Q1 20/21

Jul 24, 2020

Quarterly report

Good evening, and a very warm welcome to everyone for this Asian Paints q one FY twenty one results investor call. Today on the call, we have mister Amit Singhal, MD and CEO. Along with him, we have mister A. Vijayamurgan, CFO and company secretary, and mister Paragarani, GM Finance. To take the call forward, may I now request mister Amit Singhal to do the honors. Thank you. Good evening, everyone. I welcome you all to this investor call covering the first quarter results for financial year twenty twenty-twenty twenty one. Since the time we last interacted in the second fortnight of June twenty twenty, we have seen the number of COVID cases rising at a faster pace across the country. This has also led to certain states reintroducing lockdown and business restrictions either across the state or in a certain select regions and cities in the state. Talking specifically for the first quarter, the decorative business in India saw an improvement in demand conditions over May and June after a complete washout in April. The business picked up progressively in Tier two, Tier three and four cities where the demand conditions were better. However, in metros and some Tier one cities, the business was much slower. While the business achieved about 80% of the base volumes in May, we managed to register a double digit volume growth in of more than 14% in the month of June. At an overall level, for the first quarter, the business was able to achieve about 62% of the base of the previous year in volume terms and around 56% in value terms. This was achieved on the back of pushing upgradation and premium range of products across categories and markets. The safe painting campaign was very successful to get the paranoia of the customer mindset and was the key ingredient to get the people to paint. Our campaign on terrace watercooking also got good traction to push consumers into watercooking their homes before the monsoons. Our foray into the health and hygiene category helped us push our royal health shield, where we had a new variant, which offers all surface antibacterial protection. This coupled with our foray in Viruprotect sanitizers and launch of some innovative products has created excitement in the category. The introduction of a new sanitizing service, SanAssure, has added to the Asian Paints service brand and our ability to reach out across a large number of homes and living spaces in the country. The international business portfolio also had a good performance given the fact that markets in UAE and Africa were open in April, and the portfolio performance improved progressively during the quarter across all the markets. We managed to register a good double digit volume growth in the month of June after a negative growth in April and May. Asia was the worst affected region for us with a key unit of Nepal being most severely affected with almost complete washout for April as well as May due to the COVID related disruptions. Units in Africa and Middle East were relatively better. Ethiopian particularly managed to register low single digit growth for the quarter despite business being slow for most of the quarter. The automotive coatings JV, which we call as the PPGAP, continued to severely be impacted with the COVID related business restrictions, only adding further to the slowdown pressures in the automotive industry. And while the industrial coatings JV, which is APPV, was also impacted, it still witnessed an over an improving trend in the month of June in both protective coatings and the powder coating segment. Both the segments within the home improvement business, the kitchen business under SLEEK and the bath business under SS, added about 50% ended at about 50% lower than the base of the previous in terms of top line. And the progress has been much slower compared to the decorative business given its larger dependence on demand from new construction and the renovation businesses, which has got affected in a big way in this pandemic. Amidst the tight business conditions, the soft material price trend has been beneficial factor. Notwithstanding the sharp depreciation in the exchange rate, the overall material prices have been lower on a sequential basis as compared to the fourth quarter of the previous financial year. This has helped improving the gross margin for the entire Coatings business in India as well as the international operations. In addition, the cost control measures, especially in the area of selling and distribution expenses and admin expenses have helped negate some of the adverse impact of the lower top line for the quarter. In terms of numbers, if you look at the consolidated financials, revenue from operations from Q1 was INR2922.7 crores, lower by 42.7% over the previous year. PVDIT before other income lower than previous year by 59.8% at INR $4.70 crores, while PVT lower than previous year by 70.2% at INR305.8 crores. Net profit from continuing operations for Q1 lower than the previous year by INR67.4 crores at INR219.6 crores. If we come to the stand alone financials, revenue from operations for Q1 lower than previous year by 44.1% at INR2446.6 crores. PBIT before other income lower than previous year by 57.2 at INR457 crores, while PBT lower than previous year by 65.8% at INR337 crores. Net profit for Q1 lower than the previous year by 61.4% at INR251.9 crores. As we look forward, what we see is that as mentioned earlier, the demand conditions have improved progressively since May 2020. However, we see some disturbances in the environment due to spurt in COVID cases leading to sporadic lockdowns in various states. Monsoons have been good and normal till now, and this brings in good positivity for the good agriculture output this year, adding to the rural economy in a big way. We continue to believe that tier two, tier three, tier four cities will do well and even metros and Tier one cities should bounce back as we move ahead. There is still some uncertainty due to the varying spread of the pandemic, and it depends on the situation coming under control and returning to normalcy, which will pave the way for good business. In such uncertain environment, we continue to focus on our core strengths, focusing and understanding customer needs and staying relevant in these testing times. Internally, we continue to focus on optimizing our expenses and conserve cash, constantly looking for areas to reduce costs and take up only business critical expense. Thank you, everyone. We are happy to take any questions you might have now. Thank you very much. We will now begin the question and answer session. You. The first question is from the line of Abhish Roy from Edelweiss. Sir, fantastic recovery in June. My question is, you said the tier one and metro cities have seen a much lower recovery. Last time you mentioned that these cities, tier one and metro accounts are around 42, maybe even 50% of the demand. So will it be fair to say that the non tier one, non metro would have seen a a 25% growth given 14% growth in June? I'm asking only for June. Yeah. If you look at the month of June, in fact, I would say that, you know, the, you know, metros and tier one cities would have also recovered definitely as compared to May. But, definitely, if you look at the tier two, tier three, tier four cities to that extent, there, the growth have been definitely at a very healthy pace in double digit figures. And sir, in June, how much will be the impact of the inventory pipeline getting back to normal? So in terms of overall inventory levels, we are back onto the inventory levels of March, so there is no higher inventory in the pipeline as we see it with our retailers. So therefore, there is no piling up of inventory happening with the retailers, and this is something which is very positive because you see that whatever material has been put into the shops has got sold. So in March also, there was no depletion of inventory, so there has been no restocking. Do I understand this correct? So there is this normal stocking which happens, which retailers would do for looking at the next week sale kind of a zone, and I I I believe that there has been no exceptional inventory stocking anywhere in the system. Sir, one follow-up on this entire recovery process. You mentioned May was around 80% of last year, and June was 14% growth versus last year. So was the June month last year a software base? And to better understand, can we understand May versus June this year? So if May was 18 and June was a 114, so has been has there been the 35, 40% growth in June versus May this year? So if you look at the last year's quarter, was that about a twenty two twenty two percent almost kind of a 20% plus growth kind of a zone if you look at it. And therefore, as compared to that, when we look at the current quarter, I don't think so the May or the June was any softer from that point of view because last year, all three months, we had done fairly well. So from that point of view, I think the May and June performance that way is definitely quite good. My second question is on the SanAssure and the sale of PPE and the sale of sanitizer. Obviously, this was not there in the base. You are also charging 1,500 extra if consumer is willing. So if you could tell us how many consumers that went for the 1,500 extra. And similarly, PPE sales and the sanitizer sales, all these put together, will it be, say, five to 7% of your sales? No. I couldn't get your question. You are saying Sanishore has contributed to five to 7% of additional sales is what you're saying? No. All put together. So you did charge 1,500 extra to the customer, which was not there earlier before the COVID response. Secondly, sanitizer PSV was not there last year in the base. And, similarly, PPE, you sold much higher because, obviously, PPE used to be much lower and, obviously, nowadays. All put together, will it be five to 10% of the sales? Not at all. No. No. Because the the new category which we have started, if you see the overall business which comes from the four categories is much, much higher. This is absolutely a new category which has come on the angle. And if you remember, a large part of that initial output we had directed towards government and NGOs in terms of looking at contributing and fighting with the government the entire pandemic. So therefore, from that point of view, if you look the entire, you know, sanitizers and what has got contributed to and all is definitely not a very high company. Sir, last question. So biscuit category also saw a fantastic recovery and, in fact, resilience all three months. And they said that in July, the strong growth has continued. Now for you, if I if I want to understand July, whatever period has gone, now COVID cases have increased across India. So the fear factor in consumer would be much higher than earlier wherein it was restricted to a few cities. So could you tell us how July has been, and is there a consumer behavior of fear which has increased versus earlier? See, I would say that, you know, currently, way June has gone, what we see definitely as a trend is that customers are now beginning to adjust to the COVID in some way or the other. People are taking all their precautions in terms of what is there. We are also seeing that the recovery rate is something which is increasing far more strongly. And to that extent, the mortality rate has really not gone up overall. So from that point of view, I think lot of customers are now taking the into their stride that work has to go on, business has to kind of go on. So we feel that the fear factor in terms of is something which is now relatively stabilizing. And today, no one can predict in terms of how the cases will go in future, whether they will rise, when is the peak going to come, whether the peak is not going to come. No one can say anything about it. And I think now going forward, people are saying what happens has happened. And therefore, I would say that people have adjusted to the fear factor. And going ahead, you know, but for those sporadic, you know, lockdowns which we are seeing in certain states, we think that, you know, the demand pattern should remain similar to what possibly we have seen in June. Okay. Okay, sir. That's all from me. That was very helpful. Thank you. Thank you. The next question is from the line of Arnav Mitra from Credit Suisse. Please go ahead. Yeah, hi. Good evening, everyone. My I had a couple of questions on margins. So I think your gross margins, if I look at it in the first quarter, June is slightly lower than what you had in the March despite sequentially RM costs going down. Is this largely down to mix or any kind of pricing discounting action from your side? In fact, see, if you look at the gross margin as compared to the previous quarter of last year, the margins have improved to that extent. So what we see here is that, you know, the overall margin, if you compare it with the q four to this thing, you know, there is definitely some improvement in terms of the raw material prices which has happened. There could be a little bit in terms of, you know, the overall mix in terms of which have contributed to, you know, such a number this quarter. But but the underlying input cost scenario has become more benign in the June versus March is what you're saying? No. No. I would say that, you know, from the point of view of inputting, which we see, I don't think so that is something which is you know, has been benign. I would only say that in terms of a little bit of a mix, which would have kind of contributed in terms of that gross margin behaving like this. Sure. My second question was on staff cost. There seems to be a 15% increase between the March and June in the absolute stand alone staff cost. So anything specific here which has given up the cost? And is this the run rate that one should work with? You're talking about the employee remuneration? Employee cost. Yes. Staff cost. Yes. Employee cost. See, what we see is that largely, you know, there were certain statutory areas which we were kind of dealing with in terms of looking at overall implementation because of and other things which we had to correct in the system. So today, we don't see anything which is significant. We had taken a small salary hike in terms of the overall numbers and a little bit in terms of adding some more headcounts into that extent. But a larger thing which also comes in is from a a policy change which we have taken with respect to the gratuity. But overall, as we kind of go ahead, I think this number would definitely lower. Sure. So the gratuity thing, just to clarify, could be a a onetime thing that you would have adjusted this call. Yeah. Yeah. Just to clarify, to add to what Amit said, it's a onetime impact which has come. And it's also added to this actual valuation impact also has come in the quarter because with the fall in yields, the retirement liabilities have gone up in this quarter as compared to what it was in March. Okay. Thanks. That's it from my side. All the best. Thank you. Thank you. The next question is from the line of Abhi Mehta from IIFL. Please go ahead. Hi, sir. Sir, would it be possible to quantify the gratuity and the onetime impact? No. No. Because it's all the overall impact is very difficult to quantify. It's something in numbers, something in increment. It's all clubbed, Abhi. Oh, okay. No. I mean, I was just trying understand impact which has come in this quarter. That that's the So the last quarter number would be a fair representative to confirm? Yes. Yes. Okay. Okay, sir. And sir, the second bit, you know, just kind of trying to understand your comment in detail. You alluded that the customer is now adjusting to the new normal. Would that suggest that, you know, from now on the impact on growth rate or sales would be more linked to lockdowns because the customer response is more or less kind of coming back to the pre COVID levels or back you know, looking at painting as a normal activity. Is that a fair way to look at this, sir? See, when I said, you know, what I meant was very clearly that the customer seems to be now adjusting to the environment in terms of saying that there would be some disturbances which will come in. And the fear factor is something which is more the adjustment which the customer is making. What I meant was that this sporadic lockouts, what do they do is that they kind of spoil the continuity of business. So you can just imagine that if your house is getting painted and then there is a lockdown which is announced, okay, it can cause a real disturbance with respect to in terms of, you know, the next customer kind of thinking of getting the painting done because there is a uncertainty which is there in the environment. So I would just say that there are two clear changes. One, the fear factor people are listening to, but the sporadic lockdown, if they continue to happen, they will definitely have an effect on the demand. Okay, sir. And sir, second, my last question is on the input cost. Now you highlighted that 4Q, the costs are kind of moderated. You meant the market price. Is that right? I just wanted to clarify that. So the material prices have actually, if you see from the q four of last year to, you know, to the q one of this year, definitely, there has been a benefit in terms of the raw material prices going down. So so that is something which is definitely a benefit in terms of what we are seeing in terms of as a movement of the material prices despite the fact that we have seen that rupee has depreciated further. But we still see that because of crude and other, you know, crude derivatives coming down, that has given us a benefit in terms of the material prices. And what I meant for that, just for clarifying, the current input cost that we would have incurred in fourth to first quarter would be a fair reflection of the current market price now or not is what I wanted to understand. Yeah. It would be, you know, fair representation. See, we don't know really in terms of how quarter two behaves in terms of either from the point of view of a rupee rupee dollar behavior. Mhmm. Correct. Yeah. From the point of view of crude. Because as the demand starts picking up, we also find that the prices start going up. So, you know, I would say that it is a fair indication in terms of possibly where the prices are. And, sir, the waterproofing which you have done, is there a market growth that has been helping us? Or, you know, our campaign must have meant, Mark, you know, we would have been an outsized beneficiary of this waterproofing. So if you look at the overall market, when we look at, say, a per capita consumption kind of a thing of a waterproofing requirement at homes, I think the market is pretty unexploited today. And what really happens is that in a lot of times, we do some temporary stuff to kind of cover up the leakage in the damp test problem which we are facing internally. So today, what we see is that, you know, the potential for the waterproofing per se is very, high. And therefore, whenever there is an awareness which is made to the consumer that there is a specific product or there is something which we can do, which will offer him a reprieve against tomorrow leakages and lattiness happening. I think that is something which is definitely lapped on by the consumer. And therefore, we feel that the Terrace waterproofing campaign increased the awareness and got more people into the painting cycle before the monsoon so that they could kind of take care of their houses. So we feel that overall potential in this category still is definitely very, very high. Okay, sir. Thank you very much, sir, for answering this question. Thank you. Thank you. The next question is from the line of Taha Samulla from Piper Serica. Please go ahead. Thank you for taking my question. My question was regarding the decorative theme segment. What are trends you are seeing in your high ticket size theme? For example, Roya or. What kind of trends you are seeing in June, July? Can you please? So when we look at, basically, some of the, you know, the higher end segments which you mentioned, okay, both in the interior and exterior spaces. In the interior, especially segments which are in the health and hygiene space, which is the Royal Health Shield and other variants, I think, they seem to be doing well and holding us on. And this is a trend which we are seeing a capacity that we are able to sell that product quite well because the preposition against the antibacterial protection is pretty sharp to that extent. With respect to in terms of experience, we don't see the same kind of a pace which is there as far as for the interior products to that extent. But having said that, what we also see is that there is definitely people are more attracted towards the premium and the value for money products at the moment to that extent. And there is a little bit of, you know, down trading, which is happening from the super luxury segment in exteriors to the premium segment and the value for money segment. Thank you. Hello? Yeah. Yeah. Can you hear me? I'm audible. Yeah. Yeah. Yeah. Go ahead. Okay. So my second question was regarding the upcoming Diwali season when we roll out Asian Games Magic Carpet. So what are our plans for that Diwali season? So today, Diwali is far away as of now. We have to first see the quarter two in terms of what really happened. So I think we are definitely kind of looking at more from a quarter to quarter at this moment and not really kind of planning for Diwali. Only time will tell in terms of how normalcy kind of happens around that and how the festival season kind of really, know, opens up. Okay. Okay. That's all from my side. Thank you. Thank you. The next question is from the line of Roshan Nayak from Equintus Wealth Advisory. Please go ahead. Yes. Thanks for the opportunity. So can you help me explain how safe printing initiative have stand out across the country? Okay. We started this initiative in May, and we have also done above the line promotion of this campaign across. What we felt was that what it has done for us is that across the towns, you know, we find that customers, you know, have been able to be influenced by the safe painting campaign because the fear they have of getting the external painters in their home, that is something which has got, you know, action because there is a reputed brand which is talking of a safe painting, which kind of happens where all the painters will come with overalls and mask and all protection along with sanitizers. So I think it has really helped us, one, in terms of looking at the customer, definitely becoming far more confident in terms of getting people in into their houses. And, also, it has really helped the painters and contractors also becoming confident of really approaching the customers and telling them that today, it is safe to let them into the house because they are following certain standard operating procedures with respect to hygiene and care in terms of what they are taking into their houses. We have seen that this campaign giving us results and leads across cities to that extent, and that has been very, very beneficial to us. So is this so is the company passing on benefits? Like, if you are getting more cash discount, dealer discounts? Like So nothing like that. But, yes, in the quarter, you know, there has been definitely a slightly little bit more incentivization, which has happened, which possibly was done in the months of May and June to kind of ensure that the retailers get the confidence in terms of at least a little bit stocking so that they are able to cater to the demand. But there has been nothing very exceptional which has taken the discounting to another level. So there has been an incremental increase in terms of discounting which we have done an incentivization so that we are able to kind of get the retailers to stock for some days at least in terms of getting to the demand. Okay. And and coming to your double digit volume growth in June, So do you think it is a pent up demand or, like, it is sustainable going forward? So what we see is that since the sales had stopped by March 20 and we practically had a washout in the month of April, a lot of this pent up demand we could see in the month of May, which was happening. So what we clearly see is that the demand in June could not have been all of the pent up pent up demand because, you know, a a much a sizable quantity of that pent up demand happened in the month of May. So to that extent, I think we feel that in the month of June, we would have bought fresh homes, fresh business, fresh repaintings in terms of, you know, homes across the country. Okay. So one more question if I may squeeze in. Which which regions still continue to be affected in India? Like, which regions are witnessing a sharp recovery and which continues to be affected? Can you give some color on that? So overall, we see that the Western region is something which is far more affected. You know, we have been seeing continuous lockdowns in Maharashtra, and, you know, Mumbai has has affected and so is the interland in terms of the cities, you know, across in West. West, what we see is that all metros are affected across the country. So you have Chennai, Calcutta, Bangalore in between, okay, Delhi. I think these have been affected overall to that extent. And there have been some tier one cities as well, so which are affected, Ahmedabad, you know, Surat, some of these cities were affected. But to put it, the thing, West was the most strongly affected overall. Okay. Thank you. Thank you so much. Thank you. The next question is from the line of Abnish Agarwal from Prabhudas Giladhar. Please go ahead. Yes. Hi, sir. My question is again regarding the demand. If I can recall in the last one call, we were told that Metro's entire one cities account for nearly 40% of the total industry demand. Now if I look at the current scenario where the May and June have been good, even though metals have been metals and Tier one is still impacted. So can you share with us that particularly tire to the tire for cities and interiors of the country, how fast has the growth has been there to enable 14% volume growth in June? So you can do your own math in terms of calculating because, definitely, I think what we have seen is that, you know, the metro and the tier one cities were affected. And, therefore, as I said, you know, we have got progressively in May and June very, very good and healthy growths coming from the, you know so the tier three, tier four cities to that extent. But having said that, even with the metro and tier one cities, what we see is that there is a definitely improvement from May to June, which is happening. So I think the improvement is happening all across in terms of what you've seen in the month of June to that extent. But at the end of the day, June the tier three, tier four cities have far far outgrown the metros and the tier ones. Okay. And my second question is regarding the raw material prices. We have seen a sharp decline most so crudely in imports in 4Q. And in this quarter, there has been, I would say, a little bit of gains. But would it be suffice to presume that most of the raw material gains have accrued to us or we are still not fully realized on the gains of the deposit accrued prices in 1Q? See, how we see is that there is still quite a bit of volatility in terms of the prices. And so is there a a volatility with respect to the rupee dollar parity in terms of what we are seeing? So to that extent, we see that we have realized in terms of the material benefit which we have seen in quarter one. And it all depends in terms of how material prices would behave, but one reason to believe is that if there is demand which kind of goes up, so would be the, you know, the prices of the raw materials to that extent. So, therefore, I don't think so there would be too much of a difference between the material prices as we kind of go forward in terms of looking at the next quarter, but it all depends on the environment. There is still too much of volatility in the environment today. Okay. Thanks a lot. Thank you. The next question is from the line of Alitya Sohman from Goldman Sachs. Please go ahead. Yeah. Hi. Good evening. My first question is on pricing. Any sort of guidance on what you expect for pricing given that material cost is fairly benign? See, right now, with whatever, you know, material prices which have got affected and there has been a complementary effect in terms of the rupee depreciating, as of now, there is no price guidance in terms of what is looking at. So unless there is something really drastic really happens in the next quarter, we are not seeing any price guidance as of now. Fair enough. And secondly, in terms of dealer expansion, have we seen any meaningful dealer expansion, especially given that the growth in smaller towns has been much stronger? So definitely, dealer expansion has happened in the months of May and June, especially in tier three, tier four cities. And, obviously, it is much lower than what we would have kind of looked at in a normal scenario. But having said that, there has been some amount of dealer expansion. Yes. Thank you. Any numbers you can share on the dealer numbers, I mean, in terms of expansion or percentages? No. I would not be able to share any numbers there. Alright. And lastly, any sense on market share? I mean, given that we've done very well in June, any sense on how we've done relative to the other players? You'll know by mid August. Everyone will publish their results. All right. You. Thank you. The next question is from the line of Suresh Paddeshi from Centrum Broking. Please go ahead. Yes. Hi, good evening. Thanks for the opportunity, Amit and Durgan, sir. I have a few questions. Would you be able to indicate and help us what kind of volume we have seen decline we have seen in domestic decorators? Overall, see, in terms of we have spoken of a 44% kind of a, you know, negative, which has happened with respect to the overall business at the stand alone level in terms of what we are seeing. And to some extent, you know, the volume decline has been much lower as compared to this, which is proportionate with the June increase in terms of the double digit growth which we have had. So definitely, I think when we look at the quarter one for decorative, the the volume growth has been much lower than this. See, last quarter, you explained that there is a six to 8% difference between value and volume. So is that submission is correct for q one? Yeah. Yeah. Some see, as we kind of go ahead, that kind of, you know, variation would kind of remain roughly. It could vary a little because that range varies with respect to in terms of how we are able to kind of grow with respect to the product mix and the focus, which is there on the upgradation emulsions, which is our big focus in terms of what we are taking. And last time, also, I explained that there is a very big focus with respect to looking at the updation value for money, emulsions in terms of what we are focusing in a very, very big way and also looking at the undercoarse market as we have kind of gone ahead. So, basically, that band could vary a little bit by and large, should lie lie lie in that reach. Yeah. I got that. Amit, you just mentioned that value for money product is seeing the uptick. Is that across urban rural market is the behavior consumer behavior you're suggesting? Yeah. So that behavior is roughly what we see as a trend across. The only thing what really also happens is that when you look at the metros and the tier one and, say, even the tier two cities, there is a slightly larger contribution of the luxury and the premium products which come from these cities to that extent. So if you see that if these cities are not possibly growing at the same rate as what the t three, t four cities are going, the impact would have been would have been slightly higher. This related question on that, what would be the value for money or low end investment contribution to overall domestic decoratives? I can't give that figure to you. Is it substantially higher or lower? No. I'm just seeing it around. Sorry. I can't share the figure. No. We don't share these numbers, Shunesh. Okay. I'll still try. Okay. My last question is on the we have seen the other expenses have declined very sharply at 37%. What are the factors which has driven this? No. As we as we mentioned earlier, we had been very cautious in spending whatever that administrative expenses even to some extent some of these distribution expenses. We have been very cautious. And, also, we have taken a lot of cost control measures, and we have spoken to some of our, maybe, trade partners also to revisit some of these costs. So overall, the internal measures what we have taken put this over the tender control. I got that. Amit, would you be able to comment something on advertising? Because you feel post May, you have spent a lot. So any any color on advertising spend? Yeah. So overall, see, we have been very judicious in terms of, you know, the way we had been spending. But at the same time, I always keep on commenting that, see, when you look at, you know, marketing and when you look at advertising, this is a lot not like an on and off switch that you can set it up at any point of time, and then you are able to put it on. So I think we have tried very judiciously to spend some money in terms of our campaigns. We've had almost three above the line very strong campaigns which have been there. One is on safe painting, the other is on terrace waterproofing, and the third one was on Viral Protect sanitizers. So I think we have seen, you know, these kind of above the line campaigns. And along with this, we have judicially spent a lot of money with respect to the digital campaigns because what we feel is that given the era where a lot of people are working from home and there are people are putting a lot of eyeballs on digital content. So that is something which we have kind of taken care in terms of getting a good mix. At the same time, we have not really splurged the money if you see from the marketing overall spend in terms of what we have done to that extent. So I think it has been a fairly judicious spend in terms of what we have done. Okay. My last question is on the international business. Though in the press release, you have said that Middle East and Africa has done well, while we are seeing the challenges in Nepal and Bangladesh. How the situation is there in the month of June or as on date? So the good thing is that Nepal, which was closed in April and May almost completely, has opened up in June. And we have seen a lot of pent up demand, which is there in the month of June to that extent. And we believe that, you know, if this continues and there is no lockdown further, I think Nepal should bounce back in terms of, you know, as the quarter goes ahead. When you look at even the Bangladesh market, Bangladesh market was relatively much better than Nepal because we saw openings in the month of May to that extent. And therefore, we feel that the Bangladesh and the Sri Lankan markets have almost kind of mirrored what has been in India to that extent in terms of the way they have behaved. And therefore, the June has been a good response in both the markets, and we see that going further. I think if if there are no lockdowns and no disturbances, we should kind of do that. All right. Thank you, and all the best. Thank you. The next question is from the line of Amit Sinha from Macquarie. Please go ahead. Yes. Hi, everyone. Thanks for the opportunity. My question was more from the overall category demand perspective. So while the negative impact due to the current environment is very well known, What I wanted to understand is is there any positive or enabling kind of an environment which is being created from a demand point of view, maybe because of more number of people available at home and, you know, better labor availability maybe in the tier two, tier three towns. Is there any kind of sort or any sort of things on the positive side which you would have observed in the last two to three months? Okay. So there are several, I think, positive trends in terms of what we are seeing. The real progression of sales from May to June itself is a very, very progressive trend in terms of getting a double digit growth. So what we feel very clearly is that people want to move on, and they would like to carry on with their maintenance activities at home and repainting activities to that extent. And therefore, I think the paranoia from the people's point of view is kind of going away. So I think that is one very good trend in terms of what we are seeing. Second, what we see is that the maintenance led repainting activity, which is there, is something which people are still getting into shortly for there because that is something which they are able to see. And given the fact that people are spending so much time in the homes, that really is becoming an activity which they would like to kind of get get to do because homes are a emotional place of staying, and they would like to stay in beautiful homes from that point of view. The third thing which we are seeing is that when it comes to discretionary spend, which is in terms of really high really getting high end decor, textures, high end wallpapers, and so on and so forth, I think there is where there are people are exercising some caution in terms of really getting into those zones to that extent, which is there. But overall, I think the trends have been fairly clear that in terms of maintenance, repainting kind of a zone, I think people are not shying away, and that is something which people are definitely kind of getting into the zone. The other trend which we see is that water proofing is a good category where people are spending money because I think, as I said, if you're staying in the home and you find damp walls or leakages, people would kind of like to take action against that clearly to that extent, and that is something which we are saying people are acting in a in a in a strong manner immediately to to that extent. And to really help the customer, we have also launched a DIY reach, which is a do it yourself range, which takes care of a lot of small articles which customers can do themselves also. And this is the first time in the industry that, you know, any any company is kind of really taking this whole zone of people doing some of these things themselves also in a big way. It's something which we have placed in the market. Sure. Thanks for the detailed answer. Second one, while I understand that in terms of exact market share, you will not be able to comment at this one time. Just wanted to understand from a competitive positioning point of view, it is it looks like that the larger players across different industries, they are gaining out of this situation because of better supply chain distribution, etcetera. Is it fair to assume that, you know, that the larger, you know, you and some of the other larger players would have gained at the expense of the smaller and unorganized in the in the last two months? Would say that it is very difficult to say because what we are finding is that some of the regional players in the regions which they are present, they have still better supply chains, and they are able to kind of cater to that that requirement quite well. In India, we have quite a, you know, sizable number of regional sales that are across the country to that extent. And therefore, you know, from that point of view, I think they are able to cater to their regions and its own support to that extent fairly effectively. The only thing which has possibly affected everyone, including the organized players, is the fact that, you know, some of the production activities have got affected because of the, you know, the labor not being available in the migrant labor kind of vanishing in the months of April, May, and June. So I think that is something which has kind of taken a toll across the industry to that extent, which is there. But by and large, I feel that even some of the relatively smaller players in the regional geographies are doing fairly okay. Okay, sir. Thanks a lot for your answers. Thank you. Thank you. The next question is from the line of Rahul Maheshwari from Ambit Asset Management. Please go ahead. Good evening, Am I audible? Yes. Yes. Good evening. Sir, two questions, one thing, can you highlight on a qualitative statement of coming three, not a a precise number? During the last three, four years as the new two facilities has also been added at WiZAC and MISO, So how much are COGS of the raw material is now so much linked to the, crude oil, which is there, or any, commentary or idea or color that going forward, how much we are move we would be moving to water based chain, and there would be less volatility linked to the crude oil. This is my first question. And second thing, sir, on as you told, water proofing is a growing segment, but any chance that Asian Paints would be going into the industrial projects, like, metro tunnel projects for or they would be sticking only to the consumer granular portfolio in the water producing? Okay. As per your first question, see, if we look at our larger portfolios, our quality towards the all water based chemistries and two new plants, which we have also put up all about the water based emulsion strongly. So as a trend, we have been kind of pushing water based in a very, very strong way. But what we must understand is that the impact of food is also happening on some of the free ingredients which go on to the water based products, which are, like, certain monomers which are there, which go into the basic process of emulsion making, which go into the water based products. So you cannot rule out for sure that today, food is directly linked only to solvent based, you know, paints to that extent. Food also has impact on the crude derivatives which are there. And these derivatives do affect basically the monomer, which is linked to the water based products also. So therefore, I think the food dependence in the food variability would still be an important factor as far as the raw material prices for paints are concerned. Secondly, as far as the, you know, the big projects are concerned, Asian Paints definitely looks at some of those projects. We have a project in the institution division. And as part of that, today, we are doing work with the Bangalore Airport. We are doing some work at the Delhi Airport. We are doing a panel in. So we do take up some big projects which are there to that extent as part of our decorative and architectural business, but we also have an industrial division, which is the eight fifty g. As part of that, we basically supply for some of the infrastructure products with respect to highway and so on. So we are definitely in that business as well to that extent apart from the building. So but in waterproofing segment, how no no doubt it's a a new segment of as compared to the overall pain. But the two things over here, how much is dependency through the government based institution because from the cash flow point of view? And second thing, how in a five to ten year chart growing period, which you witnessed in paints and you delivered it, how long this segment can become, like, a $3,040,000 crore, and where you find Asian Paints over there? Yeah. Okay. So when we look at the overall waterproofing business, I I would say that the Indian market overall is fairly undercapitalized in terms of the overall thing and underutilized to that extent, and therefore, the per capita consumption is far, far lower. So for instance, if you look at China, the China, the water producing is about 52,000,000,000. Okay? As compared to that, the Indian business is nothing. So to that extent, I think it is something which is is a big business potential in terms of the bucket which we see for the coming years to that extent. And I think it should kind of carry on for the next ten to twenty years in terms of the kind of courses you can get into this business. That is one. Second, our dependence in terms of the government sector and social forces all indirect. It becomes too late. Some of the construction firms and the large contractors to that extent, the direct exposure to the government. So from that point of view, it doesn't really affect in terms of the liabilities coming on to the company. And sorry to ask the follow-up in waterproofing only, sir. Sir, the margins in terms of relation to the paint, in terms of its one x, 1.5, two x, any any rough color, not precise as a percentage, sir, if it if it will be, sir. So margins overall, when you look at the retail segment, they are comparable with things to that extent. But definitely, when you look at the projects in the institutional business, the the where you have some liquid membranes and other solid membranes, which kind of go in in some type of products there, definitely, the margins there are definitely lower than this. Okay. Thank you so much, sir. Best wishes. Thank you. The next question is from Ranjit Sirmala from BNK Securities. Please go ahead. Yes. Hi, sir. Thanks for the opportunity. First of all, I'm very glad and appreciate that you have started sharing the quantitative details on the volume growth. We always used to get a qualitative comment from you. And wish that this would continue in the ensuing quarters as well. Coming to the question about the construction chemical business, sir. We understand that this is a 1Q heavy business and the seasonality comes off a dice down as we move into the future quarters. Is this understanding right? If yes, then could you give some color on the growth rates differential between the planes and the waterproofing? I'm not looking for a number, but any qualitative comment on these things specific from the first quarter. Thank you. So as I said, I think in the previous answer as well, I we think that the, you know, the whole category of waterproofing is fairly underrepresented in India. We also feel that there is a whole need of customer education, which is required in terms of what is the right product which would go with respect to their homes when they get dampness or when they have their ceilings which are leaking or they have basements which are not great and so on and so forth. So I think there is a whole education bit which is required, you know, both at the repainting level and at the level of new construction as well. So as I see forward, definitely, in the coming times, we see that, you know, the growth trajectory at the water cooking end would be definitely much higher than as compared to the overall sales trajectory. It is fair to assume that even in the 1Q, the same thing would have been reflected? Sorry? Specific for the first quarter, the trend which you are talking about would have been reflected in the first quarter as well. That's right. Yes. Thank you, sir. Thank you. The next question is from the line of Pulkit Singhal from Motilal Oswal Asset Management. Please go ahead. Yes. Hi. Thank you for taking my question, sir. Continuing firstly on the waterproofing market, would you say that if we were to have a similar kind of income per capita, India may have a higher potential on waterproofing given the amount of monsoons that we have and the kind of quality of construction here versus China? So given the kind of population, the kind of homes which we have and not withstanding the weather conditions, I think with respect to that, even the paint consumption should be much higher to that extent. So I think from that point of view, even the paint per capita consumption today as compared to any of the developed countries is a far cry in India. So from that point of view, I think both paint and waterproofing are definitely much underrepresented, I would say, as far as overall per capita consumption goes. So, sir, the data was $22,000,000,000 in China for waterproofing versus India would be how? So India, roughly, as we know the market, would be in the zone of about INR 6,000 crores. Okay. Right. But second question, sir, given the strong performance that we've seen in June, I mean, are we saying that the repainting cycle, which earlier we might have thought would have been extended because of fear, could now actually contract because people are looking to, you know, build their house and they have to or even protect their houses from these bacteria kind of things. So is that a possibility as you see the next four, five, one, six months? No. I don't think so that it really kind of impacts in terms of contracting of the painting cycle. I just said that the deferment of the painting cycle is something which now would become lesser and lesser because people are getting more confident in terms of looking at getting, you know, painters and into their houses and so so forth to that extent. So I I don't think so. It can lead to only contraction. But what definitely is happening is that as a strategy, Asian base is also looking at various means that we can get people to kind of do up, you know, some painting within that cycle. It could be a wall. It could be a stencil. It could be a small texture. So we are looking at occasions where we can excite the customer so that they can be doing some small things during the cycle. In the gap of four to five years, we have a maintenance cycle is something which gets kind of, you know, added by some of these interactions with the consumers might have for the decor of their house. Sure. Sir, on on the other expenses, it's a a very phenomenal kind of cost cutting measures. I mean, we've seen a 37% decline in other expense versus 43% in the revenues. And I just wanted to understand because this is a quarter where a lot of people kind of identify areas where you can have some structural cost benefit and cost cutting measures. So how much of this 37% decline can we attribute to, say, some structural fixed cost benefit that will not kind of come back up once the revenues go up? How how much of that? See, overall, we have, you know, been conserving cash, and we have taken fairly stringent cost measures in the first quarter. And these measures are mix in terms of, you know, all kind of cost, in terms of whether there are fixed costs or whether in terms of the variable cost to that extent. I think both costs have been attacked in a very, very strong manner to that extent. And therefore, you know, the the cost thing extends across to various things. So for instance, just to mention, one area we have looked at is in terms of relooking at possibly the kind of rentals across for our establishments across the country. So and at the other side, we have looked at in terms of what faith control measures we can do in terms of conserving cash. So there have been all kinds of work which has been done around cost in terms of looking at conserving the same. Okay. So lastly, CapEx guidance for this year and next year, if you could just say, and when do we start incurring that CapEx this year? So we have we have we are not, you know, stopping any work with respect to CapEx. Whatever is urgent, what has have to be taken is something which we are kind of giving a go ahead. There is nothing which we have kind of stopped, which is urgent and necessary to be done to that extent. And that is how the company is proceeding because, overall, what we see is that, you know, the cash flow position is fairly comfortable. Yes. So the INR $3.70 crores of CapEx we had in FY twenty on a consolidated basis, so should we be higher? I mean, I'm because you had a CapEx phase of two years of FY 1819, around INR 2,500 crores. I'm just trying to get a sense of of where we are in the CapEx cycle. Will we have another 2,000 crores over the next two, three years, or will it be like now? You know? No. See, the large part of our cycle was over in the previous two years because the two big plants have come up to that extent. And in terms of really putting the second cycle of capacity in those plants is some time away to that extent. So, anyway, I think there are no very big CapEx cycles which are kind of coming across. And as I said that whatever we have to do incremental in terms of doing work around our plants and other things is something which we are taking off. Thank you and all the best. Thank you. The next question is from the line of Jay Doshi from Kotak Securities. Please go ahead. Jay Doshi from Kotak Securities. You may go ahead with the Congratulations on good execution and thanks for the opportunity. Now if you were to exclude top twenty, twenty five cities that are affected by COVID, how do you see the demand traction in rest of the country as of now as compared to pre COVID levels? Just want to understand if there is any indirect impact of consumer sentiment or slowdown of economy on areas that are not particularly affected by COVID? So frankly, what we see is that for all the tier three, tier four cities, I think the demand is back to the pre COVID levels, and that is something which is definitely giving us a benefit. Understood. That's it from my side. Thank you so much. Thank you. The next question is from the line of Latika Chopra from JPMorgan. Please go ahead. Yes. Hi. Just a quick question. I think part of it was answered in a previous one. In your annual report, you have talked about institutional and project business executing really well despite all the headwinds that you see on real estate front. Has there been any change in the mindset or the strategy of the company to tap into this segment? And how is the margin profile here versus the retail decorative space? And the second bit was on Editor's portfolio. I understand it's a fairly small part of your portfolio, but any color on your progress terms of distribution or product portfolio there would be helpful. Thank you. As far as the project business is concerned, it's a fairly strong strategic integral part of our business, and we have been, for the last few years, have been concentrating on that business in a very, strong manner. So that business kind of kind of imply you know, comprises of the fact that it has built the institutions, hold hotels, and all the big segments which are involved, and that is something which we have been strongly following, and it continues to be part of our strategy in terms of looking forward. What we have seen definitely is that, you know, in the first three months, definitely, that business, since it is dependent in terms of some of the new construction, which is coming into that extent, is definitely slightly slower than the retail business at the present. But I think the focus is very clear, and it is a strategic area for us to kind of really go on for future. As far as margins are concerned, the margins are slightly lower than as what we earn in the retail business when you look at the products business because it is a far more competitive business as we see it. Regarding the Adhesives business, we have been kind of, you know, looking at launching one or two products there in terms of what is there, and we have also looked at in terms of upgrading upgrading our distribution setup, which is there to that extent. But a larger focus at this point of time had been the core category in terms of things that we have looked at in terms of the months of May and June. But having said that, we are definitely looking at lots of excitement as the other segments also. Thank you. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi, thanks for the opportunity. Sir, a couple of questions. Sir, in some sectors, we are hearing that few companies are using this crisis to fast track certain big bank reforms or rather reimagining cost structure or supply chain or identifying new drivers of growth. So any such mega change you would like to call out in this crisis, which will redefine Asian Paints, let's say, two years down the line when we look back to this crisis? So I think some of the areas which we have looked at is definitely in terms of looking at houses that we can work around in terms of the raw material consumption in a very strong way. And that is the focus we have taken with respect to whether it is sourcing efficiencies or whether it is formulation efficiencies to that extent. And that's a large imperative in terms of what would definitely kind of give us gains even later at the point of time. So that is one imperative which is there. Second, we have looked at in terms of seeing that how our IT forays can be made more effective in terms of really affording people flexibility flexibility to work from anywhere without causing a threat in terms of any IT security. And therefore, we have looked at upgrading in terms of our IT infrastructure, in terms of how we are able to give a large amount of mobility to of people of flexibility flexibility from either working from anywhere, office or home to that extent, and that is something which will definitely kind of give us some advantage in the future in terms of coming times. So I think these are the principal areas in terms of what we are working very, very strongly in terms of looking at some forays, which could help us in future as well. Sure. This is helpful, sir. The second question, sir, you you mentioned in your comments in one of the answers that India is highly underrepresented in terms of claims market as well. Now if we see in last five, seven years, we have actually done very well in in terms of bridging that gap versus Asian peers. So when you still see that India is under underrepresented, what is the data points you are looking at to actually come to this conclusion? So if you look at from the point of view of, you know, how the per liter GDP is there today in India as compared to what I would see in developed countries, we would be still at a 50% mark. So I think to that extent, I think there is a huge gap between the kind of per capita consumption, what we see in far developed countries, what we see in India. And you must remember that in India, there are all kinds of homes from, you know, pakka homes to semi pakka homes to slums to, you know, high end homes which are there to that extent. And therefore, the consumption kind of really varies in terms of how people are using page to that extent. So I think the overall plethora is pretty big. And I think the other big opportunity in terms of is that you can look at upgradation in terms of paints in a very strong way, which we are looking at in terms of doing at the bottom level in terms of upgrading people from using some very basic printing material to something which is an organized emulsion in a strong way. Yeah. And, sir, if you have to peg your number in in, like, five, seven years, where do you see this number actually optimizing or saturating at in terms of per capita consumption? I think that, you know, this we would be always chasing this number for at least the next two decades. I don't see that this number, we will be able to catch up because it all depends in terms of the pace of urbanization, the pace of infrastructure development in terms of what really happens. What we see is in terms of even the kind of government spending which happens with respect to paints is much, much lower even from the point of view of protection, what you should what's ideally should happen in the environment. So I see that it's the it's something that you would really change for the next two decades as well. Yeah. That's all from my side and all the best. Thank you. The next question is from the line of Kalpesh Gupta from Ambit Securities. Please go ahead. Kalpesh Gupta, you may go ahead with the question. There seems to be no response from the line of Kalpesh Gupta. We move to the next question. The next question is from the line of Suresh Paddeshi from Centrum Broking. Please go ahead. Yes. I have just two follow ups. Have you taken or are you implementing any price cuts in this last quarter or this month? No. Hello? No. We are not doing any any price corrections. Okay. And would you be able to help me that in f five twenty, what kind of advertising spend as a percentage we would have done? Sorry. We can't disclose that figure. Okay. All right. Thank you. Thank you. The next question is from Ajithyaagi from UTI Asset Management. Please go ahead. Yes, hi. So while talking about products in the construction chemical space, you talked about how under indexed we are compared to the other countries, I'm predominantly talking about the waterproofing product. But do you think as these products become popular, they could cannibalize into our painting range of products? Because if there is less of dampness and, you know, less of leakage, then both on the exterior paints and the interior paints, the replacement cycle could get elongated. Sorry. Could you just repeat the question? I missed the last part. Sorry. So I'm saying as as these products, you know, the waterproofing products gain traction, can they cannibalize our painting range of products? Because if you have less dampness and less of seepage, you would the frequency of repainting either exterior or interior would be elongated. No. I think that doesn't really happen because today, for example, in experience, we have products which offer warranty of fifteen years and ten years and twelve years and fifteen years kind of a thing. So what we still see is that the good part is that people kind of get get bored of the same colors and same things for a period of time to that extent. And therefore, at that point of time, it is the decor led painting, which kind of kicks off to that extent if it is not maintenance led to that extent. So we've largely seen that better durability products or longer warranty products to that extent, which gives a larger longevity to that extent, do not really change the printing cycles too much. Okay. Okay. Thank you. Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Mr. Amit Singhal for closing comments. Okay. Thank you so much in terms of being there with us and you know, asking some relevant, you know, questions which is there. We are happy in terms of saying that we have been able to do relatively better in terms of this quarter one, and I think the indication of the months of May and June is something which is very heartening. We'll have to watch out in terms of what really happens in the next quarter. But thank you all, and it's been a pleasure interacting with you. Thank you very much. Thank you. Thank you. Thank you all. Thank you. On behalf of Asian Paid Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.