Ladies and gentlemen, good day, and welcome to the Q1 FY24 earnings conference call of Berger Paints India Limited, hosted by NK Global Financial Services. We have with us today Mr. Abhijit Roy, Managing Director and CEO; Mr. Kaushik Ghosh, Vice President and CFO; and Mr. Sujyoti Mukherjee, Vice President, Finance and Account. As a reminder, all participant lines will be in the 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 Mr. Nitin Gupta from NK Global Financial Services. Thank you, and over to you, sir. Thank you, Carol. 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, gentlemen. Thank you, Nitin. Good evening, ladies and gentlemen. A very warm welcome to Berger Paints India Limited earnings call for Q1 FY24. As has already been mentioned, we have with us today Mr. Abhijit Roy, our MD and CEO, and Mr. Kaushik Ghosh, Vice President and CFO. The management presentation and the performance has already been circulated to the exchanges and uploaded in the company's website for your information. Without spending any more time, I will now hand over to Mr. Roy for his comments, followed by your questions. Over to Mr. Roy. Thank you, Sujyoti. A very warm welcome to all of you. It's been a good quarter for us in spite of the very strong base that we had. We managed to have double-digit volume and value growth. Value growth for the standalone was 10.1%, operating profit growth, 37.5%, and PAT growth, 39.2%. If you look at the volume and the value growth picture for a 2-year CAGR, 3-year, and 5-year, we can see for this year, volume growth was 12.7% overall, with the decorative growth rate was higher at about 14 odd percentage. In terms of the 2-year compounded growth rate, it was 25.5% in volume term, 3-year, 39.6%, and a 5-year compounded growth rate in volume is 18.5%. If you look at value sales growth for this year, it's 10.1%, 2-year compounded is 30.1, 3 years is 49.1, and 5 years is 18.9%. If you look at the 5-year growth rate, more or less, this is at par, at 18.5% and 18.9%. The last 2 years and the 3 years growth rate, if you look, they are higher in value terms, largely because of the price increases that we took in this interim period. Now going to the next issue, in terms of our performance for this quarter, we had the highest gain in market share in the industry in quarter one, and we had the highest profitability growth, which is the operating profit growth, in quarter one of this year in the industry, in the mixed pace, the results of which have been announced already by all the other players. Therefore, we can claim with certainty that, you know, the highest gain in market share and the highest gain in operating profitability growth rate-wise, is there for us in quarter one for this year. That's, you know, something which we are happy about. If we look at the market share, it's been moving up quarter-on-quarter and year-on-year, almost every year from 2020 onwards. We have shared this with you, you know, it moved up from 18.3 to 18.6, then on to 19, then on to 19.3, and now this quarter on to 20.2, which is an increment of 0.9%. Now, this is based on the, you know, announcements of results by all the listed companies, which takes into account Berger's standalone business, plus Saboo Coatings and SPP, which operates out of India, you know, and so this is added on to this standalone results. We look at the Indian operation, and if you look at that, this is where we stand, which is 20.2% in terms of market share. If you look at only standalone also, there has been an increase by about 0.9%, which is the same as you see in the India operation. If you look at the decorative business on sustained, if you just analyze only the decorative, it's been a fairly good growth rate in quarter one. As I said, you know, healthy double-digit volume growth and a value growth which is also in double digits, higher than the overall growth rate. The industrial division grew at a slower pace than decorative in quarter one for us. Waterproofing business continued to show strong growth. Both urban and rural markets showed improvements in the quarter. We added about 1,300 plus Color Bank machines in this particular quarter. We introduced a few interesting new products. One of them was the WeatherCoat Anti Dust Cool. Our WeatherCoat Anti Dust is a leading product in that particular segment. We introduced a variant called WeatherCoat Anti Dust Cool, which not only protects from dust, but also keeps the house cool. In areas where, you know, it predominantly remains hot and slightly dusty, this product has started doing quite well. Another product which we introduced is in the luxury interior emulsion space, called Silk Glamour Dazzle. This is a high sheen product, which is much in demand in the eastern part of the country, where we are reasonably very strong. This was a product which was demanded in the marketplace because there is a affinity for very strong sheen finishes. We introduced this product, and it has been a reasonably good success so far in the East. We also introduced a few products in the waterproofing range. For the roof coatings, we have new Elastothane, which is a solvent-based polyurethane with 600% plus elongation. Then we have Polyurea, brush applied and spray applied, which we have introduced in the segment of waterproofing. We also completed the range in the tile adhesive range, you know, and introduced a few products there. Two of them are epoxy tile grout. We are soon going to launch new adhesive for stone finishes as well. This will, you know, we are going to introducing slowly one or two products every quarter to complete the range in the tile and stone adhesive range, and, and add to the waterproofing and construction chemical space, and fill up all the gaps that are there. On the industrial side, in protective coatings and general industrial business, continually steady growth for the quarter, though lower than that of decorative, as I mentioned, but we had good price realization and improved the profitability in these businesses. Automotive business had a modest growth on account of the weak growth in the two-wheeler industry. We are predominantly present in two-wheelers and commercial vehicles and tractors. Therefore, our growth rate in the automotive category was modest in this quarter. Powder coating business line continued to de-grow a little bit in this quarter due to high base effect and downturn in the fan industry. However, it has already turned around in the second quarter. In July, it registered double-digit growth, and we expect the business to turn around in quarter two, financial year 2022. The gross margin, as we see, we had indicated last time that the gross margin had jumped up from 33.8 to 39.6, and we are maintaining it at those levels. We had indicated that we will be hovering around these levels only, between 38 and 40 is what we had indicated, and we have held on to that at 39.4%. As a result of that, last time also, I had also indicated that the EBITDA growth rate should have been higher, but due to some one-off expenses, like the Kandla factory kicking off, where we had massive overhead and some advertising expense, which we had taken as a one-off, this time such expenses were not there, and therefore, the operating profit ratio improved to 18.8%, which is, you know, a fairly decent improvement from earlier levels. In terms of our debt position, it has improved considerably. You know, if you look at the net debt situation, it has come down to INR 243 crore. On a consolidated basis, it is even lower. You know, this figure is going to become this will become zero nearly by the end of the year. On a consolidated, if you look at the consolid result, we grew by 9.8% in the revenue front. The operating profit growth was 37.5%, and PAT growth was 39.9%. If you look at all the subsidiaries that we have and then the performances of them, Berolins Poland had a strong quarter of both top line and profit improvement. The bases were weak, and also it had a very good performance in the U.K. business. Overall, therefore, the growth rate was quite robust. Company's overseas subsidiary, BJN Nepal, had another quarter of de-growth in top line and profitability. This is largely a country effect. Almost every company there is suffering because of, you know, issues related to the general economic situation there. Very high inflation, very high interest costs, and there was a slowdown in the market, but things are looking up now and slowly improving. Company's subsidiary, STP Limited, showed marginal top line growth due to a high base, and it had some issues related to one of the factories where one of the lines had to be stalled, so the OEM supplies got impacted a little bit. However, there was a strong double-digit profitability growth created by improvement in gross margin due to softening of raw material prices. We expect double-digit value growth of HTP in quarter two, financial year 2024. As far as public coatings is concerned, we had a marginal de-growth in the top line due to a high base and adverse impact from the sand segment and the export segment. However, profitability recorded robust growth on the back of softening iron prices. We expect double-digit value growth in this business line as well in quarter two of financial year 2024. Company's joint venture, Berger Nippon Paint Automotive Coating, had a very robust quarter of top line and profitability growth, aided by uptick in passenger car and SUV sector. This, of course, doesn't, we don't count this, you know, into our results as it is. We have only 49% of this, so it doesn't come in the revenue at all, but it has about 9% impact in the profitability figures. Company's joint venture, Berger Becker Coatings, had a de-growth in both top line and profitability in the quarter on account of capacity constraints due to fire in one of its manufacturing facilities in Goa in Q4 FY23. This also, the top line doesn't come, only the bottom line gets added up, as we have a 49% share in this business. Road to sustainability is very important. ESG is gaining importance. We have also focused heavily onto this area. Project Jal, where we saved 2.88 lakh liters of water. In terms of solar power, we actually have now 66 lakh kilowatt hour of solar power capacity, which is a 35% increase from what we had in last year. We also had a reduction of HTP in FY23 against FY22 of 4.34%. If you look at the carbon footprint reduction, year-on-year, we have been improving, and last year we had 19,635 metric ton of CO2 reduction, which happened last year. Company expects to end the year with double-digit revenue growth as the demand outlook remains good in view of positive monsoon progress, infrastructure spend, and extended festive season. Profitability, we expect it to sustain at current levels. If the raw materials, which we expect to remain at these levels, sustain at this point, then probably the profitability also will be at similar level. We have always said that it will hover between 16%-18%. Currently, it's ahead of 18 at 18.8, so we should be around this figure if nothing untoward happens. That's all that I have to say about quarter one results. You know, I'm open to, any, whatever questions you have, and that's, that's it from my side. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star then 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use 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 Nuvama Institutional Equities. Please go ahead. Yeah, thanks, congrats on a very good set of numbers. My first question is on some of the one-offs, which you had in previous quarter. If you could update, what is the status on that? For example, from Andhra Government, 10% of the receivables were still left. What is the status on that? Second is, definitely there was a fire losses in one of the factories, and you had provided already INR 25 crore and insurance claims, et cetera. What is the status on that? So those were the quick. There was one more provision. If you could update on all the, all three. Thank you, Abneesh. Yes, you know, for the fire loss, that you mentioned, you know, we have already applied for insurance. At normal process, you know, we should be able to get it, in the next 3- 4 months. Once it comes back, then, you know, we'll obviously reverse the provisions that we have made earlier. As far as the Andhra Pradesh government, payment is concerned, we have provided for it. Some part of it, you know, is still pending. A small portion from the, for the school project which we have done is pending and, that has to come through. We had to submit certain documents, which we have just completed about 4 days back. Now they will go through the process. In a month's time, we are expecting that this AP school project balance amount of money out of about INR 300+ crore. We've got almost INR 78 crore-INR 80 crore, and balance INR 21 crore-INR 22 crore is left, which has to be received by us, and which we should receive in the next few, I would say one month maximum time frame is what I would place it at, and we should get that amount. Sure. My last question is on the volume growth. Another paint company, which also saw very strong numbers, it's a smaller company. They said that in July, the earlier trajectory, what they had seen, a strong volume growth that has sustained in July month also. Plus, all paint companies are saying because of the festival season, which is delayed this year, which gives a reprieve between the monsoon ending and the festival season. That's supposed to be good, but a lot of that benefit will come in Q3 rather than Q2, but on an overall basis, it will be better. Wanted to understand July month and festival season, how are you looking at it? Amit, you know, the, a lot of these things, you know, depend on the bases of different companies, you know. I, I won't get into the detailing of it. If you, if you study, you will find that, you know, sometimes the bases are weak, and therefore, you suddenly have a bigger growth rate in certain months or quarters. But overall, consistently, if you look at it, you should look at from the market share perspective, is there a gain or a loss of that particular company or companies concerned in particular quarter? That will give a better indication of things. The second part of it is, you know, related to what will happen, you know, in the third quarter or in the second quarter. Yes, you know, Diwali is delayed this year, the chances are that, you know, we will have a much better third quarter. Again, the third quarter base is on the lower side, because last year most companies haven't done well. On that weak base, a relatively weak base, there will be better growth rate in the third quarter. A much more robust growth rate should be there, especially if the Diwali is getting delayed. That situation is likely to arise in the third quarter. The second quarter, because of the monsoon being there, a little bit impacting in July, quite a lot, you know, many of the companies wouldn't have had very strong growth rates in July. Exceptions are there always. Depends, as I said, on the basis. Then, you know, second quarter will be moderate for most companies. The third quarter will be far more robust, as far as most of the companies in the industry concerned. Sure, thanks. That's all for me. Thank you. Thank you, Amit. Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead. Hi, sir. sir, I had a few questions. First, sir, what I'm not, I want to get an update on the level of regional competition and whether the benign input cost has resulted in that kind of increasing. Right. So regional competition, you know, had reduced a little bit, you know, if you recall, you know, in the COVID period. People used to ask, you know, earlier also that, you know, whether you think, you know, is this, you know, you are gaining off of them and, you know, is this going to sustain? I had always said that, you know, there is a possibility of them gaining, once the prices start, you know, reversing. So some amount of, you know, the, the stronger players have remained and, and they have, come back. The weaker players, of course, you know, they gave up, and, and, and they are as good as gone. Therefore, some amount of regional bounce back is there, both in the industrial side and also in the decorative side, but not very significant I would say. Okay. It would not be concerning enough to kind of consider price reduction or passing it on? Because I was essentially trying to understand, is there a reason. No. To look at prices? I don't think so. I don't think that is required at this stage. Though, you know, I think, you know, one, we must remember that, though the prices come down or raw material, you know, this is a very competitive industry. The rebates and discounts tend to move upwards in such a situation, because every company knows that the margins are there to play around. Therefore, you know, ultimately, if you reduce the price, you will tend to reduce also the price, you know, discounting and the rebating to balance out to some extent. Therefore, you know, I don't see this price drop happening immediately. Though to a large extent it depends on the leader and how, you know, it takes it up in the near future. Okay, sir. Essentially, demand is strong, competition is not a concern. The other part is, the last part is the uncertainty. Okay, I hear you. Yes. The second, the second bit, sir, I wanted to understand is the, you know, the Sandila plant. Now, is it fair to say that this quarter represents almost the entire cost and additions? Or by when do you see the costs, whether it is in terms of higher employee cost, depreciation, and even the benefits in terms of lower freight costs, to start flowing through from the Sandila plant? Or is it largely reflected? I think, you know. I was just trying to understand how should we build it in as we go forward, sir. It's still in a, a work in progress, not fully operational that way. It's not at, you know, operating efficiency, it still needs some amount of improvement. We have moved up some. On a scale of 1 to 10, I would say we are somewhere around 5, 6, you know, at those levels. It can go up further in terms of improvement. As the season comes off, you know, we are going to see significant improvement there in the Sandila plant. Sir, the depreciation is largely done, right? The depreciation cost of that unit is broadly done or there might- Yes, yes. Yes, that's there. That is done. That is done. It's only going to be any operational benefit. As they kind of scale up, we will only see benefits. That's right. -because- You are right. That's done. Okay, sir. Sir, lastly, was on the ad spend to sales. Could you... It's just a bookkeeping. If you could give us a sense on where we are in first quarter, and how do we see it behaving, going forward? What is our target internally for FY 2024 and from the steady state? We have more or less maintained the ad spend to sales ratio at wherever we were last year. Approximately at similar levels we are. We see this trend continuing going forward. We may accelerate a little bit from end of third quarter, depending on, you know, how the prices of raw material are. We may want to spend in the third and the fourth quarters, actually more than what we are doing in the first and the second quarter. Okay. That's 3.5, 3.3 was the number last year, if I'm correct. That's right. 3, 3, 3. Yes. 3% or so. The steady state or prior period was more like, in earlier years, you've almost gone to 4, 5. You think the number should be more in the 3 level on a yearly basis? It will be around 3.5%-4%, you know, towards the end of the year. At current levels, it is at the 3.5% level, approximately. Okay, sir. I'll come back in the queue for the other questions. Thank you very much, sir. Thank you. Thank you. A reminder to the participants, if you wish to ask a question, please press star then 1 on your touchtone telephone. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Hi, good evening, Abhijit. Thanks for the opportunity and congratulations on. Good evening. I was just reading, and I was more curious. At 20.2% market share, this is all India. What would be the market share where our core market is, which is North? Will be similar range would have gained or will be higher? Yeah, you know, we, we gained across the board, actually. You know, obviously, the market share to begin with is higher in the north and the east, the gains have been higher in, you know, east, possibly we would have gained definitely slightly more. Also in the north, the gains has been more or less similar to the national average. The west gain would have been slightly on the higher side. Okay. One follow-up here. Largely, this market share gain, we were under indexed into the exterior, and we have seen a lot of product launches, so that's where we have gained? Pure play the decorative inside four walls, that is the segment where we have gained the market share? More of the gain is a combination of all the factors, which, you know. You know, it's also a distribution gain, which is happening in the west and a little bit in the south as well. Where we had said that, you know, we are relatively weak, and we will focus on expanding on the network. That there is an opportunity there for further expansion, and that growth will continue. Okay, okay. My second question is on the decorative slide. You mentioned that there are new product innovation which is happening. Generally, how much time a new product gets settled? A year or so, you get a full revenue, or it takes little longer time to get the distribution gain, and then it starts showing. What are the gross margins, you have the benchmark inside the company, that, any new product you will launch, will have some gross margin impact on? Yeah. You know, it's in two parts. You know, you mentioned, you know, how long does it take? Normally, if it is a product which is in good demand in the market or we have read the demand situation correctly, then it should start reflecting in four to five months timeframe. It doesn't take that long to impact on the ground. It, it is a slow phased rollout, and therefore, that much of time is required for the rollout to happen. If we find that in the initial markets we see good traction, we roll out much faster, and therefore, you know, it should take, as I said, you know, four to five months. If we find that the, you know, we need to tweak the product a little bit, then it may get delayed a little bit in that sense. As far as, you know, the gross margin is concerned, it depends on the product category in which the product is being introduced. More or less, you know, any new product which is introduced in a particular category, say, it is luxury emulsion, then it will be close to the luxury emulsion and slightly higher around those levels of the existing luxury emulsion product. However, if we produce a very economy range product, then the margins will also be correspondingly similar to that type of a product category. Okay. My last question on the outlook slide. You said that you are expecting a double-digit revenue growth. Directionally, what we read from the market and other players, that price element is going to be sub-minimal. I mean, another 1 quarter you will have by November, you will have price annualization. In that context, do you think the volatility in the raw material prices is there, and we will still build double-digit volume, double-digit revenue growth in terms of value? Maybe if you can spell out what is the volume growth targets you are setting for FY 2024. As I said, we, you know, our value growth in the first quarter has been double digit. Volume growth also has been double digit. First quarter also was quite tough. On a very large base, we had a very big base of last year. In spite of that, you know, we were able to grow in double digits. As I said, in the third quarter, we see a possibility of a stronger growth rate. Second quarter will be not, you know, as strong as the third quarter. It will probably be similar to the first quarter. And therefore, overall, we see that, you know, we should be able to comfortably, you know, deliver the double-digit growth rate by the end of the year. Okay. Thank you, and all the best, sir. Thank you. Thank you. The next question is from the line of Keshav Bagri from VT Capital. Please go ahead. Hello, sir. Am I audible? Yes, you are. My question is on margins, actually. Is it fair to assume that margins have topped out? I think I have 2 reasons to support this. One is, I think crude will take away the sheen, and if it doesn't take away the sheen, then maybe you'll have to increase your rebate and all. Plus, the competition is also coming from Q4. What is your outlook on this? You know, we have always maintained that, you know, the margins will be around these levels, right? You know, whether it has topped out, whether it can further improve, you know, somewhat, or whether it will remain at these levels, is difficult to say at this stage. We are also doing a lot of we're taking a lot of initiatives from our side in terms of further improving cost efficiency, you know, both in terms of formulation efficiency, also in terms of raw material buying efficiency, which should reflect in some improvement in the margin. If that can be neutralized or gets neutralized by increasing competition, that may happen. Therefore, if that happens, we will be restored back to the current levels of margin. Otherwise, you know, we would have possibly improved a little bit from current levels. Okay. My second question would be like, if you look at the leaders, then they are focusing more, like they want to be a full-blown home improvement company. We are also into decorative industrial paints, exterior paints, plus we are also into, the recent, in the, the tile segment, I mean. Are we also planning to go into some deeper or some agencies? No, we, we are very clear in our head that, you know, we have no intention, and I have repeated this, you know, that we are not getting into other categories. We are going to remain in paint and waterproofing segment. In that waterproofing and construction chemical space are the tile adhesive, which is, you know, very, very similar products like, you know, cement-based, cement paste adhesives or epoxy adhesives, which is like paint only, you know. We are going to remain in this space only. We are not going to move into, you know, say, home decor or, you know, furniture or furnishings, et cetera. We will remain concentrated around the space of paint, waterproofing and construction chemicals. Okay. Thank you, sir. That is it from my side. Thank you. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead. Yeah. Thanks for the opportunity. Just wanted to understand the about market share, the 20.2% market share. Is it in paints or it includes all the categories like paints, primer, putty, and waterproofing, et cetera? Or if you can specify the market shares in the each of the categories separately, that will be good points. Anirudh, you know, this is based on published results. I, I do not have results of other companies of, you know, paint, primer, putty, et cetera. It is not possible for me to be able to project, you know, market share based on that. What we have done is, we have taken the standalone results of all the companies. You know, to the standalone results, we have added our SPP and SABU value, which is basically in India, and therefore we call it the India operation. We have added, in case of Indigo, the recent purchase of Apple Chemist, and their, that turnover as well, and then have, you know, seen where we stand in terms of market share. There, if we see it, you know, it is at 20.2% for us, an increase of 0.9% has happened in this particular quarter. I can't tell you what the market share of individual categories are, because there is no one is publishing that data, and so how do I tell you anything about it? Sure, sir. Understood. Understood. Thanks, thanks for the clarification. Second is, now projects is becoming a major segment, and we see a definite strategy from almost all the paint companies. What is Berger's strategy in case of projects business? Roughly, how do we see it panning out over a period of next two to three years? We have always been in the project business, present there, you know, for long years now. We have a fairly decent size of operation there in the project segment. It is growing, you know, it keeps growing and ebbing, you know, depending on the builder segment and how it moves. For the last 1 and a half, 2 years, it's been growing, you know, in the COVID period it had shrunk, a little bit, you know. It has its ebbs and, you know, troughs, you know, and, and peaks. As of now, it is on the growth path, doing well, doing slightly better possibly than, you know, retail. We think that, you know, this trend might continue a little bit into the future. This segment has, you know, profitability is on the lower side compared to retail, but value sales growth has been slightly higher than that of retail in the last 1.5-2 years. Okay, sir. Thanks. Last question. The trade discounts have increased, but, what would be the indicative quantum in industry and, as well as for our company also? Let's say if the trade discount was X% in Q1 FY23, so what it would be now? Maybe X plus 5% or, or how much it would have gone? That's the question. Thank you. Thanks for it. It depends on, on, you know, product category-wise. You know, it is not a uniform thing. It, it depends on my mix compared to someone else's mix. What has happened is in certain categories of products, the discounting has increased, whereas in certain other categories it hasn't increased so much. Overall impact will depend on the product mix. For example, in enamels, the discounts went up substantially, whereas, you know, in some of the other luxury emulsion products, it hasn't moved, you know, so much at all. Therefore, it will depend on the proportion of these products to the overall mix. Then the situation changes with quarter on quarter. In this quarter, enamel plays a very critical role because this is a wholesale period. Typically, you know, people tend to rebate excessively in this category. Whereas in the next quarter it will be more of an emulsion play. It will depend and keep changing. Overall, the discounting has gone up a little bit marginally. Okay. Sure, sir. That's, that's very helpful. Thank you. Okay, thanks. Thank you. The next question is from the line of Tejas Shah from Avendus Spark. Please go ahead. Hi. Thanks for the opportunity and congrats on good set of numbers, and also thanks for very detailed, initial presentation and remarks. Thank you. A couple of questions from my side. When we look at FMCG company's numbers and their commentary, it has been subdued, and the consumer sentiment has been very, very tepid. On, on retail side, it has been, very emphatically, very tepid. Between those two buckets, when we see our numbers, the... And then I'm talking about the whole industry, somehow we continue to outperform, or, or, kind of, drift away from the broader consumer sentiment. Just wanted to understand, when you talk to your salespeople, what is working for us and industry at large, which is not visible in any other consumption basket in India? This has been happening, and the paint industry has been growing at a slightly, you know, different pace than the FMCG category. Probably, you know, few reasons are there, and, you know, those reasons are peculiar to the industry at large. One is that, you know, the organization level is still at a low level. You know, it continues irrespective of, you know, what the economic situation is. The organization keeps increasing, right? We are currently sitting at about 34%. And if you look at any moderately, you know, advanced country, say China, for example, it's about 60%. If you go to Europe, US, it is about 80%-85%. You know, as soon as these houses get constructed, they get painted. After every 5 years, they get repainted again. There is this possibility of advantage of, you know, growth, which is available to this particular category. The second is in terms of premiumization also. As the income increases, you know, people tend to move upwards, so that's also helping, you know, in some amount of movement away from the unorganized towards the organized, towards more advanced products is happening. These two factors, irrespective of what you do, is not true in case of FMCG. The other factor also is that we are slightly under-penetrated. You know, as a category itself, the number of dealers is too low. You know, there are still places where we are not able to reach. We as a company specifically, if you look at it, we have so many areas where we don't have our products available. Brand is known and, you know, our product is known. We have a, you know, good, very good quality product. Somehow we have not been able to reach those locations. If we increase that reach, we have a chance of, you know, improving our growth rate. The more we do that, the more we penetrate the market. In a growing market and in under-penetrated, you know, in our case at least, it is, you know, there is a lot of scope for penetration. We see an opportunity for growth for us irrespective of what the market is behaving like. Fair point. Second question pertains to that only on, on distribution expansion that you spoke about. First, what is the annual run rate that we'll target for this year? Second, you mentioned that we had added some 1,300 Colourbank machine. Just wanted to clarify technicality here. These are always a fresh installment, right? I'm assuming that some, some machines that you would have installed 5 years back also must be coming for replacement. These are fresh installments? No, these are all fresh replacements. A fresh, you know, installation. There is no replacement machine in that. We handle it separately, and we don't count into the new expansion category. These are all new machines which have been put into new counters, which were not dealing with us or were dealing with us without machines. Okay. And sir, dealer expansion number? Dealer expansion number will be slightly more than this, you know. It, it depends on, you know, how you look at these dealers. There are retailers or wholesalers or distributors who are there. I'm not counting that, you know, so we will probably be around the 1,300 number only. If you look at the dealer expansion also, because some of the existing dealers also would have taken machines. Okay. Sir, last one, on tile adhesive, you said that we are expanding our product range. Just wanted to understand, what is the route to market? Are the same paint dealers are selling tile adhesive, or it requires a different kind of route to market than the usual traditional one? No, it is some of them, some of our paint dealers are also tile dealers, so there might be some overlap there. You know, it, basically, has more of tile dis- adhesive distributors who are appointed separately, who, you know, who cater to this market, but they are into this building material trade. We understand the nature of this business reasonably well, and, you know, we have been, you know, fairly successful in this category so far. Okay. That's all from my side. All the best for coming quarters. Thank you. Thank you. The next question is from the line of Amit Purohit from Elara Capital. Please go ahead. Yeah. Thank you, sir, for the opportunity, and congratulations. Sir, on the project side, would you be... Just wanted to understand, are we cross-leveraging some of the consultancy, waterproofing solutions that we have, which is SPL, and is that also helping us to sell our paint products along with that, or that's largely on the industrial side? Yes. You know, there are advantages for us. We are fairly strong in the project segment on the protective coatings area, and also, a strong presence in the decorative projects business. In the project business, where we sell paint, we also push our construction chemical and waterproofing products. If we get leads of construction chemical and waterproofing, then we push our paint as well into those segments. It goes into the same area, same builder, same owners, basically, same specifiers. Except that, you know, sometimes for waterproofing, we have to get the specification done separately through consultants, et cetera. For which we have to have a separate team which works on them and, you know, tries to get our products specified. Okay. sir, just on the project side, what would be the salience of project business, in our overall business? I can't hear you, Amit. Can you be a bit louder, please? I'm saying, what is, what is the salience of project business in our overall sales, for... It should not include the SPL that we already have, right? Excluding that, what would be the sales? It, it has always been around that, you know, level of 8%- 10%. Okay. For the last 2.5 years, it's been hovering around that, you know, so sometimes it increases, sometimes it goes down. Depends on the performance of this category. Sir, you indicated in the beginning that West and South are the markets where you want to scale up. Is that the market where the project business is slightly over indexed or under indexed for us? How do you, I mean, above 8% or less than 8%, how do you? Yeah, it is similar, though, you know, in the West and the South, our retail presence is weak, so our projects tend to be, you know, slightly more. It is slightly over indexed there. As and when the retail keeps improving and the distribution penetration goes up, it will fall back to the normal levels. Okay. Sir, one on waterproofing. You've been expanding into new segments like now tile adhesive as well, and grouts as well. Are we now complete range available, or there are some more pockets where you think there will be some more new product launches which will keep happening in the waterproofing space? Some more product launches are due. You know, we are more or less around, I would say 70%, 75% of the products have been introduced. Then a few more products are going to get introduced soon, to keep completing the range, that is required in the marketplace. Okay. This would be done over the next one year or so, or it should be even- Yes, in the next one year, we should be able to close most of the, you know, whatever sells in good quantities, we should be able to launch such products in the market. Okay. Thank you. Thanks, sir. Thanks, a lot. Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of Mihir Shah from Nomura. Please go ahead. Hi. Good evening, sir. Thank you for taking my question, and congrats on a, sir, a good set of results. Sir, first I wanted to just check with you, you know, on the seasonality impact on the gross margins. If, if you can just jog our memory, usually, exterior paints, which have higher margins, sell more in the first quarter. During the festive season, usually do we have a higher saliency of more economic paints getting sold, hence, the margin can get suppressed? Or, or, if you can just, you know, quarter to quarter, if you can highlight how the seasonality moves and remind us, please, sir. You know, typically in the paint industry, the first quarter is good, you know, in, in terms of margin. The second quarter has a mix which is more towards enable primer distemper in the first July and half of August, sort of a situation, and then it starts improving and moves towards more of emulsion, especially in the month of September, when interior emulsions picks up quite a lot, and along with some exteriors as well. It's in the third quarter that it becomes, you know, more oriented towards exterior and interior emulsion. That is also a very good quarter in terms of margins and profitability. Fourth quarter also, you know, margins are there, the volumes in our case tends to drop because that's the quarter where the South India starts to, you know, dominate overall, and we need to improve our presence there. The fourth quarter, you know, we have a lesser sale comparatively, in that particular quarter, compared to some of the other players who have much stronger presence there. Understood, sir. Keeping this in mind, and, you know, you had mentioned last quarter that on an operating margin level, you know, while I understand you will get reiterated, that on gross margins you will hover around the 30%-40% mark, and that is well understood. On the operating level, I wanted to check, you know, last time around, you highlighted on a steady state, it will be around 16%-17% odd. This time you've done, you know, very well. Do you think that we should revisit that guidance? Or you think that, that range still holds up quite well? No, I think we, we, we are, you know, possibly, you know, it will be within that range, we will operate 18%. 18.8% is a bit off on the higher side because the raw materials have been relatively very benign. You know, whether that remains at these levels or not is a question. You know, sometimes, you know, it's difficult to predict this part. We would prefer to remain at this, hover around this, you know, 16%-18%, what I have indicated. Probably now it is 17%-18%, where we would be more comfortable. Then that's where we will be in the second quarter and possibly in the third quarter as well. Up to which the visibility is there, after that, it is difficult to call. Got it, sir. Thank you. That's all from my side. Wishing you all the very best, sir. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Thank you. Over to you all. Thank you all for joining us, and, you know, it was great interacting with you. Hopefully, you know, I've been able to answer most of the questions very transparently and to your satisfaction. Thank you once again for coming to this meeting. Thank you. On behalf of Emkay Global Financial Services. Thank you. We conclude today's conference. Thank you all for joining. You may now disconnect your lines.