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Ladies and gentlemen, good day, and welcome to Q1 FY '21 Earnings Conference Call for Pidilite Industries Limited, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bharat Puri from ICICI Securities, thank you, and over to you, sir.
On behalf of ICICI Securities, I welcome you on to the Q1 FY '22 control of Pilot Industries. From the Main side, we have Mr. Baid, Mr. Sandeep Batra, Director of Finance and Sales and Mr. Sunil Burde. I hand over the call to Mr. Batra for opening remarks and later will be open for Q&A.
Thank you, and very good afternoon to everybody on the call. I have great pleasure in taking on the highlights of the first quarter's performance where the Board approved the inaction results yesterday. Pidilite revenue for the quarter at INR 2,952 crores grew by 6.2% over the previous year despite a very higher base. Just to remind that last year, in the first quarter, we had reported a revenue growth of 62.5%. The growth in this quarter was led by a very strong underlying volume growth of 8%. Underlying volume growth just to clarify refers to volume growth, which includes the impact of changes in product mix, so all pricing adjustments are kind of diluted from this calculation. The domestic consumer and Baga business segment growth was broad-based across categories and geographies with underlying volume growth of 12%. Both urban and rural markets grew in double digits with rural market continuing to outpace urban, which signals the gradual recovery with that economy. However, exports of our consumer and Baja products declined due to challenging demand conditions in the overseas markets. Coming to the consolidated results, the consolidated revenue at INR 3,024 crores was 5.6% higher than last year, driven by strong volume growth, particularly as I see the domestic consumer and rating. The B2B segment registered single-digit revenue decline, largely due to lower exports and lower demand from export-oriented industry. Material costs continued to soften with on consumption in the current quarter at around $150 a tonne compared to kind of 2x in the same period last year. So last year was $2,250. And this resulted in gross margin, which expanded both sequentially as well as year-on-year, 812 basis points year-on-year and 260 basis points sequentially. Part of these gains were reinvested in the form of higher A&P spend the current quarter, ASP was about 3.6% of sales versus 2.1% in the same period last year and other growth-related initial there. Consequently, our EBITDA margin went back in the 20-plus zone and at 22.7% for 521 bps above the same period last year and 430 bps higher than the fourth quarter. Domestic subsidiaries continue to deliver robust sales growth driven by the consumer and the Bazar businesses and EBITDA margins improved in all the businesses in the domestic subsidiary. Sales of our international subsidiaries, excluding DPD Lights business was largely in line with the same period last year, largely because of uncertain economic conditions, currency devaluation, challenges in some countries and local inflation pressure. EBITDA in absolute terms was also flat versus last year. The working capital situation remained very healthy and in absolute terms is lower than what we reported on March 23, resulting in very healthy cash position. As a company, we continue to invest behind building capacity for growth and future ready supply chain with the aim of upgrading our manufacturing facilities and commensurate market demand. In the current calendar year, we have commissioned 7 plants, 2 for [indiscernible] our Construction Chemicals business and one each for each of our domestic joint ventures, i.e., Grupo Puma, Tax and [indiscernible]. With growth largely to be volume led in the near term, a good monsoon, increased construction activity and stable input prices enable us to look at the future with increased optimism. We remain committed to drive profitable volume growth through investment in our brands with enhanced customer engagements and continue to build the resident agile supply chain. That's all as far as opening remarks from my side or concern, we will now open for Q&A.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Avi Mehta from Macquarie.
Sir, I just wanted to first check on the VAM price update, if you could give us a sense on where wine prices were for the quarter. I think I missed that in the opening comments it's a good kind of... Please share that... Go ahead, Sandeep.
So VAM prices in the first quarter, what we consumed at the moment was 1,150, was $50 a tonne versus $250 a tonne in the same period last year.
And sir, what's the current pricing like right now?
Current prices are anywhere between 50 to 90.
Okay. Perfect, Sir, I just wanted to also understand building up from the last quarter conference call, we've clearly achieved the margin expectation from March, which we saw 20%. We are now at 21.5% roughly or so -- how should we look at -- do you see there is an upside risk to that guidance on EBITDA margin of 2024, maybe it should be 22% to 24%? Or if you could give us some sense on how should we look at margins as we go forward? And b, if you could also give us an update on what happened to the reversal of consumer downgrades that you were kind of discussing in the last time, the product downgrades.
So Avi, on the first question, really, as far as the margin range is concerned, given the momentarily that we keep seeing in raw materials, we're more comfortable with the 20% to 24% range, and that's where we will keep it, now based on where the situation is it may go up and down in one quarter versus the other. But we are comfortable with that range. We believe beyond that range, it actually then impedes our volume growth and gives -- opens the back door to a lot of regional and other competitors. And therefore, we are comfortable with this range. I didn't understand the question on product downgrades, if you can just elaborate?
Okay. So maybe -- I mean, if I recollect from the last time, you had indicated that there was a sense on when the high inflation period kind of reverses, we can see some impact on the mix as we go forward. That is what I wanted to understand if that has panned out in terms of the mix as in lower-priced products or lower margin products have done better? Or is there anything of that sort that we have...
Not in our business. In fact, in our business, that's not the case actually. As far as we are concerned, the product mix is actually pretty much in line. And which is why if you notice, we have switched to reporting underlying volume growth rather than total volume growth because total volume growth in a stayed misstate because at products that cost very little, like, for example, the parties and so on and so forth, then actually increase your volume growth, which is not the right indicator of the business. So therefore, we are at underlying volume growth, which for the consumer and bar business is about 1%.
Perfect... That's clear, then I probably -- what I was trying to kind of understand is that when the nation was high, I thought the mix was impacted and that would have reversed, but I got maybe that impact in timeout, my understanding was impacted...
No, I think it is better...
No, that's all from my side. I'll come back in the queue for the other question.
Thank you very much. [Operator Instructions], next question is from the line of Kishan Karam Goodridge.
Sir, your material price has been declined by about 7% year-on-year basis. Is this solely due to a decrease in material price or any production efficiency?
It's always a mix of both if you look at -- and we obviously track this over a longer period of time. It's a mix of both. In this quarter, it is largely material costs because a lot of the material efficiencies when material costs were going high, we actually squeezed. But it will always be a mix of the 2. In this quarter, it would largely be material cost.
[Operator Instructions], next question is from the line of Ashish Kanodia from Citigroup.
So sir, just on the B2B side as well as on the export front, what is the sense you are getting? Is the demand environment continues to remain tepid because especially on the B2B side, it has been like 3 quarters where we have seen a Y-o-Y decline. So just wanted to get some sense in terms of when you speak to your customer on the B2B side, also on the export side, what is the sense you are getting on the overall demand environment?
Sure. So let me split this Ashish into 2 different elements. One is B2B, where there is direct exports to the developed world, which is largely the U.S. and Europe, could be pigments or it could be to customers of ours who are exporting to the developed world. This could be leather, this could be textile, this could be wooden furniture and so on and so forth. Here are the indicators we are getting is that the U.S. will probably come out of this quicker. There is a little more optimism around the U.S. where Europe may take a little longer. Fortunately, a large part of the exports is to a mix of the 2, but the U.S. a little more. Now I would wait a quarter before we declare and see as to how the situation is. But it does to be getting a little better, at least the first indicators are there. As far as the neighboring countries are concerned, which is exports, which is exports of our finished goods, -- what we are finding is countries like Nepal, for example, are suffering tremendous foreign exchange shortages. Actually, the issue is not that of demand in Napolitan issue of not there being enough foreign exchange, now Bangladesh was more a combination of a lack of foreign exchange and the fact that both the ads this time came in the same quarter and therefore, a large number of 100 days. I would say I would watch this for another 3 months, but it does appear it will be better in the second and third quarter than it was in the first.
Sure, sir. That's helpful. And secondly, on your comment in terms of reinvesting some of the RM benefits into driving growth. I mean apart from the ad spend, if you can just highlight what other initiatives you are taking to drive that profitable volume growth, that would be very helpful.
Sure. That's a great question. So we are really looking at this across 4 fronts, Ashish. -- front. One is obviously expansion in sales and distribution. Just to give you a perspective, in the last 12 months, we have added 17,000 new villages, which we are now accessing directly. We believe from a home improvement point of view, we would have the deepest distribution by a large distance. Just to give you a perspective, we now have over 8,000 Pidilite kit the PKD as we call them. All of these are in villages between 5,000 and 10,000. We've obviously expanded. Therefore, the whole sales and distribution piece is one area of investment along with the requisite like demand generation activities that take place. The second is the whole area of innovation across each of our divisions, whether it is Fevicol, whether it is fixed it, whether it is the Consumer Products division. Each of bees have now started launching a set of innovations in each of their markets. And therefore, our contribution from innovation, we would hope will actually go up substantially over the next 12 months because as I've repeatedly said, going forward, volume growth will be the key. And therefore, we must do everything vis-a-vis that. In the enablers, we've also made tremendous progress with the whole digital piece not only through digital e-commerce, et cetera, which we've talked about earlier, which has now become a regular part of our business. But to just give you an idea, for example, we have an app called Pidilite and we believe we're only 1 of 2 companies who are getting more than 25% of our sales now via an app where there is no salesman or distributor involved. So this is obviously, again, reaching our people who therefore do not even have access to our sales force can order and get material over a 24-hour period. Like this, we've got other digital initiatives on. We are also looking at some initiatives in the areas of AI. And the fourth is the supply chain, Sandeep referred to it. But if I look at the bigger picture, really, what we are doing is we're making a resilient, flexible on-demand supply chain. We now have 70 manufacturing facilities in and across India. We will probably add 3 to 4 more every year as we go forward, which is what we've got plans for so that we're not only equipped for future growth, we're also incredibly flexible and can therefore service needs in a very quick at a very short notice very quickly. So these are all the other areas of investment besides obviously investing in your brands.
Sure, sir. That's very helpful. And just last bit from my side is any pricing intervention which you might have taken given how the VAM prices have panned out? And secondly, what is the price difference between your product versus the peer product?
See, our price premium tends to be depending on the product in the whole wood releases area of between 10% to 15%. That's the premium that remains. If it goes above that, we tend -- for example, even in this quarter, we would have actually reduced prices, the effective price to the customer given the VAM price decreases. So on a consistent basis, our premium remains between 10% to 15%. We've tested over a large period of time. We believe that is what is justifiable and what the customer is happy to pay. Anything about that actually give back to the consumer because otherwise, we believe it impedes our volume growth.
So just a related question on this, maybe on the portfolio level because I understand across categories across product points, maybe the effective price teen vary. But maybe at an overall portfolio level, what kind of a reduction we might have seen this quarter?
Very difficult to say my friend because our portfolio is so wide across such a lot, it's best to take it at a vertical level and then because otherwise, it's very difficult to translate this at the company level.
Thank you. Next question is from the line of Latika Chopra from JPMorgan.
I joined in a little late, but I was just to hear your thoughts, Mr. Puri on overall B2C demand environment. I just heard your comments on B2B, but just trying to gauge, are you getting more positive, excited about the underlying growth trends that you're noticing in your business?
Thanks, Latika, always good to hear from you. Yes, I would say from a demand perspective, what we are seeing is really, a, the whole construction sector does seem to be seeing an upturn. If you look at organized real estate, you look at individual housing, there is a certain amount of LC which we are seeing in the market. We have earlier also spoken about the fact that consumers have reappraised their relationship with the home and are willing to invest more in their home. This is something which is an ongoing trend that we are seeing. The good thing we've seen now over the last 6 months is that for us, at least in our sector, we are seeing rural demand slowly coming back. It's still not the buoyant twice urban demand that we used to see. But slowly and steadily, for example, in this quarter, our rural growth rates or 1.5x urban and that's really encouraging. So I would say while the monsoon has been good, though it hasn't been well distributed. Now barring these disruptions we are having because of flooding in certain areas and disruptions, we are actually quite optimistic about the next 6 months simply because we don't see demand conditions domestically changing dramatically. There's a long festive season. And most importantly, from our point of view, we also see input prices as fairly stable.
Yes. That's good to know. And I heard your comments on pricing. Are you done with your pricing interventions because it seems your current price of AM is still lower than what your price was there in Q1. Do you anticipate you will still take some tactical calls on pricing? Or you think they are largely done?
No, absolutely, yes. We will still make some tactical calls depending on the VAM price. We're always sensitive to that. But we believe now given the last 2 weeks, the way crude, et cetera, is going, we think this is pretty much the bottom of crude and therefore, VAM it will only go back to its traditional around $1,000 a tonne over the next 6 months.
Yes. Okay. And I also was trying to just understand, there's a lot of push on rural expansion. I was just wondering if you could give us some more color on what kind of products are getting better reach in these areas? What kind of price packs, price points, what is allowing you to penetrate rural markets more? And another question I had was on your margin mix. As you go deeper into these smaller towns, rural areas, do it affect or influence your margins in any significant manner?
Good question. See, the good thing for us actually is that our rural mix outside the fact that obviously, there are smaller packs and there are more basic products, you will not sell the premium products, except maybe in Kerala or Punjab, Gujarat, in the rest of the places, it tends to be the what I would call the starting products in the range. But it is still the same fab call the same fixed rate now the basic range of waterproofing, starting from the construction very quick anyway has very deep penetration and is pretty much there across like all villages about 5,000. So it's our full basic range, and we keep adding to this range. For example, we've expanded substantially with Pidilite. We are now expanding with tiles. So on a consistent basis, based on the kind of town, we obviously have lots of rural marketing and penetration models. We classify markets into various substrates, and we believe there's an ideal product mix for every substrate. And we keep working towards reaching the ideal product mix and, therefore, in a sense, realizing the potential of that sub-state, so that's what we are doing on a consistent basis. As far as margins, discounts are concerned, frankly, they are pretty much the same as urban. Actually, discounts there tend to be lower, but freight and logistics costs tend to be higher.
All right, and could I check with you, you have a very, very wide portfolio, and you have always put your portfolio and there is a growth in pioneer categories, which were about 1/3 revenue sailing. Just trying to understand what parts of these categories or the segments of these are actually doing -- tracking your expectations, something that surprised you positively something that you think probably there's more work to do. Some flavor on that dilation solutions, premium wood finishes, some of the things, niche segments that you were tapping into?
See, actually, I'll tell you from a -- I mean I would say we've largely -- our model has worked 8 out of 10 times on a consistent basis. It takes a little bit of time. So whether it is, for example, premium wood finishes, you know that we report ICAP results separately. You would see the ICA petite itself is now a very strong unit in its own self with. And then remind you, their minimum price point starts at INR 750 a liter. So it's really premium, and we would submit the best quality wood finishes, not just in India, but in the world. So whether it is that, whether it is styled hesives, whether it's the joinery segment, we've largely -- I mean, our model has been holding well. Core has tended to grow that GDP growth has tended to be, for example, waterproofing for us continues to be a strong growth driver in respective I'm sure somebody will ask the question about competition. Well, competition from paint companies has been there now for 10 years. But we are growth we are continuing to grow healthily in waterproofing. And therefore, it remains a growth driver for us. We keep adding newer stuff. For example, we've added tile grouts, we've added stone solutions. We've now added exterior renders. So on a consistent basis, Latika, every year, we will add 1 or 2 new categories and slowly in steadily establish them.
Sure. And just last one, sorry. I remember the last earnings follows full of this, but I just thought I'll just tack if there is any meaningful update or on this interior of tarping expansion. I know your comments from the last time, but anything to call out or update on this time...
No, it's just -- it's very early days. As I said, we are not in -- all of you do Pidilite as a company. We are not the big bank. We will put up X plants and make a lot of song and done. We will do things slowly and systematically -- when we have airport, we will come back to you.
Next question is from the line of Arnab Mitra from Goldman Sec.
My question was, again, on the demand environment. I think you mentioned about the strong trend in the construction industry. On your Adhesive segment, which has direct consumer products like Fevikwik also and woodworking products, are you also seeing a buoyant demand environment there? And therefore -- and also kind of in the rural market, which indicates that even that segment, even though it's not very directly construction linked, are you positive on that in terms of how you're seeing the demand?
See a, yes, we are seeing demand definitely also showing a little bit of an uptick as far as, for example, wood adhesives is concerned, my invitation to you, Arne would be also does follow though not fully construction because 2/3 of the demand tends to be renovation. But when there is new construction, you are going to then furnish it and when you go to furnish it, they're going to put furniture. And when you're going to put furniture, you're going to use Fevicol. So we are seeing that as a lag. And at an overall level, yes, while there may be certain categories that are growing faster simply because we are at the growth stage of the category, be it Tyler diesels or waterproofing. But even the core categories of, like, say, for example, the Fevicol, we are continuing to see healthy demand.
Understood, and my related question was when you're doing the oral expansion, what you see in FMCG typically is that your fastest moving tax anyway reach through indirect means where the demand is. But in your case, does that hold to and therefore, are you getting the incremental sales on more of the non-cereal kind of products? Or do you think there's a big gap, even in the serial like reach in terms of either an organized share or actually the product not being available?
See, the difference are between traditional FMCG and use that in our case, like say, in my old world, when I was in the chocolate and toffees world or in Sudanshu old world, when he was doing detergent, you don't have to teach a person how to eat a chocolate or a toffee or to use a detergent. In our business, most of our products actually require a certain amount of user training. And in this case at times the user may be the end user himself, so what we've done, actually, which is giving us good dividends is we operate with 2 sales forces in what we call emerging India, which is a mix of rural and semi-urban India, where we have one sales force that keeps training users and consumers in the use of the product. And that, in our view, is a greater multiplier of sales rather than just pure availability. What benefits from pure availabilities actually seems like Semiquip, which are simple to use. The rest of them, we find that we -- there is a certain amount of education, which we will have to do to create the category.
Understood, and my last question was on any change in the -- or acquisition in the CapEx that you foresee the FY '24, '25, given the faster growth and your initiative...
No, we're already -- we've been repeatedly saying that, in fact, during -- even during Covet, we were busy investing in CapEx on a consistent basis. We will remain at our between 3.5% to 4.5% of sales on a consistent basis as far as CapEx is concerned.
Okay, just from my side, all the best.
Thank you, Next question is from the line of Ritesh Shah from Investec.
Just wanted some incremental flavor when we say we have underlying volume growth of, say, 8%. So can you break it up basically when we look at it from a category standpoint, say, growth in or emerging, so that's one. And secondly, again, taking a brief out of, I think, Latika question, how do we look to benchmark ourselves like what will make you happy? What will make you said? I understand you do give a number of GDP multiplier. But again, if you could put some numbers over there, I think that would be great. Or do you should not look at our volume growth versus pains or any other subsector, the building material space that you look at...
It is on a consistent basis, Ritesh actually reporting total volume growth. If on a comparative basis, we report total volume growth, our actual total volume growth will be 19%. But in our view, that's not the right way to look at it because that's just actually inflating what our cheaper products, which are, in a sense, a little more commoditized, be it parties or powders and so on. We believe underlying volume growth actually captures mix and also capture therefore, the pricing element. Now if you look at, for example, the consumer and Bazar business in the first quarter, we've grown volumes by about 12%. As per the RBI yesterday, our overall economic growth is anywhere between 6%, 6.5%. As long as we are between 1.5 to 2x GDP at a gross level, we are all right. And when I look at my categories, frankly, the good thing is it's broad-based. My core categories are growing at 1 to 1.5x GDP my growth categories are going at 2 to 3x GDP and a lot of the Pioneer categories are getting initial traction. So at an overall level, that's the indicator we use over a period of time. What we've also seen is that our core to growth in Pioneer is consistently going up. It is now pretty much -- by the end of this year, it appears it will be 60-40. And that's really, for us, therefore, gives us a grid of flywheel for growth. That's how we look at it. Those are the benchmarks we follow. We obviously study all of the other companies. But please remember that vis-a-vis them, we have a consumer products business, which is different. We have obviously a B2B business that is different. So we will look at it composite. But at an overall level, I would be very happy as long as we are between 1 to 2x GDP on a volume basis.
Sir, I just continue with the question. I'll just plug the argument a little bit around. In the current context within the raw material prices have gone down, you did indicate that we have taken some price reductions -- so when you have to take a call on market share versus profitability, you have already given a margin guidance. So is that something which is more sacrificed the market share? How should one understand that? And if could split it between CMB and B2B, it would be great.
We are clear that market share, strong volume growth is our prime indicator. I mean you would notice that in the time when we were suffering from really high raw material prices when VAM went up to $2,500 a tonne, we felt it as a temporary phenomenon and fortunately, we were proven right. We actually took down our margins down to 17% from our traditional 20% to 24%. Similarly, therefore, we are clear that volume market share is primary. We, however, don't like to claim the commodity end of the market. We are a branded business, and therefore, we make sure we command the premium. But we are also clear that -- you can get a premium higher than normal premium for 1 or 2 quarters, but then you will open your back doors for lots more people to be sitting in your garden.
Sure. This is helpful. And last question is on paints. Sir, in the last quarter, you had indicated that we had ventured into AP and Telangana state. Sir, any incremental update over here, the sort of feedback that we have, you had also indicated that we will optimize on our distribution reach. If you could provide some color over here would be great.
Its right now Too early to say. Remember, all sales systems in the first 3 months will declare success very early. To our mind, I think it's best that we come back to you 3 months later. And as we -- when we decide to expand into other states, that will be a great indicator that we've met our action standards in these states.
Sure. And sir, just last question. You have elaborated a lot on the rural rich, but you also indicated that the freight and logistic costs are over higher over here. And how should one look at the incremental margins and incremental ROCs for the incremental sales in Boral India, what we are aspiring for?
See, whenever study, actually at an overall level, there is no difference in profitability and therefore, ROCE between our rural and urban businesses, Urban businesses tend to be higher on schemes discounts because of the competitive nature of the markets. In rural and semi-urban competitive intensity is far lesser. It's about demand creation and reaching the product there and consistently, therefore servicing the market. So at an overall level, actually, it doesn't make a great difference to us in terms of the mix of sales.
Sure. This is quite helpful, sir, thank you so much all the very much.
Thank you. Next question is from the line of Sameer Gupta from IIFL Limited...
Sir, this is Percy Panthaki here. Sir, my first question is on the B2B business, and apologies if this has been answered earlier, I joined late. But what is the volume growth on the B2B business, the UVG.
See, the UVG is minus 5%, Percy good to hear from you, always good to hear from you. We answered that earlier, simply remember where we are suffering is exports to developed markets and exports by some of our customers of products which are export-oriented, be the leather, be their resins, be their textiles or would an artifact and furniture. These are the ones that are tending to suffer. The other place that is suffering is the neighboring markets like Nepal and Bangladesh, where the issue is actually one more of foreign exchange rather than that of demand.
Got it, sir, so in India, the B2B growth would be how much?
The India B2B growth is healthy. The India B2B growth is not an issue. In fact, because of the government spending and infrastructure and the overall organized construction going high, actually, B2B in India is doing pretty well.
Understood, secondly, just wanted to get your sense on margins. And obviously, in the medium term, you have given a floor and a ceiling for margin. But in the near term, would you say that the current quarter margin Q1 is sort of the peak because while VAM has fallen further, you will take price cuts. And on the other hand, crude has gone up. So would it be fair to say that the Q1 margin -- EBITDA margin in Q1 is the peak margin for you for the next few quarters?
I would not say that. I'd just say stay with 20 to 24 because crude will still have a 2-quarter impact. As Sandeep told you our consumption of WAN this quarter was at $1,100 1,100 plus a tonne, the current buying is at 900 -- so in 1 or 2 quarters, we may even go higher than here. But as I said, stay to 20 to 24 and keep focusing on the profitable volume growth.
Right, and last, just an accounting question, just wanted to understand your other expenses line has grown more than 20% Y-o-Y, which is much higher than the overall sales growth, so any reason for that?
I think the biggest -- the main cost that sits in other expenses, advertising and sales promotion, which if you look at it in terms of percentage terms last year was 2.1%, now it's 3.6%. So that itself has gone more than 50%. And that is the biggest cost that is in other expenses.
Okay. And that is the main reason why the overall other expenses percentage to sales...
Largely, yes largely.
And is this just a phasing issue? Or is the spend likely to remain at the higher side because you have sort of a benefit in the gross margin?
In our belief, as we said, we will keep playing this obviously over a longer period of time, but we will see greater focus on brand building. So it will remain at a higher level. Now what's the exact level you will see in the next 3 quarters, but it will not be going back to the same levels as it was last year because last year was a challenge year from a margin perspective.
Okay. Thank you.
Before we move to the next question, [Operator Instructions] next question is from the line of Anish Agrawal from Prabhudas Lilladher Private Limited.
A couple of questions from my side, the first question is regarding the -- you can say new or innovative products, like we have got 2, 3 buckets of products in the newer products, which have been, say, growing at much faster rate. So now what is the salience of such products where are we in terms of the total contribution and what is the outlook on that?
See, that's a difficult question, Amnish, because each of the new products is in a different life cycle stage depending on the -- so I presume your question is more towards categories rather than products because each product is different. But for example, in some of the -- like some products have been from Pioneer move to growth, if you take something like tile adhesives, -- now 4 years ago, we were very small player in Tyler deciles. Today, we believe we are one of the top 2 players in India and Tyler rises -- now that's obviously moved from 5 years to growth. Things like marble and stone, things like grouts is something that we are now slowly in the next 1 year will move from growth to Pioneer. The joinery business, where we are now the leader moved to a growth business about 2 years back and is therefore one of our growth businesses. So it's different for different businesses. But on a consistent basis, as I said, we keep looking at our own internal indicators and seeing them on a consistent basis, are we creating categories. I mean 5, 6 years ago, our ICAgile business was a small sub INR 100 crores business. It's now close to INR 400 crores. So clearly, you will see that a lot of these businesses are achieving or overachieving the benchmarks we have set for them.
Okay, and sir, how much would be, say, contribution of these businesses to our sales...
As I said, by the end of this year, we expect core to growth in Pioneer to be 60-40.
Okay, That's good, sir, the second question is that we have seen a lot of you can say disruptions from the floods and you can say on seasonal range, particularly in the month of July. So any impact it will have, particularly on the 2Q numbers in terms of demand stocks, any disruption we faced in terms of any plant or we houses, et cetera.
No, we definitely face disruptions, Anish, in the month of July simply because we have about 7 plants in Himachal close to Chandigarh. Now with that massive rain that took place there, there was a certain amount of closure. We have one of consolidating warehouse for these 7 plants is in Ambala, which is close to Chantigat again. Now we've had some disruptions for between 10 and 15 days, so on and so forth. But our way of looking at it is this happens every year in different locations. It's part of the part of the plan in operating in India, you'll have the subway or the other. Hopefully, now in August, September, we don't have further disruptions. So it may impact it definitely impacted our July sales, but it will hopefully even out over a period of time. And remember, the good thing even higher in rainfall areas is it also gives you great demand for waterproof.
Yes, absolutely. And sir, looking at the WAM scenario and the fact that you're open to, you can say, taking technical price cuts going forward also. So should we then presume that the realization in the stand-alone, which today may be say roughly around a couple of percentage points negative. So that number can go higher negative realization?
It could, yes. Definitely, like remains low and we find the need. As I said, we will prioritize in the short term the volume growth over the value...
Sorry to interrupt, the management line is not audible, sir.
Is it audible now?
Yes, sir, it is audible now.
So where did you hear us?
I think -- sir, you were saying about your VAM prices.
Yes. As far as time prices is concerned, if they continue to be at a low level and we feel the need to take some tactical price cuts, we will definitely do that. Okay.
Okay. Best of luck, and -- thanks a lot.
Thank you -- next question is from the line of Avi Mehta from Macquarie.
I just had 2 follow-ups. One was on the competitive intensity. Has there been any increase from regional competition because of the price of that...
Welcome back, Avi. I would say not significantly. But yes, I see our categories anyway, there is always 1 or 2 new competitors and the old traditional competitors. That continues. We've not seen -- we see the greater, obviously, intensity of discounting, as we said, because people now have greater eWay, which is why we -- as I said, we've taken the price cuts. But we haven't seen many new players or earlier players getting revived strongly. They've always been there, and they're still playing in the marketplace.
Okay. And just to kind of understand from a thought process perspective, the way you see this is -- if demand needs it, we will take price cut. Otherwise, it is going to be -- it's the need from competition so that we ensure that we are not significant premium from peers. Is that the way I should look at your price cut? Or how you look at that...
The belief is there are commands a certain premium. We will not let the -- therefore, if others reduce prices, we will make sure that our premium doesn't go over so that it's like in a sense, shuts us out. So we will make sure that, that premium remains at the same levels.
Okay. Perfect. So it is going to be more -- in case you face that competition, that's when we should kind of look at price cuts as of now, not otherwise.
That's true Yes.
Got it, sir, and sir, second is just an understanding question. I'm not clear yet on how is the current reporting different from the volume plus mix that you used to give earlier because the numbers have changed. So I'm not sure what has changed or what has driven that change?
One second, let Sudhanshu explain that one sec.
Avi, I think our philosophy, our underlying volume growth, which you now see is -- and I think Sandeep spoke about it a little bit. I think what we are now reporting is how our mix and volume have grown over a period of time. So I think over -- and what happens is to take your price, it is, in some ways, growth in volume and mix at constant time. I think so that's what we are reporting. And I think -- so therefore, that is the difference, and deals consistent with this. What it helps us to do is to -- as Bharat has always been saying that we are about profitable volume growth. So therefore, it's about making sure that the mix of the volume, which is growing also is consistent, point number one. Point number two, I think underlying volume growth also allows you to look at different volumes in the same bucket. So in some ways, you can aggregate apples plus oranges. So therefore, whether it is tonnes, it's kiloliters, it is units and all that, it all gets sort of subsumed because you are looking at growth net of price in your volume and mix. So I think that's what it does. So therefore, and in some ways, underlying volume growth is actually growth in turnover, but at constant price. So it is why you call it underlying that's...
I mean, what I was trying to get to is, I thought the volume plus mix the earlier way we used to give was also kind of capturing the mix impact and essentially doing the comparison. So as a servicing earlier that we kind of take -- would take a lower share and kind of take that mix impact in that sense. I thought that was coming in the last time, but maybe I'll take it off and I'm still not very clear on what exactly changed that...
Make it up offline. So I think in order to explain to you what has changed...
Next question is from the line of Sheela Rathi from Morgan Stanley.
I have 3 questions and all 3 on waterproofing, as Mr. Puri had preempted earlier. First is a very basic question, sir, is we call out that consumer Bazar is 80% and B2B is about 20% of our business. But if I have to just look at what is waterproofing as a percentage of our business. So that was my first question. Second question is, recently, Asian Paints called out that they are the largest player in the retail segment with respect to waterproofing. So what is our positioning there? And third question was Mr. Puri, you have always said that the biggest competition in waterproofing is non-consumption. And you have alluded that it's 6 out of 10 households do not use waterproofing products , so how has that number changed? And how is it different in urban India and rural India?
Okay, so great question. Let me start with the first see. As far as overall waterproofing is concerned, there is a B2B element and there is a B2C. I would say and don't hold me to the number, if I combine the 2, it would be anywhere between 15% and 18% of our sales, okay? That's the overall waterproofing portfolio. Now as far as the overall growth in waterproofing and Asian paints calling out leadership in waterproofing, frankly, what is happening is most of the paint companies have now reclassified a lot of their what were traditional paint products is waterproofing products. So for example, an exterior emulsion, which is used for exterior beautification earlier now is claimed to be exterior beautification and waterproofing. Some of the primes have been converted to internal primers for waterproof. It's very difficult to -- every paint company has a different definition of waterproofing. Traditional waterproofing, as we have seen it was normally a used in new construction be used in renovation. Largely what paint companies are even now selling is everything is about renovation, very little about new construction. Having said that, Sheela, as far as we are concerned, when we look at our growth rates, we look at where we are going, we are clear that on a consistent basis, we are like making substantial progress. As far as the consumer is concerned, and we've just done this study, for example, of the saliency of brands, 9 out of 10 consumers named Dr. Fixit as the first brand of waterproofing when they're asked to name a brand which they would like to use in waterproofing. We believe we have the brand, we have the range now this confusion, this overlap between paints and waterproofing will always continue and it depends on what people are counting. As far as the difference in penetration is concerned in waterproofing, I'll tackle this in 3 ways: in organized construction, which is organized real estate, organized commercial real estate office buildings, et cetera, we're now finding that waterproofing is getting between 65% to -- 7 out of 10 buildings are using some form of waterproofing and the organized real estate sets. In individual housing in urban India, it is between 4 and 5 out of 10, individual housing in rural India is 1 and 2 of -- and a large part of rural India tends to just do simple concrete mixing on the roof and presume that is waterproofing. So we've got a very long way to go. I mean the best indicator I can give you is world over, if you look at the ratio of waterproofing to paint, it is 1 is 2, 3 or 1 is to 4% at best. In India, it is 1 is 2, 8 or 1 is to 10%. So you can see the kind of runway that waterproofing has for a growth perspective. Does that answer your question?
Yes, it does. Just to be clear, you said it's -- I know it's not exact numbers, but it is 15% to 20% of our overall portfolio.
Yes, that's true.
Next question is from the line of Rahul from Impex.
You mentioned you've used AI in your business. Can you just elaborate a little bit about how you've done that?
See, we're still at the early stages. -- let's-- we are still working through use cases, some of which are infinitely confidential that once we are ready to talk about -- give us a little more time that we are ready to talk about it because the wise, we -- it will be music to my competitors to know how we are using it.
Next question is from the line of Jay Doshi from Kotak.
First question is just a quick follow-up on the liquestion asked by Avi. So if you were to use the same reporting for volume and mix that you used earlier, what would be your volume growth for CNB business standalone customer in Bazar this quarter versus the 12% that you've reported?
One thing... See, there just -- there's a rough calculation, there would be a margin of 0.5% to 1% difference, but we will work the exact number and come to you and they're also doing that for the last year. If we were to look at total volume growth, which is what most other companies are reporting, including the paint companies, we would -- instead of 12%, we would be at 19% growth.
That not-- That the paint companies include part and Thailand, but I was just curious to understand whether you have been reporting optically changes something versus what we...
It doesn't change substantially. The question that Avi was asking was the right one. We, as a company, have always consistently said volume plus mix. We are now doing volume plus mix at a given price. And that's the difference. And that doesn't, therefore, move the need the way total volume versus underlying volume does.
Perfect. That's helpful. Second question is for, you mentioned about you are one of the only 2 companies where not Sig. I meant your GM that portal or app has 15% up -- could you elaborate, I was not sure whether it was referring to a particular category or...
No, exact for Pidilite today, 25% of Pidilite sales every month we are now getting out of an app where a dealer, it doesn't matter where he is presuming he is in Ludhiana or he's in Trichy or he's in a small village in Maharashtra. He can actually on the app, it's key in this order and 24 hours will reach him via our distribution system. He doesn't have to call up a salesman, he doesn't have to call up a distributor. And slowly over a period of time, we are only 1 of 2 companies, we believe the other is HUL, which is doing the same thing in a substantial fashion. We are today now getting 1/4 of our sales like this, and this really therefore, sets us up for much deeper and easier distribution in the future.
Correct. Understood, so this is dealers ordering through the app, not carpenters...
Dealers ordering through the app, yes, see carpenters don't order through the air. Carpenters have a separate ad where you can ask questions, so on and so forth, et cetera, but they will be linked to a dealer.
Understood, and final question is from whatever little bit I gathered about Aisha. I mean you currently the price range that it operates at is primarily targeting the economy segment, right? The economy or ultra-economy segment in the decorative paints, is that understanding correct?
No, the understanding is not correct at all. It is actually is, in our view, matching the range of each of the paint companies with a significantly superior product. And actually, therefore, one of the first feedback we are getting is that what we are calling an economy product in the market is looking at it at the next category as a premium product, but it's early deals. But no, that's not true. We're not in just the economy or the bottom end of the market. We have a full range.
Ladies and gentlemen, this was the last question for the day. I would now like to hand the conference over to the management for the closing comments.
So at least from my side, thank you to everybody for their continued interest in Pidilite, Vats, if you have any other cost.
No, it's always a pleasure. Thank you. And the wonderful thing about the Pidilite analysts at least is you're always set us thinking and you will always ask the questions that et cetera speaking. So thank you all for your participation. Thank you for your support and have a lovely long weekend and look forward to meeting you post the weekend.
Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.