PIDILITINDNSEJanuary 23, 2025

Pidilite Industries Limited

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Management on call

Bharat Puri

MANAGING DIRECTOR – PIDILITE INDUSTRIES LIMITED

Sudhanshu Vats

MANAGING DIRECTOR,

Kavinder Singh

JOINT MANAGING DIRECTOR,

Sandeep Batra

EXECUTIVE DIRECTOR,

Dharmendra Lodha

SENIOR VICE

Amnish Agarwal

PL CAPITAL

Key numbers — 31 extracted

9.7%

ved at our board meeting yesterday. In the current quarter, we had an underlying volume growth of 9.7% across categories and geographies and that translated into a revenue growth of 9.3%. So, as you w

9.3%

ume growth of 9.7% across categories and geographies and that translated into a revenue growth of 9.3%. So, as you would have observed, the gap between the underlying volume growth and the value growt

7.3%

growth has now converged. Underlying volume growth for our Consumer and Bazaar business (C&B) was 7.3%, while the B2B segment maintained its growth momentum with underlying volume growth of 21.7%.

21.7%

was 7.3%, while the B2B segment maintained its growth momentum with underlying volume growth of 21.7%. Gross margins improved by 100 basis points year-on-year largely due to benign input prices. VA

100 basis point

aintained its growth momentum with underlying volume growth of 21.7%. Gross margins improved by 100 basis points year-on-year largely due to benign input prices. VAM consumption in the quarter was around $884

24.3%

lans to step up our A&SP spends, which we did in this quarter and our EBITDA margins came in at 24.3% versus 25.1% in Q3 last year. If I look at the nine-month performance and this is for the standal

25.1%

up our A&SP spends, which we did in this quarter and our EBITDA margins came in at 24.3% versus 25.1% in Q3 last year. If I look at the nine-month performance and this is for the standalone entity, u

9.2%

at the nine-month performance and this is for the standalone entity, underlying volume growth was 9.2% with C&B at 7% and B2B at 20%. Gross margins in the nine-month period were 284 basis points highe

performance and this is for the standalone entity, underlying volume growth was 9.2% with C&B at 7% and B2B at 20%. Gross margins in the nine-month period were 284 basis points higher than last y

20%

this is for the standalone entity, underlying volume growth was 9.2% with C&B at 7% and B2B at 20%. Gross margins in the nine-month period were 284 basis points higher than last year and EBITDA ma

284 basis point

volume growth was 9.2% with C&B at 7% and B2B at 20%. Gross margins in the nine-month period were 284 basis points higher than last year and EBITDA margins were at 24.5% compared to 23.7% in the previous nine

24.5%

s in the nine-month period were 284 basis points higher than last year and EBITDA margins were at 24.5% compared to 23.7% in the previous nine months. We continue to invest in our brands and upgrading

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Guidance — 20 items

Bharat Puri

“We are seeing that there is a certain amount of slowdown which hopefully in the first and second quarters of the next financial year, the fourth quarter, we don't see too much of change happening, but hopefully post the budget and therefore the first quarter of next year, we are hopeful that things should improve.”

Percy Panthaki

“Understood, and the growth construct that used to give us that your core will grow at 1X GDP and growth at 2X and Pioneer at 3X to 4X.”

Percy Panthaki

“And on input cost, any kind of change or should we expect this 23.5% to 24% kind of EBITDA margin to continue given where the costs are currently?”

Bharat Puri

“I think with two headwinds that we are keeping a close watch on, is the depreciating rupee as well as crude prices, both of which will impact us in the medium term, not in the immediate short term.”

Bharat Puri

“If we see our margins at the higher end, we will look at further sets of actions to stimulate growth in the first half of next year.”

Jay Doshi

“Earlier at the beginning of the year some time you had indicated that the urban real estate construction cycle benefit comes with a 2-3 year lag and you are hoping during the course of the year you will start seeing more and more benefit or maybe FY26 could be a better year?”

Arnab Mitra

“My first question actually was also on the real estate cycle where we have heard some moderation and you also alluded to certain regional issues, but I was just wondering that, our view at the end of September quarter was that because we had the monsoon effect and the election effect, there will be a bounce back from that.”

Bharat Puri

“The number of issues that we are facing or we are hearing about in local geographies , which are specific to states, is not leading us to believe that, it is all buoyant, but having said that, there is still, as we see it, this cycle of a lot of these, the construction boom that has happened over the last three years, we have started seeing benefits and frankly we do believe we will still see substantial benefits going forward.”

Bharat Puri

“Otherwise, we will tend to focus on trying to step up our underlying volume growth rather than try and do pricing because we believe that gets you short term results but a lot of medium term pain.”

Bharat Puri

“Now barring black swan events, we don't expect it to get worse.”

Risks & concerns — 14 flagged

We have been hearing about urban consumption slowdown from a few companies in the last couple of quarters.

— Percy Panthaki

Secondly, what is your mix between urban and rural and do you see an equivalent offset in terms of rural recovery, which is sort of countervailing whatever urban slowdown you are seeing and again within urban if you could give some color on whether we are seeing any different outcomes among the various segments like adhesive, construction chemicals, and so on?

— Percy Panthaki

We are seeing that there is a certain amount of slowdown which hopefully in the first and second quarters of the next financial year, the fourth quarter, we don't see too much of change happening, but hopefully post the budget and therefore the first quarter of next year, we are hopeful that things should improve.

— Bharat Puri

As far as input costs are concerned, again, given the geopolitical uncertain world that we live in and now there is also a new variable with the US coming into play, I would say for the next two months, so on and so forth, we don't see any change.

— Bharat Puri

Let me tell you that it is very difficult for us to try and find the real proportions between maintenance, repair; while we know it at a gross level because obviously a lot of small builders, medium sized builders are also serviced by the trade, a lot of them also do top-up purchasing.

— Bharat Puri

We are also hearing of some amount of slowdown in the A class cities.

— Bharat Puri

See, if there is no inflation, I mean right now, we are seeing a certain amount of pressure because actually right now only on the Rupee devaluation, it was Rupee sliding downwards, but our stance is always very clear.

— Bharat Puri

Do you see a material downside risk to this?

— Latika Chopra

If you look at, we are just being cautious.

— Bharat Puri

I mean, we have obviously changed our commentary from increasingly optimistic to cautious, simply because we are seeing a certain amount of strain in demand in urban and rural.

— Bharat Puri

But one market share, very difficult to give you of specific segments; offline whenever you want, we can discuss.

— Bharat Puri

So, first is that, if you remember, and I am sure Bharat would have shared that some time back we had done a technological partnership with Jowat for manufacturing of hot melt adhesives, hot melt pressure sensor’s adhesives and some other products.

— Sudhanshu Vats

And second part to the demand side and more on the overall consumption, not specific to Pidilite necessarily, FMCG companies are saying there are three reasons for the current urban slowdown.

— Abneesh Roy

So, structurally, not just for you but for maybe the industry, the overall spend, do you see this as a concern because next 4 years coalition politics at the Centre and States also now clearly freebies politics will continue?

— Abneesh Roy

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Q&A — 12 exchanges

My question is on the macro front. We have been hearing about urban consumption slowdown from a few companies in the last couple of quarters. What is your sense on the entire macro piece? Secondly, what is your mix between urban and rural and do you see an equivalent offset in terms of rural recovery, which is sort of countervailing whatever urban slowdown you are seeing and again within urban if you could give some color on whether we are seeing any different outcomes among the various segments like adhesive, construction chemicals, and so on?

Bharat Puri

Thanks, Percy, for the question. See at the macro level environment clearly, we are seeing a certain amount of, I would say softness in both urban and rural. You know, from a demand perspective, we are seeing a certain amount of strain. Remember, for us, rural has continued to do well while everybody else spoke about rural being underperforming. For us, we have consistently grown rural, but when we look at the numbers, especially in our core categories, we see a certain amount of strain in demand. Having said that, it is still positive, and the strength of our portfolio, which is well straddle

You often mention that about 50% of your business is dependent on new construction and so are you in position to get a sense of what is the kind of growth you are seeing in that part of the business and what is the growth in the remaining repair, maintenance, innovation part of the business? Is it possible for you to over a six-month period or quarterly basis actually get a sense? The idea of asking this question is there is no divergence between your growth rate and some of the other building material categories especially I know paints is not the right comparison, but still divergence is wid

Bharat Puri

Firstly, good to hear from you Jay. Let me tell you that it is very difficult for us to try and find the real proportions between maintenance, repair; while we know it at a gross level because obviously a lot of small builders, medium sized builders are also serviced by the trade, a lot of them also do top-up purchasing. Having said that, I can tell you that real estate, the kind of buoyancy that you saw six months back, currently there are sets of local factors, whether it be in Hyderabad, in some of the larger metros, there are local factors which are in a sense actually delaying regular con

My first question actually was also on the real estate cycle where we have heard some moderation and you also alluded to certain regional issues, but I was just wondering that, our view at the end of September quarter was that because we had the monsoon effect and the election effect, there will be a bounce back from that. So, have you not seen that benefit in play out in terms of projects or work, which would have stalled, which kind of accelerated or that has happened, but other things have slowed down. Just trying to understand how the positives and negatives played out. Regd. Office: Regen

Bharat Puri

Good to hear from you Arnab, actually, both things have not played out to the extent we thought. The festive bounce didn't come at all this year and normally when there's a shorter festive season, the post festive season tends to be a little buoyant. That was not the case. As I said on real estate, we have not seen a substantial bounce again. The number of issues that we are facing or we are hearing about in local geographies , which are specific to states, is not leading us to believe that, it is all buoyant, but having said that, there is still, as we see it, this cycle of a lot of these, th

Thank you for the opportunity. Just continuing on the comments from you on the demand side, it seems there is a bit of a caution in terms of the growth rate. And at the same time, you said there is demand which could come from the projects or the construction schedule that’s happening. Just trying to get an understanding about the conviction, confidence you have in sustaining this 7-8% kind of consumer and bazaar volume growth. Do you see a material downside risk to this? Is that what this caution is about? If you could comment on that. Regd. Office: Regent Chambers, 7th Floor Jamnalal Bajaj M

Bharat Puri

Sure. Good to hear from you Latika. If you look at, we are just being cautious. I mean, we have obviously changed our commentary from increasingly optimistic to cautious, simply because we are seeing a certain amount of strain in demand in urban and rural. Now barring black swan events, we don't expect it to get worse. Hopefully the budget, the money that will come in with the crop as a result of the good monsoon and greater government spending on both infrastructure as well as the overall thrust on Capex, we believe hopefully it should actually step up. But frankly, barring black swan events,

Thanks, and congrats. My first question is on the B2B. You have done quite well. My specific question here is, in terms of market share, if you could give us some sense, how is the market share there? Your market share in B2C is very strong and dominant market share. In B2B, any sense on how market share trend is and what would be the market share there?

Bharat Puri

See Abneesh, you cannot really look at market shares in B2B simply because each of these goes to different user segments. So B2B you will have a joinery segment, you will have paper and packaging, you will have textile emulsions, you will have leather. So, your market shares tend to be different in each of these. There is no composite market share. In most cases with one or two exceptions. We tend to be a top 2 or a top 3 player. Over time we moved up the value chain so therefore we tend to compete a lot with the multinationals. But one market share, very difficult to give you of specific segm

Hello, Mr. Bharat. I just want to know what you see in the current quarter what is the VAM consumption rate currently? And where do you expect it for the entire March quarter? So, current, in January so far and for the full quarter, what is your expectation? Thank you.

Sandeep Batra

So, for the third quarter it was $884 a ton and we anticipate it to be pretty much in this range in the fourth quarter, give or take 1% or 2% here or there. But by and large in the same range. Okay, alright. Thank you very much.

Hi, Bharat. Hi, Sudhanshu. Sir, consumer and bazar growth has been kind of in single digit for the past 7 odd quarters. So, for a strong, relatively inelastic portfolio like ours, do you think that mild inflation supports value growth without significantly sacrificing volume? Or you prefer the line inflationary environment where volume growth is fine, but we are not able to cross that hurdle of double digit value growth?

Bharat Puri

Tejas, good to hear from you, see, if you give me a choice, I would always take double digits underlying volume growth rather than value plus volume going to double digit. But frankly, I mean, because we have had these unnatural situations where post COVID we had all these supply chain disruptions, raw materials went totally out of kilter, now they are slowly gone the other way. I think we will, probably in the next financial year return to normalcy where you will have a certain amount of hopefully low inflation along with good volume growth. That's the hope that we are all working under but l

Hi, team. I just wanted to clarify on the pickup post budget point, is this more linked to a macro or is this something that tends to happen with budgets which tend to historically drive some pick up? I want to just clarify that point.

Sudhanshu Vats

No, absolutely linked to a macro pick up. We don't see any historical thing where post budgets you always have a pickup. Okay. Just the other bit, Sir, I just wanted to understand as we are seeing more and more growth move towards the pioneer and the growth categories, do you see a need to probably revisit our 3%-4% ad spend to save the range to a higher target as these products, which you highlighted earlier, need more customer education? Just repeat your question, sorry it got garbled in the middle. Sir, you traditionally said that the ad spend range is more in the 3%-4% level but that was a

Good afternoon, Sir, and thanks for the opportunity. I want to understand about the overall opportunity that we look forward from say around the medium term from 3-5 years perspective for our size of business in this electronics manufacturing? We have already tied up with Jowat and we have also entered into distribution agreement with CollTech. So, do we require more JV also as well as what kind of opportunity we are seeing in that? Regd. Office: Regent Chambers, 7th Floor Jamnalal Bajaj Marg, 208, Nariman Point, Mumbai – 400 021. Investor Relations - investor.relations@pidilite.co.in CIN: L24

Sudhanshu Vats

I think it is a substantial opportunity in the 5-year horizon and as you talked about, Abneesh was also talking about it. And at this moment, Bharat Bhai, suffice to say that we are looking at all options as to how to grow and maximize this opportunity. This is again as we keep saying for our partnering businesses, it will be in these areas you need to be specified with the custom contract manufacturers or many of these players. The process of all of this is anywhere between 12-24 months. You need to keep developing products with them for their future products. That process also requires some

So quite an intriguing discussion. Just one thing, there is a general perception that, say for example, last couple of years, real estate has been doing quite well in terms of offtake, more at the end of large developers. Now, there is a view that as you can say the apartments or the real estate construction which started mostly after, say COVID, say 2 years back, 3 years back, so that is yet to be delivered to the people who purchased the real estate. So, the next couple of years' growth should be significantly sustained or better for companies like Pidilite, So, any view on this thought?

Bharat Puri

See, again, there is a lack of organized data. I think your question is the right one. It does appear, at least from the outside, that what you are saying appears to be true because as we see across not just the Metros but even the A and B class cities, there is a large amount of construction that is coming to completion and, therefore, all of this obviously helps companies like ours substantially. So, I would say wait and watch but, I mean, on this we are quite hopeful and optimistic that it will happen because we have seen signs of that on a regular basis. Okay, thanks a lot, Sir.

Thanks for taking my question. Just a follow up to one of the questions earlier, Regd. Office: Regent Chambers, 7th Floor Jamnalal Bajaj Marg, 208, Nariman Point, Mumbai – 400 021. Investor Relations - investor.relations@pidilite.co.in CIN: L24100MH1969PLC014336 Mr. Puri, where you mentioned that for lot of your categories you need to really train the people to understand the category and that's why this distribution expansion will continue for a long period of time. From your overall portfolio, will you be able to call out what is the competitive landscape for you because it feels like that t

Bharat Puri

Good to hear from you, Sheela. I think your question is absolutely the right one. In a large number of categories, especially in rural and semi-urban India, and I say this with all humility, we actually compete with non-consumption. It's that the consumer, they do not know that there are alternatives. It's like, for example, when we do these small meets, etc. in villages on waterproofing and show them that actually you can construct without water leaking or the things that are broken in their home, this is how they can stay, you can use them again and after that nothing happens. So, the fact o

No closing comments other than wishing everybody on the call a very good evening and thank you for your continued interest. I think Bharat wanted to speak.

Bharat Puri

Yeah, again, given that I will not be on the investor calls for the last one of the year, I just wanted to thank all of you for your support, for your questions, for your contribution, for your enthusiasm. And you know it's wonderful that we have made so many friends along the way. Thank you so much all. One has learnt a lot from you, and it's been a wonderful journey along with you. Thank you all.

Speaking time

Bharat Puri

Moderator

Percy Panthaki

Abneesh Roy

Sudhanshu Vats

Sandeep Batra

Avi Mehta

Arnab Mitra

Latika Chopra

Sheela Rathi

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Opening remarks

Amnish Aggarwal

Hi. Good evening, everyone. On behalf of PL Capital, I welcome you all to Pidilite Industries Ltd. (Pidilite) Q3 conference call. We have with us the senior management of Pidilite represented by Mr. Bharat Puri, Managing Director; Mr. Sudhanshu Vats, Managing Director Designate; Mr. Kavinder Singh, Joint Managing Director Designate; Mr. Sandeep Batra, Executive Director, Finance and Chief Financial Officer; and Mr. Dharmendra Lodha, Senior Vice President, Finance. So, without taking much time, I hand over the call to the management to take the proceedings further.

Sandeep Batra

Thank you Amnish, and good afternoon, ladies and gentlemen. I will quickly take you through some of the salient points of the third quarter and nine months results, which were approved at our board meeting yesterday. In the current quarter, we had an underlying volume growth of 9.7% across categories and geographies and that translated into a revenue growth of 9.3%. So, as you would have observed, the gap between the underlying volume growth and the value growth has now converged. Underlying volume growth for our Consumer and Bazaar business (C&B) was 7.3%, while the B2B segment maintained its growth momentum with underlying volume growth of 21.7%. Gross margins improved by 100 basis points year-on-year largely due to benign input prices. VAM consumption in the quarter was around $884 a ton as compared to $902 a ton in the same period last year. As we had mentioned earlier, we had plans to step up our A&SP spends, which we did in this quarter and our EBITDA margins came in at 24.3% ver

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