Asian Paints Ltd
NSE:ASIANPAINT

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Asian Paints Ltd
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Earnings Call Transcript

Earnings Call Transcript
2022-Q2

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A
Arun Nair
Manager of Corporate Communications

Good evening, and a very warm welcome to one and all for the Asian Paints Investor Conference for the quarter -- year ended September 30, 2021. In the panel today, we have Mr. Amit Syngle, MD and CEO; we have Mr. R. J. Jeyamurugan, CFO and Company Secretary; we have Mr. Parag Rane, GM, Finance; and myself, Arun Nair, from Corporate Communications. May I now invite Mr. Amit Syngle to take you all through the presentation. Mr. Amit Syngle, over to you.

A
Amit Syngle
MD, CEO & Additional Director

Good evening, everyone, and welcome to the quarter 2 investor conference for the financial year 2022. For the next about 20 minutes, I will kind of take you through in terms of some of the brief highlights for the quarter.So one of the big things in Asian Paints, which we have been kind of really looking from the last 1942, has been the whole area of delivering joy, and that is something which possibly is one of the core values in terms of what Asian Paints has looked at. We say we exist to beautify, preserve, transform all spaces and objects and bringing happiness to the world. So I think today, this kind of emanates from what we used to say long time earlier that any surface that needs painting needs Asian Paints, and this is how it kind of really transforms now as we look at a plethora of areas in terms of -- which we are able to get as we move forward.Overall, when we look at the entire Q2, I think it's a great thing to see that overall, the growth story continues to be very, very vibrant, very strong. And I think our continued commitment in terms of looking at growing the top line very strongly, I think, has been something which we have been pursuing, and that has been the theme in quarter 2 as well.If you look at the numbers, the overall quarter 2 numbers, which is the blue graph that you see is something which is over the last year, very, very strong. So the volume numbers for Q2 are standing at about 34%, and the value figures stand at about 35%. So overall, if you see that volume and value have grown strongly together, indicative of the fact that a lot of premium and luxury products have been growing very strongly in quarter 2.The other area which you see is that we have the CAGR numbers, which is indicative of the fact that if we look at a 2-year CAGR and a 3-year CAGR, both the volume numbers and the value numbers are also pretty strong in double digits, as you see on the screen. And that is something which kind of really is kind of the story of the strong volume growths trend, which we have been seeing over the years, and this is something which has continued very, very strongly.If you look at the entire H1, in spite of the fact that the overall environment in Q1 was quite tricky, we had a month of May, where the second wave had basically a huge lockdown across the country. I think the kind of overall recovery in terms of what has been there from June is a very, very strong story, indicative in terms of the kind of growths, which we have been able to achieve in the H1 of the financial year '21, '22. So if you look at the volume growths are to the tune of about 58%, and the value is to the tune of about 56%, again, very, very strong growths.And the CAGR numbers are there for you to kind of just see that it is a story which is consistent over the last 2 to 3 years. So the 2-year CAGR is 17.5% for volume and 18% over the financial year '19. And similarly, in terms of value, if you see, for the 2 years, it is 12.3%, and for the 3 years, it is 12.7%. So very, very strong, and I wanted to really emphasize this point, that if we kind of look at basically the last 8 to 10 quarters, this is a story which has been very, very strong, which we have been pursuing as in terms of looking at really growing the market.Overall, this is another predicament in terms of what is clear from the point of view of the story which I just told you, that if you look at the entire quarters, overall, the numbers are very, very strong. This is a 3-year CAGR, which you see right on the screens, right from quarter 2 of financial year '21 going on to the quarter 3 of financial year '21 then quarter 4 of financial '21 on to the current quarter. So overall, I think you see the volume growths really in strong double-digit numbers, and this is something which has been growing over a period of time. And this is something which we are committed to in terms of really growing, and this is something which is also kind of giving company strong market share gains in the market as we kind of look forward.Some of the key things that we look at from the point view of the business. One of the big things in quarter 2 we have seen is that the growth has been led very, very strongly by the metros T1 and T2, which is centers across the regions. And this is something which is in a little bit contrast to, obviously, what we had seen last year where there was a story of T3 and T4, which is -- which was stronger than the T1, T2. But I think the good part is that even T3, T4 in Q2 has grown quite well. Obviously, the volume growth rates in T1, T2 far outstrip the growth rates in terms of T3, T4 overall. But having said that, T3, T4 centers have also done fairly well in quarter 2 to that extent. This also kind of reflects very strongly in terms of the mix because T1, T2 centers doing well is also reflective of the premium and the luxury products kind of going well across these centers.Overall, when we look at from the point of view of our growths, I think over the last year, very, very strong industry-beating growth, which is their strong and consistent market share gains, I think, which has been a very, very strong story which is emerging, and this is something, as I said, we are committed to.Both economy as well as luxury range is continuing to do well. When I say luxury, it includes premium as well. So we call it as the prelux and the lux range, both ranges kind of doing quite well overall. And this is happening both in the interior space as well as in the exterior space. Our continued kind of progress with respect to the upgradation of the market at the bottom of the pyramid continues very, very strongly. And therefore, we see the emulsions at the economy level also moving in a very, very strong trajectory to that extent.The Projects business, again, where in quarter 1 there was a slowdown because of the fact that the builder segment especially was affected during the lockdown in May, which was there, has picked up very, very strongly. We looked at changing our strategy in terms of looking at builders, government, factories, cooperative housing sectors very, very strongly, and that has been fairly upbeat. And it has given us a very, very strong growth. And we believe that now this would be indicative of a good growth coming in H2 as well as far as the Projects business goes.Some of the other categories, I think now the whole area of the waterproofing is something which is growing very, very strong, and this has become a real anchor for the company in terms of going forward. And this is something which continues to grow at a very, very feverish pace, and this is something where there are a number of new products happening, a lot of new areas in terms of what we are able to kind of get in, and this has really kind of given us a good propellant in terms of the overall growth.The other area to mention here is the wood finishes, again, a very, very important segment because what we feel is that wood as a segment is kind of increasing across the Indian homes in a very, very strong manner. And we have focused not only at the premium range, but also the luxury range, which is also pretty expensive, which comes in. But this is a category, again, where we have been able to kind of grow very well. And I would say that there is a strong market share gain happening against a lot of Italian players, which exist at the top end in terms of what are playing in the market. So I think very strong areas in terms of what we have been able to build in.If you look at some of the categories I spoke of, one of the products which has really kind of given us a very big leeway is Royale Glitz in the entire luxury interior emulsions, which is there. This is a new technology, which is supposed to be a world-class product, which comes in from the point of view of anti-stain and other parameters, and it is for the first time, giving the sophisticated luxury consumer a very, very strong and very sophisticated look for the house, which comes in doing extremely well and adding to the growth in terms of the luxury segment.We have All Protek, which is another revolutionary fire retardant paint for the first time, which has been introduced and I think it is a one of its kind product in the world in terms of what we have kind of introduced in the Indian market. Again, got a very strong response from the market, already launched.The third product I want to talk here is HydroLOC from SmartCare, which is our waterproofing flagship brand, which is there. This is a revolutionary product, which comes in. It has a technology in terms of penetrating into the wall as well as forming crystalline structure so that it can really impede the dampness of the wall in a very strong manner. And this is another product which has been launched in a very, very big way, and this is something which we -- is what is creating magic in the market, again, in terms of growing very well.We have Ingenio, which is another strong product, which comes in wood finishes in the luxury range there to that extent, something which gives top of the mind, top of the durability in terms of -- from the angle of how people can look at their wood finishes, very good and high gloss and mat levels in terms of the finish which it kind of gives.And similarly, we have 2 other products, which are largely in the undercoats category. One is the Tile Grout, which is a strong product from our waterproofing range, and we have the MDF Filler, which is something which goes for the wood finishes. So if you look at the common story here amongst the product is the innovation story, which comes in. All these products have basically a unique technology, which is world class, which is we are bringing. And I think that is something which we think, as Asian Paints, we are proud of because in each of the category, it is innovation which is kind of holding the whole stake in terms of making the entire category grow.We move on to some other areas in terms of what we have been able to do. One of the big areas Asian Paints always has followed is in terms of looking at exploding our network presence across the country, and this is something which has been going on for some time, and this is something which we have been focusing on in Q1, Q2 this year as well. This also kind of really gives us the upgradation focus, which we have in terms of getting an unorganized customer into an organized smart upgrade in terms of emulsions.One of the big things, which I wanted to share with you, is that we have looked at really expanding our rurban footprint. In last 2 years, we have really worked in terms of almost adding 40,000 new retail points, okay, in terms of -- some of the retail points are direct and some are indirect, in terms of what we are able to kind of really take on in a very, very strong manner, which kind of really explodes our presence across the country in a big way.Added to this is our Colour Worlds expansion, which kind of really keeps on growing every year, and this is something which we keep on putting on the tinting machines in the market, which gives us very good presence in newer towns, newer suburbs, which are coming up, some of the smart cities, which possibly are coming up in strongly, and that's what is the foray, which is there.Retailing, again, has been a strong strength. There is no other company which possibly has invested so much into retailing and consumer experience, and that is something which, today, we have close to about 500 stores, which are there, which we call as the Colour Idea store, and we have added about 16 new Colour Idea stores this year in terms of taking this forward.The other big kind of retailing world-class standard is the Beautiful Homes stores, which we have been speaking in the earlier meets with you as well. Now these are state-of-the-art, high-tech phygital stores, which basically offers consumers a physical and a digital experience, which is unmatched. And this is by its own standard, one of its kind of a model, which is there in the world today, offering a customer everything under one roof regarding home decor. And this is our entire stores, which are doing extremely well. And now we have 26 stores, which are functional, which are now -- and we will basically keep on adding newer stores by the end of March, and we hope to have a good number of about 35 to 40 stores by the year-end in terms of going forward. So this is a continued initiative in the area of home decor, which continues to that extent.So this entire story of Beautiful Homes then transgresses into the whole area of share of surface, transition to the share of space. So I think this is a disruption in terms of what we are taking. And we think that it kind of -- the whole area of home decor really adds on to the core business in a very strong way because the consumer is the same, and we use the entire data in terms of looking at catering to the consumer from the CRM so the person who's using Asian Paints on the surface moves on to using Asian Paints in the space, within the 4 walls, and vice versa to that extent. So I think it's a very, very strong way in terms of really complementing the core business of Asian Paints in terms of going forward.Overall, all the categories, which are kitchen, bath, furnishing, lighting and furniture are doing extremely well at the Beautiful Homes stores, and we are furthering that in a very, very big way. We have done extremely well in the furnishing area, where we had aligned with another company called Pure in the market. And this is a very strong foray, which we have taken in terms of going ahead.The overall decor story continues to be strong. We have our Nilaya wallpapers, which are in a very strong way, which come in, and we have the Royale luxury finish in terms of -- which has various variants. I spoke of the Glitz range some time back. We have launched the Sabyasachi set of wallpapers and home furnishings in a very, very strong way. In the recent time, you would have seen certain print ads in terms of what we have taken, which have been designed by the master designer himself, Sabyasachi. Some glimpses in terms of what they kind of look. I think they've really caught the fancy of the market, and we see a very strong response coming from people in terms of really adorning Sabyasachi wallpapers and looking at Sabyasachi furnishings together, offering a home a very, very new, unique look in terms of how it really comes about.So overall, I think this is a category which is doing well. Furnishing is taking place. It is kind of also elevating Asian Paints into the luxury, reckoning with all the architect and designers in a very strong way, and we feel that this is a strong way in terms of really building a top end luxury portfolio in a very big way in terms of going.The other big differentiator has been the area of services, which is a very, very unique differentiator. No other competitor has the range of services which we have, and therefore, Asian Paints pride itself in terms of really creating a service brand by itself in terms of what has been done in the last about 4, 5 years. We have now a Beautiful Homes Service, which is a turnkey service, right from the space of really renovating your house or a newly acquired home or a flat, which can be done totally by us. It is really something which has gained traction and something which is really very successful.More than 500 sites have been booked, and I think we are taking on some of the companies, which have been in this space in a very strong way, which are offering home decor at your convenience, sitting at home, in a strong way. And this is something which is a unique thing, which only in the industry or paint industry Asian Paints offers.The second big service is the Safe Painting Service, very, very strong momentum here. This service overall, as it kind of really goes, will become a strong percentage of the total business of the company and very strong momentum, and this is something which consumers are finding it very, very strong, and we are able to do and grow here in a big way. It talks of mechanization as a very, very strong way. It talks of the entire area of sanitization, which kind of comes along with it. So it's a big service, which is there. And we think that this is a service standard, which Asian Paints is kind of appropriating and taking, which no other player in the industry has kind of taken over. And this is something which is unique as far as even the entire global standards go.Now coming in terms of the overall, I must admit that the entire inflationary trend has been really unprecedented this year. We have never seen, I think, in the last about 3 to 4 decades, inflation which is so strong, which is there, and overall inflation is closer to about 18% to 20% levels when we see from a perspective of Q3 of last year to that extent. So overall, I think huge amount of inflation, which we have been seeing, and this is reflected in the chart, which you see in front of you. So if you look at from the margins of Q1 of financial year '21 to basically Q4 of financial '21, we had basically looked at about some kind of inflation kind of affecting the gross margins strongly there.But I think the bigger transition has happened when we looked at the quarter 1 of this year, where basically there was almost like a 15% material inflation, which is there. So we looked at in terms of taking price increases in terms of -- and there were price increases taken at that point of time to take and see some part of the inflation we could set up -- set off. But we saw another 6% material inflation coming in quarter 2, which is there. We could take another 4% additional price increase at that point of time to really look at in terms of what we can do to stem this trend in terms of going.Now one thing which I wanted to put forth is that I think Asian Paints has the capability in terms of taking the price increases. That has never been the concern. I think the concern has been clearly 2 areas. One is the effect in terms of the stability of the market because what we have seen is the price increases are very high. It creates a huge amount of instability in the market in terms of the rates which are offered to the consumers. And then it kind of creates a lot of confusion with respect to what the consumers is kind of purchasing because it totally depends on which retailer is kind of stocking, what kind of material at what price to that extent. And therefore, taking very, very high price increases is detrimental in terms of the stability of the market.The second area, which is very important, is that there is a certain price elasticity in terms of how consumer looks at price increases to that extent. And we chose to kind of take this type of increases given the fact that we were going through a transition of the second wave, which was there, and we wanted to kind of really give a big boost to the consumer confidence. And that is how basically these price increases were taken, which were obviously, I think, not commensurate with the total inflation in terms of what was there. But as I said that in the past, we have never kind of taken increases which are more than 3% to 4% in any year to that extent. And this time, it has been unique in terms of the way the overall inflation has panned out.When we look at -- on the basis of this, when we look at -- obviously, I think the top line numbers, as I shared with you, have been very, very strong. But I think this kind of affected all the businesses very, very strongly. And as a matter of fact, the entire paint industry and the coatings industry is affected across the world because of the inflationary trend. When we look at our International business as well, I think today, the top line across various regions has been fairly good, if you look at. So the Middle East and Asia, if you look at from the point of view of overall revenue, I think, has been good. What we got affected was clearly in Egypt and Ethiopia, which basically where the top line has not grown, if you look at both from a point of view of Q2 and the first half of the year to that extent. But I think Asia and Middle East have been pretty strong from that point of view as we look.I think the whole area which possibly came as a problem has been the overall PBT, if you see. The PBT numbers have got strongly affected because of the margin situation, which is there to that extent. And therefore, overall, when we look at PBT, there is a loss of about INR 17 crores in Q2 and in H1, a PBT loss of about INR 28 crores as far as the international operations go. And the losses have been kind of across the various markets, given the fact that the inflation has been very high. We have taken increases here as well to that extent, but obviously, the increases are not in possibly in line with the inflation, which is kind of taking place. So that's the international update in terms of how it kind of looks.When we look at the overall Industrial business in terms of the 2 joint ventures, which we have, the PPG-AP, which is the auto OE and the refinishes venture, if you look at -- I think the top lines have been strong in terms of how you see it in terms of both from the point of view of Q2 and H1. And Q1 was not too great here, but I think Q2, the business has really rallied in terms of giving a very strong 33% kind of a growth, which has come in Q2; and H1, which is the first half of the year, looks very strong in terms of a 72% growth there.When we come to possibly the PBT here, again, on the half yearly basis, we are still kind of sitting on a positive in terms of how we see. However, on the Q2 level, the margin pressures have been there here while we have taken some increases, but in the industrial zone, it takes a little bit of time to kind of get the price increase implemented. And therefore, we see a PBT loss of about 13% here as compared to the previous year as we see it.Similarly, if you look at the JV 2, which is the AP-PPG, which is largely in the area of protective coatings and powder coatings, which are very strong businesses for it, what we see is that strong top line growths both in Q2 and H1. In fact, H1 stands at almost about 92% kind of a growth. Q2 is about at a 55% growth. The -- if you look at the PBT numbers here, the PBT numbers are overall good from the point of view of H1, which is there since we have grown over the last year numbers. However, Q2 numbers have been lower to that extent, although the absolute numbers are small in terms of how we kind of look at it. So that has been the kind of industrial performance, again, basically the inflationary trends kind of weighing on the profitability a bit here to that extent.Going on to the entire business in terms of the home improvement here, I'll talk about 2 businesses. The Kitchen business, if you look at it, again, something which has been going great guns from the last 4 quarters. If we see, we have touched the INR 100 crores revenue mark milestone here in a strong manner. Strong performance in terms of Full Kitchen Solutions in terms of what we are able to deliver. Strong performance in Projects as well, which have been coming, which is reflecting in terms of Q2 growth of 70% and an overall growth of about 94% in H1.The good part is that we have been kind of able to kind of look at PBT also here, and we've been able to stem the whole thing of this thing. And now in Q2, basically, I think we are at breakeven at H1 level, given the fact Q1, there was some loss. We have still a small loss kind of a thing, as seen, of INR 7 crores there. Otherwise, I think this business has been doing very well. It is on an uptick business in a very big way.And when we come to Bath business, again, very strong performance here. And we see that overall, what we have grown is 69% in terms of the quarter 2 and about 83% as far as the first half is concerned. PBT is also strong, breakeven coming, and this has been the business which has been turning for the last about now 3 to 4 quarters to that extent, and that is something which is a very, very strong signal, which is coming. And both businesses have been turned around now, and they have started basically looking at breakeven plus some small profits, which have started to come in both the businesses combined together.You must note here also is that the inflation here was not that high as compared to the paint and coatings kind of a zone to that extent, and that is something which is a lesser impact while we have taken some price increases here as well.Some of the new introductions here, which we have done, these are like real premium luxury kitchens, which are offered. Some of these kitchens come at -- are costing about 8 lakhs to 10 lakhs. It talks of some unique materials, unique design in terms of what they offer. And this is something which is something -- which has a new foray, which is there, which is kind of being accepted very, very strongly. We have looked at even new wardrobes, new vanity cases, and therefore, the whole kind of zone, which is coming in a very strong manner.Overall, when we look at the entire stand-alone financials after you have seen all the businesses, which is there, what we see is that from the point of revenue, as I pointed out, very, very strong numbers in terms of what have come in. On the left-hand side, what you see is the quarter 2 numbers, which are there, a strong 36% growth, which is there. Obviously, I think from a gross contribution point of view, this thing is just about a 7% growth, which is coming in. I think the issue very clearly is because of the whole area of inflation. We see that there is definitely a dip with respect to PBDIT, PBT and PAT, accordingly, as we see, and that is something which possibly is because of the gross margins, which have shrunk almost by about 975 basis points, if we look, for the quarter.And if we look at from the point of view of H1, I think the situation is still strong from the point of view of overall numbers. Revenue numbers are up, as we saw, about 57%. The gross contribution here is better. PBDIT numbers are still positive in terms of -- which is there. And so our PBT is at about 16% overall growth. So I think H1 numbers are still better, although there -- here itself, what we see is that there is also a gross market margin contracting by about 837 basis points for the first quarter as well.So overall, what we see is that I think very strong top line growth, which are there and for the quarter. I think the gross margins got affected very, very strongly from the point of view of the higher inflationary trends, which are there.Looking at the overall consolidated numbers, again, the revenue number is strong for the quarter 2, which is at 33%. The gross contribution is just about 4%. The PBDIT numbers have -- is definitely a concern there at about 29% degrowth over last year's. PBT is less by about -- close to about 28%, and PAT is similar, about 29%. Again, here, the gross margin contraction has been about 90 -- 966 basis points, which are there, for the quarter. The H1 story is, as in the case of stand-alone, is much better, obviously, with the top line above 50% and PBT at about 11% in terms of what you see and PAT at about 10%. But here also, if you look at from the point of view of gross margins, it is about 816 basis points lower to that extent.Overall, I think when we look at PBDIT margins for the first half from the previous listing, it is lower by about 680 basis points. And I think a lot of measures, which have been taken in terms of looking at propping up. While at this point, I must highlight that I think the company has taken a lot of measures here as well with respect to cost controls, looking at in terms of price increases, in terms of what has been taken. By and large, if you look at, the overheads have been kept under control to that extent overall. There have been marketing expenses to kind of fuel the entire story of the volume and the value growths in terms of what we have taken over a period of time because we wanted to be consistent with our stance in terms of taking the top line forward.Dividend. Again, we have declared an interim dividend of 365%, which is higher than last year interim dividend in terms of what was paid to that extent. And we think that this is something which expresses the confidence in terms of how we want to kind of go forward with respect to the H2 of the balance here.Looking forward, I'm sure there are going to be a lot of questions in terms of what to have. But what is very clear is that the overall demand conditions look fairly good. We have a festive season, which is doing well. And we see that now with the third wave becoming a little bit distant to that extent, the consumer confidence is back in a strong way. Good monsoon is something which has given a very, very strong sentiment in the market, and we feel that the entire T3, T4 markets would kind of really do very well in terms of the -- both Q3 and Q4 going forward.We also see an uptick with respect to the real estate, which is kind of coming strongly. And therefore, I think the builder segment, with the construction going up, will start looking up, which will kind of fuel both the industrial products as well as the project sales in a strong manner.As we look at overall, I think the organization has taken a lot of steps in terms of looking at fueling this growth. We also see that we maintain all business protocols in terms of COVID controls and what -- sanitization controls, which we are kind of taking. We've also got almost 90% of our people across the company, eligible people who have been vaccinated twice. So I think the confidence is very strong that we should be able to kind of really go for very strong growths as we look at the future.Overall, from a point of view of inflation, we think this is something which we will have to live with for some time. There doesn't seem to be any reprieve now. We are just hoping that we should not see another bout of increase in terms of this kind of going forward, but this is -- inflation is here to stay, definitely to that extent. We are looking at a series of actions, which we want to kind of really look at. Namely, we are looking at some aggressive price increases in terms of what we want to kind of do. We are looking at areas in terms of formulation efficiencies, cost control and a very, very clear, regimented manner in terms of looking at seeing so that we are able to kind of action this for the quarter 3 and quarter 4 as we kind of look forward.Overall, I think the international sector is a little bit of a concern, especially the African markets, which are there. We are taking some steps in terms of what we can address there in terms of going forward, and we are confident that we would be able to correct some areas as we look forward to it.So thank you so much, and thank you for paying attention to the presentation, and we are now open for some questions.

A
Arun Nair
Manager of Corporate Communications

Thank you, sir. Today, we have participants joining on Zoom media platform and also via telecon-ing platform. [Operator Instructions] Moving forward, we have our first question from the telecon-ing platform, Mr. Abneesh Roy from Edelweiss.

A
Abneesh Roy
Senior Vice President

This is Abneesh Roy, Edelweiss. So I have got 3 questions. First question is on rural and overall volume growth. So rural, you have put out a very positive outlook. If you see, HUL has been a bit cautious. And Nielsen especially has said last 2 months, rural FMCG is now at 1/3 of urban FMCG and has come down sharply. So how confident are you of your outlook? That's the first one on the rural volume.On the overall volume, H2 has a very high base. So given that, are you content of a double-digit volume growth on Y-o-Y basis in the second half?

A
Amit Syngle
MD, CEO & Additional Director

So overall, what we look at is that -- what are the signals we are getting in the market is that Asian Paints has taken some very strong steps as far as the rurban markets are concerned is. And in T3, T4 centers, we have looked at expanding our network. We have opened up, as I briefed in this thing, a lot of retail points, so overall to that extent. We also see a lot of upgradation, which is happening from the unorganized sector to the organized sector, as we saw -- see it. The whole area of monsoons have been pretty good, and that is a positive segment, and we think that, that is a boost, which is definitely going to happen in the aggregating economy.All these factors are indicative of a good growth, which we see, especially in the rural sectors going forward. And this is basis -- our experience that even in Q2, when we look at rural centers, while T1, T2 centers have done much better, but I think, as I said, T3, T4 centers have also done equally well. So I think we see a lot of opportunity from the point of view of upgradation, from the point of view of demand for newer categories like waterproofing coming and also in terms of the fact that the sentiment is going from -- good from the monsoons point of view. So I think we are pretty confident that we should be able to kind of log in double-digit growths here as we look at the second half.

A
Abneesh Roy
Senior Vice President

So that's very helpful. My second question is on the broader strategy level. So since you have taken the leadership at Asian Paints, I see very high focus on market share and expansion into adjacencies. Is this the right time to do it given 4-decade high gross margin pressure? Now if I compare your results to HUL, I find complete extreme. For example, in volume growth, you have done extremely well, aided by market share expansion. So 34% volume growth versus 4% volume growth for HUL. But on gross margin, it's completely different and EBITDA margin, completely different. So HUL EBITDA margin is only 45 bps compression. In your case, 900 to 1,000 bps.So my question is, given such high gross margin pressure for everyone and including you, would you need to temper down your focus on market share and going into adjacencies? Launching full-page ads, for example, for your home furnishing, obviously needs money. Similarly, in terms of focus on market share, you will grow faster than the peers. But again, would you need to focus more on profitable volume growth rather than just the volume growth? Because you did say that next 1 or 2 quarters, I think margin pressure will remain.

A
Amit Syngle
MD, CEO & Additional Director

So what I see is that -- I wanted to divide the answer into 2 parts. First, very clearly, this kind of inflation has been unprecedented. We have never seen this kind of inflation of 20% levels, which has been there in the past. As I said, for the last about 40 years, we have never seen this kind of inflation, which has been there to that extent. I feel that given the fact that what we have kind of put as clear plans for the next quarter in terms of the price increases in terms of what we are taking and some of the work, which has been done, from the point of view of material formulations and other price controls, I think we are quite confident that we should be basically, by quarter 4, definitely get into our EBITDA ranges and prop up the gross margins in a strong manner as we kind of go forward.We feel that our entire work, which we are doing in adjacencies, which is the area of home decor and other areas, it's not something which is so big that today, any spends in those categories can affect the core business margins to that extent. The core business margin story is only because of the very high inflationary trend in the raw materials in terms of what we have seen in the coating industry to that extent. And what we are very confident is that going forward, we would still kind of retain our stronger strategy with respect to the volume growth, which should be intact, because that is a strategy which we have taken very clearly.But along with that, we have a clear plan in terms of how we can look at stronger price increases in terms of getting the margins back. I -- we think it's just a matter of time in terms of getting that thing done. It's not something which is a very big area of concern, which we are seeing, and I think the whole focus is definitely back to profitable growth.

A
Abneesh Roy
Senior Vice President

So that's very helpful. Last question. So when any company sees 34%, 35% sales and volume growth, there is always operating leverage. If I see your growth in EBITDA margin comparison, both are in the range of 900 to 1,000 bps. So what is the issue here? Is it very high ad spend? And if your volume growth is anyway so good, why do you need to spend so much on advertising? Is it again adjacency, which is taking away a lot of the advertising spend? And any other line item you want to highlight where the operating leverage has not worked?

A
Amit Syngle
MD, CEO & Additional Director

So there are 2, 3 areas. One is that we feel that when you look at the overall marketing spends or the media spends, which we are making, we think, as a good brand, there is always a certain share of voice, which you need to kind of maintain in the market. We need to kind of really think about midterm to long term as far as the consumer is concerned. Marketing is not like an on and off switch, which you can kind of take off the spends in 1 quarter, get them back in the second quarter to that extent. And I think if you're a long-term player, you would definitely look at possibly seeing that marketing spend is a very, very strong part of the fact in terms of how you kind of really retain your brand equity in the market in terms of going forward to that extent.As I said, the larger spends in terms of marketing are obviously in the core business to that extent, which is happening. And therefore, it's not about adjacencies in terms of -- which are kind of taking money in terms of going forward.The other area, which is there, is that we see that from a point of view of variable overheads also. Freight has been a very, very strong kind of contributor, which basically the inflation in the freight is extremely high because of the diesel rates and other things, which have happened in the market to that extent. And therefore, that is another factor, which is possibly also really contributing in terms of the overall higher overheads, which have kind of happened, and they're pushing in the gross margins overall.So I would say that -- I don't think so that it is a good idea that we should kind of really see that we should really curb the overall marketing spends. But yes, I think overall, when we look at both Q3 and Q4, we are looking at a measured stance in terms of what we need to kind of spend in terms of -- for a real good growth in terms of what we want as we go forward. Because as I said, I think the focus definitely would be on profitable growth.

A
Arun Nair
Manager of Corporate Communications

Thank you, sir. Our next question is from Mr. Manoj Menon, who has joined us from the Zoom platform.

M
Manoj Menon
Research Analyst

Thanks for a brilliant disclosure, friendly presentation. Congratulations for that, a welcome change over the last year, 1.5 years. I've got a few questions actually. So should I just go ahead? Because some of them are interlinked so just allow me to kind of maybe just speak out.So point number one, for a large company like you with probably an 80% mindshare, 70% profit pool share and a 60% value market share, these are unprecedented times, but I'm a little wondering or confused that why are you not exercising your dominance in the market in ensuring profitable. So I understand that you did mention that in the next 6 months, 1 year, which I don't really care, sorry, that's too short term. But when you're hit with a lot of uncertainty in terms of, let's say, planning, for example, right, when input hits you, why did it stop you -- because you have that level of dominance actually. So that's -- I'm just trying to understand the way you're thinking currently, strategic versus tactical, because there are maybe a lot of tactical measures you might need to take given the competitive activity levels, which you may foresee in the next 12 and 18 months, right? So that's point number one. How does that thinking -- that's question number one. Should I just go ahead or kind of stop?

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Amit Syngle
MD, CEO & Additional Director

Yes. Yes. Go ahead.

M
Manoj Menon
Research Analyst

Sure, sir. Second, linked to this subpoint here, is that when I look at, let's say, a small player like AkzoNobel, which seems to have taken a double-digit price increase versus you in the mid-single digit again, there seems to be completely 2 different thought processes there in the market, you as a market leader and there's a company which is -- so that's question number one.The second is I'm not even sure it's even a relevant question to ask, but I'll still go ahead. Given the dominance what you have and when you don't take a price increase, obviously, the informal get decimated. Now obviously, in a capital society, it's not relevant, actually to even consider that, the way I look at it. But the question here is that what -- see, basically, there are 2 levels of growth, formalization and consolidation. Now if you accelerate the formalization and consolidation both very quickly, then your growth in the medium term in paints, I have to assume that it will be in line with industry growth, correct? How are you thinking about that construct kind of -- because there is market share gain, which is great. But at the same time, are you utilizing a lot of it? Or rather, are you front-ending a lot of it actually? So how are you thinking about the industry construct? That's question number two.And the third one, I'll stop here, is that when you spoke about formulation efficiency as one of the key drivers, if you can give us some examples just to understand what exactly you mean, it will be super helpful, sir.

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Amit Syngle
MD, CEO & Additional Director

Okay. So that's a lot of questions in terms of what you've asked. I will attempt to kind of answer some of them. See, from the point of view of overall profitability, when you kind of look at, I think what we are very, very clear is that, by and large, as we kind of look forward, we will look at, as we have shared earlier, that getting PBDIT in the band of about the whole area of 18% to 20% overall. So that is something which is a clear focus. And some time back last year, if you look at the price, prices were pretty benign, and we had hit levels of about 24% at that point of time to that extent. And that was the time when everyone was asking whether this would be sustainable in terms of going forward. So I think that some of these variations will kind of come in as we kind of see the kind of inflations, which kind of really happen in the market.Having said that, we have taken close to about 7.5% increase, which is there in the Q1 and Q2 areas. If someone does then double digit by additional 2%, 3%, I don't think so it really kind of alters things very much to that extent if the inflation levels are to the tune of about 18%, 20%. I very clearly said that the larger consideration is that we can also take 15% increase and so on and so forth to that extent. The larger thing is today that have you got an eye on the consumer? Or have you got an eye only on your balance sheet in the short term, okay? I think it is very important to kind of see that when you are a player, you don't play to short-term strengths. You play to strengths which are bigger to that extent. And from that point of view, destabilizing the market in terms of taking very high increases kind of really does have an effect in terms of how market really kind of looks at it and with respect to the stability in terms of prices.Also, I think consider the fact that these are not normal circumstances, which are happening. We've had a Q1 where basically the entire May went for a toss. And then we had a quarter 2, which started where no one knew when the third wave will kind of hit us and there was always a perennial dagger hanging on the head in terms of this thing happening. At that point of time, taking increases, which -- would have really destabilized the demand to that extent, which is there.So I think as a leader, we need to kind of really respect the consumer and look at respecting the market dynamics in terms of which way it is go. I don't think so there are any short-term measures which could kind of really help us in terms of doing. So I would say that therefore, that's the largest stance in terms of what we have taken, and some other player taking 2%, 3%, 4% higher doesn't really alter the whole story. Again, you could have basically the gross margin shrinkage lesser by about maybe 100 basis points, but I think larger damage on the gross margins would still be there to that extent. So I don't really agree that 2, 3 percentage points here or there would really matter in terms of changing if another player is doing it to that extent.I think the other thing, which is very, very strong, is that when from an overall industry construct point of view, which we are concerned, as I said, we are very clear that we would like to kind of, from the medium to long term, clearly focus in terms of the band of 18% to 20% in terms of going forward. And we would have strategies to kind of look at in terms of what we can do. Our entire growth construct is from the point of view of growing the market. And it is not only about taking share to that extent. And I can give a lot of examples here in terms of how we have done. The moment we have got into Waterproofing business, we have kind of increased the overall pie of the market in a very big manner so that all the companies in the industry have now got into the waterproofing business to that extent.Similarly, if you look at the entire area of wood finishes, we have really looked at converting the entire French polish segment to a melamine and a polyurethane segment, which is there. So you are upgrading the industry and creating avenues for the industry to start growing into this because we realize that the overall per capita consumption today of India as compared to some of the West markets is something which is small. And therefore, it makes sense in terms of -- as an industry leader, kind of really upgrading and making the volume growths much higher to that extent. And we feel that if you are able to do one, I think it adds to your leadership, and you will be always much higher than the market rate because people will kind of take some time to catch on. And that is something which we will find that always from a volume -- value growth perspective, you will be definitely much higher than the overall market to that extent because you are working and expanding the market in a very, very big way.When we look at formulation efficiencies, what we really concentrate is that if there is a product, which is, say, Royale, we would look at the entire formulation, and we will see that as far as the formulation is concerned, are there any raw materials which you can replace in the formulation, which possibly are at currently trending on a lower side as compared to the original raw material, which is there in the formulation, so long as basically the customer-facing parameters of the product basically remain. And today, we do not kind of tinker with some of those attributes, which the customer is liking in the product in terms of going forward. And therefore, in a larger volume of the product, the moment you kind of really look at a replacement of a raw material to that extent with another raw material, which is coming at a cheaper price, you talk of a price saving, which comes and which kind of really helps us in terms of taking the cost out of the system.I would also say that in Q1 and Q2, we have almost saved about INR 300 crores coming out of the formulation efficiency measures we have taken. And this is something which is a strong initiative, which is on further.

M
Manoj Menon
Research Analyst

Actually, in fact, truly I was just taking some notes actually as you were speaking. Truly appreciate the disclosure friendliness, which you and team are continuing. Just one follow-up and then I come back in the queue. Is that -- can you speak about price increases, capability versus, let's say, price stability in the market? Is this a very specific market leader sort of a challenge? Or is it a general challenge for every player? The reason I asked is because when you have a certain presence in the market, let's say, when I go to [indiscernible] there are just so many Asian Paints dealers out there. It's a very Asian Paints-specific problem versus a player who may have like one store out there, right, from a price stability in that street or the cohort point of view. Am I understanding something wrong?

A
Amit Syngle
MD, CEO & Additional Director

No. I think from a player who has 1 or 2 counters in an overall market, it doesn't really matter because their overall turnover would be so small that it doesn't matter in the overall scheme of things to that extent. So for them, even if they take a 20% increase, it doesn't matter really to that extent. So I don't think so there is any comparison there.

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Arun Nair
Manager of Corporate Communications

Thank you, sir. Our next question is from Mr. Richard Liu. [Operator Instructions]

R
Richard Liu
Head of Research

Richard Liu from JM Financial. I just -- sorry, I'm harping on this again. I know we've spoken a lot about this, gross margin and et cetera, et cetera and stuff [indiscernible]. But I'm just referring to the statement that you made in the press release that you expect your gross margin to turn around strong in the quarters to come.I know you talked about [ asset ] price increases and formulation, et cetera, but you also mentioned that formulation, some of which is already sitting in Q1, Q2 in terms of benefits. I was just doing some rough math in terms of the way raw prices -- raw material prices are [ beginning ] -- unless and until you take -- actually not [ unless until. ] Even if you take the price increase of the order of say, 12% to 15% here on -- at one go, let's say, post Diwali. I'm not able to fathom a situation where you get back to your gross margin, which is higher than 40%. I'm sorry for harping on this. But if you can just take us through a bit of a detail on how do you envisage a strong turnaround in this gross margin to a level, which is, let's say, 42%, 43% or whatever it is that they're used to make earlier. And will you, as a business manager, be comfortable in taking a double-digit price increase in one go to really get your gross margin back there if that is what is required? Or do you think that there is something [indiscernible]?

A
Amit Syngle
MD, CEO & Additional Director

So 2, 3 things, just to kind of really substantiate this thing. I think possibly some of your calculations are based only with respect to the price increases, which are there to that extent. You are right. I think the pace of price increases will be a little more aggressive in terms of how we kind of look forward going, if we have to catch on in terms of the gross margins as we kind of look forward. And therefore, I think the next 2 to 3 months will kind of show that in terms of the pace of increases in terms of what we will take definitely there.The second area is the overall area of the product mix because I think when you look at from the point of view of premium and luxury products, where, obviously, I think the margins are much higher. And there are certain other categories in terms of where we could kind of really grow, especially, for example, if you look at even the area of wood finishes and other areas, I think strategically taking mix change is something, which is the other thing, which really kind of adds in terms of the overall numbers in terms of what is there.And the third area, as I said, is in terms of looking as far as the whole area of material sourcing and formulation efficiencies are concerned. There can be bigger gains, which can come out of it, because there are already a series of initiatives, which are kind of going on there.And the fourth point, which is also there, is that if you take a keen eye in terms of the work, which we are looking at from the point of view of overall overheads and also looking in terms of how we are spending for the top line, I think those are the areas we are looking at consolidated as an overall view in terms of taking this thing. But I think you're right in your assessment that there would be a larger aggression in terms of taking slightly higher quantum of increases in terms of -- as we go ahead for the next 2, 3 months in terms of looking at it.

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Richard Liu
Head of Research

Related to this -- so you're essentially saying that if you even have to take something very aggressive, and I'm not asking you to come into that number, let's say, something like a double-digit price increase, you are comfortable...

A
Amit Syngle
MD, CEO & Additional Director

No. I don't think so we would take double-digit numbers, but I think you could kind of vary the frequency in terms of the increases to that extent so that we are able to pace it out as we kind of go ahead.

R
Richard Liu
Head of Research

And the other thing related to this is that I see that the inventory that you reported for the September period versus what you posted on the [indiscernible] is not double digits. [indiscernible]. Is it fair to assume that you've locked in some [indiscernible] at Q1 prices now and have to deal with the higher Q2 prices at least for the time being? Or how does one look at that inventory? That's all from my side.

A
Amit Syngle
MD, CEO & Additional Director

No. I think it's a good observation in terms of what you have. It is right that the inventories have gone up in terms of both FG and the RM in terms of what is there. What I must remind you is that not only there is price inflation in the environment, the whole environment is also very, very uncertain. A lot of raw materials have something which are not coming in by very easily. A lot of raw materials are not available in the market to that extent. So there is quite a bit of anarchy, which is existing in the market in terms of the kind of availability in terms of some of the RMs, which are there to extent because some of the lines are getting choked in terms of the imported products coming from China. The shipping lines are not working well. There is quite a bit of chaos happening with respect to delivery times and so on, so forth, which has kind of really put a lot of uncertainty in terms of the conventional way we would like to kind of stock up both raw material and FG inventories.The other thing, which I must point out, is that the lockdowns have taken a toll with respect to basically plant closures, which are happening all across, and also with respect to the labor, which is kind of working in the plants, which has been erratic because of the location where it is, the state where it is and so on, so forth. And some of the labor is not turning up higher absenteeism, which is taking place in production and so on, so forth.Now I think one of the commitment to the market for a leader like us is that we talk of a certain level of an order fill rate to the consumer. So if an order is placed on to us, we will say that at least 90% of the order is serviced at one go so that we have the confidence of the retailer. In terms of that, that here is a company which is promising you an order because the whole paint cycle basically works on a certain ROI model. And if the inventory is not serviced in that stipulated time, it will kind of really go for a toss.So I would say that the whole inventory inflations, which you are kind of seeing both from an RM and a FG point of view, is to kind of safeguard the entire area of the order fill rate and our commitment to the retailer very, very strongly in terms of what we can supply. So whether it is a retailer, whether it is a big project, whether it is a builder site, I think that is the kind of commitment we have in terms of what we will commit. And for that, basically, what we see in the short-term measure, I think, the whole inventories have kind of gone up to that extent. But I don't think so this is a systemic change which is happening. It is only, say, change which is happening because of the current situation, which we are in to that extent. And I see this normalizing out as we kind of go forward.

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Arun Nair
Manager of Corporate Communications

Thank you, sir. Our next question is from Mr. Avi Mehta. He is joining us from the Zoom platform.

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Avi Mehta
Analyst

This is Avi Mehta from Macquarie. I just had one question on the thought process on margins versus sales growth. Now clearly, you've always said that you would want to focus on volume growth for the market. But in your -- when you say profitable growth, is the understanding that you would not look at percentage margin but look at more as EBITDA growth that you would want to achieve? Is that the construct that you would be looking for? Or is that 18% to 20% consolidated EBITDA margin range that you would want to stick with?

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Amit Syngle
MD, CEO & Additional Director

So there are -- very clearly, as I said, I think as an organization, we are committed in terms of looking at saying that the overall growths, which we want from the market, are coming from the point of view of growing the market very, very strongly and not just taking the share from people. In this, basically, there is a lot of focus in terms of some of the newer categories like waterproofing and other areas like upgradation, what we are talking of in terms of looking at going forward.So I think the commitment here is when I speak of profitable growth, we are saying that we will definitely see in terms of how we can really go forward and look at in terms of working on the product mix, in terms of seeing that we get good margins from the growth in terms of the way we are kind of growing so that basically, we are able to get that range of 18%, 20% of the PBDIT in terms of what I spoke of.So I think it is not one thing for the other to that extent. The challenge is something that we have to kind of look at both going together. But at the same time, I think the whole area of the volume growth philosophy of the organization will remain.

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Arun Nair
Manager of Corporate Communications

Thank you, sir. Our next question is from Aditya Soman.

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Aditya Soman
Equity Analyst

I'm Aditya from Goldman Sachs. So first question, will there be a buildup of inventory at the channel as well just in anticipation of price increases by you and especially now that -- I mean, even the channel would assume that there would be price increase.

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Amit Syngle
MD, CEO & Additional Director

So what really happens, if you look at the overall market construct, is that whenever you kind of announce a price increase, a week before or 5 days before the increase, there would be some kind of increase in terms of the pipeline inventories, which would happen with the retailers. But you must remember that the retailers would also kind of know that they have to pay the company immediately because it's not something which they can have a credit kind of a zone, which is there to that extent. So therefore, each retailer would kind of take a little bit of an inventory pileup depending on the increase as per their capacity only. And in a lot of many cases, what we see is that it is not that the inventory really goes up very high to that extent. It is only very few dealers who would be able to kind of do and block that kind of money in terms of going forward to that extent.So I think what we see is that it's not that there is a very big pileup in terms of inventory, which happens. Yes, there is a little bit of a blip, which comes in whenever there is a price increase, which is announced, but it's not that something where any retailer will pile up inventory for the next 2 to 3 months in terms of looking forward from a retail point of view.

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Aditya Soman
Equity Analyst

Yes. No, that's very clear. So basically, you are saying that there won't be a very significant inventory buildup. There could be some buildup but not very significant, right?

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Amit Syngle
MD, CEO & Additional Director

That's right.

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Aditya Soman
Equity Analyst

All right. And second question, in terms -- you also alluded a little bit in terms of shortages of input material. Could you highlight any specific materials that we are seeing a shortage or a potential shortage in the future?

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Amit Syngle
MD, CEO & Additional Director

It is across categories. So when you look at certain monomers, when you look at certain additives, whether a certain crude derivatives in terms of what you kind of look, I think it is kind of across. Even the basic raw material, which is titanium, which -- titanium dioxide, I think you keep on feeling the pressures in terms of the availability, and the lead times have really gone up, which is there to that extent. So I think all these areas are adding to the overall chaos.

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Aditya Soman
Equity Analyst

Fair enough. So it's fair to say that a significant proportion of your input costs then is undergoing shortages.

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Amit Syngle
MD, CEO & Additional Director

So I don't know what you mean by significant. But I think, definitely, when you look at a certain quantum of raw materials, as I said, a certain quantum of FG inventory, which is kind of coming in, all this is something which is really contributing to it. You should also realize from the fact that today, when certain regions are under lockdown and certain regions are open, there is also a differential stocking in our warehouses. It will happen because the free goods movement is not happening to that extent. And it also causes those disruptions, which are there to that extent. And similar things happen sometimes with the raw materials where the raw materials might lie at the port for some time given the fact that there would be some constraints coming because of the environment.

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Arun Nair
Manager of Corporate Communications

Thank you, sir. Our next question is from Mr. Amit Sachdeva, who has joined us from the Zoom platform.

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Amit Sachdeva
Analyst, Consumer and Retail

This is Amit Sachdeva from HSBC Securities. Sir, I have just one question, and it is about how your thought process is evolving on the general gross margin construct. Sorry, I'm going back to the same, little bit of debate again, but pardon me for that. See what I observed in the last 10, 15 years is that we have periods of crude going to 1 30, 1 40 as well. We have periods of unprecedented inflation in '12, '13 as well and now as well. And clearly, you have clearly shown that the volume growth is a priority, and you are executing really well. And the kind of network expansion that we've seen in the last 2 years is also very, very exceptional. So I clearly see that the choices you're making are different from what you have made in the past. Like in the past, when the crude was touching even 1 30, 1 40, we have never touched this kind of gross margin levels. At least, this is a choice you make. It's not that you're taking this margin. It's a choice you make in my view, and where you want to play and where you want to win and the choices you make as a result.So my sense is that -- the question here is that as a gross margin construct, not the EBITDA margin construct. EBITDA margin is a result of scale and every lot of other things. But is the gross margin construct, are you now going towards, say, well, I am comfortable with 40, and I don't have to do 44, 45. And we will drive that industry structure, industry economics towards more 40, 41 rather than 44, 45. And within that, we will maximize our EBITDA margin because it is about shaping competitive conduct as well. It is about how the industry structure is evolving new entrants. Is that thought process more nuance than just saying that, okay, by Q4, we'll have a higher margin and things. I just want to understand how we should think about your own cost structure thinking in the way you maximize your volumes and other things. I hope my question is clear.

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Amit Syngle
MD, CEO & Additional Director

Yes. I think definitely, it's -- so what -- I think what we are very clear in terms of looking forward, first of all, I would say that the past times, which you mentioned, of '12, '13 and other cases when the crude went to 1 30 is absolutely not a comparable thing.It was a time when only certain raw materials kind of went -- it is not like a scenario, which is now, okay? We have -- as I said, it is unprecedented. We have never seen inflation levels like this going from 20%, 22% kind of a zone because it is all across. It is not only in crude. It is not only because of solvent base. It is because of something happening across in titanium, in monomers, in additives, in terms of lot of other raw materials, which kind of go in terms of making the bulk of the coating industry to that extent. If you look at some of the international organizations, which are big, like PPG and other things today, everywhere, people are talking of 25%, 30% inflation levels, which has never been seen in the last 4 decades, I repeat, in the last 4 decades to that extent. And therefore, it is not a comparable situation to just crude going to 1 30, okay? So I think that is something which is a very, very clear point that the situation at the current point is a little bit more unprecedented to that extent in terms of this thing.And at this moment, I think what we are very, very clear, that you have to be a very, very clear balancer in terms of how you want to kind of really look at straddling to the situation. Like last year was a situation where we were straddling through across demand because of the lockdowns, which are happening across the country to that extent. And it was a very different scenario where there was a demand uncertainty to a different level, but the prices were pretty benign. And as I said, that we were able to reach even 46% levels to that extent, which is there. And suddenly, we are seeing a scenario where the whole situation has turned upside down in terms of the kind of margins, pressure coming because of the inflationary trends, which is all around to that extent.So I think we have taken a clearly measured stance in terms of taking a certain set of increases. We have also said, never kind of expected that the inflationary trends would keep on. So the headwinds kind of continued in terms of the inflationary trends to that extent. And therefore, I think what we are very clear, as I said, is that we will have to come back to the levels of that 18% to 20% with respect to PBDIT.And therefore, to shore up the margins, we'll have to kind of look at the series of actions, which I've already detailed earlier, in terms of which is not only with respect to prices, but across a lot of other fronts in terms of what we are taking. And I think we are pretty confident that as a leader, we should be able to kind of take that.

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Amit Sachdeva
Analyst, Consumer and Retail

Got it. No, that's very, very helpful, Amit. But just wanted to sort of get a last bit there that it is not a competitive conduct issue. That is not which is shaping your thinking.

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Amit Syngle
MD, CEO & Additional Director

As I said, I think as an industry leader with possibly, I think, the kind of thinking we have, we don't really look at the competitive conduct so strongly because there are so many new competition, which is just mushrooming up left, right, center. If we start looking at competition, we will not be able to kind of start concentrating in terms of our medium- to long-term strategy, which we have. I think we are very much convinced that we have a clear strategy forward in terms of growing the market, really kind of leading the market and bringing about far more industry level changes in terms of going forward as far as the overall consumption levels are concerned, the repainting cycles are concerned, the whole area of premium and luxury is concerned. So I think those are larger concerns to us in terms of what we want to shape up rather than looking at what competition is doing.

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Arun Nair
Manager of Corporate Communications

Thank you, sir. With the shortage of time, our next question will be our last question that we'll be taking. The question is from Mr. Tejash Shah. He is joining us from the Zoom platform.

T
Tejash Shah
Vice President of Research

This is Tejash Shah from Spark Capital. I'm just left with one question on the margin side. So one indirect lever of pricing intervention is cutting rebates. So I just wanted to check, has there been a change in strategy in rebates for last 1 year and core paints dealer network? And how do you see that changing and then the coming interventions that you want to make in the next 6 months?

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Amit Syngle
MD, CEO & Additional Director

So obviously, I think, see, if you look at the whole area of rebating and discounts, I think it kind of also varies from the overall market sentiment in terms of what is there last year. Truly, when the uncertainty was definitely much, much higher, I think the rebating levels were different in the market, and there was some bit of rebating happening differentially in different kind of quarters to that extent, which is there.As we look at this year, obviously, in terms of the whole transition point when we were from Q1 to Q2, there were some issue -- some things which we looked at in terms of how the sentiment can be improved with respect to some of the discounting strategies to that extent. But as we see forward -- going forward, if there are large amount of aggressive price increases coming, then obviously, I think the discounting and the rebating comes down in the market to that extent. So that's an additional saving, which really happens because the force of the price increase is pretty aggressive in terms of really incentivizing people to kind of lift that kind of a material and really that serving as a discount for them to that extent.So I would say that the whole area of input discounting kind of varies with: one, the market sentiment in terms of which is there; the second, the way you would like to increase your pricing to that extent. But I think overall, over the years, I think we've not really looked at too much variation of a larger stance in terms of the way we want to kind of deal with the inputs and discounts.

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Tejash Shah
Vice President of Research

Sure. And just one follow-up on the dealer network that you spoke about. So 40,000 addition in the last 18 months is a very heartening number. So any sense if you can give -- are these new addition nonpaint dealers getting added to the industry? Or you are actually gaining market share from expanding your network into other dealer networks?

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Amit Syngle
MD, CEO & Additional Director

So I think these are both direct and indirect retail points in terms of what we are kind of doing. This is not -- it is different from retailers where we are putting up our machines, which is the direct kind of ingress, which kind of takes place to that extent. These are just kind of areas, which we are trying to reach, even smaller geographies, which are there, look at even the alternate kind of a network, which would be people dealing in hardware, people dealing with electricals, people dealing in board, people dealing in cement to that extent and looking at really seeing that today, you are able to kind of create overall kind of a footprint where basically we enable the consumer to really have a very, very strong access to overall paints and waterproofing in a very, very strong way. And therefore, the numbers which we shared with you are both direct and indirect in terms of what is there. That is why the numbers are so large.

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Arun Nair
Manager of Corporate Communications

Thank you, sir. That was our last question. Now I request Mr. Amit Syngle to share the closing remarks, please.

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Amit Syngle
MD, CEO & Additional Director

So I think it is great, I think, interacting with all of you, and I think it is wonderful to hear some of the incisive questions in terms of what all of you have been asking. And I think we have been -- we have -- I have tried to kind of answer questions far more transparently, far more strongly in terms of the way we kind of look. We are pretty confident in terms of how we see going ahead both from a point of view of a profitable growth as we look at both Q3 and Q4 going forward. As I said, the times are slightly more unprecedented. But I think as a leader, we have very clear responsibility that we look in terms of growing the market and at the same time, we look at in terms of the return to the shareholders very, very strongly. So I thank you all for coming, and I think it's been a great time interacting with all of you. Thank you so much.