre pricing of paint versus per capita income of some of the developed markets versus us in terms of index? Because optically as an analyst, I can see that collectively the industry has improved margins in last 10 years, but have we somewhere made the affordability quotient, which has actually led to compromising the industry growth at broader level? Just tangentially asking the question there.
So, see, if you look at the per capita consumption of paint in India is much lower as compared to any of the Western geographies. So, there is potential in looking at increasing that consumption. Which means that if you can get more households to either consume paint or even if you look at increasing the frequency of painting, both will improve the per capita consumption of paint. And I think today as a leader, we have been looking at some of those imperatives. For example, we have looked at various avenues where you can ask the consumer to repaint his house at a higher frequency. It could be just two walls; it could be another room. Or it is even with respect to possibly looking at, seeing that there are other avenues what you can offer so that the per capita consumption can go up. That is still a big opportunity for us in India.
When we compare per capita consumption with developed markets, the ratio is actually reverse than us in terms of industrial be 70-75% versus ours is actually 75% deco. So, in deco we are as not as much under indexed as it overall number shows. Is that understanding, correct?
The industrial markets across the international geographies, especially the West, is much more developed. And infact the ratio there is 70% is industrial and 30% is Decor, whereas in India the ratio is the reverse. We believe that with the rate of industrialization, the way government spends are in infrastructure and other things, I think today we are seeing that trend in industrial contribution seems to be going up. As I said, we have seen for the last two years, the industrial growth being very strong the way they are coming. So, possibly we are inching towards, the
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industrial contribution going up, but I think very far away from where the Western world operates in.
When I look at the overall performance, let's say +2% volume, revenue decline of 5%, margin contribution higher or rather gross margin higher, is it only to do with COGS or is there any other up or down elevators here?
It is only COGS.
In this quarter, we had some benefit of past price increases which has flown through. So, that's marginal benefit also in this quarter.
Okay. And one I would say clarification. So, when I look at the volume versus value, I understand the philosophy which you follow in terms of volume which is largely tonnage. Honestly after a point in time it become meaningless, right. I mean when you have such a huge divergence when we have a probably a globally accepted metric called underlying volume growth where you could actually debase or rebase to have mix included in the volume. Is there a reason why, is it we don't want to follow that and just stick to the tonnage bit here?
This question gets asked often, but I think in our business tonnage still makes sense is how we see it on a like to like basis, not really comparable with other FMCG industries which do underlying volume growth. And to be fair, I think most of the other players also do not disclose any volume numbers as well. So, to that extent, I think what we disclose is apt.
And that's a fair one for the industry. Thank you and good luck, Sir.
Sir my question is, as a 60% market share player, anybody who is like 60% market share, it intimidates competition and potential new entrants. So, from the perspective of perhaps the strategy or the board, to what extent are we willing to go to retain market share? Like maybe it could mean that you cut your margins to much lower levels for a year or two just to defend market share and scare competition. So, to what extent are we willing to go or we are okay with seeding market share and maintaining the margin?
I don't know the number which you're quoting is your calculation what you're making. But what I see is very clear is that from the correlation between market share and margin, we are very clear that we should look at something which is really sustainable going ahead. There is no point looking at artificially trying to do something
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in the market which possibly finds that after about a year, year and a half you're not able to sustain. I think the approach which we are following is very clear that if you play to your strengths, you play to in building the brand, if you look at possibly offering customer the best value proposition. And I think if these actions give you the best retention of share or even gain of share, possibly that would be the best route to take.
Just irrationally going after saying that I want to prevent the share at any cost whatsoever might not be a good approach.
When you were discussing the white cement plant launch in June, you said this is the first foray into cement. Is there any desire that longer term, just the way cement companies have come into paints, you would have some desire of it in terms of being open to it? I know this is something not in the near medium term, but your specific comment first foray into cement, what does it mean?
So, it was just to amplify the fact that it was, I didn't say first and only I said first foray into cement. So, we would like to first see how this goes because white cement is very different which goes into repairs, Putty, into a lot many other segments like sanitary and so on, so forth. So, we would really want to see that first we get this thing going and then examine if possibly there is any other desire to get into any other cement in future.
In VAE you are among the four companies to have that capability in March of this year, and you have discussed the differentiated products which is possible once you have that, will that be essentially in the top end? And if you can give some more colour to it, what exactly is the untapped or white space left in terms of your product portfolio? How can it help?
Actually, you know from where the emulsion comes in, its the versatility of that emulsion which can be used from economy to premium to luxury. The versatility it offers is very good because one, it is essentially environment friendly, low VOC, no smell which comes in. And the other thing is that it can offer paint properties which can be very different at a cost which is unbelievable. So, I think the opportunities it opens is pretty high in what it does.
Obviously, currently in India, no one has that right?
People import it. It is not something which is available in India. People import it from outside. But I think the whole equation changes once you are making it because you are making the monomer and you are making the emulsion as well here. So, the whole cost efficiencies change drastically. And not only that, today there is no paint company making it across the world. Once the paint company starts
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making it, then you can be tailor that requirement to your need so that you can possibly align it to a certain property to what you want.
With that, we come to an end with our Q&A session. I thank everyone for actively participating in the same. I further invite Mr. Amit Syngle to give his closing remarks.
Thank you so much for taking the trouble and coming here and its been a great talking to all of you. Hope to meet you next time with much better numbers as we see. Thank you.