Good day, welcome to the Q1 FY23 earnings conference call of Berger Paints India Limited, hosted by Emkay Global Financial Services. We have with us today from the management, Mr. Abhijit Roy, MD and CEO, Mr. Srijit Dasgupta, Director of Finance and CFO, and Mr. Sujyoti Mukherjee, Vice President, Finance and Accounts. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. 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 would now like to hand the conference over to Ms. Jigisha Kapoor from Emkay Global Financial Services. Thank you, and over to you, ma'am. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen. Thank you, Jigisha. A very good afternoon, ladies and gentlemen. I'd like to extend a very warm welcome to all of you to the Q1 FY23 earnings call for Berger Paints India. As usual, I'll begin this session with a few comments about the standalone and consolidated quarterly performance, and then invite questions from the participants. One additional comment, this time. We are privileged to have with us our MD and CEO, Mr. Abhijit Roy. So I'll restrict my comments to the financial performance and then perhaps leave more room for questions from the participants, particularly on the business. Just a reminder, as usual, a standard comment and disclaimer that questions should be addressed to the quarter in question. Leading questions regarding the Q2 or Q3 performances will not be answered. Starting with the BPI standalone numbers very quickly, very robust numbers this quarter. Total income from operations grew by around 54%, PBDIT by 69.3%, PAT by 73.5%. A few comments to interpret the results I think would be useful. There was a gross margin contraction of 2.6%. However, this has to be seen, as we recall even in the trailing quarter, that this should be seen in the context of the project business last year. If we adjust the gross margin numbers, the percentages for the project business that we had last year, substantial amount, then the contraction actually drops to only about 1.5%. It's interesting to note that with the price increases, even with the very, very high raw material price increases, we've been almost able to overhaul the earlier margin levels. Another point to note is that this time the industrial businesses, particularly GI Auto, recovered very well in terms of course, volumes and value sales. As we mentioned earlier in earlier quarters, this business typically lags a little behind Deco and Protective Coatings businesses in terms of price increases, and therefore this has pulled down the gross margins to a marginal extent, about 0.4%-0.5%. This is just to explain how far we are away from Q1 FY22 gross margins. This is of course in the context of price increases. The total business managed to secure a weighted average price increase of around 21%-22% versus Q1 FY22. That that's really helped to us to claw back in terms of the gross margins. A word about the raw materials. This was a little bit of a surprise from the gradually cooling off in terms of prices that we saw in Q4 FY22. Q1 FY23 again saw an uptick in certain raw material prices, particularly rutile contributed of course, largely by the USD appreciation. There was a decrease in butyl acrylate prices, the most used monomer, but the prices of styrene monomer rose quite sharply. There was also a steep increase in phthalic anhydride, vegetable oils and solvents. This explains lowered gross margins, even in the context of very high price increases of finished goods. Other expenses, freight was largely contained at previous levels, previous year's levels. Overheads include last year the element of applicator expenses for the project business. That has to be taken into context when we look at the current year numbers in terms of percentage of sales in terms of other expenses. With the gross margin drop of 2.6%, there was a net PBDIT improvement of about 1.5%. This was a combination of some cost reduction efforts, some, the effect of project business on overheads, as I mentioned earlier. The earlier, the Q1 of FY22 quarter included these expenses which are no longer relevant for Q1 FY23. Of course, there was the scale effect of higher sales on overheads. A little bit about our BPIL consolidated numbers. Growth similar to the standalone numbers at 53.4%. EBITDA at 69.7% growth. PBIT at INR 676.9. PAT at INR 80.6. A few comments on the subsidiaries performances. Strong performances from BGN Nepal, LVL SCPL, which will be Akzo Nobel sub-coatings. STP, that's our construction chemical subsidiary, waterproofing and construction chemicals. Bolix S.A. had margin pressure in the Polish B2B business, but, reasonably good growth in the U.K. part of the business, which is acquiring larger and larger share of the total business. However, we, expect that the situation will improve in terms of demand in Q3 FY23. The ruble USD fluctuation, for our BPOL Russia business, this was treated as expenses or other income as the case may be earlier. There was a significant fluctuation this year, and in line with the Ind AS 21 view that, capital infusion or loans in the nature of a capital infusion should be treated as OCI in terms of, the effect on profits. We have, going forward, decided to treat it as other comprehensive income and not take this income in other income in the subsidiaries. That concludes my opening comments regarding the financial performance. I now invite questions from the participants on the quarter's results. Thank you. Thank you very much, sir. 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 the handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead. Yeah, thanks for the opportunity and congrats on good set of numbers. On a YOY basis, numbers are difficult to compare given COVID. My question to Abhijit is, based on the last three years-five years, in which of the domestic markets, Berger would have gained market share in Deco and anywhere, you would have lost. Similarly, if you could give us some details on waterproofing putty. It may not be relevant on five years basis, but on three-year basis, if you could share some of the success stories in waterproofing and putty also. Right. You know, so, Abneesh, you know, good to talk, you know, because this is my first interaction after a long time. With relevance to your two questions that you have put in, on a three-year CAGR basis, our growth rate will be about 17 odd%. That I think is a fairly strong growth rate. Overall, we would have gained in certain markets. It's difficult to call, you know, and we do have our own estimates. I think, you know, more in the weaker markets of West and South, we would have gained in some of those pockets. In East, we maintain our, you know, strong leadership type of a status in some of the markets. In some markets, we are at number two position, so that continues. North Central was a moderate performance overall. This is my thinking overall. Now, you know, as far as waterproofing is concerned, that has been seeing very robust growth. The growth rate has been much in excess of the paint growth rate. Exact figures is difficult to call, but you know, it will be quite substantially more than the paint growth rate. As far as the other category of putty that you mentioned, that actually last quarter we had a very low growth rate. Comparatively, you know, against growth rate of about 54% by value that we saw, putty growth rate would have been in the range of 17%-18%. We lost a little bit in putty because of pricing pressures which were there in the market. That's fine. You know, that's a call that we took. Sure. One quick follow-up question. How important is putty sales in overall scheme of things now? Because I think it helps in cross-selling your other products. Second is the North and Central, which you mentioned, where there has been slightly slower growth versus some of the other markets. Any particular reason? Is it because of your scale in those market or the market leader is more aggressive in such markets? It's a combination of all those factors, Abneesh, you know. Market leader has been much more aggressive in terms of pricing inputs there. We have also Stayed away, you know, from skirmish in the putty segment, you know, specifically there. Overall we are relatively at a, you know, moderate presence there, so the growth rate also is relatively slightly on the lower side. Sure. Last question. You have said, your auto part of the business also has done well. My question is, if you could tell us again on three-year basis because of the Berger Nippon, JV kind of, presence here, are you getting more market share here because clearly Nippon will help you in the Japanese OEM relationship? Do you think this could accelerate over a three-year basis in terms of market share? For me, you know, the Berger Nippon figures don't figure in our results because, you know, as you know, they are 51 and we are 49, so we don't consolidate their top line. We just get the part of the share of profit at the end of it. That's not included in whatever we have mentioned about automotive or what Srijit Dasgupta mentioned is essentially the one part that we are dealing with, which is two-wheelers and commercial vehicles. In commercial vehicles, you know, as you know, from a lower base it is, you know, doing much better. Which is why we had a slightly higher growth rate in terms of overall value sales. On a three-year CAGR, it will be lower, much lower than the overall growth rate that we registered. Sure. Thanks. That's all from my side. Thank you. Thanks, Abneesh. Thank you. The next question is from the line of Avi Mehta from Macquarie Capital. Please go ahead. Hi, Abhijit, and hi, team. Sir, happy speaking again with you after a long time, sir. Sir, if you could share your thoughts on the strategy that you will seek to adopt essentially to bring back. You know, you have traditionally grown in the deco segment much ahead of other peers. You've been on a spree when it comes to market share gains. Now, I can understand that, you know, the COVID has been a disruption, but as we go forward, could you share how are you seeking to approach given an aggressive leader and given a new player that is potentially entering? Any thoughts on how do you want to bring back the stronger growth in decorative that you used to enjoy earlier would be useful. Yes. You know, three things which we are looking at. You know, one is expansion of the network in a much bigger way. Last two years has been a bit impacted because of COVID, as you mentioned. We are a number two player. There is a lot of space for network expansion. Therefore, you know, we will try and do that aggressively in this year. The second part of it is related to brand and brand build-up. We will be spending a little bit extra amount of money on brand building this year. Essentially, on two new areas, on the luxury category where we would like to focus our energy, and also on the waterproofing side. Also we are expecting that, you know, these two categories anyway has got a lot of potential, and we are well poised to capture a larger share of this, of these two segments. This is the other thing which we would like to do. A combination of these two, I think, you know, we should be restoring, and, or hopefully we should be in a position to gain, in terms of growth rate. We should be, you know, near about the top. If we're one or two, you know, we don't know. It all depends. You know, but we should be there, either one or two. Okay, sir. Perfect. Sir, just a bit on the brand development side, you know, just one other thought that I wanted to explore with you is we are seeing, you know, some sort of early signs of input costs coming off. In that scenario, would you want to relook at the economy segment? Because there was a thought process that, you know, margins had taken a hit in an inflationary environment. Would you now relook at that segment, because there has been much healthy growth that was coming in within the last couple of quarters? Yeah. You know, yes, partly yes, we would like to take a relook at that. The economy segment also may need some more attention and likelihood of, you know, better growth there as well. You would kind of look at this now? I mean, I thought you were looking at that. Are you planning to look at this again, sir, given this moderation, or is it still some time away? We maybe, you know, another one or two months we would like to see, because the prices, as you have seen, is very volatile. We don't know whether, you know, this will continue. If it does, then, you know, we would definitely look at the economy segment. Okay, sir. Perfect. Lastly, Srijit Dasgupta, sir, it has been a pleasure speaking with you in all the conference calls. Look forward to meeting you some other time in any other, you know, time and occasion. Thanks again, sir, for all this. Thanks. T hanks, Avi. Good to talk to you as well. Of course, we'll reconnect sometime. Thank you. The next question is from the line of Nitin Jain from Fairview Investments. Please go ahead. Yeah, thank you for the opportunity and congratulations on the good quarter. I have just one question. You know, the market leader has been quite successful so far in you know, diversifying from being just a paints company to selling various other you know, kitchen solutions, bath solutions, and they have recently added lighting solutions as well. Given the, you know, the entry of new players in the market is going to increase the competitive intensity in the paint markets, do we also have any such plans of diversifying into related products or services anytime in the future? Thank you. As of now, there is no plan to diversify into either kitchen, bath, or any of those categories. We would prefer to focus completely onto paint and waterproofing and construction chemicals. Some allied products of near end, you know, say wallpaper, et cetera, which we might get into at a later date. But we are not looking at, you know, complete expansion into unrelated areas like lighting or furnishing or furniture or things like that. We would focus our energy and attention because there is a lot of scope within the paint category itself, both in decorative and industrial, in India and abroad. Therefore, you know, our objective is to focus on this core business, which we understand well. Especially in light of competition coming in, we would, you know, it is much better to focus on what you know best than to look at other areas. Makes sense. Thank you so much. Thank you. The next question is from the line of Varun Singh from IDBI Capital. Please go ahead. Mr. Varun Singh, your line is in talk mode. Please go ahead with your question. Yeah. Thank you very much. Sir, my question is on gross margin. This quarter we noticed that the contraction in gross margin is very, very steep when we compare to other competition. On this regard, sir, Actually, I understand you did make a mention about the project business and contextual remarks, but sir, I mean, if you can give some color with regard to, you know, how much price hike we expect more to restore gross margins to earlier level. When I say earlier level, sir, I mean the arithmetic mean or, you know, the higher level of gross margin that we used to enjoy earlier. Yeah. I restricted my remarks to comparisons with Q1 of FY22, which I thought was relevant. Compared to trailing quarter, we have not really changed much in terms of competition, certainly with the leader, and I'm talking of Q4 of FY22. Whatever little difference has happened is, as I explained, largely on account of the effect of the project business in the base quarter, meaning Q1 of FY22, and also the effect of higher GI and automotive sales, which was, as Abhijit mentioned, very much better this year on account of the high two-wheeler and certainly higher commercial vehicle numbers for the quarter. The contributions in the GI auto business are traditionally in terms of Protective business also did well and both these categories, you know, have lower gross margin, you know, so it impacted. If you look at it overall, we were at about 38%-39%, you know, earlier. We are at about 36 odd percentage. So it's not a major slip up. You know, if you counter it, if you see it against what used to be one point of time 40+, that was a very unusual period where the raw material prices were very, very low, and every company was having a very high gross margin level in paint. Now, subsequently, it has, you know, it has been stabilizing at around that 38% level. This quarter is slight dip, but we will be able to restore it back very soon. Compared to competition, we are not that far away. I think your remark was relating to competition. Yeah, that's correct. If compared to competition, if I say quarter-on-quarter decline and not year-on-year decline, I mean, for example, in case of competition, we would say hardly 100 basis points decline, but in our case, we see close to three like from 39%- 36%. Yeah, I mean in that regard, I was just you know wondering that why there is. We explained that the fair comparison would result in a margin contraction of a little over 1% as compared to the 2.6% or 2.7% that you're seeing. That's the comment. Understood, sir. I mean, when you say fair comparison means what exactly are we weaning out, which is tilting the, you know, balance, so significantly? I did not get that point, sir. What is the gap between 2.6 and 1? What is one thing? You want to understand the gap between. Yes, yes. Numbers? Yeah. About, roughly 1% is on account of the project business that happened in Q1 FY22. To explain, we have explained this in earlier quarters, the project business in terms of the sales, which includes obviously the application costs and the margin, will have result in obviously a very low RMC component in terms of the total project cost. Because the bottom line includes the application costs and the margins. It's more than offset to a large extent by the application costs which appear in overheads or other expenses. This is artificially pushing down the RMC percentages to sale in a quarter where project business is high. We explained that in Q1 FY22, because of the project business, RMC was depressed. If we take that off, meaning we take that impact off, the margin contraction drops from 2.6% or 2.7% to about 1.5%. If we also discount the impact of the higher GI and automotive sales, which Abhijit mentioned has traditionally lagged behind, deco in terms of price increases, then the actual margin contraction comes to a little over 1%, which is pretty much close to competition. Understood, sir. That's very much clear. Thank you very much. Sir, last question on waterproofing, sir, is, if you wish to call out that what percentage of our revenue now waterproofing would be, sir, roughly? Any ballpark number? It's significant now. You know, it was very small, but now it is relatively a decent figure. I can't give you the exact figure at this stage. Sir, mid-single digit or, something, anything like that? Well, you know, it's still in the single digit, but, you know, moving upwards. Okay. Okay, sir. Thank you very much, and all the best. Thank you. The next question is from the line of Ajay Thakur from Anrati. Please go ahead. Thanks for taking my question. I have two set of questions. First, wanted to check on what would be the pan-India paints retail touch point for the industry and what would be our touchpoints within the same? If you look at the machine dealer segments, you know, because there are now this new thing which has come up, you know, retail touch point, which concept has been spread by the leader. This is basically, you know, via the distributor, you go to small retailers and you sell, you know, some item or the other, and it is considered to be a touchpoint because some product or the other of the company is being sold. That's a different thing altogether. If you look at the paint category as a whole, where a significant amount of paint sales happen and the number of such dealers which are existing, probably the universe will be about 100,000, where paint sales happen in decent quantity. We are present currently with machines in about 42,000 machines are installed. Overall, we have presence in 50,000 of retail counters as such. That's what I would place it as. Now, of course, there are many small other retailers which are touched by the wholesalers who might be selling into those retailers. Those are. We can't keep a count. We don't even know how many of these are there. That will be also a fairly large number. We are trying to figure a solution for that as well to understand how many of such retailers are being touched by us. Okay, sir. You're referring to the fact that 50,000 would be including some of the non-paints that you would be doing or, you know, just is it, you know, that machine is some kind of a mechanism that we kind of. 42,000 machine counters plus 8,000 of non-machine, but paint counters with whom we deal directly. We are dealing directly with about 50,000. Indirectly, there might be a few more with whom we deal, of which I do not have a count as of now. Okay. Sir, any sense on the non-paint segment, what would be the touchpoints for you in the non-paints touchpoint? In non-paints, essentially we are there in two categories. One is the Waterproofing and the adhesives category, which is for Tile Adhesives mainly. We don't deal with any other adhesives except for the Tile Adhesives. These two categories, we have some presence there, and it is building up gradually. You know, so far, you know, difficult to give you a count, but probably will be about 3,000-4,000. Okay, sir. Sir, last question. Wanted to check on the new competition. How do you see it, you know, in terms of impacting the industry, given the fact that their differentiation within the paint segment is very difficult, you know, most of the players would be having similar kind of a product. Differentiation is obviously difficult. When new player enters, what would be the plan that they use to get into, you know, more and more outlets? Would it be the painting machine? Would it be the painters, you know, trying to address the painters? Or would it be more on the pricing front? What would be the logical, you know, kind of follow-up that could happen? Well, that question should be addressed to those who are entering. You know, how can I answer on their behalf? You know, it can be any of those combinations of any of those things. They obviously, you know, anyone entering late will have to figure out a solution, and then entering and establishing and getting the distribution network up and going, establishing brands and getting it noticed by consumers. It takes time. In my opinion, in consumer categories, you know, things don't turn around so fast. It will take, you know, a few years for that to happen. We will get to know what their strategy is soon. You know, obviously, every incumbent player will watch that carefully and take judicious action at that point of time. Okay, sir. Quite helpful, sir, and thanks for your inputs. Thank you. The next question is from the line of Jaykumar Doshi from Kotak Securities. Please go ahead. Hi. Thanks for the opportunity. Sir, this time around you've, you know, disclosed 50,000 retailers in your annual report and 42,000 tinting machines that you just talked about. If I understand correctly, this number was about 30,000 dealers about three years back, with 85% tinting machine penetration. Have you accelerated dealer penetration or dealer addition in the past three years? Or maybe our understanding of 30,000 number three years back was incorrect. No. There were 30,000, you know, effective machines earlier, and there were some, you know, which were non-machine counters which always existed about 5,000-6,000. It was about 36,000 earlier stage, which has now become 50,000 in three years, which means, you know, we have added 14,000 in three years, which is about 4,500 additional counters each year, which is very much, you know, what we have been doing. In fact, we are trying to accelerate this number further upwards. Right. The quality of dealers that you have added is no different from what it used to be earlier. It's a mixed bag. You know, sometimes you get good dealers, sometimes you know. Overall on average, you can say yes, you know, sort of similar dealers, because we are entering into areas where we were relatively weakly represented. In those markets when we get in, we get a mix of the entire sort, you know, good, bad and, you know, big, small, medium size, everyone. Correct. That's helpful. Should we expect acceleration in this trajectory now that you are focusing more and you talked about focus on distribution expansion and brand building. Will this 4,000 store increase and accelerate this number, you know, as you said, you know, around that 6,000-7,000. That's helpful. Now, second question is on since the time you took over as MD&CEO of this company, in the initial years there was visible improvement in product mix and premiumization. You had some success with Silk. Can you just walk us through the premium and luxury route and what it means in terms of gross margin? You know, when you benchmark your gross margin versus, you know, market leader, at least, you know, inflation in raw material prices aside, what we observe is that market leader has become very aggressive in putty and other low price products, whereas you've consciously, at least in this quarter, you called out that you've not pushed putty sales, so your product mix would have been more stable over a three-year period or perhaps better if premiumization and emulsion sales have continued. How should we think about your product portfolio? Where do you intend to be in the next three years and what it means for gross margins? Yeah. In the past, what we have done is essentially, as you rightly said, you know, for the first four or five years, you know, we were very focused on developing differentiated products and building up a portfolio of such products so that, you know, we get away from the market leader and compete on our own strengths. So we developed Easy Clean, we developed Anti Dust, we developed Waterproof Putty. These products have been all copied by the industry at large. But we have maintained our leadership, and we maintain a price leadership as well in these categories. These differentiated products have been built up into a sizable portfolio, which is in excess of 20% as of today, which helps us actually to improve or helped us in the past to improve our gross margin quite substantially. Now what you see as a gross margin risk for us is diluted to some extent by the industrial portfolio, which is about 20% of our basket. Now, that particular portfolio, which includes protective coatings, automotive, general industry and powder coatings, has a gross margin which is much lower than that of decorative. So it gets pulled, and what you see therefore as an end result is a diluted version. When you compare that with a pure play decorative, it's an unfair comparison. That is why you see a lower level of gross margin for us comparatively. Going forward, you know, we would like to improve our industrial profitability also, which is what we are working on. Typically, it comes with a lag, but we also have to work on these aspects of industrial profitability, which we are trying to shore up the profit margin by sensitizing the team on the need for doing so. The other part of it is related to the decorative part. The decorative part we will continue to invest, as I said, on the branding. We still see a lot of gap available in the luxury segment where, you know, it's dominated by the leader as of now. That is one segment where we would like to spend more money and try to build up a stronger presence, which will help us to improve the profitability. Would you be able to sort of for just one time call out what your market share would be in emulsions or in luxury emulsions? Your overall market share, if I understand correctly, would be in 17%-18% range, right? Right. In the decorative paint space. How does that compare, you know, in luxury emulsions or overall? Premium and luxury emulsions. I would say like this, that in as far as emulsion percentage is concerned, whatever is the industry percentage, we will be more or less similar to that in the overall. Whatever, you know, the entire industry, suppose emulsion is say 60%, we will also be somewhere around that point, right? It is not greatly at variance with any other player. As far as emulsion percentage is concerned, you know, it has been inching upwards a little bit because the putty and the primer has gone down a little for us. More or less it will be at that level. The second part of it is in the just above the premium segment, which is the Easy Clean anti-dust category, we will be much more strongly represented. We are relatively weakly represented in the luxury category. You know, Pre-Lux is something which is called the premium luxury category. There we are much stronger. In the luxury category, we are much weaker, and we would like to invest in the luxury category to build up our strength. Luxury for the industry would be what percentage of overall emulsions? I'm assuming luxury would be essentially the category where Silk Glamour operates. Yes, that's right. Will it be about INR 600-INR 650 per liter or higher, MRP-wise? MRP-wise, yes, but price-wise in the market, and you, as you know, MRP is discounted a little bit. Yes. It'll probably be more about INR 450-INR 500, up to INR 550. Depends on what brand you are taking. That's the range, you know, and then that segment is, you know, reasonably large and growing. Is it 10% of the industry sales overall? Yeah, near about. 10% of overall decorative paints, right? Not emulsions. That's right. Thank you. I have more questions, but I'll go back in the queue and wait for my chance again. Thank you so much. Thank you. Before we take the next question, a reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Trilok from Diamond Asia. Please go ahead. Yeah. Hi, sir, good evening. Thank you for attending. I want to just check, you know, from a, Sir, if you can take the phone off speaker and please clear. Sure. Yeah. I want to check, you know, from a gross margin perspective, the explanation that you know gave for auto and- See, your voice is breaking up. Can't hear you. for us to understand anything. Sir, may we request you to move to a better reception area and ask your question. Seems like we lost the connection for the current participant. A reminder to the participants, anyone who wishes to ask a question, may press star and one. The next question is from the line of Mihir from Nomura. Please go ahead. Hi, sir. Thank you for taking my question and congrats on a good set of numbers. Sir, if I just wanted to check with you. If you compare the three-year CAGR volume growth trend that we're witnessing in recent quarters versus what we were seeing pre-pandemic, there is a material shift in the you know growth trajectory. Wanted to hear your thoughts on the reasons behind this accelerated volume growth, or would it be a function of anything got to do with you know in anticipation of the new competitor, which is, or new competitors which are likely to enter with large CapEx, et cetera? You know, what are the key reasons in your mind, sir, with this accelerated volume growth trajectory, and how sustainable would it be? That's my- Quarter has been much stronger than expected. I would say it has, you know, two reasons or three reasons. One, of course, I think there is a little bit of a pent-up demand from the last two years as well. Second is that, you know, this is the first year after two years, you know, where it is not impacted by COVID as such. Therefore, there was a little bit of exuberance in the consumer category as well. Across all industries almost, you know, there was a demand buildup. Especially say if you look at the travel industry or in the hotel industry, you would have seen certain surge in demand happening. This also contributed, you know, in the case of paint as well. We saw some stronger demand than what was anticipated. That would have, you know, helped to build up, you know, the volumes. As you are rightly part of it also would have happened from the unorganized to organized shift, which would have happened in the COVID period, and that would have helped, you know, overall organized segment to grow at a faster clip. This is what I think has happened in the first quarter. Whether, you know, the mid-teens will be maintained, well, you know, my thing is we will grow at double digit. May not be mid-teens, but you know, the volume growth will be in double digit. By the end of the year also, we will remain at a double-digit volume growth rate. This is what we expect to do. Of course, you know, our work of expanding network, strengthening brand, doing the basic fundamentals will remain and that's what is going to help us. Got it. This is very helpful, sir. Thank you for that. My second question is on margins. You know, you mentioned that you were stepping up brand, you know, building activity. You know, so any color, more color you can throw on, you know, what is the level of ad spending then we should consider now? If you see both, you know, gross and EBITDA margins, you know, just before the pandemic we had seen much better margin profiles. Of course, you know, as you know, with the price increases that you've taken, you'll slowly claw your margins back, you know, and with the softening of input costs also. Removing that, you know, keeping that aside, what is the steady state margin that one should think about both on a gross and a EBITDA level, given the step up in brand investment activities that, you know, one can expect from you? No. We will be careful in not disturbing, you know, the margins as such. You know, the brand investment will be done in a calibrated way. As things move up, as the margins are there for us to spend, you know, that is how we will be doing it. You know, it's not something extraordinary that, you know, we will put into it. Our margins, the gross margins, as I said, has been hovering around that 38% level. We will try and restore it back to that level, and that's where we would remain. You know, we are not looking at, you know, expanding immediately beyond that unless the raw material prices really soften and we are able to retain that. In that case, it might move up. Otherwise we would like to, you know, stay at those levels of about 37%-38% in terms of gross margin and EBITDA level correspondingly. At a level where we are comfortable is at the 15%-17% level, which is where we would remain. Perfect. Thank you so much for answering both my questions, and wishing you all the very best, sir. Thank you. Thank you. The next question is from the line of Vihang Subramanian from Zeva Capital. Please go ahead. Yeah. Hi. Thanks a lot for taking my questions. Actually I joined the call a bit late, so apologies if it's been answered. Just one thing was, how would you sort of look at reshaping your strategy over the medium term to defend market share from new competition? Would you look at changing the margins that you give to the channel, like, you know, dealers, distributors, painters, et cetera? As I said, you know, we are not looking at any major changes. As of now, we don't know what the strategy of the newcomer will be. Most of them have already come in, all the newcomers, only one is left. You know, we don't know what their strategy will be. We will take it as it comes. You know, as of now, we have no change in strategy except for focusing on our fundamental, which is, you know, network and strengthening of the same. You know, branding and strengthening the branding and ensuring that we do our fundamentals well. Got it. Would you say that probably like, you know, the new competition that is coming now is more serious than all the competition that has come previously? Well, you know, see, they have indicated a fund level which is there for investment purpose, you know. Unless, you know, they have done that. You know, they are a serious player. You know, only time will say how much progress happens and what is it that, you know, they achieve. It's a difficult market, you know, in paint. In fact, for that matter, if you look at it, you know, worldwide if you see just Asian Paints in that market, but it hasn't worked so far, right? Similarly, if you look at our case also, you know, in many of the markets Asian remains the leader, and we have been trying and we have not succeeded greatly in breaking there. It takes a lot of time and energy and effort to build our presence. It doesn't happen overnight. We are not unduly worried, but we are taking all steps, all precautions, and we have got a little bit more energized by this entry, which is likely entry. Therefore, you know, that helps to that extent. Understood. Sure. That's it from my side. Thank you so much. Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Trilok from Diamond Asia. Please go ahead. Yeah. Hi. Sorry. Good evening. Thanks for the opportunity again. You know, from a margin perspective, how should we think about, you know, when you already commented about the one-offs in this quarter, or probably the mix change, mix impact in this quarter. Going forward, should we expect, you know, the gap between the leader and you guys to continue? Or do you think that should, Is there any chance that you can, you know, talk on the You know, if you compare Decorative to, you know, with you know, narrower because the Industrial tends to pull us down a little bit. Yeah. We are comfortable at these levels. You know, I don't see either the gap increasing or decreasing in any which way. Sure. The next question, you know, this quarter obviously you alluded to, right, putting, you know, low in context of growth rate, which obviously would have also helped gross margins. Would you sort of use that, you know, as a tactical opportunity or do you think, you know, you will not focus that on that segment at all going forward? It depends. You know, actually, it's a call which we take month-on-month. If we find that, you know, the margins become much more comfortable, we may become a little bit more aggressive on the putty front. Otherwise we will play the game, you know, as we have been doing so far. Okay. Lastly, you know, what are the steps that the company is taking to retain talent, you know, in context of new players getting into the market, both very large guys as well as incremental new players that have announced their entry into the segment? Could you just throw some light? That'll be helpful. We take, you know, many steps, you know, to retain employees. You know, it includes monetary, non-monetary training, you know, motivation of other kinds, various types of things which are done in order to, you know, first of all, retain the good people within the organization. I'm sure, you know, most of them realize that and, you know, would prefer to stay in a growing organization which has done well, where they have proven themselves and would like to stick to us. Sure. No, I mean, I agree. You know, those must be an ongoing affair, but you know, in context of the- A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Jaykumar Doshi from Kotak Securities. Please go ahead. Hi. Thanks for the opportunity again. My question was again around when we, you know, when we engage with the dealers of Asian Paints, what we gather is because of very high dealer penetration, most of them are not able to retain margins given the competitive intensity. Whereas in case of Berger, they enjoy a higher trade margin or commissions. If you are expanding dealer network more aggressively or than what you're doing earlier, does it essentially then create a similar situation where dealers, your dealers will perhaps not be able to retain the margins that they currently are because of higher sort of penetration? How do you balance that? How do you ensure enjoy a follow-up around new dealers. Are you seeing largely the business you get from these dealers, is it more of a wallet share gain from, let's say, the other paint companies, maybe the number two, number three, number four in those counters, lose market share to you? Are you consolidating, sort of, you know, within those dealers that you add? Two things. You know, one, you know, most of the dealer expansions that we are doing are in areas where we are weakly represented or not represented at all. Therefore, you know, this question of inter-dealer competition resulting in erosion of profit is lesser because there are large areas of the country where we are very weakly or not represented. Therefore, those are the focus areas as far as growth of dealer network is concerned. We take due precautions, you know, not to put too many dealers in one area, you know, resulting in a fight which doesn't, you know, help anyone of the dealers or the company for that matter. That's one part of the story. The second part, you know, which you asked is, you know, whether it is resulting in gain from which company, what are we doing, you know? It's a mixed bag. You know, sometimes we gain from wallet share from others, obviously, because if you are getting into an existing counter, you will have that advantage. Sometimes we also get into other counters which are non-paint counters, but, you know, maybe building material counters. Then therefore, we don't impact the wallet share of anyone, but we gain because of our earlier we didn't have any distribution reach there. We now have through some other party. Thank you. Can you talk a little bit about your painting services initiatives, whether you know painting services is still sort of progressing well and? Yes. You know. What's your vision there maybe in the next three years, five years? What can be its contribution to overall? Painting services is doing well, you know, in the urban centers primarily. It's not so relevant as far as our country markets are concerned. But it has a fairly decent, you know, and a good, I would say, customer recall, you know, for this service, you know, in the urban centers. We have good plans for strengthening this further into smaller towns as well and continuing to provide this service, you know, across India in the urban areas. What percentage of sales do you think it can be? When I say sales, it's purely product to product comparison. Let's say services component aside. What percentage of your product sales could be through, you know, this painting service? I can't give you the figures, you know, as such, as to. It's there as a service which we provide is, you know, it's not very large in terms of percentage, but it is a service which consumers want, and we would continue to build that. Sure. My final question is: are there any gaps in the product portfolio today across Waterproofing, Decorative Paints and Construction Chemicals that, you know, when you compare your benchmark yourself versus market leader that you intend to close or that you think where you are weak? Yes. You know, we will be introducing two very interesting products in the near future, in fact this month itself. And those products are required, you know, which we feel, not so much, you know, benchmarking against, you know, any competition, but I think there is a gap there in terms of requirement of consumers and that's something which we would like to fulfill. And those are, hopefully going to be, good volume churners for us. This will be Decorative Paints or is it Waterproofing or construction paints? It is waterproofing. Within the Waterproofing segment. Yes. Thank you so much, again, for the opportunity and good luck. Thank you. The next question is from the line of Rajan V.S., an individual investor. Please go ahead. Yeah, good evening. Thank you for the opportunity. This is not a question actually, this is a suggestion. I'm from Chennai, and I rarely see any promotion, Berger anywhere around. Okay, the total recall of the brand. Is there any specific plans to improve that? That is one. Second thing is, also there are a lot of influencers and, seldom they talk about Berger. They only talk about the market leader and maybe the new entrant. Are you planning to work who can actually to the investors, I mean the customers? No, it's a relevant question. You know, Chennai has been a Waterloo for us. In fact, you know, much of the urban centers in the west and the south, that includes Mumbai, Chennai, Hyderabad and Bangalore, has been relatively weak market. That's what I was talking about that we want to penetrate these segments. We are taking some action, and one of them is through the printing service that we talked about, you know, to give us an opportunity to enter into some of the good, you know, dealers there, so that we have a representative presence in the market. They are otherwise very resistant. You know, it's not an easy job to get into those counters. Therefore, you know, we are planning certain strategies which will enable us to at least have some presence in these major metros. Only time will tell whether it works well or not, you know, but we are attempting something there. Okay. Second thing was, if the crude prices goes up by $10 or comes down by $10, what will be the effect of your gross margin getting affected? Obviously, you know, many of our raw materials are connected to the crude prices. If the crude prices does go down, then, you know, the raw material prices hopefully will also soften with a lag. When that happens, you know, the gross margins will improve. Okay. We are not able to know the exact delta. It's probably you don't want to reveal that as such. No, we haven't done that calculation. It's very difficult also because, you know, some, it's not directly always linked, you know, because sometimes the oil prices go down, X-percentage. It's not necessary that, you know, exactly some percentage of, drop will also happen in all the raw materials linked to it because there are other demand supply, situations which come into play. You know, if that, you know, there is a problem there in terms of supply, certainly the prices may not soften to that extent. On the other hand, there are certain raw materials where the crude may not have gone down, but, you know, the prices might drop because of other reasons. It's very difficult to link one to one, but more or less, you know, it's a general rule that, you know, when these prices go down, the raw material tend to go down, most of them, and therefore the gross margin will go up. Thank you. That's it from me. Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments. Thank you all of you. Thank you for your participation and your insightful questions. It really helps us to improve. First of all, I would like to thank our MD for his presence in this call, and also Mr. Dasgupta for being a part of this earnings call right from the beginning. Hope to see you all in Q2 with a better performance. Thank you. Thank you. Thank you all. Thank you. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.