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Asian Paints Ltd
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Ladies and gentlemen, good day, and welcome to the Asian Paints Q1 FY 2019 Results Investor Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Arun Nair. Thank you, and over to you, sir.
Good evening, and welcome to Asian Paints investor conference for Q1 financial results. With me, we have Mr. K. B. S. Anand, MD senior. We have Mr. Jayesh Merchant who's the CFO and Company Secretary and also the President of Industrial JVs. We have Mr. Manish Choksi who is President of International, IT, HR and Chemicals. We have Mr. R. Jeyamurugan, VP, Finance; and Mr. Parag Rane, Chief Manager of Finance. Now may I ask Mr. K.B.S. Anand to take the call forward.
Good evening, everyone, and welcome to the Q1 FY '19 Conference Call for Asian Paints.If you look at the economic environment, the recovery trend of the domestic economy witnessed over the last couple of quarters continued to extend into the first quarter of this financial year. However, while the recovery continues to gather pace, demand conditions for the paint industry still remained challenging. At the global level, while major economies continued to show resilience, there are lingering uncertainties over the horizon. Hardening inflation and the resulting tighter monetary conditions, elevated crude oil prices, heightened trade barriers are dampening the business confidence across.The consolidated financial Q1 FY '19. Revenue from operation increased by 15.5% to INR 4,398.6 crores from INR 3,809.8 crores. PBDIT increased by 25.9% to INR 936.1 crores from INR 743.7 crores. PBT increased by 29.7% to INR 848.3 crores from INR 654.3 crores. Net profit after noncontrolling interest increased by 30.6% to INR 558 crores from INR 427.4 crores. Stand-alone financials. Revenue from operations increased by 16.2% to INR 3,706.2 crores from INR 3,188.73 crores.PBDIT for the quarter increased by 30.8% to INR 893.7 crores from INR 683.2 crores. PBT increased by 34.3% to INR 810 crores from INR 603.1 crores. Net profit increased by 35.3% to INR 542.6 crores from INR 400.9 crores.Please note that the figures for the previous year had been suitably adjusted to bring them in line with both [ yearly ] financials. Looking at the decorative business. The decorative paint business registered a good double-digit growth in the current quarter helped to an extent via the lower base in the first quarter of the previous year. On a sequential basis, material prices had been moving up and we took a price increase of 1.9% in the month of May 2018 to negate the input cost pressures to an extent. This is on the back of a 1.4% price increase effective in the month of March 2018.Reviewing industrial business. The Automotive joint venture, PPG-AP, witnessed good growth in the general industrial segment on the back of strong performance in the 2-wheeler and commercial vehicle industry. The Auto Refinish segment, which took a beating last year due to the GST rollout-related issues saw good offtake in the current year.The Industrial Coatings JV, AP-PPG, registered good growth in the quarter led by a strong performance across business segments. Profitability in both the segments was, however, affected due to the rising material cost pressures, which could not be passed through completely.Reviewing the international business. Overall, the international portfolio faced challenging business conditions across major units. The high inflationary situation continued to affect the market conditions in Egypt. ForEx unavailability continued to hurt operations in Ethiopia. Insistent rains affected sales in current quarter in the key units of Bangladesh and Sri Lanka. The fledgling operations in Indonesia continued to gather pace and the unit has done well to expand its retail network and market presence.Reviewing the Home Improvement business. Both the segments within the Home Improvement business, the Kitchen business and the Sleek and the Bath business under Ess Ess have registered strong growth in the current year. Both the businesses continued to expand their network to increase the scale of business. The CapEx plan for the stand-alone company for the current year is around INR 1,000 crores. This includes the spend of INR 800 crores on the 2 new paint manufacturing facilities being set up in Mysuru, Karnataka and Vizag, Andhra Pradesh in South India. The first phase of both these plants will be commissioned in this financial year.Going forward. As mentioned earlier, growth in the current year was, to some extent, helped by the lower base of the previous year. We are hopeful of a further recovery in demand conditions as we enter the festival season. The GST rate reduction from 28% to 18% on paints should also help demand from the small consumers and the companies taking steps to pass on the benefit of this rate reduction to consumers. However, we see a continuing increase in raw material prices and I expect an inflation of almost 10% in the second quarter on the average of last year's raw material costs. We have passed on only a part of this to the cumulative 3.3% price increases taken in March '18 and May '18 and should have ideally looked at a further price increase. However, we may need to defer it due to the GST rate reduction. In the international markets, continuing difficulties in sourcing the ForEx for business operations in Ethiopia continues to be a key concern.Thank you, everyone. We are happy to take any questions you may have.
[Operator Instructions] We have the first question from the line of Abneesh Roy from Edelweiss.
My first question is on your statement, ideally should have taken a price hike, but deferred due to GST rate cut. So does it mean you will pass on the entire, say, 10%? And because of the clauses of say, anti-profiteering, et cetera, you may not take price hike, which is warranted? So there could be margin compression in the coming quarter?
If we take a price hike, immediately it will come under the lens of the anti-profiteering bureau, so to speak. So we would have to defer it and recover across all the rest of the year.
The second is you had pointed out a Tamil Nadu slowdown in the previous quarter and competitive intensity being high. On these 2 parameters, what is the status?
The competitive intensity continues to be high, but there is a recovery.
And so what is your -- there's a recovery because of any particular reason?
No, I think the market has improved itself.
So your other expense is seeing a very low inflation, which means the ad spend also would have seen a very low single-digit growth. Does it point to just your phasing of the ad spends ?
We haven't phased all the ad spends.
But it has seen only 2% to 3% growth there of the costs.
Yes, [ underlying ] marketing spend is definitely a good double-digit growth just [ talking ] in terms of marketing expense. But some of our other costs, especially the larger costs like freight, rent, they are seeing a slightly lower inflation as compared to the previous years in Q1 for the current year. But with the way the fuel prices and -- retail prices of fuel are behaving, maybe Q2 onwards we might see a higher impact. But in Q1, we had a lower inflation of this key cost.
Sir, on your smaller businesses, Sleek and Ess Ess, Ess Ess continues to grow much faster than Sleek this quarter although 56% was at 17% for Sleek. So what's the part of dividing and taking Sleek to the next level? Last 7, 8 quarters, it's broadly in the INR 35 crores to INR 50 crores range quarterly run rate. So if you could talk about why it's such a big difference in terms of growth rate? Is GST impacting Sleek? Is there a reverse shift in Sleek?
No, no. Abneesh, if you look at the numbers, which are previously have had this [indiscernible] to be implemented, we have given the current -- in the notes to the account, we have given the right numbers, comparable numbers. Yes, I think...
I'll have a look, but...
Sleek has also grown at 22% this quarter.
The next question is from the line of Avi Mehta from India Infoline.
I just wanted to clarify just the statement that demand from small customers is likely to benefit from the GST rate reduction. Are these self-painting guys, that's why you're expecting that? Or if you could just explain what...
There is very little DIY in India. So there is not really a self-painting. But the gap between you can say the organized sector and the organized sector was much higher, that will reduce.
Okay. So you mean that it essentially has got through with market share gains in that category is why you are saying. Is that what you're referring to when you say demand from small customers?
Yes, and when the cost of paint and painting itself sort of reduces, we anticipate demand to improve.
Okay, okay. So there will be some, I think, some impact from the price reduction on the general demand plus market share gains. Is that a fair understanding, sir?
Yes.
Okay. And sir, secondly, just on the GST rate reduction being passed through. Just wanted to clarify and confirm, you have the ability to pass on differentially across different categories that higher premium products might see higher reductions. Is that something...
It will be a 10% reduction in the GST rate per se. So we operate with a certain dealer price list to our entire dealer network. That continues to be the same. The GST is simply reducing from 28% to 18%. So there was [ straight-up ] 10% reduction in the effective cost to the dealer network and consumer across products. [ Also assume ] retail price, but most of our products do not sell on the maximum retail price. So the differential may vary to some extent.
Okay. And lastly, sir, on the dealer margin itself. Because of this reduction in GST rate, would you be able to kind of weigh -- or kind of work on those numbers, reduce it to some extent? Or you would not want to kind of -- you would want to let the margin be enjoyed by the supply chain because you have increased it when there was a slight increase in tax rates, right?
No, we really can't control dealer margin because we have an open network policy with a large number of dealers in each city, and except in the very small villages and towns where there are retail, say, monopolistic dealer networks, we really don't control dealer margins at all.
Okay, okay. So that, I think, is something that the market force will decide that.
Yes.
[Operator Instructions] Next question is from [ Utsav Shah ] from [indiscernible] Capital.
I'm wondering when are the 2 plants expected to begin production that you mentioned in your CapEx expenditure for this year?
Mysuru is expected in September and Visakhapatnam in January.
Okay. And could you comment on the capitalization at the moment?
Around 75% to 80% currently.
Next question is from the line of Lakshminarayanan from Catamaran.
I have 2 questions. [indiscernible], what option do you think would benefit the industry? That's the first question. And the second, you also mentioned that -- in how the GST benefited [indiscernible] in terms of [indiscernible] with [indiscernible]. And the third question is [indiscernible]
We are not able to hear you clearly.
Yes. Can you hear me clearly now?
Yes, a little better. Start a little slowly then so we will be able to hear your questions.
And maybe ask questions one by one, so we can finish off the first one and then we go to second.
Yes, is it better now?
Yes.
So my first question is you mentioned something about the unorganized paint manufacturers [indiscernible] so what benefit you see for industry in terms of volumes?
This is more in relation to what we have [indiscernible] in the '80s and '90s when excise duty was reduced considerably in the organized sector. Demand shifted gradually from the unorganized to the organized sector to extent. So it's very difficult to talk of month-to-month deviation. But over a period of time, we definitely see a movement from the unorganized to the organized sector.
What is now currently [indiscernible] what proportion of volumes?
We are not able to hear you. Your voice is [indiscernible]
Mr. Narayanan, we request you to move to area with a network. Your voice is cutting off and possible to lift your handset?
Is this better now?
A little better.
So the question is -- last question is about [indiscernible] the volume [indiscernible].
I'm sorry to interrupt you, Mr. Narayanan, but we are still unable to hear you. We request you to call back maybe from a different device as we cannot hear you very clearly. We move to the next question. Our next question is from Amit Sachdeva from HSBC.
Sir, my question is on GST. As you put a note in your release that it'll be difficult to take price increases since GST has reduced and even though the input prices tend to have moved up quite significantly. My concern is why it is difficult for someone to understand that GST is applied on the invoice value and then your price increases is linked to input price increases that you face as an industry. Why you have to have such a dilemma that why input prices cannot be passed on to product, which especially had a higher oil linkage versus some which have lower oil linkage and why it would be such -- seen as a profiteering move? Especially in the oil industry when it is a known fact that input prices have been so high. Why you would sort of make such an assertion?
So it's partially antiprofiteering plus confusion of pricing among the entire dealer network. We have more than 52,000 dealers across the country. So varying rates and getting them settled takes a little time. So it would take at least a month for the new GST to really get implemented effectively across, which we can consider. But since time would have lapsed, it will have an impact.
And then second question, Mr. Anand, would be that obviously, time to time, you would run separate schemes also based on various product lines. And this obviously would mean that price increases in reality would vary at your will anyways. So would it not be fair to say that if, for example, where the input price inflation is low or high, you could use this leverage to push a certain volume more than others and hence with somebody also asked that actually realized price for various goods can actually quite substantially vary, when do you see this being implemented?
So the level of inputting we do is considerably low compared to the price increases we are talking about. In addition, a lot of the input is directed towards the end consumer or the [ tray ] painters, et cetera. So it's a mixture. You really can't [indiscernible] one from the other.
Okay, understand, sir. Understand perfect.
Next question is from Vicky Punjabi from JM Financial.
This is Richard here. So I just want to understand the profitability of the nondomestic decorative business and the way I'm looking at this is really the difference between the paint segment in console and the paint segment in stand-alone, which I guess represents industrial and international together. So if I look at this steady-state margin here, you should be about in the range of about 10%, 12%, 14% and that has come down significantly to about something like mid-single digit. What has helped -- how has this happened? And what will trigger a reverse move in this?
So in decorative in India, we are market leaders and we have the ability to transfer raw material prices immediately or in advance, so to speak, and hence take care of inflationary environment much more successfully than we can do in either the industrial market or in international markets where we are not the market leader. There is incumbent -- we are, to some extent, dependent on what -- how the rest of the market reacts to increasing raw material prices. Due to a relatively subdued demand in many markets, for example, Egypt, Middle East, et cetera, many of our competitors there have not taken to increasing prices, and we have not been able to take the price increases we so desire or at least to the extent we desire across markets. So the lag effective definitely there in an inflationary scenario. The previous couple of years we had sort of a deflationary scenario where the advantages were obvious and you could maintain a higher margin much more easily. Plus we are in a situation in Ethiopia where our ability to source ForEx has, in absolute terms, reduced the business and obviously also in absolute terms impacted the total profit contribution and Ethiopia was a reasonable profit contributor. So all these 3 factors have sort of impacted, this is slower demand, our ability to raise prices as well as a one-off situation in Ethiopia where we are unable source ForEx [ in transactional returns ].
So suffice it to say that this impacted more from the overseas business than from the industrial business?
Industrial business also, but you are right. To some extent yes, overseas business is much larger than the Industrial business. The impact is going to be much more significant there.
And is there any trigger for a reverse mode in this other than raw material prices itself cooling back?
No. I mean, gradually, we expect competition, too, and we have started the process of increasing prices across markets. So it will come back, but [ see ] inflationary scenario. As you are increasing prices, you're finding raw material prices are continuing to increase further. So it's not a status quo situation where you can really play catch-up so easily. It's a fluid market where there are varying dynamics.
The next question is from Vivek Maheshwari from CLSA.
My first question is the 3.3% price side that you take -- took until May, did that pass on all the cost inflation?
So it passed on the cost inflation in Q1, not what has risen in 2Q since.
Okay, which is what you have quantified as 10%. So 10% is something that is incremental...
10% is what we taken lower last year average for the full year. Now we have taken 3.3% or 3.4% over that -- already over that. It's a balanced view we would like to have taken. We have to determine when to take it.
Sure. Which means that until May, June, all the cost inflation has been passed on?
Yes.
Okay, okay. And between -- I know you don't give these numbers, but can you just qualitatively indicate the premium part of the portfolio growing faster or in line with the base portfolio?
Sorry, you know my answer already.
Okay, okay. And could you qualify when you say -- you gave an example of 19%, 18% excise duty deductions. So today, what will be the size in terms of, let's say, percentage of the unorganized market at the moment?
So a near-term study which the IPA published also was like around 30% of the market being the unorganized sector.
30%. And that 30% number is your volume or value?
Value.
Sorry?
Value.
Value.
Okay, value. And lastly, because of, let's say, a 10 percentage points price reduction, would you also expect upgrading in the category, as in paints products being more affordable and, therefore, customers going for that?
I -- well, it's very difficult to anticipate that. There could be some upgrading, but it's very difficult to talk about that as yet.
Next question is from [ Srinavas Shishakli ] from [indiscernible]...
I had a couple of questions.[indiscernible]...
Mr. [ Shishakli ], we can barely hear you. Please, if you could speak a little louder.
Is this better?
Yes.
Hello?
Yes.
Yes. Okay, great. I had a couple of questions with respect to the new capacity coming in Mysuru and Vizag. I believe that's the [ phosphates ], which are tied around the -- or [ consigned ] to the current capacity, if I'm not mistaken. So typically, when you rank these capacities, is it like -- and obviously, the market is growing at a faster pace, and it's not currently -- being the fastest plant, it would come out for a -- probably utilized perhaps within an optimal manner from day 1. So how do we think about the overall capacity balance through existing plants? And also, does this substitute for certain -- do you also source something from outside in terms of manufacturing? Or how does this kind of overall thing work? So that's one. And secondly, you have a very, sounds like, or very meaningful savings in terms of logistics. Also, any other cost for you as a company?
So the second part there is easier. There will be logistics savings since these plants are closer to the markets where we have inadequate capacity currently. The -- look, setting up a plant is a fairly long process from the point of searching from land, getting permissions, setting up the plant, et cetera. So we don't have -- we really can't set up plants every day. And given our volumes, these plants' for-sale capacity will last us only 4, 5 years. It's not going to last us much longer. Secondly, paint manufacturing is more of a batch process and not a continuous process. So we will manufacture according to where it is most optimal -- optimally beneficial and economical for the company.
And when -- if you look at the faster ramp-ups, we will not be able to the ramp up to full capacity and we can only do it in about 2.5 to 3 years' period of time even if it's based on most -- actual record pace and did everything that we have to do and got everything right first time around.
Okay, okay. Fine. Just trying -- practically, you don't use any outsourced capacity at all, right, as a company?
We do for certain products. Some of the -- for paint primers, we make outside. Some of the solvent-based paints, we make outside. But that's more because of, you can say, economic reasons rather than anything else. Wherever we think that technology is important to us, we manufacture it inside the factories.
Okay. So this capacity doesn't have any other impact [indiscernible]?
Oh, no. No.
Okay, okay. And any possibility of quantification of logistics associating because of this?
No. However -- while we have done it, I don't have the figures in front of me.
The next question is from Anand Shah from Axis Capital.
Yes, sir. So one question was essentially, would there be any fiscal savings from commercialization of these 2 plants?
There are certain tax benefits given by the government, both in Karnataka and in Andhra Pradesh.
Okay. And these would be like a state-specific benefits like the...
Yes. Yes, yes. State-specific benefit relating to the sales made locally, manufactured from the same plant.
Okay. So sales essentially only in those specific states?
Yes, only the specific states.
Which will have benefits?
Yes, yes.
Okay. Okay. And second, the inflation that you called out the expected inflation in Q2, the 10%, is essentially what you're expecting in YoY then?
YoY.
YoY, as an average based on last year, 10% on that.
So the YoY in terms of...
Quarter-to -- yes, quarter-to-quarter based on the average of last year.
Okay, okay. Average of last year YoY equals 10%. And then, is there any significant mix improvement that would have happened, let's say, this quarter? Because, I mean, if I look at the stand-alone number when compared to the growth in cost of materials and, let's say, adjust for volume growth, and I know you don't share volume growth, but if I assume a certain mix and volume, then, again, let's say, 13%, 14% volume growth and 2%, 3% pricing that's going into it. It seems the cost of materials have -- or volume-adjusted will largely be flat. So, I mean, it looks like this trajectory, for example, was much higher earlier, which will actually come down. So -- but you are expecting sort of toward a more -- so was there any mix improvement or any procurement benefit that you would have taken this quarter?
Nothing are new.
The next question is from [ Punar Majah ] from [ Berlalan & Rocha. ]
So I just want to know, currently what is the mix of solvent and water-based? And how have they moved? I believe in the last 2 analyst meets, you mentioned around 40%. So how was -- has it moved over the past few years? If you could give...
It is 40%. But then I don't think I mentioned 40% anywhere.
For water-based.
I'd like to look at the recording of the previous analyst meet to come back to that. But we don't give the mix. But definitely, over the last 2 decades, water-based is growing much faster than solvent-based. Our new plants are entirely water-based.
The next question is from the line of Lakshminarayanan from Catamaran.
My first question is regarding the GST change. You mentioned that there are some parts of the price that we pass on to the customer. And typically, what is the...
The entire tax benefit will be passed...
For the end customer, what is the range of price reduction he can actually expect?
The entire tax benefit will be passed to the customer. So the margins, if you will, will reflect the entire [indiscernible].
And our base of customers based on our [ detail ] [indiscernible]. But however, these are sort of passed on to the customers. It's up to the channel on a case to case basis.
And sir, the dealer can actually enhance his margin also?
The possibility exists, particularly in this environment. So while that might occur with some very small customers, in most markets it's difficult for the dealer to really increase his margin significantly.
Not by so much [indiscernible].
And you mentioned as well that 30% is the unorganized rate broadly. So that is more on the -- I believe it could be more on the enamel, sir, which would be in the -- which segment could be more unorganized?
Enamel [indiscernible] is certainly larger, but it is also there in emulsion.
And in emulsion, yes.
So in the emulsions also? Okay, okay. Sir, my -- another question is that from the capacity you're taking up, you're almost taking up equal to existing capacity, right, and -- which means that you're thinking about a particular volume growth for the industry. When I look at all the other players, including your, call it, top competitors, they're also taking up capacity, right? So if you can just go back and just help me understand in terms of what is the volume growth you are expecting for the industry. Is this -- is there a time -- is this something which happened earlier also when other players are setting up extra capacity? Or this is -- it happens quite continuously every cycle?
I do not give projections. The Indian Paint Association is the organization to give projections for growth for the paint industry. But given the past decade, what we are doing, like I said, Phase I will take care of the next 4, 5 years increase in production, in sales.
Okay, okay, okay. Sir, last question is that you said you have around 52,000 touch points, right? What kind of growth that actually -- I mean, how much did that end point grow for us on a year -- if you look at 5 years back, what was that number? And some direction there.
It's increasing about 3,000 end points every year in the last 4, 5 years.
Okay, okay, okay. And what is the total -- the end rate? So you are 52,000 now. From x, right, so that x is also increasing? What is that?
Yes. X is -- as the organization is increasing, as the cities are expanding, x is also increasing. So frankly, that figure is anybody's guess.
The next question is from Avi Mehta from India Infoline.
Hello?
Hello?
Yes, yes. Sir, just a clarification. The [ indiscernible ] that you're seeing, typically what is the time period for this [ antiprofiteering ]? Would you know? If you have any time in mind.
I wish I had clarity on that. I would have told you. If you have any clarity, please help me.
Sir, I think for the -- for that, we'll do that, sir. Sir, the second thing was the Industrial segment. You have indicated that margin have come under pressure because of the input cost situation and inability to pass it on. Does this rate reduction really help us in that or no? That would...
No, no, because the Industrial segment gets a -- was getting post-GST benefits as a user.
Okay. So there would be no impact on that?
There's no impact on that. It's not like it takes a little time to negotiate with each OEM customer or each contracting increase in prices or the lack of it. And in an inflationary scenario, what you negotiate, you find you already negotiated that. So it's ongoing process throughout the year.
Okay, fair enough. And that is where kind of the divergence kind of creeps in. Okay, fair enough. Okay, that's all for me.
Next question is from [indiscernible] from [indiscernible] Investments.
So my question is regarding the new upcoming plants. What I wanted to understand is, will there be any cost, a manufacturing cost reduction due to the new technology which you'll be using in the new plants?
It may not be significant from the other newer plants, but on an overall basis, the average might drop.
[Operator Instructions] The next question is from Tejash Shah from Spark Capital.
Sir, for the shop year-to-date, does it create any disruption at [indiscernible] at [ Bilalal ]?
The disruption in terms of that stickering of the price can be done for the new MRP across packs. And given that the range, that we have small packs, big packs, and which sells at a large volume, it's quite a laborious, labor-intensive exercise, which has to be done very rapidly.
So do you mean to say the price tag's for the middle -- the midlevel as well? Or they're from the fresh [ bulk ] that you plan from here on?
We really can't do it there for dealers. Well -- but we will inspect the dealers that do it at this level.
Okay. And sir, for the last 2 years, you have been picking up on various real estate sources that new real estate projects are under tremendous pressure. But -- while your [indiscernible] really just remain robust. So are you catching any significant change in that historic mix in favor of repainting demand [indiscernible] you expected?
Repainting has always been a major chunk of our business, as a matter of fact. So project sales was -- you can say new construction was a very small element in our overall business.
Yes, but is there...
This is more in the unorganized sector really [ speaking ].
Okay. But do you believe that, that small portion has become now smaller for us for and industry here?
No, I don't think so.
Okay. And sir, lastly, you mentioned [indiscernible] and volume growth. What is the number at consolidated level?
About another INR 200 crores, INR 300 crores. Around INR 200 crores at a consolidated level.
[Operator Instructions] Next question is from Abhijeet Kundu from Antique Stockbroking.
There has been a decline in other income in the quarter. Any key reason? Because, I mean, what is it doing for the year? And...
[indiscernible]
There was a CapEx -- there's been another [indiscernible] since last year on the 2 plants. And [indiscernible] come down to an extent. And there was a -- last year, we had a -- the [indiscernible] benefit going to that. And therefore, actually we had an exchange gain. But this year, you have an exchange loss. So that's it.
Okay. And with regards to new plant, so when is that -- there would be INR 1,000 crores CapEx for the year, right? For FY '19, there would -- the total CapEx should be about INR 1,200 crores, INR 1,300 crores?
It's INR 1,000 crores at the [indiscernible] level.
Yes.
Sorry, INR 1,200 crores, INR 1,300 crores on the consolidated level?
Yes, around INR 1,200 crores.
For this year.
For this year.
'18, '19.
Okay. So we include then depreciation, it should happen by the -- I mean, as the plants come in, in September as well in January, there should be increase in their position as well?
Yes.
[Operator Instructions] The next question is from Manish Ostwal from Nirmal Bang.
My question is on your comment on the international markets, the global currencies. So they present challenges in terms of growth. So how is the situation? And would there be -- do you think we can expect some improvement in the business going there?
Oh, we have only one market where we have currency challenges, which is currently Ethiopia. And we have to bear our plant down for that particular market. So there, we don't know the outlook, but we should be able to do -- maybe a little less than -- a significantly less number in Ethiopia than what we did last year. Other markets are not impacted by availability of ForEx. They may be impacted by some depreciation in their currency, and they're impacted by demand conditions that remain weak in the markets at least for a while.
Okay. And second question, it may be repetitive, but I joined a little late. So pardon me for that. In terms of GST rate cut, how do you see the impact of the demand of like-to-like basis?
So the demand, as we said, demand should increase in the medium term.
Okay. Okay. And then lastly, sir, this Home Improvement business segment, how did -- I mean, in terms of growth in the profitability, what is the outlook?
The growth has been extremely good in this quarter. We're continuing to drive for growth in the latter portion of the year.
Thank you very much. That was the last question in the queue. As there are no further questions, I would now like to hand the conference over to Mr. K.B. Anand, MD and CEO, for closing comments.
Everyone, thank you very much for participating in our conference call, and I look forward to seeing you next quarter. Thank you.
Thank you very much. On behalf of Asian Paints, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.