Hello, and good evening, everyone. Welcome to Asian Paints Q1 FY27 investor call.

I'm Lak Sharma from investor relations team, and it's my pleasure to welcome you all. We are joined by senior members of our management team, including our MD & CEO, Mr.

Amit Syngle; our CFO & Company Secretary, Mr. R J Jeyamurgan; our AVP Finance, Mr.

Parag Rane. I would now like to invite our MD & CEO to share with us his opening remarks.

Over to you, sir. Thank you.

Hello, everyone. I think, welcome to the investor conference for the Q1 of FY27.

Great to have all of you here, and it gives me pleasure in terms of really looking at in terms of what we need to kind of share with you. All of you are aware that we have been since 1942, we have been looking at existing to beautify, transform, and preserve all the spaces and objects, bringing happiness to the world.

That is something which is the core value in terms of what we have professed for a while in terms of what we have been taking. In all our actions, this is something which is visible in terms of what we do in the market.

As a standard disclaimer for all of you in terms of whatever we are going to speak about. I think if you look at from a point of view of what we have started this year is clearly looking at taking a very strong journey ahead, talking of six big areas in terms of what we want to kind of really propel the organization forward.

I have spoken earlier in terms of saying that today, I think Asian Paints prides itself in terms of really looking at making a brand in the commodity market, and we kind of really look at continuing to really add credence and saliency to this brand as we kind of go forward. That is something which is going to be a big and a massive effort, which we will kind of continue to make as we kind of go ahead.

The area of innovation, I think, is something which is very, very important, and that is something which possibly is the area of differentiation which we are looking at as we kind of keep on going ahead, and really be ahead of the curve in terms of looking at newer prepositions, newer areas for the customers we can bring in. Along with it, we are really taking the whole area of premiumization, which means that we want to kind of upgrade the consumers to a better product, where again there is value which kind of comes in from a point of view of what customer seeks from us to that extent.

The third area is pressing the whole accelerator in terms of the areas of servicing regime. Services is something which we have been appropriating.

It's a big differentiator, which we think we have been able to carve out, and services which talk of a certain stature and not basically just existing in terms of from a point of view of really serving the customer. The fourth area has been about the whole area of regionalization.

We think today, as India emerges, that's a very big story which is there, where you can't take India as one whole, but start looking at what is it that we can give to various regions, which is slightly different and married to the culture, the whole area of how people live, and to the homes of that region in terms of how it comes about. The B2B area is a big space given the urbanization and the industrialization which is taking place, and the huge amount of expenditure which is coming from the government.

That continues to be a very big bet for us in terms of what we are doing. Finally, I think at our scale, we think that backward integration is a big piece in terms of what we need to invoke, which will possibly give us a treasure chest to kind of keep on investing in the market and really kind of looking at profitable growth as we kind of go forward.

Coming to some of these issues, just to kind of give you a glimpse. This is not very exhaustive, but I think it just kind of gives you a a glimpse in terms of what we have been doing.

For example, we have introduced this entire product called the anti-damp technology in our eco emulsions. This is the first time in the world someone has introduced this kind of a technology at this price point.

We think that is something which is very, very strong because this is a genuine concern which the customer speaks about of saying, and this principally speaks of no watermarks both for interior and exterior. That is something which we have launched with a lot of kind of good response from the market, which has kind of come in.

The second area is that Asian Paints always has been appropriating color in a very, very strong manner. Therefore, we have taken this whole area of looking at that color is not only for protection, it is for beautifying, but color is so much long-lasting that it becomes your real address of the house.

That is something which we have kind of really taken a very, very big area in terms of what we are working on. Coupled with this, not only it is the delivery of the right color, it is the delivery of a color which is long-lasting and anti-fading, and at the same time, offering people a visualization of their homes in terms of colors which they will really kind of remember in terms of what they can do for beautifying their home spaces.

I think a lot of work around this, and this is the first time we have extended the warranty platform to color warranty as we look at it. The third big innovation which has been done is that we have brought in all this area of waterproofing and coupled it with also the very big need of the customer in terms of saying that it also cools the interiors from where it is where it is coming from.

We are talking of not only a protection which is against water, but it is also a protection against the heat, and therefore it kind of creates a difference between the outside temperature and the inside temperature, which not only you know saves energy, but also kind of gives you a lot of relief in terms of the way the Indian homes are structured, so that possibly this becomes a very, very big preposition in terms of what we offer along with a 10-year warranty, which kind of comes in. Then kind of taking the battle to the luxury area, we've launched this top-end product, which is basically from an Italian collaboration of ours, which we work with.

This is a top-end product which is what we call as the Emporio Urano, which talks of giving you a very, very strong area of not only gloss, but it also talks of a warranty, it talks of best-in-class film clarity, and a lot many other things which come in. Again, a first one in the world in terms of invoking some of these innovations which come to plate.

As I spoke of the regionalization, this has been one imperative where we are taking the packs in such a manner that they become really loved by the customers in terms of what they see. Today, when you kind of walk into an Asian Paints shop, you will find that the packs adorning the whole area and kind of attracting the customers to the culture which they know, the culture they're familiar.

For example, in Rajasthan, we celebrate the whole area in terms of core elements of the Rajasthani culture, which kind of adorn the packs, and they can use the QR code to kind of really get into more to kind of really enjoy the area which they kind of stay in. Similarly, we've done something in Andhra, Telangana this year.

Most importantly, first time in wood finishes, we are invoking something very distinct which comes in from the craft of Chittoor, Andhra Pradesh, which we are trying to build on the packaging. We feel that this is a big area which kind of improves the involvement of the customer with the category.

We see now so many homes who kind of take this pack and really put the pack after emptying it in their living rooms in terms of, and they are able to put a plant inside it, they are able to do so many things out of it, it becomes a pride of holding in terms of what really comes out. The services, I think we have been proliferating this very strongly.

We have the world's largest home painting service, which we call the Beautiful Homes Painting Service. On-time completion, the whole area of color guidance, the whole area in terms of looking at supervision, the fact that we look at a lot of mechanization which comes in, we are talking of a very, very high customer delight level which comes in, which is measured through an NPS exercise in terms of what we do.

This is something which is going on very well, now spreading across towns, across the country. Therefore, this is something which possibly is a great area in terms of what we have kind of really embarked upon.

The second area is Total Assure. This is a service which we kind of really offer in the B2B business which is there, and we offer it to the builders and CHS societies where we are able to kind of give them this service, which makes gives them a assurance that throughout the painting, they will kind of get a very strong experience regarding the paint completion or in terms of looking at looking at the quality which is delivered and in terms of possibly the kind of products which kind of come in through this service.

To that extent, this is another big area which we have kind of really transitioned on. The third area is Smart Assure, which is all about taking the expertise of Asian Paints in waterproofing, and really assuring the customer that any kind of problem in terms of leakage is what we can really handle, and that's a very strong Smart Assure solution in terms of what we kind of really offer.

Finally, we have something which is called the MetaCare, which is the asset protection system. Today, you'll be happy to know that we offer this in B2B, and today there are so many premium factories which are kind of taking this service from us today, which is an anti-corrosion kind of a system in terms of what we offer, and we take almost the warranty for the full factory in terms of what we maintain.

Today, best of the names are kind of coming to us in terms of saying that today Asian Paints can look at providing this service to various factories and various institutions in terms of going forward. As you see, we are kind of extending this service interface because we truly believe that one of the big areas how the brand can be propelled forward is the service benchmark.

That is something which we are really kind of moving, so that the true area of customer-centricity can be invoked in a very strong manner. The other area which we are kind of galloping is the whole area of B2B.

I've been speaking about this over the last 1.5, 2 years. To that extent, we feel that that's a very big growth vehicle in terms of looking at capitalizing on the infrastructure growth which is happening.

Various segments here, whether it is factories, whether it is hospitality, whether it is the government, all are very, very strong segments which are driving the whole B2B business, which earlier used to be largely builders and CHS only to that extent. Now I think it has evolved into a very big game, and that is something you find that whether it is airports, whether it is ports, whether it is bullet trains, we are all over the place in terms of what we are able to kind of offer from a point of view of various products and services which are there.

In this, we also have something called the AP Juggernaut, where we kind of look at offering a lot many areas as one customer to basically whether it is deco or industrial needs of one key account. We have a huge number of more than 100 key accounts in terms of what we kind of look at as part of our juggernaut, where it is one AP getting all the kind of services of Asian Paints under one umbrella to the key account in terms of what we see.

I think that's the last space in terms of what we look at from a point of view of looking. I spoke about the backward integration.

We've already completed our white cement plant, which is now fully operational and working on very, very good capacities overall in terms of Fujairah, Dubai. The second state-of-the-art thing which is coming is what we talk of the VAM-VAE manufacturing ecosystem.

This is the first time in India someone has invoked this technology. Worldwide, there are four or five players who kind of really operate in this space.

We are operating in this space by making some things which is very, very different, which is very core to our business in terms of what we want to do. This is a new-gen emulsion.

The first phase of this activity, we are kicking off now by the August month, and we feel that this is a very big area in terms of what we will kind of get into. You can just see from the glimpse that basically this is a big investment which we have made with a lot of sophistication, where today you can control the entire plant through only one room in terms of what can be done.

It's really state-of-the-art in terms of what we have put in. Overall, coming to the story in terms of how Q1 has kind of been for us, I think it's been a overall a good month in terms of what we see, taking on from Quarter 4, which we were definitely doing quite well.

Overall, we are at about a strong 9% volume growth in terms of what we have seen, and the growths have been almost across the months in terms of what we have been able to garner in in this entire quarter. I think it's been a strong volume growth.

If you look at from the point of view of value, okay, the decorative value has grown at a very good pitch of about 16.6%, albeit on a lower base, but overall, I think it has grown to a very good pitch overall, to some extent aided by some of the price increases as well in terms of what is there, possibly a weighted price increase of about 6.8% or so in terms of what is captured in it to that extent. I think overall it's been a strong month where we have kind of looked at improving the product mix, looking at the whole area of premiumization very well in terms of what we have spoken of.

If we take the industrial, that has also gone at the same pitch possibly, and both auto and general industrial has done well. If you take that 16.5% growth, including industrial as well to that extent.

I think both the businesses have done very, very well in terms of looking at where we are. Some highlights in terms of the performance: overall, as I said, good volume growth which we are kind of seeing in terms of looking at it.

We have seen that possibly some of the growths from the rural markets have been much better than as compared to the urban markets, which is what we have kind of seen to that extent, and this was a trend which we saw in Quarter 4 as well, and the trend kind of continues to strengthen in terms of looking at in terms of going. However, the B2B markets continue to be governed by good growths in urban to that extent.

When we look at premiumization, we have been able to kind of galvanize a lot of products from a point of view of upgrading the customer to a higher level. Premiumization has been the used route, not only in terms of, looking at premium, but also looking at luxury.

I think that is something which has been a good focus, which has been delivered through a 360-degree action we have taken around, whether it is in terms of product, whether it is in terms of marketing activities, but this has been a big focus in terms of what we have taken. The B2B business has been very, very strong again.

I think it has kind of sustained the momentum, and all segments are performing well for us in terms of how we have kind of driven this segment. There is obviously, I think, a strong foray continues that we continue to open newer counters, newer, selling points which are there.

That possibly is something which is the credence of our overall distribution reach and network depth, which we'll keep on invoking as we kind of continue to grow ahead. If you look at overall, the innovation approach has really given us very, very strong point.

New products basically from a portfolio contribute to 17% of our overall revenues. I think that's a pretty high number in terms of contribution in terms of what we get.

As I said, what will kind of give it more credence is that when we have our VAE production as Phase 1 starting now, which will strengthen the prepositions even more in terms of the coming times as we see it. As far as decor is concerned, today we are the number one integrated home decor player.

This is something which we have been kind of working on for some time, and if you look at it, we have about 74 Beautiful Homes stores which are, under one roof you can get all the decor items, lots of collaborations here which is there. Overall, yes, I think we face a lot of competition here from the unorganized sector which is there.

Our area has been more in terms of catering to customization in terms of what we believe is required. Overall, a mixed bag this quarter again.

Overall, we have seen that, kitchen and weather seal revenues have been strong in terms of double digits. However, White Teak and bath have been on a lower side to that extent.

Therefore, even in terms of the bottom line, I think there is some tension which is still continuing to kind of really exist, but I think we are at it, and we are still believing that we want to kind of really look at possibly furthering it because it adds to the whole area of home in a very big way in which we want to kind of really hold the sway as we kind of go forward. Coming to industrial business, as I said, the two businesses which we have, PPG AP, which is the automotive OE business which is there, the top line has been about 13% growth in terms of what we have achieved.

We have got a strong a PBT growth of about 5% which is there. The PBT margins have been a little bit stressed here, about 15.7%, lower by 119 bps points.

Overall, I think, the business continues to do well, especially the auto, marine, and the packaging business continues to be kind of good in terms of what we have been able to kind of do it here. When it comes to the general industrial business, I think there the growths have been fairly strong.

21% is the overall growth in terms of what we have been able to do. However, we have not been able to take so many price increases in the market.

It has been also very competitive, and therefore the PBT margins are about 6.9% for the quarter, a little bit lower than what we had basically achieved overall compared on Y-on-Y basis to that extent. There is still about a 4% growth in terms of PBT in terms of what we have got.

Globally, I think these are the geographies where we are present all across the world. This is the geographies which possibly we have kind of enhanced our work.

All of you are aware that given the overall conditions in terms of what are existing, I think all geographies in Middle East have been a little bit stressed, both from a point of view of inflation and from the point of view of the overall demand. Overall, I think we have been able to do a strong job in terms of what we have been doing.

We have made the innovation story very, very big in this markets. We launched a top-end luxury product called Royale Steller, and this product has been launched at various markets, including UAE, Bahrain, and Oman.

We've also launched a product called Acrycoat Novi in Egypt, which is there, which is again a ultra-premium product which kind of comes with lots many properties. We are also launching our Nilaya brand today in UAE, Bahrain, and Oman because that that market is a luxury market for us, and really want to kind of take on competition in terms of making our mark in the luxury markets.

Then we have extended some of our areas in terms of our strengths in the Indian market in terms of whether it is waterproofing, whether it is premium products, or whether it is in terms of some of the luxury products in terms of the emulsions as well. That is something which we have launched in Nepal.

I think we continue to kind of leverage our overall innovation in terms of the Indian markets, and kind of trying to really make the global markets go and take a premiumization space there. I think this has yielded results.

We have grown at about almost 27% in Quarter 1 here, and this has been a very strong performance, and the performance by and large is across regions in terms of what you see, okay? Overall, obviously, a lot of units have done well in terms of Egypt, UAE, Nepal, Bangladesh, all of them have done quite well overall to that extent in terms of where we are.

The PBT growths are also very strong. Overall, the growths have almost doubled in terms of the overall global environment.

If you look at various countries, every country across basically except for Africa, where we had basically Ethiopia there were some problems in terms of overall currency and devaluation and so on and so forth. I think overall otherwise we have done fairly well in terms of across various regions across to the extent, and that's something which is a good story which comes in with a PBT margin of about 7.9%, which is higher by 275 bps points.

If you look at from a standalone perspective, the overall gross margin trend has been also fairly strong. A little bit of pressure on gross margin.

We were at about 43.8% from a overall 45.6% in the last quarter to that extent, but we are still possibly higher than if you look at from the point of view of the preceding year-on-year quarter in Q1 of FY26. Obviously, I think the pressure came in from a huge amount of inflation.

While we have taken price increases in the month of April, May, June, the overall weighted average price increases possibly around 7% to that extent in terms of what is there, and the material inflation was still very, very high to that extent of about 25%. That is something which possibly is an area which we will have to look at from a point of view of going forward that how does it really impact us in terms of going ahead.

In summary, if you look at the standalone financials, overall top line growth of about 17% which is there. You see the PBDIT growth, the PBT growth, and the PAT growths all above 30% in terms of what comes in.

Again, very, very strong PBDIT margin of 22%, okay, and also looking at the overall growths which have come in, I think the bottom line has also been very, very strong and healthy in terms of what we have been able to deliver. Consol almost follows the same route in terms of what is there.

In fact, it gets bettered to about an 18% top line in terms of what we see. Overall, again, PBDIT, PBT, and PAT margins are higher than the standalone numbers in terms of what we are able to see given good growth across businesses in terms of what we have been able to garner.

PBDIT margin stand at about 20.6%, almost 240 bps points higher in terms of what we have seen to that extent. Overall, I think it's been a strong position in terms of what we have been able to drive the consolidated financials also.

Obviously, something which you're eager of in terms of what really happens, what is auguring ahead in terms of what we look at. I think what is our top worry is the whole area of the renewed conflict.

The volatility in raw material prices kind of continues, and it kind of really puts a lot of pressure on the supply chain logistics, which are kind of coming in both from a point of view of freight availability and the fluctuation of prices which are happening across to that extent, given the fact that the paint industry is largely dependent in terms of crude and crude derivatives to that extent. That continues to kind of really worry us in terms of looking at how we kind of really look at possibly, fighting this whole area of the volatility in terms of going ahead.

That's something which possibly we are kind of really handling it as we handled in Quarter 1. When we look at overall, I think our priority is very clear that can we maintain the growth momentum which we have seen today in the last few quarters, which we have been able to kind of really look at.

The competitive intensity seems to be all-time high, okay? I don't think so there is any leeway which we think in terms of which is there.

Our whole attempt is that the whole area of consumer connect, the emotional marketing, and the technological disruption and innovation, what we look at is the key points in terms of what we profess as we kind of go forward. When we look at Quarter 2, the whole area of agility is very, very important.

We look at possibly speed and discipline coming so that we can, sustain this growth momentum in terms of what we are taking and we can be one above in terms of looking at how we propel these growths going forward. We are looking at, the brand building part as I spoke of, looking at deepening the consumer relevance, looking at sharpening the differentiation story, and strengthen our market salience going forward.

I think cost is a very big area. We have launched a real strong initiative around cost and which we benefited in Quarter 1 as well.

Whether it is in terms of sourcing, formulation you know efficiencies, this is going to be a big thing. Today, I think we will kick off our VAE also in Quarter 2.

I think all those will give us some benefits in terms of looking at what we are able to do to kind of keep the cost under check, and giving us possibly a good area in terms of saying how we can deal with the inflation which is kind of going on. Thank you so much for hearing what I had to say.

Thanks. Am I audible?

Yes, you are.

My first question is on the innovation. So 17% of the revenue is coming from innovation, that seems very high.

How do you define innovation? What time period of launch you are considering here?

Will this be largely in construction chemical and waterproofing? Versus your overall gross margin, say of around 43%, and EBITDA margin, say of 20%, where will these innovations be currently?

I guess gross margins would be ahead of this, but if you could tell us in terms of EBITDA margin, where would these innovations be at current juncture?

Overall, our definition is that we look at basically products basically which have been launched, and it takes time to kind of really launch them nationally. Basically something which is in a 3-year timeframe is what we look at in terms of defining our new products which is there.

A lot of these new products are not only in the waterproofing construction chemical zone, a lot of them are in the emulsion zone, as I spoke of in terms of what comes in. It would also include absolutely new customer prepositions in terms of what we are launching, and also in the premium and the luxury segment which is there.

Given the fact that a lot of them are coming across various categories, especially in premium luxury, they possibly, I think, kind of corroborate our overall margins in terms of what we look at in terms of getting, and therefore they would be a propellant in terms of keeping our margins overall healthy in that space in terms of how we kind of look at.

Sure. I had one question on the demand side.

You have done quite well on the profitability, congrats for that. On the demand side, will you be happy with the 9% volume growth on a soft base of last year?

I do understand a lot of moving parts. Initially when price hike is so sharp, there will be a postponement of demand.

Price hikes happened in March and I think April, May. If you could tell us overall, was there a negative impact or a positive impact of the price hike on postponement of demand?

Second is of course Indian customer is extremely value-conscious, a lot of customers will very happily delay their painting by a few quarters. Was there an adverse impact of that?

Was there an adverse impact of Bengal election because I think every Bengali painter went back to Bengal for his SIR and vote and all that? Was that a big problem?

If you could highlight overall, what is your view on the demand? Are you happy with the 9% volume growth?

Overall, I think, as an organization, you would like to achieve more and more, I think happiness is a relative state in terms of what you speak of. I think overall, the demand conditions have been decent in terms of what we have seen.

As I said, all 3 months, I think the demand has been decent. Yes, because of the pricing actions, there could be some bit of extra pipeline inventory which would have kind of come in to that extent, but overall we see that the demands have been decent.

Yes, we would have loved the demand conditions to be a little bit more vibrant with respect to the T1, T2 cities, where we have seen possibly a lower growth rate as compared to the rural cities in terms of T3, T4 cities to that extent. Therefore, possibly that could have been a little bit more, but it got compensated by good growths in T1, T2 in the B2B sector to that extent, where a lot of government kind of expenditure which is happening across cities to that extent.

I think in all, possibly we could have kind of really looked at touching a double digit, but overall we seem to be quite happy in terms of what we had predicted last quarter, that we should be in that band of about 8%

to 10%. Sure.

Last quick question on the two industrial segments. When do you see margins normalizing?

Currently around 120 bps drop is there in both the segments. Volume growth seems to be a bit low in the first one.

If you could elaborate how much was the pricing growth? Are you again happy with the volume growth in both the segments of the industrial?

Actually, if you look at in industrial, the price increase action comes in a little bit more deferred, and therefore the entire pricing action will not kind of reflect here. Because what happens is with some of the B2B customers and key accounts, the whole process of price increase is something which basically takes a bit of time.

It's not like in the decorative market that you can announce the price increase and basically from the next day it is implemented to that extent. It takes a bit of time in terms of looking at the industrial segment.

In that also, what we see that segments which have really done well is the whole area of auto OE, which has done extremely well in terms of both volume and value in terms of what we have been able to grow. Similarly, the whole area of marine and packaging, which has done well.

Some of the areas like refinishes have been a little bit slow. Again, from a general industrial business, we look at, I think the value, volume growths have been strong in that area in terms of what comes in.

Overall, what we feel is that the margin impact is because of the later call in terms of the price increases which is coming. Overall, my belief is that industrial will continue to grow at a higher pitch than decorative as we kind of look ahead.

Sure. Thank you.

That's all from my side. Thank you.

Hi, team. Am I audible?

Yes, you are. Yeah.

Yeah.

Hi, sir. Sir, I just wanted to first start with the demand side.

We've seen 9% volume growth. Could you share your thoughts on how should we look at FY27 volume growth, especially because as we go into the later part of the year, the base turns adverse.

Any thoughts on how should we look at the full year would be useful. Yeah.

I think definitely how we are looking at is that, as we kind of look at Quarter 2, overall we are entering also a festive kind of quarter where there is definitely the month of September becomes good enough from the point of view of some festive sales which are coming in. As we look at even Quarter 3, Quarter 4, overall, I think we have given our direction that we should stay in the volume region of about 8% to 10%.

That is something which I think we should kind of really look at because we do not know at this stage how would the second half of the year augur from a point of view of overall price volatility and so on, forth. As we go ahead, possibly some of those indications will also look at that whether there would be price changes which would happen in the second half, which could kind of trigger up demand even further in terms of looking at it.

I think at current stage, we're looking at more like the band of 8% to 10% for the full FY27.

Perfect, sir. Perfect.

That's very useful. Sir, the second bit is just related to what you highlighted about the input cost environment.

Could you help us appreciate how from a going forward basis do you see input cost pressures panning out? You did highlight low-cost inventory, but then logically 2Q might be lower than 1Q, but for the full year, how should we look at it?

Any thoughts over there if you could share, that would be helpful. That's all from my side.

I think overall what we have seen is that Quarter 2 has traditionally been as a little bit of a lower margin because of the mix in terms of what we sell in Quarter 2 overall to that extent. I think given the fact that we are taking a very strong drive in terms of premiumization, how we want to kind of really go ahead from a point of view of overall mix in terms of looking at it, I think we are still kind of garnering around that the guidance of 18% to 20% in terms of our PBDIT margins holds in terms of what we are taking.

We are making a lot of effort with respect to both looking at saying how do we galvanize demand, how do we look at in terms of premiumization, and third, how do we looking at our cost structures far more strongly, especially with respect to backward integration and some of the cost efficiencies we are building through our formulations and sourcing.

Got it, sir. Thank you very much, folks.

Thanks a lot.

Hi, sir. Good evening.

Thank you for taking my question and congrats on a great set of numbers. Sir, first wanted to understand the mix and the gross margin expansion surprise that we've seen this quarter.

The difference between the value and volume, it seems that the mix is a positive 1 versus -4 that was indicated in the last quarter. When one links this to the gross margin expansion which saw the start of high raw material prices, it seems that sales from putty, etc., have been negligible.

Would this be a fair reading, or would there be higher sales from exterior paints and premium paints that is leading to this better mix improvement and gross margin expansion? Wanted some understanding on this, so that's question number one.

Okay. As I said that there's been a lot of focus in terms of looking at premiumization, a lot of focus in terms of driving a better mix in terms of what we have kind of looked at.

Therefore, I think that has been principally one of the reasons in terms of how we have driven basically today the overall margins in terms of what we have been able to achieve. At the same time, I think there is obviously some benefit of the inventory in terms of what we had, which is basically a low-cost inventory to start within the quarter to that extent, which has added to possibly the overall area of the margins in terms of what we have been able to garner.

That is why I think the pricing which we took has been a fairly calibrated pricing in terms of what we have maintained. Going forward, I think this imperative of looking at premiumization, looking at some of the newer innovations in terms of what is going on so that we can get higher margins and really get the premium for the brand in terms of what we are is going to be the effort in terms of going forward.

Understood. That negative 4% mix, would that assumption be required to be revisited, sir?

As I see it, going forward, for some quarters till the time basically we don't take pricing corrections, okay, I think value and volume gap possibly would be on the positive side as you are seeing in this quarter, and the difference might not be too much in terms of what we would kind of see. I think till the time we kind of really get into pricing corrections, the value would continue to be higher than the volume.

Understood. That's one.

Second, I wanted to check about the pricing, average pricing of 7% that is there for this quarter. When you speak to the dealers, we believe that there's a price increase of 13-14% that is put through till the month of June.

Would that be the pricing growth that one should look forward for from 2Q onwards on the pricing front? Secondly, you highlighted that rural is doing much better than urban.

There shouldn't be any impact on the product mix because of higher sales from rural in anticipation of this, right?

Overall, see, given the rural growth being better, I think we've seen a certain product mix we've got into that extent. Therefore, possibly even when I say rural, I think there is a classification of certain T3, T4 cities we kind of look at.

Therefore, possibly we are able to push some bit of good premium products there. Today, if you look at from a point of view of trend data, some of the auto sales and some of the other things are also happening very well in some of these T3 cities which are there to that extent.

Therefore, we are able to push some premiumization in some of those markets. Therefore, we feel that possibly urban markets from here would kind of only grow higher as it kind of really achieves.

Therefore, from the point of view of product mix, I think we should be able to maintain that kind of a overall zone in terms of looking at what we want to kind of really look at going. What was the second area you had asked?

The pricing growth about 13-14% would be a fair for 2Q onwards?

I think overall the weighted average has been about 7% in terms of what is there. Overall, it will be totally depends on the product mix in terms of what is there because there is a differential pricing which has happened on each category in terms of what we have taken.

Therefore, I think the product mix will govern in terms of looking at what is the total kind of impact of the pricing which will come. Possibly it would be in the range of about 8% to 9%.

Understood. Last question, a bookkeeping one, if I may.

When one sees the change in inventory, it seems like there has been a material increase in the change in inventory. This is usually on the low-cost how low-cost or it would be the average cost that we book out here?

How should one see the change in inventory? Would you have a higher finished good inventory booked at lower cost and the benefit of that can come through in coming quarters?

See, if you look at from a inventory point of view, in fact, I think we have done better from a point of view of overall number of days of inventory in terms of what we are holding. It's just that basically a lot of raw material inventory which has kind of come in, it has come in at possibly a higher cost to that extent, which is there, which is where you are seeing basically a blip in terms of the overall inventory which is there to that extent.

That is something which possibly will partly kind of really be affecting some kind of margins as we kind of go into Quarter 2.

Got it. Thank you so much and wishing you all the very best.

Sorry, Mihir. Just to sort of add to that, most of the low-cost inventory benefit on finished goods, I think has seeped through in Q1.

Here onwards, we will see the pricing inflation sort of coming in.

Then you've already taken price increases, no, Parag?

So... We'll have to see how the mix also behaves, and therefore Q2 basis that.

Got it. Thank you, gentlemen, and wishing you all the best.

Yeah. Thank you.

In fact, most of my questions were answered. Only one clarification if I may, Amit.

Noted the outlook for Q2. Now, I completely understand the volatility part of it, but conceptually speaking and also practically based on historical experiences, in fact, times like these which are very difficult, tend to favor larger, formal players, right?

Isn't it? Secondly, for a full-year basis, I understand the price part of it, but if I heard you correctly, you are still talking about a 10% volume growth, right?

Yeah. I've spoken of that 8% to 10% as a overall volume band for the entire year in terms of what is there.

What you said is right that today, I think in Quarter 1, we would have definitely got some advantage in terms of some of the smaller players in terms of what is there because the supply chains were pretty volatile from what it kind of comes in. Therefore, given the fact that our supply chain was far more robust to that extent, yes, some advantage of that will kind of seep in both for Quarter 1 and Quarter 2 going ahead.

Thank you. Thank you and all the best.

Hi, am I audible?

Yes, you are.

Sir. Firstly, just a question on this quarter.

The volume-value gap which is approximately about 7% this quarter, could you give some kind of flavor on further breaking this up into a pure price increase and a mix change?

Overall, as I said that the contribution of the premium products has been definitely much better in this, and basically there is definitely almost about a 3% impact which is coming higher because of the better mix in terms of what we have been able to sell to that extent. Today, I think there has been still a decent performance from a point of view of overall, the mix of economy products as well to that extent.

On a longer run, if we say that the product mix is definitely much better from what conventionally we have been selling in various quarters, given the fact that there is a premiumization drive, there is also some of the newer products which have kind of come in. All that have given us that benefit in terms of making the mix a little bit favorable from a point of view of premium products.

It's a +3 on mix. Got it.

Secondly, just wanted to understand in terms of the pricing. Now I know that you have several input costs and they have their own demand supply functions, etc., and it's not just linked to crude.

I understand that. Just as a very rule of thumb kind of a calculation, the price increases that you have taken thus far, they are sort of benchmarked to what kind of crude levels, or rather, if you want to maintain a margin in the middle of the 18% to 20% kind of a band with only the current price increases, at what crude level does this equation sort of set in?

I think, again, it's a slightly more difficult question to really answer because the pan of raw materials is something across. It is not that every raw material, because example, TiO2 is something which is not linked to crude at all to that extent, and it's the largest value consumption in terms of the paint industry in terms of what it kind of comes in.

Similarly, if we look at a range of additives and stuff like that which is there is not really linked to crude to that extent. I think going forward, overall, the current estimate in terms of what we see is that the crude band has been very, very volatile also.

It is very difficult to put up a saying that at 90, this will happen, and at 100, this will happen. That correlation becomes very difficult to justify because of the fact that the raw material purchasing will happen from time to time.

It's literally the weighted average which really counts in terms of what we would have kind of really bought at to that extent. Therefore, the direct correlation with crude at this point of time is very difficult to kind of say that if I were to kind of benchmark to a certain level of crude pricing, that my margins would kind of land at that.

I think it is a very difficult thing. What we can definitely take in the point is that I think that 18% to 20% guidance is a good guidance to take.

If irrespective input costs, whether it is TiO2, monomers, polymers, whatever it is, supposing they maintain in future at today's prices, would you need any kind of pricing either increase or decrease to stay within that 18% to 20% band?

Again, as I said, I think the volatility as we speak also there are some prices which are going down, some prices which are going up. As we have seen that some prices had started coming down in June as well, okay?

I think the volatility is so much that you can't take anything at a constant in terms of saying that in Quarter 1, this was the constant parameter which we have taken, which if it remains in Quarter 2 will give us this kind of margins. I think we'll have to live with this fluctuation which has started, that some of the prices, for example, we have seen that the TiO2 prices were fairly stable, but it has started to going up, okay, and that trend basically we saw it in end of June which is starting to happen.

Some of the prices in terms of monomers have started to come down from where they were at earlier levels. Very difficult to really benchmark and say that we can correlate it to it.

Finally, it would kind of really matter in terms of the overall material index for which it comes to when we look at the overall set of raw materials to that extent.

Got it. Last question, would you be able to give some kind of idea of the benefit of the low-cost inventory this quarter?

Would you be able to quantify it in terms of basis points of gross margin or something like that?

Again, difficult to kind of really put a number to it because see today we have seen that normally you will not keep too much of inventory also. There is a mix of newer kind of inventory which has also kind of come in to that extent in the months of about 30 to 45 days in terms of what we would have sold the inventory.

Possibly a lot of inventory which we would have sold for the half of the quarter would have been possibly based on some of the old raw materials and the finished goods.

Sir. Thank you so much.

All the best.

Hello, am I audible?

Yes, you are.

Sir, given that low-cost inventory was contributing to our sales for roughly half of the quarter, could you give us some indication about how profitability may have changed in the first half of the quarter versus let's say the second half? When we think about second quarter, if prices broadly remain where they are, costs remain broadly where they are, are you thinking about taking more price increases, or would there be a potential of margin compression versus Q1 levels?

As I said, typically you see that Quarter 2 relatively speaking the margins are a little bit lower as compared to what we get in other quarters, given the product mix where we kind of speak of. Therefore, as we kind of look at today, I think any price movements will depend on only the volatility which we will see in the market right now.

It's very difficult to say that today we will take a price increase. Ideally, we would not like to take any increases going forward unless basically the situation really becomes alarming in terms of what we need to kind of do in certain categories if it kind of really comes to the point in terms of doing so.

As we see it, overall I think definitely going ahead, I think the whole idea is that we can still maintain our band in terms of what we have been operating on.

Understood. The reason, sir, that I was asking this is because you have shown that costs have gone up by almost 25%, and if we consider that costs broadly remain where they are, and the price increase has been to the tune of 9, 10, or 11%, then does that mean that we are bracing for gross margin compression, of course keeping the seasonality aspect aside?

As I said, see today what's happening is that we are also seeing a lot of prices also coming down in the market to that extent. I think what is really happening is that the volatility is really also helping us in a way that possibly that if you are able to manage your overall sourcing and logistics very well, I think it can basically be also an area of advantage in terms of what you kind of look at in terms of going forward.

Therefore, today, what we see is that while there is a gap between overall increase we have taken and the overall inflation, I think there is also a little bit of a deflation in terms of what we are seeing in a lot categories which are basically the input cost to that extent. I think that mix married with the mix in terms of what we sell in Quarter 2 would really kind of govern in terms of possibly where we lie.

As I said, obviously, I think to some extent, a large part of this inflation effect definitely will kind of really come in terms of looking at going ahead in Quarter 2.

Perfect. That's helpful, sir.

Just one clarification. We've been quite aggressive on putty and low-value emulsions and have gained significant market share.

Just wanted to understand what is our strategy going to be around these products. Is it that we are incrementally going to focus a lot more on premium and luxury and reduce our focus on these products, or is it that we just had some possibly mix benefit this quarter because of pre-buying at the premium and luxury end?

See, the strategy going ahead is that basically we kind of really get growths in every segment which is there because as is the overall premium segment important to us, the economy segment is also large, and that is also very, very important in terms of what we are able to grow. Putty is a starting point in terms of paints in terms of what is there to that extent, so that segment is also important because it really signifies that that's the first purchase a consumer is doing as far as painting is concerned to that extent.

I think as we go ahead, where we are going to maintain is the focus is going to be definitely maintained that in each of the segments, we have a decent growth in terms of what we are able to make. At the same time, there is a lot of imperative that we are able to upgrade the consumer, one, from the unorganized industry to basically organized, and second, from the levels of eco to premium, to premium to luxury.

I think those imperatives in terms of our overall strategy will remain.

Understood, sir. Thank you so much.

Hi, thanks for the opportunity. I have a few questions on VAM-VAE backward integration project.

First is, is the understanding correct that VAE emulsion will be largely utilized only for premium and luxury emulsions? See,

actually, it's a technology which is quite future-generation oriented. It talks of basically low VOC which kind of comes in to that extent, and it talks of giving some special properties in paint it can garner.

It totally depends in terms of how you formulate the emulsions because today the general market operates on certain standardized emulsions in terms of what really comes in to that extent. Overall, when we look at this entire thing, the usage can be across any category of products, not limited to only premium.

It can go into economy, it can go into other segments as well, which is like adhesives and powders as well to that extent in terms of what we look at. I think the overall consumption is fairly broad in terms of what we can look at it, and therefore possibly that's how we are looking at leveraging the overall output as it comes by.

How should one think about this 150 million metric ton capacity versus your potential requirement at the current scale of business?

Overall, it would depend in terms of how many products we are able to kind of really get the whole area of VAE into to that extent, which would kind of really guide the overall consumption from that 150 metric tons which we have kind of indicated. It also takes a little bit of time to kind of really reach that kind of a capacity in terms of what is there.

Our feeling is that possibly over a period of about 2, 2.5 years, we should be able to kind of reach basically a capacity which is higher and closer to about 150 MT.

The last one, at the time of announcement of this project, you had indicated that you expect this will give you cost competitiveness which should help your gross margins by 400 to 500 basis point. I assumed that would be pertaining to the part of the portfolio where you are utilizing this in-house capacity.

Does that 400-500 basis point, let's say, for now if I assume it's only premium and luxury emulsion, does that 400-500 basis point still hold at the current landed prices of VAM or VAE emulsions versus that?

Again, see, as a general rule, possibly I think there would be a certain band in terms of what we will operate upon. Very difficult to say that it will maintain at 400 or 500 or between 300 to 400 because overall it also depends in terms of possibly the kind of advantage which you are getting from a point of view of the current sourcing which you are kind of doing, and also the kind of formulations you are kind of really planning to make to that extent.

Generally, I think overall it should kind of really for the category of products from that point of view, I think it would kind of translate into that 300 to 500 kind of a band.

Thank you very much and wish you the very best for the project commissioning.

Hi. Thank you for the opportunity, sir, and good set of numbers.

Just on the industry growth, what is your sense on that? Second, I wanted to understand on the economy range.

About 2 years back when the competition started to catch up, I remember some comments coming from industry players largely around the economy segment being very, very competitive and all. Now when I see your launches on the economy segment is slightly on a product differentiation, is this the mix change that you called out, is it much more structural in nature?

One should assume that now most of the players whatever on the pricing side much of it is over and everybody is now focusing on premiumizing in every segment of the economy and all? First question is on the industry growth, just to understand your market share trend, how it would have been for this quarter.

Overall what we see is that definitely some of the medium to large players would have got some benefit from a point of view of some of the smaller players to that extent. Therefore, what we see definitely is that possibly to some extent, we would have grown slightly higher than the industry average in terms of what is there to that extent.

Definitely that would be the zone in terms of how we look at the overall market. As far as the economy products are concerned, I think today the competition intensity is all across, whether it is economy, whether it is premium, and whether it is in luxury.

I think the competitive kind of environment continues not only from one player or two players, but for across players, I think it kind of continues to that extent. My estimate is that that will continue to remain as we kind of go ahead to that extent.

I think this competitive intensity will remain. I think the economy segment possibly, given the fact that there is a propensity that you can kind of really convert a contractor much better in terms of looking at if you were to do higher discounting.

I think the competition would remain slightly more intense as far as economy is concerned. I think the relative difference between economy and premium from a competitive intensity is not very much different.

Sure. Thanks a lot.

Thank you. Okay.

Thank you, everyone, for joining us. Thank you.