Asian Paints Ltd

NSE:ASIANPAINT

Q4-2025 Earnings Call

[Operator]

Good evening, all of you, and thank you for joining us today to discuss the Asian Paints Q4 and Full Year 2025 Earnings. I am Jay Lakshmi Gupta from the Investor Relations team. We have with us today our MD and CEO, Mr. Amit Syngle; our CFO and Company Secretary, Mr. R. J. Jeyamurugan; and Mr. Parag Rane, AVP Finance. I would now like to invite Mr. Amit Syngle to give his opening comments.

[Amit Syngle, executive]

Hi. Good evening. Good to see everyone here. I think a lot of people are attending online, and we have a mixed crowd in terms of someone turning physically and someone on the online. So I think we'll start with the opening areas in terms of what we are looking. First of all, I wanted to just talk about the core value at Asian Paints, which is what we have been doing since 1942. It's all about looking at existing to beautify, preserve and transform all living spaces, objects so that we are able to bring happiness and joy to the world. I think that has been the core value in terms of what we have looked at. And through this process, appropriated not only homes but looked at any surface which really comes a way in terms of what we can do in terms of really looking at a transformation in that piece.



The standard disclaimer in terms of how we look at from the point of view of how it goes by. So overall, I think it was a tough quarter in terms of the demand conditions being pretty tough in terms of how we could kind of look at. And from that perspective, I think it is -- if you see the overall numbers, the volume growth in the quarter 4 is about 1.8% in terms of what we have got. And the value is a degrowth of about minus 5% in terms of what we have for the quarter. If you look on a 12-monthly basis, then we are up by about 2.5 percentage points. And on a value, we are down by about minus 5.7%. So overall, even from a year perspective, all of you have seen that through the various quarters, it has been overall fairly tough in terms of how we have seen the overall paint industry this year, and that is something which is possibly reflected also from the weak demand conditions which we have seen throughout the year in terms of what has kind of come by.



So I think the decorative business has been far more affected than the industrial business. So when we kind of add the industrial business, Overall, the industrial business seems to be doing much, much better in terms of the overall growth. When I say industrial, it includes auto, it includes industrial paints in terms of the protective coatings, which are there, powder and refinishes, all these paints are clubbed under industrial in terms of what you see. I think this is something which has been overall growing quite well quarter-on-quarter in terms of what we have seen. So if you add these numbers, obviously, the volume growth goes to 2.1% on a quarter 4. And the -- for a value, the value growth also kind of goes up, and it is at minus 4.1% in terms of what you see. On a 12-monthly level, the volume will stand at about 2.8% and the value at about minus 4.6%. So you could see that because of the industrial, this is something which is there.



Also to note is that overall, the industrial trajectory seems to be kind of really still going quite well overall in terms of what we are able to see in this year. This is something which some of you have been seeing in terms of our overall trajectory. The CAGR numbers, which is the 5-year CAGR numbers over the various quarters have been still very, very strong in terms of what we have been able to achieve, which kind of just shows the health of the organization from a point of view of last 5 years in terms of what is we have grown. Obviously, I think last 2 quarters have been a little bit lower in terms of from the CAGR perspective only, but I think we continuously keep on looking at driving the growth overall from the point of view of going forward.



As I said, overall quarter was kind of affected by the weak demand conditions in terms of what we were able to see. Like last time, we said, the T3, T4 Tier cities did relatively better as compared to the Tier 1, Tier 2 cities to that extent. So therefore, I think the urban centers were much more slower in terms of what we have been able to see overall to that extent. And this is a trend which continues into the fourth quarter in terms of what we have seen. Overall, our initiative in terms of looking at more distribution points as the country continues to expand, both from a point of view of suburbs, which are there in terms of the larger cities or from the point of view of smaller towns expansion, I think that foray continues. We have almost about 1.69 lakh touch points in terms of what we have kind of created over a period of time, and that is a fairly strong number in terms of how it kind of comes and this keeps on increasing quarter-to-quarter and over the years in terms of the numbers has really gone up.



The other advent has been in terms of the area of services. I think that has been a very strong focus at Asian Paints, and this is something which we have been really taking very, very strongly. And therefore, the whole area of really taking the trend of service economy and really riding it from the point of view of what we offer is something which we are fairly strong at in terms of what we have done. The service now has been in operation for the last about 6 years strongly. Earlier, we used to run something called the Home Solutions and then now it is more like a franchise service in terms of what we run across the country. And this service has given us large dividends in terms of gains which are there. We are present across more than 600 cities and towns across the country. And this is something which basically helps us reach the consumer literally directly in terms of looking at working from a point of view of CRM and really associating with trends which are happening at a consumer level to that extent. So I think as part of our service foray, this is a strong service in terms of what we are anyway running.



The other area which has done extremely well is the area of B2B is what we call. And now this area literally becomes what we call as the B2C, which is directly to some of the smaller builders in CHS. It is B2B to large corporates and large builders and key accounts and B2C, which is directly to the government. So that is the constitution of the overall B2B business in terms of what we look at. And this is a strong foray, which has been growing again over a period of time. And in Q4 also, we have seen a fairly strong trajectory in terms of how -- what we have been able to deliver from the point of view of the overall B2B business, which has come in. When we look at from the point of view of innovation, that is something which you are all aware that Asian Paints has been strongly straddling this space in a very big way.



Last 5 years, we have seen almost close to about 300-plus new products in terms of what we've been able to launch across the market because we truly believe that the brand is really making differential propositions in the market to excite the customers and the dealers to that extent. And therefore, this continues to be a big initiative. We have more than 130 patents in terms of what we have and created in the last 5 years. And more than that, this trajectory has created in quarter 4, almost about a 14% contribution to the top line in terms of how it comes. So very strong initiative from a point of view of innovation in terms of what is there. The other big strategy which we had taken on course was the area of backward integration. This is something which you are all aware that we invested into a white cement plant, which is what we had done at Fujera in Dubai, a plant of 2.75 lakh tonnes capacity, which is there. The plant should be operational by June of this year to that extent. And we will continue to kind of really look at white cement coming from this plant for us, which is the first foray into cement in terms of what we are looking to that extent.



The second big investment has been in terms of looking at the most progressive emulsion, which would be there, and it is a futuristic project from a point of view of an emulsion, which will be environment friendly. It is futuristic and only about 4 players in the world have technology for it. So this is the first plant we are putting up almost with a CapEx of more than INR 3,000 crores in terms of what we are kind of putting into that extent. And this should be operational partially in the month of March, April of 2026 and fully by April of 2027. So that's how the trajectory of this plant would be there. And we believe that once these forays are complete, they significantly add to our overall margins in terms of the game we are able to play, plus also from the point of view of innovation in the products from the qualities which we can impart. So I think very strong objectives which we have kind of put on to place.



The other strategy has been on premiumization and really kind of associating with the consumer very, very strongly in a category which always is something which is more like an interaction once in 5 years, which the consumer faces. So as part of this, our premiumization drive, we have really revamped our packaging -- and today, we can claim that it's one of the best packaging in terms of what we see today across the industry in terms of what is there. We keep on doing innovations here. What you see on the screen is the innovation which we did as part of the pack of making the regionalism come far more strongly so that we are able to really be closer to the customer in the region. So you've seen the phenomenon of IPL in terms of how IPL has created a regional for, riding on that same flavor, we are doing now regional packs, which kind of take the culture of that region and really create an association of a consumer, which is far more strong. And that is something which we did in this pack, which is a freemium exterior coating called Altima in terms of what is there.



So it was used with technology. So if you have a QR code, you just click it and you really get the flavor of that entire culture to that extent. So I think quite innovative. First time in the industry, anyone has done this kind of a zone. And it kind of brings us very close to the consumer and a drive for premiumization strongly. Not only that, these are more examples of our regional packaging, which has been done. You can appreciate the fact that today, for the kind of size of supply chain we have to kind of really look at regionalism, I think it is a very strong customization story in terms of what's coming in. And we are finding that all the places where the regional packs are going, we are definitely getting a higher traction in terms of overall growth, which we are able to get. So from a premiumization perspective, this really works very well for us. Not only that, it's also about the whole new area of ingredient marketing in terms of what we have looked. So, each of the packs now today, we talk of an ingredient, which kind of lends special properties to the pack. So what you saw -- what you see in the screen is a pack, which is of Altima Protect. It has a special ingredient called graphene, which by virtue of its own kind of existence is a very special raw material, which adds to the strength of the overall coating in a very, very big way. And that is why it adds to the durability and the warranty of the product to that extent.



So I think, again, differentiation in terms of looking at ingredients and now this ingredient story comes across our various products in premium and luxury. So in Royale, we have something called a Teflon. And in some other products, we have something which is called a PU serum and so on and so forth. So lots of areas of looking at strengthening our products, our quality in terms of what we are able to do with new age materials, which are kind of coming into that extent. Second, looking at products which can never be imagined or thought of. The example of SmartCare Infinia in terms of what you see, it is a futuristic product with almost what we call as a lifetime warranty, easily can go beyond 25 years of life for terrace waterproofing. It's really a high-end technology product, which has been introduced by us in terms of what is there. And not only this, we keep on looking at expanding our innovation with respect to various areas, so whether it is tools or rollers in terms of what we have or it is from the point of view of any other areas which are relating to waterproofing or to wood finishes and so on and so forth.



So just to kind of give you a flavor that this is a continuous path in terms of what we are taking strongly to that extent. Not only this, I think while premiumization is one of the objectives, the other big area is to keep on looking at exploring the bottom of the pyramid far more strongly, looking at getting the unorganized customer into an organized brand. And from that perspective, we look at this entire campaign, which is the start point of an emulsion, which is there, which is the ACE and the tractor emulsion in terms of what we have, where we get the person who is a value seeker in terms of buying a product to give him the value proposition coming in strongly. So that's why the whole area of a proposition of budget come warranty kind of a zone, which comes in. So a person buying is comforted that he's getting something in a certain value. At the same time, something which is durable comes with a warranty and comes with the trust of Asian Paints very, very strongly. So I think that's again a very strong campaign, which we have unleashed in along with IPL, and that is something which is even playing now as we kind of really enter the months of April and May to that extent.



So that was a strong thing in terms of what we did in Q4 to kind of really rejuvenate some of these products and look at basically bringing some excitement at that level to that extent. The other big area in terms of what we invoked, all of you are aware that Harihar has been a very strong strategy and a corporate positioning in terms of what we have taken. We really looked at the fact that today, given the large portfolio, one of the things which we really stand out is the fact that the quality which we give and the kind of durability we are able to offer is very, very strong. And given the fact that you talk of a certain kind of a share in the market, we almost spoke of that every second house is today painted by Asian Paints to that extent. And this has been a legacy of the last 80 years in terms of what we have seen. Given that kind of an overall presence, we felt -- we really kind of researched and looked at physically shooting 12 to 14 homes across the country where possibly these are real shoots where we looked at houses painted with Asian Paints and how they really bring about the whole area of warranty and credibility and trust far more strongly. So we say it's a winner campaign in terms of what has been running, and this is something which we launched in Q4 and now running into April and May, just to kind of give you the idea in terms of saying that today, warranty for Asian Paints would mean that H.



Let's take a look at this visual piece. So, I think it's something which has really caught the fancy of the consumer, touched the consumer right in the heart because it's a real campaign. It's not something which is conducted. It's something which is real, what you see around to that extent. And I think really says a lot in terms of possibly the whole area of emotion every home brings along with a sense of trust and durability in terms of what it conveys from a warranty point of view. So I think that's what we ran. And as a continuation of the herger, we felt that not only surfaces, we need to look at spaces, and that is why we appropriated entering into home decor. So in home decor, we talk of surface decor, which is all about the surfaces. And we talk about the space decor, which is there. And today, I think one of the things to understand is that it is something which is a very strong diversification because what we speak is that today, when you make a new home, only 2% of that cost is paint. But when you look at the full home in terms of the space, you have very high spends which happen in the home with respect to all other categories, whether it is furniture, furnishing, kitchen, bath, flooring and so on and so forth.



So the idea was to kind of extend the same customer who's into painting into getting into home decor because painting is episodic. It happens once in 5 years as a maintenance cycle, but home decor is a continuous process. So you keep on doing your home, whether it is a cushion, whether it is a furniture, whether it's a lighting. So I think it's a continuous piece. The idea was that the brand always is part of the decor life cycle of the customer in terms of what is there. And that's how the whole home decor piece kind of comes into place to that extent. We've been strongly kind of looking at the strategy as an integrated strategy for the last about now 4 years to that extent. Earlier, we had kitchen and bath, which we had purchased separately as an acquisition, which is what we did. But I think last 4 years, we have been into this foray of home decor, where we've looked at possibly spaces which can offer home decor under one roof. As part of that, we have our Beautiful Home stores, which are today about 67 stores across the country in 53 cities in terms of what we have. And they are very strong proponents of offering integrated home decor under one roof. And that is why we say that we are now #1 players in terms of offering an integrated home decor.



As part of this, if you look at the kitchen business in modular kitchens, we are #1. We -- as part of decorative lighting, we acquired White Teak. We are #1 in terms of the lighting business to that extent. We also have a bath brand called SS to that extent. We have aligned with a brand called Pure in terms of looking at furnishing. So lots of areas, a lot of kind of collaborations with Sabyasachi, Sarita, Handa and so on and so forth to offer a full package of home. So now we talk of full homes from a herger perspective. Surface decor and space decor combined in terms of what we speak of. So while I think this strategy we have taken the last year, overall, we looked at even kind of exploring that space even more. We found that today, if you look at -- we were there at the premium segment, but at the luxury segment, it was a vacant position. And therefore, we looked at opening world's first design destination for a global luxury in Mumbai. This is a 1 lakh square feet space, which has been opened in Lower Paril in Mumbai called the Nilaya Anthology, Nilaya being our super luxury brand in terms of what we speak of. And this is a design destination, which basically looks at really celebrating art culture and design in a very strong way.



The whole concept is based on confluence, confluence of India design and international design, where you kind of find the best of art, artisanal, cultural stuff as well as the best of international design in furniture, kitchen, furnishing and so on and so forth, every category combined together to that extent. So if you got a chance, possibly do visit, this is one of the best stores across the world in terms of what you see, kind of really places Asian Paints right up there from a point of view of luxury positioning, which is no one else has kind of taken this positioning today in the market. And it's not very easy to kind of really go into a luxury positioning to that extent. And along with this, we are launching -- we have launched Nilaya emulsions, which are there, which kind of really integrate with the concept of luxury, which comes in strongly. So that's how it kind of really integrates in terms of taking forward. Not only this, we have looked at very, very premium beautiful home stores now, which has come in. We have in a city like Bombay, we have 2 very big stores, one of almost about 14,000 square feet in Borivali and the other of about close to 15,000 square feet in -- on the Linking Road in Bandra West to that extent. What you also see is a store in Surat, which has been put. Another store has been put in Guwahati.



So I think today, this is a very strong spread in terms of offering home decor under one roof to that extent. So while I think these are initial stages, I would say, it takes time to kind of build up this category because all of you are aware that today, the home decor category is a large unorganized sector where it kind of really dominates. So I think last year, again, for home decor has been tough in terms of what we have seen. This is a glimpse of the wallpapers we do in terms of the textures, wallpapers we bring to the fair. So I was talking about the industry being tough last year in terms of what we have seen overall. So from a point of view of -- if you look at both kitchens and bath, okay? Kitchen has been again flat in terms of what we see overall to that extent in terms of what we have been able to achieve from a point of view of the overall 12-monthly performance, whereas from a bath perspective, we have seen some single-digit growth, which have kind of come in to that extent. But I think the concern here is that in both the categories, there is a certain loss which we are making in quarter 4 and as well as for the year. And that is something which we need to set it right as we are kind of going ahead.



Secondly, we faced a lot of headwinds in White Teak, for the last 5 months, we have not been able to really build anything to that extent, which has taken a toll with respect to overall this thing, given the fact that the -- there are some BIS specifications which come in and a lot of input comes in from China. So I think we have been able to -- we have been stuck in White Teak and not able to really look at any selling which has happened in a big way in terms of the last 4, 5 months, leading to possibly a negative degrowth, which has happened with respect to this. Again, in Weatherseal, which was a brand which we acquired 2 years back on doors and windows. Top line, 2 years, the growth was good. This year, the growth is there, but very, very small in terms of which is there to that extent. Again, muted demand. But again, I think this is something which we are looking strongly even from the point of view of what we are able to build together as we grow ahead in terms of the profitability. But we must understand that all these are the constituents of that integrated home decor, and that is why we have to carry all these categories in terms of what is there. And that is something which we are still committed to in terms of how we would kind of really take it ahead.



Coming to AP Global business. Again, this is spread across largely in terms of Africa, Middle East and Asia in terms of what you see in terms of the locations. Overall, another challenging year in terms of global in terms of what we see. Overall, from a perspective, we see that in quarter 4, we were at about minus 1.5% kind of a zone, which is there, although in constant currency terms, we were still at about 6% in terms of what we saw. However, from even a yearly perspective, overall, we are just at about base in terms of the overall numbers in terms of what it pans out from this thing. Largely, if you look at the geographies of Middle East and Asia have done relatively better. However, I think Africa has underperformed where we have been seized by the devaluation in terms of the currency, which has been happening, which has taken a toll with respect to both the top lines and the bottom lines in terms of what we have been able to register. So even from a point of view of overall PBT, we see a decline, which has happened in AP Global this year overall to that extent. So that is how overall the profitability has also suffered as a combination of one, which is market-led and second, from a point of view of currency devaluation in terms of what we see. So that's the global business for you.



Looking quickly at the industrial business. Again, this business, as I said, we have 2 joint ventures with PPG. PPG is one of the largest coatings company worldwide with a large base in U.S. Some these JVs have been now existing. One JV has been there for more than 25 years. The other has been there for more than 15 years to that extent in terms of what we have been doing. If you look at the performance of PPG AP, which is a JV, which is with auto and auto refinishes largely marine business to that extent. That is something which overall has grown this year to that extent. And what we see is that from a point of view of overall perspective, in Q4, we see almost about 3% kind of a growth, whereas for the year, the growth is close to about 6% in terms of what we are able to see to that extent.



However, from a profitability point of view, while Q4 was a little bit depressed, overall, the business has done well. We see almost about 14.6% in terms of looking at the PBT margin, which was there last year. This year, it is about 12.1% -- from APG point of view, Q4 has been a strong revenue growth, almost double digit, 10% in terms of what we have kind of got. And the growth is across business segments of powder, protective and so on and so forth, which is there. However, PBT margin has been something which is under pressure is about 8.3% vis-a-vis 10.7% of last year in terms of what we have seen. But overall, top lines have been strong in terms of what is there. For the year, both businesses combined together, you see a top line of almost about a 6% value in terms of what has come in to that extent. So that's the industrial business in terms of what is there.



Just to give you an idea in terms of what's happening from a point of view of inflation, deflation overall, if you see the last quarter, we see -- saw a deflation of about 1% to 1.5% kind of a deflation in terms of what we have seen. We have done a small price decrease of about just 0.4% overall in terms of what we have looked at to that extent. But overall, this year, it has been fairly good. We have not seen any big inflations, which are there to that extent, and that is something which has been an overall good trend in terms of what we have been able to see. Now if you look at, therefore, the financials in terms of how these financials pan out, it is very clear that overall, the value has had an impact with respect to the overall margins. We have seen some bit of down trading, which has really happened. I spoke of the stand-alone at about minus 5%. From a point of view of gross margins, they have gone up. Combination of some deflation and some of the work which has been done from a point of view of sourcing formulation efficiencies in terms of what we have brought in. So the gross margins is at peak in a way in terms of what we see, almost about 44.9% in Q4, and this is an increase over what we have seen of Q4 over last year to that extent.



Overall, PBDIT margins are in the zone of our guidance of 18% to 20% at about 18.5%, although they are a notch lower than Q4 of last year in terms of what you see and also sequentially a little bit lower than that of Q3 in terms of what we have seen. So I think that's how the overall numbers stack out from a stand-alone business. From a consol business, if you look at, obviously, since stand-alone is a big part of it, the top line trajectory is a decline of 5.4%, given the fact that even global markets have not really grown to that extent. Gross margins are at about 43-odd percent, which is 42.9%, a little bit decline over last year in terms of consol, what we are able to see. PBDIT margins are still good at about 18.9%, although lower than what we have seen last year to that extent. So I think that's how the numbers stack out from a point of view of both stand-alone and consolidated business in terms of how we are able to see it to that extent.



When we look at from a point of view of the consol -- sorry, I just missed the point last -- what I said was for the stand-alone, which was for quarter 4 and for the year. For the consolidated now for the quarter 4 in terms of what we are looking is almost a gross margin of about 43.7% in terms of what is there, which is an increase over Q4 of last year as we have seen in the overall business in stand-alone as well to that extent. Then we look at from a point of view of gross margins, we are at about 43.7%. PBDIT margins are at about 17.2%. So here, there is, I think, a little bit lowering of the margin, which is there, which is something which is a concern in terms of what is what we are looking at. If you look at from an FY '25 perspective, for the full year in terms of consolidated, again, the sales have declined by about 4.5%. Gross margins are at about 42.3%, almost about 100 bps decline, which is there. And in terms of PBT margins, it is 17.8% in terms of what we have overall.



So if you look at from a point of view of both stand-alone and consolidated, obviously, the gross margins have gone up, but the PBDIT margins have come down a little bit to that extent overall from last year as well as sequentially to that extent. So that's the stand-alone and the consolidated business in terms of what you see. Some exceptions, which I must highlight overall. So we have taken an impairment in terms of White Peak. This was -- obviously, we've seen that today, we had to take a provision because of the fact that the trajectory of the business was not as per what we had kind of really predicted. And therefore, a fair valuation loss on derivative contracts for the future stake purchases is what we have taken. If you look at it, the total impairment provision on goodwill consolidation is INR 77.8 crores. On stand-alone, the impact is about INR 78.5% in terms of what we see. So that's on White Peak.



Similarly, there has been on the consolidated financials, what we have seen is an impact which is there from a point of view of some other exceptional items. We had announced our divestment in terms of the Indonesia operations, which were there. And therefore, with respect to that, there is a recognized loss of about INR 83.7 crores in terms of the consolidated financials is what we have taken for the quarter. And then we have a company which we acquired in Sri Lanka, Causeway Paints. And there, we have taken an impairment loss of about another INR 21.5 crores, which is the goodwill on consolidation, which comes in. So I think these are the special exceptional items for the quarter 4 financials in terms of what we look at in terms of what has come about.



Overall, I think, yes, we'll be curious to see in terms of how we are looking at quarter 1. Obviously, the larger area is that you don't see too much in terms of -- from a point of view of demand coming back very, very strongly. While the Tier 3, Tier 4 cities are betting a little bit better, I think it is still a cautious optimistic mood in terms of what we are taking in terms of looking forward in terms of how it will go. Monsoon prediction has been strong. So I think that is a positive point in terms of what we look forward to. Overall, I think there is an element of flux, which is happening from the geopolitical situation, which is going around. We'll have to wait and see in terms of how things kind of really mature there in terms of their overall normalcy, which kind of comes into that extent.



So given that, I think -- and we're seeing the certain demand, which is there, we are still kind of cautiously optimistic about the coming quarter in terms of what we see. So that's our overall this thing. Just a quick point. The dividend payout is something which you have seen consistently we have been able to kind of grow and maintain. We have taken a dividend payout at 60% as well for this year in terms of what has been put into that extent in terms of what comes in. Just a bit in terms of the ESG bit, which has been a core to our strategy in terms of how we are building up. I think on all the fronts, whether it is environment, social or governance, strong imperatives, strong commitment in terms of what the organization is showing and taking it ahead in a big way to that extent. And that is something which we have seen strongly. So overall, from a point of view of how we have looked at our numbers in terms of going forward, today, the current status is that all the numbers seem to be growing strong from the point of view of what we have done.



So whether it is from the point of view of freshwater replenishment or it is from the point of view of greenhouse gases and therefore, the footprint reduction with respect to the CO2 imprint or it is from the point of view of specific affluent, I think that is something which has been strong. And from a social point of view, we run something called the Beautiful Homes Color Academy. Where we are able to really work around the livelihood of so many people who are plumbers, carpenters and painters. And that is something which has been a very strong imperative where we are able to train more than 8.45 lakh people in a year. So I think that has been a strong imperative from a social point of view, and these are what we are kind of committed to in terms of looking forward. So I think well on to our overall targets numbers in terms of what we are kind of taking to that extent, and that is something which we are confident in terms of what we should deliver to that extent. So thank you for that. And this is what you see is the -- our association with Start Foundation, where we look at democratization of art across the country as our foray into color very, very strongly. Thank you so much.

[Operator]

Thank you, Mr. Amit, for your opening comments. A very good evening to one and all present here. Today, we have participants who have joined us physically as well as virtually on Zoom video platform. [Operator's Instructions]

[Abneesh Roy, analyst]

I have 2 questions. My first question -- so I'm Abneesh Roy from Nuvama. My first question is on the warranty bit, which you discussed in the presentation. One is, is there a cost escalation because of this? Because I remember earlier, it was more of a 3-year warranty. Now you're talking about 4 years. And in some products, you are talking about 25-year warranty on the rooftop. So is there a cost escalation from a raw material perspective and from a claim perspective? Because obviously, from 3 years, you move to 4 years. And how important is this from a consumer decision perspective, given the competitive scenario and the new player was more on slow 4 player and now you're matching that. So how important and how it will help in FY '26?

[Amit Syngle, executive]

So I think, first of all, when we have looked at seeing our warranties, we have looked at our formulations and the formulations have been done in such a manner that the overall margins which we derive out of the product, we don't have an impact from a cost perspective to that extent. So it's more a chemistry marvel in terms of what we have kind of put in terms of looking at the innovation which comes in the formulation to that extent. That's point one. Second, warranty becomes a de facto correlation to the quality of the product to that extent. So it's not necessary that every customer will look at 5 years or 10 years or 15 years in terms of repainting, which is there. But it becomes definitely a strong correlation with respect to how you perceive the quality of the product, and it gives you an assurance in terms of that this product is if it is going to be talking of this kind of a warranty. It's looking at possibly giving me this kind of durability over a period of time to that extent. So we think the relationship of the customer with the warranty is very, very strong in terms of what comes in. And in fact, Asian Paints was the first one to introduce warranties about 20 years back in terms of when we started looking at all these warranties coming into picture to that extent. So I think that's how we kind of look at, one, cost neutrality; second, from a point of view of looking at these warranties becoming a very strong signature of your trust on durability and performance.

[Abneesh Roy, analyst]

One related question to my first question is in terms of advertising, the new player which entered a few quarters back, if I see their advertisement, they are talking that why continue with the legacy brand, and they are trying to connect with the Gen Z and the new age customer. I understand the warranty bit helps from a quality perspective, but how are you addressing this aspect?

[Amit Syngle, executive]

See, overall, today, when a customer is buying, customer is today relating to a lot of new stuff in terms of what we are doing. So for example, we recently launched what is called Chromacosm, which is the world's largest color system, which offers more than 5,300 shades. So this is today the world's best color system in terms of what we have in terms of what is launched to that extent. Today, we offer more than 1,000 shops across the country, which offers the best color consultancy, which is offered, which is what possibly any Gen Z or a millennial customer would kind of really look at from the point of view of appropriation when they are looking at it. Today, I think the most important part is the visualization. So the work we do on digital, whether it is with apps or whether it is on our website is absolutely led through artificial intelligence and looking at all the latest stuff which kind of comes in from the perspective of what it influences the customer.



So I think saying is something, but people experiencing it is something very, very different to that extent. And as we know it today, possibly we invoke the latest and the best technology. So one technology is signified by the innovation which you are bringing. So for example, a product which is -- can last on a terrace waterproofing for 25 years is a sign of innovation, which really connects with a modern age customer to that extent. Secondly, the work around color consultancy, color in terms of what you do is something which is there. So I think we believe that as a brand which has been there for so many decades, we don't have to go on the rooftop and shout that what we are not doing or what we are not changing. We believe we are bringing the customer the latest.

[Abneesh Roy, analyst]

My second and last question is on the divestment, which you did in Indonesia. Now in international markets, if I see Sri Lanka has been challenging in FY '25 and Africa, Egypt, et cetera, have been challenging now for many quarters. Similarly, in Home Decor, if I see you have listed 9 verticals and you have taken impairment losses in that in this quarter and earlier quarters also in some of those. My question here is, are you evaluating more such divestment in international in any of the markets? And even in home decor, would you now need to evaluate whether you need to exist in all those 9 verticals?

[Amit Syngle, executive]

So how we see it from a global perspective, right now, we are looking at more at consolidation in terms of what we want to do because now some of these units are not of a small size, except for South Pacific operation in terms of what is -- what we have is a small operation. Our presence in Middle East is now big in terms of what is there. Similarly, when you look at Bangladesh and Sri Lanka, I think the investments are big in terms of what we have made. The entire foray there is to kind of really see that you are amongst the top 2 players in those countries. That is something which is what our belief is in terms of really strengthening our position to that extent. Similarly, when we look at from a home decor perspective, I was just explaining the rationale in terms of why home decor because as part of our corporate positioning, we are the only paint players possibly who are into the whole area of home very strongly. So there is no one which is appropriating home in such a way in terms of what we are doing because we believe that if you are part of the decor life cycle of the customer, then whether it is a rented home, whether it is a first home, it's a renovation, it's a second home or even a kids home, you are part of the decor life cycle of the customer very, very strongly in terms of what we believe. And therefore, I think there also what we are looking at consolidation. We want to say that in all the brand spaces, if you are not 1 or 2 in terms of looking at the businesses, we should not kind of exist there as we kind of go forward. At this stage, I think the other foray there is to offer a complete offer to the consumer so that we are able to kind of really say it is truly decor under one roof in terms of what comes in. And similarly, I think in the paint business also, we have looked at waterproofing. We have looked at textures. We have looked at tools to kind of really complete the overall offering in terms of what we are able to make. But everywhere, the endeavor is that if you have to exist, you have to really look at #1 or #2 position being there.

[Atul Mehra, analyst]

Atul Mehra from Motilal Oswal Asset Management. Sir, if we look at the current financial year gone by, it is by far like one of the worst financial years we've had in a long time.

[Amit Syngle, executive]

Yes.

[Atul Mehra, analyst]

So how much of this would you attribute to new competition? And how much of this would you attribute to the broader economy? So that's the first question, sir.

[Amit Syngle, executive]

So as we see it, I think if you look at over the last 2 decades, and this is something which I had commented last quarter as well, we have not seen possibly demand conditions like this on the paint industry ever like this to that extent. So if you look at the overall organized paint growth, especially in the decorative sector, it is negative this year, okay? And if you trace back for the last full 2 decades, there's not a single year where you have got a negative growth in terms of the paint industry to that extent. So I would say that one would largely attribute it to the slowing down of the market in terms of what has happened. Demand conditions being very, very challenging, both from the point of view of new construction, second, from the point of view of repainting. And third, to some extent, while the B2B business is good, but it is not compared to what we have seen in the last 5 years or so to that extent. So I think that is one answer. The second is, while we have always seen competition in the market, we've had newer players like JSW and Indigo and so on and so forth, which have come into the market. Yes, this year, we have seen 3, 4 new other players which have kind of come into the market to that extent. So I would say that possibly to some extent in a market which is already slow, the intensity of competitive action has been much more as well to that extent. So to some extent, it is, I think, a double whammy in terms of is a combination of the market slowing down, plus in terms of the increased competition coming from both the existing and the newer players in terms of what we see.

[Atul Mehra, analyst]

And sir, secondly, in terms of -- given what you said in terms of increasing competitive intensity, so what is our strategy going to be to defend market share, to defend profitability. So if you can talk a little bit about how we plan to come out of this particular competitive environment in a positive way.

[Amit Syngle, executive]

So I think our stand is very clear that we would kind of look at playing to our strengths in terms of what we would like to kind of do in terms of this environment. I think the whole area of Asian Paints, bringing a certain quality, bringing a certain kind of loyalty, bringing a certain value to the consumer is something which is very, very important because we believe that if your value proposition is strong, the customer will buy into it. It's not a question of just discounting. It's not a question of offering something very cheap to that extent. It's the value which really counts to that extent. And therefore, we would continuously play on the value proposition very, very strongly in terms of what we want to offer whether it is from the point of view of economy, whether it is from a point of view of premium or luxury, I think the proposition is very important in terms of what we have been fighting on and which we will continue to fight as we kind of really go ahead in terms of looking at the market. We also believe that we have a very, very strong network. I spoke about 1.69 lakh distribution points to that extent. And I think that's the other area which we will keep on expanding to that extent in terms of looking at. As I see it, I think the moment the demand conditions are back, I think we would see much better kind of a performance in terms of what is there overall as we see ahead. I think from a competitive intensity, some of it will continue. I think, but it has to be kind of really countered only to an extent possibly that it doesn't go beyond a certain value in terms of what we are able to offer to the consumer.

[Latika Chopra, analyst]

This is Latika from JPMorgan. Just extending from the previous comment that you made, clearly, competitive intensity of acknowledge is going to stay high. Just want to get a sense, check on, do you see a downside to this 18% to 20% margin guidance that you have shared, considering there is -- you sense there's more need to spend in the market, whether in terms of increasing the brand loyalty part, visibility part, improving the value proposition further, probably investing in more in the market. Any thoughts on that? How are you thinking about it?

[Amit Syngle, executive]

I think there is no 2 ways about it that possibly you will have to spend more in the market, very clearly. So whether it is from a point of view of building the brand, or whether it is from the point of view of looking at seeing that you are present across the country in terms of your distribution spends in terms of what you need to kind of make or even from a point of view of looking at elasticity of your pricing in terms of how you want to kind of behave vis-a-vis any other competition to that extent. And therefore, we are still very confident that today, as we are going ahead, there are a series of things in terms of as an organization, which we have kind of taken up, whether it is a very big area of backward integration, which we have built in. And as I said, that I think we saw it coming earlier in terms of what was going to happen in terms of the competitive intensity. And we invested earlier. So not only this, we have already unleashed 3 of the backward integration initiatives, which are already in operation right now, 2 I spoke of, which are going to kick in now and next year as we see it to that extent. So I think that is going to bring us a very strong cushion in terms of some of the spends which we are going to be able to make in the market.



Second, I think our constant work around looking at sourcing, purchasing efficiencies in terms of what is there, given the fact that you are able to buy materials at scale, I think that is something which is going to be very, very important in terms of looking at it in terms of going forward. And therefore, I think we are looking at definitely some saving which comes out of that to kind of really spend money in the market. And the third area is there what we also see is that these times call for very strong cost efficiency measures, okay, which would be in terms of the way we spend, the way we look at our existing models and redefining our models. So we've already kicked in an exercise to kind of really look at in terms of what we can do in that space. And the last area, which is still getting comforting right now, we've seen a deflation in the last quarter. We see in the current quarter also, there would be a deflation of about at least 0.5% to 1% in terms of what would kind of happen. I think all these are good arsenals to kind of give us good kind of spending power in the market at the same time, maintaining our guidance, which we have in terms of what we are going to maintain.

[Latika Chopra, analyst]

Understood. The second question was on demand. You gave 3 reasons why FY '25 was soft for the category -- decor category. One was new construction not being as much. Second was renovation. Intensity was probably not as much high, which is repainting. And the third one was you would have expected B2B to have done better. Now as you look through FY '26 or sequentially, as you're going through this quarter or how you exit the March quarter, which of these 3 you sense is going to pick up first? And is there a -- would you want to hazard a guess where you land or the category lands in FY '26 because FY '25 was a negative year?

[Amit Syngle, executive]

So overall, when we look at FY '26, there are some good areas which are auguring in terms of what we are seeing. First, as we see it, I think the -- what we are seeing from the last third and the fourth quarter is the government spending is coming back, okay? Which was disrupted in the first half because of elections or otherwise in terms of what you see. And that is a very big source today in terms of, I think, as Asian Prints, we are looking at any other airport, tunnels, bridges in terms of what are happening. That is something which we look at in terms of contributing to that extent. And we feel that, that is something which is going to give us a good gain from a point of view of our whole B2B kind of a business, which is going to come up to that extent. That is one area which we are very confident, and that is something which is going to increase. Second, we also see that the mid- to luxury housing is something which is going to flare up as we are kind of going ahead. We are already seeing second homes coming up in a very big way in terms of this thing, which basically gives a flip to the premium and the luxury products in a very big way to that extent. And that is something which we see will go up to that extent.



Third, T3, T4 is a good indication, which is coming in terms of looking at some of the rural demand coming back to that extent. And given the fact that last year was a good monsoon and we are looking at a predictability of a good monsoon coming further, I think that is another big bright spot in terms of what we see, which would kind of augur well in terms of going ahead to that extent. I think given these factors which are there and unless there is a geopolitical event which really kind of really looks at spoiling this kind of trajectory, we think that FY '26 should be definitely much better in terms of -- from the point of view of this thing. But obviously, there is a caution till the time we really see that demand really picking up to that extent. So therefore, I think we are still being overall cautious in terms of what we would look at. But I think the idea is to kind of really aim for single-digit value growth for the year FY '26.

[Latika Chopra, analyst]

And if I could squeeze one on CapEx because you mentioned INR 3,000-odd crores, if I heard correctly, on futuristic emulsion plant that you're putting up I think between FY '26 and '27. Any color on stand-alone and consolidated CapEx for FY '26 and FY '27 for Asian Paints?

[Amit Syngle, executive]

So we've already -- about 1.5 years back, we had announced our overall consolidated CapEx, which was closer to about INR 9,000 crores in terms of what we were -- INR 8,500 crores, which we were spending. As part of that, we had budgeted for these spends, which are there to that extent. If you look at it today, we have been able to spend a considerable portion out of that till FY '25 in terms of what we see. As we look at FY '26, our overall CapEx will be complete from a white cement perspective, which is there. It's only part of the CapEx of the VAM BA plant which is going to kind of go till about the FY '27 to that extent, which would be left out of that INR 3,000 crores. I think that would be something which would kind of come in this year to that extent. So overall, from a stand-alone and a consol overall CapEx this year, we would be. We are expecting about INR 700 crores to INR 800 crores outflow this year and probably a similar number next year.

[Jaykumar Doshi, analyst]

This is Jay from Kotak Securities. First is, was there a conscious decision to improve gross margin in this quarter because the sequential improvement is fairly impressive. And on the other side, I think that even underperformance versus market has also increased or maybe some of the companies are yet to report. But -- so do you think you may have lost some market share because of this gross margin focus?

[Amit Syngle, executive]

So see, it's not that the gross margin came at 2 levels. One was the deflation, which kind of really happened in the market. And overall, second, what we see is that overall, from the point of view of the raw material efficiencies, which have been built in, in terms of the work which we have done, I think basically looked at improving the overall gross margins, which is there, which has kind of come in to that extent. So I don't think so. I think the foray in terms of looking at cost continued from a point of view of raw materials, which basically jaggged up. I think the bonus came in from the point of view of deflation, which was there in the market to that extent, which gave us the overall gross margins, which have gone up. I think from a point of view of overall share in the market, as I said, that we will have to kind of wait for all the results, which would kind of come in for Q4 to that extent. But given the fact that we are talking of a market being overall negative, there could be a possibility of some loss, which could have happened to some of the -- either the existing players or some part to the new competition as well.

[Jaykumar Doshi, analyst]

Sure. Second is just clarification. Single-digit value growth for FY '26, that is your outlook for the category overall industry or for Asian Paints?

[Amit Syngle, executive]

For Asian Paints.

[Jaykumar Doshi, analyst]

Okay. And you still maintain 18% to 20% consolidated EBITDA margin guidance?

[Amit Syngle, executive]

That's right.

[Jaykumar Doshi, analyst]

Finally, 1 year ago, most of us in this room would have probably expected Asian Paints to defend market share better when the new entrant came in, and we would have not expected the consolidated EBITDA margin to drop below 18%. So I mean, when I look at the end of the year with hindsight benefit, we feel that this entire thesis has not played out. Maybe #2, #3 player have defended market share better. So what do you think has played out this year, which resulted to these outcomes because...

[Amit Syngle, executive]

So overall, when you see the overall market, if you see, I think the factors which have been play are multiple, as I said. First of all, I think given the fact that the overall market has not kind of really played up to that extent, I think we did not anticipate possibly the kind of competitive intensity, which would have kind of come up given the fact that demand was not there and everyone was fighting for the same share to that extent. I think -- and given the fact that possibly you have a certain share to that extent, you are possibly coming under glare from all the competition to that extent. So it's not about one competition. It is about everyone kind of really fighting for the same pie in terms of what we see. Second, I think what we see is that possibly, when you look at from the point of view of price elasticity and when you look at from fighting the competition on a certain pricing level, I think you would be kind of be very clear that you would kind of go to a certain level which is sustainable, and you will not go to a level which is unsustainable to that extent. I don't think so it is a year's game. It is a game of looking properly at the next 3 years as well in terms of how it pans out because I think some of those performances can be just a flash in the pan in terms of what we can see in terms of what is really happening. I think sustainability is more important. We could have kind of guided the share much better in terms of spending some more money and so on and so forth. But I think one very clear thing is that you are looking at possibly an area of sustainability, what you want to maintain in the market when you look at possibly even preventing your share erosion to some extent.

[Jaykumar Doshi, analyst]

And this strategy will continue even going forward that you will not -- you would want to respond on pricing or -- so it is not because we are getting into a deflationary environment.

[Amit Syngle, executive]

So it's not that we look at saying that we have not responded on either on the pricing or in terms of the product innovation. As I said, I think we are focusing very clearly in terms of looking at the value proposition, okay? I think or even from a point of view of looking at how we want to kind of build capabilities into our people in terms of going forward. So I think that is all part in terms of looking at how these execution skills will kind of really come into that extent. What we are very clear is that given the fact that we know the market, we know the fact that our dealer relationships are strong to that extent. We are looking at more in terms of looking at, one, bringing in more technology. So we've kind of really got now a salesforce.com in terms of what we have kind of implemented as part of our technology so that we are able to service the market better, at the same time, have an internal productivity in terms of what we can really look at to that extent. Similarly, from a point of view of looking at dealer coverage, dealer opening, dealer servicing in a certain period of time in terms of what we can do, what are the pluses in terms of what you can incorporate in terms of going forward. So we definitely are relooking at some of those full areas in terms of execution so that we don't lag behind in some of those areas as we kind of go ahead.

[Jaykumar Doshi, analyst]

Okay. My second and last question. In the new product contribution or innovation, you gave a number of 14% sales. It has 3 part of questions. The first is that if you can elaborate what is the entry mid economy premium split in terms of volume value. Second, to be specific, is this overall mix 14%? What is the deviation if our gross margin is 42% on average? What percentage of business is below that? And third is, is it really a conscious strategy we play to develop volume? And at some point of time, do we take a call that, okay, now this new product has to come in the INR 300 plus or INR 400-plus or INR 2,000 plus per liter segment?

[Amit Syngle, executive]

So overall, see, the innovation in terms of the new products happen pan across the economy, premium and the luxury space. In fact, if you look at it, the larger plethora products, basically, I think close to about 60% of the projects -- products will come in the premium to the luxury space in terms of what we will introduce to that extent. And therefore, even from a point of view of kind of contributing to the gross margins, that would be similarly that same range in terms of what they will contribute to that extent. So if you look at from a division point of view, I think today, like last year also, we have looked at in terms of launching a plethora of luxury products in terms of what we have kind of come in because there is a constant kind of foray in terms of looking at premiumization in terms of what we want to achieve. But at the same time, we introduced like a product which we introduced called the new Bharat, which was introduced last year, which was more at the bottom of the pyramid level to that extent. But the larger contribution definitely comes from premium to luxury in terms of what we kind of look at in terms of going ahead. And that has been the kind of foray and that is how the contribution also gets affected in terms of how we would kind of look at in terms of maximizing the sale from a point of view of premium luxury. It's just that last year, we have seen a little bit of a down trading, which has been happening to that extent. And that is why the mix has not been so great in terms of what possibly we would have kind of really seen overall to that extent. And as we kind of keep on going, I think the innovation kind of comes in from the point of view of identifying the consumer gaps in terms of what people are looking at. So it's not that I will just predecide that I'm going to launch a product at an x rupees per liter to that extent. What you really kind of look at mapping is how the market gaps from a consumer kind of buy out, how it is kind of really panning out. And then you would look at possibly expanding that price point from a point of view of a new product or innovation.

[Jaykumar Doshi, analyst]

Just one follow-up here. In this 14%, how much percentage was interior or exterior?

[Amit Syngle, executive]

So I think largely, it would come from interiors. I think almost about 65% would be interiors roughly.

[Unknown Analyst]

Sir, you talked about the distribution reach of 169,000 for us. As we go ahead, do we see any -- I mean, where I'm coming from is FMCG company says that the total reach possibly is 12 million. With respect to paint sector, how can -- what is the maximum potential we can get to? And earlier, you have talked about expanding into markets like J&K. So are we going for smaller dealers now versus what we have been doing in the past or smaller towns? Just want to understand the potential with respect to the distribution reach because everyone is talking about it.

[Amit Syngle, executive]

So see, we must remember that today, the Indian market is expanding very fast. The consumption levels we see is today across the length and the breadth. So suddenly, if you have seen that the kind of infrastructure, which has come in Northeast, okay? Suddenly, the whole market has exploded in terms of newer touch points which have kind of come in, which were never accessible earlier to that extent. So those are all new touch points which have kind of come in and there could be almost like about 1,000 touch points which have come in to that extent. Similarly, if you look at markets like the Jammu and Kashmir, okay? Now the moment the normalcy kind of comes in to that extent, there are more touch points in terms of what really come in to that extent. Similarly, when you look at any of the metro towns, the suburbs keep on kind of really developing much more and so on and so forth. Kerala is now like one city. There are largely not any differences between one city and another city to that extent. So we are seeing this -- and then there is this whole smart cities, which are kind of coming out today overall. So we feel that every year, there are new touch points which are coming up to that extent, given the fact that -- we kind of keep on looking at towns with a certain population where the representation is not there.



So that is how we define the potential in terms of opening more towns and so on and so forth. Yes, a larger number of dealers which we are opening are smaller dealers to that extent, given the fact that they are in smaller towns, smaller cities or in the suburbs to that extent in terms of what is there. But at the same time, today, if there are opportunities which come in like I mentioned about the Northeast or a J&K to that extent, we possibly even look at counters who have never dealt with paint earlier to that extent. So it could be just a cement counter, for example, today. That itself offers you a huge potential because there might be 1 lakh touch points of cement paints guys who have not even expanded or they never sold paint to that extent. So I feel that the potential today is immense in terms of looking. And we ourselves look at possibly a very large number every year in terms of what we are able to kind of take on. So if you ask me, frankly, saying that will it stop at 2.5 lakh? No, it will not.

[Unknown Analyst]

So just a follow-up here. How do we decide the number of 5,000 or 10,000 dealers in a year? Is it a function of incremental growth we get from them? I mean, how do we arrive at a number of how many dealers to add in a year?

[Amit Syngle, executive]

So we do a scientific cluster analysis in terms of seeing our representation in terms of the reach to a particular consumers to that extent. So in that way, we would kind of really look at saying that these are the minimum counters we would kind of really need to kind of cater to a certain population of a customer in a certain cluster in terms of how it comes up because it is essential that today's world when people don't want to travel and the whole area of saying that I want convenience at footstep. I think that becomes a very, very big area in terms of looking at that cluster analysis in terms of way we look at it. And secondly, the newer towns are full opportunity areas where there is possibly no counter to that extent. And we would like to kind of really open up a counter so that we can give access to that town in terms of really availing the set of paints from this thing. So I think that is more the consumer reach is something what we take as a very finite parameter in terms of looking at how many counters do we want to kind of look at? Because essentially, we would not also like to kind of say that we keep on offering or improving the counters only in one cluster because then it will only distribute the sales. It will not increase the sales in terms of going forward.

[Unknown Analyst]

Sir, second question is, you've answered this question before also. So you talked about the organized sector not doing well, in fact, negative growth for the organized paint industry. So what in your estimate is now the size of the decorative paint market, if we include waterproofing, putty, everything, where are we now there? And what would be the share of organized unorganized?

[Amit Syngle, executive]

So I would say that roughly the paint market size, if we take waterproofing and putty, everything would be about closer to about INR 80,000 crores in terms of what we see in terms of the overall size. And I would say that from a point of view of a value share today, 75% to 78% is organized in terms of how I see it overall to that extent. So that's how I put that as the size of the organized market.

[Unknown Analyst]

Sir, one last question. What's the whole idea behind Nilaya Anthology?

[Amit Syngle, executive]

Okay. So if you look at the whole germination of the paint industry, largely, the presence has been more from a point of view of economy to mass premium to premium in terms of what we have seen to that extent. In terms of today, if you look at luxury homes, if you look at possibly the top 500 HNI families in India, okay, they would kind of really look at getting a lot of things from outside India in terms of either traveling to Italy or traveling to Germany and looking at really purchasing a lot of stuff from there or looking at seeking something which is exclusive, which is bespoke, which is limited collection kind of a thing, which kind of comes in. And it is really in the arena of super luxury in terms of what it translates to. Similarly, if you look at from a point of view of an architect interior design community, if you look at the top 300 to 500 architects designers today, okay? They look at possibly seeing something which is very different, which is unusual, which is again limited in terms of what it kind of offers to that extent. And that is why we have looked at possibly saying that when it comes to both surface decor and home decor, can we have something which comes in, which really sits at this place so that we are able to get these HNIs and these top architects and designers to kind of really come and really get that feel of that luxury and purchase from there to that extent. With that intention, we have looked at basically making it as an international design destination for global luxury. So I talk of confluence and design.



So we have the best of the Indian kind of decor items in terms of what we have put from the point of view of it could be the kitchen, it could be a furnishing range. It could be the wallpaper range. It could be a texture range. It could be an artifact in terms of what would be there to that extent. And from the best of the world, for example, this space harnesses the best from, say, Denmark to Portugal to Japan, to Italy to that extent. So the best of the design artifacts and the home decor items which kind of come into this space. So it's basically a confluence, which seeks best design and really kind of gets the right kind of people who are looking for very, very limited collection in the area of global luxury to that extent. So right from texture to furnishing to mosaics to kitchen to furniture, to bath to Sabyasachi, everything is kind of really under one roof. And this is -- we think is first time in the world someone has created an infrastructure like this. Yes. Sorry. If someone else has a question, we can come back to you.

[Rohan Kalle, analyst]

Rohan here from InCred. I have 3 questions. One is on the competitive intensity, while a lot of, let's say, the attention has been towards the newest entrant, would you say other players like, let's say, Jordan Paints, Nippon, have you seen competitive intensity step up from them as well? Or would you attribute most of it to the newest entrant?

[Amit Syngle, executive]

So I would say that when you look at the players you just named, I think we are seeing definitely that they have been affected the most by the newer players to that extent. In fact, there was a time when they were possibly following the same route as some of the newer competition is following now. And as I said, that path is sometimes not very sustainable. And after 5 years of -- or about 10 years of existence, they have realized that the path of just spending money and buying sales is not a great path to that extent. And that is how now they are really facing the crunch in terms of possibly not really being able to grow the market to that extent. In fact, we have seen possibly in some of those brands, the maximum kind of battering down in terms of what has happened this year to that extent. So possibly, it is, I think, a combination of existing players and some of the new players who have come in, in terms of which are adding to the competitive intensity, not these 2.

[Rohan Kalle, analyst]

Sure, sir. Just a follow-up on that. You also mentioned down trading earlier. Would you attribute it more, let's say, from customers shifting preferences from premium to economy or shifting brands completely?

[Amit Syngle, executive]

See, how we are seeing is that to some extent, there are some consumption trends which are changing also in the market to that extent, which is there. People are now differentially possibly spending money, whether it is from a point of view of travel, food and so on and so forth. There are much larger spends in terms of happening in some categories like hospitality and so on and so forth. We also are finding that overall, from the point of view of the market, there has been a liquidity crunch in terms of -- especially when it comes to looking at some of the renovation businesses in home decor and the painting business and so on and so forth to that extent. Given the fact that there is a little bit of a crunch, either there is a postponement which is happening. So we've seen that this year, possibly on the repainting, there has been a bit of a postponement, which has also happened to that extent. And given the fact that if some people are constrained to kind of really do it because there is an event at home or there is something which is there to that extent, I think possibly today, some amount of down trading will happen from a point of view of person saying that if not luxury, I'll take into premium product to that extent or if not premium, I'll buy into a good super economy product in terms of what comes into that extent. So I think that is the trend in terms of what we are seeing that possibly given the liquidity, given the fact that there are also varying requirements in terms of where you are spending, I think that is what we are seeing as a little bit of a down trading which is happening across.

[Rohan Kalle, analyst]

Sure, sir. Just the last one on the industrial business, on a full year basis, we've been able to maintain margins in the automotive segment. but we've lost some margins on the non-auto side. And if you see the recent strategy briefing by Nerolac, they had spoken about structurally improving their industrial margins in the India business going forward. So just wanted to understand where do you see margins trending for both of our PPG JVs and the overall mix of industrial going forward for us?

[Amit Syngle, executive]

In fact, today, the auto and the refinishes margins are the maximum in terms of what we garner actually to that extent. And we cater to a lot many customers all across. But I think we -- our margins are very, very strong in terms of both the auto and the refinishes. I think the margins basically come under some pressure when it looks to categories like powder and protective paints to that extent or even something like a road marking paint and so on and so forth. Some of those categories are more prone to possibly lower margins as compared to possibly auto and auto refinishes to that extent.

[Operator]

[Operator's Instructions] Our first question is from Mr. Mihir Shah.

[Mihir Shah, analyst]

This is Mihir from Nomura. So it's been about 9 months since we have seen very low volume growth in the industry on [indiscernible]. How should one think about volumes going forward? Do you see there's been enough of time of this weak demand? And should one expect double-digit volume growth to come back? Is it a possibility that you are thinking? Is it in your assumptions? Also, it can be supported by the lower base? Or do you think that there is still high inventory in the channel or there are new stocks from other players in the market that can limit a possibility of double-digit volume growth in the coming year?

[Amit Syngle, executive]

See, as I said, currently, given the overall environment, I think we should be more practical in terms of looking at what is the reality in terms of the market today. I think today, we are hearing across brands to that extent, the demand conditions still continue to be sluggish. We don't see really an acceleration in terms of the demand. And particularly when we see the overall home, home construction segment to that extent, we are not seeing that there is a crazy demand which is coming. It might be towards the infrastructure side to that extent, as I mentioned, in terms of that we would kind of see a more flurry of the overall demand and in terms of consumption, which will kind of come in. So I think from that point of view, today, I don't think so that we should just say that we are gunning for double digit or something like that. I think we should kind of really be watchful and look at possibly seeing that what you are kind of really is something which is gaining at what is achievable and what you are kind of really targeting is something which is aligned to your strategies in terms of going forward. So I think from that point of view, I would still say that at this stage, as I said, I think a single-digit value growth would be a more good, stronger imperative in terms of how we would look at in terms of going ahead in the market.

[Mihir Shah, analyst]

Sir, secondly, on crude has corrected quite a bit. What are your thoughts on possibility of price cuts or making paints more affordable? Would you think that, that will be a factor that can drive up volumes? Or do you think higher dealer margins can lead to better volumes for you? Any study on the current situation on both these aspects that you can share will be very useful.

[Amit Syngle, executive]

See, you're right. Today, if you look at from the point of view of crude, the prices have come down and really trading at one of the lower levels. Similarly, we have seen the rupee-dollar parity, which had basically gone to a certain level and now starting to come down. I think the whole volatility in terms of the environment is very, very high now. At this moment, I don't think so it would be really appropriate to kind of take stances in terms of looking at either decreasing or looking at prices in a very different way to that extent. I think we need to have patience. We don't know what is the second salvo of tariffs, which are going to come after 90 days of this reprieve, which is going to happen. And we don't know in terms of how the geopolitical conditions pan out to that extent. At the same time, there is also the talk of some antidumping duties, which are going to come in terms of some of the raw materials, which is being spoken of in the market. So I think we'll have to kind of really wait and watch and really see how these things pan out and maybe then take calls in terms of going forward. It's too early to say in terms of that you could kind of take a price decrease going forward.

[Mihir Shah, analyst]

Got it, sir. And lastly, the difference between volume and value has increased from 8% versus 5% that we had seen in earlier years. Should one take this as a new normal until the high-value growth, high-value paint category comes back?

[Amit Syngle, executive]

So I think I had commented last time also that we are aiming that this should not be more than 6%, okay? As we see it, this time, it is between 7%, 7.5% in terms of what we are already seeing. The endeavor very clearly is as we kind of go, we look at our product mix very strongly. And the intention would be to kind of really get it within that band of 6%.

[Operator]

Our next question is from Mr. Tejash Shah.

[Tejash Shah, analyst]

This is Tejas from Avendus Spark. Sir, you broadly covered the current aspect of the demand and margins. I was just wondering if 5 years ago, if we were told that there will be sharp revival in premium urban housing and the K-shaped recovery favoring again urban consumers. And on top of that...

[Amit Syngle, executive]

Sorry, your voice is echoing a little bit. It's not sharp enough. Not able to get your question.

[Tejash Shah, analyst]

Sir, is this better? Hello?

[Amit Syngle, executive]

Yes.

[Tejash Shah, analyst]

Yes. Sir, I'm saying 5 years ago, if somebody -- if you told that there will be sharp revival in urban housing and the K-shaped recovery again favoring urban consumers. And on top of that, under your leadership, our extra focus on participating in B2B business, we would have thought a very, very strong scenario for Asian Paints in the next 5 years, so '22, '25 and also for the industry also. So where is that, that all the macro indicators are very strong, but somewhere the paint industry has decoupled from some of those macro indicators?

[Amit Syngle, executive]

See, actually, if you look at, it's not only the paint industry right now, if you take the entire home industry overall to that extent, I think everyone is kind of really affected to that extent. It's not just that it is the paint part to that extent. You've seen today a resizing of the cement business in terms of what is there to that extent. We see steel where it is kind of going to that extent. I think overall, if you see components from a point of view of construction categories to in-home categories, we are not seeing any big amount of inflation. So you take the case of, for example, bath, okay? All the current players, whether it is Sera, Parry, all the other players are not kind of looking at any big growth, which are kind of seen to that extent. So what we are seeing is that I think it is pan-home categories and construction categories, which have overall not grown the way possibly we had anticipated in terms of going. A lot of stuff which has gone into the infrastructure, for example, the number of airports which have kind of come in or now the consumption, which is going to happen at railways, defense, some of these kind of sectors is something which is going to be much more in terms of looking at rather than just looking at the home segment to that extent. And that is why you are seeing an inflation from an industrial sales point of view in terms of what we are seeing. But having said that, today, I think the whole area of the [indiscernible], which the government had put for cheaper housing to that extent or from a point of view of the mid- to luxury housing in terms of what I spoke of. Some of those avenues are going to come around as I see it from a cyclicity point of view to that extent. So I think we are really banking in terms of some of those parameters now kicking in, which possibly kicks in from the point of view of the retail construction really growing and then prepping up all the categories around home.

[Tejash Shah, analyst]

And sir, second, have we done at our level or industry level any studies where we compare per capita pricing -- per liter pricing of paint versus per capita income of some of the developed markets versus us in terms of index. Have we -- because optically, as an analyst, I can see that collectively, the industry has improved margins in the last 10 years. But have we somewhere made the affordability caent, which has actually led to compromising the industry growth at a broader level, just tangentially asking the question there.

[Amit Syngle, executive]

So see, if you look at the per capita consumption of paint in India is much, much lower as compared to any of the Western geographies to that extent. So I think still from that point of view, the potential in terms of looking at increasing that consumption is something which is really a potential. So which means that if you can get more households to kind of either consume paint or even if you look at increasing the frequency of painting, both will kind of go a lot in terms of improving the per capita consumption of paint to that extent. And I think today, as a leader, we have been kind of looking at some of those imperatives. For example, we have looked at various avenues where you can ask the consumer to kind of repaint his house at a higher frequency. It could be just 2 walls. It could be another room in terms of what could kind of come in to that extent or it is even with respect to possibly looking at seeing that there are other avenues in terms of what you can offer so that the per capita consumption can go up. So I think that is still a big opportunity for us in India.

[Tejash Shah, analyst]

Just one follow-up. When we compare per capita consumption with developed markets, over there, the ratio is actually reversed than us in terms of industrial will be 70, 75 versus ours is actually 75 deco. So somewhere decotodeco, we are not as much under-indexed as the overall number shows. Is that understanding correct?

[Amit Syngle, executive]

So I didn't understand this question. So see, the industrial markets across international geographies, especially the West, I think, is much more developed today. And in fact, the ratio there is 70% is industrial and 30% is deco, whereas in India, the ratio is the reverse in terms of what we see. So we believe that with the rate of industrialization, the way the overall kind of spends of government in terms of infrastructure and other things, I think today, we are seeing trends that the industrial contribution seems to be going up. As I said, we have seen for the last 2 years, the industrial growth being very, very strong in terms of the way they are coming. So I think possibly, we are moving towards and inching towards the industrial contribution going up, but I think very far away from where the Western world.

[Operator]

[Operator's Instructions] We now further move on to our next question by Mr. Manoj Menon.

[Manoj Menon, analyst]

Just 2 questions only. One, when I look at the overall performance, let's say, plus 2% volume revenue decline of 5% contribution margin higher or rather gross margin higher. Is it only to do with COGS? Or is there any other up or down elevators here? Finally, it is only COGS in terms of what you see.

[R. Jeyamurugan, executive]

In this quarter, we had some benefit of past price increases, which has flown through. So that's a marginal benefit also in this quarter.

[Manoj Menon, analyst]

Okay. And one, I would say, a clarification. So when I look at the volume versus value, I understand the philosophy which you follow in terms of volume, which is largely tonnage. Honestly, after a point in time, it become meaningless, right? I mean when you have such a huge divergence when we have probably a globally accepted metric called underlying volume growth where you could actually debase or rebase and kind of have the mix included in the volume. Is there a reason why we don't want to follow that and just stick to the tonnage bit here?

[Amit Syngle, executive]

So Manoj, yes, this question gets asked often, but I think in our business, tonnage still makes sense is how we see it on a like-to-like basis, not really comparable with other FMCG industries, which do underlying volume growth. And to be fair, I think most of the other players also do not disclose any volume numbers as well. So to that extent, I think what we disclose is that.

[Manoj Menon, analyst]

That's a fair one for the industry.

[Unknown Analyst]

Sir, my question is, as a 60% market share player, anybody who is like 60% market share, it intimidates competition and potential new entrants. So from the perspective of perhaps the strategy or the Board, to what extent are we willing to go to retain market share? Like maybe it could mean that you cut your margins to much lower levels for a year or 2 just to defend market share and scare competition. So to what extent are we willing to go or we are okay ceding market share and maintaining the margin?

[Amit Syngle, executive]

Okay. First of all, I don't know the number which you're quoting is your calculation in terms of what you are making. But what I see is very clearly is that from the correlation between a market share and a margin to that extent. What we are very clear is that we should kind of look at something which is really sustainable in terms of going ahead. There is no point in terms of looking at artificially kind of trying to do something in the market, which possibly that you find that after about a year, 1.5 years, you're not able to sustain to that extent, okay? I think the approach which we are following is very clear that if you play to your strengths, you play it to in terms of building the brand, if you look at possibly offering the customer the best value proposition to that extent. And I think if these actions possibly give you the best kind of retention of share or even gain of share possibly, that would be the best route to kind of take. Just kind of irrationally kind of going after in terms of saying that I want to really kind of prevent the share at any cost whatsoever might not be a good approach in terms of taking.

[Unknown Analyst]

Two quick questions. When you were discussing the white cement plant launch in June, you said this is the first foray into cement. Is there any desire that longer term, just the way cement companies have come into paints, you would have some desire of it in terms of being open to it. I know this is something not in the near, medium term, but your specific comment, first foray into cement, what does it mean?

[Amit Syngle, executive]

Yes. So it was just to kind of amplify the fact that it was -- I didn't say first and only. I said first foray into cement to that extent. So I think we would like to kind of really first see in terms of how does this go because white cement is something very different, which goes into repairs, it goes into putty, it goes into a lot many other segments like sanitary and so on and so forth to that extent. So we would kind of really want to kind of see that first we get this thing going and then examine if possibly there is any other desire to kind of get into any other cement in the future.

[Unknown Analyst]

And second and last question is on the BAE, you are among the top 4 companies to have that capability in March of this year. And you have discussed the differentiated products, which is possible once you have that. Will that be essentially in the top end? And if you can give some more color to it, what exactly is the untapped or white space left in terms of your product portfolio, how it can help?

[Amit Syngle, executive]

Actually, from where the emulsion comes in, it's the versatility of that emulsion, which can be used from right from economy to premium to luxury. I think the versatility it offers is very good because, one, it is essentially environment-friendly, low VOC, no smell kind of a zone, which kind of comes in. And the other thing is that it can offer paint properties, which can be very, very different at a cost which is unbelievable. So I think the opportunity that kind of really opens up is pretty high in terms of what it does.

[Unknown Analyst]

Obviously, currently in India, no one has that, right?

[Amit Syngle, executive]

So today, people import it. It is not something which is available in India. People import it from outside to that extent. But I think the whole equation changes once you are making it because you are making the monomer and you are making the emulsion as well here. So the whole cost efficiencies change drastically from that point of view. And not only that, today, there is no paint company making it across the world. Once the paint company starts making it, then you are able to tailor that requirement to your need so that you can possibly align it to a certain property in terms of what you want.

[Operator]

With that, we come to an end with our question-and-answer session. I thank everyone for actively participating in the same. I further invite Mr. Amit Syngle to give his closing remarks.

[Amit Syngle, executive]

Okay. Thank you so much for taking the trouble and coming here to that extent, and it's been a great talking to all of you to the extent. Hope to kind of now meet you next time with much better numbers as we see. Thank you.

[Operator]

Thank you so much, everyone, for your active participation.