Ladies and gentlemen, good day, and welcome to Kansai Nerolac Paints Q1 FY2025 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 your 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, Aditya. On behalf of ICICI Securities Limited, we welcome you all to Q1 FY2025 results conference call of Kansai Nerolac Paints Limited. We have with us today senior management, represented by Mr. Anuj Jain, Managing Director, Mr. Prashant Pai, Director, Finance, and Mr. Jason Gonsalves, Director, Corporate Planning, IT and Materials. Now, I hand over the call to the management for initial comments on the quarterly performance, and then we will open the floor for question and answer session. Thanks, and over to you, sir. Thank you, Aniruddha. Good morning, everyone, and greetings to all of you. Grateful, as usual, for your continued support and participation in such calls. Thanks for joining this call of Kansai Nerolac for quarter 1, financial year 2024-2025. For the quarter, as you would have seen in the results, the top line is down by approximately 1%, and gross margin expanded by around 1.7%, 170 basis points, and profit before tax is up by 6.2%. If you look at the segments, in industrial, there was a good demand in automotive coating, especially the passenger vehicle witnessed decent demand, and two-wheeler actually witnessed a strong growth. In the last few years, two-wheeler was not doing so well, but from last year, third quarter, the two-wheeler picked up, and that trend continued. The performance coating, which is a non-auto segment, which is dependent on infrastructure growth, witnessed subdued demand due to elections in this quarter, but picked up in June 2024. In decorative, overall demand was muted due to unprecedented heatwave and elections. However, during the quarter, new business, which include premium wood finishes, construction chemicals, waterproofing, witnessed strong growth. Also, project sale, institutional sale, which is one area under our strategy where we are focused, also witnessed good demand growth. Despite this muted demand, the premium saliency has increased, which is also reflecting in our gross margin, part of it reflecting in our gross margin expansion. If you look at urban market and rural, urban market is still doing better. Rural, there are green shoots, quarter-on-quarter basis, some improvement, but still rural is behind urban. During the current quarter, we have started seeing raw material prices trend going up in some of the key raw material categories, but I think during the quarter, we were able to manage it judiciously through product mix, marginal advantage of inventory and the cost saving initiatives. If we talk about some of the initiatives, you know, related to industrial business, specifically in the automotive, our approach continue to focus on some of the unique high-end technology solutions, which is in line with our strategy of launching sustainable products to reduce resource use and carbon emission, because that is also one of the requirement of our marquee customers. New technology customer base has been expanded, and the new products have been deployed at more number of customers. So the highlights are like low-bake epoxy CED is introduced at more number of customers. This basically helps in terms of bringing down the baking schedule and the temperature, and therefore indirectly helps in energy saving and the emission savings, so cost and emission environment both. Another technology is sustainable low flash-off, which is a single stage, compact three-coat, one-bake roof system, also implemented in some more customer. And this also will help reducing the painting cycle at the customer end, and therefore increasing the productivity and saving energy and the emissions. Direct to metal coat monocoat, you know, was again introduced in some of our customers, and this also is a monocoat system. Traditionally, you know, there are two-coat system and three-coat system. It's a monocoat system, again, helpful to increase the productivity. Then there are some more technologies in the area of low-bake and, you know, emission-free, including tin-free CED, which is, you know, high solids and, it's devoid of heavy metals. And we have started, we have launched it sometime in the, you know, last year, but now we have started expanding it to more number of customers. Some new segments which were introduced, which we have been speaking about, which include seam sealer, underbody and alloy wheels. They are continuously, quarter-on-quarter, we are seeing a good traction and the sales to business is going up. Electric vehicles, which has been a focus area from the government also in the auto industry, the penetration in four-wheeler of electric vehicle as of now is low. It is 2%, so maybe from last year or last two year, it has gone up from one or two, 1% to 2%. In two-wheeler, now it is around 7%, and in three-wheeler it is more than 50%. And in this EV emerging trend also, our market share is in line with the overall market share what we have in auto. Because this is a future trend, so we are conscious of ensuring that our market share is also high in this segment. Coming to the other part of industrial, which is auto refinish, after finish market. So there, in terms of our strategy, we are focusing on adding more and more number of A-class body shops, who basically, consume more premium, the high NPU polyurethane coatings, and that's what we are doing. So, you know, we have further expanded, expanded the A-class body shops, and our saliency of this premium polyurethane coating within auto refinish has gone up significantly. In performance coating, which is mix of liquid and powder, so one of the focus area was also to concentrate on high-tech premium items, which include like bridges, windmills, appliances, construction equipment, helmets, and there, again, our saliency last year also it has gone up in the first quarter also, the premium saliency has gone up. In powder coating, premium items include rebar, pipe coating, alloy wheels, construction equipment, which is upcoming trend, and these are like the growth drivers for the future also. Coming to some of the highlights in decorative. So one, we have been discussing about the Paint+, you know, which is a range of products which are different or of a democratic nature. So we have introduced more number of products, and the saliency of Paint+ product is continuously going up. In this quarter also, it has gone up. Paint+ also helps the premiumization, and even in this quarter, the saliency of premium range of products has gone up if I compare with the last year. Some new products we have introduced in the market, one is, you know, texture range designs, and these are very, very niche, unique premium designs, which give you a different kind of textures and designs on the wall, which comes from Japanese culture or Italian culture. So this is one range of product which we introduced. We have introduced one new product, Excel No Dust. It's a long-lasting paint with excellent dust pickup resistance. We've also introduced the Wow Whites. So Wow Whites is a range of whites, which we introduced in some of our products, so they are in the, in the premium category or popular category. And it has a very good whiteness and higher coverage, almost 15% higher coverage, if you compare with any of the products which are available in the market. In construction chemical, we have introduced, membrane, you know, that's a new introduction what we have done. And in wood finishes, two-component polyurethane, one-component polyurethane, you know, some of these products we have introduced. There are some more introduction in the wood finish range, which has happened in the first quarter. So a lot of products we have introduced, and, the contribution of this new product, is higher, more than 10%, more than double digit, and we- in the pipeline, we have more number of products. Of this Paint+ of the products which we are launching, the challenge is always that, you know, how do you explain to the relevant people? So we do connect with the architects, interior decorator, where we explain about the features of this product. But, in the last quarter, we have initiated, one more, platform, which is Masterclass. So it's basically a platform for dealers and distributors and the influencers. So we invite the dealers, you know, because... And, and we do a class where we demonstrate, you know, that how these products are different, what are the features of this product, what are the benefits of this product. So we are trying to educate the dealers and the painters or contractors through the Masterclass, and every time we take one or two products, and we are doing multiple classes, to educate the people about the differentiation of these products. In this process, we also introduced one more initiative, which is Nerolac Knows. So for the customer today, it is very difficult to decide the right product based on his requirement, the property, the surface, the problem, and the special feature. So you can visit our website and you can see the column, Nerolac Knows, where it's very easy to navigate. If you try to put your requirements there, that what is your need and requirement, problem, solution, and it, it can, you know, you can navigate through this process and see that how the recommendation of the product comes in. So this is, in the area of Paint+, you know, what initiatives we have taken. In the area of influencer program and services, we have been talking about, the paint as a service and architect, interior decorator, through digital and through, you know, separate feet on the street, we have been approaching them. So continuously, our service business is going up, and I can say that now it is stabilized, and, you know, all the actions which were to be implemented are implemented, and now it is stabilized, and therefore, now we are, you know, scaling up in terms of generating more leads and more businesses. In AID also, core number of architects are continuously going up, so, you know, every quarter, we are able to increase our number of architects who are participating. Generally, we get the contribution, good contribution of premium business, whatever business comes through the leads from the architects. We have also started getting testimonials, and these testimonials are put on the digital platform where the architects are talking about the using the our products, Paint+ products, and the benefit what we are getting. We are also providing need-based, the on-site support to the architects. So this is in the area of architects. In retail, earlier we spoke about our Next Gen Shoppe, which is the kind of experience model which has been implemented at the dealer's end. So by end of June, we crossed about 100 dealers, you know, this Shoppe is already installed. There is a smaller version of the Shoppe, which is called Shop-in-Shop. There also, you know, more than 100 counters we have installed it. And both the Shop-in-Shop and Shop-in-Shop includes innovative mix, we call it Nix Sensor, but it is ultimately artificial intelligence-based color recommendation device, where in fact the customer can interact and the system can advise, you know, that or recommend the color. So this is a part of this retail experience. In new businesses, the growth is strong and continuously our saliency is going up. Similarly, in the project business, we are almost there in 78 to 79 towns now, and there also the growth is good and saliency is continuously going up. In terms of our visibility, in fact last year, we increased our marketing budget, and in terms of absolute, we are maintaining, you know, similar kind of thing. Rural and urban country, I mentioned that, the urban is still doing better, but rural, we are seeing some kind of, you know, catching up. In terms of capacity, our capacity, you know, expansion project in Srikakulam and Jamshedpur, we are on track. You know, we are adding the capacity in water base, which is more than 30%. Overall, deco addition is also in that particular range. So mostly this capacity addition is happening in the area of decorative, because industrial, we have already expanded our capacity, and today we have a different capacity available as to cater the requirement of the customers. Overall capacity utilization in the quarter 1 is around 60%. In terms of ESG, you know, that, in last two years, we have been recognized by CRISIL and the different agencies. One more, Morningstar Sustainalytics is from the leading ESG research, ratings and data firm that supports investors around the world with the development and implementation of responsible investment strategies. We participated in that, and we are ranked 16 among 577 companies in the chemical sector. So this is our ranking, which is a good ranking, and it's one of the better rankings if you look at, you know, within the industry. And also in terms of, they also a risk, they do a risk rating for ESG. So, we have been rated in the low, and it's, you know, again, better in the industry standard. We continue to be water positive. We became water positive last year, so we continue to do that. And in addition, we have identified the climate change risk from the TCFD framework and mapping actions in place to mitigate the implications. In terms of our digital initiatives, a lot of our decorative influencer programs or affiliate programs, all are completely digital, end-to-end digital. There is no manual intervention there. Many more digital initiatives we have, you know, taken, including migration of CRM. SAP S/4HANA on Rise is the most advanced platform, which we are, you know, which we are going to transit to, and Concur, which is for expense management and basically bringing more efficiency in our cost management. These initiatives are expected to help provide operational agility, efficiency, you know, so that's the advantage which we are anticipating and returning from some of these initiatives. Overall outlook, the monsoons are expected to be good, and we hope that, you know, the decorative demand will see the improvement. And, given the continued focus on infrastructure growth and the new projects and order pipeline, we believe the demand for performance coating should be strong, and also it goes with our initiatives and the work what we were doing for last one year or two years. So this is the small commentary on what we have seen in the first quarter, and we open the floor for the... You can open the floor for the questions now. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on the 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. Yeah, thanks. I have three questions. My first question is on the competitive intensity. So any pushback you are seeing from your painters, architects or dealers in terms of any more demands or any shift from you to the new player, Birla Opus? And because they are offering, say, one year extra warranty or 10% extra grammage or digitally connected tinting machine, what will be your specific response to these three? Why I'm asking this is market leader in the media interview said that the initial response to the launch by the new player seems to be underwhelming. So what will be your take on that in your markets? These three will be helpful. I think, you know, earlier also we've been talking about it because, there cannot be an overnight solution to these things. It takes time. So, I think I've been maintaining the statement that this industry is good size, and we welcome any new competitor to this industry. But, the progress, cannot be very fast, it can be slow. So I think they have already rolled out, in the market, all the initiatives, and, we expect it to take time, so I think it's early to talk about it. As of now, you can say that, you know, there's not much impact on, you know, the, the existing players. But I think it takes time, so it's not I'm undermining any efforts. So it takes time. It goes, it's a gradual process, you know, that where you connect with the consumers, through the advertising, you connect with the painters and dealers, you have to demonstrate your product. So we, we still believe that it takes, it's a gradual process, it takes time. It will take its own time. These are good companies who have entered, and they have entered with some of their commitment. But I think the market is such that it will, it will take time. Extra warranty and, Grasim, no change from you or the legacy players, right? Till now. Extra, you know, warranty, in some of the products we already have extra warranty, so that is not, you know, Four years. Yeah, in some of the products we have, and as I said, you know, some of the new products which we have introduced, you know, these products are there with the extra warranty. And in terms of printing machine also, in fact, you know, because direct linkage ultimately means what? That all the formulations, what is there in the system need to be updated timely. So we have a strong system, you know, that where the—whenever the new products we are adding or the new shades we are adding, those, you know, those recipes are entered in the system, you know, effectively. So, so, so that's also very much in place. So no problem with that. The extra material, as of now, you know, not much feedback or pushback from the market, because again, it's a matter of whether the customer knows about it. Secondly, you know, if the customer requirement is specific, then whether he needs the extra quantity. So as of now, the pushback from the market is not there. The digitally connected printing machine, do we need that? Does it really add value? As I said, that, you know, the only requirement of that digital connection is that whenever you put new formulations or new products or new recipes, so you can do it fast. So we already have a system in place where we are able to implement changes in the recipes instantly, so there's no gap related to it. Understood. My second question is on the interesting thing you said on the EV. You have a very strong market share in the auto paints historically, because of your strong relationship with the Japanese auto players. But in two-wheeler and three-wheelers in the EV, many new startups have come, and you said that the market share here is very similar to your overall auto market share. So how you are able to manage this? Because these are startups and these are new companies. So is it product superiority? Is it the kind of track record you have? What's really helping there, if you could tell us? In this industrial, apart from the relationship with the Japanese customer, what is more important is the technology, and more important is the implementation of the technology at the line of the customer. So I think there we have a clear moat and, you know, clear unique advantage of our understanding of the customer lines and what can work on the customer line. So it's a mixture of technology, the implementation at the customer line and entire supply chain, you know, because all these new players who are coming up, estimating the market demand, what shade will move, and, you know, it's a very kind of volatile. So we have the capability of supply chain and also backed with the multiple plants. So otherwise, in most of the cases, there is one source of supply, but we have multiple sources of supply. The combination of all these things really help us to get this business. EV is a emerging trend, so any emerging trend in the industrial area, because that is our forte, we are very conscious that even if the market is small today, but we participate aggressively in that, so that whenever this market emerge, you know that we are, we, we are at advantage. My third and last question will be on the rural demand. So if I see some of the FMCG companies in Q1, already rural is faster than urban, and same is true for the Nielsen FMCG data. So here question is, have you seen in historical time period any kind of correlation between your rural versus urban versus FMCG? And second related question is, market leaders come out with Virat Kohli as the brand ambassador for their new Neo Bharat Latex. Obviously, that's at the lower end. So would you also need such a product at such pricing for the urban and rural? Lower end, is that needed for you? So first, first question was? Introduce Virat Kohli. Virat Kohli. Before Virat Kohli, what did you say, Manish? So rural demand, you think, should also start inching up versus urban for you also with some lag, because FMCG it's already happening. Yes. So like, you know, in our case, in industrial, we see the trend in two-wheeler, and there already the trend is seen. It has picked up. But in decorative, as of now, in our case, it is still lagging behind if we compare with the urban. But if I compare or if I see this kind of last two, three quarters, it is inching up. So it is definitely giving the direction that in the coming quarters, maybe rural will do better. And our contribution, if we compare with the industry, our contribution from the rural is better. So, when the rural start contributing, I think that advantage also we should get. And this, new product, what you're talking about, yeah, it's a, you know, interior and exterior. There's a, you know, new product which is introduced. And, so it happens in the industry. I think, you know, it's a, it's a good, you know, sometimes a new product comes in, and if it goes with the market, requirement and the consumer insight. So we are also ready with the, you know, the interior product. It's already tested in the market. Okay. That's all from my side. Thank you very much. Thank you. Thank you. Our next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead. Thank you. So first question is on the demand for the decorative paint. So you mentioned two reasons for slower demand in Q1. Now most of them behind, like clear election. You can just talk about how our exit was or how Q2 is going as of now? That is first question. Second is, if you can just throw some more light on the industrial, both auto and non-auto, in the backdrop of auto volumes and the infra spend, should we assume in both those sub-segments, high- single- digit to low double digit kind of growth? That is it. Thank you. You know, one was affected in Lucknow. These were some of the reasons, but I think, you know, if you compare decorative, even last year, if you see, you know, the, the growth of the industry, the paint market, was in line with the consumption growth. So I think, you know, across FMCG or other sectors, the consumption has some strength. So I think the improvement will definitely happen. It will be a gradual improvement. For the year, as we said earlier, you know, maybe a single- high- digit volume growth is definitely, you know, possible, and there would be a gap between the value and volume. So if we, if we go back, you know, earlier years, where the growth used to be double- digit kind of thing, you know, value, volume, that may not be there. But I think now onward definitely, the demand will pick up, and I expect that the second half would be better, because even in the first quarter, the number of marriages were also less. Whatever we keep reading now, July onward or second quarter onward, even that season is looking nice. So this is about decorative. In industrial auto, I think at the start of the year, we estimated that the production growth of the auto manufacturers would be in the range of 6% to 7%. So I think that is maintained. There may be some differences on a quarter basis here or there, but I think annual this number is probably intact, and it's in line with the projection. In the performance coating or the non-auto, I think the outlook is better. So maybe last quarter was not so good because of the capex movement or election. Definitely got impacted. We've already seen that, you know, this situation has changed in the month of June. And based on the new projects which are there in pipeline or certain order pipeline, you know, I believe that that trend would be strong. I noted. Just one, one question. You talked about some innovations in the industrial paints, both auto and non-auto. Just want to understand that those innovations which eventually help clients in some kind of savings or efficiency, how is it visible in our financial statements? Any measurable parameter, whether in terms of, I mean, higher wallet share or higher margins or any other parameter. So how do we track our benefit because of those innovations? One is that, you know, continuous innovation helps us to, to maintain our market share or to grow our market share, and that is very important. Second, obviously, when we come up with this technology, part of it definitely gets reflected in the margins. So margins, and you can say premiumization, the story what I was talking about. So these are the three things which really help you to maintain your market share or grow market share. It helps you to increase your margins, and also it helps in premiumization, which is also linked to the margin. So, one more point to that. Generally, in auto OEM customers, there is a trend of, you know, these guys all now ask for price reductions, right? So when a product is introduced, over a period, the price goes down. But when you keep on innovating newer products, you can command a better price, and you are able to protect the margins. So that is our strategy going for all these years, which has helped us to maintain our margins. Understood. Noted. Thanks a lot and all the best. Thank you. Thank you. Our next question is from the line of Mihir Shah from Nomura. Please go ahead. Hi, sir. This is Mihir from Nomura. Thank you for taking my question. So firstly, congrats on a good margin management versus what we have seen with the market leader. I wanted to check with you, would it be fair to assume that all the low-cost inventory that you had would have been exhausted? And given the raw material prices are going up, you know, the margin pressure can be, can we start, you know, will be visible from Q2 onwards on margins getting contracted. I know you've taken 2% price increases, but would it be sufficient, or would that impact margins from Q2 onwards? Mihir, I think the advantages are marginal, and, I think, you know, in the Q2, as you rightly said, that we have taken a price increase, and, and one price is already—price increase is already done, and there is another price increase, which is, which is in pipeline. So I think as of now, whatever trend is there, we should be able to offset that, and if there is a further inflation, then we may have to think about it. But I think whatever visibility is there as of now, that price increase is decided. In fact, there are, you know, some, some of the products which are in the Paint+ range, we have taken extra price increase. Understood. Sir, how about price hikes in the auto and non-auto industrial part of the business? Is that also needed, and have you been able to push any of them? Mihir, the auto, you know, generally what we do is that, whenever we see the stability, so if you remember that, you know, the last one year, there has been a deflationary trend, but still the situation has been volatile in terms of geopolitical situation, crude prices, the currency, and therefore, you know, there was a pressure in terms of reduction in the prices. But so we were not very clear about that, how the trend is going to set. So I think the initiative is more in terms of holding the price reductions or, you know, not going for the kind of price reduction, so that if this inflation happens, we are... Even the auto, it's, you know, we have been talking about it, it's always take a lag. So I think it was in that direction that, you know, till the time the stability does not come in, you know, don't get into a price reduction and all these things, and that is how we are trying to manage it. ... Got it. So secondly, I wanted to check with you on the seasonality of sales. You know, we've done close to about 2,100 crores of sales in June. Would the coming quarters have you know, a more you know, slower or more seasonality that will impact for you to sustain this kind of number? Or do you think that you can you can you know, achieve this or sales around this number, basically? If you're talking about the absolute number, generally in our case, the first quarter and the third quarter, absolute numbers are higher. And one of the main reason is that in these quarters, the contribution of decorative business is higher. So because we have a different mix, the second quarter, fourth quarter, the more contribution comes from the industrial business, and first quarter and third quarter, more contribution comes from decorative business. So these two quarters, you'll see higher numbers, and generally, second quarter, fourth quarter, our numbers, absolute numbers are lower. Yeah. No, I was just, it was just an extension to what Keyur had also asked, because, you know, when we are modeling, we are thinking that you can at least do a high- single to double- digit for the remaining part of the year now. So we wanted to understand, is there a risk to that assumption, because you've been very guarded in your commentary also? You are talking of the growth? Hmm. Yeah. Talking the growth, I think, as I said, that in the growth in the coming quarters in decorative will improve, and the performance coating, we are expecting a better demand. So overall- Got it. You will see then a better growth. Got it, sir. So my last bookkeeping question is on employee cost. Wanted to check, you know, the increase is more than average. What is driving this, and will this be the new cost level or any adjustment that needs to be done on this employee cost line item? One element is this, this RSUs, which we are giving to our select talent pool, and with the help of that, you know, the attrition in the talent pool is, you know, very, very low. So I think we are able to hold that, you know, strategic intent and with more people. So that's one area of the cost. The other area is that some of the initiatives what we have mentioned in the area of performance coating division and the decorative, there we have added the manpower. Got it. So they can let you sustain. Got it, sir. Thank you. That's all from my side. All the way, thanks. Thank you. Thank you. Our next question is from the line of Percy Panth from IIFL. Please go ahead. Hi, sir. I just wanted to understand the gross margin expansion a little better. Is it primarily coming from the decorative segment or the industrial segment? It's mix of both. I think our mix has improved in decorative and industrial also, and some of the cost-saving measures that we have taken, so it is quite a balance between both. Understood. Understood. So roughly, same kind of basis points increase in both of them? Yes. Okay. And whatever has led to the gross margin expansion, those factors are sort of here to stay. It is not something reversible or anything like that, right? Yes. That is what our endeavor is. Understood. Secondly, just wanted to understand on your EBITDA margin. So on a YoY basis, the EBITDA margins have been flat this quarter. Should we be looking at similar kind of flat EBITDA margins for the remaining nine months? The reason why I ask this question is, last year, from quarter to quarter, your EBITDA margins were very volatile. So just wanted to understand that even in this market, when other companies are actually seeing an EBITDA margin decline, if you are maintaining a flat level also, it is quite creditable. So is that how we should model it out for the remaining three quarters? I think, you know, earlier also we said that, because generally, as you rightly said, quarter to quarter, our mix changes, and therefore you see this volatility. That's why generally we comment on the annual basis. Annual basis, our target or endeavor is to maintain our margins. Maintain versus FY 2024, right? Yes. Yes. Understood. Understood. Yeah, that's all from me, sir. Thank you, and all the best. Thank you. Our next question is on the line of Lakshmi Narayanan from Tunga Investments. Please go ahead. Thank you. Hope I'm audible. Two things. You know, we talked about, you know, warranty. I just want to understand how many people actually exercise warranty. If you look at either in terms of the liters of petrol or liters of paint, or in terms of number of customers, if 100, 100 liters or 100 people buy the product, how many actually exercise warranty? Maybe less than 1%. Because it's more of a, you know, kind of verbal assurance, you know, when they go to the counter or dealer, you know, there's a warranty on the product. More of a verbal assurance, but in actuality, very, very less number of people. Got it. So that means that it's, like, whether you increase that warranty or not doesn't really matter. Yes. Okay. The second question is that, when you actually expand your distribution, do you find it is more difficult to expand your distribution than what it was, like, two years back? Or, you know, what is your... How things have changed in the last two, three years, especially post-COVID? Last 2, 3 years, not much has changed, but I can probably say that, you know, when the number of players increase, then the expectation of the dealers obviously change. You know, it's like, maybe their expectation goes up, to some extent, and therefore, your offerings, you know, get tweaked. So maybe to some extent, you can say your discounts goes up, or to some extent, your, the packages what you're offering in terms of machine, there the, you know, changes happen. So to that an extent, there is some change, where the expectations of the market is little higher. So opening is not difficult, but I think, more negotiation or, you know, more expectation, that's the change. Can you just quantify it or can you just drill deeper here? No, difficult to quantify, but I'm just saying like, you know, traditionally the industry is placing the machine at the counter, charging some money, giving a target, you know, but then the more number of players are there, you know, then the offers are available on competitive basis, so there people start negotiating. When you are opening the new counters, you know, you are offering a particular discount, let us say X discount. Maybe their expectation little goes up, so to that extent, the team has to spend more time to explain the benefits. So somewhere there could be little implication of the cost, which, which has already happened in last 1.5 years. Somewhere it is more time spending to open the more number of dealers, and therefore, maybe some requirement of the manpower goes up. Got it. So how many, what is the kind of distribution expansion you plan for the year? Generally, we target in the range of 8% to 10%. Got it. Got it. And the second question is related to demand of premium, because you mentioned that the premium saliency is strong. What has been the price growth or the volume growth in the premium segment for us? Yes, I'm talking about the saliency which has gone up. So which means that, the growth in the premium is unfortunately, in the first quarter, if you see negative, it's a negative. Overall growth is negative. But in the premium, you know that it is not negative, so that's the point, and that's why the saliency is gone up. So premium is doing better. Like, by what percentage, sir? Price, volume, any, any, any, anything you can- We don't talk about that, but saliency has gone up. So, you can say that the trend in our case is that the growth in the premium is better. So if generally, let's say example, that if the market is growing at the rate of 0%, then maybe the premium is growing at the rate of 2% to 3%. Okay. Okay. And you talked about project business. You have already reached around 79 towns or so. What kind of growth on a rolling- 12-month basis you are seeing in this segment, and what kind of contribution it makes to your business now? We are looking at a high- double-digit growth. Last year also we achieved it, this year also we are looking at that. And because the general market is, repainting is, you know, sluggish, but the project market, the growth is still there, and that's why our saliency is going up. We are looking at high, high double-digit growth. For you, in terms of the overall decorative business, how much it would be? You are, you're looking at what, 10% of your decorative will come from project business, or what kind of? As of now, as of now, it is lower. You can say it is higher- single- digit. You know, as of now it is lower. But for the industry, so we are under-index on project, you know, because initially or earlier in our focus was not there. It is only last 1.5 to two years, we are putting focus on project, and now the saliency is going up. As of now, we are under-index if you compare with the industry, but our trend is positive, so maybe over a period of time we'll catch up. We'll get into a double digit. As of now, we are not in double digit, we are single digit. My last question, you talked about performance coating business. Just want to understand how large is the performance coating business for us, and what are the applications we cater to, and, what kind of market size it has, and who are the people you actually compete with in this segment, which is non-decorative and performance coating? The market size is quite large actually, and the growth is good. In fact, performance coating division, the growth has been higher because of the government focus on the infrastructure. And actually it is, market size is now very close to the auto market size, and that's the market where our market share is lower. In auto, we are market leader, but there it is lower. I'm talking about the relatively. And therefore, for us, the growth prospect is high and we foresee a sustainable growth. So the segment I said is infrastructure related, you know, which is, you know, bridges and railways, and you know, there are many segment there. You know, if you look at- Drums and barrels. Drums and barrels. TV. TV. Helmets. Helmets, railways, construction, construction equipment. There are many, many segments there, and glass, electrical, so there in fact, you know, then some of the coil coatings are there. So some segments are big, some segments are niche, but it makes sense, you know, in the niche segment, maybe your volumes are lower- Right. But your margins are better, and that's the technology advantage you are getting. And it's not easy to play in the niche segment, you know, that because how do you manage the forecast versus delivery? So that's the capability which we have worked upon. It also depends on a lot of approvals, which we started almost 1.5 years back, and today we have a lot of approvals in our hand. So, so that's what... I think the market size is quite good and effective. How consolidated is this market, sir? Like, I mean, who are the large players? Like, is it like, as consolidated like the decorative? There are actually larger number of players in this market. If you compare with decorative, there have been traditionally four or five players. In this market, already 10 players are there, and they have been there for quite a long. So who's who of the industry, you know, all the big names of Indian industry like PPG, AkzoNobel, Hempel, Jotun, Nippon, all are there, and there are many more, niche players, you know, that who are international players, they are available. Got it. Got it, sir. Thank you so much, and I'll come back to you. Thank you. Thank you. Our next question is from the line of Amnish Aggarwal from Prabhudas Lilladher Private Limited. Please go ahead. ... Yeah, hi. Hi, sir, congrats on good numbers. I have a couple of questions. First is- Thank you. How should we look at the volume growth in 1Q? So, is it, you can say, positive for both decoratives as well as industrials? What sort of volume growth should we, you can say, expect? That is positive from about, you know, mid-single-digit is the volume growth. Overall? Yes. Okay, and, decorative is also on the positive side? Yes, on the positive side. Slightly lower, you know, from industrials we compare, but positive side. On the positive side, okay. Do you see a possibility that with the now monsoon being normal, are we heading for, say, any probability, double-digit volume growth coming in the coming few quarters? Difficult to comment, you know, because as I said, that last one year or we have seen that, the decorative linkage is earlier we used to clearly link it with the GDP. But, I think the, you know, in the past, the GDP and the consumption growth used to be very close. But now the GDP growth is good, but consumption growth is lower. And I think the paint is a discretionary item, so it is, it has a you know, it is directly proportional to the consumption growth. So high single digit possibility is there, and I'm not saying every quarter, but I think overall for the year, high single digit volume growth is possible. Okay. And sir, my next question is, again, I think couple of people have also asked earlier is on the margins. Because if we look at, say, first, the gross margin QOQ, we have shown an expansion whereas the market leader has shown a decline. So is it purely due to mix, or is it due to some low-cost inventory, you can say, sitting with us? So how can we explain that? That is one. And secondly, with 37% gross margins, does it mean that in decoratives we have gone north of 40% during this quarter? Yeah, margin, I already said that it's a mix of, you know, the product mix definitely is better because it is better in decorative also, it is better in industrial also. We also got some advantage of the low-cost inventory. And then there are a lot of cost measurements which we have taken and which has, you know, worked, worked for us. So I think that is the story about the margin. What is the second question? Yeah, second- Decorative margins are always higher than industrial margins. Okay. And, sir, my final bit is on the other expenditure part, because the other expenditure has actually gone up by 70 basis points. So any big, you can say, spends on advertising or, or any you can say? Yeah, it is mainly in the area of advertising. The increase which has... When I say advertising, it's more of a marketing. So some of the initiative what I mentioned, those are properly supported with, you know, some of the marketing initiatives, and these expenses are related to that. Okay, sir. Thanks a lot. Thank you. Thank you. Our next question is from the line of Avi Mehta from Macquarie. Please, please go ahead. Hi, sir. Thanks for the opportunity. Sir, I understand your comment that it is too early to take a call on Grasim's entry, but wanted to just get a sense versus, say, a few quarters back when there was complete uncertainty around the launch. Now, with Grasim actually on the ground, how has your confidence or your concern changed? I think, Avi, for validation that what we were saying, that this market difficult to turn it around overnight. It's a gradual process. I think for validation, that is getting validated. If you say the concern was more earlier and concern is less, yeah, you can say that you are feeling more - we are feeling more confident about our strategy today. Okay, sir. That's extremely useful. And sir, the second bit was on the competitive situation in the auto and performance coatings. Has that changed? Or if you could just give us an update on how does our market shares stand versus... If you have any comment over there? That's all. So in auto, in fact, last two, three years and now also continuously we are increasing our market share. That is there. And in the performance coating division, which is the opportunity area for us, and in the past, in the performance coating there are two parts, liquid and powder. Powder, we are market leader, and there is a good category growth, which is expected in powder also. And in the powder, there's a premium category where we are under- indexed. That's the initiative we have taken. Technology, we are very-- technologically, we are very strong. In the liquid market is very large, our market share is low. Earlier, we used to play in the lower segment, economy segment, where the margins were the issue. Our first target was to come out of those categories and get into the better categories, better product mix, where the margins are also decent. That bridge we have crossed. Today, in fact, our business is, we have already upgraded the business and the whatever growth we are getting, we are getting at good margins, and that market is good. Technologically, we are well placed. So I think, you know, that there we feel competition is there. In fact, in this market, the competition is there for many years, and I think any international player, if you really look at it, is available in the Indian market. But I think there we have a confidence that over a period of time, we have built the moat and the differentiation in this particular business, and that is helping us to, you know, keep us very optimistic. Perfect, sir. And sir, if with your permission, just the last question on the margin front. I mean, you've given us a very clear, you know, how you look at the margins from an FY20 25 perspective. Just wanted to, you know, check whether, would any increase in competitive intensity, say, in the festive period because of the new player entering in, is that something that is already baked into the numbers? And if that doesn't pan out, because as you said, in even earlier, these things take time, from an industry perspective... you know, it may not be. So would that be an upside risk as well, if, you know, what we are assuming kind of pans out? Is that how I should see the margin coming to? Clearly, there has been an in- Whatever is visible as of now, and obviously, as you asked your first question, although visibility is better, so to that an extent, this is factored in the numbers. Okay, sir. Okay, perfect. Thanks. That's all from my side, sir. Thank you. Thank you. Our next question is from the line of Nurumi from ACL. Please go ahead. Hi, sir. Thank you for the opportunity. This is Nurumi from ACL, sir. I hope I am audible. Yes. Hello? Yes, please. Yes, go ahead. Hello? You're audible. You can go ahead, yes. Okay. Hi, yeah. Also, sir, I have a couple of questions. Firstly, you mentioned that the overall capacity utilization is at 60%, and that you have a capacity headroom on the industrial side. So is it possible to quantify what is the utilization of the decorative and industrial segment? No, generally, you know that most of our plants are common plants, so generally, we look at the utilization at total level, and total level it is around 60%. Okay. All right. And on the auto segment, so in the last few years, we have entered, like, you know, various new segments to increase the addressable market. So is there more scope to increase the TAM in the auto segment or will more of the incremental growth come from the non-auto side? So within the auto, from the new segment, segment which has four- wheeler sealer and alloy wheels, and there are one or two more segments where we have entered. So there we are getting some uptake. You know, they contribute, not very significantly, but even if you get more than 1% or 2%, I think that's good enough. So that's one area within the auto. And, the performance coating, which is a non-auto side in the liquid area, that's a big market and there we have a good opportunity, and that is what we are targeting. Okay, sir. Got it. Thank you. Thank you. Thank you. Our next question is from the line of Tejas Shah from Avendus Spark. Please go ahead. Hi, sir. Thanks for the opportunity, and congrats on good set of numbers. Sir, just wanted to double-click on your remark that we are more confident and optimistic than, let's say, what we were six months before on the competitive landscape. Are you more confident that we can protect our share, or are you confident that growth is enough to accommodate one big player? And are we confident that, because whatever you spoke so far, it looks like the cost of doing business is actually going up on marketing side, on dealer side. So are you confident on margin as well? Yes. So, you know, generally what happens is that we have taken a route, you know, and a strategy, and the confidence always goes up when you see that your strategy is working, the initiatives are working. Because the protection of market share or growth of market share depends on two parts. One, that whether you are getting through the initiatives, the other, you know, sometimes you have to push for the sales. So when your initiatives helps, you know, it is good, you know, because that gives you a sustainable thing. Related to our competition, I definitely feel that in the long run, competition is good for this industry. Mainly reason is it will help in terms of increasing the per capita consumption. It will help in terms of faster shift from the informal to the formal. It will also help, you know, when you see more visibility. So ultimately, paint is a low involvement category, where the, you know, consumer involvement is high only when he does the shade selection. When he does the paint selection, then the role of the influencer become more important. But with more, you know, number of players, more visibility, you know, there is always a possibility of consumer becoming closer to the category. And that's also a very good sign for the industry, that if the consumer become more closer to the industry, then the more premiumization happen, and therefore it also helps in the margins. So I think it's a mix of both. That, the strategy, what we have followed, also the market size is big, you know, that because the players who are entering are a very reputed players, and, you know, they have a good capacity, they have a good capability. So, you know, when the players are entering, I think we have to accept it that, you know, the market, is going to have more number of players, and the market is big enough, to absorb the players. So I think my answer to this, in this regard, is a mix of, both the things. Sure. I logged in a bit late, so apologies if I'm asking what you have answered already. Did we take any price hike recently? Yes, we have taken one price increase already, and another price increase is in pipeline, which is already announced in the market. So, sir, just a follow-up question on this. So all the paint players who are listed, they have kind of indicated that they are at the upper end of the margins in FY2024 exit. And to combat the competition, perhaps it's very normal to expect that margins will go down. So why... How should we see this strategy? Because at one level, we are actually increasing consumer price when consumer has will get one more option to choose from. So how should we think about where you are in the upper end of the margins, we are increasing prices also, and consumer has one more choice also coming to choose from? It depends, you know, ultimately, how much consumer knows about the price. Is the price the criteria for the consumer? Certainly not. Because today, unfortunately, you know, the consumer is not aware of today, even if you want to do a painting in your house, I don't think you will have some figure in your mind. You will have, you will have to depend on somebody to guide you. So pricing is not important from the consumer. Maybe at the lower end. It does help, but in the, you know, popular range and the premium range, it doesn't matter. So what is important is that, whether your, your distribution or the dealers are convinced about your product, whether they are ready to put in that, you know, extra effort, the painter initiative, the influencer initiative, how much you are in touch with them, and whether they are confident, you know, about... Typically in this market, that's why I say that any change happens gradual because, if you've seen for last, many years, the market shares are kind of unchanged or maybe for some period, you know, the share of some company goes up. In other periods, some other company, you know, goes up. So it becomes a habit-based industry. So changing from, you know, that habit to something else, is a, is a difficult task. So I think, you know, you have to choose your areas, you have to choose your niche, you have to choose your regional thing, and there you get a better result. But if you have to go whole- hog, then obviously it's a costly affair, and how much sustainability is, one has to see. Got it. Got it. Thanks for the detailed answers, sir. Thanks, and all the best. Yeah. Bye. Thank you. Our next question is from the line of Nikunj Gala from Sundaram AMC. Please go ahead. Yeah. Good afternoon, everyone. Thanks for taking my question. I have a question on the industrial side. Can you just help us with what will be the contribution from industrial for us, say FY2024, and within industrial, how big, auto will be for us? Early in the yearly basis, it is 55/ 45. 55% comes from decorative, and 45% from industrial. And within that 45, approximately 70% would be auto. And this is on an annual basis. Quarter-wise, it changes. Yeah. And, how this number would have changed over the last five years? Because I remember, like, you know, a few years ago also, these numbers were pretty much same. Yeah. So it should keep changing, you know, that there were years where then 55 went down to 52, 53, but then again came back to 55. So it's in the same range. Okay, sure. And in auto segment, like you mentioned, you are gaining market share, but is it possible to give us some sense on how big is the size and what's our market share in that? Our market share in auto is close to 60%, 60. Okay. Sure. And just lastly, on the, you know, how we should be looking at this segment in the next, you know, five-year period? Like, is it a still a scope for us to gain more volume share from the existing OEM or new OEM coming onto the board, or, you know, more of a premium offering to the existing OEM? How one should look at the, you know, growth trajectory? Next five-year, the outlook is good, you know, because. Again, the penetration of, you know, the passenger vehicle and two-wheeler in India is very low. If you compare with any of the country in the, you know, world, it is very, very low, and it is always proportional to the infrastructure growth which is happening in India. So in the past, there was more, this was more cyclical, that some year it does well, some year it doesn't well. But that nature of cyclic, cyclic nature is also, you know, becoming low. So therefore, the market is becoming more cyclical or more stable, we can say. The technology is emerging and, a lot of new technologies are coming up. Mm-hmm. We have a pipeline of technology available for next three years, five years. So therefore, continuous upgradation and therefore continuous, premiumization also. So in the next five years, I do see, the volume impact and value impact, positive impact in, in both the scenarios. Okay. How big is the market today, sir, like, overall? Market is, you know, overall so what is approximately, generally, like, you know, India is INR 70,000 crore of industry, out of that 30% industrial. So you can say around INR 20,000 crore could be the market size. Okay. Within that, the whatever is our contribution from auto, the same contribution will be at industry level also, right? No, I'm talking about this 30% of the total size is related to industrial. Right. Including auto. Our contribution of auto would be higher, you know, because- Okay. market share in that area. Okay, sure. Yeah. Thank you for answering all my questions, sir. Thank you. Thank you. Thank you. Our next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead. Thanks for the opportunity again. Just one question on the industrial side. Have we seen... I mean, just, in case of Asian Paints, after the disclosure, we can see aggressive growth for their industry part of the business. So, have we lost any share, either in auto or non-auto industrial, or have we seen cost of doing business going up or competitive intensity going up in that part of the business? No. In auto, we are increasing our market share, and in the non-auto, as I said earlier also, that we exited some of the business which is at the lower end, and at the, you know, in the segments where we have decided, there we have started doing well. And, the cost of business has not gone up. In fact, we are now playing into the segment which are more technology solution-oriented, and therefore... In fact, you know, in the non-auto business, actually, we have improved our margins. Earlier, we used to work on a very, very low margins. I think last one and a half year, we worked on it, and we are working on a decent margin. Okay. Yeah, just last one follow-up. So probably, back-end calculations suggest that, as you mentioned, margins had gone down in the industrial part of the business, and probably we were much, much higher levels in FY2017, FY2018, FY2019 level, FY2017, FY2018. Where would we be in terms of, say, profitability, in terms of industrial paints? From our earlier high, if you can just give any qualitative or quantitative idea on the margins of the industrial business. Industrial margins, generally have been volatile, so even if you say 17, 18, maybe there could be a, you know, one small period, you know, that where the margins are higher. I think generally the B2B business, B2B business, which is more volume and kind of thing, I think, what is good for us is the maintaining, sustaining double- digit margin. That is how we look at it. Right now, EBITDA levels, the margins would be in double digits? Yes. In the industrial business. Yes. I mean, based on your commentary with the improved mix, probably that should continue to be the case, going forward as well. That is what our endeavor is. Okay. Thanks a lot. Thank you. Thank you. Thank you. Ladies and gentlemen, that was the last question for the day. I now end the conference. Over to the management for closing comments. Thank you, everyone, for participating, and as usual, your questions always help us. We get some insights. Thanks for supporting, and thanks for joining this call today. As we discussed about, you know, that the first quarter was muted, but with this monsoon, we expect, you know, gradual improvement in decorative demand. Auto has done well, and the non-auto industrial, we feel that, you know, going forward, strong growth based on the government thrust on the infrastructure. Some of you are, you know, obviously eager and conscious to know about the competition, so whatever steps we could have taken, we have taken. But I think more importantly is that our balanced portfolio of decorative and industrial, you know, positions us well to navigate this competitive, you know, challenges or changes effectively. Our idea is basically to use our strength in addressing any type of challenges to drive sustained growth and value for our stakeholders. Thank you for your participation. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.