Q3 20/21

Jan 29, 2021

Ladies and gentlemen, good day, and welcome to the Q3 FY 'twenty one Earnings Conference Call of PD LIGHT Industries Limited hosted by IFL Capital Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Parsi Pandakhi from IFL Capital Limited. Thank you, and over to you, sir. Hi. Good evening, everyone. Welcome to this Pitlite's Q3 conference call. We have with us mister Apoorva Parekh, executive director, and mister Pradeep Menon, CFO, to take us through this result. So without further ado, I'd like to hand over to mister Pradeep Menon. Performance for the quarter and nine months period ended thirty first December twenty twenty. Consolidated net sales grew by 20%. Excluding the impact of the newly acquired Pedalite Adhesives Private Limited, the growth was 16%. Consumer and Bazaar segment grew by 25% and Business to Business segment by 3%. On YTD December 2020, net sales declined by 12%. EBITDA before non operating income at INR641 crore grew by 38%. Excluding the impact of the acquisition, it was 33% over the same quarter last year. This was on account of lower input costs and ANSP spends. EBITDA for the nine months ended stood at crore and declined by 4% over the same period last year. Standalone net sales grew by 18% with growth in Consumer and Bazaar segment by 21% and B2B by 10%. For YTD, December 20, net sales declined by 13%. Robust growth was registered across all consumer and bazaar verticals driven by continued demand momentum in rural areas and strong recovery in urban, including metros. Double digit growth in b to b segment was led by resurgence in industrial and manufacturing activities. The profitability for the quarter versus prior year was aided by favorable input costs and lower discretionary spends. However, significant inflation in input costs during the quarter, margins will be under pressure in the coming quarters. Our key raw material, VAM, procurement rate over the last few months have increased from $750 to $930, then to $1,200 and now it was around $1,300 per metric ton. The consumption cost for VAM in the quarter which went by in quarter three twenty one was approximately 875 US dollar per ton compared to US dollar 940 in quarter three twenty twenty. I I when I said quarter three twenty, I mean the previous year ended 1920. Material cost as a percentage to net sales is lower by 121 basis points over the same quarter last year and higher by 137 basis points versus previous quarter. EBITDA before non operating income at INR $5.72 crores grew by 33% over the same quarter last year on account of lower input costs and A and P expense. EBITDA for the nine months ended stood at INR $11.42 crores and declined by 5% over the same period last year. Profit before tax and exceptional items at INR $5.49 crores grew by 27% over the same quarter last year. PAT at INR $4.00 9 crores grew by 24% over the same quarter last year. Regarding subsidiaries, overseas subsidiaries performed strongly reporting double digit constant currency revenue and earnings growth. Domestic subsidiaries in the Consumer and Bazaar segment have shown healthy growth. Subsidiaries in the b two b segment have shown signs of recovery in the latter part of the quarter. In the case of Huntsman Advanced Material Solutions Private Limited, which is the entity we took over from Huntsman in the quarter which has gone by, which is now renamed as Pedalite Adhesives Private Limited or PAPL. It has shown sequential monthly improvement in sales during the quarter. There has also been improvement in EBITDA margins due to lower input costs and controls over discretionary expenses. The transition has progressed smoothly and as per plan. Business arrangements with existing manufacturers, installers, customers, vendors have, you know, have transitioned, and we are working on the go to market approach, distribution opportunities, and brand strategy positioning for implementation in the new financial year. We are encouraged by the quarter three performance. The company is closely tracking the rising raw material and packaging materials with the objective to operate within the targeted EBITDA margins of 21% to 24%. Our focus will be on driving volume growth through investment in our brands, sales, distribution as well as consumer relevant information. Going forward, we remain cautiously optimistic on continuing robust demand conditions. That ends our opening statement, and I would like to hand over back to Percy and the team for the questions. Thank you very much. We will now begin the question and answer session. The first question is from the line of Anand Shah from Axis Capital. Please go ahead. Yes. Hi. Just thanks for the opportunity. Just two questions here. Firstly, on the demand, I mean, we've obviously seen a very strong resurgence, 20% plus in your consumer and bazaar business. So how much of this you would attribute a bit to pent up from Q1, Q2 and to maybe delayed festive or to the construction pickup that we are seeing generally? So kind of some color on what could be the sustainable growth as per you. And secondly, on the margins, you have alluded to the rising VAM prices. They've gone up substantially. I mean next quarter, perhaps on a Y o Y could be 40%, 50% up if this pricing remains. So have you taken any pricing up already, or, you know, what kind of pricing would you be looking at? Would it be broad based? You know, any color on that as well. Thanks. Sure. Sure. So I I'll I'll I'll answer both the questions, and, you know, Puru will chip in as appropriate. So I think the first point is on the recovery in demand. What we have seen is actually a broad based recovery across all of our various businesses. You know, in the past when we came in and we had these conversations, we said, you know, there is construction chemicals which is doing well. There are parts of the rural which are doing well. But now we what we are seeing is all across, you know, we are seeing demand. Metros have also recovered, so also urban. So overall, it is a broad based recovery. I we believe it's a combination of factors. The fact that, you know, the the pandemic impacts have receded, that is one. There could be some impact of pent up demand. We do not have much of an impact of festive season, you know, unlike some of the other industries which have a peaking in during the festive season. That is not really a driver or not a significant driver anyway. And, also, finally, industrial activity is also picking up, which is reflected in our b to b segment. That also, obviously, has got a, you know, sort of an impact on the on our consumer and balancing. So it's a combination of factors. A factor which is difficult to, of course, also validate or, you know, sort of reconfirm is that in the current environment, many of the established players with supply chains and footprint across the country are able to respond to the situations of demand, the raw material availability, and all this much faster and quicker versus some of the smaller players. And so there could be some impact also coming from that aspect. Yeah. But I think it's a broad based what we are seeing, not just in pockets. That is on the first question. I'll also answer the second question, then hand over to Apurva any additional points. As far as margins go, we have not taken any pricing yet. Of course, the b to b segment, what happens is as soon many of the b to b businesses, there is a, you know, sort of arrangements wherein the pricing, etcetera, is linked with input prices. And, therefore, in those cases, we have taken some increases, but they are not the largest business. As you know, 80% of our business is consumer and bazaar. So there, we are waiting and watching. Our intention is and we never do, you know, take on and pass on all of the price increase to the consumer. So what we will be doing is a mix of productivity improvement, a mix of, you know, pricing if this sustains for some more period of time. And with the focus that it shouldn't be that, you know, volume growth gets impacted. So it'll it'll it will have to be a sort of a balanced approach, not, you know, that we pass on the full pricing at this stage. Yeah. I'll just pause here. Apurva, if you could just add on any no. I think that's fine. Nothing more to add at this time. No. That's that's quite comprehensive. Thanks. I'll come back in the queue, Manav, for more questions. Thanks. Thank you. Thank you. The next question is from the line of Nitin Sagdhir from Green Capital Single Family Office. Please go ahead. Hi. Good morning to the management, and good morning to Apoorva and Pradeep. My question pertains to can you give me a color on the distribution and the increase in distributors or the reduction in distribution? And second is in terms of advertising and marketing expenses vis a vis sales for the quarter, the percentages of the marketing expenses? I'll answer the second question first and request support to chip in on the first one. See, as far as advertising and promotion is concerned, you know, we had a sales promotion is concerned. We had a practical difficulty in implementing some of our plans given various disruptions in the market. However, the positive point is that as we ended the quarter, the spends are pretty much in line with our annual sort of average. We typically spend a and s p between three and a half to 4%, and that's the kind of range we have achieved at the end of the quarter. But, obviously, we could not spend what we plan to spend in October and part of November, and therefore, the spends have been lower in the quarter. But going forward with the kind of, you know, expectations, volumes, as well as plans that we have in place, that's the kind of range that we would be spending advertising a sales promotion. Okay. And the first part? Yeah. Yeah. Question was what the increase in number of distributor, or what was the question? I just wanted to get a sense of the distribution in terms of has there been a significant increase in distributors or a reduction in distribute distributors? What is the color on that? So there is see, we have a fairly widespread distribution across India. You know, we cover most of the, you know, the towns with population up to 50,000, and we are now expanding into rural area. There is no reduction in number of distributor. But on an ongoing basis, we do add new distributors in newly emerging area within larger towns and in smaller rural areas. So that's an ongoing activity of expanding our distribution and also the number of dealers. Okay. My second question is in terms of is there any expansion which is planned, for increasing the lines and then that means increasing the capacity or increasing retail expansion on plants? Can you just put sort of a statement on that, at least what we can look forward to in the next one or the quarter, if any case is planned? Yeah. So I'll I'll answer that. See, as far as capacity planning is concerned, you know, in terms of CapExes, a, we spend typically between around four to 5% of our revenue as CapEx. Some of it is greenfield, and some of it is sort of expansion CapEx. And we continuously look at, you know, the demand projections when we plan this out. So we have continued to spend on our capacity. And we, of course, do have a longer term plan, like a two to three year kind of horizon also. So all of those plans have been crafted in the last few months, and so we are sort of ready to go. There's nothing specific to call out. We are continuing to invest even during these periods or even when there was a lockdown period. We continue to invest because we believe that the capacities would be required, and we need to be ready when the demand is up. So that's the overall approach in the capacity planning. Okay. Thank you. That's all the from my end, all the best, and congratulations on the steady set of results once again. Thank you so much. Thank you. The next question is from the line of Prateek Rangmekar from Credit Suisse. Please go ahead. Yes. Hi, thanks for taking my question. I have two questions actually. The first one is on the Huntsman acquisition. The last time we spoke, I think it was too early for you to provide any color on the kind of synergies or anything that you expect from that acquisition now since you already had it for another, I think, two months or so. So any color on that, that you would like to provide on the kind of synergies you expect? Yeah. So I think, we had, clarified that you take about sort of six months to really come back and, you know, share a kind of a formal kind of a feedback. But, obviously, that is work in progress at the moment. We are looking at distribution gaps, geographical gaps. We are also looking at, you know, a brand positioning, pricing. All of those elements are right now happening. Of course, cost also we are looking at in terms of, you know, overlap and and, you know, cost that we in between the Pedalite Systems and the Huntsman acquired subsidiaries systems. However, fact of the matter is it is on its stand alone basis also quite a profitable entity. You know? So I think the priority would be on volume and top line growth there. Synergies and costs could be, you know, would be there, but may not be as critical. So that's the thinking at the moment. Okay. Fair enough. And just another thing on the consumer business. In your release, you mentioned that it seems like there is a gap between the value and volume growth. It seems volume has grown faster than value this time. So is there anything to highlight as to why that is the case in this quarter? No. There are see, there couple of things. One is that because of the fact that we've had a significant drop in fact, the it's quite a strange situation. We've had a situation where the some of the input prices were at the absolute low when the quarter started, and then it sort of picked up. So in some of the categories, the schemes and discounts which have been run have been have been done to make sure that the pricing in the landed cost in the market is the landed price in the market is appropriate. So that is the reason why you're seeing some divergence between volume and value, but not significant. You know? It wouldn't it was it's not a significant one. And, you know, of course, as the quarter has come to a close, obviously, those additional spends and schemes would be obviously not appropriate since the raw material costs have already gone up. That's the primary reason. So would you have then withdrawn these schemes? And Yes. Yes. And four q things have come back to normal, hasn't it? Yes. Yes. And now, of course, now we have to wait and watch how the raw material costs go up. I mean, they've already gone up. How to respond to that? You know, whether appropriate, you know, as I said, productivity, pricing, all of those angles, we'll have to look. And if I could if I could just squeeze in one more. On the real estate side, so if you could just throw some color on what sort of a pickup you're noticing. Is it in a particular geography, particular cities? And how much of this is fresh projects being started or sorry, on rather pent up demand in terms of projects being caught up, which were stuck for like during the lockdown period. And would you expect the run rate that you're seeing now to sustain, or would you expect that to accelerate, especially from the point of view of your subsidiaries where you have, like, a direct relation with the real estate on the real estate side? Yeah. So on the real estate side, what we are seeing is, you know, projects which are held up. There is some, you know, indications of restart. These these are already existing projects where there could have been some delays and disruptions. The the order taking in some of these projects have gone up. Yeah. But the translation to sales is going to take longer, you know, from order taking to actually translating into an actual invoice booking and actual sale. So that is gonna take a a little more time, but there is a quite a lot of positive indication from the sort of inquiries orders which are coming in. So that's all I would say. Absolutely fresh new projects. There are a few, but they are not as sort of widespread. Apurva, you want to add some color on this? No. I think that that that's what you said is is correct. Nothing more to add on that. Okay. Thank you, sir. Just one small bookkeeping question. The Huntsman acquisition, that is included in the consumer part or in the industrial part? I would assume consumer. Right? Consumer. Yes. Consumer. Okay. Thank you so much. That's all from my side. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Yes. Hi. Thanks for the opportunity. So, semicolon, your brand is very quite solid, and we have entrenched the printer as a competitor really well. So I just wanted to understand from a competitive intensity point of view, when we look at construction chemicals and waterproofing, I understand, Nina, percept and, basically, the the runway on how we actually have that acquisition. But how entrenched are we with a carrier when it comes to construction chemicals and waterproofing as a segment one one looked at increasing confidence in terms of paying the treatment. So I wanted to understand that. The line was not very good, but I'll try and answer what I've understood. So you're basically, asking the the competition and the, you know, the the kind of environment we are operating in as far as waterproofing is concerned. Is that the question? Yes. That's the question. So with carpenters, our channel is really strong. But when it comes to this specific segment, how uniquely are those positioned? That's that's what I'm going to find. Yeah. So I I I'll try and answer that. See, frankly speaking, as far as waterproofing is concerned, you know, if you look at the brand we established, that is possibly the one which has got, you know, a strong track record and is sort of synonymous with the category. So recall of the brand is also very strong. We've as you rightly mentioned, there are different players who have got different sort of strengths. So, you know, there is a hardware channel. There is a paints channel. There is other channels like building materials, cement. So each of the players have each of the various companies who operate have got strength in those respective channels. So that's a fair fair fact. But as far as we are concerned, we are looking at what do we offer. So we have strong r and d innovation. We have got strengths to distribute across these various channels. We have a strong connect with specialized waterproofers and civil contractors. And finally, as you mentioned, we have got an arm which actually executes these projects. So we are not just providing the product, but also giving the service. So in a way, if you look at it from a large customer perspective, he has one neck to catch for both the product and the service. So that's the way we we think that we have, you know, we we have the strength and the capability. Of course, there will be a competition as is the case in all the k all the various category. And therefore, we believe we are in a position of strength to, you know, deliver a strong growth. We have done that. And even during this period, this year, even last year in in challenging times, you know, the growth was double digit plus in construction chemicals. And even this year, we have consistently called out that it has been the fastest sort of performing segment for us during the year. So I think, yeah, that's where we see it. There is, of course, competition which is there. Apur, do wanna add something? Yes. See, I think the important thing is we we we have a significant first mover advantage. You know, we were the first company to focus on a construction chemical retail market, and hence, we have an excellent end user connect with all the people involved in waterproofing trade as well as waterproofing end users. So we have been doing significant ground level activities for many, many years, much before any other players. And hence, as you said, the way we have a strong connect in the woodworking segment with carpenters, we have similar strong connect with various people involved in the waterproofing trade, be it influencers or end user or even consumers. Apumat, just a follow-up question over here. The larger players, what they have resorted to is one basically, there has to be a right to win. And secondly, bundling as a strategy has been implemented by by the competition. So would you say that we have a right to win in waterproofing as a category? I I understand Nina first of is a big lever that we have, and we are focusing on larger projects more on refurbishment. But would we say that we have a right to win? And are there any more complementary products under the pipeline basket wherein, actually, we can bundle and push this thing through? No. See, let's keep project and retail aside. So in retail segment, we have a comprehensive product portfolio. So for a person who does waterproofing, you know, small waterproofing jobs, we have a full portfolio of product, and we have been working with that customer for a long period of time. So, you know, there is a strong product acceptance. You know, there is a strong end user connect, and that gives us clearly the advantage. And, you know, we have been working with so when you talk about bundling, we do have a full range of waterproofing product that the person needs. I think the bundling that you refer in respect to dealer is a different thing. Our belief is that, you know, the the the our brands have strong pull. Our brands have strong product acceptance amongst the relevant end user. And we have a very, very strong end user connect to last many, many years. And that is what gives us the competitive advantage. Bundling of the products and all have, you know, in my in our opinion, you know, limited value. You know, the people do want to use the right product for the right job and not just because it's bundled with something else. That that certainly helps. So just if I can just just push it a bit further. Sir, you indicated bundling is something that we can do within waterproofing product categories. Is it possible that there are any other complementary products within the Fitlite basket wherein we can put waterproofing along with that? And, actually, we can put it in the channel more aggressively. I understand brand is something which is phenomenal. I can do none. Everything is right, but I just wanted to understand one specific aspect over here. Look. We have a wide portfolio of product which goes to relevant outlets. If you go to a hardware outlet, PD LIGHT has large number of products which goes into a hardware outlet. Or if you go to, you know, cement outlet, largely buys only waterproofing product. Again, we have a we have the right products for them. If you look at paint type of outlets, yes, we have some more products which a paint outlet can buy. But but, you know, our our greatest strength lies in the other categories of outlet where there is a large consumption of waterproofing products. Sure. Thank you so much for the detailed answers. Appreciate it. Thank you. The next question is from the line of Parsi Panthakhi from IFL Capital Limited. Please go ahead. Hi, sir. Good evening. I have two questions. First, again, first question is again on waterproofing more from the competitive angle. So you you have been the market leader in waterproofing since a long time. Just wanted to understand if, basically, your gap with the number two player is not coming down. Do you see the number two player sort of growing at a faster rate than you? Or, basically, the growth is similar, and therefore, relative market shares are more or less maintained. Yeah. So at least it's our view that and we we sort of seeing the growths which are getting reported. It's very difficult to exactly get product wise information or etcetera. But our sense is that, you know, the position in terms of market share, we've continued to maintain, if not slightly increase. The the market itself has been growing very fast. So it is less about gaining share from each other. Rather, it is more about, you know, ensuring that, you know, we are able to capture the pie which is expanding. And it's a well known fact that the size of waterproofing market in India is relatively small, and therefore, the opportunity is there. Of course, there are many players and there are pain players, etcetera, in the market, but I think there is enough opportunity to grow for all the players. And some of this helps because it helps in expanding and usage of the product faster when there is more competition. So we welcome that, and we believe we are in a good space so far, whatever we have seen. Just a sub question to this. In waterproofing, there are many different types of solutions. There are sheets, and there are polymers, and there are primers, and so many different types of solutions out there. So where do you think I mean, firstly, out of these four, five options, which is basically the largest size in terms of revenues for the industry as a whole? And where is the growth the highest out of these solutions? Yeah. That's For the industry, again, both these are pertaining to the industry. Yeah. Apoorva, you wanna chip in on this one? Yeah. I see. I think I may not have the exact numbers, but overall, see, there are a there are a set of waterproofing product which are used when a new building is being constructed. And, you know, there there there are a set of product, for example, which is added in cement or or various other products which are used for waterproofing while a new construction is being done. This is typically done by a a building contractor or a or a or a waterproofing contractor. Now we are very, very strong in this space, and this is is where we believe the largest consumption lies. Also, now some waterproofing products are used by painters when they do painting. They do apply waterproof primer or they apply a waterproof paint. Here, paint companies have a better advantage than us due to the connector with painters and their distribution in paint channel. So they have been trying to convert some of the painters product into waterproof products, which is like creating a new segment or a new market. But it is doesn't take away from the market, which is towards which is to be used while constructing a a building an individual building or or a large building, and that is where our biggest strength lies. We also have strength in number of other segment like tiling, grouting. We are a full service waterproofing service provider with a full segment of products. So I I do not have the exact market size of each segment, but the core waterproofing is what we are the strongest, you know, in terms of end user connector, distribution, brand awareness, etcetera. And we also now have some products, waterproof related products, which painters can use. Got you. My second question is on your margins. This quarter, your margins are probably at all time high, and input cost is going up. Now, obviously, some amount of price increase will happen. But, ultimately, at least in the short term, it is the company which decides the margins that it wants to operate at. So from that point of view, just wanted to understand the level of price increase you will take to target a certain amount of margin. Last quarter, you had said, like, 21% or something is a good level of margin to remain at. Today, we are much, much higher than that. So is that 21% number very conservative in light of these results? Or do you think that given where the raw materials are, that kind of dip in margins versus this exceptionally high level can actually happen? No. I think we had given a range. We typically operate within a range of 21 to 24%. So that's the kind of range we had mentioned last time. So Correct. 21 is the bottom 24. Yes. Yeah. So that's the kind of range we expect going forward. As I said, as you rightly mentioned, some bit of pricing may need to be taken if the costs, you know, continue, you know, or the inflation continues unabated, but not fully. And therefore, there will be and at the same time, we need to also invest behind the brand and sales distribution. So there will be additional cost coming there as well. So that's the kind of range we expect to operate. So but is it possible that, like, for a few quarters, four to six quarters, you might continue to remain higher than the upper level of that band, or you think that the reversion might happen a little more quickly than that? See, even last time, we had mentioned that the current the quarter we are now reporting, which is quarter three, we may not see the full impact of inflation because, you know, you're carrying stocks of lower priced materials, raw material, and finished goods. But now the fully the all the new arrivals are all coming in at a higher cost. The costs are going to come in anyway, and some bit of pricing, as you mentioned, if it happens, that will negate part of it, but not fully, and plus the investment behind the NSP which will happen. So we do expect to operate in this range of 21 to 24 only. I don't think that unless, of course, there is again a these are difficult to predict, you know, the way costs have dropped and then gone back. Anybody's guess. But at this point of time, our view is the next, you know, maybe four to six months, the costs are going to be higher. And therefore, this is the kind of the insurer expect. Thank you. That's all from me. Thank you. The next question is from the line of Heath Wara from Prabhudasiladar. Please go ahead. Yeah. Hello. Thank you for the opportunity. So the first question I want to ask was actually on the raw materials. We saw that the raw material prices have gone up. They've shot up a lot. So is there any particular reason for that? Or it's just because of increase in, mean, basically, the usage for the raw material? Or is there any specific reason why we've seen such a sharp increase? Yeah. See, frankly speaking, every raw material, you know, there are different drivers of the increase. But if you want a very broad based kind of response, I would say few things have happened. One is, you know, of course, basically, crude prices themselves have gone up between in the last six months. That is one sort of very basic driver. The other thing which has happened is in some of these, you know, some of these products, the Chinese and Asian consumption is high. And therefore, when the consumption and demand, you know, went up, that had a immediate impact. Second the third element which has also happened is many of the refineries have been operating at a lower capacity. And because of the lower capacity, the the production is also lower. You know? And as a consequence, the response time to the uptick in demand has been less. So, basically, you know, sort of two or three sort of broad reasons. And then one or two cases, we also had some unplanned shutdowns in the the various manufacturing units in in some of these large raw materials. And these are the combination of factors. But all of them, we don't see it recovering in the next sort of month or two, which is why we are saying that it could take, you know, five, six months for prices to come back to some normalcy. Okay. Thank you. And, sir, just one more question, mainly on, the cost advantage. So we had reduced the cost, some of our costs. So going into the next year, how much of the cost advantage do we sustain? See, frankly speaking, I don't think we can look at it that way. What you have to look at it is what is the kind of operating margins or EBITDA margins we will be up we'll be working with. So as I said, that's the kind of range. You know, 21 to 24 is the broad range we will be working with for next year as well. So that that will give you an indication compared to last this year or the previous year or whatever. Okay. Thank you. Thank you. Thank you. The next question is from the line of Kosto Pawaskar from Sherkan. Please go ahead. For giving me the opportunity. So my question is on the Hatsman acquisition. So this acquisition has better higher margins than what our business has. And in your initial comment, you mentioned that still a lot of work has to be done in terms of distribution expansion and on the cost front as well. So considering that, should we expect the margins of this particular, you know, business to further improve from the current level? Yeah. So, you know, I'll I'll just give a couple of qualitative comments, and then, you know, maybe approval will chip in also. See, I think the first thing is that we are only operated two months. It's very early days. And what we have seen, you know, in the two months versus the past data is that we've got some benefits of the better mix of the kind of products we have sold. Second is, like our, you know, like many of the other products, there have been lower input costs during the quarter. Not necessarily going forward, but lower input costs during the quarter because what we are carrying or or whatever we had contracted. Now because of that, the costs are lower and the mix is better, and we're seeing a much better margin. I think we'll have to just wait and watch on the sustainability of the of the margin. What will be the sort of longer term number? Because at the same time, to expand distribution and volume, we will also have to invest in the market. Right? You have to invest on distribution people, etcetera. So we let you just watch this. Right now, as as I said, yes, it has improved versus the past because of these two reasons. Buddha, you wanna say some additional? Yeah. I would like to say, the current margins are high as, you know, as Pradeep said, the raw material prices are lower. As they increase, it will have some impact. And also, as we spend more money on the building capability in this business as well as on brand building, the cost will go up. So the current level of margin is quite high, and it may not maintain at this level. However, it will still be a it it is likely that it will be still a very profitable business. Okay, sir. Thank you. Thank you. The next question is from the line of Shanti Patel from Shanti Patel Investment. Please go ahead. So capacity utilization is I'm sorry to interrupt you, mister Patel, but your voice is breaking. Can you please check? Don't worry. And now it will come. Hello? I think now it is okay. Hello? Better, sir. Yeah. First, what is our capacity utilization today? Number two, where we stand as far as in the market ranking is concerned? And number three, what is the return on capital employed today, and what you expect in next one year? So I think I'll just broadly cover the points. So I think one is that in terms of capacity utilization, you know, we have you know, we continue to invest But as far as the current capacity utilizations are concerned, they would all be in the range of about 85 to 90%. So that's the kind of range we are operating in, which is obviously means that we need to continue to invest on our capacities going forward as well. As far as, you know, ranking, etcetera, is concerned, I think I I guess this is not something we track. So you should be better placed to give us a feedback. And as far as return on capital employed is concerned, the metrics are all sort of public, you know, and so that's something that, again, something which will be available in public domain. Suffice to say that as far as return on capital employee is concerned, we, you know, we very closely look at the kind of investments we make. We very closely look at the kind of working capital we maintain. And therefore, our endeavor is always to ensure a better return as far as shareholders come. Thank you. The next question is from the line of Jastip Valia from Infina Finance. Please go ahead. Good afternoon, sir. Thanks for taking my question. Sir, our my question is on the the brand, Araldite. So is there a a very large unorganized market in epoxy adhesives in India? By unorganized, I mean, local payers who service markets like, let's say, imitation jewelry through resin and and hardener import from China. If that's the case, what's your estimate on the size of this market? And can you tap this market through, let's say, improving distribution reach or, let's say, coming coming out with a lower value added product at lower price point, which would be more amenable to this kind of market? Yes. There is a certain handicraft jewelry type of market which operates at the lower end of the market with low selling price. Yes. There could be opportunity in that kind of a segment. But but the bigger opportunity is in the core usages of the brand where the margins are better and where Allied is a strong player, and we plan to focus there. Got it. So any idea of the size of this market at the at lower price points? It's difficult to estimate. You know, that is that is not a significant focus area while decides maybe larger, but the margin pool is much smaller. So we will examine it. If we find there is good opportunity there, we will certainly address it. But, you know, in terms of margin pool, it's not our opinion is it's not very significant. It's a imitation valerie type market. Got it, sir. Thank you, sir. That's all from my side. Thank you. The next question is from the line of Ratesha from Investec. Please go ahead. Mister Sharma, we request you to please unmute yourself if muted from your handset. Yeah. Hi. Am I audible? Yes. You are audible now. Yeah. Since there's one bookkeeping question, what are the spot prices against $875 what you indicated for q three? Yeah. So the spot prices are around $1,300. 1,300. Okay. Thank you so much. Thank you. Anyone who wishes to ask a question may press star and one now. The next question is from the line of Survi Chen from Macquarie. Please go ahead. Hi, sir. I had one question. So you've said that we've seen demand recovery in the metros and the urban areas as well. Just wanted to get your sense as to what can be a reason for a lower recovery compared to a leading player, you know, pain player station paints where you had, like, a 30% volume growth this quarter. So just wanted to get your sense as to are there any geographies which are yet to see recovery, or what could be a reason for that? See, there are two, three points around, you know, comparison with paint players. First of all, our whatever our growth is you know, we have a set of businesses and categories which are not all of them overlap exactly with the paint players. So we have a mix. So first of all, there is the consumer and bazaar element, and then there is, of course, the b to b segment. So both are there sitting in our numbers. That is one. Second is if you look at the areas or businesses where we overlap with Asian or with any other paint players where results have come out, it will be in the space of largely waterproofing construction chemicals. So whatever is the growth rates which have been declared by the paint companies, our growth would be there and thereabouts, if not slightly higher. So the so there is no problem in the on that side, you know, in from a competitor with the paint companies. However, from a geographical point of view, urban areas were much more impacted by COVID and therefore have taken longer to recover. Also, just a point as far as quarter three results are concerned, we don't have a festive season led demand, And therefore, you know, that is another element. We we it's not a significant play as far as our returns are concerned or our sales are concerned. And finally, volumes in some of the paint businesses are also led by some of the lower sort of price products like party, etcetera. The volume is high, but value is low. So we don't have that, you know, kind of large portfolio in that area. Anyway, we're not in that segment at all. So that's possibly three or four reasons to explain. Apurva, you have anything to add on this? No. I think what you have said is is is correct. Thank you, sir. That answered my question. Thank you. The next question is from the line of Anand Shah from Axis Capital. Please go ahead. Yes. Just two follow ups. So firstly, if you can throw some color on the international business. I mean that seems to be doing quite well both in Q2 and Q3 and especially Americas, which is seeing very, very strong growth. So what's the outlook there? And what's driving this growth in Americas? And just a bookkeeping on the Huntsman acquisition, I mean, that that was a complete cash payout by internal accruals, or did you resort to any minor debt in interim, you know, just to fund that? Just those two. Yeah. So I'll answer the second question and request, Pulwar to answer the first one. See, as far as acquisition's concerned, we did that out of our own, internal accruals. We have a substantial treasury. So that was the, source of the funding. And as you know, when we did the deal, the deal was 90% of the payout, and the balance 10% is paid on achieving a certain sort of metrics. So that's the way the deal was struck. Yeah? Okay. Got it. It. Got it. As far as international business goes, you know, The Americas, in Brazil, the overall business was good. One of the factor for was also the corona voucher that the government had given there, which resulted in a significant growth in the construction market. And our company and our team was sort of well poised to benefit from it. So that was one of the factors. As far as US goes, also in US, during lockdown, the art, hobby and craft category has seen significant growth. And again, our company did well to capitalize on this. So I would say while both companies did well, they were also aided by the external conditions. And such high growth may not sustain going forward. But both companies are now reasonably, you know, well placed in terms of the management team, product portfolio, and other things to be able to perform consistently. That that is what we hope and expect. Also in second quarter, we saw good improvement in our SARC region. You know, our Bangladesh and Sri Lanka business are good and strong. And as as, you know, from corona, these countries are recovering both the businesses so sure, you know, saw good growth in those two markets as well. Got it. Got it. Thanks a lot, sir. Thank you. The next question is from the line of Uttar Solapurwala from Damas Capital. Please go ahead. Can you provide an update on the other acquisition that you made in 2019 and 2020, like PD LIGHT, C Techos, KNX India Stone Products and Group of Puma? Yeah. So I'll just many of these actually, in the case of 10x, this is, you know, essentially, in terms of operations, etcetera, we have taken it over. In fact, the actual transfer of business happened in May 2020, so it's hardly six months. So we've transferred operations controls into into Mumbai, and work has started. As far as the other two entities are concerned, we are in the stage of actually setting up factories, manufacturing facilities, and these would be live sometime in 2122 during the financial year sorry, '22. That is a couple of quarters three quarters away. So I think these are the broad updates on these two. Thank you. Thank you. The next question is from the line of Nitun Soni from GC Investment. Please go ahead. Yes. Hi. Just one query question. Basically, I just wanted your view on how are you seeing this trend of cost consumers buying, you know, ready made furnitures and things like that, you know, like, Ikea coming up and Urban Ladders and Urban, you know, Pepperfry, all of them were springing up big time. And it's a big market, and all these big organizations are getting into it. Does it how do you see that affecting our demand for credit call? I'll take that, Pradeep. Yeah. So see, ready made furniture is not a new trend or phenomenon. You know, ready made furniture has been coming in India for more than thirty, forty years. We are also today the strongest player in the joinery adhesive segment. We have a right product portfolio and the right go to market to service this segment. So we have the right products, right technology, and right distribution to address that market. In addition, what we are finding is that both ready made furniture and on-site furnitures are growing at good pace. In India, there is still a lot of room for interior decor and on-site furniture to happen. And we are currently finding that both segments are growing at reasonable pace. And, you know, we are we are sort of well equipped to serve both the segments. But, like, just one query. So in cases like these organized guys, then do we get a pricing power for selling our products through whether it is Pepperfry or these organized guys, or we don't really get the pricing power? See, Pepperfry is is a marketplace for furniture, so they end up buying from lot of smaller joinery. And as you know, we have a strategic investment in Pepperfry. So we know that company fairly well. It's it's a marketplace for furniture sellers, and they buy from large number of joineries. And, yes, we do get reasonable pricing power because of our product, our technology, and our service. Oh, okay. So you really and and how big would that contribution be, like, furniture market for the overall market Like, would you be able to give some I do not like to break that up for confidentiality reasons. But, however, still, the on-site furniture is a much larger piece much larger part of the overall business. And you don't see that consumer habit of getting that things, making it house is changing very No. It it in a there is market, overall, is growing. So there are people who are never doing on-site furniture, do a little bit of on-site furniture, and also they buy furniture from outside. In India, there is a very good growth runway available for both. It is possible that ready made, you know, ready made furniture growth rate maybe a little bit more, but there is still healthy growth available in both on-site furniture and off-site furniture. Because a lot lot lot of furniture and construction is yet to happen. And and we are present on both the sides, whether it is made in house or from outside? Yes. In joineries or in in on-site. In both of the segment, we are very strong, and we are present in both of them. Yes. So it we technically, are in different weather. What grows for us? We are we we are present, and we are strong in both the segments. Perfect. Perfect. Perfect. Thank you very much. Yeah. Thank you. The next question is from the line of Kostup Pawaskar from Chelkhan. Please go ahead. Yes. Just a a question. So you just mentioned that your capacity utilization is around 85% to 90%, and you are looking beyond investment in CapEx. So what are your CapEx plans for next two years? No. I think I'd I'd covered it earlier. Typically, we spend within four to 5% of our revenue as CapEx. So those those are the kind of range in which we continue to invest. There's no nothing significantly different. So it's a very consistent plan year on year that we end up spending, and that's planned out for several years. Yeah. Absolutely. Okay. Okay. Thank you, sir. Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to the management for closing comments. Yes. First of all, thank you all for coming in and having raising the valid questions to us. Appreciate the the questions, and please stay safe. And till we meet again, good evening to all of you. Thank you. Thank you. Thank you. On behalf of ISL Capital Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.