Good afternoon. A warm welcome to all of you for Kansai Nerolac Paints Investor Meet, FY 2024-2025. First of all, thank you very much for coming and making your presence. I know it was a short notice, but thanks a lot for making it for this conference. At the outset, let me introduce to you our new Managing Director, Mr. Praveen Chaudhari. Praveen Chaudhari is a visionary and a dynamic leader. Praveen Chaudhari brings an exceptional blend of strategic insight, operational expertise, and transformational leadership to the role. His extensive experience in the paint industry has consistently demonstrated his ability to drive operational excellence, foster innovation, and lead business towards sustained growth. Mr. Praveen Chaudhari had a long career with Kansai Nerolac Paints. Near 25 years where he was the Executive Director. Then from there, he went to Pidilite Industries, where he was CEO of Special Products.
From there, he moved on to Kansai Paint Japan, where he held very, very senior-level roles in Kansai Paint Japan. Now, today, he is the Managing Director of Kansai Nerolac Paints. We welcome him to Kansai. We also have Mr. Jason Gonsalves, who is our Director of IT and Supply Chain. He is here. Apart from this, the entire Management Committee is here. All of you can interact with them during the Q&A. You all know, currently, the paint industry is going through a challenging environment, particularly decorative, mainly due to new competition and stress on demand. However, of late, there is slight improvement, and we are on the growth trajectory. Apart from this, as far as the industry is concerned, it has been growing, and we are doing well on the industrial front as well.
We believe, going forward, we'll continue to do well on the industrial. With these few words, now I request Jason Gonsalves to take you through our presentation for FY quarter and FY 2024-2025. Jason.
Thank you, Prashant. Once again, a warm welcome to all of you. Thank you for making it here this afternoon. Over the next 20-30 minutes, I will try and give you insight into what we, as an organization, have been doing over the last 12 months. After that, we'll open the floor up for questions and answers. This will be the rough flow of the presentation. Coming to the Nerolac story, this is a slide we put up in every investor conference. It outlines our purpose and our vision. Our purpose is to create environments for a healthy and beautiful future. Our vision is to design solutions that protect, inspire, and touch lives every day.
As you can see in this pictorial representation, Nerolac is possibly present in every aspect of our life, be it at home, be it when we are at offices, or even when we are traveling wherever we go. There is a bit of Nerolac in our lives on an everyday basis. We are a very focused paint organization. We believe in coatings, and we consider ourselves as a powerhouse of paint. This is because maybe there are five pillars on which we believe very strongly we have invested over the years. One is a strong 100-plus years of expertise and legacy in the paint industry, a very, very strong research and development orientation, and a mindset where we have cutting-edge technologies which we work on. We have also access to a lot of global technologies thanks to Kansai Paint and the entire Kansai Paint network.
We are an innovative company. We bring the pioneering spirit of Japan to India. We are the undisputed leaders in industrial. Over the last three years, we have been talking of this innovation called Paint Plus in the decorative market. We are the second strongest consumer brand. We still maintain that position. We have an iconic Nerolac jingle. These are the four or five elements which make us a powerhouse of paint, and that gives us our strength, and that gives us confidence about how we would navigate the future. Coming to the business environment, if you look at 2024-2025, there were six big themes that emerged. One is a very stable demand in automotive. During the year, there were a lot of talks that the automotive will slow down. There is some sort of a slowdown in the automotive, especially passenger vehicle.
Overall, auto did pretty well. I'll cover that in the later part of my presentation. The government thrust on infrastructure continued throughout the year, and that's also reflected in our numbers. Crude has shown signs of softening. Today, it is hovering in the range of around $60-$65. The rural recovery, which started in the previous year towards the end of the previous year, continued. Of course, we have some new challenges in the form of geopolitical challenges which are emerging. I need not talk about them. I'm sure all of us are aware of it. There is a lot of volatility in the forex market. We saw a sharp decline in the rupee. Coming now to our main businesses, which is the decorative business and the industrial business. I'll begin with the decorative business.
Our decorative strategy, which we have been talking about in the last two, three years, is around seven elements. I will not talk about them now, but maybe in each of the coming slides, I will cover these elements in a little more detail. Our decorative portfolio today is a very vast portfolio. We are present in virtually all segments of the decorative market, whether it's the retail segment, construction, chemicals, wood finishes. We have got the whole range of products to compete in the marketplace.
As far as strategy is concerned, there are some pillars of the strategy, which is product superiority based on Paint Plus, the Japanese technology that we bring into all of our products, the very strong focus on an influencer program, on a loyalty program, which is basically being leveraged for three things on the retail front to actually increase extraction and expansion, and to drive possibly two new verticals, which we have been working aggressively in the last two to three years, which is projects and new businesses. These are the three elements which are driving on the ground our growth or our aspirations, which is backed by the whole background of superior product technology, the Japanese technology, and Paint Plus. Coming to Paint Plus, we know we launched this in the beginning of 2022-2023. It was based on creating a differentiated product portfolio.
Happy to say in three years, this has actually borne fruit. Today, we have a double-digit salience in Paint Plus. In the last one year, we have progressed by 190 basis points. We have a whole host of products which we keep bringing out in the Paint Plus range to try and create a differentiation and uniqueness in the marketplace for Nerolac paints. This spirit of trying to create something different is also reflected in the way we launch products. In the last one year, we have launched 20-plus new products in the marketplace. Many of them are unique in the category or are fighting existing products in the existing market basket or maybe exploiting new price points or price point niches. This is the kind of range and the kind of innovation engine that is running in the organization.
This is a repeat of what possibly we did in the previous two years also. There is a relentless focus on trying to bring new, new things to the marketplace and bring a freshness to the portfolio time and again for the consumer. What has happened? It has gone from here. It is not visible yet. Moving ahead on decorative, the third pillar is our influencer program. We have three elements in the influencer program. One is Paint-as-a-Service. Today, we are present in 250 cities. The salience of Paint-as-a-Service keeps on increasing in the decorative business for us. We have a very sustained program for architects and interior designers. Today, we are present in 45-plus cities. Almost 8,000 architects are onboarded. Third is our program for the painters, which is our Pragati program. Today, we have 1,000,000-plus painters associated with the Pragati program.
Over the last three years, we have seen an increase in the secondary salience to primary. Today, possibly as an organization, we have a better understanding of who is actually consuming our emerging paints. The influencer program in the last two to three years has gone from strength to strength. This is possibly something which will give us a lot of dividend going forward. The fourth element is the whole retail experience. We have two major pillars out here. One is the next-gen shopping and the shop-in-shop concept that we have tried to propagate. Over the last one year, we have added 200 such retail platforms. Today, that number is roughly 350-plus. Today, its contribution is somewhere in the middle single digits to the decorative sale. In terms of new business and projects, both these businesses are doing extremely well.
They're growing better than the market. We have a good strong pipeline for the project business. We have an active set of customers, and this is actively tracked. Today, we are present in almost 80-plus cities for the project business. This is giving us a lot of traction. These two are actually acting as good growth drivers, almost repeating the same kind of growth that we had in the previous year. In terms of branding, marketing, and media campaign, while maybe our visibility in the TV media has been slightly less, our focus this year was on the digital platforms. There was a lot of work that we did here, which is reflected in both the increase in organic traffic as well as organic leads. It's helped us retain our brand awareness at a number two position.
These are some of the accolades that we have won. This is some of the marquee projects that we have executed. There are many more, but we have just put a couple of them on the slide. Coming to the industrial part of our business, again, we have a huge portfolio of products. We are the undisputed leaders in industrial. You can see our wide range of product portfolio. Some of it is kept out for those of you who would like to see and understand the products. On industrial, our strategy is, you can say, divided into two parts. In automotive, where we have a very, very high market share, we have access to the latest technology. Here, we are trying to increase the addressable markets by trying to find new segments to enter so that they become the growth drivers of the future.
In the other part of the industrial business, which is what we call the performance coating business, there are four things that drive the strategy. One is premiumization, new technologies, new approvals, and expansion. This is the way we are driving our whole industrial go-to-market in the last one year or so. Coming to the highlights in automotive, we can see that SIAM reported a 6% increase in passenger vehicles. We maintained a good growth momentum. We gained market share here in this particular segment. We have introduced some of the latest technologies that are there in the portfolio for the passenger vehicle market. Similarly, two-wheelers and three-wheelers had a double-digit growth. Here too, we launched a low-bake product, a low-cost performance monocoat product for two-wheelers. A lot of technology is driving the whole go-to-market in the automotive segment.
Commercial vehicles and tractors had a modest contraction in the current year. There is some revival in the tractor segment because of rural demand. Here, we launched again some products for this particular segment. Coming to auto refinish, we had a high single-digit growth. We maintained the momentum of the previous year. We introduced new technology in the form of water-based solutions, low VOC paints, and we implemented some digital solutions for the paint shops. Coming to performance coating, both in liquid and powder, I think we had very good growth, especially in liquid. I think our growth has been excellent. We have strengthened our portfolio in both the coil coating, thermal range, and the Nerothane PU range. In powder, we introduced some of the new products to keep our leadership intact in the powder segment.
These are some of the accolades that we have won in the industrial business. Coming to manufacturing, we have a 600 million liters-plus capacity. We are augmenting our capacity at Kanpur. That plant is close to commissioning. Vizag phase 1 got commissioned in the current year. We are now expanding our auto paints in the coming year. We introduced some amount of digitalization, or we furthered the digitalization footprint that we have in manufacturing by introducing certain solutions in our manufacturing plants. Similarly, it is the case in supply chain, which is the heart of the entire paint industry because you need to be agile, you need to be flexible. We are implementing a whole new digital solution here, which will shortly go live.
Similarly, on human capital, we continued the thrust of people-first, nurturing talent, and ensuring that we have an engaged and collaborative work culture within the organization through some of our platforms that we have internally. These are some of the two, you can say, two new platforms that we introduced. Our dealer app, we completely reinvented it. We launched it on a completely new platform. We have introduced a procurement solution for our vendors. On ESG, there is a whole body of work that is going on, as you can see. We are water positive. These five elements drive our strategy: decarbonization, resource use, quality of life, diversity, and governance. The kind of work that we are doing is reflected in possibly the kind of ratings that we are getting in the various rating agencies on ESG.
If you see the S&P Dow Jones, we are rated in the top 8% percentile. In FTSE, we are in the top 12% percentile. CRISIL rates us in the strong category. I mean, a lot of work that is happening in this space. These are some of our CSR initiatives. We got the Golden Peacock Award this year for our corporate social responsibility. Coming to the financial performance, if you look at Quarter 4, we've had a growth of 4.7%. We have been able to maintain our PBDIT marginally lower. For the year, at a standalone basis, our revenue growth was around 1.4%. There's a slight dip in our PBDIT by around 4.8%. Coming to the consolidated figures, because our subsidiaries did not do all too well, our net revenue for the quarter was up by 2.7%, and for the year, at 0.3%.
Our working capital, we have been able to maintain our cash conversion cycle. We've actually bettered it in the current year. We've controlled our inventories, and that's helped us to improve our cash conversion cycle. In terms of dividends, we are maintaining the same dividend as we gave last year at INR 375%. Really, that confidence is there in the organization, and that's what we want to convey to our shareholders. In terms of CapEx, most of the CapEx is normal CapEx. There's a slight increase in projects because of the Vizag plant. Otherwise, everything is normal and as in the previous years. In terms of risk and outlook, we see few risks. One is the Rupee depreciation. There's a lot of volatility in the Rupee. The uncertainty because of the kind of changes at the global level.
Currently, we are not witnessing anything in the short term, but we really don't know what will happen going forward. In terms of outlook, as per the RBI bulletin, rural demand is expected to continue to be good. Construction activity is poised to increase. Passenger vehicles and two-wheelers are expected to continue to maintain the demand momentum. Performance coating, we believe, will do well backed by a good order pipeline. With this, friends, I conclude the presentation, and I will now open up the floor for questions and answers. I will request Praveen Chaudhari and Prashant Pai to come to the dais. We can start with the Q&A.
Yeah. Hi. Hello. Audible? I'm not sure. Yeah, I'm audible? Yeah. Hi. This is Avi here from Acquiree. I just wanted to have two questions.
One, if I were to look at the company's performance on EBITDA margin front over the last, say, from 2019 onwards, we have seen EBITDA margin contract by almost about 100 basis points from 2019 to 2025. Now, while we do not disclose segmental level between decorative and industrial, it would be great if you would qualitatively give us a sense on where has this margin expansion been sharper in to help us appreciate how should we look at it going forward. This is in context with our earlier presentation where we had shared a focus of growing more through industrial. So an ability to appreciate how the industrial margin profile has behaved and how the decorative would be useful. If you could kind of address that, sir.
Right. Right, Avi. Good to hear from you.
As far as the last five years, if you're looking at our EBITDA margin contraction that you're referring to, it has been primarily driven by the RM thing that you would have noticed. In the last till 2022-2023, there has been a severe inflationary phase where we have found it's difficult pass-through to industrial. That is why it has led to that contraction. If you look at now, I think this profile is much more improved in terms of pass-through that has happened in the last two years. In decorative, obviously, because of competition intensity being very high, there has been a lot of upfront investment that has happened in terms of advertising spend, manpower front, even a little bit on influencer spend that has increased. All that is happening.
We believe that is important from the point of view of protecting our market share in our strong market as far as decorative is concerned. Now, as this intensity will settle, I'm sure all this investment will have its own payback, and then we'll be recovering from whatever investment you have done in protecting our margin. Coming to our industrial front, what you have told on 18th of April in our session, obviously, industrial being an important growth driver that you have identified clearly from the point that India is now investing heavily in infrastructure. Kansai as a group globally is well poised to leverage that industrial growth from a technology point of view, from approval specification, all that point of view.
The important point is, as the India market is maturing in infrastructure, the requirement of the paint that they're asking for is actually high performance in nature, where there are more warranties, more take on the sustainability. A lot of that thing is getting asked by. They also obviously want global approved suppliers. In that space, I think Kansai Nerolac stands a great chance. There is enough opportunity for us to premiumize also. Take a railway as a segment. I think kind of railway we used to have and now kind of railway that we travel in obviously asks for a greater and more sophisticated paint, which obviously comes at a premium. We have those kind of approvals from the global suppliers.
I think all such play that we are identified, I think will give us leverage in terms of the premiumization opportunity, which will help us in improving our margin. As we move forward, I think even in industrial, we see uptake as far as margins profile is concerned.
If I may follow up and kind of what I was trying to get to is we are taking 2019 to 2025. Crude has gone through its ups and downs, but we are broadly at a level where crude is passing, should have been passed on. What I was trying to understand is if the headline margin is down 100 basis points, is decorative margin more than 100 and industrial less than 100, or is it equal?
The underlying theme or underappreciation, what I was trying to get is if you focus more on industrial, does that then change the margin dynamics? Because industrial, as we appreciate, has been a different margin trajectory versus where decorative is. That is what I was trying to kind of dig deeper. Would you be able to give any numbers or any sense on how should we look at next year from a margin perspective?
I think next year, I think our guidance has been always 13-14%. I think we stick to that at least for this year. We are looking at the current nature of the business that we are into. I am sure the kind of effort that we have elaborated in our midterm plan, obviously, guidance is that we should be doing better than that going forward.
For current year, at least, it will be at the same level of 13%-14%.
Okay. We are at the bottom end of that range. Still, we should kind of see it.
Okay. Fair enough. Right.
The second question is on the growth expectations. Now, when we started, as we are in this year, we have a realization that is essentially declining in the decorative segment. This year's performance, while it has been a sequential improvement, still is in the low single-digit realm. From a year perspective, would you see second half kind of moving up and still the full year still is looking like a mid to high single digit, or should we look at a low to mid single digit kind of performance? Within that, if you could give us a sense on how do you see automotive behaving in particular.
Right.
Okay. I think as far as decorative is concerned, looking at the Quarter 3, Quarter 4, and Quarter 3 is concerned, I think we have seen slight uptick as far as growth is concerned, especially rurally shipping better. Even the monsoon prediction and whatever instantly government announced, subject to geopolitical situation not changing dramatically, I think should help us improve further as we move as far as decorative is concerned. That full-fledged, I think, picture or outlook will be clear in the second half, giving the current competition, which is making this whole picture muddy with the listed company and not so listed, but not declaring their segment result is concerned. I think second half will be definitely better compared to, I think, first half as far as decorative is concerned.
As far as automotive is concerned, I think there has been, I would say, automotive as a whole, there will be some kind of a mix change that might happen. Passenger vehicle, as was said, there will be some pressure as they're indicating. Two-wheeler, on the other side, two-wheeler, three-wheeler, they're projecting a good volume growth. I think as a whole, auto should still do reasonably well compared to what has been shown or indicated. We are pretty confident that whatever we have done last year, we have grown higher than the market. I think same trend should continue this year also.
Got it, sir. Last, just a small bookkeeping. From a two-wheeler versus four-wheeler, is there any margin divergence that one should be bearing in mind as in two-wheelers lower margin, which could? Okay. That's all from my side. Thank you. Hi, sir.
Thank you for the opportunity. This is Mridmai from Mehta & Co. So I had a couple of questions. Firstly, you had mentioned earlier that the gap between the industrial margins and the decorative margins has been going down. With that happening, should we see lower seasonality in terms of margins? Because Q4 being strong on an industrial basis, we have seen a sequential margin pressure. Should that change going ahead?
Yeah, I think yes. That will also depend on the, I would say, ratio. In auto itself, if you see, some ratio might change. Industrial, when we say, it is not only auto, it is also about other three-four verticals that we have, including powder, high performance coating, general industrial. I think auto is what I said, actually, there is a margin profile which is changing.
In industrial, as we start premiumizing, hopefully that will also get changed. For some period of time, that seasonality might impact and we might see some variation. Over a longer period, I think yes, you're right, there will be some kind of rationalization and stabilization that will come. When you say longer period, would you? Maybe two to three years. All right. Okay. Secondly, you mentioned that Rupee depreciation is a risk that you are seeing. With the crude prices coming down, is it setting each other off, or do you still expect some kind of margin benefit to come in in the coming quarters? Yeah. As of now, till Quarter 4, actually, it is set off. Whatever crude benefit that we got actually got offset by the dollar.
Yes, beyond this, if it comes, there will be some pass-through also will happen as far as industrial is concerned. We will try to retain as much as possible, but of course, not the whole thing will come as margin.
Okay, sir. Thank you.
Sir, Ramesh Bhojwani from Mehta & Co. First and foremost, your presentation this time has been very, very positive, pragmatic, and purposeful. It has covered a lot of things without detailing much. The two thoughts which I would like to share. Recently, the entrant of Aditya Birla in paint came to me as an unpleasant surprise, but notwithstanding the fact that they are in. Asian Paints have started communicating in the television media very, very strongly. How do you see their participation and how is Aditya Birla playing up the market? I believe they are still in the decorative segment.
They are not industrial segment is your forte, so we will not, I mean, we don't have 80% of the power portion is protected. But the decorative segment, how are you looking at it going forward with GSW Paints, with Aditya Birla and trying to rattle up the market?
Yeah. So I mean, it's their strategy and obviously to create brand awareness, they'll do all this. Despite all that happening, you just saw in the presentation, even our brand reckoning is still number two. We are still top two brand recognized as far as India is concerned. Without advertising, also the legacy of Nerolac, which is 100 years old, still I think is playing us off. Having said that, if you look at our ad spend, we have not reduced our ad spend. Only thing is the manner in which we advertise has changed. The channel has changed.
I think we focused heavily on the digital now. Obviously, we are doing fairly targeted advertising rather than doing a mass advertisement, which, because I do not think more consideration awareness is going to help us. I think it is now pretty much targeted effort we need to do to extract more. Whereas for other competitors, I think it is more of awareness requirement. I think need of the hour is different. Obviously, our choice of the media is different. I think we are aware of that particular requirement and we are pushing our expense towards more digital, which is more targeted. As far as spend is concerned, it is same as what we were doing earlier.
Going forward, when you are on your blueprint, are you seeing a FTR contribution from the decorative segment going forward in the coming year without naming any percentage, but over and above what it has been doing in the past two, three years? Contribution in a sense, mix or what? Incremental. The increment. The incremental part of the growth. Yeah. Yeah. Paint industry as a whole has been. I saw a lot of innovation in warm white and outside. This thought I thought I will share with you.
No, in India, I see 70% of the market is decorative as of now, and that's I think likely to be so for a foreseeable future.
If that be the case, and historically, if you have been growing at at least one time of GDP, which is 6%-7%, I think it is very important for us to maintain that growth rate as far as decorative is also concerned for us to as a company to grow. Obviously, focusing on industrial to grow slightly higher than that. That is obviously the ambition and desire that we have, and efforts are in that direction. Now, all the effort of launching new products and obviously putting in technological advanced products in the market, using new channels, obviously all that game is to maintain that particular growth rate.
Thank you and all the best.
Thank you.
Good evening, sir. Just continuing on his question, Birla Opus last year was not much in the market, but right now, 6%-8% they have captured the market.
They should be around 9% by 2025. They got a very strong access to the dealer network, and they are targeting approximately to be the second player in the next three to four years. How could our company stay off this particular in the decorative markets? Seeing this coming. Thank you.
Yeah, so that's their ambition. As far as we are concerned, I think our choice of market is very clear. We are extremely strong in north and east and followed by west. I think our whole effort is to protect our market share in that particular market and resist all the moves from the competition to capture our market and grow at the market rate. That's our ambition. They'll try their best, and we'll be obviously there to fight out the battle in the market.
Now, north, they are entering very strongly.
Sorry?
North, they are entering very strongly.
In fact, they started with North plant first, then South plant. I think these two plants they started. Again, starting plant and extracting more from the market. See, selling has happened. Sellout also has to happen. We are watching that situation, and we'll be definitely happy to see that this effort gets truncated someday, maybe this year.
What is your strategy for the dealer? Basically, Vizag is there. How they have captured so much of the dealer network. What is your go-to-market strategy? How are you planning to?
Actually, they copied our strategy, right? I mean, we are here for the last three, four decades, and our whole GTM was exactly the same what possibly they copied. I mean, we were there. Direct dealer distribution was there.
We added distributors to have to open up more retail points in the smaller towns. Obviously, using Paint-as-a-Service project business, all that thing is copied as it is. All that one did is was whatever I was giving, more than that I'm giving. That's all. The question is how long you sustain and whether consumer really buys that thing, whether pass-through is happening to the consumer, etc. It remains to be seen.
Thank you, sir.
There's nothing different and unique is the message. If it is not unique, sustainability or sustaining that effort for long is always a challenge.
Thank you, sir. Wish you all the best.
Yeah, hi. Am I audible? I'm Darshad trfrom Mehta & Co., and my question is towards subsidiaries' performance. You said that it's weaker and this is impacting the console results.
Could you elaborate more on that? Also, will it get better? If yes, then in what time frame?
Thanks.
Subsidiary performance, how was it, and is it going to be better or what is your outlook?
As far as subsidiaries, we are facing challenges in Sri Lanka and Bangladesh because of the local issues there. Currently, there is a stress. As far as Nepal is concerned, we are doing better than the market. Our domestic subsidiary, of course, we have done a revamp. We had not done well last year, but there is a big change, and there is likely to be good improvement in the current year. Within the current year. Thanks.
Hello, sir. Ajay Thakur from Anand Rathi Securities.
Just wanted to get a sense on the growth, volume growth in the industry, how it had been in Q4, and what is the trajectory that we can expect going forward, say, for Q1 and Q2, if some colors can be given on the same.
Yeah. As an industry, I think our understanding is that it should be mid-single digit is what I understand from the results that are yet to come, but these are expected, you know, guess, you can say. As far as, yeah. If you can just repeat the answer because I could not hear it clearly. Sir, if you can just repeat the answer, I could not hear it clearly.
Repeat the answer. Okay. Yes, sir.
As far as Quarter 4 is concerned, results are not yet out, but our estimate is that it will be about mid-single digit volume growth is our anticipation. As far as Quarter 1 and Quarter 2 are concerned, it should be in the same range.
Sir, the volume value gap that we had been seeing in the realization versus the volume growth for the decorative segment, which has been persistent for all the companies, all the industry players, it has been reducing or it has been kind of indicated to reduce. How has the trend been now? Are we seeing that trend actually reducing further in Q4?
Volume value gap?
Yes. Yes.
It is improving now.
Correct. Okay. Sir, last bit was on the crude oil prices. We have seen the crude oil prices actually correcting quite a bit and quite sharply of late.
Given the current at $60, if you can throw some broad numbers or at least indicative number as to $10 kind of a correction on crude oil prices, what kind of a benefit we can expect for our gross margins or the EBITDA margins?
Yeah, see, this crude oil correction also has to be sustained for some time because we have inventories and obviously there are contracts. One has to wait for this level to be settled. If that happens in the next contract, obviously we will be able to get that benefit. Right now, it is very difficult to know whether it will be sustained or whether dollar will be where it is and what happens after this geopolitical situation fully develops. I think it is a wait and watch.
As far as the industrial concern, obviously there'll be some pass-through, some we'll be able to retain. As far as decorative, if it is either way, obviously it will be straight pass-through that will happen to market.
Understood. Thanks, sir.
Sir, you mentioned that your target would be to maintain your stronghold in the northern and western markets. You have a new capacity that's come on stream in southern India in Vizag. Do you expect or are you targeting that because there's a new capacity installed in the south that you would want to fight in that market and gain some share because our market share in the southern markets would be lower than our pan-India share? Any aspiration with respect to that area?
Yeah. North and east obviously is strong, there's no doubt.
As far as Vizag is concerned, our next best city or next best state in south is Andhra and Telangana. Obviously, to service that, it makes sense that we have a capacity available there. That was the main reason why Vizag is there. The idea is to maintain and grow that particular state. Second, we also have a plant in Huzur, which is in Karnataka, where also we have this entire range that we can produce to service the market. Vizag expansion was purely from this Andhra and Telangana state.
Just to service the existing demand in those states or you are targeting to ramp up?
No, no, existing. Because my existing plant in Kanpur obviously is getting saturated. We had to expand in some region and target that particular sale for that state.
There could be some benefit coming in from lower transportation costs and things like that.
Exactly. Correct. Correct.
Anyone else?
Hi. Thank you. This is Pratik from HSBC. My question is about the broader industry. Can you speak a little more about the unorganized segment? How do you see them? Do you see them losing market share further, or will they remain around the current 20% on an industry level? If you can split that between techco and industrial, that will also be great. Thank you.
Your question is organized sector, whether they lose market share further?
Sorry, unorganized. Unorganized.
Unorganized sector. Okay. Yeah, yeah. There is nothing. There is no systematic data as far as unorganized sector is concerned. It is very difficult to say what is happening.
Obviously, over the years, there has been some shrinkage, which has happened because organized paint players have expanded into rural areas also via distributors and so many other means. As a result, obviously, there has been some shrinkage that might have happened, I'm sure. There are some sectors which obviously there is a great shrinkage that we have seen, especially in the solvent-based paint. After GST, that whole price arbitrage benefit has gone completely. There is a clear disadvantage to that particular segment, especially on higher working capital requirement, etc., etc. However, having said that, there are some niche markets where they are present in some niche segments of projects and some particular items. It's very difficult to estimate whether that ratio has changed or not changed. Very, very difficult to estimate.
Obviously, if I enter a rural market, the assumption is that I would have taken some share also. If you look at the last three, four years' growth of 33%, 24%, obviously, one is pent-up demand and also some, I would say, trouble with unorganized player, I guess. Very difficult to put a number. Frankly, it's a very qualitative answer in absence of proper data.
Is there an unorganized space in the industrial segment as well? Is that larger or smaller?
Yeah, there are. In our sector also, there is an unorganized segment as far as industrial is concerned. Very large, it's there. They are primarily into the economy segment, not into the premium segment as I elaborated earlier. As far as we are concerned, our place is outright in premium and mid-range where performance matters.
Frankly, it really doesn't matter for us whether they are there or not.
Thank you.
If there are no other questions, we can close this Q&A. Please join us for high tea.
Yeah. Thank you. Thank you so much.