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Asian Paints Ltd
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Good evening, and a very warm welcome to one and all to Asian Paints Investor Conference for Q1 FY 2022 Results. Today, the panel, we have Mr. Amit Syngle, MD and CEO. We have Mr. R. J. Jeyamurugan, CFO and Company Secretary, and we also have Mr. Parag Rane, GM, Finance.May we now request Mr. Amit Syngle to take you all through the presentation. Mr. Amit Syngle.
Hello. Good evening, and very, very warm welcome to all of you. I think it is great to be meeting once again at the end of this quarter 1 of the financial year '21, '22. So I would take you through some of the achievements and how would some of the numbers pan out in terms of the overall quarter 1 as we see it. Obviously, I think, one of the big area in Asian Paint always has been working for the last 7 decades is that one thing, which is very, very precious to us is that the core value of Asian Paints as a brand is about delivering joy since 1942, and we exist to glorify, preserve, transform all spaces and objects, bringing happiness to the world. So I think that's the theme. So whether it's the whole journey from surface to space within the home, or it is about industrial or it is about auto OE or it is about the areas which are there in the home decor, I think, overall, we kind of see that we can bring joy to people's lives as we kind of go ahead. So that's I think the overall purpose. When we look at -- going ahead, this is the disclaimer, which we wanted to just put up, which is there. And now getting on to how Q1 has -- the journey has been. So obviously, I think, when we look at the overall Q1, sitting into Q4 of last year, we were thinking that it has something which we will have roll-up time in terms of really taking the quarter 1 in a very, very strong manner, and all preparations where there. And that was a time when the whole area of the second wave started impacting the business. And we saw that from the last week of March, regions like Maharashtra and other regions kind of started showing increase in cases. And by the second fortnight of April, we suddenly saw that the number of cases had spiraled, and we started seeing lockdowns happening at various places.So what we saw very clearly was that April, which was going very well till 20th of April or so started basically coming down to the extent with respect to demand because, obviously, there were lockdowns happening and the market conditions were not good. And the paranoia in the customers' mind was back in terms of what we saw.So I think that was the impact, which started in April, and we saw this impact really getting very, very drastic in May, where the entire country practically was under a lockdown scenario to that extent. And then I think we started seeing something of a reprieve where cases started coming down. And I think demand starting picking up since the lockdown started opening in June, to that extent.So I think that's being the journey, but for us, when we look at the month of April, I think we have done extremely well in terms of what volume and value. And May was a month, which we got really impacted. And overall, the numbers were not too good in the month of May, but June, again, we really kind of came back very, very strongly. And therefore, if I were to sum up what the one, I think, it is the magic of April and June literally where we were able to kind of give an uptick of volumes in a very, very strong manner. And that is where I think we saw a lot of demand also come in June, which was a pent-up demand because of May possibly not going well.So overall, given this journey, this is the numbers how they kind of pan out. So you -- we get almost 106% kind of volume growth, which we see over the last financial year. And you must remember that, obviously, this was not a very normal Q1 to that extent because April was subdued in the financial year 2021 as we kind of look at. But I think the story has been that we have been fairly consistent with respect to our [ 4 ] days in the market as to the gist in terms of what we have been taking. And as a result, if you'll see what we tried to show you here is that if you look at the CAGR numbers, which is the compounded growth rate over the 2- and 3-year periods, you know that number is looking pretty good. So if you look at over the yellow bar, which is the financial year '18, '19, the CAGR is about 15.4%. And if you look at the figure, which is the '19, '20, the CAGR is both 12.7%. And in terms of absolute growth, if you see '18, '19, it's about 14%. And on '19, '20 financial year, it is 21%. So I think the story, which is very, very clear, is the fact that even if we were to kind of really see that the last quarter was not so great, but I think the story of double digits has been very, very consistent. And I think that is something, which is kind of giving us a very clear signal that the strategies we have taken with respect to growing the market, having something which is bang on and something doing quite well. Similarly, when we come to the net sales in terms of this thing, the story is similar. There is a 95% value growth over the corresponding year. The CAGRs over '18, '19 and '19, '20, when we look at it is 8.8% and 4.5%. And the absolute growths over these 2 years are 19% and 18%. So story is quite similar, obviously, in terms of looking the absolute growths are double digit in terms of even value in terms of what we look at to that extent. And especially, I think the CAGR over '18, '19 is pretty good. So I think one of the clear signals here is that we see a very clear consistency in terms of our strategy, in terms of going forward. And this has been the story for the last 4, 5 years, where I think quarter-on-quarter, this is something, which we would like to kind take on that is something, which is working for us. So that's how in terms of overall volume and value kind of pans out. When we look at this trend over a few quarters, I think what we would have tried to show you here is, very clearly, that the each of the bars here, if you see Q1 of financial year '22, and we will see a corresponding 3-year CAGR growth, okay, it's a 15.4% growth. Similarly, when you go to Q4 of financial '21, it is 17.9% and then 22.7% and 13.5%. The story again is consistent what I just told you is that very, very strong volume growth trends, which we have been maintaining. And as a leader, one of the imperatives have been that can be really grow the overall market and just not look at in terms of what game we want to kind of make, but can we grow the overall market, and that's been the imperative of a leader in terms of what we have been doing, and that has given us very, very healthy compounded growth rates, as you can kind of see on the screen. So that's the story in terms of the overall -- the way the volume trend has been. Overall, I think that one of the things, which we saw that the -- there has been a very, very steep inflation in terms of the raw material prices. And if you see this trend started at the end of Q3 of financial year 2021. And we saw a huge increase, which we saw in Q4 of financial year '21. And then on Q1 over Q4, we see -- we saw another inflation to that extent. So I think this has been a very, very strong inflationary period and coupled with the fact that the market conditions were disturbed because of COVID, and they were not very, very normal, I think it was something which we had to be careful about in terms of how we want to handle and how we want to kind of take care of it. So we looked at in terms of doing some price increases, and we have taken some price increases if you look at the overall quarter 1. The first one we took on 1st of May and then we took something which was on 20th, 2firsst of June. And then we took something which is nonoperational from 1st of July. So I think we have taken overall increase of about 3%, which is there because anything additional to that in this environment would not have been very, very great from a point of view of how it would have landed on the customers given the psyche of the customers at this point of time. It was not that we did not have the elasticity to take it, but we were very clear that we need to kind of be clear about not getting any imbalances in the market and see in terms of that we do look at a gradual kind of increase. In addition, what we also did was we worked a lot in terms of looking at our sourcing efficiencies, our formulation efficiencies and did a lot of work around that, so that we could conserve some margins there to that extent, and that is something which you see end result that in quarter 1 of financial year '22, the overall gross margins have fallen. So they come to about 39.6%, and this is -- if you literally look at it, it's almost close to a 5% kind of a drop from what we were in Q4 as we kind of go ahead. Now obviously, I think there would be a lot of questions, which will come in on this in terms of how this gross margin and there and so on and so forth. Now as we kind of go forward, there will be 2, 3 things. One, we will take more increases as we kind of go into quarter 2. The other would be that when we see that how we want to deliver, we see also that there could be some softening of prices in the coming quarter to that extent. And that, coupled with how rupee kind of behaves, it will be an overall picture in terms of what we see in terms of going forward. But what we see is that, overall, as we kind of get into the future quarters, I think the margin story is very, very intact. And there is no problem in terms of looking at taking price increases and going forward. So this is not a cause of very big worry to that extent as we kind of look forward. Overall, when we look at the overall business thing, one of the key things which possibly we would like to kind of tell everyone is that this time, in contrast to what happened last year, we see that the T1 -- the metros, the T1, 2 centers grew at a much faster rate as compared to the T3, T4, which in last year when we saw there was over then the market started opening. T3, T4, which are the smaller towns were growing much faster, which kind of really corroborates to the fact that I think the ingress of COVID in terms of the cases was much higher in smaller cities. And therefore, they were still very affected while the T1, T2 centers were bouncing back far faster to that extent, and that possibly has also impacted a little bit in terms of seeing how the overall market has grown, how the certain mix has grown and overall that point of time how these things have happened. And this is something which we see differences across regions, across divisions and so on and so forth. But one of the big things which is there at the South market was the one which got really impacted far more strongly. We saw that the regions of North, Central, West was still kind of okay, but South got really impacted because we saw protracted kind of cases happening in Karnataka and Tamil Nadu and Kerala and even Andhra Pradesh to that extent. So I think that is something which happened. Plus, I think the Eastern market was affected West Bengal because of elections earlier and then the whole Northeast market, which also got affected, which is also recovering now to that extent. So I think these were the areas which, when you kind of really get into the market, you see in terms of what's really happening. Overall, when we see the product mix, we have seen that the economy and the luxury range has been leading the growth. The middle segment is something, which has a little bit stagnated to that extent, but I think it's the economy in the luxury range, which has kind of led the growth in a very, very strong manner. And within that also, what we see is that the whole area of exteriors market has grown quite well overall in terms of what we see because I think the paranoia was there, and people were not allowing the painters and everything inside the houses to that extent. And therefore, there was a slight differential, which we saw with respect to how exteriors behaved as compared to interiors. The other redeeming factor this time was that, unlike last year, the projects in large institutional sales did very well. And we saw a lot of segments, which are the segments of builders, segments of government and so on and so forth kind of really springing back. And these too really grew very well in April and June again because May, I think, was, universally, the market was closed. And therefore, I think projects business has been very, very robust, which is a very good signal for going ahead in terms of how it kind of looks for the balance of the year. The other category, which really kind of did well for us was the waterproofing category, and this is something which has been doing well across. So whether it is retail or whether you see in terms of projects, this is something which has been doing quite well, and we have been launching a huge number of products here to that extent. And last year, we would have launched close to about 25 new products here. And even this quarter, we have launched some products here to that extent. And this is something which is kind of giving us a very, very good growth in terms of how we are growing. And also it kind of really embellishes the top coats very strongly because you're getting into some areas at the foundation stage. And therefore, it helps us in terms of selling the top coats as well as we kind of go forward. The adhesive range has also kind of done quite well even -- when you see, and this is something where we have introduced some really unique products in the market and really trying to challenge the existing players. And this is something, which kind of goes well because a lot of our retailers also sell adhesives to that extent. And therefore, it kind of jells with the business overall as you kind of see. When we see new product repositions, again, one of the categories where we have been really' expounding the market is in the area of wood finishes. So whether it is polyurethanes or polyesters, we have been doing a lot of job. And these are real high-end luxury ranges, which are there with high, high kind of margins to that extent, and that is something which possibly has done well for us in terms of looking at the overall market when we look at. So I think this is a brief glimpse in terms of our product range in terms of what has really happened and how the whole quarter has really gone up. Some of the new products which have been launched because innovation, I think, is a constant addition pain. So I think it just is so, so strong that we have kind of really been able to kind of look at a lot of patents in the last 3, 4 years, which have come in. And I think we have a dedicated R&D team, and this is something which really kind of keeps the company live, and they keep on contributing to the top line in a very, very strong manner. And we are very proud that, as market leaders, we have been able to bring new technologies, new concepts, new things in the market in a very big way. So I think one of the products which has done very well is All Protek. First time in the India category of fire retardant paint, which has come in. I think this is truly a innovative kind of product, which has come in. We've looked at Ingenio, which is a polyurethane, which has come at the top end, and Royale gets the super luxury end in terms of a product, which is there with the outstanding stain resistance. So I think that has been the story, but even SmartCare, as I said, this is only one of the products here, tile grout, which is there, but a range of products coming in. And I think this has been a very, very strong propellant in terms of, one, adding to the top line. And what I see is that for the coming years, I think this will remain as a core part of our strategy in terms of really invigorating the customer with new things, new technologies, new prepositions in terms of going forward.Overall, when we look at the domestic decorative business, one of the things which Asian Paints continuously has been doing is the market expansion and evolution in terms of looking at newer towns, newer places and enhancing our overall reach. And today, we continue to add lots of new dealers with our tinting machines, which are called the color wheels to that extent. And we keep on enhancing our urban footprint to that extent, and the good part is that there are new towns, new districts, which keep on coming, and that is something which is a constant source of enhancing our reach overall to that extent. We have a category which is called the color ideas, which looks at offering decor to a customer, which is aided, and so on and so forth, and the whole journey is a very strong digital journey, which kind of comes in. And that's something which we keep on adding to the numbers, and we've added 6 new stores here to that extent. And finally, the epitome in terms of what we have, the top end is what we call as a Beautiful Homes store. This is a one-stop decor shop, which, under one roof, offers everything which you would ask for from a point of view of home decor. So whether it is furniture, whether it is furnishing, whether it is flooring, whether it is kitchen, bath, you ask for it and everything you will get under one roof. And this whole store is very, very unique. It's a concept at a global level. No one has a model like this, and we're fairly proud of this model in terms of looking at large stores, which are of 6,000 to 7,000 square feet in size, but offering to the customer a highly technology-led journey, which is able to kind of give them everything under one roof in a very strong manner. So these stores are going very well. We've already got 18 stores and another 15 are in pipeline. So this is a strong strategy with respect to our entire movement from share of surface to the share of space within the home, and that is something which we have been appropriating very strongly. Now related with this is the whole area where, in terms of the Beautiful Homes service which is there, which is coming up, and this was launched last year, and we spoke about it earlier. And this has been accepted very well and is kind of growing. I think one of the big changes post COVID, what we are seeing is that the whole requirement of services at home is becoming a very, very big zone, and that is something which we have been propounding going forward. And I must say that in the industry, this is a unique model in terms of what we have got known as a model within the paint industry in terms of offering beautiful homes, which is an at-home design service and not only design but full execution sitting in the comfort of your home to that extent. We also have a new alignment, which we have done with Pure, which is a well-known brand in the area of furnishings, and we have done a strong alignment with them in terms of this thing, which is yielding very, very good results because we have now various ranges, which we work with them. We have 3 brands, which we are working: the Ador brand, the Royale brand and the Nilaya brand, which works there. And this is something which, along with our wall papers, we are taking very ahead, and we have aligned with the ace designer, the master himself, Sabyasachi terms of taking this entire forward. Some of the glimpses for you in terms of how we have launched, this is a new series of wall papers, which in alignment with Sabyasachi which have come in. And equivalent, we have done a new launch, which is about furnishings, which also has been designed by the master himself. So very unique super luxury right at the top end, something which never existed in the market and something which is really the real top end of the market to that extent. And this is something which we are taking across in a very, very strong manner across our Beautiful Homes stores and other parts of the network where we think we can sell it. So the whole synergy with respect to taking the share of surface to the share of space becomes very strong. So anything which is in the home, whether it is furnishing, whether it is flooring, whether it is lighting, so everything kind of converges here in a very strong manner as you can kind of see it. The other area, which we have forayed is the area of designer tiles. Again, if you see, it is talking about surfaces and spaces within the home to that extent. And these are tiles, which we have launched in the market, and this is a very strong segment with the architects and interior designers. And we offer lots of variance here in terms of which are 3D, anti-skid and so on and so forth. And we also see that this is a very strong preference with some of our market retailers to that extent. And this is something, going forward, we are looking at in a big way in terms of how we are able to kind of expound it in the market. So if you look at from a point of view of trajectory, the trajectory is very clear. If you are going to be in the home decor market, we are going to come with innovations, whether it is Sabyasachi, whether it is in terms of designer tiles, whether it is in terms of designer furniture or lighting and something which we can stand out and something which we can take on very strongly and it aligns with the overall business going forward. Some of the other things, which I wanted to quickly touch on is that I spoke of the Beautiful Homes service, which is one of the big kind of differentiators, which is there. But along with that, our entire Safe Painting service has been a very, very big blockbuster and that is something which has been a real boon in times of COVID when people prefer Safe Painting and so on and so forth. And it has done extremely well in looking at where it is kind of going. We have also launched a version of it, which is called -- which is meant for the AIDs to that extent, and that is something which is also kind of doing well. We also have a San Assure service, which is all about sanitization. And in today's world, I think it is very, very necessary. So whether it is commercial spaces or it is homes or it is institutions, we have this service. We have 2 variants of it, one a home variant and the other is a pro variant, which is there to that extent. And both variants have been doing very well. And I must say that in quarter 1, this has been a real differentiator in terms of looking at all these at-home services. And I think Asian Paints is very clear that this is something, which we'll take forward strongly because this is truly a real differentiator in the market as we kind of go ahead. Coming to other businesses, we speak about our international business. So if you look at the overall business, I think from a top line perspective, all regions have done extremely well. And you must remember that last year, while I think India was suffering with respect to the COVID very strongly in Q1, there were a lot of parts of the international business which kept on doing well. So whether it was the Middle East, whether -- or it was Africa, it was only partly Asia which was affected last year to that extent. But if you look at the numbers here, the top line has been really very, very good if you compare with the last year numbers. And all the green arrows, which you see are the increases, which we are seeing in the various geographies. So whether it is Africa, Middle East, Asia or South Pacific, the growths have been pretty good. And if you see that even in Asia, where the growth is in triple digit, and this is a little bit more because of -- in Asia last year, the effect was more. But otherwise, I think, fairly healthy numbers in terms of what you see, except for South Pacific, where it is a single digit kind of growth in terms of what we've got. However, what we see here is that, like in India, I think the inflation was very, very high. And while we took price increases to the extent of about 10% and across various markets to that extent, but overall, I think it did impact the gross margins in a very, very strong manner. And therefore, we see the effect on the bottom line to that extent. So whether it is the case of Africa, where there's minus 9 or whether it is Middle East or whether it is Asia, which is just about to come to a little bit of a positive level, we see that this has been a little bit led by the inflation in the market to that extent. And despite the increases taken, it has something which has really affected the bottom line to that extent. But I think going ahead, we are very clear that we are taking more increases as the inflation kind of is there, and we feel that this is something which we should be able to really overcome as we kind of go into future. When we look at industrial business, 2 businesses we have. One is the PPG-AP, which is the business where we tackle the auto OE and the refinishes market in a very, very strong. I think these are 2 businesses, which got affected very strongly in quarter 1. But what we are seeing is that given the fact that the last year, the quarter was depressed, the numbers are still very healthy on INR 256 crores on a base of 83. So the growth is pretty huge in terms of what we see. But at the same time, I think, overall, what we saw that, even in this business, getting the price increases to the market and implementing those price increases, it was a little bit slow, and that is what it has impacted in terms of looking at the numbers, which we see, although numbers are much better than what it was in the quarter 1, which was a hugely negative last year to that extent. And therefore, the situation has done quite well this year from the point of view of this business, as we have seen that businesses in April and June were good here as well. When we look at the other industrial business, which is the other JV, which we have with PPG, which is called AP-PPG, here, the business has been very good. Very strong performance across segments, whether it is protective paints, whether it is powder, whether it is flooring, we've seen very good kind of this thing. And we've seen that despite the last quarter, so obviously, last quarter was a little bit depressed in this thing, but I think very strong growths which have come in, which you see to the level of about triple-digit numbers, which you could see on the screen. So I think from that point of view, top line has been good. But I think the good part here has been that even bottom line has been not bad at all, if you see. And we have made a profit here to that extent as we see this business, although gross margins here, again, have come down because of the fact that we were able to do a certain amount of price increase in the market, but not able to take care of the full inflation, which had come in to that extent. And therefore, gross margins were affected. But overall, I think this business has done quite well when we look at it. The last vertical, which is about the Home Improvement vertical. Now if you look at it here, if you look at the Kitchen business, I think it has done fabulously well, okay, where it has grown in triple-digit numbers. Now even if you discount for the last year a little bit of a lower base, the jump is pretty strong. And in terms of CAGRs, this number is also very, very good in terms of what we see. So overall, I think there is a consistent growth now happening, and it's a business which is on -- clearly on a defined path, and we think this is something which is going great. If you look at -- there was inflation here, and we took some increases in this, but the PBT has been much better. We have reduced the component of high loss, which was there. And while there is a loss still there to that extent, but we have seen that in the last Q3 and Q4, as you have seen, we have come literally to almost breakeven here to that extent. So I think we are confident that this is something, which we will kind of cross and go ahead with them. There should not be any problem in terms of going forward. As you see, the Bath business, again, it has done well. I thought lower than kitchen, but it is still on an absolute value quite good. The CAGRs here also is pretty good to that extent. And again, from a bottom line perspective, we have done well over the previous year in terms of reducing the losses, almost like a breakeven kind of a scenario minus 2 crores, which is there. And what we have seen is that our efforts on premiumization, our efforts on expansion in the market have really kind of given us gains there. And both businesses, I would say that now are stable from a future trajectory going forward to that extent as we kind of go. And I'm sure that the bottom line also will look good as we kind of go ahead. So that's, I think, some substance in terms of all the businesses in terms of what you see it. So overall, summarizing the standalone financials, if you look at it, the revenue has been a whopper 95.6%, which is there. And as I said earlier, the CAGR number, both on value and volume, have been pretty good to that extent. And therefore, it is consistent, robust and very clearly in line with our strategy in terms of growing the market in a very big way. You see the gross contributions are also quite good. But I think PBDIT had a little bit got affected with respect to the gross margins, which are there. But overall, the number is pretty good in terms of what we see in terms of both PBDIT, PBT and the PAT numbers, which you kind of see. These are very, very strong numbers in terms of this thing. And when in terms of the absolute numbers, which you see, these numbers are pretty good in terms of when we see the last year quarter. And please remember that this is not a normal quarter. This is also an abnormal quarter to that extent. And therefore, these numbers really stand out, and they are really good numbers in terms of what we are able to see in terms of looking at the kind of delivery, which has happened for the standalone business. Obviously, yes, the steep inflation has got the gross contribution margin affected and even the PBDIT affected, therefore, to that extent. And we have been taking price increases, as I said, across businesses, in standalone as well. And I think as we kind of go ahead, this is something which will get addressed in future. When we look at the consol, again, if you see the numbers are possibly a little lower than the standalone numbers, which are there to that extent, which means the standalone business has done much better in terms of compared to the other businesses to that extent, but the numbers here are also pretty good because we see almost like a 91% jump in terms of revenue. And from a CAGR perspective, again, this is positive numbers over a 3-year CAGR kind of a thing, which you look, and that is something which is heartening. Gross contribution, again, has the same story here where there's a dip because of the material inflation, and there is a contraction to some extent. But overall, the number stands pretty robust. PBDIT, again, the same story in terms of what we see that there is some bit of contraction, which is happening in terms of as a percentage to net sales. But overall, what we see is that we have been able to control the overheads well, arresting the fall in PBDIT margins to that extent. PBT and PAT numbers on the overall thing looks quite good, 154% and 161% kind of increase. So overall, what we see is that, on an absolute level, I think the numbers are pretty good in a very, very tough circumstances, tough environment in terms of what we have seen this year. And I think, going forward, as markets are really opening, what we are seeing is that possibly, I think it's -- if you don't have a third wave, it should be, I think, good to that extent. Overall, some other areas quickly to kind of tell you, COVID working around with stakeholders, internal and external, I think a lot of work has been done. And I must say that not only in terms of our employees, we have looked at in terms of supporting the stakeholders, be it vendors, dealers, contractors in a very, very strong manner in terms of what has been done. We have really rolled out a very, very strong program as a vaccination drive, and we are proud to inform that, now, 90% of our eligible employees, when I say eligible, some of the people had got COVID and they can't really go for a vaccination for a certain time, and 90% of the eligible employees have got their first jabs, so which is very good. And it kind of is a good preparation for the coming quarter, which is there in terms of this thing, which gives us the confidence ahead. And apart from this, we have really supported a good CSR work, which has been there in the market, supplying concentrators, hospital beds, sanitizers to hospitals in terms of bringing a lot of work around that, around the community, which we think, as a brand, we want to kind of take forward. And last year, if you remember, we also had done a large amount of donation in that area to that extent to the government principles. Some area, which you see that the direction we are going as a brand, working for a sustainable future in a strong manner. So if you look at the area of water replenishment, again, this is a very, very strong area in terms of what we are seeing, and this something is a constant kind of zone, which we are working because we want to conserve water overall in terms of as we kind of go ahead. And that is something we want to add back to the mother nature in terms of going ahead. And this is something which we see will catch on steam as we kind of go into the future quarters here. Again, the whole area of the renewable energy is very strong. It's a very, very good percentage in terms of total consumption, which comes from RE, and that is something which is what we are proud of. And this, we have been increasing year-on-year to that extent. Other parameters, whether it is the affluent, the generation or it is reduction in hazardous waste, I think these have been strong parameters, and we really look at benchmarking us in terms of where we are with respect to the industry and global players. And it's a very strong kind of numbers in terms of what we see, in terms of what we have been able to reduce. These are strong numbers, which you can see, which is 75.9% and 56%. Again, in terms of the -- we have been able to kind of look at the renewable content in terms of some of our large volume products to that extent. And this kind of just shows the direction, which the company wants to take in terms of sustainability ahead.And finally, the health and hygiene, I think we keep on touching lives, I think, in a very, very strong manner, as we say that reaching out to people and giving them joy and bringing joy to their lives has been one of the core kind of principles we have operated on. And you'll see that this is something, which we are strong on. We've already kind of touched about 51,000 lives against what we did about 1.7 lakh numbers last year. So I think, overall, these are all indications which are very positive in terms of what the brand wants to do and how we want to kind of take this journey ahead. Lastly, the last slide in terms of overall, when we look at, I think the -- how we are seeing is that the demand outlook is quite positive, okay, with the second wave kind of abating. Yes, some regions like Maharashtra and Kerala and parts of Northeast are still a little bit of a worry, where we have a Delta variant kind of coming, but I think the vaccination drive is picking up to that extent. And what we see is that, definitely, I think it's a very, very positive environment. And what you have seen last year, we see a lot of pent-up demand, which kind of comes in. So the paint demand really doesn't go off. It just gets deferred to that extent. From that point of view, I think, overall Q2 looks very, very positive to us to that extent, and that is something which we have looked at in terms of looking at our inventory and our planning, so that we can take on Q2 in a very big manner. Overall, monsoons have been good till now, and the forecast is that it is going to be a normal monsoon to that extent. And therefore, we feel that given the larger agrarian economy, the rural sector is kind of want to go do well. And therefore, we see a splurge in the T3, T4 kind of city is going to happen as we kind of go ahead. We have a longer Diwali this year to that extent. And therefore, it kind of really helps the September, October retail period in a big way. Also today, we are kind of building capabilities that tomorrow, if there is a third wave, how do we kind of tackle, how do we kind of look at that, it can become part of a planning, so that overall, we are not affected too much in terms of going forward, and that is something which we are kind of really working around with. Overall, on the material inflation, till now it has been a worrying scenario, but we are seeing some signs of softening, and we will see how this trend really settles. But as I said, some increases we are already committed to, which we are kind of taking and going ahead to that extent, and that is something which we will kind of look at possibly seeing how we can look at addressing the gross margins in terms of going forward. But I think the story of strong growth would still remain as we look forward to the balance here. Thank you so much for listening to me, and we will -- we are open to all questions. Thank you.
[Operator Instructions] Our first question is coming from the telecalling. We have Mr. Abneesh, who has joined us through telecalling.
So firstly, Amit, congrats on a very good sales and volume growth performance. I have 2 questions. The first is on patent. So in FY '21, you have filed 20 new patents and overall 76. So paints is normally regarded not as a very high-technology input kind of a category. So wanted to understand these patents. In what areas, these are what kind of competitive advantage these can give over longer term? And how much could be the scope of the commercialization of these patents?
Yes. Thanks, Abneesh, in terms of asking. So in how we see is that the whole area of patenting is a very, very strong indication of the technology prowess of the company and in terms of what platforms and what kind of technologies which we are kind of evoking and going ahead. So if you look at the whole area of decorative and industrial, yes, patents are more in vogue as far as the industrial paints are concerned. And today, you would see across organization, there are a lot of industrial patents which happen, and then it is far easier to kind of really look at protecting that technology going forward because it is meant for only specific customers to that extent. And therefore, I think the patenting is quite in vogue there to that extent. So out of the 70, which we have applied, there are some which have gone into the industrial paint zone. But I think one thing, which we wanted to alter the paradigm in the paint industry, is we wanted to look at patents in the decorative paints as well. And therefore, we have looked at a lot of products, which we are coming, where the patenting is around either a unique technology, which we have taken, or a unique process we have adopted in terms of making it to that extent or a clubbing of 2, 3 technologies, which have come in. How we see it is kind of going forward is that it kind of gives us an edge in the market because certain properties in paints, which we will get, are a result of that patenting, which we have done. So for -- to give you an example, we have recently developed a glass coating, which can be applied on glass easily, and it will not kind of [ de-shade ] the look of the glass, but it will give protection from dirt and any kind of impurity, which comes on it to that extent. Now it is a unique patent, which we have applied for it, so that today, a lot of people cannot copy it to that extent. And secondly, I think we really get a heads-up in terms of really taking the product to the market and really kind of doing it. So I think our objective is that we do patenting from the point of view of looking at how much commercialization we can do and not look at from a theoretical perspective of saying and announcing in the market that I have so many patents to that extent. So I think that's an internal target in terms of looking at percentage commercialization of the total patents to that extent, and that is something which we are going forward. But in tracks, the whole area of patenting, both in decorative and industrial, gives you an edge. It kind of gives you something what we call as the inimitable T index, which is you are differentiated from the market in a very strong way, and it will take some time for any competition to catch on it or they can't even offer that kind of properties, which are emanating from a patented product.
That was quite helpful. My last question is on, again, R&D. And so you have highlighted in your earlier calls that the R&D team is working on alternate raw materials, alternate formulations to drive cost savings. When I see the 30 bps gross margin compression this quarter, so how do you measure the productivity of R&D team, not from a quarter perspective because in paint, normally, you have to take 2 quarters, 3 quarters to get full trend? So on that say 2 quarter time frame, how to measure the productivity, whether you're getting more savings versus the industry? So this objective, is that also because you are driving market share so there could be more compression than industry? So how do you measure the productivity? And how do we -- as outside people, how do we see whether it's working or not?
So overall, we have a lot of internal parameters in terms of what we look at. We have parameters like sourcing efficiency in terms of what we speak of. So from what we were sourcing earlier to now in terms of what's the improvement, in terms of that sourcing, there's a formulation efficiency, which means that, earlier, there was a certain cost of a formulation in terms of what have been able to work around, so that we have been able to conserve that cost in terms of looking at a formulation efficiency. We also have certain other indicators. Like internally, we have an H1, H2, H3 indicator to kind of look at in terms of which horizons we are kind of really looking at the products coming in, in terms of what we are introducing. So some of those horizons, which will give us a larger margin and a larger thing going, will kind of indicate a larger productivity for the R&D. So finally, at the end of it, there is a value metric, which we kind of really look at measuring the R&D efficiency from the point of view of total money spent on R&D and the total contribution which R&D would make with respect to either conserving cost or generating revenues in terms of the new products they are generating.
Our next caller is Mr. Avi Mehta, and he has joined us on Zoom [Operator Instructions].
Can you hear me now?
Yes, sir.
Sorry, I'm not able to enable my camera for some reason. Let me state with my questions. So thanks a lot for the presentation. It is extremely detailed. First, I wanted to understand. You have shown a very confident and a very bullish outlook in terms of the going forward in the near term. I wanted to just contrast it to what we are seeing globally. As the recovery is panning out, there is a movement away from home improvement. Do you see that as a concern for India? And if not, why? That would be my first question, sir, if you could help me.
Okay. So when you look at, I think, the Indian market is very, very different in terms of how it kind of really behaves. I think it is a market, which really believes in huge consumption, which is there given our population, which is there to that extent. And therefore, I think it -- as we see that consumption is the one which really differentiates our overall growth and deliveries in terms of what really happens in the economy and the market to that extent. So as I see it today across businesses, so whether it is our business or whether it is FMCG or whether it is consumer durables or it is in terms of IT or anything, I think what we see is definitely that as the markets really open, the pent-up demand doesn't really go anywhere. The pent-up demand still kind of literally remains to that extent. And therefore, especially if I talk of the paint industry, we have seen very clearly last year that given the fact that quarter 1 was down, the pent-up demand really continued until Q3 and early parts of Q4 to that extent. And therefore, what really happens is only a deferment, and the demand really kind of doesn't go off to that extent. And therefore, in some instances, what I see is that the demand literally kind of comes with a rebellion. It literally kind of comes with a very strong force to that extent. And therefore, if today, I think customers get an inkling that today we are getting a clear quarter, and there are going to be no further waves, which are going to affect the market, I think that demand conditions would be very, very strong as we kind of look at it. And most of the industries today are looking at preparing for this kind of a surge, which is going to happen to that extent going forward.
So if I understand it correctly, you -- your argument is that from a -- it's a deferment. I kind of appreciate that, but we had that same in the last year. So you're saying basically, whatever impact we saw in growth trajectory in last year would come back with the renewed focus in this year or when the year normalizes. Is that a fair understanding?
Yes. That's a fair understanding because what we feel is that -- and I could kind of amplify that point because if someone is going to do a painting of his home, which is maintenance-led, okay, or it is a new home-led kind of a thing, the person will kind of defer it and will do it somewhere in that quarter, which kind of follows to that extent. It will always be there. If it is a project which is going on, it's a project will come to a standstill, but the requirement, which is still kind of come in, in the subsequent period to that extent. Therefore, what I feel is that the deferment kind of really kind of happens very, very strongly. And it is something which is a feature which possible will happen this year also.
Okay, sir. So my second question was around the gross margin. Sir, I just wanted to understand, is there a threshold gross margin below which you wouldn't -- or how do you look at this margin number? Is it growth number internally? What is the benchmark that you kind of look at just to help us understand?
Yes. So if you look at the gross margin, depends on a lot many parameters to that extent, I think the correct parameter to kind of look at is PBDIT, where we look at possibly seeing that can we maintain the PBDIT in a certain range, and that is something which would then get back calculated to gross margins overall, a lot of other factors in terms of what we would kind of look at overall. So I think the correct way to look at is that we will always see the PBDIT as a percentage in a certain kind of a range, which is there to that extent, and that is something which would be possibly a good way in terms of keeping on monitoring in terms of which we are kind of going into the market ahead.
So if I may push, would you be able to share that range, sir?
So that range possibly could be anywhere between 19 and, say, 21. So that is the kind of range, I think, would possibly be there.
Our next caller is Mr. Alok joining us on the Zoom platform. We will come back to you, Mr. Alok. Meanwhile, we will move on to Mr. Shirish Pardeshi.
Yes. Amit and the team, I have 2 questions. The first question is obviously on the volume recovery, and you have sounded very confident in terms of the rural and Tier 1 recovery. Could you quantify how the growth is actually happening on ground, whether it be metros and semi metros are really driving and pushing your volume? And how do you see the Tier 2 and Tier 3 markets panning out going forward?
So I think I explained that point. When you look at the overall dynamics of the market, we have seen a larger ingress of COVID into the smaller towns and smaller cities this time. As a result, their fight back to normalcy has been -- has taken some time in terms of what is there, which is in contrast to what was last year. So what has really happened is that the metro T1 and T2 cities actually have kind of sprung back faster in terms of what we see. And from, say, the last week of April to the last week of May, to that extent, possibly, they were down to that extent given the differential lockdowns which were happening across the country. But they have sprung back far more faster in terms of contributing to the demand. And we see that, definitely, the demand conditions have been such that the growth rates, which we see in metro T1, T2 cities are to the range of about 25% to 30% higher than what we see the growth rates, which are happening in the T3, T4 cities to that extent. So I think that has been a very, very strong redeemer with respect to seeing the volume numbers, which are happening. And also I think all the volumes, which I'm sharing doesn't have too much component of any inventory in the pipeline to that extent. In our case, possibly, the inventories are not higher. So to that extent, this is largely the secondary sales, which you are seeing in the market to that extent. So there is no parameter, which really says that this is not the secondary sales, which are happening in the market.
That's wonderful. But while speaking to channel partners, I think one of the new growth driver for the company is also the exterior and the waterproofing business. So if you can quantify nondecorative per se, what would be the contribution or growth numbers in these 2 segments?
That would be difficult to kind of really share in terms of those numbers to that extent in terms of quantifying. But I can really share with you that, overall, the numbers have been, as I said, very, very healthy in these areas. And the T1, T2 contribution have been much higher to the levels of 25% to 30% higher than the T3, T4 cities.
Okay. My last question is on the nondecorative paint segment, which is decorative -- home decor and all. How do you -- how do we look at this business in the next 3 years, I mean, in terms of contribution, profitability, number of stores? Or what else can get added? Because you did mention that there is a lot of trust on adding products in the home decor segment.
So overall, as we see is that given the large share of the coatings in the overall business in terms of what we are doing because, I think that will still remain because the coatings business continues to grow by that 15%, 20% kind of a zone, which is year-on-year to that extent. So even if a new category which comes in, finally, what we will see is that in the coming 3 to 5 years, it would be possibly contributing to in terms of a single digit to an overall kind of business to that extent, both with respect to top lines or in terms of bottom line to that extent. It will not something which will become immediately a substantial part of your business because you must remember that the base business is really gallivanting and growing in a very, very strong manner, and it is not that this diversification of getting into home decor is being done because if there is anything which is happening to the parent business. It's being done because it really supplements the parent business in terms of coatings further. So what we see is that in a way, this business coming in will also kind of really keep on growing our basic coatings business. So I think the overall contributions will remain at a single-digit level.
[Operator Instructions] We have Mr. Alok back with us.
So apologies, previously was not able to unmute. I just have 2 questions. Firstly, over the next few quarters, would you be worried of any sort of macro headwinds in the rural market or your economy range of product leading to any kind of deferment in a particular section? Any visible signs as of now for you or the demand can reasonably be quite resilient?
No. I don't see any issues there because, as I said, even in the first quarter, both the economy and the luxury range has done well to that extent. So I don't see any headwinds with respect to any of the categories to that extent. I think as we kind of move ahead, we will see a fairly holistic kind of growth going forward. Yes, a little bit depending on in terms of the purchasing power and this thing a little bit possibly could be that people start looking at a little down from, say, a luxury segment to a premium segment kind of a thing. So there could be a little bit of cannibalization, which could kind of take this. But largely, I don't see that there is going to be any big structural level changes in terms of really kind of giving a very different profile to our mix.
Got it, got it. This is really encouraging. And just quickly, what would your capacity utilization levels currently? And any CapEx guidance that you can share?
So overall, I think the levels are increased from last year, so we would be currently -- I think when we look at the levels of July, we would be at anywhere between 70% to 75% kind of a capacity utilization. So I think there is enough kind of capacity, which is available across locations to that extent. And currently, we're not putting any embargo on the CapEx. So wherever the CapEx is required, we are kind of looking at going forward and putting that CapEx in terms of areas, which are required.
Our next participant is Mr. Manoj Menon, who joined us from the telecalling.
This is Manoj from ICICI Securities. I got a request upfront. I'm not sure these are fastest things. The first actually kind of to limit to one question. My request -- humble request from me from next time, we should rather do it right from the beginning because I've got a few questions actually, some of them possibly say yes or no response actually. So I just go ahead and ask those because I had prepared these. The first, Amit, is actually on the -- in the last year or so, it appears in our primary research that the unorganized segment has significantly suffered. It seems quite obvious across different consumption categories. So the question here is, is there a quantification which you have on how much unorganized would have suffered and the organized would have benefited, if any? So that's one. And how much of it is repeatable in terms of medium term? The second part is there are a lot questions on crude linkage and crude linked inputs and the impact on gross margins, which is honestly a strategic decision, which you take on how -- is it the life safety value of the consumer versus the short-term profit, so which I completely get it. The question here is from a medium-term point of view. The second question is, is crude linkage is even relevant given the significantly higher proportion of emulsions and the water-based products which you have? And the third, maybe I'll come and ask you this 3 months later in the call was I would just wanted to hear your thoughts on the capability building, which you are doing as a company, which is completely qualitative on the non-paint business, the people process, back end of it.
Okay. I respect the fact that you wanted to ask a lot of questions, but there's no end to questions. We can extend this session by even an hour, and I think questions will still remain. So I think we have to do some jurisdiction with respect to cutting the questions. Sorry about that. But getting on to your first question, I can just tell you that it's very difficult to quantify what is the share of the unorganized and what is the share we are taking away and so on and so forth because, see, none of the unorganized figures are published. And to some extent, there are more than 75 to 100 unorganized players who would be doing anything from ranging between 20 crores to 30 crores to about 400 crores, 500 crores kind of a zone. So I think the whole area is very, very big from that point of view. But in general, what I can tell you is that from the quantification we have been doing, what we see is that the unorganized companies have done very well in the regions where they are based actually to that extent. So the regional players have done quite well. It is only the unorganized company who had a little bit of a pan-India kind of a business where they have suffered because their supply chain efficiencies have not been able to build them out to kind of reach all parts of the country to that extent. So I would say that, by and large, a lot of players have their regional strengths, and they have been able to maintain those regional strengths very, very strongly. But it is only that what we are seeing that, on a pan-India basis, some of these companies possibly are kind of suffering. Overall, what I say is that the larger share last year we have gained is from the organized sector and not too much from the unorganized sector to that extent in terms of we look at it. And therefore, going forward, I think we are very clear that whatever share we have gained is something which will stay with us in terms of going forward, and it's not something which is kind of going to go away to that extent, and that is something which we continuously have our strategies in terms of what we need to do. So I think we strongly look at in terms of looking at our market shares in a very, very strong manner. So that's the question one. The second question in terms of what you were asking was about -- I'll jump to the subjective part of the question in terms of what you asked. I think you are right. As far as the home decor business and the diversifications, they require a different set of kind of competencies, which kind of come in. We have a very, very strong in-house functional training cells, which really work right from the induction of the person to look at in terms of what we are able to kind of do in terms of really nurturing the person in that direction. At the same time, we do take a lot of specialists, for example, to kind of tell you that, overall, at India level, we would have now almost like 1,000 color consultant designers kind of people to that extent who are kind of really looking at educating the customer, really kind of getting the whole area of design in customers' mind, looking at color consultations going ahead to that extent. And the whole area of services, which I spoke of at home services, are the areas in terms of what we have been strongly looking in terms of going ahead in terms of what we can do and what we can really kind of go look at. So I think we have a very clear defined program in terms of what the kind of skill levels, which we want to induce in certain existing people, at the same time what fresh ingress of specialized people we need to kind of take as we kind of go forward. And the third question quickly to answer in terms of the point of view from the raw materials point, which you asked, yes, I think, to some extent, if you look at crude and crude derivatives to that extent, they kind of really look at contributing to a certain percentage in terms of looking at the overall business. But yes, we have been trying to move the business to the water-based kind of a zone going forward to that extent. And I think, as we kind of go forward, that's a balance we maintain to that extent. And I think a huge kind of deployment is towards looking at economies of scale, looking at sourcing efficiencies, looking at formulation efficiencies going ahead. And I think that would be the basic part in terms of what we would maintain as we kind of go ahead.
Our next question is coming from Mr. Aditya Soman, joining us on Zoom.
So just one question from my end. Amit, in terms of -- I think when you discussed the numbers, you indicated that your growth was obviously stronger in metros and the rural. But if you look at the mix, that sort of the difference in the sales growth and the volume growth actually widened. What would be the explanation for that? And then in terms of input costs, again, I mean, I'm not very clear why we haven't taken pricing. It was just -- and why we feel a lot more confident about pricing in the last 10 days or so.
See, first of all, from a point of view of overall product mix in terms of what is there, I think, overall, we have been strongly focusing in terms of the upgradation emulsions in a very strong manner, which is upgrading the dimensional distemper user to organized emulsion coming to a smart emulsion to that extent, and that is something which is a foray, which we have done in -- not only in T3, T4 cities, but also in T1, T2 cities in a very, very strong manner. So we are seeing that type of a growth happening in terms of those things very strongly to that extent, and that is something which is showing in our mix as well in terms of going forward. At the same time, we saw a large uptick in terms of the luxury and the super luxury products, which I mentioned, with respect to our exterior and wood finishes products, which are there to that extent, and that is something which is also showing to that extent coming from the T1, T2 higher demand, which is there. But I would say that we should not read too much in the mix at this stage because what really happens in a COVID-like scenario, the whole consumption patterns get disrupted. We don't know really who's coming in, why is he coming in. And there is also what happens is a little bit of downgrade, which starts happening in terms of certain categories to that extent. So I think what starts creeping is a little bit of irrationality into a rational behavior at that point of time. And therefore, I would only say that we should not read too much in terms of what's happening in the product mix at this point of time and look forward to a normal quarter and see in terms of what's really happening with respect to the product that's there to that extent. So I would kind of read the situation like that.
Next question is coming from Mr. Vishal Punmiya.
Vishal from Nirmal Bang. So my question is, again, a follow-up on the previous question on the mix. If you can just quantify the mix of economy/bottom of the pyramid/value for money products for us currently. And the same, if you can give the number for FY '20, that would be really helpful.
No. I think if I have to do that, I have to open several extra sheets in front of you to kind of show you all the kind of percentage contributions like that. That would not be really possible to that extent. But what I can tell you is that from an overall mix perspective, if you take the entire category of economy products to that extent, the overall growth rates have been, to some extent, higher, as I said, overall. And the growth rates at the luxury have been higher. It's the premium end in the middle, which has got compressed a little bit to that extent as we see, and that is how the overall mix is emanating. And within this, if you look at the T1, T2 cities have done much better in terms of growth rates of both 25% -- kind of 25% to 30% higher, both in economy and in luxury products to that extent. And if you look -- roughly, if you look at the T1 -- metro T1, T2 kind of cities would contribute to about 40% to 45% of kind of a business, which is there overall in the mix. So I think that's the stats, which I can definitely share with you in terms of how it kind of looks.
Our next question is coming from Mr. Arnab Mitra, who's joining us on Zoom. We will move on and come back to you, Mr. Arnab. Joining us on a teleconferencing call right now is Mr. [ Robert Marshall ].
My question is linked to the previous one in terms of the mix effect and so on. So I was just wondering how much of an effect that had on the gross margin because, obviously, there's been kind of a lot of material effects, these operational leverage effects and then there's a mix effect, too. So I was wondering what the kind of the key components were in terms of gross margin and so to what extent you're expecting kind of reversals and also what your anticipations are in terms of raw materials. So to what degree do you need to increase pricing? Or to what extent you expect a reversal on TiO2, et cetera?
Okay. See, one of the reasons in terms of -- which was also kind of coming in is that how do we kind of look at in terms of increasing the prices in the market depending on the raw material increases, which are taking place. One of the things, which possibly, which has upset in the Q4 and Q1 of this year has been that this whole thing of the lockdowns coming in the market not having a clear period in terms of what we would kind of really take. And that is why as I said in Q1, you've taken about a 3% kind of a hike in terms of going forward. We also feel that if you increase the prices suddenly by 7%, 8% in the market, it creates a lot of imbalances with respect to the rates in the market, which kind of happens, which causes inconvenience to the customers in terms of how they kind of deal with in terms of going forward. So I think if you want to know that the correlation between raw material increase and the pricing, I think it is a little bit of a deferred increase in terms of what really takes place. And consequently, same thing when it kind of the raw material prices reduced. Again, it's a deferred decrease. So I think from both ways, it kind of we want to balance the market. We want to see that the market doesn't come -- become very, very competitive from the point of view of offering differential rates to the customer. So I think we take a little bit of a steady view in terms of how we want to kind of decrease over a period of time. And this time, what has happened is that the material increase has been fairly unnatural in terms of the way it has kind of happened in terms of going ahead, and that is why we have just taken a certain amount of increase. And as we kind of go ahead, we will take more increases in terms of looking at the situation going forward.
And can you speak to operational leverage? So kind of where you are on utilization, et cetera. What is the effects have been on that?
Yes. So from a point of view of the leverage in terms of what we get is also a function in terms of how we can see that depending on how the raw materials profiling is going on, how we kind of look at bringing that whole part into our formulation efficiencies and look at alternates in terms of what we can get from the point of view of certain raw materials to that extent and also look at multiple vendors, so that we are able to kind of really see that there is a differential which kind of comes in. The leverage obviously comes in given the scale, which I think we operate at to that extent. And therefore, what we do try to do is that using that scale, either you are able to kind of negotiate much better or you are able to kind of take advantage of the shortages, which come in the market, and look at in terms of a prolonged period, where you will not get into shortages and get some commitments from the player given the fact that your requirements are large. So that's the kind of leverage in terms of what we would kind of take going forward.
And do you have any kind of strong views on the raw materials, i.e., you're expecting it to stay at these levels? Or are you expecting a significant retrenchment?
So by and large, we think that they might stay like this. There is some softening, which is expected in terms of what is there to that extent, which could be to the tune of about 1.5% kind of a zone. But I don't see too much softening of prices immediately.
[Operator Instructions] Our next participant is again joining us on the telecalling, Mr. Percy Panthaki.
Sir, I just wanted to know, I mean, I know it's difficult to do this, but your best estimate as to what is the COVID impact on the top line for this quarter.
Okay. See, if you look at from a CAGR perspective, actually, I would say that the double digit, both volume growths and a near double-digit value growths to that extent kind of really indicates that, possibly, the impact really happened in the month of May and, to some extent, to some number of days in April. But I think what we did was we could recoup up some of those volumes in the month of June to that extent. So I would say that it's not that we see that there is too much of an impact. What is an impact is basically the whole area of production efficiencies in terms of working kiosk in the distribution and some of those inefficiencies which have crept in given the various kinds of -- the kind of conditions, which we have seen. So whether it is the working capital, some of those are the areas. So overall on demand front, I would say that I don't see that there is too much of a depression effect apart from May, part of which we have recouped, and part we will possibly get into the Q2 numbers in terms of going forward. However, the whole other areas, which are in and around is something which has definitely taken a toll in terms of the thing there. So I think, overall, this is a way, which possibly, while it was more vicious, overall, I think April and June being good, we have been able to kind of really recoup a lot of those volumes.
Right, sir. And very quickly, deriving the pricing from your volume and total value, it seems the derived pricing is negative 7% to 8%, which is, of course, mixed to a large extent. This is despite a 3% price increase. So in absence of that, the derived pricing plus mix would be minus 10%. And this is in a situation where the metros, et cetera, have done well. So just wanted to understand why this number is so huge this quarter.
No. One number, which is very clearly, is that because we have not taken the kind of increases, which we would have kind of taken because that's a clear 5% to 7% differential, which is coming in the gross margins, which you see because of the material inflation being much, much higher in the price increase, which we have taken. To some extent, secondly, it is a little bit of the product mix in terms of what we are seeing overall because, typically, the volume-value gap, which you are seeing, overall, to that extent, it's still about 11%, if you see in the overall range. Normally, that gap is in the range of about 7% to 8% kind of a thing. So there is an impact of 2%, 3%, which is coming because of the mix impact, which is there in the market to that extent. And as I said, that even in metros, T1, T2, we cannot take for granted that the luxury segment stays the way it is to that extent. And we have seen that, in some cases, people have downgraded and looked at other options, which are there to that extent. So I think that's how we would kind of sum up in terms of how the overall pricing equation and the mix is kind of looking.
Our next question is coming from Mr. Kedar Kailaje from Zoom.
I am Kedar Kailaje from Fortress Group. So my -- I had 2 questions. So firstly, in the paint segment, how would you compare your growth versus the industry? Have you gained market share here? And secondly, in the waterproofing segment, again, have you gained market share here? And since the competition is intensifying, how would you see -- or do you see any pressure on the margins going forward?
Okay. First of all, in terms of the various regions, as I said, the South is the only region, which has not possibly gone so much given the fact that we have had more pressing situations in terms of lockdowns in various Southern markets, be it Karnataka, be it TN, be it Andhra or Kerala to that extent. However, all across other places, we think we would have definitely grown better than competition. Obviously, all the results are not out as of now. And so we don't really know. We are the first players to kind of in the industry to come out with the results. So I think in a month's time, we would know in terms of what the actual situation is. But the way we have kind of worked, the way we have seen various markets, we have a reason to believe that, definitely, we would have kind of gained market share in the market to that extent. The second question, which you were asking was -- sorry, what was the question? Okay. So as far as the waterproofing market is concerned, the market is pretty big. The market size is pretty big in terms of what is there. We also see that there have been no paint players in the market to that extent. We were the first ones to kind of really enter that market as a paint player to that extent. And after us, we have seen all of the other companies followed us in terms of looking at entering that market. We believe the whole market here lies in terms of, one, the ingenuity of your product in terms of the solutions, which you are able to offer. So it's a product, which is not like a product which you advertise and it sells. It sells because you are promising a solution in a certain promise to the customer, and it kind of works in tandem strongly with what is the capability of your product; and secondly, what is the skills that you have imparted to a contractor or an applicator to apply that product; and what is the kind of warranties, which you are giving in the market. So I think it's a very solution-oriented product in the market. It's not very easy for a player to kind of come and start replacing others. We have worked very, very hard in this category: one, in terms of getting the ingenuity in our products; secondly, also looking at training a lot of people; and third, based on the training and the product, we're looking at offering certain warranties in the market to that extent. So I feel that it is a category, which takes time to kind of get in, and it's not very easy, even if competition is increasing. I think the player, which kind of really is promising a solution is an expert in waterproofing would kind of stay ahead.
Our next question is from Mr. Richard Liu.
Am I audible?
Yes.
Amit, I just wanted your perspective on gross margin. I know you talked a lot about it already, but my -- what -- the tone that I have in mind is asunder, right? I mean, you talked about a threshold EBITDA margin of about 19% to 21%, whereas if I look at it in -- for the month of -- for Q1, I think the consol level, it was more like 16, 16.5. Your gross margin has fallen very, very sharply from the last 2 quarter level to whatever it is right now. And yet, you're taking a price hike, which is in the ballpark of about just about 1%, 2%. So I know you talked about balancing the market, et cetera, in terms of not taking sharp price hike, but I just wanted to get your perspective on how you see this whole gross margin thing shaping up going forward and how much of pain do you see to that extent before you see things balancing out, either through your own pricing action or through raw material prices softening or through operating leverage or whatever the other things you've said.
Okay. So see, one of the things is that when I spoke of certain PBDIT, I think if you look at the standalone business, which is a major contribution in the consol, we are still at about 18.6% kind of a thing there. So I think, from the levels which I indicated, I think since that's a larger contribution, that is something which we are aiming at in terms of kind of getting on to. As far as the consol business, if you look at the other markets, I think the international business has been one of the businesses, which has not done well to some extent because of the Asian markets having a very large ingress in terms of the COVID, especially Nepal, Sri Lanka, Bangladesh, Indonesia kind of markets to that extent. What we are very confident, as we look into the quarter ahead, is that since these markets have started opening up, one, we feel that the situation from the point of view of the international will be much better to that extent in terms of looking at it. And what we are saying is that we are not looking at a percentage alone in terms of increase. We are looking at larger increases in the coming time. So 1% is just something which we have announced now. We are taking more increases, I think, as we kind of get into the quarter to that extent. And therefore, I think the total impact will be much higher in terms of what we take as the price increase. So what we see is that we should be able to cover up a large chunk in terms of looking at going ahead. We also expect some softening on the prices. So I think, as a combination of the 2 going ahead, I think we should be able to cover up a chunk of this kind of a deficit in terms of what we are seeing.
In the interest of time, we will take that as a last question. Thank you to our panelist and to all the participants for their valuable questions. May I now request Mr. Amit Syngle to please share his closing address.
Okay. Good. Having spoken to you, I know that there have been far more requirement of questions and so on and so forth. And possibly, I think what we'll have to do is the next time is we can keep maybe the presentation a little bit more smaller and far more crisper to that extent, so that we can accommodate more questions to kind of come in. But I'm really thankful to all of you in terms of coming and joining us for this meet, and hope we have been able to answer some of your queries strongly. And I see that wishing you all the best, and keep safe. Thank you.
Thank you, everyone. We close our investor conference for Q1 FY '22 results today.