Ladies and gentlemen, good day, and welcome to the Kansai Nerolac Paints Limited Q1 FY24 conference call, hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you, and over to you, sir. Yeah, thanks, Taco. On behalf of ICICI Securities, we welcome you all to Q1 FY2024 results conference call of Kansai Nerolac Paints Limited. We have with us senior management, represented by Mr. Anuj Jain, Managing Director, Mr. Prashant Pai, Director, Finance, and Mr. Jason Gonsalves, Director, Corporate Planning, IT and Materials. I hand over the call to the management for the initial details about the quarterly performance, then we will open the floor for question and answer session. Thanks, over to you, sir. Thank you, Aniruddha. Good afternoon, namaskar, and season greetings to all of you. It was actually a pleasure to meet many of you personally during our first physical investor meeting, which we conducted in the month of May. I'm grateful for your continued support and interest in our company. Thank you all for joining this call of Kansai Nerolac for quarter one, financial year 2023, 2024. For the quarter, we recorded top-line growth of 6.5% over the corresponding quarter of the previous year. EBITDA growth is 30.6%, and the PBT growth, without exception, is 39%. During first quarter, the growth in automotive, which was led by passenger vehicle, was higher. The passenger vehicle, the growth was good. Two-wheelers were marginal. Decorative volume growth is higher single digit. Raw material prices softening, but still we need to be watchful, because of the volatility in crude and Forex, and also some uncertainty on account of geopolitical changes continues. I'll give you some brief commentary about, you know, decorative and industrial businesses. Just to talk about decorative, as we informed earlier or as we discussed earlier, we have taken up some growth initiatives in decorative, and these initiatives are in the area of feet on street, digital, influencer outreach, new product launches, services, and project business. As of now, our assessment is that these initiatives are as per plan and going in the right direction. Let me share a few highlights of decorative in the Q1. For Q1, ex-putty growth is closer to double-digit. Some initiative, as I mentioned, like Paint Plus, which is all about paint, this is Paint Plus with Japanese technology. It's all about performance, and that is what our positioning was, that paint is not only about color, but it also gives the performance. In this, in some of the key categories, like, you know, waterproofing, we have completed the range, which is also, you know, related to a Paint Plus product, like No Damp, No Damp Plus, and Damp Lock, and some of these products are unique. In the emulsion category, in the super premium or luxury category, we informed earlier that we introduced Impression Kashmir, but now we have introduced three variants into that. There is a high sheen variant, there is a mid sheen variant, and there is a matte variant. Today, if we look at the different geographies or different segmentation of the customer, they prefer to have a different kind of sheen level or the matte level, and this is one product category where we have provided three different variants in terms of the sheen and matte. In wood category also, Italian finishes and, you know, this polyurethane and polyester pigmented PU, which we introduced earlier. Now, we have further introduced bio coatings with green certifications. The polyurethane range we have introduced with green certifications also, and also introduced a niche product, which is soft touch coatings. They are also in the area of high-end wood coating, but they are soft touch, soft feel, and a very, very different kind of, you know, the performance coating. We also introduced one product, which is called Crystal Sheen. This is also innovative product. This product, when it comes in contact with water, it forms crystal, and that crystals, you know, that form the protective layer. It's in the affordable category, so it will be a part of waterproofing, but quite affordable like... You know, if you remember, we discussed earlier that when we talk about Paint Plus, it is all about providing some unique pro- you know, proposition, and also some propositions which we are trying to democratize. Crystal Sheen will be a part of that. We introduced products with better whites, non-yellowing property, and overall, through these initiatives, our salience, you know, that in premium, has gone up in the, you know, first quarter. The salience has gone up in premium and economy. Popular salience has come down, but in premium and economy, it has gone up. The other part of our initiative in decorative is about influencers, because we believe that the role of influencer is very, very important in paint category. Our focus is on key painters and architects and interior decorators, and then, you know, the infrastructure which we have already put in place now, to basically demonstrate the advantage of Paint Plus products to the key influencers. Digital adoption, digital initiatives progressing well. The lead generation, which we have started sharing business with the influencers, because our approach includes that we generate the, generate the business, share with the influencer, and it become a business sharing model. We only started seeing benefits in key markets, and the scale-up process continues as we are seeing the benefits where we discussed earlier also, that now we are starting the scale-up process, that continues. In terms of our distribution, the expansion is gaining traction, and the growth in distribution has been in double digit, higher than what we have been achieving in last 2 years. For the project business, by March end, we were in 55 towns. Now, by June end, we have expanded it to 71 towns. Project business is all about generating the pipelines. We have a good pipeline now for converting to business. Next generation services, which we started last year, during the mid last year, with the proposition of 5 days touch free. We are present in 450 towns now, but we have started active lead generation in 145 towns. Service team and structure has been expanded, and we have the structure in 450 towns and 145 towns. We discussed earlier that we have been strong in Tier 2, Tier 3, Tier 4, but, based on these initiatives what we have taken, and these some of these initiatives are quite apt for Tier 1, Tier 2 category. We are seeing a higher growth in, you know, urban or Tier 1, we can say. I'm happy to share that, you know, the reflection of these initiatives we are able to see in Tier 1, which has been our weaker markets. Waterproofing and wood range is well accepted, and we have started getting a good growth. They are contributing a good growth to us now. For brand initiatives, as we said earlier, that we are maintaining the share of voice, and in the 1st quarter, we started the campaign on waterproofing also. Earlier we were doing campaign only on the paint products, now we started on waterproofing, and therefore we are seeing a good positive reflection in waterproofing. We also started advertising Excel Everlast, which is the proposition of 12 years and self-cleaning property, a part of Paint Plus. The Kashmir and all these campaigns which we shared during last physical meet are with, you know, Paint Plus with Germ-Free technology. That's one common thing, common theme, which we are trying to land at. These are a few of the details related to decorative. Coming to industrial side and in the industrial, in the auto, because we are significant player in auto, and we are seeing healthy and steady increase in business. Initiatives were to get into new segments. We got into seam sealers, underbody, alloy wheels and fasteners. Now we started generating business from these new segments. Pre-treatment also, we have done a technology tie-up. Then, shortly we'll start seeing the business in pre-treatment chemicals. Our approach, which we discussed in the past, continue to focus on technologically superior products, like heavy, heavy metal seal, electrocoats, energy efficient, something which can be, you know, which require a lower temperature for baking. Two-component common primer, which is suitable for different plastic substrates. All this is in line with our strategy of launching sustainable technologies to reduce VOC and carbon emission. In the category Auto Refinish, as a part of industrial, where our market share has been low, we have been successful in adding A-class body shops, which are the premium body shop. This is also helping us increasing the salience of premium in the Auto Refinish. Within industrial, the non-auto part, which is Performance Coatings division, which is largely based on the infrastructure growth. I think the good CapEx investment from the public and private sector is happening, and therefore, infrastructure growth is expected to remain high. This is supporting and should support further also demand of performance coatings. In this business, the, the one of the success driver is getting the approval and are that, you know, the pipeline approval continues. We further got some approvals by, you know, some major oil refineries, also approvals for wheel coatings in railways. There is a specialized coating which we have developed for Delhi-Mumbai freight corridor, which is a very, very high corrosion resistance. Last time we shared that we have been supplying to, you know, this coastal project and this Vande Bharat train and the bullet project. There also are the efforts and the business continues. The change in approach in Performance Coatings division last year we started is, again, the focus on high technology product, premi- premium. The low-end product, where the margins have been very, very low, those businesses gradually we, we have, we have come out. In fact, this initiative started second quarter of last year. The first quarter was the last quarter, and I think by and large, that part is over. Maybe some part still will continue, but by and large it is over. We are seeing the change in the salience in the Performance Coatings division also. In general, just to talk about the capacity expansion project, which we shared in the past. The all projects related to Visakhapatnam, Jaipur, and Hosur are on track and will be commissioned as per plan. Lastly, you know, the this land sale, you know, we completed sale of land at Thane, and the consideration of INR 601 crore was received in the quarter one. These proceeds will be used mainly to support business and growth initiatives. These are a few high-highlights related to quarter one, and I tried giving you some, you know, kind of, some flavor of what is happening in decorative and industrial. With this now, I invite for the questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead. Yeah, thanks. My first question is on the pricing. Given, in the non-deco, your gross and EBITDA margins today expanded, what kind of price cut already you have taken, and any more plans will be there in terms of price cuts? Thanks, Abneesh. As of now, very, very, you know, no price cuts, you can say. We're trying to hold, hold down that, you know, because the raw material prices are cooled off, but, still, you know, there's some volatility there. We are trying to reach to that stage where we are able to understand that what is sustainable and stabilized. I think that may happen in the future, but as of now, no price cuts. Would that be true even for the deco part, given you want to be a bit more aggressive and gain market share? There also, margins have expanded. Would the no price cut as of now, in terms of on-value also, would that be true even for deco? Yes. As of now, no price cut, but you can see partly in terms of discount in the market, it has gone up, but no price cuts as of now. Yeah. My second question is on the projects business, especially residential, et cetera. What would be your market share there versus the pure deco market share? Clearly, we are seeing very good recovery for all the real estate players, and after many years, we are seeing good recovery. How do you be indexed in terms of market share in that part of the business? Our market share is less than 10% in the project business, and earlier, I think we shared that our reach was not much. We were playing only in the few markets. As I mentioned, now we have expanded the project team, a dedicated project team and a dedicated product portfolio in the 71, 71 market. This is, you know, in the project business, what is important is that for residential or the new housing segment, we have to build the pipeline, and then the team goes and, you know, try to convert into a business. We have been able to build a good pipeline, and we feel that we'll be able to do better in project business now. Right. Finally, on the raw material side, given China, the recovery has been slower than expectation. What would be your thoughts on the pricing for some of the key raw material like titanium dioxide in FY 2024? Do you see further correction, or do you think from the current level, say, in Q1, what you consume, it will be largely stable based on current understanding? Jason, would you answer this question? Based on our current understanding, I think the prices of, prices of, important commodities like TiO2 are already at their lower levels. From here, I don't think there is significant downside that can be expected. In fact, prices will go up, gradually. Okay, that's all from me. Thank you. Thanks, Abneesh. Thank you. Our next question is from the line of Percy Panthaki from IIFL. Please go ahead. Uh, hi, sir. Uh, you mentioned that in performance coatings, there were some very low-margin products, uh, uh, basically, which you have, uh, gradually discontinued. So, uh, just wanted to understand, uh, uh, before you started that process, what percentage, uh, of the total consolidated sales did those products constitute? In that business, in the high-performance coating, it was about 10% of the business. At an overall company level, that would be what percent? I'm just trying to understand, you know, over the last two years, you have done a certain amount of growth. If you basically let go certain sales, then I should adjust for that. 2%-3%. 2%-3% only. Okay. Okay, understood. Secondly, just wanted to understand in terms of typically the lead and lag, which happens between the spot prices going down and them showing up in terms of your PNL. Just wanted to understand that the Q1 PNL that we see, does that fully factor in the low input cost prices? Do you think that we had some slightly higher cost inventory, and we will see further sort of true picture of the full low-cost benefit available in Q2? It's fully addressed. It is fully addressed. It is fully addressed. Okay. What is your view on the recent, uptick in crude price from 75 to 85? Has that also caused a similar kind of uptick in your, polymers, monomers, et cetera? As of now, it is not immediately reflected, but if this trend continues, we will start seeing, you know, again, a slight hardening in the prices. What immediately gets affected are, you know, certain solvents which are dependent on crude, but not in the larger raw material basket. Understood, understood. In light of this, commodity cost environment, whatever we are seeing, today, what is your view on pricing in the decorative business for the next 6 months or so? Do you think that, more or less, the industry will keep the current prices? When I'm saying prices, I don't necessarily mean MRP, I mean, in whatever way and fashion, whether through higher rebates or whatever else. Do you see pricing coming down, or do you see pricing being more or less, maintained at the current level? In the near future, probably you can see some little high rebates in the marketplace. As I said, that we are still not able to fix that what is achieved so far, or to what extent it is sustainable, because there is a volatility in Forex and crude oil price. We'll have to wait for some time to see that what is sustainable, then the decision, you know, can be taken. As of now, partly, you know, because there is advantage, one can see that maybe higher discount in the marketplace. Right. My last question is on full year margins at an overall consolidated basis. Now that we are more or less in a normal or sort of stable commodity price environment, and a lot of your price increases also have gone through. On an annualized basis, what is a good margin for you guys to target? See, if you see last year's EBITDA margins, more that, you know, it was quite low, right? If you see, at the end of the year, started over a period, it has, it has gradually improved. On an overall basis, you know, we have been saying that, around 14%, EBITDA margins should be on a sustainable basis. See, in our case, you know, because the mix changes on a quarter-to-quarter basis, so, you know, because there are certain- Yeah, that's why I asked for annualized, number. 14% should be possible. Yeah, yeah. Okay, okay. Thank you very much. Thank you. Our next question is from the line of Aditya Bhartia from Investec. Please go ahead. Hi, good afternoon, sir. Just wanted to understand what proportion of our revenues would we be deriving from tier one towns and metro towns, and how is it likely to be different versus other large incumbents? Also, how are you seeing this proportion shaping up going forward? Generally, like, you know, tier one town, because our share is low and, our contribution to sale is, is on the lower side, maybe in the range of 10%-15% from the tier one only, I'm saying. For the industry, it may be, you know, 20%-25%. Our contribution has been coming more from tier three, tier four, and also tier two, but tier one, our contribution is low. Almost half of where the industry could be. Do you see this changing sharply, are you expecting any sudden changes in the next 1 or 2 years, or it will only be a gradual process? We are expecting a changes because all the initiatives which I discussed about, whether it's a project business, a service business, or the architect initiatives, are primarily they're in the tier one market. We are expecting Understood, sir. Sir, in the last analyst meet, you had highlighted that in terms of mind share, you already occupy number two position. In that context, wanted to understand how you're thinking about the advertising strategy. Would we be continuing to go aggressive on advertising, or is, is, is there a thought process that we can take a bit of a breather around that, keep, keep the advertising costs low because we already have a decent mind share? Our mind share, as I said earlier, also, it is, you know, we are strong, we are number two, no doubt about it. We have to establish this new positioning, which is about, you know, Paint Plus and all these products, what we have introduced or what we are introducing. I think it is important for us to make this communication reach to the consumer mind, that what exactly the Paint Plus is. For some time, I think, you know, that we will continue to put more efforts in terms of advertising and marketing, till we find that the Paint Plus proposition is getting set, because this is something which we believe is going to give, give us a differentiation. Understood. That, that's simple, sir. Thank you so much. Thank you. Our next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead, sir. Hi, Anuj, Prashant. Good afternoon. Thanks for the opportunity. I have 3 questions. First question, you have spoken a lot about project business. Just wanted to think, how this business will shape up, and if you can help me, what is the strong markets? Is it tier 2, tier 3 markets we are strong, and now we are trying to focus on tier 1, or is it vice versa? Maybe if you can share, what is the current quantum, and where do you aspire to grow this business over the next 3-4 years? The project business, actually, it's, you know, we were quite limited, and whichever market we are strong, for example, like some of the markets in North India, we are strong, so we were limited to that. Actually now, you know, we are expanding the tier one market. Mainly this business, if you see all the metros, you know, at the country level, country level, maybe the contribution of project business to total decorative sale could be in the range of 12%-13% for the industry. But if you see metros, it could be 25%-30%. Extended metros, the A-class towns, it could be around 15%-20%. When I talk about 71 town, now we are, you know, that metros and A-class towns, and to some extent, you know, because the project business is growing fast, the rate of growth is 1.5 to 1.8 times of the overall growth. The industry is growing at the rate of say, 7%, 8%, the project business is growing at the rate of 12%, 13%. The growth will continue, and we are seeing that this is becoming a trend even in the tier 2, tier 3 towns also now, because a lot of verticalization is happening. This business is, you know, it, it is expanding, and we have expanded our reach to 71 towns. Whichever town now we find that the verticalization is happening and the potential is going beyond the threshold, you know, we are looking at all those markets. I think, and if your question in terms of what is the contribution we are getting from the project business, it is in the range of 8%-9%. That's what we are getting. We, you know, with the initiative we have taken and the pipeline what we have, we believe that it will, you know, become more and more. That's really helpful. Just, to extend, Anuj, just wanted to check, are we trying to say that our distribution and service factor, which is important for this, and that we are growing, or you are saying that the product business is also going to ramp up? It's a both things, you know, because when you talk about the service and all these things, what happens is that this is the opportunity to reach directly to the consumers and the users. Whether it's a project business or influencer or the service, you have the opportunity to reach out directly to the consumers and users, and share that business with your business partners, like dealers and, you know, the painters. Both the things are important. It's a business sharing model, so that we add business to the people who work with us, and then they add business to us. That is how we are looking at it. Okay. My second and last question on the new product development. I see over the last, 12 odd months, we have done a lot of, innovation and, product, recheck, which has happened. Just wanted to pick your thought, what are the promising products you need, and what is the contribution over the last 12 months from this new product, what you have developed, especially in terms of technology? New product, generally, like, you know, we track the product which are introduced in 3 years' time, where the contribution is around 10%. Specifically, if your question is about Paint Plus product, where we are talking about the unique proposition... Yes. there it is, you know, now it is touching about 7%-8%. This number three years was what? For this Paint Plus proposition, we started from last year only. Okay. Yeah. This is basically you are trying to get a different class and mass of customer, or is it that uniqueness is because of the pricing? Both things. One, that, you know, we understand that in the market today, there are a good number of customers who are ready to experiment, you know, that, so why did they see more value addition? For us, the Paint Plus is that, as I said, that it is all about performance. One, that we are trying to give a benefit, you know, which we believe the customer is ready to experiment for. Then Paint Plus also includes some product, which is a different kind of pricing, or maybe you are able to offer a proposition at a lower price point. Maybe the same proposition was available at a premium price point, now we are able to make it available at a popular, and we are also attempting to make few of the proposition available at the economy price point also. Yeah, yeah, that's exactly. One follow-up here, that which segment, I mean, is it premium, mid-price or popular? Which segment is seeing a lot of traction that I wanted to check on you now? As of now, the traction is in the premium. Okay. As a pipeline that, you know, we expect it to come in the popular also. Sure. Wonderful. Thank you and all the best. Thank you. Thank you. Our next question is from the line of Amnish Aggarwal from Prabhudas Lilladher Private Limited. Please go ahead, sir. Yeah. Hi, Anuj and Prashant. Thanks for the opportunity. Sir, my question is that you said that your industrial segment, particularly the non-auto industrial, is doing very well due to railways and general pickup in infrastructure activity. Do you believe that this segment can grow volumes in at least, say, high single-digit kind of a scenario? Do you believe that the ratio of industrial to deco, what exactly is the ratio now, and do you think that it can tilt slightly in the favor of industrial going forward? Non-auto, you're right. Actually, you know, that market growth is good, the size is also good, and with whatever initiatives we have taken, we believe that we should be able to get a good growth, sustainable growth, higher, higher single-digit, definitely, possibly double-digit growth also is possible. In our business, like you know, you know that auto, we already have a very good market share, so therefore, always the attempt is that how do we maintain or increase the addressable market size, and that's why some of the new segments we are looking at. One side is like a decorative initiative, the other side is a non-auto, you know, kind of initiative. Because with the change in our strategy and getting into more technological savvy products or premium products, we have initiatives in both. Going forward, there may be a possibility that there could be a little more tilt towards non-auto. Within industrial, I'm saying that between the auto and non-auto, there could be a more tilt towards non-auto. The current breakup of the business is on 55, 45, keep changing quarter-wise, but I think there we don't see much of change, but within the industrial, there's a possibility of change. Okay, that's very helpful. Sir, over the past few years, I believe, auto was down and deco was doing relatively better, but still the ratio remained at 55, 45? Generally, that's the statement we make. Obviously, year-over-year basis, sometimes it's 1%, 2% here or there, it keeps changing. It's not that exactly it is 55, 45, but that's, that's generally we communicate. Okay, there is no meaningful difference? No, it's maybe, you know, sometime like 2% here or there, like that. Okay. Okay. My second question is on the margins. Like this quarter, we have done 16.1% kind of an EBITDA margin. Usually now, for example, in 3Q, this time, Diwali sales will also come, and second half is usually relatively heavier for infrastructure and auto. Okay. Do you believe that if, as far as your current year is concerned, this quarter has already seen the peak of the margins? Prashant. As Anuj mentioned, you know, our this mix changes, and accordingly, the margin also slightly goes here, here and there. As I mentioned earlier, our overall EBITDA margins are bound to improve, definitely more than last year, and should be stabilizing around 14%. That's what we feel. Okay. sir, if you look at, say, 14, it means that there might be some quarter with even, say, 12, 11, or some kind of number. Yeah, it's possible, because in the fourth quarter, our -- we are more industrial heavy. Every quarter it depends. Accordingly, it, you know, slightly varies. Eventually, I said it should come closer to that or slightly more than that as well. Okay. It means but if we look at, say, if we take into account the mix, then which are the best margin quarters for us, 1 Q and 3 Q? Yeah. Yes. Okay. That's pretty useful. Thank you, sir. Thank you. Thank you. Our next question is from the line of Avi Mehta from Macquarie. Please go ahead, sir. Hi, sir. Thanks for the opportunity. Sir, I just wanted to check, from whatever I heard in the Paint Plus proposition, would it be fair to say that, you know, two years or three years down the line, the portfolio for decorative would be a slightly more premium than what it is right now? Because the ports, you know, because of positioning also kind of moves to a more premium or kind of segment. Is that a right way to look at this? Yes, Avi, it is possible. Even last year in the first quarter, the, the premium saliency in our case has gone up, but, the saliency also has gone up in case of economic products. Maybe the popular, is getting, you know, the share of popular is getting divided between the premium and the economy. Internally, yes, if you look at that, our salience of the premium will go up. As Paint Plus progresses, the way I should see is that our portfolio will become a lot more richer in terms of mix and move more towards the economy and premium. That's the way I'm kind of looking at that. If that is the case, should we also see that flow through to margins? Of course, in the, you know, premium category, the margins are more. Obviously, we look at that. Mm-hmm. That's why, if you remember that earlier also, we discussed that when we talk about increasing our marketing expenditure, that is also around 10+, you know, because these are the products with the better margins. The more saliency we are able to increase, the part of our marketing expenditure, what we are increasing, would get offset by the margin increase through this product. At the EBITDA level, would it flow through, and is there a range that you would want to give us, say, two years, three years down the line, where you see it? I understand, you know, near term, we might kind of have some fluctuations, but do you have some numbers in mind on this? Avi, we still maintain that, overall 14% plus EBITDA. Mm-hmm. Because, as, as, as you say, we see the way current situation is, and we see the quarters coming ahead, we feel that this should be... Even though we have taken this, this Paint Plus into account, while, while I'm saying I should get that 14% plus, EBITDA margins. Avi, you know, in the long term, obviously, you can understand that, you know, when we are increasing the portfolio, obviously, in the long term, it will definitely be helpful, but difficult to put any numbers to that as of now. No, fair enough, sir. Fair enough. The last bit was on the industrial side. Now, in each of the segments, the, the focus is to kind of move towards more technologically superior products. Now, obviously, the relationship with the parent kind of helps, kind of helps us. How does it impact the royalty and overall EBITDA margin profile in the industrial business per se? Could you help us understand that, sir? Prashant. On the industrial, yes, royalty, as we have told you, it is paid only on certain products where we have got, you know, formulation from Kansai- based. There are a lot of industrial products where we don't pay any royalty because it's our own developed products. Okay? As far as margins is concerned on industrial, it will move in line with the raw material prices, will be going up and down. Obviously, there will be, whenever there are, there will be times when there will be pressure from the OEMs for price reduction as well. We need to have a balance between this. You know, earlier when the price went up very high, none of the OEMs gave us price increases. The price increases came at a very, very later date when we had already suffered quite a lot. Eventually, it balances. If you take a long-term view, it will definitely have a good, you know, a sustainable margin on a long-term basis. Okay. Where I'm coming from is because as we move towards more superior products, does the royalty payout to the parent also rise? Logically, they would need formulation. If that is the case, if, you know, I mean, overall, from a company net level EBITDA basis, is the product cross margin high enough to kind of offset that? That is what I was trying to understand. Avi, the royalty percentage is fixed, okay? That will, even if they give you a superior product, it doesn't say that I have to pay a higher royalty. The royalty percentage is fixed, so it will not, not matter much. It doesn't matter much. Okay, sir. Okay. No, okay. That's, that, that's clear. That's all from my side. Thank you very much. Thanks. Thank you. Our next question is from the line of Ajay Thakur from Anand Rathi Securities. Please go ahead, sir. Hi, thanks for taking my question. Want to understand a bit more on the market share, how things are moving over there, specifically with respect to the competition. You already indicated that the discount and rebates are going up. Are, are we already also seeing some bit of, you know, higher ad spends? Then going forward, what is the outlook, both in terms of the market share and the competition? If we look at, you know, the journey of last 1.5 years, I think quarter on quarter basis, we have been improving and narrowing the gap, you know, from the market. As I just mentioned that, in the quarter one, excluding putty, if you look at the volume growth, it is closer to double digits, so we are very close to that. Our first task was to see that, you know, how do we come in line with the market growth, and then see whether we can outgrow the market. I think that journey, we are, you know, we are traveling in the right direction and our gap is narrowed, and we are very close to it, and going forward, we see the improvement. Okay. Secondly, I want to check on the distribution reach. What is, you know, how much additions we have done in the Q1, and what is our target for the full year? Also, you know, how easy or difficult it would be to kind of put a tinting machine into, into a, you know, dealership? How easy or difficult it is for a new player to set up a tinting machine with the, with the dealer? Generally, if we look at, you know, yesteryears, we have been adding 8%-10% of the networks every year. This year we are targeting a higher number, you know, double-digit number, higher number. In the first quarter, you know, that it is, it is on track. We have been able to add double digits, the distribution to double digits. That is our target for the year. tinting machine, you know, we have a penetration of about 80%, and whatever new distribution we are opening, we always try that at least 50%-60% of the distribution to start with, you know, should have the machine, and that is something which we are able to do. Understand. Do, for the tinting machine, do we give some kind of a, you know, kind of a credit to the dealers or how is it actually? How is it versus for the other players, actually? It's not a credit, but we give a subsidy on the machines. We also, you know, tie up with the dealers on some target basis, and accordingly, we provide a discount or subsidy on the machines. Understand. Helpful. Thank you, sir. Thank you. Our next question is from the line of Harsh Shah from InCred Capital. Please go ahead. Yeah, hi. Hi, Hi, sir. My question was more on the use of cash. Could you be more specific, I mean, what kind of areas we wish to use the cash, which we got from the profit on sale of land? Cash from the land? Yeah. As I said that, you know, we are definitely looking at the business initiatives. You know, it could be expansion, the growth initiatives. At the right time, we'll speak about it, largely it will be used for the business initiatives. Okay. No, no, no plans to acquire a smaller company, let's say, or, from the authority, some other categories or, or anything on that part? It's not clear. Mr. Harsh Shah, may we request you to use your handset, please? Yeah. Yeah. So, so the question was, is there an intent, intent, to acquire a smaller company in some categories as well, like we did the acquisition of Sharma? Anything from that side this time? Difficult to comment at this point of time, obviously we always keep exploring the opportunities. In the past also, whenever we found a route or right opportunities, we got into it. That is always there in the radar, whatever good opportunities are there. Okay, okay. Secondly, sir, in, for the current quarter, for our interior segment growth, is there an element of pricing in there or it's completely volume-led? A mix. It's a mixed thing. It's, it's also volume, but also a bit pricing. You can say mix- Mix between the volume and pricing for this quarter? Maybe a difference about 5%. Yeah. 5%. By when do you see the pricing coming in the picture? Second or third. Third quarter. Okay, sir. Thank you so much. Thank you. Thank you. Our next question is from the line of Prachi Kodikal from Bay Capital. Please go ahead. Good afternoon, sir. My first question was related to the ad spend. If you could quantify what that was as a percent of sales in the first quarter? One second. Sure. It's about 4.5%. 4.5. Okay, thank you. Is that the trajectory we'll maintain for the rest of the year as well? Should be, yes. Okay. Okay, thank you for that. The next question was: What is the cash in books for this quarter end? We have about INR 800-900 crore of cash available. This is primarily coming from that land sale, which we just saw. We have got sufficient cash to take care of any, any eventualities. Okay, okay. Thank you. That's all for myself. Thanks a lot, sir. Thank you. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Yeah. Hi, Anuj. Hi, Prashant. Thanks for the opportunity. Since you took charge, you have maintained that our mindshare versus market share has a huge gap. ...When we look at all the initiatives that you would have taken in, in the recent past, should we expect market share gain in the near term to kind of jump up, or, or that's a very long-drawn process, and we'll have to wait? That is our intent, that is our efforts. I would not like to specifically comment on the time frame. Obviously, we, we would like to see the gains as early as possible. It, it cannot be a long-drawn game, you know, because if you are taking some initiative, there has to be a reasonable time frame. I think you know that, a lot of time it takes in terms of building the infrastructure, and most of the initiatives are digitally enabled. There, in fact, you have to invest into the digital system, and thereafter, the digital adoption also takes time. I think that, gradually we are making the progress, and, maybe next, 6 months to 12 months time, we should start seeing the results of that. Sure. So just expanding on that, between the two options, let's say, to increase market share and market where, where you are very dominant in North India versus, let's say, where you are, you are just emerging challenger, which is usually easier to, to execute? The, the strong market is easier and the, you know, weaker market, it is challenging. Having said that, I think the weaker market, if one compares with existing player versus new player, still, you know, that would be. For the existing player, it is, it is easier, you know, if I, if I have to answer your question, question in that manner. You know, the models could be different, the discount structure could be different. You have to do a different activity, and sometime you do experiment and see that what experiment is working. I think that's the process we are going through. Okay. Sir, all the paint players are highlighting that this year has a thick monsoon. We have this extra month before the Diwali season kicks in. Our memory is slightly foggy on this, but historically, whenever this has happened in calendar, how much delta we would have seen versus, let's say, normal pre-Diwali season? Is it like a very sizable one or 5%-10% delta on market side, demand side? Generally, like, you know, if you get 45 days before Diwali, after monsoon, before Diwali, which is expected this year, because Diwali, I think, is on thirteenth, twelfth, 13 November, and generally we expect monsoon to be over by September end, you are getting a 45 days. We always see a good delta, which means that if the industry is growing at double digit or 8, 10%, maybe suddenly in one quarter you find higher double digit growth. Okay. Sir, last one. Now we have a sufficient cash balance on our books, and we have seen many players in waterproofing that they have inorganically built capabilities by acquiring smaller companies. Do we have any plan of kind of building up capabilities on some of those adjacencies that you have just entered into? In waterproofing, we already done it, you know, with the Perma. As I just mentioned, that we always keep exploring the opportunity and whenever any, right opportunity, viable opportunity is there, that is always there on the radar. Would you be open for any paints, smaller players? As I said, it's, it's not a question of paint or adjacent. It's like, whether there, there is a right fit, you know, which is, you know, available. Not many opportunities are there in the market. As of now, I think the focus is, when we are trying to build the technologically superior products of the adjacent market, wherever there's a right opportunity, that we'll keep evaluating. Thanks, sir. That's all from my side. Thank you. Thank you. Our next question is from the line of Archana Menon from Morgan Stanley. Please go ahead. Hi. Thank you for the opportunity. Yes. My question was on the industrial side. Generally, what is your experience based in the past, that when commodities are easing, generally, what's the timeline that you have to pass on a price cut? It's about, after you stabilize it, three to six months. Okay. Sir, right now, what would the industrial margins be like? Would they be in a healthy double digits? They got into double digits, yeah. Okay. Okay. Sir, one bookkeeping question: What would your tax be on the sale of land in this quarter? It's about 22%. 22%. Got it. Thank you. Thanks. Thank you. Our next question is from the line of Nisar Parikh from Native Capital. Please go ahead. Yeah, hi, thanks. First question is on the decorative side, right? The top markets, can you give a sense on what would be your market share in the top 2, 3 markets? Top two, three markets? Overall, our market share is little lesser than 10%, and our strong market is North, where the market share would be more than 15%. Got it. Going forward, you know, how do you see the mix between your industrial and the decorative changing, you know, especially in the next 2, 3-year horizon, how are you seeing that mix changing? As of now, as I said, you know, because auto is quite stable. The good part is that now we are, the outlook is positive. Longer-term outlook are also positive, but it's a stable growth which will keep coming. We are trying to build up more growth from decorative and non-auto part. To that extent, there could be some change, but, you know, the decorative and non-auto will compensate each other. I don't think there will be a much change in terms of the breakup of decorative industry. Right. Last question is on the, on the auto side in this quarter, in the last six months, can you talk about any new, any specific new client or, client additions or something like that? Yes, it's a part of our plan. I can't talk about the, you know, the names, but yes, we always make the plan in terms of new business and the new clients, and we are making a good progress in that. Has there been, like, specific client additions in the last 3-6 months? Yes, yes. Okay. All right. Thank you. Thank you. Thank you. Ladies and gentlemen, you may press star 1 to ask a question. Ladies and gentlemen, that brings us to the end of our question-and-answer session. I would now like to hand the conference over to the management for closing comments. Thanks, everyone, for your questions, and I hope that we are able to answer your questions properly. We feel it's a good time for the paint industry. For us specifically, now that we are into a different segment, we are quite diversified, and all the business segments are looking decent. Auto is having a good attraction. As I said, that in two wheelers also, maybe the way we are looking at the monsoon, it is possible that from 3rd quarter, the two-wheeler, which has been subdued so far, will pick up. We are also seeing the traction in this non-auto part. Decorative also, if you look at the economy status and the good monsoons and the longer Diwali season, I think all these segments are looking good. It is not very frequent that we see that all the segments are having a good, optimistic outlook, but that is what we are seeing now, and therefore, our outlook is quite positive for this particular year. Thanks for your questions and thanks for listening to us, hearing us, and all the season's greetings to all of you. Thank you for joining today. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines for this.