Hello, and good evening, everyone. Welcome to Asian Paints Q4 and FY 2026 investor call. I'm Laksh Sharma from Investor Relations team, and it's my pleasure to welcome you all. We are joined today by senior members of our management team, including our MD and CEO, Mr. Amit Syngle. Our CFO and Company Secretary, Mr. R.J. Jeyamurugan. Our AVP Finance, Mr. Parag Rane. I'd now like to invite our MD and CEO for his opening remarks. Over to you, sir. Thank you.
Hello. Good evening to everyone, and welcome to the investor conference for Q4 and looking at the full year of FY 2026. For Asian Paints, I think this has been the core value since 1942, and I've been speaking about this over several quarters and years. We clearly believe that we exist to beautify, preserve, and transform all spaces and objects, bringing joy and happiness to the world. If you see whether it is any surface, home, object, any surface, that is something which we look at really transforming, beautifying, and preserving as we go ahead. The standard disclaimer for everyone. Let's get on to in terms of what we have been doing and what we have been driving in this quarter. Overall, there have been very powerful initiatives in terms of what we have seen and we have driven.
First of all, the whole area of looking at upping up the ante in terms of building the brand, and that is something which we have purely driven very strongly throughout the year and also in Q4, given the whole area of focus in terms of what we have taken. I think it's a challenge to kind of really see that in a fragmented media setting, what is it that you can do, both in conventional channels as well as digital to kind of really bring it up. The second area is in terms of looking at driving the growth with innovation, and that is something which we have driven from the technology point of view in terms of bringing differentiated propositions in terms of what the market really holds.
The third area is the angle of services, and in today's world, that is something which takes precedence and really builds the brand in terms of really being closer to the consumer, and that's what we have really put the real ignition on. Regionalization has been another objective in terms of what we have taken, and that is something getting closer to the regional consumer and looking at appropriating areas which basically really enthrall the customer in various regions across the country. The whole area of the B2B has been very strong, and given the kind of investments which are happening in this space, this has been a growth engine for us in terms of in a very big way.
Finally, I think giving credence to the fact that today that we can really add to our overall areas of cost excellence, the whole space of backward integration has been also very significant for us and a huge amount of investments taking place in this area. Overall, just to kind of build this story and amplify the points which I just made, we have really kind of gone full on in terms of looking at amping up the whole area of Damp Proof.
Much so that now Damp Proof has become generic to the category, and therefore, today we are appropriating Asian Paints Damp Proof very strongly, which singularly is the largest product in terms of the way it kind of really offers solutions to the customer, both from the point of view of waterproofing as well as the heat conservation in terms of what basically with cooling the interiors, so to say. Not only this, we have looked at appropriating cricket. Cricket is really the religion in India, and that's something which we have really taken in a very big way, and therefore we partnered up with BCCI in terms of a color sponsorship for every Indian cricket event which is happening in India.
That's a very big space in terms of what we have appropriated, where we have looked at lots of innovations during the matches in terms of really getting the fans aligned and really owning up the colors in a very big way. This is something which has really worked magically for us in terms of reaching out the brand to billions of people across. I think not only that, we've also looked at saying that what is it that you can do in terms of saying that in every match, apart from the innovations what you are able to do, you're also kind of reach out to one emotion, one nation, and therefore we created one anthem, where basically we used Sunidhi and Vishal to kind of really appropriate an anthem which really touches people at the right spot in terms of what it does.
At the same time, it amplifies the whole nation part in a very big way as a universal emotion which comes out. The other big area which we have been kind of doing, we have been for the last about 23 years, looking at talking of the only Indian research in the Indian market about colors and regional usages. This is our ColorNext property where we look at color and material intelligence in a strong manner. This has been something which has been really very close to the architects, making us literally the forerunners in terms of really dictating what colors would move and what possibly materials would kind of move along with them.
Here we spoke of two things very clearly, the Colour of the Year, Moonlit Silk, and the Wallpaper of the Year, Zanskar, inspired from a peak in Ladakh in terms of what we speak of. I think lots of areas which kind of really motivate the architect and the design community strongly. Not only this, we've kind of looked at upping the ante on decor by coming out with signature collections which are topmost and top-notch across the world. Basically, we bring in the best of the excitements from all the fashion capitals across the world, look at appropriating in terms of what it means for the walls, and really offer scintillating finishes, which basically up the whole game in terms of how today high-end homes and homes can really look like in terms of appropriating these kind of finishes.
Not only this, the whole world of digital is very important. We have kind of shifted a lot of our spends into the digital zone now, and we have various properties which we keep on appropriating. One of the biggest properties is Where The Heart Is, which is basically looking at bringing the whole area of "Har Ghar Kuch Kehta Hai" in a very strong manner. We launched the ninth season with very strong personalities in terms of looking like cricketers and Bollywood stars and regional stars coming in a very strong manner and doing up their homes and really making it something which is very aspirational, both from the point of view of color and decor in terms of what you bring in. Not only that, I spoke about the innovation, and I think this is really a constant at Asian Paints.
We keep on looking at amping up the whole element of bringing lots of new technology. Today, we speak of more than 160 patents in terms of what we have put into the market. As part of that, basically, we look at commercializing certain patents in terms of giving parameters and differentiated product propositions for the customer. We launched something called Damp Secure in the whole world of waterproofing. We have launched, first time in the world, an anti-termite finish called PU Gold. In the space of high-performance coatings as well, some elevated finishes for steel structures, basically based on really evolved platforms and technology in terms of what we appropriated. Lots of new zones, which we brought in in quarter four, in alignment with basically our overall innovation strategy in terms of what we have taken.
Not only this, we have been partnering with the St+art Foundation across the country and for the last about 10 years. This has been a very strong foray where we have looked at really beautifying the public spaces in a very big way. Today, we do more than 500 murals across about 29 cities, seven art districts in terms of what we have created. This is something which is really an unparalleled initiative, which kind of really gives us a very strong work with the nation, as well as kind of modernizing India with art, one wall at a time. This is something which is very big in terms of what we have really appropriated. Services, as I said, and I think this is something which one area which we have been really amplifying a lot.
We have today the world's largest painting service, which we run, which is called the Beautiful Homes Painting Service. We run various models here where we are looking at appropriating these services directly to the consumer, offering him the best of the solutions, the best of the decor for their homes. This is something which is fully technology-led service, which is something which we pursue in a very strong manner. The second area is of Total Assure, which is a service which we offer, which is backed on an AI platform, where we are offering it to large projects, where basically builders and other big entities can monitor in terms of how basically the painting is going at their large areas.
This is something which we also give to large factories as well in terms of looking at what we are able to do across the painting cycle overall there. The other thing which we do very strongly is the whole area of maintaining factories and maintaining assets against corrosion resistance and other things. This is a service called Metacare in terms of what we do and a very popular service. All the big names in the industry today are aligning with us in terms of us kind of taking care of their assets from the point of view of coatings, which come in strongly from the point of view of preserving the assets.
Lastly, a SmartAssure service, which basically talks of offering solutions regarding waterproofing in a very big way so that the clients get a full experience of the expert knowledge of Asian Paints, and they are able to kind of take care of any dampness or waterproofing issues in their homes to that extent. So a series of services as a very big differentiator, which possibly is really unparalleled in the industry as we see it. The other area which has been very strong is the whole area of B2B. This we basically look at appropriating from the point of view of the conventional builders and the CHS.
We have moved very strongly into parallel spaces where we looked at large builders, large factories in terms of what we appropriate, large hospitality areas, and also the whole area of the government, where today every airport, every port, every tunnel, which we are kind of approaching and looking at participating in the growth story where government is kind of putting a lot of money, where we are able to kind of offer a very strong platform in terms of aligning our services, our products, to give solutions here. We think this is a very high growth segment in terms of what we are appropriating.
We have an initiative called the Juggernaut here, which basically brings the strength of one AP, where we basically marry Deco and industrial interfaces to kind of give one solution to the consumer, which is holistic in nature in terms of what we put in. I think lots of great things happening in this space as we look at it. Coming to numbers. If you look at it has been obviously a strong quarter of growth. The volume growth is back on double- digits in terms of what you see very strongly, which has come in in this quarter. We can see that the trajectory has been steadily good over the four quarters in terms of what we have seen this year.
When we look at the decorative business per se, if you look at 12.4% volume growth in terms of what we have achieved, a very strong value growth of about 10.2%, which has come in. Both double-digit growth is happening. Also this time, the difference between the volume and the value is just about 2.2% in terms of what we see, indicating a fairly healthy mix in terms of what we have been able to sell. If you look at on a yearly level, volume growths are close to about 9%, which is quite commendable overall. The value growth is about 4.3% in terms of what we see. The volume value gap at an overall year level is still about 4% in terms of what you're able to see. Overall, good going in terms of the quarter as we see it.
When we look at the full coatings world, which is decorative plus industrial, which means the full coatings range, again, I think the volume from 12.4% goes to 12.7% in the quarter, and the value growth goes to about 11%. Very strong, robust growth in terms of what you see for the full coatings in terms of what we have been able to kind of get in. At a country level, when you look at a yearly thing, volume goes to about 9% and the value growth goes to about 5.3%. Good growth overall in terms of what we have been able to kind of really monitor and possibly, growths are strongly above the market growth rates.
If you look at some parts of this overall growth in terms of what we see, I think we saw definitely improvement in terms of the demand conditions in all three months, basically, where we were able to register good growth across the months in terms of what is there. We got good kind of growth both in rural and urban centers across. That is something which was good. Obviously, rural was a little bit ahead of the urban growth in terms of what we could kind of really get in. Which is good news in terms of overall, in terms of the market growth as we kind of see it. The other area which was very good was that the premiumization strategy has been working very well.
I think it kind of improved the overall mix, and the pre-lux categories have moved quite well overall in terms of improving the mix story. I spoke about the B2B business. I think this has been stellar in terms of how it has been able to do, and this is something which has become now a very strong growth vehicle, both from the point of view of a builder segment, the factory segment, and the government segment going very well here. If you look at the overall area of distribution, I think we continue to add retailers. More than 4,000 retailers is what we have added across the country. Not only that, we have been able to spread our Beautiful Homes Painting Service across almost about 70%-80% of the pin codes across the country to that extent.
It's been fairly strong in terms of what we've been able to add overall from the point of view of our distribution levels, which are concerned. If you look at the area of technology and innovation, new products is something which we have always looked at, and it has contributed now to a substantial 17% of the overall revenues, which kind of just shows the pace of innovation and the whole area of consumer excitement, which we are able to bring into the market. The area of VAM VAE, which is our backward integration project, is something which is we are looking forward to strongly. As you know that today, worldwide, there are very limited people who are making VAM VAE.
For us, it is a signature project which is there, and we expect to commission this in the first half of this year, which kind of really brings to us very strong innovation capabilities in the market and really kind of changing the fabric of the market from the area of looking at green paints in a strong manner. Overall, that's something which we feel is a very strong kind of catalyst for us in terms of going forward. In the area of home decor, we've moved our inclination from surface decor to space decor because we felt we are very close to homes. Obviously, I think we have been struggling a little bit in this area, I think, over a period of time, and this is one strong zone which we are possibly not leaving so easily.
We are today the number one integrated home player with very strong strengths in areas like kitchen, lighting, textures, wallpapers, furnishings. These have been strong areas in terms of what we have been doing. This is something which we are also marketing through 74 Beautiful Home stores across 20 states, basically. No one today in the industry has created a space of convergence for the customer, where the customer gets their visualization very strongly, and they get a spate of territories to beautify their homes through the Beautiful Home stores, which we have kind of put in. Overall, if you look at here, I think we have been better in the quarter in terms of what we have been able to do.
The kitchen revenue has overall grown in terms of both from the point of view of quarter as well as from the point of view of the year. To that extent, even from the point of view of bath, when we look, quarter has done fairly well in terms of almost about a 4% growth. While at an yearly level, we are basically just below the base in terms of where we are to that extent. When we look at the two other businesses, both White Teak and Weatherseal, I think we have had a very strong quarter where both White Teak and Weatherseal have done very well overall to that extent. Weatherseal for the yearly level has also kind of really done fairly well, growing at more than 40%, whereas White Teak has been a little bit down to that extent.
Little bit of a mixed result in terms of what we see, but this is again continuing to be a area of passion which we are strongly driving because we know that it adds back to the original coatings category in a same manner because it is the same customer whom we are approaching and really appropriating the whole area of Beautiful Homes very strongly. That's about home décor. When we come to the international business, again, this is the spread of our business across the world in terms of what you can see across the geographies. We also kind of export from some of these markets to 60 other countries which are there overall to that extent. Some of our brands here are also different brands which have come in over a period of time through some acquisitions as well.
If you look at the business, I think, overall business has been very well. The markets of Asia have really led the show very strongly. Middle East also has been strong along with Africa. Overall, I think it's been a very overall good quarter where we have grown in double digit terms. Overall, when we look at from the point of view of the year also, there is almost about a 9% growth in terms of what we have been able to achieve. There is clearly good kind of gains which have been registered in markets of Sri Lanka, Egypt, UAE to that extent. Despite the current geopolitical situation continuing, I think Middle East has still kind of stretched and delivered a strong, resilient performance.
This is also reflected from the point of view of profitability when we see in terms of absolute terms, very strong growth. I think the good part is that we have been able to extend the PBT margins, which are about 8.5% for the quarter, which is a strong improvement in terms of 370 basis points Q- on- Q. I think year- on-y ear, sorry. That is something which today, if you look at a yearly level also, we have done fairly well and this has been a strong business this year across in terms of what we have been able to deliver. That's AP Global for you. Coming to the industrial segment, again, today we have two joint ventures as you are aware of, one for the auto OE which is called PPGAP.
The other is basically for general industrial products which is called APPPG. Both the businesses have done well as you can see in Q4 in both businesses strong double digit growth in what we have been able to achieve from a point of view of overall revenue. That is something which is reflecting also in the yearly sales in both the JVs which are very strong double digits in what we have registered. Both at a quarter as well as the year level strong growths which are coming. As far as PBT is concerned, if you look at the area of PPGAP, very strong delivery in what we have got. Very strong growth upward of 20%, both at a quarter and a yearly level.
PBT margins are at about 12.2% for the quarter and higher than the possibility year-over-year in terms of what we see for the same quarter. When we look at AP Global again today, as I said, the revenue growths have been very strong, double-digit both quarter and the year level. Even from the point of view of overall PBT, the margin has been a little bit affected given the fact that there has been a little bit of a competitive intensity which we have seen in the market. Overall, PBT margin is at about 7.3%, lower by a little bit, 100 basis points. I would say combined, both the businesses have done very well in terms of their overall performance.
If you look at the whole trajectory in terms of what has been there, I think it's been a good year where we have seen deflation in terms of the market across the four quarters which is there. Even in quarter four we saw a deflation of about 1.4% in terms of what is there, taking our gross margins to almost an all-time high of about 45.6%, which is very strong in terms of the gross margins in terms of what we see. Therefore, how does it really reflect on the financials? First, if we were to look at from a perspective of the standalone financials here, okay. I spoke of the net sales, which is in double digits in terms of which is there on the value parameter of about 10%.
Overall from the point of view of PBDIT, very strong growth of 26% with a PBDIT margin of about 21.2, which is higher by 260 basis points year-on-year to that extent. Very strong growth which is there overall. Even if you look at the PAT, while the PAT is shown as 67% overall, if you exclude the exceptional items and were to compare like to like last year, we are at about a 32.7% year-on-year growth, which is pretty substantial in terms of what is there. A very strong top line driven by an equally strong bottom line in terms of what has come in a very big way. Similarly, if you were to look at the yearly level, the overall top line is at about 4.3%. I spoke of the volume growth closer to about 9% in terms of what is there.
Overall, from the point of view of PBDIT growth, have been still strong, almost about 11.2% growth, PBDIT margins at 20.1%, higher than 130 basis points. Even PAT is at almost double digit, about 10.8% growth after the exceptional items in terms of what we see. For the year also, I think the bottom line has been very strong. The volume has been very strong. The value is at about 4.3% in terms of what we see. That's standalone in terms of how we see. Let's look at the consolidated numbers. Obviously, consolidated numbers are reflected from the standalone definitely, and even consolidated numbers are pretty good in terms of what we see. In fact, the top line moves further to about 11%, as I spoke of here to that extent. Top line, again, very strong.
If I look at from the point of view of gross margins, again, higher by 100 basis points year-on-year. PBDIT growth is quite good at 24.4%, and the PBDIT margins at about 19.4%, higher than 210 basis points year-on-year to that extent. I think PAT growth, if I were to look at, again, excluding exceptional items, is 34.1%. Strong numbers, which we are able to see for the quarter. For the year again, the net sales growth from 4.3% moves to about 5.1% in consolidated from standalone. Gross margins again at 43.7%, again higher 140 basis points. PBDIT grew in double digits and PBDIT margins at 18.9%, higher almost by 110 basis points. Similarly, the story of PAT, where we have grown by almost about 11.8%.
Again, I could say that strong numbers in terms of what we see, both at a quarter level as well as the year levels, especially from the point of view of bottom line, it has been very strong in terms of what we see. As our promise, we have been consistent with respect to our dividend payout. Again, this year we have declared about 60% payout today. The final dividend would basically be INR 23 per share to that extent. This is basically, there was an interim dividend which we had declared at INR 4.5, which was already declared. I think overall, if you look at the total dividend for the year becomes INR 27.5, and the payout is about 60% ratio in terms of what we see.
I think that's something which is again, very strong in terms of what we have been able to do, and that is something which we feel is very clearly as a return to all the shareholders in terms of what we really pledge out. After this performance, obviously the question is, how is the market panning out? We are already two months into this quarter already to that extent. We have seen obviously very high volatile macro conditions in the market. The geopolitical situation is obviously very dicey, and there is a cautiousness around that in terms of how possibly this volatility translates into inflation, because we have already seen a very high inflation in terms of what has happened in the market.
That is something which is something to be watched out day in, day out in terms of how that situation points out to that extent. Overall, we want to sustain the growth momentum despite all these uncertainties happening and really see that possibly that we look at controlling the market from the point of view of what rates, what price increases we pass out, so that basically we are not at a situation where inflation becomes really very high, affecting the demand. I think we are approaching that very carefully in terms of what we want to do. Industrial coatings will continue to grow much higher than decoratives overall given the kind of investment happening in infrastructure and the government spending, which is happening in this area.
International business, again, is expected to continue to grow to that extent and therefore, both industrial and international will definitely strongly contribute to our overall growth going forward as far as this quarter is concerned, which is Q1. When I spoke about pricing, despite a very strong inflation which has taken, we have already taken close to about 10.5% to 11% kind of a price increase. We are talking of possibly going ahead and talking of some more price increases, which are going to happen to that extent. I think it is really important at this point of time that as a leader of the industry, we see in terms of what is the measured increases which we can pass out to the customers so that we don't allow the inflation and kind of affect the demand in terms of going forward.
We are, I think continuously evaluating this in terms of the way we want to go. At the same time, some minimum increases is something which we've already passed in the market and some more might happen as we go ahead as we look at it. This is generally the outlook in terms of where it comes in and some areas on sustainability, I think this is an area of passion. If you can see that today the performance has been very strong and somewhere we are getting closer to our targets for 2030 much earlier, whether it is water replenishment, whether it is specific hazards, whether it is a reduction in specific effluent generation which is there, or it is about the Scope 1 and 2 emissions along with the recycling of the plastic and packaging.
Not only that, the renewable energy is a very big area in terms of what we look along with bio-based raw materials coming in products to that extent. We have also really looked at working in the health space so that we are able to align and help people in that space as we have gone forward. At the same time, we have looked at training a lot of people through our Beautiful Homes Academy. More than nine lakh people we have really trained, that is something which has been the hallmark of a service which we are offering. Along with training, there is obviously a quality of training which is monitored in terms of what we do. Finally, the whole area of employee engagement has been strong. We have had a very strong quarter.
We just did the engagement survey, and we have really come out very strongly in terms of how we have been able to increase people's engagement, inclusiveness, and empowerment in a very strong manner. I think that's all from me in terms of how we have kind of really performed, what we have done to that extent, and I think it's a real pleasure speaking to all of you. Thank you.
Thank you so much, sir. Ladies and gentlemen, we will now open the call for the question and answer session. We will wait a few minutes for the queue to form. We request participants to limit themselves to two questions each and return to the queue if they have any additional queries. To ask a question, please raise your hand using the participant tab on the screen. The first question is from Mr. Vivek Maheshwari from Jefferies. I request you, sir, to kindly unmute and please ask your question.
Hi. Good evening, team. Two questions. First is you mentioned about price hikes of about 10%, 11%. Can you just highlight if you were to pass on the total cost impact, including the rupee depreciation? Have you passed on the entire impact, or what will be the shortfall? You did mention another round of price hikes. What are your thoughts on that? That's the first question.
Overall, as I said, we have only passed on some necessary increases to that extent. We feel that the overall impact is much, much higher, maybe closer to about 20% or so. We have passed on around 11%. We are looking at further price increases, which might happen in the market as we kind of go ahead. At the same time, we don't intend to possibly look at passing out the entire impact so that we are able to kind of maintain a balance between inflation in the market and what we are able to kind of really absorb to that extent. At the same time, we are also looking at a lot of measures from our side, which would be in the area of cost excellence, looking at in terms of what we can do around material sourcing efficiencies and so on and so forth.
That part of the inflation which we are not passing out is something which we can work around and see that how do we work around in terms of looking at conserving those costs and seeing that we are still kind of able to maintain our overall margin guidance.
Just to follow up, Mr. Syngle, when you say 20% versus what you have taken, that is base is previous quarter or that is base is where the spot prices are as well as where the rupee is?
Largely, we look at basically the inflation which is affecting the quarter which is coming in to that extent. From that point of view, we have looked at evaluating that one, and that is how we have looked at passing the price increases.
Got it. The second question is on the volume growth. Obviously, you have been doing well for the last two quarters. Look, part of this is essentially the base, but how do you think about, let's say, the intrinsic demand in the sector? What is your outlook? Would love to know your thoughts on competition. Two parts. One is the outlook on volume growth beyond the base, and the second is the competition bit.
Overall, what we see is that, as I mentioned, that the demand has been good in terms of what we have seen, both from the point of view of the rural demand as well as from the point of view of the urban centers also doing well. We expect at least some part of this demand to sustain in the market, and we have been seeing some early shoots in the month of April and May to that extent. We basically believe that going forward, we are still kind of looking at basically that we are able to get into at least looking at a high single-digit volume growth in terms of what we would kind of really achieve.
Sure. Any comments on the competition?
I think the competitive intensity in the market is going to be strong, and we feel that that is something which will continue. We have the consolidated players now who have kind of really trying to align and come out with a unified strategy. We also have newer competition in the market, and the existing players are also equally kind of intense in the market. We feel that the competitive intensity will continue to grow in terms of how we see the year ahead.
Got it. Thank you, wishing you and your team all the very best.
Thank you.
Thank you so much, sir. The next question is from Mr. Mihir Shah from Nomura. I kindly request you to unmute, and please ask your question.
Hi, sir. Good evening. Thank you for taking my questions. Congrats on a great set of numbers. Just wanted to understand, how do you see the volume growth trajectory as we go through the quarters during the year? How are you seeing the 4Q and 1Q volumes? Are you seeing dealers buying more than what they bought in the past, and they're stocking up due to the 10%+ price increase that you have announced? Secondly, post 2Q, you will be having a higher base, unlike a favorable base that we had seen over the past few quarters. Can this upstocking that we are seeing in 4Q and 1Q maybe, and a higher base from 2Q, impact volume growth trajectory for the year? That's my first question.
How we see is that, yes, even in the quarter four towards the fag end, we have seen basically some increased stocking which possibly would have happened because of the price increase announcements to that extent. Obviously in quarter one, we would kind of expect that possibly the pipeline stocks to kind of go up to some extent as and when a price increase is announced. At the same time, I think we are also very clear that today we will look at possibly the overall liquidation of the stocks in the market, which is happening, and the demand conditions being there in terms of looking at how it is going, because the market can really stock up to only a certain limit in terms of what we see.
While there could be a little bit of up stocking which could happen because of the price increases, we are still kind of confident that overall demand conditions should continue in terms of looking at giving us closer to, as I said, high single digit volume growth closely in the band of about 8%-10% in terms of what we are looking in terms of going as we kind of predict going forward. As far as I think bases are concerned, overall quarter two, we also have a longer Diwali to that extent. We have a larger kind of a period which is there both from the point of view of quarter two and quarter three in terms of what we see as compared to the previous year.
We are also looking forward to possibly the monsoons being quite okay, not possibly full to that extent as per what the IMD predictions are coming in. We are looking at overall good, fairly okay demand conditions, and we are looking at possibly a longer festive season also. I think the only worry in the segment is basically the geopolitical scenario, which is kind of going on. If that kind of really prolongs, it will have a different set of calibrations in terms of what we will have to look at from the point of view of inflation and other things hitting the demand conditions.
Understood. That is very clear. Thank you for that. Second question is on the margins again. The price hikes that you have taken will cover, I would say, a part of the gross profit per ton, but margins, on a percentage basis, will see some impact. However, the commencement of your backward integration project from 1Q or one half, which you've called out now, the timing also is quite timely, basically. How should one think about the benefits that you will probably get from these backward integrations plus which the peers will not see, but you will see the benefits coming in. How should we see the impact on the margins as we go along? Because in the past upcycle of crude, we had seen margins going down as 500 basis points-800 basis points also.
Any color on the percentage margins with the benefits of backward integration over the coming year will be helpful.
Two things. One, basically, as I said, we will continue to take some more calibrated increases, which we think the market can absorb and we are also aware of the fact that we should not really look at suppressing the demand by too much of increases which happen in the market to that extent. That’s one part of it. Second, as I said that we have been working very strongly in terms of our cost frameworks, and there is where we are very strongly looking at how we conserve material prices, how we bring more efficiency with respect to how we consume material, how we manufacture products, and so on and so forth. That’s a strong initiative which we think possibly would give us definitely some cover from the point of view of margins. The third area, as you rightly mentioned, is backward integration.
As I see it, I think we’ll have to see the whole impact of backward integration over the year, because today, a part of it is coming in H1, as I said, and therefore, we will definitely get benefits, but we’ll have to observe these benefits over a year to that extent, rather than getting those benefits immediately in quarter one to some extent, which is there. I think with the set of things which we are doing and some passing of some more price increases, we should possibly see that how we can basically retain our margin guidance in terms of going forward.
Sorry. You said you’ll maintain the margin guidance, sir?
Yeah.
Understood. Got it. Thank you. Wishing you all the very best.
Thank you.
Thank you so much, sir. We now move on to our next question by Mr. Amit Sachdeva from UBS. Sir, I request you to kindly unmute and please ask your question.
Hi. Am I audible?
Yes.
Hi. Good evening. Congratulations on great set of numbers, sir. My question is to your comment when you say competitive intensity will remain high, or at least that's what I could hear. Last year, we saw competitive intensity sort of show up in a manner that there was free volumes to consumers, and there were higher discountings and even higher margins for dealers as well by new entrants. That persisted for a while. Now we are in a very volatile environment of commodities, input prices. Things look uncertain on many fronts. When you say competitive intensity remains high, do you still allude to that discounting will remain high, or do you think that it will show up in more product innovation or A&P spends and so on and so forth? I would assume that in such an environment, perhaps discounting-led competitive intensity would have reduced.
How we should interpret your comment on this front?
First of all, despite the environment, what we are seeing in terms of the inflation environment, and despite the price increases we have taken, we have not seen any letup in terms of the discounting in the market to that extent. I must make it straight that today, I think the discounting intensity stays, whether it is retailers, whether it is contractors, whether it is other stakeholders to that extent. Therefore, what we see very clearly is that whether it is existing players, whether it is new players, I think the intensity of that kind of continues to that extent, and people calibrate in terms of looking at how much they need to really spend and so on, so forth. Maybe there could be some rationalization around the A&P spends in terms of what we could see in the market to that extent.
When I meant about competitive intensity, I was meaning about the whole area of discounting, which according to us will continue.
Got it. Very well understood, Amit. Thank you so much. My very quick second one would be where obviously the 10% price hike that you mentioned that you've taken on a cumulative basis, has that some part of it reflected in Q4 as well, or it is largely for Q1? I would assume that some inventory buildup was already there. How we should think about the pricing playing out in the revenue line in this quarter or the next, and if you take incremental price increases, just to help me understand a little bit on pricing side.
Actually, you're right because some part of the inventory is always with us to that extent. It has not majorly impacted us in terms of from the point of view of any things which are hitting the margin because the existing inventory has helped us in terms of tiding over the inflation which is there. Therefore, the larger impact we will definitely see in Q1 and Q2 in terms of what is going to happen to that extent. The other thing which is there is that in the last quarter, we also had the benefit of a deflation, which we saw basically, that is why possibly we are also seeing higher PBDIT margins overall in terms of even higher gross margins in terms of what we are anticipating.
As I said earlier, I think we are looking at recovering some of this thing through the price increases already taken. Some we are in the process of taking to that extent, coupled with the whole area of cost working and other areas in terms of how we want to kind of look at calibrating our spends in terms of going forward so that we are able to play this game of looking at driving top line as well as balancing the bottom line margins.
Just to understand clearly that in doing so, you'd like to maintain your margin guidance, which has been always 18%-20%. There's a high single-digit volume, basically ambition as well for the year. I assume when you say high single digit, you mean FY 2027. Also the pricing, whatever will build up, will build up on top of it. Is this the way to interpret what you're saying?
Absolutely right. We are maintaining our margin guidance which is there. We are looking at the price increases which are happening in terms of what is there and trying to see that we get into that area of 8%-10% volume growth.
Excellent. Amit, thank you so much. Excellent set of results. Congratulations once again.
Thank you so much, sir. Next question is from Latika Chopra from JP Morgan. I kindly request you to unmute and ask your question, please.
Yeah. Hi. Part of my question was answered. Amit, I just wanted to check again on the competitive intensity. It seems all the players, including the new entrant, took double-digit price increases. It seems that the pricing levels are now coming at least to the par, but you mentioned that the discounting levels remain highs. Is it right to assume that the new player pricing is still below yours?
As I said, just to reiterate what I said earlier, finally what we see is that everyone adjusts to the overall pricing at the same levels which are there, which are basically the apparent rates of the market in terms of what possibly the pricing is pitched at. Finally, I think today what matters is in terms of what are the discounting you are doing to various stakeholders to that extent. As I said earlier, today, I think the differentials in terms of the discounting between the various players is exactly the same as they were earlier. There is no change in terms of that we see at all to that extent, and therefore, the intensity of competition still remains in terms of going forward.
Assuming the raw material prices come off, in such a scenario, do you think a part of these price increases that the industry has taken will be sticky, based as your experiences in the past?
As I see it, obviously, if there is a prolonged kind of situation which kind of really happens. Today, we will have to really think in terms of what part possibly we can really pass further in the market in terms of from what we have already done to that extent. Therefore, possibly, I think some of those will be sticky to the extent that possibly till the time the situation carries on. Possibly there is no going back on it to that extent. I think it is going to take some time before possibly softening is going to really happen, all depending on how the geopolitical environment behaves.
Last bit, Amit, we have wrapped up FY 2026. You had a good exit quarter. Basis your understanding of the secondary sales environment, how would you read the market shares for Asian Paints in FY 2026 versus last year?
I think all the results are out in the market. Obviously, I think all of you can calculate the shares in terms of where we have moved from where we were.
All right. Thank you and all the best.
Thank you so much. The next question is from Percy Panthaki from IIFL. I request you to kindly unmute.
Hi, sir. Thanks for taking my question. I just wanted to understand this. When you are saying that you will maintain the margin guidance of 18%-20%, does this in the back end imply an assumption that the macroeconomic situation or the geopolitical situation rather will sort of get resolved and the commodity prices will come down pretty quickly? Would you say that even if crude remains in that $90-$100 kind of a band for the rest of the year, even in that kind of a scenario, the margin guidance would remain intact?
See, as we see it, I think, in these conditions, very difficult to kind of really predict for over three to four quarters overall to that extent, I think. I think, clearly, if we were to look at the next two quarters is something which we are very seeing that possibly, I think the inflations level are not going to come down so easily. Obviously, it depends on where the whole war situation goes and how it kind of really fructifies to that extent in terms of looking at what further impact in terms of raw material prices, it kind of really caters to that extent.
I think in the given scenario, in terms of what we see is that we need to work very diligently in terms of looking at saying that how do we kind of really look at maintaining our overall margin band in terms of what is there. It'll be a combination, as I said, of working on cost efficiencies. It could be a combination of basically the mix which we are able to sell in the market. At the same time, possibly looking at a very disciplined approach in terms of how we really look at our spends in the market as we go ahead.
Understood. The context of my question was, if I look at the last crude cycle, which was FY 2022, at that time also, I think on a YoY basis for the full year, there was about a 14% average price increase. At that time, we had finished the full year at a margin of 16.5% FY 2022 consol. If I compare it to FY 2020, because FY 2021 was exceptional because of cost savings, et cetera. FY 2020 was about 20.5%. There was about a 400 basis points kind of a contraction in FY 2022, despite fairly high price increases. What is different this time, which gives you the confidence to say that we've closed this year at 18.8%? You're saying basically the contraction won't be more than, let's say, about 100 basis points.
See, first of all, I think, the current context is that we are looking at possibly the first six months at this stage, because very difficult to really, as I said, predict for the full year to that extent. As I see it for the first six months, possibly, yes, overall we are still open to more price increases in terms of what we need to take from the current levels where we are to that extent, and that would really compensate for some deficit in terms of what we are seeing. The second thing different this time we are looking at is possibly the whole area of the premiumization story and other areas of bettering the product mix in terms of what we want to set up in the market.
The third area is, obviously, I think some areas which we have kind of already rolled out, whether it is the areas of backward integration and in some of the areas of our overall cost efficiencies in terms of what we are looking to kind of really look at it. I think it's not going to be an easy one. It is going to be definitely tough, but the endeavor definitely is basically that you try to remain in touch in terms of the margin band given.
Understood. My second question, sir, is on demand. In any product, there is a certain price elasticity of demand. If you take pricing up, it affects demand. How do we look at this price elasticity for paints? Just for example, in the last cycle, again in FY 2022, we did not see any kind of impact, but the construct was different there in the sense that people were spending more time at home, and therefore looking at their houses and feeling that we need to make this better and spending more on home improvement. Anyways, there weren't too many avenues to spend on at that point of time. But that is not the case right now. People right now will have to pick and choose where to spend.
Very frankly, the last big crude inflation cycle apart from FY 2022 that I can see, where you have taken a double-digit pricing is, I think only FY 2012, where anyways the demand scenario itself was very buoyant and robust. In a way we are at a position today where this question is difficult to answer empirically speaking. What is your take on the price elasticity of demand for this product, and how do you think the price increases will impact volume?
Overall, if you look at from the point of view of the paint industry, when we speak of the final cost to the consumer, it is basically a combination of the material prices and the labor prices to that extent. The overall material component in terms of the overall per square feet, what lands to the customer, the material cost is only about 35%-40% to that extent. The larger area is of labor. What we are seeing is that possibly the overall increase in terms of the material prices kind of gets a little bit nullified in terms of that overall per square feet prices to that extent which we see. I think the impact which possibly see from the point of view of percentage terms doesn't come to the same thing, which possibly is there.
That is why possibly in each cycle, which we see that the impact possibly might be limited unless obviously, the things go kind of haywire in terms of looking at everything, turning very different from the point of view of crude prices or in from the point of view of dollar strengthening to that extent. I think we will have to watch out for that from the point of view of looking at it. We feel that today, given the fact that, one, anyway, the spend on paint is discretionary to that extent, and sometimes it is occasion and maintenance-led also, which is there. From that point of view, I think the elasticity is definitely there to that extent.
I think it all depends in terms of possibly what is the quantum of increases you are able to take, and that is why I said we need to calibrate those increases in such a manner that the final landed cost to the consumer is something which is still tenable and we don't really ruin that kind of equation in terms of the prices becoming too high, which becomes untenable for customers to get their homes done.
Yeah. Just couple of very quick hygiene questions. One is, what is the impact of upstocking on this quarter? I know it's difficult to exactly calculate, but whatever you think is the best estimate, we will go with that. Or even if that is not possible, what is the growth in Jan and Feb, only these two months, and we will go with that as the substitute. Second question is, the other expenses line has grown only by 2% this quarter. Any reason behind that?
Overall, when you look at the current quarter, the good thing is that all three months have grown by double digits. I think that has been very strong. I think some uptick from a point of view of upstocking has happened in the fag end of March in terms of what I see. I think the impact of that would be possibly for the March month, possibly the March growth rates would be higher by that 3%-4% mark to that extent, which would be the impact of the upstocking, which would have happened in the month of March. I think the good part is that both January and February have been very strong in terms of what we have been able to achieve overall from the point of view of overall sales, which has happened this quarter.
The other expenses, sir?
Other expenses in terms of cost reductions. The other expenses growth is largely in line with how we have seen the full year, where the various cross initiatives have actually worked for us. It helps that we have a higher sort of revenue scale in this quarter, which has also helped the overhead absorptions.
Okay, sir. I'll take this offline. Thank you very much.
Thank you so much. The next question is from Aditya Bhartia from Investec. I kindly request you to unmute and please ask your question.
Hi. Can you hear me, sir? Again, on VAE and VAM.[audio distortion]
Sorry, I can't hear you properly.
Hello. Is it better now, sir?
No, sir.
No, your voice is breaking.
Hello?
Yeah.
Yeah, we can hear you now.
Perfect. Sorry about that. My first question was again on VAE and VAM project. While I understand that these benefits would be felt over the course of entire year, but could you give us some indication what could be the benefit in terms of costing, in terms of gross margins? I understand that it will also help formulations and improve the quality of the product, help us differentiate. What could be the impact on gross margins over the course of the year?
As I said, I think it's too early to say in terms of what is there, because I think there are several factors at play. One is basically the extent of possibly usage and production of this emulsion across various products in terms of what we can take. The other is basically how do we ramp up the overall capacity in terms of what we are able to make to that extent. I think therefore, at this point it will be very difficult to really give a quantum to that because the whole thing will vary from quarter to quarter, and it is only by the last quarter possibly that we would be able to come to know that what possibly would be the larger impact across in terms of what would we be making.
Sure. Understood, sir.
Sorry. The fact that what we are commissioning in this first half is only the VAE part. The entire VAM VAE project as such will still take some time, and that is when you'll start realizing the whole anticipated benefits. We'll have to phase it out over the next one and a half, two years.
Understood. That's very clear. My second question was on the mix impact that we saw in this particular quarter, which was only to the extent of -2.5%. If I recall, it was almost a similar trend that we had seen in quarter three of FY 2022 as well, which is again a period wherein we had taken very sharp price increases. Is it a case that when we take sharp price increases, there's upstocking that happens specifically for paints, and therefore paints proportion goes up in the overall mix, and that's why we get to see a lower mix impact as well, and we should be back to whatever, 4.5%-5.5% kind of a range in the next few quarters?
Overall, see, quarter four is anyway also basically a month where you have a larger, higher value contribution, which kind of really happens. That is one. Second, yes, because of the price increase, I think there is definitely an upstocking which happens in high-value products, especially, as I said, that in the month of March, possibly we would have seen definitely some upstocking happening there. We feel that over a period of time, it is good to kind of maintain that 3%-4% gap, which would kind of remain from a point of view of overall direction between volume and value.
We are now speaking about 3%-4% gap versus, let's say, 5%-6% that we used to speak earlier.
Yeah.
Is that on account of confidence that we are having that premium and pre-lux categories are doing better?
Currently, it looks like that, we should be kind of really be able to kind of look at that gap of about 3%-4%.
Sure, sir. That's very helpful. Thank you so much.
We'll be taking the last question. The last question is by Mr. Pratik Gothi, and he is from HSBC. I request you, sir, to kindly unmute, and please ask your question.
Hello. Yes. Am I audible?
Yes, you are.
Thank you for the opportunity. I just have one question, please. In terms of mix, you already touched upon this. Any more color on the performance of the pre-lux category and whether economy range continues to outpace them on growth?
I think I have already maintained earlier as well, that today if you look at, I think the economy range contribution obviously is pretty high to that extent. It's not that it's a compromise that you don't grow on economy and you grow only in pre-lux to that extent. I think the efforts are very clearly that we are looking at the whole area of pre-lux very strongly in terms of how we want to kind of grow.
This is not only in emulsion, it is across categories in terms of whether it is waterproofing, whether it is in terms of wood finishes, that we would kind of really look in terms of saying that that whole premiumization as a strategy is something which is strong in terms of what we are able to take, which basically looks at outpacing the growth somewhat, which happens from the point of view of the overall eco emulsions as well.
Got it. A related question is the volume-value gap. Maybe I heard it wrong, you mentioned that 3%-4% kind of [audio distortion]
Sorry, we lost you in between. Are you still there?
Sir, we are not able to hear you.
Can you hear me?
Yeah, I can hear you now.
Yes. Sorry about that. Maybe a glitch on my end. I was saying the volume-value gap of 3%- 4%. Did you mention that-
Yes, I did.
...that will remain over the next few quarters as well, even during the price hikes are being followed through?
Yeah, I think that is something which is there because to some extent, basically the price increases might not be at a certain regular interval or whatever to that extent. Overall, we see that we think that this trajectory of 3%-4% will remain overall as we kind of go ahead.
Got it. Okay. That helps. Thank you so much.
Thank you, sir. On behalf of Asian Paints Limited, this concludes today's conference. Thank you for joining us. You may now disconnect your line and exit the webinar. Thank you once again, everyone, for participating.