Berger Paints India Ltd

NSE:BERGEPAINT

Earnings Call Analysis

Strong Growth, Market Share Gain, Margin Expansion Expected

The company achieved double-digit volume growth of 11.8% and gained the highest market share among listed peers, reaching 20.9%. Despite a slight dip in value growth to 2.4%, operating margins remained strong at 17.2%, outperforming industry rates. Key markets like Kerala and West Bengal showed slow performance, but overall growth stands above industry averages. The company anticipates better margins and value growth, with a projected 2% price increase in Q2. International operations saw robust performance, especially in Poland, while Nepal struggled. The company is cash surplus with INR 657 crores and aims to enhance urban market presence and digital initiatives.

Strong Volume Growth and Market Share Gains

In the first quarter of the financial year, the company demonstrated a robust 11.8% growth in total volume and captured a leading market share among listed players, reaching 20.9%. This significant leap from a market share of 19.7% last year highlights the company's superior performance relative to its competitors, despite a challenging market environment where the industry average growth was negative.

Operational Performance and Profit Margins

The company’s operating profit margin was recorded at 17.2% this quarter, which is slightly lower compared to the previous year's record of 18.8%. Despite this slight dip, it remains within the company's guidance range of 15% to 17%. The company's strategic decisions to increase advertising spend, especially during the general election period, and take product price increases, have been aimed at countering raw material price inflation and should help improve margins in the upcoming quarters.

Diversified Product Performance

While there was a notable volume growth, the value growth was considerably lower at 2.4%, primarily due to a 5% reduction in product prices last year and a shift in product mix towards high-volume, low-value construction chemical products. Sales in luxury product segments, particularly in key markets like Kerala and West Bengal, were subdued, impacting the overall mix.

Innovative Product Launches and Market Expansion

Recent product launches have shown promising results with 'Easy Clean Silky Touch' and 'Roof Kool & Seal' gaining traction in the market. The company’s emphasis on innovative products such as ‘Seal-O-Prime’ and ‘Home Shield Waterproof Putty’ has helped solidify its leadership position in the industry. Additionally, aggressive network expansion, including the addition of 1,900 retail touchpoints and 1,800 Colorbank machines, aims to bolster market presence, particularly in under-indexed urban and metro areas.

Positive Outlook and Strategic Initiatives

Looking forward, the company expects decorative business value growth to improve aided by product price increases anticipated to be around 2%. The outlook for the industrial business is also positive, driven by increased government spending on infrastructure and the recently enhanced operational efficiency. Moreover, initiatives on the digital front, including the ‘My Colour’ app and new website functionalities, are expected to strengthen customer engagement and drive additional leads.

Financial Health and Cash Flow

The company is in a strong financial position with a cash surplus of INR 657 crores as of June '24, a significant turnaround from having debt last year. Internal accruals are expected to sufficiently finance ongoing projects in Panagarh and Odisha, ensuring no additional borrowing is required. This healthy cash flow not only supports operational expansion but also secures future growth prospects.

International Operations and Subsidiary Performance

Among its international operations, the Polish subsidiary Bolix S.A. showcased consistent growth in top-line and profitability, supported by strong operating margins. Contrarily, the Nepalese subsidiary faced persistent challenges, although recent signs of market improvement offer a hopeful outlook. Joint ventures such as Berger Becker Coatings continued to see healthy top-line growth albeit with pressure on margins due to competitive pricing strategies.

Earnings Call Transcript 2025-Q1

[Nitin Gupta, analyst]

Hi. Good evening, everyone. This is Nitin Gupta from Emkay Global. I would like to welcome all to the Q1 FY '25 Results Conference Call of Berger Paints India Limited. I thank Berger Paints management for allowing us to host. We have with us today, Mr. Abhijit Roy, Managing Director and CEO; Mr. Kaushik Ghosh, Vice President and CFO; and Mr. Sujyoti Mukherjee, Vice President, Finance and Accounts.

I shall now hand over the call to the management for the opening remarks, post which we will proceed with Q&A session. Over to you gentlemen.

[Sujyoti Mukherjee, executive]

Thank you, Nitin. A very warm welcome to all of you in the Berger Paints earnings update call for Q1 FY '25. Of course, this year, doing it on the Zoom platform. For your information, the management presentation on the results have already been uploaded in the stock exchange and the company's website.

We will also run you through the presentation along with the opening comments from Mr. Roy and I hold you -- and follow it with the question-and-answer session. So with that, I, actually, hand you over to Mr. Roy for his opening comments.

[Abhijit Roy, executive]

Thank you, Sujyoti, and good evening, all of you. With me today is Kaushik Ghosh, who's the CFO. And we'll make a small presentation first and then move on to the question-and-answer session. Allow me to share the presentation. Why is this not getting reflected on the screen? Can you allow the sharing?

[Sujyoti Mukherjee, executive]

Yes, it is...

[Abhijit Roy, executive]

Is it coming?

[Sujyoti Mukherjee, executive]

Yes, the first slide is there.

[Abhijit Roy, executive]

I can't see anything on my side. Is it moving now?

[Sujyoti Mukherjee, executive]

Yes, it is visible.

[Abhijit Roy, executive]

No, is it moving to the next screen, no?

[Sujyoti Mukherjee, executive]

Hasn't yet moved.

[Abhijit Roy, executive]

So that's the problem. I'm stopping sharing and re-sharing again. Let me see if it works. can you see the screen now?

[Sujyoti Mukherjee, executive]

Yes.

[Abhijit Roy, executive]

Let me see if this shifts down.

[Sujyoti Mukherjee, executive]

Yes, the next screen is there.

[Abhijit Roy, executive]

Okay, so good evening, once again, just a quick look at what we have done in quarter 1. Strong double-digit volume growth, highest market share gain amongst listed players on year-on-year and quarter-on-quarter basis. Operating margin outperforms guidance and the price increase undertaken on differentiated products in the first quarter itself by us and is followed by two other price increases in July, and one due in August. Out of the two, one in July and one in August 12, which we are going to take place.

Going by what we have done in the last few quarters, we have been consistently outperforming the industry growth rate. So if we look from quarter 1 of financial year '24, the blue line indicates the industry growth rate, and the red one is what we have been delivering. So consistently above the industry rate right through. In this quarter, the industry grew by minus 0.8%, and our growth rate was 2.7%.

The industry growth has been calculated based on the performance, the results declared by five listed paint companies, including us. And the growth percentage is calculated for Berger Paints' India operation, which includes Berger Paints standalone plus STP and Saboo Coatings based out of India, which are small operations. But since they are in India, we have included those operations as well.

As far as market share and profitability is concerned, we have been constantly gaining for the last few years. So in financial year '21, based on the five listed companies, again, 18.6% was our market share. It moved to 18.9%. In '23, it moved up to 19.3%. Last year, we were at 19.7% by the end of the year. And in quarter 1 of this year, we have jumped to 20.9%. So this is as far as market share is concerned.

If we look at the operating profit margin movement as well, you will see that we have always hovered, except for some aberrations, between the 15% to the 16.5%, 17% range. So our guidance has always been that we will be between 15% and 17%. There were two aberrations in quarter 2 and 3, which we had gone down and the industry had gone down in those quarters. And then quarter 1 of last year, we were at 18.8%, which was the highest ever. And in that, decorative was nearly 20%.

So therefore, from there, because the bases were very high, though we did 17.2% this quarter, which is the second highest in so many quarters from '22 onwards. But still, there is a negative -- small marginal negative growth rate, but we are expecting that we will do slightly better in quarter 2, over the 17%. So our guidance of 15% to 17%, where we have been hovering, we will be slightly bettering that in the first quarter and in the second quarter as well, hopefully.

As far as quarter 1 performance is concerned, total volume growth was 11.8%; value growth, 2.4%. The double-digit volume growth was registered for the quarter, but the value growth moderated over the corresponding period on account of three major factors: Number one, impact of product price reduction of about 5% taken in Q3 and Q4 of last year. So that's straight away 5% to be subtracted.

High-volume, low-value construction chemical products, which showed greater growth and traction so that mix changed a little bit in that way. The luxury product sales were impacted, softened a little bit, primarily states of Kerala and West Bengal, which are big markets for us, which are primarily luxury markets, had a very subdued quarter, and that impacted our mix and hence, the value growth looks lesser than the volume growth.

In terms of 2-year, 3-year and 4-year growth rates, standalone 2-year was 12.2%, volume growth; 3 years, 20.8%; and 4 years, 32% in terms of volume growth rates. If you look at value growth rates, it's 6.2%, 20.1% and 35.8%. We have maintained strong compound credit growth rate consistently over the past few years.

Operating profit margin, last year, if you look at it on the left-hand side, below the green brush, 37.5% was our growth rate and 18.8% was the margin for quarter 1 of last year. This year, it is minus 5.9% and 17.2% in terms of EBITDA to sales or the margin percentage.

Unusually, high profit growth last year and margins was aided by the low-cost inventory. Now a little bit of inflation in RM prices has happened in the recent past, especially for methyl methacrylate and butyl acrylate, which are used for emulsion making for water-based paint.

We took a strategic call to enhance advertisement spending, especially during the general election, we were very visible. The other part is the product price increases undertaken in the quarter and subsequently, to improve margins marginally going forward after compensating for RM inflation and increased advertisement cost. So we expect that marginal improvement in the operating margin will take place in quarter 2 after the price increases in spite of some of the raw material price increase, which has happened so far.

As far as figures are concerned, you would have seen that already, value growth of 2.4%, operating profit growth of 5 point -- a degrowth of 5.9% and PAT degrowth of 6.4%. In gross margin terms, we are more or less hovering around similar levels of 39% to 40%, where we normally are stationed. That's where we have been for the last many quarters, from quarter 4 of financial year '23, which is about 39.6%, 39.4%, 40%, 40.3%, 40.3% and now 39.2%. So that is where we have been. [ We expect ] that, it will show a marginal improvement, again, as I have mentioned. It will go back probably to 40% or 40% plus in the second quarter.

Decorative business recorded double-digit volume growth. Construction chemical and waterproofing business had a strong performance. Project business had an improved showing on the back of outperformance in the real estate sector. And we went for aggressive network expansion, the basics have been going on pretty well. We added 1,900 plus retail touchpoints, installed 1,800-plus Colorbank machines and renewed focus on urban markets with a new team in place.

We are very hopeful -- we had a weak presence relatively in the urban areas, especially the big metros in the West and the South, where we have a relatively weak presence. We have created a separate team now to focus with a very senior manager in charge, and we expect that we will see some results and very positive results in the urban markets in the near future.

As far as recently product -- launched products are concerned, two of them are doing quite well. Easy Clean Silky Touch, this is an upgraded version of Easy Clean. As you know, this is a leader in its category. And we have launched a better finished product, which is more akin luxury finishes. And this is called Easy Clean Silky Touch, doing quite well in many of the markets.

We had introduced Roof Kool & Seal some months back, around November, December of last year. It's picked up momentum. It's doing quite well. In fact, we are looking at advertising this strongly in the near future. With the line: Chhath ke cracks ko kare totally seal, ghar mein de thandaaa feel. So this is something which we are expecting should do well.

Innovative products and services, which we have launched over the years in the recent past, Seal-O-Prime; Anti Dust, which is a leader in its category; Imperia Amaze, this is a good coating acrylic finish; Home Shield Waterproof Putty, this is the first waterproof putty that was launched in our country and has now been copied by almost everyone in the industry; Long Life 15, which is a 15-year warranty product on the exterior; Easy Clean, which is clear leader in its category even today; Express Painting, the first painting service, which was introduced in India and continues to remain very strong.

So most of these are innovated. All of them are innovated by us actually and has been now become a standard of the industry as such most players are into this. But we remain to hold leadership position in many of the products and the service is also going very strong, the Express Painting service.

As far as pain studios, our exclusive stores for paint selling, is concerned. We now have about 616 franchisee stores across the country, mostly in the urban markets. And we are going to take it up to 1,000 plus by the year-end. This is something which we think for our urban initiative, which we have undertaken, this is also important to get a foothold in the urban markets and become stronger there.

On the digital side, we have taken many initiatives, but three of them I would like to mention. One is Salesforce, the introduction of Salesforce for our painters has already happened for Express Painting, lead generation and follow through, that is also on now in Salesforce. As far as the dealer side is concerned that's going to be introduced in the next 2 months. So we will have all the painters, the customer side of it and the dealers on Salesforce.

As far as website is concerned, this is a new website, which we have introduced recently. It had a lot of innovations in it, a very interesting website, has seen increased footfalls or rather eyeballs coming in. And this website is very mobile-friendly as well, along with -- and will allow us to, I think, create a larger set of leads for our businesses.

The other part is the My Colour app, which is gaining popularity. We now have 130,000-plus users who have downloaded and are regularly using this. This is basically to choose the color in your house, and it is AI-based. So it suggests possible color combinations depending on the area in which you are there. And it's a very interesting thing, which we have created already on its own. Without advertisement, we have seen this many downloads. I think it has a good future, and we should be able to use this to get closer to the customer.

Industrial business, protective coating business had a modest performance, somewhat impacted by the general elections, but business picked up in June. And in July, it picked up further. So we are seeing good traction now in protective coatings business because the infra business is supposed to be doing well. This business should grow at a good pace.

Automotive and general industrial business saw muted growth in the quarter on the back of subdued growth in the commercial vehicle segment. But in July, it showed some improvement. Hopefully, in August, it will be even better. In powder coatings, business line continued its steady growth.

As far as significant projects in industrial business is concerned, in the last few months, we had done Chenab Bridge; Vande Bharath bogies, basically; IICC Yashabhoomi, which we painted; Chennai Airport. So many of the infrastructure projects, as we are the leader in this category, we keep doing some of these projects.

Cash flow situation. It has been improving steadily. At one point of time, last year, we had debt on our books. Now we are in cash surplus, which is the normal situation for us. As of June '24 end, we had a surplus of INR 657 crores. And every month, it keeps going up. So -- and we are -- as far as the two projects, which we will be spending some money on, one is Panagarh project, the other one is Odisha. We will have enough money to be able to not borrow anything. It will probably be mostly the internal accruals. Almost all of it will come through that. And we will still be having some amount of cash with us at any point of time.

Financial results. Consolidated total income from operations 2%. Operating profit minus, 6.2%. PAT at 0.2% minus.

As far as international operations are concerned, company's overseas subsidiary, Bolix S.A., Poland continued its growth trajectory on top line. Profitability showed robust growth, both in constant currency and Indian rupee, helped by improvement in operating margin.

Company subsidiary, BJN Nepal, continued its dismal performance, both on top line and profitability, faced with persistent liquidity issues and unfavorable market conditions. However, of late, we see signs of improvement. And in this month, I think we will be able to grow marginally in that market. Last quarter, we had a very large de-growth but now we are seeing it changing already.

Company subsidiary, STP Limited had a good quarter of top line growth. However, profitability recorded a marginal degrowth on account of adverse mix impact on lower sale of admixtures. Admixture sales were impacted due to the election, a lot of the infrastructure projects was stalled. It is going to come in, in second and third quarter. So we should see improvement there in terms of the mix in STP.

SBL Specialty Coatings also had a muted top line growth in the quarter. It suffered a profit degrowth on account of scale and mix impact.

The joint venture, Berger Becker Coatings, even though it had a healthy top line growth. However, profitability saw a marginal decline impacted by product price reduction passed on to customers to regain market share.

And company's joint venture, Berger Nippon Paint Automotive Coatings, had a steady business growth, riding on a good show by passenger vehicle segment and robust profitability on the back of improved raw material prices.

For [ the other ] business and on the ESG front, we did a lot of good work. 19.59% electricity generated from renewable energy last year. We had 839 tonnes of waste recycled last year. Last mile delivery through e-vehicle to reduce carbon footprint has been initiated in many of our depots, and 49,149 KL of water was recycled last year, which is a 53% increase from financial year '23.

This type of work continues. In quarter 1, we have seen further improvement on all of these parameters. And we hope that this year, we will have -- in fact, we have gone for Dow Jones Sustainability Index for the first time, we will have -- we will get scored on that. And so therefore, we are hoping that we will begin with a good score in the first place and keep improving from there on.

Looking at the business outlook going forward, we expect that the normal monsoon is likely to shore up rural demand condition. Decorative business value growth will improve in quarter 2, aided by product price increases to some extent. That's about 2-odd percentage of increase should happen in terms of value growth.

Industrial business outlook seen better on the back of increased government spending on infrastructure post-elections. And geopolitical factors, however, may pose some risk to inflation. If that doesn't happen, then we should expect a better result both on the top line and the bottom line in quarter 2 and going forward as well.

Thank you, and that's all that I had to say from my side as far as the presentation is concerned, and we can open up now for question and answer.

[Nitin Gupta, analyst]

Thanks, Abhijit. We will now start with Q&A session. I hand over to my colleague, Pinky Mahato, for the Q&A session.

[Pinky Mahato, analyst]

[Operator Instructions] First question is from the line of Abneesh Roy from Nuvama.

[Abneesh Roy, analyst]

Am I audible?

[Abhijit Roy, executive]

Yes, yes, Abneesh, you are.

[Abneesh Roy, analyst]

Firstly, congrats on the market share, I think, very resilient performance for many years. My first question is on that only. So sir, you also claim market share expansion. I'm sure it's based on the math in terms of the results, which come out. The player which got listed a few years back, Indigo Paints, they also claim market share expansion. So I wanted to understand who is losing market share? Is it the market leader? Or is it the #3 or #4 player? And is this sustainable? Because in the past, we have seen if the market leader in any category, in consumption, loses, they know how to get it back. So what will be your comments on both these aspects?

[Abhijit Roy, executive]

Yes. So it's an interesting question, and I thought someone will ask. And since you have asked, this is the first question. Let me answer it in this way. There are two parts to it.

In quarter 1, typically, the gains have happened for -- if you look at the five companies together, there is a gain from the listed company that you mentioned, which is Indigo, I presume. And there is a gain for us as well. And though Akzo's results is more positive, but they haven't gained in this quarter, if you look at the figures. The reason is that the value sales -- in fact, Kansai also has got a growth little bit. If you look at last year performance and then if you look at the quarter performance, then you will see an improvement in the growth rate because whatever we have seen so far, Asian has lost in the first quarter a little bit because of the results, which has happened this quarter for them. And it has been gained by 2, 3 other players.

If you look at last year versus this quarter, then the biggest gain you will see is for us, followed by that of, strangely, Nerolac. Because from the perspective of the first quarter value sales for Nerolac and Berger, the first quarter is always much higher. And then it tapers down a little bit in second quarter in terms of value sales. So it is not the growth percentage alone, which is very important. It is also the total value that you do in a particular quarter, which will enable you to judge how your share has moved.

So in this case, our values and our market share has gone up from 19.7%-odd to 20.9% if you compare from the yearly total of last year to the quarter market share of this year. However, if you look at quarter-to-quarter, which means quarter 1 of 4 years back, quarter 1 of 3 years back, quarter 1 of 2 years back, quarter 1 of last year and quarter 1 of this year, then quarter 1 of last year, we were at somewhere around 20.2%. And today, and this quarter, we are at 20.9%. So it's a jump from 20.2% to 20.9%, if you look at quarter-to-quarter, quarter 1 of last year versus quarter 1 of this year.

But if you look at yearly, dropped from 20.2% to 19.7% by the end of the year. And from 19.7%, it has now moved up back to 20.9%. And that, I said, is because of our first quarter being very strong in terms of value sales.

So it may slip from 20.9% to 20.4% or 20.5%. Typically, we go down by 0.4% to 0.5% by the end of the year. And as you said, the leader tends to come back more towards the third and fourth quarter because they are much stronger in the Southern Belt, where fourth quarter is the strongest.

So you have this equation changing a little bit quarter-to-quarter. But overall, as you saw, our market share, we have been gaining year-on-year by 0.3% to 0.5%. And this year also, we are likely to gain by 0.5% to 0.6%.

[Abneesh Roy, analyst]

Sure. Understood. That's quite useful. My second question is on the new player. Their results also came today. It seems they have done around INR 80 crores, INR 90 crores sales based on the math. But they did say that because of the CWIP, the actual number is higher. So it becomes difficult to really judge how they have done. So my specific questions to you is in terms of tinting machine or, say, discounts or, say, in terms of the warranty or extra grammage, is there any demand from the end customer or the painter or the dealer to you? Or do you envisage, because these are early days, would you need to do any tweak in those four aspects?

Second, Kansai said that their confidence level of fighting new players, new competition is now higher versus what it was, say, before the launch. So around 4, 5 months back, it is higher now. Would your confidence level also be higher because you are extremely important and larger player than Kansai? So to that extent, your understanding and your impact what you have felt till now will be far more helpful for us to understand as an outsider, if you could comment on that part.

[Abhijit Roy, executive]

Yes. So Abneesh, it is very early days. It's difficult for us to actually -- so the initial hype that was there, I think, has come down somewhat. The fear factor or the amount of noise that was there has dissipated to a large extent, I would say. Now it's performance led, and we have to see how it happens. As of now, it is primarily what they are doing is trying to spread to as many locations as possible. They are giving these free machines, along with that, some material, but that's placement, which is happening. It is the repeat cycle, which is very important. We need to keep a watch on that, how much of it is rotating. As of now, it's just placement, which has happened in only 1, 2 months that, too.

So it's -- that is why I'm saying it is slightly premature to say how it will move forward, how the repeat will happen. Because onetime placement is fine, but we need to see how the movement happens, and that is crucial.

Of course, they have put in a lot -- many manpower on the ground. A lot of work is happening there. And I expect advertisement also to break soon from September onwards, which will support the distribution on the ground. But as I said, the confidence, we never lost it. So I don't think we have regained anything. But I would place it that we are watchful. We are seeing how would things pan out. But as the initial hype around it, along with -- even for the dealers, it has come down substantially, I would say.

[Abneesh Roy, analyst]

And on those four aspects, Abhijit, tinting machine, the size and the live talking it does with the headquarter. Second is in terms of either discounts or, say, from the architects and painters, any feedback and extra grammage do you need to give? Any of these?

[Abhijit Roy, executive]

Yes. So let me tell you. So that feedback and all that they talk about from the instant information that we also get information, which is coming in at a frequent interval. I don't think that makes any difference to the competitive scenario at all. And it's no great advantage because everyone -- I think, Asian also gets that information. So it's not something which is different.

The second part is related to the grammage -- extra grammage that they were giving. I'm told that it has been stopped already recently. So a part of that saving, which they have is possibly being reallocated to the painters in terms of extra payout. That's what we have seen so far. It just happened 15, 20 days back. So I don't know whether that is a firm decision on their part, or is it just withdrawal for the time being, but they have stopped this in some of the markets at least, this free stock, which they were giving, the 10% extra.

So that's something which we have seen already. I don't think it was having any great traction anyway. So that's not something which was giving them great results. So that is what is another departure, which has happened from what they had initially started. So this is all that I can say at this stage.

[Pinky Mahato, analyst]

Next question is from line of Karthik Chellappa, Indus Capital.

[Karthik Chellappa, analyst]

Am I audible?

[Abhijit Roy, executive]

Yes, yes, you are, Karthik.

[Karthik Chellappa, analyst]

Congrats on the quarter. I have 2 questions. The first one is if you look at the first quarter standalone business alone, the gap between value and volume is almost 10 percentage points. Half of it is explained by the price cut, the balance half is probably explained by mix with the value products probably doing better than premium.

Now despite all this, our gross margins year-on-year have held up pretty well. Would you attribute all of this just to the low-cost inventory? Or are there any other factors at play?

[Abhijit Roy, executive]

No. So what you are saying is right, absolutely, that there is gap. Half of it, as you said rightly, is explained by the price drop which has happened. The other half is due to mix. But just because it is high volume and low value does not mix that the margin is not strong. The margin is quite strong. But the volume is there, but the value is relatively low.

So for example, just to give you, like, say, Water Thinnable Primer is a low-value product at times -- the economy Water Thinnable Primer, but it has very high volumes. And the margin is also quite sharp. In fact, it is sometimes better than in the average margin -- gross margin. So therefore, margin is protected.

However, the value sales start suffering, and the volumes keep going up. So this is the ASP starts dropping a little bit compared to -- sometimes it can also be the reverse that you have a high-ASP product, but the margin might be very low. For example, enamel, ASP is about INR 230, but the margin is one of the lowest. So it is not necessary that just because the value is high and the volume is low, that the margin is going to be also very high. It doesn't happen like that in paint.

[Karthik Chellappa, analyst]

Okay. So sir, then the corollary would be that if tomorrow premium or emulsion were also to rise in the mix, it need not necessarily mean a gross margin expansion. There might be so many other variables at play, including the variants within emulsions, which you have sold. Would that be a fair conclusion?

[Abhijit Roy, executive]

Normally, the luxury category emulsions has higher margin levels. So if that was up, there will be any movement in margin, provided something else doesn't start dropping. Something -- so no other high-margin products also start sinking.

[Karthik Chellappa, analyst]

Okay. Excellent. My second question, sir, is would you be able to share what would be the total dealer outlets with tinting machines today? And what would that percentage be of total dealers?

[Abhijit Roy, executive]

So it's almost 90% plus in terms of the saturation level that we have in terms of machines with relevant meaningful dealers. We also have a large number of retailers and sub-dealers of distributors and wholesalers who also sell our products, but I'm not counting those. But if you take the universe where we are supplying, and which has meaningful sales. Out of that, 90% plus will be covered with machines. And this number will be in excess of 40,000.

[Karthik Chellappa, analyst]

Excess of 40,000. Okay. Last question from my side, sir, is on the volume growth of 12%, could you give some color on geography-wise, which are the geographies, at least qualitatively, which outperformed, and which were the ones which were underperforming? You did highlight West Bengal and Kerala. But apart from that, any other color?

[Abhijit Roy, executive]

So there was underperformance from Andhra Pradesh -- the Andhra Pradesh-Telangana area. We did badly in Kerala. Kerala, I think it has -- uniformly for the entire industry, there was an underperformance this quarter. West Bengal for -- again, for the industry at large. In fact, we did slightly better than the industry, but it's been a little down and out in the first quarter, but things are improving already. And that is it. I think largely, other people -- other places, we were fairly well placed.

[Karthik Chellappa, analyst]

And the outperformance?

[Abhijit Roy, executive]

I would prefer not to answer.

[Pinky Mahato, analyst]

[Operator Instructions] Next question is from line of Hritam Mukherjee.

[Hritam Mukherjee]

Am I audible?

[Abhijit Roy, executive]

Yes, yes, Hritam.

[Hritam Mukherjee]

Congratulations on a good set of numbers. I'm from Thomson Reuters. And actually, I wanted to take some color from you on your Bangladesh business. I'm given to understand that your unit Berger Paints Bangladesh is the country's biggest paint maker and almost has a 65% market share.

Considering the scenario that unfolded in last few weeks, especially this week, can you give me a color on how your operations in Bangladesh currently stand? As in if you have restarted your operations? If it was down? If was there an interruption? At what capacity are your factories back to work, et cetera?

[Abhijit Roy, executive]

Berger Paints Bangladesh is an independent company. There is no implication for us in terms of our performance. It is neither there in the Berger standalone result. It is not there in the Berger consolidated as well. It is independent entity controlled from a -- basically, it's a U.K. controlled company, and we have got nothing to do -- I am there in the Board of that company, but that's it. So there's no linkage with our results, therefore.

However, just to reassure you, everyone is safe in that company. That's number one. Number two, every asset is safe. And it has been -- it has come back to action on the ground from yesterday, sales have begun. But as you know, the situation is not very bright as of now. But I think situation should improve and we should be able to be on a growth path there as well. But it has no implications because it doesn't get included in our standalone or consolidated results.

[Hritam Mukherjee]

Sir, one follow-up. In your press releases, you said that the Berger Paints India has operations in Bangladesh. So needed some clarity on that.

[Abhijit Roy, executive]

No, I have not -- we have not released ever Berger Paints India has any operations in Bangladesh. We never had, and we have no intention of having as well.

[Hritam Mukherjee]

All right. Okay. Any reason as to why no intentions considering it's also...

[Abhijit Roy, executive]

It's listed separately, and it's an independent company. So...

[Hritam Mukherjee]

So it's going to operate separately as...

[Abhijit Roy, executive]

It's going to operate independently. There is a separate Board for it. It is headed by a Chairman who's an American. There are Board members, which are -- one gentleman is a French gentleman -- citizen. There are Bangladesh-based people who are there, who are very eminent people from Bangladesh. Only one or two members are from India. So it is run as a separate multinational company headquartered out of U.K.

[Pinky Mahato, analyst]

[Operator Instructions] The next question is from the line of Amit Purohit.

[Amit Purohit, analyst]

Congratulations on good set of numbers. I represent Elara Capital. Sir, just wanted to understand on the industry growth, how has been Q1 at an industry level? I understand peak double-digit. So generally, how should one read the industry growth for Q1?

[Abhijit Roy, executive]

So industry growth in terms of volume will be probably around 8-odd percentage. That's -- that will be the industry growth. Always, it is dominated by the industry leader to a large extent, and since they have indicated that they have grown by 7%. So estimated growth will be around 8%, 8.2%, possibly.

The other part is related to how it will look like. My guess is that it will improve as the year progresses from second quarter to the third quarter and the best will come in the fourth quarter.

[Amit Purohit, analyst]

Okay. So have you seen some signs of improvement already, I mean, just to get a sense qualitatively?

[Abhijit Roy, executive]

Yes. I mean there has been some improvement from what it was in the first quarter. No substantial improvement, but there is some improvement.

[Amit Purohit, analyst]

And just, sir, just a clarification. You indicated the dealer count of 40,000 was where the printing machines are there. Overall, dealers would be -- direct, indirect together would be what number that would be for us? Or is it...

[Abhijit Roy, executive]

That's why I said we have -- direct dealers have about 47,000, 48,000, out of which about 40,000-odd is already having machines. And there will be many more indirect ones, which are basically retailers of distributors or that of wholesalers. And that will be another probably 8,000, 10,000 at least, which will be there in the system.

[Amit Purohit, analyst]

Sure. And I remember about 1.5, 2 years back, we have taken an aggressive stance of expanding our dealer reach, is -- do we continue? I mean, what is the kind of addition that we are looking this year and probably next year?

[Abhijit Roy, executive]

We continue that. We are going to continue in terms of network expansion because we -- there are large tracks of India where we are under-represented, under-indexed. And therefore, these are the places where we have to add quickly our foot -- we have to put our dealer numbers in those locations, where we are not present, we expect that to reach about 8,000, at least, this year. Additional 8,000 is what we are looking at.

In the first quarter, we have done about 1,800 machines. And we expect that typically, it tends to pick up in the second and third quarter. So we are reasonably confident that we should be able to cross the 8,000 numbers this year.

[Amit Purohit, analyst]

And sir, is it safe to assume that much of it would be in the Tier 2, Tier 3? Or we are now looking at metros as well, metro, you highlighted you have a -- separate now centers as well to focus on...

[Abhijit Roy, executive]

That's right. So Metros will be -- much of it will be in stores which we are looking at. And in the country, Tier 2, Tier 3 towns, that's where the number of machines will be coming up in larger numbers.

[Pinky Mahato, analyst]

[Operator Instructions] As there are no further questions, we consider that as the last question for the day. I hand over to management for closing remarks.

[Abhijit Roy, executive]

Okay. Thank you very much, and it was a pleasure meeting all of you again. Do you have anything to say?

[Sujyoti Mukherjee, executive]

No. Thank you so much. Yes, and we also thank Emkay Global for conducting this call. Thank all of you for your participation. Thank you.

[Abhijit Roy, executive]

Thank you and have a nice weekend.

[Pinky Mahato, analyst]

On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us.