Ladies and gentlemen, good day and welcome to Q2 FY 2023 results conference call, Berger Paints India Limited, hosted by Emkay Global Financial Services. We have with us today Mr. Abhijit Roy, Managing Director and CEO, Mr. Kaushik Ghosh, CFO and Vice President, Mr. Sujyoti Mukherjee, Vice President, Finance and Accounts. As a reminder, all participants lines will be in a 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 and zero on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Ms. Saaksha Mantoo from Emkay Global Financial Services. Thank you and over to you. 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 opening remarks. Over to you. Thank you, Saaksha. Good evening, ladies and gentlemen. I extend a warm welcome to all of you to the Berger Paints Q2 FY 2023 earnings call. Just for your information, the recent presentations on the performance has been uploaded on the website. As a standard disclaimer, your questions should be restricted to the quarter only. With this, I will hand over to Mr. Abhijit Roy, our MD and CEO, to talk about the performance of the company before we can take your questions. Over to Mr. Roy. Thank you, Sujyoti, and good evening and a warm welcome to all of you. I will start off with a quick look at the results so far, which we have published for the second quarter. The value growth as we see it is 22.5% on a standalone basis, and on consolidated it's 20%. Operating profit growth is 4.7% on a standalone basis. Consolidated is 2.8%. On a half yearly basis, which is on a standalone, if you look at the growth, 36.7% and operating profit growth, 31.9%. On a three-year CAGR basis, we have just taken that from 2019-2020 because of this COVID period. There's been ups and downs in this period, and it tends to distort the picture a little bit. The three-year CAGR, if you look at the quarter, it is 18.4%, and three-year EBITDA growth is 13.1%. On a half yearly basis, the three-year CAGR is 17.3% delivered by us, and operating profit growth, 11% so far. If you look more in depth, the decorative business continued to grow well in quarter two. We registered double-digit volume growth and a value growth about 23% +. We gained significant market share up to the half year mark, from 18%- 18.8%, going by the figures which have been published by the five leading players whose results are declared already and they represent the top market. If you look at the reasons for the type of growth that we have had so far in that time, network expansion, there's been a significant increase in the number of dealers added in this quarter. We have been adding on average about 3,000-4,000 machines per year. On the half year mark, we typically used to do about 1,500-1,800. This quarter we have almost doubled that number or closer to 1.8x that number. We installed about 3,200 machines in this particular half year period. Up to September end 2022, our numbers were instead of 1,800, 1,700, 1,800 for the half year, it's about 3,200. We expect that this network expansion drive will continue through the year. The second part is non-paint dealers. Also we added a fairly large number. These were mainly through the distributors. These include not only paints but also non-paints dealers who got added. That number is in excess of 2,000 that we added in the first half, and we expect to maintain a similar number or slightly increase it in the second half. T1, T2, and T3 cities all showed high double-digit growth over corresponding quarter last year. Rural markets grew at a slower pace, especially in the north-central region. Construction chemicals segment registered strong growth in the quarter. We introduced three new products in this quarter. A primer in the matte finish range, there's a demand which is picking up in matte finish especially in the northern area. This product has been introduced for that purpose. There were two products which we introduced in the waterproofing area. One called Damstop Advanced. It is to basically repair if there is, you know, dampness there on the walls without having to break open the wall and then, you know, go right to the brick surface. This can be applied by just removing the finish coat and the putty coat, and then this particular chemical can be applied, and it will do a very good job of waterproofing. This comes under the name Damstop Advanced. We introduced another product called Damstop Duo, which is basically a primer with in-built waterproofing properties. It does the job of a primer coat, at the same time, it does also waterproofing. Both these products have just been introduced and is doing very well and well-received in the marketplace. In the industrial side, we have GI and Auto business which showed good growth during the quarter. As we all know, the auto industry has revived somewhat. Even the two-wheeler industry has done slightly better than what they have been doing so far. The commercial vehicle, of course, is growing at a much faster pace on a lower base. These two categories in which we are heavily present are doing well. The general industry category also has done reasonably well in this quarter. Protective coatings, in which we are the leader in India, continues to grow very strongly and registered another strong double-digit growth in quarter two. Significant price increases were achieved in the industrial business lines. Some of it came also in September and then in October as well. The impact will be felt much more possibly in the third quarter in terms of improvement of the profitability of the industrial business line. Powder coatings business line had a negative growth impacted by the slowdown in the business of fan manufacturers on account of certain regulatory changes which will come into effect from the 1st of January, 2023. However, this business line has a very small contribution to our total operating and therefore, you know, hasn't had any great significant impact. It did have, you know, little bit of a drag on the overall growth rate. Profitability. Raw material as a percentage of sales went up mainly on account of material price increases, partly offset by increase in product prices. There was no significant product price increase taken in quarter two. We just take a small price increase which was there. As the industry took this price increase, we also took the same amount of price increase. However, the raw material prices went up much more. We did not pick up the prices again in that quarter because prices had started softening from August onwards, and we could see that, you know, it is going downwards, so there's no point taking up the prices of finished products and then reducing it again. We retained our prices in quarter two. Quarter three, the raw material prices are likely to soften, you know, compared to what it was last year and what it was in quarter two, and therefore there will be an expansion in gross margin in Q3. Softening of monomer and solvent prices has happened, and has remained at those lower levels. Titanium dioxide prices have also started moving down, and is also softening a little bit. Profitability for the quarter was also impacted on account of an inclusion of one-time subsidy income of INR 18.7 crore last year in the same quarter. If you remove this, then of course the profitability percentage would move up significantly. Mix improvement likely in quarter three and quarter four on the back of increased sales of exterior wall coatings and waterproofing items which have high gross margins. Regarding capacities, we have set up this, for some time we have been working on this new facility at Sandila. It is now almost ready for production. We are just waiting for the final certifications and, you know, other approvals that are required, and we should be able to kick-start production from the month of December. Estimated outlay for this entire project was slightly in excess of INR 1,000 crores. Potential increase in capacity will be on a two-shift basis, almost 33% increase in capacity will happen. That's a significant addition to our capacity from one plant, fairly large plant, and this is the largest for us in India. Company has also acquired 30 acres of land in Panagarh in West Bengal for the manufacturing of construction chemicals, resin and industrial products. Estimated outlay is about INR 175 crores. Further brownfield expansions in Hindupur for solvent and resin and Visakhapatnam for emulsions and water-based expansion is on the way and should be ready by next year. I have already discussed about the financial performance, that is 22.5% on the standalone basis, you know, top line growth. 4.7% EBITDA growth. If you look at the growth in terms of the standalone half year numbers, total income growth 36.7%. Operating profit growth 31.9%. Tax growth of 30%. Results are all there and uploaded. I will not dwell too much into that. What I'll move on to is the performance quarter-over-quarter. You know, if you look at the two-year performance as a CAGR as well, it's been pretty strong. Even on a three-year basis, it's been, as I had read out to you earlier, a strong double-digit number. Operating profit growth too, the number is in double digit if you take, the two-year, three-year CAGR, for half yearly results. For the quarter, typically the two quarters last year and this year as well in second quarter, raw material prices have tended to peak and then had sloped downwards. The quarter has been a bit impacted in both the years, last year and this year, though we had said, and we had actually grown positively last year. Only one company in the entire paints domain which has done so. This year, you know, it has impacted and, the growth rate that we could have seen was slightly lower. Gross margin trend, more or less it has been hovering around similar levels, you know, for the last few quarters, at around the mark of 35%. Likely to move up, as I mentioned, in quarter three and quarter four because of the softening primarily of raw material and also a positive mix change in these two quarters. Consolidated results on similar lines of standalone, slightly pulled down by the Polish operations, the Bolix Poland operations that we have. With the Ukraine war, it has been impacted. The Poland results are therefore, you know, slightly below what they normally do. It's been negative in quarter two as well. That's why, again, you know, against the delivery of top line of 22.5% in the standalone, in the consolidated results you see a lowering of that to 20%, primarily due to the Bolix Poland operation. All the other figures that you have in the presentation is already there with you, so I won't get into the detail. I will just speak about the consolidated performances of various companies within. Berger Becker had a good quarter of performance, both on the top line and profitability. The Polish subsidiary, Bolix, had de-grown, as I mentioned, both in top line and profitability, impacted by the Ukraine war and high inflation there negatively impacting the consolidated numbers. STP showed strong double-digit growth on both sales and profits. This is our construction chemicals company which we acquired about three years back. It's doing very well and growing well on sales and profits during the year, aided by improvement in gross margin there. Specialty coatings, Saboo Coatings, had a flat top line growth and a neutral profit growth. The top line growth was low due to the sign industry impact, just like we faced the same problem in powder coatings within Berger. The Saboo Coatings division also had a problem there. This is going to recover very strongly in the Q3 and Q4 period when the sign industry starts, you know, filling up the pipelines, producing much more, this growth will come back. Company's joint ventures, Berger Nippon Paint Automotive Coatings and Berger Becker Coatings, both registered strong performance on top line and profitability, aided by product price increases. Outlook. Demand in urban markets looks encouraging. Hoping for an uptick in the rural demand as well on the back of good monsoon. Mix improvement is likely in the coming quarters, supported by increased sale of exterior coatings. Industrial sales outlook remains strong on the back of growth in auto sector and government spending in infrastructure. Key raw material prices like monomers and solvents softened towards the end of Q2 and likely to remain so in Q3 and Q4. However, exchange rate depreciation on account of strong U.S. dollar may be a concern. That's all that we have to say from our side. Open for questions. Thank you. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. I think the first question from the line of Vishal Pandya from Nirmal Bang Institutional Equities. Please go ahead. Yeah, thank you for the opportunity. I actually had a question on the overall demand environment. Abhijit, if you can just help us understand how things are panning out within the quarter across product categories as well as regions. You called out that the volume growth for the quarter was in double digits. Was it in low double digit? If the volume growth was in 11%-12% range, it seems that there is a decent increment in the volume growth momentum compared to the previous quarter. What are the key drivers of this improvement? Right. Thank you. You know, I'll just answer two or three. One is the demand outlook, you know, which was there or demand situation which was there in Q2. Q2 demand was pretty robust, I would say. As you heard, you know, we did have a double-digit volume growth. That double-digit volume growth was in the lower double digits. As you rightly said, you know, it was about 11 odd percentage. And the value growth in decorative was to the tune of 23% +. Industrial, I mean, in some of the categories it was higher, in some it was lower. So on average it was very similar to the decorative side, slightly lower than that. So this was the case as far as the second quarter is concerned. You asked another question, which was related to. What were the key drivers of this growth? The products, the regions, so which did Right. You know, mostly the urban markets did fairly well. Compared to the rural areas, there was stronger growth in the urban markets for us. Some of the product categories, you know, which did well, you know, some of the emulsion categories did fairly well for us, especially the premium and the luxury premium type of category in the interior space. Exterior growth was muted. The waterproofing grew very well in the second quarter as well. Overall, if you look at it, the second was you know very stable as far as demand growth was concerned. One area of concern was the accelerating raw material prices, which again started softening towards the end of the quarter. Okay. If I just do an integrated realization for the quarter, if I just take the standalone sales growth of around 2.5% and the volume growth around 11%. The integrated realization for this quarter is around 11.5%-12%. This is obviously lower than the 18.5% seen in the previous quarter. We have called out that the premium segment actually did well in urban and the urban markets did well in 2Q. What is actually leading to this lower realization for the quarter? There are two reasons for it, you know. One is, you know, in the premium segment, we did well only in the interior. The exterior category was, you know, very badly affected because of excessive rains. That was the reason why, you know. The price increases that have happened were in categories, which were linked to the exterior category. Hence, you know, if you look at the price increases that we have taken, there are certain categories where there has been negligible price increase. There are certain categories where there have been very minimal or moderate price increases, and there are some categories where we have heavier price increases. Unfortunately, you know, the mix that is taken into account when calculating this 22% or 21%, why is it now 12%? That takes into account, you know, the average mix for the year. Quarter- to- quarter, there is significant variation which happens. In the quarter of this June, July, August, September, which is a rainy season, most of the material we sell is enamel, distemper, primer, putty, and then interior emulsion, because in exterior remains impacted. This particular mix, therefore, you know. In case of, for example, putty or for that matter, you know, some of the waterproofing items, there was no price increase at all. And therefore, you know, it will tend to impact overall realization that will happen. But you will see the realization improve if it had been a normal mix. This is the reason why this variation tends to happen. Okay. Thank you. I'll come back for more questions. Thank you, Abhijit. Thank you. Thank you, sir. We'll take the next question from the line of Mr. Avi Mehta from Kotak. Please go ahead, sir. Hi, sir. Am I audible? Hello? Yes, yes. I can hear you, Abhi. Yeah. Hi. Hi, sir. Sir, I want to understand, you know, the margin profile a little better. Basically, this time we saw a high cost, you know, RM which you didn't pass on completely. As we go forward, mix is improving, input costs are also kind of moderating. From that sense, I think that last quarter you said normalized gross margin should be more like 37%-38%. Should we not see that kind of starting to maybe beyond that also in the next quarter itself, or is there anything that we should be watching out for? You are right, Abhi. You know, it will move up to that level. You know, around that range of 37%-38% is what I would expect. At the end of quarter three. And because some of the raw materials is still there, you know, in October, for example, it was still being consumed of prior vintage. But it will go back to that range of about 37%-38% in the third quarter, is what I would expect. And subsequently, in the fourth quarter, if things remain at these levels, then we might see a slightly higher improvement on that as well. Perfect, sir. Very clear. The second thing I wanted to understand is on the capacity side. Now, we have just, you know, commissioned the large capacity that you were working on for so long. You know, there have been announcements that they're about to do backward integration as well. Wanted to hear your thoughts, which are, would you kind of want to evaluate that or, where we are in terms of capacity, we are fairly optimistic at least on that front. Right. You know, as far as the capacity addition is concerned, it was very much needed by us. At the rate at which we are growing, we would have reached about, you know, in normal circumstances, in a normal month, we would be around 80%-85% in terms of capacity level. In seasonal months, you know, we tend to struggle in supply, you know. Therefore, this is a much needed addition, and it will suffice our needs for the next 2.5 Years, maybe three years. We will have to look for additional capacity, either brownfield or greenfield after that. As far as the second part is concerned of backward integration, I presume you are talking in terms of the leader who have announced certain things and certain moves. We are not looking at that area. We don't use VAM or VAM ethylene in any of our products so far. We are not into adhesives where the consumption of VAM is higher. We are not into certain other types of, you know, categories which they might be thinking of. Actually, you know, this VAM and VAM ethylene can also be, especially VAM ethylene, is an ingredient as far as a product called PVA Polymer which can be made out of this. It has, you know, it can be made also from acrylic-based technology, and we are working on that direction rather than the VAM ethylene direction. Got it, sir. I mean, from that. Sir, as a concept, just wanted to understand, you know, capacity, is that a way to argue for competitive strength in any manner? Would you kind of argue on that, or is it much more nuanced than that? How, what exactly are you using that side? Because there has been, you know, this is a broader question, given that a lot of capacity addition is being planned in this industry. Wanted to understand just, you know, would that change the competitive dynamics? Is there a competitive advantage, and how do you see that? No, I personally don't think I've been in this industry for a long time now, you know. I don't think this is really a competitive advantage, you know. As and when the demand is, you know, rising, I'm sure, you know, anyone and everyone will put up the capacity required for this purpose of servicing this coming up demand, you know. Upcoming demand, you know, when you see that projection, we keep doing that projection on a three-year cycle. Whenever it is required that investment needs to be made, that is the time when one should make the investment. I don't see this, you know, as a big competitive edge in terms of commodity categories where, you know, if you scale up and become very big, you know, you stand to gain advantage. In this case, that is not the case. You know, therefore, capacity addition by itself is of no great consequence, or it doesn't add any competitive advantage. Okay, sir. Perfect. That's all from my side. I'll come back in the queue for the other questions. Thank you very much, sir. Thank you. Thank you. We'll take the next question from the line of Mr. Harsh Shah from Investec. Please go ahead, sir. Yeah. Hi. Sir, my question is more on the retail side. We've added close to 6,000 basis points and more than 3,000 vending machines in the first half, which is kind of close to two extra purchase on an annual basis. Would like to understand what are your plans for the next 12 to 18 months on the expansion side? I didn't get it where you got the number of 6,000 machines being added in the first half. No, no. 6,000 number of sales points that you mentioned in your presentation. Right. Yeah. Both on the number of dealers and sales and vending machine, right? I think we mentioned in the first six months has been, I mean, more than what we do on an annual basis, right? What's your plan, sir, over the next 12 to 18 months, in this area? Yeah. You know, as far as this area is concerned, you know, as you know, you know, we are a number two player, but, you know, there are large number of pockets where we are very weakly represented on the ground, and it was very necessary that we ramped up our presence in many of these markets. That's what we are doing, you know, filling up the gaps to best extent possible. And that, this ramping up will continue. You can keep expecting the second half as well. It will be at a similar pace or slightly higher than this in the second half. This will continue for the next one to two years going forward because this needs to be done in order to penetrate the market in large spaces in parts of India where we are weakly represented. Which countries would be largely in Tier 2, Tier 3 cities or is it spread across both metros and Tier 2, Tier 3 cities expansion, sir? Largely Tier 2, Tier 3 cities and, you know, upcountry areas, especially in domains in the South and the West, where we are less present there. Okay. Could you help me with the current count, I mean, the total dealer count as on September and painting machine count as on September? Well, you know, our total painting machine numbers will be somewhere around 36,000-37,000, possibly. The exact numbers I don't have with me now, but, you know, somewhere around that number it will be. The dealer count numbers will be slightly higher than that. Typically, you know, the gap between the painting machine dealers and the non-painting machine dealers is varying between 5,000-7,000. We can add the exact numbers there. This is, this number, let's say close to 35,000-odd number is the active dealer count, right? Or total dealer count. This is, you know, how you define active depends on that. A lot of companies define active in different ways. If some companies define it as single liter build is active, some companies define a consistent number of liters build as active. It depends on how you define, you know. I am talking of, you know, at least doing certain amount of sale in a year, and that is how we define an active dealer and that is, that number is what I'm talking about. Okay. Sure. Technically it's only construction chemicals and, so I mean, if you could give numbers, how people are seeing as a percentage of overall business now? It's improving and because it is growing much faster, it is becoming increasingly important. The exact percentage I won't be able to tell you, but it is becoming significant gradually. Much of it is the kind of improvements which are getting here more from the project side of the business, or it's evenly between B2B and B2C, specifically for the construction business category. Yeah. It's, you know, much of it today is on the retail side. You know, some amount is also now building, gaining traction on the projects side as well. I think going forward, both of it will continue to grow. Okay. Largely on the project business that has grown in more than the overall company growth, sir, the current quarter? Slightly more. It is similar, almost. Okay. What is the contribution to the overall business as projects is driving growth high single digits, double digits? That is clear enough. You know, it's about, you know, I would say, you know, mid-high single digits%, you know, as of now to the total overall. Okay. Thank you so much. Okay. Thank you, sir. We take the next question from the line of Mr. Mihir Shah from Motilal Oswal. Please go ahead. Hi, sir. Thank you for taking my question. Firstly on the near-term demand, you know, we believe October has seen an extended monsoon, and some players have already called out that, demand in October is to be muted. Can one say that volume growth can be impacted in the third quarter, because of this phenomenon? It's difficult to say, you know, whether the volume growth will be impacted and to what extent. You know, it'll all depend on November and December. Yes, you know, the rains did impact, you know, in the past 15 days. The overall sales was impacted. There were many holidays as well, you know, so that also created some amount of turbulence and disruptions in the whole system. We did manage to grow but, obviously, you know, the growth rate was not at the pace which we were doing earlier. But we expect that in November and December some of that growth will come back, because, some of it would have been postponed, you know, because of the rain. Especially we have seen even in the COVID periods, that when the COVID got over, you know, it started picking up. Painting and paint, you know, tends to get, you know, postponed. Whether it will be coming in November, December or whether it comes in January, February, March is difficult to say. We expect an upswing in November and December to make up for some of the losses in demand growth that would have happened in October. Precisely, sir. I exactly was wanting to ask that given a festive demand was due and with festive days passing by, will this demand come back immediately or probably just next year? I hear your point, sir. Secondly, I wanted to check on the you know, pricing front. If last year during November and December, all paint players were taking sharp price hikes and that will anniversarize now. Incrementally, I believe, given the raw material prices are softening, there is no further requirement as of now to take price increases. Volume growth being where it is, value growth will also start seeing muted because of absence of price hikes of you know, price-led growth. In that context, you know, any, what would be your thoughts and how should we think or look, you know, going forward for, from that point of view? You're right that the volume value distinction that we were getting earlier obviously will get reduced, you know, because there were some of them which happened in November with price increases last year and some happened in December last year. A few of them happened in January, February as well. The impact on the percentage of difference between volume and value will get reduced in the third quarter. If volume growth and volume growth differential that we got this quarter was about 12%, going forward that will get much reduced in the third quarter. However, you know, the mix will change, so we will get some impact of that still. The second part of it is, you know, it depends on the volume growth that we register ultimately at the end of this financial year. We have to wait and see how it happens. Understood, sir. My last question, actually, just wanted to hear your thought on the entire capacity increase that we are, you know, hearing across all key paint players across the board. You know, everybody really called out large capacity increase on the onset of a huge CapEx program by Grasim. Now, please, can one consider it would just be a risk of industry undergoing overcapacity, you know, in a couple of years' time, given growth is what it is, you know, and because there's so much of large capacity coming on stream at the same time, you know, can there be a risk of overcapacity at all? I mean, or you think there is ample of still space for everybody to continue the similar volume trajectory that we are doing right now, in the near to medium term, sir? From our perspective, I mentioned that earlier as well, that you know, we don't invest you know, in advance waiting for something to happen. We are investing being that you know, we are already reaching a stage where we are not able to fulfill our demand, which is growing every year with our existing capacity. We have put up this capacity at Lucknow you know, primarily to cater to our demand. You know, if the demand doesn't fall precipitously and continues to grow, which I expect that you know, we will continue to grow at a reasonably good pace you know, going forward as well, then I see no reason. In fact, we may have to look for more additional capacity as far as we are concerned. What others are doing, why they are doing, whether, you know, they will have, you know, something in terms of demand and whether they will be able to, you know, justify the investment is for them to understand. As far as we are concerned, I don't see that. Even if you look at the industry, this is not like a commodity category. Like, you know, cement, you know, you have a glut and the prices are dropping because you have to have, you know, operating ratios. You know, you have to operate the plant and there's a fixed cost involved. Here there is no such, you know, great issue there. Possibly other people, if they don't have the demand, they will operate at lesser levels. You know, some amount of cost increase might occur, but it won't be significant. Got it. I completely hear your point, sir. Thank you very much. That is all from my side. Wishing you all the very best. Thank you. Thank you. Thank you, sir. We take the next question from the line of Mr. Tejas Shah from PhillipCapital. Please go ahead, sir. Hi. Thank you for the opportunity. Couple of questions from my side. First question is, we are seeing this rapid distribution network expansion across the industry, and we are also actually doing a very good job on our account. Just wanted to know, is it that we are adding interesting paint dealers into our network or we are expanding the network itself by converting non-paint dealers into paint dealers? Right. Both is happening. You know, one of them, you know, the machines are typically going mostly into paint dealer counters. A few of them also in non-paint dealers, but mostly in paint dealer counters. As far as the non-paint retail expansion that is happening, those are primarily non-paint dealers. They may be hardware dealers, they may be pipe dealers, they may be cement dealers. It can be anything. They are building material dealers and we are expanding there. There is a need for normal paints, you know, without the machines also, which can be sold easily. Later on, if some of these counters, you know, they will morph into good paint counters where we can install our machines at a later date. Sure. There will be a going forward as you bring more and more non-paint dealers into the network. The predictability of numbers or revenue that we used to account for, it loses relevance in terms of what we used to do earlier as a throughput per dealer. We should see more of it as a kind of protecting the modes that are expanding the mode, practical approach to it more rather than a growth driver by itself. Is that a fair understanding? No, I think, you know, it is very much required in a country like India, you know, you need to get your presence there, and availability of material is very necessary. As I said, you know, we are very weakly represented in many parts of the country, especially in the south and west, you know, upcountry areas. We need to improve our presence there. We have a necessity of actually, you know, putting up any form of retail counter, whether with machine or without machine, to have our presence in those markets. It's a strategic growth opportunity for us. I don't see it as a tactical move. Fair point, sir. Second, the announcement that we have seen some cement players getting into paints, the impact on demand or distribution will come to know only when this product is actually launched. Are you sensing any pressure on talent crunch or talent retention? You have already seen one company announcing the ESOP plans for employees for the first time. Others also we are picking up from like when the attrition is very high. Any thoughts on that? You know, some amount of attrition will happen. You know, obviously, you know, there is a lot of manpower which is expected. You know, when newcomers come in, they look for experienced people from existing players. Then therefore a little bit of attrition will happen. We, however, have our own policies in place, you know, structures in place. We do encourage. We have ESOPs running for a long time in fact in our company. In our case, it goes down right up to the area manager level. Many of them are benefited immensely out of it. We try and retain our talent as much as possible. There will be little bit of attrition which is expected, and we are prepared for it. Sure. Just lastly, if you can comment on competitive intensity currently in terms of repositioned accounts by peers and industry in general? I would say it's at, you know, normal level. In fact, you know, previous year there was, you know, more rebating going on, especially from the market leaders. This year, you know, there has been lessening of that intensity of rebate possibly a little bit. Therefore, you know, going forward, I don't know, but the situation is, you know, pretty normal now. It's a competitive industry. There will be, you know, a standard level of rebates and price which will go on and that happens. That's how it goes. Great. That's it from myself. Thanks a lot. Thank you. Thank you, sir. We'll take the next question from the line of Mr. Varun Singh from IDBI Capital. Please go ahead, sir. Yeah, thanks. Thank you. Sir, I think my first focus on in waterproofing business. Sir, how much we have been able to leverage our existing distribution channel? If you can give some obvious understanding over there. Also with regards to how we plan to grow the category. Maybe if you can give an example that if Axis the total distribution reach, then in what percentage we are able to sell our waterproofing products? Right. You know, waterproofing products sells, you know, through two different channels. One is, of course, detailed distribution channel that we have. Many of the products which are there, is actually, you know, can be sold through the paints channel because the repair part of it, happens through the paints network history. After that we are, you know, wherever, you know, I think a fairly strong reach is, there as far as the paint network is concerned. It also sells through the cement retail network. We haven't made any great attempts there in the cement retail network. That's an opportunity area which exists. The third part of it is the project segment. In that, you know, we are utilizing our project team to sell the waterproofing products. There is a growth opportunity available in the project segments, and I think we will accelerate our growth in that area in the near future. In the paint retail outlets, roughly what percentage of the outlets we would be able to sell our products as on today? We don't calculate it in that way. I don't have the numbers, but it will be fairly large I think. I think ballpark estimate like 30%-40% or something. Yeah, it should be beyond that. You know, 30%-35% should definitely be there which will be selling our waterproofing products. Okay. Sure, sir. My second question is on emerging competition. If you can give some understanding with regards to how competition is heating up, for example, Indigo Paints or JSW Paints, which are in the market where we are already strong. Any comment over there, sir, would be highly appreciated. You know, we have been growing, as you can see from the figures, and we have been gaining market share. We are happy with what we are doing. We have our own strategy in place. Competition is there and will be there. I don't see any of these players impacting so far, you know, in any significant way our strategies or our growth plans. That's going on as per plan, and we are growing. Okay. That means no market share loss in any of the businesses there? No, we have gained market share. We made the presentation and we also showed that, you know, we have actually gained market share. Over the last four to five years, we've been gaining gradually. This year, half year also we have gained market share in the marketplace. Okay. Sure, sir. That's very helpful. Thank you very much, and wish you all the best. Thank you. Thank you, sir. We'll take the next question from the line of Mr. Akshayshen Tucker from Fidelity. Please go ahead. Hello. Hello. Yeah, carry on. Yeah. Sorry, just a quick question. Just to clarify, you mentioned the gap between value and volume growth, which about 10% this quarter goes down. Is it possible to quantify it in the sense, you know, I think last year would have seen high single digit price hikes. So that could come down to like low double single digits, the gap between the two. That's question one. Question two was around, Poland business. Could you please clarify for us as to how the business is growing? I think last year, in the annual report you had mentioned the turnover over there at about INR 375 crores. In INR terms, you know, given the kind of geopolitical tension that you're seeing in that geography, how is that going to be behaving? Thank you. Yeah. Thank you. You know, so the gap, yes, you know you are right, but the gap will between the volume and the value get reduced. You know, it was about 12-odd%, you know, in quarter two, but it will come to single digits in quarter three. What single digits will depend on the mix, you know, but it will definitely be lower than the gap that existed in Q2. As far as the Poland business is concerned, you are right. You know, on the figure. It is actually degrowing in Poland, you know, so that is why, you know, it's impacting our consolidated sales. In quarter two, it had a degrowth. In quarter three as well, you know, we are expecting that there will be a marginal degrowth there as well. All right. Thank you. Thank you, sir. I'll take the next question from the line of Mr. Percy Panthaki from IIFL. Please go ahead. Hi, sir. Good evening. Sorry to belabor the point, but I also just wanted to ask, this volume value gap, which is 12%. This 12% has two elements. One is the pure price increases and one is the mix impact. If I try to disaggregate these two, would you say that the pure price increase is somewhere around the 20% YOY and the mix impact is 8%, or are the numbers something else? You know, let me clarify this once again. You know, maybe, I've not been able to explain this properly. This 20% that you mentioned is on average. If you take a look at the entire year's average and a product mix, if you take a look at that, you will get a 20% type of an increase. However, what happens is in this monsoon season, it's a different type of a market, right? You know, with torrential rain happening, you don't expect that exterior painting will happen, right? Therefore, you know, it tends to change the mix completely and quite a dramatic shift which happens. Those who are in the paint industry for a long time know that, you know, in this period, you know, it is typically the wholesaling stocking up which happens with enamel, distemper, primer, putty, et cetera. Then low-end type of products which sell, you know. That's the problem of the mix which is created. Now, when the price increases took place last year, you know, much of the price increases were actually in exterior products or in certain other products where the increases were substantial. In some product categories, you know, like enamel, it was much depressed in terms of increase. So the increase percentage was much lower. Similarly, in putty there was barely any price increase. Similarly, in terms of some of the other product categories also there were very little price increases. As a result of that, when these type of products grew and the other products where the price increases happened did not grow, some of them declined actually a little bit. Therefore, the overall impact was like that. Now, whether this will carry on and you can, you know, now project it on to the other quarters, it's not possible to say because it won't happen that way, right? You know, because the third quarter whole mix will change and the percentage will change. I can't comment on that. Whether it is 20 - 12, therefore 8% is the mix and the mix will reverse this quarter or not, that won't happen in that way. It depends on the type of products and the mix that, you know, we generate in the third quarter. Understood. I understand what you are saying. I'll just simplify my question. My question is that, the mix that you had this quarter and the mix that you had in 2Q of last year. Yes. Is it materially different or is that mix more or less on a YOY basis? The mix is roughly the same? That is roughly the same. There was some deterioration in the mix this year on account of the excessive rainfall that was there this year. That is the reason why it got little bit distorted compared to last year's quarter two. Okay. Understood, sir. That's all from me. Thanks and all the best. Thank you. We'll take the next question from the line of Mr. Avi Mehta from Macquarie. Please go ahead, sir. Hi, sir. I just had a bookkeeping question. Wanted to understand the reason for the increase in receivables days or debtor days. Has there been a change in the mix which is driving that, or is it because the dealer terms have been changed? No, dealer terms haven't changed, Avi. You know, it's primarily that, you know, there has been, I think the prices have gone up substantially for most of the finished goods. There has been, on the money flow, you know, there is a limited money flow only. There has been little bit of a 60 days of delay, in terms of number of days that you are seeing, in the receivables. But receivables is well within control. There is no cause of worry at all. It is some liquidity relief. That's all. It is a liquidity related issue which will settle down soon. Correct, sir. Good information. Additional. Yeah. Thank you. Thank you. Ladies and gentlemen, that was the last question for the day, and now I'll hand the conference over to the management for closing comments. Thank you all for coming and, you know, attending today's session. You know, I hope, we have been able to clarify most of your questions. All the best, to you and, you know, have a nice weekend which is coming up. Thank you very much once again. Thank you. Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us and you may now disconnect your lines.