Q1 21/22

Aug 12, 2021

Welcome to Spark Capital, I welcome you all to Petrolite Industries 1Q FY 'twenty '2 Earnings Call. From Petrolite Industries, we have with us today Mr. Bharat Puri, Managing Director and Mr. Pradeep Menon, CFO, to take us through the results. I'll now hand over the call to Mr. Menon for his opening remarks. Post this, we can open the floor for Q and A. Over to you, Mr. Menon. Thank you, Tejas. Good evening, everyone. I'll start with my opening statement. Despite a challenging business environment, we have delivered strong broad based sales as well as earning growth across businesses and geographies on previous year's low base. The second wave of COVID nineteen disrupted business continuity from April '21 with gradual closure across the country for May 21 and June. We have seen demand recovery since mid June post the lockdown with most markets returning to normalcy across town classes and geographies. While consumer and bazaar businesses, CNB, has witnessed recovery led by Adhesive, Construction Chemicals and DIY portfolio, recovery in business to business, B2B is on account of resurgence in industrial activity. Now I'll begin with a summary of the financial performance for the quarter ended thirtieth June twenty twenty one. On consolidated basis, net sales at INR1928 crores for the quarter grew by 120.7%. Excluding Pedalite Adhesives Private Limited, PAPL, it grew by 112.5%. This was led by 111.7% growth in CNB segment. Excluding PAPL, it was 101.5% growth and 156.1% growth in B2B segment. Gross margins have contracted on account of sharp escalation in input costs, partially mitigated through pricing taken across categories in a range of 4% to 6%, covering 75% of inflation. Material cost as a percentage to net sales is higher by four thirty seven basis points versus same quarter last year and 182 basis points versus sequential quarter. EBITDA before non operating income grew by 428.8%, excluding 395.9%. Profit before tax and exceptional items grew by 814.4%, excluding BAPL 745.3%. Now moving on to standalone financial performance. Standalone net sales at INR1617 crores grew by 110.6% with underlying sales volume and mix growth of 104.6%. This was driven by growth of 102.8% in sales volume and mix of CNB and 113.1% in sales volume and mix of B2B. Our key raw material, Benyl Acetate Monomer, BAM, procurement rates had increased over the months to $2,000 per metric ton in April 2021. VAM has now started softening with a current price between $1,400 to $1,500 per metric ton, still higher than previous financial year. Quarter one gram consumption rate at dollar 1,610 per metric ton is against quarter one twenty one of $890 per metric ton. Material cost as a percentage to net sales is higher by five twenty nine basis points over same quarter last year and two seventy five basis points versus sequential quarter. EBITDA before non operating income at INR308 crores grew by 219% over the same quarter last year. Profit before tax and exceptional items at INR355 crores grew by 361% over the same quarter last year. On a like to like basis, excluding dividend from subsidiary, PBT grew by 236%. Overseas subsidiaries continued its positive momentum and reported high double digit constant currency revenue growth as well as strong earnings growth. Our domestic subsidiaries suffered as a consequence of the lockdown in May. However, a sustained recovery in demand has seen from June onwards. Input costs remain a significant challenge. We see these as peaking in the current quarter and then gradually softening over the second half of the year. Going forward, we remain cautiously optimistic on a sustained demand recovery. Our focus remains on delivering volume led competitive and profitable growth as well as the health and safety of our ecosystems. That concludes our opening statement, and I would now hand it back to the host for the q and a session. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. The first question is from the line of Agneshwar from Edelweiss. Please go ahead. Yes. Thanks for the opportunity. My first question is on the PAPL. When I compare the EBITDA margin for PAPL for q four versus q one, so sequentially, I'm not getting much of a difference. It's largely in that thirty one point two to thirty one point eight, so fairly stable. But when I see the overall business, the decrease in terms of quarter on quarter margin is much higher. So if you could just explain the difference, I understand TAPL is the more premium and consumer part of the business. But is that the only reason that the control gets diluted by the b to b and overall, like, international part? So some color on PAPL, why it is much more consistent in terms of margin? Go ahead, Talith. Yeah. So, Abhish, thanks for the question. So as far as PAPL is concerned, you know, obviously, as I as we said in terms of response to the various input prices or changes in input costs, we have taken appropriate actions in terms of pricing costs and so on and so forth. So some of that you are seeing in the results of the company. As far as the are you talking with the rest of the b two b segment in the subsidiaries, or you're talking about the consolidated picture? Yes. Second part of the question. The consolidated. Yeah. So on the consolidated, obviously, they they there are other subsidiaries in our portfolio. Some of them are much more exposed to the real estate where the recovery and the, you know, the margins have been under greater pressure. So that is the reason why you are seeing a distinction between PAPL and the remaining part of the subsidiary portfolio. But when I compare the like to like CAPL to your consumer addressing part of the business, quarter on quarter, will that also behave similar? So it has sustained in terms of margin. See, Amish, good to hear from you. Actually, what because, see, the rest of the business is a composite of many products, and it therefore depends on the mix and the raw material movement of that mix. As far as PAPL is concerned, it's a simple epoxy resin, and therefore, it largely is dependent on epoxy resin. So the simple answer is it may or may not move in conjunction with the adhesive portfolio because the you know, it's a raw material. The principal raw material is not greatly in use in the rest of. Sure. Sir, since you are also there in the call, I have just one quick question. So in the past You can ask as many questions as you want. Right. When I'd asked you last time on the real estate recovery, you were a bit more cautious. But when I checked with my real estate analyst or see the comments of the real estate players, they are very positive, and they see some many of them see this as a multiyear bull run. Now time has gone, and we have gone through the wave two pandemic, which which could have worsened the sentiment. What would be your take on real estate recovery? Is it not are you getting now a bit more confident versus last time? See, on real estate, there is no doubt about the fact that there is a substantial decrease in terms of the inventory that builders you know, the organized real estate was holding, which was not moving earlier and has moved, and therefore prices have also moved up. So clearly, there is clearly a a good amount of clearance of inventory. However, if you look at, for example, I mean, you know, you and me both live in Mumbai. Normally, in the real estate boom times, the first two pages of any newspaper would be just the new projects being launched on real estate. Right? I don't think we have reached that stage. I think, you know, I hope you are right that it is the beginning because real estate has not gone through just COVID. Even the three to four years before COVID, it was suffering. And therefore, in many ways, hopefully, they have come out come off the bottom and they are in the takeoff stage, but let's wait for the next six months and see. Sure. That's simple. Last question, sir. So when I see your brands in your presentation, my question is on some of those which is not discussed that much. So if you could tell us on these three specific brands, SteelGrip, Motomax, and Terminator, last few years and maybe the outlook also, how is the situation here? See, as far as pegylite is concerned, Avnish, you know that we have an approach where we have a large number of brands for specific users. Some of these may be niche users. SteelGrip is, of course, a popular brand. It is a known electrical insulation tape and is a substantial part of our portfolio. Terminator is a growing one because, you know, the problem of white ants is a major problem, and it's been a growth brand for us for a number of times. It's not a very large brand, but it's a steady I mean, it's not a small brand either. And as far as Motomax, again, is concerned, good steady brand, the whole auto area for us is currently small, but clearly an area of potential because of, you know, auto grooming. I mean, we are the world's largest population of two wheelers, and therefore, grooming is something we are looking at. And we are finding actually Motomax and actually with a lot of other brands, a lot of success coming via b two c, which is coming via the ecommerce route. And today, for example, you know, in the last three months, the largest selling drain declogger on Amazon is not DrainX, which is the country leader, but it's actually a Piddler product called declog. Now like this, we've been working with a set of partners, so on and so forth. And a lot of these brands we are looking at are also d two c. I mean, just to give you an overall perspective, what we did in ecommerce in the full year in 1920, we are now doing in a single month, for example, in the month of July in this year. So we've really upped our lead there. You know, it's a long runway. By no means are we saying that we're declaring success, but we are absolutely going in the right direction. Sir, just one follow-up. Paynek is the market leader, so how come your product has done better on ecommerce? Is it any specific price differential that's driving? I think it's a mix of an appropriate product with good marketing and, you know, being able to understand consumer needs and push and work partner with the customer in taking it forward. And, you know, the good thing is when customers use the product, they come back and ask for it. So in fact, in the last three months, it's been the number one seller Oh. On Amazon. Right. That's all from my side. Thanks a lot and all the Thanks, Abhish. Thank you. Thank you. Next question is from the line of Abhi Mehta from Macquarie. Please go ahead. Hi, Thanks a lot for this opportunity. I had three questions. First was essentially on input cost. Now you said at the start of the comment that VAM has moderated from the highs of 2,000 to almost about $1,415,100 US dollars. But then you're saying that we expect VAM to peak in 2Q. Q. I'm just still confused. When norm is already moderating, why do you say that it'll peak in February? Very simple, Adi. What we buy in q one, we will consume in q two. That's it. So you meant from a okay. Okay. Okay. Sorry. That classified. We'll actually yeah. Okay. Okay. So you meant your own, but, is there a further moderation that you're kind of expecting from this level? Or if you could kind of give us some We are definitely expecting a further moderation from this level, but, you know, currently, world over global chemical prices are displaying such volatility. Mhmm. So we're keeping our fingers crossed, but, yes, we don't see $141,500 as a sustainable level. It may not come back to our you know, last year at one point in time, it was even $700. It won't come back to that, but we do believe that it will it will moderate further from this 1,500 level. Okay, sir. Okay. I mean, would you say somewhere around last year, I think thousand was where you would grow most of the time. I think that's what you would mean. 900 was yeah. But 9 last you know, if I look at year before, Pradeep, what would what would year before the average be? It would be 900, Bharat. So eight ninety nine twenty also? Yeah. Yeah. Yeah. 200. Close to nine. So I would say yes. I I think it won't come back to 900 quickly, but I I do hope that between thousand and 1,200 is where it returns to. Okay, sir. Okay. So from that lens, you're essentially okay. So that is how you kind of see this. Sir, the second bit is, again, linked to the margin, only continue on that. Even in the first quarter, had indicated you had taken 4% to 6% oil price increase. It covered 75% of the input cost inflation. Now that time, the cost was at 2,000. So would it be fair to say now that the input cost itself has come up, we are almost covered to the entire basket, and we don't need any further price increases? On VAM, we may be covered you know, by the end of quarter two, we will be covered. We as far as VAM is concerned and some of the other raw materials, we may not be we're studying it closely. But our hope is, you know, we purpose you know, we clearly want volume growth, and we don't want to constrain our growth because we find price elasticity beyond the certain level, then the it impacts the consumer. Mhmm. So we're keeping a close watch. If prices continue to moderate, we will not need any further price. And yes, we will have covered for the whole time by the time quarter two goes. Okay. Okay. Sir, the beyond recovery side, mean, it's been quite healthy. Is the cautious optimism because of the concerns on third wave, or is there is there anything else that we're seeing? And related, could you give us a sense? Has this trend sustained in the last two months, July, August as well? So, yes, the trend has been extremely positive ever since the lockdowns have got lifted since the June and has sustained for July and whatever is the limited period of August up to now. Yes. The cautious optimism is we are keeping our fingers crossed for this firm famous third wave. We're hoping it doesn't happen at all. And if it does, unfortunately, happen, it is you know, it doesn't lead to widespread lockdown. Therefore, the cautious optimism. Otherwise, we do believe that there is a certain amount of pent up demand. And, you know, as the economy recovers, you know that we correlate very well to GDP. As GDP comes back, I think we will see far better demand condition. And this is across both the segments. I mean, the key in the consumer was out as well in the both the key segments? Are these as waterproofing or is it Across. Actually, it's based. I mean, to be fair, this is across the portfolio, very broad based and, actually, across even geography. Seems like the metros have come back strongly now in the first quarter. Of course, they went down the most. I think the great thing is, you know, we had spoken last time about us investing substantially in the rural and small town. Mhmm. Now despite the forty five day closure in the first quarter, our rural and small town sales is actually at you know, this it has obviously grown over last year, but it's actually even at the same level as year before, which suggests that when, you know, you have a normal quarter, we will again come back to substantial growth in small town and rural. So at an overall level, it is broad based across geographies, across categories. And, actually, you know, what you would also like, Avi, I think is international is actually this time now leading the growth rather than, you know, a lot of times you will ask, what about international? You would see that international has grown not only over last year, but also over 1920 substantially. So overall, our act we have got our basic strategy in place internationally. And, again, there also, whether it is our neighboring countries of Bangladesh, Sri Lanka, Nepal, whether it is Middle East, Africa, we are doing. So overall, the international markets are actually outperforming the domestic market. On on that front, the margin is I had no one off, right, in the international? Sorry. That was the only clarifications too. And then any what the question is, are there any one offs in the international margin? Yes, sir. Because they've kind of reached a, you know, a new high finance or back to, you know, their kind of strength and strength. So I'm assuming there's no one off over there. Just wanted to confirm. No. No. There are no one offs. Okay, sir. I'll come back in the queue for the other questions. Thank you very much, sir. Most welcome. Thank you. Participants, please press star and one to ask a question. The next question is from the line of Faiza Shah from Spark Capital. Please go ahead. Hi. So a couple of questions on in your presentation, you spoke about that by the June, you are seeing some signs of recovery. So if you can slice and dice this recovery in terms of rural urban and also the trend of premiumization post the second wave, how it is panning out? See, very simply, Tejas, what is happening is because the metros are springing back, then therefore, premiumization automatic normally leads from metro and Tier one towns, which have been growing faster. You're seeing that happen. As I said, the lovely thing that we are seeing, the good thing is that rural and semi urban, which had a very strong last year, are sustaining their growth rates despite that strong last year. So it is it's a broad based growth, and it is also broad based across adhesives. Waterproofing is growing very well. DIY is growing well, and you've seen that the b to b business is also growing well. Oh, sir, any observation on premiumization side? Premiumization normally is led by the metros in tier one towns, and we are seeing, you know, that come back as the med you know, the fastest growing because they also I must say degrew the fastest last year. The fastest growing job you know, geographic segment from a town perspective are the metros. Metros tend to be where the premium products are consumed. So, obviously, over the last year, you'll see a much better premiumization trend. And sir, last one on distribution expansion. So we had a very specific program to increase our distribution footprint in tier two, tier three and even rural areas. So any update on the scheme? And did it get derailed because of second wave of scheme suddenly? No. Actually, yes, it did get handicapped because this time, rural and semi urban was hit. But over the last fifteen months, we just we have been you know, we have longer term plans that we believe that we have a lot more runway still left in rural and small town India, and therefore, we set up a separate division called Emerging India, which actually looks after that. You know, in the last, if I forget just the first quarter, if I look at the fifteen months, if you look at any parameters of infrastructure, the number of sub stockings that we have, the number of key dealers that we have, the number of our own people that we have, you know, while other people have been cutting back. We've actually added almost a 100 people in this area because we see the potential. Whether you see therefore, our coverage, for example, in both towns as well as villages, We also have a partnership with Hindustan Unilever, which we're experimenting. We're using their Shakti Amaz for bra for Bihar and seeing that as a multiplier, which takes us even to, you know, villages below three and two thousand. So at an overall level, if there is one area where we have added substantial infrastructure and made substantial gains, it would definitely be rural and semi urban India. Fair enough, sir. Very helpful, sir. So I'll come back in the queue for more questions. Bye. You. The next question is from the line of Chirag Khedaya from ValueQuest. Please go ahead. Sir, my first question was on more on real estate revival. From lot of you know, building material companies, we are hearing that they are quite optimistic on real estate revival going ahead. I just wanted your view how you look at this trend. See, definitely, we are also quite optimistic about real estate now reviving because, you know, as you know, real estate has suffered not only during COVID, but even before COVID. There is no doubt about the fact that when we speak to a lot of our key customers, they have seen a lot of inventory liquidation of their existing projects. And I think the next phase would be I mean, you know, all of us know that there is a massive housing stock shortage both at the affordable and the upper middle class level in India. So will it be lead to a new real estate boom? Frankly, your guess is as good as mine, but we definitely hope so. Okay. Okay. And secondly, on pricing, we have seen commodity prices going up sharply. And this quarter also, we have seen impact on gross margins. So going ahead, how one should look at this gross margin line item? Are we able to pass on complete commodity inflation or it is still fixed? See, as I said, we've seen some unprecedented cost inflation. We have passed 75% of this to consumer. We consciously took a call believing that because this was not a long term secular trend, this was not because of demand conditions, but because of supply constraints. We believe that a lot of these raw material prices would moderate in quarters two, three, and four. We do believe we've already started seeing moderation happening. Our belief is by the time we are in quarter three and definitely in quarter four, prices would have moderated for our gross margins to come back to the levels that we deem acceptable. Okay. And just, sir, lastly, on overall competitive intensity in construction chemical space, how how you look at that? See, there are you know, given our leadership position, these are these are the construction chemicals. These I mean, you know, the paint companies, for example, have been in construction chemicals now for over, you know, five to ten years. So when it's not new competition. We are used to this competition. The fact of the matter is that, actually, this competition is also leading to the market expanding faster. As all of you know, waterproofing is a category has, at best, about 40% penetration, which means four out of 10 new homes that are built actually do proper waterproofing. Hopefully, with the entrance of new players, etcetera, and this four becomes six big game. We are clear that our leadership position has to be maintained by a strong brand, great innovation, and then great sales and distribution. As far as we are concerned, even now, waterproofing remains one of our fastest growing categories. So our belief is the market is expanding. Your players are coming in, but in no way are we losing market share. In fact, we believe we would have probably gained a little market share. Got it. Got it. Very clear, sir. Thank you and all the best. Thank you. Thank you. Participants to ask a question, please press star The next question is from the line of Abhi Mehta from Macquarie. Please go ahead. Hi, sir. Thanks for the follow-up opportunity. Just on the comment on the margin again. Gross margins, we would kind of start normalizing towards the earlier levels. We have moved our cost base also relatively to a lower level as a percentage of sales and as recovery pans out, that should also pan out. In that sense, would it be fair to now look at EBITDA margins moving ahead of the earlier levels of 20%, 24% that you had highlighted in the last conference call, at least in the near term? Our belief too early to say, Adi, but our belief is we would actually reinvest for stronger volume growth both in the current categories as well as the adjacencies. So if you give me a choice between taking EBITDA margin beyond 24%, I would say, listen. I'd rather use the money to take my growth rates higher. And, you know, because that volume would sustain and then gives you far greater leverage over a period of time. Early to say, let's see how the raw material situation evolves, but we would be very comfortable because we are also very clear, Adi, that we would like to maintain a price. You know, our brand gets a premium of between 1520% vis a vis competition. We don't want it to go beyond that. So, you know, therefore, if raw material prices soften beyond what we expect, we would actually pass off in terms of price, etcetera, but, again, focus on volume growth. So, yes, I take that point. But, you know, where I was coming from is that premium has moderated in the last few months. So which is, not months, but, yeah, in last few quarters, which is why I felt that, you know, you had. That's why it's a question or that's why Okay. Actually, the premium has not moderated, Abhi, because, see, all of the other fellows have also you know, you can't you can't price closer to FEVICOL and hope that you will sell so on and so forth. So the others are also suffering, and therefore, you know, it isn't that they have raised prices and we haven't they raised to 75%. They also raised to 75%. Okay, sir. Okay. Okay. Fair enough, sir. So the second bit was essentially just trying to understand your thought process on, you know, building the next management level or you we recently saw the appointment of mister Watts. Could you now he he's four years to he'll be kind of with you. Could you give us a sense on what is the broad plan of, you know, the going forward basis? Yeah. Is is it going to be more as, someone will be working with you for the near term? Could you just give us a sense on what is the thought process on introducing, into various categories? Anything to kind of introduce him to? Because he doesn't know this. He's not been in the Pillar system, but you obviously are there to kind of explain to him. If you could just give us a sense on the process forward. Thank you very much. See, as an organization, you know, I mean, that Pillarized is a forward looking, and we forward the plan of habits. And it is our belief that, you know, as we increase the number of work you know, if you look at our number of subsidiaries, you look at our number of verticals, a pioneer model by definition is going to be far more complex than, know, mono category companies or two category companies. I mean, we are a company that now has over 30 verticals. Now, therefore, we felt that it's important for us to strengthen the management team, make sure that we have, you know, enough bench strength available, and we do that without putting any pressure on individual so that, you know, you get enough time to learn, understand the company, take over little parts of it. Sudanshu has wonderful heritage. He comes from a really good category. And, you know, for example, consumer products is something he understands well. He's also been in the castrol, which is similar to our bazaar environment. So, therefore, it's important that we give him enough time to settle down, and we give him responsibility so that he gets his arms around and understands the organization rather than, you know, he has a very limited time and therefore, you know, gets prone to doing things quickly rather than having understood the whole thing. So it's part of our, you know, longer term plan. And you know that over the last ten years, we have substantially strengthened our leadership bench. In fact, most of our leaders are now leadership leaders. And this is, again, you know, part of that plan where we are building the of tomorrow as we continue to deliver on today. Perfect, sir. Perfect. That this is all from my side. Thank you very much. Thanks a lot, sir. Welcome, my dear. Thank you. The next question is from the line of Ladika Chopra from JPMorgan. Please go ahead. Thank you for the opportunity. My question was on Construction Chemicals. I I did hear you talking about the good prospects here. But my question is more on the profitability, you know, of this segment considering now you have multiple players here. How does it how is it that's stacking against, you know, your core Adhesives portfolio? Is the focus a lot more on growth? And do you see, you know, there is a risk of on on the margin front here, both from maybe, you know, sustaining current level of margins or, you know, expanding that? Great question, Lavika. Good to hear from you after long. I'm hearing from you after long, so good to hear from you. I think your question is a good one. See, at Pideline, what we do is at a gross margin level, the difference between adhesives and construction chemicals is not substantial. But because we see construction chemicals as a strong growth business, which we would like to grow it, you know, two to five times GDP, obviously, from both marketing, sales, and distribution, a people perspective, it's an invest business. So while this EBITDA may be lower over a period of time, we believe that the growth rates, you know, allow this period maybe three, five, or ten years. We believe that it is will compensate vis a vis the much higher growth rates. So competition is we are obviously already and had anticipated and have seen and have been seen. Our focus is clear. Keep creating strong brands, keep delivering outstanding customer service, and keep going deeper and deeper into, you know, both rural and semi urban India. And there is a lot of runway still for construction chemicals. So from a margin perspective, gross margin, similar to any of our businesses. And with that, largely because we would invest more in it from, you know, people and marketing perspective, it may be lower, but that's intention. Once it achieves a certain size and maturity, obviously, then it becomes similar to the other business. Sure. This is useful. And can I just check on, you know, your FY '22 CapEx plans? Anything meaningful to keep in mind here? Yeah. Our CapEx levels remain at similar levels. We normally spend between four to 6% of our turnover on CapEx, that's the you know, this it may be at the higher end because as we've now learned from the pandemic, we need a far more resilient supply chain. So, Abhita, as we speak, we have 12 new facilities, brownfield and greenfield being set up in various parts of the country. But the CapEx is not, you know, substantially greater or I mean, it still remains in that same range. What we've done is we've used the pandemic to reassess and see how we want our supply chain to be set up, both from a production facility as well as a warehousing level, and we're now pretty much by the March of you know, by the end of this financial year, we would be ready for the next phase of growth. Sure. And and if I may squeeze in one last one, this is you know, Adelite acquisition is now done. It's it's nicely fitted in your portfolio. Obviously, there's more scope there, but any thoughts on incremental m and a, how how aggressive or, you know, you could be on that front? Any particular segments that you will be more focused on on on that side? See, we are clear that Arundhite is a growth business for us. We now slowly got our understanding of the business. It's also a business that has seen high cost of the the best, you know, par for the course. But we're you know, you would have already seen in the three quarters that we've handled the business. We are beating the acquisition case safely. But we still believe that there is a long runway for growth to to see how, you know, another one of Vigilife's, what I would call, power brands. We believe it is right up there, and it has the opportunity to be a much stronger and bigger brand than it is. Not only also in India, we've also launched it in Bangladesh and Nepal. We're looking at other geographies. So we see a lot of runway for bit for Araldite. Yeah. No. Sure. I was I was checking on your appetite for more acquisitions, actually. Is that something, you know, which will remain on a priority agenda for you? See, we are very clear. You know, we have a very clear agenda both organically and inorganically. This is how you know you know our agenda around core growth and pioneer categories. And if we find opportunities in any of these areas, we will always be open both while, obviously, we are pushing organically. If we find any inorganic opportunities, we will always be open. We've got the management bench strength and the bench now to be able to die as we've, you know, shown in our recent acquisitions. We've got the ability to manage and, you know, beat the acquisition case on each of our acquisitions. Sure. Thank you so much, and and and wish you the best. Thank you so much, Laveka. Good to hear from you after long. Okay. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Yes. Hi, sir. Thanks for the opportunity. Sir, first is, I think the NPL margins are quite solid. It was last quarter this quarter as well. I just wanted to understand, is it possible if you can give some color on pro form a basis year on year revenue growth over here? And again, any color on the industry growth rate, specifically for PAPL? Sorry. I missed the second part of your question. The what growth rate? Industry growth rates. See, the industry growth rate is difficult to say, but as far as PAPM is concerned, we're clear that, you know, Aralife brand has a significant runway for growth both from an innovation perspective as well as a sales and distribution reach perspective. You would have already seen in the last three quarters. You know, right now, I wouldn't want to go into comparable, but, you know, take the last quarter one now despite being closed for forty five days, we've done a substantial amount of sales. South, which is actually a strong region for Aranlight, has been closed for even longer periods. So you can see that in normal times, Aranlight will move to the next level. It is going to be a growth brand for us, and it will be one of power brands going forward. Sir, just trying to understand from a market industry growth rates and market share, if it's possible to provide some color. The the market growth rate, if I was to add Aralite and the Pedalite brands that exist, which is Fevatite and Bluepix, we would be somewhere between 6570% of the markets. In this segment, just own Marvel brand, what are called epoxy adhesives, and the number two or, you know, far number two would be astral bond type, which will be about 20 to 25%, and everybody else will be the balance. This is helpful. Sir, my second question is, we understand based on my reading that there is initiation of antidumping duties specifically on silicon sealants. I'm I'm probably mute a bit to the space, so par pardon me for my ignorance. Just wanted to understand what is the level of backward integration supply chain given we have silicon exposure in the marketplace. So is it something that is it a positive for us, or it's a negative for for us? How how should one understand this? See, remember, silicon sealants, actually, the base raw materials of silicon sealants is pretty much made by just three or four fellows across the world, whether it is a dow, whether it's a backer, whether it's such a so I'm not clear on the antidumping duty, but the issue with silicon is right now the other way around. Prices have really gone up in the last twelve months. So I'm not sure where you got this information on the antidumping duty. Most of, you know, the Indian manufacturers compound either buy the raw material and compound and then make the products in the man where they are making it. Silicon sealants tend to be the base sealants in any sealants portfolio. You then have acrylics and hybrids. So over the period of time, again, if you want to be a long term player in sealants, you need the full range of silicones, acetox seeds. I'm sorry to get technical, acrylics, and then hybrids. And the real margins obviously come from the premium from the premium sealants. Right. So, sir, my question is, do we import the base silicon, what we sell in the marketplace? Because to my limited understanding, I understand that a lot of it is imported repackaged into smaller batches and sold. So for us, this is something that we Every there is no silicon manufactured in India, Ritesh. Everything that anybody makes, the base silicon is imported. Okay. So I don't know. So to my understanding, I think there's a company called HP, Astral, and there is one more called. No. No. HP Astral, all of them only compound the product. Remember, the base silicon raw material is imported even by them. And HP is big actually in solvent cements, which is a different category, but all of this is the base raw material. We don't have the large enough chemical. You know, these need chemical plants which are of a very different scale and size. We don't have those in India currently. Okay. So if at all anything, it is an industry wide cost of increase, if at all any. Absolutely. Absolutely. Yeah. Right. Alright, sir. Second question, similar lines. Again, there are antidumping investigations which are going on PTFE, which I think could actually benefit SteelGrip or Alight products that we have in that basket. Any thoughts over here? See, both silicon seal Rupesh, both silicon sealants, PTFE, these are not very large categories for any of us. I mean, you know and therefore, while, yes, it may give you a small benefit. These are you know, it's not something that is substantially gonna move the needle for any of us. If it does happen, yes, we have the PTSD manufacturing ability in India. We manufacture it ourselves, so it'll help us. But it's not very it's these are not products which are over 500 crores or any subsidy. Sure. And, sir, my last question, if I look at our stand alone revenues and if I strip out Ika, Sippy, and MENA and also PAPL, and if I look at on a two year CAGR revenue group basis, the decline is far steep. So just wanted to have your thoughts. Are you happy, or is it something which is the natural course of decline because the market conditions are like that? So that's the first question, and I wanted to have your thoughts specifically on the PVA side of things. Just wanted to have some comfort that we are not losing market share on the retail side of the business. Or to put it the other way around, is it that the SBR and joinery business, is it growing at a faster rate as compared to the retail business? Good question. See, let me tell you very clearly, Vishal. I don't think the two years is a fair comparison for the simple reason that, obviously, you you know, COVID hit you hard last year, and it is again hitting you in the first quarter of this year. So you don't have a long enough base. But if you saw the year before that, our fastest growing business is PVA. In the fifteen months of COVID, Ritesh, it is our belief that enough PVA businesses, we have actually gained market share, not lost, but gained. Actually, a lot of the regional and other players have suffered and suffered hard. And, you know, knowing that the competitive geographies and growth rates are higher than the places where competition had a presence, so it's clear that we gained market share. As far as joineries and this is concerned, it is actually growing slower than even we thought. Please remember, we are the leader there also. We got Jawad tie up and this we also have a close to between sixty and seventy share of that market. Actually, they because a large number of joineries are medium and small scale, in this COVID period, they have suffered far more than the average, you know, small carpenter. So, actually, this business, the organized business in is actually not gaining from the unorganized, but I would say the unorganized in the last fifteen months is probably gained the other way around because, you know, small fellows have been able to bounce back. The larger joineries have taken a lot more time. Sure. So, sir, just to conclude, should one assume that the retail gross rate has been higher than joinery as we are put together? In the COVID period, definitely so. Okay. That's that's quite useful. Thank you so much, sir. I'll join back. Thank you. Thank you. The next question is from the line of Kausu Pawashkar from Shaikhanda BNP Paribas. Please go ahead. Yes. Thanks. Thank you, sir. Thanks for giving me the opportunity. I have two questions. One, on your international subsidiaries, you explained that this quarter, is a substantial improvement in the performance. But now considering the cases, you know, coming back in the market, it's few days. It's been in. I believe, have you seen any kind of, you know, weakness in demand in the recent weeks? Sorry. I didn't get your question, my friend. Can you just repeat a little louder? Yeah. So my question is on your international subsidiaries. We have seen good recovery y o y in q one FY twenty two. I believe this is mainly because the the base was also low. But if we consider the q three, q four, the recovery was good. But now cases are coming back, you know, in some of the international markets, the COVID cases. Okay. So considering that, have you seen any kind of weakness in some of the markets international markets? That's a good question. Yeah. I got your question. See, remember on international, we have recast our strategy about three and a half, four years back and focused. Actually, if you look at our international growth, even we are growing substantially even over the pre COVID period. So, you know, you it has nothing to do with low basis. The the international markets were not as impacted as India was in the first place. And when we bounced back, we've actually grown over the pre COVID period. There are certain geographies that have had issues as far as cases is concerned, notably Bangladesh, Brazil, which last year had a massive number of cases, actually grew well last year, which is quite a dichotomy. This year, they've withdrawn some of the cash coupons that they were giving to their customers, so Brazil is a little softer. But at an overall level, if you look at Internet our overall international operations, whether it is our neighboring countries, whether it is emerging with the least, whether it's extremely well in Africa, which seems to be even are now lesser impacted. So over a sec you know, over a longer term period, actually, international over a full year period is outperforming the domestic market by long business. Right. And so my second question is on your domestic subsidiaries like MENA and IT, it's like they're still, you know, good recovery, but and you also indicated in the call that metros are recovering, and we are seeing good growth in the tier one. Some of these domestic subsidiaries, will the, you know, performance will sustain better performance, or how how how we should look into this? See, as long as we don't have further lockdown, I think they will sustain and actually get better because they have suffered in the first quarter. So, you know, if they get a free run without any closures, three and six months, you will actually see their performance even improve further. Okay. Okay. Thanks. Thank you. Thank you. The next question is from the line of Jayakumar Doshi from Quota. Please go ahead. Hi, good evening and thanks for the opportunity. I would want to understand your strategy for the arts and crafts business because if I were to think of the last ten, fifteen years, in mid-2000s, you did a few acquisitions to sort of expand the portfolio and scale up. In the recent years, I have not seen any inorganic sort of acquisition to scale up that portfolio. And it seems to me that that portfolio is not growing any faster than the company, whereas the opportunity, in my view, should be really big. So does it get necessary as is it as important a portfolio for Prolite as FeliCol and as Construction Chemicals? And if you can give us some thoughts on where do you see this business in the next three to That's five a good question, Jay. See, let me tell you that this business actually has suffered the most during the COVID period. You know, remember, art and craft, the single largest consumer is children. And if children are sitting at home, then, you know, if the school is able to cover their basic, you know, the three r and the signed syllabus, things like projects and so on, you know, go through the window. So, really, the school closure in fact, if you look at all stationary companies, it doesn't matter whether it is an ITC or it's a cabin, whoever, they have all suffered greatly over the last fifteen months because of COVID. Having said that, if you look at over a longer period of time, we definitely, a, where the key leaders in the segments we operate, which is art and craft. With the closure of both schools and offices, this is not hits, and we therefore had time to, you know, in a sense, recraft our strategy. We are focusing a lot more now on adult art. We are focusing a lot more on fine arts. So if you a lot of innovation, Some have already come into the market. You will see some more coming. We see this as a growth area for us, yeah, going into the future and, you know, organically as well as if we find the right inorganic opportunities, you know, in a country that has 600,000,000 children, there can be no doubt about the fact that over a period of time in normal circumstances, this will be an attractive business. And that's, you know, the philosophy with which we address the business. Are there any adjacent, if I may ask just one follow-up, are there any adjacent segments within the tasteful art and craft space that you think fits well well within your scheme of things is a good fit and can be a scalable opportunity? I think there are a large number of segments. The thing is they must fit into our pioneer model. We don't want to do, you know, the usual pencils and, you know, sharpeners and so on and so forth, etcetera, because that's where the commodity end of the market. But as I'm saying, let's just wait for, you know, hopefully, normalcy in three, six months. I don't know your guess is as good as mine to return, and you will see that, you know, we've used the pandemic period to recraft and be ready for the next phase. That's good to know. Thank you so much. That's it. Welcome. Thank you. The next question is from the line of Tejesh Shah. Yes. Hi, Sasu. One follow-up question on Construction Chemicals. So last two, three quarters, we are picking up some paint companies that they are placing Construction Chemicals undercoat, the waterproofing in particular. And they are also tying up their paint warranty with construction chemical performance. So does it dilute our offering or our standing in market as a stand alone construction chemical product, especially in the remedial part of the business? Again, good question, Pages. Remember, in waterproofing, there are three large segments. There is what we call organized real estate, so commercial, so factory, which is a large, you know, the building's in a DKC or, you know, in a place of the new trade World Trade Center, etcetera. That is one segment. The second segment is individual housing, which is normally minus the metros and all other Indian towns, which is IHBs as we call them. And the third is repair and renovation. Remember, most of the paint companies really play in repair and renovation. When a person is building a new house or person is building a new building, in fact, in the new building segment where Lina Percept, etcetera, played, the competition tends to be the other multinationals like Sika and Fosterock. It's not the paint companies that are competition. In the individual housing, again, remember in new construction, mostly when the person is you know, the basic waterproofing is done when you're putting the slabs, so on and so forth, much, you know, much before paint ever enters the consideration. And that's the time that the consumer is going to be building materials store, what is the cement and steel store. And therefore, most paint companies don't have a reach there itself. Where the competition exists is in repair and renovation. World over, 60 to 70% is of waterproofing is new construction, 30 is repair and renovation. In India, because our quality of construction and people haven't done waterproofing during this thing, repair and renovation has become bigger. Now the fact of the matter is that largely these warranties matter on the exterior. And on exterior, we also have a full range of paint. So our raincoat, which is our equivalent exterior product, offers the same warranties, etcetera. We and it is the first waterproofing paint. So while paint companies compete with us, remember, in pretty much, they compete with us in one third of the market. Sure. Sure. So this this is very helpful, sir. Thanks. Thanks. Thank you. The next question is from the line of Moneisha Badhwani from Shea Capital. Please go ahead. Manisha Vadhwani, please go ahead with your question. Your line is unmuted. As there is no response, we'll move to the next question, which is from the line of Abhishra from Edelweiss. Please go ahead. Yeah. I had a follow-up question on Pepperfry and Homelane. Now these businesses require a lot of cash as these are digital businesses. And because of work from home and impact of more digital consumption, these will be seeing more demand also structurally. If you don't invest further, your stake will get diluted. So what is the thought process on further investment in these cash settling business? We will look at it on a case to case basis. I you know, up to now, we are very happy with our investment most from a learning perspective. I'm is and, you know, the way this market is going, it'll actually also give us a very good financial return, but that was never our objective. Having said that, we're I mean, you know, as you know, Amish, we're a company that constantly keeps pushing the envelope, experimenting, and therefore, if we find that, you know, this is an area that we we need to keep getting deeper in, we will keep investing. Right. Last question, you are in putting up 12 new factories in India. So what would be the update on those? And from a two, three years perspective, would you need to put outside India also in some of these products? Yes. Actually, we've actually just completed our second factory in Bangladesh where currently we've just inaugurated our JV in Kenya with a new factory. So and we have plans in one or two other locations. So very clear, Amish. We've always said that international will follow national. India will be our laboratory. We will learn and succeed in India. Once we've got a success model, we would reapply it to other emerging markets. And that's the model that we keep going forward. But digital investments like Homeland and Step Upright will happen only in India. Right? Yes. Those are only in India. Those I mean, we are we are not an we are not going to do for investment. We're doing investment largely for learning and participation. Right. Sure, Raja. That's very helpful. That's all for me. Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments. Yeah. Thank you. Thank you, everybody. So so sorry, Pradeep. Go ahead. No. No. I just wanted to thank everybody for joining in and just wish them to remain safe and sound during these challenging times. Back to you, Bharat. No. And I absolutely. I just wanted to wish people a safe and, you know, just stay safe, stay strong. And, hopefully, when we meet next time, you know, the third wave is a distant memory, and, hopefully, we're in better times. That's all we hope for. And thank you all for your participation. Always a pleasure. I always learn from these interactions as much as, like, inform you. So thank you all for your participation. Thank you. On behalf of Spark Capital Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.