Earnings call transcript

MANAGEMENT

MR. ABHIJIT ROY – MANAGING DIRECTOR AND CHIEF

EXECUTIVE OFFICER – BERGER PAINTS INDIA LIMITED

MR. KAUSHIK GHOSH – CHIEF FINANCIAL OFFICER –

MODERATOR

MR. NITIN GUPTA – EMKAY GLOBAL FINANCIAL

Nitin Gupta

Hi, good evening, everyone. This is Nitin Gupta from Emkay Global. I would like to welcome all to Berger Paints India Limited Q1FY 26 result conference call.

Nitin Gupta

I thank Berger Paint management for allowing us to host.

Nitin Gupta

We have with us today Mr. Abhijit Roy, Managing Director, and CEO,

Mr. Kaushik Ghosh CFO, Mr. Sujyoti Mukherjee, Vice President Finance, and Accounts. Mr.

Sayantan Sarkar GM. Finance and Accounts. I shall now hand over the call to management for the opening remarks post, which we will proceed with Q&A session , over to you, Sir.

Abhijit Roy

Thank you. Anything, and good afternoon to all of you.

Abhijit Roy

Let's begin the presentation with a quick look at what is going on again.

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can you move the screen? Yeah.

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right? Quick. Look at the quarter. One results. You know, we continue to gain market share

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market share above 20% within the listed company space.

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Mid single digit volume growth was registered in quarter. 1

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growth was moderated by heavier than expected monsoon. Towards the end of

May and June.

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Pvdit margins improved both sequentially and year on year. In spite of heavy competitive pressures.

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automotive segment delivered stronger volume and value growth versus overall performance

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and strong revenue growth. In international operations

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we have been consistently outperforming the industry resulting in market share gain.

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These are the 5 quarter industry growth as

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per the results published. These are standalone results of various companies added together in the listed space.

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As you can see, the growth rate has been, for the industry has been minus 0 point 9, minus 3.3 minus 4. Then it went up to minus 1.2, and this time for the 1st time it is positive at 0 point 3% for the existing listed players in the industry, that 5 players which are there.

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And if you look at

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our performance. Against that, we have been at 2.4 minus 0 point 4 plus 0 point

4 plus 4.4, and then again at 2%, this time

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so consistently above the industry level.

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As a result of that, we have been gaining markets where, in spite of intensifying competition.

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18.9 to 19.3 to 19.5, then on to 20.3 and 21.2.

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This is the market share as per the standalone results which have been declared

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by the companies over the years and in this quarter.

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however, if you add guerrilla and assume that

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they would have gained about 5 and a half to 6% share. Then to our market share stands slightly above 20%, and we remain at that level.

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In fact, you know, we have been gaining market share even with their presence continuously.

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Now, if you look at

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the top line growth which we registered this quarter standalone basis 5.6% volume growth and 2% value growth.

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The decorative segment delivered mid single digit volume growth. The volume value gap narrowed, driven by improved mix and waning impact of price, prior price corrections.

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strong traction in roof, coolant seal, home shield range of products and wood coatings.

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protective and automotive coatings maintained positive volume, momentum, gi, and powder coatings. Performance remained subdued.

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If you look at the gross margins, it's been very stable

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and across quarters, in spite of increased competition, it's been hovering in that range of 39 to 41.

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This quarter, too, it was 40.1%

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against year on year. If you compare against quarter one of last year, which was at 39.3, it's an improvement.

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There is a slight dip from 4th quarter of last year, from 41.2 to 40.1.

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This drip is explained by adverse mixed impact

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due to excessive rains. There was a little bit of a less sale of exterior emulsions, and also the luxury interior emulsion sales was down a bit compared to 4th quarter of last year.

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and therefore slight. Dip there. That you see, however, you know, against quarter one of last year there is an improvement from 39.3 to 40.1

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on the operating profit side. However, it's all positive.

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In fact, it has been steadily gaining ground

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from quarter 2 of last year. If you look at it from 15.8 it moved up to 16.2, then further to 16.6,

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and in this quarter it has gone up to 17.4%,

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which is an improvement over quarter one of last year, which was at 17.2, and also against quarter 4 of last year, which was at 16.6%.

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So you know, margin resilience is driven by stable gross margins

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and operating leverage from fixed costs

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which we have been able to control and reduce and improved utilization at the

Sandeela plant last time. If you recall, you know, we had initiated the Sandeela plant, and

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we were burdened with extra load of of that plant.

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and we had mentioned that, you know we will improve on this as the things go forward, and so that has helped us

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to improve our overall profitability operating profit ratio

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in terms of results. If you look at it

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2% is the sales growth rate, vbdit standalone

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pbdit growth rate 3.3% profit.

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Pb, it at 5.1 pbt. Before exceptional item is 5.3%.

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There is an exceptional item of 36.8 crore. This is an unfortunate fire incident which happened in our warehouse in near Kolkata, in Barrasad.

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There was one other warehouse nearby which caught fire

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from there. The fire spread to another warehouse, which is which was adjacent to us, which was a Hitachi warehouse. The Acs burst into flames, and the flame leapt into our warehouse, and

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our warehouse got gutted completely.

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Of course you know it's fully insured, and therefore, insurance process is on. So that's an exceptional item of 36 crores, which is why you see a negative there in terms of

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Pvt and pact

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but otherwise, without that exceptional item, we would have registered a growth in pat of around 5 point something percentage

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as far as the 3 year 4 year 5 year. Results are concerned.

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You can see the Cagr 3 year

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which is 14.8 and 10.2 in terms of volume value and net sales and Pvd it.

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If you take 4 year volume growth is 16.8% Cagr.

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you know, net sales value growth 15.3%.

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And in terms of Pvd growth, it is 22.6%

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and 5 year Cagr 26.3 28.2 and 34.5%

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on a consolidated basis as well.

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It is a similar trend line for 3 year, 4 year and 5 year, quite robust. 4 and 5 year figures.

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It's just that, you know. The last 3 years, especially the last 2 years, as you are aware, there have been price drops. As a result, you know, plus, there has been a slowdown and the intensification of competition which has squeezed the volume value growth a little bit, but still at a reasonable level.

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At 3 year levels. Also, we are in a standalone basis, 14.8 and 10.2

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strong performance sustained led by

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anti-dust, long life and silo prime construction, chemicals and waterproofing, delivered robust volume value growth with stable margins.

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roof, coolant seal, further picked up momentum

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wood coatings, postage reverts volume and value growths.

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store footprint expanded by over 300 during the quarter, taking the total count to

1,300 plus stores, as on date

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underscoring continued retail network growth

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printing machine installations, over 2,500 plus for the quarter. So we are well on course to add 10,000 plus more machines

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for the year.

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We introduced a a product called color plus in this quarter. It's a interior premium emulsion.

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matte finish. We had easy clean, which is a clear leader in that segment, but that's a little bit of shine which is there on the wall. People wanted a matte finish as well, and this is a new product category which we have introduced called color plus doing reasonably well. So far, you know, the momentum is picking up across. We have launched it initially in the South. And now we will be expanding it across the country

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walls. That wow! European technology washable color guard with 6 years of warranty, premium, emulsion in the matte finish category.

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We, of course, you know, continue to advertise the new ad has been released.

Called nothing science like silk

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for silk glamour with Karina there

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easy clean continues to, you know. Do well in the market across markets.

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Of course, you know, we also introduced another new product called Luxol metallics.

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This is a solvent based metallic range, silver, gold, copper

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which is picking up in this country. And we thought that you know this segment was missing, and we introduced it in this quarter.

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It is a lustrous metallic scene you enriched with 4 years of warranty

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we had introduced. If you recall, I had spoken about anti dust cool, which is, you know, earlier we had introduced this. We had introduced last quarter roof, cool and seal. Last year it did quite well the whole of last year. This year. It continues to do even better, and we introduced a new product this year called tank cool for the water tanks on the rooftop

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all of these 3 products for the summer months. It is a very useful range of products, anti dust cool for the body, roof, cool and seal for the roof and tank, cool for the tank.

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and we advertised across newspapers this entire cool series. As you can see, the house wearing a jacket that you need not worry about the summer heat. Even in the summer heat the temperature goes down by 8 to 10 degrees centigrade, making you feel much more comfortable

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in terms of consolidated sales. Top line value growth at 3.6%

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operating profit is impacted due to margin pressures in Bullix, says Uk.

Operations essentially because of the project. One of the projects where the cost due to time delay, you know, went out of revenue, and therefore there was some pressure on the profit there. Joint ventures delivered, strong performance in both revenue and profitability.

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Consolidated results as you see it, 3.6% value growth, 1.1% operating profit growth.

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And then, of course, you know the 2 exceptions, one is the bullix cost overrun, and the second one is the exceptional item, the fire which pulls down the profit in the Pvt.

And Pat Range.

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Bj. And Nepal outperformed within the group, delivering strong revenue growth and margin expansion

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wholly owned. Subsidiary. Bullix reported a stable quarter in revenue.

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However, Muted margins in Uk operations, as I mentioned, impacted overall bullix group profitability.

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Stp and Svl coating show, flattish growth.

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weighing on overall profitability due to scale challenges.

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Berger rock continued to post solid performance. This is our auto refinish joint venture with rock paints of Japan

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in both revenue and profitability growth.

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The Joint venture, Bnpa, which is Berja Nippon paint automotive coatings which is focused on the automotive, 4 Wheeler car and passenger car and Suv business delivered robust growth in revenue and profits

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driven by higher oem sales in the automotive segment, along with some good business. In some of the new accounts, like Kia, etcetera.

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Berger Becker Joint Venture, also witnessed a strong turnout post fire, related losses.

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aided by improved product, mix and margin recovery.

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How does the business outlook look like for the rest of 26?

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Gradual improvement in demand. Indicators observed with early momentum in urban markets.

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well progressing monsoon and easing inflation may support rural sentiment under a supportive policy. Environment.

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market competitiveness to stay elevated, continued thrust on innovation and brand distinctiveness to navigate short term challenges

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potential pickup in government infra spending in the latter half of the year could aid growth, momentum and broaden economic activity.

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currency, volatility, ongoing tariff wars and evolving geopolitical tensions remain key risk factors.

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Abhijit Roy

Thank you.

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Abhijit Roy

And I'm stopping here and opening up for questions.

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Nitin Gupta

Thanks, Abhijit, so we will now start with the Q. And a session I hand over to my colleague, Bhavik Shankalisha, to moderate the Q. And a session over to you. Bhavik.

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Bhavik Shanklesha

Those of you who have the questions can raise your hands. Now we'll announce your name and unmute your line, please highlight your full name and the organization you represent.

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Bhavik Shanklesha

The 1st question is from the line of Mehersha.

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Bhavik Shanklesha

Please go ahead.

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Mihir Shah

Hi, sir, thank you for taking my question. This is Mehisha from Nomura.

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Mihir Shah

Hi, sir. Firstly, congrats on better than peers volume growth number and continued, share gains.

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Mihir Shah

So firstly, on volume growth, I wanted to check. You know, the while, you know, you've done better. But we were expecting a little bit of improvement versus the number that we have seen of 5 and a half percent we were expecting. Maybe, you know, closer to high single digit volume growth.

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Mihir Shah

so so on this front, basically, can one expect this growth that has not come

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Mihir Shah

to be deferred in the coming quarters, and should we expect a better volume growth in the coming quarters any signs or indication that you're seeing of this to continue to improve. Apart from the you know, the sales that we lost this time around.

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Abhijit Roy

So typically May, you know, sales do come back, you know, because the monsoon is unpredictable, you know, it's it's difficult to guess in India, you know, when it will come and how long it will prevail.

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Abhijit Roy

So it started a bit early this time in towards you know end of May, which was a surprise, you know, across many markets, and it was quite intense in some parts of the country.

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So May and June. As a result of that, you know. Normally in pain it gets postponed.

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Abhijit Roy

July also was quite heavy. So, but once it abates we have always seen that you know the sales tend to come back, so we would expect that, you know sales will come back once. The monsoon, you know, abates.

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Mihir Shah

So so fair to say an indication from your side would be helpful if I had to say a high single digit can be expected in coming quarters because of this deferment, plus any further improvement that you're seeing in the market, or that is giving you confidence that you know that there's the you know. The the volume low volume phase that we have seen is kind of now kind of behind.

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Abhijit Roy

So, you know, if you ask me, my expectation is that once the rain stops, it should go up.

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But if you are asking me whether I'm seeing any indication immediately. So far, you know, we haven't seen anything which indicates that you know substantial improvement in volume

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growth, momentum will be there.

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However, you know, once the rain stops, it is expected that you know the volume momentum should pick up.

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Mihir Shah

Got it. That's very clear. Thank you for that second question is on competitive intensity. It seems other players have highlighted that the the dealers lost to competition are now coming back, wanted to know your thoughts on. You know how this is shaping up for you and any other trend that you are seeing in the marketplace. With respect to competition, etc.

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Abhijit Roy

So, frankly speaking, you know, competition as I had already always maintained.

You know there will be

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some share loss which is likely to happen, for all the players which we have seen happening in the recent past right, because any new player who comes in

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will gain some share, and that will be at the cost of the existing players, otherwise we would have got that share. So from that perspective there has been some loss.

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Abhijit Roy

as I said also last time, that you know for the past few months we feel that it has become. You know, it's not increasing in terms of intensity. It is stabilized at those levels. So I won't say that, you know, dealers are coming back. But the initial euphoria is over completely.

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Abhijit Roy

That's gone. You know that initially, that curiosity, the enthusiasm that was there, something new, something great is happening that is completely gone. Now, now, you know, is the time when people start realizing that it is not very easy to get additional margin. So what was happening was, you know, there was a competitor which was discounting heavily.

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and the dealers were selling at a price which was similar to ours in the marketplace initially, and therefore they were pocketing that differential in their pocket. But once with the network expansion happening heavily and and interdealer competition increasing, that margin of profit has reduced considerably, and as a result of that there is a little bit of a loss of interest from the dealers.

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And hence people might be feeling that, you know, some of these dealers might be coming back

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to the legacy companies with whom they have been dealing in the past, because once they see that there is no great margin, and the movement of the product is nothing great. So far.

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then, they feel that you know, why should we be pushing this so aggressively?

So that's that's a normal behavior, you know, expected out of. You know. Any newcomer who enters, you know, initially gets in, and then.

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you know, stabilizes at some point. And that's what is happening now.

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Mihir Shah

Got it. Thanks for your thoughts, sir. Always very helpful. Lastly, if I can just push it one more on margins you continue to maintain the margin guidance when that we highlighted. I I assume that there's no change out there right.

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Abhijit Roy

No, not at all. You have seen that. We have, in fact, always said that it will be operating in the 15 to 17% range. We have been more or less towards the more towards the

17. In fact, in the standalone we are ahead of 17, but we are around that point only.

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Mihir Shah

Got it, wishing you all the very best, sir. Thank you very much, that's all. From my side.

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Abhijit Roy

Thank you.

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Bhavik Shanklesha

Thank you. Next question is from the lahin of Avi mehta. Please go ahead.

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Avi Mehta

Yeah, Hi, sir. Am I audible?

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Abhijit Roy

Yes, you are, Abhi. Go ahead.

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Avi Mehta

So Hi! This is avi mehta here. From a query, sir, I had 2 questions you've clearly indicated about the margin, you know, comfort. But I just wanted to also check would given this demand environment. Would we still want to say that we would gun for a low double digit volume growth in the next year, or the demand environment. How do you see that if you could give us some clarity on

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Avi Mehta

that expectation that would be useful. And second, sir, I wanted to check. Yes, I do understand the stabilization of competitive trends, but would love to hear your thoughts on. How do you see this intensity behaving now that there has been another merger between Axo and Gsw.

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Abhijit Roy

Right? No. So as far as volume, no trend you have seen.

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Abhijit Roy

you know that we have been hovering around this. You know 5, 6% to 7, 8% range. The whole of last year we were at around and on average around 8%. And you know, last

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Abhijit Roy

quarter quarter 4 of last year. Also, we were around that same point of 8 to 9% in terms of volume. This quarter has been little bit lower than that at about 5 and a half percent.

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Abhijit Roy

We expect that, you know, once the rains are over, to go back to that 7, 8, 9% range initially, and maybe even better. You know, as the year progresses. So this is something which we feel that should happen

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Abhijit Roy

now, as far as competitive intensity is concerned.

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Abhijit Roy

You know, I have explained about the 1st player, which is, you know,

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who entered, you know, initially and the second, which you mentioned. Jsw. Plus exo. That's, you know. Still not, you know, formalized sort of they have to 1st of all.

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Abhijit Roy

merge, you know, or do something, or if it is standalone, if they operate just like they are doing today, I see no great changes happening in the competitive intensity. Yes, there is some change which is likely to happen. The change in ownership.

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Abhijit Roy

there might be, you know, some amount of advertisement which will go up some spending increase, possibly.

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Abhijit Roy

but overall, I don't see any major tangible change this. Both these players have been existing in the Indian market for a long time.

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Abhijit Roy

one which is almost equal to us in number of years, and the other, which has been there for 5, 6, 7 years now. So I don't see any significant change in competitive intensity emanating from this change that has happened.

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Avi Mehta

Very clear, sir, very clear. And, sir, if I may just follow this up from a growth perspective. What you're expecting, sir, are you? I mean, how do we see the demand trends is, you know, wanted to get your thoughts. It's been now 3 years where growth has been weak. We are still, you know, expecting that the relationship with Gdp will come back.

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Avi Mehta

But what do you think went wrong, that this, you know, situation has arisen. In the

1st place, what would be your thoughts on that.

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Abhijit Roy

No, nothing went wrong, you know. In fact, you know, it's a mistaken notion that.

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Avi Mehta

Oh, okay, sir.

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Abhijit Roy

There has been, there has been a great demand shrinkage, you know. In fact.

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Avi Mehta

Yeah.

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Abhijit Roy

2, 23. We had a very good year, in fact.

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Abhijit Roy

2324 was reasonably okay, you know. So you can say it's not a 3 year phenomenon. It's a sort of a 2425 has been an issue, and 2324, second half was an issue.

So it's about one and a half years where the growth has been lesser.

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Abhijit Roy

And a large part of that reason is, you know, that the volume growth has been there. But the value growth has not been there because there was a price drop of almost.

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Abhijit Roy

you know, 5, 6 percentage. Right? So when you have last whole of last year you are fighting against this price drop of 5, 6%.

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Abhijit Roy

Then a new player had come in. New player had come in and it had taken 3 and a half percent. So if you have 5, 6% of price drop and 3 and a half percent going to the new player. So that's accounts for 8 and a half percent. In spite of that, we did register a growth of about 4 and a half percent last year.

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Abhijit Roy

So if you add back this 8 and a half to the 4 and a half, it would have been 13% growth. So that's why, I'm saying it is not that the growth rate had come down. It's just that the price drop impacted significantly last year.

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Abhijit Roy

and the intensification of the competition who took away about 3 and a half percent overall impacted everyone to that extent, some, maybe 5%, some, maybe 3%. But overall there was an impact for every player. Obviously, because when you know the consumers are going to another brand that brand otherwise would have you know that consumer demand would have come to us otherwise, so that much of share loss has happened for everyone, right? So

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Abhijit Roy

overall industry. If you look at, you know even this quarter.

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Abhijit Roy

it has grown the industry. The legacy players has grown by approximately around, say, 0 point 5%.

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Abhijit Roy

And Birla would be sitting at around 5 and a half or percentage to 6 percentage.

Right? So overall, the industry's growth is 6, 6 and a half percent, you know, which is not very bad in terms of the value sales.

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Abhijit Roy

the overall consumer demand itself has been lesser, you know, compared for all categories. It is not only paint in any type of consumer category. There has been a bit of a slowdown there, so instead of 6 and a half, it would probably would have been under normal circumstances, 8 and a half, 9, 10, maybe. So that slowdown of 3, 4% is there in the consumer sentiment because of inflation because of other issues

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Abhijit Roy

which is progressively improving. So that is why we are hopeful that in the second half

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Abhijit Roy

there will be, you know, a good improvement overall that you see from the current levels.

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Abhijit Roy

Got it, sir. Got it very, very clear, sir, very clear. Thanks a lot. I have some other questions, but I'll come back in the queue. Thank you very much, sir.

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Abhijit Roy

Thank you.

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Bhavik Shanklesha

Thank you, Avi. Next question is from the line of Teja Shah. Please go ahead.

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Tejash Shah

Hi! Am I audible?

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Abhijit Roy

It is.

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Bhavik Shanklesha

Yes.

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Tejash Shah

Yeah, thanks.

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Tejash Shah

Hi, sir, this is Dj, from Avenda spark.

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Tejash Shah

So you broadly touched upon competitive intensity, and you have been very fairly consistent and honest. On this.

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Abhijit Roy

Be a bit louder. I can't hear you.

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Tejash Shah

Sir? Am I audible? Hello!

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Abhijit Roy

Yeah, now you are.

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Tejash Shah

Yeah, sorry. Sorry. No, I said, that you broadly touched upon competitive intensity, and you have been fairly consistent in that. Just wanted to understand. Is there any more nuanced dimension to it in terms of premium, economy or mass? Is it like? Varies a lot in terms of the segment of the market?

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Abhijit Roy

So. No, frankly speaking, not so much, you know. It. Is there more towards the economy, the primers and and you know, lesser towards the luxury or premium luxury, category. So mostly the commodity type where the 1st it expected as well that you know where lesser branding

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Abhijit Roy

strength is required. That is the place where one tends to have some sort of erosion initially. So that's where it is getting impacted first, st and

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Abhijit Roy

probably you know, most companies would be reacting in that space also and ensuring that that that is taken care of. So

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Abhijit Roy

of from the perspective of, you know. Otherwise there is no other major

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Abhijit Roy

mix change. We would have seen, you know, observed

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Abhijit Roy

any particular peculiarity in the way it has been impacted by the competitive intensity.

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Tejash Shah

Perfect, sir, and, sir, any regional nuances worth highlighting, and also are they, or are the compete? Density has become much more aggressive or equal in project business versus the rest.

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Abhijit Roy

I can't hear you properly.

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Tejash Shah

Hello, Hello! Yes, yeah, no. I was asking, is there any regional nuances worth highlighting, and also any different or or any comments to make on project business versus the rest on the same parameter.

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Abhijit Roy

No, not really, you know, project business, no, nothing, you know, which is worth mentioning. And even in the regional nuances you know nothing which is extraordinary, you know it is more or less similar in nature. Across most regions.

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Abhijit Roy

Possibly in the South there has been, you know.

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Abhijit Roy

slightly higher intensity of competition than the rest.

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Tejash Shah

Okay? And so last one, if I may given that most of the paint companies flagged weak demand in June, July, due to early onset of monsoon. How do you assess the current inventory levels in the trade channel? And why am I asking this is that? Do you foresee some pressure on margins, let's say, because there is a lot of stocking up which would have happened because of early monsoon this year.

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Abhijit Roy

So you know, they just normally in the paint business, you know, when we are selling. We have to collect also. Otherwise, you know, sales get stuck immediately, right, you know. So

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Abhijit Roy

that is why the sales figure on the growth has been less so. The mark. The

Channel inventory is fine, you know. I don't see that, you know, getting impacted in any significant way

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Abhijit Roy

unless you know they pay the Channel inventory clears. Then they pay, and then we again sell the cycle doesn't move. So

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Abhijit Roy

there is no

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Abhijit Roy

great impact there, as far as the Channel inventory is concerned, and therefore it is normal business at this point of the year. Normally it rains. It's a monsoon month. It is expected to rain, and every year we go through this same situation, so I don't see any major change there.

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Tejash Shah

Perfect, sir, as always, very helpful thanks, and all the best.

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Bhavik Shanklesha

Thank you.

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Bhavik Shanklesha

Next question is from the line of Abnish Roy. Please go ahead.

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Abneesh Roy , Nuvama: Yeah.

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Abneesh Roy , Nuvama: thanks. Thanks. So firstly, congrats on continued faster growth.

One is on bolex. Any timelines you see in terms of recovery. It's a mature market where multiple factors are in play in terms of low growth. Geopolitical tensions keep happening.

What will be the long term strategy in a bullix kind of a business given the developed market where it is.

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Abhijit Roy

So actually, abnesh, you know this

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Abhijit Roy

bolex business, you know, as we see it, you know, it's in a it's on a good wicket as of now, largely because, you know, it is in a domain which is basically meant for energy saving. As you know, this is a insulation business, and in in Europe and Uk. The governments are promoting this, you know, in order to save energy with the geopolitical situation being, as is.

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Abhijit Roy

and with Russian oil not being there for them, which has become expensive for them gas. And you know other energy costs. They want to save on the energy cost. So it's a category which is actually growing.

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Abhijit Roy

We had a little bit of an issue in the Uk operations with, you know, 2 of our projects which are there where there was a delay, you know. Actually, this delay has been going on for some time now. Because of other regulatory issues which cropped up there

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Abhijit Roy

which is getting tackled, but unusual, you know, unnecessary losses because of the time delay which happened for us.

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Abhijit Roy

But it is. It was not within our control, you know, because the regulatory changes happened suddenly, and we had to, you know, change our entire strategy for these projects.

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Abhijit Roy

But this is just a temporary phenomenon, it will go away and overall. The business is very healthy, and it is looking quite promising now.

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Abneesh Roy , Nuvama: Sure my second question is back on the Indian deco market. So the market leader has been highlighting one or 2 things in the last 2 quarters. One is, of course, a regionalized product strategy which Fmc. Companies, like unilever Nestle, have been doing, winning in many India kind of a concept. So wherein for a few states, you have a specific product packaging, targeting that similarly, one more thing which they have been doing last maybe 2, 3 quarters is 4 year warranty.

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Abneesh Roy , Nuvama: Have you also responded with a similar kind of strategy. And does this help in in overall market dynamics?

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Abhijit Roy

So, Agnesh, you know, India, as you know.

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Abhijit Roy

has different tastes across different regions, and therefore product mixes are different in different locations. It is tailored in that direction. We don't have the type of container design, or, you know, specific to a region that you are talking about. We? I don't think that is required as well. So much.

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Abhijit Roy

Yes, you know, it aligns well with the consumers, possibly. But you know more importantly, the type of products that sell in particular regions are what

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Abhijit Roy

is of greater importance, you know, and tailoring our products and the pricing for that region becomes very critical. Therefore we always do that. It is an important way of, you know, and even the advertisements, the way you communicate. You know everything changes from different states and different regions in India.

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Abhijit Roy

It's not a single country, you know, where you can advertise one thing and communicate, you know. So everything, the product, the pricing, the promotion. All the piece are, you know, except for the distribution strategy, which is quite, you know, similar across regions. Everything else tends to change, depending on where you are within the country, so that has to be done. If you really want to do well, if you are all India player, you will have to keep doing this.

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Abneesh Roy , Nuvama: Understood. One more question on the India competition. Deco to be fair, you have been the most candid, transparent, and frankly commenting on competition, on national media interview. I think it's a commendable thing.

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Abneesh Roy , Nuvama: And you said a few months back that new player last 3, 4 months.

It's a stagnant sales. Now we are seeing other players. Legacy players also talk more confidently. My specific question here is you said initial euphoria among dealers is completely gone. Specific question here is, how is the initial euphoria in the painter and influencer now versus the 1st

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Abneesh Roy , Nuvama: 6 months. Here also has it kind of evaporated, and 10% extra grummage by the new player we got in another call today that maybe in some areas it is reversing. Now, these are early data points. What are you picking up on the 10% extra damage.

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Abhijit Roy

So you know, the 10% extra grammage there has been reduction there.

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Abhijit Roy

I am told that you know earlier it was across all pack sizes. Now it's there primarily in the 20 liter pack sizes.

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Abhijit Roy

the one and 4 liter possibly has been withdrawn in in many markets. That's the news which is coming back to us.

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Abhijit Roy

So there is some rationalization obviously happening in that space. Possibly, you know. This has been, as I had always said that. You know this has been tried in the past by a few other companies. It, you know, initially give some result. But then it, you know, then becomes quite useless, you know, in terms of added advantage in the marketplace, and sometimes can be at the detriment, you know, in terms of sales growth.

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Abhijit Roy

So therefore, you know, I think possibly it will get slowly phased out.

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Abhijit Roy

It's an initial entry strategy, as was indicated by them, and I think you know it will get gradually phased out. So this is my viewpoint. Things have to be seen, you know, whether this is true or whether this will sustain. One has to see that.

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Abhijit Roy

as far as you know, the painter influencer area is concerned. There, you know.

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Abhijit Roy

So far I don't see any ebbing

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Abhijit Roy

that neither was there any great enthusiasm, nor is there an ebb in that. It is still, you know, hard work in that segment for any new entrant, or even for existing place. We have to really work hard in this particular area.

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Abneesh Roy , Nuvama: And last, follow up question, sir, and I'll end there this 5.5% market share, say, for the new player.

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Abneesh Roy , Nuvama: is it largely in the lower end, because you, who have been there for decades and have done a commendable job, still, you are under indexed in the Mid and premium versus, say the market leader, and versus the brand which got sold. So in that context, obviously, entry barriers in mid and premium are far, far higher. So would you say that this 5.5% market share is heavily over indexed at the lower end.

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Abhijit Roy

So most likely I don't have access to the sales data but I would guess that that is most likely to happen.

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Abhijit Roy

you know, largely because, as you rightly said, in the luxury, premium, luxury, segment brand plays a far bigger role there.

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Abhijit Roy

And you know, it is difficult to change a customer in this particular area, however, you know, at the lower end or at the mid lower end, it is relatively possible, with the effort of the influencers to change

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Abhijit Roy

customer preferences, and therefore, you know more possibility of

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Abhijit Roy

you know the sales getting overly indexed at the initial stage in these category of products.

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Abneesh Roy , Nuvama: Thanks, that's all from me, and all the best. Thank you.

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Bhavik Shanklesha

Thank you. Abnish.

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Bhavik Shanklesha

Next question is from the line of Karthik Chalapa. Please go ahead.

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Karthik Chellappa-Indus Capital

Yeah. Thank you very much for the opportunity. Karthik here from Indus. Capital. Am I audible.

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Abhijit Roy

Yes, you are.

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Karthik Chellappa-Indus Capital

Okay, great. Thank you very much, sir, and congrats on the quarter. So 2 questions from my side. The 1st is with your assessment of the way volume demand is set to recover after the monsoon season, and the way mix has been evolving and the annualization of the price cuts. At what point or in how many quarters in your assessment you think volume and value growth will start to converge.

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Abhijit Roy

So you know, Karthik.

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Abhijit Roy

possibly, you know, for the next 2, 3 quarters there will be some differential between the volume and the value growth largely because of the mix of products, you know, which is growing faster than those which are not growing as fast, you know. So from that perspective. There are 2 categories, you know. One is the texture coating, the other is the tile adhesives

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Abhijit Roy

for us. You know, those 2 categories are growing at a faster pace than, say, some of the other categories which are there in paint right? So, as a result of that. And these are, you know, high volume, but lesser value products doesn't mean that they are less profitable.

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Abhijit Roy

But you know they have. The nature of the product is like that. That it is, you know, voluminous with lesser value. So such a scenario, when you look at it, and since we measure it in Kg. Stroke liter, we all combine it together.

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Abhijit Roy

Then it looks like that. The volume growth is on the higher side compared to the value, and that differential is possibly going to remain at about.

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Abhijit Roy

say, one and a half, 2%. It will narrow down further. It's already at around 3, 3 and a half percent. Now, with the growth rate jumping for regular paint that might narrow down to one and a half to 2%. But you know that differential will remain to some extent.

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Karthik Chellappa-Indus Capital

So, conservatively speaking, the earliest we can expect assuming, if volume growth recovers to, let's say 7 to 9% for us to hit a high single digit value growth. Conservatively speaking, we can probably look at the 4th quarter exit of this year, or possibly in early Fy. 27.

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Abhijit Roy

I think you know, if if all things go well, we can expect that the 4th quarter should be where you know we can expect that, as you are saying, or early next 1st quarter, maybe.

But we would see if all things go well if the rains, you know, stop, and the demand

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Abhijit Roy

should, as I expect, you know, to come back, as it has always happened in the paint industry earlier. Then I think you know 3rd and 4th quarter, we should expect that you know, the value growth will come to a reasonably high level, you know. Possibly close to the, you know, 9, 10% range.

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Karthik Chellappa-Indus Capital

Excellent. My last question, sir, is, if I were to look at the

Standalone employee expenses in the last 5 quarters, barring maybe one quarter that has continued to grow at double digit.

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Karthik Chellappa-Indus Capital

What proportion of that would be, let's say, increase in feet on street versus, let's say, normal salary inflation. And is this also one of the ways in which the heightened competitive intensity is manifesting, whether in terms of retention of staff or higher payouts, etc.

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Abhijit Roy

No, so it has been, you know. We have added genuinely, you know, feet on the street as well.

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Abhijit Roy

But since the you know, as you see, 8 to 10% has been historically there. With us, it's not as if something different is happening now.

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Abhijit Roy

The salary increases. In India, you know, the inflation has always been in excess of 5 to 6%. So

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Abhijit Roy

the increases has always been in the range of 8 to 9% on an average

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Abhijit Roy

that you know we have given. So

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Abhijit Roy

that's something which will always happen irrespective of what is the situation like, unless it's a sort of a disaster

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Abhijit Roy

so as an employee cost to sales, it tends to move up a bit, you know, under the current circumstances, when the value growth is not coming.

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Abhijit Roy

but there's been no tangible massive increase in as far as the employee cost is concerned. The other part is yes, you know we have increased the feet on the street, not only, you know, because just because the competition has come in, but because we feel there is an opportunity for us in certain markets like the urban markets

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Abhijit Roy

where we have invested. So now that investment immediately doesn't give result, it takes a little bit of time. We are very certain that you know from 4th quarter of this year we will see, you know, quite a impact, as far as the urban performance is concerned, for us.

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Karthik Chellappa-Indus Capital

Excellent, sir. One data point, if you can share for this quarter, by how much did the anp expenses grow year on year? Would you be able to give some color.

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Abhijit Roy

So there has been an increase, you know, normal increase would have been possibly around 4 to 5%, maybe on the Amp expense growth. You know, SIM, similar to our sales growth, but a little bit higher, and which is why you know.

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Abhijit Roy

the expenses would have grown at that level. Only notice.

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Karthik Chellappa-Indus Capital

That's all.

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Abhijit Roy

Have you to say.

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Karthik Chellappa-Indus Capital

Okay, excellent, that's all from my side, sir. Wish you and the team all the very best for the remaining quarters.

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Abhijit Roy

Thank you.

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Bhavik Shanklesha

Thank you.

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Bhavik Shanklesha

Next question is from the line of Pratek Gothi. Please go ahead.

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Pratik Gothi

Hello!

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Abhijit Roy

Hi.

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Pratik Gothi

Hi! This is Pratik Gauthi from Hsbc.

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Pratik Gothi

I have a couple of questions. Question one. So the luxury, segment of emulsions. Have we seen slow growth in that particular segment over the last few years?

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Pratik Gothi

And if yes do you think there is some down trading in that segment from, say, luxury to premium? Or is there some other trend at play there would like it? If you throw some light, please.

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Abhijit Roy

Oh, you know, as far as luxury segment is concerned, you know the luxury, interior segment has seen for us some slowdown.

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Abhijit Roy

The luxury exterior continues to do reasonably well, you know, so

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Abhijit Roy

there is no fixed trend which says that luxury is moving, downshifting towards

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Abhijit Roy

premium. As far as we are concerned. The luxury exterior continues to do quite well the luxury interior. You know we are not a very strong player there, but we have pockets of strength.

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Abhijit Roy

and in those pockets we were a bit impacted by the excessive rains which happened, you know. So maybe

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Abhijit Roy

some people postponed or just changed it, and I don't know what the reason is, but there was

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Abhijit Roy

a little bit of a slowdown in those locations, though interior shouldn't have been impacted. Exterior should have been impacted more in rains. But we see the other way around.

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Abhijit Roy

The interior getting impacted a bit more

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Abhijit Roy

so that is what has happened. So I I don't see any secular trend of downshift, you know, happening from luxury to premium category.

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Pratik Gothi

Great. Thank you.

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Pratik Gothi

And my other question is on the industrial business.

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Pratik Gothi

So performance has been mixed, so to speak. Is that the right way to put it.

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Pratik Gothi

Yeah, you can.

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Abhijit Roy

Say that you know some of the categories, like the automotive, did much better

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Abhijit Roy

on the back of, you know, slightly lower basis. You know they did. You know good growth.

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Abhijit Roy

both the 2 Wheeler, the commercial vehicles in which we are present, and even in the joint venture which we are there with Nippon. That did very well, in fact.

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Abhijit Roy

so overall the auto segment did better. Auto refinish grew very well.

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Abhijit Roy

The protective coatings volume growth was quite good.

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Abhijit Roy

but we know we had to cut prices a little bit because in the profitability was reasonably good and the competitive intensity was high. So, therefore, we, you know the value growth was, you know, not as high as the volume growth.

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Abhijit Roy

The powder and the general industries categories. Those 2, you know, had some issue with the demand itself.

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Abhijit Roy

Primarily the fan industry suffered a bit, and and hence

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Abhijit Roy

the gi and the powder! Both of these had very muted growth.

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Pratik Gothi

Okay, that's thank you.

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Nitin Gupta

Thank you. Next question is from the line of sukrit. Patil. Please go ahead.

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sucrit patil

Yes. Good evening. Am I audible?

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Abhijit Roy

Yeah, if you can be a bit louder, it will help.

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sucrit patil

Yes. Am I? Am I audible now?

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Abhijit Roy

Yes.

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sucrit patil

Yes, okay. So I'm a shareholder of your company. And my question is, given the exceptional loss of, say, 36,000 crores 3,600 crores from the warehouse fire and the impact of the early monsoon on volume growth. How is Berger paints strengthening? Is operational

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sucrit patil

this thing. And is there a new risk of mitigation, pre frame frameworks or supply chain.

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sucrit patil

the redundant redundancies billing built to safeguard future profitability.

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Abhijit Roy

1st of all, it is 36 crores, not 3,600 crores.

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sucrit patil

Sorry. Sorry. Sorry.

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Abhijit Roy

Sorry, but.

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sucrit patil

Got it.

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Abhijit Roy

Stock inventory which we had in the warehouse.

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Abhijit Roy

It was an unfortunate incident which was beyond our control, because the fire didn't catch within our warehouse. It it actually happened, you know.

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Abhijit Roy

quite some distance away, but that fire, you know, engulfed some other fire.

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Abhijit Roy

and then we were about, you know 3 warehouses away from it, but our then all the 4 warehouses got burnt down, so nothing that you could have done from your side. We were, we take extreme precaution across our warehouses. We are very well, you know, equipped to handle fire. If it had happened in within our unit, possibly we would have, and unfortunately it wasn't Saturday evening

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Abhijit Roy

when all the employees had gone home. There was no one to, you know. Do the firefighting in case there were some people there we would have possibly tackled it even better.

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Abhijit Roy

but it would have been risky that way.

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Abhijit Roy

The fire engines, you know, came in. Even they were finding it difficult to to control the fire. And therefore, you know, beyond control. Actually so nothing that we could have done. We we do take extreme care, as far as our you know, because we are a, you know category where this is of extreme importance. So rest assured that we have no problem there.

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sucrit patil

Okay. Great. Thank you. Thank you very much.

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Abhijit Roy

Right.

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Nitin Gupta

Thank you. Next question is from the line of Jake Omar. Doshi. Please go ahead.

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Jaykumar Doshi (Kotak): Yeah.

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Jaykumar Doshi (Kotak): Hi! Hi, Abhijit, sir, thanks for the opportunity.

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Jaykumar Doshi (Kotak): I've got 3 questions. The 1st one is in the competitive intensity which you know, you've largely answered.

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Jaykumar Doshi (Kotak): but very specifically, I would like to know

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Jaykumar Doshi (Kotak): that. Whether is there any change in trade schemes working capital credit period that you know the new entrant is offering to its dealer network versus what it used to be 6 months back.

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Abhijit Roy

Hi.

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Abhijit Roy

no, they they have been more or less, you know. They came in with a dealer price list, which was 5% lesser

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Abhijit Roy

in terms of pricing, you know, and schemes which was likely higher loaded than the industry in general.

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Abhijit Roy

But you know I see no major changes, the schemes have become more complicated. It was initially inbuilt scheme which was being given

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Abhijit Roy

most of it used to be 80 90% loaded onto all dealers in a in a similar way. But now it's like any other player, it's become very, you know.

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Abhijit Roy

challenging or complicated, I would say, so

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Abhijit Roy

that's the only change which has happened. I I see no other change which has, you know, happened from what it was there in the.

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Jaykumar Doshi (Kotak): No additional working capital credit period support in case of.

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Abhijit Roy

Not that I am aware of, which which makes you know nothing, has come back which is of significance. I would say.

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Jaykumar Doshi (Kotak): Now, is there any increase in competitive response from incumbents this year especially, you know any rebates or sort of schemes on party or at economy and or in the projects business. So

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Jaykumar Doshi (Kotak): just want to know if you know, if the new entrance sort of stabilizes at 5 6%

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Jaykumar Doshi (Kotak): market share. Would you guys, would you guys actually, now, sort of seize, take an opportunity to, you know, regain some of the lost share.

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Abhijit Roy

So you know, Jay, actually, if you ask me, you know, it is better to remain at a stable price level instead of trying to

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Abhijit Roy

do something, you know, because these things have their own way of stabilizing, you know. So

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Abhijit Roy

we have seen this happening earlier with another player, you know, who had entered in the South. If you recall in in Tamil.

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Jaykumar Doshi (Kotak): My bad.

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Abhijit Roy

And and then they did this exactly the same thing, and when you start withdrawing the benefits to the dealers and the painters, then the sales start, you know.

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Abhijit Roy

coming down, you know, and then you just have to remain steady and keep growing, you know. So there is no point

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Abhijit Roy

trying to, because it destabilizes the rates, and then, you know, the dealers get walked up.

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Abhijit Roy

and then there are a lot of disturbances in the network.

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Abhijit Roy

and that is something which is avoidable, you know. So it, we follow our own policies and carry on, irrespective of what you know others are doing or not doing.

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Abhijit Roy

I don't see that, you know that we would be actually trying to do something, you know. In fact, the

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Abhijit Roy

the game should come back. You know, the dealers will realize that, you know, if the momentum is not there in terms of, you know, movement of the product.

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Abhijit Roy

and if he is not making additional margin from the newcomer. Then why should he try to push that product? And why should he therefore continue in a bigger way with the new incumbent, so he tends to swing back slowly towards the existing players. So that's what

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Abhijit Roy

has happened in the past, and is more likely to happen in the future as well.

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Jaykumar Doshi (Kotak): Perfect, very helpful. Second question is on. We're not hearing a lot about waterproofing construction. Chemicals on, you know, generally paints earnings, calls these days. So is it that you know the low hanging fruit or the initial market share gains from traditional waterproofing players have come through. And now you know, you're seeing broadly similar growth in those categories as you're seeing in decorative paints, or is it only because of competitive?

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Jaykumar Doshi (Kotak): You know, focus on decorative paints, you know, it is not discussed anymore.

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Abhijit Roy

I don't know. Frankly speaking, you know, as far as we are concerned, we see a much faster growth in the construction, chemical waterproofing still continuing for us.

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Abhijit Roy

and is likely to continue in the next 3, 4 years, it is likely to continue at a faster clip so as far as we are concerned. You know this category is growing at a faster pace.

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Jaykumar Doshi (Kotak): Last bookkeeping question on the market share slide where you've shown you've just crossed 21% in one Qfy, 26 in. Numerator is your entire India business decorative plus industrial, both combined.

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Abhijit Roy

That is right.

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Jaykumar Doshi (Kotak): And denominator would comprise of. You know how many players you you've mentioned listed players.

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Abhijit Roy

So so it is. Asian, kansai exo, noble indigo and berger. These are the 5 place which are there

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Abhijit Roy

and the denominator. This is the total standalone value of all of these players, and in the in and our value includes

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Abhijit Roy

2 companies, you know, in addition to the standalone figures, which is Stp.

Which operates out of India and sbl coatings, which is sabu coatings, which also operates within India only. So these are the 2 companies which adds, adds up. And if you add up these standalone figure with these 2 companies, that's where our market share is.

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Jaykumar Doshi (Kotak): Would the trend be broadly similar for decorative paints? Also, if you were to do the same exercise for decorative paint, same set of.

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Abhijit Roy

Yes, more or less, you know, it will vary, maybe point 5.6% here and there, but trend will be very similar.

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Jaykumar Doshi (Kotak): That's it from my side. Thank you very much, and good luck.

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Nitin Gupta

Thank you. Next question is from the line of amit purohit. Please go ahead.

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Amit Purohit

Hi, sir! Good evening. Thank you for the opportunity. Am I audible.

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Abhijit Roy

Yes, you are amit. Go ahead.

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Amit Purohit

This is just on on the growth trends one wanted to understand you clearly.

Highlighted that you are doing, not anything much. We are waiting for

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Amit Purohit

the things to happen, which is a natural progress, that as the dealers realize that margins are less and velocity is low, they will come back. But I just want to understand within the incubments when I look at growth trends this quarter has been slightly. We've seen the leader doing a relatively better versus its own performance and our gap kind of narrowing. Would it be more because of the regional, or it would be more because of the

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Amit Purohit

products mix that would have led to this slightly gap in reducing. I know it's a quarter thing, but just wanted to have your thoughts.

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Abhijit Roy

No, it's, you know, see?

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Abhijit Roy

difficult to say for me, you know.

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Abhijit Roy

on this type of a situation we have continued to do what we can do

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Abhijit Roy

what the leader does, or what the gaps are. Sometimes, you know, they do.

Well, sometimes they do little worse than us, you know. So

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Abhijit Roy

it's it's always, you know, difficult for us to justify the gap, increasing or decreasing. Right? You know. Sometimes, you know, there are

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Abhijit Roy

extraordinary events happening for them as well, you know, so which can create, you know, gaps which are higher. Sometimes it is not so, and you know it is normalized business, and then the gaps get narrower. So

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Abhijit Roy

nothing that I can comment on it is not something which is

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Abhijit Roy

within our control as well. We keep doing what we can do best, and hope that you know we are ahead of the pack

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Abhijit Roy

as far as the industry growth is concerned. Wherever it is, we should be ahead of that by at least 2, 2 and a half percent. And that's what we maintain.

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Amit Purohit

And, sir, second question on the industry growth itself. So you clearly highlighted that as the rain I mean season gets lower if we expect the growth to come back.

But I'm I'm just trying to think about it on a yoi basis. The I mean rains remain right in July, and since there is still there is a demand is muted

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Amit Purohit

would would that be a point of a concern as we go ahead, or you think the base effects will help probably help us, and hence the growth will improve. Because I I understand Q.

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Amit Purohit

Onwards the base for our industry growth started to become much more muted.

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Abhijit Roy

Yeah. So you know, the base effect will help definitely in the 3rd and the 4th quarter, you know.

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Abhijit Roy

Overall that should be a positive, for you know most of the players.

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Abhijit Roy

but you know, as far as the rains are concerned, it has been relatively heavier.

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Abhijit Roy

and we expect that you know normally, when it rains much more heavier than normal. The damage is also to the wall is much higher, so the demand tends to pick up, you know, after the rains a bit, so we expect that you know that there will be good movement, you know, towards the second half of the year.

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Abhijit Roy

coupled with, you know, relatively lower basis the growth rates should pick up in the second half.

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Amit Purohit

Well, thank you for the clarification. Thanks a lot. All the best.

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Nitin Gupta

Thank you. We consider that as the last question for the day, I hand over the call to management for closing remarks.

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Abhijit Roy

So thank you all for coming and taking time out and attending to this meet, you know. Wish you all the best. Thank you very much.

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Nitin Gupta

Thank you on behalf of Mk. Global financial services that concludes this conference. Thank you for joining us.