ASIANPAINT — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
Thank you sir.
We will begin with the Q&A session now.
Today we have participants joining on Zoom video platform and also via tele calling.
Requesting all participants joined via Zoom video platform, please use the raise hand feature to ask a question.
Participants, kindly unmute when given a chance to ask a question.
Please say your name and company name before asking your questions.
Please also restrict your questions to two questions only.
Participants connecting via Zoom video platform, can post their question on the chat box too, and we will ask on your behalf.
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Please say your name and company name before asking your question.
Now we have the first question from the tele calling platform itself and that is Mr. Abneesh Roy (Edelweiss).
Abneesh Roy
Thanks, Congrats on extremely strong volume growth and good margin recovery.
My first question is on volume growth.
So, post Diwali, do you see a preponement or demand.
Because your price hike was coming in December and maybe even in November because it happens a bit gradually.
So, that was quite well known in the media.
Consumer also would have picked up, dealers and painters also would had picked up.
So, did you get some benefit of that.
Second is that, people in FMCG, they are seeing rural slow down quite prominently.
We have seen very inflation in diesel prices, fertilizer prices, plus you have seen various sharp Covid phase 2 in the smaller town.
So would there be some lag effect on sales.
Currently numbers are not suggesting that.
They see the rural growth at some places getting at a lower level.
Amit Syngle
Okay.
Overall see what we feel is that, you know, the festive season this time was very very strong and we felt that the consumer demand which came in was very positive at that point of time.
So, overall, when we look at October, in the entire quarter, 11 | P a g e was at the maximum volume growth to that extent and therefore October was a very healthy month and so was November to that extent.
Infact, we feel that the overall volume growths would have been higher if in the second fortnight we would not have been hit by the third wave of Covid kind of starting to that extent.
What we feel is that largely, to some extent, since you know we have seen that you know it was an early Diwali to that extent and that is why also we saw that a larger demand came in October in a very very strong way which basically kind of helped us in terms of achieving the overall volume growths which we are speaking of to that extent.
The second thing which is there is that we have seen that you know the effect of Covid very very strongly.
In quarter 2, what we had seen was that it was the T3, T4 cities which were performing extremely well and they had given a very high growth number overall to that extent because there was still a little bit of a impact in terms of what was happening of the Covid in terms of T1, T2 and the Metros and the larger cities to that extent.
In quarter 3, we saw the reverse since the environment was much more open to that extent.
The spending in the Metro, T1, T2 has really exceeded the kind of demand which was coming from the T3, T4 cities to that extent.
We feel that, one, we did not see that the T3, T4 cities were way off the demand to that extent.
So the demand was still pretty healthy, a notch lower than T1, T2 to that extent and we still feel that the story as maybe the other companies in the industries are feeling for us I think that T3, T4 has been very very strong and we have looked at a large part of network opening, looking at getting into upgradation products and a lot of work which we have done to kind of spruce up the demand in terms of the T3, T4 cities to that extent.
So overall what we see is that the story of T3, T4 cities should be quite relevant.
The overall rainfall has been pretty okay to that extent and I think there is still a strong story which is there as far as the T3, T4 cities are concerned.
Abneesh Roy
That’s helpful.
One small follow-up; In the international markets, the price hike in paints would had been how much and the 18% price hike that you had taken in India, will that be the highest any paint business has seen in any other part of the world.
Amit Syngle
So, I couldn’t get the second part of your question.
Abneesh Roy
if the 18% price hike is the highest in the world
Amit Syngle
So, see, in the international market, the inflation has been upwards of about close to about 28-29 kind of a percentage.
What we have been able to take overall increases is in the zone of about 15-18% in various markets to that extent and we have not been taken increases as we have done in the Indian market which has grown to almost something like about 22-23% in terms of the overall increases which is there.
I would say that yes this kind of price inflation which we have taken, I think it is for the first time in the history of Asian Paints we would have taken this kind of increases to that extent and it would be definitely something which has been one of the stronger price increases we have taken in the past.
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Abneesh Roy
My second and last question is on waterproofing.
What kind of price hikes has it taken there and when you compare it to Pidilite as they had been in the business before you; how do you compare yourself Vs Pidilite currently and longer term, how would you like to dominate there, the way you dominate paints.
Amit Syngle
So, actually, what we see is that overall waterproofing I think the pricing has been comparable to what we have taken the increases across all other products.
There is nothing which is special about waterproofing to that extent.
It’s in the same league as what we have taken for emulsions and other products to that extent.
Going forward, see waterproofing is a integral part of a strategy and we feel that it comes as a natural thing from a consumer‘s point of view because the consumer earlier used to really blame the top coat because of the fact that he sees any problem there and therefore we saw that waterproofing was a very big potential in terms of putting in place.
Overall, as we see, we have been growing, as I said, at a very very strong rate over the last seven years and we see that the overall potential in terms of the overall waterproofing market is extremely high and therefore we really do not compare in terms of, you know, how are we doing with respect to some of the other players in the market.
But what we know very clearly is that with the kind of range which we have, the kind of products which we have and the kind of resources which we have put behind, I think we are growing much faster than the market than any other player Indian or multinational.
Abneesh Roy
Sure, that’s very helpful.
That’s all from my side.
Moderator · Conference Operator
Thank you sir.
Requesting everybody to keep your questions to 2 questions only in the interest of time.
Our next question is from Mr Avi Mehta (Macquarie).
Avi Mehta
Hi sir, I just had two questions.
Barring the short-term impact of this wave, would it be fair to expect that the sharp price increases taken would result in volume declining because 3Q possibly didn’t see the full impact of that 15% price hike.
Amit Syngle
I don’t think so that would happen because you know we’ve seen an early of almost about a 10% increase which we did it in November and we still we saw a very healthy growth which we were able to achieve in November and if I look at the second price increase which we implemented.
Even the first fortnight of December was very very good from the point of view of overall demand to that extent.
It is only that in the second fortnight, we got hit with the third wave coming in.
As I see it the, you know, the elasticity of you know paint from the point of view of pricing is pretty good.
The only, to some extent, where it kind of starts making an impact is at the economy end to that extent where it can start hurting you a little to that extent going forward.
However, we must remember that when you look at there is a cost of painting, 60-70% cost is of labour and the material cost is only about 30-40% to that extent and therefore even if there is a larger increase, the effect gets nullified from the point of view of an overall increase which you see in terms of prices to that extent when it translates into a per square feet price on a 13 | P a g e certain surface.
So, what we see going forward that largely I don’t think so that we could kind of get impacted, especially the luxury premium space would be very strong to kind of happen.
There could be a little bit of impact at the economy end but by and large I think the volume growth should be healthy.
Avi Mehta
Okay perfect sir.
I just wanted to check on the price increases.
What kind of crude price inflation is built into the price hike stakes taken till date.
Would it be fair to say crude price till 80/85 dollars because that’s what the level was or already passed on but further inflation would necessitate more price hikes.
Amit Syngle
So see it is not directly correlated with just the crude prices because a lot of products which, raw materials which go into paint are derivatives which are there.
So it’s not a direct correlation that if the crude price goes up by two dollars, then there will be a correlation in terms of the price hike we need to kind of take over all.
So I think, overall we had taken a median in terms of about 80-82 kind of a range in terms of the crude prices going forward and we think that you know it would really depend on certain crude derivatives in terms of how the price would translate in terms of those loans.
As we see right now, the inflationary percentages might not be very very high as we kind of look at the quarter 4 to that extent.
But we will have to kind of wait and watch.
In case the obviously I think the inflation goes very very high, we will have to take a call in terms of what to kind of do but there is no direct correlation which you can put to crude prices in terms of there and what increase we need to kind of take.
Avi Mehta
Perfect sir.
Very clear and thank you and wish you luck for the future.
Amit Syngle
Thank you
Moderator · Conference Operator
Thank you sir.
Our next question is from Mr. Manoj Menon (ICICI Securities) who has joined us on Zoom
Manoj Menon
Hello Amit.
Mr. Jeyamurugan, Parag and Arun.
Now the first thing I just wanted to understand you know if it is possible for you to help us you know is that, in the overall volume revenue growth you know which Asian Paints you know disclose every quarter.
Would you be able to help us understand what is actually paints and what is non- paints contribution to the, let’s say, over the last 3/5yrs, etc. So let's say, for example, the reason I'm asking is because when I compare as an analyst, Asian Paints’ performance with the other paint companies, it does appear that Asian has done a far far better you know, execution or other strategies and execution when it comes to the non-paints portfolio.
So it'll be very helpful if you can quantify let's say, what is the non-paint contribution to your overall portfolio today.
Amit Syngle
So, overall, if you look at from a point of view of non-paints kind of a sale today, we account for everything which is happening in terms of whether it is waterproofing, putty or whatever, that's part of the paint sales as well to that extent.
It's only the you know, the area which is the kitchen, the bath business and the other areas of 14 | P a g e home decor, which we see are basically part of the non-paints which kind of really qualify under that category to that extent.
And that part is not a very, very big part of the overall business.
You've just seen that I spoke of kitchen and bath business, crossing about 100 crores in each of the quarters to that extent, which is there, plus the fact that today, there are other home decor areas like furniture, furnishing, fabrics, in terms of what we deal with.
So if you look at it from a point of view of an overall percentage to the overall coatings business, the non-paint would not form a very major part of it.
So the larger performance you can take it is largely on the paint performance what you see.
Manoj Menon
Amit I truly appreciate that you know, comment, but maybe I'm happy to kind of connect one on one on this, but is it even actually fair to call the waterproofing as part of paints actually because, you know, paints is supposed to be delivering a different functionality.
Let's say versus the waterproofing where the consumer understanding that it is meant for the roof.
But whereas let's say, waterproofing, which is meant for the wall is like, obviously, should classified or different classification.
Now, what I'm trying to understand is that I think you're done a very good job in terms of but it appears that you're very reluctant to acknowledge the good work, which you have done actually in terms of the non-paints diversification.
Amit Syngle
No, no, we will take the trade of doing good work all across and not look at only one category in terms of doing good work, good work there.
But principally I disagree with you because see, if you look at and that's what I emphasize, the point at waterproofing is an integral part of painting, you know, just like you put a primer and a putty today, waterproofing is put to kind of take care of any seepage which happens on the wall or any damp walls which are there to that extent.
So I think the way we are pitching to all the retailers, to painters, to contractors is the fact that today, you can't see waterproofing separate to painting to that extent and that I think, has been the largest story which we have been taking unless your waterproofing is going on a very, very specific specialized purpose of saying you're looking at a swimming pool, where you are looking and applying waterproofing there to that extent for special delivery to that extent.
But in our business, the larger zone which we are looking at is that how it is integrated with paint going forward and as I said, that is why we don't want to really compare, you know, with any other company in terms of what is the there because they might be talking about waterproofing as a totally separate business in terms of how they see it.
In our business.
It is very well integrated into the mainstream line.
Manoj Menon
Understood that I think probably the achievement which you know, paint companies like you and some of your peers would have managed in the last two, three years.
I get that the second question here is, you know, can I take a step back and think about the assumption 15-18 months back and versus let's say what realistically transpired and actually happened in the market.
You know, that, you know, when I when I go back to April, May June of 2020, the assumption or the expectation was that, I mean consumers are very worried and kind of been willing to you want printers to come into your home and because you're worried about COVID etc. Versus the reality was that, it 15 | P a g e appears that you know, yours is one of those industries where it actually got benefitted from, let's say, whether it is the consumer thought, you know, consumer spending more time at home, it kind of completely turned on its head from versus expectation.
Second aspect is also that, you know, possibly rental people moved to villages and kind of let's say you had more rental apartments available in urban areas, or vice versa, etc. Just trying to understand that, in your opinion, just for a minute to leave the hat of the CEO and just put the hat of a marketing manager; In your scientific observation, what you've seen in the last 18 months.
Is there any significant noise in the last 18 months of performance at an industry level, including you as a market leader?
Amit Syngle
No, as I see, overall, you know, as I said earlier, that there are two larger components of painting, one is the repainting segment, which is there the other is the new construction segment which is there to that extent.
What we saw very clearly in the year one was that the repainting which is there only got deferred when there was COVID to that extent and therefore, we always kept on referring to a pent up demand which kept on happening whenever the market really opened for us to that extent.
So the repainting market in a nutshell never got affected to that extent, it only got deferred to another quarter or to another two quarters to that extent in terms of what is there.
The fresh construction is where it got impacted far more strongly for the industry as a whole because it is not very easy that if you have started construction of a building that you can stop and kind of start it very easily because there is labor, there is other infrastructure which kind of comes into place to that extent.
So, what I seen year one, which is the last year you know, the construction business got affected in a very big way and that is why some of the projects areas got affected in a very, very strong manner to that extent which is there.
But coming into this year, we have seen impetus in terms of both of businesses apart from the month of May, which kind of created that COVID crisis which was there.
We saw definitely the pent up demand happening in June, July and August to that extent which is there and also we have seen a very strong demand coming from the real estate construction infra business this year which has basically accelerated the projects and the institutional business.
Manoj Menon
I'm sorry, I'm sorry sir, just to push the envelope on this actually, basically what I'm trying to understand is in the last 18 months, let's say since March 2020, or rather 20-21 months since March 2020, Did the industry benefit from you know any one off noise about let's say people in urban moving to rural, which means we have more you know, let's say apartments available in urban for rental, or you know, let's say if I XYZ went from urban to rural you said okay, you know, let me paint my rural home as well.
So, what I am trying to understand is that are there any in your opinion as a CEO/Marketing Manager that look really noise one off in the last 18 months of demand trends which I've seen,
Amit Syngle
Okay quickly, just to tell you that see.
I don't think so that has got really too much impact overall because, in fact, with lot of Metro homes going down the rental homes, basically repainting came down to some extent.
On the other side, the second 16 | P a g e homes market kind of increased because a lot of people were purchasing second homes and so forth to that extent.
At the same time, you know, a lot of people started focusing on their homes, which they were staying into that extent because they stayed in the home for a very long time they started basically painting more in the home and the frequency of possibly the painting cycles increased to that extent.
So, I would say it was overall just a shift of the demand to that extent, I didn't see that that anything which has really contributed in terms of the industry increasing a lot just because of any of these demographic changes taking place.
Moderator · Conference Operator
Thank you, sir..
The next question is from Mr. Tejash Shah (Spark Capital)
Tejash Shah
Hi thanks for the opportunity.
Thanks for the very detailed presentation and so I'm not left with much questions on the decorative part or the core business but except one that you spoke about Project business today.
And now, Project business is coming out of the Slumber after a long, and we did well in the quarter materially versus the other part of the business you called out in the opening remarks also.
So just wanted to understand that.
How is the growth runway looking here because it is after almost 7-8 years, we are seeing the cycle reviving (A) and 6-7 years back we vaguely used to say that the mix of fresh painting versus repainting is 75-25 and I believe in last few years that number would have moved in favor of repainting materially.
So where it stands today and how do you see it panning out in the cycle that's ending let’s say two, three years.
Amit Syngle
So I would say that structurally, you know, we still kind of talk of, you know, the new construction to be still around about 30%.
And, you know, today the repainting to be about 70% kind of a zone, because what we've also seen is that in the while there's a pick up which is there, both from the point of view of builders coming into this space, we also see a lot of action happening at the factories, the institutions and so on so forth.
But more importantly, I think government spending has really gone up in the last two years to that extent.
So, government is a very strong space in terms of where we have seen a lot of kind of spending which is happening from a projects institutional space.
For us, that segment has also gone up because of the waterproofing coming into that extent because waterproofing becomes an integral part to start the foundation in terms of what is there and then basically gets into the whole painting cycle after that to that extent.
So overall, I would say that the percentages would be like 70-30 and my take is that going forward, I think we will see a lot of Capex, which will happen from a point of view of the budget, which is coming on infrastructure going forward to that extent, and therefore I would say that the fresh construction, I think as an activity, would continue in the coming two years very, very strongly in terms of both government spending, as well as the private lobbies coming in terms of spending on the housing segment.
Tejash Shah
Sir just one clarification on that.
So, waterproofing in construction project or government projects will be part of Asian PPG or it will be part of Asian decorative.
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Amit Syngle
No the entire projects business also is part of the Asian Paints only to the extent; where Asian PPG comes in that they look at supplying to OE businesses like the auto and so on so forth and the general industrial business basically would basically give larger thing to factories for chimneys, for maintenance and so on so far to that extent, which are all basically as we call it, the protective coatings and the powder coatings to that extent; but the projects business which I just spoke of, which is the builders and which is the cooperative housing societies and some of the government projects which are coming up or the hotels or the institutions all will come under the Asian Paints business.
Tejash Shah
Sure that clarifies, the second question is so last few quarters The most exciting part of your presentation has been the vision that you've shared on from ‘share of the wall’ to ‘share of space’.
Now if you can share some Operational Insights on the decor and business -how does customer discover us, what is the material sourcing arrangement and how the fulfilment happens on the whole line of business.
Amit Syngle
Okay.
So there are two things one is obviously the physical, brick and mortar model in terms of what we follow.
So, we have standalone kitchen and bath stores which are there across the country which we are able to kind of push the home decor items through those stores to that extent.
We have started with this whole vision of something called beautifulhomes.com which is a central engine, where the customer comes in looking at inspirations of home decor and so forth.
We are able to kind of then generate a lot of digital leads which kind of come in from there where people are seeking home decor in a very big way.
And then we kind of direct them to two areas.
One is we have got a Beautiful Home service, which provides basically them a full experience sitting at home of redecorating their homes or renovating their homes.
In addition, we have now 29 Beautiful Home stores which are there which is decor under one roof.
So we will guide a lot of those people who are coming onto our central engine beautifulhomes.com In terms of going into those stores and really kind of getting their home decor requirements from there.
In addition, these stores will get basically walk-ins which are happening because they are related.
They are in a high retail street market to that extent so on and so forth.
So I think the whole model which works in is from the point of view is that there is a digital engine which is energizing the people on inspiration and visits and then there is a brick and mortar model which basically makes people experience things see the physicality of it, experience it and then kind of take those things home.
Tejas Shah
That is very helpful sir, thanks and all the best!
Moderator · Conference Operator
Thank you, sir.
Our next question is from Mr. Jay Doshi (Kotak Securities).
He is joining us on Zoom.
Jay Doshi
Hi, Thanks for the opportunity.
I have a couple of questions.
The first one so you indicated significant progress in network expansion, called out 45,000 outlets being added over the past seven quarters.
Can you provide some more insights in terms of the 18 | P a g e quality of these retail outlets that you added, what is the tinting machine penetration in these outlets or over the last seven quarters, how many tinting machines have you seeded, and where is your overall network count today in terms of peer count.
Amit Syngle
So see, overall, if you look at you know, when I when we speak of this 45,000 Retail touch points we speak of the overall ingress which we are making with respect to one putting our tinting machines there to that extent.
We are also now working with respect to certain distributors in terms of reaching out to smaller players where we want to increase our reach in terms of smaller towns and so on and so forth which is there as a model in terms of what we are taking to that extent and therefore it involves all kinds of retailers coming onto the picture.
There could be you know retailers who are dealing in electrical, there could be retailers who are kind of dealing in cement and steel and so on and so forth.
So it kind of includes a whole plethora of people who come onto the board to that extent in terms of overall tinting machines, I think the ingress has been very very strong in terms of what is there because literally now it has become like an hygiene that because we are a retailer cannot operate without the tinting machine not being there with him to that extent and therefore what we see is that that's the overall zone which we are looking where possibly we speak of Today, Retail touch points which are almost about more than about 1.4 lakhs overall to that extent.
But not necessarily every one of these would be our direct retailer to that extent.
And nor everyone would have a tinting machine in terms of which is there to that extent.
But overall that's the kind of touchpoints which we are talking in terms of going forward and gradually what we see is that as these retailers mature, they will eventually take a printing machine and go forward to that extent.
So that gives you an indication in terms of how the numbers kind of look for future.
Jay Doshi
But have you seen just a follow up, have you increase your tinting machine penetration or seeding per year or per quarter significantly versus the previous run rate?
Amit Syngle
So we see that that is a overall focus which we have been maintaining for the last 4-5 years.
Yes, if you compare from what we have done possibly a decade back, the run rate would have kind of gone up to that extent.
But that is, I think, inherent part of our strategy that we kind of keep on looking at putting more and more machines, as I said in newer towns, suburbs, newer cities and so on so forth as we kind of go forward.
Jay Doshi
Sure.
And the second quick question is you called out that you're targeting 7- 8% revenues from services and 8-10%, from home decor, so what is the timeframe that you are referring to?
And in services revenue typically for a paint project services is 2/3 of sales.
So what does this mean in terms of revenue accounting?
Does it mean that when you indicate 7-8% of your revenue should be services, does it mean 3-4% of your projects or overall paint business will be through your services?
Amit Syngle
So what it is that first of all, I think we are saying that by, you know, definitely in the next 2-3 years, we will kind of get into this number of percentage contributions in terms of what we are speaking of.
So, specifically, I think by March of 19 | P a g e 2025, we are definitely looking at this kind of contributions coming.
In case of services, what happens we talk of the GMV which is the Gross Merchandise Value overall.
So, therefore, to that extent, it is a combination of the material plus labor in terms of what really kind of plays in; whereas, in from the point of view of decor also it kind of varies that in some cases it would be only the material which would be there in some cases it will be a question of labor plus material coming into the play to that extent, but what we are definitely saying is that, that is the if you look at the overall GMVs, they will start contributing to those kinds of percentages in terms of the overall business.
Jay Doshi
Just so that I understood correctly 17-18% of your revenues will come from home decor and services in the next March 2025.
And that number would be less than 3- 4% today.
Amit Syngle
So, today, you know, you can't take it as 17% straight away because as I said there is a gross merchandise value which is there.
So, if you look at it from the point of view, you will have to break it up from the point of view of material plus labor to that extent.
So, there will be a percentage possibly lower than that in terms of what you are talking that is point one to that extent and secondly, today, yes, today that number definitely is in the region of about 5 to 6%.
Jay Doshi
Understood, thank you that is very helpful.
Moderator · Conference Operator
Thank you, sir, moving on to the next question.
We have Mr. Shirish Pardeshi (Centrum).
Shirish Pardeshi
Hi good evening Amit, good evening Mr. Murugan and team.
Thanks for the opportunity here.
I really appreciate the comments what you have passed on before.
I think the volume growth momentum is very, very strong.
Just one quick question.
I think not per say the rural but the fantastic work what you have been harping on saying that T2, T3 market and now we are exploring the distributor lead model of what is it that the merit it can go up to and this is a this is a continuous journey which I can understand, but obviously there is some level in your understanding that you are trying a new format but what is the merit and this kind of growth, how long it will continue?
I mean, demand conditions are very good but the channels and formats that you are using will have some limitations at some point of time.
Amit Syngle
I would not agree to that because I see that we are a consumption market in India, we are also a growing market to that extent, I think the GDP projections which are there are not the projections that are coming down substantially as compared to what we look at the western markets to that extent.
I would say that if the GDP is remaining in the healthy zone of anywhere between 6-8% kind of a zone for our country going forward.
I don't see that, you know, growths would be a problem to kind of come in.
What we also significantly see is that today when you go into T3, T4 cities, I think the consumption is kind of going up the decor levels are going up to that extent, the purchasing capacity is 20 | P a g e going up to that extent.
And therefore, what we see is that the potential which kind of some of the rural geographies kind of give you is very strong, and therefore, we think that the expansion process will continue.
Today, as the towns get populated more and more you kind of look at two or three outlets coming in when that get populated more and they expand the outlet go to 10 or so, to that extent in terms of that place.
So, what we see is it's a continuous process and I don't see that there is any stoppage to this if I look at it from the point of view, even from the point of view of next 20 years or so.
Shirish Pardeshi
Thank you Amit.
My next and last question is on obviously the margin.
You did mention that this kind of price increases has never happened in the history of paint industry or any of the industry, but just suspicion, that if the way inflation is looking at, you yourself said that the crude derivative will have a lag and if assume that hypothetically the inflation is still hitting on, would you have a confidence today saying that in the in the way you want to protect the margin further, you will still exercise or the management is of the view that we will still be able to pass on some more price increases to this to the trade or whatever has happened?
Amit Syngle
See, I think it is always a very, very dynamic situation in terms of what you play out to.
Now, so look at it in the in the last six months we did not take such a heavy increase because we were trying to balance the whole area of consumer demand, the consumer sentiments because we were going through a far more stronger COVID period where anyway the demand conditions were not looking very good to that extent.
I think we will always kind of balance the fact that when we kind of go ahead and if there are inflation, what is the part which you can absorb, what is the part you can pass on?
I think these are dynamic questions we take a call as we kind of go ahead.
We would like to respect the consumer sentiment and look at in terms of not upsetting that at the same time, we would not like to kind of take and say that the profitable growth component kind of goes out of the story to that extent.
So, I would say that we will take a very, very balanced opinion in terms of going forward in terms of balancing demand versus the price or you know pass on which we kind of do as you go ahead.
Shirish Pardeshi
Sure, thank you Amit!
Moderator · Conference Operator
So the next question is from Percy Panthaki (IIFL)
Percy Panthaki
Hi, Just wanted to check some information which was discussed earlier whether I got it right.
So basically you said that the repainting constitutes 30% of sales now, which was a couple of years earlier pre-paint ….
Amit Syngle
No, no the other way around. repainting is about 70% definitely.
Percy Panthaki
Correct. so repainting is 70 and pre-pandemic, it was 75, Is that correct?
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Amit Syngle
Very difficult to really assess that, you know, it was exactly by that percentage because no one measures it that strongly to that extent.
So you could take a band that it has remained in that band over a period of time.
Percy Panthaki
Okay, see what I'm trying to understand Amit is, you mentioned that real estate revival is one of the things which is sort of benefiting the top line.
So, I just wanted to get a sense of how much that benefit would be.
So, let's say if the real estate cycle had not revived and it had remained as sluggish as it was 2-3 years ago, then the sales growth of 28% you have done that would have been how much lower is what I'm trying to understand.
Amit Syngle
See.
I think if you get into that kind of a microanalysis, it is very difficult to kind of put saying whether it could have taken 2% of the volume growth or it would have taken 3% of the value growth to that extent.
I don't think so, it works like that to kind of micromanage it like this, because as far as even the construction segment is concerned, you know, the growths kind of vary it is never dead to that extent.
So, it might basically if it is growing at possibly 30%, It might come down to 20% or 15% because some projects will keep on going, some government spending will keep on happening, some hotels will keep on coming in the environment and so on so forth to that extent.
So I think to that extent, you know, depending on what is there, you could just say that, you know maximum it could be 2, 3, 4 points here and there, which you could kind of really see in terms of the market can behave to that extent, but I don't think so that it would kind of do a very big major indent in terms of bringing it down by 50% or so.
Percy Panthaki
Understood that helps.
Secondly, I just wanted to understand, based on your input cost scenario, you mentioned that margins in Q4 should be better because part of the prices increases will filter through in Q4 only.
But wouldn't the same hold true for input cost inflation as well that Q4 versus Q3 on a sequential basis.
Don't you see input cost Inflation still being positive?
Amit Syngle
No, see if you look at the quantum of the price increases which we have taken in November and December, you know they are pretty substantial and we would not have realized it over the full quarter period to that extent.
So, what I meant was that this whole price increase of close to about 15%, The full thing would kind of take shape in quarter four, and whereas the inflation which we see over Q4 to Q3 would not behave that kind of dimension to that extent, and it would be possibly much milder as we kind of go and see.
So therefore, I think a larger impact in terms of profitability will definitely come in Q4.
Moderator · Conference Operator
The last question in the interest of time is from Mr. Abhijeet Kundu (Antique).
He has joined from zoom.
Abhijeet Kundu
Sir thank you so much for the opportunity.
So, you said that in the last three years you added about 45,000 new touch points which is broadly about 15,000 22 | P a g e touch points.
So when we compare it with your previous year, I mean last 10-15 years, typically it used to be in the range of 4000-5000 per month, sorry per year.
Now the addition has been quite substantial.
So according to how much would be the, I know you can’t give a particular figure to that, but there would be a good amount of growth coming due to the outside addition.
When one could be that and in terms of geography, which are the geographies, you have been very strong in south and west and followed by I mean there is a good amount of presence across geography, but south and west have been very strong geography, so all these incremental outlets that have been added which are the geographies that have done well for you or have been major additions.
Amit Syngle
Okay, see when I speak of the number of outlets as I said, these are outlets which are direct and some indirect outlets which you are getting and you know, so there are outlets where you will open directly and there are outlets now which we have started opening through distributors as well.
So, I think the combined impact of 45,000 what we spoke of is coming as a combination of both to that extent, and what are the things which you were kind of referring to earlier was more in terms of the direct outlets to that extent, which were coming in.
So that's clarification number one.
Second, when we look at the overall, I think all geographies have done extremely well for us and we are seeing that the kind of double-digit growths which we are seeing today across the country for several quarters now, these are kind of spread across all the divisions to that extent, and we would say that, I think the impetus is coming from all the divisions across the country geographically very well.
But I think if you were to kind of pick-up we have seen that the geographies which are there of North and Central and East have been possibly, you know, having far more outlets and far more distinct which are coming as compared to possibly relatively south and west.
Abhijeet Kundu
And last one, in terms of your capacity, you still have spare capacity, can be added in your last two units.
So, When do you plan to add capacity there, because you have the assembly line in place, but you have to add proper capacity there
Amit Syngle
Yeah, so I think it will happen definitely, I think we will look at in the next two, three years to kind of look at in terms of adding that capacity going forward, and the rate at which we are going definitely we will need that capacity.
Abhijeet Kundu
And what would be the utilization levels currently?
Amit Syngle
It is at about 70-75% level.
Abhijeet Kundu
Okay sir, that’s it for me.
Moderator · Conference Operator
Thank you, sir.
That was our last question.
We would now request Mr. Amit.
Syngle to give his closing remarks.
Amit Syngle
So thank you all.
I'm sure that there would have been many more questions and we could have carried on for the next hour as well.
But I think it's been a pleasure 23 | P a g e interacting with all of you and it's great, I think, listening and answering to your queries.
I look forward to meeting you and wish you a very, very safe next quarter.
Thank you. ###