Q4 17/18

May 25, 2018

Ladies and gentlemen, good day, and welcome to Vitalite Industries Limited Q4 FY 'eighteen Earnings Conference Call hosted by Axos Capital Limited. As a reminder, all participant lines will be in a listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. I now hand the conference over to Mr. Anand Shah from AXIS Capital Limited. Thank you, and over to you. Hi. Good afternoon, everyone. And on behalf of Axis Capital, I welcome you all to the Applied Industries Q4 FY 'eighteen earnings conference call. We have with us the senior management of the company, representative by Mr. Apuroparak, Executive Director and Mr. Prathy Ganesh, the CFO. I'd like to now hand over the call to the team for opening remarks. Thanks, and over to you. Good evening, everybody. I will begin with a summary of the financial performance for the quarter ended March 2018 for the stand alone business. On a comparable basis, net sales at INR $12.61 crore grew by 14.5% over the same quarter last year with underlying volume and mix growth of 13.3%. This was driven by a 13.4 growth in sales volume and mix of Consumer and Bazaar products and 13.9% growth in sales volume and mix of Industrial products. EBITDA before non operating income at INR $2.55 crore declined by 0.3% over the same quarter last year, given the input cost led contraction in gross margins by about 1% and ALSP cost increases. Profit after tax during the current quarter is at INR238 crore, an increase of 235% over the same quarter last year. Current tax for the 2018 includes an amount of INR46 crore being excess income tax provision of earlier years now return back. For the year ended March 2018 on a standalone basis, comparable net sale at INR5281 crores grew by 12%. EBITDA before non operating income grew by 5.3. Profit after tax increased by 23.4% over the previous financial year. Now I will move to a summary of the consolidated business for the quarter ended March 2018. On a comparable basis, net sales at INR1473 crore grew by 19.8% over the same quarter last year. This excludes the sale of the Cyclo division of Pidlite USA, which was sold in June 2017. EBITDA before non operating income stood at INR274 crore for the quarter and grew by 5% over the same period last year. Profit after tax during the current quarter is at INR248 crore, an increase of 57% over the same quarter last year. For the year ended March 2018, on a consolidated basis, comparable net sales at INR5989 crore, excluding the sale of Cyclo division, grew by 11.5%. EBITDA before non operating income grew by 6%. Profit after tax increased by 12% over the previous financial year. During the quarter, Pitlet also completed the acquisition of 70% stake in CP Polyurethane Private Limited. Gradually improving demand conditions led to another quarter of double digit volume growth. While commodity cost inflation as a result of rising input prices and currency headwinds is a concern, we remain focused on delivering steady volume driven growth. We can now open the floor for questions. Thank you very much, sir. We will now begin the question and answer session. We have our first question from the line of Abni Shroy from Edelweiss. Please go ahead. Sir, thanks. My first question is on Brazil and Egypt. Sir, Brazil, minus 8% sales decline in q four and minus 3% full year. So what's the longer term game plan? Because I remember many years this issue has remained. So do you also plan to exit this market at some stage the way you keep rationalizing? And same the same is the case for Egypt, although that has done reasonably well for the full year? As far as Brazil goes, I think one thing to note is that from last two three years or so, we have been able to eliminate the losses at EBITDA level with various initiatives to improve gross margin and controlling expenses. And hence to that effect, are really focused on we have reduced the sale of certain low margin products, low margin product as well as low margin customers. So the sale has been impacted due to factors of this nature. We currently at this time are focused on ensuring that this business is running an efficient basis while we evaluate strategic options. As far as Egypt goes, Egypt is part of an important focus territory for us, which is Middle East and Africa. Egyptian market has seen lot of ups and downs including currency related issues. And hence, it has had an impact on profit. Otherwise, in Egypt, we sell Fevicol and related adhesives. And we believe that long term, it is an important market for both Egypt as well as some of the Northern African countries. And having said that also to add, even in Legend, we have been able to cut down the losses, which the company is incurring at this point in time. Sure. So my second question is on the Indian subsidiaries. I'm seeing extremely good performance from Neenah and Percept. And quarter four Y o Y growth is even superior than the full year growth of both businesses. That's not the case for ICA. So if you could take us through all these three subsidiaries, why ICA has not done well, and why Neenah and Percept have accelerated in q four versus the full year. Yeah. So, again, if you look at the waterproofing business and which is where NENA waterproofing and Percept waterproofing businesses play a role, these these have seen a good uptick in business. While overall, if you look at the construction sector, while the larger cities, there is still some amount of stress. At a very broad level, there there are a lot of construction activity which is going on in small towns and rural areas, which are typically the smaller constructions as opposed to the large city constructions. So overall overall situation is improving as far as both of these businesses are are concerned. They are they are definitely seeing a good uptake and very decent order size book. At the same time, if you look at ICA Ped Lite, in the last quarter, we had shared that towards the end of last quarter, we had a classification issue with with with the authorities and which is something which we have contested. So there was a spillover effect of that into q four as well, and it's this factor which has actually impacted the performance for the for the quarter. Having said that, supplies, etcetera, had resumed. So so while the matter in terms of the classification issue that is being contested by us, The business is something where where the disruption is now not there anymore. It started off. Sir, could you clarify on the classification issue? Was it GST related, and why should it impact sales? So again, this was, as as I mentioned, the classification issue where the DRI had taken a position that we have not done the right classification. And temporarily, they had actually seize the stocks, which means that for a period of time, we were not able to sell. But they have since released it, and the matter will, of course, now take its logical course in terms of what happens to the classification. Currently, we have moved to the revised classification under protest and and recommence business. So are we providing for this any provisioning we are doing? Yeah. So so the amount which you have paid under protest, that is fully provided for in the books, and which is why you're seeing that the profits have taken a dip in the quarter. Right. And, sir, the last question. So could you say what's the what could be the revenue potential from the floor sealant and the tile adhesive? I saw the interview today of the MD. So you're talking about these. What can be the long term potential? And what's the current status floor sealant and tile laddices? I think it is Floor Coating, must not be Floor Sealant. But having said that, I think both the product portfolio has substantial potential. As you know, we would not like to spell out any individual sales target for this product group. But floor coating market in India is at a nascent stage and we believe there is very substantial potential and hence that was the reason to acquire CP business. As the construction practices in India evolve, the flooring is also likely to evolve and result into substantial business. Similar is the case of tiling adhesive. Lot of tiling in India is still done with cement, while as in lot of countries similar to India as well as in Western countries, there is significant use of tile adhesive. So that is also a market which is likely to grow at a faster pace, but I would not like to individually spell out any growth numbers for them or any target for them. But these will be largely unorganized, right, currently? No. It is not unorganized. It's a change in user habit. So in tile adhesive, as I said, people are using cement. You are moving from cement to tile adhesive. And as far as flooring goes, you know, these are floor coatings which are, you know, epoxy based or polyurethane based, where currently these type of floor coatings are not used. These floor coatings are much superior, which gives much greater durability in industrial facility, health care facility, food industry. So here again, it's an improvement in the current practices. And as you know, PD LIGHT is very good where we can be where we participate in actually changing the user habits. Okay, sir. That's all. Thank you. Thank you. We have our next question from the line of Abhi Mehta from IIFL. Please go ahead. Hi, sir. Congratulations on the good revenue growth performance. Just wanted to understand on the there is a change in the commentary that I noticed. You have pointed to steady volume driven growth versus the third quarter you pointed to profitable volume growth. I just want to know, am I reading too much into this change or does this suggest an increased preference on sales over margins? And is there a minimum margin? Anything on that front would be very helpful if you could share. Yeah. So again, as we have seen, clearly, are headwinds in terms of raw material costs as well as as well as the rupee dollar exchange range, which would obviously put some amount of pressure as far as margin goes. Would that result in any price increases we'll need to take? Answer is obviously yes. But would we take the full amount of increase or would we take at the lower level and and absorb some part of it? It's it's also something which will come into play. Reason why I'm saying is that our focus as category leaders in most of the spaces we operate in would would clearly be in terms of volume growth. And when we say volume growth, it's got to be profitable volume growth. So so so it it's it's not as a question of going in for volume growth at any cost. We'll we'll continue to be focused on profitable volume growth. Okay. So so that focus on, you know, it is not that you've changed. It's just I'm reading too much probably. That is what would be great. And and as we have mentioned in the past, we will continue to operate in an EBITDA band, and and that would be our way forward. Yes, sir. But, you know, we have not spelled out the are we okay to spell that brand out? Or no, you would prefer not to give us the brand? What exactly would that brand be? So again again, it over the recent quarters, we have operated at a significantly higher rate of EBITDA even going to 25%, 26%. Current year, we have entered with a 24%. We would be comfortable with EBITDA being slightly lower than where we are currently, but obviously, it will have to operate within a plan, say, it's something like a 22% to 25% that amounts. Okay, sir. Okay. That's the first part. The second part, is that your comment was about gradually improving demand conditions. Now you've seen three quarters of very healthy volume growth rate. What is it that is the concern for us to not call out a demand recovery? Because, you know, you've actually performed very well for three straight quarters. I would so, you know, why the conservatism? I'm just trying to understand whatever you So, again, if you look at the current year, quarter one obviously was impacted by GST. Quarter two was also partially aided by the fact that q one was was poor. Quarter three had a very good growth, part of it coming from a lower base because we had demonetization in the previous year. And in that sense, one could say this is a clean quarter. But, yes, there would have been some amount of demonetization impact in the current quarter as well, but much more of the import impact would have been in the previous quarter. So what we see is that there is definitely growth momentum. We do see a gradual improvement as far as the demand environment is concerned. But at this point in time, I would say maybe a couple of further quarters is where we will have a clear view to say that in terms of demand momentum, is it something which is really picked up? But clearly, the indications are positive. Okay, sir. And lastly, if I may, you know, this quarter has seen a very healthy performance in The U. S. Subsidiary. Just want to kind of understand, is there something that, you know, we should kind of is that is there any one off over there? Or is this the run rate that we can assume? What has kind of happened, if you could look through some light? Because the subsidiary performance has been very, very good in the fourth quarter. No, I would not read too much into one quarter for subsidiary of that size. The business has had a steady improvement in performance. It had headwinds of change in user habit in the address coloring segment. That's why if you see the full year performance is not as good. But otherwise, it has a good steady business with customers like Walmart, Amazon, Hobby Lobby, etcetera. But I would not read too much into a growth of one quarter. But otherwise, they have a reasonable steady business in place. So let me rephrase it. Is it that the adult coloring impact is largely in the base, which is what, you know, we saw, know, that's what the numbers suggest, and hence, this is what so I was just trying to see, is there what is the one off if it all that is? So one off last year's sale could be lower due to various seasons to some extent because I would not say that the growth that we have achieved in this quarter is the normal growth rate. That is not the kind of growth rate that would happen sort of every quarter. Okay. Fair enough, sir. I'll come back and discuss the other questions. Thank you very much, sir. Thank you. We have the next question from the line of Gunjan Tatyani from JPMorgan. Please go ahead. Yes. Hi, sir. Thanks for taking my questions. Just looking at the growth trends, if I look at the mix that you've given in your presentation of the adhesive and the construction chemical, it shows that the adhesive and chem construction chemical is growing at high teens, whereas art still continues to be a drag. Is is that correct? Yes. See, that is that that when we do art, it's arts and craft products. And within that arts and craft products, there is a portfolio of products which is, you know, for art design segment, handicraft type of segment. So that particular segment, we still continue to see the stress and it has still not fully recovered after the demonetization. And and also there has been an increase in competition intensity in that segment. So so that particular segment, which is part of what we classify as art and craft product, is still under stress. So that did see a a degrowth last year. Right? That's right. So would you say would you say that f 19 should stabilize or we should see a drag? Because the reason I'm asking this is that if I look at the growth of the adhesives in the construction chemical, it actually is far better than the headline growth. So if this drag is not there in F 'nineteen, then we could actually have the flow through of complete flow through in terms of 16%, 17% going coming through in the overall reported numbers. As a matter of policy, we would not like to give out or call out any projection. Sector was under stress. We are hopeful that this stress now would stabilize and we should see a stability in this sales growth. But I would not like to say whether what exactly will happen in the next year. We are encouraged by good growth rate in other two segments. They are the far two bigger segments. This is a smaller segment. This has seen a lot of good growth two years ago. Now it has seen some stress. We have to see how this year goes. Sure. The other two segments have really done very well. They they are much more larger and significant segment. I just like the segment. And also, as I said, within this segment, also, are other products which are like school craft adhesives and some of the hobby craft colors. They are doing okay. Okay. Got it. And so second would be on the VAM, if you can give us some sense, how do you see this trending? I mean, of course, there's been a sharp increase that you've seen in past quarter. So where is it now, and how do you see in terms of demand supply dynamics? Is there something we should be worried about, or it should just just follow the crude on the on the in in terms of inflation? Yeah. So currently, if you look at the VAM prices, they have moved up along with crude. But in terms of the way VAM behaves, it's not necessary that it should move in tandem with crude. And again, in terms of numbers, if you were to look at it in in quarter three, we had shared that the average price is about $975. For quarter four, it was up at 1,100. And if you look at current procurement prices, it's even higher. So VAM prices definitely are are at an uptick and at close to your historic levels at this point in time. The current would be how much? So current currently, if you look at market spot prices, it's 1,300 plus. And it's still trending up? Yeah. Okay. And and what kind of pricing action we are okay to take? You did mention that we will be okay to absorb. Any any thoughts there? I mean, just we should just go by the EBITDA margin guidance, or is there anything that you think, you know, we would be covering up 60% of the RM inflation? And And and, clearly, in terms of price increases, the raw material procurement cost will also be a major function in terms of our pricing positions. And what we would do is we would not take across the board prices. This would be product specific where the input cost impact is higher. Obviously, there would be some amount of prices increases which would kick in. So this would be product specific. Okay. And just last one clarification in this other expenses. If you can give, how much was the ad spend for the quarter and the year? And also this provision which you mentioned for the classification issue, was this captured bill in the other expenses in this quarter? Yeah. So two points as far as the provision for the classification issue that has been provided for by our joint venture, ICA Pidlite. So that's not something which is there in the Pidlite Industries books of account. Of course, it will come into consolidation, but not in the stand alone books. The second point as far as the ANSP spends, yes, it is part of other expenses and which is where you are seeing a significant uptick out there. And the way we look we manage our A and SP spend is also not typically quarter by quarter. It is more activity led, which is why we are seeing a a high level of spend in quarter four. But what we should also remember is that, as an overall full year spend, the total spend is at around 3.7% to sales versus the previous year, which was close to 3.5%. So on a full year basis, it's not a very significant increase. It's it's actually more of a timing issue. We would stay at 3.7 to 4% range going into f nineteen also as you're looking to accelerate the volume growth. Yeah. So we have been typically operating in a 3.5 to 4% range. And as the business grows, the absolute amount which should be available for spends would also go up. Okay. Got it. Thank you so much. Thank you. We have our next question from the line of Chilag Shah from CLSA. Please go ahead. Yeah. Hi. Thank you for taking my question. We spoke earlier about, you know, how BigLight has developed a full product portfolio of joinery products. Can you just give us a little bit of an update around that, especially in the background of the fact that the MDF market in India is growing very fast? So as far as joinery product portfolio goes, as we have shared earlier, we have now a good product range. We have a good route to market. Also, have done a tie up with this company called Joovat, which is a German company, which specializes in joinery adhesive. So overall, we are well prepared for this segment. And we are taking all the appropriate actions to ensure that we have a good market share in this segment. Just elaborating further on that, on the on the Jova JV, do we have access to the to the product portfolio? Yes. We have access to certain product. Yes, certainly. Okay. Fair enough. Thank you. Thank you. We have the next question from the line of Kratika Rastogi from ACK Capital. Please go ahead. Mr. Rastogi, please go ahead. Yeah. Hello? Yeah. You can go ahead. Yeah. Congratulations on a good set of numbers. I just wanted to ask one question. Like how is the growth in the rural market and urban market? And how Pedialyte is expecting like how it will like its revenues will grow in both the markets? So a smaller town or the rural growth is certainly faster than the urban towns. And we have we are putting in extra resources to ensure that we are well prepared for the higher growth, which will come from smaller towns. So we are seeing a faster growth like many other companies in smaller towns. Oh, okay. Okay. And there is I also wanted to ask, like, there is a shift happening because of GST from unorganized to the organized players. So how do you see the business will pick up in the future? How is the how do you see the demand picking up? So any shift that would happen from unorganized to organized would certainly benefit a company like PD LITE. So even here, as the GST implementation has happened and as there is better enforcement, the companies who are not tax compliant will certainly suffer and benefit of that certainly should come to more organized companies. And I would also like to add that GST implementation, while it's reached a level of stability, things like eBay bill is still being rolled out, the invoice matching, which is the ultimate objective in terms of what entitles you for the credit, that's not yet implemented. So it's also something where the entire implementation process will will take some more time. And gradually, that's where the benefits for the organized players will also start showing up much more. Okay. Okay. Thank you very much. Thank you. We have the next question from the line of Atul Tiwari from Citigroup. Please go ahead. Sir, in past, we have spoken about achieving 15% kind of revenue growth. And now we are there at least in this quarter and even higher than that probably. And we are seeing demand revival. You know, should we expect, you know, next year a minimum of this growth and possibly even a higher number? I mean, should we reset our aspirations going ahead? So again, as far as our aspirations are concerned, historically, over time, we have grown at 15% plus, and that has always been our stated aspiration in in in terms of growth numbers. But at the same time, we should remember that's not a target we are we are chasing. And we we do believe that as a company, we do the right things, the outcome is something which will which will follow. But having said that, if you look at the last couple of quarters, yes, the demand environment definitely is improving. The the outlook definitely looks positive. Things are all going well, but I would still say that probably a couple of quarters is where some amount of definitiveness will come in terms of the demand pickup situation. Okay. And sir, what will be the consolidated CapEx in FY 'nineteen and 'twenty? So typically typically, our CapEx is anywhere between 2% to 4% of our revenue. And while we would be adding capacities, etcetera, on an ongoing basis, we would expect to be within this range. Okay. Thank you. Thank you. We have the next question from the line of Prasad Deshmagh from Bank of America. Please go ahead. Yes. A couple of questions. Firstly, when the raw material costs are going up, and you spoke about potential price increases also, but are there any pockets in the business, especially post GLT, post demon kind of an era, where you think you can save enough costs so that price increases probably can be delayed? So there are definitely a few areas in terms of whether it is the network of optimization in terms of how we distribute the products, the pure logistics play, etcetera, which again would get implemented over a period of time. But having said that having said that, the kind of raw material increases which we are seeing currently is quite significant at this point in time. So unless they moderate, I would would guess amount of price increases would be on the cards. Yeah. Second question, if I look at your data days, they seem to have gone up like I'm looking at post India's number. So they've gone up from, say, 48 to 56 from FY sixteen to, like, two years consistently, they are they are they are going up. Is there any reason for this? So if you look at the current year current year, we have also done the acquisition of CP, which has happened towards the end of the year. So what you would see in debtors is that the entire debtors would come and sit towards that, but the corresponding sales is not there. So that's one major reason why the debtors days as of March 18 has gone up. Got it. Got it. And last question, in post GST scenario, there's a consolidation of industry consolidation and so on, whatever is being spoken about. The smaller guys, how are they responding? Are they are they I mean, is there a threat that they actually follow the right business practices and then probably start scaling up faster? Or is it like many of them are scaling downwards? No, it's too early to say anything. The smaller players still exist, and they are trying to run the business as best as they can. And I don't think we would like to assert a guess on how they transform or how they adopt themselves to this. I guess it would be a mix of it. Some of them may adopt and may become more organized. Some of them may not be able to manage. We have our next question from the line of Rohit Kalam from Credit Suisse. Please go ahead. Hi, everyone. Thanks for taking my question. So firstly, could you please explain the rise in other income, quite a sharp rise this quarter we've seen? So that's primarily on account of treasury income. Okay. But can you call out for some trends going forward or this will be continued to be quite volatile? So again, we did complete the buyback towards the end of the year. So you could see some amount of debt driven by that in Q1. But as free cash flows keep getting generated, unless they are used for say acquisitions or any other purpose, you would expect to see an increase in treasury income, which we would have because the cash surplus is something which in the normal course would go up. Okay. Got it. So on the second question was on the, sorry, EBITDA margin band, what is it that you mentioned would be a comfortable level for you? 20 to 22%? Yes. Typically, a 21, 22% going up to 24, 25, that could be the band you could look at. Okay. Couple of years, we have been at the higher end of the band. That's right. So this I was looking at your gross margins historically. Now I think back in FY 'eleven, 'twelve, when we had a similar kind of crude spike, when crude was sort of low for a couple of years, then there was a sharp spike in crude and BAM. So we had about a cumulative 500 basis point gross margin impact over the next over those two years. So my question is, if we are looking at like a massive gross margin impact going forward, given that you are not looking at sort of taking up sufficient price hikes, would you be willing to use your ad spends as a lever to kind of maintain EBITDA margin impact at a lower level? I think I think ad spend is not something which would come in as a lever in terms of EBITDA margin. And we should also remember that we are talking about three and up to 4% of sales, not a very significant number. It's actually the effectivity of our advertising expense probably, which is which might be creating an impression that these spends absolute spends are are very significant. And and having said that, it will have to be a combination of sales mix, some amount of price increases as less cost efficiency. It will actually be in in such a scenario, it will be a combination of factors which will come into play. Got it. That's helpful. So lastly, any price increase you have taken in the last few months which you could call out for maybe in the last quarter? Yes. So some of the products, we have taken price increases both in Q4 as well as in Q1 this year. And as I mentioned, this would also be product specific, cannot done across the board increase. Got it. That's very helpful, Thank you. Thank you. We have our next question from the line of Sreedharam Ard from Sundaram Mutual Fund. Sir, if I go a couple of years back towards 2015, margins were around 14%. I know VAM prices were around 900 mark. Now today, they are 1,300 and the margin that you are saying is around 20 odd levels. I mean, it sustainable? Or am I looking at a different picture? Can you just throw light on what towards the 2015 and compare it with what is it today? So can you please clarify the number? What are you referring to 1420% with which number? Yes, yes, yes, yes. Towards the end of 2015, FY 'fifteen, margins were on the 14% mark. And at that time, what price were margin or what are you talking? EBITDA margin, sir. Oh, EBITDA margins were actually 17 to 18%. Okay. Okay. Okay. And at that time, the van prices were on the 900 right? So today no, I just want to make a correlation. I mean, there is something can you just throw light on how the margins will be sustained going forward? Or how do you say 20% in terms of some inputs will be helpful? No, I think as Dinesh explained clear, first of all, the WAP prices are still not 1,300 I mean, this is a new buying price as of today. So our current cost is not $1,300 But if there is a significant increase in material cost, we will take several action to mitigate the impact of that. Now our point about remaining in the band is that we may or we may not be able to fully mitigate the impact of increase in the cost. But we will use the various levers that Ganesh talked about to mitigate as much impact of material cost that we think is judicious to pass on. Okay. So you're saying so how much will it be passed on? Just in case, can you put it? As we said that we would like to operate, as Ganesh said, we would like to operate in a band of about 20% to 23% to 25% EBITDA margin. So that is the band in which we like to operate. Hence, we will take various action on product pricing and other things to try to remain in that band. In the year, which you mentioned, when material costs have suddenly gone up from $800 to $1,600 the impact was too fast and too sudden, and hence, it had an impact in one year. That is something which can always happen. But however, we will take whatever action we can to mitigate the impact of it, while remaining in overall EBITDA band, which we have indicated. We have our next question from the line of Anand Shah from Axis Capital. Please go ahead. Yes. Hi, sir. Just a couple of questions here. Sir, firstly, on this margin profile for the domestic subsidiaries, where MENA and Percept and all that, we have seen improvement. So is this the level of sustainable margins? And also on ICA, last year, it was about 11% this year, obviously, because of the classification issue, you did see a drop in margins. What's the sustainable margin level there? Nina and Percepta, we have been taking various actions to improve their margin profile, we're improving the product and customer mix. So that has resulted in a good growth, but it's too early to say what is a sustainable sustainable table margin for the business. But our endeavor is to continuously try to improve the margin of these businesses, And that is largely by improving the mix that we have. But we have to see this for next one or two years and see actually how this pans out. As far as ICAR goes, we have explained Ganesh has explained the difficulty that we had. We faced some difficulty in Q3 and Q4 because of the product classification issue. While we are contesting that the production and supplies have started. But long term, it's a very good and exciting business. It's a large market. It's a market which is HSN to PD LIVE. And we believe that we can build a fairly decent sized business in that subsidiary. Okay. And just one bookkeeping question. There's others category also within this domestic subsidiary. So businesses does this rebuild? There's a INR16 crore revenue example you recorded in 4Q, multi 55 crore for the full year apart from Neenaparcept, ICA and CP. Is actually part of Construction Chemicals. This is part of Construction, but it's housing subsidiary, is it? Yeah. Yeah. We have couple of subsidiaries which we had acquired or set up as a joint venture with them again supplies to other domestic subsidiaries. So that is one of that. Other is also a whole type business which we had acquired several years ago. So that whole type subsidiary, which has a manufacturing plant in Jammu, so that operates as a separate entity, but it supplies all the products to Penelite. And that is, again, a 100% subsidiary of Penelite. However, manufactures the product and sells to PD LITE. So some of these subsidiaries are captive in nature to sell products to PD LITE or its subsidiaries. Okay. Sir, one more thing on Construction Chemicals, I'd like remember that you have sort of split distribution or teams in a way, I know you have a team which is now involved in educating and spreading awareness dedicated to the channel and consumers. Can you elaborate on that? Yes. We have a team which is focused on sale and retailing, while there is a team which is used into what we call as market development. So their effort is to educate customers, educate the influencers to work with various people in the ecosystem to improve the sales of the product. So it is a team that does not do retailing by going shop to shop, but it is involved in market development. Okay. And this has been since how long? It has been since some time. The, you know, the structure of that team can, you know, keeps on changing from time to time depending on our priorities. But it's it's an approach that we have had for several years. Okay. Okay. And in construction chemicals, the general uptick that you've seen apart from macro, would I be right in saying the brand building initiative, Mr. Patience campaign and all that would have also helped significantly in the mining growth here? Yes. Yes. It has helped. It has helped it it has helped improve the brand awareness, product awareness, and it has certainly helped sales. Okay. Okay. And any any specific product ranges there which are doing really well in Construction Chemicals that you can call out? No. We would not like to call out any particular brand or product, but it's a portfolio of products that we sell and adopt to fix it brand. And several brands in that portfolio have done well. Okay. Okay. Perfect, sir. Thanks a lot. Thank you. The next question is from the line of individual investor, Chirag Shah. Please go ahead. Hello. Sir, please go ahead. Sir, my question is on ICA. Sir, I want to understand the normalized EBITDA margins going ahead and also the opportunity for exports. I think it's too early to talk about the normalized EBITDA margin, but let me explain you what we are doing. We are setting up a plant in India in Gujarat, Chambushar. So we are going to start manufacturing a lot of product Earlier, most of the products were coming were imported and repacked into India. So that's a big change, which is going to help the margin. Second is, we have invested resources in sales and marketing, which would allow us to grow the business faster. So again, as the business grows faster and by local manufacturing, the cost would come down, the EBITDA of this business will improve. But again, we would not like to give any band on the projected margin. But clearly, we are working towards a structural improvement in margin over next several years. Okay. So what would be the current margins because this quarter was washed completely, that's why. So currently the margins are not strictly not comparable because sales was impacted as well as given that we have paid additional taxes under protest, the margins are also impacted. So it's it's not strictly comparable. Okay. Fine. And who are the two close competitors to Aika? There are paint companies, all the paint company, I think Asian paint has this business, there is a company called Serka, which has this business. So there are several players who are in the wood finishes market. Some of them have premium good finishes like Asian Paints and couple of other companies. But largely, paint companies are in this segment, and there are couple of other companies who are also into good finishes. Okay. Fine. Sir, any outlook on export for this product? We are operating at the higher end of the markets. We are operating in specialized premium good finishes, which we believe is a faster growing market. Okay. For any And currently, the focus is on the domestic market, and that is where we are working towards scaling up. Sir, any outlook on revenue for FY 2019 for this particular segment? So we would not like to give any outlook, but you can understand from our efforts that since we are setting up a manufacturing plant, we have entered into this joint venture. It's clearly with intention of making it a sizable business. But what it would actually be next one or two years is something which we would not like to call out. Okay, sir. Thanks a lot. Thank you. We have the next question from the line of Manish Pota from Renaissance Investment. Please go ahead. Hi, Praveen. Congrats on the results. Just wanted to get your thoughts, what will give us confidence that we'll be more confident about the outlook by that? That's what metric you all internally would suggest? We don't look at metrics like that. Effort is to do the is to have a proper strategy and then to ensure that we execute the strategy well. Now certainly sometimes there are certain factors which would not allow us to achieve our desired growth rate. But our effort is to continue doing the right set of things, and that is what we are clearly focused on. So we really do not spend a lot of time looking at external factors which may which are not in our control. We continue to do the both things which we believe are right for the business. And if sometimes the factors are against you, we may see a little slower growth rate. But on medium to long term period, we believe that if we execute our strategy well, we should be able to achieve our desired growth rates. Okay. And have you called out any price hike which you have taken, let's say, off rate to cover this RM price pressure? Yes, we have taken price increase in some of the products already. And as there is further spending of raw material price, we will take further appropriate pricing actions. How much would it be blended, let's say, broadly? Look, currently, I think, you know, Ganesh, anything on that? So again again, these are product specific. So if you look at rubber based products where again there was a significant increase in R and M cost, the increases would be in the range of say 2% to 5%. Okay. Okay, fine. Thanks. Thank you. Next question is from the line of Sanket Sungvi from Ascon. Please go ahead. Hi, sir. Thanks for taking my questions. Sir, my question is in 2018, as you entered into joint venture with Chovat, so it's a leading industrial adhesives. So sir, where do you see how much percentage of revenue would be coming from this sector? And how much kind of market share do you actually assume that it will dominate in India? So first of all, it is not a joint venture. And second is, we would clearly not like to give any specific figures about an individual business like this. Jawad is a leading player in certain type of adhesives and our tie up with them would certainly help our business. But I would not like to give out specific figures of how much we plan to achieve or what share we are likely to achieve. But it will clearly strengthen our business and will help us grow it faster in that product technology. Okay. Okay. And one more question, sir. We saw we've seen quarter on quarter results, sir, the consumer and bizarre products, the revenue that were you know, we were earning, you know, has gone down. So could you just, you know, highlight more on that thing? Sorry, can you repeat your question? Sir, the consumer and bazaar products, the revenue coming from the consumer and bazaar products quarter on quarter has declined from the third quarter to fourth quarter. So sir, could you just throw more light on that thing? No. So if you look at growth, in fact, Consumer Bazaar sales, we have actually had a good growth starting think comparing Q3 value. See, quarter to quarter comparison is not valid for us. There are various factors of seasonality and otherwise. And hence, you cannot compare q three sales with q four sales. That's what you are asking. Right? Just not it. So so that is not comparable at all in our case because of seasonality and several other factors, which is channel inventory and other things. Traditionally for us, Q4 is the slowest quarter and Q2 and Q3 tend to be higher quarters. This is a pattern that you would see for the last many, many years. Thank you. As there are no further questions, now hand the conference back to the management for closing comments. I would like to thank everyone for coming on the call. Thanks a lot. Thank you. On behalf of Axos Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.