Q2 17/18

Nov 10, 2017

Ladies and gentlemen, good day, and welcome to Pedialyte Industries Q2 FY 'eighteen Results Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Rahul Jasani from ICICI Securities. Thank you. All over to you, sir. Yes. Good evening, everyone. We would like to thank the management of Fieldlight Industries for giving us this opportunity to host the Q2 FY 'eighteen earnings call. We have with us Mr. Apurva Parekh, Executive Director, Beetlelight Industries on the call. We would now like to hand over the call to Mr. Apurva for his opening remarks followed by Q and A. Thank you, and over to you, sir. Thank you, Rael. Thank you, everybody, for joining the conference call of Pireline. I'll start by giving a brief commentary on our results. Net sales for the quarter grew by 11.2% with underlying volume and mix growth of 12%. This was driven by 15% growth in volume and mix of consumer and bazaar products and 1% decline in volume and mix of industrial products. EBITDA before non operating income grew by 21% and profit after tax grew by 15.4%. On a consolidated basis, net sales excluding the impact of Cyclo business, which was sold by Pigilite USA in June 2017, grew by 9%. In a challenging business environment, we delivered good overall performance. This quarter saw double digit growth in underlying volume and mix. We remain cautiously for the future and remain focused on driving profitable volume growth. We can now start with questions. Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Session. First questions. Question from the line of Avnish Roy from Edelweiss. Sir, congrats on good for the numbers. My first question is on your domestic subsidiaries. How has Neenah, Percept and ICA declined? Yes. So Neenah and Percept had a reasonable performance in the quarter. These are the two waterproofing subsidiaries. So Neenah sales grew by about 1% and Percept sales grew by 16%. The sale was impacted a bit by very high monsoons in many parts of India and some other issues which have been affecting construction industry. However, the profit growth has been good. This is due to our focus on both margins and cost. ICAF three light growth in a comparable basis is about 17%. The reported figure looks like a decline of 1%, but that is due to how the GST sales impact is accounted. Removing that, the sales grew by about 17%. So you expect MENA to recover now because in Q1, I think it was a very strong double digit growth? You see, it's difficult to give for companies of this size, I think quarter to quarter numbers are not the best indication. So as you can see, for first six month period, EBITDA sales has grown by 16%. So that is encouraging. However, construction industry is still seeing some stress. So it's hence, it's difficult to predict on what kind of performance would be there for rest of the year. However, we are taking a lot of initiatives in terms of developing the business of both of these companies. We are expanding our consumer base from builders to a lot of other segments. And hence, we are optimistic that the subsidiaries will do well. Domestic Consumer business has seen very good volume growth. My question was how is the competitive intensity in heavy coal, the ASP rate came down. So how did that impact the overall inventory? So because rate cut was there, so did that week two postponement and that's why Q2 would have benefited because of that and that's a one off, you would like to call that off? And from the larger players who are entering into this, how is the competitive intensity? In the first quarter, the impact was not about delaying decision or anything like that, but just because of the GST related transition issues, a lot of people, especially the channel partners like distributors and dealers held back their purchases. So our first quarter sale was affected because of GST, which was going to be implemented in July. So current quarter's growth is partially due to restocking by the channel partners. And some amount of growth is due to sort of better demand in this quarter. As far as larger competition goes, the new entrants, we do not believe that any of the new entrants in the Favicol segment has had any significant impact. Sir, because of GST smaller players are losing out or are you seeing even reverse shift, we are seeing in some sectors reverse shift after because hardly any compliance is being implemented in the GST regime? See, I think it's too early to really say whether the business is shifting either way. But I think, clearly, there is a greater focus on compliance. And people are conscious, even dealers are seem to be more oriented towards purchasing products from companies which are tax compliant. So based on very, very just last couple of months of experience, it appears that people are favoring companies who are GST compliant. But how will this pan out, we have to see. But it's too early to really say whether business has gone either way. Okay, sir. That's all from my side. Thank you. Thank you. We'll take the next question from the line of Avi Mehta from India Infoline. Please go ahead. Hi, sir. Thanks for taking my question. Sir, essentially, my question was on the sales growth front. Now while the Excuse me, this is your friend. Mr. Mehta, may I request you to keep your microphone a bit of introduction. Okay. Is this better? Yes. Thank you. Okay. Sir, my question was on the sales growth. Essentially, if I look at the first half headline sales number that you've given, it's about 5%. And you're highlighting the first quarter conference call that the underlying retail demand was high single digits in April and May. Does that suggest that demand environment has kind of moderated? If not, would you help explain that? And related to that, why are why the cautious optimism? Is that the reason? What I have said in the last investor call that our sales in April and in May was had grown by about 8% to 9%. So that was our primary sales in April and 'nine had grown by about that much. And because there is no way for us to estimate what really the consumer offtake is. How could it be in that order? Our consumer and branded business, if you see for the first half of the year, has had 6% or 7% growth. So it's not much different than what was there in the first couple of months of the year. Our Industrial Products has not done very well. For the first six months of the year, the sale has been largely flat. And even within Industrial Products, the impact has been greater on the export of our Industrial Products. So if you see from the number, they say for the first six months number is not very different from what I had said for the first two months, except for Industrial Products, where the exports have been impacted. Sir, in that case, then if you're seeing such a healthy growth rate kind of continuing, why cautious optimism? Would you not argue for this rate to sustain as we go forward? And what remains the concern over there? No. In just first couple of quarters, GST has just been implemented. A lot of things are fluid for the moment. So when we stay cautiously optimistic, 6% to 7% is not our growth target. We would like definitely to grow to be in double digit plus. So my comment is not in the context of the current growth rate. Sir. Okay. Okay. Sir, my second question was on the EBITDA margin. We have seen an expansion in the Consumer and Bazaar segmental margins from the first quarter levels. What would have driven that? Has there been a price increase since the one that you indicated in May? Any further price increases? No. The EBITDA margin expansion is largely due to lower advertising and promotion expenses in this quarter. Our advertising and promotion expenditure in this quarter were lower than normal. Our advertising and promotion expenditure are not uniform across all the four quarters. It depends on the opportunity or it depends on whether we have spent for production of films or have bought a significant campaign on television. So for various reasons, the expenditure was lower in this quarter, and that has resulted in expansion of margin. However, our expenditure on advertising and promotion will normalize over the next couple of quarters. Okay. And sir, any update on VAM, if you could share it? That's all from my side. I'll come back to the Q and VAM prices have seen an increase. So compared to June between June and September, there has not been much difference. The prices remain at the same level between June and September. However, after September, the prices have increased a bit. They are now upwards of $1,000 per tonne. So from $920 was the number that was in the first quarter. So it's now $1,000 Is that how it is? That means I'm talking about the prices still at current pricing. In September, they were again at the same level as June. So the second quarter prices were similar to first quarter, but now they are a little bit higher than that. Sir. I'll come back in the queue for any questions. Thank you very much, sir. Thank you. Thank you. We take the next question from the line of Gunjan Kakyani from JPMorgan. Please go ahead. Yes. Hi, sir. Thanks for taking my questions. Just to follow-up on the previous question, you mentioned ad spends have been more detailed. Could you give some guidance where should we look for the ad spend this year? Because I think even last year, our ad spend were curtailed. Our advertising spend should be around between 3.5% to 4% of net sales. And last last year, it was purely curtailed because there was pressure on top line and due to demonetization, other factors. So we had controlled some of our advertising and promotional expenditure. However, in current year, the second quarter is not because of that, it's just because we didn't have the right opportunity. But for the full year, our expenditure would be in the range of 3.5% to 4% of net sales. Would you be able to share the amount that you would have spent in the first half of the year? Our expenditure in the first half of the year on advertising and promotion should be about $65.70 crores. The first half of the year. Okay. Sir, secondly, just moving to this margin outlook, I just wanted to get your sense on how should we look at it from here on in the sense that we are clearly seeing Vams prices increase. And also, will see ad spends increasing in the second half of the year. So if we were to look at, let's say, F 'eighteen and F 'nineteen, what would be your broad guidance around the margin expectations? We do not like to as we always do, we would not like to give a specific guidance in terms of a number. And the biggest factor that would determine our EBITDA margin would be the sales growth. So while material cost and advertising promotion expense will have an impact on it, but very the largest impact would be on what kind of growth rate we achieve for the balance part of the year. Okay. And if you were to look at the underlying demand trends in, let's say, October, November post the Q2 close, have you seen the momentum that you saw in September sustain? I think, Ujjain, it will not be right for us to share on how we are doing in the current quarter. First of all, it's early and also it will not be right. We've just announced September results. So it will not be right to share the current trend. But if you look at the second quarter numbers, the situation clearly is much better than the first quarter, which was impacted by GST. We have seen across the board double digit growth in most of our product categories. We see that companies like us, which are tax compliant and which have extensive distribution network, it appears that we are benefiting and gaining. Now we need to see how this sustains and what kind of growth rates we get in next couple of quarters. It could give a much better idea. Okay. Sure. Just last question from my side. On the Art and Materials segment, we did see a degrowth Has there been any improvement on that space or it continues to stay under pressure? So Art, when you call that Art Material, what we call it Art and Stationery portfolio is a wide portfolio, which includes products like Stationery Adhesive, art material and handicraft adhesive and colors. So we have three or four categories which falls under this. Most of them appear to be doing okay except for one segment, which is handicraft adhesive. That segment is not doing very well, but rest of the segments are doing okay. Okay. All right. I'll turn back to you. Thank you so much. Thank you. We'll take the next question from the line of Rohit Kadam from Credit Suisse. Please go ahead. Hi, sir. Thanks for taking my question. So on gross margins, so we've seen flat gross margins Y o Y in your stand alone. And I mean, so despite input costs moving up, I mean, how was it Did we take some price hikes through the quarter or there was some amount of promotional intensity which went down? That's my first question. Right. If you look at our material cost as a percentage of sales for first six months, it has increased by 150 basis points. So there has been clearly an impact of increase in material costs, and that has resulted in two fifty basis points increase in material costs. We have done some price increases over the last one year at different points of time. It's not across the board price increases, but in some of the products, we have increased the price. But the impact of increase is clearly visible in our material cost as a percentage of sales. Okay. So anything any price increases you've taken in the last quarter, in the September? We would have taken in few products, but it's not an across the board kind of a price case. Nothing in your core additive kind of portfolio? It's in some products, yes, but not in most of the not in many of the products in the core portfolio. Okay. So my second question is, is the overall kind of system inventory, which typically for you is fifteen days with distributors and another fifteen days with wholesaler, is it back to the same level? Or is it going to settle at a lower level? And any particular region, Pan India, which is hopefully still fully not kind of normalized? Distributor inventories is back to near normal. We work closely with distributors, and we have a good sense of their inventory, which I would say is back to near normal. As far as retailers or the smaller retailer inventory also appears to be okay. The wholesaler inventory is still impacted a bit. They are not stocking as much goods as before. But the bulk of the retailers inventory is coming back to near normal levels. Okay. Just one last question, if I may. So if I look at your Consol less stand alone, which is basically your international and the water booking facilities, I hit a top line decline of high double digits. So is the difference versus what you reported, is there adverse currency impact there? Yes. Can you repeat the question, please? No. So when I look at your so you've given your constant currency international numbers, which is like a 2% decline across all your businesses. But when I do your reported Kansal miner stand alone, the decline Y o Y seems to be quite high. So is it because of some adverse cross currency impact? Yes. A little bit of cross currency impact and along with that, there is a even elimination impact of interest subsidiary sales. We'll take the next question from the line of Omnisagarwal from Prabhupada Field. Hi, sir. I have a couple of questions. My first question is regarding our gross margins, where we have seen a Q o Q improvement by nearly two forty bps. So can you throw some light on this Q on Q improvement in margins? You're talking about EBITDA margin. Right? Gross margin, sir. Gross margin improvement is largely driven by mix. Any any difference between Q1 and Q2 gross margin is only because of mix. Okay. So it means q two, your product mix was better? Slightly better. Yes. Okay. And sir, in the same context, the same when you have stated about the volume growth, you are seeing volume mix of whether it is 15% or 12%. Can you throw some light on what's the difference between this volume mix and pure volume growth? Yes, mix because we have a set of we have a very different we have products which are very different like we have a very quick, which is a very small volume versus heavy cost. So in our case, the price per kg differs significantly. Smaller consumer product price per kg will be very different than larger product. So if you do pure volume, in our case, it does not mean anything because our pure volume would not indicate any kind of it could not give a right indication. So the way we compute this is by keeping prices common across the two periods and then try to see what is the difference in growth, and that technically is volume and mix together and not volume alone. This is how you calculate. What we what we are using here, volume and mix is the right description of what the growth is. Your volume is just adding up damages for two periods for which for us is not comparable and it could not mean anything. Okay. Okay. Understood. So we derive this figure by keeping the selling price constant across two periods and seeing what the difference in growth rate is. Okay. And sir, my final question is that, obviously, there is an expectation that the organized sector will gain from the unorganized sector. But in the 1Q, we had seen some inventory destocking. So out of the growth which we have received in this quarter, can you give us some idea about what could be the proportion of inventory stocking out of this? Yes, it's very, very difficult to say because inventory is stocked at various levels. So it's very, very difficult to predict on what it would be. And I would request or encourage you not to really look at quarter numbers too much and try to make a sense of it. It's very, very difficult to estimate and the figures can change quarter to quarter. So it would be very, very difficult to estimate on how much of this growth is to, you know, inventory coming back to normal level and the normal growth. Okay. And, sir, finally, just one bookkeeping question. What was the ad spend during the current quarter? So ad spend, as we said, during the current quarter was about 1.7 of sales, you know, which would be about 20 to 23 crores. And what was the same number last year, sir, same quarter? The figure was much higher. I think last year in the same quarter was more like $55.57 crores. INR 55 crores, and this year is 1.7% of sales. That's right. Sir. Thanks a lot. You. Take the next question from the line of Lakshmi Narayana from Katmuth. Please go ahead. Yes. Thanks for taking my question. I have two questions. One is on an outreach program of car centers. What percentage of car centers you actually cover in India right now? And what was that number, say, five years back? Any kind of things that would be helpful. The second is what has been the contribution of do it yourself product like a five year service fee, etcetera, for us in terms of our stand alone revenues? And what are that five years back? Okay. Now as far as there are two levels of carpeting, as you mean. There are people who are known as contractor or mystery as we call them. They are the people who typically take a job from a consumer and execute the job with the help of carpenters. So contractors are the people who are really the decision maker in terms of the process. So we basically cover most of the contractors who exist. I would not like to give a number for competitive reasons, but we do cover most of the contractors, and we have very good connect with them. What was the figure five years ago, I don't have that figure handy, but we steadily increased our penetration and reach to cover what we believe are most of the relevant contractors. We still can't cover all of them, but that figure would have increased on a steady basis. And this is a very important initiative for us, so we give it a lot of focus. And every year, we cover more and more of them. But we have a fairly good coverage of contractors. Is there any zone in India where there is sufficient amount of contractors, but our outreach program hasn't really covered? And and will that which which state or which regions are those? And then, you know, what is our plan for those regions? So there would be geography, which is not as well covered. Maybe there there may be different geography where our presence may not be uniform. But it will not be right for me to share those kind of details on a call in terms of which are the area where our penetration is low. But just to tell you, the segment is growing, more contractors come into play every year, more towns come into play, smaller towns start coming into consumption cycle. So that is the way we penetrate and grow. And of course, we have some geography gaps or areas of improvement, and we have broken through that. But I cannot share specific details or names of those ones. Got it. And what has been the expenditure on that? Because you talked about advertising thing, but for the below the line initiative, what kind of amount you spent? Below the line would be I don't have the exact figure right now, but it's substantial part of our advertising and promotion spend. Got it. And the second question is on the do it yourself product. The do it yourself product, again, we would not like to give brand wide sales and break up of our business in that manner. We share the figure is what is our consumer and what are branded adhesive sales, which is about 50% of our total sales. However, what I would like to say is we have some brands like FavicWeek and EmSeal, which are fairly large brands, they figure amongst top five or 10 brands of P like, and they have significant sales. So consumer brands are very important to us. And some of them like Favicol, Faviquit and MCL are fairly significant contributor to the turnover of the company. And any sense of what's been the growth there? I'm not asking for the revenue contribution, but in terms of growth, is it above the company's growth or below the company's growth? Over a five year period, I would say that it would be in line with the company's growth, maybe a bit higher than that. We'll take the next question from the line of Avi Mehta from India Infoline. Sir, is there any geographical trend in terms of the demand pickup in any segments, either urban, rural or any regions, which have done differently? More or less, there are some states which are doing a little better, but no clear trend is really emerging, which is very significant in nature. However, we do see that the demand from smaller population center is increasing, and that could be due to wholesale being under stress. So a lot of smaller population center, which was serviced by wholesale, are now buying more quantity directly from the local distributor. So we see greater growth coming from smaller population centers. Sir, sir, in that kind of sense, now that as you highlighted, wholesale inventory is where it's not yet kind of moved up, you also indicated about, I think, three quarters back or two quarters back, the increasing focus on direct distribution. Have you made any increased efforts over there? Or could you share any numbers on that front? So wholesale inventory, as I said, it has not come back to normal level, but wholesale inventory also is better than what it was in June. So inventory correction has happened even at wholesale level, but it may not be back to the historic levels. As far as our initiative to expand our distribution, we are focused a lot and we have achieved significant growth in semi wholesalers, the smaller wholesalers as well as we have enrolled them into our direct distribution plan and our various promotion plan. So we have achieved a good increase in numbers of them. In addition to that, we as a company have really focused in smaller population centers. So all the towns below two lakhs get special attention from PD LIGHT. All businesses of PD LIGHT go in a compliant manner to service those towns. So we have steadily covered most of the towns which are below two lakhs in most parts of India. This is the Ergun program that is kind of? This What we call as Rural. Yes. Okay. Okay. So that yes. So we have made good progress in that. Every year, we make steady progress in that direction to cover more and more geography and to do more and more work in such terms. Sir, second question was that you have always highlighted this focus on doing double digit kind of volume growth, bringing growth back on that. Turnover there was on demand environment not being favorable, it's also macro, wherever it is. Do you increasingly feel that we are seeing a change in the consumer sentiment? Or is this more it is more time? What is your view now, sir? No, I think there is no difference in our view compared to what we said earlier. We need to see some more quarters to see how things are moving. But in June and when there was because of GST coming, there was a bit of disturbance People were not fully ready. Their transition has gone well. Most of the channel partners have adopted it too well, and the trade has really started happening at a good pace. So that's very good progress from June. But from the underlying consumer demand, it's still too early to say anything. I think one or two more quarters would give a very good idea. Okay. So as of now, it's still too early to kind of call out the same kind of pickup? It is. We would not like to really call out and make some guess because the indications are not very clear. Also in our industry, there are no sort of tracking to really give us a right idea. Okay. And sir, lastly, on the gross margin front or, let's say, on the overall margin front, while there was the initial concern about input costs pressures kind of coming in, we see that the market is turning a little benign in terms of the near expectations from a seven fifty to nine fifty while that was sharper. Now it's more or less VAM is also settling in a very kind of broad range. Would you kind of argue, given the price increases, that they are in a much better more comfortable situation in terms of input costs? Or is there anything that we should be kind of aware of? See, input cost, don't know what you mean by more comfortable, but compared to September, as I said earlier, GAM prices have still gone up a bit more compared to September. So they have increased by 10% or so since September. So there is a bit of an upward trend in some raw material. In some raw material have corrected a bit. So overall, there has been an upward trend. Oil prices are firm. So overall, it is possible that the raw material prices may increase all relevant firm. Okay. Specifically, what is the quantum of price increases, sir? Is there a number which could share on overall portfolio basis in the second quarter? While I this is across some of the products, but on the overall portfolio? We've not received different price increase in second quarter. We'll take the next question from the line of Manu Agarwal, an individual investor. As we can see the tax rate has increased from 28% to 32% since the last year. So moving forward, can we say that the tax rate would remain in the same range? Yes. Yes, that is correct. Okay. Thank you. Thank you so much. Sure. Thank you. Take the next question from the line of Anshooman Hathri from Haitong Securities. Please go ahead. Yes. Thank you for the opportunity and congratulations on performance. My question is regarding the mix of consumer versus industrial. Over years, we are seeing the consumer segment is gaining is increasing in terms of overall mix. So how do you see it in the next couple of years whether the industrial will continue to go down? Or can the pickup in industrial activity bring it back to the earlier levels? Yes, we have a very strong position in consumer and product, and we are making a significant investment to achieve accelerated growth in consumer and Qatar product. And hence, for this very reason, the contribution of consumer and Fazar products to overall sales of the company can continue to increase. The focus will be more on consumer rather than industrial? No, it's not rather than both of our both are very important businesses to realize. We also have a very, very good industrial business, but we have greater strength in the Zuker and Bajar business. And we are making greater investments in that area for accelerated growth. And hence, it's likely that, that business may grow faster. So we give equal and sufficient attention to industrial business as well. And but there, we are a bit dependent on how the end user industries In terms of the supply to companies like paint companies, ink, textile, we export a lot of our products. So our industrial product business, to some extent, does get impacted more by external factors than our consumer and bajaar business. And hence, their growth rates may not be as uniform as our consumer and bajaar product business. So just both the businesses will get the right attention. However, we have much stronger position in consumer and Wajah, and we are putting greater investment in that. So that may see better growth rate as it has happened in last few years. Okay. So my other question is regarding these coatings, where we have gone ahead in the value chain and have few quotes whereas at the same time, have seen some companies coming into the Additive segment. So how do you see this whole market coming together, the companies targeting each other's market, Global Light is number one by far in the additive segment. So how do you see your quoting segment going, say, in the next three to four years? We have had some Coating products for many years. Used to sell some rig tamper and some stainers for many years. In stainers, we have good position. So that is our part of coating portfolio. We also have some waterproofing, coating like external waterproofing coatings and some of the other related products. So we have been involved in some niche or specialized coating products. So as of right now, this is our portfolio, and this is what we are working with. But there is no immediate plan to do anything more than that. As far as the paint companies coming into adhesive, they have been making effort. Asian Paints has been making effort. Some other paint companies have either announced or have made some effort. But we believe these are very two different markets. It requires different set of competencies to succeed in the respective markets. But these are capable companies, so we are keeping a close watch. However, we do not believe that there has been any significant impact in since they have launched these products. Okay. Lastly, on so you had launched a new product for furniture making using machines, different kind of fail call variants. So how is the pickup? And what kind of market do you see for this machine based furniture production, some automated machinery? So that business is doing well. What you are referring to is what we call as joinery adhesives. Joineries are the units which make furniture using machines. And we have been focused on this segment. We have significantly expanded our product range, put together a special team to service this segment. And this business has been growing at a good pace, and we will continue to put greater attention on this to gain further share in this segment. However, Indian market still has very large share of furniture which is made on-site. And in that particular segment, FERVICOL is also very, very strong. We We take our next question from the line of Gunjan Prathyani from JPMorgan. Please go ahead. Yes. Hi, sir. Thanks for taking my questions again. Two questions. Firstly, on the industrial business, I did saw you did mention somewhere in the press that it's been some orders which have been shifted or a timing difference. So do we see the revenue growth coming back in third quarter in this segment? And also, the margins seem to have moderated far higher than the consumer segment in this segment. Is it to do with the ramp pressure already being priced in here? Now on Industrial Products, I had given two reasons. One was some timing difference on some orders. And in addition to that, one more factor was there. Because of very high increase in input cost, we have had cut down export of some of the products where margin were challenged. So these two factors resulted into an impact on export. Now if you look at our export business and go back from look at 'sixteen, 'sixteen, 'sixteen, 'seventeen and 'seventeen, 'eighteen, our margins have significantly improved last year. Our Industrial Product margin in 'sixteen, 'seventeen was significantly higher than the year ago. So and even if you look at 'fourteen, 'fifteen. So for last couple of years, when the raw material cycle was very low, the Industrial business significantly benefited from it, and there was a big margin expansion. However, as material prices have strengthened, it is natural that in this cycle, industrial product margins would come down. Okay. And the second question on your on some of the products where competition is stronger, is NPD epoxy and the tile adhesive, silicon. What are we doing? Is that we are focusing a lot on new launches? Or what is your thought process around the gaps that we have versus the competition? Epoxy adhesive and tile adhesive or silicon sealants are not very big or important products for us. Mean, they by important, I mean, they do not contribute significantly to our turnover. I mean, the contribution is very small at this moment. So in that way, these products do not significantly impact our top or bottom line. However, we are also making our efforts and initiative to increase our presence in this market. If you look at epoxy adhesive, Araldite is the largest brand and ResinOva is the second largest brand. So we make our effort to improve our position in this segment. But as of today, they have low contribution to our sales and profits. We'll take the next question from the line of Rahul Jasani from ICICI Securities. So I just had two questions. One is that you mentioned that the demand situation has improved in Q2. Was it due to festive season also? Where do you see the impact of festive season? Because it was an early festive season from this time. Right. So early Diwali does benefit, but in our case, the products whose sale is linked to Diwali is not very large. For companies like paint companies, early Diwali has a very significant positive impact. For us, the contribution of these type of products, which are very closely related to Diwali is small. So there could have been some impact, but generally for us, this impact is not very large. Got it. Got it. Okay. And just wanted an update on what you call the Pioneer products, new innovation. You mentioned about the joinery product, but anything on other products such as Pile Adhesives, Wood Finishes, etcetera. So we have in terms of Wood Finishes, you may be aware that we have done that joint venture with Aika. So now that business is our major initiative in that area is under our subsidiary called three Lite Aika. Aika, as you all know, is one of the world's largest premium wood finishes company. And we now have a fifty-fifty JV with them, and we are in process of setting up a manufacturing plant in Gujarat. So with this, we plan to grow our presence in this segment. So that's on wood finishes. On tile adhesive also, we have adopted some new strategy, which has been under pilot for last few months in one state of India, we have seen some encouraging results. So we plan to put again more efforts to grow our presence in tile adhesive segment. Got it. Got it. That's it from my side. Thank you. We take the next question from the line of Lakshmi Narayana from Potomari. Sir, I have one question regarding your BAZA segment and consumer segment, right? While the industrial thing you actually would plan your business keeping in mind the industrial growth or even in consumer, some part which will actually get into the real estate growth, right? So for most of the business, when you actually plan for your business, what are the two one or two top indicators you actually take as a leading indicator for your growth? We don't plan very short term growth. I think if you mean, what is the indicator and what actual growth we will get in the next quarter or next six months. See, we PIDILIDA as a company does not work in this manner. We work on slightly medium to long term. So we have identified the segments in which we want to participate, and we developed clear strategy and initiatives that we want to pursue. And we are focused on ensuring that we execute our initiatives well, and we believe that the growth will follow. So we do not really like to plan based on what would happen in quarter or because of this external fact that this should happen. So we are focused on a longer term growth. Is that your question? Or Yes. It's more on the longer term. When you actually plan for your business like five years, right? So that is clearly the demand on housing segment. You know that things could actually pan out. Are getting into more on the housing segment, obviously, etcetera, right? But for the other part of the business, which is essentially the consumer glue any other products in terms of car rental, etcetera, right? What do you I mean, how do you plan for your growth is my question because There's a answer. It's a lot of the category. What we have understood is that the consumption level in India or consumption or penetration is still very low. So in most of the segments for us, the real challenge is to expand the market. PC Lite is leader in most of the products and segments in which we operate. However, the consumption level in India still continue to be low compared to many of the adjacent countries. So what we have done successfully over the year is the focus on creating or expanding the market. So when we plan for future also, we are aware of the fact that in our products, the potential is there. We need to focus and create a new consumption, expand consumption, improve penetration, look at areas of India where the consumption may be lower than the rest, focus there or focus on changing the habits of people so consumption goes up. We align our business from the fact is where we believe that there is a significant untapped potential and we work towards tapping that potential. The next question from the line of Nitin Bansal from Amneal Capital. Please go ahead. Sir, good evening. One question that you answered really earlier that you cut down the advertisement expenditure roughly via material number from last year, same period INR55 crores. This type was materially less number. So how do you see give why did you have a lower number in this quarter? And do you see that there is going to be a relatively materially higher spend over the next six months or over the next eighteen months as you try to gain from unorganized, etcetera? So Nitin, it was not a conscious decision, and we did not cut down the expense. I think I explained earlier that this was purely a timing difference. If you really look at the same quarter last year, our expenditure was much higher than normal. And this quarter, it was much lower than normal. And that is purely timing opportunity based. Our campaigns are largely linked around the right opportunity, and then we spend significant. We don't try to balance that expenditure quarter to quarter. Okay. And you also explained the value and the mix breakup. So value and mix, how is it driving? So given the scenario where we are in our country right now, in terms of there are certain instances of organized industry construction possibly not going through massive growth right now or if you look at the other building materials, let's say, plywood sales or a tile sales, Y o Y, it's down in this quarter at the primary level at least. Are you noticing that the bulk volume of packages for you are growing relatively slower than the small level of small packages? And you also indicated that small town sales are higher. So how should one read about what's happening in the bulk packaging and small packaging? See, if you look at the question that I asked before, when we look at the large builder segment who build multistory type of complexes, it still relatively a smaller part of this new construction in India. The bulk of construction in India is still single storey construction, which happens across India. So there is a stress in the larger, bigger segment, and that does have an impact on everybody, including to us to some extent. But there is a vast amount of construction, which is of single storey, which happens across India, where the stress is not same. That's the point on that. Sir, last question. In terms of GST impact or otherwise, how do you foresee the next eighteen months or so in terms of working capital change for the company, in terms of what sort of initiatives you are taking to improve our working capital because of either regulatory changes or self internal? Or should because margins are fairly one thing, but other thing is how we can be more capital efficient from here on also? What kind of scope do you see? What are you doing? See, working capital is very important to Prelate. And we at any given time, we have a lot of initiatives on how to optimize our inventory and our receivables. So that's a continuous exercise. And we always find opportunities to address it or reduce it. As far as related to GST, there is some temporary increase in working capital, which is related to GST, which we would expect to normalize. But on an ongoing basis, whether GST would result into higher working capital, we don't know we need to see. So as far as GST goes also, our hope or expectation is that should not have any material impact on our working capital. But as far as for rest of our businesses, there is always room to optimize and improve the efficiency. Sir, any targets that you could actually explain to us that over the next eighteen months or so, I'm not looking at short term eighteen months, thirty months, what sort of inefficiency can be extracted from the system? I can share we have internal targets, but I would not like to set or share any target, and it would not be very significant compared to the scale of the company. If you look at our working capital, and if you have a 5% or 10% correction, it's not going to make a significant difference. So we have internal targets to improve and bring greater efficiency. But I don't think that would have any significant impact of that nature. Okay, sir. Any trends that one can see from the Construction Chemicals in terms of which can impact growth rates one year and two years down the road because the initiatives in terms of penetration, in terms of new product launches. Can we see Construction Chemicals growth over the next one or two years materially different from what We we have seen in the last few are working hard to see materially different growth rate in terms of initiative. This year, you may have seen that we had a campaign with Amitabh So we had a campaign which was on Doctor. Fitbit as a brand and also we had a campaign on a Jodi, which is our two leading products, again with Amitabh Bachchan. And those advertisement really helped us improve awareness of Doctor. Fixit across various town classes. So as far as our initiative was just focused on increasing brand awareness, increasing product usage or application awareness, and we are working towards achieving materially higher growth rate in Construction Chemicals. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments. Thank you, everybody, for joining the call on a Friday evening. We appreciate your interest in City Light. Have a good weekend. Thank you. Thank you very much, sir. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.