Pidilite Industries Limited (PIDILITIND) Q2 FY23 Earnings Concall Transcript

Pidilite Industries Limited (NSE: PIDILITIND) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate Participants:

Krishnan Sambamoorthy — Vice President, Equity Research

Sandeep Batra — Chief Financial Officer

Bharat Puri — Managing Director

Analysts:

Avi Mehta — Macquarie Group Limited — Analyst

Ritesh Shah — Investec — Analyst

Latika Chopra — J. P. Morgan — Analyst

Shirish Pardeshi — Centrum Wealth Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Pidilite Industries Limited Q2 FY ’23 Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Krishnan Sambamoorthy. Thank you, and over to you, sir.

Krishnan Sambamoorthy — Vice President, Equity Research

Thanks, Mike. On behalf of Motilal Oswal Institutional Equity, I welcome you all to the 2Q and 1H FY ’23 conference call of Pidilite. As always, it’s a pleasure to host the management of Pidilite Industries. We have with us Mr. Bharat Puri, Managing Director; Mr. Sudhanshu Vats, Deputy Managing Director; Mr. Sandeep Batra, CFO; as well as Mr. Sunil Burde, Vice President, Accounts.

I’ll now hand over the call to the management for opening comments.

Sandeep Batra — Chief Financial Officer

Right. Good afternoon. This is Sandeep Batra from the offices of Pidilite. I will begin with a summary of the financial performance for the quarter and half year ended 30th September. On a consolidated basis, net sales for the half year stood at INR6,090 crores, a growth of 34.1% which was aided by strong volume growth across categories and geographies. Our growth was broad-based across Consumer and Bazaar segment which grew 35%, and the B2B segment which grew by 33%. This growth was enabled by distribution expansion, innovation, a very responsive supply chain, and our ongoing digital initiatives.

For the quarter, net sales — consolidated net sales was INR3,000 crores, a growth of 14.8%. This quarter saw input costs at all-time high levels with material cost as a percentage to net sales higher by 436 basis points over the same period last year and 74 basis points sequentially.

Calibrated price increases as well as a sharp focus on operational efficiencies helped us to maintain EBITDA margins in line with the previous two quarters. Absolute EBITDA for the half year at INR1,029 crores was up by 14.7% over the same period last year. EBITDA for the current quarter at INR500 crores was lower by 9% over the same period last year.

Now, moving on to stand-alone financial performance. Net sales for the half year at INR5,481 crores was 35% higher than the same period last year, again, led by 35.4% growth in Consumer Bazaar and 33.7% growth in the B2B segment. For the quarter, net sales at INR2,703 crores were higher by 15.1%.

The consumption rates of our key raw material, VAM, has continued to increase during the quarter. Q2 VAM consumption rate was $2,491 per ton versus the first quarter by the previous quarter being $2,231 per ton. Our current rates at which we are ordering are ranging between $1,200 to $1,400. EBITDA before nonoperating income for the first half was 11.5% higher at INR951 crores. And profit before tax and exceptional items for the half year at INR876 crores was 14.2% higher.

I’ll also give a quick overview of the performance of our subsidiaries. Domestic subsidiaries maintained positive momentum with the Consumer and Bazaar-oriented subsidiaries continuing to deliver industry-leading growth and margins, whilst the B2B subsidiaries reduced their losses significantly. International subsidiaries witnessed good sales growth but EBITDA remained under pressure due to higher input costs.

We remain cautiously optimistic on improving demand conditions aided by favorable monsoon and increase in construction activities. And with the decline in commodity costs, particularly VAM, profitability will improve sequentially. Our focus continues to be to deliver broad-based profitable volume growth.

With this, open to any questions that the participants may have.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] We have the first question from the line of Avi Mehta from Macquarie. Please go ahead.

Avi Mehta — Macquarie Group Limited — Analyst

Hi, sir. Am I audible?

Operator

Yes, you are.

Sandeep Batra — Chief Financial Officer

Yes, you are.

Avi Mehta — Macquarie Group Limited — Analyst

Yeah. Sir, I’m sorry, I just missed the initial comments on the VAM. Could you kind of re-highlight that first? That was the first one.

Sandeep Batra — Chief Financial Officer

Sure. Do you want to respond to that? So our — the consumption rate for VAM for the second quarter was $2,491 per ton as opposed to $2,231 in the first quarter of this fiscal. And last year same period, it was $2,071 per ton. Current spot rates are ranging between $1,200 to $1,400.

Avi Mehta — Macquarie Group Limited — Analyst

So just kind of taking this forward, given where the VAM situation is more or less kind of back to pre-COVID levels or actually closer to that, would you now argue for a more front-ended return to the earlier shared guidance of 20% to 24% EBITDA margin in the second half? Would that be the right way to see this?

Sandeep Batra — Chief Financial Officer

See, I think there are two factors to be looked at. One is while VAM is a very important and key raw material, it is maybe about 20%, 25% of our raw material basket. There are other raw materials which have not yet come back to the kind of pre-COVID levels.

Secondly, the currency has depreciated by more than 10%. And thirdly, we are carrying inventory, both of raw material as well as finished goods. So I think on a blended basis, certainly, while we see margins improving and maybe in the fourth quarter we should be able to report EBITDA margins north of 20%, but to give a very specific number at this stage would be difficult.

Avi Mehta — Macquarie Group Limited — Analyst

Fair enough, sir. This is helpful. The second bit, sir, I just wanted to kind of better appreciate the demand situation. You highlighted there have been some tailwinds for demand as we go forward given that construction activity has improved. How — but you kind of shared some caution because there was weakness in this quarter. So would — in your best estimate, do you see that we are now in the path of recovery to reach in fact a double-digit level in volume growth? Or is this going to take some time more for us to kind of move back to that level? How — your any comments on that front would be really useful, sir.

Bharat Puri — Managing Director

Okay. I’ll take that. Good afternoon, Avi. I think that’s the right question. See, my invitation to you is if you look at and pick out quarters, then it tends to distort the picture. If you look at the first half, and we also look at CAGRs, which I think probably is the best indicator of including over the pre-COVID period, you would find that for the first half, whether it is our value or volume growth, both will be in a CAGR-basis in the mid-teens.

Therefore, to my mind, as far as demand is concerned, while obviously, the jury is out to see how does rural and semi-urban come back in the third and fourth quarters, there is sufficient evidence to show that there is a tailwind, especially in urban, including the Class I, Class II towns, both from a real estate construction activity and the consumer’s overall attitude towards the home.

So if you were to ask me at an overall level, obviously, our objective would be volume growth — profitable volume growth. And the way it looks currently is, for example, I can tell you as of last year, the second and the third quarters were bumper quarters for two reasons. One was the first quarter was a quarter of a lot of closures, and therefore, there was a lot of pent-up demand in the second quarter. In the third quarter, there was substantial pricing that we had taken two large price increases because of the raw material situation, and therefore, dealer inventories have substantially gone up. Now, when you equalize this over the year, we are — our objective remains double-digit volume growth, and we are very confident that for the year, that’s where you’ll be. We’ve always trended and said, listen, core categories at 1 to 1.5 times GDP growth, growth categories at 2 to 5 times GDP growth, and pioneer categories at INR100 crores in three years. If you look at it the last three-year period, we’re actually fairly consistent on these parameters, in fact, beating them by some distance.

Avi Mehta — Macquarie Group Limited — Analyst

Yes. So I mean, what — if I hear you correctly, as you said, quarterly it’s getting a little noisy, that’s why I just wondered kind of would you say — because price hikes were also, as you rightly said, we started in the second half, so they’re not yet in that base as we speak. So is the right lens to see is as pricing starts to become normal, this pricing growth will move towards volume or that’s not the right way? That’s what I was trying to appreciate better.

Bharat Puri — Managing Director

I think the right way to look at it is two things. One is definitely volume growth because in any emerging market, that is a greater indicator of greater usage as well as new customer. I think the right way to look at it is two things. One is definitely volume growth because in any emerging market that is a greater indicator of greater usage, as well as new customer. And we — what I — we will also keep looking at because we’ve had these unnatural years where somewhere second quarter was impacted, somewhere third quarter — so we’re also looking at CAGRs over the pre-COVID period and saying that listen, overall, equalizing for all of this, are we growing substantially or not? And fortunately for us, the answer is yes.

Avi Mehta — Macquarie Group Limited — Analyst

Okay, sir. Okay, got it, sir. And sir, just a last bookkeeping request. Would it be possible to give us a sense on the volume growth for the quarter? It just helps us appreciate the three-year CAGR and volume a lot better. If…

Bharat Puri — Managing Director

It will be about 1.2% to 1.5% on Consumer and Bazaar. And overall, I think it will be — overall, you can take it as pretty much on par, point something it is.

Avi Mehta — Macquarie Group Limited — Analyst

Okay. So, similar as the Consumer and Bazaar. Okay, sir. Overall. Thank you very much sir.

Bharat Puri — Managing Director

Yeah. And for the first half, it is about 21% volume growth.

Avi Mehta — Macquarie Group Limited — Analyst

21% on overall basis?

Bharat Puri — Managing Director

Yeah.

Avi Mehta — Macquarie Group Limited — Analyst

Thank you very much sir. Thanks a lot. That’s all from my side.

Operator

Thank you.

Bharat Puri — Managing Director

Thanks.

Operator

[Operator Instructions] We have the next question from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Hi, sir. Thanks for the opportunity. Sir, my first question is, how do you reflect upon the recent amendment which has come to Section 194R under the Income Tax Act? Basically, it reflects on the incentives like gifts and perquisites which are given to the channel partners. How does it impact us or how should we understand this particular variable for the company?

Bharat Puri — Managing Director

I think that’s a great question. I — It definitely impacts us because, obviously, our incentives and — for all leading companies, companies with leader products, what you try and do is give dealers non-cash incentives so that there is no undercutting in the market. Now, we’ve obviously therefore evolved a set of policies. While taking this into account, I mean, it’s something that — it’s something that we don’t welcome, but it is something we have to live with and we will live with it. You know what I mean?

Sandeep Batra — Chief Financial Officer

Yes, so I think we are, from a compliance point of view, totally on top of it in terms of — and not only how it impacts us, but also how it impacts our channel partners. So, we have, from that point of view, educated all the channel partners, the implications that this has on us, on our business with them, and on their business. And we have factored the impact of that in our business model going forward.

Operator

Mr. Ritesh, is that all?

Ritesh Shah — Investec — Analyst

Hello? Hello? Am I audible?

Operator

Yes, now you are.

Ritesh Shah — Investec — Analyst

Yeah, yeah. Sir, let me just rephrase the question. I’ll just take a step back. If I — If I have to understand, how much is the money that we put on the table for the distributors, for the dealers, and the influencers separately? If you can explain it from a margin standpoint or if you are selling something for INR100, basically, if there’s a bridge available, taking into account the margins for the different parts of the value chain.

Sandeep Batra — Chief Financial Officer

We have not reduced or adjusted the margins of the channel partners. Whatever is the impact, we have, as I said, factored that in our business model going forward. The amount, in any case, is not very material.

Ritesh Shah — Investec — Analyst

Okay. But sir, when we look at this particular variable from a marketplace standpoint, is it something that we are — we will incur more expense so that the dealer gets the same quantum? Or basically, we are telling the dealer that you’ll get less because we are adjusting for the tax direction?

Sandeep Batra — Chief Financial Officer

I think it is a combination. We are not — it’s not a hard and fast rule. Depending upon the program that we are running, the kind of benefit that is being given, we will — we have calibrated that accordingly. So, there is no hard and fast rule that either dealer will bear or we will bear. It’s something that we have, as I said, first of all, it is not very material. Secondly, we have factored that in without, in any way, trying to compromise the relationship that we have with our channel partners. And I’m very happy to connect with you outside this call if you have any other specific questions on this topic.

Ritesh Shah — Investec — Analyst

Sure. Sure. I’ll connect with you separately on this. Sir, my second question is on price growth. You did indicate variables of rural and urban demand. Plus, there will be some benefits on raw material prices actually softening going forward. So, how should we look at incremental pricing trends for the two segments? If you can provide such color over here, that would be useful.

Bharat Puri — Managing Director

See, as far as pricing is concerned, we don’t see ourselves taking any more pricing. I think we are currently fully priced and, therefore, we see no further pricing actions from us either on a B2C or a B2B basis. In fact, in B2B in certain cases, we will be looking at a reduction in prices. In B2C, we will start — look at the rupee, as well as the overall cost of raw materials and then take appropriate calls. But we don’t see any price — further pricing action in terms of increasing prices.

Ritesh Shah — Investec — Analyst

Sure, sir. This is helpful. I’ll join back. Thank you. Thank you so much.

Bharat Puri — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Latika Chopra from J.P. Morgan. Please go ahead.

Latika Chopra — J. P. Morgan — Analyst

Yeah. Hi, thanks for the opportunity. A couple of questions. The first was, if you could provide some flavor on what is the contribution or exposure of your portfolio towards new construction? And what is the kind of momentum you are witnessing on that part of the business?

Bharat Puri — Managing Director

Good to hear from you, Latika. See, it’s a very difficult question, and I’ll tell you why. Because different divisions of ours have different exposures. New construction, there are some which are more correlated like, for example, the tile adhesive business. And obviously, waterproofing, especially new construction, tends to be larger users.

Having said that, these are the basic ground rules that we follow but don’t hold us to it — to the last decimal point is. It’s twp-third and one-third. Two-third of our business tends to come out of renovation and repair, and 1/3 of our business tends to come out of new construction. Clearly, there is a certain tailwind as far as new construction is concerned across the board. And it is visible both in an organized real estate sense, as well as new constructions in Class 1 and Class 2 towns.

Latika Chopra — J. P. Morgan — Analyst

Sure. Thanks for that. My second question was around innovation intensity. You’ve alluded to the fact that you’re looking to pace it up and probably every division will see one new launch every quarter, if I’m — if I remember correctly. I wanted to understand what’s been the progress on that aspect? What are the kind of product introductions you are rolling out across your core categories and some of the new emerging categories? And what kind of revenue share some of these new products could eventually have, in your view or what kind of a growth contribution can these products do to the overall Consumer and Bazaar, in particular, segment growth?

Bharat Puri — Managing Director

That’s a good question. In a steady state, the objective we give our people is, hopefully, one-third of our growth should come out of innovation and two-thirds of our growth should come out of growing the core. Now, we’ve got a whole set of products. Again, it is different for different divisions. A lot of them, for example, have been launched already in the last six months. You will see launches happening across the next six. As things normalize and as we are able to undertake a whole lot of field activity and now we have enough flex in terms of being able to invest behind new products, you will see this at the intensity go up.

At Pidilite, we are clear that our four big drivers of growth remain, A, innovation, B, sales and distribution, C, digital; and the last being resilient supply chain, which aids better service and, therefore, growth. And on all four, we have an ongoing fairly aggressive program which is, to my mind, tracking on schedule.

Latika Chopra — J. P. Morgan — Analyst

Okay. Recently, you just alluded to the fact that for B2B segment, you may take some price reductions, while for B2C, one has to see how commodity trends behave. So, one part was, what is the feelings for B2B generally in your overall business mix? And second was, in the past cycles, when commodities have seen deflation, how have your pricing strategy behaved for the core adhesives portfolio or waterproofing portfolio in the past? I mean, is there actually a need to return back to the full price increases that you’ve taken because this time these have been very significant. How would you think about that?

Bharat Puri — Managing Director

See — Again, great question. If you look at the core adhesives portfolio from a B2C perspective, clearly, we have always maintained that we thought that this raw material inflation was not permanent, it was temporary. And therefore, we will only price at 75% of inflation. So in Bazaar and Consumer segments, we have — we deliberately called out that we’re going to reduce our margin because we believe there — this is not something that is permanent. And fortunately, we’ve been proven right as prices have now come outwards.

Now as far as we’re concerned, our overall principle, Latika, is that we believe in the core adhesives portfolio our brands command a premium of about 15%. That’s the kind of premium that we maintained from a pricing point of view. We believe any premium that we take more than that tends to affect our volume growth. And our mantra remains profitable volume growth. Therefore, that’s the stance we will continue to follow as we go forward. As far as B2B is concerned, remember in B2B you raise prices also much faster and you reduce them because the customer is getting impacted straight away. And given its size, B2B remains about 15% of our business, so it’s not a substantial impact but from a profitability point of view, we’ve already obviously worked that through our plans.

Latika Chopra — J. P. Morgan — Analyst

Sure. That’s very clear. Thank you so much, Mr. Puri for answering my question.

Bharat Puri — Managing Director

Most welcome.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Krishnan Sambamoorthy. Please go ahead.

Krishnan Sambamoorthy — Vice President, Equity Research

Yeah. Am I audible?

Operator

Yes. We can hear you, Krishnan.

Krishnan Sambamoorthy — Vice President, Equity Research

Yeah. Hi, Bharat. My question is on the comeback of smaller regional unorganized players. I think various estimates have been at about — pegged them at about a third of the market. Now given that we are seeing extremely sharp commodity cost inflation and particularly on a sequential basis, do you see a risk that they — since they are coming back, there could be — even as the market situation improves, would do you see slower growth as some of these players who were badly affected by RM price made their businesses unviable, or given the shortage of VAM globally, were not even able to procure VAM. Would that affect your growth in the time that these guys come back?

Bharat Puri — Managing Director

Sure. Good to hear, Krishnan. See, listen, as far as the — there is no doubt about the fact that the smaller regional players will have greater access and lesser inventory, and therefore they will come back. Remember, a large part of their share has been taken by the bigger competitors who could be regional or even national for example. We have tended to take far lesser share from them because these tend to operate at the price competitive end of the market at the lower end of the market. Having said that, I think, yes, you will see greater competition, but I do also think that given the current trends you will also see greater demand. And therefore you will come back to a situation of normalcy, I suspect, by the first quarter of next year.

Krishnan Sambamoorthy — Vice President, Equity Research

Sure. That’s useful, Bharat. My second question is on — given that Sandeep mentioned that there’s been such a steep reduction in your purchasing cost, have you taken any price reductions in the last month or so?

Bharat Puri — Managing Director

We’ve taken price reductions only for B2B customers where what it was necessary. We haven’t taken in B2C areas because remember, A, we haven’t priced to the full extent. B, remember the 1,200 price was at INR73, INR74 and not INR81, INR82 as it is now. So, therefore, working that out, if there is a need — as I said, remember, our stance is very clear. We will work with a price premium of about 15%. If we find that that premium is going higher, we will reduce prices. Now it may be via discounts or it may be via price increase — price list cuts.

Krishnan Sambamoorthy — Vice President, Equity Research

Sure. That’s clear. Thanks, Bharat.

Operator

Thank you. [Operator Instructions] We have the next question on the line of Shirish Pardeshi from Centrum. Please go ahead.

Shirish Pardeshi — Centrum Wealth Management — Analyst

Yeah. Hi. Good evening, Bharat. Thanks for the opportunity. Just two questions. At this point of time, what is our weighted inflation which we are seeing because I heard in the previous commentary that there is some prices of raw material is not softened, so in that context just wanted to hear what is the current inflation and how the sequential inflation has moved?

Sandeep Batra — Chief Financial Officer

I’ll give you the answer via an index. We have on a raw material index that we track internally. ’19 — if you take base year as ’19, ’20 that index had reached to 193 in June, went up to 200 in September, so sequentially quarter-on-quarter there was an increase. And we now see that index coming down to maybe 180 or something in the third quarter.

Shirish Pardeshi — Centrum Wealth Management — Analyst

Okay.

Sandeep Batra — Chief Financial Officer

And mean keep in mind that even versus same period last year, in material margin we have a 500 bps GAAP, right, even if you take last year second quarter as the base.

Shirish Pardeshi — Centrum Wealth Management — Analyst

Thank you, Sandeep. That’s helpful.

Sandeep Batra — Chief Financial Officer

Yeah.

Shirish Pardeshi — Centrum Wealth Management — Analyst

The second question I have — if you can share some context into Consumer and Bazaar, the distribution expansion. And I think I really like that this time there is some more information, which has happened, but maybe our efforts on expanding the distribution if you can give some color.

Bharat Puri — Managing Director

Sure. See, we’ve consistently maintained, Shirish, that one of our drivers of growth is sales and distribution. And in our categories even equalized for income, we believe there is a substantial opportunity in small town and rural India, which is why we set up a separate division called Emerging India, which over the last four years has made a tremendous amount of progress.

Currently, for example, over the last two years, we have increased coverage in towns and villages below 10,000. By about 20,000, we now — sorry, cover 24,000 such villages against about 13,000 or 14,000 a year. In 10,000 to 20,000, we are pretty much now covering the large part of the universe. So is it in 25,000 to 50,000. So we have a whole set of initiatives around both reach, the availability, and the quality of availability. And then, obviously demand generation teaching people how to use. We have an initiative called Pidilite ki Duniya, which is small, rural stores in villages below 10,000. We are now slowly reaching about 7,000 such stores across rural India. So on a consistent basis, we believe over the next not just 12 or 24 months, but possibly over the next three to five years, this will remain an avenue of growth for Pidilite.

Shirish Pardeshi — Centrum Wealth Management — Analyst

That’s helpful, Bharat. Just one follow-up on here. When we track the paint companies, they’re also making an effort. Now I do understand the comments what you passed on last quarter call, but just more curious to understand if — what is the distribution advantage to the paint companies versus Pidilite.

Bharat Puri — Managing Director

See, I think, very simply if you look at the number of outlets that paint companies cover directly vis-a-vis us, our number is far, far larger largely because of the range that we have, the kind of price points that we have. So for example, we would be actually covering pretty much twice the number of outlets that the largest paint company covers on a direct basis.

Shirish Pardeshi — Centrum Wealth Management — Analyst

Okay. Got it. Thank you and all the best to you.

Bharat Puri — Managing Director

Thank you so much.

Operator

Thank you. We have the next question from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Hi, sir. Thanks for the follow-up. Sir, you gave a very interesting data point. You indicated we try to maintain a 10% premium on the brand as that impacts our volumes. Did I hear it, right, sir?

Bharat Puri — Managing Director

10% to 15%.

Ritesh Shah — Investec — Analyst

Sir, how should one better understand this number if one has to look at it from a price elasticity of demand standpoint, and if you could bifurcate it between B2B, B2C I think that would be awesome.

Bharat Puri — Managing Director

This is purely on B2C, not B2B. B2B tends to be different for different. B2B has a very large number of segments. And, therefore, like for example, what you will do in textile emulsions is very different from what you will do in pigments, which is different from what you will do in joinery and these things. So, leave B2B aside for a moment. B2B is much more a price-value relationship. In B2C, rarely we look at our competitors who we believe are competing head-on against us, and we believe we — A, we always maintain a product advantage. One of Pidilite’s philosophies has always been to offer a better product, which is demonstrably better and can be demonstrated so to the consumer. And then obviously, on that, we overlay our brand-building activities, both with the consumer as well as the user, and that gives us a premium of between 10% and 15% in the market.

Ritesh Shah — Investec — Analyst

Sir, if one had to include the quantum of discounts over here which we give to the value chain, how will this number change from 10% to 15%?

Bharat Puri — Managing Director

It’s the net. I’m talking of net. Post all discounts, I mean every competitor of mine will be — if you look at their price list, they will price at the same rate as us, but they will be giving discounts 4 or 5 times us.

Ritesh Shah — Investec — Analyst

Okay, so this net of discounts. That’s great. And sir, what will be the number — similar number on the B2B side? It was significantly lower, right? Sir, how should we understand it? And has that number changed given the competitive intensity has increased in the several segments that we operate at?

Bharat Puri — Managing Director

See, in B2B, it’s very difficult, but as I told you, there are very distinct segments and technology plays a very large part. Like, for example, if I give you an example of organized furniture, the large furniture makers, they use a technology called hot melt adhesives, right? We are one of the few people in India who make European quality because we have a collaboration with the leading Europeans. We’re the only guys who make — everybody else imports it. Now obviously, therefore, the margins there would be very healthy. So it depends product to product and what’s the price premium. But as a company, one of our movements over the last, I would say, five to 10 years has been to consistently keep moving up the value chain and vacating the commodity end of the market.

Unlike a lot of, say, other companies in other sectors who have been going after volume for volumes, we don’t do that. We actually — our mantra is profitable volume growth, not just volume growth.

Ritesh Shah — Investec — Analyst

Sir, sorry for a follow-up, sir. Can you highlight any particular segment that we have vacated over the last, say, five years, seven years, specifically on the B2B side of things?

Bharat Puri — Managing Director

See, we had a whole range of lower-priced, for example, products which were at the base level in, say, for example, for furniture centres, for joineries, etc. Over time, either we’ve improved them and we don’t price those higher and had better products or we vacated those. So we’ve got — I mean you will see this both in B2C and B2B.

Ritesh Shah — Investec — Analyst

Sure, sir. This is helpful. Thank you so much.

Operator

[Operator Instructions]

Krishnan Sambamoorthy — Vice President, Equity Research

Bharat, I’ll go again. Particularly with the growth that you have indicated in rural, in towns with over 20,000 population as well as with between 10,000 and 20,000. Has the regional skew of your business changed? In fact — which — particularly towards the northern and the eastern part of the country?

Bharat Puri — Managing Director

Actually, no. I mean, overall, our growth has been fairly secular across all regions of the country. We haven’t seen — I mean, there are — at times, you will find, for example, in one year or two years, but over a larger period of time — actually, we follow a system where we correlates to ability to pay. And there, frankly, our penetration is fairly — I mean, our penetration and market shares don’t change dramatically over the four regions of the country.

Krishnan Sambamoorthy — Vice President, Equity Research

Okay. And as the water profile business becomes larger, would that regional skews remain similar to your Consumer and Bazaar segment?

Bharat Puri — Managing Director

No. In the Waterproofing segment, by definition, wherever there is more water, therefore higher rainfall, those markets tend to be bigger. So as waterproofing gets much bigger, the coastal areas of the country, the areas where there is higher rainfall, will tend to play a larger role than the drier part of the country where the problem, therefore, of waterproofing is not such an — you don’t need solutions that are very rigorous and expensive.

Krishnan Sambamoorthy — Vice President, Equity Research

Got it. My last question is on — the bookkeeping question. Given you continued healthy demand prospects, what are your capex plans for both FY ’23 as well as FY ’24?

Bharat Puri — Managing Director

See, as we’ve maintained over — one of the first things we did during COVID, Krishnan, was we realized that supply chains will have to change dramatically. And in the course of the last three years, we’ve actually completely rejigged our whole supply chain network. We now have — 20 of our facilities across the country have been expanded substantially. These are brownfields. In addition, we put 11 new factories in place. We now have more than 60 manufacturing locations across India, forgetting those abroad for a moment. We have plans, obviously, and we are clear that we are positioned for the next phase of growth. Whenever we find — and we plan on a three-year basis. Whenever we find even in three years later based on our projection, we may be running short, we will always start looking at plans. So we have — you would see over the last three years and you will see it over the next three. Our capex tends to remain between 3% to 5% of sale, but it remains a very active part of our growth plans going forward.

Krishnan Sambamoorthy — Vice President, Equity Research

Okay. Just a follow-up to that question. Are these new — 11 new plants that you indicated, are they something similar to what the FMCG companies are doing, ITC and Unilever, smaller and more nimbler plants closer to demand locations?

Bharat Puri — Managing Director

Absolutely, yes.

Krishnan Sambamoorthy — Vice President, Equity Research

Okay. Thanks a lot.

Operator

Thank you. We have no further questions. I would now like to hand it over to the management for closing comments.

Sandeep Batra — Chief Financial Officer

So thank you very much. Thank you to all the participants for your continued interest in Pidilite and we’ll connect again for the — after the third quarter results. Thank you very much. And thank you very much, and have a good evening.

Bharat Puri — Managing Director

Thank you.

Krishnan Sambamoorthy — Vice President, Equity Research

Thank you.

Operator

[Operator Closing Remarks]