Asian Paints Ltd

NSE:ASIANPAINT

Earnings Call Analysis

Strong Volume Growth Amidst Market Challenges

In Q4 and FY 2024, Asian Paints experienced robust volume growth despite a slight decline in value sales due to a 3.7% price decrease. PAT surged by 32%, and PBDIT margins improved by 220 basis points for the year. The company expects continued double-digit volume growth, aided by favorable monsoon predictions and Diwali season sales. They maintained an 18-20% EBITDA margin guidance, leveraging supply chain efficiencies and new product launches. Significant investments in capacity expansions and backward integration are projected to boost future performance further.

A Strong But Challenging Quarter

The latest quarter for the company saw robust double-digit volume growth, a testament to the company’s ability to sustain momentum even in a tough market environment. However, a notable price decrease of around 3.7% negatively impacted overall value growth, resulting in a slight dip of 1.8%. Despite this, the company showcased resilience with a volume growth of 9% for the fiscal year (FY) 2024, translating to a value growth of approximately 3%.

Operational Efficiencies and Margin Improvements

Gross margins for the company have seen a significant uptick compared to both the previous quarter and year-over-year. This improvement comes partly due to deflation in raw material prices and partly due to the company's concerted efforts in sourcing and formulation efficiencies. Despite a sequential decline in PBDIT margins for Q4, the overall fiscal year '24 saw improvements in PBDIT and other profitability metrics.

Rural and Urban Market Dynamics

Interestingly, the company noted that urban centers grew slightly faster than rural markets during the fiscal year. Nonetheless, rural markets showed signs of resurgence as of April and early May, indicating potential for balanced growth across both segments moving forward.

Focus on Industrial Business and Joint Ventures

The industrial segment has been a strong performer, supported by joint ventures with PPG of the U.S., which have shown very promising growth both in volume and value terms. This growth has effectively mitigated the impact of headwinds faced in other parts of the business.

Strategic Innovations and Patents

A key driver for future growth lies in the company's strong emphasis on innovation, as evidenced by over 126 patents filed over the past six years. These innovations have not only bolstered the company’s product offerings but also ensured higher profitability through differentiated products in both the premium and luxury segments.

Expansion and Capacity Building

The company has ambitious plans for capacity expansions, with significant greenfield and brownfield projects underway. A new fully automated plant in Madhya Pradesh is expected to go online by 2028, adding around 4 lakh KL per annum capacity. Additionally, backward integration initiatives, such as a white cement plant in Fujairah and Dubai, are set to enhance the company's operational efficiencies further.

Future Outlook and Guidance

Looking ahead, the company maintains a positive outlook, guided by optimistic monsoon predictions and a robust festive season. Management has reaffirmed their commitment to a strong double-digit volume growth for the upcoming year, with key focus areas being rural market resurgence, B2B business growth, and continued strength in both industrial and international markets.

Earnings Call Transcript 2024-Q4

[Sunila Martis, executive]

Good evening, all of you. Thank you so much for joining us today to discuss Asian Paints Q4 and full year 2024 earnings. I'm Sunila Martis, I'm from the Investor Relations team, and it's great to welcome all of you here today. We also have with us today our MD and CEO, Mr. Amit Syngle; our CFO and Company Secretary, Mr. R. J. Jeyamurugan; and Mr. Parag Rane, AVP Finance.

I would now like to invite Amit, to come and give his opening comments.

[Amit Syngle, executive]

Very good evening to all of you. I think it's a pleasure to see a lot of you physically. I think most of the times we have been on calls and so on and so forth. So I think a good time to really interact and have a conversation with all of you. Today, we are looking at the Q4 results, which have -- which we've announced today. And along with that, looking at the FY '24 in terms of how does the years span by take you through a small presentation.

You're all familiar with the fact that we started our journey way back in 1942. And today, we are very clear that we exist to beautify preserve, transform all spaces and objects bringing happiness to the world. So the whole area of bringing joy and happiness to people's lives is a strong area as a core value of the brand, which we kind of really pursue quite strongly all across our initiatives in terms of what we take.

A small disclaimer, which you are all aware. Coming to numbers. If you look at the numbers, obviously, this quarter was a little bit slow from the point of view of overall value delivery in terms of what we're seeing, but we're still seeing a very, very strong volume growth of double digits, which have come in, which was the promise I made last quarter as I was presenting, saying that we will look at double-digit volume growth to kind of come in, which is something which we have maintained over a period of time, very, very strongly to that extent.

However, you are aware of the fact that we have taken a total price decrease of about -- close to about 3.7%, which impacted literally the volume value gap, which you have been traditionally seeing between the volume and value numbers to that extent.

And therefore, the overall value was a little bit depressed below the base at minus 1.8% in terms of what is there. Overall, for the financial year, if we look at it, the value growth was closer to about 3% in terms of what we registered with a volume growth of 9% coming in, both from a point of view of Q4 as well as the point of view of FY '24.

If you look at the CAGR numbers over the last about 4 years, they have been very, very strong in terms of high double-digit numbers in terms of what you see. And that is something which we have been pursuing, which kind of gives you an idea of the kind of growth which we have been pursuing over the years in terms of what we have kind of resulted in.

So I think that's the overall area in terms of looking at how overall the top line has translated in terms of both Q4 and FY '24 in terms of what it is.

The industrial business, as you are aware, for the last 3 years has been doing very, very strong. And our -- both the industrial JVs, which are there, both the APPPG and the PPGAP, which is the joint venture with PPG of U.S., have been really performing very strongly.

If you look at the growths, which come in along with the trajectory of the industrial sales as well to that extent. The industrial sales by itself has really grown very, very strongly, as I said, in terms of both volume and value to that extent. And today for Q4, if we take those numbers, the value trajected from that minus 1.8% comes down to about minus 0.7% to that extent.

And for the FY '24, the growth rates go from about 3% to about 4% overall, the volume growth goes up to about 10% on an annualized level to that extent. So I think it is important, yes, while we see Q4, but the important part is to kind of look at the full year because quarterly, there have been some variations in terms of what we see.

But the important point is that you've still kind of registered a total double-digit growth in terms of -- for the entire year coming in strongly. And the value possibly is a little bit depressed because of the 3.6% kind of a price decrease in terms of what I have indicated to you with a little bit of down trading in terms of what has happened especially in Q4 to that extent.

When we look at this chart and some of you who have been tracking are familiar with the fact that over the last almost 8, 9 quarters, 12 quarters, literally to that extent, if you see the trajectory on the double-digit volume growth has been a very, very strong story, which we have been kind of talking to you every time when we kind of meet and speak about overall of our growth rates, we feel that the volume trajectory kind of gives us a boost in terms of looking at more from the point of view of saying that this is something which is a strong, sustainable business, which is happening quarter-on-quarter, which kind of comes in.

And the numbers are very, very clear that from a compounded average growth rate level, the double-digit numbers are on higher digit levels to that extent, especially if you look at on quarter 4, the number is even higher than normal 15%, 16% in terms of what we want -- what we really speak of. So that's the story in terms of the trajectory in terms of how we overall see in terms of the growth, how it pans out.

Some highlights in terms of what we see, what has happened to this thing. While I think there has been a lot been about the rural markets, so to say, and the rural markets kind of coming back and so on and so forth, we find that -- for us, I think the urban centers drew a tad faster than the rural markets.

But the difference is not too much in terms of what we see, in terms of how the performance has been to that extent. And therefore, I think our concentration and focus has been on both the side of the markets to that extent. In fact, we see now in April itself that there is some more resurgence happening in terms of the rural markets to that extent, which is a good sign and a positive sign in terms of what we are kind of seeing.

If you look at the product mix, yes, the product mix has got affected a little, especially in terms of the overall Q4 to that extent. But if you speak about the entire year, I think two segments where we've gained strongly is, one, is the eco, which is the economy smart end of the market, which is there, which is a strong area of growth, which is for -- which has come in for us. And that itself is a higher contribution in terms of the overall market also, which is there.

The second area which has been done well is the luxury set of markets where the luxury products have done well overall to that extent. But the premium market, which is also a part of the overall thing has been slow for -- a little bit slow for us. to that extent. And that is something which we have seen that there is possibly some kind of down trading which is happening, especially in rural centers, prima facie in terms of the people going from premium to economic segment overall to that extent.

But I must remind you that if you look at the overall structure, the eco market is close to still about 70% of the total market in terms of what we see. And in both the markets, whether it is eco, premium or luxury, today Asian Paints talks of a stronger share in terms of what we have in all the 3 areas as we kind of go forward.

If we look at from the point of view of distribution, that has been, I think, the very strong strength which Asian Paints has always been driving. And today we feel that in the last about 3 years, we have been able to drive almost about -- additionally about 40,000 to 45,000 retail points which are there.

And in the current year itself also, there is a very big push in terms of looking at almost about 10,000 retail points more, taking a tally to more than about 1.63 lakh retail points, which is significantly much, much over almost, I would say, 4x -- 3 to 4x any other competitor, which is there to that extent, which gives us a very strong sense of representation across the large tracks of country.

And this is something which is comparable to possibly any large FMCG player as well to that extent. So therefore, I think this is something which has been a strength and this is something which we feel is a very, very strong support to us, which happens. And we also feel that over a period of time, we have seen that this kind of network also keeps on growing very well for us over a period of time.

When you look at the projects, which is the B2B business, that also has been a fairly strong story over a period of time in terms of what we have seen. In Q4, specifically, we felt that there was a little bit of a slowdown more from the point of view of the government business slowing down because of the impending election code kind of striking into that extent.

And therefore, a little bit of a slowdown in terms of what we see, especially in the latter heart of -- half of February and March to that extent. And we feel that possibly there is some postponement of demand which is taking place, which should kind of keep come kicking in live in June and July as we kind of go forward to that extent.

Overall, I think waterproofing business, which we -- as the brand SmartCare, has been a hallmark 8 years back when we launched the product. And today, we speak of being #1 in the retail market in terms of our overall presence across the various regions across the country.

And today, the entire range is represented by almost about more than 280 products, which are all indigenously developed by us through our technology. So I think this is a big -- very big area and the projects area has really kind of prospered because of this, because now you are talking of admixtures, which become at the foundation of a building. So you can just imagine that in a B2B business, you are right there at the foundation to the top coats to that extent.

And therefore, the full area is something which we cover very, very strongly with our admixtures, membranes, repair chemicals and construction chemicals, which kind of come in as part of the total range.

The whole area of innovation has been a strong story of -- at a backbone in Asian Paints. And today, if you look at -- we've almost got more than 126 patents, which have come in over the last about 6 years. And out of these patents, almost 60 have been granted to us and more than about 30 patents have been commercialized.

Now that's the strength which the brand brings on to the table in terms of looking at patenting not only the products, but also the process in terms of manufacturing, which gives us a little bit of in terms of that, difficult for any competition to really ape the products as you kind of go forward to that extent.

And today, new products form a sizable part of our overall revenue, almost about catering to 11% to 12% of the top line to that extent, which comes in, which is a very strong story in terms of going forward because it puts excitement in the market. It also gives higher profitability to the network as we kind of speak of going forward.

You are aware, we have announced some of these investments some time back. Just to kind of give you an update in terms of where we are. With respect to our greenfield venture in Madhya Pradesh, which we announced sometime back, we are talking of a 4 lakh per annum kind of a capacity, which, again, would be one of the biggest globally in terms of what would be there fully automated plants should come in.

We have done the land acquisition in terms of what is there and the statutory approvals on environment are WIP, and we think we should kind of complete this project by 2028 in terms of what is required and that would kind of really be a surge in capacity in terms of what will come in.

We had initiated a lot of brownfield projects, which are there in terms of our existing plants, which are there in Kasna and Khandala and Ankleshwar and Mysuru and that has given us a good lift of about 17 -- almost about 17 lakh KL to about 22.7 lakh KL kind of a capacity boost, which would happen. And out of this, Kasna and Khandala is something which we have completed. Ankleshwar and Mysuru are underway, and we should be able to kind of complete that in this year, as you kind of go ahead to that extent. So overall, the capacity really kind of surges in a big way in terms of this thing.

Our backward integration initiatives are also online. The white cement plant in Fujairah and Dubai is something which is online, and we should be able to kind of really commission the plant early next year in terms of where we are to that extent.

Today, the machinery has been ordered and everything is in -- the pace is right in terms of where we are kind of proceeding with the entire white cement facility, which is there. The VAM-VAE plant, again, is something which you would have seen we announced our partnership with GCPL in terms of looking at the ethylene supply, which will kind of come in.

It's something which is, again, on track, and we are looking at, again, the year 2026 in terms of when we should kind of look at in terms of getting that also kick off done in terms of this thing, which would kind of give us a very, very strong capability from a point of view of offering environment-friendly emulsion, which would be available at almost the lowest price too, which is compared to any other player in India to that extent.

So I think that's something which are strong initiatives, which we are kind of doing in terms of all our capital expenditure, which we have kind of announced.

The one big announcement, which we did was that we are looking at now revolutionizing the bottom of the pyramid. We still feel that the bottom of the pyramid is a very, very huge market, almost about INR 5,000 crores in terms of what we estimate that market to be. It is something which we have a product called distempers as you are aware, and there are some low-cost emulsions there.

We have come out with this new absolutely strong technology, which is called the latex technology, which comes from our table. To that extent, it's a new platform, it's a new technology, absolutely, which comes in, which offers the capability of -- for the first time, offering a product at the cost of the distemper, which is much, much better from a point of view of durability, coverage, everything and price has been matched to the distemper product strongly.

And I think this is something which we launched in January of 2024. And we are seeing volumes really building up and very strong kind of growths happening, which is kind of boosting the whole economy set in a very, very big way in terms of what's coming in. And this is the kind of revolution because this kind of really actually gives us the whole area of bringing joy and happiness to every home as we kind of see to that extent.

And therefore, this is something which we are talking very strongly, which will have impact both on some of the urban centers, but more strongly on the -- all the rural centers, which will kind of come in to that extent. So that's a very big launch. And because it is so big, we thought that it kind of really needs someone with stature, someone with a lot of respect, someone who's possibly grown on his own kind of work, perseverance in terms of what is there.

And therefore, we've taken Virat Kohli as the brand ambassador who has kind of really come on to this table to kind of look at the overall Asian Paints brand, but first of all, we are kind of really leveraging him from the point of view of this Neo Bharat. And the whole proposition here is of, Har Ghar Khelega and Har Ghar Khilega. So basically, every house is going to play with this and every house is going to bloom as we kind of go forward in terms of this kind of proposition, which comes in.

And not only this, we have kind of really given a very big kind of incentive in the market in terms of looking at promoting kids across a lot of households who could kind of really be selected as part of the cricket scholarship which we are offering. So almost about 200 kids will be selected and you are talking on expenditure of INR 2 lakhs per kid at least, which would kind of come in.

And that's the larger part of the brand in terms of what will play. But that's the impact in terms of what we want to kind of do over a period of time in terms of looking at really taking on the large area of the bottom of the pyramid in terms of taking, and I think it should kind of really give us a boost from the unorganized sector as well, which is there.

So the idea is that basically as a leader, you keep on expanding the market. okay? And that's where the play is to that extent in terms of going forward. Along with that, I think the innovation really continues in terms of what we keep on doing around the festivals, what we keep on doing around our initiatives to kind of democratize art overall across the country to that extent. And we have seen that the whole area of the propensity of a person to buy Asian Paints is something which we have been able to kind of increase given the work which we do around with the brand to that extent, and that is a story which we keep on kind of continuing, whether it is innovative packaging, whether it is innovative ads, which we bring on to the table.

But more importantly, I think what we have done is that the whole area of Beautiful Homes painting service, which is a very, very large service for us now. I think it has really bloomed us for us. It is globally now the largest painting service, which is offered by any brand whatsoever. And it is literally growing at the rate of about 70% to 80% for us year-on-year to that extent. It's a sizable kind of zone, which comes with a very, very strong NPS, which is what we call the service parameter of almost about 77% in terms of what we offer.

So I think it's a very valuable property. It's something which is growing, and it's something which kind of aids the consumer in terms of getting the best painting experience. overall to that extent in terms of what they can manage. Along with that, I think a host of initiatives, which are there around taking the stakeholders, so whether be it the painter, contractor or it is being an architect designer and so on and so forth, I think that is something which we have kind of worked strongly.

We have now about 23 color academies across the country. And we trained -- last year trained about 6.8 lakh painters, plumbers, carpenters across that -- upskilling their levels and increasing their livelihood in a very strong manner. And this year, we are literally homing in terms of going to about 8 to 9 lakhs kind of training centers -- training numbers, which would kind of really give us a very, very strong Pan-India kind of penetration in terms of this community, which is working around us and strongly kind of aiding the overall product growth. So that's, I think, some of the work, which is around the brand in terms of what's happening in terms of what you see.

Important part, as I spoke of the AIDs, we speak of this whole parameter of color and material intelligence. We have a property called the Color Next in terms of what we speak of. And this has been started in 2003 and more than 2 decades of work around in this area, which has kind of propelled us in terms of really aligning with the best of the architect designers across the various towns in the country to that extent, which kind of gives you a very big flavor of the recommendation of Asian Paints as a brand first, which kind of comes in from all the designers to that extent.

And I think this is an area which kind of propels the premium and the luxury end of the market in a very strong manner because the sites which the designers do are possibly more the medium to luxury kind of sites which kind of come in to that extent. And that's a big propellant for our premium to luxury kind of finishes in terms of what we work. I can just tell you this that there is no other competitor who would kind of do this kind of work, which is happening with the aids to that extent. So I think this is a big boost in terms of what we look at in terms of going forward.

Just coming quickly to the home decor business, and I think this is something which we have been discussing. This has been a strong area of passion and growth in terms of what we have been pursuing overall. So if you look at, I think, the last 3 to 4 years in terms of the energy, which has been put in, it has resulted in making us the #1 integrated home decor player. When I say integrated home decor player, today, this industry is really diversified with a lot of smaller players across various regions and very less national players which are there. To that extent, we have kind of really brought everything together. Now we talk of 60 BH stores, which is the Beautiful Home stores across the country, and we are expanding the stores fairly rapidly in terms of our overall foray.

The stores are almost growing at almost about 50% to 60% in terms of their this thing and they offer categories which are all across, whether it is fabric, whether it is furnishing, whether it is furniture, lighting, bath, kitchen, so you name it, flooring, everything is something which is subsumed under that. And these stores are phygital stores, which is physical plus digital stores. Doing very well. But if you look at the other categories, whether it is the whole area of decorative lighting, we are #1 there in terms of which comes in or you look at the area of fabrics, which are close -- we are a strong #2, which comes in there.

Our align -- our wallcoverings and textures, we are #1 there. We have aligned strongly, as you know, with Sabyasachi and Sarita Handa and Jaipur Rugs and lots of other brands to kind of bring in the best to the customer. And I think this is something which we feel is a strong foray and one incident, which we are -- one thing which we are finding is that retailers who are kind of getting into this BH kind of framework are growing much faster in the coatings business as well.

So it has a clear correlation in terms of completing the product for the customer. And therefore, the largest strategy is that can we be part of the home decor cycle of the customers so that we are able to kind of assist them not only from the point of view of painting, but also renovating and making new homes really come alive.

So I think that's the foray, which is doing fairly well to that extent. Kitchen and Bath has not done well to be upfront with you. Quarter 4 has been down. In the full year, you have seen that the business has not done well overall, to that extent I think bath, our share in the market is very, very small at the moment to that extent. And therefore, we faced some headwinds in terms of the demand being on a very low side and to that extent, also the pressure comes in both from the unorganized segment as well as from the organized players to that extent.

And therefore, that is a business which we need to kind of really pick up and work strongly in terms of really taking it ahead. Kitchen was okay but not so great in terms of what we see overall for the year. The thing is negative, but the good part in Q4, we have still registered positive numbers in terms of the overall revenue, in terms of what we see.

You are aware that we are talking of now looking at bath and kitchen becoming integral with the Asian Paints business so that we can really talk of the same service standard, same servicing, everything. And therefore, the merging is kind of giving us a big stroke for next year in terms of what we want to kind of do both with kitchen and bath so that we are able to kind of really take this business and make it big as part of our overall decor initiative in terms of which is there.

Both White Teak and the Weatherseal, which is the UPVC doors, windows business, Again, those businesses in Q4 have done well in terms of top line. For the full year also, if you see the numbers are fairly strong in terms of what we are doing to that extent. And as I said, in decorative lightning, we are #1, to that extent.

And therefore, I think these businesses will continue to grow with us in terms of the way -- the idea here is to kind of really make these businesses large spread it across the country, use the muscle of our distribution to see that we are able to kind of really look at this going places as we kind of go ahead in the market to that extent and really become the #1 national players in terms of operating in both those areas as we kind of go ahead.

So that's the lighting and the UPVC business for you. As I said, we have a partnership with Sabyasachi, and we just launched our new addition of the Sabyasachi wallpapers, which are there, and this is something which is a fairly exciting part. These wallpapers are one of the most expensive wallpapers in the world in terms of what we see in terms of what comes. Largely, they go up to INR 200 to INR 500 per square feet on a wall to that extent. And you can just imagine that a 10 x 10 wall would be almost about INR 1.5 lakhs to INR 2 lakhs kind of expenditure in terms of what you're putting into that extent And that's the whole area in terms of really upgrading and looking at making the product -- the brand very, very premium in terms of going where we have Nilaya as a brand to that extent.

Global. This is the kind of representations we have all across. If you look at the overall business, if I kind of see the overall business, yes, the business -- in terms of the overall numbers, is negative when you look at the INR terms to that extent, minus 1% to that extent in terms of how it kind of really looks.

Quarter 4 was still positive in terms of the numbers, which we take. But if you look at it from a constant currency point of view, I think we are still good in terms of the overall growth in terms of what we are registering. And if we take ex-Asia numbers or ex-Nepal numbers because Nepal has been a market which has been really suffering for the last about 2 years, and we are #1 in the Nepal market to that extent.

And that is why if I take net of Nepal, I think the growth are in double digits in terms of what we see for the global business to that extent. So -- geographies. In terms of various geographies, Lanka is now back to that extent. Ethiopia, Egypt has started doing well. The whole UAE market is doing well for us to that extent. But this is something which we will continue to focus as we kind of go ahead from a point of view of our global business.

I think what we have seen last 2, 3 years, the industrial market has become strong for us, very, very good business kind of coming in the kind of growth, which you are seeing are also very strong. In Q4 itself, we saw one of the businesses, which is the auto business growing in double-digit numbers. The other business was also closer to the double-digit numbers. But for the full year, if you see that both businesses have done extremely well in terms of the kind of growth which we have got in terms of this thing. Both businesses, in fact, are in double-digit numbers.

The good part is that the profits are also very, very strong, which are coming in to that extent, and that is kind of giving us a kind of this thing that we are investing more and more in these businesses going forward in terms of propping up the industrial sales. So that is something which is adding to our overall muscle in a very strong manner.

Overall, when you look at from the point of view of overall gross margins, it's been a bright year obviously, in terms of what we have had. The overall gross margins have, in fact, gone up in terms of what you see from the last quarter and even from the point of view of last year, overall to that extent, it's a big increase in terms of what we are seeing vis-a-vis last year overall.

Obviously, it is aided by in terms of some of the deflation, which we have seen in terms of the raw material prices, but a strong part has been also the work on sourcing and formulation efficiencies, which we have been kind of putting in, combined giving us this kind of overall gross margin improvement overall in terms of what we see in terms of the market.

In a nutshell, when I look at from a summary point of view, overall, when we look at quarter 4, as I said earlier, the top line in terms of value is at about minus 2%. But if you take the industrial sales, it comes down to almost at base. In terms of volume, it is double digit in terms of where it comes into about 10%.

Overall, numbers on PBDIT, PBT has been weaker, given the value sales have not kind of come in, in quarter 4 to that extent. But I think on the whole, it is important to kind of look at the entire FY '24 stand alone numbers, which would come in, which clearly shows that whether it is PBDIT, whether it is PBT, PAT, in all cases, vis-a-vis last year, the overall margin improvement has happened strongly in terms of what we've been able to kind of do. And even in terms of the top line, the 10% top line from volume point of view remains. The value is about 3% after that 3.6% price decrease in terms of what I spoke of to that extent.

So overall, I think the gross margin improvement, PBDIT margin improvement vis-a-vis last year in terms of the full year, in terms of what we are seeing very, very strongly. Obviously, in Q4, the PBDIT margins have come down vis-a-vis the last year and both sequentially to that extent. But that is more because of the fact that we have seen the value sales not really coming in to that extent, which has impacted the PBDIT margins to some extent in terms of the quarter 4.

But overall, I think the picture looks very healthy from the overall financial year '24 point of view in terms of the -- all the margins kind of going up for us and really kind of the profits being strong in terms of how it has resulted.

Similarly, I think the consol numbers are similar to that extent. In fact, if you look at from a Q4 point of view, the consol PAT is up in terms of how it kind of really looks at. Even the top line is about minus 1% to that extent. In terms of the FY '24, the numbers are similar. The PAT is almost up by 32%. The PBDIT margins are up from last year, almost about 220 basis points to that extent.

And similarly, in consol, as you compare for Q4, the PBDIT margins are lower both from last year and sequentially to that extent. So I think that's the picture in terms of what comes in still a very, very strong year, I would say, given the conditions in the market and to kind of -- log in about a double-digit number for the entire year is, I think, a strong performance coming with strong PBDIT margin improvements, overall, is a story which comes in. So that's the overall financials for you.

We declared a 60% kind of payout dividend, which, in terms of absolute value, is much, much higher in terms of what we are kind of looking at giving and that's been the story, which is strong in terms of the dividend percentage and have been rewarding the shareholders with this kind of a performance, which comes in. And obviously, now the moot question which all of you are kind of looking forward to hearing is that, what's next, what's coming in? How is the next year kind of looking into that extent?

As we enter into the next year, obviously, I think this year, there has been a little bit of this blip because of elections, the heat wave and so on and so forth, what is there. But we have started seeing some now movement in the market. In fact, the rural markets are now responding much better as we see in the month of April and the starting of May as of now we see it, to that extent.

So we are still positive on the overall quarter in terms of how it would go in terms of looking at it and looking at really aiming for still strong double-digit volume growth for the quarter going forward to that extent. And also for the year, in terms of -- we are pretty -- looking pretty strong because 2, 3 factors which are coming across. One, I do think the monsoon predictions till now has been good, which kind of is always a strong area of improving the sentiment, which kind of comes in both from the point of view of rural markets, to that extent, and that is something which we are hoping.

Second, we have a decent Diwali period, the festival period, which is kind of coming to that extent, which would kind of aid both Q2 and Q3 to that extent for us in terms of going forwards. So that's kind of positive in terms of what we are seeing. We are also seeing a little bit of a deferred demand from Q4, which is now going to come both in retail and the B2B business to some extent and that is something which is there.

We also see a resurgence with respect to the B2B business, which will happen in terms of the government continuing to spend money with respect to their development areas, the infrastructure areas to that extent. And these are very, very strong areas, which is there.

Even in Industrial, we see both the industrial productive paint market as well as the auto market continue to grow as we kind of see auto players build up their builds and newer players kind of entering with newer models and so on and so forth. The whole electric car evolution is also kind of becoming strong.

So we think -- I think industrial business would kind of continue to go this thing. On international, we are a little bit this thing on Asia because I don't think so we are seeing too much recovery in Nepal, to that extent, but we are still buoyant in terms of the overall. UAE business, which is there. Ethiopia, Lanka and some of the other kind of countries which are there. So therefore, I think that market is strong.

The deco market is something which we will continue to focus, and that's a very strong area of focus. And we feel that in -- one of the big focus which we are taking is the bath and the kitchen business in terms of what we want to kind of put it back on a growth trajectory as we kind of go forward. So overall, I think, fairly strong in terms of the next year, fairly optimistic about in terms of where we are and the promise of volume growth still remains intact in terms of what we want to kind of put in.

ESG, again, very strong kind of commitment. And as a leader is something which we are setting new trends here, so whether it is from the point of view of looking at product stewardship in terms of the environment or looking at the whole governance standards in terms of what we spoke of or the whole area of social in terms of building a certain safety culture, building and energizing people around it. I think that's a big area in terms of what we are kind of looking.

If you look at the kind of commitments which we are looking going forward till 2030, are very, very strong in terms of what we are putting upfront as numbers going forward to that extent, and this is kind of reflected in the kind of work which we are doing.

We are almost looking forward to a scenario where today, Asian Paints puts up a new plant. And we don't require water. We don't require electricity, we would require only land, okay? And if land was available in Meta, we would put a plant in the Meta world to that extent. So that's something which we kind of look at strongly in terms of our commitment to sustainability and green as we go forward. Democratizing art as we kind of look at going ahead and bringing joy and happiness to all your lives. Thank you.

[Sunila Martis, executive]

Good evening, everyone. Today, we have participants who have joined us physically as well as virtually on Zoom video platform and teleconferencing. [Operator Instructions]

[Mihir Shah, analyst]

This is Mihir Shah from Nomura. So congrats on double-digit volume growth despite the high ways, it's quite appreciable. Sir, how should -- you mentioned double-digit volume growth for FY '25 also and in 1Q also? But I just wanted to check how should one think about volumes? Can they accelerate from 10-plus percent levels to early to mid-teens levels, especially for two reasons or few reasons rather.

One is that you're starting to cycle a moderate volume base unlike last year. Second, rural recovery is quite right because of monsoons, et cetera. Third, this new launch about the Neo Bharat that you've done and tapping an untapped market versus earlier and increasing our total addressable market. So can volumes potentially be into 12% to 15-plus percent range rather than being just about 10-plus percent range?

[Amit Syngle, executive]

See, obviously, most of the points you mentioned are right because these are the movements which we are seeing, especially I think the rural uptick would be a very strong point in terms of what would come in. I think the whole area of us, which we are talking of Har Ghar latex almost is a very strong point in terms of what we want to bring to the stable in terms of looking at that segment giving us very strong growth, which can come in to that extent.

Apart from the fact that a whole lot of initiatives, which are lined up from the point of view of both premium and luxury markets as well in terms of looking at it because we would like to kind of really look at growth in those segments also coming very, very strongly as we kind of go ahead.

So currently, I think, obviously, while we are putting ourselves at double digit, it's very difficult to say whether it will be just about double digit or it would be in mid-teens to kind of stay, but the endeavor, obviously, would be to kind of really take this and really see if we can explore the market as we kind of go forward in terms of all these initiatives.

I think the confidence which we are getting with respect to our new launch, which is Neo Bharat is very, very strong. And we will have to just see that how things augur well, and I think the real test would be possibly to that extent, the Q2, Q3 kind of quarters which will come in, in terms of what will really establish and show us in terms of where are we headed in terms of looking at going to that extent.

If you remember that from a point of view of volume always, the CAGRs have been very, very strong. In fact, the CAGRs have been in the area of about 14%, 15% overall to that extent in the last 4 years. So the endeavor is definitely to kind of go towards that kind of a zone, but I think what we are looking at underwriting definitely strongly is that you should get into a double-digit volume growth definitely for next year.

[Mihir Shah, analyst]

Sir, one ancillary question to that is on the difference between the value and volumes. Given that the -- there's another very sharp equal to distemper price point launch, and rural also will probably can further deteriorate the mix. Should one revisit our assumptions on the difference between value volume or the sales from primary and the other segments can take care of that and mix may not deteriorate further from Europe?

[Amit Syngle, executive]

So I think like -- while we have spoken of Neo Bharat very strongly, but we have almost launched a lot of differentiated products in each category. We have a product called All Protek, which is there in the premium segment, which is by itself a patented product in terms of what is there. And similarly, we have a Glitz, which is there in the luxury segment to that extent.

So I think the amount of work which we are looking at to kind of do with all the stakeholders looking at architects, designers which I spoke of. The endeavor there is that we should kind of really look at balancing the economic growth, which is coming with some good growth happening both in the premium and the luxury sector also.

So the entire effort and the endeavor would be that we balance the numbers to some extent and kind of really operate still in that gap of about 5% to 6% between value and volume, which has been possibly the area which we would like to kind of look at. I think this quarter has been a bit of an anomaly in terms of -- because of the price decrease, which has been taken to that extent. But I think going forward, we would like to kind of maintain that kind of a gap going forward in value and volume.

[Mihir Shah, analyst]

So my second question is on margins. Despite the price cut, despite down trading witnessing in the quarter, your sequential gross margins were held up. So you've done very well on that part as well. How should one think about gross margins going forward? Do you see that margins can sustain at the current levels for some time?

We understand the medium-term guidance that you had shared with us earlier, and I'm sure that you're not changing that, but maybe for a near term -- for the next 4 quarters of FY '25, can we sustain such margins that we are holding up currently?

[Amit Syngle, executive]

So obviously, I think our guidance in terms of both PBDIT margins and overall gross margins would remain the same in terms of what is there. We are not changing the guidance going forward. But I think importantly, the PBDIT margin maintaining it between that 18% to 20% is very important for us in terms of what we will see in terms of our various initiatives, which we look at.

The current geopolitical situations are a little bit worrying and the whole area of crude kind of behaving slightly differently when we see in terms of up and down kind of a thing which is happening, would kind of decide in terms of what really happens to the overall gross margins to that extent which is there.

But I think we will have to kind of react accordingly depending on how the raw materials kind of behave in terms of their pricing as we kind of go into quarter 2 and quarter 3 to that extent. So that remains to be seen. But having said that, I think the commitment to kind of get the PBDIT margins maintaining in the same kind guidance range of 18% to 20% remain.

[Mihir Shah, analyst]

Got it. Sir, one quick bookkeeping question. Any one-offs in employee costs or other expenses in this quarter. And that's all from my side.

[Amit Syngle, executive]

So quarter 4, we have increased our marketing spends definitely and that is something which we have consciously done in terms of a higher marketing spend in terms of what we have taken. I think the whole area of brand building is something which is very close to us.

We feel that the equity of the brand has to be really supported and has to be leveraged much more in terms of what is there because that is something which will propel us both in the premium, luxury segment and also kind of retain the kind of possibly recall or the consideration to buy which people have for Asian Paints to that extent. So I think marketing spends, we have kind of upped the ante and that, I think, will continue in quarter 1 and quarter 2 as well.

[Amit Sachdeva, analyst]

This is Amit Sachdeva from HSBC. Sir, I have two questions. First question I want to ask is that given that, obviously, new competition has finally come to our doors, and we have been anticipating it for a while. Now question is everybody interprets it differently. People in this room interpret it differently, you probably interpret it differently and other participants in the paint industry would also have a view. So -- and we may have a different view, right?

So I just wanted to ask you that given initial pricing is in the place -- and I'm sure a lot of people who joined that company has come from the same ecosystem. And there's some familiarity and some unknowns, but how you are reading the situation in terms of pricing, their aggression level or signaling that you have put already in the marketplace. One should -- is it disruptive to you? Is it normal to you? Or is it something that is still evolving and you want to watch out for? I just want your sort of initial reaction to it because the bit of an event that which has already happened now and we want your reaction to it.

[Amit Syngle, executive]

According to me, one of the things is just I would say, is just a copy paste, which is happening in the market to that extent. There is nothing which is unusual. There is nothing something which is innovative, which I see in terms of what is happening. Just because one can put a pricing pressure or one can put muscle in terms of looking at saying that I want to do a launch all across, I think it doesn't really impact the market because the market is pretty seasoned.

And they have seen so many new players in the last 2 decades, which have kind of come and gone to that extent. But having said that, I think it's too early to say anything in terms of really because they've just kind of come in and launched to that extent. And as I said, all competition is welcome because I think it brings the best and out of the existing players in terms of what we will do and how we can kind of take on to the market.

And also given the fact that, as a leader, I think we believe that it is important to kind of really increase the overall pie rather than keep on fighting on the same pie to that extent. So I think our objective is something which is very different. And therefore, we are not really perturbed. We are not kind of really amazed by anything which has happened until now.

[Amit Sachdeva, analyst]

Sure. That's very helpful. So I want to ask -- I want to just push it a little bit more. Then obviously, what you are suggesting is that industry structure is likely to be rational. And the response from you is not going to be anything unusual rather than just a normal competitive response, typically in a cycle that happens.

But I want to ask that what sort of signaling industry has already given to them, signaling by which your pricing decision that you have taken in the last 2 years. Has the industry conveyed to them that how you guys will think if they were to do X, Y, Z. I just want to understand what's the behavior shaping that has already happened? Is there some reading you get?

[Amit Syngle, executive]

There's nothing which is shaping, first of all. Because how we see the market is that the market operates on MRP less, okay? It doesn't operate on in terms of, what is the discounted value to the dealer to that extent and therefore. And the idea is that today, in terms of Asian Paints has been commanding premium market at least 5% to 10% in terms of the overall prices. We've had so many competitors who have come, who have priced themselves 10%, 15%, 20% lower to that extent.

But I think the customer is very clear that when they are buying into a brand, they're buying into a trust, they are buying into an equity. They are buying into something which is a warranty which kind of comes in and a quality to that extent. So currently, from even the pricing levels we see actually there is nothing which the market is kind of seeing because with vis-a-vis the existing players, they feel that the pricing is the same.

[Amit Sachdeva, analyst]

Got it. That's very helpful, Amit. The second bit I want to ask is a little bit of what my colleague has already asked in some way, but let me just try my luck again. I want to sort of understand the pricing outlook as you see evolve for the next year, given where the input prices are, you already know them. And given where the demand environment is and you have some hope that demand will pick up, in premium, which is not so sort of strong right now. But given where we are, do you see pricing to plateau like a 0 or it would still be deflationary as is -- assuming things are as is as we stand?

[Amit Syngle, executive]

See, currently, what we see is that the crude has been going in a certain band. Some of the crude derivatives like monomers and all have shown some signs of pickup in terms of which is there to that extent in the market. But the key raw material, which is TiO2, which is something which is still stable in terms of the overall value.

So I think for the coming quarter, we don't see any big kind of changes with respect to the raw material prices, which has happened. And therefore, I think prices would remain benign. We don't see any disturbances which would happen in terms of price going forward.

And I think as a strategy, what we are very clear that going forward, I think it is better to kind of really invest in terms of taking the brand further into the equity and so on so forth rather than kind of putting pressure in the market in terms of pricing because that pricing is something which sometimes is never sustainable because any competitor who wants to sell vis-a-vis you would always keep that gap, which is already there to that extent.

So I don't think so it really helps anyone in the industry to that extent. So we are very clear that today, we are looking at more investing into the brand as we kind of go forward unless there is a big change with respect to the geopolitical collapse happening in some geography of the world which causes mayhem to that extent, which would kind of really mean that we would react accordingly in terms of seeing what has to be done on pricing.

[Amit Sachdeva, analyst]

So can I just assume that pricing will not be deflationary with what you are just saying?

[Amit Syngle, executive]

So you can assume what I'm kind of saying from what is there is that as I look at it, from a Q1, we see that basically it will be benign in terms of what is there clearly. And as we kind of go forward, I think we only expect some inflation to take place in terms of pricing.

[Tejash Shah, analyst]

Tejash from Avendus Spark. Amit, as Amit rightly said that it has been -- the chapters of this competition has been unfolding gradually. So last 2 years, talent loyalty was put to test. In 6 months, perhaps customer loyalty will be put to test. And as we stand today, dealer's loyalty will be put to test.

So just wanted to understand that as the landfall is happening as we speak now of the competition, what is your understanding from past experiences also, how do you retain dealership -- dealers' loyalty? And just an additional point of where expansion that we have done on dealers from last 3, 4 years, 10,000 dealers again this year.

One, grievance is that we are picking up in our channel check now is that we -- dealers are complaining about the territory getting smaller and smaller. So how should we think this paradox of -- as at one point, you want to expand distribution and then grievance is also now building up?

[Amit Syngle, executive]

See, as I see it in terms of overall, some of these loyalties which you spoke of, I think it is too early. Some of them, we are already seeing fracturing happening there to that extent, okay, when at this stage to that extent. As a clear kind of strategy, Asian Paints has only used consumer as a very, very strong tool in terms of influencing the network, influencing the stakeholders which are involved to that extent.

And today, we believe strongly that one of the big areas which kind of puts pressure on the network, on the influencers, is the consumers' consideration to buy, okay? And that is something which we would kind of really put a heavy muscle in terms of ensuring that today the mind share Asian Paints have, we would kind of continue to invest that we get that mind share very clear to that extent.

And we feel that if you are able to work on the brand and with your supply chain efficiencies in terms of what you have put in, with the innovation which you kind of bring in terms of differentiation. I think today, the dealer loyalties are very difficult to shift to that extent, which is there to that extent, because dealer also kind of understands the environment. They understand the pressure in terms of what comes in from a demand kind of a scenario to that extent.

And as I said, that therefore, it is difficult to kind of go and change the market very easily in terms of the structure of the market. Whatever you do, whether you copy the formulations, whether you take the people, whether you copy the plants, it's not so easy. And we have seen it in the past with so many companies coming into the fore to that extent. Five years back when there was another competitor which entered, I think all of you were asking the same questions. And now no one asked about that competitor at all. So maybe I think we don't know what happens in the next 2 years.

[Tejash Shah, analyst]

And the last one, the muscle that you spoke about, one visible muscle that we have on our P&L this year is versus your long-term guidance on margins versus where we are exiting this year, there's a gap of 200 basis points or 250 basis points as you lead the band. Do you think this as an ammunition that you'll use this year to kind of protect or gain market share if need be?

[Amit Syngle, executive]

As I said, I think whatever is the ammunition we will put behind as I hinted that we are putting a lot of muscle behind our marketing. And that is something which we will continue to do. You've seen a new brand ambassador, which has kind of come in. These brand ambassadors don't come in cheap to that extent. And today, as we kind of look at, okay? We are putting our muscle whether it is IPL as a media or in terms of any other hot properties which are coming. We think -- I think that's a strong imperative which is there, and this ammunition will help us in terms of doing that.

[Unknown Analyst]

And sir, thanks for reassuring on the volume growth. But my question relates to, again, the VAM and VAE have discussed in the past. But one of the competitors retreating again that there is no benefit of manufacturing VAM here in India. So could you give us, again, a perspective that what exactly the margin benefit we are looking at and how that benefit will flow to us in terms of manufacturing versus importing from the international markets?

[Amit Syngle, executive]

Okay. So when we got into this business and we are looking at investing more than INR 2,100 crores in terms of setting up a plant, okay, we would not be blind to set up a place where there is no cost benefit, okay? That's the first answer, okay.

Second, when we look at the benefit which will come in vis-a-vis any import which comes in, the advantage is not only with respect to the cost, but in terms of the innovation in the emulsion properties, which we will be able to get, which no one is able to do it with direct imports to that extent. And this will add some unique properties to the paint at a cost, which is unimaginable to that extent by maintaining possibly the same or higher margins in terms of what will come in.

What we think, depending on how we kind of really rapidly increase the utilization of the plant. I think overall, in terms of margins, it will definitely aid, in terms of at least about 1%, 1.5% in terms of boosting the margins.

[Unknown Analyst]

At the overall company level, 1% to 1.5%. And the second question relates to the segmentation of the market you described like eco, premium and luxury. And you mentioned that there are pressures in the luxury segments. So could you give us a broader market differentiation, how these three markets have grown in FY '24? And how do you expect these markets to grow? And what is our play in each of the markets? We understand Neo Bharat, but what is our play in the segment like luxury and the premium markets?

[Amit Syngle, executive]

So in each of the markets, whether it is economy, premium or luxury, I think the share Asian Paints enjoys is very strong to that extent. So therefore, it is not that the share is higher in one and share is lower in other to that extent. So the shares are very strong. In fact, progressively, if you go to premium to luxury, the shares get only higher to that extent. That is one.

Secondly, what we see is that as the market construct is today luxury is coming in very strongly, whether we see luxury apartment sales, which is a happening, second homes, second villas, which are kind of coming for people. We see a penchant in terms of people kind of upgrading strongly to that extent.

So we are banking very strongly that the premium and the luxury segments will kind of fight back strongly because there is nothing which is a worry of loss of share there. It's only in terms of the propensity of the people kind of really upgrade and get into that kind of a segment. We also feel that the down trading would be much lesser in the coming year in terms of what is there, which would kind of really prop up that premium segment, which there is something which we have felt in terms of a slow movement this year to that extent.

So given that fact, we are definitely -- this year, we have done fairly well in the economy and luxury. As I said, premium was slow. Next year, we are looking at definitely taking economy with the Neo Bharat coming in a very big way. But we are putting a lot of energy, both in premium and luxury to match the growth rates which we can get in economy even there.

[Sheela Rathi, analyst]

Sheela Rathi from Morgan Stanley. Sir, my first question was with respect to our distribution strategy this year. So one, obviously, what is the plan in terms of expansion? And is there any differentiation we are trying to bring to the table this year in terms of what we are doing on the distribution side? Because there's a lot of catch-up which is being done by even the existing competition in terms of their market strategy now on distribution.

[Amit Syngle, executive]

See, the entire game on distribution is basically seeing that how we can look at really aiding the retailer from the perspective of ROI. And I think that is a very big factor in terms of what really governs how the retailer gets loyal to you to that extent. So I think the parameters which I spoke of, one of the bigger parameters is that are you able to generate demand, okay?

So are you able to kind of really see that you -- whatever you are giving to the retailer, he is able to liquidate and rotate that capital in a certain manner. And what we are really aiming is that, can we improve that rotation so that possibly the whole ROI number kind of really jacks up to that extent. It's not easy for any other player to kind of do that. Because it requires a whole lot of investment, not only from a point of view of just the supply chain engine, which kind of really works, but it also requires a lot of investment with respect to your forecasting abilities.

And therefore, what we are doing is, we are also invoking a lot of element of AI and other algorithm models which are kind of coming in, which will kind of really look at improving our forecasting ability and our ability to kind of really increase our -- the order fill rates, which we call in terms of the retailer when they kind of really order something from us. And therefore, parallelly given the marketing spend on consumer looking at saying that equally the liquidation also gets very, very strong in terms of going forward.

We have a very strong painting service, which is going on. We are looking at a very strong digital program in terms of how we look at customers kind of behave. We have almost about 4 crores customers coming on our website. And today, we are looking at really seeing that we are able to get these customers to kind of get converted into demand for our retailers in a strong manner.

So the entire perspective, which we are bringing, which is very different from competition, is to really kind of reenergize the ROI in terms of which goes up, which will basically means revamping of the supply chain model. It would mean kind of getting AI to kind of really look at better prediction, which kind of comes in. And third, in terms of looking at a marketing capability to energize the whole area of demand and the whole compulsion of the customer to really [indiscernible].

[Sheela Rathi, analyst]

Any guidance on the growth rate on distribution?

[Amit Syngle, executive]

So at an average, I think we have been adding almost about 10,000 retail points every year and not withstanding, someone said that today, some people are saying that their business is decreasing because of the numbers coming in. I think this country is huge. And the way it is expanding, the way the demand is going, way the cities -- suburbs are expanding, okay, I don't think so there is any saturation which we are seeing in terms of clusters, which are opening up, especially when we look at the rural segments in terms of to that extent. So I think that area of about 10,000 retail points would kind of really remain.

[Sheela Rathi, analyst]

Sir, my second question is with respect to EBITDA margins. You said that we have maintained the guidance of 18% to 20%. So just wanted to understand from you that what are the levers for us to maintain these margins? Because you talked about investments around media investments. So I just wanted to get your perspective there.

[Amit Syngle, executive]

See, the big levers definitely there are is the whole area of the world-class supply chain model in terms of what we run, which ensures that the kind of overheads, the CPTs, which we kind of work across our plants is something which gives us a very, very big advantage in terms of what we are able to kind of get in terms of our overall cost to that extent.

The second area is in terms of our efficiency in dealing with overheads with the kind of scale -- economies of scale, which kind of come in something which is a second big imperative. The third area is the whole area of sourcing and formulation efficiencies, which work as a very big lever because in the paint industry, almost about 58% to 60% cost is raw material cost to that extent. And therefore, any work which happens in this framework will only give you more and more margins which could kind of come in to that extent.

And the fact that you are a fairly strong player, I think you do get economies of scale. Today, if you look at the EBITDA percentage margin difference between us and any other player, it's a significant difference, which kind of really exists. And therefore, we feel that some of these initiatives, which we are kind of looking at, will give us far more leverage in terms of looking at maintaining this kind of a guidance in terms of what we are putting up. And not only that, once we kick off our backward integration initiatives in terms of the white cement and the VAM-VAE, which is kind of coming in, that itself will kind of give a boost in terms of maintaining this kind of a guidance going forward.

[Jaykumar Doshi, analyst]

This is Jay Doshi from Kotak Securities. Down trading from premium to economy is a trend that we are seeing across most consumption categories, partly due to inflationary pressure that consumers are facing. What -- as a market leader, what are the steps you are taking to arrest this decline to the extent possible?

[Amit Syngle, executive]

So see, I think it is a natural propensity of the people that the value for money equation is something which is very, very important to the Indian consumer. And therefore, I think where we are kind of working very strongly is that to improve the VFM equations for the customer very strongly. So for instance, to give you an example, if there is a premium product, which is priced at a certain point, we are looking at saying that can the customer get higher coverage out of that product, which basically means that the per square feet cost for the customer at a premium level becomes very, very attractive in terms of which is there without decreasing the price of the product to that extent.

So there are, I think, initiatives like that where we are looking at saying that at a certain price point, the kind of value which you can give to the consumer is so strong that possibly the down trading attraction is something which becomes lower because the moment the customer down trades what the person gets out of that product is not similar to what he has left at a certain price point.

[Jaykumar Doshi, analyst]

Nothing actually on pricing?

[Amit Syngle, executive]

That's why you asked me a roundabout question and I gave you a roundabout answer on that.

[Jaykumar Doshi, analyst]

I meant are you -- I mean you generally talk about 3% price reduction, but we don't know whether the 3% -- I mean, it's 5%, 7% at premium level and negligible at luxury level or something like that.

[Amit Syngle, executive]

So see, there is some balancing of costing, which we will keep on doing depending on possibly where is what you feel as some bit of a pressure, which comes from the market. But essentially, what is being seen is from the point of view of is the affordability at the consumer level. We don't really benchmark ourselves in terms of looking because, today, what we feel is that we are the first ones who would kind of really regulate a certain price in the market in terms of what we want to do to that extent.

We don't really look at X, Y, Z in terms of what they are offering to that extent because whatever is the pricing people adjust their discounting accordingly to that extent. So the pricing model has to be seen along with the discounting model, okay? Unfortunately, a 2%, 3% increase in the -- hike in the market doesn't do anything because the discounting is much more than that, which is happening.

So therefore, I feel that today, pricing is not the right way to kind of really look at it, whatever kind of corrections which we are taking is more because you have seen the kind of inflation -- inflationary levels, which we have seen in the years gone by to that extent. And there is some correction in terms of what we are doing because of that. And the deflationary environment, which is giving us some buffer in terms of saying that you can't look at possibly increasing your margins to a little bit beyond the point because then the consumer starts down trading, which is what we spoke of.

[Jaykumar Doshi, analyst]

Second one is actually on pricing direct one. There's a 15% price gap between Birla Opus and Asian Paints today ballpark, if you consider their extra grammage. Should we expect this to narrow down during the course of FY '25?

[Amit Syngle, executive]

I don't think so. Because today, there are already competitions who are less than 15% than us. And that is something which we have felt that it's been for years. It's not something which is extraordinary in terms of what is there. So all the new players, basically, they even go down to 20% lower. So this is not an extraordinary strategy in terms of looking at pricing lower.

In fact, what really happens is that over a period of time, the pricing literally for the other players kind of dips forward and they start competing with some of the smaller players in the market to that extent. So I think each player finds its own level of pricing to that extent. And I think what you need to be very clear is the elasticity in your pricing, which is there in the market to some extent.

[Shirish Pardeshi, analyst]

This is Shirish from Centrum. Sir, two questions in the beginning. You mentioned that 70% market is economy. So just one clarification. This includes putty and distemper or its only economy emulsions?

[Amit Syngle, executive]

No, it includes putty and distemper as well.

[Shirish Pardeshi, analyst]

So if that 70% is there -- there are two questions here. What was this number 5 years before? And is the main source of growth for this quarter or going forward?

[Amit Syngle, executive]

So I don't think that the structure of the market has changed much. In fact, what I would say is that the premium and luxury segments have grown bigger only over a period of time to that extent. So the economy segments have only kind of reduced because what we find is that the unorganized companies which were very largely into powder distemper, cement paints and so on and so forth, all have graduated to possibly some emulsion paints to that extent or low-cost emulsions to that extent. So therefore, the overall segment in terms of looking at is the -- only premium and luxury has grown a little bit more as compared to the previous years.

[Shirish Pardeshi, analyst]

Okay. My second question is on the new businesses -- not new, but Ess Ess and Bath, we have been struggling. I'm using words struggling because last 10 years, we have done many rounds of changes front and back and now you're saying that there is a synergy and you're going to integrate this business. What is missing here? Is this business not related or the way we are projecting. Are you really confident that this business after integration will start throwing a positive number?

[Amit Syngle, executive]

I think one of the things which we have not been able to do in the two businesses is brand building, okay? And that has been the core strength of Asian Paints overall in terms of what we bring. I spoke about generation of consumer demand. The fact that you will become default, the first choice for the consumer to that extent.

I think in both the businesses, we have not been able to build the businesses very strongly. And as a result, we are changing -- taking a significant change and now bringing everything under Beautiful Homes as the umbrella brand. And therefore, we feel that going forward, start building the umbrella brand Beautiful Homes. So it is Beautiful Homes kitchen, Beautiful Homes bath as you kind of go forward. And that is something which becomes the resonance with the consumer in terms of taking it today. Because I think the brand consciousness today is going very, very high to that extent, and we find that the whole area of people kind of graduating to more and more brands is becoming very strong.

Currently, I think Asian Paints was just an underlier there to that extent, it was not upfront in terms of what was there because we had Sleek by Asian Paints or Ess Ess by Asian Paints kind of a thing. Now we are trying to bring it in upfront in terms of what we want to kind of do. And we feel that given that strategy if tomorrow, we are looking at doing any corporate campaigns in terms of BH and others, it would kind of give a very strong kind of impetus in these two areas because we think at the back end in terms of factories, production, product, premiumness, there is nothing which is lacking to that extent.

We have the quality which is really paramount and very good to that extent. It just needs basically a nudge and a push in terms of the overall brand which is what we are kind of taking this year very strongly in terms of building that synergy we want to do.

[Shirish Pardeshi, analyst]

Just last question related to this, the new business, which is closer to your heart, home decor. Can you give us the idea now from 60 stores next 5 years? Because somewhere you mentioned previously that you want to have at least targeting 10% contribution from this business. So where we are this on the journey? Will it happen in 3 years? Will it happen in more than 4 years, 5 years? Maybe some more color if you can share.

[Amit Syngle, executive]

First of all, all businesses are close to the heart, okay? Some might be in left ventricle and some might be in the right ventricle to that extent, but all businesses are close to heart to that extent. As we see it in terms of growing the decor business in terms of you have spoken of about 60 stores. We are looking at -- this year going to about 85 to 90 stores in terms of what we want to kind of do.

Over a period of 5 years, I think the trajectory we would like to build is anywhere between 150 to 200 stores in terms of what we want to build in to that extent. But these stores, what we are looking at is not only looking at the number, we are looking at now the per square feet size of the stores going up to that extent, which is the largest strategy.

Going from about a 6,000 square feet store to more than 10,000 to more than 15,000 square feet kind of stores, which is there. We have recently put up a store in Chennai, which is in Anna Nagar, which is more than -- almost about 43,000 square feet in terms of what has been put to that extent.

So I think the strategy is to kind of look at the per square feet space, which is kind of offering the Home Decor to that extent in terms of the locations and not only looking at the number of stores to that extent. So while we are looking at number 150 to 200, which I said, okay, but I'm also looking at the per square feet space going almost to about 2x to 3x.

[Avi Mehta, analyst]

This is Avi from Macquarie. Sir, just first, if I -- from whatever the earlier analyst meets have been and from your predecessors as well, you've conditioned ourselves to look at paint industry as a growth in the percentage of GDP. And when we look at the current year in terms of value growth for -- and I'm taking you as a benchmark for the industry, the relationship seems to have fallen out of place. Could you give us an understanding of why this year -- if it is different year, why? Or do you see the relationship has to be revisited? Would love to hear your thoughts.

[Amit Syngle, executive]

See, first of all, I see what you're very correct is that the GDP correlation is something really gone for a toss in the current year, which you are very right to that extent. I also feel that today, I'm not very sure of the -- how the GDP numbers are coming, okay? And you guys are better wizards in terms of really understanding in terms of how those numbers are coming and so on and so forth.

And sometimes you feel that there is such a variation happening across industries. How does that GDP really correlate to the actual GDP in terms of what we are kind of talking of. So even if you look at the core sectors, whether it is steel, cement, so on and so forth. No where it is correlating with the kind of possibly overall GDP growth in terms of what we are kind of talking of to that extent.

So therefore, I feel that there is something which we need to kind of look at from a normalization of this GDP growths, which are happening to find out more realistically that if we are talking of a 7% growth whether that 7% really translate to a real time of 5% or 4% GDP for a certain sector and therefore, kind of look at extrapolating data in terms of seeing how the correlation works out.

So currently, as you rightly said, even we are not kind of really correlating to the GDP in terms of looking at it because, hypothetically, if you look at a 7% kind of GDP or a 6.5% GDP, you would call it almost about 9% to 10% of our value growth, which will come in the market to that extent, which possibly is the correlation, which is spoiled. So -- we are also looking at ways and means in terms of finding out what is the real GDP.

[Avi Mehta, analyst]

Okay. So you believe that the relationship still would -- is sustaining. There's nothing to kind of...

[Amit Syngle, executive]

But the correct GDP in terms of what would kind of really be applied to a certain sector is something which I think we need to kind of do a work to kind of find out because the GDP is also varying from region to region, okay? So if you look at possibly in certain regions in the country, some regions are growing faster, some regions are going slower to that extent. But when you get the GDP number overall, that's a conglomeration of a full number, which kind of comes in to that extent. So I think maybe some more work needs to happen in terms of really dissecting that.

[Avi Mehta, analyst]

Got it, sir. The second, I just had some basic bookkeeping questions. First was, would you be able to give us a sense on how ad spend for FY '24 is as either a percentage of sales or from a percentage growth perspective. And b, if you could give us a sense on tinting machine count, where do we stand? And what is the outlook there, if you could give us that sense.

[Amit Syngle, executive]

So see, as I said, in terms of the tinting machines, the rough way to kind of look at is that we are almost about 3 to 3.5x any nearest player to that extent, okay? Since you know the numbers of others, you can extrapolate the data anyway to that extent. So that is one in terms of how we kind of look at in terms of the overall tinting data in terms of how it kind of really looks.

From a point of view of advertising. Really, I think it's a band in terms of what we keep on looking at in terms of going -- so basically the band can go to 3% to 4%, it can go to 5%, it is the band in terms of what we kind of look at in terms of this thing because there are very much strong components around it.

There is something which is happening, which is more below the line, which is more disruptive work in terms of, for example, the work which we do in terms of street art which is there, okay? That is a very different kind of work which happens in terms of the attributable spend in terms of what we make. But that's the kind of band in terms of what we operate on.

[Avi Mehta, analyst]

So 3% to 5% roughly is the band?

[Amit Syngle, executive]

Yes.

[Avi Mehta, analyst]

And sir, lastly, I'm sorry, one bit that I wanted to clarify, the 5% to 6% that you said is the difference in value and volume that you expect, right?

[Amit Syngle, executive]

That's right.

[Sunila Martis, executive]

Thank you, everyone. We now invite Mr. Amit Syngle to give the closing remarks.

[Amit Syngle, executive]

Okay. Great. I think it's lovely to kind of interact physically with all of you. I think it kind of really also gives some familiarity in terms of who's asking the question. Otherwise, on the screen. It's just a question which kind of really flashes across.

So -- but it's great, and I would kind of really say that how we kind of look at forward, we look at possibly strong business in terms of taking it in. And we feel that we should kind of come to your expectations clearly when we look at meeting again after the quarter 1. Thank you.