Berger Paints India Ltd

NSE:BERGEPAINT

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, welcome to the Q4 and FY '23 Results Conference Call of Berger Paints India Limited hosted by Emkay Global Financial Services. As a reminder, all participant lines will be in the listen-only mode. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Nitin Gupta of Emkay Global Financial Services. Thank you, and over to you, sir.

[Nitin Gupta, analyst]

Thank you, Govind. Good evening, everyone. I would like to welcome the management and thank them for giving this opportunity. We have with us today Mr. Abhijit Roy, Managing Director and CEO; Mr. Kaushik Gosh, 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. Over to you, gentlemen.

[Sujyoti Mukherjee, executive]

Thank you, Nitin. Good evening, ladies and gentlemen. A warm welcome to Berger Paints India Limited Earnings Call for Q4 FY '23 as well as for the financial year '23. As always, we have with us today Mr. Abhijit Roy, our MD and CEO; and Mr. Kaushik Gosh, Vice President and CFO. We are really encouraged by your participation. And I would like to inform you that the management presentation on the performance has been uploaded in our website as well as in the stock exchanges. I would now like to hand over this call to Mr. Abhijit Roy for his comments on the performance. Over to you.

[Abhijit Roy, executive]

Thank you. Thank you, Sujyoti, and a very warm welcome to all of you to this earnings call. We will begin first by looking at what we have done for the year. The company recorded a strong performance for the year. Our consolidated top line crossed INR 10,000 crores in this particular year in '22-'23. India operations top line almost to INR 10,000 crores as well. Company gained market share in 2022-2023. The stand-alone turnover growth was 22.3%, highest in the industry, and consolidated turnover growth was 20.6%. Double-digit operating profit growth at 13.8% in the stand-alone and 11.7% on the consolidated business. Company added around 8,000-plus retail touch points in financial year '23 and installed about 5,200 color bank machines. The Protective Coatings business itself crossed INR 1,000 crores. We are the market leader and continue to remain a market leader in this segment. The non-auto-industrial business also recorded market leadership with top line of above INR 1,450 crores. All industrial business lines showed improved profitability at operating margin level. company successfully set up its biggest manufacturing facility in Sandila, Uttar Pradesh of 33,000 metric ton capacity with an investment of INR 1,037 crores. We have had consistent growth over the years. If we look at this year's growth as well, volume sales growth versus ‘22 and ‘23. In '23, we had a volume sales growth of 15.5%. The decorative volume growth is in the range of 17.6%, 3 years compounded growth rate of the company per se is 16.6%. Value sales growth this year 22.3%. 3-year compounded growth rate, 18.5%. This comes on the backdrop of a robust 28.6% last year as well. Over the years, if you look at the stand-alone performance this year, we had, as I said, the value growth of 22.3%, operating profit growth of 13.8%, EBIT, 13.4%; PBT 9.7% and PAT 10.5%. The financial results are there similar all the figures which are available in terms of PBDIT growth 13.8%, PBDIT to sales, it is at 14.2% for the year. Growth rate consolidated 20.6% revenue growth, PBDIT, 11.7%. And PAT 3.3% brought down basically because of the Sandila investment, the depreciation and the interest cost has gone up substantially reducing the PBT and PAT. If we look at some of the other issues in present capacity that we have, 95,000 metric tons. Biggest plant went on commercial production in February 2023, with 33,000 metric ton capacity, which will manufacture products across all categories. Presently, the capacity utilization is hovering in the range of around 40% to 50%. And some capacity additions in existing plants, but no further greenfield project envisaged for financial year '23-‘24. The new plant at Panagarh in West Bengal to be commissioned around March ‘25 to produce industrial paints and construction chemicals. Looking at the quarter 4 performance now. The volume sales growth was at 11.1% overall for the company. And for decorative, it was slightly in excess of 14.5%. In case of value sales growth, we registered 13.6%, 3 years compounded volume growth at 19.4% and 3 years compounded value growth is at 23.1%. Decorative business, as I mentioned, both double-digit volume and value growth, both in excess of 14%. Construction Chemicals segment also recorded a robust growth for the quarter. Several new products were launched in the quarter. In the industrial segment, we had a flattish volume or negative volume for some of these like powder coating, but the value growth for all the industrial ligations were in excess of double digit, primarily driven by price increases. Innovations for success and new product launches, we introduced anti-dust cool, and there were 3 products in the wood coatings range, Imperia trends, Imperia BDZ and Imperia Duracoat. Some of these are very interesting finishes, which you can possibly see. If you are looking at the presentation, interesting finishes, metallic finishes, filament finish, Hammer tone finish. So these are different types of finishes which are there for decorative finishes for wood coatings.Similarly, a product which got introduced called Duracoat. Again, in an epoxy-based product, very popular for hobbyist, small interior decorators as well, tables, et cetera, which can be created with different types of designs, some of which are shown in the photograph ahead. Media campaign continued. We, in fact, spent a little bit extra money in both in digital media and television as well. in this period in quarter 4 of this year compared to quarter 4 of last year. So the spend percentage in advertising went up a little bit. In '21, '22, Q4, we had cut back a little on the advertisement spend. And this year, we actually increased it. So therefore, the growth in advertisement spend has been much beyond the sales growth in this quarter. Industrial business, automotive, general industrial, protective, as I mentioned, all had double-digit value growth, but volume growth were negligible primarily because they were led by price increase led growth. Powder coating continued to have a negative growth rate, both in volume and value term. As far as gross margin is concerned, as we had mentioned last time, we have seen a restoration of the gross margin on the back of a drop in raw material prices has bounced back from 33.8% of quarter 3 to 39.6% as you can see in the graph. So we are expecting that we will be able to maintain the gross margins at these levels, which is a healthy gross margin to be at. And we have been consistently been in this range of 38% to 40%, and that's where we would like to be in the future as well. As far as PBDIT is concerned, it did not go up to that extent. It actually moved up from 12.9% to 15.6%. We could have been higher at about probably around 16.6% to 17% range. which is where we would expect to be in quarter 1. This quarter, we had some one-off expenses, and that's where we got impacted a bit. There were 3 issues. One was the overhead and operating expenses in account of Sandila project, which got completed in the month of February. We started when we had recruited from the month of November. And that expense came in much of it, all the workers, officers, managers and then that added up to an overhead expense, which was in excess of what the normal expense is. The second part of it was we had done some Andhra Pradesh school project, which was a big project, which we had done the year before. And in that, 90% of the payment we received 10% of the payment, it comes delayed normally because lots of formalities to be filled up before that payment is released. That was taking time, and we have provided for it, therefore. And if we had not done these 2 one-off expenses, and this is an expense which we will -- we are very sure that we will get back either this quarter or the next quarter. But we wanted to be doubly safe, and therefore, we have provided for it. Had we not done it. Our EBITDA would have possibly been about 1% higher, which would have given us a growth rate in the range of 16%, 17%, which would have been a healthier growth rate.Operating margin, excluding other income, however, showed an improvement sequentially of 270 basis points. We expect gross margin to hold, as I mentioned, at the same level going forward. Operating margins are expected to improve in quarter 1 of financial year '24 itself. PAT has been lower over corresponding quarter last year on account of higher depreciation and finance costs on the Sandila project, which will be normalized in the coming quarters. The net debt situation, which had risen to about INR 1,000 crores in September ‘23 has come down to INR 610 crores and at the end of March, and we would expect that we will have net -- will become net cash positive by the end of financial year '24. Company presently has the shortest receivable collection base in the industry at around 37, 38 days. And if you look at the decorative again, it will be probably the lowest in the industry at about 23 days.Standalone growth for quarter 4, I have discussed already. But just to reiterate, 13.6% in terms of income growth, PBDIT growth, 9%. And then PBT and PAT at minus 3.2%, primarily because of the depreciation and interest cost of the Sandila plant.Financial results over the year, income from operations has been fluctuating from quarter 1 of financial year '22 due to COVID issues, 96%, 26%, 21.73%, then again bounced back to 53.7%, 22.52% and then now 13.6% consolidated results on similar count. The consolidated result if you observe is lower than that of -- in terms of profit and also in sales growth rate and PAT and PBT are especially lower. The PBDIT lowering is due to primarily Bolix and Nepal operations, which went negative in this quarter. Therefore, you see a lowering from 9% to 6.4%. In case of PAT and PBT, we had a fire in our Burger Becker plant in the month of March, we had to provide for this of our portion of it, which is about INR 28 crores to INR 29 crores. As a result of that, and we have taken this provision though we have applied for the insurance, and we are reasonably certain that we should get it in quarter 1 or quarter 2. But since it will take some time, we have provided for this. And as and when it comes back, it will be restored back into our accounts. So therefore, this is the reason why you see an extraordinary drop in PAT and primarily because of the fire incidents and the polices made thereof. Income from operations growth trend for consolidated on similar lines as that of stand-alone. The performance of our consolidated company subsidiary, STP Limited, showed robust top line and profitability growth aided by higher gross margin and reduction in overheads. This is the construction chemical company, which we had acquired some time back. and did very well in quarter 4 and also right through the year. SBL, which is Saboo Coatings Limited, had a marginal degrowth in top line for the year but showed improvement in profitability. The company's overseas subsidiaries, BJ in Nepal had a degrowth in top line and profitability on account of steep inflation and cash crunch in the economy, whereby company decided to hold back on extended credit. The outstandings were going up and we decided not to extend it anymore. And therefore, we cut back on the sales a little bit and suffered because of that. Companies overseas subsidiary, Bolix Poland also had a degrowth in top line and profitability on account of Ukraine war and inflationary environment. U.K. operations were also impacted by high inflation. It's coming back, but we have to see it's too early to call as far as Bolix is concerned. Company's joint venture, Burger Nippon Paint Automotive Coatings had a very strong quarter of top line and profitability growth aided by the growth in the automotive sector. Company's joint venture Berger Becker Coatings Financial performance was negatively impacted on account of the fire and the loss in one of the factories in this quarter, an amount of about INR 28-odd crores was provided for the same claims are being processed. Strategizing for growth, we will expect to continue to grow at a good healthy pace. Network expansion, we are already having 40,000 retailers. We plan to add 8,000 retail touch points in the year '23, '24 as well. In terms of product innovation, we have done several product innovations in the recent past. Some more are there in the pipeline, which will come in this year in '23-'24. The focus in advertising will be on the digital side of advertising, though our advertising spend will increase considerably this year, both on television and on the digital media once again. Influencer outreach company has about 1.3 lakh contractors and painters with regular offtake of company's products. We plan to scale up significantly in this area. Cost restructuring, working with R&D to find more cost-effective alternative formula and efficient formula. Improvement in manufacturing efficiencies through automation and overhead reduction will carry on as we have been doing in the past. All this, we will do and still focus on the ESG part of it, environment, social and governance aspects. We have -- even in the recent plant in Lucknow, it's probably one of the greenest plant around complete solar power generation, excellent water recycling and waste water reduction. So we have taken a lot of measures across various factories in order to become far better in terms of our environmental footprint, similarly in terms of social issues and government.The company expects to continue double-digit growth in decorative business in the coming quarters as the demand outlook remains good in view of lower inflation and prediction of normal monsoon, I think so far, April has begun very well and we expect that May and June should also be good. Industrial sales outlook remains strong on the back of upturn in automotive and infrastructure sector. Raw material prices other than any exchange rate fluctuation appears benign as of now. We therefore expect that our gross margins will hold. Profitability expected to improve in quarter 1 of financial year '24 on the back of improvement in operating margin, the one-off expenses that we incurred won't be there, and therefore, we expect a good, solid improvement as far as EBITDA is concerned. And company is confident to have a strong performance in its 100th year of operation. Thank you, and we can field the questions more.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama Institutional Equities.

[Abneesh Roy, analyst]

Yes. And you have shown good improvement in the volume growth trajectory. My question essentially on the cost aspect. So first is on the Andhra government delay in the receivables. So would you be fully confident of this? And if you could quantify how big is the amount? And in the past, have you seen such delays in other state government receivables also. And does this change your aggression in any way to the state government?

[Abhijit Roy, executive]

Yes, we are very confident of this amount that we should be getting it. Basically, they have a system whereby it is automated. And this amount goes through a portal, which is called CFMS, in their terms. And once it reaches there, it gets disbursed. So of the total quantum, which was there in excess of INR 300 crores, we have received 90% of it and 10% was what was left. Out of that, what they had indicated was that this is the last person portion, which is there for which there is a procedure that we have to get certifications from the headmasters and the assistant engineers of each of the schools, there are 12,000 of them. We have so far collected about 8,000. So we are -- we have to collect this balance 4,000, which is taking some time because it is disbursed and you have to contact both of these guys and it takes some time. Once we get it, once we submit this, we are 100% confident that the payment will come through. So no worries as far as this is concerned. As far as other state government, yes, we keep doing projects elsewhere. And so far, there has been no such defaults from anywhere in the country.

[Abneesh Roy, analyst]

Sure. Understood. My second question is on the advertising spend, which you said has gone up significantly this quarter on Y-o-Y basis. And next quarter and for the next full year also FY '24, you do expect ad spends to go up, which I understand given the gross margin expansion. If I see the market leader Q4 results also, their other expenses has gone up. So if I compare your ad expense versus pre-COVID as a percentage of sales, if you could give clarity there, I understand Y-o-Y because of the COVID et cetera, we [indiscernible] Y-o-Y it has gone up, but versus pre-COVID, where do we stand in terms of ad spend as a percentage of sales?

[Abhijit Roy, executive]

So Y-o-Y, as you are rightly saying, it's because we had cut back a little bit and now we are going back to normal spend levels. But pre-COVID, we are marginally ahead of that. We are spending a little bit extra, especially on the digital media, there has been a substantial increase in spend there. The TV hasn't gone up so much, but the digital, there has been a massive increase.

[Abneesh Roy, analyst]

And digital increase? And is it due to any particular reason? Or is it just a cost optimization versus the TV media? And also other paint companies are seeing a lot of activity happening from their side on the architecture side. So is that also a meaningful expense from your side?

[Abhijit Roy, executive]

So on the architecture side, we haven't gone in such an extent, but the digital media, we are going primarily because we see the audience quite a lot shifting in that direction. And we have started targeting because it also helps us to -- because we don't want to scatter our money uselessly into places where it may not be so useful for us. So in certain states where we want to do activities on certain brands, which are not that strong all India, we would prefer to go digitally there because there are certainly brands like that where we want to advertise digitally and that's where the spend is going up, corresponding a little bit of reduction might be happening on the television. Overall, therefore, compared to pre-COVID period, there has been an increase, but marginal increase on television and a much more substantial increase in digital.

[Operator]

The next question is from the line of Avi Mehta from Macquarie.

[Avi Mehta, analyst]

Sir, I just wanted to clarify the amount that is left from other dish school project is INR 30 crores? Or what is the amount -- sorry, I missed that one in the earlier.

[Abhijit Roy, executive]

No. So total amount that is due is approximately INR 30 crores, of which we took a hit of about INR 20 crores, INR 21 crores this quarter, primarily because they have crossed 1 year period. Some of it is in phases. So we have done some schools which very much earlier. So that which crossed 1 year, we have taken the complete provisioning for that.

[Avi Mehta, analyst]

And sir, the second bit when I look at the EBITDA margin, what you've kind of indicated, would it be fair to say that the 16.5% or 16.5% to 17%, given input costs are also remaining benign. And we should expect or we can expect such a performance for the year as well. Obviously, assuming that input costs remain at benign. Is that a fair way to look at this? Or if you could help me understand that—

[Abhijit Roy, executive]

So I can predict for you for the first quarter because that's more closer and we have got 1 month, which has already gone past. And so therefore, we can with a reasonable degree of certainty, comment on that, if the price remain [indiscernible] if all other conditions remain similar then yes, of course, we are looking at that type of EBITDA range, which is there. However, if we see some activities happening which are beyond the normal, then obviously, things might change. But yes, if everything remains the same, that is why the range will be.

[Avi Mehta, analyst]

And those activities will largely be input cost related, right? So that's how I should--

[Abhijit Roy, executive]

Yes. Primarily that unless, of course, also towards the end of the year, we expect competition to come in, in form of some of the players who have declared that from the fourth quarter, they will jump in. So at that point of time, it might be some sort of a skirmish in the market for a short while. So there, we don't know what will be the situation. But otherwise, yes, this is where we will be.

[Avi Mehta, analyst]

Perfect, sir. And sir, on this -- when you answered the ad spend remaining ahead of pre-COVID, that was ad spend to sales, right? I just wanted to clarify that point also?

[Abhijit Roy, executive]

Yes. Both in terms of absolute and investment to sales as well.

[Avi Mehta, analyst]

And last bit, sir, if you could give us a sense on the construction chemicals business? And how do you see the growth in this category? If you could give us some understanding of how large is it for us right now? And whether it's only in the subsidiaries, how do you -- or whether comes in stand-alone. So it's a mix of too many questions, but I just wanted to understand the Construction Chemicals business better, sir.

[Abhijit Roy, executive]

Right. So as far as Berger is concerned, within Berger itself, this is growing very well at a very robust pace. And it is now becoming more and more significant. We expect this construction chemical to be around the range of 8% to 10% of the decorative business in the next 2 years. That's for sure, it looks like the way it is growing at present. In addition to that pardon me?

[Avi Mehta, analyst]

So sorry, go ahead, sir.

[Abhijit Roy, executive]

Yes. So -- and in addition to this, we have, of course, our subsidiary company, which is STP, which is also in the construction chemical space, which also is growing quite fast. So overall, it should be around the 10% range comfortably in the next 1.5 to 2 years.

[Avi Mehta, analyst]

Sir, sorry, just on that bit, currently, what is the selling, sir, because that will give us a sense of the growth that we are expecting?

[Abhijit Roy, executive]

So currently, both put together, both put together, we will be somewhere around INR 1,000 crores.

[Operator]

We have the next question from the line of Percy Panthaki from IIFL.

[Percy Panthaki, analyst]

With some amount of decline in crude and crude related input costs. How are you looking at sort of the pricing scenario in the next few months? And when I say pricing, I'm talking about consumer pricing and plus any extra activity in the trade via discounts, rebating, et cetera, et cetera.

[Abhijit Roy, executive]

No. So crude has come down is true and the prices of raw materials have become benign. As we can see from the gross margin expansion also, it is quite evident However, it's a competitive industry. And typically, if there is competition, you tend to fight it more fiercely in the market. And the prices do settle to a level which is sensible. I think there will be some amount of rebating which is going to go up a little bit, possibly, but not significantly because this is the level where we were pre-COVID. And we -- it's not something which is substantially different from where we were pre-COVID.

[Percy Panthaki, analyst]

Right, sir. And you also spoke in your initial comments that gross margins, I mean, sustainable basis, you would like to maintain it around the 38% to 40% mark. If you can also give a similar idea as to your EBITDA margins, please?

[Abhijit Roy, executive]

So EBITDA margin has been -- if that is the range. Normally, we operate at 16% to 17% range of EBITDA. That's where we can be going forward as well.

[Percy Panthaki, analyst]

This is on a consolidated basis, right?

[Abhijit Roy, executive]

That is right.

[Operator]

The next question is from the line of Tejash Shah from Avendus Park.

[Tejash Shah, analyst]

Sir, you spoke about adding somewhere around 8,000 dealers on the base of 40,000. So that's a very healthy 20% addition. So historically, how does this translate into growth, a 20% addition on distribution footprint will translate into 5%, 10%, 15%? How does it actually impact the growth in the year where you are expanding?

[Abhijit Roy, executive]

So typically, this will probably result in 5% to 6% of increase over additional increase over whatever normal increase we would have got otherwise if we have normally grown at 7%, 8%, this will give us 5% additional, which is about 13-odd percent.

[Tejash Shah, analyst]

Sure, sure. And sir, if you can give some insights on are we specifically targeting any geography where we are under-indexed in terms of our presence, and we are disproportionately adding dealers there? Or if there's a normal course of expansion that we have been doing for last many years?

[Abhijit Roy, executive]

So normally, we have been growing at about INR 5,000, INR 4,000 to INR 5,000 outlets. Last year, '22, '23, we grew slightly faster. We grew by 7,000 outlets, of which 5,000 plus were machines. And this year, again, we want to go slightly ahead of that from 7,000 it to 8,000 outlets. And therefore, the increase -- and then if you have seen last year also, in terms of value sales growth, we were the highest in the industry. And then this would help us this year as well in growing at a faster pace than the industry in general.

[Tejash Shah, analyst]

And sir, last question, if I may, on your margin guidance. Sir, your own commentary on the existing competitive scenario. And then at the end of the year, you also highlighted there's a competition which is coming. Your guidance on going back to 14% to 16% kind of EBITDA margin, do you think that the upper end it is slightly aggressive? Or you believe that with raw material benefit coming through, you can actually revert back to those levels?

[Abhijit Roy, executive]

I didn't get it. Can you repeat the question, please?

[Tejash Shah, analyst]

So 14% to 16% right, consolidated margins?

[Abhijit Roy, executive]

16%, I said it will be in the range of 16% to 17%. That's where we should be.

[Tejash Shah, analyst]

Okay. So sir, that's a healthy expansion on where we are exiting this year? So looking at -- you qualified this year to be slightly competitive than the past years. So just wanted to know how confident are we able to? Because I'm assuming that a large part of this benefit or expansion will be gross margin led. So looking at our stepped-up investment on A&P commitment and then competitive landscape also, how confident are we to actually kind of revert back to those levels of margins?

[Abhijit Roy, executive]

It's a combination of 2 3 factors. One, of course, is that there was this one-off expenses which were there this year, which will not be there next year. The second is that we are doing a lot of exercise on the overhead front which we expect that will yield very positive results, and we should be able to reduce our overhead percentage to sales in at least by 0.5% is what we are looking at. This is something which is a work in progress, but we are reasonably confident that we should be able to deliver on that front. And then lastly, it is true that there will be an expansion in the margin in the gross margin, which will happen. But the competitive spirit that we are looking at is not necessary that always that price will start falling and therefore, it will drag down the EBITDA. That's not what we have seen so far in the industry. And we expect that, that trend will continue in the future, as well.

[Operator]

The next question is from the line of Shirish Pardeshi from Centrum Broking.

[Shirish Pardeshi, analyst]

I have 3 questions. You just touched upon on the competition. Would you be able to give us some color how the competition is behaving at this time? Because what we gather from the trade is that they're expecting a very strong either improvement in terms of their profitability on the account of either dropping the prices or from the point of increasing the discounts because the competition is really heightening at the trade. So I'm more interested in looking at what's your comment on that?

[Abhijit Roy, executive]

No, the ground realities are slightly different. I think in fact, the hyperactivity that we had seen about 1 year back is no longer there. It is much more normalized. And if this trend continues, I don't see any reason to be worried about in terms of delivering on the EBITDA margins as well.

[Shirish Pardeshi, analyst]

But do you think there is a pressure from the trade that to drop the prices?

[Abhijit Roy, executive]

I will feel that because I don't think that's the scenario now. The trade seems to be -- at least in the month of April, they were pretty okay. In the month of May, in the first 7, 10 days, there's a bit of a slowdown, but it's picking up now again. So I don't see that pressure coming in from the trade, which will force all of us to look at trying to get additional sales to additional rebating.

[Shirish Pardeshi, analyst]

My second question on the regional split, I guess, North has a lot of issues in terms of the offtake in the beginning, but now it's improving. While South has done well. So in terms of your sale, which segments or which markets has grown faster for you?

[Abhijit Roy, executive]

Almost across the board, but we are relatively a weaker player in the South. So for us, it's been east and then North and West which have been growing. South also has grown well on a lower base for us.

[Shirish Pardeshi, analyst]

And the last question on the initial slides, what you have mentioned that the 33,000 metric tonnes what we are added in the month of February. And I think the present capacity is 95,000 metric tonnes, and you said that it's about 40,000, 50,000 utilization. To your understanding, when does this 40,000, 50,000 capacity utilization will happen for Sandila?

[Abhijit Roy, executive]

So Sandila is already at 40% to 50%, you are right. And that will take about 1.5, 2 years for it to reach to 75% to 80%, which is then, for us, normally, the seasonal month, it tends to go up to 100% utilized in a normal month, it is about 65%, 70%, 75%. So that's a good figure to be at. So in 1.5 to 2 years' time frame, we should be able to reach that level of 70%, 75% at Sandila as well. Meanwhile, in the next 2 years after, we will have to start looking at brownfield expansions in our existing plants and also a greenfield possibly in the state of Orissa, which we will start setting up from ‘26 onwards.

[Shirish Pardeshi, analyst]

So just one follow-up on the account of Sandila. You said that the overhead has actually picked up your cost. But is there anything one-off which is going to come in FY '24 because of Sandila plan?

[Abhijit Roy, executive]

No, nothing more to be there. We have taken whatever had to be taken.

[Operator]

We have the next question from the line of Jay Doshi from Kotak Securities.

[Jaykumar Doshi, analyst]

Congratulations on 2 consecutive quarters of market industry leading growth. I have 2 questions. The first one is just a bookkeeping question. You called out INR 20 crores, INR 21 crores of provisioning then on account of the Andhra Pradesh school project. And you also indicated there was some more provisioning at subsidiary level and some one-off costs associated with the opening of the Sandila plan. Is it possible to quantify that? Essentially, just trying to understand what's the extent of impact onetime cost as a percentage of consolidated revenues.

[Abneesh Roy, analyst]

So approximately, it will be another INR 8 crores or INR 9 crores in addition to waste school. So approximate value will be about INR 28 crores, which is there, which is a one-off. So you can build that in as a percentage and understand whatever it is.

[Jaykumar Doshi, analyst]

Second is just -- could you give us some color on what is your market share in the 4 regions, the North, Southeast and West. Ballpark numbers will also be fine.

[Abhijit Roy, executive]

Very difficult to say. We don't calculate it in that way. And I can't tell you that, but I can only let you know that in the East, we are the strongest in North also, we are well placed, relatively weaker in the West and the South. And it varies from state to state, even in these areas. For example, in UP, we might be relatively much stronger, much, much stronger than say, in Punjab or Himachal Pradesh. So it's a very broad term to use, and I don't think it makes any sense. But overall, our market share, however, between 19% to 20% in the all India scenario. In the East, obviously, therefore, it is much higher. North will be also slightly higher than the average and relatively weaker in the West and the South.

[Jaykumar Doshi, analyst]

Weaker in south, my understanding that you're strong in Kerala and you do have presence in A.P. and Telangana as well. I think Karnataka and Tamil Nadu are the 2 markets where you have [indiscernible].

[Abhijit Roy, executive]

Also Telangana, we are very weak. So Andhra, we are strong and Kerala, we are strong. But the other 3 states, we are relatively much, much weaker.

[Operator]

The next question is from the line of Harsh Shah from InCred Capital.

[Harsh Shah, analyst]

Sir, you talked about improving profitability in your industrial business. So can you quantify or just an indication as to at what level are the margins at EBITDA or PBT? Whatever you're comfortable sharing.

[Abhijit Roy, executive]

So the industrial also different businesses have different levels. Powder Coating, which is degrowing in sales has a very high EBITDA to sales as of now, quite close to decorative actually. As far as protective coatings is concerned, it is below decorative, but it is improving every quarter. So the last quarter, it was in good double digits. In case of automotive and general industries -- it's -- again, it started at a very low level. By the end of Q4, it was in double digit, just above. So that is how it is.

[Harsh Shah, analyst]

So on a blended basis, would the sustainable margins for, let's say, the entire industrial including auto and not put together, would that be in low teens for you?

[Abhijit Roy, executive]

For the Industrial business, yes, it will be somewhere in between 12% to 14% blended if we assume that this quarter 4 results will continue and the decorative is much higher also.

[Operator]

Okay. We have the next question from the line of Mihir P. Shah from Nomura.

[Mihir Shah, analyst]

So firstly, on historically between the value growth and volume growth, there used to be a difference between the value and so there used to be a negative mix effect historically, but we've seen over a period of time that mix kind of going away. So I just wanted to check with you, is this because -- so in this quarter, probably, is it because there is no pricing and mix is gone away? Or there is still some element of pricing and an element of mix, which is still leading to value and volume growth to be in the similar range?

[Abhijit Roy, executive]

So this quarter, the price increase benefit that we were getting in the second quarter and to some extent, even in the third quarter, has completely vanished in quarter 4. So the volume value gap became negligible except for the positive mix change any, which was to happen. And when we sell this low-end emulsions, et cetera, those are also priced comparatively lower, and they are growing at a reasonably good pace. As a result, sometimes the volume growth might exceed the value growth if you are looking at those in that way. So that can explain the slightly higher volume growth than the value growth in this quarter.

[Mihir Shah, analyst]

Sir. And so suffice to say that, I mean, of course, there can be some seasonality effect, et cetera. But on a steady-state basis, how should we think about the negative mix that we used to see in the earlier years? Can that settle down completely or it will be a quarter-to-quarter phenomenon?

[Abhijit Roy, executive]

So it can be a quarter-to-quarter phenomenon. It depends on every quarter, I think scenarios change a little bit in the paint industry. For example, in the second quarter, it will be -- the mix normally tends to reverse in the negative direction because a lot of sales of distemper, primers, et cetera, happen in that quarter. Again, in the third quarter and the fourth quarter, it tends to pick up, especially in the third quarter in the October, November, December, Diwali period. The emulsion sales go up significantly and take to high-end emulsion and then you have value growth far in excess of volume. So it varies from quarter-to-quarter, it's very difficult to give you a generalized picture for the whole year.

[Mihir Shah, analyst]

And sir, how should one think about pricing now, given raw materials are completely back. In your view, do you think that there can be a case for price cuts in the industry?

[Abhijit Roy, executive]

So in my current situation, I don't see that immediately what is required to be done, especially if the demand scenario is decent and good. There is no need for that at all. If the situation arises that the demand starts faltering and we see the prices remaining benign and stable at this point or reducing further in terms of raw material prices, then maybe a price cut might be required, but not at this stage.

[Mihir Shah, analyst]

Sir, the other question I wanted to check with you was on the product mix that you have. If you can share any broad range of your product mix between premium, mid and mass. Where do you -- where is it standing currently? And where do you see that in the next 3 or years? Because we've seen a lot of new differentiated high-end launches that are happening. So if you can throw some light on that product mix change that you are endeavoring to do?

[Abhijit Roy, executive]

So the growth is improving as far as the premium luxury category is concerned for us, -- and that continues to happen over the period of years, we have seen that improving. And then we have become -- in the relax category, not in the luxury category. We still need to do some work on the luxury category. And I believe that there is a lot of growth opportunity in the luxury category as well, where we have a product called Weathercoat Long Life and the exterior category, which is doing very well. But in the steel glamor, which is the interior luxury, that hasn't grown all that well that we would have anticipated. So there is some space there for growth in that particular category. We are doing very well, and we are a leader in the immediately below luxury category, which is called the premium luxury category, which -- where we have 2 brands, PV Clean and antidust. Both are leaders in their own category in that particular segment. So that continues to grow very well, and we will be investing in advertisement and also in terms of other activities to grow the premium luxury and the luxury category to help premiumization of our entire product portfolio.

[Mihir Shah, analyst]

And my last question, sir, is on the subsidiaries of Bolix on any visibility by when do you expect an improvement in that region, sir? Or when we can start seeing some growth numbers versus a degrowth and improvement in margins?

[Abhijit Roy, executive]

So last 3 months, which is January, February, March, which gets actually consolidated with our April, May, June accounts. That has been good. But it's very difficult to say how things will be going forward. As of now, the situation there remains tense because the war continues and lots of [indiscernible] into Poland, and it creates just some amount of disturbance. The inflation is at a high level. Though we managed to sell and do reasonably well, whether we will be able to continue that. That is something which I can't give visibility on. And then difficult what is a small operation for us, overall, the stakes are not so high. And so it doesn't impact us so much as far as the overall result is compared.

[Operator]

Thank you -- the next question is from the line of Avi Mehta from Macquarie.

[Avi Mehta, analyst]

I just wanted to check on the fans business in the powder coatings. When do you see that kind of turning around because it's been some time since that weakness has been continuing?

[Abhijit Roy, executive]

That is true. And we were expecting that it would have -- the summers are setting in and like April, May should have been much better. So April, it did improve to some extent because all this 5-star rating, et cetera, has settled down. And the expectation was that it will do much better. It did improve, but not to the extent that we would have loved it to. It is still below the threshold level that one would have expected. But man, again, there has been further more improvement on that. Hopefully, this trend will now continue to improve because the pipeline which has got reduced considerably needs to be filled up again. So gradually, I think it will come back.

[Operator]

The next question is from the line of Deepak Parmar an Individual Investor.

[Unknown Analyst]

My question is, among the listed competitors, are we planning to grow at the fastest in FY '24? I mean that is and gain market share. Can you put some color on this?

[Abhijit Roy, executive]

Yes. So the intention is that because last year also, we grew the fastest, and we gained market share. My estimate is about 0.4% in the overall market for the companies which are in the listed space. And we are the only company which would have grown a significant market share in the year gone by. And we expect that this year, too, in '23, '24, we would gain some market share. The quantification is difficult, but we would like to be the fastest growing definitely in the market.

[Unknown Analyst]

Another point is this UP plant, how is going to help in terms of improving margin because North is your second test market. So will it help in terms of improving the margin, the up plant, which has come up?

[Abhijit Roy, executive]

Yes. So some amount of help definitely will happen 2 things which is there. One, of course, is the freight cost reduction will happen to a large extent. And the responsiveness of the company to certain changes in requirements also will be much faster. So thereby, both sales and in terms of operating margin, the freight cost reduction will help. In addition, of course, we have some tax benefits, which will come in, which will kick in also.

[Unknown Analyst]

And one last question. As you rightly said, with a lot of other competitors coming in by Q4. And Telangana, Maharashtra and Karnataka, these are one of the biggest paint markets. So how are we going to counter the current existing players and the new players in our weaker markets. I mean, how -- what are our strategy to counter these players?

[Abhijit Roy, executive]

So no, these have been markets which where we have been traditionally on the weaker side. We have taken some initiatives, which are out of the box a little bit and attempting these things. Last year, we did that, and we achieved some degree of success, I would say. But this is something which needs to be continued this year as well. And hopefully, we will be able to grow at a reasonable pace even in these markets.

[Operator]

As there are no further questions from the participants. I now hand the conference over to the management for closing comments. Over to you, sir.

[Abhijit Roy, executive]

Thank you. And this has been a good year for us, and we are entering into the 100th year. This will be, in fact, under here in existence in India. We started our journey in 1923 in the month of December. And then therefore, we will touch exactly 100 years in December of 2023. We expect that this year will be a good year for us and the 100-year will be one of the best that we have seen so far. We have crossed this milestone of INR 10,000 crores. That gives us some win to our journey. And then we hope that the year which is ahead of us, we should be able to deliver on the promises that we have made. Thank you once again for listening to us and patiently and hope and wish us the luck as well for the coming years.

[Operator]

Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.