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

Mr. Amit Syngle · : MD & CEO

Good evening to everyone.

It's a pleasure to meet you aŌer a long Ɵme physically, one on one, and we are all here to look at the Q4 and FY2023 results.

Just want to take you through a small presentaƟon.

As you are all aware, this is something which is the core value in terms of what we look at. ‘Delivering joy since 1942’.

We have completed more than 80 years now in terms of looking at BeauƟfying, Preserving, and Transforming all spaces and objects and bringing happiness to the world.

And this is something which is the core in terms of what we really believe as we go forward.

3 | P a g e So, when we look at the overall results, I think it's been a strong performance which has come in Q4 and also in the enƟre FY2023. As we look at overall numbers, we had strong double-digit volume growth of about 16% in the quarter, and overall value is closer to about 13% in terms of what we delivered.

So strong double-digit numbers coming in there.

This translates to the enƟre year, FY2023, when we look a strong number of about 14% in terms of volume.

And this is despite the fact that Q3 was a bit ﬂat in terms of what we saw 4 | P a g e and a very, very strong value number of about 20%, which comes in.

While it has some component of price increases which were taken overall, but a strong performance coming in terms of the overall area of product mix.

What is heartening here is both Q4 and FY23, if, you look at the CAGR numbers, they are very, very healthy in terms of what you see.

CAGR numbers both on volume and value are strong healthy numbers.

And I think this just shows the fact that the organizaƟon has been focusing very clearly, in terms of not only the value growths but the volume growths over a 3-year period, which have been very, very strong in terms of how they have come in.

This is another chart which reﬂects the same thing in terms of looking at the volume growth over three years on a CAGR basis.

And if you look at the trajectory, again, very strong double- digit numbers coming from us and this is very clearly focusing on the fact that the whole area of growth, which is led by volumes in a strong manner, comes in there and this translates obviously to strong value growths as well over a three-year period.

And this is quite a consistent performance.

If you are able to see the numbers that way, the performance becomes quite consistent in terms of the way we have been growing over a period of Ɵme.

5 | P a g e Some of the areas in terms of what have been typically the growth drivers as we kind of see it.

In Q4, we looked at both T1, T2 ciƟes and the T3, T4 ciƟes growing almost at the same pace, which is really heartening because what you look at in the environment and when you look at the FMCGs largely, you know, the smaller ciƟes not doing so well over the last 2-3 quarters.

But for us, I think the smaller ciƟes also, which is a very, very strong source of our growth, has done quite well over a period of Ɵme and there are clearly double-digit CAGR numbers which are coming across both rural and urban centres.

When we look at the mix in the quarter, again, the mix is quite good.

Largely, we have grown at double-digit numbers, both with respect to the economy, premium and the luxury set of products.

So overall, the double-digit kind of story conƟnues with respect to the product mix.

Obviously, some categories have grown even faster in a double-digit mode.

So, when we look at some of the upgradaƟon emulsions, when we look at waterprooﬁng, look at some segments of ﬂooring, admixtures, they have really gone very well for us and have outstripped even the kind of double-digit growth which has been across that category.

As I said, the premium and luxury products have been also growing quite well.

And today we have really gained inroads in the premium luxury segment of wood ﬁnishes in a very strong 6 | P a g e manner.

And that is something which is a strong footprint which has come in across our sales this quarter.

From a point of view of our expansion, the distribuƟon keeps on expanding at a very, very strong pace.

And overall, we are speaking of our distribuƟon expansion to about almost 1.5 lakh retail points which are there, which is literally comparable to any FMCG kind of representaƟon which takes place across the network.

And we are very clear that this is something which is a strategy which conƟnues so that we are making the product available to more and more customers easily across various clusters in various ciƟes.

One of the other big diﬀerenƟators which we see ourselves from the compeƟƟon is the whole servicing footprint.

We have something which is called the ‘Safe PrinƟng Service’ and a related service which is called the ‘Trusted Contractor Service’.

And these two services put together have been doing exceedingly well.

We are touching about 1.7 lakh customers throughout the country with more than 600 towns enabling this service across.

We feel this is globally the world's largest service footprint, any coaƟngs company has.

So, it's decidedly a very, very big kind of a diﬀerenƟator in terms of what we see.

And you must remember that it is very diﬃcult to kind of really match the servicing footprint of the company, for any compeƟƟon to kind of come in to take it, and this kind of really gets us in the homes of the customers in a very, very strong manner.

When we look at Projects / InsƟtuƟon, as it is the B2B business, this again, has been growing at a very, very strong pace.

And we ﬁnd ourselves not only growing in the builder and the co- operaƟve housing sector, which is there, but very strongly in two sectors where we're focused, which is the factories and the government sector.

The government sector has been really exponenƟally growing for us, because of the government spending on infrastructure which is taking place.

Our enƟre waterprooﬁng range, which consists of membranes and admixtures and some of the other waterprooﬁng kind of products which come in, which are in the repair range, have really kind of straddled very strongly in this sector, giving us really unprecedented growths in terms of what we have seen over the last three years and these growths really conƟnue to kind of give us a very, very strong footprint.

So much so that now, Asian Paints is 7 | P a g e the number one player in terms of waterprooﬁng as far as we look at from a retail point of view, in a very strong manner.

Overall, we see that innovaƟon has been a very, very strong footprint in terms of how the company has been driving the sales.

Over the last seven years, we have launched about 250 new products in the market.

And these are not products which are just variants which are coming.

These are products which are really geƫng in a new customer proposiƟon, which is very clear and today strongly going ahead.

We have applied for almost 106 patents over some of these products which we are launching in the market.

So, a very, very strong innovaƟon pillar which is invoked.

And today these products kind of contribute to more than 10% to the total revenue, which is a very healthy ﬁgure in terms of what we see and just showcases the innovaƟon potenƟal, in terms of what we are harnessing as we are going ahead.

In addiƟon, all of you are aware and we have been making you aware of the strong work happening in respect of capacity expansion, in terms of what we have taken.

We have already commiƩed very, very strong Capex, some brownﬁeld, some new projects and also to backward integraƟon projects which we have announced with respect to cement or our VAM VAE emulsion faciliƟes which have been announced.

So, I think in all the very, very strong indicators which give the health of the organizaƟon in terms of the way we are proceeding and looking at going ahead.

8 | P a g e In addiƟon, we conƟnue to kind of really be the voice of the industry with respect to our color and material trends which we introduce.

We reach out to more than 7,500 architectural ﬁrms across the country, and we talk of this preposiƟon, which is very, very strong with respect to what are the kind of trends which we see are coming.

And these trends are based on socio economic movements which are happening, which reﬂect on lifestyle trends and therefore the whole area of décor and color trends strongly.

We have introduced this year, almost four stories which are strong in trends and the color of the year is called ‘Silver Escapade’, in terms of our launch, which is there.

9 | P a g e We also have lots of campaigns as part of our markeƟng iniƟaƟves, in terms of what we launch and the boƩom of the pyramid is a strong area in terms of where we keep on working, in terms of really converƟng the customer from the unorganized to branded smart emulsions in a very strong manner.

And some campaigns like this, you would have been able to see which are very, very strong, which are coming.

But not only this, our campaigns with respect to our LUX categories, which are Royale Glitz, and some of the other premium products which we launched have also done very, very well in terms of what we have been kind of taking in.

Today, we can easily say that the share of voice in media is something which outstrips the compeƟƟon and therefore we don't shy away from really spending good amount of money from an adverƟsing mix point of view.

And even in Q4, you would see that our spends in adverƟsing, markeƟng has been much higher in terms of looking at really propelling the business as we kind of go ahead.

10 | P a g e Our forte into Home Décor is something which is doing extremely well.

And today we operate in so many categories apart from Bath, Kitchen.

We have introduced the whole area of doors, windows, furnishing and furniture and so many other categories, rugs and so and so forth, which have come so that we have become almost, you know, an integrated player in terms of Home Décor oﬀerings.

We have now literally by April end, about 50 stores operaƟonal across the country.

And this is something, which is a very, very strong iniƟaƟve which is kind of coming and today this business is about 4 - 4.5% of our total business.

And we have already announced that by March of FY26, we will look at this Home Décor business contribuƟng to about 8 - 10% of our total architectural business going forward.

So, this is a substanƟal kind of investment and strong focus with respect to Home Décor because this literally complements the painƟng category in a very strong manner, because it is all about the same home where you are selling and entering from a point of view of the décor life cycle of the customer in a strong manner.

11 | P a g e We've also kind of looked at partnering the customer in terms of making a beauƟful home for the customer in a strong manner and we have an end to end design and execuƟon service, which is called the ‘BeauƟful Homes Service’.

Now, this service is a ﬁrst of a kind experience coupled with digital visualizaƟons and professional execuƟon, which kind of comes in and in its own way, it is something which is doing extremely well.

We are today, very strongly focusing on this service.

This service is now the number 3 service at an India level in terms what we look at as an end-to-end kind of service.

In the paint sector, you don't have any other company which oﬀers this kind of service and this is another diﬀerenƟator over the ‘Safe PainƟng Service’, which I had highlighted earlier.

12 | P a g e As one part of it, Kitchen and Bath is a strong business today.

This is about Rs.

800 crores overall as a business in terms of Kitchen plus Bath.

Q4 has not been very, very strong with respect to the Kitchen and Bath performance because of the sluggish market demand overall in terms of what we saw in the category.

However, when we look at the year, Bath has done relaƟvely well at about 15% growth and also registered a small proﬁt in terms of what has come in, looking at the boƩom-line.

As far as Kitchen is concerned, the kitchen market is consisƟng of two things.

One is a modular kitchen, which has done extremely well for us, and other is a components and hardware business, which has not done too well, and that has contributed to possibly a negaƟve kind of de-growth happening in terms of the Q4. Also, at a yearly level, the Kitchen business because of the components, has not done well and also registered a small loss.

But we are very conﬁdent that this is something which we should be able to overcome as we go ahead because the whole demand for this category seems to be deﬁnitely on and this is something which we are focusing very, very strongly.

13 | P a g e If you remember, we acquired two companies, one was White Teak, which was in the decoraƟve lighƟng business and the other was Weatherseal, which was into uPVC doors and windows.

Both the businesses this year have really taken oﬀ very, very strongly.

Q4 has done very well in both categories.

At a yearly level, we have literally kind of doubled the numbers to Rs.

109 crores in lighƟng with a very strong proﬁtability coming there and also, in terms of the uPVC doors and windows, where we have taken that category almost from about Rs.

12 crores to about Rs.

25 crores.

And therefore, both categories seem to be doing very well.

In lighƟng, we are now the Number 1 player in terms of the decoraƟve lighƟng as it has panned out for us.

And therefore, these two categories are doing extremely well in Home Décor.

14 | P a g e Coming quickly to the overall internaƟonal business, this is the footprint in terms of what you see, where we are represented all across in terms of how we have been funcƟoning over the years.

And today, when we look at the global environment, there have been, as you are aware, some challenges which are there in Lanka.

We also have a lot of challenges with respect to devaluaƟon of currency, which is happening in areas like Egypt, Bangladesh, Lanka and so on, so forth.

So, if I look at basically Q4, what has stood out is performances in Middle East and 15 | P a g e Africa, where the markets have done well.

And Asia has been a liƩle bit down because of Lanka and secondly, Nepal because of the poliƟcal environment has not been doing too well in terms of what we see.

Overall, while it shows a de-growth in the global business, but if you look at constant currency terms, the growth is about 9 - 10%.

It's only because of the devaluaƟon of the currency that you see a de-growth which is there of 3%.

Overall, it has done quite well from on constant currency terms.

The proﬁtability has been the highlight in global.

If you look from an overall yearly perspecƟve, the proﬁts have been very, very strong in terms of almost registering proﬁts of about Rs.

158 crores.

And therefore, we see that this is something which is strong in terms of the way we have bounced back in terms of the overall global environment this year, how it has panned out.

So that's the global business for you.

Coming to the Industrial Business, this has been really a strong kind of performance in terms of what we see of both the businesses.

One is what we call the Auto OE business, which is a PPGAP business, and the other is basically the General Industrial business, which is APPPG business.

So, if you look at from a revenues point of view, Q4 has done quite well in terms of both the businesses.

But the highlight has been the yearly performance which you look at is in double-digit growth in terms of almost 27% growth, which are there in terms of the top line.

16 | P a g e So, both businesses have done very well.

And so also in the area of PBT.

If you see, the PBT margins have been very, very strong in terms of the growths which have come in.

So Industrial Business is a highlight.

In APPPG, we have crossed Rs.

1,000 crores for the ﬁrst Ɵme and the business has doubled in about three years.

So, it's been a very, very strong performance in terms of overall Industrial Business, in terms of how we have performed this year, both from top line and boƩom line.

This is really a category which has done extremely well.

If you look at gross margins, the gross margins have been going up steadily thanks to basically the fact that there has been a soŌening of the prices and there has been a liƩle bit of deﬂaƟon in terms of looking at prices across coming down and material costs are a very, very strong component of our business.

So, when you look at possibly the gross margins in Q4, we are at about 43%, which is one of the highest gross margins in terms of what we are registering.

And this is a very strong movement which you are seeing.

And I think there was a worry amongst a lot of you in terms of saying where are the margins going and I think it is clearly dependent on inﬂaƟon which we saw in the past.

A very, very strong recovery with respect to gross margins in Q4 is something which you see is clearly reﬂected here.

And what we saw in this Q4 was about a 4% kind of a deﬂaƟon, which was seen in this quarter overall.

17 | P a g e Coming to the standalone results, as I said, for Q4, the numbers are very clear where the value growth is about 12%, the volume growth is about 16% overall.

The PBDIT numbers and the PBT numbers are very, very strong.

Both quarter on quarter and year on year, the margins have substanƟally improved overall.

The PAT growths are preƩy healthy in Q4 about 37% on a standalone business, in terms of what we see.

On a yearly level, again if you look at it overall, a 20% kind of a top line revenue growth which comes in with a 14% volume growth and PBDIT margins have gone up.

PBT margins have also gone up from a point of view of a yearly perspecƟve.

And the PAT growth is about 31% overall.

So, strong numbers for both Q4 as well as for the enƟre year.

And that is something which is really quite posiƟve for the overall business as we see it.

18 | P a g e When we look at the consolidated numbers, obviously the consolidated numbers get dominated by the standalone numbers.

We see that at consolidated level again, the overall top line number for Q4 is about 11% compared to a 13% of a standalone.

But I think again, the good point is that the PBDIT margins have gone up in Q4 and the PAT is a very healthy 44% kind of increase, aided to some extent by the global proﬁtability, which has come in in Q4 as well as in the year.

When we look at on a yearly basis, again, the top line numbers are very healthy to about 19%.

So just about a percentage down from the standalone numbers of 20% in terms of what you saw.

But again, I think the PBDIT and the PBT margins have grown on, as we compare with year on year basis.

And the PAT is again a very healthy 36% in terms of what you see overall coming in.

So, I think both set of numbers are preƩy healthy in terms of what we see, and I think the heartening part is that the overall margins now are in the range of what we have been talking about in terms of where we wanted to be as we go ahead.

So, I think that is something which is very, very strong in terms of how it has all come in.

19 | P a g e There are some ExcepƟonal Items in terms of the overall list, and this is something which we wanted to highlight.

The expenses which are kind of really coming because of the ongoing problem in Sri Lanka, in terms of the economic crisis and there is something which we have taken an Impairment loss.

The numbers are not too big, but that is something which we have taken.

These are the two numbers which have come as an ExcepƟon which we thought we'll just highlight for you.

20 | P a g e So, in summary, we look at some of the highlights.

It is very clear that we have now touched Rs.

30,000 crore mark in terms of Net Sales at standalone level, which is a very, very strong number and this is 3 Ɵmes the nearest compeƟtor in India.

So that generally shows the size which is there.

And I must remind you that today the overall market size of paints is closer to about Rs.

70,000 - 75,000 crores, out of which, this becomes a substanƟal segment in terms of what we are operaƟng in.

We are seeing double-digit volume and value growth for decor business for the year, and that is something which is very strong because you can easily see that the base numbers are not small numbers.

The base is very, very strong numbers, which are coming in there.

And to grow on that with double-digits is no mean task in terms of what we have kind of taken on.

Overall, commiƩed to the Home Décor revenue, we have said that 8 - 10% will take a very clear focus on this category.

As I said, this business complements the exisƟng coaƟngs business in a very, very strong manner.

The non-auto industrial business, which is a General Industrial business for ProtecƟve coaƟngs is something which has crossed a landmark Rs.

1,000 crores.

It has doubled the business in three years with very strong proﬁtability also rising, which is a very good and posiƟve sign in terms of showing the ingress of Asian Paints, not only from an architectural point of view, but also from an industrial point of view in a strong manner.

In global, as I said, while the numbers were looking weak, but if you look at it from constant currency terms, we sƟll have a double-digit growth which we have been able to take.

And this is because of the fact that there are devaluaƟons of the currency happening in Egypt, Bangladesh and Sri Lanka, as you are aware of.

But I think, the overall growth trajectory on constant currency terms is preƩy strong in terms of what we see.

And the other thing which is there is that, one deﬁnitely there has been some soŌening of prices.

But as an organizaƟon, we focus on operaƟonal eﬃciencies very, very strongly and also look at formulaƟon and sourcing eﬃciencies, which is a large component, which we try to bring a strong eﬃciency in our overall input costs.

And that has also contributed to our margin 21 | P a g e increase, which is both quarter on quarter as well as what we see from a point of view of on a year on year basis.

So, these are strong signals which are possibly coming in terms of giving a hint in terms of what lies ahead.

In terms of dividend pay-out, there has been a constant strong upward journey.

And I think, if you look at from an industry standard, the pay-outs are very, very strong in terms of what we are making.

And this Ɵme the pay-out is almost 60% kind of a pay-out which shows the direcƟon in the sense that we would like to reward the shareholders in terms of the good performance which has come in from a proﬁtability point of view, as we see this year folding up.

22 | P a g e The other thing which is very clear is we are deeply intertwined with ESG this year.

We've started this process of sustainability long back, but we have now taken the ESG road very, very strongly.

In all these areas of Environment, Social and Governance, I think there are very, very strong iniƟaƟves and imperaƟves which have been put, so that we are able to kind of really, as a leader, take a very clear lead in the market.

For a lot of you who do not know, we today have RE which is the energy which comes in, almost about close to 60-65% is what is generated by us for our plants.

And we are water posiƟve, which means that the amount of water we take from the ground, we generate more water per say and I think this goes as part of our ESG framework.

I think Governance is of the highest standards which we try to build in.

And therefore, today you will see that as the annual report comes in, that all these elements are intertwined with the business in terms of going ahead.

And it's not like it's a separate iniƟaƟve.

So, if you are able to turn ESG to kind of show you the way of proﬁtability, I think that is something which really maƩers in terms of looking at what we want to do.

23 | P a g e As I said, freshwater replenishment in terms of the numbers are very strong.

Similarly, the renewable electricity, the numbers are very clear and our targets which we have taken for 2030 are preƩy aggressive.

The new iniƟaƟve of recycled material and packaging is another strong iniƟaƟve which is being taken, which kind of shows that as a leader, we are willing to really put our money behind in terms of these issues and look at relaying into the business growth as we go ahead.

24 | P a g e Obviously, I'm sure a lot of quesƟons will come in terms of how we see the outlook overall, in terms of looking at how we want to grow.

I think the GDP numbers which have come out are preƩy strong in terms of what is there.

And we are all aware that when we look at paint, we speak of 1 – 1.5 Ɵmes the growth of GDP as an indicaƟve direcƟon in terms of what is there.

So, we feel for the year, deﬁnitely, I think the growth numbers look strong.

We are focused on growth in a very, very strong manner as an organizaƟon to move forward.

And this growth comes not only from the point of view of just compeƟƟon or the unorganized sector.

It also comes from overall increasing the per capita consumpƟon of paint in the industry which as a leader we have taken on ourselves.

Also geƫng into newer categories, like we have fuelled the whole story in waterprooﬁng in a very big manner.

So, I think our focus on growth, will remain and we are looking posiƟve with respect to how the year would pan out from a point of view of overall growth.

Obviously, in terms of the monsoon forecast, there have been some quesƟons raised in terms of the El Nino and so on, so forth.

Now that is clearly what eﬀects the agrarian economy in terms of iniƟaƟng the rural demand.

So, we will look at possibly coming to a more deﬁniƟve analysis on that as the year progresses and we would know shortly in June and July what's 25 | P a g e happening to monsoons.

But I think overall, we don't see an outlier here in terms of something which can upset the apple cart going forward.

InﬂaƟon, overall, raw material prices appear stable.

We might not see too many high peaks or lows coming and therefore largely they might remain benign with some spurts here and there, depending on some geopoliƟcal condiƟons which might develop overall, but fairly kind of appears stable as a structure in terms of going forward.

We focus our energies on architecture business, which anyway is the core, but along with that, growing the Home Décor business, growing the Industrial Business have been strong objecƟves with whatever we can do with respect to even the global business.

So, I think focusing on all around work as an organizaƟon in terms of what we want to really target and grow, especially geographies of Sri Lanka, Bangladesh and Egypt is something which we would look at in terms of our internaƟonal footprint going forward.

So that's all.

And thank you very much for listening intently to this.

We are now open to quesƟons.

Thank you.

Moderator · Conference Operator

We now begin the Q&A session.

Mr. Abneesh Roy (Nuvama)

This is Abneesh here from Nuvama.

Two quesƟons.

First is on Home Décor.

So, when I see the strong performance of the real estate and I see that that's extremely strong.

But when I see your numbers in Ess Ess and Sleek, you've pointed out that the retail demand is weak.

So where is the disconnect there?

And second, aŌer so many years, the margins in both businesses are extremely weak, almost no proﬁtability.

So, what is the reason and what can change in three years?

Because your guidance of doubling from 4 - 5% to 8 - 10% means that it would be extremely strong growth in terms of revenues because your core business is also growing in double digits.

So where is the conﬁdence coming from because if I see Ess Ess and Sleek, we are not geƫng the conﬁdence.

Of course, you have now diversiﬁed far beyond that.

So is the conﬁdence coming from those segments.

26 | P a g e

Mr. Amit Syngle · : MD & CEO

So, you are right.

What we have seen deﬁnitely is strong acƟvity in the housing sector overall, which is there, which is reﬂected from a point of view of even the Projects B2B business which is coming in.

If you look at closely, the last two years, the Kitchen and the Bath business has done well.

It has grown at almost about 30% overall growth, which is there.

This year, the Bath business overall is grown at about 15% and has given us almost about Rs.

4 crores proﬁt over that number.

Yes, the proﬁts are lesser, but you must appreciate the fact that today, our share in the business of Bath is in single digits overall in terms of what we see.

We are compeƟng with a larger number of giants there in terms of what's working, be it a Jaquar, a Parry, a Cera, Hindustan, Kohler, kind of companies which are operaƟng in terms of that segment.

And therefore, today, I think we are kind of tesƟng out various strategies in terms of what can take us there.

Similarly, in Kitchen, the Kitchen business has grown by about 17%, which is the modular kitchen business.

It’s the components business, which has a certain percentage in the broader business which has come down because it's like a hardware business in terms of what you see.

And the modular kitchen business is in proﬁts to that extent.

It’s the components which has come down.

How we see these two businesses ﬂaring up and what is our conﬁdence coming from is our chain of stores, which we have put up now.

This chain of stores has come in the last three years, and this is called the ‘BeauƟful Homes’ stores.

As you spoke of, about 50 stores are there now operaƟng in April.

And we kind of want to take this number to about 100 stores over a period of next two years.

We think that this is going to be a very big galvanizing factor, where we are able to oﬀer décor under one roof very strongly and able to aƩract the customer in a strong manner and really make the customer aware of the Asian Paints prowess and together in terms of the overall Home Décor area.

So, I think we believe that given the fact that we are the Challenger brand with respect to both the Bath and the Kitchen business, we are now looking more in control in terms of going forward and our basis of growing from 4 to 8% contribuƟon arises from the fact that we deﬁnitely look at our chain of stores contribuƟng in a sizable manner, along with categories of fabrics, lighƟng, furniture, ﬁƩed furniture, also coming in very, very strongly to kind of amp up the volumes overall.

27 | P a g e

Mr. Abneesh Roy (Nuvama)

My second quesƟon is on waterprooﬁng.

You have become Number 1 in the retail waterprooﬁng.

So, I want to understand when you entered this space 6-7 years back, that Ɵme, what was the construct of the industry or who were the key players?

What have you done diﬀerent and who would have lost market share if you could clarify that?

Second is when I see B2B, obviously Pidilite is a big daddy there.

So now that you've have cracked the retail part, would you go onto B2B also in a signiﬁcant manner over the next 5 years and Pidilite has now entered paints, more interior paints.

Would you see that as a big long-term compeƟƟon?

And is it a bigger compeƟƟon than Grasim from a structural point of view, because Grasim currently is not present in most of the adjacencies.

Mr. Amit Syngle · : MD & CEO

I think when we look at from the point of view of waterprooﬁng, we started this iniƟaƟve about 7 years back and we started from literally scratch and we developed indigenous technology in terms of looking at developing this business very, very strongly.

In retail, the larger players which were there in the market was Roﬀ, Sika, Fosroc and Pidilite.

And over a period of Ɵme, what we see, it's not about just the share in terms of what we have gained from them.

We have really enlarged the overall market by reaching out to more homes, making the awareness of waterprooﬁng very, very strong.

And the whole waterprooﬁng area has been a boon for us, because earlier the complaints on paint was related to the paint.

But now, what is very clearly happening is that we are able to take care of the dampness and the leakages because the waterprooﬁng coming in.

And therefore, what we see is that we have really exploded the retail market and leŌ the exisƟng players far behind in retail, because they were just servicing the demand and they were not doing anything in terms of inﬂaƟng the demand.

And therefore, we think that we are now far, far ahead of any other player in the retail market for sure.

And that has also given credence because of our very, very strong distribuƟon footprint we have used eﬀecƟvely in terms of really reaching out with waterprooﬁng to every small town in the country.

Our prowess in retail is more than any other brand because they operate through a distributor structure.

We operate directly with the 28 | P a g e retailers and therefore we are able to train and teach our retailers to do much more business in a very strong manner.

As far as projects is concerned, I want to tell you that we are almost the number 3 player in projects as well because there are very diﬀerent players in terms of projects.

There are some mulƟnaƟonals there in terms of what is there overall.

But, I would say that we are now a very signiﬁcant player in projects as well.

As I said, we have entered admixtures, we have entered the repair range, we have entered the membranes range and today we oﬀer every other product.

There are almost about 200 products which we are oﬀering in the waterprooﬁng category, which are technical products in the project regime.

And I would say that it is another maƩer of 2 years, we would become tops in the project sales market as well.

So that's the overall waterprooﬁng answer.

The second area is with respect to Pidilite’s entry, in terms of the overall paint market.

As I see it, you know overall, while they were in some segments of paint, some of the exterior segments they were present in wood ﬁnishes as form of ICA so and so forth.

I think, this is a more range compleƟon exercise which I see from them coming in.

The products are at a very, very price economy level.

There is nothing outstanding about the products which kind of comes in and what we feel is that it's just range compleƟon which is happening, where they want to touch the market much before others do in terms of the new players coming in.

Actually, we don't see any threat happening there at all because that segment is something which possibly we are entrenched very, very strongly in and we don't see any disrupƟon coming in.

So, we feel that possibly they might disrupt some of the unorganized sector, which is there because the price parity in terms of what they're oﬀering is at a very low level and they want to uƟlize their distribuƟon structure to kind of really reach out to some of the dealers who would ask for paint.

I don't see it's a very signiﬁcant kind of iniƟaƟve which could kind of really ruﬄe the paint market anyways.

Mr. Percy Panthaky (IIFL)

Percy Panthaky from IIFL.

Two quesƟons from my side.

This quarter, margins have already exceeded 21%.

Your earlier guidance was that you would try and maintain around 18-20%.

So, do you think in light of these results, your guidance is conservaƟve and actually you will do 29 | P a g e more than that going ahead?

Mr. Amit Syngle · : MD & CEO

I think we are sƟll maintaining the same guidance.

We are not kind of really looking at saying that the margins can go up or whatever, because we sƟll feel that the environment is not fully stabilized.

Today, there is an element of large amount of inﬂaƟon happening across the world.

The demand condiƟons are all topsy turvy in terms of what we are seeing.

So, we do not know in terms of from a point of view of overall price stability.

While we have said that we are apprehending, at least for the ﬁrst half of the year, some price stability should happen.

We really do not know in terms of which way the overall raw material prices can go because you have seen the amount of jumps that we are seeing in crude.

It kind of varies from something like 74 to 82 kind of a thing in 2-3 days’ Ɵme.

So, we do not really know in terms of which way it goes.

We would like to kind of sƟll see it for another 6 months in terms of how the enƟre thing moves before we kind of really look at changing our guidance overall.

But we are very conﬁdent that we should remain in this bracket as we kind of go ahead.

Mr. Percy Panthaky (IIFL)

If I assume hypotheƟcally, if the input prices remain stable where they are, will the EBITDA margins also remain at Q4 levels?

Or do you think that they would sƟll sort of go down towards your 18-20% band because you would probably increase rebates, or you would pass on prices or increase ad spend or whatever other reason?

Mr. Amit Syngle · : MD & CEO

As I see it, it is very clear that we want to look at seeing that we conƟnuously inﬂate demand in the market.

So today, the kind of overall price increases taken over the last one and a half years have been very, very high.

We will sƟll observe the market in terms of saying that if we need to pass on some and take decrease in certain prices and really raƟonalize some of the areas as we go ahead which can really aﬀect possibly from the margin level in Q4. And that is why I said we would like to remain in that 18-20% band as a guidance overall.

We are also looking at really taking on the area overall in terms of our markeƟng and adverƟsing, in terms of what we want to do in some of the newer segments in terms of what we are doing.

Therefore, I think on a safer side we should kind of really look at being in that 18-20 range as 30 | P a g e we go ahead.

Mr. Percy Panthaky (IIFL)

Second quesƟon is as you have given some sort of guidance on the Home Décor business that it's around 4%.

You want to take it to about 8.5%.

Can you give some similar kind of idea on waterprooﬁng?

What percentage of sales currently is waterprooﬁng and how much it can be 3 years down the line?

Mr. Amit Syngle · : MD & CEO

So overall, we started waterprooﬁng from a zero base.

Just for your informaƟon, as I said.

Today, if you look at from the size of the overall waterprooﬁng market, when we looked at possibly the size of the waterprooﬁng market was just about something like about Rs.

6,000 to 7,000 crores in terms of what is there.

We feel that now the size of the waterprooﬁng market has literally gone up, given our ingress in the market in a very, very strong manner.

And therefore, what we see is deﬁnitely from a point of view of retail, we are very, very strongly contribuƟng to the overall business, which comes in retail in a very strong manner and also in projects.

It is very diﬃcult to put a percentage to that because the overall segment growth is very very strong going forward.

Mr. Percy Panthaky (IIFL)

But currently would waterprooﬁng be close to a double-digit kind of contribuƟon to your own sales?

Mr. Amit Syngle · : MD & CEO

Deﬁnitely.

Mr. Parag Rane

Percy, just one clariﬁcaƟon.

I heard you menƟoning 21% odd margin.

So, the band of 18-20% that we state as our targeted range.

The way we look at it is PBDIT before Other Income, as a percentage of sales and not sales plus operaƟng income.

So, that is the expectaƟon that we are saying.

31 | P a g e

Mr. Mihir Shah (Nomura)

This is Mihir from Nomura.

So, my ﬁrst quesƟon is on 4Q.

Is there any element of postponed sales from earlier quarters that were weak in the 4Q?

And if you can give any colour on how April and May are shaping up.

Is the strong volume growth that we've seen in 4Q conƟnuing in the April-May months?

Mr. Amit Syngle · : MD & CEO

So how we see it is that there is no element of postponement deﬁnitely.

I think Q4 is pure sales of Q4 in terms of what we see come in.

And as we had said earlier, Q3, given the fact that it was a longer base which was there and that is why possibly the Q3 growths were a liƩle bit lesser because of the shorter Diwali season this year and the demand not really picking up.

But Diwali sales literally dies at that point of Ɵme.

It doesn't really carry into the next quarter.

As we look at the current environment, I think overall the demand condiƟons are good in terms of what we are seeing and we see that going forward possibly for this quarter, deﬁnitely.

I think in terms of we are really aiming at a double-digit volume growth going forward.

Mr. Mihir Shah (Nomura)

My second quesƟon is liƩle medium to longer term on distribuƟon.

Actually, you know, I recollect that in the nine months call, you had menƟoned that, you know, you added a similar number of dealers or distributors or reach in what you had done in the previous year in FY22. In nine months, you added the similar number.

So, can you share what you've done for the full year and what is the kind of distribuƟon or dealer reach that we are thinking about for the next year and year aŌer?

Mr. Amit Syngle · : MD & CEO

So, what we see is that I think in the year gone by, we would have added almost about anywhere between 15,000–20,000 dealer points.

And going forward, we are aiming at anywhere between 10,000-15,000 retail points coming up in the coming year as well.

And that is going to be a strong aim in terms of what we would like to do.

And the larger focus sƟll remains on the smaller ciƟes and the suburbs of the bigger ciƟes, because we truly look it at that from a liƩle bit of a cluster approach in terms of where we would like to have an outlet going forward.

So therefore, possibly another 10,000-15,000 retail outlets, deﬁnitely, we are 32 | P a g e looking at.

Mr. Mihir Shah (Nomura)

I believe that over the period of last couple of years, we've seen a lot of formalizaƟon happening.

We've seen very strong volume growth coming.

We see that volume growth conƟnuing.

Can you talk a bit on the unorganized players, the regional players?

How much have they shrunk?

You know, to what extent are they pained or do you expect them to come back with raw metal prices now geƫng beƩer or, you know, your raw material prices cooling oﬀ, your gross margins geƫng beƩer?

Can one expect the unorganized players to come back in in a big way?

Mr. Amit Syngle · : MD & CEO

I think what we have seen is in the ﬁrst two years that the unorganized players had their volumes compressed because of their supply chains being not so eﬃcient as the bigger players.

And the raw material scenario was also causing quite a bit of havoc with the inﬂaƟon we were seeing.

In the last year, what we have seen is that there is some stabilizaƟon happening with respect to their supply chains and people are no longer regional.

They are sƟll kind of becoming naƟonal because of the ease of their supply chains now happening.

We have seen possibly, you know, we used to divide the unorganized sector as 30% and 70% as organized.

Maybe I think in the last years, we would have seen some movement of 4 or 5% kind of decrease, which is there.

Our belief is that possibly given the price advantage they sƟll have and the fact that there are strong regional enƟƟes and are expanding, possibly I think the raƟo will come back literally to what it was earlier in terms of they covering the ground to the 3 - 5%, which they have lost out.

Ms. Sheela Rathi (Morgan Stanley)

This is Sheela Rathi from Morgan Stanley.

Thanks for giving the idea on the total size for industry, which is at Rs.

70,000 crores.

How should we think of the growth rate over the next ﬁve years for the industry?

And you just alluded to the fact that unorganized could go back to 33 | P a g e 35% in the near term.

But how should we think of that number in the next ﬁve years?

Mr. Amit Syngle So, we are pegging the number going to almost like about Rs.

1 lakh crores over the ﬁve years.

So, the growth rates are deﬁnitely ranging between 10 - 12% kind of a zone as we kind of go ahead.

So, I think this is an industry which will deﬁnitely grow.

Given the fact that we see possibly a stable government, we see government spending strongly, we also see a GDP of anywhere between 6 - 7%.

And to that extent, which will conƟnue to fuel this market going forward.

In terms of shares, I think the shares would kind of remain in this zone because the smaller players, MSMEs come with their own strengths.

And I think it is always good to have the regional players possibly catering to the market in a strong manner.

They have large government support also in terms of some of the pricing taxaƟon structures which kind of come in.

Therefore, we see that from a point of view of economy products in that kind of segment, they will conƟnue to be in that market.

But, we deﬁnitely see this industry going to about 1 lakh crore, as we kind of go forward.

With respect to your presentaƟon, where you have menƟoned that we will pursue an aggressive strategy.

So, I just wanted to understand the deﬁniƟon of aggressive.

Is it around expanding into adjacencies?

Is it around being more aggressive with respect to distribuƟon, or do we expect some price cuts coming through because we are geƫng into a deﬂaƟonary mode.

So, if you could just expand on that.

Mr. Amit Syngle So aggressive means everything what you said.

It's not only architectural, we are looking at seeing that we have diﬀerenƟal strategies to grow across the country.

Whether it is in distribuƟon, whether it is with the supply chain, whether it is with respect to our new products or whether it is in terms of looking at the premium luxury segment, in terms of what we are launching or even waterprooﬁng segment.

When it comes to industrial, I have already spoken that there has been very big aggression, which we have been taking, both from a General Industrial and the AutomoƟve Industrial kind of a zone.

Home Décor, I have indicated the kind of trajectory, we want to follow from where we are to where we want to go to by FY26. 34 | P a g e Similarly, I think in Global, we would like to see that it's not only in terms of the exisƟng countries.

If there is any opportunity which comes, we will be in aggressive terms of going into a new country as well going forward.

Our aggression conƟnues from a point of view of even the whole area of really puƫng strengths in the organizaƟon, so that we are able to supplement and retain our margins strongly.

That is why our backward integraƟon strategy is very important.

So that possibly as go ahead, we are able to take recourse from the fact that we are adding more and more margins to our material consumpƟon story in a very big way.

So, I think aggressive literally means that it is in all areas.

Mr. Shirish Pardeshi (Centrum)

Hi Amit and team, thanks for the opportunity and congratulaƟons for good set of numbers.

Just two observaƟons.

In this quarter you have reported a 16% volume growth and also margins have expanded.

So, if I give the beneﬁt and I just wanted to understand.

Is this margin expansion primarily because of the falling raw material prices and packaging material or there is a mix improvement because if your volume growth is higher, than your revenue growth, I was suspecƟng the volume growth is driven by the more economic emulsions.

So therefore, the quesƟon.

There are two quesƟons What is the quality of margin which you are trying to gather?

And second, therefore, if you can give a broad number for domesƟc decoraƟve in terms of premium emulsions, economy emulsions and low-end emulsions.

The broad number - I know you will be hesitant to give me the exact number, but if you can help me on that.

Mr. Amit Syngle · : MD & CEO

So overall, when we look at the margin story.

It really revolves around 3 areas.

One is the material prices soŌening, which is very clear.

We have seen a 4% kind of a deﬂaƟon in prices, which we have seen in Q4 very clearly.

The second is a strong imperaƟve on formulaƟon and sourcing eﬃciencies, which is also giving us a strength in terms of really making our material prices lower, given the fact that we are working on formulaƟon eﬃciencies and sourcing eﬃciencies.

The third area is the overall mix has been decent because while the premium and the luxury segments have also grown by double-digits, we have seen some of the other segments which have grown far higher than that double-digit on an outlier kind of perspecƟve overall.

So, I 35 | P a g e think it's a combinaƟon of the mix being good, but some of the other products really being an outlier kind of products coming in.

So, from a point of view of premium luxury, we see that possibly premium luxury is in double-digits, but the smart emulsions, economy emulsions would be slightly higher than the premium luxury in terms of what they would have contributed into the margins.

Mr. Shirish Pardeshi (Centrum)

Would you comment on FY23, what would be the broad mix?

If I check with you on the luxury premium?

Mr. Amit Syngle · : MD & CEO

Our intenƟon obviously is that we stay ahead on a very healthy product mix going forward because the whole game of geƫng the margins in that band is dependent on the product mix in terms of the way you operate.

Obviously, it depends on inﬂaƟon, in terms of prices very strongly because the material prices contribute to a substanƟal chunk in terms of our overall kind of price structure.

So, going forward, I think we are very clear that we are going on a very, very balanced kind of a growth, where we look at furthering the luxury and the premium sectors very, very strongly.

But what you must understand is that if you look at the enƟre structure of the product proﬁles, the boƩom of the pyramid and the middle segment premium is a large contributor in terms of the overall structure, in terms of consumpƟon, which really happens.

So, while you would like to conƟnue to grow at the luxury and the premium level, you can't ignore the premium and the boƩom end in terms of growth.

So, as I said, we will try to balance in terms of seeing that we are able to take a very, very structured, balanced approach where we grow possibly in a balanced manner across the luxury premium and the economy segments.

Mr. Shirish Pardeshi (Centrum)

My second quesƟon on the industrial part.

The growth rates were lower.

However, you have shown good margin expansion.

Is it a funcƟon that it's a compeƟƟve business?

You have not dropped the prices and now will be forced to drop the prices in industrial and the growth will come back.

36 | P a g e

Mr. Amit Syngle · : MD & CEO

So, we have not dropped the prices.

If you see the proﬁtability, the proﬁtability has improved of both the businesses, In fact, we have been one of the strong proponents in terms of taking the price increases very, very strongly, whenever we felt that we need to take price increases because of inﬂaƟon.

I think where the kind of imperaƟve has come in is that we have looked at increasing our reach from a point of view of some key account customers.

We have looked at the depth of going to the customers and focused in terms of the technical servicing part in a very, very strong manner.

We have also invoked our enƟre JV with PPG Industries and introduced some very, very superior products in the market, which are actually at the high end of the market.

But they give very, very strong performance when it comes to the technical features they oﬀer.

Whether it is from a point of view of say a heat resistant paint or whether it is from point of view of epoxy or a chlorinated rubber in terms of what we oﬀer in the market.

So, I think it is a combinaƟon of superior technical service, the reach, the depth of quality of customers in terms of what we are doing and also very, very strong diﬀerenƟated products which we are now invoking in the market in a very strong way.

Mr. Shirish Pardeshi (Centrum)

My last quesƟon on the capex and capacity, can you outline the next 15 months, which are the capacity which will get operaƟonal and what capex we are looking at FY24?

Mr. Parag Rane

Next year, our capex plan in terms of spends should be in the region of about Rs.

2,000 -2,300 odd crores.

The uƟlizaƟon the way we see it today, we are somewhere around the 75-78% mark.

The brownﬁeld expansions which are ongoing.

And we have a host of them ongoing, I think a couple of them will deﬁnitely come on stream as we go into FY24. Then the balance spends beyond that year, that's how we are seeing it.

Mr. Shirish Pardeshi (Centrum)

Parag, just you can help me what KL capacity will get added in FY24.

Mr. Parag Rane

37 | P a g e So, in a FY24, we would add roughly about 2.2 - 2.5 lakh KL to the capacity.

Mr Avi Mehta (Macquarie)

Avi here from Macquarie.

I wanted just to beƩer understand the margin comment.

Now, was there any one oﬀ in this quarter in terms of inventory?

Because there's no low cost inventory.

And really logically, it seems that you've done a change in formulaƟon.

Volume growth remains healthy.

So, demand environment doesn't seem to be the concern, even your comments.

Is this more a comment from a medium-term perspecƟve, that over Ɵme demand might come oﬀ and hence we need to pass on?

Is that why you're arguing for margins to come down from current levels?

What exactly is the driver for that?

Mr. Amit Syngle · : MD & CEO

Overall, what we see is that we had taken certain price increases over a period of Ɵme.

And what has happened is that we have not looked at decreasing any prices in this quarter.

So, the higher price increases conƟnued and we had a scenario of material prices soŌening of about 4%.

Coupled with that, we had this whole area of the operaƟonal eﬃciencies and also the purchase sourcing eﬃciencies really coming in strongly.

You must appreciate that when you look at the overall environment, the suppliers themselves are quite confused in terms of what's happening because the US and China economies, which are big consumpƟon hubs, they are going northwards from the point of view of not knowing and the overall inventories are coming down.

So therefore, the whole area of negoƟaƟon with the large vendors is becoming very strong in terms of procuring some eﬃciencies, in terms of what you are able to kind do.

And given the fact that we never lowered our prices and our product mix is quite decent in terms of what we've been able to achieve, that has really supplemented in terms of the margins, which you see.

Which is why I commented earlier, that we would not bank in terms of just saying that this thing will stay forever, because one, you do not know in terms of what are the material speciﬁc movements.

For example, today we ﬁnd that TiO2 is kind of going higher and some other solvents are coming possibly lower.

So, you do not know the exact mix of the raw 38 | P a g e materials in terms of which way they will move.

Also, the fact that we are sensing that if today there are certain segments where customers are ﬁnding it a liƩle bit more expensive to buy that product and there is some downtrading happening, we might look at possibly really adjusƟng some prices going forward.

But the impact of this quarter is very clearly because of the price increases that you have goƩen and the material prices going down, beƩer negoƟaƟon of prices, all that has given us this kind of margin and the product mix being sƟll strong.

Mr Avi Mehta (Macquarie)

In your framework, if understand it correctly, the way you are saying is, I will essenƟally ensure a parƟcular revenue growth should be there and we will not necessarily focus on margins.

Margins will be maintained in that band.

But I would look to drive as much revenue growth as I can and that would be the thought process.

The ﬂow through the EBITDA may not be margin but will be more in revenue.

Mr. Amit Syngle · : MD & CEO

See, we believe in balanced growth.

If you have seen last three years also when I showed you the volume trajectory, we believe in not only driving only value, but we think that volume is a very, very essenƟal kind of parameter which gives help to the market in a very, very strong way in terms of how you want to look at growing the market, because the only value component can come because of price increases as well.

So, volume is a true indicator in terms of the health, in terms how the overall product proﬁles are going.

We believe in a balanced, proﬁtable growth.

I would not like to compromise one on the other side, and I think that's the right way to look at it, because in a growing market, possibly, you know, you can’t be siding with one and saying that I don't want to look at the other side.

Therefore, I think the way to go is a balanced, proﬁtable growth in terms of what we are looking at.

Mr Avi Mehta (Macquarie)

The second bit is on the VAE project in parƟcular.

Now, you know, if you could give us some internaƟonal examples where VAE is used because one of the pushbacks that tends to come in is that this can be similar to at some point of Ɵme.

If you remember, there was something called nanotechnology, which was being argued that could be a new thing in paints.

You know, 39 | P a g e how do we understand the way, whether it's a fad?

Why do think it's a very big change.

So, any internaƟonal examples you could share on where VAE is being used or give us to beƩer appreciate this technology.

Mr. Amit Syngle · : MD & CEO

Today, if you look VAE is used across the world.

If you take even in a company like Sherwin- Williams, which is the largest paint player in the world today, they have a substanƟal usage of VAE, which they use because VAE is essenƟally a very progressive emulsion.

It is one - environment friendly, it is low on VOC, it has literally no oﬀensive smell, which comes in and therefore it is the emulsion of the future in terms of what we see.

Today large quanƟƟes of this emulsion are imported into India because there are only four or ﬁve players across the world who make it.

Where our game comes in very strongly is that the moment, we look at making this emulsion in India, it kind of gives us very, very strong leverage from the point of view of cosƟngs and margins, which we are able to derive in our products.

This gives us the capability of really pricing our products very, very strongly from a point of view of what we want to do in the market going forward, which we think, today that the other players would be deﬁnitely forced to use this emulsion, but they have to import this emulsion otherwise and there is an import duty component, there is a freight component which comes in.

And therefore, the kind of eﬃciencies it does oﬀers us is very strong because people cannot escape using this emulsion because it is one of those areas which also imparts some special properƟes to the paint, which you are able to get at a very cost eﬀecƟve manner, when you use this emulsion.

And given the fact that this emulsion is progressive environment friendly and literally no oﬀensive smell, it is deﬁnitely an emulsion where people can't really ﬁnd an alternate in terms of just using it because that alternate will come at a higher cost.

Mr. Tejash Shah (Avendus Spark)

Hi, Tejash from Avendus Spark.

The kind of ramp up that we have seen on our retail touch points, how what kind of ramp up we need on the backend in terms of depot network, in terms of feet on the street also.

And does it mean that our depot network also would actually go up or would have gone up in the last two, three years in the same pace?

So, has it actually expanded in the same way that we have expanded the frontend?

And how what was it for 40 | P a g e example, this year we're targeƟng 10% retail touch point increase.

Does it mean that the feet on the street that we have also needs to increase in the same proporƟon?

Mr. Amit Syngle · : MD & CEO

So, what we have done is that over the last three years, the overall hiring of the company has been fairly aggressive.

We even looked at the same thing during COVID Ɵmes and this year itself, we would be recruiƟng more than 1,000 people in terms of what we are doing, both from the campuses all across, as well as the front liners, which would come in.

And this is almost 3 Ɵmes what we would generally recruit in every year.

So, you're right, because with such a large retail network, there has to be a ramp up in terms of the people which are also happening.

And therefore, I think we are deﬁnitely using large amount of technologies to kind of see that the producƟvity element remains in terms of our overall foray.

But yes, the number of people are being ramped up and they are ramped up because of also the backward integraƟon, the Home Décor and other areas coming in.

So, it's an all-around ramp up which is kind of taking place.

Mr. Tejash Shah (Avendus Spark)

On depot network, what will be the count, if you can share and what was it 3 years back?

Mr. Amit Syngle · : MD & CEO

I think we would have added about 40 odd warehouses over the last 3 years as we see it.

But I think more importantly, what we have done is that the size of the warehouses has doubled to now almost like 1 lakh square feet to about 1.2 - 1.5 lakh square feet.

So, both things in terms of expanding the size of our warehouses, the mechanizaƟon of the warehouses and the number of warehouses.

So, all around there is expansion which is happening with respect to the distribuƟon structure.

Ms. LaƟka Chopra (JP Morgan): This is LaƟka from JP Morgan.

My quesƟon was, you know, on this volume value diﬀerenƟal of 3% in the quarter.

If I go by your comments, probably we are looking at industry deco volume growth of 10 to 12%, one and a half to two Ɵmes GDP.

Do you anƟcipate for the coming year given you know, you menƟoned that the economy emulsions are growing at a 41 | P a g e liƩle faster pace?

And then, of course, you have Home Décor contribuƟon as well coming in.

Would this volume value diﬀerenƟal stay stable in your view, or it could expand for the coming year or reduce?

It's very diﬃcult to say because for each quarter, the mix also varies.

It's not one mix which is there because when you come to Q2, there is also a stocking pressure which comes in which people stock for the season.

And when we look at Q3, this Ɵme we are looking at a longer Diwali which comes in.

So typically, during a Diwali season, what happens, the mix kind of varies from Q1 and Q4 in terms of what we you look at.

So therefore, very diﬃcult to say in terms of how the mix would augur going ahead.

But I think, we have reason to believe that it should be a certain band in terms of what we should kind of follow.

So, it could be possibly anywhere between plus minus 2-3% in terms of what we look at going forward, unless obviously there is some other disrupƟon in the market which takes place.

It is also a funcƟon of someƟmes that if you are able to gain share from some of the unorganized, then it fuels the volume part to slightly more than the value part someƟmes.

So, I think it is very diﬃcult to say that what would be the real guidance to kind of see the value volume kind of a stroke there.

But I think from our point of view, the guidance very clearly remains from a margin perspecƟve.

Clearly that we would really like to retain that margin.

At the same Ɵme, we would like to be, as I said, aggressive in all segments so that we are also looking at broadening the market and gaining share.

Ms. LaƟka Chopra (JP Morgan): And any ﬂavour on, you know, Home Décor segment other than Bath and Kitchen.

You know, how do they track on gross margins, operaƟng margins?

You know, because you have given a FY 26 revenue target, but any thoughts on how the proﬁtability will basically play out over medium term here?

I think for each category, it kind of really varies.

You've seen the Bath and the Kitchen in terms of the way it is kind of unfolding in terms of this thing.

Typically, what we see is that when we have acquired the lighƟng category, you know, the margins there with EDITDA close to about 42 | P a g e 18 - 20% zone.

And when you look at possibly the furnishing business, that would be in the range of about 10 - 14%.

So, you know, it would vary from category to category depending on one, the innovaƟon, the spread, the kind of range in terms of what you are kind of dwelling into.

But I think over a period of Ɵme, deﬁnitely we would see that this category should be seƩling anywhere between 10 - 14% kind of a zone.

Ms. LaƟka Chopra (JP Morgan): Can I just check for our FY23, on a standalone basis, what was adverƟsing to revenue raƟo for the full year?

Is it possible to share?

Mr. Parag Rane

It should be about three and a half percent.

Mr. Chirag Shah (CLSA)

This is Chirag Shah from CLSA.

Amit.

My quesƟon is going back to the Home Décor business, as we scale up this business and the business becomes far bigger, is there a merit in simplifying the corporate structure over here and what is the kind of capital that you need to deploy to scale up the ambiƟon that we have?

Are we also expecƟng more categories to get launched here?

Also, a liƩle bit, if you can, share the growth plans in the White Teak business in parƟcular and on BeauƟful Homes.

We are right now catering only to 11 ciƟes, but as we plan to double the number of stores, how many ciƟes do we plan to sell in?

Just trying to get a sense of where the market goes in terms of the geographical expansion.

Mr. Amit Syngle · : MD & CEO

Just to factually correct you, the BeauƟful Homes service plaƞorm is in 11 ciƟes.

The BeauƟful Homes stores are in much number of ciƟes, almost about 30 odd ciƟes.

So, I think both the framework will keep on expanding as we kind of go ahead and as I spoke of going from 50 to 75 to 100 stores, I think we will deﬁnitely have a footprint of about being about 50-60 ciƟes where the BeauƟful Homes store network is going to be there.

So, when we look at this thing in terms of categories especially, I think we are very buoyant in terms of categories like the fabrics, the lighƟng, the doors and windows, uPVC business.

We are looking at literally exponenƟal growth, upwards of 50% in some of these categories, which 43 | P a g e we will focus on as we go ahead.

And as I said, some of these categories are also very, very proﬁtable, and very strong from a point of view of design, commanding a certain price as you go ahead.

We have already added categories like rugs, ﬂooring, bedsheets in terms of the overall business going forward.

We are working on a very big category, which is called the ﬁƩed furniture, which is there apart from the furniture which is there.

And in future we will not mind adding any other categories which could kind of really be aƩracƟve overall.

But, we think that today we have harnessed actually most of the categories in terms of the Home Décor business, which are there and therefore we think currently we would like to have some consolidaƟon.

We have also launched Ɵles which are there, which is part of the Home Décor segment.

But we are not going for very aggressive volumes in terms of the Ɵles, but we are looking more the designer and the high-end Ɵles, which are coming in as a range compleƟon in terms of our overall Home Décor business.

So, I think that is something which is the intenƟon in terms of how we would like to grow this.

As a structure, right now, we have put all this under a parƟcular Home Décor structure, so that we can leverage all our skills in design, designers, structure who operate and our own leveraging of the architects, the designers in a very, very strong manner.

So currently it is a structure which is possibly we are trying to put where there is some overlap of the paint business.

But as we move forward, the structure will possibly see, whether we merge this structure into the full structure or whether we make it sharper, is something which we are seeing as the business progresses.

Mr. Chirag Shah (CLSA)

On the White Teak part and the furnishing business, what is the expansion that we expect on White Teak and in furnishing will it be largely distribuƟon led business, and if that is the case, is there a scope to signiﬁcantly expand faster?

Mr. Amit Syngle · : MD & CEO

When we see from a point of view of furnishing, when we took over the business, it had only about 100 retail points.

Now we have 900 retail points in two years.

So that is the way we have expanded the business and it is just not a distribuƟon story.

It is also a story of design where 44 | P a g e you give a very designer stuﬀ.

So, we have a Sabyasachi range of furnishing which is there.

There is a ‘Pure’ concept range of furnishing which comes at even a price of Rs.

6,000 a meter to about Rs.

9,000 a meter, which is really the high end of the market.

So therefore, we are looking at segmentaƟon within that kind of market in a strong manner, and it's not a pure play distribuƟon in terms of what we are looking.

But as I said, we are now in the furnishing market become number two player already in the market in the short span of two years.

We will conƟnue the imperaƟve of saying that not only we look at distribuƟon, but we look at possibly the design, the quality of the cloth and other parameters which come in so that we can oﬀer a very, very strong range to the customer in India in terms of what possibly the customer demands.

As far as lighƟng is concerned, we have ended this year at Rs.

109 crores.

We are angling for deﬁnitely a 50% plus growth kind of a thing in terms of what we want to take on this segment.

The segment, according to us, is about closer to about Rs.

1,100 crores as a market in terms of the overall segment.

And therefore, we think that there is enough scope to grow proﬁtably in this segment, because a lot of this lighƟng is imported from China today in the Indian market, which is of a certain quality.

And therefore, there is enough scope to grow in the White Teak lighƟng segment as well.

Mr. Chirag Shah (CLSA)

My last quesƟon is on the backward integraƟon.

If you can just give an update on the backward integraƟon faciliƟes that we are expecƟng, in white cement, VAE and Monomer.

And Parag, does the Rs.

2,300 crore number include this backward integraƟon related capex as well and how much?

Mr. Amit Syngle · : MD & CEO

Yes, that number includes because you must appreciate that the funding takes place over the next 2 to 3 years’ Ɵmeframe.

So, this funding, which Parag spoke of includes that kind of funding which is happening both from a VAM VAE perspecƟve, which is a plant, which is coming up and also the cement plant which is coming up in Dubai, Fujairah.

Apart from that, we have anyway expanded some other elements of backward integraƟon as well, which is already implemented in our plants at the moment.

45 | P a g e Mr. Manoj Menon (ICICI SecuriƟes): Hi Amit and team, excellent performance given the market context.

This is Maonj Menon from ICICI SecuriƟes.

Sir, actually my quesƟons are not really pertaining to the quarter.

One quesƟon which investors do highlight to us or rather ask us how do you actually deﬁne volumes?

You know, is it tonnage or is there a formula which you apply?

So, the volume basically is a conversion in terms of the speciﬁc gravity of the material, in terms of which we look at converƟng it into litres.

So today, whatever we sell in value terms, there's a conversion which takes place into deﬁning it as a litre.

And that kind of consƟtutes what we see as a volume.

So therefore, in a way, the volume is linked to the value in a strong manner in terms of how it emanates.

Mr. Manoj Menon (ICICI SecuriƟes): Understood, so is it fair to say that let's say when you sell a PuƩy at Rs.

20 per kilo, versus the top end of, let's say, paint that, you know, maybe Rs.

800, you know, per litre.

I mean, give, or take, Kilo Vs Litre is like maybe 0.9.

You know, is it fair to say that, you know, the formula which you use takes care of this, you know, signiﬁcant, let's say delta in terms of 40 X in terms of low end to the high-end product, which you sell.

No, see each volume, which comes in is basically related to the value in that sense; because what will happen in terms of, say, a category like distemper.

When we look at distemper, basically it has a certain speciﬁc gravity raƟo which kind of comes which qualiﬁes it in certain volume zone.

There is no formula which is used to bring everything to the same base.

If there is a waterprooﬁng product, it has a certain volume which is coming in because of the overall thing and it will have a certain value contribuƟon which will be possibly lesser than the value contribuƟon of a luxury product.

So, there is no one formula which binds everyone to bring it into a certain zone that the same formula is applied towards that.

It is a pure play volume which comes of that category, which adds to the overall volume in terms of what we project at the overall level.

And why, we feel it is comparable because each company has the same 46 | P a g e product range today in the paint industry.

So, there is no company in the paint industry, which does not have a puƩy, does not have a primer, does not have a distemper, or does not have waterprooﬁng.

So therefore, I think when people speak of volumes overall, it is by and large comparable in terms of what really people are speaking of in the industry.

Mr. Manoj Menon (ICICI SecuriƟes): That's very fair.

So basically, what I understood is it's not necessarily a value weighted volume, it's actually a volumetric volume understood sir.

That’s right.

Mr. Manoj Menon (ICICI SecuriƟes): It's a brilliant work you have done in waterprooﬁng.

And I think there was no quesƟon on adhesives.

Maybe some comments on adhesives also, would be helpful on some good work you have done there.

You know, on building lot many more businesses outside of paints.

2 quesƟons Amit, actually the quanƟtaƟve part is there for all of us to see, qualitaƟvely let's say how would you managing complexity.

I know that's like an omnibus quesƟon but so many categories.

And secondly, with some of the new businesses which you have, looking to ramp up also a lot of retail Ɵnge to it right.

Now you've been a product company for a long Ɵme, how are you managing the transiƟon, at least in some of the businesses from, let's say, product to retail?

So, we started waterprooﬁng about seven years, eight years back now and because of our indigenous technology, we really grew the waterprooﬁng business.

Because waterprooﬁng business is a very, very technical business where historically people like Sika, Fosroc and some of these companies have been as mulƟnaƟonals at the helm of aﬀairs.

Similarly, when we look at a category like adhesives, which we started about six years back and now we are clearly the number 2 player with respect to the adhesives category.

Or we look at possibly, we started the whole zone of wallpapers or the painƟng tools which have kind of come in.

In each of these categories, what we have clearly see is that, these are not like standalone categories where we will have to put a separate structure to take care of it.

We have largely tried an 47 | P a g e integraƟon approach that the current business is able to sustain that kind of new category, which we are introducing with possibly the same set of people, who are catering and reaching the same places where possibly paint is reaching.

So, the area, what we have looked at possibly going forward in terms of the new categories is largely an integraƟon, where either the integraƟon takes place at the retail point or the integraƟon takes place at the consumer point.

And therefore, possibly from a structure point of view, it has not added principally to the structural cost which possibly any new category would have added, and therefore possibly the resilience in terms of why we are able to grow these categories very strongly.

Mr. Manoj Menon (ICICI SecuriƟes): One request actually, you know, which I would be doing with all the listed paint companies, you know from this quarter onwards.

You know, will it be feasible to follow the template, let's say which Indigo started a couple of years back, you know reporƟng segmental at least the revenue part, if not the proﬁts.

It’s a request which has come from consensus invesƟng side.

Mr. R J Jeyamurugan

Manoj, will come back on that

Mr. Abneesh Roy (Nuvama)

A few follow up quesƟons.

The ﬁrst is on the Non-Deco India business.

So, when I see your auto paints and industrial paints, last year your margins were fairly similar at 6%.

But this year the gap is almost 450 bps, which was diﬃcult to understand if you could explain that.

Second is given the size of industrial at around Rs.

1,000 crores, how much would be the auto paints also.

Third, as the leader in auto paint Kansai, two days back said that they have gained market share in all the verƟcals of auto paints - four-wheeler, two-wheeler EVs and the commercial vehicles also.

So, if you could tell us with your relaƟonship or partnership with PPG, what has been the gains in the last 6-7 years post the relaƟonship being more formalized?

Mr. Amit Syngle · : MD & CEO

48 | P a g e One of the reasons I explained earlier, why the margins have really increased here is the fact that we have become very, very strong with respect to taking certain price increases in the market, which we were not possibly taking earlier.

And this has come on the behest of our superior oﬀerings which are there in the market from a point of view of diﬀerenƟated oﬀerings which we are able to give the market.

As I explained, that if I am giving a ﬂoor coaƟng, the ﬂoor coaƟng will come with some addiƟonal parameters and therefore it will be of a certain higher price as compared to compeƟƟon in terms of what we are able to put up.

And this is also led by our technology which comes from PPG, what we have been kind of doing.

So, from an overall point of view, both businesses, whether it is the Auto OE business or it is the General Industrial businesses, we have been able to one, take very, very progressive price increases with respect to our range.

Second, I think the diﬀerenƟated products are giving us a very good opportunity to price and diﬀerenƟate certain products much higher than compeƟƟon, which has led to this kind of overall proﬁtability.

And third, I think there has been a strong amount of work at the R&D level in terms of looking at really working around the formulaƟons to see that we are able to kind of increase our margins in a very, very strong manner.

So, I think these are the components which possibly have inﬂated the Industrial volumes for us in a very strong manner.

Mr. Abneesh Roy (Nuvama)

Your Auto paints, the margins are beƩer because those are 450 bps ahead of Industrial.

So, when you are saying R&D has helped or whatever diﬀerenƟated, is it only in Auto that you are doing diﬀerenƟated?

Mr. Parag Rane

So Abneesh, another part of that quesƟon is also the fact that Auto margins were always beƩer than the General Industrial.

In the previous year, given the nature of the business, which is more B2B, the price increases actually come with a signiﬁcant lag in the Auto business and therefore you had a much larger inﬂaƟonary impact on the Auto business.

Mr. Abneesh Roy (Nuvama)

49 | P a g e And size of auto business, and if you could talk about the market share gains in the last seven years.

Mr. Parag Rane

So, the Rs.

1,000 crores that we reported is on the non-auto business purely.

It doesn't include any auto.

The auto business is the JV, where about 1/3rd of the business is from the four- wheeler OEMs.

Another 1/3rd is from the two wheelers and other commercial vehicles, and 1/3rd is from the reﬁnish segment.

Mr. Abneesh Roy (Nuvama)

So last quesƟon on Indonesia.

6 to 7 years back, there were big plans.

Would do you say where you are currently, you'll be hugely disappointed?

And is there disappointment because of the GDP, because most companies in Indonesia are disappoinƟng, or would you be saying that you are in the right path, because of the COVID or whatever issues, things got a bit derailed?

Mr. Amit Syngle · : MD & CEO

No, deﬁnitely.

I think Indonesia has been a disappointment for sure.

I think the trajectory in the last three years has not been good at all in terms of what we anƟcipated in the market.

I think, we see ourselves very clearly that when you are at single digit market share, and we have not been able to grow the market very aggressively.

So, we are puƫng adequate measures in terms of saying that we give ourselves some Ɵme in terms of seeing how we need to galvanize that business and take it ahead.

I don't think I have to blame the economy for doing it because when you are at a low market share, then it is not the economy, but it is your own strength in terms of doing what we can do in that market.

So, I think there is a way to go in that market deﬁnitely.

What we have been deﬁnitely able to do is prune the losses a liƩle bit in terms of what we were earning there.

But having said that, I think the larger growth strategy has to kick in in terms of possibly, seeing that that business becomes worthwhile as we ahead.

Mr. Abneesh Roy (Nuvama)

As of now, you don't think you have to model right, because you don't talk about it and you are sƟll saying that you have cut the losses rather than you have the strategy to scale up.

50 | P a g e

Mr. Amit Syngle · : MD & CEO

There is a strategy which is in place.

It's just that some parts of the strategy have not gone in the way in terms of how we would have liked.

For example, we tried to possibly see the enƟre lay of the land, because in Indonesia, if you see there are islands which are spread all across the country.

We decided on approaching everything at one shot which possibly did not give us the leeway, now we are looking at a far more concentrated strategy in terms of key strategic places in Indonesia, and that's something which will follow now.

But there is deﬁnitely a strategy in place because without strategy, then we would have winded up far earlier.

Moderator · Conference Operator

Due to Ɵme constraints, will be ending the Q&A session right now.

We thank all the audience for all their quesƟons.

May I now request Mr. Amit Syngle for his closing remarks?

Mr. Amit Syngle · : MD & CEO

Okay, great.

I think it was a good session.

I think aŌer a long Ɵme we had a physical session with all of you.

So, thank you for coming and I hope we added some value in terms of answering some queries of yours.

I look forward to meeƟng you in future and seeing how we can make this session far stronger and more interacƟve as we go by.

Thank you.