Ladies and gentlemen, good day, and welcome to the Pidilite Industries Q4 FY 2021 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jigar Shah from ICICI Securities. Thank you, and over to you, sir. Thank you, Rutuja. Hello, and welcome everyone to Pidilite Industries Q4 FY 2021 earnings conference call. We have with us today Mr. Apurva Parekh, Executive Director, Mr. Bharat Puri, Managing Director, and Mr. Pradip Menon, CFO to take us through this result. Without much ado, I would like to hand over the call to Mr. Pradip Menon for his opening remarks. Thank you. Thank you, Jigar. Good evening, everybody. This quarter witnessed robust broad-based growth across all businesses and geographies. Despite significant challenges in FY 2021, we have displayed adaptability and resilience while building capability and capacity. I'll begin with a summary of the financial performance for the quarter and year ended 31st March 2021. On consolidated basis, net sales at INR 2,230 crore for the quarter grew by 45.3%. Excluding the newly acquired Huntsman subsidiary, PAPL, growth was at 38.2%. This was driven by a 50% growth in Consumer & Bazaar segment and an excess of 20% growth in the B2B segment. Full year 2021 net sales at INR 7,251 crore was flat over last year. Gross margins for the quarter were impacted due to significant inflation in input costs. Material cost as a percentage to net sales is higher by 440 basis points versus same quarter last year and 390 basis points versus previous quarter. EBITDA before non-operating income at INR 460 crore grew by 52% over the same quarter last year. EBITDA for the year ended stood at INR 1,683 crore and grew by 7% over last year. On a like-to-like basis, excluding the newly acquired subsidiaries, EBITDA in Q4 grew by 41% and 3% for the full year. Moving on to standalone performance. Net sales at INR 1,851 crore grew by 42% over the same quarter last year with underlying volume and mix growth of 40%. There was a 45% growth in sales and volume mix of Consumer & Bazaar segment and 26% growth in sales and volume of B2B segment. Robust growth was registered across all major categories like adhesives, construction chemicals and DIY segment, driven by continued demand momentum in both rural and urban geographies. B2B segment posted sequential volume and value growth in excess of 26%, aided by gradual and consistent pickup in economic activities. Net sales for the year ended at INR 6,187 crore, declined by 2% year-on-year. Our key raw material, vinyl acetate monomer, procurement rates over the last few months have increased from around $930 all the way up to $2,000. There has also been significant increase in other input costs. Capacity disruption at manufacturing sites, overall pickup in global recovery and strong domestic demands have led to this inflation. Consumption cost for quarter four 20 21 of VAM is approximately $1,200 compared to $925 in quarter four 2020 and $875 per ton in the previous quarter. Material cost as a percentage of net sales increased by 388 basis points over the same quarter last year and 317 basis points versus previous quarter. EBITDA before non-operating income at INR 408 crore grew by 43% over the same quarter last year. EBITDA for the year ended 2021 was at INR 1,550 crore. Grew by 4% over last year. PBT before exceptional items at INR 376 crore grew by 43% over the same quarter last year. PBT for the year ended 2021 was INR 1,457 crore. Declined by 3% over last year. Moving on to subsidiaries. Domestic subsidiaries in the C&B segment have shown healthy growth. Subsidiaries in the B2B segment have shown early signs of recovery. Current inflationary trend in input costs and construction activities being impacted due to extended lockdown in many parts of the country, timing of recovery is uncertain. Our newly acquired subsidiary, Pidilite Adhesives Private Limited, formerly known as HAMSPL, has shown sequential monthly improvement in sales and business is growing in well over double digits during the quarter. Our business and financial integration has progressed smoothly as per the plan. We expect better realization in margins after the current raw material cycle is settled and growth momentum expected to continue. In terms of way forward, the current second wave of pandemic poses challenges and demand outlook remains uncertain. Despite pricing and cost actions, we expect margins to remain under pressure in the coming quarters. Our focus is to ensure supply, service, and customer end-user connects when markets are operating. Pidilite remains committed to working with our partners to overcome this crisis. I will now hand this back to Jigar and the hosting team. Thank you, sir. Rutuja, you can go forward with the question and answer. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question please 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 handsets while asking the questions`. Ladies and gentlemen we will wait for a moment while the question queue is assembled. The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead. Thanks for the opportunity. My first question is on vinyl acetate monomer, $2,000 pricing is absolutely unheard of. Last quarter, you had said you have not taken price increase, and you said that you will try to manage the product mix rather than taking price hike. What is the situation now, and what is the view on VAM? Is it just a very short-term sharp spike? Sure. I think Yeah, sorry. Please go ahead. Do you want me to go ahead, Bharat? Abneesh, good to hear from you. $2,000 a ton is unprecedented for vinyl acetate monomer. We have already taken price at the end of March, in the last week of March, and we are taking price again in this month, which is in the month of May. We will cover to the extent of about 75% of inflation. Our belief is that this is not due to a demand situation, but due to supply constraints as a result of a number of factors, which includes the U.S. storms, and therefore closures in the U.S., Europe buying from Asia, increased demand, and plant closures in Asia. We believe in the second half of the year, this will moderate. We will keep a close watch. Yes, as far as the first six months is concerned, this is definitely going to have a substantial impact on our operations, and therefore, we've had to take price. This kind of a sharp inflation, do you see regional smaller players losing market share? Without any doubt. What tends to happen in a situation like this is, this is unprecedented, and therefore, the domestic market shoots up much more. People like us obviously have larger inventories, and it takes time for us to work through, in a sense, lower priced inventory. For the smaller and regional players, it hits much harder, and supply itself is a constraint for some period of time. If I look at the last four months, I believe we would have also gained market share. Sure. My second question is on two of your underperforming segments. Essentially, if I see Nina and if I see Middle East and Africa, they have two very similar traits. Hardly any sales growth, EBITDA loss this quarter, base quarter, full year for both the businesses. If you could tell us what is the way forward and what is the plan here? Do you plan to kind of consolidate and maybe reduce exposure in these two businesses? See, very different. Let me give you a overall picture. As far as Nina Percept is concerned, this is our waterproofing higher end contracting arm, which suffered massively as a result of the country-wide lockdown last year. By the time labor, et cetera, came back, it was probably six to seven months. Actually, in the last quarter of this year, the business started picking up fairly well. It's unfortunate that we got into wave two. On a structural basis, the business is a strong profitable one as you've seen in the past. Actually, in the last five months, our order book has actually become quite healthy because as the government is putting in infrastructure projects, we have gained a fair amount of these projects. In the short run, again, because of closures, because of lockdown, and also this unprecedented raw material situation, it's almost a perfect storm for MENA. But over a period of time, whether that will be six or nine months, the business will come back to its normal shape. As far as Middle East, Africa is concerned, you're only, I suspect, looking at the Pidilite Middle East subsidiary. You're not looking at as an overall picture, actually, in the Middle East, Africa, we've grown this year. Africa actually far more substantially because that also includes exports from here in the nine months of Actually, even for the 12-month period, our export business has grown. Really, therefore, as far as Middle East and Africa is concerned, it is back in action and actually, fortunately, even in the current period, it continues to do well because there are no lockdowns happening either in the Middle East or Africa. Two different businesses and therefore, different answers. What is the issue with that business, sir? Having lost it, Middle East, Africa, et cetera. That is a very small manufacturing part of the business, which was manufacturing powder. Given the situation again in the Middle East last year, where they also closed down for a substantial period, labor went back, et cetera. We suffered with the specific subsidiary. If I aggregate my Middle East, Africa business, it is a very healthy business. Thanks, sir. That's very helpful. Just one small last question. On Huntsman, you have given the numbers. Thanks for that. INR 34 crore EBITDA on INR 109 crore sales, that's extremely good EBITDA margin of 31%. Obviously far superior than the reported standalone et cetera. My question is this the real sustainable margin? Here also, my sense is raw material will impact. If I compare Huntsman to your own segments, is it comparable margin or currently some costs in Huntsman are not there? You're not advertising. No. See, at an overall level, we always maintained, even when we took over the Huntsman business, we had signaled that actually it's at an EBITDA margin higher than our business. Having said that, the two raw materials that have seen the sharpest increase in the chemical sector are VAM and the epoxy resin. Again, this is another business which over the next three to six months, epoxy resin, in fact, even here we've taken substantial pricing, but not to the extent of the raw material increases. Therefore, overall structurally, this is a solid, profitable business. In a steady state, it will probably be at higher than the aggregate margin of Pidilite, but equivalent to Pidilite's good businesses. In the next six months, again, because of the epoxy resin situation where epoxy resin prices are pretty much Pradip Menon will give us the details, but it is pretty much doubled. As a result of that, next three to six months, you will see some moderation of margins, but structurally it's like a star Pidilite business, therefore, it will be at the higher than the aggregate Pidilite aggregated margin. Sure. Thanks, sir. That's very helpful and all the best. Thanks. Thank you, Abneesh. Abneesh, just to close the point which Bharat was talking about. epoxy, actually, their prices have gone up to almost INR 400 a kg, versus about between INR 160 to INR 200 a kg. there again, the prices have indeed doubled. That is another category where we had to take price hike. Just to close that point. Thanks. Sure. Thanks. Thank you. The next question is from the line of Prashant Kutty from Sundaram Mutual Fund. Please go ahead. Thank you very much for the opportunity, sir. Congrats on a very strong sales performance. What I understand, sir, it's a little difficult to say at this point of time how things might be at this point of time from a demand standpoint. Generally, just looking at how the recovery happened and the pent-up happened pretty soon, as far as our categories were concerned last time, and also in terms of the impact that you're probably hearing across the board. Construction activity in general seems to be slightly better off. Is there a little bit of optimism over here that the recovery would be much more faster when it comes to a lot of our categories are concerned? That's just the only one question which I had in terms of thoughts. Thank you, Prashant. I wish what you were saying was true. Frankly, the answer to that is we don't know. As of now, pretty much 70% of the country is closed down, and while there is some construction activity, it is at a much lesser level. How soon it will bounce back? Frankly, it will be directly proportional to the reduction of the pandemic. Very difficult to say as to, will it bounce back as quickly, far quicker? Last year was encouraging, but I would not hazard any guesses of how it's going to play out this time. Just if I can probably extend this. Even in terms of, let's say, even the last three months, how they've gone, they've been pretty strong. Did the trend kind of happen to continue in terms of April until the lockdown happened? Why I'm asking about more so construction activity specifically is, we do a lot of project business as well. Are those projects still continuing despite the pandemic going on? That was the context more so. Two things. One is, wherever business was open in April, what we saw in April is wherever business was not locked down, it was continuing at a good rate. Wherever it started closing down, it started with Maharashtra, then parts of Gujarat, Madhya Pradesh. It was all pretty much proportional to the pandemic. Even on projects, right now what we are seeing is there are very few projects that are declared essential services, and therefore even projects are impacted, though there is at least some basic construction activity is still on, but not at the same pace as it was on earlier. Yes, projects you still have some activity, whereas in the retail market, pretty much 75% of the country today is closed. Just if I could probably squeeze in one more in terms of a follow-up. You highlighted that obviously because of VAM, a lot of the unorganized would probably struggle. Again, the pandemic too, the second wave coming in, it's going to be even more of a struggle this time for them. Any sense in terms of how much are we hearing instances that probably unorganized are in this actually probably kind of getting shut, or probably you feel that they really don't have a chance to come back in both these scenarios where demand is also bad and even my cost scenario is also really bad? Could we actually see very sharp gains in our, as far as organized to unorganized is concerned? Is that a fair assumption? I don't think so. I think it happened more substantially. We saw them slowly coming back. Yes, they will suffer, but see, they have a reason to exist. That reason, while today is more difficult because of both the raw material situation, the pandemic, and actually also it will start impacting liquidity. In our view, they will continue to exist. We do believe that at least in the shorter period, we will continue to gain market share because, A, our supply chain is far more adapted and resilient and therefore has far more sources of supply. The other thing is consumers also tend to turn to trusted brands whenever there is adversity, and I think both those things benefit us. Sure. Thank you so much, and all the very best to you. Hoping for a quicker return. Thank you. Thank you, Prashant. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to one per participant. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Hi, good evening, team. A couple of questions from my side. One is on the costing and pricing. Firstly, could you give me an idea of what is the weighted average price increase that you have taken for the portfolio? Secondly, these input costs, as you said, the inflation is very unprecedented. What is the call or view you are taking in terms of where these prices are going to stabilize? Because your future pricing is going to be based on some kind of view that you will take on these commodities right now. Great questions, Percy. The first part is, see, given the breadth of our portfolio and its different sizes, it's very difficult to look at what is our weighted price increase because we just have too large a range across too many divisions. At a broad level, what I can tell you is currently we are pricing at 75% of inflation. Our belief, therefore, is that in a worst-case scenario, over the six-month period, the current raw material prices will come down to at least a 75% level, which will in a sense enable us to come back to normalcy. That's what we are planning on. We will have to play this, in a sense, week by fortnight by month and keep a close watch, and then see as to what's the action we need to take. If I understand you correctly, what you're saying is if VAM is at INR 2,000, your current pricing is sort of assuming that if it comes down to INR 1,500, you should be okay. It comes down to, yeah, between $1,200 and $1,500 is where we assume it come down at least in a six-month period. Right. I understand it's difficult to give a weighted average pricing. In that case, could you just give us a couple of examples in your largest-selling products, what kind of pricing you have taken without averaging it? See, again, difficult to distinguish. Take for example, in Fevicol, again, remember, because even brand Fevicol in woodworking has a large number of SKUs and the pricing is different across SKUs. Pradip, would it be fair to say that the aggregate price increase between March and May for Fevicol would be in the range of between 4%-6%? Yeah, that will be correct. Okay. Got you, sir. Second question is on the demand scenario. I know it's very difficult to forecast out, just wanted to get a sense on what is the situation right now. You mentioned that 75% of the shops are completely closed. Did I hear that correctly? Yes. Pretty much 75% of the country today is under lockdown, which means shops are closed because a large part of our shops, with the exception of very few, are not classified as "Essential services". Right. Construction is, I think, classified as essential. Even there would be some amount of direct sales that might be happening to construction. What kind of percentage of your portfolio is exposed to that which would not be affected? There is some amount of sales happening, but again, it is less than 20% of the overall portfolio. Okay, sir. That's all from me. Thanks, and all the best. Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead. Hi. I just had two questions. First, I wanted to clarify this $2,000 essentially, is there a very wide range? Is there a lot of volatility in the VAM price that you're witnessing? Or is it like it's broadly kind of remaining at that level, A? B, is mix going to be a lever that you will use again in this quarter to kind of offset the impact? The product portfolio mix, p roduct mix. Thanks. There is a substantial amount of volatility in VAM prices, unfortunately, volatility is only one direction, which is up now because of the various problems. We saw it start at $800 and it has inched its way up to $2,000. We haven't seen it start moderating yet. We believe by June it will start moderating, in our belief. That's the situation on VAM. The second part of your question was? Was essentially mix. Would you look to play the product portfolio like SKU mix? That, as a matter of strategy, we keep doing, which is the whole game around premiumization, innovation. In a situation where currently the demand itself is strained, very difficult. An improving mix is anyway part of our regular strategy. Okay. Just the last bit, just a clarification, if I may. I was a little surprised to see the FY 2021 performance. Basically, positively surprised in the adhesive segment, and a little bit kind of surprised to see the waterproofing segment performance. We have seen quite healthy growth, while waterproofing is more or less flattish. Just wanted to understand. My expectation was waterproofing will actually continue to do well. What am I missing here? No, what you are looking at is only the organized high-end institutional waterproofing, which is via Nina Percept, right? No. What I'm doing is I'm looking at the shares that you give out. The FY 2021 shares that you've given, if I compare it with the FY 2020 share, they are more or less flattish on the waterproofing side, which suggests that waterproofing is close to zero, -1. That is because you've seen a substantial decline in the Nina Percept business. Last year, given that the high-end waterproofing was closed pretty much for six months of the year. Yeah. One large part of waterproofing, which is institutional waterproofing, is where everybody suffered. When I look at my overall waterproofing portfolio. Yeah. Actually, waterproofing has grown at a rate much higher than the average. Actually, one of our big growth drivers over a nine-month period has been waterproofing. Actually, waterproofing is leading the growth rather than lagging. Okay. Adhesives would be a little bit of a laggard. Would that be a fair conclusion? I think adhesives have remained very close to the averages. Last year, because of all of the issues, B2B would be a little bit of a laggard. Okay. Where I was going with this is for the second wave. The first lockdown, while it may not be an exact mirror image, it gives you a sense on how you can expect. What would you say are the risks to kind of that assumption? I would say there are three risks to that assumption. The first is last time, rural and small-town India was not impacted pretty much through the whole pandemic. This time, we are clearly seeing signs of that being impacted, and therefore, will that lead the growth or not is to be seen. That is critical. The other thing is last time, because it was a full lockdown with everything closed, B2B tended to suffer a lot more. Right now, we are actually seeing that B2B is suffering far less than retail, because B2B in large cases, manufacturing is open, et cetera, and therefore B2B is this time suffering less rather than more. The third thing is last time, the pandemic was worldwide and the world was closed. Unfortunate for us, but in the second wave, we are amongst the worst impacted. For example, when I look at April and I even look at May, our export sales is pretty much going as per plan. Okay. It's only our neighbors like Nepal, et cetera, that are impacted. Middle East, Africa, et cetera, is normal. You can hear me? Yes, I can hear you. Yeah. Sorry, sir. From a product portfolio side also it would be the way? I was essentially looking from that aspect as well. Sorry, that was the whole point. I would say so. I think in this time, retail will be impacted, B2B will be better, exports will be better. Waterproofing would be better than some of the other products? I would think so. By the very nature of the waterproofing product, even if you take a city like Mumbai right now, pre-monsoon work is allowed. If there is urgent repair and renovation work in waterproofing, that is allowed, whereas regular retail shops are closed or r enovation is not allowed. Perfect, sir. This is very helpful. Thanks a lot, and wish you lots of luck for the future. Thank you very much. Thank you. Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead. Yeah, hi. Thanks for taking my question. My question was again on your price increases. Given the extent of inflation in VAM and some of your other commodities, I'm a little surprised that the price increase is still 4%-6%, because what we've seen in the past, and even almost 10 years back, where inflation was very high in some of these commodities, you put in double-digit price hikes, and we are seeing that kind of price hikes in many consumer categories where inflation is actually much lower. Is it just that you feel this is a transient phase and you don't want to kind of disturb the market? Or there is some worry of compression of demand due to elasticity, why your price hikes are not more aggressive than what that 6% level? Two things, Arnab. One is, remember when you're comparing with 10 years back, our operating margins used to be 10% lower. Therefore, the need for us keeping our head above the water and therefore taking aggressive price was different as it is now. You would also appreciate that if you look at the second quarter or the third quarter of last year, normally we indicate a margin range of 20%-24%. We were way above that margin range. Right. Therefore, we anyway felt there was a need to moderate margin, otherwise we're actually opening our back doors to a lot more competition. It's a mixture of two things. One is we believe that we had a certain amount of compression in the margin that we intended to do anyway, given the situation that we were in, therefore, our margins were at a high. The second is, yes, we do believe that these raw material prices, the trends are transient. These are not permanent because there are no demand-based factors. These are all related to disruptions in supply. Therefore, we believe that it is far better for us While we may moderate margin for, say, two or three quarters, it's far more sensible rather than us to take price and actually impact the demand on a longer term basis, as well as, in a sense, also disturb the market. Sure. Thanks. That's very helpful. Bharat, just one follow-up question on your subsidiaries. ICA, you've had a good ramp-up last year towards the second half. In the wood finish market, how do you see the prospects here? In terms of growth, is there a lot more growth now, even though that you've had a couple of years of this business? I just wanted your thoughts on that. ICA remains one of our strong growth drivers. We believe the premiumization trend in wood finishes has got a long way to play out yet, and in the super premium finishes, we are the number one player. Now that we have local manufacturing, we are seeing the advantages of that. We see a fairly long runway for the ICA business and where it's going to book. Okay, thanks for that. That's very helpful. That's it from my side. All the best. Thank you, Arnab. Thank you. The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal. Please go ahead. Hi, team. Congratulations on great set of numbers. My question is more structural. Bharat, the broad guidance was that growth in pioneer categories over the medium term were expected to grow from a third of sales to half of sales. Now, I understand some of these categories, the growth may have been disrupted in FY 2021. A, what was the broad proportion of pioneer in those categories in FY 2021? The timelines by which you are expecting it to be about half of sales now. We had always said, Krishnan, firstly, good to hear from you and great question. We had always said that, listen, this is going to change over a five-year period. In many ways, last year, somebody has pressed the pause button on everything, and therefore, for example, we were building three factories for pioneer products across Litokol, Tenax, and Grupo Puma. Those have obviously got delayed by six months as a result of this. Actually, the plan has got, at best, pushed forward by a year. When I look at my nine-month sales, it is still the growth in pioneer categories that are behaving as growth in pioneer. They've grown much faster than the core categories. We know that the core strategy that we have or all the basic strategy we put in place is the right one. Frankly, three or six months in these unprecedented times, frankly, is something that we can live with. Sure. Anything that you'd like to point out where you are particularly pleased with the performance on the pioneer categories and any category where you think the scale-up has been lower than expectation? Excluding, of course, the current environment that made that happen. See, for example, we've always maintained that irrespective of competition, the waterproofing category is a growth category, and we've seen that evidenced. We continue to be strong leaders and grow strongly in that market. We're now finding a great amount of traction and initial success in the whole area of tile adhesives, which we called out as a pioneer category. Pretty much what we said last year in terms of our strategy has been playing out despite the pandemic. Understood. Thanks, Bharat. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Hi, sir. Thanks for the opportunity. Sir, I had two questions. My first question is on the working capital. If I look at the receivable days, it's the highest what we see in the last 20 years. That's what my model adds up to. I don't have beyond that. Wanted to understand the reason for receivables to jump up sharply. Secondly, also, basically, inventory days have also moved up both at standalone as well as Consolidated. I think it would be a good thing if more of it is on the cost side. That's the first question, sir. Would like to understand this behavior. Yes. If you want to take that up, then I'll give you more. Yeah, sure. I'll take it. I think maybe we should connect offline. Frankly speaking, on working capital, on debtors, actually, in fact, because we've done that review. Our debtor days have sharply come down over the last one year. In fact, our overdues are at an all-time low. I guess we should pick that up and have a conversation. Certainly, between the last two to three years, our debtor days at the end of March was the lowest. Even on inventory, whether it is inventories which are beyond a certain period of time because we keep a very close watch on our undesirable, we call it undesirable inventory. Those have also sharply come down in the last one year. Maybe, we should pick this up. Frankly, we believe we've done a pretty decent job in a fairly tumultuous year to manage both. Yeah. I'll maybe connect with you separately. Sure. My second question is, we have given numbers on PAPL separately on the slide. Thanks for that. I just wanted to understand, when we had done the transaction, I think the number which was indicated was around INR 500 crore, if I'm not mistaken, and that number actually looks like a pretty steep growth on a year-on-year basis. Can you give some more color on what it means on a year-on-year basis? Secondly, is it on back of market share improvement? And what it also implies to the existing product that we had in the same chemistry? Sure. Apurva, you want to answer that? Yeah. I think what we had indicated at the time of acquisition was that the business size was close to INR 400 crore and our annualized number, if you see for this quarter, is about 20% higher. The business has got off to a good start. During the last quarter, our other epoxy brands have also done reasonably well. Overall, as a portfolio, we have done quite well in the last quarter. Sir, would we have grown on the market share side as compared to the peer set? There may have been some market share gain, but as you know, it is only first five months since acquisition, so we may have gained some market share. As our full integration happens with Pidilite, then we would expect better market share gain in the future. That's great and quite encouraging. Sir, last question. You did indicate about the price increases. Just wanted to touch upon, have we changed around the discounting or the incentive schemes, given the demand is a bit subdued in the current scenario? Thank you. See, we keep doing that on a consistent basis. We keep flexing and so on, so forth, based on the market. There's no substantial change. Yes, on a regular basis, like for example, if demand is subdued right now, a dealer's concern really is safety, security, and servicing what orders he has. He's not really worried about who's giving him a greater discount. Obviously in periods like this, that's not the focus. We, on a regular basis, keep flexing that. Sure. That helps. Thank you so much for the answers, and wish you good luck. Welcome. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi. Thanks for the opportunity and congrats on a good set of numbers in this context. Now inflation across board, across commodity basket is steep, and obviously VAM is slightly unprecedented, but otherwise also it looks steep across. In a hypothetical scenario of inflation staying where it is, what will be your pricing strategy, let's say for second half of the year? Would you prefer to pass on the pressure to customers or would you prefer to let go margins for a while? We have always maintained, Tejas, that we manage margins in a range, and that range is between 20%-24%. When we are lucky or when we have a great run like we had, say, in parts of last year, it may go up to 25%, 26%, 27%. Hopefully, there should not be a time, but it could in one or two quarters even go below 20%. At an overall yearly basis, we'd like to keep our margin range between 20%-24%. We believe that is a sustainable range. That's also a range that allows us to focus on volume and volume growth rather than just purely value. We're fairly confident that over a larger period of time, we should be able to maintain that range. If pricing was to sustain and therefore to be in that range, we need to take greater pricing. We will do that. My push always is that every inflation situation is an opportunity for us to become a little more efficient. Therefore, we will keep looking at all hard. If you look at our cost management last year, you would see that we've upped the game substantially as far as our own cost management is concerned. The challenge will always be can we keep getting more efficient and therefore not pricing at 100% of inflation, but maybe at 75% or 80% or 85%. At least getting some out of cost is the objective we would work with. Sure. This is helpful, sir. Second, you touched upon waterproofing demand. Considering that at least in some markets we are seeing that waterproofing and other construction work has been allowed. This demand seems much more non-discretionary in nature versus, let's say, adhesive or other woodworking demand. Are we seeing any divergent trend in that part of the portfolio versus the rest of the business? Right now, given that the lockdown is pretty much just less than a month, very difficult to see a larger term trend. If I was to look at last year, the first business that came back was actually waterproofing, which suggested that if consumers are spending more time at home, then they want to address their home the first. If this, depending on how long the lockdowns persist, I suspect we will see a repeat of that this year also. Sure. Last on bookkeeping. Our portfolio business has also expanded in different direction in last many years. VAM as a percentage of total RM basket, is it still very high or what would the number be now? It is. Let me just simply put it is still our number one raw material by a long distance, and therefore it is still critical to our success. Okay. That's all from my side, sir. Thanks and all the best. Thank you. Thank you. The next question is from the line of Anand Shah from Axis Capital. Please go ahead. Hi, team. Thanks for taking my question. Just couple of questions. Firstly, on waterproofing segment, you have done pretty well this year and we are picking up the same from. A lot of paint companies as well. Are we seeing a big market expansion sort of happening, and is this driven by sort of more consumer awareness or sort of the usage increase or consumers sort of picking up for protecting their undercoat and all these? What is really driving, because we're seeing some multiple entries as well as significant growth rates for all players, including you? See, the simple answer to that is we've always maintained that as far as waterproofing is concerned, if you compare equivalent markets which are similar to India, whether it's Brazil or Thailand or China, the proportion of waterproofing to paint, for example, is amongst the lowest in India, which suggests that India's penetration of waterproofing is extremely low. Now, at best, proper waterproofing is done by four out of 10 new homes that are built in India. Thus, as a result, is this a growth segment for the future? Absolutely, yes, and over a large period of time. And we've always said that a certain amount of competition will actually help this segment because more the people, greater the awareness, and therefore it becomes an essential part of actually construction activity. And we're seeing the first signs of that. I can't say that it has already happened. It is still a long distance to go. Yes, the waterproofing market, we see the market itself growing substantially. Our objective remains to hopefully get the largest share of that growth. Got it. Within the waterproofing segment, is it possible to share what would be unorganized or these regional local players? Is it that this organized pie is gaining quite a bit of share from that segment as well? The unorganized is not so large. Actually, in waterproofing, you're competing against non-consumption because the consumer doesn't know. They do very basic or no waterproofing. Actually, it's not so much about unorganized and small-scale sector as it is about non-consumption itself. People not doing anything, and therefore then suffering leakages and problems later. Got it. That's very clear. Thanks. My second question was this alternate trade channels that you are developing essentially very relevant in these times. You've seen big pickups in e-com, modern trade and your Pidilite Ki Duniya. Any color you can share on the salience of this and what particular portfolios are working for you in this? Absolutely. You see, the simple thing that we have done last year in a sense is focusing on making ourselves stronger. One of the things that we've done very aggressively is both, A, aggressively expanding in rural and small town India. For many years, we have called that out, for example, as an opportunity. Like for example, in a year like last year, while most people were holding their manpower constant, if not cutting down, we actually added people in rural and small town because we saw that growing. We added about 700 new sub-stockists in rural India. We added about 60,000 new outlets. We're covering 7,000 new villages. Therefore, at an overall level, we are clear that we have to keep strengthening ourselves and rural, small town, e-commerce, for example. Obviously, growth rates don't matter because the business has gone up 4x, 5x. We focused on that. Modern trade has come back very strongly. We are clear that as part of our strategy, making sure that we continuously access what we at Pidilite call sales excellence, which includes, therefore, visibility, availability, and the quality of availability across different channels. We're pushing at that hard, and frankly, that has given us good results. One of the reasons why we believe we've grown faster than the market is because we've accessed a much larger part of the market than we had. Got it. No, that is very helpful. Thanks for the question. Thank you. The next question is from the line of Nitin Shakdher from Green Capital Single Family Office. Please go ahead. Hi, good afternoon. My question is more towards Mr. Menon. I noticed in the standalone statement of assets and liabilities 31/3/2020 versus 31/3/2021. Financial assets investments is down from INR 715 crore to INR 169 crore, trade receivables is up from INR 806 crore to INR 999 crore, cash equivalent position is down from INR 564 crore to INR 109 crore. I just wanted to understand why the cash position and cash equivalent position down, why is it that the financial assets of investments we are showcasing INR 1,108 crore at the end of the year INR 3,312 crore. Can you just explain the behind numbers behind the cash position and the bank balances and the investment differences? Sure. I think the first thing I'll call out is the cash part. I think, as you know, we had the significant acquisition during the year of the Huntsman subsidiary, which was worth about INR 2,100 crore. We funded that from our own internal investments. Obviously, the investment position at the end of, if you compare March 2020 versus March 2021, there will be significant difference because there was the entire payout happened in November 2020, therefore that's not really strictly comparable. That is one part. As far as the individual current assets numbers are concerned, again, if you recollect March 2020, we had l ockdown in the last five or six days of the year, or six or seven days of the year. Things like debtors, et cetera, would not reflect a full completed month of business. Here we have a period of March 2021 where we are growing at a certain growth rate and we've seen the growth rate of in excess of 40%. When you compare absolutes, you'll always see the numbers are higher. If you look at the number of days, I'm just trying to respond back on the other question which came during the meeting. If you look at the number of days of trade receivables as an example, or the number of days of inventory, we have actually had a significant reduction on both number of days of inventory and the number of days of receivables. I think you have to look at this in terms of the sales that you're doing rather the absolute numbers. Okay. If it is not clear, we can obviously again take it offline. Sure. Checking everybody. Yeah. Thank you. Firstly, other invitation I have is for you is that because we've funded the full acquisition out of internal accruals, in a sense what we've also done is improved our returns substantially because all of you know that currently treasury returns are fairly minimal. The fact that we've been able to use that money in a business which we believe is obviously already generating a far higher rate of return is something that is advantageous for us in the long run. Sure. Thank you. Thank you. The next question is from the line of Sunita Sachdev from UBS Securities. Please go ahead. Hi, Bharat sir. How are you? I'm very well, Sunita. Good to hear from you. Yes, sir. My question was more with reference to the construction chemicals industry per se. You've obviously been a very strong part of most of the areas. Just trying to understand, do you have any admixtures or any particular strategy where you would kind of address that part of the market as well? We have looked at admixtures. In the initial stages we did have them. However, we believe that's a commodity business and Pidilite is a value-added branded player. Therefore we exited admixtures years back. It's a pure commodity. I hope I'm not causing offense. It's almost like selling cement, which is not where we want to be. Therefore we exited. We don't believe this is critical to all construction chemicals. We would rather go up value chain and we get far more value added products. That part of the market being commoditized, you've kind of decided not to be part of it. Overall, with a view to the construction chemicals, is it like INR 10,000 crore or how big would that market be overall on construction chemicals? It is very difficult to estimate because everybody has a different idea itself of what is a construction chemical. Therefore very hard to say as to, because there are various kinds of chemicals that go into construction. They could be for different purposes altogether. My own advice would be, Sunita, I would not hazard a guess because we first have to define what are construction chemicals to then look at the size of the market. If we were to look at just the waterproofing part of the market, no, it would definitely be much smaller than INR 10,000 crore. Right. Absolutely. Lastly, if I may, I just wanted to kind of ask you in terms of for the construction chemicals industry, obviously having a rock solid real estate sector and real estate sector doing well is important. Given the second wave, can I get any insights from you as to where are we in terms of the real estate upstream that we had seen last year? How are they managing on the ground? Thank you. See, just too early to say. We did see real estate going through a certain amount of resurgence, if I may put it in the six months between September and March until we ran into the second wave. Right now, I think in a sense there is a pause button pressed and we don't know where it's going to play out. Just remember, Sunita, if you take the overall waterproofings of construction markets, there are four big markets we play in. There is new home, individual home, there's organized real estate, which is what you are referring to, which is largely large towns. There is individual homes which is pretty much 70% of India. There's a large institutional market which could be, for example, the Parliament House in Delhi, or it could be new factories coming up or new headquarters of companies, IT centers, etcetera. There is repair and renovation. Real estate suffers with one of the four large segments that suffers, the one that drives the fortune of the waterproofing market. Right. Got it, sir. Thank you. Welcome. Thank you. The next question is from the line of Nitin Jain from Fairview Advisor. Please go ahead. Hello. Yeah. Thank you for the opportunity. I just have two small questions. In terms of the waterproofing business, is it possible to quantify what is the contribution to the overall portfolio and are we losing market share to the paint companies here? Every quarter we get to know from the paint companies that they are gaining in the organized sector. I can answer the second part. The first part is very difficult because it depends on the proportion of what, but those numbers are available. I can tell you definitely that we know our growth rates and we see we're missing in the marketplace. Remember, again, as I said, please remember that waterproofing is these four segments that I just referred to, Sunita, which is organized real estate, individual new home, repair and renovation, and institutional. Remember, the paint companies tend to play a large part in only two of these four segments, not all four. Having said that, frankly, our own belief is, by no stretch of imagination do we believe we are losing market share. We believe that, yes, the market is growing fast. We think we are maintaining, and at times in certain markets we are gaining. Let's say at an overall level, we believe we are maintaining our share in a fast-growing market. Yes, in any market that is growing fast, you will see a lot of entrants. Frankly, I would look at their staying power over a larger period of time rather than look at one year periods. Okay. My follow-up is regarding the Pidilite Ki Duniya stores. We seem to have shown a really good growth there. What is the overall strategy here for the growth plan for the next three years or so? If you can. We are very clear that rural India offers Pidilite a great amount of scope, equalized even for income. We believe that there is a lot of runway for us in rural India. One of the things, therefore, however, in the categories that we operate, just making our product available doesn't help. We have to make our product available, then we have to train people in the usage of the product, in a sense, create the category. PKDs are one avenue of doing that, like this, we have a number of plans which we are doing in rural India, that's working very well for us. One of the reasons why our growth rates are higher than the average is that, in rural and small towns, we're doing much better than most. Okay. Sir, are these exclusive stores or multi-brand outlets? No, these are multi-brand outlets where we train the fellow in our outlets. Remember, given that these are all in villages with populations of 5,000- 8,000, in most cases we are amongst the only people who access these people. Most of the other fellows, they end up buying the product from wholesale. We are amongst the only company that actually reaches there and then does work with masons, with carpenters and plumbers in training the product, and then building it. These are multi-brand. These are not exclusive. These are not Pidilite outlets. Okay. Thank you. That's all from me. Thank you. Thank you. The next question is from the line of Kedar Kailaje from Fortress Group. Please go ahead. Hi. Thanks for the opportunity, congratulations on good set of results. My question was on the waterproofing segment. You mentioned that this is a future growth driver, you are also focusing a lot on that. Given that the competition is going to increase, a lot of the paint companies are also entering. Do you think it will have a pressure on your margins and pricing, you'll have to have a different strategy? I just want your view on that. This question gets asked all the time. Firstly, remember the paint companies are not entering now. I mean, for example, the paint companies have been in waterproofing over the last five years. This is not something new. It's only that newer paint companies, the smaller ones, see the bigger fellows, and they also want to make an entry. At an overall level, we don't see our margins being hit. This is not price competition here. When you're trying to protect your home for a period of time, you want a trusted brand which does the job rather than look at price. Therefore, we have not seen our margins being hit, and we don't see them being hit overall. It's not a price competition game. It's about brand and service and stroke the products that you offer, product superiority. Okay, fine. That's it. Other questions have been answered. Thank you. Thank you. Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Jigar Shah for closing comments. Thank you everyone for joining the call, and thank you management for presenting an opportunity to hold the call. Now hand over to management for closing comments. Okay. I'll just give a set of closing comments. I think a lot has been answered. What has been answered in questions I won't focus on. I just wanted to give an overall view of how does Pidilite view the overall market/situation. We said this last year. We say the same thing this year. As far as we're concerned, we're focused on the India story over a longer period of time. The pandemic is extremely unfortunate. It's a reality. Obviously therefore our first priority becomes safety and security of our people and of our extended business ecosystem, whether it's our dealers, whether it's our users, et cetera. We've actually taken a lot of steps to try and help them. We actually did COVID insurance for our carpenter community, for our masons community, et cetera. Step one is, in this situation, focus on agility, resilience, via first ensuring safety and security of the network. The second thing is we've continued to substantially invest in getting our supply chain to be agile and be much closer to the customer. Something that doesn't get talked about a lot, over the last one year, we've actually completed seven brownfield projects, one greenfield project in Vizag. As we speak, in progress are 10 new greenfield projects, 10 new factories of Pidilite coming up for different product ranges across. Our CapEx remains at the same INR 300 crore- INR 350 crore a year. We've actually upgraded, added space or added new warehouses in 10 of our warehouses, again, in terms of getting closer to the customer. We've made a substantial amount of expansion and substantial amount of investment in the rural/small town. I talked about that, so I won't repeat that. The other thing that I'd like to mention is digital. I think Pidilite has always been a digitally adept company, but we are trying to push the envelope. Today, we've got all of our distributor force, all of our sales force, everybody operating digitally. 87% of our dealers are on a pure auto-replenishment, therefore, there is no need for us to take orders, so on. All our major end users now have loyalty apps which are being regularly scanned. Our field marketing has got totally automated. For the retailer, we have a Pidilite Genie app, and we already have more than 3,00,000 lakh dealers who are actually dealing with us on that app. A whole set of measures which I can take you through. One of the reasons of our competitive edge has been digital, and this is something we are pushing substantially. The other obviously is innovation. All of you know that Pidilite is known for innovation. Not just innovation in communication and advertising, but also in products. We've had a whole set of ranges of products, whether it be in the construction chemicals for waterproofing area, whether it be in the cements area, which we continue to introduce the moment the markets came back. That's again, been a significant driver of growth. In the end, I think there is this amorphous thing which we all call culture. I think at Pidilite, we've always said that it is crisis that tests the character of a company. If you look at the last 12 months, Pidilite's culture has really, in a sense, been one of our factors. We were voted as one of the great places to work, so on. More than that, it is just that people putting up their hand, owning their consumer, owning their customer, and therefore ensuring that even in these times, we deliver service that is hopefully an edge better than others, has been the overall Pidilite picture. I thought, let me just give you an overall picture. Apurva, Pradip, would you like to add anything? No, I think you have covered it well, Bharat. Nothing more to add. Thank you. The only other thing is, we had always said that we believe that Huntsman is an accretive and a very strategic acquisition for us, and you can see in the six months of the results that we're already on that road very strongly. Pradip, over to you. Sorry. I think, Bharat, all points are covered. If you've no other point, I just wanted to end the call by wishing everybody on the call to stay safe and, hopefully, you and your extended families are able to get through this situation absolutely fine and, hopefully, we come out all stronger at the end of it. Absolutely. Thank you. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.