Ladies and gentlemen, good day and welcome to Pidilite Industries Limited Q4 FY23 earnings conference call, hosted by Motilal Oswal Financial Services Limited. 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 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Kasat from Motilal Oswal. Thank you and over to you. Hi, everyone. Good morning, afternoon, evening to all, and trust you are having a great day. It's a pleasure to host the quarter and year-end conference call of Pidilite Industries. The company today is represented by Mr. Bharat Puri, Managing Director, Mr. Sudhanshu Vats, Deputy Managing Director, Mr. Sandeep Batra, CFO, and Mr. Sunil Burde, Senior VP Accounts. I will now hand over the call to Mr. Batra for his opening remarks. Over to you, sir. Thank you, very good evening to all those who have joined the call. I will quickly give you a summary of the financial performance for the year and the quarter, the results of which were approved by our board yesterday. A quick look at the full year financials. Consolidated revenue for FY2022-2023 came in at INR 11,752 crores, obviously a great milestone for the company and was up by 18.9% over the previous year. This was driven by strong volume growth, improved mix and price increases. Growth was broad-based across the Consumer and Bazaar and the B2B segments, with the domestic Consumer and Bazaar segment reporting growth in excess of 20%. Consolidated margins came in at 242 basis points lower, largely on account of escalation input costs which were pronounced in the first half of last year. These input in cost increases were partially mitigated by pricing, mix and cost reduction initiatives. Consolidated EBITDA came in just a shade under INR 2,000 crores and at INR 1,984 crores was up by 7.4% over last year. Standalone for Pidilite Industries revenues were INR 10,545 crores, which grew by 19.1%. The growth was led by a very strong 20.9% growth in the Consumer and Bazaar segment, whereas the B2B segment grew by 12.4%. Amidst uncertain global economic conditions and inflationary pressures, the international subsidiaries reported modest sales growth, but with improvement in EBITDA, and the domestic Consumer and Bazaar subsidiaries continue to deliver industry-leading profit and growth. The operational cash flow remained healthy during the year, and working capital in March was kind of similar levels at what it was in March 2022. The board has recommended a final dividend of INR 11 per share, subject to approval by the shareholders at the ensuing annual general meeting. I'll quickly cover the performance for the fourth quarter, where consolidated revenues at INR 2,674 crores were up by 7% over same period last year. In this quarter, we saw material costs come down vis-à-vis the same period last year as well as sequentially. The drop in material costs as a percentage to net sale for the quarter was 317 basis points over same period last year and nearly 500 basis points sequentially. EBITDA for the quarter at INR 459 crores was up by 14.5%, and PBT for the quarter was up by 13.5%. Stand-alone revenues at INR 2,366 crores for the quarter were up by 6.6%. PBT for the quarter, sorry, at INR 389 crores was up by 13.6%. The consumption rates for VAM, our key raw material, moderated during the quarter with Q4 consumption rates around $1,300 per ton versus $2,420 in the same period last year and around $2,000 in the third quarter. Current rates are around $1,100 a ton. During the quarter, we also augmented and completed our coatings portfolio with the launch of Haisha range of products in identified geographies in select states. Basis market response will decide the next steps. With the aim of upgrading our manufacturing facilities and servicing market demand, we've commissioned 3 plants in this calendar year with the plan to commission another 5 before June 2023. While the near-term environment is, likely to remain uncertain, we look forward to the future with cautious optimism. The moderation in input costs, easing of inflation, and growth in infrastructure and construction should enable us to deliver volume-led profitable growth. We continue to invest in building a resilient and agile supply chain and in digital initiatives. With this, I throw the floor open for questions. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead. Yeah, thanks. My first question is on the decor paints interior. In the interview, you have mentioned this is not a full-fledged launch, this is more of a range completion. I wanted to understand, what exactly you mean in terms of, mass media advertising and, building connects with painters because you have been in exterior paints, but wanted to understand when you benchmark against the market leader in paints, how is your painter connect? If you could answer these two aspects. Abneesh, I knew that you will be having the first question, and I knew that your first question will be on paints. Having said that, as far as, you know, advertising, the product or mass media, you know, let me just give you a little bit of a background. You know that we have been in paints or parts of paints for a long period of time, so paints is not new for us. Right? What we were getting is a request from a lot of our dealers, especially in some geographies, saying that, "Listen, you know, you have 2/3 of the range, but you don't have 1/3 of the range. Can you please at least, you know, complete the range for us just so that, you know, we can deal with just one company and satisfy consumers?" Once we assessed this, we obviously surveyed this with a fair degree of seriousness. When we saw that there was a lot of demand for this, that's when we went and launched the range of paints. As far as our, you know, user connect is concerned, in these geographies, our user connect. I don't want to compare with others, but obviously, you know, one of Pidilite's secret sauces is user connect. It is of a high order. Sure. Does your aggression increase versus what you have done in 15 years? Because you already had two-thirds of the portfolio. That wanted to understand. Right now it's a range completion exercise. We will gauge the response, so on and so forth. Obviously, we've put the right products in the market. Let's take a call 3 to 6. I mean, this is not, you know, 1 of our big growth initiatives of the future where we've got a set of plans which we are putting behind it, et cetera. It's 1 more initiative which helps us complete our range as a home improvement company. Based on the response, let's wait 3 to 6 months, and then maybe this question will have a better answer. Sure, sir. That's useful. My second question is on slide number 10. There if I see in terms of sales and profits, the B2B business has grown profit faster even in this quarter and full year versus the C&B, which is a bit surprising given the kind of inflation you have seen for major part of the year. Why should B2B profits grow faster than the Consumer and Bazaar? That's even more surprising because on sales, Consumer and Bazaar has grown faster. Is there any reporting change issue here? Because normally branded parts should see faster profit growth. See what happens, Abneesh, again, great question. What happens is in B2B businesses, both ways, when you know, remember when prices go up, you raise prices much quicker in because, you know, your contracts are normally for a shorter period of time, whereas in bazaar, given the inventory that you have in trade, given the raw material inventory, et cetera, that you have, tends to take a longer time. What tends to happen is you will get back margin quicker here simply because you will be able to, A, get price earlier and give back price much quicker. The other side is of course on raw and packing materials. In industrial products, the inventory is much lower, your consumption rates drop much quicker. Is there anything I'm missing, Sandeep? No, I think, absolutely right. Sure. Last question, on Araldite, route to market change. Why this has been done, now, and, what will be the benefits? If you could elaborate what exactly was done here, in terms of route to market change. See, basically Araldite had a different route to market from Pidilite in the sense that they had one more layer in the distribution chain, which they called as, you know, AD. AD stood for their, you know, almost like a state CNF who was actually carrying the inventory and therefore, you know, obviating the need for the company to have depots, so on and so forth, and carry that inventory in each location. Given that in Pidilite we already have the warehouses, we had all, you know... Obviously, we, you know, we are a relationship-oriented company. We didn't cut off straightaway. We gave the ADs scope to do other businesses, so on and so forth. Frankly, this layer was unnecessary in the distribution chain. It is good for a multinational that doesn't have a bazaar or a consumer presence. We basically removed one layer. In the last two months of the year, in February and March, basically we stored all of the stocks which were at the AD end, because now there will be no ADs from 1st of April, therefore our primary sales in Araldite was impacted substantially in the 4th quarter. This will recover, right? Of course. Actually, our secondary sales is perfectly all right. Remember, what is important to a company is the secondary sales, which is really simply the sales from the dealer to the final consumer. There we are growing very healthily. Here, what is happening was, we're eliminating 1 full step in the distribution chain that will have, you know, 3 months off, therefore, issues as far as the numbers are concerned, obviously it's to the benefit of the company because you're removing 1 layer of the distribution chain and the sales is not impacted in any way. Issue is largely done, right? From the reporting perspective, you said 200-300 base impact. Will the impact be in Q1 also? In terms of the primary versus secondary, I understand, but in terms of the reporting, the impact is done. 95% is done, so there will be no impact in quarter one. Yeah. Okay, sir. Thanks a lot. That's all from me. Thank you. Thank you. Next question comes from the line of Sonali Salgaonkar from Jefferies. Please go ahead. Sir, thank you for the opportunity. My first question is regarding the price hikes. Sir, could we get an approximate sense as to how much has been the cumulative increase in price hikes from last year to this year, say over the past 12 months? Do you expect to give away certain price hikes for driving volumes from here on? See, two things. One is, remember, it's very difficult for us to give you a weighted figure because the raw material situation has been dramatically different for our different verticals. For example, you know, wood adhesives, which are impacted by VAM had far higher increases. Waterproofing and coatings had lower increases. The consumer adhesives like a Fevikwik, et cetera, had even lower. You know, let me just give you a gross figure, which I'll come back to. As far as the future is concerned, no, we do not see any need for any future price increases. If the situation gets on materials gets more benign, we will actually see back. We've always maintained that at Pidilite our focus is on profitable volume growth. If our premium vis-à-vis other people goes more than 15%, we will actually cut back on price. In a broad sense, therefore, we will look at profitable volume growth. I'll give it to Sandeep for the exact weighted numbers on price increases. If you look at the full year versus the same period last year, the amount of pricing that is embedded will be in Consumer and Bazaar in the range of about 8%-10%. If you come to the quarter, that number will be much lower because a lot of the pricing happened in FY21-22 also. It may be around 4%-5% in the quarter, but for the year it would have been much higher. Weighted average would have been about 8%-10%. Understand. My second question is, now, you know, your presentation gave a lot of color of the demand that was shaping up in Q4. Coming in Q1, how do you see demand both in Consumer and Bazaar as well as B2B? The reason I'm asking is because, we have got to understand that the CapEx revival cycle is going on very strong. Do you foresee better traction in B2B from here on? Also, about the consumer discretionary slow, you know, slowdown that we have been talking about? See, as far as consumer discretionary is concerned, the silver lining has been that in the fourth quarter for the first time. See, unlike FMCG, we never had a decline in rural or semi-urban sales. It only slowed down. Normally, we used to grow at one and a half times urban sales. In this case, rural and semi-urban became slower than urban. For the first time in the fourth quarter, we've seen rural and semi-urban actually grow faster than urban. It's too early to call it a trend. We are very hopeful that this continues over the next three to six months. The other tailwind that we have clearly is that real estate and construction is seeing an upsurge, and that obviously benefits us. About one-third of our demand comes out of new construction. On an overall basis, we would say on domestic demand, we are, you know, as we say, fairly optimistic because hopefully it will continue. International is actually a tale of two different variables. Wherever we have an exposure to international markets or we are exporting directly, we are finding a substantial impact there. For example, our pigments business exports a lot to U.S. and Europe. There we are seeing straight declines because the markets there are very soft. I mean, they're in near recession-like situations. Even our, you know, customers in India who are supplying abroad, this could be leather, this could be textiles, et cetera, we are finding they are suffering and therefore in a sense we are suffering. On the other side, domestic demand for B2B, whether it be, for example, infrastructure, construction, waterproofing of large projects, joineries, continues at a great rate. Domestic B2B is all right. It's only international B2B, which if you ask me, is uncertain right now. Got it. Sir, just one last question from my side. Many of the paint companies have entered into, some of the products that you are into. How do you foresee competition shaping up? See, Sonali, we are not at all strangers to competition. We've had, you know, with our market shares and market leading position, every year we have two or three new competitors. In one range, we had all the multinationals. We had Henkel, 3M. All of Huntsman, all of them come in. We've had the large paint. Paint companies have been in waterproofing for over 10 years now. It's not something that is new to them anymore. Having said that, you can see that, you know, these remain our growth areas. We remain clear leaders. Obviously, we don't take any of them lightly. We keep a close watch on them, and we are clear that therefore, you know, we must maintain/increase market shares. If you look at the whole year, if you look at our Consumer and Bazaar businesses, we've got healthy double-digit volume growths. That will suggest that, you know, the market has not grown at this rate, so there is no way that we would have lost any market share. Having said that, as we said, listen, competition is something that will keep happening. Our job is to hopefully delight our consumer and our customer a little more than everybody else, and that's where our focus lies. Right. Our guidance for FY2024 remains double-digit volume growth and 20%-24% EBITDA margin. Is that correct? You know, going to the guidance, we've always said that, listen, our objective is to grow at 1-2 times GDP, depending on the economic conditions. That's what we would be aiming for. Therefore, profitable volume growth in that sense remains our single guiding light in these circumstances. Margins, we've always said that, listen, our range on a normal basis is 20%-24%. We see ourselves returning to that range in this year, yes. Got it, sir. Very helpful. Thank you. Welcome. Thank you. Next question comes from the line of Avi Mehta from Macquarie Group. Please go ahead. Hi, sir. I just wanted to follow up on the last question. Basically, how do you see the interplay between volume growth and realization growth moderation playing out in FY2024 as you see the input cost moderation? Does volumes kind of easily offset this? If you could share your thoughts on that, please. Good to hear from you. You see, this year is going to be a volume lead. Why I'm saying is our focus must be on profitable volume growth. If you would ask me what would be our push at our field, it would be two things. One is obviously volume growth. The second is mix, better product mix. We don't see any price-led growth. In fact, if the situation gets more benign, you may actually have volumes exceed value growth at times. That's, you know, we'll have to wait 3-6 months and see where the situation goes before we pass judgment on that. Really, therefore, we would see this being a year led by volume growth with some amount of hopefully mixed growth also. Sir, does the penetration opportunity kind of change or, I mean, penetration take up, is that or is the competition something that one should be concerned? I'm just trying to better picture because last quarter call you said, "Not seriously worried about pricing-based competition coming back." Does that in any way help volumes? How do you see that, and how has that traditionally panned out in the earlier years? See, remember, Avi, while, you know, obviously we're leaders in all of our segments, even in the, what we call the popular and the economy segments of, say, wood adhesives, we are the leader by far. It's not that. We have offers at every price point. We have our own equations to know at what, in what segment, what's the price premium that our product should command, and we remain within that band, and therefore push across the board. It's not that we are only in the premium part of the market. The thing is, I don't see You know, right now it seems that VAM is moderated, and it will be in this $1,000-$1,200 range. This will not see substantial price decreases. You know, demand would get impacted if you had, for example, VAM at $800, then you would have substantial price reductions and therefore, hopefully an impact on demand. As of now, what normally what tends to happen is when inflation has happened, we've seen this in the last 2 years, there has been some amount of downgradation, right? People have switched from premium adhesives to more economy adhesives. As it changes the other way around, you will see upgradation come back, which has been a, you know, premiumization and upgradation has been a normal part of our strategy anyway. If prices reduce, that will come back again. Perfect, sir. Clear then. Got it, sir. Just this, second bookkeeping. When you look at this range, you know, the normalized range of margins of 20%-24%, would it be fair to say that should kind of pan out just, you know, there's no other headwind as we go into first quarter and should start in the initial part of the year itself, or will it take some time to reach that again, sir? In our view, it will actually March exit. We are already there. Starting first quarter we should be there. We may choose to invest in certain areas in one or two quarters. At an overall level, you will see it from, you know, first of April onwards. In fact, we've seen it on the thirtieth of March. Therefore, it will not change. Oh, perfect, sir. Okay. That's all from my side, and thank you very much, sir. Thanks for this. Welcome. Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Jaykumar Doshi from Kotak. Please go ahead. Yeah. Hi. Good afternoon, and thanks for the opportunity. Just want to know a little bit more about your foray into decorative paints, I mean the product portfolio expansion. Have you, have you sort of built a separate sales and distribution team? At this point of time, are you looking at, you know, going beyond the distributor model or beyond your current set of reach? The final question is: What are your sort of, you know, thoughts on marketing strategy for the portfolio? See, on the first question, remember we already have the sales force in place, in large parts of India, the deepest sales force across all home improvement is already with Pidilite. It's not a separate sales force. We may add separate fellows for certain activities in paints, but at an overall level, we will use the strength of Pidilite in terms of its distribution reach, rather than have a separate sales force. As far as marketing strategy is concerned, and I keep saying this is not a big time, you know, we want to do INR 1,000 crores in one year, and therefore we are going to have this big bang launch. We will go about it gradually, look at dealer reaction, and then go step by step. Just wait and watch. Understood. Reasonable to expect that it, at any point of time, it will not have any, you know, significant impact on profitability. No, I don't see it having a significant impact on profitability because remember, we are only doing this in select geographies, understanding, then moving on. This is not like, you know, we've not put up five plants and running a depreciation bill from day one kind of thing. This is from our existing facilities in select geographies, understanding the market, fine-tuning our offer, and seeing whether this is a useful road to go on, to go down. Understood. That's helpful. Now my next question is, you know, VAM prices have already come down to about $1,100. Do you have more headroom for gross margin expansion from these levels? 46.8% consolidated that you reported this quarter. Is there more sort of benefit still left to reflect? Without doubt. You see, if my friend Sandip just said his average consumption was $1,300, and the current price is $1,100, that itself answers the question. Understood. We should expect that inch closer to 50% going into first half, and likewise, you indicated 20%+ EBITDA margin as well. Yeah. Jai, the 50 number is your number, not ours. Okay, understood. Final one, was there any one-time expense or anything, in this quarter? Because usually, you know, when I look at QOQ and YOY, the gross margin expansion is meaningful, whereas EBITDA margin expansion is a tad lower. When I look at employee as well as other expenses versus volume growth, seems a bit high. Was there any one-time investment or expenses in this quarter in that between gross profit and EBITDA? There was no one time- There was. Both. Sorry. No, there was no one-time expense. I think when you compare quarter-on-quarter, this quarter was like, you know, fully normal quarter. The entire team is out in the market doing market development. Secondly, we also stepped up investments in market-facing expenses, be it both direct advertising as well as connect with our users. That got significantly stepped up in the quarter. You would have seen a few of the ads on TV that got aired, the Araldite ad in particular. Those are all some of the gross margin we've plowed back into market-facing initiatives. Perfect. Thank you. One final one, sir. You had talked about, you know, more innovations and new product launches. Have I missed anything or, you know, anything that, you know, you can provide some commentary and color on that? See, actually, I, we can actually do a full session on that because in each of our divisions, we have one or two new products in different places, in different geographies. Suffice to say that at Pidilite, innovation has always been one of our drivers of growth. Now it's back. You know, whether it is waterproofing, where we have two new products, whether it is maintenance, where we have a new product called Fevicol Home Fix, whether it's the woodworking division, where we have a product called Fevicol Hyperstar. We've got a range of innovations in play, and you will see them, in the marketplace as we speak, and you'll see a whole new range also coming through. We've got a whole range of sealants. Roff, which is our tiling adhesive now, has got a full range. In fact, Roff now has 10 plants across the country. It actually has the best tiling manufacturing footprint of anybody, including the leader in tiling. you know, we're in a sense, always preparing for the future as we keep handling the current. Understood. Thank you so much, sir, and wish you the very best for FY2024. Thank you, Jay. Same to you. Thank you. Next question comes from the line of Sheela Rathi from Morgan Stanley. Please go ahead. Yeah, thanks for the opportunity. Mr. Puri, very interesting branding of the decorative paint, Haisha. My questions are on the decorative paint segment itself. The first question I had was, how should we think of the capacity which you have built for this particular segment, you know, maybe now or 12 months from now? If you could give some idea there. Secondly, of course, there is an overlap with respect to the distribution network. If you could give us some quantification here, is that what is the target distribution we are looking at? The third and final bit here is that what is the early feedback you're getting, you know, with the launch of these products into the market? Sheela, firstly, always good to hear from you. Nice questions. I mean, as far as paints is concerned, we already had capacity because we were in the coatings business, so on and so forth. Those of you who cover paints also know that paints is not capital intensive. Paints is not one of those things where you need to put up these mega, you know, cement-like plants, if I could call it. Therefore, we've always had the capacity, I mean, we understand the technology. We've always made the product. Without disclosing how much capacity, we have adequate capacity to be able to scale up at a rapid pace if we would choose to. The second thing is, as far as distribution is concerned, very simply, please remember, we call on more paint outlets than all paint companies except the leaders. Even today, this is all India, as we go down town classes, we actually have distribution which will probably be amongst the best, if not the best. Now, therefore, we will make sure that we cut the cloth according to our needs and therefore, marketing strategies, you know, you would appreciate if I tell you my marketing strategies, my competition will be happier than you are. Suffice to say that whenever Pidilite does something, we do it with a fair amount of thought. We do it differently from everybody else, and we do it with a long-term perspective. We are not here to show you one quarter or two quarters numbers, but to see whether this is something that can add to our overall, you know, what you guys call total addressable market. Whether we will be a true home improvement company, where if you want to renovate or build a new home, anything to do with the finishing of the home, we will have a product. And- Ladies and gentlemen, the management line has been disconnected. Please hold while we quickly get them reconnected. Ladies and gentlemen, thank you for being on hold. The management line has been reconnected. Thank you. Over to you. Yeah. I don't know who was in the question queue. Sheela, did you get the response. We got cut off. Yeah. your question? Sorry, we got disconnected. I'll be promoting the next one in line. That is, Mr. Purushottam from Minvest Services. Please go ahead. Yeah. First of all, thanks for giving me the opportunity and hearty congratulations to entire Pidilite team for achieving record revenue, especially in the current turbulent times. Truly remarkable. I have a couple of questions to ask. My first question is, why has consolidated revenue in Q4 declined over Q3? Any specific reason for that? My second question, you talked about volume-based growth in FY2024. What% of annual revenue in FY23 was generated through digital channels? What are the digital initiatives that company has currently embarked? My last question is, material cost as a% to sales in Q4 is lower compared to Q3? Is this repeatable in the current quarter and the next quarter? Thank you so much. Sure. Purushotham, I'll answer your questions. The first question was why Q4 is declined over Q3. Historically, if you look at our numbers for the past many years, you will see that our Q4 is generally our smallest quarter in terms of revenue. Q3 is generally the biggest quarter, and Q1 is also a significant quarter. Q4 is generally smaller. The second question you had was on digital. One of the digital initiatives that we have launched is a dealer app through which a dealer can directly place the order on the distributor without having the distributor person call him up and take the order. Revenues from that exceeded INR 1,000 crores, nearly 15% and in excess of 15% of the sales of Consumer and Bazaar business. Your last question was on the trajectory of material costs. We did see a sharp reduction in fourth quarter sequentially. We do anticipate some slight moderation in the first quarter also going forward. From what we have seen in terms of our purchase prices for the last three months, they have kind of been stable. Given the kind of inventory that we hold, it takes about three months for the benefit of any reduction in costs to kind of reflect in. As we look ahead, yes, you could see some moderation in the first quarter, but nowhere near what we saw in fourth quarter. Thank you so much, sir. Thanks for your time. Thank you. Next question comes from the line of Latika Chopra from J.P. Morgan. Please go ahead. Hi. Thank you for the opportunity. I know some of my questions have got answered. I got disconnected, so I'm not sure if you mentioned or clarified on what was the impact of route to market change for Araldite of 1.5%, if I'm not mistaken. Was it on Consumer and Bazaar domestic revenue? Yes, it was on Consumer and Bazaar domestic revenue. Absolutely. All right. The second bit I wanted to check was, you know, you've decided to phase out, you know, the Sargent Art business in US. Just trying to understand, are there any parts of your businesses that you're evaluating or exploring, to review, to divest? See, we've always said. Latika, firstly, always good to hear from you. We've always said that we would like to be an emerging markets multinational. You know, therefore the phasing out of Sargent Art in a sense reflects that. We keep looking at various businesses, so on and so forth, on a consistent basis. Now you would see that we don't have any now developed market portfolio left in our international businesses. We've always said we'd like India to be the cut copy paste business for all international businesses, and that's what we will be working towards. Sure. The last bit was you were, you know, adding lot of, you know, setting up, manufacturing units, investing behind a lot of your new portfolio, building capabilities there. Are we done with large chunk of that in terms of CapEx or, you know, we should expect more in FY2024, 2025? Any thoughts on CapEx plans? Our CapEx remains at about 3%-5% of sale. Having said that, obviously we've added a lot of, you know, just to speak, we've added 12 plants in the last two years. In this quarter alone, we've added three, and in the next quarter we'll add another five. Having said that, a large part of our growth CapEx is in place. You know, given that we are focusing on volume growth and then ours is a volume-led product, it'll be normal CapEx. There will not be any of the areas where you will suddenly see our CapEx go beyond our normal limits. Sure. Mr. Puri, the last bit was on talent management. You know, you are operating across multiple categories and have done so well. You know, we just wanted to understand better, you know, what kind of, you know, talent hirings or capability buildings has the company been more focused over the last two, three years? That's a great question. See, one of the things actually we've been on, not just for the last two or three years, but actually now for the last five to seven years, is we've clearly said we want to, A, build a culture and then a team that is fairly unique in our sector. We've been on this journey of what we call building a proneurial culture, which is a mix of professional and entrepreneurial. You know, can we capture the capability system, process, the rigor, the cap of a good multinational, but can we have the entrepreneurial energy? Can we have the risk-taking ability, the agility and speed of a good entrepreneurial company? We've been on this journey. In fact, if you look at our leadership bench, I would submit in our sectors or actually compared to most consumer companies, it will be a very strong bench. Almost all, if not all of my leadership team are people with, you know, A, Ivy League background, B, have served in great companies and now been in Pidilite for a fair period of time. We've also extended that across the levels. One of the areas we have focused a lot, which doesn't get talked about, is we've changed our talent bench and our talent profile over the last five years fairly dramatically. Does that mean there's been a change in, you know, employee incentive structure, any KPI changes there? Also, I was curious to understand, you know, how are the responsibilities, you know, shared between yourself and Mr. Sudhanshu Vats? Fair. See, answering the first, absolutely, yes. You know, our incentive system, so on and so forth, obviously reflect what we call our objectives and the Pidilite way of working and what we believe makes Pidilite successful, and the incentives actually reflect that, whether it be in the mix of pay and the way people are evaluated and therefore rewarded. As far as Sudhanshu is concerned, Sudhanshu has been handling parts of the business. He's the best way to put it is Sudhanshu is being prepared that he has a full view of Pidilite without the pressure of quarter-to-quarter numbers. Right now there is, you know, for example, the consumer product divisions, a lot of the RL division he handles directly. Slowly and steadily, he will keep handling greater amounts of responsibility so that it's a, you know, he gradually eases in rather than with the sudden shock of, you know, having to do various things in a short period of time. Since he's here, it'll be good for him to also answer that question. Yeah. No, thanks for the question and thanks Bharat. I think as Bharat rightly pointed out, I think the idea is to gradually ease in. I think having said that, I think to answer your question, I would say two points. One is that from the point of view of all businesses I continue to be involved in some form or the other, and managing, independently, we are slowly and gradually building on businesses. We started with consumer products. We've then added Aerolite. I look after our construction chemicals business as I go forward, managing industrial business as well a little bit in the transition. I think, that's how it is progressing. Thank you. Thank you, Bharat, and. Thank you. Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Ritesh Shah from Investec. Please go ahead. Yeah, hi, sir. Thanks for the opportunity. Sir, couple of questions. First is a generic question. I wanted to understand what percentage of our sales, do we actually bundle? Say hypothetically, if I am a painter, and I buy goods versus for INR X, so if I come to Pidilite, how much of bundling can actually work over here? That's a very difficult question, Ritesh, because it differs from geography to geography and town class. You know, for example, in the big towns, the mason, the plumber, and the painter tend to be separate. As you go down town classes, he becomes a handyman who does a little bit of each. There's no one answer to the question. It will depend on town classes and even different geographies have different practices. You know, some things are done by a certain tradesman in one part of India, they're done by a different person in another part of India. Very difficult to give you one standard answer for that question. Okay. I'll just flip around the question a little bit. Say if we look at it from a hardware shop standpoint, is there an element of bundling which works? I'm referring it more from a distribution standpoint, so influencer apart, mason, plumber, painter, from the channel standpoint. Without any doubt. See, you know, for example, hardware, paints, and as you go down the POP strata and you go to tier three, four and five-class towns, it becomes hardware, paints and building materials. In some cases, it'll become ply, hardware and paints. There is an overlap of different channels in different geographies. In a broad sense, don't hold me to that, the more larger the town, the more the sub-segmentation or disaggregation. The smaller the town, less developed, the more the aggregation. Yeah. Okay, sir. I'll just try again. I'll try to flip the question again. Sir, internally, do we try to cross-sell products like how is the organization structured? We have phenomenal brands. Each brand does beautifully well independently. Given we are into waterproofing and then we want to put paints along, how will internally the system work to make that sale happen, cross-sell happen? Okay, that's a good question. We do it in three ways. The first thing we do obviously is we have a master database which looks at what everybody sells, and therefore what we will try and do is make sure that all of our, the relevant divisions cover that outlet. Secondly, at the dealer level, we also have umbrella schemes that are common across Pidilite. There is an incentive for him to sell, him or her to sell Pidilite rather than sell only some products of Pidilite. Right? The third thing is we also run therefore programs with the divisions where we, you know, incentivize them to sell products across divisions rather than their own divisions. Mix of all three things. Right. Just a follow-up over here, sir. You indicated paints more as a completion of a particular range. Sir, in past you have maintained that probably we would not venture into this. We are already there, unless something really innovative. Sir, why this change in heart now? It was always a natural extension for Pidilite to get into given brand and distribution. See, it is really a result of a lot. I mean, you know, we were obviously exactly saying this to our customers, but we've been having a series of customer meets across the last two years, and we've had a very strong demand from our customers saying that, "Listen, I mean, you know, while you don't need to go head on and be this big, the biggest paint company in the business, your products." You know, for example, a lot of our dealers believe that the best exterior paint products are ours because they do both paint and waterproofing. You know, people have been happy selling them. It's largely based on customer feedback and customer response where they've been pushing us. When we went in and looked at certain geographies, we found that, listen, this is a growing market with an opportunity for a player who is differentiated and clear on why they want to be playing here. All right. Sir, just a follow-up question on paints. Sir, you just indicated that you don't want to go head on. Pidilite and the brands, I think, they have enjoyed leadership position in each of the segments. How should we look at it, given it is Pidilite? You have the distribution, you have brand, you have everything, and you would not just get in for the sake of it. You indicated long-term strategy is there on home improvement. What's the broader vision, sir? See, the broader vision is to be a full home improvement company which addresses all needs across home improvement. As you rightly said, listen, Pidilite always believes in doing things differently. Let it unfold in the market, and we'll show it to you once we've done it. Okay. Sir, if I may just squeeze in one more. You indicated, I think, on CNBC that there are 4 states that we ventured into, if I heard it right. Sir, can you detail which were those 4 states and any specific reason to choose those states? Is it because of distribution or proximity to manufacturing facilities? No, we didn't indicate four states. Actually, in CNBC, I just said two states, which was AP and Telangana, which in a sense was the old AP and Orissa. Those are the states, and very simply, I mean, we did those states because of proximity to our manufacturing location. Okay. Sir, last question. Basically, the company has multiple units, I think 33 plants, and I don't understand 35 co-makers. What part of this manufacturing footprint is actually fungible for paints as a category? Like, say, 10 out of 33 plants already have the facilities where we can ramp up. A large part of the coatings plants, I would say at a broad level, don't hold me to the number, but 4-6 plants in the coating areas would be fungible for paints anytime. Okay. This is quite helpful. Thank you so much for the answers. Thank you. Thank you. Thank you. Next question comes from the line of Keyur from ICICI Prudential Life Insurance. Please go ahead. Thanks for the opportunity. Sir, first question is on the current demand environment, as you mentioned that near-term uncertainty. In the backdrop where real estate and especially new real estate is doing well and expected to do well, what is holding us back to give guidance of not guidance as such, but say, basically uncertainty in the near-term demand? See, two things. One is, Keyur, we're clear, you know, now you can't isolate yourself as an economy from the rest of the world. Given that the rest of the world has all this uncertainty, there will be some spill-over. We are seeing, for example, of customers of ours who have export-oriented businesses are already suffering. One is the uncertainty around the whole geopolitical stroke, recession in the West, stroke muted demand, therefore, in these places, the currency crisis in some of the developing economies. That's one uncertainty that we've been talking about. The second is we just want to be clear that rural and semi-urban India, the demand is fully back to its traditional levels rather than being the muted that it was, you know, besides the fourth quarter of last year, pretty much for the last one year. Okay. Okay. sir, second question is on this higher OpEx, which was partially answered that generally, it was spent on the market-facing activity. This was one-off activity or this is how it will be since we have higher gross margin, you would continue to invest more than usual to drive growth? We will definitely continue to invest more than usual as gross margins come. It may be in some similar activities in different, you know. Basically, as a company, we're investing in 5 areas, right? First and foremost, we are investing in route to market. Secondly, we're investing in marketing, which is basically advertising as well as sales promotion. The third is we are strongly investing in digital. Digital includes e-commerce, it includes our digital initiatives, it includes our analytical initiatives. The fourth is we are investing in innovation and making sure that our innovation machine fires at a much higher rate. Of course, actually the most important 5th, we are investing in people. All five we will keep looking at and making sure as we've always maintained, we are a long-term player, we are a marathoner, we are not interested in the 100-meter sprint, and we will keep preparing to make sure that we can keep running the marathon at the right pace. Sure. Thanks. Just last one question. On the paint side, as you mentioned, that we want, basically the company wants to, complete the portfolio. We already had this, structure of, say, tinting machine and all, or the pace at which we want to grow, we won't need that infrastructure. How we would like to, grow, our business? I mean, do we need paint tinting machine? Do we have that, asset, or how will we go about that? Thank you. We already had the infrastructure, and we already had tinting machines because the exterior paints are again, also tinted. We already have the infrastructure in place. Any number which are there in already in the distribution, ballpark number, if not the exact number? Wait and watch. Wait and watch. Let it reach a number where you get an aha. Right now, let's, you know. Okay. say that we have the infrastructure, let it pan out. Sure. Noted. Sir, thanks a lot and all the very best. Thank you. Thank you so much. Thank you. Next question comes from the line of Ritesh Shah from Investec. Please go ahead. Yeah, hi, sir. Thanks for the follow-up. Sir, my question is on incremental capital deployment. Is there a threshold ROC that we look at, as you venture into new product categories? Absolutely, yes. In each of our areas, we are clear that, you know, it has to be intrinsically profitable. We may, therefore, it has to have a gross margin which is of acceptable level. It obviously, the CapEx proposal has to have an IRR that works for us. We may choose to invest more and therefore, you know, in the initial years not make the same margin on the product. We do not enter into any of the commodity side or the value-based side of the market. We are clear that over a long term, stable this thing, all our products will meet benchmark IRRs and will be intrinsically profitable. Sir, any quantification, please? Let's keep that, you know, each. Again, it is different for core businesses, different for growth businesses, different for pioneer businesses. Suffice to say that it is far higher, much, you know, more than double the cost of capital. That's helpful. Sir, secondly, on the demand side, can you please dissect the trend that you're looking at semi-urban, rural, versus urban? See, as far as semi-urban and rural is concerned, what we've seen for the first time in quarter four is that demand actually there was better than it was in urban. Otherwise, the last three quarters before that, actually urban demand was outpacing rural and semi-urban. Therefore, we are saying, listen, we are hopeful. Let's see if this persists for the next two quarters, then we know that, you know, we are back to normal rural and semi-urban demand. Sir, any particular variables which resulted to this swing or is it just the base effect on inflation is actually getting captured, and that's the reason why the swing in demand or improvement in demand? Very difficult to say, but I think as, you know, some money has gone into people's homes. Remember in the rural areas, wherever money comes in, it tends to go either into construction, into weddings, into, you know, discretionary spends. It appears, and again, this is a guess, this is not based on real data, but it appears that money in the hands of the consumer is slowly increasing in rural areas. Sure. Sir, just last question. El Niño, no El Niño, does it impact the sales trajectory of the company? Like is there any correlation both on the CMB side as well as on the B2B side? We've done this analysis. To be fair, what it tends to have a greater impact on morale and the overall feel-good factor rather than on hard sales. We're not able to correlate hard. You know, on El Niño years, they tend to be a little harder, especially in rural and semi-urban. I mean, when we look at the data, it doesn't give you the stark difference. Sure. This is useful, sir. Thank you so much. Welcome. Thank you. Next question comes from the line of Sheela Rathi from Morgan Stanley. Please go ahead. Yes, thank you for taking my question. Mr. Puri, one question which I had was, is that, I mean, did I hear you correctly when you said that paint companies are also present in all the four construction chemical categories? Is it something which has changed recently? If I remember correctly in the past, you have said two out of four categories is where the paint companies have been focusing on. No, no. See, if you say category, again, if you're saying segment, normally paint companies tend to focus on the paint outlets. The paint outlets tend to focus on renovation rather than on new construction. That has not changed. Some of them have been trying to venture also into the projects area, so on and so forth. Largely, if I was to say, the paint companies remain focused on paint arts and what I would call the large renovation segment. changed in the last couple of years with the past. Sorry, we're not able to hear you. No big change versus the past, right? It's still the same. The only thing that has changed is now some of them are venturing into the product in the projects areas and, you know, trying to spread their wings. That is expected. That's also been going on for some time. I mean, it's not something they're doing in the last 1 year. They've been doing it probably for the last 3 to 4 years. I understand. Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session. I would now like to hand the conference over to the management for closing comments. No closing comments, thank you very much to everybody on the call for your continued interest in Pidilite. We'll connect again after the first quarter results. Thank you. Have a good day. Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.