Berger Paints India Ltd (NSE: BERGEPAINT) Q1 2026 Earnings Call dated Aug. 05, 2025
Corporate Participants:
Unidentified Speaker
Abhijit Roy — Managing Director and Chief Executive Officer
Analysts:
Unidentified Participant
NITIN GUPTA — Analyst
Bhavik Shanklesha — Analyst
Mihir Shah — Analyst
Avi Mehta — Analyst
Tejash Shah — Analyst
Abneesh Roy — Analyst
Karthik Chellappa — Analyst
Pratik Gothi — Analyst
Jaykumar Doshi — Analyst
Presentation:
NITIN GUPTA — Analyst
Sa. Can we start? Yeah, I was about to ask you. Yeah, let’s start. Hi, good evening everyone. This is Nitin Gupta from MK Global. I would like to welcome all to Baja Pace, India’s Q1 FY26 result conference call. I thank Ben management for allowing us to host. We have with us today Mr. Abhijit Roy, Managing Director and CEO Mr. Kaushik Ghosh, CFO Mr. Sujyoti Mukherjee, Vice President Finance and Accounts. Mr. Saintan Sarkar, GM Finance and Accounts. I shall now hand over the call to management for the opening remarks post which we will proceed with Q and a session. Over to you sir.
Abhijit Roy — Managing Director and Chief Executive Officer
Thank you and good afternoon to all of you. Let’s begin the presentation with a quick look at what is going on again. Can you move the screen? Yeah. Right, quick look at the quarter one results. You know we continue to gain market share. Market share above 20% within the listed company space. Mid single digit volume growth was registered in quarter one. Growth was moderated by heavier than expected monsoon towards the end of May and June. PVDIT margins improved both sequentially and year on year in spite of heavy competitive pressures. Automotive segment delivered strong stronger volume and value growth versus overall performance and strong revenue growth.
In international operations. We have been consistently outperforming the industry resulting in market share gain. These are the five quarter industry growth as per the results published. These are standalone results of various companies added together in the listed space. As you can see the growth rate has been for the industry has been -0.9, -3.3 -4. Then it went up to -1.2 and this time for the first time it is positive at 0.3% for the existing listed players in the industry. The five players which are there. And if you look at our performance against that we have been at 2.4 minus 0.4 plus 0.4 plus 4.4 and then again at 2% this time so consistently above the industry level.
As a result of that we have been gaining markets where in spite of intensifying competition 18.9 to 19.3 to 19.5 then on to 20.3 and 21.2. This is the market share as per the standalone results which have been declared by the companies over the years. And in this quarter, however, if you add Barilla and assume that they would have gained about 5 and a half to 6% share, then too our market share stands slightly above 20% and we remain at that level. In fact, you know we have been gaining market share even with their presence continuously.
Now if you look at the top line growth which we registered this quarter. Standalone basis 5.6% volume growth and 2% value growth. The decorative segment delivered mid single digit volume growth. The volume value gap narrowed driven by improved mix and waning impact of price. Prior price corrections, strong traction in roof cool and seal, home shield range of products and wood coatings, protective and automotive coatings maintained positive volume momentum. GI and powder coatings performance remained subdued. If you look at the gross margins it’s been very stable and across quarters in spite of increased competition, it’s been hovering in that range of 39 to 41.
This quarter too it was 40.1% against year on year. If you compare against quarter one of last year which was at 39.3, it’s an improvement. There is a slight dip from fourth quarter of last year from 41.2 to 40.1. This drip is explained by adverse mix impact due to excessive rains. There was a little bit of a less sale of exterior emulsions and also the luxury interior emulsion sales was down a bit compared to fourth quarter of last year and therefore slight dip there that you see. However you know against quarter one of last year there is an improvement from 39.3 to 40.1.
On the operating profit side, however, it’s all positive. In fact it has been steadily gaining ground from quarter two of last year. If you look at it from 15.8 it moved up to 16.2, then further to 16.6 and in this quarter it has gone up to 17.4% which is an improvement over quarter one of last year which was at 17.2 and also against quarter four of last year which was at 16.6%. So you know margin resilience is driven by stable gross margins and operating leverage from fixed costs which we have been able to control and reduce and improved utilization at the Sandila plant.
Last time if you recall, you know we had initiated the Sandila plant and we were burdened with extra load of that plant and we had mentioned that you know we will improve on this as the things go forward and so that has helped us to improve our overall profitability. Operating profit ratio in terms of results if you look at it, 2% is the sales growth rate. PBDIT standalone PBDIT growth rate 33.3% profit. PBIT at 5.1 PBT before exceptional item is 5.3%. There is an exceptional item of 36.8 crore. This is an unfortunate fire incident which happened in our warehouse near Kolkata in Barasat.
There was one Other warehouse nearby which caught fire. From there the fire spread to another warehouse which is, which was adjacent to us, which was a Hitachi warehouse. The ACS burst into flames and the flame leapt into our warehouse and our warehouse got gutted completely. Of course you know it’s fully insured and therefore insurance process is on. So that’s an exceptional item of 36 crores which is why you see a negative there in terms of PVT and pat. But otherwise without that exceptional item we would have registered a growth in PAT of around 5 point something percentage.
As far as the 3 year, 4 year 5 year results are concerned. You can see the CAGR 3 year which is 10, 4.8 and 10.2 in terms of volume value and net sales and PVDIT. If you take 4 year volume growth is 16.8% CAGRADE, you know net sales value growth 15.3% and in terms of PBDIT growth it is 22.6% and 5 year CAGR 26.3, 28.2 and 34.5% on a consolidated basis as well. It is a similar trend line for three year, four year and five year quite robust four and five year figures. It’s just that, you know, the last three years, especially the last two years as you are aware there have been price drops as a result, you know plus there has been a slowdown and the intensification of competition which has squeezed the volume value growth a little bit but still at a reasonable level at 3 year levels also we are in a standalone basis 10, 4.8 and 10.2 strong performance sustained led by Anti Dust Long Life and Coelo prime construction Chemicals and waterproofing delivered robust volume value growth with stable margins.
Roof coolant seal further picked up momentum. Wood coatings postage towards volume and value growths. Store footprint expanded by over 300 during the quarter taking the total count to 1300 plus stores as on date underscoring continued retail network growth. Tinting machine installations over 2500 plus for the quarter. So we are well on course to add 10,000 plus more machines for the year. We introduced a product called Color plus in this quarter. It’s a interior premium emulsion matte finish. We had easy clean which is a clear leader in that segment. But that’s a little bit of shine which is there on the wall.
People wanted a matte finish as well. And this is a new product category which we have introduced called Color plus doing reasonably well so far. You know the momentum is picking up. We have launched it initially in the south and now we will be expanding it across the country. Walls that wow European technology. Washable color guard with six years of warranty. Premium emulsion in the matte finish category. We of course you know, continue to advertise. The new ad has been released called Nothing signs like silk for Silk Glamour with Karina there. Easy Clean continues to, you know, do well in the market.
Across markets. Of course, you know, we also introduced another new product called Luxol Metallics. This is a solvent based metallic range. Silver, gold, copper which is picking up in this country. And we thought that, you know, this segment was missing and we introduced it in this quarter. It is a lustrous metallic sheen you enriched with four years of warranty. We had introduced, if you recall I had spoken about Antidust cool which is, you know earlier we had introduced this. We had introduced last quarter roof cool and seal last year. It did quite well the whole of last year.
This year it continues to do even better. And we introduced a new product this year called Tank Cool for the water tanks on the rooftop. All of these three products for the summer months. It is a very useful range of products. Anti Dust Cool for the body, Roof cool and seal for the roof and Tank Cool for the tank. And we advertised across newspapers this entire cool series. As you can see the house wearing a jacket that you need not worry about the summer heat. Even in the summer heat the temperature goes down by 8 to 10 degree centigrade making you feel much more comfortable in terms of consolidated sales.
Top line value growth at 3.6% operating profit is impacted due to margin pressures in Bolex says UK operations essentially because of the project. One of the projects where the cost due to time delay, you know, went ahead of revenue and therefore there was some pressure on the profit there. Joint ventures delivered strong performance in both revenue and profitability. Consolidated results as you see it, 3.6% value growth, 1.1% operating profit growth. And then of course, you know, the two exceptions. One is the Bolex cost overrun and the second one is the exceptional item the Fire which pulls down the profit in the PVT and PAT range.
BJ and Nepal outperformed within the group delivering strong revenue growth and margin expansion. Only bond subsidiary Bolex reported a stable quarter in revenue. However, muted margins in UK operations as I mentioned, impacted overall Bolex Group profitability. STP and SBL coatings saw flattish growth weighing on overall profitability. Due to scale challenges. Berger Rock continued to post solid performance. This is our auto refinish joint venture with Rock Paints of Japan. In both revenue and profitability growth. The joint venture bnpa, which is Berger Nippon Paint Automotive Coatings which is focused on the automotive four wheeler car and passenger car and SUV business, delivered robust growth in revenue and profits driven by higher OEM sales in the automotive segment along with some good business in some of the new accounts like KIA etc.
Berger Becker Joint venture also witnessed a strong turnout post fire related losses aided by improved product mix and margin recovery. How does the business outlook look like for the rest of 26? Gradual improvement in demand indicators observed with early momentum in urban markets well progressing monsoon and easing inflation may support rural sentiment under a supportive policy environment. Market competitiveness to stay elevated. Continued thrust on innovation and brand distinctiveness to navigate short term challenges. Potential pickup in government infra spending in the latter half of the year could aid growth momentum and broaden economic activity. Currency volatility, ongoing tariff wars and evolving geopolitical tensions remain key risk factors.
Thank you and I’m stopping here and opening up for questions.
Questions and Answers:
NITIN GUPTA
Thanks Abhijit. So we will now start with the Q A session I hand over to my colleague Bhavik Shanklesha to moderate the Q and A session. Over to you Bhavik.
Bhavik Shanklesha
Those of you who have the questions can raise your hands now. You will announce your name and unmute your line. Please highlight your full name and the organization you represent. The first question is from the line of Misha. Please go ahead.
Mihir Shah
Hi sir, thank you for taking my question. Thank you. This is Mihisha from Nomura. Hi sir. Firstly congrats on better than peers volume growth number and continued share gains. So firstly on volume growth I wanted to check, you know, the while, you know you’ve done better but we were expecting a little bit of improvement versus the number that we have seen of five and a half percent. We were expecting maybe you know, closer to high single digit volume growth. So on this front basically can one expect this growth that has not come to be deferred in the coming quarters and should we expect a better volume growth in the coming quarters? Any signs or indication that you’re seeing of this to continue to improve apart from the sales that we lost this time around.
Abhijit Roy
So typically sales do come back because the monsoon is unpredictable. You know, it’s difficult to guess in India, you know, when it will come and how long it will prevail? So it started a bit early this time in towards, you know, end of May which was a surprise, you know, across many markets and it was quite intense in some parts of the country. So May and June as a result of that, you know, normally in pain, it gets postponed. July also was quite heavy. So. But once it abates, we have always seen that, you know, the sales tend to come back.
So we would expect that, you know, sales will come back once the monsoon, you know, abates.
Mihir Shah
So, so, so fair to say an indication from your side would be helpful. Fair to say high single digit can be expected in coming quarters because of this deferment. Plus any further improvement that you are seeing in the market or that is giving you confidence that, you know, that there’s the, you know, the volume, low volume phase that we have seen is kind of now kind of behind.
Abhijit Roy
So you know, if you ask me, my expectation is that once the rain stops, it should go up. But if you are asking me whether I’m seeing any indication immediately, so far, you know, we haven’t seen anything which indicates that, you know, substantial improvement in volume growth momentum will be there. However, you know, once the rain stops, it is expected that, you know, the volume momentum should pick up.
Mihir Shah
Got it. That’s very clear. Thank you for that. Second question is on competitive intensity. It seems other players have highlighted that the, the dealers lost to competition are now coming back. Wanted to know your thoughts on, you know, how this is shaping up for you and any other trend that you are seeing in the marketplace with respect to competition, etc.
Abhijit Roy
So frankly speaking, you know, competition, as I had already always maintained, you know, there will be some share loss which is likely to happen for all the players which we have seen happening in the recent past. Right. Because any new player who comes in will gain some share and that will be at the cost of the existing players. Otherwise we would have got that share. So from that perspective there has been some loss, as I said also last time that, you know, for the past few months we feel that it has become, you know, it’s not increasing in terms of intensity, it is stabilized at those levels.
So I won’t say that, you know, dealers are coming back, but the initial euphoria is over completely. That’s gone. You know, that initially that curiosity, the enthusiasm that was there, something new, something great is happening that is completely gone now. Now, you know, is the time when people start realizing that it is not very easy to get additional margin. So what was happening was, you know, there was a competitor which was discounting heavily and, and the dealers were selling at a price which was similar to ours in the marketplace initially and therefore they were pocketing the differential in their inner pocket.
But once with the network expansion happening heavily and inter dealer computation Increasing that margin of profit has reduced considerably. And as a result of that there is a little bit of a loss of interest from the dealers. And hence people might be feeling that some of these dealers might be coming back to the legacy companies with whom they have been dealing in the past. Because once they see that there is no great margin and the movement of the product is nothing great so far, then they feel that, you know, why should we be pushing this so aggressively? So that’s, that’s a normal behavior, you know, expected out of, you know, any newcomer who enters, you know, initially gets in and then you know, stabilizes at some point and that’s what is happening now.
Mihir Shah
Got it. Thanks for your thoughts sir, always very helpful. Lastly, if I can just push it one more on margins, you continue to maintain the margin guidance band that we highlighted. I. I assume that there’s no change out there, right?
Abhijit Roy
No, not at all. You have seen that we have in fact always said that it will be operating in the 15 to 17% range. We have been more or less towards the. More towards the 17. In fact in the standalone we are ahead of 17% but we are around that point only.
Mihir Shah
Got it. Wishing you all the very best sir. Thank you very much. That’s all from my side.
Abhijit Roy
Thank you.
Bhavik Shanklesha
Thank you. Next question is from the Lahin of Avi Mehta. Please go ahead.
Avi Mehta
Yeah, hi sir, am I audible?
Abhijit Roy
Yes, you are Avi. Go ahead sir.
Avi Mehta
Hi, this is Avi Mehta here from aquiry. Sir, I had two questions. You’ve clearly indicated about the margin comfort but I just wanted to also check would given this demand environment, would we still want to say that we would gun for a low double digit volume growth in the next year or the demand environment, how do you see that? If you could give us some clarity on that expectation, that would be useful. And second sir, I wanted to check, yes, I do understand the stabilization of competitive trends but would love to hear your thoughts on how do you see this intensity behaving now that there has been another merger between AXO and jsw.
Right.
Abhijit Roy
You know, so as far as volume know trend, you have seen, you know that we have been hovering around this, you know, 5, 6% to 7, 8% range. So whole of last year we were at around on average around 8%. And you know last quarter, quarter four of last year also we were around that same point of 8 to 9% in terms of volume, this quarter has been little bit lower than that at about five and a half percent. We expect that, you know, once the rains are over to go back to that 7, 8, 9% range initially and maybe even better, you know, as the year progresses.
So this is something which we feel that should happen now as far as competitive intensity is concerned. You know, I have explained about the first player which is, you know, who entered, you know, initially and the second which you mentioned, JSW +EXO that’s you know, still not, you know, formalized sort of they have to first of all merge, you know, or do something or if it is standalone, if they operate just like they are doing today. I see no great changes happening in the competitive intensity. Yes, there is some change which is likely to happen.
The change in ownership there might be, you know, some amount of advertisement which will go up, some spending increase possibly. But overall I don’t see any major tangible change. This. Both these players have been existing in the Indian market for a long time. One which is almost equal to us in number of years and the other which has been there for five, six, seven years now. So I don’t see any significant change in competitive intensity emanating from this change that has happened.
Avi Mehta
Very clear, sir, very clear. And sir, if I may just, you know, follow this up from a growth perspective, what you’re expecting, sir, are you, I mean how do we see the demand trends is, you know, wanted to get your thoughts. It’s been now three years where growth has been weak. We are still, you know, expecting that the relationship with GDP will come back. But what do you think went wrong, that this, you know, situation has arisen in the first place? What would be your thoughts on that?
Abhijit Roy
So nothing went wrong. In fact, you know, it’s a mistaken notion that. Oh okay sir, there has been, there has been a great demand shrinkage. You know, in fact, till 2223 we had a very good year. In fact, 2324 was reasonably okay, you know, so you can say it’s not a three year phenomenon. It’s a sort of a 24, 25 has been an issue and 23 24, second half was an issue. So it’s about one and a half years where the growth has been lesser. And a large part of that reason is, you know, that the volume growth has been there but the value growth has not been there because there was a price drop of Almost, you know, 5, 6 percentage.
Right. So when you have last whole of last year we were fighting against this price drop of 5,6%. Then a new player had come in, new player had come in and it had taken three and a half percent. So if you have Five, six percent of price drop and three and a half percent going to the new player. So that’s accounts for eight and a half percent. In spite of that, we did register a growth of about four and a half percent last year. So if you add back this eight and a half to the four and a half, it would have been 13% growth.
So that’s why I’m saying it is not that the growth rate had come down, it’s just that the price drop impacted significantly last year and the intensification of the competition, who took away about three and a half percent overall, impacted everyone to that extent. Some maybe 5%, some maybe 3%. But overall there was an impact for every player, obviously, because when you know the consumers are going to another brand, that brand otherwise would have, you know, that consumer demand would have come to us otherwise. So that much of share loss has happened for everyone. Right.
So overall industry, if you look at, you know, even this quarter, it has grown, the industry, the legacy players, has grown by Approximately around, say 0.5%. And Birla would be sitting at around five and a half, odd percentage to six percentage. Right. So overall the industry’s growth is six, six and a half percent, you know, which is not very bad in terms of the value sales. The overall consumer demand itself has been lesser, you know, compared for all categories. It is not only paint, you know, any type of consumer category. There has been a bit of a slowdown there.
So instead of six and a half, it would probably would have been under normal circumstances, eight and a half, nine, ten maybe. So that slowdown of three, four percent is there in the consumer sentiment because of inflation, because of other issues, which is progressively improving. So that is why we are hopeful that in the second half there will be, you know, a good improvement overall that you see from the current levels.
Avi Mehta
Got it, sir, got it. Very, very clear, sir, very clear. Thanks a lot. I have some other questions, but I’ll. Come back in the queue. Thank you very much.
Abhijit Roy
Sure. Thank.
Bhavik Shanklesha
Thank you. Next question is from the line of Tejas Shah. Please go ahead.
Tejash Shah
Hi, am I audible? Yes, yeah, thanks. Hi, sir, this is Tejas from Avindus Park. Sir, you broadly touched upon competitive intensity and you have been very fairly consistent and honest on this.
Abhijit Roy
Can you be a bit louder? I can’t hear you.
Tejash Shah
So am I audible?
Abhijit Roy
Hello? Yeah, now you are.
Tejash Shah
Yeah, sorry, sorry, no, I, I said that you broadly touched upon competitive intensity and you have been fairly consistent in that. Just wanted to understand, is there any more nuanced dimension to it in Terms of premium economy or mass is the, is it like varies a lot in, in terms of the segment of the market.
Abhijit Roy
So no, frankly speaking, not so much. You know, it is there more towards the economy, the primers and, and you know, lesser towards the luxury or premium luxury category. So mostly the commodity type where the first it expected as well that, you know, where lesser branding strength is required. That is the place where one tends to have some sort of erosion initially. So that’s where it is getting impacted first. And probably, you know, most companies would be reacting in that space also and ensuring that, that that is taken care of. So from the perspective of, you know, otherwise there is no other major mix change we would have seen, you know, observed any particular peculiarity in the way it has been impacted by the competitive intensity.
Tejash Shah
Perfect, sir. And so any regional nuances worth highlighting and also are they or the competent density has become much more aggressive or, or equal in project business versus the rest of the.
Abhijit Roy
I can’t hear you properly.
Tejash Shah
Hello? Hello.
Abhijit Roy
Yes.
Tejash Shah
Yeah, no, I was asking is there any regional nuances worth highlighting and also any different or, or any comments to make on project business versus the rest on the same parameter?
Abhijit Roy
No, not really. You know, project business. No, nothing, you know, which is worth mentioning. And even in the regional nuances, you know, nothing which is extraordinary. You know, it is more or less similar in nature across most regions, possibly in the south, there has been, you know, slightly higher intensity of competition than the rest.
Tejash Shah
Okay, and so last one if I may. Given that most of the paint companies flagged weak demand in June, July due to early onset of monsoon, how do you assess the current inventory levels in the trade channel? And, and why am I asking this is that do you foresee some pressure on margins, let’s say because there is, there is a lot of stocking up which would have happened because of early monsoon this year.
Abhijit Roy
So, you know, Tejas, normally in the paint business, you know, when we are selling, we have to collect also otherwise, you know, sales get stuck immediately. Right. You know, so that is why the sales figure and the growth has been less. So the channel inventory is fine. You know, I don’t see that, you know, getting impacted in any significant way. Unless, you know, they pay, the general inventory clears, then they pay and then we again sell. The cycle doesn’t move. So there is no great impact there as far as the channel inventory is concerned. And therefore it is normal business at this point of the year.
Normally it rains. It’s a monsoon month. It is expected to rain. And every year we go through the same situation. So I don’t see any major change there.
Tejash Shah
Perfect. Sir, as always, very helpful, thanks and all the best.
Bhavik Shanklesha
Thank you. Next question is from the line of Abnishroy. Please go ahead.
Abneesh Roy
Yeah, thanks. Thanks. So firstly congrats on continued faster growth. One is on Bolex. Any timelines you see in terms of recovery, it’s a mature market where multiple factors are in play in terms of low growth, geopolitical tensions keep happening. What will be the long term strategy in a Bolix kind of a business given the developed market where it is?
Abhijit Roy
So actually means, you know, this Bolex business, you know, as we see it, you know it’s in a, it’s on a good wicket as of now largely because you know it is in a domain which is basically meant for energy saving. As you know this is a insulation business and in, in Europe and UK the governments are promoting this, you know, in order to save energy. With the geopolitical situation being as is and with Russian oil not being there for them, it which has become expensive for them gas and you know, other energy costs, they want to save on the energy cost.
So it’s a category which is actually growing. We had a little bit of an issue in the UK operations with you know, two of our projects which are there where there was a delay. You know actually this delay has been going on for some time now because of other regulatory issues which cropped up there which is getting tackled. But unusual, you know, unnecessary losses because of the time delay which happened for us. But it is, it was not within our control, you know, because the regulatory changes happened suddenly and we had to change our entire strategy for these projects.
But this is just a temporary phenomenon. It will go away. And overall the business is very healthy and it is looking quite promising now. Sure.
Abneesh Roy
My second question is back on the Indian Deco market. So the market leader has been highlighting one or two things in the last two quarters. One is of course a regionalized product strategy which FMCG companies like Unilever, Nestle have been doing winning in many India kind of a concept. So wherein for a few states you have a specific product packaging targeting that. Similarly one more thing which they have been doing last maybe two, three quarters is four year warranty. Have you also responded with a similar kind of strategy and does this help in. In overall market dynamics?
Abhijit Roy
So Nishino earlier as you know has different tastes across different regions and therefore product mixes are different in different locations. It is tailored in that direction. We don’t have that type of container design or you know, specific to a region that you are talking about. We, I don’t think that is required as well so much. Yes, you know, it aligns well with the consumers possibly. But you know, more importantly the type of products that sell in particular regions are what is of greater importance, you know, and tailoring our products and the pricing for that region becomes very critical.
Therefore we always do that. It is an important way of, you know, and even the advertisements, the way you communicate, you know, everything changes from different states and different regions in India. It’s not a single country, you know, where you can advertise one thing and communicate, you know, so everything, the product, the pricing, the promotion, all the P’s are, you know, except for the distribution strategy which is quite, you know, similar across regions. Everything else tends to change depending on where you are within the country. So that has to be done if you really want to do well.
If you are an all India player, you will have to keep doing this.
Abneesh Roy
Understood. One more question on the India competition deco. To be fair, you have been the most candid, transparent and frankly commenting on competition on national media interview. I think it’s a commendable thing. And you said a few months back that new player last three, four months, it’s a stagnant sales. Now we are seeing other players, legacy players also talk more confidently. My specific question here is you said initial euphoria among dealers is completely gone. Specific question here is how is the initial euphoria in the painter and influencer now versus the first six months here also has it kind of evaporated and 10% extra gramage by the new player.
We got in another call today that maybe in some areas it is reversing. Now these are early data points. What are you picking up on the 10% extra damage?
Abhijit Roy
So you know, the 10 extra damage there has been reduction there. I am told that, you know, earlier it was across all pack sizes. Now it’s there primarily in the 20 liter pack sizes. The 1 and 4 liter possibly has been withdrawn in, you know, many markets. That’s the news which is coming back to us. So there is some rationalization obviously happening in that space. Possibly you know, this has been as I had always said that, you know, this has been tried in the past by a few other companies. It you know, initially gives some result but then it, you know, then becomes quite useless, you know, in terms of added advantage in the marketplace and sometimes can be at the detriment, you know, in terms of sales growth.
So therefore, you know, I think possibly it will get slowly Phased out. It’s an initial entry strategy as was indicated by them and I think you know it will get gradually phased out. So this is my viewpoint, things have to be seen, you know whether this is true or whether this will sustain. One has to see that the as far as you know, the painter influencer area is concerned there. You know so far I don’t see any ebbing that. Neither was there any great enthusiasm nor is there an ebb in that. It is still, you know, hard work in that segment for any new entrant or even for existing place.
You have to really work hard in this particular area.
Abneesh Roy
And last follow up question sir, and I’ll end there. This 5.5% market share say for the new player, is it largely in the lower end? Because you who have been there for decades and have done a commendable job still you are under indexed in the mid end premium versus say the market leader and versus the brand which got sold. So in that context obviously anti barriers in mid and premium are far far higher. So would you say that this 5.5% market share is heavily over indexed at the lower end?
Abhijit Roy
Most likely. Abneet I don’t have access to the sales data but I would guess that that is most likely to happen, you know, largely because as you rightly said in the luxury premium, luxury segment brand plays a far bigger role there and you know it is difficult to change a customer in this particular area. However, you know, at the lower end or at the mid lower end it is relatively possible with the effort of the influencers to change customer preferences and therefore, you know, more possibility of, you know, the sales getting overly indexed at the initial stage in these category of products.
Abneesh Roy
Thanks, that’s all from me and all the best.
Abhijit Roy
Thank you.
Bhavik Shanklesha
Thank you Avnish. Next question is from the line of Karthik Chalappa. Please go ahead.
Karthik Chellappa
Yeah, thank you very much for the opportunity. Karthik here from Indus Capital. Am I audible?
Abhijit Roy
Yes, you are.
Karthik Chellappa
Okay, great. Thank you very much sir and congrats on the quarter. So two questions from my side. The first is with your assessment of the way volume demand is set to recover after the monsoon season and the way mix has been evolving and the anization of the price cuts. At what point or in how many quarters in your assessment you think volume and value growth will start to converge.
Abhijit Roy
So you know Karthik, possibly, you know for the next 2, 3/4 there will be some differential between the volume and the value growth largely because of the mix of products, you know, which is growing faster than Those which are not growing as fast, you know. So from that perspective there are two categories. You know, one is the texture coating, the other is the tile adhesives. For us, you know, those two categories are growing at a faster pace than say some of the other categories which are there in paint. Right. So as a result of that, and these are, you know, high volume but lesser value products, doesn’t mean that they are less profitable, but you know, they have, the nature of the product is like that, that it is, you know, voluminous with lesser value.
So such a scenario, when you look at it and since we measure it in kg stroke, literally we all combine it together, then it looks like that the volume growth is on the higher side compared to the value and that differential is possibly going to remain at about say 1 and a half, 2%. It will narrow down further. It’s already at around 3, 3.5% now with the growth rate jumping for regular paint, that might narrow down to one and a half to 2%. But you know, that differential will remain to some extent.
Karthik Chellappa
So conservatively speaking, the earliest we can expect, assuming if volume growth recovers to let’s say 7 to 9% for us to hit a high single digit value growth, conservatively speaking, we can probably look at the fourth quarter exit of this year or possibly in early FY27.
Abhijit Roy
I think if all things go well, we can expect that the fourth quarter should be where, you know, we can expect that, as you are saying, or early next first quarter maybe. But we would see if all things go well, if the rains, you know, stop and the demand should, as I expect, you know, to come back, as it has always happened in the paint industry earlier then I think, you know, third and fourth quarter, we should expect that, you know, the value growth will come to a reasonably high level, possibly close to the 9, 10% range.
Karthik Chellappa
Excellent. My last question, sir, is if I were to look at the standalone employee expenses in the last five quarters, barring maybe one quarter that has continued to grow at double digit, what proportion of that would be, let’s say, increase in feet on street versus let’s say normal salary inflation. And is this also one of the ways in which the heightened competitive intensity is manifesting, whether in terms of retention of staff or higher payouts, etc?
Abhijit Roy
No, so it has been, you know, we have added genuinely, you know, feet on the street as well. But since the, you know, as you see, 8 to 10% has been historically there with us, it’s not as if something different is happening now. The salary increases in India, you know, the inflation has always been in excess of 5 to 6%. So the increases has always been in the range of 8 to 9% on an average that, you know, we have given. So that’s something which will always happen irrespective of what is the situation like, unless it’s a sort of a disaster.
So as an employee cost to sales, it tends to move up a bit, you know, under the current circumstances when the value growth is not coming. But there has been no tangible massive increase in as far as the employee cost is concerned. The other part is yes, you know, we have increased the feet on the street not only, you know, because just because the competition has come in, but because we feel there is an opportunity for us in certain markets like the urban markets where we have invested. So the now that investment immediately doesn’t give result.
It takes a little bit of time. We are very certain that, you know, from fourth quarter of this year we will see, you know, a quite an impact as far as the urban performance is concerned for us.
Karthik Chellappa
Excellent. Sir, one data point. If you can share for this quarter by how much did the A and P expenses grow year on year, would you be able to give some color?
Abhijit Roy
So there has been an increase in a normal increase would have been possibly around 4 to 5% maybe on the amp expense growth, you know, similar to our sales growth, but a little bit higher. And which is why, you know, the expenses would have grown at that level, not.
Karthik Chellappa
Okay, excellent. That’s all from my side, sir. Wish you and the team all the very best for the remaining quarters.
Abhijit Roy
Thank you.
Bhavik Shanklesha
Thank you. Next question is from the line of Pratik Gauti. Please go ahead.
Pratik Gothi
Hello.
Abhijit Roy
Hi.
Pratik Gothi
Hi, this is Pratik Gauti from hsbc. I have a couple of questions. Question one. So the luxury segment of emulsions, have we seen slow growth in that particular.
Abhijit Roy
Segment over the last few years? And if.
Pratik Gothi
Yes, do you think there’s some down.
Abhijit Roy
Trading in that segment from say luxury.
Pratik Gothi
To premium or is there some other trend at play there? Would like it if you throw some light, please.
Abhijit Roy
So, you know, as far as luxury segment is concerned, you know, the luxury interior segment has seen for us some slowdown. The luxury exterior continues to do reasonably well. You know, so there is no fixed trend which says that luxury is moving down, shifting towards premium. As far as we are concerned, the luxury exterior continues to do quite well. The luxury interior, you know, we are not a very strong player there, but we have pockets of strength and in those pockets we were a bit impacted by the excessive Rains which happened, you know, so maybe some people postponed or just changed it, you know, I don’t know what the reason is, but there was a little bit of a slowdown in those locations though.
Interior shouldn’t have been impacted, exterior should have been impacted more in rains. But we see the other way around, the interior getting impacted a bit more. So that is what has happened. So I, I don’t see any secular trend of downshift, you know, happening from luxury to premium category.
Pratik Gothi
Great, thank you. And my other question is on the industrial business. So performance has been mixed, so to speak. Is that the right way to put it?
Abhijit Roy
Say that, you know, some of the categories like the automotive did much better on the back of, you know, slightly lower basis. You know, they did, you know, good growth. Both the two wheeler, the commercial vehicles in which we are present and even in the joint venture which we are there with nipple on, that did very well in fact. So overall the auto segment did better. Auto refinish grew very well. The protective coatings volume growth was quite good, but you know, we had to cut prices a little bit because, you know, the profitability was reasonably good and the competitive intensity was high.
So therefore, you know, the value growth was, you know, not as high as the volume growth. The powder and the general industries categories, those two, you know, had some issue with the demand itself. Primarily the fan industry suffered a bit and hence the GI and the powder, both of these had very muted growth.
Pratik Gothi
Okay, that helps. Thank you.
Bhavik Shanklesha
Thank you. Next question is from the line of Sucrit Patil. Please go ahead.
Unidentified Participant
Yes, good evening. Am I audible?
Abhijit Roy
Yeah, if you can be a bit louder, it will help.
Unidentified Participant
Yes, Am I, am I audible now?
Abhijit Roy
Yes, yes.
Unidentified Participant
Okay, so I’m a shareholder of your company and my question is given the exceptional loss of say 36,000 crores, 3,600 crores from the warehouse fire and the impact of the early monsoon on volume growth. How is budger paints strengthening is operational this thing and is there a new risk of mitigation frameworks or supply chain redundancies building built to safeguard future profitability?
Abhijit Roy
First of all, it is 36 crores, not 3,600 crores.
Unidentified Participant
Sorry, sorry, sorry, sorry. Correct.
Abhijit Roy
You’re right. Inventory which we had in the warehouse, it was an unfortunate incident which was beyond our control because the fire didn’t catch within our warehouse. It, it actually happened, you know, quite some distance away. But that fire, you know, engulfed some other fire and then we were about, you know, three warehouses away from it. But our, that all the four warehouses got Burned down. So nothing that you could have done from your side. We were, we take extreme precaution across our warehouses. We are very well, you know, equipped to handle fire. If it had happened within our unit, possibly we would have.
And unfortunately it wasn’t Saturday evening when all the employees had gone home, there was no one to, you know, do the firefighting in case there were some people there. We would have possibly tackled it even better. But it would have been risky that way. The fire engines, you know, came in. Even they were finding it difficult to, to control the fire and therefore, you know, beyond control actually. So nothing that we could have done. We, we too take extreme care as far as our, you know, because we are a, you know, category where this is of extreme importance.
So rest assured that we have no problem there.
Unidentified Participant
Okay, great. Thank you. Thank you very much.
Abhijit Roy
Right.
Bhavik Shanklesha
Thank you. Next question is from the line of Jay Gomar Doshi. Please go ahead.
Jaykumar Doshi
Yeah, hi. Hi, Abhijit sir. Thanks for the opportunity. I’ve got three questions. The first one is in the competitive intensity which you’ve largely answered, but very specifically I would like to know is there any change in trade schemes, working capital credit period that the new entrant is offering to its dealer network versus what it used to be six months back?
Abhijit Roy
No, they have been more or less, you know, they came in with a dealer price list which was 5% lesser in terms of pricing, you know, and schemes which were slightly higher loaded than the industry in general. But you know, I see no major changes. The schemes have become more complicated. It was initially inbuilt scheme which was being given most of it used to be 80, 90% loaded onto all dealers, you know, in a similar way. But now it’s like any other player. It’s become very, you know, challenging or complicated I would say. So that’s the only change which has happened.
I see no other change which has, you know, happened from what it was there in the past.
Jaykumar Doshi
No additional working capital credit period support.
Abhijit Roy
In case, not that I am aware of which. Which makes, you know, nothing has come back which is of significance, I would say.
Jaykumar Doshi
Now, is there any increase in competitive response from incumbents this year, especially you know, any debates or sort of schemes on party or at economy and, or in the projects business. So just want to know if, you know, if the new entrance sort of stabilizes at 5,6% kind of market share, would you guys actually now sort of see, take an opportunity to, you know, regain some of the lost share.
Abhijit Roy
So, you know, actually if you ask me, you know, it is better to remain at a stable price level instead of trying to do something, you know, because these things have their own way of stabilizing, you know, so we have seen this happening earlier with another player, you know, who had entered in the south, if you recall, and, and, and then they did this exactly the same thing. And when you start withdrawing the benefits to the dealers and the painters, then the sales start, you know, coming down, you know, and then you just have to remain steady and keep growing, you know, so there is no point trying to.
Because it destabilizes the rates. And then, you know, the dealers get worked up and then there are a lot of disturbances in the network and that is something which is avoidable, you know, so it we follow our own policies and carry on irrespective of what, you know, others are doing or not doing. I don’t see that, you know, that we would be actually trying to do something. You know, in fact, the, the gains should come back, you know, the dealers will realize that, you know, if the momentum is not there in terms of, you know, movement of the product and if he is not making additional margin from the newcomer, then why should he try to push that product and why should he therefore continue in a bigger way with the new incumbent? So he tends to swing back slowly towards the existing players.
So that’s what has happened in the past and is more likely to happen in the future as well.
Jaykumar Doshi
Perfect. Very helpful. Second question is on, you know, we have, we are not hearing a lot about waterproofing, construction, chemicals on, you know, generally paints earnings calls these days. So is it that, you know, the low hanging fruit or the initial market share gains from traditional waterproofing players have come through and now, you know, you’re seeing broadly similar growth in those categories as you’re seeing in decorative frames. Or is it only because of competitive, you know, focus on decorative paints? You know, it is not discussed anymore.
Abhijit Roy
I don’t know. I mean, frankly speaking, you know, as far as we are concerned, we see a much faster growth in the construction chemical waterproofing still continuing for us and is likely to continue in the next three, four years. It is likely to continue at a faster clip. So as far as we are concerned, you know, this category is growing at a faster pace.
Jaykumar Doshi
Last bookkeeping question on the market share slide where you’ve shown you’ve just crossed 21 in one QFY 26 in numerator is your entire India business. Decorative plus industrial both combined.
Abhijit Roy
That’s right.
Jaykumar Doshi
And denominator would comprise of, you know, how many Players you mentioned listed.
Abhijit Roy
So. So it is Asian, Kansai, Axonobel, Indigo and Berger. These are the five players which are there and the denominator, this is a total standalone value of all of these players and in the in and our value includes two companies, you know, in addition to the standalone figures which is STP which operates out of India and SBL Coatings which is Sabu Coatings which also operates within India only. So these are the two companies which ads adds up and if you add up these standalone figure with these two companies, that’s where our market share is.
Jaykumar Doshi
Would the trend be broadly similar for decorative paints also if you were to do the same exercise for decorative paint.
Abhijit Roy
Same set of companies, more or less, you know, it will vary maybe 0 5.6% here and there, but trend will be very similar.
Jaykumar Doshi
That’s it from my side. Thank you very much and good luck.
Bhavik Shanklesha
Thank you. Next question is from the line of Amit Purohit. Please go ahead.
Unidentified Participant
Hi sir, good evening. Thank you for the opportunity. Am I audible?
Abhijit Roy
Yes, you are Amit.
Unidentified Participant
Yeah, just on, on the growth trends one I wanted to understand you clearly highlighted that you are doing nothing, anything much. We are waiting for the things to happen which is a natural progress that as the dealers realize that margins are less and velocity is low, they will come back. But I just want to understand within the incumbents when I look at growth trends this quarter has been slightly. We’ve seen the leader doing a relatively better versus its own performance and our gap kind of narrowing. Would it be more because of the regional or it would be more because of the products mix that would have led to this slightly gap in reducing.
I know it’s a quarter thing but just wanted to have your thoughts.
Abhijit Roy
No, it’s you know, see difficult to say for me, you know, on this type of a situation we have continued to do what we can do, what the leader does or what the gaps are. Sometimes, you know, they do well, sometimes they do little worse than us, you know, so it’s, it’s always, you know, difficult for us to justify the gap increasing or decreasing. Right. You know, sometimes, you know there are extraordinary events happening for them as well, you know, so which can create, you know, gaps which are higher, sometimes it is not so and you know it is normalized business and then the gaps get narrower.
So nothing that I can comment on. It is not something which is within our control as well. We keep doing what we can do best and I hope that you know we are ahead of the pack as far as the industry growth is concerned wherever it is, we should be ahead of that by at least two, two and a half percent and that’s what we maintain.
Unidentified Participant
And sir, second question on the industry growth itself. So you clearly highlighted that as the rain, I mean, season gets over, if we expect the growth to come back. But I’m, I’m just trying to think about it on a yoy basis. The, I mean, rains remain right in July and since there is still there is a demand is muted. Would, would that be a point of a concern as we go ahead or you think the base effects will help? Probably help us and hence the growth will improve? Because I understand Q2 onwards, the base for our industry growth started to become much more muted.
Abhijit Roy
Yeah. So, you know, the base effect will help definitely in the third and the fourth quarter. You know, overall that should be a positive for, you know, most of the players. But you know, as far as the rains are concerned, it has been relatively heavier and we expect that, you know, normally when it rains much more heavier than normal, the damage is also to the wall is much higher. So the demand tends to pick up, you know, after the rains a bit. So we expect that, you know, that there will be good movement, you know, towards the second half of the year coupled with, you know, relatively lower basis, the growth rates should pick up in the second half.
Unidentified Participant
Thank you for the clarifications. Thanks a lot.
NITIN GUPTA
Thank you. We consider that as the last question for the day I hand over the call to management for closing remarks.
Abhijit Roy
So thank you all for coming and taking time out and attending to this meet. You know, wish you all the best. Thank you very much.
NITIN GUPTA
Thank you. On behalf of MK Global Financial Services. That concludes this conference. Thank you for joining us. SA.