Asian Paints Ltd

NSE:ASIANPAINT

Earnings Call Transcript 2023-Q4

[Sunila Martis, executive]

Good evening, all of you, and thanks for joining us to discuss Asian Paints Q4 and FY '23 earnings. I'm Sunila Martis from the Investor Relations team. Together with my colleague, Arun Nair, we are happy to welcome all of you here. We have on the dais with us today our MD and CEO, Mr. Amit Syngle. We also have with us Mr. R. J. Jeyamurugan, our CFO and Company Secretary. And we have with us Mr. Parag Rane, AVP Finance. I would now like to invite Amit for his opening comments.

[Amit Syngle, executive]

Good evening to everyone. It's a pleasure to meet you after a long time, physically one-on-one, and we are all here for -- looking at the quarter 4 to the financial year '23 results in terms of what have been there. Just wanted to take you through a small presentation in terms of what the whole area is all about.

As you're all aware, this is something which is the core value in terms of what we look at, delivering joy since 1942. We have completed more than 80 years now in terms of looking at beautifying preserving and transforming all spaces and objects and bringing happiness to the world, and this is something which is the core in terms of what we really believe as we go forward.

So when we look at in terms of the overall results, I think it's been a strong performance which has come in the year -- in quarter 4 and also in the entire financial year '23 as we look at overall numbers, when we look at from a point of view of strong double-digit volume growth of about 16% in the quarter, which comes in. and for the overall value is closer to about 13% in terms of what we delivered.

So strong double-digit numbers coming in there. This translates to the entire year, financial year '23 when we look a strong number of about 14% in terms of volume. And this is despite the fact that quarter 3 was a bit flat in terms of what we saw and a very, very strong value number of about 20%, which comes in. While it has some component of price increases, which were taken overall, but a strong performance coming in, in terms of the overall area of the product mix and other areas in terms of what we have looked at.

What is happening here is both quarter 4 and the financial '23, if you look at the CAGR numbers, they are very, very healthy in terms of what you'll see. CAGR numbers, both on volume and value are strong, healthy numbers, which we take. And I think this just shows the fact that the organization has been focusing very clearly in terms of not only the value growth, but the volume growth over a 3-year period, which have been very, very strong in terms of how they have come in.

This is another chart which reflects the same thing in terms of looking at the volume growth over a 3 year on a CAGR basis. And if you look at possibly the trajectory. Again, very strong double-digit numbers coming from us. And this is very clear, focusing the fact that the whole area of growth which is led by volumes in a strong manner comes in there, and this translates obviously to strong value growth as well over a 3-year period to that extent. And this is quite a consistent performance if you are able to see the numbers that way, the performance becomes quite consistent in terms of the way we have been growing over a period of time.

Some of the areas in terms of what have been typically the growth drivers as we see it, in our set -- in quarter 4, we looked at both T1 and T2 cities and the T3, T4 cities growing almost at the same pace, which is really heartening because what you look at in the environment and when you look at FMCGs largely, we have been looking at the smaller cities not doing so well to that extent over the last 2, 3 quarters to that extent.

But for us, I think the smaller cities also, which is a very, very strong source of our growth has done quite well over a period of time to that extent. And there are clearly double-digit CAGR numbers which are coming across both rural and urban centers to that extent. When we look at the mix in the quarter, again, the mix is quite good. Largely, we have grown at double-digit numbers, both with respect to the Economy, Premium and the Luxury set of products. So overall, the double-digit story continues with respect to the product mix there.

Obviously, some categories have grown even faster in a double-digit mode. So when we look at some of the upgradation Emulsions, when we look at Waterproofing, look at some segments of Flooring, Admixtures, they have really gone very well for us and have outstripped even the double-digit growth, which have been across the category to that extent.

As I said, Premium & Luxury products have been also growing quite well. And today, we have really gained inroads in the premium luxury segment of Wood Finish is in a very strong manner, and that is something which is a strong footprint, which has come in across our sales when we have seen this quarter.

From a point of view of our expansion, the distribution keeps on expanding at a very, very strong pace. And overall, we are speaking of our distribution expansion to about almost 1.5 lacs retail points, which are there, which is literally comparable to any FMCG kind of a representation, which takes place across the network, and we are very clear that this is something which is a strategy which continues so that we are making the product available to more and more customers easily across various clusters in various cities.

One of the other big differentiators that we see ourselves from the competition is the whole servicing footprint. We have something which is called the Safe Painting Service and a related service, which is called the Trusted Contractor Service. And these 2 services put together have been doing exceedingly well. We are touching about 1.7 lacs customers throughout the country with more than 600 towns enabling this service across. We feel this is the -- globally, the world's largest service footprint, any coatings company has to that extent.

So it's decidedly a very, very big differentiator in terms of what we see. And you must remember that very difficult to really match a servicing footprint of any company for any competition to come in to take it. And this really gets us in the homes of the customers in a very, very strong manner.

When we look at Projects/Institutions, which is the B2B business, This, again, has been growing at a very, very strong pace. And we find ourselves not only growing in the builder and the cooperative housing sector, which is there. But very strongly in 2 sectors where we are focused, which is the factories and the government sector.

The government sector has been really exponentially growing with us because of the government spending on infrastructure, which is taking place. Our entire Waterproofing range, which consists of membranes and Admixtures and some of the other Waterproofing products which come in, which are in the repair range have really straddled very strongly in this sector, giving us really unprecedented growth in terms of what we have seen over the last 3 years, and this growth really continue to give us a very, very strong footprint.

So much so that now Asian Paints is the #1 player in terms of Waterproofing as far as we look at from a retail point of view in a very strong manner. Overall, we see that the innovation has been a very, very strong footprint in terms of how the company has been driving the sales over the last 7 years. We have launched about 250 new products in the market. And these are not products which are just products which are variants which are coming, products, which are really getting a new customer proposition, which is very clear.

And today, strongly going ahead, we have almost applied for 106 patents over some of these products which we are launching in the market. So a very, very strong innovation pillar, which is invoked. And today, these products contribute to more than 10% to the total revenue, which is a very healthy figure in terms of what we see, which kind of just showcases the innovation potential in terms of what we are harnessing as we are going ahead.

In addition, all of you are aware, we have been making you aware that strong work happening is with respect to capacity expansion in terms of what we have taken. And we have already committed a very, very strong CapEx, which is there to some of the brownfield, some of the new projects and also to the backward integration projects which we have announced with respect to cement or our VAM VAE Emulsion facilities which have been announced, which you are all aware of.

So I think in all very, very strong indicators, which give the health of the organization in terms of the way we are proceeding and looking at going ahead. In addition, we continue to really be the voice of the industry with respect to our color and material trends, which we introduced. We reach out to more than 7,500 architectural firms across the country. And we talk of this proposition, which is very, very strong with respect to what are the trends which we see, which are coming? And these trends are based on socioeconomic movements, which are happening, which reflect on lifestyle trends and therefore, the whole area of decor and color trends strongly.

So a very strong this thing. We have introduced this year, almost 4 stories, which are strong in trends and the color of the year is called Silver Escapade in terms of what comes in terms of our launch, which is there. We also have lots of campaigns as part of our marketing initiatives in terms of what we launch. And the bottom of the pyramid is a strong area in terms of where we keep on working in terms of really converting the customer from the unorganized to the branded, smart Emulsions in a very strong manner and some campaigns like this, you would have been able to see, which are very, very strong, which are coming. But not only in this thing, our campaigns with respect to our LUXE categories, which are Royale Glitz and some of the other premium products, which we launched have also done very, very well in terms of what we have been taking in.

And today, we can easily say that the share of voice in media is something which outstrips the competition and therefore, we don't shy away from really spending a good amount of money from an advertising mix point of view. And even in quarter 4, you would see that our spend in terms of the advertising marketing has been much higher in terms of looking at really propelling the business as we go ahead.

Our foray into Home Decor is something which is doing extremely well. And today, we are -- we operate in so many categories apart from Bath, Kitchen. We have introduced the whole area of Kitchen, Doors, Windows, Furnishing and Furniture and so many other categories, Rugs and so on and so forth which have come, so that we have become almost an integrated player in terms of the Home Decor offerings. We have now literally by the April end, we have about 50 stores operational across the country. And this is something which is a very, very strong initiative, which is coming.

And today, this business is about 4% to 4.5% of our total business. And we have already announced that by March of '26, we will look at this Home Décor business contributing to about 8% to 10% of our total Architectural business going forward.

So this is a substantial investment and strong focus with respect to Home Décor because this literally complements the painting category in a very strong manner because it is all about the same home where you are selling and entering into the customer from a point of view of a decor life cycle of the customer in a strong manner.

We've also looked at partnering the customer in terms of making a beautiful home for the customer in a strong manner, and we have an end-to-end design and execution service, which is there, which is called the Beautiful Homes Service. Now this service is a first-of-a-kind experience. Coupled with digital visualizations and professional execution, which comes in.

And in its own way, it is something which is doing extremely well. We are today very, very strongly focusing on this service. This service is now the #3 service at an India level in terms of what we look as an end-to-end service. In the paint sector, you don't have any other company which offers this kind of a service, which really happens.

And this is another differentiator over the Safe Painting Service, which I had highlighted earlier in terms of what we are speaking of. As 1 part of it, Kitchen and Bath is a strong business today, this is about INR 800 crores overall as a business in terms of what we look in terms of the overall Kitchen plus Bath, which comes in. Quarter 4 has not been very, very strong with respect to the Kitchen and Bath overall performance because of the sluggish market demand overall in terms of what we saw in the category.

However, when we look at the overall year, Bath has done relatively well at about 15% growth and also registered a small profit in terms of what has come in, in terms of looking at the bottom line. As far as Kitchen is concerned, the kitchen market is consisting of 2 things. One is on modular kitchens, which has done extremely well for us. And there is a components and hardware business, which has not done too well to that extent. And that has contributed to possibly a negative degrowth happening in terms of the quarter 4.

And also at a yearly level, the Kitchen business because of the components has not done well and also registered a small loss. But what we are very confident that this is something which is what we should be able to overcome as we go ahead because the whole demand for this category seems to be definitely on and this is something which we are focusing very, very strongly. When we look at overall, the other 2 categories, if you remember, we acquired 2 companies. One was White Teak, which was in the decorative lighting business. and the other was the Weatherseal, which was into the UPVC doors and windows.

Both the businesses this year have really taken off very, very strongly, both Q4 has done very well in both the categories at an yearly level. We have literally doubled the numbers to INR 109 crores in lighting with a very strong profitability coming there. And also in terms of the UPVC doors and windows where we have taken the category almost from about INR 12 crores to about INR 25 crores overall in terms of what we have registered.

And therefore, both the categories seem to be doing very well. In lighting, we are now the #1 player in terms of the decorative lighting as it really has panned out for us. And therefore, these 2 categories doing extremely well in terms of the Home Décor.

Coming quickly to the overall international business. This is the footprint in terms of what you see, where we are represented all across in terms of how we have been functioning over the years. And today, when we look at the global environment, there have been, as you are aware, some challenges which are there in Lanka, and we also have a lot of challenges with respect to devaluation of currency, which is happening in areas like Egypt, Bangladesh, Lanka and so on and so forth to that extent.

So if I look at basically the quarter 4, Obviously, what has stood out is performance is in Middle East and Africa where the markets have done overall well to that extent. And Asia has been a little bit down because of one Lanka. And secondly, Nepal because of the political environment there has not been doing too well in terms of what we see. Overall, while it shows a degrowth in the global business.

But if you look at it from a constant currency terms, the growth is to the extent of about almost 9% to 10% in terms of what has taken. It's only because of the devaluation of the currency that you see that you saw -- see a de-growth, which is there to that extent of 3%.

Overall, it has done quite well from a constant currency term. The profitability has been the highlight in global. If you look at from an overall yearly perspective, the profits have been very, very strong in terms of almost registering profits of about INR 158 crores. And therefore, we see that this is something which is strong in terms of the way we have bounced back in terms of the overall global environment as we see in terms of this year, how it has panned out.

So that's the global business for you. Coming to the industrial business, this has been really a strong performance in terms of what we see of both the businesses. One is what we call the auto OE business, it is the PPG-AP business and the other is basically the general industrial business, which is the AP-PPG business to that extent. So if you look at from a revenues point of view, both Q4 has done quite well in terms of both the businesses to that extent. But the highlight has been the year performance, which you look which is in double-digit growth, which is really coming out in terms of almost 27%, 26% growth which are there to that extent in terms of the top line.

So both businesses have done very well. And so also in the area of PBT, if you see the PBT margins have been very, very strong in terms of the growth which have come in. So industrial business is a highlight. In AP-PPG, we have crossed INR 1,000 crores for the first time, and the business has doubled in about 3 years' time. So it's been a very, very strong performance in terms of Overall, the industrial business in terms of how we have performed this year and both from top line and bottom line, this is really a category which has done extremely well overall.

If you look at gross margins, gross margins have been going up steadily, thanks to basically the fact that there has been a softening of the prices, and there has been a little bit of deflation in terms of looking at prices across coming down and material costs are a very, very strong component of our business. So when you look at possibly the gross margins at the -- on the Q4, we are almost at about 43%, which is one of the highest gross margins in terms of what we are registering. And this is a very, very strong movement which you are seeing.

And I think there was a worry amongst a lot of you in terms of saying where are the margins going to that extent. And I think it is clearly dependent in terms of some of the inflation, which we saw in the past to that extent and a very, very strong recovery with respect to gross margins in quarter 4 is something which you see is clearly reflected here in terms of our journey there to that extent. And what we saw in this quarter 4 was about a 4% a deflation, which was seen in this quarter overall.

Coming to the stand-alone results. Again, as I said for quarter 4, the numbers are very clear where the value growth is about 12%. The volume growth is about 16% overall. The PBDIT numbers and the PBT numbers are very, very strong, both quarter-on-quarter and year-on-year, the margins have substantially improved overall to that extent, which is there.

The PAT growth are pretty healthy of -- in quarter 4, about 37% on a stand-alone business in terms of what we see. On a yearly level, again, if you look at it, overall, a 20% kind of a top line revenue, which comes in with a 14% volume growth. And PBDIT margins have gone up. PBT margins have also gone up from a point of yearly perspective. And the PAT growth is to the extent of about 31% overall. So strong numbers overall for both Q4 as well as for the entire year to that extent, and that is something which is really quite positive for the overall business as we see it.

When we look at the consolidated numbers, obviously, the consolidated numbers get dominated by the stand-alone numbers to that extent overall. And we see that at a consolidated level, again, the overall top line number for quarter 4 is about 11% compared to 13% of a stand-alone, which is there to that extent. But I think, again, the good point is that the PBDIT margins have gone up in quarter 4 to that extent. And the PAT is a very healthy 44% kind of increase, aided to some extent by the global profitability, which has come in quarter 4 as well as well as in the year to that extent.

When we look at on a yearly basis, again, the top line numbers are very healthy to about 19%. So just about a percentage down from the stand-alone numbers of 20% in terms of what you saw. But again, I think the PBDIT and the PBT margins have grown on as we compare with the year-on-year basis to that extent. And the PAT is again a very healthy 36% in terms of what you see overall coming in. So I think both set of numbers pretty healthy in terms of what we see.

And I think the heartening part is that the overall margins now are in the range in terms of what we have been talking about. Overall, in terms of where we wanted to be as we kind of go ahead to that extent. So I think that is something which is very, very strong in terms of how it has all about come in. There are some exceptional items in terms of the overall list, and this is something which we wanted to highlight. There is some kind of the expenses, which are kind of really coming because of the ongoing problem in Sri Lanka in terms of the literal economic crisis, and there is something which we have taken an impairment as a loss. The numbers are not too big, but that is something which we have taken.

And these are the 2 numbers which have come as an exception, which we thought we'll just highlight for you. So in summary, when we look at I think some of the great highlights is very clear that we have now touched a INR 30,000 crore mark in terms of net sales at a stand-alone level, which is a very, very strong number, and this is 3x the nearest competitor in India. So that generally shows the size which is there.

And I must remind you that today, the overall market size of paints is closer to about INR 70,000 crores to about INR 75,000 crores, out of which this becomes a substantial segment in terms of what we are operating in. We are seeing double-digit volume and value growth of Deco business for the year, and that is something which is very strong because you can easily see that the base numbers are not small numbers. The base are very, very strong numbers, which are coming in there. And to grow on that on double digits is no mean task in terms of what we have kind of taken on.

Overall, committed to the Home Décor revenue, we have said that 8% to 10% will take and a very clear focus on this category. As I said, this business complements the existing coatings business in a very, very strong manner. The non-auto industrial business, which is a general industrial business for productive coatings and otherwise, is something which has crossed the landmark INR 1,000 crores, and it has doubled the business in 3 years with very strong profitability also arising to that extent, which is a very good and positive sign in terms of showing the ingress of Asian Paints not only from an architectural point of view but also from an industrial point of view in a strong manner.

In global, as I said, while the numbers were looking weak. But if you look at it from a constant currency terms, we still have a double-digit growth, which we have been able to take and this is because of the fact that there are devaluations of the currency happening in Egypt, Bangladesh and Sri Lanka as you are kind of aware of to that extent. But I think the overall growth trajectory on constant currency terms is pretty strong in terms of what we see.

And the other thing which is there is that, one, definitely, there has been some softening of prices. But as an organization, we focus on operational efficiencies very, very strongly and also look at formulation and sourcing efficiencies, which is a large component, which we try to bring, a strong kind of efficiency in our overall kind of input cost to that extent. And that has also contributed to our margin increase, which is both quarter-on-quarter as well as what we see from a point of view of a year-on-year basis, to that extent.

So these are strong kind of signals which are possibly coming in terms of giving a hint in terms of what lies ahead as we kind of go ahead. In terms of, obviously, the dividend payout, there has been a constant, strong upward journey in terms of what you see. And I think if you look at from an industry standard, the payouts are very, very strong in terms of what we are making. And this time, the payout is almost about 60% kind of a payout, which is happening, which kind of just shows the direction of the sense that we would like to reward the shareholders in terms of the good performance, which has come in from a profitability point of view as we see this year kind of folding up.

The other thing which is very clear is we are deeply kind of intertwined in the ESG this year. We started this process of sustainability long back, but we have kind of now taken the ESG road very, very strongly. And in all these areas of environment, social and governance, I think there are very, very strong initiatives and imperatives, which have been put so that we are able to kind of really as a leader take very clear lead to that extent of market. For a lot of you who do not know, we today have almost RE, which is the energy, which comes in almost about -- close to about 60% to 65% is what is generated by us to that extent for our plants.

And we are water-positive, which means that the amount of water we take from the ground, we generate more water per se, to that extent. And I think this goes as part of our ESG framework. I think governance is of the highest standards, which we had to build in to that extent. And therefore, today, you will see that as the annual report comes in that all these elements are intertwined with the business in terms of going ahead, and it's not like it's a separate initiative.

So if you are able to turn the ESG to kind of show the way of profitability, I think that is something which really matters in terms of looking what we want to kind of do. As I said, the fresh water replenishment in terms of -- the numbers are very strong. Similarly, the renewable electricity, the numbers are going very clear and our targets which we have taken for 2030 are pretty aggressive in terms of this thing. The new initiative of recycled material and packaging is another strong initiative, which is being taken, which kind of shows that, as a leader, we are willing to kind of really put our money behind in terms of these issues and look at kind of relating into the business growth as we kind of go ahead.

Obviously, I'm sure a lot of questions will come in terms of how we see the outlook overall in terms of looking at how we want to kind of grow. I think the GDP numbers, which have come out are pretty strong in terms of what is there. And we are all aware that when we look at paint, we speak of 1, 1.5x the growth of the GDP as an indicative direction in terms of what is there. So we feel for the year, definitely, I think the growth numbers look strong. We are focused on growth in a very, very strong manner as an organization to go forward.

And this growth comes not only from the point of view of just competition or the unorganized sector. It also comes from the overall increase in the per capita consumption of paint in the industry. And that is the leader, we have taken our task ourselves and also getting into newer categories like we have kind of fueled the whole story in waterproofing in a very big manner. So I think our focus on growth will kind of remain and we are looking positive with respect to how the year would pan out from a point of view of overall growth.

Obviously, in terms of the monsoon forecast, there have been some question marks raised in terms of the El Nino and so on and so forth to that extent. Now that is clearly what affects the agrarian economy in terms of initiating the rural demand. So we will look at possibly coming to more definitive analysis on that as the year progresses, and we will know shortly in June and July what's happening to monsoons. But I think overall, we don't see an outlier here in terms of something which can upset the apple cart going forward to that extent.

Inflation, overall raw material prices appear stable. We might not see too many high peaks or low peaks kind of coming to that extent. And therefore, largely they might remain benign with some spurts here and there depending on some geopolitical conditions, which might develop overall, but fairly kind of appears stable as a structure in terms of going forward. We focus our energies on architectural business, which anyway is the core.

But along with that, growing the Home Décor business, growing the Industrial business has been strong objectives with whatever we can do with respect to even the global business. So I think focusing on all around work as an organization in terms of what we want to kind of really target and grow, especially geographies of Sri Lanka, Bangladesh and Egypt is something which you would kind of look at in terms of our international footprint going forward. So that's all, and thank you very much for listening intently to this. We are now open to questions.

[Sunila Martis, executive]

Thank you for the presentation, Mr. Amit Syngle. Good evening, everyone. We now begin the Q&A session for the quarter 4 investor conference. We have live audience with us at the venue and participants joining on Zoom video platform and teleconferencing as well. [Operator Instructions]

[Abneesh Roy, analyst]

This is Abneesh from Nuvama. Two questions. First is on Home Decor. So when I see the strong performance of the real estate, when I see that, that's extremely strong. But when I see your numbers in Ess Ess and Sleek, you have pointed out that the retail demand is weak. So where is the disconnect there? .

And second, after so many years, the margins in both businesses are extremely weak, almost no profitability. So what is the reason? And what can change in 3 years because your guidance of doubling from 4% to 5% to 8% to 10% means that it will be extremely strong growth in terms of revenues because your core business is also growing in double digits. So where is the confidence coming from? Because if I see Ess Ess and Sleek, we are not getting the confidence. Of course, you have now diversified far beyond that. So is the confidence coming from those segments?

[Amit Syngle, executive]

So you're right. What we have seen definitely is a strong activity in the housing sector overall, which is there, which is reflected from a point of view of or even the project's B2B business, which is coming in. If you look at closely, the last 2 years, the Kitchen and the Bath business has done well. It has grown at almost about 30% overall growth to that extent which is there.

This year, the Bath business overall has grown at about 15% and has given us almost about INR 4 crores kind of profit over that number. Yes, the profits are lesser. But you must appreciate the fact that today, our share in the business of Bath is in single digits overall in terms of what we see. We are competing with a larger amount of giants there in terms of what's working, be it Jaguar, Parry, Asera, Hindustan, Kohler kind of companies which are operating in terms of that segment. And therefore, today, I think we are kind of trying -- testing out various strategies in terms of what can take us there.

Similarly, in Kitchen, the Kitchen business has grown by about 17%, which is a modular kitchen business. It's the components business, which has a certain percentage in the total business, which has come down because it's like a hardware business in terms of what you see, overall, to that extent. And the modular kitchen business is in profits to that extent. It's the components which has kind of come down. How we see these 2 businesses flaring up and what is our confidence coming from is our chain of stores, which we have kind of put up now, this chain of stores has come in the last 3 years now. And this is called the Beautiful Homes Stores.

As we spoke of about 50 stores are there now operating in April and we kind of want to take this number to about 100 stores over a period of next 2 years as we kind of look at. We think that this is going to be a very big galvanizing factor where we are able to offer decor under 1 roof very strongly and able to attract the customer in a strong manner and really make the customer aware of the Asian Paints prowess together in terms of the overall Home Décor area to that extent.

So I think we believe that given the fact that we are the challenger brand with respect to both the Bath and the Kitchen to that extent. I think we are now looking more in control in terms of going forward. And our basis of growing from 4% to an 8% contribution arises from the fact that we definitely look at our chain of stores kind of contributing in a sizable manner. Along with the categories of fabrics, lighting, furniture, fitted furniture, also coming in very, very strongly to kind of amp up the volumes overall to that extent.

[Abneesh Roy, analyst]

SureMy second question is on Waterproofing, you have become #1 in the retail Waterproofing. So I want to understand when you had entered this space, say, 6, 7 years back, that time, what was the construct of the industry. So who were the key players? What have you done different? And who would have lost market share, if you could clarify there.

Second is when I see the B2B, obviously, Pidilite is a big daddy there. So now that you have cracked the retail part, would you go now B2B also in a significant manner over the next 5 years? And Pidilite has now entered paints -- interior paints. So would you see that as a big long-term competition? And is it a bigger competition than Grasim from a structural point of view because Grasim currently is not present in most of the adjacencies.

[Amit Syngle, executive]

I like the way you ask multiple questions in 1 question. But I think when we look at from the point of view of Waterproofing, we started this initiative about 7 years back, and we started from literally scratch and we developed indigenous technology in terms of looking at developing this business very, very strongly.

In retail, the larger players, which were there in the market was Roff, Sika, Fosroc and Pidilite to that extent. And over a period of time, what we see, it's not about just the share in terms of what we have gained from them, it's about we have really enlarged the overall market by reaching out to more homes, making the awareness of waterproofing very, very strong. And the whole water proofing area has been a boon for us because earlier, the complaints on paint was related to the paint to that extent. But now what very clearly happening is that we are able to take care of the dampness and the leakages because of the Waterproofing coming in.

And therefore, what we see is that we have really exploded the retail market and left the existing players far behind in retail because they were just servicing the demand and they were not doing anything in terms of inflating the demand to that extent. And therefore, we think that we are not far, far ahead of any other player in the retail market for sure to that extent. And that has also given credence because of our very, very strong distribution footprint in terms of what we have used very, very effectively in terms of really reaching out waterproofing to every small town in the country to that extent. That's one.

And our prowess in retail is more than any other brand because they operate through a distributor structure. We operate directly with the retailers and therefore, we are able to kind of really train, teach our retailers to kind of do much more business in a very strong manner. As far as projects is concerned, I want to tell you that we are almost the #3 player in projects as well because there are very different set of players in terms of projects which are dealing. There are some multinationals there in terms of what is there to that extent overall.

But I would say that we are now a very significant player in projects as well to that extent. As I said, we are -- entered Admixtures. We have entered the repair range. We have entered the membranes range. And today, we offer every other products. They are almost about 200 products, which we are offering in the Waterproofing category, which are technical products and the projects regime. And I would say that it is another matter of 2 years. We would become tops in the project sales market as well. So that's the overall Waterproofing answer.

The second area is with respect to Pidilite's entry in terms of the overall paint market. As I see it, overall, while they were in some segments of the paint, some of the exterior segments in terms of what they were present, they were present in wood finishes as form of ICA and so on and so forth. I think this is a more range completion exercise, which I see them coming in. The products are at a very, very price economy level to that extent. There is nothing outstanding about the products which kind of come in.

And what we feel is that it's just a range completion, which is happening where they want to touch the market much before others do in terms of the new players coming into that extent. Actually, we don't see any threat happening there at all to that extent because that segment is something which possibly is we are entrenched very, very strongly, and we don't see any disruption coming in that to that extent.

So we feel that possibly they might disrupt some of the unorganized sector, which is there to that extent because the price parity in terms of what they're offering is at a very low level, and they want to utilize their distribution structure to kind of really reach out to some of the dealers who would ask for paint coming in to that extent. I don't see it's a very significant kind of initiative, which could kind of really ruffle the paint market anyway.

[Percy Panthaki, analyst]

Percy Panthaki from IIFL. Two questions from my side. Firstly, on the margins. This quarter, margins have already exceeded 21%. Your earlier guidance was that you would try and maintain around 18% to 20%. So do you think in light of these results, your guidance is conservative and actually you will actually do more than that going ahead. So that's my first question, sir.

[Amit Syngle, executive]

Okay. So I think we are still maintaining the same guidance. We are not kind of really looking at -- saying that the margins can go up or whatever because we still feel that the environment is not fully stabilized. Today, there is an element of a large amount of deflation happening across -- inflation happening across the world to that extent, the demand conditions are all topsy-turvy in terms of what we are seeing.

So we do not know in terms of -- from a point of view of overall price stability. While we have said that we are apprehending at least for the first half of the year, some price stability should happen, we really do not know in terms of which way the overall -- the raw material prices can go because you yourself have seen the amount of jumps which we are seeing in crude. It kind of varies from something like [ INR 74 to INR 82 ] kind of a thing in 2, 3 days time kind of a thing. So we do not really know in terms of which way it goes. We would like to kind of still see it for another 6 months to see in terms of how the entire thing moves before we kind of really look at changing our guidance overall. But we are very confident that we should remain in this bracket as we kind of go ahead.

[Percy Panthaki, analyst]

Sir, just if I assume hypothetically, if the prices remain stable where they are -- if the input prices remain stable where they are, will the EBITDA margins also remain at Q4 levels? Or do you think that they would still sort of go down towards your 18% to 20% band because you would probably increase rebates or you would pass on prices or increase ad spend or whatever other reason.

[Amit Syngle, executive]

So as I see it, it is very clear that we want to look at seeing that we continuously kind of inflate the demand in the market to that extent. So today, the kind of overall price increases taken over the last 1.5 years have been very, very high to that extent. We will still observe the market in terms of saying that if we need to pass on some of the thing and take a decrease in certain prices and really rationalize some of the areas as we kind of go ahead is something which we will see, which can really affect possibly from the margin level we are sitting in Q4 to that extent.

And that is why I said we would like to remain in that 18%, 20% band as a guidance overall. We're also looking at really taking on the area overall in terms of our marketing and advertising in terms of what we want to do in terms of the some of the newer segments in terms of what we are doing to that extent. Therefore, I think on a safer side, we should kind of really look at being in that 18% to 20% range as we kind of go ahead.

[Percy Panthaki, analyst]

All right, sir. Second question is, as you've given some sort of guidance on the Home Décor business that it's around 4%, you want to take it to about 8%, 8.5%. Can you give some similar kind of idea on Waterproofing? What percentage of sales currently is Waterproofing and how much it can be 3 years down the line?

[Amit Syngle, executive]

So overall, we started Waterproofing from a 0 base, just for your information, as I said. And today, if you look at from the size of the overall waterproofing market, when we overall looked at possibly the size of the waterproofing market was just about something like about INR 6,000 crores to INR 7,000 crores in terms of what is there. We feel that now the size of the waterproofing market has literally kind of gone up given our ingress in the market in a very, very strong manner to that extent.

And therefore, what we see is definitely from a point of view of retail we are very, very strongly contributing to the overall business, which comes in retail in a very strong manner and also in projects. It's very difficult to put a percentage to that because the overall segment itself growth is very, very strong in terms of how it is kind of going forward to that extent.

[Percy Panthaki, analyst]

But currently, would like Waterproofing be close to a double-digit kind of contribution to your own sales?

[Amit Syngle, executive]

Definitely.

[Parag Rane, executive]

Percy, just 1 clarification. I heard you mentioning 21% at kind of a margin. So the band of 18% to 20% that we state as our range, our targeted range, the way we look at it is PBDIT before other income as a percentage of sales and not sales plus operating income. So to just get that state, and that is the expectation that we assume.

[Mihir Shah, analyst]

This is Mihir from Nomura. So my first question is on 4Q. Is there any element of postponed sales from earlier quarters that were weak in the 4Q. And if you can give any color on how April and May shaping up, is the growth volume growth, the strong volume growth that we've seen continuing in the April, May months?

[Amit Syngle, executive]

So how we see it is that there is no element of postponement definitely. I think Q4 is a -- pure sales of Q4 in terms of what we see as kind of come in to that extent. And as we had said earlier, Q3, given the fact that it was a longer Diwali base, which was there to that extent, and that is why possibly the Q3 growth were a little bit lesser because of the shorter Diwali season this year and the demand not really picking up to that extent.

But literally, the Diwali sales literally dies at that point of time. It doesn't really carry into the next quarter to that extent. As we look at the current environment, I think overall, the demand conditions are good in terms of what we are seeing it. And we see that going forward, possibly for this quarter, definitely, I think in terms of we are really aiming at a double-digit volume growth going forward.

[Mihir Shah, analyst]

So my second question is a little medium to longer term on distribution. Actually, I recollect that in the 9 months call, you had mentioned that you added a similar number of dealers or distribute -- or reach what you had done in the previous year in FY '22 in 9 months, you added the similar number. So can you share what you've done for the full year? And what is the kind of distribution or dealer reach that we are thinking about for the next year and year after?

[Amit Syngle, executive]

So what we see is that I think in the year gone by, we would have added about almost about anywhere between 15,000 to 20,000 dealer points going forward. And going forward, we are aiming at anywhere between 10,000 to 15,000 retail points coming up in the coming year as well, and that is going to be a strong kind of aim in terms of what we would like to do. And the larger focus still remains in terms of the smaller cities and the suburbs of the bigger cities in terms of what's really coming in because we truly look at it from a little bit of a cluster approach in terms of where we would like to kind of have an outlet in terms of going forward. So therefore, possibly another 10,000 to 15,000 retail outlets in terms of definitely we are looking at.

[Mihir Shah, analyst]

Sir, 1 last question on the unorganized players. I believe that over the period of last couple of years, we've seen a lot of formalization happening. We've seen very strong volume growth coming. We see that volume growth continuing. Can you talk a bit on the unorganized players, the regional players? How much have they shrunk? To what extent are they pained? Or do you expect them to come back with the raw material prices now getting better your raw material prices cooling off, your gross margins getting better. can one expect the unorganized players to come back in a big way?

[Amit Syngle, executive]

So definitely, I think what we have seen is in the first 2 years that the unorganized players had their volumes compressed because of their supply chains being not so efficient as the bigger players to that extent. And the raw material scenario was also causing quite a bit of havoc with the kind of inflation in terms of what we were seeing.

In the last year, what we have seen is that there is some stabilization happening with respect to their supply chains and people are no longer regional. They are still kind of becoming national because of the ease of their supply chain is now happening to that extent. We have seen -- possibly, we used to divide the unorganized sector as 30% value and 70% is organized to that extent. Maybe I think the last year, we would have seen some movement of 4% or 5% kind of decrease, which is there. Our belief is that possibly given the price advantage they still have and the fact that there are strong regional entities to that extent and are expanding. Possibly, I think the ratio will come back literally to what it was earlier to that extent in terms of they covering the ground to the 3% to 5%, which they have lost out.

[Sheela Rathi, analyst]

This is Sheela Rathi from Morgan Stanley. Sir, thanks for giving the idea on the total TAM for the industry, which is at INR 70,000 crores. How should we think of the growth rate over the next 5 years for the industry? And you just alluded to the fact that unorganized could go back to 35% in the near term. But how should we think of that number in the next 5 years?

[Amit Syngle, executive]

So we are pegging the number going to almost like about INR 1 lac crores over the 5 years. So the growth rates are definitely ranging between 10% to 12% kind of a zone as we kind of go ahead to that extent. So I think this is an industry which will definitely grow. Given the fact that we see possibly a stable government, we see government spending strongly. We also see a GDP of anywhere between 6% to 7%, which is remaining.

And to that extent, which will continue to kind of fuel this market going forward to that extent. In terms of shares, I think the shares would kind of remain in this zone because the smaller players, MSMEs come with their own strength to that extent. And I think it is always good to have the regional players possibly catering to the market in a strong manner. They have large government support also in terms of some of the pricing, taxation structures, which kind of come into that extent. Therefore, we see that from a point of view of economy products, products in that kind of a segment, they will kind of continue to kind of be in that market to that extent. But we definitely see this industry going to about INR 1 lac crore as we kind of go forward.

[Sheela Rathi, analyst]

And my second question was with respect to your presentation where you mentioned that we will pursue an aggressive strategy. So I just wanted to understand the definition of aggressive. Is it around expanding into adjacencies? Is it around being more aggressive with respect to distribution or do we expect some price cuts coming through because we are getting into a deflationary mode. So if you could just expand on that?

[Amit Syngle, executive]

So aggressive means everything what you said, okay? So we would like to possibly -- as I said, it's not only architectural we are looking at in terms of really seeing that we have differential strategies to grow across the country, whether it is in distribution, whether it is with respect to supply chain, whether it is with respect to our new products or whether it is in terms of looking at the premium luxury segments in terms of what we are launching, or even Waterproofing segment in terms of what is there to that extent.

When it comes to industrial, I've already spoken that there has been very big aggression, which we have been kind of taking both from a general industrial and the automotive industrial kind of a zone. Home Décor, I have indicated the kind of trajectory we want to kind of follow from where we are to where we want to go to by '26 to that extent.

Similarly, I think in global, we would like to kind of see that it's not only in terms of the existing countries. If there is an opportunity which comes, we will be aggressive in terms of going into a new country as well in terms of looking at going forward. And our aggression continues from a point of view of even the whole area of really putting strength in the organization so that we are able to supplement and retain our margins strongly and that is why our backward integration strategy is very, very important in terms of what we are looking so that possibly as we go ahead, we are able to take recourse from the fact that we are adding more and more margins to our material consumption story in a very big way. So I think aggressive literally means that it is in all areas.

[Unknown Analyst]

Congratulations for a good set of numbers. Just 2 observations. In this quarter, you have reported 16% volume growth and also margin has expanded. So if I give the benefit, and I just wanted to understand, is this margin expansion is primarily because of the falling raw material prices and packaging material? Or there is a mix improvement because if your volume growth is higher than your revenue growth, I was suspecting the volume growth is driven by the economic Emulsions. So therefore, the question -- there are 2 questions. What is the quality of margin, which you are trying to gather? And second, therefore, if you can give a broad number for domestic decorative in terms of premium Emulsions, economic Emulsions and low-end Emulsions, broad number. I know you will be hesitant to give me the exact number, but if you can help me on that?

[Amit Syngle, executive]

So overall, when we look at the margin story, you can sit, you know it really revolves around 3 areas. One is the material prices softening, which is very clear. We have seen a 4% kind of a deflation in prices, which we have seen in Q4 very clearly.

The second thing is that a strong imperative on formulation and sourcing efficiencies, which is also giving us a strength in terms of really making our material prices lower to that extent, given the fact that you are working on formulation efficiencies and sourcing efficiencies.

The third area is what we have seen is that the overall mix has been decent because while the Premium and the Luxury segments have also grown by double digits to that extent. We have seen some of the other segments, which have grown far higher than that double-digit on an outlier perspective overall. So I think it's a combination of the mix being good. But some of the other products really being an outlier products overall coming in. So from a point of view of premium luxury, we see that possibly premium luxury are in double digit, but the smart Emulsion, the economy Emulsions would be slightly higher than the premium luxury in terms of what they would have contributed into the margins.

[Unknown Analyst]

So would you comment on FY '23, what would be the broad mix if I check with you on the luxury premium?

[Amit Syngle, executive]

So see, our intention obviously is that we stay ahead on a very healthy product mix going forward because the whole game of getting the margins in that band is dependent on the product mix in terms of the way you operate. Obviously, in terms of -- it depends on the inflation in terms of prices very strongly because the material prices contribute to a substantial chunk in terms of our overall price structure as we look at.

So going forward, I think we are very clear that we are going on a very, very balanced growth where we look at furthering the Luxury and the Premium sectors very, very strongly. But what you must understand is that if you look at the entire structure of really the product profiles, the bottom of the pyramid and the middle segment Premium is a large contributor in terms of the overall structure in terms of consumption, which really happens.

So while you would like to continue to grow at the luxury and the premium level, you can't ignore the premium and the bottom end in terms of what comes in, in terms of growth. So as I said, we will try to balance in terms of seeing that we are able to take a very, very structured balanced kind of an approach where we grow possibly in a balanced manner across the Luxury, Premium in the Economy segments.

[Unknown Analyst]

My second question on the industrial part. The growth rates were lower. However, you have shown the good margin expansion. Is it a function that it's being competitive business? You have not dropped the prices and now you'll be forced to drop the prices in industrial and the growth will come back.

[Amit Syngle, executive]

So we have not dropped the prices. If you see the profitability, the profitability has improved of the -- both the businesses to that extent. In fact, we have been one of the strong proponents in terms of taking the price increases very, very strongly whenever we feel that we need to take price increases because of inflation.

I think where the imperative has come in is that we have looked at increasing our reach from a point of view of some key account customers. We have looked at depth going in the customers and focused in terms of the technical servicing part in a very, very strong manner. We've also invoked our entire JV with PPG Industries and introduced some very, very superior products in the market, which are actually at the high end of the market but they give very, very strong performance when it comes to the technical features they offer to that extent, whether it is from a point of view of, say, a heat resisting paint or whether it is from point of view of an epoxy or a chlorinated rubber in terms of what we offer in the market to that extent.

So I think it's a combination of superior technical service, the reach, the depth of quality of customers in terms of what we are doing and also very, very strong differentiated products, which we are now invoking in the market in a very strong way.

[Unknown Analyst]

My last question on the CapEx and capacity. Can you outline next 15 months, which are the capacity which will get operational? And what are the CapEx we are looking F '24?

[Amit Syngle, executive]

Okay, do you want to answer that? .

[Parag Rane, executive]

Yes. So next year, our CapEx plan in terms of spend should be in the region of about INR 2,000-odd crores, INR 2,000 crores to INR 2,300-odd crores. The utilization the way we see it today, we are somewhere around the 75%, 78% mark. The brownfield expansions, which are ongoing, right, and we have a host of them ongoing. I think a couple of them will definitely come on stream as we go into FY '24. So -- and then the balance ones, beyond that year. That's how we are seeing it.

[Unknown Analyst]

Parag, just you can help me what kl capacity, which will get added in F '24?

[Parag Rane, executive]

So in FY '24, we would probably add roughly about roughly about 2.5 lac kiloliters to the capacity.

[Avi Mehta, analyst]

Sir, Avi here from Macquarie. Sir, 2 questions. I wanted to just better understand the margin comment. Now was there any one-off in this quarter in terms of inventory because I would have -- there's no low cost inventory. But logically, it seems that you've done the change in formulation. Volume growth remains healthy. So demand environment doesn't seem to be the concern, at least even in your comments. What exactly is this more a comment from a medium-term perspective that over time, demand might come off and hence, you need to pass on. Is that why you're arguing for margins to come down from current levels? What exactly is the driver for that?

[Amit Syngle, executive]

So overall, what we see is that you should see that we had taken certain price increases over a period of time. And what has happened is that we have not looked at decreasing any prices in this quarter. So the higher price increases continued to that extent, okay? And we had a scenario of material prices softening to the extent of about 4% happening. Over that, coupled with that, we had this whole area of the operational efficiencies and also the purchase sourcing efficiencies really coming in strongly because you must appreciate that when you look at the overall environment, the suppliers themselves are quite confused in terms of what's happening because the U.S. and China economies which are big consumption hubs, they are going northwards from a point of view of not knowing in terms of -- really and the overall inventories are coming down to that extent.

So therefore, the whole area of negotiation with the large vendors is becoming very strong in terms of procuring some efficiencies in terms of what you are able to do. And given the fact that we never lowered our prices to that extent and we were going and our product mix is quite decent in terms of what we've been able to achieve, that has really given us the supplement in terms of the margins, which you see to that extent. And which is why I commented earlier that we would not bank in terms of just saying that this thing will stay forever because, one, you do not know in terms of what are the material-specific movements.

For example, today, we find that TiO2 is going higher and some other solvents are coming possibly lower to that extent. So you do not know the exact mix of the raw materials in terms of which way they will move to that extent. And also the fact that we are sensing that if today, there are certain segments where customers are finding it a little bit more expensive to really buy that product, and there is some down trading happening to that extent. We might look at possibly really adjusting some prices going forward to that extent. But the impact of this quarter is very clearly because of the price increases, which we have gotten and the material prices going down, better negotiation of prices, all that has really given us this margin and the product mix being still strong.

[Avi Mehta, analyst]

Sir, in your framework, if I understand it correctly, the way you're saying is I will essentially ensure a particular revenue growth should be there and we will not necessarily focus on margins. Margins really maintain in that band, but I would look to drive as much revenue growth as I can, and that would be the thought process. So that is -- the flow through to EBITDA may not be in margin, but [indiscernible] revenue.

[Amit Syngle, executive]

See, we believe in balanced growth. And if you have seen last 3 years also when I showed you the volume trajectory, we believe in not only driving only value, but we think that volume is a very, very essential parameter which gives health to the market in a very, very strong way in terms of how you want to really look at growing the market because the only value component can come because of price increases as well to that extent.

So volume is a true indicator in terms of the health, in terms of how the overall product profiles are going. We believe in a balanced profitable growth. I would not like to compromise one on the other side to that extent. And I think that's the right way to look at it because in a growing market, possibly. You can't be siding with one side and saying that I don't want to really look at the other side to that extent. And therefore, I think the way to go is a balanced profitable growth in terms of what we are looking at.

[Avi Mehta, analyst]

Perfect, sir. Sir, the second bit is on the VAE project in particular. Now if you could give us some international examples where VAE is used because one of the pushbacks that tends to come in is that -- is this -- this can be similar to -- at some point of time, if you remember, there was something called nanotechnology, which was being argued, that could be a new thing in paints. How do we understand the -- whether it's a fad, why do you think it's a very big change. So any international examples if you could share on where VAE is being used or give us -- to better appreciate this technology?

[Amit Syngle, executive]

So today, if you look at VAE is used across the world. So if you take even in a company like Sherwin-Williams, which is the largest paint player in the world today, they have a substantial usage of VAE, which they use because VAE is essentially a very progressive emulsion because it is, one, environment friendly. It is low on VOC. It has literally no offensive smell, which comes in. And therefore, it is the emulsion of the future in terms of what we see.

Today, large quantities of this emulsion are imported into India because there are only 4 or 5 players across the world who make it. Where our game comes in very strongly is that the moment we look at making this emulsion in India to that extent, it gives us very, very strong leverage from the point of view of costings and margins, which we are able to derive in our products to that extent, which gives us the capability of really pricing our products very, very strongly from a point of view of what we want to do in the market going forward, which we think today that the other players would be definitely forced to use this emulsion, but they have to import this emulsion otherwise, and there is an import duty component.

There's a freight component which comes in. And therefore, the kind of efficiencies it offers us is very strong because people cannot escape not using this emulsion to that extent because it is one of those areas, which also impacts some special properties to the paint which you are able to get at a very cost-effective manner when you use this emulsion. And given the fact thus, this emulsion is progressive, environment-friendly and literally no offensive smell. It is definitely an emulsion where people can't really find an alternate in terms of just using it because that alternate will come at a higher cost.

[Tejash Shah, analyst]

Tejash from Avendus Spark. Sir, just 1 question. The kind of ramp-up that we have seen on our retail touch points, what kind of ramp up you need on the back end in terms of depot network in terms of feet on the street also? What -- and then does it mean that our depot network also would actually go up or would have gone up in the last 2, 3 years in the same pace?

[Amit Syngle, executive]

Sorry, if you could -- there is a muffled sound coming in.

[Tejash Shah, analyst]

Yes. No, the kind of ramp-up that we have seen in our retail network, it also needs to be supported by depot networking on the market. So has it -- also expanded in the same way the way we have expanded to the front end? And b, how -- what percent for example, this year, we are targeting 10% retail touch point increase. Does it mean that the feet on the street that we have also needs to increase in the same proportion?

[Amit Syngle, executive]

Yes. So what we have done is that over the last 3 years, the overall hiring of the company has been fairly aggressive. We even looked at the same thing during COVID times to that extent. And this year itself, we would be recruiting more than 1,000 people in terms of what we are doing, both from the campuses all across as well as the front liners which would come in. And this is almost 3x what we would generally recruit in every year to that extent.

So you're right, because with such a large retail network, there has to be a ramp-up in terms of the people which are also happening. And therefore, I think we are definitely using a large amount of technologies to see that the productivity element remains in terms of our overall foray. But yes, the number of people are being ramped up, and they are ramped up because of also the backward integration, the Home Décor and other areas coming in to that extent. So it's an all-around ramp-up, which is taking place.

[Tejash Shah, analyst]

And sir, on depot network, what will be the count, if you can share? And what was it 3 years ago?

[R. Jeyamurugan, executive]

Depot addition, number of depot...

[Amit Syngle, executive]

Okay. So I think we would have added about 40-odd warehouses over the last 3 years as we see it to that extent. But I think more importantly, what we have done is that the size of the warehouses has doubled to now almost like 1 lac square feet to about 1.2 to 1.5 lac square feet. So both things in terms of expanding the size of our warehouses, the mechanization of the warehouses and the number of warehouses. So all around there is expansion which is happening with respect to the distribution structure.

[Latika Chopra, analyst]

This is Latika from JPMorgan. My question was on this volume value differential of 3% in the quarter. If I go by your comments, probably you're looking at industry Deco volume growth of 10% to 12%, 1.5x to 2x GDP. Do you anticipate for the coming year given you mentioned that the economy Emulsions are growing at a little faster piece. And then, of course, you have a Home Décor contribution as well coming in. Would this volume value differential stay stable in your view? Or it could expand for the coming year or reduce?

[Amit Syngle, executive]

So it's very difficult to say in terms of -- because, see, for each quarter, the mix also varies. It's not 1 mix which is there because when you come to, say, the quarter 2, there is also a stocking pressure, which comes in which people stock for the season to that extent. And when we look at Q3, this time, we are looking at a longer Diwali to that extent which comes in.

So typically, during a Diwali season, what happens, the mix varies from a Q1 and a Q4 in terms of what we do look at to that extent. So therefore, very difficult to say in terms of how the mix would augur in terms of going ahead. But I think we have reason to believe that it should be really in a certain band in terms of what we should follow to that extent. So it could be possibly anywhere between plus/minus 2%, 3% in terms of what we look at going forward unless obviously, there is some other disruption in the market, which takes place.

It is also a function of sometimes that if you are able to gain shares from some of the unorganized sector to that extent, then it fuels the volume part of slightly more to that extent than the value part sometimes to that extent. So I think it is very difficult to say that what would be the real guidance to see the value volume stroke there to that extent. But I think from our point of view, the guidance very clearly remains from a margin perspective, clearly, we would really like to retain that margin. At the same time, we would like to be, as I said, aggressive in all segments so that we are also really looking at broadening the market and gaining share.

[Latika Chopra, analyst]

And any flavor on Home Décor segments other than Bath and Kitchen. How do they track on gross margins, operating margins, because you've given an FY '26 revenue target. But any thoughts on how the profitability will basically play out over medium term here?

[Amit Syngle, executive]

So I think for each category, it really varies. You've seen the Bath and Kitchen in terms of the way it is unfolding in terms of this thing. Typically, what we see is that when we have acquired the lighting category, the margins there are -- EBITDA is close to about 18% to 20% zone, which comes in to that extent. And when you look at possibly the furnishing business, that would be in the range of about 10% to 14%.

So it would vary from category to category depending on, one, the innovation, the spread, the range in terms of what you are dwelling to that extent. But I think over a period of time, definitely, we would see that this category should be settling anywhere between 10% to 14% kind of a zone.

[Latika Chopra, analyst]

All right. And can I just check for FY '23 on a stand-alone basis, what was advertising to revenue ratio for the full year? Is it possible to share?

[Parag Rane, executive]

It should be about 3.5%.

[Sunila Martis, executive]

Thank you for the questions live audience. We now move on to the participants join via Zoom video platform. Our first question is from Mr. Chirag Shah. [Operator Instructions]

[Chirag Shah, analyst]

Sure. This is Chirag Shah from CLSA. Amit, my question is going back to the Home Décor business. As we scale up this business and the business becomes far bigger, is there a merit in simplifying the corporate structure over here? And what is the kind of capital that we need to deploy to scale up to the ambition that we have? Are we also expecting more categories to get launched here?

And also a little bit, if you can share the growth plans in the White Teak business in particular? And on Beautiful Homes, we are right now catering only to 11 cities. But as we plan to double the number of stores, how many cities do we plan to say? Just trying to get a sense of where the market goes in terms of the geographical expansion?

[Amit Syngle, executive]

Okay. Just to factually correct you, the Beautiful Homes Service platform is in 11 cities. The Beautiful Homes stores are in much larger number of cities, almost about 30-odd cities in terms of what we see.

So I think both the framework will keep on expanding as we go ahead. And as I spoke of going from 50 to 75 to 100 stores, I think we will definitely have a footprint of about being over in about 50 to 60 cities where the home -- Beautiful Homes store network is going to be there to that extent. So when we look at this thing in terms of categories, especially, I think we are very buoyant in terms of categories like the fabrics, the lighting, the doors and windows, UPVC business. We are looking at literally exponential growth upwards of 50% in some of these categories, which we will focus on as we go ahead.

And as I said, some of these categories are also very, very profitable and very strong from a point of view of design commanding a certain price as you go ahead to that extent. We have already added categories like Rugs, Flooring, Bed sheets in terms of the overall business in terms of going forward. To that extent, there is -- already we are working on a very big category, which is called the Fitted Furniture which is there to that extent apart from the furniture, which is there to that extent.

And in future, we would not mind adding any other categories which could really be attractive overall. But we think that today, we have harnessed actually most of the categories in terms of the Home Décor business which are there to that extent. And therefore, we think currently, we would like to have some consolidation in terms of really seeing that we are looking at it. We have also launched tiles, which are there, which is a part of the Home Décor segment to that extent.

But we are not going for very aggressive volumes in terms of the tiles, but we are looking more the designer and the high-end tiles which are coming in as a range completion in terms of our overall Home Décor business. So I think that is something which is the intention in terms of how we would like to grow this. As a structure, right now, we have put all this under a particular Home Décor structure, which is there to that extent, so that we can leverage all our skills in design, designers, structure who operate and our own leveraging of that architects, designers in a very, very strong manner.

So currently, it is a structure which is possibly we are trying to put where there is some overlap of the paint business, which is there. But as we move forward, the structure will possibly see whether we merge the structure into the full structure or whether we really make it more sharper is something which we are seeing as the business progresses.

[Chirag Shah, analyst]

Sure. And on the White Teak part and the Furnishing business, what is the expansion that we expect on White Teak. And in Furnishing, will it be largely distribution-led business and if that is the case, is there a scope to significantly expand faster?

[Amit Syngle, executive]

So overall, when we see from a point of view of Furnishing, when we took over the business, it had only about 100 retail points. Now we have 900 retail points in 2 years. So that is the way we have expanded the business. And it is just not a distribution story, it is also a story of design where you give very, very -- design and stuff.

So we have a Sabyasachi range of furnishing, which is there. There is a pure concept range of furnishing, which comes at even a price of INR 6,000 a meter to about INR 9,000 a meter, which is really the high end of the market. So therefore, we are looking at segmentation within that kind of market in a strong manner and it's not a pure play distribution in terms of what we are looking to that extent.

But as I said, that we are now in the furnishing market, become #2 player already in the market in a short span of 2 years to that extent. We will continue to be imperative of saying that not only we look at distribution, but we look at possibly the design, the quality of the cloth and other parameters, which come in, so that we can offer a very, very strong range to the customer in India in terms of what possibly the customer demands.

As far as the lighting concern is concerned, we have ended this year at INR 109 crores. We are [ aiming ] for definitely 50% plus growth kind of a thing in terms of what we want to take on this segment. This segment, according to us is about closer to about INR 1,100 crores as a market in terms of the overall segment. And therefore, we think that there is enough scope to grow profitability in terms of profitability in this segment because lot of this lighting is imported from China today in the Indian market, which is of a certain quality to that extent. And therefore, there is enough scope to grow in the White Teak Lighting segment as well.

[Chirag Shah, analyst]

Got it. My last question is on the backward integration. If you can just give an update on the backward integration facilities that we are expecting in white cement, VAE and monomer. And Parag, does the INR 2,300 crore number include this backward integration related CapEx as well? And how much?

[Amit Syngle, executive]

So yes, that number includes because you must appreciate that the funding takes place over the next 2 to 3 years' time frame to that extent. So this funding, which Parag spoke of includes that kind of funding which is happening both from a VAM VAE perspective, which is a plant which is coming up and also the cement plant which is coming up in Dubai Fujairah, to that extent. Apart from that, we have anyway expanded into some other elements of backward integration as well to that extent, which is already implemented to the -- in our plants at the moment.

[Sunila Martis, executive]

Thank you for your question, Mr. Chirag Shah. We now move on to the next participant, Mr. Manoj Menon. [Operator Instructions]

[Manoj Menon, analyst]

Excellent performance given the market context. This is Manoj Menon from ICICI Securities. Sir, actually, my questions are really actually pertaining to the quarter. One question which investors do highlight to us or other ask us, is, how do you actually define volumes? Is it tonnage? Or is there a formula which you apply?

[Amit Syngle, executive]

So the volume basically is a conversion in terms of the specific gravity of the material in terms of which we look converting it into liters. So today, whatever we sell in value terms, there's a conversion which takes place into defining it as a liter to that extent, and that constitutes what we see as the volume. So therefore, in a way, the volume is linked to the value in a strong manner in terms of how it emanates.

[Manoj Menon, analyst]

Understood. So is it fair to say that, let's say, when you sell putty at INR 20 per kilo versus the top end of, let's say, paint at maybe INR 800 per liter, I mean, give or take a kilo versus liters is like maybe 0.9. Is it fair to say that the formula which you use takes care of this significant, let's say, delta in terms of 40x in terms of your low end to the high-end product which you sell?

[Amit Syngle, executive]

No. See, each volume, which comes in is basically related to the value in that sense to that extent because what will happen in terms of, say, a category like distemper. When we look at distemper, basically, it has a certain specific gravity ratio, which comes which qualifies it into a certain volume zone to that extent. What we look at is -- there is no formula, which is used to really bring everything to the same base to that extent.

If there is a Waterproofing product, it has a certain volume, which is coming in because of the overall thing and it will have a certain value contribution which would be possibly lesser than the value contribution of a Luxury product, which would be there to that extent. So there is no one formula which binds everyone to bring it into a certain zone that the same formula is applied towards that. It's a pure-play volume, which comes of that category To that extent. It adds to the overall volume in terms of what we project at an overall level in terms of what is there.

And why we feel it is comparable because each company has the same product range today in the paint industry. So there is no industry in the paint which does not have a putty, does not have a primer, does not have a distemper or does not have waterproofing. So therefore, I think when people speak of volumes overall to that extent, it is, by and large, comparable in terms of what really people are speaking of in the industry.

[Manoj Menon, analyst]

That's very fair. So basically, what I understood is it's not necessarily a valuated volume. It's actually a volumetric volume. Understood, sir. If have something to follow-up, I will take it offline. Understood. And only second last question is -- it's a brilliant work which you have done in Waterproofing. And I think there is [ no person on ] Adhesives. Maybe some comments on Adhesives also would be helpful on some good work you have done there. On building, a lot many more businesses outside of paints, 2 questions sum it, actually, the quantitative part is all for us to see. Qualitatively, let's say, how are you managing complexity.

I know that's like an omnibus question with so many categories. And secondly, some of the new businesses, which you are looking to ramp up also has got a retail [ hints to it ], right? Now you have been a product company for a long time, how are you managing the transition at least in some of the businesses from, let's say, product to retail?

[Amit Syngle, executive]

Okay. See, I can only give you a little bit of -- so we started Waterproofing about 7 years, 8 years back now to that extent. And because of our indigenous technology, we really grew the Waterproofing business because actually, a Waterproofing business is a very, very technical business where historically, people like Sika, Fosroc and some of these companies have been as multinationals at the helm of a fair to that extent.

Similarly, when we look at a category like Adhesives, which we started about 6 years back, and now we are clearly the #2 player with respect to the Adhesives category to that extent. Or we look at possibly we started the whole zone of wall papers or the painting tools, which have come in, in each of these categories, what we have clearly seen that these are not like stand-alone categories where we will have to put a separate structure to take care of it.

We have largely tried an integration approach that the current business is able to sustain that new category which we are introducing with possibly the same set of people who are catering and reaching the same places where possibly paint is reaching to that extent. So the area what we have looked at possibly going forward in terms of the new categories is largely an integration where either the integration takes place at the retail point or the integration takes place at a consumer point to that extent. And therefore, possibly from a structure point of view, it has not added principally to the structural cost, which possibly any new category would have added to that extent. And therefore, possibly the resilience in terms of why we are able to grow these categories very strongly.

Are you Manoj, I think he's cut off. Maybe he was satisfied with the answer.

[Manoj Menon, analyst]

No, no, I couldn't unmute, I'm sorry. Hello?

[Amit Syngle, executive]

Yes, Manoj.

[Manoj Menon, analyst]

No, I'm very much there actually so -- thank you, sir. It is very much clear in terms of both the -- Sir, 1 request actually which I would be doing with all the listed paint companies from this quarter onwards. Will it be feasible to follow the template, let's say, when Indigo started a couple of years back of reporting segmental, at least the revenue part, if not the profits. It's a request which comes from, let's say, consensus investing side.

[Amit Syngle, executive]

Yes. You want to say...

[R. Jeyamurugan, executive]

Manoj, we'll come back on that. I don't want to comment now.

[Amit Syngle, executive]

So you've heard the CFO say what he wants to say on that. I have no power as a CEO to say anything on that.

[Sunila Martis, executive]

Thank you for your question, Mr. Manoj Menon. We now move on to the live audience for 1 last question.

[Abneesh Roy, analyst]

A few follow-on questions. So first is on the non-Deco India business. So when I see your auto paints and your industrial paints. Last year, your margins were fairly similar at 6%, but this year, the gap is almost 450 bps, which was difficult to understand if you could explain that.

Second is you have given the size of industrial at around INR 1,000 crores, how much would be the auto paints also. Third is the leader in auto paints, Kansai 2 days back, said that they have gained market share in all the verticals or auto paints, 4-wheeler, 2-wheeler, EVs and the commercial vehicles also. So if you could tell us with your relationship or partnership with PPG, what has been the gains in the last 6, 7 years post the relationship being more formalized?

[Amit Syngle, executive]

Okay. Let me answer the first part you said you're asking about margins where...

[Abneesh Roy, analyst]

450 bps, gap in margins between auto and industrial this year, last year, both were at similar margins?

[Amit Syngle, executive]

Yes. So see, one of the reasons I explained earlier why the margins have kind of really increased here is the fact that we have become very, very strong with respect to taking certain price increases in the market, which we were not possibly taking earlier. And this has come on the behest of our superior offerings, which are there in the market from a point of view of differentiated offerings, which we are able to kind of give in the market to that extent.

As I explained, that if I'm giving a floor coating, the floor coating will come with some additional parameters and therefore, it will be of a certain higher price as compared to competition in terms of what we are able to put up. And this is also led by our technology, which comes from PPG to that extent, which what we have been kind of doing. So from an overall point of view, both businesses, whether it is the auto OE business or it is the general industrial businesses, we have been able to, one, take very, very progressive price increases with respect to our range.

Second, I think the differentiated products are giving us a very good opportunity to price and differentiates certain products much higher than competition, which has led to this kind of overall profitability, which has kind of come in to that extent. And third, I think there has been a strong amount of work at the R&D level in terms of looking at really working around the formulations to see that we are able to kind of increase our margins in a very, very strong manner to that extent. So I think these are the components which possibly have kind of inflated the industrial volumes for us in a very strong manner.

[Abneesh Roy, analyst]

No, sir, your auto paint margins are better because those are 450 bps ahead of industrial. So when you're saying R&D is held or whatever differentiated, is it only in auto that you are doing differentiated?

[Parag Rane, executive]

No, Abneesh, another part to that question is also the fact that auto margins were always better than the general industrial. In the previous year, given the nature of the business, which is more B2B the price increases actually come with a significant lag in the auto business. And therefore, you had a much larger inflationary impact on the auto business.

[Abneesh Roy, analyst]

And size of auto business and if you could talk about the market share gains in the last 7, 8 years.

[Parag Rane, executive]

So the INR 1,000 crores that we reported is on the non-auto business purely. It doesn't include any auto. The auto business is the second JV where about 1/3 of the business is from the 4-wheeler OEMs, another 1/3 is from the 2-wheelers and other commercial vehicles and 1/3 is from the [ re-finish ] segment.

[Abneesh Roy, analyst]

Last question on Indonesia. 6 years back, there were big plans. Would you say where you are currently, you will be hugely disappointed? And is that disappointment because of the GDP because most companies in Indonesia are disappointing? Or would you be saying that you are in the right path, because of the COVID or whatever issues, things got a little bit de-railed.

[Amit Syngle, executive]

No. Definitely, I think Indonesia has been a disappointment for sure because I think the trajectory in the last 3 years has not been good at all in terms of what we anticipated in the market to that extent. Not [ blaming ] the fact that other companies, how they are doing. But I think we see ourselves very clearly that when you are at a single-digit market share, and we have not been able to grow the market very aggressively. So we are putting adequate measures in terms of saying that we give ourselves some time in terms of seeing how we need to kind of galvanize that business and take it ahead to that extent.

I don't think so, I have to blame the economy for doing it because when you are at a low market share, then it is not the economy, but is your own strength in terms of doing what we can do in that market to that extent. So I think there's a way to go in that market definitely. What we have been definitely able to do is prune the losses a little bit in terms of what we were earning there. But having said that, I think the larger growth strategy has to kick in, in terms of possibly seeing that, that business becomes worthwhile as we kind of go ahead.

[Abneesh Roy, analyst]

But as of now, you don't think you have the model, right, because you don't talk about it and you're still saying that you've cut the losses rather than you have the strategy to scale up the revenue...

[Amit Syngle, executive]

No, there is a strategy which is in place, which is there. It's just that some parts of the strategy have not gone in the way in terms of we would have liked. For example, we tried to possibly see the entire lay off the land because in Indonesia, if you see, there are islands which are spread all across the country to that extent. We decide [indiscernible] an approach of approaching everything at 1 shot, which possibly did not give us the leeway. Now we are looking at a far more concentrated strategy in terms of key strategic places in Indonesia, and that's something which we have to follow now. But there is definitely a strategy in place because without strategy, then we would have winded up far earlier to that.

[Sunila Martis, executive]

Due to time constraint, we'll be ending the Q&A session right now. We thank all the audience for all their questions. May I now request Mr. Amit Syngle for his closing remarks.

[Amit Syngle, executive]

Okay. Great. I think it was a good session. I think, after a long time. We had a 1 physical session with all of you to that extent. So thank you for coming and I hope we added some value in terms of answering some queries of yours to that extent. I look forward to meeting you in the future and seeing how we can make this session far more stronger and attractive as we go by. Thank you.