Asian Paints Limited (ASIANPAINT) Q3 FY21 Earnings Concall Transcript

Asian Paints Limited (NSE:ASIANPAINT) Q3 FY21 earnings concall dated Jan. 21, 2021,

Corporate Participants:

Amit Syngle — Managing Director and Chief Executive Officer

Analysts:

Abneesh Roy — Edelweiss Securities — Analyst

Chetan Chhajed — — Analyst

Shirish Pardeshi — Centrum Broking — Analyst

Percy Panthaki — IIFL Research — Analyst

Avi Mehta — Macquarie Research — Analyst

Sunita Sachdev — UBS Investment Bank — Analyst

Richard Liu — JM Financial — Analyst

Anshuman Atri — PremjiInvest — Analyst

Aditya Soman — Goldman Sachs — Analyst

Varun Singh — IDBI Capital — Analyst

Neel Thakkar — — Analyst

Bhavik Patel — Tradebulls Securities — Analyst

Presentation:

Good evening, it’s a great occasion to be welcoming all of you for the Q3 Investors Meet. I know we are going through the pandemic and therefore, the entire thing is something which is hosted through the digital media, but I’m sure that now all of you are quite used to this kind of investors meet. To start with — I think a little bit glitch in terms of looking at the presentation and I’ll take you through a small presentation before we really get into the Q&A.

Okay, so what you see is the disclaimer and I think people can just go through it before we get on with the presentation. It’s not changing the slide. Can you physically change the slide? I think we’re just getting the presentation on for you. Okay, I think you can change the slides from behind. So, now it’s working. Sorry for the glitch in terms of this thing. That’s the disclaimer for you before you’re going to the presentation. We look at the overall market conditions which have been there for Q3, what we see is that there is definitely a normalization which has been seen through various activities and the rise of the COVID cases has definitely come down from the peaks what we had seen in Q2 and therefore, I think, overall the country has done a fairly good job in terms of containing the spread of the overall COVID cases.

Obviously, we have seen a lackluster Q1 which affected the entire industry across the globe and then we had a second quarter where there was definitely some recovery and then we have had the third quarter which has definitely witnessed a real rebound in terms of the demand conditions as we see it. What we had also seen that there was a GDP decline in Q2 to about minus 7.5%, which showed a good recovery after what we saw as a steep fall in Q1. Overall, when we see, the recovery is definitely supported by certain reasons which are coming clearly. One is obviously a very, very strong festive and a marriage season which we saw in October and it was also supported by a recovery in real estate and new construction, which we see due to various reasons across the country which has happened and that is something which has augured well across sectors manufacturing as well as construction.

We look at raw material inflation, it is something which is definitely on an upswing. We have seen the lows in Q2, but we saw the crude prices going up and now starting December, I think we’re seeing definitely the raw material prices in the coatings industry getting affected both from the point of view of crude — crude derivatives and certain critical raw materials which are there and that is an impact possibly which will come in the next quarter. Overall, the forex movement has been pretty supportive and we’ve not seen too much of a inflation in terms of the INR to that extent and what we see it’s been largely constant and possibly moving into a territory where it is getting a little bit stronger.

We look at overall the domestic decorative business as far as the overall paint market, when Asian Paints is concerned. We see a very, very strong growth in the paint market in Q3 following a very good and positive Q2 as well and this is something which is giving a indication that what we have seen this Q3 growth is coming also on the stance of continued strong growth in Tier 2, Tier 3, and Tier 4 markets, but the big change which we have seen in Q3 is that when you look at the metros and you look at the Tier 1 markets, those have also rebounded back and that is a big change and a pleasant change which we are seeing in quarter three.

Overall, if you look at the Asian Paints decorative performance, there is 33% volume growth in quarter three for the domestic decorative business and a very, very strong good volume growth coming in each of the months, which is the October, November, December in the quarter, which is something which is heartening and gives us confidence that this is a sustainable demand in terms of what we were able to see after some time. We also see a change in terms of the large projects in the institutional business where we have seen a strong growth which was not evident in the quarter one and quarter two and that’s another change which is happening.

Overall, the product mix has definitely improved in a big way and we see that the premium and the luxury range is doing quite well for the company giving us a good value growth as well in this quarter and we see that it is also well supported through our entire area of Smartcare and Economy emulsions which has been the focus for some time. The services regime at Asian Paints has been very, very strong and we have kind of looked at Safe Painting and San Assure, which is our sanitization service in a strong way and that is something which has got a real good traction and has got a very strong good equity for the company in this period.

When we look at decor, we are largely a very, very strong player in decor with respect to our wallpapers and with respect to our textures what we do and what we have seen is a very good impact of our Beautiful Home Service, which we launched in this year and in a short span, we have seen that this is something which has really given us good confidence. Overall, if you look at the gross margins for the quarter, they are much better than last year supported by lower prices and some real great work which has happened in terms of driving the sourcing and the formulation efficiencies which has added in terms of bracing up the overall gross margin. However, going forward, the raw material prices look quite inflationary and this is an effect which we have started seeing in December and the full impact possibly will be seen in Q4. I would now like to take you through a small introductory AV which is…

[Video Presentation].

So what you saw was this new service and as you see it, it’s an amazing service, which basically gives you at home experience wherein you can renovate your home, you can do anything with respect to anything in the home space to that extent and it kind of is a very good opportunity to connect with the home consumer in a strong way and this is something which has got a very, very good response. So that’s one of the areas which has happened. The second area which I wanted to kind of bring to your notice is the work which we have done with respect to decor and looked at in terms of retailing so that we are able to offer a consumer a very strong service under one roof of a large store which is there. This is a very unique format and we think worldwide it is the only format which is kind of talking of a space of about 6,000 square feet under which we are talking of everything which is in the home available for the customer backed with technology and backed with very super consulting experience, which kind of comes in. Let’s see the AV.

[Video Presentation]

So what you saw was all categories within one place on a world-class store and this is something which has met with a very, very good response in the market. Going on in terms of looking at giving you a transition in terms of how things have moved from quarter one to quarter three, obviously, we saw that quarter one is something which was quite depressed given the fact that April was absolutely a whitewash and May was partial to that extent, but quarter two recovered well at 11% kind of a volume and a 6% value growth, which came in. Quarter three is the point of time where we have got very good demand conditions, some pent-up demand, which is there and a good kind of festival and marriage demand which came in coupled with some of the construction activities which began and got us 33% volume growth and a 26% value growth.

Going on to other businesses, let’s take a look at the international business. Overall in the international business, also the performance has been pretty strong. The volumes have picked up strongly in Q3 there as well. We see a good recovery in all parts of Asia and the Middle East and that’s something which has been very, very strong in terms of what we have kind of witnessed. So all units have reported a double-digit volume growth in Q3 and which is really heartening to see. Ethiopia, Bahrain, and Indonesia are a little bit exception because of some of the external conditions going on in this country in terms of what we see overall. The other good thing is that the pickup has been seen across the price segments whether it is economy, premium or the luxury end and that is something which has augured well with respect to both the volume and the value growth coming in.

We have done a very strong work in terms of expanding the portfolio in a very, very strong way and the big introductions have been in the area of waterproofing which has now gone to almost all the countries and all the units in a very strong way and we’ve looked at, focusing on the premium and the luxury emulsions so that we are able to kind of look at premiumization in a strong way which kind of really — holds very good in terms of looking at the imagery of the brand overall.

In Q3, if you look at the margins, the margins were obviously supported by low material prices as well as the benefit out some of the cost control measures which were put in. So, therefore, I think overall, margins have been pretty good as is kind of seen in the graph alongside. Overall, international business revenue in Q3 was at about INR700 crores, which is almost a 22.4% growth and on a nine-monthly basis, it was INR1,756 crores, which is a growth of about 1.3%, which is really, really appreciated because of the fact that we had a quarter one which was really subdued.

International business profitability has also been very good and in Q3 we see it is at about INR74 crores, which is a very strong increase over the last year Q3 and on a nine-month level also, we see it is at about INR147 crores, which is a growth of about 41.6% over last year. So, overall, very strong top line and a equally strong bottom line with lots of initiatives thrown in.

Some of the initiatives which are mentioned, waterproofing range has now got launched across Asia, Middle East, Africa and that is something which is giving us good gains and also what we have done is that we’ve looked at the bath business now coming into South Asia which is Nepal and Bangladesh and what you see is some of the stores in Nepal and Bangladesh, which is what has been put up and therefore, truly we are kind of leveraging the strengths in terms of looking at the India market and looking at going international with them.

When we look at the industrial business, we have two joint ventures with PPG. The first one PPG-AP looks at largely the auto OE part. The auto sector sales and the builds data, which is a work which is done at workshops where the cars come for painting, the data exhibits a very, very strong continued recovery, which is happening in Q3, which is a good sign in terms of what we see and it is also represented by the auto sales data, which all of you are aware of. The OE business therefore reported a good double-digit value in Q3 and there was also a pickup in the refinishes business which has also been in the positive zone for the quarter.

In the other JV, which is the industrial JV which we call as the AP-PPG, the demand recovery again has been good. We see industries kind of coming back strongly with respect to the work of expansion and maintenance and we have seen this has led to a double-digit value growth in Q3. Obviously, the segments which have kind of braced it up is the powder coating segment in a strong way and the industrial liquid paints which also have been showing very, very good uptick from the last quarter as well. So, overall, when we look at profitability in both these business, have been quite good and the profitability, especially, if I look at the AP-PPG has been also coming due to the contained cost during this period. So I would say that’s the status in terms of the industrial business as you look at it.

Going on to the home improvement business. We have two businesses here, which is the kitchen and the bath business. Both businesses did quite well in Q3, double-digit growth in Q3 from the components as well as for the full kitchens, which is a big focus of the organization. Projects segment also — too saw a good pick up on a sequential basis. And therefore, what we got — for the first time, we kind of registered an EBITDA breakeven in quarter three for the Kitchen business. So I think that is something which is really tremendous.

As we look at the Bath business, again, strong sequential pickup, which has been seen in terms of the demand across the product segments, which are there. We have been looking at premiumization in terms of some of the products, which are there, which is something, which has seen strongly in the quarter. Projects business like in Kitchen has also grown and has shown quite a bit of improvement as the housing sector and the construction really picks up.

Overall when we you look at the PBT level, again, a milestone where we are looking at a profit of INR1 crore, which has come in Q3 on a back of a PBT breakeven in Q2, as well. So I think, overall, what we see is that there is a good top line, which is coming, overall improvement in gross margins, cost control, and definitely there is a lower spend in marketing to that extent. But I think the top line is something, which has driven the bottom line in a strong way.

Finally, when we look at the overall summary at the Company level, in terms of the standalone alone financials for quarter three, the revenue uptick is 26.1%, which is a stronger Q3 delivery. The PBDIT is at about 46.7% growth. The PBT is at 56.3% and the PAT is at about 56.5%. So overall, I think there is a good uptick with respect to the overall PBDIT margins, which are at a big increase.

When we look at the nine-monthly figure, the revenue is a little bit down negative because of the first quarter, which you are all aware. And it is at a negative 3.5%. The PBDIT, however, is at about 4.9% growth, the PBT at about 6.8%, and the PAT should have been equal to the PBT, but for the fact that we had given a one-time deferment reversal taken last year on account of the tax rate change, which was there. So otherwise the PBT and the PAT figures would have been the same to that extent. The PBDIT margins here have also gone up as kind of indicated. So I think that’s the picture, which is there at the stand-alone financials.

At the consolidated financial level, in fact, the performance has improved when we look at from the profitability point of view. The top line is at about 25.2% value, which is the growth, which has come in. The PBDIT is at about 49.5%, the PBT is at about 60.5%, higher than overall standalone. And PAT is 62.3%. So, here again, I think there is a margin improvement, which is strong in PBDIT as you see it.

On a nine-monthly figure, we have the revenue, which is — the value sales is minus 3.3%. The PBDIT is 5.3% growth. The PBT is at about 7.3%. And PAT is at 1.7% for the same reasons, which I detailed earlier, in the stand-alone and with respect to the one-time deferment reversal taken last year. So the PBDIT margins again are good here in terms of as you see it. So that’s how basically the stand-alone and the consolidated results span out for you.

Looking forward, obviously, I’m sure that lot of you want to know in terms of what really happens to this. What we see is that the Q4 demand conditions should be good. And there should be continued recovery in terms of the consumer sentiments given the fact that now we have the rollout of the COVID vaccination program and the paranoia in the customers’ mind is going down because of the lower cases, which are coming to that extent. And therefore, we feel that the overall domestic demand recovery will become broad based and really well entrenched.

However, obviously, there is a bit of a caution that in case there is any surge of COVID cases or a different strain of COVID, which kind of comes in, okay? Now, what we are seeing as in some of the geographies globally, whether it is with respect to U.K. or Europe and so on so forth, it could kind of really impact some of the supply chain and other things to that extent, although we are all hoping that it kind of really doesn’t happen.

The raw material prices, obviously, are seeing a sharp inflation at I said. And this could be in the range of anywhere between 6% to 9% kind of an inflation, which is there. And we see that, possibly, this will have an impact with respect to looking at seeing very critically whether we need to kind of look at any pricing changes or passing it on to the consumer as we look at Q4.

Overall, I think, our focus is very clearly on innovation. We are looking at lots of new launches in terms of coming and we will continue our work through on cost optimization and looking up taking only business critical spends across all businesses. And that is how we are seeing the overall quarter going ahead. Thank you so much for your attention.

Questions and Answers:

Operator

[Operator Instructions] We have with us our first speaker. The question is coming from Mr. Abneesh Roy. Requesting Mr. Abneesh Roy to please put your video and audio on, and please ask your question. Sir, please unmute your mic and please then ask a question.

Abneesh Roy — Edelweiss Securities — Analyst

Yeah. Now I’ll go ahead with the question. My first question is on the real estate recovery. So we have seen fantastic recovery across cities in terms of new sale homes. So are you ramping up your capability in terms of assess and sleek. Even for the Projects business of paints, are you increasing the team size across cities going to more cities, because this can become quite big because after many, many years real estate, as a sector, has come back? And what could be your thoughts on the real estate recovery? Is it more of near-term catch up? Is it because the registration costs have been cut? Or do you see a secular two, three — could see a rally in the real estate?

Amit Syngle — Managing Director and Chief Executive Officer

So, overall, what we see is that we will have to watch for trends in terms of what’s happening in the real estate and construction. What we are seeing currently also it is the — the larger inflation is coming in terms of the construction activities, which is to the low and the mid income groups to that extent. And the registration process has kind of energized some of the purchase of the houses in some of the metros to that extent, especially, Bombay, we have seen a good surge in terms of the number of houses getting sold and kind of coming in.

What we see going forward that we will have to watch this trend more strongly because a three months to six months kind of an indication is not a very strong indication because till quarter two, the construction activities were small and therefore we have just seen three months of it. So we would have to really watch whether this is sustainable in terms of going ahead, given the fact that now some of the concessions on registration now withdrawn and the fact that today people are watching out for the vaccination coming into that extent. So we will have to watch that before we really kind of go to big — full hog in terms of looking at what needs to be done.

Secondly, as far as capacities are concerned — the capacities are pretty comfortable both with respect to the Bath business as well as with respect to the overall Paint business and we don’t that we have any problems in terms of ramping up the production which is required. In case there is a surge which kind of comes in with respect to some of the demand from both the construction and the real estate business to that extent. So I think we are pretty comfortable with respect to the overall capacities. Speaker O-Operator Thank you, sir. We will take the next question from Mr. Chetan Chhajed [Phonetic]. Mr. Chetan, you are requested to please unmute yourself, keep your video on and please say your company name before asking your question. Mr. Chetan, please put your video on.

Chetan Chhajed — — Analyst

Hello. Good evening, sir. Good evening, Syngle, sir. Thank you so much for nice presentation, and congratulations for the super results. I’m a retail investor. I’m not from any company. I just wanted to know that the home decor segment that you are concentrating, are you taking any capex? That is my first question. In view of, like, are you anticipating any — can you give any guidance regarding that segment that you see — are you seeing that as an growth segment? And secondly, the growth that we have seen in this Q3 quarter which is like — is it one-off growth? Or do you anticipate this growth momentum to continue henceforth? Or — I mean, I just wanted to ask whether it is due to this pent-up demand? Or are you expecting like structural like growth, which is coming in at this space? Thank you so much.

Amit Syngle — Managing Director and Chief Executive Officer

So as far as the capacities are concerned what we are very clear is that both with respect to Home Improvement, whether it is Kitchen, Bath, we are pretty comfortable as of now. And we don’t think that immediately for the next six months to a year that we need any augmentation with respect to the capacity, and we should be able to take care of the increased demand, which is coming. Second, as I see the overall demand, there is definitely a combination of two, three areas in the demand, which has happened. One is obviously there is a festive demand, which has come in, which was also supplemented by the marriage season, which was there at that point of time.

Secondly, what we have seen is that there is a pent-up demand for — from Q1 and Q2, which has come into Q3 to that extent. And third, we are seeing good demand coming from the construction segment, which is there to that extent. What we definitely see is that some of the pent-up demand will get subsumed now in Q3. And when we look at the ongoing period, we might not see too much of a pent-up demand coming in there. Secondly, what we also would kind of see that the festival demand was kind of relative to what the pre to that extent. But having said that, overall, we think that the demand conditions would still remain quite healthy. And possibly going forward, I think, we would kind of look at good growths coming in the further quarters as we see ahead.

Chetan Chhajed — — Analyst

Thank you so much, sir. Can you give any number for growth guidance?

Amit Syngle — Managing Director and Chief Executive Officer

Very difficult to give numbers in terms of looking at future growths.

Chetan Chhajed — — Analyst

Thank you so much, sir. Good day.

Operator

Thank you, Mr. Chetan. Our next question is coming from Mr. Shirish Pardeshi. Mr. Shirish Pardeshi, request you to please put your video on, unmute yourself and ask your question. Sir, please unmute yourself, Mr. Shirish.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah. Thank you. I think host was locking me to speak. Hey, hi, Amit. Happy New Year, and thanks for a wonderful surprise. I think I am more astonished with 30% growth. And I think we have seen that and we are a strong believer because I recently did some travel across Maharashtra. I think, two things I would like to indicate. I think, yes, my experience says deep down in Maharashtra is that the rural economy is really strong, but, of course, there is a competition angle to it.

So my first question is that how are you going to deal with the competition? Whether this demand is really going to stay from the unorganized conversion to the organized, because really unorganized is taken a toll. That’s the first part of the question. The second part is that you have seen last two quarters the urban centers have been still picking up. So my strong feeling is that now you are giving a cautious view. But I strongly feel that quarter four demand is going to come back. So is there any thought on that?

And the second question I have on Home Improvement. Is — how much is the Project business is now? Because my sense is that Project is one of the business, which you have been harping on. And I think there is a way forward and you guys are going to do a wonderful job.

And the third is last, if you can give some more color on home decor what you have just mentioned that big store, how many stores you’re planning in next two years to three years? I mean not this year perspective, but maybe 2021, 2023 if — any indicative number, if you can help me to understand? Thank you.

Amit Syngle — Managing Director and Chief Executive Officer

Okay. See, as far as, I think, overall competition is concerned, what we are very clear is that as an organization and as a leader in the paints market, we look at possibly only growing the market because we feel that the per capita consumption in the market is pretty low. And therefore, in all segments, whether they are water proofing or wood finishes or even in terms of the wall-coats, we think that there is a very, very big scope in terms of enlarging the market and that is something which we keep on innovating in terms of looking at growing.

Secondly, when we look at, overall, from the point of view of rural plus urban what we are very clear is that in quarter three, we have seen very strong growths already coming from the metros T1 and T2 cities. And these growths are not only from T3 and T4, which was the earlier observation, which was coming in quarter one and quarter two. So that impact has already come in Q3 in a big way and we are — the growths are pretty healthy, which are coming from the metros T1, T2, and this is also because of the — that the paranoia about the COVID has come down and people are letting people in their homes even in large societies to that extent. And that is something which is an observation across metros and megacities to that extent.

So therefore, the phenomena of metro T1, T2 growing is something, which is already on and that is why I said that it is part of the Q3 growths in terms of what we are already saying in terms of what’s happening. As far as the overall projects business is concerned, that has been a focus area for us, not only with respect to Home Improvement, but with respect to even Projects. We are looking at really growing the Projects business across segments, it could be large institutional buyers, it could be hotels, it could be industries and so on so forth. And we are looking at a larger footprint there to that extent. And that has been a focus for some point of — from some time to that extent. And we feel that it’s a strong sector to be in in terms of what is there. And that basically would remain as a focus in terms of going forward. And there is — good growths are what are being anticipated.

And the last question with respect to home decor, we have currently put in about 16 stores, which are spanning across various cities across the country. We are looking at this number in terms of looking at doubling this number as we kind of go head in the next about two years kind of a time. And we think that it’s a very, very strong opportunity in terms of looking at now, the whole area of the share of space in the homes.

Shirish Pardeshi — Centrum Broking — Analyst

Thank you, and all the best.

Operator

Thank you, Mr. Shirish.

Amit Syngle — Managing Director and Chief Executive Officer

Thank you.

Operator

Our next question is coming from Percy. Requesting Percy to please put your video on and ask your question.

Percy Panthaki — IIFL Research — Analyst

Hi, am I audible?

Operator

Yes, sir. You are.

Percy Panthaki — IIFL Research — Analyst

Alright. Sir, I have two questions, and I’ll put both of them upfront. So, first question is, first of all congrats on the amazing sales growth that you have clocked this quarter, and the question is relating to that. So when we do conversation and checks with paint dealers, obviously, always there is some amount of discrepancy between what they say and what the company reports, and that is a normal. However, this quarter, the difference was fairly large — much, much larger than what we would normally expect in terms of your growth being much, much higher versus what the dealers were saying, which was very subdued. So just trying to understand what could be the possible reasons behind this? Have you sort of increased the number of dealers, and therefore, each dealer is now serving lesser number of customers, therefore, when we talk to dealers, we are getting that kind of sense? Or could there be some other reason to this? So that is question one.

Question two is that your margins are at all-time-high levels and now we’re seeing input costs going up. And in the past you’ve said that 20%, 21% EBITDA margins are something that is sustainable level. So it would be interesting to know your pricing strategy broadly going forward. Would you want to sort of absorb this cost increase that has happened and let the margins revert to a more sort of historic levels? Or would you say that the margins have taken a step jump up permanently, and instead of 20%, 21%, probably 24%, 25% is the new normal now? So these are my two questions, sir.

Amit Syngle — Managing Director and Chief Executive Officer

Okay. Great. So when we look at the overall growths, I don’t think so we have done anything substantial or very strong in terms of inordinately increasing our number of dealers or the network to that extent. It has been a normal expansion, which we have been kind of looking at over a period of time. What has really made the difference, as I said, was — one was the pent-up demand, which has come in. The festival season being very, very good in terms of what we saw coupled with the marriage season which was there, which we saw in October and November to that extent.

One big large difference which happened was that the metros Tier 1 and Tier 2 cities, which were not growing at that pace earlier. In fact, the metros were negative from that overall point of view of growth. They have sharply come back. And please remember, it’s a large potential, which is there in terms of some of these larger cities and they have really augmented the overall growth in a big way. And they have augmented the growth with respect to even improving the mix which has come in with the luxury and premium products kind of coming into that extent.

The other area, which has augmented the growth in a strong way, which is there, which might not be coming from the dealers very straight is also the large project sales, which have come in and there. What we feel is that large industries, some of the government spending and a lot of other areas have kind of gone up. And that has kind of given us a fillip in terms of looking at the overall demand going up.

At the same time, as Asian Paints, we’ve always believe that there are — always we can expand the market and we have been looking at expanding the market both at the top end and at the bottom of the pyramid. And in the bottom of the pyramid what we have seen is that today we have got a good success in terms of looking at getting the unorganized customer into the organized market to that extent. And that is something which is propelling the growth rates. And then there is an upgradation from the economy to the premium to the luxury, which is the second phenomena, which we have been kind of driving very, very strongly.

So this is all which is kind of cumulating in terms of giving the high growth, which you are seeing to that extent and that is something, which, as I said earlier, a part of it is something, which is definitely sustainable in terms of what we see in terms of going ahead. So I think that’s with respect to in terms of the growth, which we are seeing.

Second, as far as the input raw material prices are concerned, definitely, as I said, in December, we are seeing an upward trajectory crude had been already going up. And we feel that the raw material prices are definitely going to up. But as an operator, as a company, we have always believed in the philosophy that we need to kind of keep on offering customer a certain value for money. And if that elasticity of pricing kind of gets upset, it would upset the demand also to that extent. So I think what we are watching out is that whether the high inflationary pressures are there or are they going to settle, we are also watching the rupee very closely as to how the rupee kind of comes in. And based on some of these trends, we will take a decision whether we need to kind of pass on the entire thing as a price increase kind of a thing to that extent or we want to kind of look at in terms of absorbing some of the inflation, which is coming in. So that’s a decision we will take in terms of after observing what the trends are around.

Percy Panthaki — IIFL Research — Analyst

Okay, sir. Thank you.

Operator

Our next question is coming from Mr. Avi Mehta. Request you to please ask your question.

Avi Mehta — Macquarie Research — Analyst

Hi. Am I audible?

Amit Syngle — Managing Director and Chief Executive Officer

Yes.

Avi Mehta — Macquarie Research — Analyst

Sir, thanks for the opportunity and congrats on performance. I had three questions, if I may. Just first on a broad basis, you have indicated a focus on home decor with the new stores. I wanted to just get your thought process over here. Are you looking to be a retailer of multiple brands in — which are third-party in nature? Or is this a test ground for you to evaluate setting up of new manufacturing of own brands you will have. That is more a strategic question if you could comment, sir.

The second bit was, other peers have indicated that there has been very strong growth niches in the coatings segment, which is either stuff like ceiling paints, roof paints. I wanted to understand your thoughts on those segments, and whether you’re exploring them what you said not world tier [Phonetic] company, just if you could kind of share your thoughts.

And lastly a bookkeeping, sir. Is it possible for us to break the growth rate that you have seen this quarter into what could be possibly driven by pent-up and — which is more in your view or other factors? That’s it.

Amit Syngle — Managing Director and Chief Executive Officer

Okay. When we look at the overall strategy with respect to the home decor segment, what we have taken a call is that, we are looking at providing the customer one of the best technological experiences with respect to visualization, which we can offer to the customer with respect to what’s available within the home, so much so that the Beautiful Home Services will showcase to the customer what’s available or what the home would look like before the customer really gets into the home to that extent. So I think the visualization and therefore the execution is a very, very strong strategy in terms of what we have taken. As far as the ingredients of that kind of go, we already have a Kitchen and a Bath business where we have invested in. That’s a strong investment, which is already there, which will kind of get subsumed in this strategy in terms of going ahead.

In addition, what we have done is that we have looked at certain stronger tie-ups in terms of some of the other categories, which have come in. And as the business kind of go ahead, we are taking strategic decisions in terms of getting into some of those segments, whether it could be furnishing with furniture, flooring and so on so forth to that extent. Right now, the entire thing is in terms of giving the customer a very, very strong experience, which comes in, and that’s how we are kind of looking at the entire area going forward. That’s one.

Secondly, when we look at the entire area, which you spoke of, in terms of the strategization of the sale, the overall growths, when we see, it is very difficult to say that out of the total growths, which have happened, what percentage is pent-up and what percentage is festive and what percentage is kind of coming from, say the construction segment or from the metros T1, T2 kind of a city to that extent. However, as we see it, today possibly, some of the indicative things are that earlier we used to called talk of a multiple of the GDP to that extent, which is also not true now to that extent as we kind of go forward.

So what we see is that possibly, we will have to live with this kind of a zone that the growths will continue to be healthy. It’s very difficult to kind of really peg the number in terms of what could be the pent-up demand, which would have gone in, which would not come in the fourth quarter, what would be the construction demand, which would be there to that extent. And therefore, segmentation of that is something, which is not really possible to that extent.

I forgot the second question which you had asked.

Avi Mehta — Macquarie Research — Analyst

Sir, the question that I asked that there are peers who have indicated that usages are growing, which is very strong customer uptake of…

Amit Syngle — Managing Director and Chief Executive Officer

Yeah. So as far as Asian Paints is concerned, we really think that today, when a customer is buying for various usages in the house, okay, the Surface segmentation as a strategy has not worked in India, because the consumer awareness with respect to paint is very, very small. And surface segmentation has worked largely globally to that extent, where you have kitchen and bath paints and you have ceiling paints and kind of differences which kind of come in from the point of flooring paints and so on and so forth.

But having said that, what we see is that interior is a very large portion, which is there in largely anyone who’s buying paints buys it for everything, which is ceiling, walls and everything combined. Niches work only with respect to certain of the products, which are at the high end, which could be with respect to Luxury and Premium products where sheen levels can be different in terms of the blast, which you get to that extent or is with respect to your wood finishes where possibly with the higher premiumization and the luxury ports you get more durability and more blast and so on so forth to that extent. So we feel that surface segmentation possibly is not a very strong growth vehicle as you kind of go ahead.

Avi Mehta — Macquarie Research — Analyst

Okay, sir. Thanks. That’s all from my side. Thank you very much, sir.

Operator

Thank you, Mr. Avi. Our next question is from Ms. Sunita Sachdev. Ma’am, please ask your question.

Sunita Sachdev — UBS Investment Bank — Analyst

Not allowed to unmute.

Operator

We can hear you. Ma’am, please ask your question. You muted.

Amit Syngle — Managing Director and Chief Executive Officer

We can hear you.

Sunita Sachdev — UBS Investment Bank — Analyst

Okay. Unmute. All right. Thank you for the opportunity. I had three questions. The first is, I think, we’ve seen a very benign raw material price strategy, which has kind of helped us to expand our product breadth, as well as go deeper into distribution in the country for the last three years to four years. Now that we are at the onset of a huge inflationary kind of a move, does this strategy change in any way, or what would be the way forward in terms of how should we look at your product breadth and depth strategy?

Amit Syngle — Managing Director and Chief Executive Officer

Okay. When we look at the overall product strategy, what we need to kind of take care, is not inflation or deflation, which is happening, but what we need to kind of keep in mind as the consumer. And so long as you are offering a product, which makes sense for the consumer, has a unique selling proposition, that is what really matters. So when we look at possibly a value for money, smart product, there the — I think, even if there is inflation, we would like to kind of see that at a certain price point, whether the product is making sense for the customer with respect to the budget of the customer and what the customer perceives as a value coming out of that product. And similarly for any high-end product, we see that today, it’s not that the inflation and the deflation would kind of alter our product strategy in terms of going ahead, we would kind of be committed more to the consumer, rather than looking at it in terms of pricing inflation and deflation, in terms of deciding what the product strategy is.

Sunita Sachdev — UBS Investment Bank — Analyst

So taking that forward, one would assume that there would be quite a lot of absorption of your raw material cost, as you kind of press ahead to grow volumes?

Amit Syngle — Managing Director and Chief Executive Officer

So there are two views on it. So, obviously, for the value for money, smart consumer, the elasticity of price is pretty weak in terms of what we have seen. But as far as the premium and the luxury segments goes, the elasticity can be increased there to that extent. And therefore, as I said earlier, we are watching trends and we are looking at whether these inflationary levels are there to stay and whether — what’s really happening to the rupee dollar parity to that extent. And depending on how the trends kind of come in, we would kind of take a call with respect to what segment, what products we would kind of look at — increase in the market, as we kind of go ahead.

Sunita Sachdev — UBS Investment Bank — Analyst

Lastly, just switching gears, I know, you guys have gained a lot of market share. Any sense of what kind of market share gains have we gained in the last two to three years in this product penetration strategy and market growth strategy?

Amit Syngle — Managing Director and Chief Executive Officer

See, those overall figures, as we see it, are published figures available from each of the competitors which are there. What we have seen is that over the years, we have been gaining market share every year, and even this year, if you look at the first half, we have been the fastest growing company as compared to all the organized companies. So to that extent, there is a good market share gain, which has happened to that extent. And I think that’s the strategy going ahead that, we not only kind of look at market share gains, we also look at — in terms of exploring the overall market. And as a leader, we believe that is a good approach to kind of take in terms of keep on looking at newer areas, where you can really kind of get your products in.

Sunita Sachdev — UBS Investment Bank — Analyst

Thank you, sir. Thank you, and all the best.

Operator

Thank you, ma’am. Our next question is coming from Mr. Kunal Chandak. Mr. Kunal Chandak, please ask your question. Requesting Mr. Kunal Chandak to please ask your question. We will come back to you, Mr. Kunal Chandak. We will take the next caller. We have our next participant, Mr. Richard Liu. Mr. Richard Liu, request you to please ask your question. Mr. Richard Liu, yes, we can hear you, sir, please ask your question.

Richard Liu — JM Financial — Analyst

You can hear me? Hello? Hello?

Operator

Yes, sir. We can hear you. Please ask your question.

Richard Liu — JM Financial — Analyst

Okay. Thank you. I have two questions actually, right. I mean if — and I’m just looking at [Speech Overlap].

Operator

Mr. Richard, you muted. Yes. Please ask your question, Mr. Richard. You have muted your mike Mr. Richard.

Richard Liu — JM Financial — Analyst

Yes. Am I audible?

Operator

Yes, we can hear you.

Richard Liu — JM Financial — Analyst

Yeah. Okay. Sorry about that. So if I look at pre-COVID, right, the confidence on demand environment was not all that strong, and this is true for paint companies as well as for other consumption related categories. Post-COVID, we see that everybody seems to have become much more confident in terms of growth, including yourself, considering the kind of numbers that you have reported. As an outside observer, isn’t this rather counterintuitive that confidence level of businesses have actually picked up post, what is possibly one of the worst human crisis that we’ve seen in recent time? And I’ve heard you in earlier quarter talking about people wanting to feel good about their homes, etc. But this level of growth from 6% to 8% that used to be there pre-COVID, going up to nothing less than 30% now, how do you reconcile this? And — so this is question number one. And related to this, number two is, if I go back in time, many years back, I recall — hello. Hello?

Operator

Continue…

Richard Liu — JM Financial — Analyst

Am I audible?

Operator

Yes sir. Continue please.

Richard Liu — JM Financial — Analyst

Sorry. And if I go back to some years — operator, am I audible? Because I think the management is not audible.

Operator

You’re audible, sir. We are audible, sir. Can the studio here us? Continue with your question, sir.

Amit Syngle — Managing Director and Chief Executive Officer

I think we’ll get the next question.

Richard Liu — JM Financial — Analyst

Okay. So if I go back and — yeah.

Amit Syngle — Managing Director and Chief Executive Officer

Yeah. I think you’re muting yourself. Please unmute yourself.

Richard Liu — JM Financial — Analyst

I am not doing anything to my — to the controls actually. Okay. Are you able to hear me?

Amit Syngle — Managing Director and Chief Executive Officer

Now we are able to hear you. Yeah.

Richard Liu — JM Financial — Analyst

Okay. Thank you. So, that was the first part of my question regarding pre-COVID and post-COVID growth. And related to this is that, that is — if I go back in times — you guys used to say that that we will not be satisfied till we get to mid-teens level of volume growth, which is what the trend growth should be. Now that you are far ahead of mid-teens, is 30 the new 60 — Sorry. Am I audible?

Amit Syngle — Managing Director and Chief Executive Officer

Yeah, you are.

Richard Liu — JM Financial — Analyst

Ma’am, can you hear me?

Operator

Yes, sir. We can hear you.

Richard Liu — JM Financial — Analyst

Yeah, so, I wanted to ask that, so, earlier you guys used to talk about mid-teens volume growth being a good volume growth from your perspective, and now that you are in the 30s, when you do your business plan for coming years, how are you going to look at growth that is satisfactory for you? I mean is 30 the new mid-teens, as far as what you will consider as good growth? Those are my two questions. Thank you. Sorry about the trouble.

Amit Syngle — Managing Director and Chief Executive Officer

No. It’s okay. See first of all, your question is absolutely relevant in terms of saying that when we were looking at pre-COVID, obviously, there was a little bit of a cautious optimism in terms of the way economy was behaving. But I must clarify even at that point of time, we used to kind of register growths which are in double-digits to that extent, and that is something which we have been doing for the past two years. So 12% to 15% was the norm in terms of what we have been doing, and that is something which was at the pre-COVID levels also to that extent.

How we see is that? Obviously, 30% is not a norm going ahead for sure, because what we see is that, there is a pent-up demand, which has kind of come in — in this number, and there is also a festive sale, which has kind of come in to that extent as we see in terms of going forward. And there is an irregularity in the pattern, because as I said now there are metros and T1, T2, which has started growing, which were not growing earlier to that extent. As we kind of go ahead possibly, we will have to, for some time, look at very closely doing month-to-quarter kind of a planning and not look at a yearly planning as we kind of go head, because that’s the best way to kind of look at this a little bit of uncertainty to that extent in terms of going forward. It’s very difficult to kind of say that, what kind of level the growth would kind of stabilize at, because it will also depend on what the GDP levels really kind of stabilize at, in terms of going forward.

So I think as a combination, we would kind of look at a little bit of a short-term planning at this stage and keep on looking at a month to a quarter kind of a planning, and then kind of as it stabilizes, we would be able to kind of better kind of predict in terms of what the growth rates would come for future.

Richard Liu — JM Financial — Analyst

Okay. And how do you reconcile this pre-COVID of 6% to 8% going to 30% post-COVID? I’ve heard you about festivals and weddings etc. But even if you take that into account, the confidence level of businesses post-COVID seems to be exceptionally strong, which is very…

Amit Syngle — Managing Director and Chief Executive Officer

So, as I said earlier, when you look at the 30% kind of a growth as I have been saying earlier, there is obviously a pent-up demand component, there is a festive component, which is kind of embedded in it, to that extent. There is also the entire component with respect to the metros Tier 1, Tier 2 cities kind of contributing to the growth, which were earlier — the growth was negative, and you can well imagine that the growth has turned positive there, which has added to the numbers, especially in the Luxury, Premium segments to that extent. What we also see is that the Construction segment in the large institutional business is back. So there is a component, which is coming from that as well. So — and there would be components which would be in terms of the market share gains, which would happen from both the organized and the unorganized segment. So I — you can really break up into four or five clear slices, which are there. Now, I’m not very able — clearly able to tell you that what slices, what percentage to that extent, but these are the five slices, which you could see in terms of the overall growth.

Richard Liu — JM Financial — Analyst

Okay. Thank you.

Operator

Thank you, Mr. Richard. Our next question is coming from Mr. Anshuman Atri. Requesting Mr. Anshuman Atri to please ask his question.

Anshuman Atri — PremjiInvest — Analyst

Yeah. Hi, sir. My question is — hello.

Amit Syngle — Managing Director and Chief Executive Officer

Yeah, we can hear you.

Anshuman Atri — PremjiInvest — Analyst

Yeah, my question is regarding the change in behavior of customers during the COVID in the rural and urban. So are you seeing more repainting cultures [Phonetic] or people who are going for unorganized or unbranded products, now asking for products from Asian or other branded categories? So do you see a change in overall behavior, which can lead to a better demand going forward, more sustainable one?

Amit Syngle — Managing Director and Chief Executive Officer

Yeah. So I think, one of the trends, which we have seen that, whenever there is a crisis or whenever there is the larger natural kind of calamity, which comes in, people tend to kind of make safer choices. They kind of tend to go to a brand they can trust to that extent. So there is a clear reason to believe that possibly people would have navigated to possibly more trusted brands, which would be there in the overall organized sector to that extent. So that is something which is clearly evident in terms of what really comes out and that’s the behavior, which have seen in the past as well to that extent, and that is something which possibly would have happened during this point of time as well.

Anshuman Atri — PremjiInvest — Analyst

And the rural market, over the last few quarters, how has been the trend in terms of growth. Are you seeing a tapering down, as the migrants come back to the metros, or the rural is holding strong?

Amit Syngle — Managing Director and Chief Executive Officer

In fact, what we see is that both Q1 and Q2, the rural markets, which we qualify the T3, T4 cities. They were growing very well. In quarter three, in fact that growth has continued to a strong level as well. However, I think the big changes I have been saying here, what has happened is that the T1, T2 and the metros, which were almost at negative growths are not growing very, very strongly, are the ones which have turned around the corner, and they have started growing at a good pitch. To answer your question, we are not seeing that there is any tapering down in terms of demand at the T3, T4 rural markets.

Anshuman Atri — PremjiInvest — Analyst

And sir, lastly, in terms of margins, which is competitions coming from newer categories, some — like steel players have entered the paint category, seeing good margins. So what kind of margin range do you see, as a safe margin for attracting customers, new players in the competition in the market?

Amit Syngle — Managing Director and Chief Executive Officer

See, that’s a very relative thing in terms of — the news — a new competitor who is coming in and if they are operating in some low segments at 6% to 8% or 10%, for them even 15% would be higher. So I think it totally depends on their orientation in terms of what they consider as a good margin. As I said, we are very clear that we will look at margins, which are sustainable and we will look at possibly the consumer, with respect to our pricing, so that we are able to offer a customer, a good value for the price we are charging to that extent. And therefore at the moment what, we see is that the consumer is a far more stronger area to look at rather than looking at competition and what they can get in and what they want really.

Anshuman Atri — PremjiInvest — Analyst

Thank you, sir.

Operator

Sir, our next question is coming from Mr. Aditya Soman. Requesting Mr. Aditya Soman to please ask his question.

Aditya Soman — Goldman Sachs — Analyst

Yeah, hi, thanks for the opportunity. Couple of questions from me. Firstly, did you see any sense of any increase in channel inventory in the period, because as we sort of — in anticipation of price increases? Or is this something that is also giving you sort of some confidence in volume growth in Q4 for example?

Amit Syngle — Managing Director and Chief Executive Officer

So till the time the price increase is not announced, people will not stock, and that is something which we are seeing in the market very clearly. That people — there is no inventory in the network, which has gone up or in the pipeline to that extent. What we see is that, we have also not put any pressure in terms of stocking up inventory with our retailers to that extent, and we have a strong reason to believe that whatever has possibly got sold from us, has got sold in the secondary market as well.

Aditya Soman — Goldman Sachs — Analyst

Understand. That’s very clear. And in terms of pent-up demand, is there a better way of looking at it? Just looking at nine months growth given that some of those consumers who missed out on paintings in April or May came back to paint in October, November, December when conditions were better? So there is still — I would still think that there is some room that in 4Q, since you still are down YoY and nine months that some consumers would incrementally still come back in terms of pent-up demand?

Amit Syngle — Managing Director and Chief Executive Officer

So see actually what — the trend is very clearly that if the — if there is a whole painting, which is related to the repainting or the maintenance, okay. That will always kind of never go down, it will get only deferred. So it’s very difficult to kind of say that what component of the deferment has kind of got subsumed in quarter three, and what possibly will come in quarter four or quarter one of next year to that extent. That is point one.

Second, I think where there would be an opportunity lost would be, that occasion-led painting where people would have kind of got into a marriage or in terms of any function at the home, I think that is a painting cycle, which you would have kind of missed. And possibly, it would not come back till the time there’s another event happening in the same house to that extent.

The third area is the overall area of construction. So construction-led painting, which is new housing, which is coming, will always have a component of deferment to that extent, and not an opportunity lost to that extent. So what we have reason to believe is, overall, to that extent, even if in terms of some pent-up, which has kind of got consumed in Q3, there could be some pent-up, which would come in Q4 and Q1 as well, but very difficult to quantify really that what percentage is pent-up and what percentage is new kind of assumed.

Aditya Soman — Goldman Sachs — Analyst

Understood. very clear, sir. And just one, in terms of the gap between volume growth and revenue growth, so this would largely be newer customers being added at lower price points, right?

Amit Syngle — Managing Director and Chief Executive Officer

No. If you see that these gaps have been there for some time in our overall value and volume sales over the various quarters, to that extent. And we have been very clearly saying that there are segments which are like waterproofing, under coats, the value-based emulsions, the smart products, which are there to that extent. And some of those products are going at a far larger clip as compared to the luxury and the premium products. And that is what is kind of creating this gap between the value and the volume. It’s not the new customers who come in because the new customers can come at any price point. It could be at a luxury point, it could be at a premium, it could be at the economy.

Aditya Soman — Goldman Sachs — Analyst

But in this quarter, with sort of some of the demand coming back in larger cities and with luxury emulsions, it should have narrowed, right, but we haven’t seen that happen as well?

Amit Syngle — Managing Director and Chief Executive Officer

Yeah. But what we are also seeing is that with the luxury and premium also growing very well. The other set of products, which I mentioned are also basically growing much higher than what they were growing earlier. So it really balanced that whole thing and the gap is there as you see it what it is.

Aditya Soman — Goldman Sachs — Analyst

Understand. Very clear. Thanks for the clarifications.

Operator

Thank you, Mr. Aditya. Our next question is coming from Mr. Varun Pratap Singh. Requesting Mr. Varun Pratap Singh to please ask his question.

Varun Singh — IDBI Capital — Analyst

Sure. Am I audible?

Amit Syngle — Managing Director and Chief Executive Officer

Yes.

Operator

Yes, sir, you are.

Varun Singh — IDBI Capital — Analyst

Okay. Thank you very much, sir. Congratulations on a very great set of numbers. And I think most of my questions have been already answered. Just wanted to — Amit sir, have your comment on this home decor segment. I understand last quarter, you mentioned that we want to move from a surface decor to entire decor solution for customers. So — and it was a very nice video that you played during this conference. And as a customer, I could kind of envisage that what kind of solution that Asian Paints is willing to offer or what I could get as a customer. But sir, if you could highlight in terms of what are the competitive strength that we are creating to make this category very, very large? I understand currently, it is highly unorganized. At the same time, you — I mean, anything that you wish to comment on IKEA because IKEA is also getting very aggressive into this entire home decor thing. So on product level, how do we wish to compete? And second question in same category is who are we creating the solution for? For premium customer, economy customer, I mean, how — if you could give some clarity on the competitive strength on product level as well as the target audience or customers?

Amit Syngle — Managing Director and Chief Executive Officer

Okay. You know how we look at in terms of what are the unique points in terms of what we want to bring in terms of our whole home decor strategy is very clear. We have moved on from the point of view of just a share of surface to a share of space within the home in a very strong manner. When we look at the share of space, we don’t look at only the premium and the super luxury customer. We look at customers who are at all the price points in terms of what we see to that extent. The unique point which we are bringing on to the table is the fact that our — all our stores and our service are very highly technology-led, okay. So in terms of 3D visualization, in terms of looking at AR/VR kind of a situation in terms of what we have introduced. So that people are able to visualize their homes like never before, and that is something which is a very strong strength, which we are really giving them a technology which is on world-class standards in terms of what we have put in and it is from a consumer’s point of view and not from our point of view as a vendor to the customer to that extent. That is point one.

The second area is that even if there is good visualization, the customer really struggles from good execution, which comes in. And there is a lot of anxiety, which comes in with good execution and people don’t really deliver what they show. So to that extent, there’s the trust of the Asian Paints which come in, where we are delivering strong execution capabilities in terms of delivering what we are able to showcase to the customer. And we believe that we are doing it in a manner that it is a very, very unique model where possibly the IKEAs of the world are possibly in a far more larger format, and they can’t look at this kind of a personalization and customization, which Asian Paints is bringing as a very, very strong alternative to the customer to that extent. And therefore, not offering something off the rack, which the customer can assemble or in terms of look at doing himself or herself to that extent. So that’s something which we are looking. So obviously, a lot of unique propositions and basically for all customers to that extent and not looking at only the premium customers.

Varun Singh — IDBI Capital — Analyst

So sir, are you saying that we are competing on technology and execution primarily, and not more of the product point of view or some kind of strength that we wish to see it on that front?

Amit Syngle — Managing Director and Chief Executive Officer

See, you can never compete only on visualization and this thing. As I said, you will have to give a product, which is design-led, you have to give a service, which is design-led, you have to give something which really looks good and feels good to the customer to that extent. So it’s a combination of some great products, some excellent visualization and some impeccable execution.

Varun Singh — IDBI Capital — Analyst

Sure, sir. So that’s very helpful and in terms of customers who would — so we would be targeting almost every category of customers, not just premium and popular ones?

Amit Syngle — Managing Director and Chief Executive Officer

Yeah.

Varun Singh — IDBI Capital — Analyst

Sure, sir. Thank you very much. That’s very helpful.

Operator

Moving on to our next question, which is coming from Mr. Mr. Neel Thakkar [Phonetic], please ask your question.

Neel Thakkar — — Analyst

Hello.

Operator

We can hear you, sir. Please ask your question.

Neel Thakkar — — Analyst

Yeah. Sure. My question is we have not seen such interest rates in a long, long time. Consequently, the home sales are materializing, and we are seeing that effect in paints industry and also we have seen some effect in timber and plywood industry also and the tailwind is here to stay because this lower interest rates are here to stay. My question is empirically, how momentous lower interest rates have been for Asian Paints? And secondly, any backward integration plans?

Amit Syngle — Managing Director and Chief Executive Officer

So as far as demand is concerned, it’s a combination of lot many factors as per us, and interest rates are not the only area in terms of what we say. It is one of the catalysts which kind of come into the process where people tend to kind of get into more. But it is also a function with respect to a lot of things which would happen with respect to personal taxes need, low-income to mid-income to premium housing, to that extent, it all varies depending on which kind of consumer is really spending.

So what we see currently is definitely inflation happening at the low-end and the mid-end and to some extent, given the benefits given by the governments, I think we saw something happening at the premium end as well to that extent. We are not very sure that only interest rates would be a big kind of a catalyst continuing in terms of looking at this real estate. Because the past records in terms of what we have seen in terms of the real estate construction segment has not been very, very strong to that extent and today, what we see is that while the market — the money position in the — for builders and so on and so forth, is not so great. But given the fact that the — today, the interest rates are low, it could kind of trigger off a good revolution in terms of looking at housing sector growing. But I think that we have to kind of wait for trends to kind of stabilize and see in terms of what really happens.

Neel Thakkar — — Analyst

Okay. And the second question, any — about any backward integration plans?

Amit Syngle — Managing Director and Chief Executive Officer

With respect to what?

Neel Thakkar — — Analyst

With respect to your supply chain — any of the supply chain?

Amit Syngle — Managing Director and Chief Executive Officer

No. So currently, we had two chemical plants as well, which were the ingredients which used to go into the paint. One was pentaerythritol and the other was phthalic. We have closed down our phthalic facility to that extent and as such, we don’t have any other plans in terms of getting into a backward integration as far as raw materials are concerned.

Neel Thakkar — — Analyst

Okay. Okay. That’s all. Thank you.

Operator

Speaker O-Operator

Thank you. May I request Mr. Bhavik to take the next question please. Mr. Bhavik, please ask your question. We can hear you, sir. Please ask your question.

Bhavik Patel — Tradebulls Securities — Analyst

On water-based plants that we have installed…

Amit Syngle — Managing Director and Chief Executive Officer

You have to speak loudly. We are able to just faintly hear you.

Bhavik Patel — Tradebulls Securities — Analyst

Hello. Yes. Can you hear me?

Amit Syngle — Managing Director and Chief Executive Officer

Yeah.

Bhavik Patel — Tradebulls Securities — Analyst

Yeah. Yeah. Sir, I have two questions, one is on the water-based plants that were installed two years ago. Can I know the capacity utilization of those plants?

Amit Syngle — Managing Director and Chief Executive Officer

So overall, today, if you look at the capacity utilization is roughly at about 60% and that is what we are kind of utilizing and therefore, there is umpteen capacity available for the growth which we see in future.

Bhavik Patel — Tradebulls Securities — Analyst

Okay. Sure, sir. And second one is on the Kitchen business. Like we have seen the breakeven EBITDA in this quarter. So sir, do you foresee that this growth would be sustainable in the near future and ahead [Phonetic] as well?

Amit Syngle — Managing Director and Chief Executive Officer

What we see is a very clear correlation that we are able to kind of drive the top line very, very strongly and drive the whole objectives in terms of premiumization going ahead, I think we would be able to definitely give a fillip to the bottom line in these categories going ahead. But having said that, we have to be very cautious there to that extent, given the fact that because of the current conditions, the overheads have been low, the marketing expenses have been a bit lower. So we will have to really watch the situation going ahead in terms of how really demand pans out, how we are able to look at the premiumization. But I think the fact that we have got it, I think, is a good boost to looking at what we have done in the current quarter.

Bhavik Patel — Tradebulls Securities — Analyst

Thank you, sir.

Operator

Thank you, Mr. Bhavik. With that we close our question and answer session for today evening. May I now request Mr. Amit Syngle to kindly share his closing remarks.

Amit Syngle — Managing Director and Chief Executive Officer

So thank you all for joining us for this investors meet. Sorry for the glitch in the beginning in terms of getting the presentation on. But I think it’s been a great session in terms of a lot of incisive questions coming from all of you and wishing you all the best.