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Asian Paints Ltd
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Good evening, and a very warm welcome to one and all for the Asian Paints investor conference for Q3 FY 2021 results. Today, on the call, in the panel, we have Mr. Amit Syngle, MD and CEO. We also have Mr. R. J. Jeyamurugan, CFO and Company Secretary. We also have Mr. Parag Rane, GM Finance, and myself, Arun Nair from Corporate Communications. We will start with the presentation followed by a Q&A session. At the time of Q&A, I request everybody to raise your virtual hand and take your question. Requesting participants to introduce themselves and the company name before asking the questions. I may now invite Mr. Amit Syngle to take the presentation.
Good evening. It's a great occasion to be welcoming all of you for the Q3 investors meet. I know we are going through the pandemic, and therefore, the entire thing is something which is hosted through the digital media. But I'm sure that now all of you are quite used to this kind of investors meet. To start with, I think it's a little bit glitch in terms of looking at the presentation, and I'll take you through a small presentation before we really get into the Q&A. Okay. So what you see is the disclaimer, and I think people can just go through it before we get on with the presentation. It's not changing the slide. Can you physically change the slide? I think we're just getting the presentation on for you. Good. Okay, I think you can change the slides from behind, so now it's working. Sorry for the glitch in terms of this thing. That's the disclaimer for you before you're going through the presentation. We look at the overall market conditions, which have been there for Q3. What we see is that there is definitely a normalization, which has been seen through various activities and the rise of the COVID cases has definitely come down from the peaks what we had seen in Q2. And therefore, I think, overall, the country has done a fairly good job in terms of containing the spread of the overall COVID cases. Obviously, we have seen a lackluster Q1, which affected the entire industry across the globe. And then we had a second quarter where there was definitely some recovery. And then we have had the third quarter, which has definitely witnessed a real rebound in terms of the demand conditions as we see it. What we had also seen that there was a GDP decline in Q2 to about minus 7.5%, which now -- which showed a good recovery after what we saw is a steep fall in Q1. Overall, when we see the recovery is definitely supported by certain reasons which are coming clearly. One is, obviously, a very, very strong festive and a marriage season, which we saw in October. And it was also supported by a recovery in real estate and new construction, which we see due to various reasons across the country, which has happened. And that is something which is augured well across sectors, manufacturing as well as construction. We look at raw material inflation. It is something which is definitely on an upswing. We've seen the lows in Q2, but we see -- saw the crude prices going up. And now starting December, I think we are seeing definitely the raw material prices in the coatings industry getting affected both from the point of view of crude, crude derivatives and certain critical raw materials, which are there. And that is an impact, possibly, which will come in the next quarter. Overall, the ForEx movement has been pretty supportive, and we've not seen -- sorry. We've not seen too much of an inflation in terms of the INR to that extent. And what we see is it's been largely constant and possibly moving into a territory where it is getting a little bit stronger. We look at overall, the domestic decorative business as far as overall paint market when Asian Paints is concerned. We see a very, very strong growth in the paint market in Q3 following a very good and positive Q2 as well. And this is something which is giving a indication that what we have seen. This Q3 growth is coming also on the stance of continued strong growth in Tier 2, Tier 3 and Tier 4 markets. But the big change which we have seen in Q3 is that when you look at the metros and you look at the Tier 1 markets, those have also rebounded back, and that is a big change and a pleasant change, which we are seeing in quarter 3. Overall, if you look at the Asian Paints' Decorative performance, there is a 33% volume growth in quarter 3 for the domestic Decorative business and a very, very strong, good volume growth coming in each of the months, which is the October, November, December in the quarter, which is something which is heartening and gives us confidence that this is a sustainable demand in terms of what we were able to see after some time. We also see a change in terms of the large projects in the institutional business, where we have seen a strong growth, which was not evident in the quarter 1 and quarter 2, and that's another change which is happening. Overall, the product mix has definitely improved in a big way, and we see that the Premium and the Luxury range is doing quite well for the company, giving us a good value growth as well in this quarter. And we see that it is also well supported through our entire area of SmartCare and Economy emulsions, which has been the focus for some time. The services regime at Asian Paints has been very, very strong, and we have kind of looked at Safe Painting and San Assure, which is our sanitization service in a strong way. And that is something which has got a real good traction and has got a very strong good equity for the company in this period. When we look at décor, we are largely a very, very strong player in décor with respect to our wallpapers and with respect to our textures, what we do. And what we have seen is a very good impact of our ‘Beautiful Homes service, which we launched in this year. And in a short span, we have seen that this has something which has really given us good confidence. Overall, if you look at the gross margins for the quarter, they are much better than last year, supported by lower prices and some real great work which has happened in terms of driving the sourcing and the formulation efficiencies, which has added in terms of bracing up the overall gross margin. However, as going forward, the material prices -- raw material prices look quite inflationary. And this is effect which we have started seeing in December and the full impact possibly will be seen in Q4. I would now like to take you through a small introductory AV.[Presentation]
So what you saw was this new service. And as you see it, it's an amazing service, which basically gives you at-home experience wherein you can renovate your home, you can do anything with respect to anything in the home space to that extent, and it kind of is a very good opportunity to connect with the home consumer in a strong way. And this is something which has got a very, very good response. So that's one of the areas which has happened. The second area which I wanted to kind of bring to your notice is the work which we have done with respect to décor and looked at in terms of retailing. So that we are able to offer a consumer a very strong service under one roof of a large store, which is there. This is a very unique format, and we think worldwide, it is the only format which is kind of talking of a space of about 6,000 square feet, under which we are talking of everything which is in the home, available for the customer, backed with technology and backed with very super consulting experience, which kind of comes in. Let's see the AV. [Presentation]
So what you saw was all categories within 1 place on a world-class store, and this is something which has met with a very, very good response in the market. Going on in terms of looking at giving you a transition in terms of how things have moved from quarter 1 to quarter 3. Obviously, we saw that quarter something which was quite depressed, given the fact that April was absolutely a whitewash and May was partial to that extent. But quarter 2 recovered well at 11% kind of a volume and a 6% value growth, which came in. But quarter 3 is the point of time where we have got very good demand conditions, some pent-up demand, which is there and a good kind of festival and marriage demand, which came in, coupled with some of the construction activities, which began and got us a 33% volume growth and a 26% value growth. Going on to other businesses. Let's take a look at the international business. Overall, in the international business, also, the performance has been pretty strong. The volumes have picked strongly in Q3 there as well. We see good recovery in all parts of Asia and the Middle East, and that's something which has been very, very strong in terms of what we have kind of witnessed. So all units have reported a double-digit volume growth in Q3 and which is fairly heartening to see. Ethiopia, Bahrain and Indonesia are a little bit exception because of some of the external conditions going on in this country in terms of we see overall. The other good thing is that the pickup has been seen across the price segments, whether it is economy, premium or the luxury end and that is something which has augured well with respect to both the volume and the value growth coming in. We have done a very strong work in terms of expanding the portfolio in a very, very strong way. And the big introductions have been in the area of waterproofing, which has now gone to almost all the countries and all the units in a very strong way. And we've looked at focusing on the premium and the luxury emulsions so that we are able to kind of look at premiumization in a strong way, which kind of really holds very good in terms of looking at the imagery of the brand overall. In Q3, if you look at the margins, the margins were obviously supported by low material prices as well as the benefit of some of the cost control measures, which were put in. So therefore, I think overall, margins have been pretty good as is kind of seen in the graph alongside. Overall, international business revenue in Q3 was at about INR 700 crores, which is almost a 22.4% growth. And at -- on a 9 monthly basis, it was INR 1,756 crores, which is a growth of about 1.3%, which is really, really appreciated because of the fact that we had a quarter 1, which was really subdued. International business, profitability has also been very good. In Q3, we see it is at about INR 74 crores, which is a very strong increase over the last year Q3. And on a 9-month level also, we see it is at about INR 147 crores, which is a growth of about a 41.6% over last year. So overall, very strong top line and a equally strong bottom line with lots of initiatives thrown in. Some of the initiatives, which I mentioned, the waterproofing range has now got launched across Asia, Middle East, Africa, and that is something which is giving us good gains. And also what we have done is that we've looked at the bath business now coming into South Asia, which is Nepal and Bangladesh. And what you see is some of the stores in Nepal and Bangladesh, which is what has been put up. And therefore, truly, we are kind of leveraging the strength in terms of looking at the India market and looking at going international with them. When we look at the industrial business, we have 2 joint ventures with PPG. The first one, PPG-AP, looks at largely the auto OE part. The auto sector sales and the builds data, which is the work which is done at workshops where the cars come for painting. The data exhibits a very, very strong continued recovery, which is happening in Q3, which is a good sign in terms of what we see. And it is also represented by the auto sales data, which all of you are aware of. The OE business, therefore, reported a good double-digit value in Q3, and there was also a pickup in the refinish business, which has also been in the positive zone for the quarter. In the other JV, which is the industrial JV, which we call as the AP-PPG. The demand recovery, again, has been good. We see industries kind of coming back strongly with respect to the work of expansion and maintenance. And we have seen this has led to a double-digit value growth in Q3. Obviously, the segments which have kind of braced it up is the Powder Coating segment in a strong way and the industrial liquid paints, which also have been showing very, very good uptick from the last quarter as well. So overall, when we look at profitability, in both these businesses have been quite good and the profitability, especially if I look at the AP-PPG has been also coming due to the contained cost during this period. So I would say that's the status in terms of the industrial business as you look at it. Going on to the home improvement business. We have 2 businesses here, which is the Kitchen and the Bath business. Both businesses did quite well in Q3, double-digit growth in Q3 for the components as well as for the full kitchens, which is the big focus of the organization. Project segment also, too, saw a good pickup and on a sequential basis. And therefore, what we got, for the first time, we kind of registered an EBITDA breakeven in quarter 3 for the Kitchen business. So I think that is something which is really tremendous. As we look at the Bath business, again, strong sequential pickup, which has been seen in terms of the demand across the product segments, which are there. We have been looking at premiumization in terms of some of the products which are there, which is something which is seen strongly in the quarter. Projects business, like in kitchen has also grown and has shown quite a bit of improvement as the housing sector and the construction really picks up. Overall, when we look at the PBT level, again, a milestone where we are looking at a profit of INR 1 crore, which has come in Q3 on a back of PBT breakeven in Q2 as well. So I think overall, what we see is that there is a good top line, which is coming, overall improvement in gross margins, cost control, and definitely, there is a lower spend in marketing to that extent. But I think the top line is something which has driven the bottom line in a strong way. Finally, when we look at the overall summary at the company level, in terms of the standalone financials for quarter 3, the revenue uptick is 26.1%, which is a strong Q3 delivery. The PBDIT is at about 46.7% growth. The PBT is at 56.3%, and the PAT is at about 56.5%. So overall, I think there is a good uptick with respect to the overall PBDIT margins, which are at a big increase. When we look at the 9 monthly figure, the revenue is a little bit down negative because of the first quarter, which you are all aware, and it is at a negative 3.5%. The PBDIT, however, is at about a 4.9% growth. The PBT at about 6.8%. And the PAT should have been equal to the PBT, but for the fact that we had given a onetime deferment reversal taken last year on account of the tax rate change, which was there. So otherwise, the PBT and the PAT figures would have been the same to that extent. The PBDIT margins here have also gone up as kind of indicated. So I think that's the picture which is there at the standalone financials. At the consolidated financial level, in fact, the performance has improved when we look at from the profitability point of view. The top line is at about 25.2% value, which is the growth which has come in. The PBDIT is at about 49.5%. The PBT is at about 60.5% higher than the overall standalone. And PAT is 62.3%. So here again, I think there is a margin improvement, which is strong in PBDIT as you see it. On a 9 monthly figure, we have the revenue, which is the value sales is minus 3.3%. The PBDIT is 5.3% growth. The PBT is at about 7.3%. And PAT is at 1.7% for the same reasons, which I detailed earlier in the standalone and with respect to a onetime deferment reversal taken last year. So the EBITDA margins, again, are good here in terms of as you see it. So that's how basically the standalone and the consolidated results pan out for you. Looking forward, obviously, I'm sure that a lot of you want to know in terms of what really happens to this. What we see is that the Q4 demand conditions should be good, and there should be continued recovery in terms of the consumer sentiments. Given the fact that now we have the rollout of the COVID vaccination program and the paranoia in the customers' mind is going down because of the lower cases, which are coming to that extent. And therefore, we feel that the overall domestic demand recovery to become broad-based and really well entrenched. However, obviously, there is a bit of a caution that in case there is any surge of COVID cases or a different strain of COVID, which kind of comes in, okay, now what we are seeing is in some of the geographies globally, whether it is with respect to U.K. or Europe and so on and so forth, it could kind of really impact some of the supply chain and other things to that extent, although we are all hoping that it kind of really doesn't happen. The raw material prices, obviously, are seeing a sharp inflation, as I said, and this could be in the range of anywhere between 6% to 9% kind of an inflation, which is there. And we see that possibly, this will have an impact with respect to looking at -- seeing very critically, whether we need to kind of look at any pricing changes or passing it on to the consumer as we look at Q4. Overall, I think our focus is very clearly on innovation. We are looking at lots of new launches in terms of coming, and we'll continue our work through on cost optimization and looking up -- taking only business-critical spend across all businesses, and that is how we are seeing the overall quarter going ahead. Thank you so much for your attention.
[Operator Instructions] We have with us our first speaker. The question is coming from Mr. Abneesh Roy. [Operator Instructions]
Yes. Now I'll go ahead with the question. My first question is on the real estate recovery. So we have seen fantastic recovery across cities in terms of new sale of homes. So are you ramping up your capability in terms of [ assets in sleek] ? Even for the project business of Paints, are you increasing the team size across cities, going to more cities, because this can become quite big because after many, many years, real estate as a sector has come back. And what would be your thoughts on the real estate recovery? Is it more of near-term catch up? Is it because registration costs have been cut? Or do you see a secular 2 3-year rally in the real estate?
So overall, what we see is that we will have to watch for trends in terms of what's happening in the real estate and construction. What we are seeing currently, also, it is the larger inflation is coming in terms of the construction activities, which is to the low end, the mid-income groups to that extent. And the registration process has kind of energized some of the purchase of the houses in some of the metros, to that extent, especially Bombay, we have seen a good surge in terms of the number of houses getting sold and kind of coming in. What we see going forward that we will have to watch this trend more strongly because a 3 to 6 months kind of indication is not a very strong indication because till quarter 2, the construction activities were small, and therefore, we've just seen 3 months of it. So we would have to really watch whether this is sustainable in terms of going ahead, given the fact that now some of the concessions on registration are withdrawn, and the fact that today, people are watching out for the vaccination coming in to that extent. So we will have to watch that before we really kind of go big -- full hog in terms of looking at what needs to be done. Secondly, as far as capacities are concerned, the capacities are pretty comfortable, both with respect to the Bath business as well as with respect to the overall Paint business, and we don't see that we have any problems in terms of ramping up the production, which is required. In case there is a surge, which kind of comes in with respect to some of the demand from both the construction and the real estate business to that extent. So I think we are pretty comfortable with respect to the overall capacities.
We will take the next question from Mr. [ Chetan Chhajed ].
And congratulations for the stellar results. I'm a retail investor, I'm not from any company. I just wanted to know that the home décor segment that you are concentrating, are you taking any CapEx? That is one -- first question. In view of, like, are you anticipating any -- can you give any guidance regarding that segment that you are -- are you seeing that as a growth segment? And secondly, the growth that we have seen in this Q3 quarter, which is like -- is it a one-off growth? Or do you anticipate this growth momentum to continue, henceforth? Or I mean, I just wanted to ask whether it is due to just pent-up demand or are you expecting like structural like growth, which is coming in at this pace?
So as far as the capacities are concerned, what we are very clear is that both with respect to home improvement, whether it is Kitchen, Bath, we are pretty comfortable as of now. And we don't think that immediately for the next 6 months to a year that we need any augmentation with respect to the capacity, and we should be able to take care of the increased demand, which is coming. Second, as I see the overall demand, there is definitely a combination of 2, 3 areas in the demand, which has happened: One is, obviously, there is a festive demand, which has come in, which was also supplemented by the marriage season, which was there at that point of time; secondly, what we have seen is that there is a pent-up demand for -- from Q1 and Q2, which has come into Q3 to that extent; and third, we are seeing good demand coming from the construction segment there to that extent. What we definitely see is that some of the pent-up demand will get subsumed now in Q3. And when we look at the ongoing period, we might not see too much of a pent-up demand coming in there. Secondly, what we also would kind of see that the festival demand was kind of relative to quarter 3 to that extent. But having said that, overall, we think that the demand conditions would still remain quite healthy. And possibly going forward, I think we would kind of look at good growths coming in the further quarters as we see ahead.
Can you give any number for growth guidance?
Very difficult to give numbers in terms of looking at future growths.
Next question is coming from Mr. Shirish Pardeshi.
Amit, happy new year, and thanks for a wonderful surprise. I think I'm more astonished with 30% growth. And I think we are seeing that and I'm a strong believer because I recently did some travel across Maharashtra. I think 2 things I would like to indicate, I think, yes, my experience is deep down in Maharashtra is that the rural economy is really strong. But of course, there is a competition angle to it. So my first question is that how are you going to deal with the competition? And whether this demand is really going to stay from the unorganized conversion to the organized because really unorganized has taken a toll. That's the first part of the question. The second part is that you have seen last 2 quarters, the urban centers has been still picking up. So my strong feeling is that now you are giving a cautious view, but I strongly feel that quarter 4 demand is going to come back. So is there any thought on that? And the second question I have on home improvement, is how much is the project business is now? Because my sense is that project is one of the business which you have been harping on and I think there is a way forward, and you guys are going to do a wonderful job. And the third is last, if you can give some more color on home décor, what you have just mentioned that a big store. How many stores you're planning in next 2 to 3 years? I mean, not this year perspective, but maybe '21, '23, if any indicative number, if you can help me to understand.
Okay. See, as far as, I think overall, competition is concerned, what we are very clear is that as an organization and as a leader in the Paints market, we look at possibly only growing the market because we feel that the per capita consumption and the market is pretty low. And therefore, in all segments, whether they are waterproofing or wood finishes or even in terms of the wall coats, we think that there is a very, very big scope in terms of enlargening the market, and that is something which we keep on innovating in terms of looking at growing. Secondly, when we look at overall, from the point of view of rural plus urban, what we are very clear is that in quarter 3, we have seen very strong growths already coming from the metros, T1 and T2 cities. And these growths are not only from T3 and T4, which was the earlier observation, which was coming in quarter 1 and quarter 2. So that impact has already come in Q3 in a big way, and we are seeing the growths are pretty healthy, which are coming from the metros T1 and T2. And this is also because of -- that the paranoia about the COVID has come down and people are letting people in their homes, even in large societies to that extent, and that is something which is an observation across metros and bigger cities to that extent. So therefore, the phenomena of metro T1, T2 growing is something which is already on. And that is why I said that it is part of the Q3 growths in terms of what we are already seeing in terms of what's happening. As far as the overall projects business is concerned, that has been a focus area for us, not only with respect to home improvement but with respect to even projects. We are looking at really growing the projects business across segments. It could be large institutional buyers. It could be hotels, it could be industries and so on and so forth. And we are looking at a larger footprint there to that extent, and that has been a focus for some point of -- from some time to that extent. And we feel that it's a strong sector to be in, in terms of what is there. And that basically would remain as a focus in terms of going forward. And there is good growth are what is being anticipated. And the last question with respect to home décor, we have currently put in about 16 stores, which are spanning across various cities across the country. We are looking at this number in terms of looking at doubling this number as we kind of go ahead in the next about 2 years kind of a time, and we think that it's a very, very strong opportunity in terms of looking at now the whole area of the share of space in the homes.
Our next question is coming from Percy.
Hi, am I audible?
Yes, sir, you are.
Sir, I have 2 questions, and I'll put both of them upfront. So first question is, first of all, congrats on the amazing sales growth that you have clocked this quarter, and the question is relating to that. So when we do conversation and checks with paint dealers, obviously, always, there is some amount of discrepancy between what they say and what the company reports, and that is normal. However, this quarter, the difference was fairly large, much, much larger than what we would normally expect. In terms of your growth being much, much higher versus what the dealers were saying, which was very subdued. So just trying to understand what could be the possible reasons behind this? Have you sort of increased the number of dealers, and therefore, each dealer is now serving a lesser number of customers, therefore, when we talk to dealers, we are getting that kind of sense? Or could there be some other reason to this? So that is question 1. Question 2 is that your margins are at all-time high levels, and now you're seeing input costs going up. And in the past, you've said that 20%, 21% EBITDA margins are something that is a sustainable level. So would be interesting to know your pricing strategy broadly going forward? Would you want to sort of absorb this cost increase that has happened and let the margins revert to a more sort of historic levels? Or would you say that the margins have taken a step jump up permanently and instead of 20%, 21%, probably 24%, 25% is the new normal now?
Okay. Great. So when we look at the overall growth, I don't think so we have done anything substantial or very strong in terms of inordinately increasing our number of dealers or the network to that extent. It has been a normal expansion, which we have been kind of looking at over a period of time. What has really made the difference, as I said, was 1 was the pent-up demand, which has come in, the festival season being very, very good in terms of what we saw, coupled with the marriage season, which was there, which we saw in October and November to that extent. One big large difference which happened was that the metro -- metros, Tier 1 and Tier 2 cities, which were not growing at that pace earlier. And in fact, the metros were negative from that overall point of view of growth, they have sharply come back. And please remember it's a large potential, which is there in terms of some of these larger cities, and they have really augmented the overall growth in a big way. And they have augmented the growth with respect to even improving the mix, which has come in with the luxury and premium products kind of coming into that extent. The other area which has augmented the growth in a strong way, which is there, which might not be coming from the dealers very straight is also the large project sales, which have come in and there, what we feel is that large industries, some of the government spending and a lot of other areas have kind of gone up. And that has kind of given us a fillip in terms of looking at the overall demand going up. At the same time, as Asian Paints, we've always believed that there are always, we can expand the market. And we have been looking at expanding the market, both at the top end and at the bottom of the pyramid. And in the bottom of pyramid, what we've seen is that today, we have got a good success in terms of looking at getting the unorganized customer into the organized market to that extend, and that is something which is propelling the growth rates. And then there is an upgradation from the economy to the premium to the luxury, which is the second phenomena which we have been kind of driving very, very strongly. So this is all which is kind of cumulating in terms of giving the high growths, which you are seeing to that extent, and that is something, which, as I said earlier, a part of it is something which is definitely sustainable in terms of what we see in terms of going ahead. So I think that's with respect to in terms of the growth which we are seeing. Second, as far as the input, raw material prices are concerned, definitely, as I said, in December, we are seeing an upward trajectory. Crude had been already going up. And we feel that the raw material prices are definitely going to up. But as an operator, as a company, we have always believed in the philosophy that we need to kind of keep on offering customer a certain value for money. And if that elasticity of pricing kind of gets upset, it would upset the demand also to that extent. So I think what we are watching out is that whether the high inflationary pressures are there or are they going to settle, we're also watching the rupee very closely as to how the rupee kind of comes in. And based on some of these trends, we will take a decision whether we need to kind of pass on the entire thing as a price increase kind of a thing to that extent or we want to kind of look at in terms of absorbing some of the inflation, which is coming in. So that's a decision we will take in terms of after observing what the trends are around.
Our next question is coming from Mr. Avi Mehta.
And congrats on the performance. I had 3 questions, if I may. Just first, on a broad basis, you have indicated a focus on home décor with the new stores. I wanted to just get your thought process over here. Are you looking to be a retailer of multiple brands in -- which are third-party in nature? Or is this a test ground for you to evaluate setting up of new manufacturing or home brands over there? That is more a strategic question if you could comment, sir. The second bit was other peers have indicated that there has been very strong growth in niches in the coating segment, which is either stuff like seal paints, roof paints. I wanted to understand your thoughts on those segments and whether you are exploring them or is it not worth our company, just if you could kind of share your thoughts? And lastly, a bookkeeping, sir, is it possible for us to break the growth rate that we have seen this quarter, into what could be possibly driven by pent-up and which is more in your view, other factors? That's all.
Okay. When we look at the overall strategy with respect to the home décor segment, what we have taken a call is that we are looking at providing the customer one of the best technological experiences with respect to visualization, which we can offer to the customer with respect to what's available within the home. So much so that the Beautiful Home service's will showcase to the customer what's available or what the home would look like before the customer really gets into the home to that extent. So I think the visualization, and therefore, the execution is a very, very strong strategy in terms of what we've taken. As far as the ingredients of that kind of go, we already have a kitchen and a bath business where we have invested, and that's a strong investment, which is already there, which will kind of get subsumed in this strategy in terms of going ahead. In addition, what we have done is that we have looked at certain stronger tie-ups in terms of some of the other categories which have come in. And as the business kind of go ahead, we are taking strategic decisions in terms of getting into some of those segments, whether it could be furnishing, the furniture, flooring and so on and so forth, to that extent. Right now, the entire thing is in terms of giving the customer a very, very strong experience, which comes in, and that's how we are kind of looking at the entire area going forward. That's one. Secondly, when we look at the entire area, which you spoke of in terms of the strategization of the sale. The overall growths when we see it is very difficult to say that out of the total growth which has happened, what percentage is pent-up and what percentage is festive and what percentage is kind of coming from, say, the construction segment or from the metros T1, T2 kind of a city to that extent. However, as we see it today, possibly, some of the indicative things are that earlier, we used to talk of a multiple of the GDP to that extent, which is also not true now to that extent as we kind of go forward. So what we see is that possibly, we will have to live with this kind of a zone that the growths will continue to be healthy. It's very difficult to kind of really peg a number. In terms of what could be the pent-up demand, which would have gone in, which would not come in the fourth quarter? What would be the construction demand, which would be there to that extent? And therefore, segmentation of that is something which is not really possible to that extent. I forgot the second question which you had asked.
Sir, the question that I was -- there are peers who have indicated that niches are growing, which is -- we've seen very strong customer uptick.
Yes, yes. Yes. So as far as Asian paints is concerned, we really think that today, when a customer is buying for various usages in the house, okay? The surface segmentation as a strategy has not worked in India because the awareness with respect to paint is very, very small. And surface segmentation has worked largely globally to that extent where you have kitchen and bath paints and you have ceiling paints and kind of differences, which kind of come in from the point of view of flooring paints and so on and so forth. But having said that, what we see is that interiors is a very large portion, which is there and largely anyone who's buying paints, buys it for everything, which is ceiling, walls and everything combined. Niches work only with respect to certain of the products, which are at the high end, which could be with respect to luxury and premium products where sheen levels can be different in terms of the gloss which you get to that extent, or is the respect to your wood finishes where possibly with the higher premiumization and the luxury coats, you get more durability and more gloss and so on and so forth to that extent. So we feel that surface segmentation possibly is not a very strong growth vehicle as you kind of go ahead.
Our next question is from Ms. Sunita Sachdev.
I had 3 questions. The first is, I think we've seen a very benign raw material price strategy, which has kind of helped us to expand our product breadth as well as go deeper into distribution in the country for the last 3 to 4 years. Now that we are at the onset of a huge inflationary kind of a move, does the strategy change in any way? Or what would be the way forward in terms of how should we look at your product breadth and depth strategy?
Okay. When we look at the overall product strategy, what we need to kind of take care is not inflation or deflation, which is happening, but what we need to kind of keep in mind is the consumer. And so long as you are offering a product, which makes the sense for the consumer, has a unique selling proposition. That is what really matters. So when we look at possibly a value for money, smart product, there the -- I think, even if there is a inflation, we would like to kind of see that at a certain price point, whether the product is making sense for the customer with respect to the budget of the customer and what the customer perceives as a value coming out of that product. And similarly, for any high-end product, we see that today, it's not that the inflation and the deflation would kind of alter our product strategy in terms of going ahead. We would kind of be committed more to the consumer rather than looking at in terms of pricing, inflation and deflation in terms of deciding what the product strategy is.
So taking that forward, one would assume that there would be quite a lot of absorption of your raw material cost as you kind of press ahead to grow volumes?
So there are 2 views on it. So obviously, for the value for money, smart consumer, the elasticity of price is pretty weak in terms of what we have seen. But as far as the premium and the luxury segments goes, the elasticity can be increased there to that extent. And therefore, as I said earlier, we are watching trends, and we are looking at whether these inflationary levels are there to stay and whether what's really happening to the rupee, dollar parity to that extent. And depending on how the trends kind of come in, we would kind of take a call with respect to what segment, what products we would kind of look at increase in the market as we kind of go ahead.
And lastly, just switching gears. I know you guys have gained a lot of market share. Any sense of what kind of market share gains have we gained in the last 2 to 3 years in this product penetration strategy and market growth strategy?
See, those overall figures, as we see it are our published figures available from each of the competitors which are there. What we have seen is that over the years, we have been gaining market share every year. And even this year, if you look at the first half, we have been the fastest-growing company as compared to all the organized companies. So to that extent, there is a good market share in which has happened to that extent. And I think that's the strategy we bring ahead that we not only kind of look at market share gains, we also look at in terms of [ exploring ] the overall market. And as a leader, we believe that is a good approach to kind of take in terms of keep on looking at newer areas where you can really kind of get your product traction.
Our next question is coming from Mr. [ Kunal Chandak ]. [Operator Instructions] We will take the next caller. We have our next participant, Mr. Richard Liu. [Operator Instructions]
Hello. Am I audible?
Yes, sir. Continue please.
Operator, am I audible? Because I think the management is not audible.
You are audible, sir. You are audible, sir. Can the studio hear us? Continue with your question, sir.
I think you're muting yourself. Please unmute yourself.
I am not doing anything to audio controls actually.
We are able to hear you.
Okay. You are able to hear me?
Yes.
Okay, thank you. So that was the first part of my question, regarding pre-COVID and post-COVID growth. And related to this is that -- if I go back in time, you guys used to say that. We will not be satisfied till we get to a mid-teens level of volume growth which is what the trend growth should be. Now that you are far ahead of mid-teens -- sorry. Am I audible? Ma'am.
You are.
Yes, sir. We can hear you?
Yes. So I wanted to ask that, so earlier you guys used to talk about mid-teens volume growth being a good volume growth from your perspective and now that you are in the 30s. When you do your business plans for coming years, how are you going to -- how are you going to look at growth that is satisfactory for you. I mean is 30 the new mid-teens as far as what you will consider as good growth? Those are my 2 questions. Sorry about the trouble.
No, it's okay. See, first of all, your question is absolutely relevant in terms of saying that when we were looking at pre-COVID obviously, there was a little bit of a cautious optimism in terms of the way economy was behaving. But I must clarify, even at that point of time, we used to kind of register growths which are in double digits to that extent. And that is something which we have been doing for the past 2 years, so 12% to 15% was a norm in terms of what we have been doing. And that is something which was at the pre-COVID levels also to that extent. How we see is that, obviously, 30% is not a norm going ahead for sure. Because what we see is that there is a pent-up demand, which has kind of come in, in this number. And there is also a festive sales, which has kind of come in to that extent as we see in terms of going forward. And there's a irregularity in the pattern because, as I said now, there are metros in T1, T2, which have started growing, which were not growing earlier to that extent. As we kind of go ahead possibly, we will have to, for some time, look at very closely during month to quarter kind of a planning and not look at a yearly planning as we kind of go ahead because that's the best way to kind of look at this a little bit of an uncertainty to that extent in terms of going forward. It's very difficult to kind of say that what kind of levels the growth would kind of stabilize that because it will also depend on what the GDP levels really kind of stabilize that in terms of going forward. So I think as a combination, we would kind of look at a little bit of a short-term planning at this stage and keep on looking at a month to a quarter kind of a planning and then kind of as it stabilizes, we would be able to kind of better kind of predict in terms of what the growth rates would come for future.
Okay. And how do you reconcile this pre-COVID of 6% to 8% going to 30% post COVID? I've heard you about festivals and weddings, et cetera. But even if you take that into account, the confidence level of businesses post COVID seems to be exceptionally strong. This is still counter-intuitive.
So as I said earlier 30% kind of a growth, as I have been saying earlier. There is obviously a pent-up demand component. There is a festive component, which is kind of embedded in it to that extent. There is also the entire component with respect to the metros, Tier 1, Tier 2 cities kind of contributing to the growth, which were earlier, the growth was negative. And you can well imagine that the growth has turned positive there, which has added to the numbers, especially in the luxury premium segments to that extent. What we also see is that the construction segment and the large institutional business is back, so there is a component which is coming from that as well. So -- and there would be components, which would be in terms of the market share gains, which would happen from both the organized and the unorganized segment. So you can really break up into 4 or 5 clear slices which are there. Now I'm not very able -- clearly able to tell you that what slices, what percentage to that extent. But these are the 5 slices, which you could see in terms of the overall growth.
Our next question is coming from Mr. Anshuman Atri.
Yes. My question is regarding the change in behavior of customer during the COVID in the rural and urban. So are you seeing more repainting cycles or people who were going for unorganized or unbranded products now asking for products from Asian or other branded categories? Do you see a change in overall behavior, which can lead to better demand going forward? More sustainable one?
Yes. So I think one of the trends which we have seen that whenever there is a crisis, or whenever there is a larger natural kind of calamity, which comes in, people tend to kind of make safer choices. They kind of tend to go to a brand they can trust to that extent. So there is clear reason to believe that possibly, people would have navigated to possibly more trusted brands, which would be there in the overall organized sector to that extent. So that is something which is clearly evident in terms of what really comes out, and that's a behavior, which we have seen in the past as well to that extent, and that is something which possibly would have happened during this point of time as well.
And in the rural market, over the last 3 quarters, how has been the trend in terms of growth? Are you seeing it tapering down as the migrants come back to the metros or the rural is holding strong?
In fact, what we see is that both Q1 and Q2, the rural markets, which we qualify as the T3, T4 cities, they were growing very well. In quarter 3, in fact, that growth has continued to a strong level as well. However, I think the big change, as I've been saying, what has happened is that the T1, T2 and the metros, which were almost at negative growths or not growing very, very strongly, are the ones which have turned around the corner, and they have started growing at a good pitch. To answer your question, we are not seeing that there is any tapering down in terms of demand at the T3, T4 rural markets.
And sir, lastly, in terms of margins versus competition coming from newer categories, some -- like steel players have entered the paint category, seeing good margins. So what kind of margin range do you see as a safe margin for not attracting customers new players in the competitive -- new in the market?
See, that's a very relative thing in terms of -- if the new competitor who's coming in, if they are operating in some low segments at 6% to 8% or 10% for them, even 15% would be higher. So I think it totally depends on their orientation in terms of what they consider as a good margin. As I said, we are very clear that we will look at margins which are sustainable and we will look at possibly the consumer with respect to our pricing, so that we are able to offer a customer a good value for the price we are charging to that extent. And therefore, at the moment, what we see is that the consumer is a far more stronger area to look at rather than looking at competition and what they can get in and what they want really.
Our next question is coming from Mr. Aditya Soman.
A couple of questions from me. Firstly, did you see any sense of any increase in channel inventory in the period because as we sort of -- in anticipation of price increases? Or is this something that is also giving you sort of some confidence in volume growth in Q4, for example?
So till the time, the price increase is not announced, people will not stock, and that is something which we are seeing in the market very clearly that people. There is no inventory in the network, which has gone up or in the pipeline to that extent. What we see is that we have also not put any pressure in terms of stocking up inventory with our retailers to that extent. And we have a strong reason to believe that whatever has possibly got sold from us has got sold in the secondary market as well.
Understand. That's very clear. And in terms of pent-up demand, is there a -- is a better way of looking at it, just looking at 9-month growth, given that some of those consumers would missed out on painting, in April or may came back to paint in October, November, December when conditions were better? So there's still -- I would still think that there's some room that in 4Q, since you still are down Y-o-Y in 9 months that some consumers would incrementally still come back in terms of pent-up demand.
So see, actually, what -- the trend is very clearly that if there is a whole painting, which is related to the repainting or the maintenance okay? That will always kind of never go down. It will get only deferred. So it's very difficult to kind of say that what component of the deferment has kind of got subsumed in quarter 3 and what possibly will come in quarter 4 or quarter 1 of next year to that extent. That is point 1. Second, I think where there would be an opportunity loss would be that occasion-led painting where people would have kind of got into a marriage or in terms of any function at the home, I think that is a painting cycle, which you would have kind of missed and possibly. It would not come back till the time there's another event happening in the same house to that extent. The third area is the overall area of construction. So construction-led painting, which is new housing, which is coming, will always have a component of deferment to that extent and not an opportunity loss to that extent. So what we have reason to believe is, overall, to that extent, even if in terms of some pent-up, which has got consumed in Q3, there could be some pent-up, which would come in Q4 and Q1 as well. But very difficult to quantify really that what percentage is pent-up and what percentage is new kind of a zone.
Understand. Very clear, sir. And just one, in terms of the gap between volume growth and revenue growth? So this would largely be newer customers being added at lower price points, right?
No. If you see that these gaps have been there for some time in our overall value and volume sales over the various quarters, to that extent. And we have been very clearly saying that there are segments which are like waterproofing, under coats, the value-based emulsions, the smart products, which are there to that extent. And some of those products are going at a far larger clip as compared to the luxury and the premium products. And that is what is kind of creating this gap between the value and the volume. It's not the new customers who come in because the new customers can come at any price point. It could be at a luxury point, it could be at a premium, it could be at the economy.
But in this quarter, with sort of some of the demand coming back in larger cities and with luxury emulsions, it should have narrowed, right, but we haven't seen that happen as well.
Yes. But what we are also seeing is that with the luxury and premium also growing very well. The other set of products, which I mentioned are also basically growing much higher than what they were growing earlier. So it really balanced that whole thing and the gap is there as you see it what it is.
Our next question is coming from Mr. Varun Pratap Singh.
Congratulations on a very great set of numbers. And I think most of my questions have been already answered. Just wanted to -- Amit sir, have your comment on this home décor segment. I understand last quarter, you mentioned that we want to move from a surface décor to entire décor solution for customers. So -- and it was a very nice video that you played during this conference. And as a customer, I could kind of envisage that what kind of solution that Asian Paints is willing to offer or what I could get as a customer. But sir, if you could highlight in terms of what are the competitive strength that we are creating to make this category very, very large? I understand currently, it is highly unorganized. At the same time, you -- I mean, anything that you wish to comment on IKEA because IKEA is also getting very aggressive into this entire home décor thing. So on product level, how do we wish to compete? And second question in same category is who are we creating the solution for? For premium customer, economy customer, I mean, how -- if you could give some clarity on the competitive strength on product level as well as the target audience or customers?
Okay. How we look at in terms of what are the unique points in terms of what we want to bring in terms of our whole home décor strategy is very clear. We have moved on from the point of view of just a share of surface to a share of space within the home in a very strong manner. When we look at the share of space, we don't look at only the premium and the super luxury customer. We look at customers who are at all the price points in terms of what we see to that extent. The unique point which we are bringing on to the table is the fact that our -- all our stores and our service are very highly technology-led, okay. So in terms of 3D visualization, in terms of looking at AR/VR kind of a situation in terms of what we have introduced. So that people are able to visualize their homes like never before, and that is something which is a very strong strength, which we are really giving them a technology which is on world-class standards in terms of what we have put in. And it is from a consumer's point of view and not from our point of view as a vendor to the customer to that extent. That is point one. The second area is that even if there is good visualization, the customer really struggles from good execution, which comes in. And there is a lot of anxiety, which comes in with good execution and people don't really deliver what they show. So to that extent, there's the trust of the Asian Paints which come in, where we are delivering strong execution capabilities in terms of delivering what we are able to showcase to the customer. And we believe that we are doing it in a manner that it is a very, very unique model where possibly the IKEAs of the world are possibly in a far more larger format, and they can't look at this kind of a personalization and customization, which Asian Paints is bringing as a very, very strong alternative to the customer to that extent. And therefore, not offering something off the rack, which the customer can assemble or in terms of look at doing himself or herself to that extent. So that's something which we are looking. So obviously, a lot of unique propositions and basically for all customers to that extent and not looking at only the premium customers.
So sir, are you saying that we are competing on technology and execution primarily, and not more of the product point of view or some kind of strength that we wish to see it on that front?
See, you can never compete only on visualization and this thing. As I said, you will have to give a product, which is design-led, you have to give a service, which is design-led, you have to give something which really looks good and feels good to the customer to that extent. So it's a combination of some great products, some excellent visualization and some impeccable execution. .
Sure, sir. So that's very helpful. And in terms of customers who would -- so we would be targeting almost every category of customers, not just premium and popular ones.
Yes.
Our next question, which is coming from Mr. [ Neel Thakkar ].
My question is we have not seen such interest rates in a long, long time. Consequently, the home sales are materializing, and we are seeing that effect in paints industry and also we have seen some effect in timber and plywood industry also. And the tailwind is here to stay because this lower interest rates are here to stay. My question is empirically, how momentous lower interest rates have been for Asian Paints? And secondly, any backward integration plans?
So as far as demand is concerned, it's a combination of lot many factors as per us, and interest rates are not the only area in terms of what we say. It is one of the catalysts which kind of come into the process where people tend to kind of get into more. But it is also a function with respect to a lot of things which would happen with respect to personal taxes need, low-income to mid-income to premium housing, to that extent, it all varies depending on which kind of consumer is really spending. So what we see currently is definitely inflation happening at the low-end and the mid-end. And to some extent, given the benefits given by the governments, I think we saw something happening at the premium end as well to that extent. We are not very sure that only interest rates would be a big kind of a catalyst continuing in terms of looking at this real estate. Because the past records in terms of what we have seen in terms of the real estate construction segment has not been very, very strong to that extent. And today, what we see is that while the market -- the money position in the -- for builders and so on and so forth, is not so great. But given the fact that the -- today, the interest rates are low, it could kind of trigger off a good revolution in terms of looking at housing sector growing. But I think that we have to kind of wait for trends to kind of stabilize and see in terms of what really happens.
Okay. And the second question, any -- about any backward integration plans?
With respect to what?
With respect to your supply chain, any of the supply chain?
No. So currently, we had 2 chemical plants as well, which were the ingredients which used to go into the paint. One was pentaerythritol and the other was phthalic. We have closed down our phthalic facility to that extent. And as such, we don't have any other plans in terms of getting into a backward integration as far as raw materials are concerned.
May I request Mr. Bhavik to take the next question, please.
[indiscernible]
You have to speak loudly, we are able to just faintly hear you.
Sir, I have 2 questions. One is on the water waste plants that were installed 2 years ago. Can I know the capacity utilization of those plants?
So overall, today, if you look at the capacity utilization is roughly at about 60%. And that is what we are kind of utilizing. And therefore, there is umpteen capacity available for the growth which we see in future.
Okay. Sure, sir. And second one is on the Kitchen business. Like we have seen the breakeven EBITDA in this quarter. So sir, do you foresee that this growth would be sustainable in the near future and ahead as well?
What we see is a very clear correlation that we are able to kind of drive the top line very, very strongly. And drive the whole objectives in terms of premiumization going ahead, I think we would be able to definitely give a fillip to the bottom line in these categories going ahead. But having said that, we have to be very cautious there to that extent, given the fact that because of the current conditions, the overheads have been low, the marketing expenses have been a bit lower. So we will have to really watch the situation going ahead in terms of how really demand pans out, how we are able to look at the premiumization. But I think the fact that we have got it, I think, is a good boost to looking at what we have done in the current quarter.
With that, we close our question-and-answer session for today evening. May I now request Mr. Amit Syngle to kindly share his closing remarks.
So thank you all for joining us for this investors meet. Sorry for the glitch in the beginning in terms of getting the presentation on. But I think it's been a great session in terms of a lot of incisive questions coming from all of you and wishing you all the best.