Shalimar Paints Limited (SHALPAINTS) Q4 FY23 Earnings Concall Transcript

Shalimar Paints Limited (NSE:SHALPAINTS) Q4 FY23 Earnings Concall dated May. 30, 2023

Corporate Participants:

Ashok Kumar Gupta — Managing Director

Mohit Kumar Donter — Chief Financial Officer

Kuldeep Raina — Director

Analysts:

Ronak Jain — Orient Capital — Analyst

Manan Poladia — MKP Securities — Analyst

Praful Siddharth — Shravas Capital Advisors — Analyst

Webo — — Analyst

Darshan Shah — — Analyst

Sahil Bajoria — — Analyst

Manan Poladia — MQB Securities — Analyst

Amit Mamgain — Asian Market Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Shalimar Paints Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Jain from Orient Capital. Thank you, and over to you, Mr. Ronak.

Ronak Jain — Orient Capital — Analyst

Hello. A very good afternoon to you. Thank you, and welcome to the Q4 and FY ’23 earnings conference call of Shalimar Paints Limited. Today on this call, we have Mr. Ashok Kumar Gupta, Managing Director, along with the senior management team. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. A detailed safe harbor statement is given on page 2 of the company’s investor presentation, which has been uploaded on the stock exchange and company’s website as well.

With this, I hand over the call to Mr. Ashok Kumar Gupta for his opening remarks. Over to you, sir.

Ashok Kumar Gupta — Managing Director

Good morning, everyone. It’s our pleasure to have a discussion with all of you regarding our results for the quarter four as well as the financial last year. My colleague Mohit is with me, who is the CFO of the company. And I request him to just give a brief — performance to you. And then I’ll take over from him. Thank you, and Mohit.

Mohit Kumar Donter — Chief Financial Officer

Yeah. Thank you. Thank you very much, sir. Good afternoon, everyone. First of all, I would like to thank everyone for your participation in Shalimar’s growth journey. Last Saturday, our Board has approved the quarterly as well as annual financial results of our company. During the quarter and in full year, we have recorded a consistent growth, both in terms of volumes as well as value. In quarter four, we have recorded total income of INR139 crores with a growth of 7% from the previous quarter and 29% from the last quarter same year. There are some adjustments of around INR626 crores in the top line. Had it not been there, revenue was [Indecipherable] at INR145 crores for the quarter.

Cost, we have recorded at 72%, with a gross margin of 28%, which is an improvement of 2% from the previous quarter. EBITDA, we have recorded a net [Indecipherable] EBITDA of INR2.65 crores. We have booked a loss of INR9.62 crores before taxes for the quarter and last year quarter it was INR9.3 crores last year same quarter. In case of EBITDA line, there are again some adjustments because of customer costs and recognition policy. These total adjustments are to the tune of INR65 crores. Had it not been there the EBITDA would have been better off by INR5 crore and would have closed somewhere around INR4 crore EBITDA for the quarter as a positive number.

In full financial year ’22-’23, we recorded a turnover of INR493 crores. Again, there is an adjustment of around INR12 crores in the top line. We have closed a year with a growth of 36% in revenue and 15% in volume, which is hard in the industry or faster than the industry. Gross margins for the full year is 27% and cost at 73% of net revenue. EBITDA for the year is negative INR7.55 crores. If I [Indecipherable] the adjustment, it would have been reduced by INR5 crores and would be around INR2.5 crores against INR25 crores last year. Loss before taxes is on a full year INR36 crores against the INR61 crores last year. I think it’s a significant improvement during the year.

And during the quarter, as I already mentioned, the company had to go book additional cost of INR5 crores in various line items wherein INR4 crore is in cost of goods sold and the remaining is in other taxes, which do not curtail in the current quarter and year. As these sectional costs will not be there, gross margin will be better by 2% and EBITDA by INR5 crores.

So with this, I’m handing over to Mr. Gupta. Thank you very much.

Ashok Kumar Gupta — Managing Director

Good afternoon, and again, thank you, Mohit, for your opening remarks. So let me tell my friends that we have followed a very aggressive strategy in this financial year ’22-’23. As you know, Hella Infra gave us the funding sometime in March ’22. And right from the word go the strategy was aggressive. Aggressive when I say is that let’s try to gain market share. Let’s try to grow aggressive — flow against the current, make investment, spend money, increase expenses. But end of the day, it’s important that we get more sales and more market share. We worked in this year to that strategy. We started that strategy. And going forward, we will continue that in a much more aggressive manner.

So going forward, you will see expenses further going up, investments further going up, and the company will continue to attempt to garner more and more market share. You would have observed that Mohit was speaking about certain adjustments. So apart from an aggressive strategy for more market share, we also changed our auditor. So earlier, we had some auditor [Indecipherable] but with the new promoter coming in or a new investor coming in, as well as taking a more aggressive approach, we have taken brand [Indecipherable] as a auditor. And as you know, as and when any auditor comes on your stage, they try to kind of do their own working.

And always, there will be some new — your provisions that will be provided, which may not be there earlier. So accordingly, any auditor try to put up some more provisions we were to provide for eventualities, which may or may not happen. These are cases which were there 15, 20 years old, stock adjustment, the adjustment on a comp of last year. So there are many adjustments which we are [Indecipherable] any year when the auditor changes. So those impacts are there and as Mohit was saying, if those were not there, then [Indecipherable] would have been on paper much better.

I give you in comparison with the industry our industry has grown in this year by around on an average 18% to 22%, if you see the [Indecipherable] of the top 5 players, while our growth on an yearly basis is almost 40%. So again, the industry as is around 20%, value growth we are around 40% revenue growth. Quarter-wise also if you see the industry was growing hardly 10%, 15%. Our growth is around 35%. My colleague, Kuldip, he will explain more about it. Similarly, on account of improvement in the margin, the cost of goods sold has increased for most of the players with respect to the previous year.

In the financial year ’22-’23 many cases, it has simply increased by 4%, 5%. In some cases, the same, but we have been able to reduce our cost of goods sold by around 3%. Again, aggressive expenses strategy, increased expense, increased capex but improved efficiency. It is a surprise to see that most paint companies have a very constant cost of implied around 6% — here again, by overall year basis, our employee cost as a percentage of revenue is marginally lower. In the last quarter, we again became address and we increased our manpower.

So you see a slight increase in the manpower cost in the last part of the year. So all-in-all, we have been taking a very aggressive strategy, aggressive for increasing the volumes. So ultimately, as you know, so many players are coming in the paint industry so unless until we increase our market share now tomorrow is little too late. If you do all these adjustments, I’m happy to share with you that we have worked towards kind of a [Indecipherable] after all the statement, all the adjustment. And if we do all that adjustment, it’s possible that we may be neither EBITDA positive or negative or minus negative. That means we have been able to cover a long distance whereas last year our EBITDA loss was around INR28 crores, this is almost neutral.

So which is a very big story, very big coverage. Again, if I see our industry, the improvement in EBITDA is [Indecipherable]. So I think on the whole, it was a good year for us in Shalimar. We’re very happy with the things which have turned up, investments have come up, strategy is aggressive, results are coming in, sales have increased almost double the rate of the competitor. We can’t ask for more.

Thank you very much, and we are now open for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from the line of Manan Poladia from MKP Securities.

Manan Poladia — MKP Securities — Analyst

Am I audible now? Yes. Sir, we’ve spoken earlier and you’ve given me a certain guidance saying the 25%, 30% odd sales target for the next two, three years? And congratulations on the great set of results primarily. You’ve delivered on your guidance, so that’s fantastic. So what I wanted to understand was from year going forward since we’ve come to almost [Indecipherable] adjustments flat EBITDA level. How do we get to the point where we have a positive EBITDA, like what changes are you making? Because I’m guessing we are spending a lot more on advertising guidance, right?

Ashok Kumar Gupta — Managing Director

So if you see our Q4 it is almost positive EBITDA, even if it is 2% or so. Already we have reached it — if adjustments were not there. So we would have been almost 2% positive EBITDA. This should go up in this year significantly. The whole game is now of volume. We were growing last year 40% and then if this trend continues, then coming few days, coming few months is going to be all added, all the new revenue will be added to the EBITDA only — increase significantly.

Manan Poladia — MKP Securities — Analyst

Just one follow-up question on that. What would be our total capacity and utilization at the moment?

Ashok Kumar Gupta — Managing Director

So today, my capacity is sufficient to give me a turnover of almost INR1,200 crores to INR1,500 crores and INR1,200 crores. And my utilization on a country level is almost 50%.

Manan Poladia — MKP Securities — Analyst

Okay, sir. Sir, my second question is related to the water soluble in the industrial coating space that you are talking about. So what I wanted to understand was [Indecipherable] Paints is also launching their own water soluble brand for kids furniture and that specific niche. So I wanted to understand the competitive landscape in that space?

Ashok Kumar Gupta — Managing Director

Who is a better person than my colleague Kuldip to explain this [Indecipherable].

Kuldip Raina — Director

Thanks, sir. See, [Indecipherable] is altogether in a different landscape. They operate in a different area altogether. Sirca [Indecipherable] kind of put figures to it, 80% to 85% of wood coating industry, they import and sell. And now that they have launched some emulsions in the marketplace so see, essentially Sirca is known by — from the wood coating point of view, they don’t have majority of shares in the accretive space as such. Barring that, they have some of the dealers who are common dealers from them, who sell decorative paints as well. So I don’t see any challenge from these kind of players because they operate in a different space altogether.

Operator

[Operator Instructions] Our next question is from the line of Praful Siddharth from Shravas Capital.

Praful Siddharth — Shravas Capital Advisors — Analyst

Congrats on a great set of numbers. Sir, I just have a few questions. So if you look at sequentially, right, other expenses have gone up from 16.4% on revenues up to 21.1%. So is this entire difference attributable to the cost of [Indecipherable] we made during the quarter?

Ashok Kumar Gupta — Managing Director

Yeah, you are right. Actually lot of positions have been added. I think in other expenses, almost INR4 crores worth of provisions are there, primarily for [Indecipherable] and GST cases of prior years. So all those provisions are there. If they were not there other expenses would have been [Indecipherable], I think, INR4 crores.

Praful Siddharth — Shravas Capital Advisors — Analyst

Sure. And has this entirely been provided for this — this is a one-off expense, right?

Ashok Kumar Gupta — Managing Director

This is one-off expense over, I think mostly sales tax 13, 14, 14, 15 [Phonetic], and it’s not exactly expense. So we have filed our return of 13, 14, 14, 15 [Phonetic] and now they have created a demand that you have to pay so much money because certain documents are not agreeing to whatever somebody have committed, they say some signature or not proper or whatever. They are 13, 14, 14, 15 [Phonetic] what we would do. We can’t fight, can’t do anything about it. Just accept it now.

Praful Siddharth — Shravas Capital Advisors — Analyst

Yeah, sir. Sir, and how many dealers did we have in the month of April and May and also how was the growth momentum in these two months?

Ashok Kumar Gupta — Managing Director

Favorite subject of Kuldip, he will speak about it. Kuldip?

Kuldip Raina — Director

Yeah. So see, as we had said in the last meeting also that we are wanting to aggressively increase our footprint in the marketplace, be it regional, be it [Indecipherable] in the existing market. So if I have to put a figure to this, last year, we have increased our distribution by 25%. So roughly, we have added some 1,500 to 1,600 new outlets, which have contributed actually 13% for our top line. So it is augmenting well with our strategy of expansion and extraction, which we had also discussed last time. In terms of expansion, we are going to increase our footprint. And in terms of extraction, we are going to get better shop share from the existing outlets.

Praful Siddharth — Shravas Capital Advisors — Analyst

Sure sir. Sir, what is the revenue contribution from infra market in this quarter? If I remember right, it was INR5 crores to INR6 crores in the last two quarters.

Kuldip Raina — Director

So it has been — it has contributed 1% to 1.5% to our overall revenue.

Praful Siddharth — Shravas Capital Advisors — Analyst

Sir, so when you say 1% to 1.5% of revenue, does this also include the sales routed through intra market or only the sales with [Indecipherable] directly?

Kuldip Raina — Director

All put together.

Praful Siddharth — Shravas Capital Advisors — Analyst

All put together. Sure, sir. So this is my last question. So what are the factors which are driving the growth of the interest in paint segment because they see significant volume growth will come back to decorative.

Kuldip Raina — Director

Okay. So if you look at [Indecipherable] that our growth has been highest in the industry this year. We are ahead of the industry by 20%. If you look at the industry this year, 19% to 20% has been the growth, whereas our growth has been in the tune of 40%. And as far as the emulsion film is concerned, this has happened on account of greater demand for [Indecipherable], which we have increased by — which has gone roughly 6 to 7 months up in terms of we were at 50% to 60%. So that has helped us to build better value stream as against volumes.

Praful Siddharth — Shravas Capital Advisors — Analyst

Great, sir. Thank you. And would we continue the same growth momentum going forward?

Kuldip Raina — Director

That’s what we are continuing. Our target is to further get in line with the industry norms, which is roughly 68% to 70%. And also in the first quarter end only we’ll be able to touch that. And for that, we have handled our product pipeline in place. We have got our focus, which is essentially on to water-based products and essentially on emulsions.

Operator

[Operator Instructions] Our next question is from the line of Webo [Phonetic] who’s an Individual Investor.

Webo — — Analyst

So I have two questions. First is taking a cue from your opening comments about spending more to grow faster. How should we look at future profitability? So if there were INR100 crores of incremental revenues in the next year, what will be the percentage that would flow into EBITDA? So that’s the first question.

Ashok Kumar Gupta — Managing Director

So if you observe our gross margin is in the range of 30%, 32%. So one thing which has to happen now is with increased volume and increased focus on emulsion, this amount has to increase to 33% to 34%. Now if I talk of increasing in the expense, so the increase in expenses are mostly in two ways, one is capex, and one is in HR, which is people. Already, our HR expenses is 11%, 12%. I don’t think it would grow more than around 11% to 12% in any case. I think going forward it will continue to be around 11%. So that way, percentage-wise, it is not — our increased expenses will not go into our expense part of it. On the capex side, as you know, capex doesn’t affect your EBITDA. So the entire increase in sales [Indecipherable] EBITDA by way of gross margin minus your HR cost. So all that money will be flowing in EBITDA primarily.

Webo — — Analyst

If you assume in the ballpark of INR100 crores was incremental revenue, something like INR30 crores, INR35 crores should flow into EBITDA?

Ashok Kumar Gupta — Managing Director

No. It will be — it will not be more than 15%, 20% because I said 11% growth in [Indecipherable] cost itself and some costs will go in freight. So it may be lower than that because our gross margin is 32%, some of it will [Indecipherable].

Webo — — Analyst

Sir, the next question was on the balance sheet. I’m just trying to understand. So there is — there are two big components, which have led to a cash brand as far as your cash flows is concerned and which has consequently affected the net debt on the books. The first one is changes in working capital. Now, your working capital on a year-on-year basis has moved from somewhere around two months to more than three months now, right? Bulk of this is driven by receivables. So if you could shed some light on that. Second, there is this item called cash flow from investing activities, which is almost INR84 crores. What is the nature of this cash flow? Could you explain that, please?

Kuldip Raina — Director

Okay. So if you see our inventories level, which has grown by around INR20 crores during the year. And our debtors have also grown by almost INR30 crores. So majority of the working capital, which we have increased in these two line items. Apart from that, we have increased our changing field wherein we have done some capex part. Apart from that, [Indecipherable] we have spent some good amount of money there for the high yield. So we have spent around INR40 crores, INR45 crores during the in terms of working capital as well as of the aspects. If we talk about the investment activities, there are some parts which we received as warrants from the investor INR37.5 crores. And the remaining we have [Indecipherable] maturing on coming [Indecipherable].

Ashok Kumar Gupta — Managing Director

And you mentioned about the increase in the receivables. But receivable they were like fees almost same as 80 days. It is just different, 80 days only, is it? Actually the investment has gone into — if you notice our — considering the size of the company has increased from INR350 crores to INR490 crores. [Indecipherable] working capital is the there. Our receivable days has been broadly 80, 81 days. Our inventory days, historically, it was very high, it was 130, 140 days. In FY ’21, it was 140, ’22 it was 130. Now it has come down to 115. What we have done is, we have done some correction in papers because our papers there was huge amounts of share payment that has happened the last time when you’re comparing in FY ’22 March ’22, there were huge shares in payments to creditors, which is we have regularized because we wanted to build long-term relationships with the vendor. So we have now been in line with the industry.

Webo — — Analyst

Okay. And just correlated, what is this other financial assets line in your balance sheet? What does this comprise of? This must be some part of the warrant?

Ashok Kumar Gupta — Managing Director

So these are short-term [Indecipherable] and deposits from the leaders. Primarily fixed deposits.

Webo — — Analyst

Right. So if I have to take the net debt calculation for you guys, [Indecipherable]. So I will add cash, cash equivalents, bank balances and other financial assets.

Kuldip Raina — Director

For the OCD part, which is INR55 crores given to [Indecipherable] your outside debt will be around INR37 crores, INR38 crores and your fixed deposit is around INR75-plus-crores.

Webo — — Analyst

Okay. Understood. Understood. I think for just the sake of clarity for all investors, you might want to put this upfront because this kind of excel is confusing, but it’s clear now.

Ashok Kumar Gupta — Managing Director

A very good suggestion. We will try to do it from the next quarter. [Indecipherable].

Operator

[Operator Instructions] Our next question is from the line of Darshan Shah [Phonetic], who is an Individual Investor.

Darshan Shah — — Analyst

Am I audible? So as mentioned in the previous call that Infra Market has plans to open their own stores, there are materials will be showcased and that initiated some time back, I believe. So can you please give us some updates in terms of the number of new additions?

Ashok Kumar Gupta — Managing Director

So this is more from a branding perspective that Shalimar is trying to do further [Indecipherable]. So currently, we have around 5 to 6 stores, which is being where Shalimar stores are being there. That’s an overall number perspective. So see, this is — there are a few stores of Hella Infra where we are keeping Shalimar pace. But as mentioned, this is more a branding part of it. These are retail stores, and they are even Hella Infra [Indecipherable] stores. So sales will pick up in due course of time. But slowly in those towns where Hella has opened up stores and they’re keeping our material, the word is spreading around — to that extent.

Darshan Shah — — Analyst

Okay, sir. And the plan going ahead, do you plan to accelerate the number of stores?

Ashok Kumar Gupta — Managing Director

Hella will increase the number of stores. We will only keep our material there.

Operator

[Operator Instructions] Our next question is from the line of Sahil Bajoria [Phonetic] who’s an Individual Investor.

Sahil Bajoria — — Analyst

So I have a couple of questions. How are we dividing the current production capacity between the decorative and industrial paint segment? And what steps are being taken to optimize and maximize our capacity utilization for both decorative and industrial paint?

Ashok Kumar Gupta — Managing Director

So I think currently, it’s around 30%, 32% production happens for industrial and around 70% production happens for decorative. And so we are increasing our capacity utilization in all the plants, but mostly in Nashik and Chennai, where we had some spare capital with us. Capacity-wise, there is no constraint. So we do not envisage any problem. But yes, the impact is as sales will increase, capacity-wise will automatically increase.

Sahil Bajoria — — Analyst

Okay. Also, could you provide more details on our expansion plan for increasing capacity in different regions? Which specific field locations are being targeted for capacity expansion? And are there any plans to explore visibility in the east zone as well.

Ashok Kumar Gupta — Managing Director

So we have three plants today, one in Sikandrabad in UP. The second in Nashik in Maharashtra; and third near Chennai in Tamil Nadu. Now we are only taking some brownfield expansion to the extent that in the [Indecipherable] not there or managing facilities not there and automation should happen all this to increase our capacity significantly. We’re having large plans for that. But this investment which has been made is more by way of infrastructure and automation and not personally only for increasing the capacity. But as a result in the capacity will increase significantly. We do not have an immediate plan for east zone, not even next two, three, four months because we are looking at more capital utilization at the current plants. And after the utilization is better, perhaps we’ll look at it. So maybe in due course of time in a couple of months, we will look at East zone.

Operator

[Operator Instructions] Our next question is from the line of Manan Poladia from MQB Securities [Phonetic].

Manan Poladia — MQB Securities — Analyst

Sir, my question is based on — I have two questions. The first question is you spoke about capex, sir, but I can’t see any changes in your gross lock or in your cash flow statement. So I just wanted to understand when is the capex, like has it been passed through the P&L?

Ashok Kumar Gupta — Managing Director

No. So we have now yet taken the capex. We only plan for it. We have done more capex. I will not say we have not done any capex but it may be the order of INR5 crores to INR10 crores only at this moment, but the things have started. For example, the first thing which we are doing and which we think the most important is R&D center. We planned expense of around INR8 crores to INR10 crores there. The construction has started. We actually — investment, which might be there might be only INR1 crores or INR2 crores. And I’m sure more would have put in capital work in progress, whatever INR1 crores or INR2 crores might have gone. So you will not see gross lock increasing. But usually work was increasing this year, not last year.

Kuldip Raina — Director

To summarize, we are investing around INR11 crores till now. And the results we have shown in the cash flow statement on the last phase. So this INR11 crore primarily tinting machine to the tune of around INR5 crore and remaining is [Indecipherable].

Mohit Kumar Donter — Chief Financial Officer

Okay, sir. Understood. So that’s the first question. And secondly, we have about.

Kuldip Raina — Director

We’ve received about INR75 crores from the warrants, correct? Like that we still have. INR70 crores has been received. So INR150 crores of warrant was issued. Around INR35 crores is — INR7 crores was received and INR120 crores that amount is yet to be received, which we will receive in this year.

Manan Poladia — MKP Securities — Analyst

Okay. So, my question was on the utilization of each funds. Like once this entire INR150 crore block is received, what do we intend to do with them outside of the capex that we are already doing and outside of the distribution expansion?

Ashok Kumar Gupta — Managing Director

Primarily marketing and maybe we’ll see when it comes. We haven’t submitted our plans for the expansion or utilization as yet. We have — funds come. And so those plans will be formatted while the funds come.

Manan Poladia — MQB Securities — Analyst

Sir, my just — my only question is if you could give me a broad percentage number also on how much you intend to use for expansion and how much you intend to use for advertising, whatever is your mark — like a broad percentage number would also do. I don’t need an absolute fixed number as of right now.

Ashok Kumar Gupta — Managing Director

See, in total capex, in the three places we are taking up, we will be investing on INR140 crores would be through our own funds, remaining we will.

Kuldip Raina — Director

So INR190 crores is likely expense in the all investments, maybe slightly less, looking at considering cash there. And another we are planning to spend around INR30 crores in marketing this year. Last year, maybe more than INR30 crores, INR40 crores, INR50 crores. That’s how we are trying it increase the bank so that you can increase your sales.

Operator

Our next question is from the line of Amit Mamgain from Asian Market Securities.

Amit Mamgain — Asian Market Securities — Analyst

Congratulations on great set of numbers. So sir, I have a few questions. One again, a clarity so did I hear that — so our like-to-like basis in terms of revenue for Q4 was INR145 crore as investors we should consider INR145 crores that should be the base for [Indecipherable]?

Ashok Kumar Gupta — Managing Director

Yes, around INR140 crores. You’re right.

Amit Mamgain — Asian Market Securities — Analyst

INR145 crores, right?

Ashok Kumar Gupta — Managing Director

INR140 crores.

Amit Mamgain — Asian Market Securities — Analyst

INR140 crores. Okay. Perfect. So my second question is we’ve taken this employee stock option program very recently. I think this was last month. Can you just elaborate on the for 19 lakh shares across. So if you could just.

Ashok Kumar Gupta — Managing Director

We have given the ESOP to all our employees based on the grade and number of years of experience that they have. And we’ve got a very good response for them from all the employees. We’ve already connected with all of them. Now they have a window of next 6 to 12 months, whom they need to exercise it. So till the time is there — once the time is there we’ll be allotting the ESOP.

Amit Mamgain — Asian Market Securities — Analyst

That’s a very good initiative as a company. Thank you so much. If I have any other questions, I’ll come back in the queue.

Operator

[Operator Instructions] Our next question is from the line of Mr. Darshan Shah [Phonetic], who’s an Individual Investor.

Darshan Shah — — Analyst

As a follow-up question. So could you paint some picture about our freight cost situation?

Ashok Kumar Gupta — Managing Director

Our freight cost continues to be in the range of 7% to 8%. I think for the last three, four years, it’s the same with us is true. There has been increase in the diesel prices and all those things have happened. So, we have opened more depots — because I think there was supposed to be minor increase, but because the increase wasn’t, there has not been any increase in percentage — so freight cost continues to be 7%, 8%. So far as in competitor concern, [Indecipherable].

Darshan Shah — — Analyst

So do we — can we expect this number to come down to, say, 5% to 6%? Or it will remain stable for some time.

Ashok Kumar Gupta — Managing Director

I think this year also as a strategy we’re planning to open around 10 to 15 depots more. So as we said, we got a little aggressive in terms of distribution expansion. So this year, we do see a reduction in freight cost, but it will not be like 1% or 100 basis points. It could be 0.25% to 0.5%.

Darshan Shah — — Analyst

Yes, sir. And if I could recall correctly about last quarter, you had set a growth rate of about 20% to 30% year-on-year.

Ashok Kumar Gupta — Managing Director

No, no. Last quarter, we have a growth rate on a comparative basis of 36%.

Darshan Shah — — Analyst

Okay, sir. So do you have — have you set any potential growth targets for the future?

Ashok Kumar Gupta — Managing Director

We continue to be in the similar line. We continue to maintain INR35%?

Darshan Shah — — Analyst

Could you just shine some light on the factors that you believe will help you maintain these high growth factors.

Ashok Kumar Gupta — Managing Director

So as you know, we are in two areas: industrial and decorative. When you say industrial, you basically refer to protective coatings. We are not in automobiles. We are not in coil coating. We are not in significantly [Indecipherable] coating. If we are present, our presence is in protective quoting. What do you mean by productive coating? Protective coating mainly refers to coating on screen [Indecipherable] which is like TV or anything [Indecipherable]. And we have five lines — pipeline. Protective coating has been forte of Shalimar Paints for long. We have not been focusing on it for some time. But our focus has changed.

We have gained back on protective coating and on the pipeline and on the steel quoting. I must share with you that perhaps in this year, our growth in this segment of protective coating has been highest in the whole industry. Growth has come not only in terms of value, but also in terms of number of products which are being supplied. Over a period of time maybe next two or three years, maybe even shorter than that depends on our R&D we will be having the largest basket of products to offer in the protective coating segment. Our idea is nobody should have the range that we will have. Nobody should have our quality — our quality should be second to none, our range should be second to none.

Hopefully, our quality and range in that, our volumes and our value will be second to none. That’s our idea. So this is one area where our growth is expected to come. We are currently selling around INR200 crores worth of protecting coating over the year. The market is very big. Market I think, is more than INR4,000 crores. We’ve got a big way to go. It can increase INR200 crores to INR400 crore, INR500 crore, INR600 crores even INR1,000 crores in the coat [Indecipherable]. Secondly, so growth will primarily come from industrial which is protective coating. Secondly, we are focusing on the [Indecipherable]. Our colleague Kuldip has done a lot of work in the decorative coatings. He’s going to give you a good glance of what exactly he is planning in decorative, particularly emulsions, particularly with painters, so that volumes can come from there. Kuldip, can you add on, please?

Kuldip Raina — Director

So as we discussed last time also, our growth story is all about expansion and extraction. So — and in line with that, what we have also understood that painter and dealer plays a very big global when it comes to the selling of decorative products, wherein they have a better say they act as brand advocates — so we have taken that route to kind of accelerate our growth now and in the future also. So a lot has been done around painters. We have almost doubled the number of printers working with Shalimar. We have also doubled the number of painters [Indecipherable] who are buying every now and then and which is a clear indication of the resiliency or the equity of brand Shalimar going up in the marketplace.

Apart from that, we are going — we have also introduced some products in emulsion category, which have also given us some inroads in the marketplace. Also, we have 8 to 10 new products lined up for the future, which will further strengthen our product portfolio and our growth in the marketplace. So construction chemical space, we were not present, we have launched one particular product, which has taken off very well in the [Indecipherable] space, which has already been a INR2,000, INR2,500 crores now. And so as the size of the industry because it all developed in the last 5, 6 years time only, and we have launched one product into that particular by the name of [Indecipherable], which is doing very well.

We have also ventured into primers by launching a variant of primers. As I mentioned, we have got 7 to 8 more products to launch, and that’s all about definitive. And the focus on painter and the dealer expansion will continue with a lot of spend happening around visibility in the marketplace and onboarding of new customers and painters. We’ll go on to the digital platform very aggressively just to establish that connect with the consumer.

So that’s how it’s happening in decorative. And as kind of [Indecipherable] we are taking a leadership position, we are wanting to take leadership position, one or two verticals as far as industry is concerned by establishing our complete product portfolio basket of products. And since we are very strong in pipeline segment, we are aiming to be number one in this particular segment in due course of time.

Operator

Our next question is from the line of Amit Mamgain from Asian Market Securities.

Amit Mamgain — Asian Market Securities — Analyst

I think I had a question which was now well elaborated by Mr. Kuldip. My last question is, sir, could you just let us know the timeline for the warrant conversion both by Hella and the promoters?

Ashok Kumar Gupta — Managing Director

So I think it was 18 months. 18 months should be over in September.

Amit Mamgain — Asian Market Securities — Analyst

This coming September, right? And sir, even the OCD, I mean, OCD is optional, but okay perfect, I got your point. So this September is the warrant conversion, right?

Ashok Kumar Gupta — Managing Director

Yeah.

Operator

That was the last question of our question-and-answer session. I would now like to hand the conference over to Mr. Ashok Kumar Gupta for closing comments. Over to you, sir.

Ashok Kumar Gupta — Managing Director

Thank you, members. It’s really good of you to take so much interest on our company. I must tell you that it was a good year for us — we’ve grown company. And in all areas of operation that was a [Indecipherable]. And there has been a lot of cleaning up done in the organization in the plants and account, the assets. These things should give us results. Thank you so much for your participation.

Operator

[Operator Closing Remarks]