Ladies and gentlemen, good day and welcome to the Pidilite Industries Limited Q1 FY2023 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Arun Baid from ICICI Securities. Thank you, and over to you. On behalf of ICICI Securities, I welcome you all to the Q1 FY23 post-results phone call. From the management side, we have Mr. Bharat Puri, Managing Director, Mr. Sudhanshu Vats, Deputy Managing Director, and Mr. Sandeep Batra, CFO. Now, I hand over the call to Mr. Batra for opening remarks, post which the floor will be open for Q&A. Over to you, sir. Thank you, and good afternoon, and a warm welcome to all those who have joined the call. I take great pleasure in sharing my opening comments on the first quarter results, which were approved by the board at its meeting yesterday. First of all, delighted to share that on a consolidated basis, the company crossed the milestone of INR 3,000 crore in revenues for the first time. This represented an over 60% growth over the same period last year, a combination of higher volumes and measured price increases. Consumer and Bazaar growth was across all geographies and categories of adhesives, construction chemicals, and DIY portfolio. B2B growth was also strong across all verticals. While input costs remained elevated, sequential EBITDA margins remained constant on account of calibrated pricing, higher volumes, and effective cost management actions. Now I'll share a summary of the financial performance for the quarter ended June 2022. On a consolidated basis, net sales were INR 3091 crores, a growth of 60.3% over the same period last year. Consumer and Bazaar segment grew by 63.9%, with B2B segment growing at 49.8%. As mentioned earlier, gross margins remained impacted on account of steep escalation in input costs. Material costs as a percentage to net sales for the quarter were higher by 736 basis points over same period last year and 180 basis points higher over the immediately preceding quarter. EBITDA for the quarter was INR 529 crores, a growth of 52.3% over the same period last year. Profit before tax and exceptional items was at INR 473 crore and increased by 63.3% over same period last year. I'll quickly touch upon the standalone financial performance, where net sales at INR 2,778 crore were higher by 62.5% over the same period last year, with sales volume and mix growing by 44.3%. Consumer and Bazaar sales were higher by 66.6% with an underlying volume and mix growth of 49.2%. The B2B segment grew by 50.5% with an underlying volume and mix growth of 28.9%. The prices of our key raw material, vinyl acetate monomer, VAM, have continued to increase during the quarter. Q1 consumption rates were $2,230 per metric ton versus $1,608 per metric ton in the same period last year. EBITDA before non-operating income for the current quarter is at INR 487 crores, higher by 50.3% over same period last year. Profit before tax and exceptional items at INR 443 crores grew by 58.8% over the same period last year. I'll quickly now touch upon the performance of our subsidiaries, starting with the overseas and international subsidiaries, which maintained positive growth momentum and reported high double-digit constant currency revenue growth, largely due to judicious pricing actions. Subsidiaries in Asia reported higher sales and EBITDA, while the Africa subsidiaries continued the growth momentum. The subsidiaries in Americas reported higher sales, but EBITDA was under pressure due to higher input costs. The domestic subsidiaries registered good sales growth. However, the EBITDA margins of the B2B subsidiaries in India, they remain under pressure due to higher input costs. While the near term remains challenging, we remain cautiously optimistic on the medium term given the recent softening of input prices led by lower oil prices. A good monsoon and a continued good demand conditions in the housing and home improvement sector. Our focus continues to be to deliver broad-based profitable volume growth. With this, I come to the end of my opening remarks. I open the floor for questions. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. We take the first question from the line of Mr. Avi Mehta from Macquarie. Please go ahead, sir. Hi, sir. Am I audible? Yes, you're audible. Yeah. Hi, sir. Sir, I just wanted to understand, you know, the comment of bit of a near-term challenging situation, because it seems you've indicated that demand is positive, clearly from the performance. Input costs are also moderating. Would love to hear, why you have said a challenging situation in near-term. Sure. Really, why we are saying the near-term is challenging is because of two reasons. Reason number one is that quarter one of the year is when we have seen the highest input costs, that all of the inputs bought in quarter one, a large part of the inputs will be consumed in quarter two. Therefore, quarter two from a near-term perspective is challenging because from a margin perspective it would remain challenging. The highest raw material cost that we believe we will see will be in this quarter. That's one reason. The second reason is largely given that, you know, on a year-on-year basis, all building materials have seen substantial inflation. We are seeing some amount of slowdown/moderation of growth in the rural/small towns. Until, you know, the effects of a good monsoon, money going into the hands of the consumer in rural and semi-urban happens, which will probably happen only in the second half, the near term will remain challenging. Thus, the comment of the near term remains challenging. Okay. Does that answer your question? Yes, yeah. Perfectly clear. Just on the follow-up essentially was essentially on the margin. Is the understanding correct that the price hikes also will start to flow through a lot more in 2Q? Hence from a margin perspective, logically gross margin should slowly start to improve as we go forward. Would you expect 2Q to kind of see what I was trying to get to is it does seem like 1Q is probably the bottom on, in terms of gross margins. Would love- I don't think there will be a substantial difference between first quarter and second quarter because we have taken some pricing in the first quarter. As I said, the highest impact of raw materials or material cost as a percentage of sale, if we were to look at constant prices, would be the highest in Q2 and not Q1. Having said that, let's see how the product mix works out and how consumption works out. It's not going to be significantly better or significantly worse. It'll probably be in the same range. Okay, sir. Got it. Sir, second bit I wanted to kind of just understand on the, you know, the last call you had indicated a focus on innovation that you were trying to start to, you know, build in. Is there any update in terms of the initiatives that you had planned in terms of distribution and, new product launches? See, first I'll tackle distribution. Yes, on distribution, we have continued our strong investment, especially in the smaller towns and rural India. As we speak, we now have more than 7,500 Pidilite ki Duniya in rural stores in villages which have a population of between 5,000 and 10,000. We've now added another 17,000 villages to our direct coverage in the course of the last six months, and these are normally villages with a population of between 5,000 and 8,000. Overall, from a therefore Pidilite reach perspective from, our investment in route to market, especially in small towns and rural areas, we continue the march. As far as innovation is concerned, each of our divisions are, for example, our waterproofing division has had an innovation in terms of, you know, product you would have seen advertised in the first quarter called Roofseal Classic, which is a coating which is for roofs. Similarly, each of the divisions now has an innovation program. Each of these would be, you know, significant innovations, which obviously over the next 18-36 months will start contributing substantially to revenue. Got it, sir. That's all from my side. I'll come back in the queue for the remaining questions, sir. Thank you. Sure. Thanks. Thank you, sir. We take the next question from the line of Mr. Abneesh Roy from Edelweiss. Please go ahead. Yeah, thanks, congrats on a very good performance. My first question is on the business, which suffered a lot in the last two and a half years. On the arts and crafts, you have mentioned the business has doubled because schools are now back. I want to understand here two things. How is the margin profile here? Have you managed to take the price hike here also almost 25%, towards the inflation impact? And second, have you gained market share because such a tough time for your competitors? Ideally, have you gained market share here? Specific to Art Materials, firstly, good to hear from you, Abneesh. This time your record has been broken. Normally, you're always the fellow with the first question. This time you've been beaten to second place. It's always good to hear from you. Really, as far as art materials is concerned, as you know, a lot of the margins in art material are linked to price points, you know, INR 10, INR 15, INR 20, and therefore you tend to be a little more conservative. Again, our pricing here, while at the gross level would be at 75% of inflation, in some cases it may only be 60% because you want to maintain the sanctity of the price point. Having said that, have we gained market share? I think the answer is yes. We look at our growth rates, what has happened is there is consolidation happening, and from a distribution and reach perspective, the larger players clearly are gaining at the expense of smaller players. Sure. Thanks. That's helpful. My second question is on the observation you had made in the Q4 call that in the global shortage in raw material, there were two issues. One was the force majeure clause of the many plants which were there, and there was cartelization. I understand the global recession fears, which is driving down most of the other commodities. On these two aspects, what is the update on the closure of plants and cartelization? There are still one or two plants, but obviously you can't keep plants closed indefinitely, so we are definitely seeing an easing. I suspect your next question is going to be on VAM rates, so I will answer it straight away. If you look at VAM, we are finding that VAM is moderating and the spot rates are now gone below $2,000. In fact, they range anywhere between $1,600 and $1,800 a ton. Clearly, both from a force majeure point of view and I think, the overall demand situation is such that it's not possible for, you know, these are all short-term phenomena which happen for three to six months. Now, barring any unforeseen circumstances, Abhi, unless we have, you know, last time in January, we were confident the rates would come down and then Russia-Ukraine happened. As long as we don't have any geopolitical issues or some unforeseen areas that happen, we actually believe the second half of the year you will see a moderation across input costs. Sure. My last question is on Araldite and the tiling solution. On Araldite, if you could give us some update on the distribution and product extension that you have done, in the last, say few quarters. Tiling solution, you had mentioned 15% penetration and I think INR 1,600 crore kind of size. Now with the kind of growth we are seeing across industries, a lot of good, demand in the real estate also, where do you see these numbers for the industry in terms of penetration and size from a three to four year perspective? Let me answer the tiling question first. As far as tiling adhesives is concerned, this is a fast growing market because obviously a lot of companies are investing and consumers, you know, with the larger and the vitrified tiles, if you don't use adhesive, you're gonna have issues, and people are realizing that. It's very difficult right now because there are a lot of unorganized and small players also in the market. Abneesh, it's very difficult to, you know, estimate what pace the market is growing. If I, you know, and I won't take one quarter, but if I take the last 12 months, I suspect the market is growing anywhere between 15%-20%. We are obviously growing at rates far higher than that. As far as Araldite is concerned, our march continues. We have now started introducing Araldite in small towns and rural in the first quarter of this year. In one of the regions we've done that, we've tested, we're moving forward. The good news is that Araldite continues on its growth path. We continue to register strong growth on Araldite, and we still believe there is a large amount of sales and distribution still to be attained even before we go into innovations or marketing, et cetera, which you will see in the second half. You will also see, you know, Araldite being blessed with traditional Pidilite advertising. Wait and watch. Sure. That's very helpful, sir. Thanks a lot. Thank you. We'll take the next question from the line of Mr. Trilok from Dymon Asia. Please go ahead, sir. Yeah. Hi. Good evening, sir. Thanks for the opportunity. You know, when we compare this performance, you know, along with other. Sir, we don't have direct competitors, but across, you know, the building materials or building, you know, sort of associated companies, despite we having strong brands. Are you sort of, you know, satisfied with the kind of two-year, three-year, you know, the CAGR performance that you guys have delivered? See, I first want to just clarify this because this keeps getting asked. You know, the thing with Pidilite is because we have no like-for-like, apples-to-apples comparison, you fellows keep comparing us with different building material fellows. Largely, as far as we're concerned, you keep comparing us with paint. Why we are not an apple-to-apple comparison, and this is especially for my friend Avi Mehta, who always uses this comparison. The fact of the matter is that 15% of our business is B2B. Another 15% of our business is FMCG. So really 70% of our business is what I would traditionally call bazaar, and even in that. Therefore, I would say pretty much half our business compares to paint. Another 15%-20% compares to FMCG. Another 15%-20% compares to both projects as well as traditional B2B. Now, when I look at, therefore, our own internal standards over a large period of time, today if I look at the end of the first quarter, and obviously we're not looking at one quarter's growth. When I look over a three-year period across both my B2C businesses and B2B businesses, we have healthy double-digit growths. We've got obviously access to all of the peers' numbers, and we continue to be in the top quartile. Please remember that we don't, you know, add back. We actually equalize volumes for value. If we were to add back the volume of, say, tile adhesives, et cetera, our volume growth would actually be one and a half times what they are today. But that frankly is not a fair comparison. At an overall level, are we satisfied? Yes. Could we, you know, can we be happier? Definitely, we can be happier. I don't tell my teams I'm satisfied. At an overall level, all our numbers and our indications show that we are in the top percentile or the top quartile of performers, and that keeps us happy. Fair enough. I mean, we also understand that you guys are not like-for-like comparison, but from value perspective, you know, and volume both, you know, at least for our understanding, you guys seem to be lagging. That's why I ask, you know, are you guys in a culture with that performance? Second is, you know, all this, I mean, in the historical sort of competition, you know, we obviously never intended to sort of venture into paints, you know, as a category. But as per our checks, you know, suggest you guys seem to be sort of planning to do so. Could you just comment on that, please? See, you must understand that Pidilite, you know, we have an overlap with paints in a lot of areas. See, a large part of waterproofing is coatings. Now, a lot of times paint companies take their exterior coatings and actually call that under waterproofing. The roof coatings, which also a lot of times come under waterproofing. Similarly, we've traditionally, because of our pigments business, we've had a tinting business. We've always had a rural, you know, DDL and distemper business which has existed for 20-25 years. Actually, if you look at our total, and, you know, then our premium subsidiary, ICA Pidilite, is in premium wood position. Actually, if I add all of my paint businesses, we're a significant player in paints, though we are not a, you know, consolidated paint major. As far as we're concerned, you know, therefore, you know, I suspect your question is shorthand saying, are we going to do another, you know, five plants, large scale paint entry? The answer is no. We're happy with the way we are going. As the Pidilite model is about creating disruption. Wherever we find we can create markets, we can disrupt markets. That's where we focus on. That's where we put our resources and that's what we continue. The understanding of, you know, getting directly into paints is not true as of now, correct? See, as I told you, we're already in, you know, water- Yeah, yeah. You know, paints. We are already in paints. Sure. Understood. Thank you very much. Thank you. Thank you. A reminder to all the participants. Anyone who wishes to ask a question may press star and one on their touchtone phone. We take the next question from the line of Mr. Krishnan from Motilal Oswal. Please go ahead, sir. Yeah. Hi, Bharat. Hi, Krishnan. Bharat, sir, typically Pidilite has always operated at a certain premium, right? Is to the other brands and the other players in the market, and therefore the guidance of 20%-22% margins. Now you've indicated that raw costs have come down to about $1,600, $1,650-$1,800 per dollar per metric ton. Right? Do you see a scope for a sharp deflation, sharp reduction in prices, and possibly a sharper reduction in prices than the inflation in your own top line product prices? Is that a likely possibility towards the second half of the year? That's a great question, Krishnan, but very difficult to predict. See, in today's VUCA world, where fortnight by fortnight things keep changing, very difficult to work out if nothing, you know, unforeseen happens, so on and so forth. We do see VAM coming down to more palatable levels, so on and so forth. Frankly, wait another three months when we actually see the trend, because right now it's like, you know, two, a fortnight or a month of trends. Let's wait another three months and then we should be far clearer on what second half margins will look like. Sure. Again, in the same vein that you had indicated in the last quarter that the unorganized and smaller players were more adversely affected, right? From a commodity cost perspective. Do you see a scope for increased competition in the second half of the year and beyond or again, is it too early to say? See, to my mind, whenever the material cost situation turns benign, and I don't know when it will, competition normally increases because a lot more people jump in. In these current times when the situation is inflationary, most of these people have much longer credit periods. They tend to buy spot from the market. Will competition increase? Frankly, in our sector, we are no strangers to competition. We keep getting newer competitors as well as the old ones. Frankly, we expect that to continue. We work with the assumption that it will remain a very competitive space. Got it. Thanks, sir. Thank you. Thank you. We take the next question from the line of Mr. Percy from IIFL. Please go ahead, sir. Hi, sir. Just wanted to know what is the total price increase you have taken in the last five to six quarters on Fevicol as well as on an overall company on a weighted average basis? Good to hear from you, Percy. It's a very difficult question because as I said, we've got so many product ranges, divisions. On a weighted basis, I would say our price increase is anywhere between 14% and 18% over a year's period, and Fevicol would probably be at the high end of that. Okay. It's not as if Fevicol is like 1.5 times or 1.7 times the- No, no. We always. You remember we've always said that we would be conservative. We would rather sacrifice short-term margin for medium-term volume, and that's what we've been doing though. Fevicol is not 1.5 or 2 times or any such thing. Right. Since VAM has come down, I'm assuming that there are no further price increases in the pipeline, right? Oh, absolutely. If, you know, this trend on VAM continues, which, knock on wood, hopefully it should, then obviously we, you know, we would not need to raise any further prices. Right. Secondly, I just wanted to understand some of the niche or rather smaller brands that you have but on which you are focusing for growth, so things like Roff for WD-40, et cetera. If you take that as a portfolio, what is the growth of that portfolio as indexed to your overall company growth? See, you know, as I said every investors meet, we break our business into three buckets. Core, growth, and pioneer. Core is where we already have a market-leading position. Our job is to grow the category. There we try and grow between 1.5-2 times GDP growth. In growth categories, where we are competing against non-consumption, things like waterproofing, things like, for example, floors, joineries, et cetera, we try and grow at 2-5 times GDP. Third is pioneer categories where we want to achieve a certain minimum size. That minimum size normally is INR 100 crores in three years. Those are the parameters with which we operate each of our categories. Largely, actually, in the last 12 months, we've been exceeding these numbers. Would you be able to give some idea on which are the brands which are in your pioneer categories, but which have sort of not reached that INR 100 crore mark? Right now, for example, if I look at floor coating, we have a company called Cipy that largely currently operates in the industrial flooring space. We haven't done much in the area of commercial flooring, so on and so forth, et cetera. Now, that is something that is a pioneer category. We have a whole category called epoxy grouts, which we have a brand called Roff Starlike. You know, Roff Starlike. Epoxy grouts is another category where we are in the pioneer. So like this, Sure. At any point of time at Pidilite, we will have anywhere between five and eight pioneer categories being tested in various places. These are some of those. Okay. One last clarification. This, ratio of GDP which you're talking about. Firstly, the GDP itself, you're talking about, the nominal GDP growth or the real GDP growth? Secondly, in terms of, your growth, you are talking about volume growth or value growth in this equation? Normally, we try and equate real GDP growth to volume growth and nominal GDP growth to value growth. Okay. Okay, that's all from me. Thanks. Welcome. Thank you very much, sir. Thank you. The next question comes in from Sheela Rathi. Thank you for taking my question. Hello, Mr. Puri. I have two questions. The first question, you know, a follow-up to the questions asked by the previous participant, was with respect to margins. You have said that, you know, we are seeing trends of VAM pricing coming down. At the same time, you have said that we won't be taking any further price hikes. In order for us to go back to the pre-COVID level margins or the high margins of the past, do you think we are at a point where operating leverage will be the key driver of margins going ahead? I think firstly, good to hear from you, Sheela. I think that's a great question. You know, right now, again, in this uncertain VUCA world, very difficult to say what will happen three, six months later. It does appear from where we sit today that going forward, actually, frankly, the decrease in input prices will actually become a greater contributor to margin growth than anything else, because, you know, we don't know to what extent and where they will fall to, and we hope that they do. Otherwise, your question is right. We don't see greater pricing action taking place, hopefully in the next 12 months, so therefore whatever leverage you will get will be operating leverage. In our belief, it will take six to nine months for the whole input prices situation to really settle and for it to find its, you know, real level where we say that, "Hey, you know, this is the new normal." It's then that we will be able to ascertain, you know, where we are and what we need to do. Understood. The second question was with respect to your distribution strategy. You mentioned that you're really going into very small towns. You know, if I heard it correctly, the population size is about 5,000- 7,000 people. Is it just too small for a category like yours? I would believe if you would focus more on the core category to spread your wings in those smaller towns. Why is there a need to go in such small towns when the opportunity is much higher in urban as well as, you know, tier three, tier four cities? Sure. That's a great question. See, remember, it's not either/or. We're pushing hard in urban. For example, if you look at the last quarter, actually the growth is led by metro and tier one. Even if I look at a three-year period, our metro and tier one growth are very healthy. You know, our belief is that when I even equalize for income, Sheela, we still believe because of a lack of knowledge and a lack of understanding, we're not achieving what we believe is the right penetration for our products there. Which is why we're doing all of these initiatives that people who can afford our products. Remember, in rural areas, whenever people have any form of prosperity, it goes either into construction or into gold, right? Now, construction is right up our sleeve, and therefore, you know, if they do the right waterproofing at stage one, then we've got trained users right from, you know, the base of the pyramid. The second thing, of course, is that any objects that we have, remember, reuse is a much bigger thing in rural areas, whether it is your agricultural pipes for which we have solvent cement, whether it is objects at home for which we have, again, a whole range of glues. Our belief is that, listen, we must keep investing in this market while we continue, you know, urban and tier one is easier to focus on. By no means are we taking our focus away from that, but it's and rather than either/or. Understood. If I may just ask a follow-up question. Sure. What would the mix be with respect to urban and rural currently? Revenue mix. See, very difficult to say because of the extent of wholesale, but on a broad level, it will be 2/3, 1/3. All right. Thank you. That's it from me. Thank you. Thank you. A reminder to all the participants, anyone who wishes to ask his question may press star and one on their touchtone phone. We take the next question from the line of Mr. Ritesh from Investec. Please go ahead, sir. Yeah, hi, sir. Thanks for the opportunity. My first question is in continuation to one of the prior participants. I'm just trying to put my head around basically diminishing marginal returns. You indicated focusing on more villages with lesser population. I'm just trying to understand how do you look at the size of the market, the investment, and what do you expect out of it? If one had to put it in numbers, how should we understand that? Sir, that's a great question, Ritesh. See, we have a whole system where we actually have divided the country into a whole set of substates based on economic prosperity, and we obviously have surrogate measures of economic prosperity. Against that, we plot the penetration of our products in these substates, and then based on obviously a system on where we believe the greatest bang for our resources is, we prioritize a set of substates. It's a fairly evolved system. I won't pick it up here, but Your question is the right one. In a country as large as India and as widespread as India, how do you prioritize and make sure that, you know, you're not pushing water uphill? We've got a fairly evolved system over time where we realize that, listen, if a place has this kind of economic potential, this is what is our rightful share. If, you know, then based on where we are, try to prioritize and say, "Listen, this is what we'll take up in stage one. We'll do something else in stage two," et cetera, et cetera. Like for example, in places like Bihar, we are actually working with HUL, where we are using their Shakti platforms to actually take forward our products because we realize that it's not viable for us to do the same. Like this, we keep putting various experiments in place. Our whole objective remains that make sure that, you know, the first mover and first user advantage remains, that any consumer in the smallest of small towns starts with Pidilite and hopefully stays with Pidilite. Sir, can you detail the HUL platform that you indicated in Bihar? Sorry, I could not comprehend it. HUL has this concept of the Shakti, where they have these Shakti Ammas who go to the small towns and villages, et cetera. We're trying to work with them in a partnership with them where they sell not only HUL products but our products also in Bihar. Okay. If I have to put the question, if I just flip it around, we have a basket of SKUs. How do you look to cross-sell the number of SKUs? That's one. The other way to look at it is if you are targeting a village with a population of, say, 5,000-10,000, is there a metric that you look at it to target on a per capita basis, to make sense to go into the hinterland? There are two questions. One is per capita, and second is extent of ability on cross-selling SKUs. See, the first one, frankly, the per capita one is the one that we use, but we don't use a simple measure of per capita. We use what is called per capita economic potential of which, and how much of it are we actually accessing. As I said, we divide this into substates. Those substates, we assess the economic potential and see against that potential, how much of that are we penetrating. As far as cross-selling is concerned, actually in the smaller towns or rural areas it is much more easier because the outlet tends to be the same. See, the guy in the small villages sells, you know, kirana year-round, and then he sells various seasonal products and sells stuff like building materials. So therefore, accessing these outlets with cross-selling is not a problem. Okay. Sir, will it be possible for you to quantify per capita economic potential that you look at? See, again, as I said, it's different for different substates. Maybe, like, you know, in a different meeting, we can do that and take you through our. It's a fairly evolved, and I would say we have a lot of intellectual property invested in there. Okay. Sure. My second question is, yeah, sorry on this question because obviously this question was asked to Pidilite. You did elaborate that we are in Tier 2, Tier 3 towns already. If you really have to be in tier, what would that question mean over there? See, disruption would mean, I mean, if I was to go back in time, if we were the first guys with printing machines, that would be disruption, right? Right. Things, that's why I mean things that disrupt the market where you become a one or two player, where the others don't have a chance of, you know, in a sense catching up with you. That is disruption in our mind. If you had some like, you know, miracle product, so on and so forth. I'm just thinking aloud, given my old background in paint. Anything that where you get an aha either from the consumer or the user or the seller or all three of them. Okay. It's clear, sir. That is good. Thanks a lot. Thank you so much. Thank you. Thank you very much. We'll take the next question from the line of Mr. Rishi Modi from Marcellus Investment Managers. Please go ahead, sir. Hi, sir. Just wanted an update on understanding in the past three to four years, right. We've seen a lot of these paint players and a lot of hardware building and building materials players coming into the white glue segment, and which is your core category. Just wanted to understand, has there been any market share loss to the likes of Asian Paints, Berger Paints, Astral, or are they taking the share from the unorganized sector? That's a great question. We've been obviously keeping a close watch on them. Frankly, the only player that is actually put some volumes which are significant out there is Asian Paints. Asian Paints uncharacteristically so is actually operating at the bottom end of the market. Their current pricing is, you know, actually the equivalent of economy dues. They're tending to gain a lot of share, therefore, from the unorganized/small players. If you look at our growth rates, and again, I know I'm not looking at growth rates only over this quarter. When I look over the last 12, 18 or 24 months, in our belief we are actually gaining share, we are not losing share in white glues by any stretch of imagination. On the waterproofing front as well, there's been a lot of aggression by the paint players. They're trying to do something which will replace Fixit. Just wanted to understand, like what kind of projects is Fixit getting used in, what kind of projects is Asian Paints' waterproofing getting used in, and have we lost any market share out there to the likes of Asian Paints, Berger Paints? See, again, in waterproofing, you know, there are I've always said there are two large segments, new construction and repair and renovation. Normally, the paint companies largely tend to play in repair and renovation, though some of them are now putting up project teams for new construction. In new construction, our competition tends to be the large multinationals like Sika or BASF or Fosroc. In retail, which is the repair and renovation, it tends to be the paint companies. Again, with the entry of the paint companies, what has actually happened is this was a tremendously underdeveloped market. The market itself is growing at a much higher rate. When we look at our growth rates, we believe we are still growing faster than the market. There is also consolidation taking place. In our belief, we haven't lost market share at a gross level to any of the paint players. In fact, you know, our growth rates remain very healthy. Most of the paint companies also, remember, in waterproofing are still playing in the coating space. You know, products that painters can use rather than masons, et cetera, et cetera. Masons is a new user for them, which they are not familiar with. Even in repair and renovation, they tend to be more concentrated on coatings. If you see their offer, it is largely around coatings. As I said, at an overall level, when I look at our waterproofing portfolio, we are maintaining our momentum. In fact, actually what's happening because of all of this action is the category is growing and, you know, because we are the largest, we tend to get a larger share of the category. Okay. A lot of these paint players are also, you know, creating what they've been claiming to say that they're training people to become waterproofing specialists. Just wanted to get an idea on where we are on that front, like, because as the category is gonna expand, it's gonna professionalize as well. Like you'll have specialist applicators for this and masons, painters. There'll be a differentiation then. Just wanted to get your view on this. See, this is something that Pidilite has been doing for years. You know, we have a skilled waterproofers' program where we train people to become waterproofers. We certify them based on their level of skill. We then recommend their services. Frankly, all that the paint companies are doing is just following us. In fact, a lot of them have taken some of our people, and they're therefore actually, I mean, it's a great compliment to us because imitation is the best form of flattery. They're all actually doing what Pidilite has been doing for many years. Okay. That's encouraging to hear. Thank you, sir. Thank you, Rishi. Thank you, sir. A reminder to all the participants, anyone who wishes to ask a question may press star and one. We'll take the next question from the line of Mr. Rajesh from Informist. Please go ahead, sir. Yeah. Hello, sir. I just wanted, you mentioned about the input cost being elevated because the materials that you stored in the June quarter would also get consumed in the current quarter. Will it be possible for you to give us a sequential of what was the sequential rise in the cost of production in the June quarter, and how much do you expect the rise to be in the September quarter, the sequential? My friend, if I put my team on it will take a lot of time because remember, we operate across 30 different verticals, each of whom has a different raw material cost. At a high level, if I can tell you, our VAM consumption would be between $2,200 and $2,400 a ton in the first quarter. In the second quarter, it will probably be between $2,300 and $2,500. Okay. Okay. That's all. That was the only question. Thank you. Thank you. Thank you, sir. We take the next question from the line of Mr. Amnish Aggarwal from Prabhudas Lilladher. Please go ahead, sir. Yeah. Hi. I have just one question. If you look at this quarter, volume growth has been pretty healthy, both in Consumer and Bazaar as well as on the industrial side. Now, if I look at particularly, say, our top line growth trajectory, the first time around, we have now crossed INR 3,000 crore. Like last year, 3Q, which is usually perceived to be the festival quarter, we were at INR 2,800 crore. Is this, you can say, this kind of volume growth or the uptick we have seen, some one-off kind of an element, or should we consider it as a new base and then try to build upon this? Is there demand so strong that it will continue like this? See, that question, I again will remain cautiously optimistic. To our mind, in this first quarter there has also been a certain element of pent-up demand. Obviously, when you are comparing bases, you are comparing versus two months of last year to three months of this year because, you know, for one month, COVID was closed. Having said all of that, clearly we are seeing some tailwinds in terms of good housing demand. We are seeing that post-COVID, consumers are investing a lot more in their homes, be it in repair, be it in renovation, be it in up-gradation. We are seeing an upsurge in the whole real estate sector. You know, clearly you're seeing organized real estate and commercial real estate see some upside. On the other hand, the headwind is inflation, my friend, and, you know, we all know that any emerging market, inflation will always moderate growth. Now, across building materials, if you were to build a home between last year and this year, I don't have the exact numbers, but I suspect your costs are up anywhere between 12%-25%. Therefore, that does seem to impact volume growth. I think the next six months will show where does really the new normal come to. Our focus will be obviously therefore on profitable volume growth because, you know, if we are able to make sure that we are getting volume, then we will have reached the next phase of growth. Okay, sir. That is pretty useful. Just one thing incremental on this, because we have been doing lot of innovation, new launches. What could be the share of, say, top line from the launched products which we have launched in the last couple of years or last two, three years? See, let me say that number is a confidential number, but it is a significant percentage of sales. Okay. It is in good double digits? No, no. If it was double digits, my friend, then our growth would be coming. As a percentage of growth, it will obviously be in double digits, but in the percentage of total, it will not be in double digits. Okay, sir. Thank you. Thank you. Thank you very much. We take the next question from the line of Mr. Divij from Ankhonia Advisors. Please go ahead. Sir, good afternoon, and thank you very much for taking my question. This might be a bit repetitive, but just to get a sense on Tier 2, 3 and 4 cities, you said repairs and renovation being one aspect and construction of new infrastructure or homes being another. What do you expect the drivers in, say, the next one year, again, like you mentioned, given the inflation constraints on the consumer with elevated food prices and energy, et cetera? See, in most tier two, three and four towns, new construction tends to drive growth, though repair and renovation is an equal piece during festivals, et cetera. You know, whenever the crop earnings, et cetera, come in, consumers will both repair, renovate and then add a room or add a terrace and so on and so forth. Based on the inflation, difficult to say, you know, where it will pan out, but I suspect the mix will not change. We'll just have to see where the quantums are, and it will really depend. To my mind, this good monsoon will take another three months to play out. In the second half of the year, hopefully we will see a good impact of this monsoon also. Right, sir. Second question. With regards to paint players, and I'm going to drill down specifically on Asian Paints. I think, you and I given our history with the company. They've sort of morphed their business now as opposed to traditional coatings and paints into decorators altogether, where they transform your house into end, be it from consulting to in-house products available. Does that pose an additional threat as far as repair and renovation and construction is concerned, considering that their distribution network is arguably as good as paints? See, to my mind, you know, it all depends on. Currently they have an initiative which is doing that, but frankly, it's only restricted to large towns and that also to small parts of large towns. I mean, for it to significantly impact the millions of customers who construct or repair and renovate every year involves a scale which is very, very different. I would say the jury is out. As of now, from a distribution perspective, frankly, we believe actually we have a reach which is far deeper than any of the paint companies. Thank you, sir. Last question, with regards to your distribution itself, considering you've got such a robust network. If you can give an overview, hypothetically now that we've seen sort of an erratic monsoon, and I'm doubling down on tier two, three and four cities because that's largely the narrative as to where growth is coming forth in the next three or four years in India. What do you see with regards to monsoon? Because we've seen states like UP, Jharkhand, Gujarat and Bihar not have the amount of rain that they would essentially expect this year around, where we're seeing bags sold per sq ft having reduced by 13%. Do you think that is a bit concerning or are you still optimistic for the year to come? See, I think, you know, all the numbers you're giving are the right ones. Dhiraj, my simple answer to you would be, let's address this question at the end of the monsoon. It's clear that the pattern of the monsoon over years has changed. We seem to have these sudden spurts rather than this constant monsoon. Let's revisit around the fifteenth of September, and then we'll know where, you know, prosperity is high, where it is, and where it hasn't been good. Very difficult to say currently. Got it, sir. Look forward to speaking to you then. Thank you. Sure. Thanks. Thank you very much. A reminder to all the participants. If you wish to ask a question, you may press star and one on your touchtone phone. We take the next question from the line of Sanchit Narang from Paras Sales. Please go ahead, sir. Hi, sir. Thanks for the opportunity. Hello? Yes, yes. Sanchit. Yes. My first question is that in C&B business, what I am seeing is that margin is dipping to, like, 2% from the past year or two years. Sorry, you're not very audible, my friend. Just repeat your question. Sir, I'm saying that, in C&B business, we are seeing a 2% margin drop, as we compare it to year-on-year basis. Uh-huh. When can we expect it to come back to the previous level? Like, it was, what, 24%, previously. See, as of now, as we've consistently said, we have purposely moderated margins in the interest of volume. As raw material prices ease, as input prices ease, we will see it come back. We would rather prioritize volume. You know, if you see the absolute profit, we are still growing very healthily. We would still prioritize volume over percentage margin. Given the way raw materials are, difficult to say, but I would suspect, hopefully, our exit margins will be in our range of 20%-24%. Okay, that's helpful, sir. The second thing, if you can guide us with the PAPL numbers, in terms of their- PAPL has now got merged into Pidilite. If you have last year's numbers, I can tell you that our growth rates in PAPL are very similar to our growth rates at an overall level. PAPL is growing very healthily. Okay. That's helpful, sir. That's all from my side. Thank you, Sanchit. Thank you very much. We take the next follow-up question from the line of Rishi Mody from Marcellus Investment Managers. Please go ahead, sir. Yeah. Just one broad question, right? We're seeing a lot of this trend of a modular furniture coming into the play for people who are, you know, renovating their home or they're buying new homes. Just wanted to understand how you view this. Is it a positive? Is it a negative? Because what we understand is there's a lot of glue gets consumed in furniture and a bunch of it gets wasted, which is going to reduce once modular furniture comes into play. I'm coming from that thought line. If you could just give me more understanding of this phenomenon that is taking place in the furniture industry. See, for long we've been looking at the whole area of modular furniture. It's actually, it's not a new listing. Modular furniture has now existed for a large period of time. There are a large number of joineries that have been set up. One of the reasons why we did our tie-up with Jowat, who is Europe's leader in a technology called hot melts, which actually go in these joineries, is that we wanted the same market share in the joineries that we have in retail. Having said that, what we are seeing, Rishi, is that, you know, while modular in a growth rate sense may be higher, it is still, you know, 85/15 or 90/10 between customers making custom-made furniture. Because this is the only country in the world where you can custom make your furniture to your house, and it's cheaper than ready-made furniture. Therefore, you know, while 10 years back, we all did this trend work and thought that this is going to actually go up very substantially, frankly, the growth rates have not been at those levels at all. Having said that, we are obviously alive to it. We keep studying it. We have similar market shares in the joineries that we have at custom-made furniture. Like, let's say, you know, if I'm to get an idea of how much value of adhesives gets used in a custom-made furniture versus a modular furniture, including your joineries and everything. If, let's say, INR 10 gets used in a custom-made furniture, how much would be getting used in a modular furniture in totality? In fact, frankly, in value, the number, because the technology used is different. What, you know, joineries use is a technology called hot melt adhesives, which actually melt under heat, which are, incidentally, we are the only. Now one or two other people may be still trying, but we are the only local manufacturers of hot melt. The rest is all imported. On a per kg cost, et cetera, or a usage cost, there's not a great difference. Okay. All right. It's only at the lower end of the market, where at the cheaper end of the market, just as in a custom-made furniture, you have economy glues. In joinery furniture, in the cheap joineries, maybe using cheaper products. Okay. Like, ideally if modular furniture picks up, you know, over the next decade or so, we should ideally benefit from it given the current scenario. Of course, there will be prices coming down in the future once more players enter, but the high value items go into modular furniture compared to the custom furniture. It all depends on the quality of furniture, my friend. You know, just as in every market there is furniture for rich India, middle India, and aspirant India, it's the same here. You know, the quality differs dramatically. Difficult to make one generalization. Okay. Got that. Thank you, sir. Thank you. Thank you very much. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Mr. Arun Baid from ICICI Securities. Thank you. Over to you, sir. On behalf of ICICI Securities, I thank the management of Pidilite for allowing us to host the call. I hand over the call to the management for any closing remarks before concluding the call. Thank you very much to all those who joined the call for their continued interest in tracking Pidilite, and we'll connect with you after the second quarter. Have a good evening, everyone. Thank you. On behalf of ICICI Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.