Spark Capital, I welcome you all to Pidilite Industries' 1Q FY 2022 Earnings Call. From Pidilite Industries, we have with us today Mr. Bharat Puri, Managing Director, and Mr. Pradip Menon, CFO, to take us through the results. I'll now hand over the call to Mr. Menon for his opening remarks, post which we can open the floor for Q&A. Over to you, Mr. Menon. Thank you, Tejas. Good evening, everyone. I'll start with my opening statement. Despite a challenging business environment, we have delivered strong broad-based sales as well as earning growth across businesses and geographies on previous years' low base. The second wave of COVID-19 disrupted business continuity from second half of April 2021, with gradual closure across the country for May 2021 and part of June. We have seen demand recovery since mid-June, post the lockdown, with most markets returning to normalcy across town classes and geographies. While consumer and bazaar businesses, C&B, has witnessed recovery led by adhesive, construction chemical, and DIY portfolio, recovery in business-to-business, B2B, is on account of resurgence in industrial activity. Now I'll begin with a summary of the financial performance for the quarter ended 30th June 2021. On consolidated basis, net sales at INR 1,928 crores for the quarter grew by 120.7%. Excluding Pidilite Adhesives Pvt Ltd, PAPL, it grew by 112.5%. This was led by 111.7% growth in C&B segment. Excluding PAPL, it was 101.5% growth, and 156.1% growth in B2B segment. Gross margins have contracted on account of sharp escalation in input costs, partially mitigated through pricing taken across categories in a range of 4%-6%, covering 75% of inflation. Material cost as a percentage to net sales is higher by 437 basis points versus same quarter last year, and 182 basis points versus sequential quarter. EBITDA before non-operating income grew by 428.8%, excluding PAPL, 395.9%. Profit before tax and exceptional items grew by 814.4%, excluding PAPL, 745.3%. Moving on to standalone financial performance. Standalone net sales at INR 1,617 crores grew by 110.6% with underlying sales volume and mix growth of 104.6%. This was driven by growth of 102.8% in sales volume and mix of C&B and 113.1% in sales volume and mix of B2B. Our key raw material, Vinyl Acetate Monomer, VAM, procurement rates had increased over the months to $2,000 per metric ton in April 2021. VAM has now started softening with a current price between $1,400-$1,500 per metric ton, still higher than previous financial year. Quarter one VAM consumption rate at $1,610 per metric ton is against quarter one 2021 of $890 per metric ton. Material cost as a percentage to net sales is higher by 529 basis points over same quarter last year, and 275 basis points over the sequential quarter. EBITDA before non-operating income at INR 308 crore grew by 219% over the same quarter last year. Profit Before Tax and exceptional items at INR 355 crores grew by 361% over the same quarter last year. On a like-to-like basis, excluding dividends from subsidiaries, PBT grew by 236%. Overseas subsidiaries continued its positive momentum and reported high double-digit constant currency revenue growth as well as strong earnings growth. Our domestic subsidiaries suffered as a consequence of the lockdown in May. Sustained recovery in demand is seen from June onwards. Input costs remain a significant challenge. We see these as peaking in the current quarter and then gradually softening over the second half of the year. Going forward, we remain cautiously optimistic on a sustained demand recovery. Our focus remains on delivering volume-led competitive and profitable growth, as well as the health and safety of our ecosystems. That concludes our opening statement. I would now hand it back to the host for the Q&A session. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the dashboard telephone. If you wish to withdraw the question, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait a moment for the questions you will send us. The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead. Thanks for the opportunity. My first question is on the PAPL. When I compare the EBITDA margins for PAPL for Q4 versus Q1, so sequentially, I'm not getting much of a difference. It's largely in that 31.2%-31.8%, so fairly stable. When I see the overall business, the seepage in terms of quarter-on-quarter margin is much higher. If you could explain the difference. I understand PAPL is the more premium and the consumer part of the business. Is that the only reason that the control gets diluted by the B2B and overall international part? Some color on PAPL, why it is much more consistent in terms of margin? Go ahead, Pradip. Abneesh, thanks for the question. As far as PAPL is concerned, obviously, as we said, in terms of response to the various input prices or changes in input costs, we have taken appropriate actions in terms of pricing, costs, and so on and so forth. Some of that you are seeing in the results of the company. Are you talking about the rest of the B2B segment in the subsidiaries, or you're talking about the consolidated picture? The second part of the question. The consolidated. Yeah. On the consolidated, obviously, there are other subsidiaries in our portfolio. Some of them are much more exposed to the real estate, where the recovery and the margins have been under greater pressure. That is the reason why you are seeing a distinction between PAPL and the remaining part of the subsidiary portfolio. When I compare, say, like to like PAPL to your consumer adhesive part of the business, quarter-on-quarter, will that also behave similar? It has sustained in terms of margin? See, Abneesh, good to hear from you. Because the rest of the business is a composite of many products, and it therefore depends on the mix and the raw material movement of that mix. As far as PAPL is concerned, it's a simple epoxy resin, and therefore it largely is dependent on epoxy resin. The simple answer is it may or may not move in conjunction with the adhesive portfolio because its raw material, the principal raw material, is not greatly in use in the rest of Pidilite. Sure. Sir, since you are also there in the call, I have just one quick question. You can ask as many questions as you want. Right. When I'd asked you last time on the real estate recovery, you were a bit more cautious. When I check with my real estate analyst or see the comments of the real estate players, they are very positive, and many of them see this as a multi-year bull run. Time has gone, and we have gone through the wave two pandemic, which could have worsened the sentiment. What would be your take on real estate recovery? Are you getting now a bit more confident versus last time? See, on real estate, there is no doubt about the fact that there is a substantial decrease in terms of the inventory that builders, the organized real estate was holding, which was not moving earlier and has moved, and therefore prices have also moved up. Clearly, there is a good amount of clearance of inventory. If you look at, for example, you and me both live in Mumbai. Normally, in the real estate boom times, the first two pages of any newspaper would be just the new projects being launched on real estate, right? I don't think we have reached that stage. I hope you're right that it is the beginning because real estate has not gone through just COVID. Even the three - four years before COVID, it was suffering. Therefore, in many ways, hopefully they have come off the bottom and they are in the takeoff stage. Let's wait for the next six months and see. Sure. That's it. The last question, Sir. When I see your brands in your presentation, my question is on some of those which is not discussed that much. If you could tell us on these three specific brands, Steelgrip, Motomax, and Terminator, last few years and maybe the outlook also, how is the situation here? As far as Pidilite is concerned, Abneesh, you know that we have an approach where we have a large number of brands for specific uses. Some of these may be niche uses. Steelgrip is, of course, a popular brand. It is a good electrical insulation tape and is a substantial part of our portfolio. Terminator is a growing one because the problem of white ants is a major problem, and it's been a growth brand for us for a number of times. It's not a very large brand, but it's a steady, I mean, it's not a small brand either. As far as Motomax again is concerned, good, steady brand. The whole auto area for us is currently small, but clearly an area of potential because auto grooming, I mean, we are the world's largest population of two-wheelers, and therefore auto grooming is something we're looking at. We're finding actually Motomax and actually with a lot of other brands, a lot of success coming via D2C, which is coming via the e-commerce route. Today, for example, in the last three months. The largest selling drain de-clogger on Amazon is not Dranex, which is the country leader, but is actually a Pidilite product called D-Klog. Like this, we've been working with a set of partners, so on so forth, and a lot of these brands we are looking at are also D2C. Just to give you an overall perspective, what we did in e-commerce in the full year in 2019-2020, we are now doing in a single month, for example, in the month of July in this year. We've really upped our game there, and it's a long runway. By no means are we saying that we're declaring success, but we are absolutely going in the right direction. Sir, just one follow-up. Dranex is a market leader, how come your product has done better on e-commerce? Is it any specific price differential that's driving? I think it's a mix of an appropriate product with good marketing and being able to understand consumer needs and push and work, partner with the customer in taking it forward. The good thing is when customers use the product, they come back and ask for it. In fact, in the last three months it's been the number one seller- Oh. On Amazon. Right. That's all from my side. Thanks a lot and all the best. Thanks, Abneesh. Thank you. Thank you. Participants who ask a question, please press star and one. The next question is from the line of Avi Mehta from Macquarie. Please go ahead. Hi, Sir. Thanks a lot for this opportunity. I had three questions. First was essentially on input cost. You said at the start of the comment that VAM has moderated from the highs of $2,000 to almost about $1,400-$1,500, but then you are saying that we expect VAM to peak in Q2. I'm just still confused. When VAM is already moderating, why do you say that it'll peak in Q2? Very simple. Avi, what we buy in Q1, we will consume in Q2. Okay. The impact of the price of VAM. Okay. Sorry. That clarifies. Will actually. Yeah. Okay. You meant your own, but is there a further moderation that you're kind of expecting from this level? If you could kind of give us some hints there. We are definitely expecting a further moderation from this level, but currently, world over, global chemical prices are displaying such volatility. We're keeping our fingers crossed. Yes, we don't see $1,400, $1,500 as a sustainable level. It may not come back. Last year at one point in time, it was even $700. It won't come back to that. Yeah. We do believe that it will moderate further from this $ 1,500 level. Okay, Sir. Would you say somewhere around, last year, I think $1,000 was where you were below most of the time. I think that's what you would mean. $900 was, yeah. Yeah. If I look at year before, Pradip, what would year before's average be? Yeah, it would be $ 900, Bharat. $ 890-$ 900. $1920 also? Yeah. Yeah. For the year $900. Close to $900. I would say yes. I think it won't come back to $ 900 quickly, but I do hope that between $ 1,000 and $ 1,200 is where it returns to. Okay, Sir. From that lens, you're essentially that is how you kind of see this. Sir, the second bit is, again, linked to the margins, only continuing on that. Even in the first quarter, you had indicated you had take 4%-6% odd price increase. It covered 75% of the input cost inflation. Now, that time the cost was at $2,000. Would it be fair to say now that the input cost itself has come off, we are almost covered to the entire basket, and we don't need any further price increases? On VAM, we may be covered. By the end of quarter two, we will be covered, Avi, as far as VAM is concerned, and some of the other raw materials we may not be. We're studying it closely. Our hope is, we clearly want volume growth, and we don't want to constrain our growth because we find price elasticity beyond a certain level, then it impacts the consumer. We're keeping a close watch. If prices continue to moderate, we will not need any further price, and yes, we would have covered for the whole time by the time quarter two goes. Okay. Sir, on the demand recovery side, and it's been quite healthy, is the cautious optimism because of the concerns on third wave, or is there anything else that we're seeing? Related, could you give us a sense, has the strength sustained in the last two months, July, August, is that? Yes, the trend has been extremely positive ever since the lockdowns have got lifted since the middle of June and has sustained for July and whatever is the limited period of August up to now. Yes. The cautious optimism is we are keeping our fingers crossed for this famous third wave. We're hoping it doesn't happen at all, and if it does, unfortunately happen, it doesn't lead to widespread lockdowns, therefore, the cautious optimism. We do believe that there is a certain amount of pent-up demand, and as the economy recovers, you know that we correlate very well to GDP. As GDP comes back, I think we will see far better demand conditions. This is across both the segments, in the consumer bazaar as well in the both ET segments, or this is waterproofing, or is it? Across. Across. This is broad based. To be fair, this is across the portfolio, very broad based, and actually across even geography. Things like the metros have come back strongly now in the first quarter. Of course, they went down the most. I think the great thing is, we had spoken last time about us investing substantially in rural and small town. Despite a 45-day closure in the first quarter, our rural and small town sales has obviously grown over last year, but it's actually even at the same levels as year before, which suggests that when you have a normal quarter, we will again come back to substantial growth in small town and rural. At an overall level, it is broad-based across geographies, across categories. What you would also like, Avi, I think is international is actually this time now leading the growth rather than, a lot of times you would ask: "What about international?" You would see that international has grown not only over last year, but also over 2019, 2020 substantially. Overall, we have got our basic strategy in place internationally, and again, there also, whether it is our neighboring countries of Bangladesh, Sri Lanka, Nepal, whether it is Middle East, Africa, we are doing. Overall, the international markets are actually outperforming the domestic markets. On that front, the margin had no one-off, right, in the international? Sorry, that was the only clarification. The question is, are there any one-offs in the international margin? Yes, Sir, they've kind of reached a new high, if I may say, or back to their kind of strength has sustained. I'm assuming there's no one-off over there. Just wanted to confirm. No, no. There are no one-offs. Okay, Sir. I'll come back in the queue for the other question. Thank you very much, Sir. Most welcome. Thank you. Participants, please press star and one to ask a question. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Yeah, hi. Sir, a couple of questions. On your presentation, you spoke about that by the end of June, we are seeing some signs of recovery. If you can slice and dice this recovery in terms of rural, urban, and also the trend of premiumization post the second wave, how it is panning out? Very simply, Tejas, what is happening is because the metros are springing back, therefore premiumization automatically normally leads from metro and tier one towns which have been growing fast. You are seeing that happen. As I said, the lovely thing that we are seeing, the good thing is that rural and semi-urban, which had a very strong last year, are sustaining their growth rates despite that strong last year. It's a broad-based growth, it is also broad-based across adhesives. Waterproofing is doing very well, DIY is doing well, you've seen that the B2B business is also doing well. Okay. Sir, any observation on premiumization side? Premiumization normally is led by the metros and tier one towns, and we are seeing that come back as the fastest growing because they also, I must say, de-grew the fastest last year. The fastest growing geographic segment from a town perspective are the metros. Metros tend to be where the premium products are consumed. Obviously over last year, you will see a much better premiumization trend. Sure. Sir, last one on distribution expansion. We had a very specific program to increase our distribution footprint in tier two, tier three, and even rural areas. Any update on the scheme, and did it get deranged because of second wave which came suddenly? No, actually, yes, it did get handicapped because this time rural and semi-urban was hit. Over the last 15 months, Tejas Shah, we have longer term plans where we believe that we have a lot more runway still left in rural and small town India, and therefore we set up a separate division called Emerging India, which actually looks after that. Forget just the first quarter, if I look at the 15 months, if you look at any parameter of infrastructure, the number of sub-stockists that we have, the number of key dealers that we have, the number of our own people that we have. While other people have been cutting back, we've actually added almost 100 people in this area because we see the potential. Whether you see, therefore, our coverage, for example, in both towns as well as villages. We also have a partnership with Hindustan Unilever, which we're experimenting. We're using their Shakti Ammas for Bihar and seeing that as a multiplier, which takes us even to villages below three and 2,000. At an overall level, if there is one area where we have added substantial infrastructure and made substantial gains, it would definitely be rural and semi-urban India. Fair enough, Sir. Very helpful, Sir. Sir, I'll come back in the queue for more questions. Bye. Thank you. The next question is from the line of Chirag Lodaya from Valuequest. Please go ahead. Sir, my first question was on more on real estate revival. From lot of building material companies, we are hearing that they are quite optimistic on real estate revival going ahead. I just wanted your view, how you look at this trend. Definitely we are also quite optimistic about real estate now reviving because as you know, real estate has suffered not only during COVID, but even before COVID. There is no doubt about the fact that when we speak to a lot of our key customers, they have seen a lot of inventory liquidation of their existing projects. I think the next phase would be, all of us know that there is a massive housing stock shortage, both at the affordable and the upper middle class level in India. Will it lead to a new real estate boom? Frankly, your guess is as good as mine, but we definitely hope so. Okay. Sir, secondly, on pricing. We have seen commodity prices going up sharply, and this quarter also we have seen impact on gross margin. Going ahead, how one should look at this gross margin line item, and are we able to pass on complete commodity inflation, or it is still pending? As I said, we've seen some unprecedented cost inflation. We have passed 75% of this to consumers. We consciously took a call believing that because this was not a long-term secular trend, this was not because of demand conditions, but because of supply constraints. We believed that a lot of these raw material prices would moderate in quarters two, three and four. We've already started seeing moderation happening. Our belief is by the time we are in quarter three and definitely in quarter four, prices would have moderated for our gross margins to come back to the levels that we deem acceptable. Okay. Just, Sir, lastly, on overall competitive intensity in construction chemical space, how you look at that? Given our leadership position, be it adhesives or be it construction chemicals, the paint companies, for example, have been in construction chemicals now for over 5- 10 years. It's not new competition. We are used to this competition. The fact of the matter is that actually this competition is also leading to the market expanding faster. As all of you know, waterproofing as a category has, at best, about 40% penetration, which means four out of 10 new homes that are built actually do proper waterproofing. Hopefully, with the entrance of new players, et cetera, if this four becomes six, we gain. We are clear that our leadership position has to be maintained by a strong brand, great innovation, and then great sales and distribution. As far as we are concerned, even now, waterproofing remains one of our fastest growing categories. Our belief is the market is expanding. Newer players are coming in, but in no way are we losing market share. In fact, we believe we would have probably gained a little market share. Okay. Very clear, Sir. Thank you, and all the best. Thank you. Thank you. Participants, to ask a question, please press star and one. The next question is on the line of Avi Mehta from Macquarie. Please go ahead. Hi, Sir. Thanks for the follow-up opportunity. Just on the comment on the margin again. Now, gross margins, we would kind of start normalizing towards the earlier levels. We have moved our cost base also relatively to a lower level as a percentage of sales. As recovery pans out, that should also pan out. In that sense, would it be fair to now look at the EBITDA margins moving ahead of the earlier levels of 20%-24% that you had highlighted in the last conference call, at least in the near term? Too early to say, Avi, our belief is we would actually reinvest for stronger volume growth, both in the current categories as well as the adjacencies. If you gave me a choice between taking EBITDA margin beyond 24%, I would say, "Listen, I'd rather use the money to take my growth rates higher." Because that volume growth sustains and gives you far greater leverage over a period of time. Early to say. Let's see how the raw material situation evolves. We would be very comfortable because we're also very clear, Avi, that we would like to maintain a price. Our brand gets a premium of between 15% and 20% with the competition. We don't want it to go beyond that. Therefore, if raw material prices soften beyond what we expect, we would actually pass off in terms of price, et cetera, but again, focus on volume growth. Yes, I take that point. Where I was coming from is that premium has moderated in the last few months. Not months, but yeah, in last few quarters. Which is why I felt that you had leeway both ways. That's why the question. Actually, the premium has not moderated, Avi, because, see, all of the other fellows have also. You can't price closer to Fevicol and hope that you will sell and so on and so forth. The others are also suffering and therefore, it isn't that they have raised prices and we haven't. We raised to 75%, they also raised to 75%. Okay, S ir. Fair enough, Sir. Sir, the second bit was essentially just trying to understand your thought process on building the next management level. We recently saw the appointment of Mr. Vats. Yeah. Now he's four years to he'll be kind of with you. Could you give us a sense on what is the broad plan of the going forward basis? Is it going to be more as someone who'll be working with you for the near term? Could you just give us a sense on what is the thought process on introducing into various categories? Anything to kind of introduce him to? Because he's not been in the Pidilite system, but you obviously are there to kind of explain to him. If you could just give us a sense- Yeah. On the process forward? Thank you very much. See, as an organization, Avi, that Pidilite is a forward-looking and we forward plan a fair bit. It is our belief that as we increase the number of If you look at our number of subsidiaries, you look at our number of verticals. A pioneer model by definition is going to be far more complex than mono-category companies or two-category companies. We are a company that now has over 30 verticals. Therefore, we felt that it's important for us to strengthen the management team, make sure that we have enough bench strength available, and we do that without putting any pressure on individuals so that you get enough time to learn, understand the company, take over little parts of it. Sudhanshu has wonderful heritage. He comes from a really good pedigree. And for example, consumer products is something he understands well. He's also been in a Castrol, which is similar to our bazaar environment. Therefore, it's important that we give him enough time to settle down, and we give him responsibility so that he gets his arms around and understands the organization, rather than he has a very limited time and therefore, gets prone to doing things quickly rather than having understood the whole thing. It's part of our longer-term plan. You know that over the last 10 years, we have substantially strengthened our leadership bench. In fact, most of our leaders are now blue-chip leaders. This is again, part of that plan where we are building the Pidilite of tomorrow as we continue to deliver on today. Perfect, Sir. Perfect. This is all from my side. Thank you very much. Thanks a lot, Sir. Welcome, my dear. Thank you. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead. Thank you for the opportunity. My question was on our construction chemicals. I did hear you talking about the good prospects here, but my question is more on the profitability of this segment, considering now you have multiple players here. How is it that stacking against your core adhesives portfolio? Is the focus a lot more on growth, and do you see there is a risk on the margin front here, both from maybe sustaining current level of margins or expanding that? Great question, Latika. Good to hear from you after long. I'm hearing from you after long, good to hear from you. I think your question is a good one. At Pidilite, what we do is, at a gross margin level, the difference between adhesives and construction chemicals is not substantial. Because we see construction chemicals as a strong growth business, which we would like to grow it 2x - 5x times GDP. Obviously, from both a marketing, a sales, and distribution, a people perspective, it's an invest business. While its EBITDA may be lower, over a period of time, we believe that the growth rates, and now this period may be three, five, or 10 years. We believe that it will compensate vis-a-vis the much higher growth rates. We are obviously already had anticipated and have seen and have been seeing. Our focus is clear, keep creating strong brands, keep delivering outstanding customer service, and keep going deeper and deeper into both rural and semi-urban India. There is a lot of runway still for construction chemicals. From a margin perspective, gross margin, similar to any of our businesses. EBITDA, largely because we would invest more in it from people and marketing perspective, it may be lower, but that's intentional. Once it achieves a certain size and maturity, obviously then it becomes similar to the other businesses. Sure. This is useful. Can I just check on your FY 2022 CapEx plans? Anything meaningful to keep in mind here? Our CapEx levels remain at similar levels. We normally spend between 4% - 6% of our turnover on CapEx. It may be at the higher end because as we've now learned from the pandemic, we need a far more resilient supply chain. Latika, as we speak, we have 12 new facilities, brownfield and greenfield, being set up in various parts of the country. The CapEx is not substantially greater. It still remains in that same range. What we've done is we've used the pandemic to reassess and say how we want our supply chain to be set up, both from a production facilities as well as a warehousing level, and we're now pretty much by the end of March, by the end of this financial year, we would be ready for the next phase of growth. Sure. If I may squeeze in one last one. Araldite acquisition is now done. It is nicely fitted in your portfolio. Obviously, there is more scope there, but any thoughts on incremental M&A, how aggressive you could be on that front? Any particular segments that you will be more focused on that side? We are clear that Araldite is a growth business for us. We now slowly got an understanding of the business. It's also a business that has seen high costs, obviously, but that's par for the course. You would have already seen in the three quarters that we've handled the business, we are beating the acquisition case safely. We still believe that there is a long runway for growth, watch and see how Araldite becomes another one of Pidilite's, what I would call power brands. We believe it is right up there, and it has the opportunity to be a much stronger and bigger brand than it is. Not only also in India, we've also launched it in Bangladesh, in Nepal. We're looking at other geographies. We see a lot of runway for Araldite. Yeah, no, sure. I was checking on your appetite for more acquisitions, actually. Is that something which will remain on a priority agenda for you? See, we are very clear. We have a very clear agenda, both organically and inorganically. You know our agenda around core growth in pioneer categories. If we find opportunities in any of these areas, we will always be open. Both while obviously we are pushing organically, if we find any inorganic opportunities, we will always be open. We've got the management bench strength and the bench now to be able to, as we've shown in our recent acquisitions, manage and beat the acquisition case on each of our acquisitions. Sure. Thank you so much, and wish you the best. Thank you so much, Latika. Good to hear from you after long. Okay. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Yes. Hi, Sir. Thanks for the opportunity. Sir, first is, I think PAPL margins are quite solid. It was last quarter, this quarter as well. I just wanted to understand, is it possible if you can give some color on pro forma basis year-on-year revenue growth over here? Again, any color on the industry growth rate, specifically for PAPL. Sorry, I missed the second part of your question. The what growth rate? Industry growth rates. See, the industry growth rate, difficult to say. As far as PAPL is concerned, we're clear that the Araldite brand has a significant runway for growth, both from an innovation perspective as well as a sales and distribution reach perspective. You would have already seen in the last three quarters. Right now, I wouldn't want to go into comparables. Take the last quarter one now, despite being closed for 45 days, we've done a substantial amount of sale. South, which is actually a strong region for Araldite, has been closed for even longer periods. You can see that in normal times, Araldite will move to the next level. It is going to be a growth brand for us, and it will be one of Pidilite's power brands going forward. Sir, just trying to understand from a market industry growth rate and market share, if it's possible to provide some color? See, the market growth rate, if I was to add Araldite and the Pidilite brands that exist, which is Fevikwik and Glufix, we would be somewhere between 65% and 70% of the market. In this segment, which is stone marble, what are called epoxy adhesives. The number two would be Astral Bondtite, which will be about 20%-25%, and everybody else will be the balance. This is helpful. Sir, my second question is, we understand, based on my reading, that there is initiation of anti-dumping duties, specifically on silicone sealants. I'm probably new a bit to the space, so pardon me for my ignorance. Just wanted to understand, what is the level of backward integration supply chain, given we have silicone exposure in the marketplace. Is it a positive for us or it's a negative for us? How should one understand this? See, remember, silicone sealants, actually the base raw material for silicone sealants is pretty much made by just three or four fellows across the world, whether it is a Dow, whether it's a Wacker. I'm not clear on the anti-dumping duty, but the issue with silicone is right now the other way around. Prices have really gone up in the last 12 months. I'm not sure where you got this information on the anti-dumping duty. Most of the Indian manufacturers buy the raw material and compound and then make the product where they are making it. Silicone sealants tend to be the base sealants in any sealants portfolio. You then have acrylics and hybrids. Over the period of time, again, if you want to be a long-term player in sealants, you need the full range of silicones, acetoxys, I'm sorry to get technical, acrylics, and then hybrids. The real margins obviously come from the premium sealants. Right. Sir, my question is, do we import the base silicone, what we sell in the marketplace? To my limited understanding, I understand that a lot of it is imported, repackaged into smaller satchels and sold. There is no silicone manufactured in India, Ritesh. Everything that anybody makes, the base silicone is imported. Okay. I don't know. To my understanding, I think there's a company called HP Adhesives, and there is one more. No. HP Adhesives, all of them only compound the product. Remember, the base silicone raw material is imported even by them. HP is big actually in solvent cements, which is a different category. All of this is the base raw material. We don't have the large enough chemical. These need chemical plants which are of a very different scale and size. We don't have those in India currently. Okay. If at all, anything that is an industry-wide cost curve increase, if at all any anti-dumping- Yes, absolutely. Yeah. Right. Sir, second question, similar lines. Again, there are anti-dumping investigations which are going on PTFE, which I think could actually benefit Steelgrip or allied products that we have in that basket. Any thoughts over here? Ritesh, both silicone sealants, PTFE, these are not very large categories for any of us. Therefore, while, yes, it may give you a small benefit, it's not something that is substantially going to move the needle for any of us. If it does happen, yes, we have the PTFE manufacturing ability in India. We manufacture it ourselves, so it'll help us. These are not products which are over INR 500 crores or any such thing. Sure. Sir, my last question, if I look at our standalone revenues and if I strip out ICA, CIPY, and Nina and also PAPL, and if I look at on a two-year CAGR revenue growth basis, the decline is quite steep. Just wanted to have your thoughts. Are you happy or is it something which is the natural course of decline because the market conditions are like that? That's the first question. I wanted to have your thoughts specifically on the PVA side of things. Just wanted to have some comfort that we are not losing market share on the retail side of the business. To put it the other way around, is it that the SBR and joinery business, is it growing at a faster rate as compared to the retail business? Good question. See, let me tell you very clearly, Ritesh. I don't think the two years is a fair comparison for the simple reason that obviously, COVID hit you hard last year, and it has again hit you in the first quarter of this year. You don't have a long enough base. If you saw the year before that, our fastest growing business was PVA. In these 15 months of COVID, Ritesh, it is our belief that in our PVA businesses, we have actually gained market share, not lost, but gained. Actually, a lot of the regional and other players have suffered and suffered hard. Knowing that the competitive geographies, our growth rates are higher in the places where competition had a presence. It's clear that we've gained market share. As far as joineries and this is concerned, it is actually growing slower than even we thought. Please remember, we are the leader there also with our Jowat, KAYAP and this, we also have a close to between 60% and 70% share of that market. Actually, because a large number of joineries are medium and small scale, in this COVID period, they have suffered far more than the average small carpenter. Actually, the organized business is actually not gaining from the unorganized, but I would say the unorganized in the last 15 months has probably gained the other way around because small fellows have been able to bounce back. The larger joineries have taken a lot more time. Sir, just to conclude, should one assume that the retail growth rate has been higher than joinery as we are put together? In the COVID period, definitely so. Okay. That's quite useful. Thank you so much, Sir. I'll join back with you. Thank you. Thank you. The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead. Yeah. Thank you, Sir. Thanks for giving me the opportunity. I have two questions. On your international subsidiaries, we have seen that this quarter there is a substantial improvement in the performance. Now considering the cases coming back in markets such as U.S., especially North America, I believe, have you seen any kind of weakness in demand in the recent weeks? Sorry, I didn't get your question, my friend. Can you just repeat a little louder? Yeah. My question is on your international subsidiaries. We have seen a good recovery YoY in Q1 FY 2022. I believe this is mainly because the base was also low. If we consider the Q3, Q4, the recovery was good. Now cases are coming back in some of the international markets, these COVID cases. Considering that, have you seen any kind of weakness in some of the international markets? That's a good question. Yeah, I got your question. See, remember on international, we had recast our strategy about 3.5, four years back and focused. Actually, if you look at our international growth, we are growing substantially even over the pre-COVID period. It has nothing to do with low bases. The international markets were not as impacted as India was in the first place. When we bounced back, we've actually grown over the pre-COVID period. There are certain geographies that have had issues as far as cases is concerned, notably Bangladesh. Brazil, which last year had a massive number of cases, actually grew well last year, which is quite a dichotomy. This year, they've withdrawn some of the cash coupons that they were giving to their customers, Brazil is a little softer. At an overall level, if you look at our overall international operations, whether it is our neighboring countries, whether it is emerging Middle East, we are doing extremely well in Africa, which seems to be even now lesser impacted. Over a longer term period, actually international over a two-year period is outperforming the domestic market by a long distance. Right. Sir, my second question is on your domestic subsidiaries like Nina Percept and PAPL. We have seen good recovery, and you have also indicated in the call that metros are recovering, and we are seeing good growth in the tier one towns as well. Some of these domestic subsidiaries, will the performance sustain better performance? Or how we should look into this? See, as long as we don't have further lockdown, I think they will sustain and actually get better because they have suffered in the first quarter. If they get a free run without any closures for three and six months, you will actually see their performance even improve further. Okay. Thanks a lot. Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi. Good evening, and thanks for the opportunity. I would want to understand your strategy for the arts and crafts business. If I were to think of the last 10, 15 years, in mid-2000, you did a few acquisitions to sort of expand the portfolio and scale up. In the recent years, I have not seen any inorganic sort of acquisition to scale up that portfolio. Seems to me that that portfolio is not growing any faster than the company, whereas the opportunity in my view should be. Really big. Is it as important a portfolio for Pidilite as Fevicol and as construction chemicals? If you can give us some thoughts on where do you see this business in the next three-five years? Sure. That's a good question, Jay. Let me tell you that this business actually has suffered the most during the COVID period. Remember, art and craft, the single largest consumer is children. If children are sitting at home, if the school is able to cover their basic three Rs and the science syllabus, things like projects and so on go through the window. Really the school closure, in fact, if you look at all stationery companies, it doesn't matter whether it is an ITC or it's a Camlin, whoever, they have all suffered greatly over the last 15 months because of COVID. Having said that, if you look at over a longer period of time, we definitely, A, we're the clear leader in the segments we operate, which is art and craft. With the closure of both schools and offices, this has got hit. We therefore had time to, in a sense, recraft our strategy. We're focusing a lot more now on adult art. We're focusing a lot more on fine art. A lot of innovation, some have already come into the market, you will see some more come in. We see this as a growth area for us, Jay, going into the future. Organically, as well as if we find the right inorganic opportunity, in a country that has 600 million children, there can be no doubt about the fact that over a period of time in normal circumstances, this will be an attractive business. That's the philosophy with which we address the business. If I may ask just one follow-up. Are there any adjacent segments within the stationery art and craft space that you think fits well within your scheme of things, is a good fit, and can be a scalable opportunity? I think there are a large number of segments. The thing is they must fit into our pioneer model. We don't want to do the usual pencils and sharpeners and so on and so forth, et cetera, because that's at the commodity end of the market. As I'm saying, Jay, just wait for hopefully normalcy in three, six months, I don't know, your guess is as good as mine, to return, and you will see that we've used the pandemic period to recraft and be ready for the next phase. That's good to know. Thank you so much. That's it. Welcome. Thank you. The next question is from the line of Tejas Shah. Yeah. Hi, Sir. One follow-up question on construction chemicals. Last two, three quarters, we are picking up from paint companies that they are placing construction chemicals undercoat, the waterproofing in particular, and they are also tying up their paint warranty with construction chemical performance. Does it dilute our offering or our standing in market as a standalone construction chemical product, especially in the remedial part of the business? Good question, Tejas. Remember, in waterproofing, there are three large segments. There is what we call organized real estate, commercial store factory, which is a large building in a BKC or in a Delhi's Connaught Place or the new World Trade Center, et cetera. That is one segment. The second segment is individual housing, which is normally minus the metros and all other Indian towns, which is IHBs, as we call them. The third is repair and renovation. Remember, most of the paint companies really play in repair and renovation. When a person is building a new house or a person is building a new building. In fact, in the new building segment where Neoperl, et cetera, play in, the competition tends to be the other multinationals like Sika and Fosroc. It is not the paint companies that are competition. In the individual housing, again, remember in new construction, mostly when the person the basic waterproofing is done when you're putting the slab, so on and so forth, much before paint ever enters the consideration. That's the time that the consumer is going to the building material store, what is the cement and steel store. Therefore, most paint companies don't have a reach there itself. Where the competition exists is in repair and renovation. World over, 60%-70% of waterproofing is new construction, 30% is repair and renovation. In India, because our quality of construction and people haven't done waterproofing during this thing, repair and renovation has become bigger. The fact of the matter is that largely these warranties matter on the exterior. On exterior, we also have a full range of paints. Our Raincoat, which is our equivalent exterior product, offers the same warranties, et cetera. It is the first waterproofing paint. While paint companies compete with us, remember, pretty much they compete with us in 1/3 of the market. Sure. This is very helpful, Sir. Thanks. Thank you. The next question is from the line of Monisha Wadhwani from Share Capital. Please go ahead. Monisha Wadhwani, please go ahead with your question. Your line is unmuted. As there is no response, I'll move to the next question, which is from the line of Abneesh Roy from Edelweiss. Please go ahead. Yeah, I had a follow-up question on Pepperfry and HomeLane. Now, these businesses require a lot of cash as these are digital businesses. Because of work from home and impact of more digital consumption, these will be seeing more demand also structurally. If you don't invest further, your stake will get diluted. What is the thought process on further investment in these cash-guzzling businesses? We will look at it on a case-to-case basis. Up to now, we are very happy with our investment, both from a learning perspective, and the way this market is going, it'll actually also give us a very good financial return, but that was never our objective. Having said that, as you know, Amish, we're a company that constantly keeps pushing the envelope, experimenting, and therefore, if we find that this is an area that we need to keep getting deeper in, we will keep investing. Right. Last question. You are putting up 12 new factories in India. What is the update on those? From a two, three years perspective, would you need to put outside India also in some of these products? Actually, we've actually just completed our second factory in Bangladesh, where currently we've just inaugurated our JV in Kenya with a new factory. We have plans in one or two other locations. Very clear, Amish, we've always said that international will follow national. India will be our laboratory. We will learn and succeed in India. Once we've got a success model, we would reapply it to other emerging markets, that's the model that we keep going forward. Digital investments like HomeLane and Pepperfry will happen only in India, right? Yes, those are only in India. We are not going to do investment for investment. We're doing investment largely for learning and participation. Right. Sure. That's very helpful. That's all from my side. Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you, everybody. Sorry, Pradip, go ahead. No, I just wanted to thank everybody for joining in and just wish them to remain safe and sound during these challenging times. Back to you, Bharat. No, absolutely. I just wanted to wish people a safe and they stay safe, stay strong, hopefully when we meet next time, the third wave is a distant memory, hopefully, we're in better times. That's all we hope for. Thank you all for your participation. Always a pleasure. I always learn from these interactions as much as inform you. Thank you all for your participation. Thank you. On behalf of Spark Capital Advisors, that concludes this conference. Thank you for joining us. You may now disconnect your lines.