ASIANPAINT — earnings call
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Prepared remarks
Moderator · Conference Operator
Good Evening, everyone.
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Our first caller has joined via zoom, Mr. Abneesh Roy (Nuvama).
Abneesh Roy
Yeah Hi, thanks for the opportunity.
My first question is on the capacity and the demand in paints.
So if I see in Q2, You had sharply increased the capacity guidance and now in Q3 further 4 lakh have been added.
Being industry leader, I'm sure you will be tracking the capacity addition announcement by non-paint players, number 2, number 3 paint players also.
So one question I had was over the next three four years with your capacity and so much capacity in the market, How do you see overall market share, overall pricing discipline etc. Because of that, because everything seems to be happening at the same time.
What would your view be on that?
Amit Syngle
So first of all, as we see it, you know, our capex announcement is not equivalent to sales.
I have been maintaining that for a very strong point of point of time.
And we see that today when we are looking at an increase in capacity, it is to do with the way we have been growing in the last 10-15 years at a certain CAGR in terms of overall volume.
And if we look at the last two years, we have added almost about Rs.
9000 Crores overall in just about two years to that extent.
So, our capacity expansions in terms of what we are looking is in line with what we have seen as our 23 | P a g e growth patterns and also what we are putting our strategic direction in terms of growing and expanding our footprint with respect to the emerging Indian market, which we see a lot of potential in terms of going.
Today, what I see very clearly is that the market is about Rs.
70,000 Crores to that extent.
So we have all the newer players who are coming and they want to kind of do business, maximum I see in another three years’ time, they can do a maximum sale of about Rs.
1000 Crores to Rs.
1500 Crores which actually would be miniscule percentage of the total capacity they are talking of in terms of putting.
So I can say that for Asian paints that it is a very clear calculated move in terms of what we are making because today we are operating at about 70- 75% of our capacity and going forward, we are very clear that we would be able to kind of utilize all these capacities and we are keeping pace with our growth plans to that extent and with respect to how others are kind of putting their capacity, I think it is their only calculation which is there.
We do not know in terms of how they justify the capacity additions which they will do over a period of time because we don't see that they will be able to realize the capacities to that extent in terms of the way they are putting the capacities.
Abneesh Roy
Sure Amit, Thanks, one follow up on the demand bit.
In Q3, the demand has been volatile.
So, when I see the November remarks and December remarks, I wanted to understand the difference there.
Is it because of the base because in December you have said double-digit growth, November you have set a recovery.
So is it just because of base because what is the reason for difference in the commentary and in Q4, would you say that the double-digit sales growth which happened in December, could you be confident of a double-digit growth for the full quarter in Q4.
Amit Syngle
So, I think we are very clear that the commentary which is there for the quarter is that I spoke of two very heavy price increases which we took last year of almost 10 and 5% which has kind of increased the stock into the market and therefore the inventory has kind of had gone up in the in the network in a very strong manner.
So that was clearly one of the reasons which we saw that we saw very, very strong numbers which were there in October and November which came in because of these 24 | P a g e two price increases to that extent.
The second reason is that the extended monsoons which went on till almost about 15th October, really kind of effected the shorter Diwali which we had to that extent and therefore that was a double impact on the October volumes in terms of what it took this year to that extent and therefore I think the October is totally understandable in the way it was.
And what we clearly saw that there was some impact of the price increase based in November as well.
But definitely there was a recovery which happened and I think December we were back to normal in terms of what we could see with respect to the overall market conditions and how we see the secondaries moving in the market.
Therefore, what we see is that we are fairly optimistic about the Q4 in terms of going forward.
Obviously, the cold wave has been very, very strong in the northern markets in terms of some extent, which also effects the exterior painting at this point of time.
But I think, we are confident that overall that the Q4 volumes should be optimistic in terms of going forward.
Abneesh Roy
Sure, and my second and last question is on the Bath and the Kitchen.
So those are a bit more discretionary versus paints and when I see the urban demand in terms of new drivers clearly, we are seeing job losses in the start-ups, tech job addition has been anti multi quarter low.
But then I also see that there is a inflation cooling off and the salary hikes also seem to be quite optimistic.
So, if I mix all this, how do you see your Bath and Kitchen growth in the coming quarters?
Amit Syngle
So, in fact, I would qualify that question from the point of view of our home decor completely because now it is not the question of only Bath and Kitchen.
It's a question of kitchen, furnishing, lighting everything in terms of what we sell.
So, as we kind of look at the Q4 yes, these are categories which are slightly more discretionary, but we feel that this should be also in line with the overall economy in terms of the way we go off.
The construction is going on at a good rate and there is good real estate equity in the market in terms of people are purchasing new homes and second homes despite the interest rates going up.
So I think it is all dependent on this whole area of housing index, new construction, new houses coming up to that extent, but I think we are still optimistic that the overall home decor should kind of continue to do well as we kind of look at Q4 as well.
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Abneesh Roy
So, thanks.
That's all for my side, thank you.
Moderator · Conference Operator
Thank you very much for your questions, Sir.
I request all the participants to kindly limit your questions to only two due to time constraints.
Moving ahead, our next caller has joined via Zoom video platform, Mr. Avi Mehta (Macquarie).
Avi Mehta
Hi, sorry, am I audible?
Amit Syngle
Yes, you are.
Avi Mehta
Hi Sir, I just wanted to kind of build it on your comment on the sequential EBITDA margin expansion in fourth quarter, given that third quarter was already at around 19-20%.
Should the current input environment in terms of costs and if I hear you your demand commentary was also fairly supportive, are we looking at 20% Plus EBITDA margin trajectory going forward?
Is that a fair way to read your comments or am I wrong in that assessment?
Amit Syngle
So, if you know, we have already kind of maintained that we would lie in this whole band of about 17-20% band in terms of what we have been speaking about.
Obviously, when we look at, you know the PBDIT margins of the last quarter.
It has improved by almost about 4.8% as far as the standalone business is concerned, and what we see is the realization in terms of the deflation has not been fully there to that extent.
However, what we will see is that I think, we see that there could be marginal increase in terms of the overall margins, which we'll see in Q4. But definitely we are seeing some more deflation to come and full realization of the Q3 deflation to that extent.
So therefore, we definitely see the margins to kind of go up.
Avi Mehta
And Sir, would it be fair that the mix also was inferior.
The volume growth also was relatively weaker.
So you also had, you know those headwinds in terms of margins and all that together still, you know, while steady state might be that range, it could be slightly ahead or more ahead of that.
That's why I was coming.
That's where I was coming with
Amit Syngle
Yeah, it would definitely be there because the product mix given the fact that last year in the same quarter, the high value products had a higher price increase and therefore the inventory of those products was higher.
So as we kind of 26 | P a g e go see that the mix would definitely kind of improve is what we are confident of and obviously as the volume growths improve, the value growths also will improve with a better mix to that extent.
So that will also definitely positively impact the margins.
Avi Mehta
Perfect Sir, okay and the second bit I just wanted to just understand the demand comment a little better.
While you highlighted December had seen double digit value growth.
I just want to understand what gives us confidence because there is also this comment that keeps kind of floating around that the stronger growths in the earlier periods was more an advancement of demand and hence we could probably move to a period of slow volume growth.
I would love to hear your thoughts on why you believe that may not be the case.
Amit Syngle
So, what I see is that, you know, going forward, obviously a lot depends in terms of how the economy behaves and how the overall GDP comes up.
We feel that, you know, there is definitely you know, a little bit of a bettering down not very high volatile volume grows to that extent.
So, I think the volume growth would continue possibly, the level of volume growth which we have seen in the past would definitely come down to that extent because today the markets are kind of now coming to a certain maturity.
They have seen two years of good growth overall to that extent the bases which we all are sitting are at a certain level.
So we might not see very explosive volume growths to that extent, but definitely I think we would see good volume growths going forward to that extent because of the overall economy what has been predicted at being a decent level as we kind of go forward.
So from that point of view, I think the December double digit was a good indication.
But as I said then double digit there is always an 11% and there is always a 20% as well.
So I think the double digits also vary from that point of view to that extent.
And therefore what we are saying is that we are optimistic, but obviously I think the overall kind of story on volume growths might not be the same as what we have seen in the last two years.
Avi Mehta
Sir, but good would mean still a double digit?
Would that be a fair comment?
I think it can be 11 or 20, but still that would be a reasonable range
Amit Syngle
Yes.
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Avi Mehta
Or are we seeing could might be a single digit, that’s why I just wanted to clarify that point.
Amit Syngle
No, I will leave that interpretation to you.
But for us, I think good can really be definitely in the double digit growths.
Avi Mehta
Perfect sir.
That's all from my side.
Thank you very much.
Moderator · Conference Operator
Thank you very much.
So our next caller has joined us via Zoom video platform.
Mr. Jaykumar Doshi (Kotak Securities).
Jaykumar Doshi
Hi, thanks for the opportunity.
You mentioned that, you know, full impact of 3Q deflation was not reflected in gross margin.
And over and above that there is further reduction in RM prices in 4Q.
So is it possible to quantify what is the extent of gross margin improvement?
Should we expect further from 39% all levels for India business if RM prices stabilize at current levels?
And at what point of time would you consider passing on some benefit to customers in the form of end product price reductions and what gross margins would you consider there?
Amit Syngle
So what we see is that see we are still assessing that for Q4 what would be the exact kind of deflation which we would see.
As I said that part utilization of the deflation has happened in the Q3, which is there.
Now I think it totally depends in terms of how Q4 augurs from the point of view of total RM softening in terms of what we see and I think any decision with respect to price corrections or otherwise we will take only when we are kind of very clear that there are certain kinds of cost reductions which are happening from the point of view of Q4 and they are there to stay in the market because we should not forget that the there is still which is a war which is going on to that extent, there is still some volatility, which we see in terms of the variation from up and down in terms of the prices which are happening to that extent.
So we will take a call depending on how Q4 finally augurs with respect to the deflation.
As far as gross margins are concerned, I think too from existing level of about 39 in terms of 38.6 where we are to that extent, there would be definitely marginal improvement which we'll definitely see as a result of what we have seen from the Q3 kind of deflation which overall has come about.
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Jaykumar Doshi
Just a follow up there, are you still maintaining your band of 39 to 40% as the range you want to be in or is there a possibility of it moving up?
Amit Syngle
So see, it totally depends in terms of the softening of the prices and where they are and when do we kind of if they go up but yes, we would like to maintain overall, the overall band in terms of about that 38 to 40% in terms of what we would like to keep ideally.
Jaykumar Doshi
Perfect, and capacity expansion increase from 17.5 lakhs to 26 point something, so it's roughly about 50% increase.
So is this like for like, I know you have some third party contract manufacturing also.
Is the mix going to change?
This is more of like for like a 50% increase.
Amit Syngle
No, this is our in house capacity in terms of what we are talking of increasing and there we have a mix of increases in capacity which is happening in water-based in terms of solvent-based in terms of some of the wood finishes categories, and even in terms of the waterproofing areas.
So it kind of really spans across the various kind of overall product range in terms of what we have.
As far as the you know the outsourced manufacturing is concerned, that is something which is in line it is almost equal to about almost about 15 lakh to 16 lakh KL in terms of capacity, which we have to that extent, which possibly is not going up at a very very high pitch as compared to what we are doing at in terms of the in-house kind of investments.
Jaykumar Doshi
But outsourced is usually different products. set of products right..
Amit Syngle
So yeah, so that is what I'm saying the outside processing largely would be for some of our powder products and some of the other primer products in terms of what we have to that extent even some range of stiff paints which we have to that extent, but there is some duplication, which happens in terms of the outside and the inside capacity as well.
Depending on how the overall kind of logistics fare out in terms of various regions to that extent.
So, as I said that the larger increase in capacities is in overall our water-based our overall solvent-based products and in terms of some wood finishes and waterproofing categories.
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Jaykumar Doshi
Thank you so much.
Moderator · Conference Operator
Thank you sir, our next caller is Mr. Shirish Pardeshi (Centrum), joined us via Zoom video platform.
Shirish Pardeshi
Hi Good Evening, Amit and team.
Thanks for the opportunity.
Two questions.. so you started with the remark that this quarter was rough.
And you did explain that the rains were prolonged.
But however, December you also mentioned you were very positive.
So just wanted to understand in the beginning of rains or October, was the system inventory was cut because maybe the trade was expecting some some amount of price cuts and maybe if you can say what is the inventory level today happening at the trade level.
Amit Syngle
So as I said that, see when you announce a 10% increase you know the inventory levels across the entire trade will definitely go up, because in our paint industry 10% is too huge kind of you know pricing price increases will happen.
If any retailer doesn't pick up any material in this kind of increase then the retailer cannot function in the market to that extent.
So there was an all-round inventory increase across the set of retailers, whether it is small towns, mid towns, or it is the T1, T2 or the metro cities to that extent and therefore, the inventory definitely went up in the month of October and again in the month of November to that extent and therefore, if you sequentially look at it, Q4 was a little bit weaker as compared to the Q3 of last year to that extent.
So I think very clearly what we saw was that this inventory impact coupled by the monsoon impact of October, which I spoke of, really did depress October in terms of the way we it kind of came up.
There was definitely a recovery in November, which we saw, but it was not a full recovery because we had another price increase on first of December, which kind of really kept the inventory levels inflated to some extent.
And it was only in December that those inventories started liquidating and compared to last quarter this year, we definitely see that the level of inventory in the network would be limited and not to the extent in terms of the way it was in Q3 of last year.
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Shirish Pardeshi
Just one follow up here, I do understand for many years, we ran the annual incentive for the trade partners.
Now was it that also was not a driver, or the quantum of incentive was not lucrative for the trade to pick up the inventory.
Amit Syngle
The quantum of incentive can never match the 15% kind of a price increase.
So it can never match the price increases.
Shirish Pardeshi
Okay.
Second question on the overall capacity expansion.
You did mention that the capacity is growing, but can you give us some timelines over the next 8 to 10 months or maybe 12 months, what is the water base capacity which is going to come in the system?
Amit Syngle
So as I said that currently from 17, we are going to about 22.7 lakh KL which is there.
So, you see almost five lakh KL jump which is happening and this five lakh KL jump would happen possibly in the next about two years to two and a half years in terms of what will come out and then we will start basically actioning the four lakh capacity in terms of what we have spoken of.
Shirish Pardeshi
Okay, thank you Amit and all the best to you and the team.
Amit Syngle
Thank you.
Moderator · Conference Operator
Thank you sir, our next caller has joined us via Zoom video platform, Mr. Manoj Menon (ICICI Sec).
Manoj Menon
Hi team, this is Manoj from ICICI securities Normally, I wouldn't focus too much on the short term but this time given there are just too many moving parts and one off.
Just forced to ask a few follow up again on the December quarter.
To start with, you know, given the flattish rupees Crores revenue, largely speaking in standalone, does it kind of imply that paints would have declined significantly given the assumption that the rest of the business would have grown pretty well?
Amit Syngle
No, I think nothing like that.
Overall because the larger contribution is from the paints only to that extent.
So, overall if you look at from an organization perspective, the other businesses are fairly small from the point of view of the coatings business.
So, the larger impact has come in from largely the decorative business of 31 | P a g e paints specifically, as I said, the industrial businesses, both Auto and the General Industrial business and coatings have done well.
So the larger kind of impact is from the point of view of the Deco business.
Manoj Menon
Amit my question is, thanks for this was essentially, example do we include adhesives in the definition of decoratives.
I am not sure whether I should add up both, whether adhesives should be clubbed with paints, we are trying to analyse.
Just unsure.
Parag Rane
In the standalone revenue number, both paints and adhesives is definitely a part of it but the volume numbers are standalone paints, So to that extent, the volume is only for paints
Amit Syngle
And see in terms of the other businesses like even adhesives and all as compared to the overall larger categories, it will still be the larger categories which dominate the overall this thing.
So it is reflective of the overall larger interior, exteriors, wood finishes and the waterproofing business which we have.
Manoj Menon
Fair Point and Secondly, it also is looking through the last year concall transcripts exactly the same time 12 months back, you know, what we find is, there are questions about inventory, etc. last year and the comment was, it is not a material one, that's one, second, you know, given the as a recall you know, the October, let's say the price, and the price increases in November, which was one of the highest, etc. Essentially, meant that that December would have been a low base month for you, right?
I mean, so what I'm trying to understand is the recovery this December, is it an optical one or is it something underlying here?
Amit Syngle
No. So what as I said is that the recovery in December we see measure in terms of more from the point of view of the secondaries, which we see in the market, to that extent, because it's not that the inventory in the market will become zero, there will be some inventory which will still remain in the system to that extent, and what we would kind of say is that the double digit recovery in terms of what we are seeing is definitely with respect to the secondaries, which have been moving the market and we have seen that the secondaries have moved both in the T1, T2 and T3, T4 cities to 32 | P a g e that extent.
So actually the double digit is coming, more from the point of view of watching what the extent the secondaries have kind of come in, and there is no possibly inventory pile up, which is kind of happening in the month of December, which is giving the double digit to the extent.
But to the fact that last year, December would have been slightly lesser because of the increased pileup of inventory of October and November.
That comment would be right
Manoj Menon
Fair point, Amit thanks for that.
Secondly, just on the ESOP plan, which was announced some time back, you know, it's one of the first let's say you're done in a long time.
Just could you comment about the people policy attrition particularly in the middle and above, and some more colour on the ESOP etc and, and more importantly, an analysis on let's say, What made the management decide to do this at a particular point in time and how do you see this panning out?
Amit Syngle
So, the ESOP policy was announced in June of 2020, in terms of when we had kind of really announced the whole area.
So it was done almost about three years back in terms of what we see.
One of the areas which we kind of looked at was that ESOP was now becoming a norm in all, you know, world multinational FMCG companies to that extent, and when we peg ourselves, we compare ourselves to the best in the world in terms of looking at the kind of people we get from premium campuses, all across India, and even at the lateral level in terms of whatever we take.
So I think the whole concept of looking at ESOPs came in from the point of view of saying that this would be a strong area in terms of looking at one, propelling the overall growth in terms of linking it to the actual kind of business growths and therefore the return to the stakeholders, which kind of really happens.
And the second area obviously, we looked at, was saying that as we kind of go ahead, the human capital is very, very important and the way we have ambitions in terms of going forward, we needed to kind of also see that we could kind of look at a dual area of both, you know, incentivization and retention of people in the organization to that extent.
So I think that was the basis in terms of what we looked at the ESOP strategy and what we have seen in the last three years, actually, that overall, you know, the attrition rates today to that extent, are basically in a certain band in terms of what we 33 | P a g e see overall.
The rates have not kind of gone up.
In specific cadres it might have kind of increased a little bit here and there to that extent, but as far as the top and middle management is concerned, that is something which is basically in line with the last about seven, eight years in terms of what we have seen as the overall attrition.
Moderator · Conference Operator
Thank you sir, our next caller is Mr. Tejash Shah (Avendus Spark) joined us via Zoom video platform.
Tejash Shah
Hi, thanks for the opportunity.
Sir, we have been growing aggressively in Projects business for a while.
So just wanted to know what will be our current contribution from this vertical and is there any number that you would like to saturate this business and how different is the margin and working capital profile of this vertical versus our core B2C paint business.
Amit Syngle
So overall, from the profile, we really see that this business is pegged at about anywhere close to about 15-20% of the total business in terms of what we see.
It varies depending on how the overall retail and the project growth rate really pan out to that extent, but it kind of is in that kind of a band in terms of what we see.
Overall, the growths in this business have been stronger in terms of what we see from a point of view of overall businesses which we have been able to see whether it is a builder segment, the government segment, the cooperative housing sector or the factory segment to that extent, and there is something which is a very strong focus in terms of what we have maintained.
As far as overall working capital is concerned, we really worked through our retailers here and there is not a direct kind of intervention in terms of what we make to that extent.
So therefore, the working capital requirements are literally similar as compared to the retailing environment.
As far as overall returns are concerned from the business.
Yes, definitely.
This business is far more competitive to that extent, and it is definitely something which is slightly lower than the retail business in terms of what we make.
Tejash Shah
Sir second and last question.
For many years, infact decades, this sector has enjoyed a form of oligopoly.
And this question was perhaps not relevant because everybody was growing together.
But now we have attracted competition from various quarters not even from our industry, but from outside also.
So do you believe 34 | P a g e that the case for consolidation is very strong now than ever?
And if you believe in that, would Asian Paints be willing to participate?
In this?
Or would you prefer to go organically and then face competition on your own?
Amit Syngle
You're talking about the paints category.
I missed the first part of your question.
Tejash Shah
Yeah sir, yeah sir paints category.
Amit Syngle
Okay.
So as I see it, I think, given the strengths which we have, from the point of view of our R&D, the strengths which we have in IT, the world class supply engine which we have and the areas of marketing and branding excellence in terms of what we pursue, I think we have been very strong in terms of looking at pursuing the kind of, you know, growths and the returns which we have seen.
We have almost have a CAGR of about 12 to 14% in terms of what we have had for the last about 10 to 12 years and it has been a very strong growth rate in terms of we have been able to see.
As a leader we have also been growing the market to that extent, and we don't look at competition only from the point of view of acquisition of sales from any other player to that extent.
So we were the first pioneers in the exterior market to kind of grow up the market from cement paints to that extent.
We have kind of transformed the French Polish market in terms of entire wood finishes market.
We have looked at the bottom of the pyramid to explode the entire distemper market into economy emulsion sales market.
So what we see is that we have been taking strategic shifts in terms of increasing the per capita consumption of paint and therefore, we have been channelizing the growth strategy of paint sector in a certain manner to that extent.
As we believe we will continue to do that we don't really look at from the point of view of saying that any acquisition of competition is kind of giving us any benefits from the point of view of our strategy to that extent, but having said that, if there is a preposition which is really cutting edge, if it is there is something which comes up, which kind of adds to the organization from the point of view of either technology or from any other strength area, we are open to that in terms of looking at in terms of any anything which comes from a consolidation point of view to that extent; but I believe that we have a very strong story of our own, which is very clearly growth rate 35 | P a g e and it has led from a profitable growth perspective.
Also, I think, I like to factually correct you that it is not that the competition is coming now.
The competition has been coming for the last two decades.
We had Sherwin Williams, which came in some time back, tried persisting for a certain point of time.
We have had entries of Nippon, Jotun, lot many other players in the market.
We have loads of other players which are relatively at a small level.
There is already a Kamdhenu and there are other players to that extent.
So I think the market is an Indigo, which has come up seven years, eight years back.
So I think the market always has seen a lot of players coming into this market to that extent.
So therefore, we see that this is a continuous process and I think we anticipate even more players coming as we can go ahead.
Moderator · Conference Operator
Thank you Sir.
Our last caller of the day is Mr. Mihir Shah (Nomura), joining us via zoom with your platform.
Mihir Shah
Thank you for taking my question.
This is Mihir Shah from Nomura.
So I just wanted to get your understanding on the demand environment in the near to medium term and how you see it because you know when we see your 3Q numbers and other discretionary category numbers, it is indicating a slowdown.
Can we say that Asian Paints 3Q numbers, you know there was one off in the numbers and volume, you know, like you highlighted for the December month can continue to deliver double digit growth over the next couple of quarters.
Is there any trend that you're seeing in rural, of course, you highlighted that the spot there was no trend but any trend that you've seen that in rural or urban demand.
Is there slowdown gripping on or are there any green shoots of improvement, any kind of indication or you know even from the unorganized - are you seeing any competitive intensity increasing any of these, You know from the demand front if you can touch upon that would be very helpful sir.
Thank you sir.
Amit Syngle
So I've already touched on this question and as I see it that overall, I think we remain pretty optimistic about the coming quarter to that extent in terms of the overall sales.
Yes, there has been a little bit of a slowdown and I mentioned that possibly the kind of growths which we have seen in the last two years might start coming down to that extent, but we still see, you know healthy growths which are 36 | P a g e going to happen in the market as far as the paints category is concerned going forward; and therefore as I said that, possibly I don't see any difference with respect to T1, T2 cities or T3, T4 cities.
In fact, our anticipation is that some of the T3 T4 cities will start coming up as we reach the middle of the Q4 and Q1 of next year to that extent.
So overall, I think we are still kind of very positive about Q4 in terms of looking at how the growths are because I think the last 12 quarters, or last 11 quarters indicate the growth trajectory in terms of what we have been able to deliver and therefore we will see that this quarter definitely was affected given the high bases and the price increases in terms of what we have taken in the past; but we remain positive as far as Q4 is concerned.
Mihir Shah
Good to hear that, sir.
Thank you.
That's very helpful.
So my last question is actually a bit a little bit of a bookkeeping.
I just wanted to understand the mixed impact.
When you triangulate the value growth and volume growth.
You know and we factor in the earlier taken price increases.
You know, we're still seeing, you know, price increase would have been in a mid teen range for the 3Q.
Of course, it'll slow down further in the 4Q.
But the mix impact for the 3Q seems to be quite large, similar to what we've seen in the 2Q, somewhere about you know, 12 to 14% range.
Sir, can this quantum continue, or will it reduce to the, you know, negative 5% levels that we are used to seeing in the earlier years you know, so that's all from my side.
Thank you.
Amit Syngle
So, what we see going forward, that the mix will definitely improve.
We are kind of predicting that for the Q4 overall the mix as compared to Q3, we have delivered would definitely improve and therefore what we definitely see is that going forward, we will have possibly, you know, a larger focus with respect to the kind of growths which come in from, you know, the high end, premium luxury products in terms of going forward, which will definitely kind of look at in terms of taking the overall volume and value gaps to a certain level in terms of what we have seen in good in some of the times earlier to that extent.
So therefore, going forward, we will always see possibly, you know, a gap of about, you know, the 4 to 6% kind of gaps which we see between them the volume and the value as we kind of go forward.
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Mihir Shah
Fantastic.
That's very heartening to hear.
And I completely understand the point that you mentioned on the gross margin improvement, so nothing further to add.
Just if you can throw one more small little bit of all the other expenses, you know, we've seen some moderation, can this be attributed to lower ad spends?
And given that there's a large capex announcement?
When will these costs you know start coming in and to what level would they kind of increase the other expense line item?
That's all from my side?
Thank you.
Amit Syngle
So overall, we don't see any aberration with respect to the overall overheads.
The overheads would partially be as a percentage be higher because of the lower volumes to that extent, but overall, from a point of view of whether going forward that it can affect our advertising or marketing expenses or in terms of employee spends or in terms of general overheads, we don't see that there would be any larger curbs or anything which we would kind of place to that extent.
The capex funding is very clear that it is coming from a certain section of our reserves which are there to that extent, so I don't see any implications with respect to going forward in terms of a larger containment of any of the overhead spends as we kind of go forward.
Mihir Shah
Thank you, sir, wishing you all the very best.
Amit Syngle
Thank you.
Moderator · Conference Operator
Thank you sir and thank you everyone for your questions and for joining us.
I now request Mr. Amit Syngle to give us the closing remarks.
Amit Syngle
So thank you, everyone, for joining us for this investor conference.
And it was great kind of hearing all your queries and we hope that as we kind of go forward, we look at more buoyant times in future.
Thank you. ###