JSW Dulux Limited (500710) Earnings Call Transcript & Summary

So a wonderful good evening to all of you. Representing ICICI, it's our absolute pleasure to have the senior management from Akzo Nobel India today, talking to you in a small group investor format. There's only about 15 investors. It's a small group, so feel free to raise your questions at appropriate times later because we've got 60 minutes. So welcoming Rajiv Rajgopal, the Managing Director; R. Krishna, the Chief Financial Officer; and Harshi Rastogi, Company Secretary and the Chief Compliance Officer. Rajiv sir, over to you for your opening remarks. And if you have a presentation, please feel free to share that and speak. It's over to you. And after your remarks, we'll manage the question queue, sir. Thank you.

Thank you. Thank you, Manoj. It's almost good afternoon to all of you. Thank you for taking time out to join this call. I understand that it's a very busy day with a lot of results getting reported. So deeply appreciated. I hope all of you can see the deck, Manoj. Is it visible on your end before I go ahead?

Yes, sir. Please continue.

Well, I don't need to introduce these 2 people because they belong to television ad for Velvet Touch. We've had some fantastic reviews even from some of the analysts who've sort of reached out saying good to see it. We just showed that to our Board. And obviously, they were absolutely delighted with the sort of work that we are putting on the brand front, yes. So first and foremost, let me quickly run the deck. And what I want to do is get back to some of the directives that I've been sort of playing to you starting from 2018 when I took over the role. First, let me start with the business environment, just we're all of us on the same page. Well, I think all of us, with the same papers, they are not really too much. But suffice to say that -- if you want to look at it, the way I see it is the India growth is picking up, you're seeing spots. There are so many sectors which have started bouncing back. Real estate infrastructure started doing well. If you look at it, despite Omicron, the fact is many of the companies have started testing high single-digit, double-digit growth again in the last quarter. Remember last quarter for many companies, including in our industry, we had posted some terrific growth. So really, our growth on top of that is really what I call it separates the men from the boys, yes. If you look at some of the key economic activities, whether it's a core sector growth, expectations index, it's been on an incline. I think, of late, primarily because of the fact that there is a bit of inflationary pressures. And all of you know about it, I think that's the only concern that I think people have. I think the other two for us, from a business perspective, we keep a close watch on ForEx, but ForEx and crude [indiscernible] impact of that is [indiscernible] impacts -- a tremendous impact on the way we do business. So these are the 2 to watch out for as we start [indiscernible]. Our business update perspective quickly, just so I would once again run with Akzo Nobel for some of you who are coming for the first. We've got 5 sites, pretty much when I taken over with a mandate of sort of running it as a paints and coatings organization. What we've started doing between us, all the functions that work with us, we started making sure that we drive the business. And so if you look at, we've got about 1460 employees, 5 manufacturing sites, Mohali, Gwalior, Thane, Hyderabad and Bangalore. We've got our regional offices in Bangalore, so 5 offices. We've scaled our distributions significant, talk of 16,000 are actually the number [indiscernible] more closer to 20,000 retailers and 15,000 machines. And we got about 4,000 B2B customers, significant scale back -- scale up after the COVID wave 2. We've also got a world-class color center for ASC in Bangalore. And through this call, I'm also going to sort of organize a visit once we are able to travel wholeheartedly for some of our investors, those who will keep [ acting ] will reach out to you sure so that we can take you through our plants and show you some of the world-class color centers that we have, which are also some of the global centers that we've sort of opened. We also have a low-cost innovation center for driving differentiated products in Thane, and I will talk more about it as you need. So just to start with, this is the new purpose. For those of you who [indiscernible] investor call, our new purpose is about 3, very simply put people planet paint. And really, this is about making an impact to each one of the [indiscernible] we move forward. So I'll come to the quarter. Our focus has been to continuously drive innovations, disruptive technology and driving some industry for us. So if you look at it, what we've done is our flagship brand, Velvet Touch. We decided to put the brand back on air. We tried a few experiments. Very clearly, consumers told us that look Velvet Touch is including Dulux. And what we've done is we put a new ad just before IPL started on air, and then we've had some great reviews. We used a differentiated technology called Tru Color. And for those of you who are interested, do reach out to Harshi [indiscernible] seeing the impact of Velvet Touch on the walls. We've seen some phenomenal growth on the brand over the last couple of months. On the portfolio expansion, I did mention to you that when we started getting into differentiated products, consumers and customers will start [ loading ] with confidence of the sort of products that we do because of the sheer quality that we bring in. So FloorPlus -- Dulux FloorPlus has seen some phenomenal uptick, and we just launched it in 3 or 4 geographies. The third is in terms of exterior. We brought our PU into our exterior emulsion. So we've redefined crack proof with new technology [indiscernible] warranty on the brand, and you will see more to come in the quarters ahead. We also taken a 4.7% price increase in the quarter, in January and February, but in the last 2 weeks of January and the first 2 weeks of February, the demand was a bit soft because of the impact of Omicron, but we saw from the second week of February pretty much, and let me be honest, going forward, even through the quite recent times, a very strong uptick in demand. So we are seeing a strong turnaround, and that's what has let your company to be able to demonstrate superior performance. A growth has been led by premium category and if you really were to look at our project, business saw some heavy growth, unprecedented growth in the last quarter. I would just say that this is the first quarter where I can officially say that we've started gaining market share. And if you see in the quarter results, for the full year, we've become the second fastest paint growing company in India. And I'm so proud that all these small efforts that the team has been putting over the last many years has come to fruition and [indiscernible] better time when the industry is likely to see more players coming in, then we start really putting the stripes and now getting back into the field. So really, really proud of this. We started seeing some market share gains, of course, in our premium segment, but also in some of the other segments in [ growth fees ] in our paints business. We've also seen some very good growth in our coatings business. I'll come to that. So some of the other products that we launched included Simply Refresh in the quarter, which is our first DIY kit. We've worked with our U.K. team very, very closely to bring you some world-class products. As we speak, it is live in Amazon. If any of you are interested, please do reach out to us. We'll be happy to also share with you, we got a kit and the kit has got all the [indiscernible] instructions. We're also getting on video on how to use and also some commercials will be coming, which will be seen on the digital platforms very shortly. Our health and well-being platform, which is Better Living Dulux, which is the first bio-based paint from Tea Tree oil, is doing well. We started seeing some good uptick, and we want to sort of see how we can progress this quarter. [indiscernible] I think really what we think of being a challenger brand is the fact that you need to really disrupt the market because that's what you would expect when new players come in. [indiscernible] realize is we got to start working with the startup in the ecosystem to see what we can. So the entire team of Paint The Future for India is about saying how can you get your digital solution to boost the magic of paint and transform the way consumers experience Dulux. This entire Paint The Future is working around -- you can see almost about 9 platforms, things like [indiscernible] sale, how do you visualize better, how do you get personalization and experience when you get on the journey, how can you get trusted application, trusted adviser. So I'm just trying to [indiscernible]. We're getting -- we've got more than 100-plus applicants from the startup on our platform, and we are very -- working very closely with NASSCOM and IPP and KPMG on this to try and take this forward. Coatings, I think what really differentiates us is we've really done well in coatings in the last quarter too. So it's not just our paints business, which has done well, close to double-digit performance. But even our coatings business across -- I think the only business, which I would say I had a little bit of a slow start for reasons all of you know was automotive and specialty coatings business, we saw a slightly lower growth, primarily because of issues like the semiconductor, which impacted some of the customers in which we operate. But all our businesses have posted double-digit growth. And it's for the first time that I see all businesses in Akzo Nobel [indiscernible]. So whether it's in terms of projecting esthetics and assets, whether it's in terms of powder through sustainable solutions or looking at our beverage, internal, external of both the food and beverages, I think we've started getting some good, very good. Our challenge in this business has been the pricing. So pricing actions are slower because these are all time-based contracts. And as a result, our ability to sort of execute price increases has been a bit challenging, which is where at an aggregate level when Krishna speaks, all of you will realize that our [ virtual ] ends of the contribution margins have actually been slightly impacted by our coatings business. Nevertheless, what I'm really pleased is I've seen a lot of headlines [indiscernible] we are definitely on our paints business, having one of the sharpest margins in the [indiscernible] sort of sustained. Next -- yes, so this one I'm extremely what I'm proud about is the fact that we've got approval for super premium luxury paint coatings in our ASC business, right? I'm trying to be a little just louder if that helps. So exclusively provided for -- for example, for McLaren and BMW. So these are the 2 that sort of [indiscernible] and we will talk more about it if you have any further questions to ask. So on the planet, I think we are absolutely committed to our ESG, sustainability, the global -- the targets that are also being sort of taken in India and by 2030, we will have 100% of our energy requirements coming from renewable resources, and we want to reduce carbon emission in by 50%. We are also going to be playing a lead role in the shift to plastic as and when the regulations come out. And also in terms of rainwater harvesting, water conservation, we will start playing a lead role. On planet, one of the things we really want to do is to reduce emissions and waste. And there is a lot of work which is happening on harvesting solar energy, using a lot of [indiscernible] at our sites and also solvent recovery to reduce waste that's happening in all the sites that are producing solar. For people, I'm extremely proud of the work that our CSR team is doing. I'm sure as many of you are watching the LinkedIn posts that we post. We have opened a couple of academies. We are working very closely with some of the governments, and we are very, very proud to say that we have started equipping. And we are the first company to actually drive women painters into our society. You can see the 3 young ladies there, absolutely smiling because we've ensured that we start providing them livelihood. We are also starting an experiment that you see in the floor below to project, our Indradhanush in Northeast where we've started providing livelihood to almost about 100 of women to start with. And this is something that we've been expanding as we move forward. These women have also become entrepreneurs. So they are not just painters, but they have also started opening shops as a matter of livelihood and something that we have really, really felt proud of. We also provided a lot of telehealth, not just to our employees, and our customers, but also to all our painters because to me, the real impact should come to the society in which we work with. So this is another thing that we are very proud of. So it's not just about performance. It's not just about now having the mantra of regarding the second growth company, and it's not 1 quarter. It's for the fiscal full year, we've had a 30% growth. I think I would like to say these are baby steps of what we, as a team, are committed to sort of putting as a footprint as we move forward. Also proud of the fact that we got recognized as a great place to work. You can see my -- some members of my management team on the diversity and inclusion, BreakTheBias sort of agenda. You can see from the photograph itself that the men have started getting out numbered, something that I'm truly proud of and something that we will continue to join. We ran an initiative called [indiscernible] Initiative, which is about care connectivity, connective culture. And these are initiatives that I will talk more at the AGM to those of you who joined, you will get to hear a little more. So with this, let me hand it over to Krishna for the financial performance. Krishna, over to you [indiscernible].

Thanks, Rajiv. As you are all aware, we embarked on our Grow & Deliver journey in 2021. And I'm extremely happy with the progress we made in this ambition. At INR 3,149 crores of top line, we have achieved highest ever revenue with a strong double-digit growth both in paints & coating businesses. This has been achieved through our innovative products, customer-focused solutions and market share gains in said categories and geographies. As we recon, the ear has witnessed a significant inflationary pressures, and we took calculated pricing actions to mitigate the impact of this. By end March, we had implemented around 21% price increase with 4.7% price increase in the paints business in Q4. With this, the GM percentage in paints is relatively held, but when the benefit of pricing in coatings has been slower to translate, given the long-term value of the B2B business -- long-term nature of the B2B projects. And with the OpEx efficient -- with the efficient management of OpEx, ANI was able to deliver the highest ever EBIT from the operations at INR 356 crores. And at 11.3%, we also sustained the double-digit profitability for the third consecutive year. Profit after tax was at -- up by 40%. This also includes the onetime tax provision reversals pertaining to the earlier years. However, even after excluding this impact, the full year profit growth was the highest in the industry. Moving forward, as far as the Q4 performance is concerned, we had a strong finish of the year across both the businesses. While the industry witnessed some demand contraction due to the Omicron impact in January and February. We made a strong comeback in March, achieving the double-digit quarter growth in the fifth time in a row. As alluded earlier, our pricing actions are carefully calculated and -- which helped us to cover the inflation impact in absolute terms. We struck this entity in our EBIT from the operations and sustain the double-digit profitability for the 13 quarters, and the profit was flat due to the onetime adjustments of the one of the tax pending -- pendencies, which we cleared in the Thane factory. And moving forward, if there's one thing I'm proudly -- I'm proud of is that how well we manage our profitability in a volatile and inflationary environment, which clearly depicts that how the raw material costs have remained at elevated level. And -- but how steady pricing actions helped us to gradually reduce the margin dilution. I believe this is the testimony of our strong analytics collaboration between the functions and the faith in customers and partners. Regarding the cash flows, as India celebrates 75th year of independence this year, we are proud to announce a total dividend of INR 75 per share for the FY '21-'22 to commemorate this momentous occasion. This onetime proposal is subject to the shareholders' approval. We are grateful to our investors, shareholders for their unstinted support and remain committed to increasing the value for them as we're going forward as well. With this, I'll now hand it over back to Rajiv to confer his concluding remarks.

Thanks, Krishna. So I just want to say, it's -- for me, it's a very quite a [indiscernible] a journey of 1000 miles begins with a single step. I'm reminded because many of you have been a huge support and I just want to thank, I wouldn't call out, many of you on this call who have very -- been very patient and been a great support and encouragement during the last 3 years. So if you look at it in 2018, '19, many of you had highlighted concerns about Akzo Nobel India performance. At that point of time, with a lot of butterflies in my stomach, perhaps now I can say, I'm committed to our performance of growth and double-digit profitability. Some of you did ask me, which one are you sure off and I said double-digit profitable because Akzo Nobel has given me most embarking on a 15 by 20 journey, but I did also put my hand out and say we will start getting growth. And we will start not just getting growth but also getting significant growth. Through the years, we've invested in brand distribution technology to bring up, in my view, some great innovations from a consumer point of view, and we are now working on some disruptive solutions. So in the journey, I think getting the INR 300,000 crores top line and delivering a very strong double-digit profitability is something that truly sort of has been [indiscernible]. But what also came as a surprise after all the results came in yesterday, was to see that we've also, in a way, for the full year, become the second fastest growing paint company. I think, look, for us, it is about the journey. We are committed to this. We believe, like many of you have reminded me very often, that it's a great brand. It's a great company. And now the time has come to really start making sure that we done it. What I'm really pleased about is the fact that we had lost market share in a couple of years, and we've really started putting it back. And we've got the analytics out-of-market brand category level. Obviously, [indiscernible] understand I'm concerned that I cannot share that, maybe the excitement and the voice after we've got some of the analytics even yesterday, just gives me satisfaction to some of the baby steps that we've got some of the strategic drivers that we put in place that they seem to be working and seem to be in the right direction. So that's what we're going to see. I want to thank you to all of you once again for your time, and I look forward to all your questions. With this, let me hand it over back to ICICI. So, Manoj, I'll leave it back to you.

Thank you, sir. [Operator Instructions] We have the first question from the line of Chanchal Khandelwal.

Yes, please.

Chanchal, kindly unmute your line and go ahead with your question.

Chanchal, we can't hear you. Chanchal saying, can't talk.

Chanchal, can you unmute your line and go ahead with the question.

Yes, now it's possible. Can you hear me, Rajiv?

Yes, yes.

Yes, we can hear you.

So congrats on a good set of numbers. I mean, I got to know today it's a 75-year-old brand in India. I'm sure you have a bigger right to win and the journey has just started. My question, Rajiv, is if you can talk about the new launches? I mean, a couple of launches looks interesting. And also on the mass and economy segment, what are you doing steps to gain market share there, that's a bigger part of the market?

So firstly, our launches have been across the portfolio. Let me start straight with answering the questions that you asked. We have launched our mass and economy product called Dulux Promise SmartChoice. The reason we took time was we wanted all our launches because this is coming at a price point of INR 80 a liter, right? INR 80, INR 90 a liter. It has to be accretive to the margins that we work with. So a lot of time went in making sure that the formulations are [indiscernible]. And we are able to give a good product, right formulation without sort of -- we're destroying the margin profile of what we already do. With that, let me tell you that is the single brand, which has played a huge role in our recovery between 2020 and now. So very clearly, we're committed. We are also going to be bringing in a few other categories as we speak, but before Diwali, some more of mass offerings and mass products as we move forward. You will start seeing it, I'm sorry, Chanchal, I won't give you the specifics. But between now and Diwali is just 3, 4 months, you will see some more interesting products coming in and formats coming into the mass and economy. We are committed to it. As I mentioned, our distribution 2.0, we have now started -- see, when I joined this company in 2013, we were covering 800 towns in the country, right? When I came back in 2018, we had moved up to about 2,000 towns. As of this morning, we've got a BI dashboard, which showed me that we are today almost in 4,700 towns out of 11,000 towns. Our journey is, in the next 2 years, I want to reach 9,000 towns. And for that, getting the right portfolio assortment, it's very critical, hence mass and economy is going to play a great role. But as you do that, we also want to make sure that we are able to defend and grow our premium segment. And that's some of the work that we've also done because that's how we've sort of make your margins accretive to what you do. And so the work on Dulux FloorPlus, Velvet Touch, or Dulux Weathershield Powerflexx and Max, also the FloorPlus, et cetera, are in that direction. So some of the products we launched, we've talked about, Chanchal. So Velvet Touch, Tru Color, we've launched FloorPlus. We've just launched Simply Refresh. We are testing it in Delhi. We're already testing for it. We've launched it both on Amazon and on the retail shops. We are testing for a few things on hypothesis on pricing, et cetera. We've got started getting some feedback from the outlets where we sell and then we will start making it sharper. We've also developed a new communication, which will be ready by July, August, and we'll then start going through that -- on that. And DIY, the way we are driving DIY in India is not just through consumers who want to paint, of course, it's for them. But we also understand that large part of the application is done to painters. So we are also going to put a program for painters who want to teach the consumers how to apply DIY products. We're very clear to do it. So that's something which is also very interesting. In the project side, we launched an anti-combination offering. And I must tell you, as infrastructure goes, that product is getting [indiscernible], and that's another thing which is driving [indiscernible] Chanchal?

Yes, I can -- yes.

So on our coatings side we basically put a couple of [indiscernible] ASC is doing well. Our metallic bonded powder is doing very well. In fact, to your question, we will be adding capacity in our powder and paints business in the next years.

Sure. One more question, if I may. So your other expenditure has not gone up. I mean you have cut that spend probably. I mean, given the time when you want to gain market share when there's a competition coming up, a big group entering this space, I mean, if you have to be the #2 in terms of growth going forward, you'll have to spend. And maybe this quarter, you had Omicron, so that could be the reason. But just your thoughts here.

Yes. So my thought is very clear, Chanchal. Thank you for your question. We have dropped to about 3%, 3.2% [indiscernible]. As I mentioned to you, we are committed to taking it back to 5% [indiscernible]. Obviously, we will thereafter spend where it is required. So really, some of the work that we are doing on the interior, exterior products and some waterproofing brand. Also we just -- we are able to launch our digital film in a couple of weeks. We -- and also the new formats that we are launching. You will see a lot of work happening on advertising and [indiscernible]. So all I can say is this is a line that I'm personally now holding and we've taken Vandana Krishnia who's been a pretty high performing marketing [indiscernible]. In fact, she just finished the presentation with the Board and I think the Board recognized we've got a truly good market here now. And so that's how we take it forward, Chanchal. This is something that we are monitoring. We are very cognizant of the fact that a lot of new players have come and one more new player -- large player is coming in. So we are sort of cognizant of it. We'll continue to track the brand because that's our biggest asset.

We have the next question from Aditya Bagul.

Hello?

Yes, please go ahead.

So sir, a couple of questions on the quarter. One is maybe for Q4 or FY '22 ...

Chanchal (sic) [ Aditya ] you'll need to be a little louder please if you can.

Am I audible now?

You're audible. It's a little faint. That's all.

All right. Let me come back in the queue.

Okay. No problem. No problem. We'll wait. [ Rushad ], you want to take the next?

Let him just dive back.

Yes, we have the next question from Dipen Sanghvi.

Hi. Am I audible?

Yes, you're audible.

Thank you, Rajiv, and congratulations to you and the entire team for a good set of numbers. My question is on those couple of data points you had shared in the presentation about the extent of raw material inflation and the cumulative price hike taken. Can you just elaborate a little more if the same number, how does it look when you compare B2B and B2C. For the full year basis, what has been the increase in the RM inflation and the price hike taken cumulatively for both similar to B2C?

So Dipen, let me hand it over to Krishna. He will first give you the [indiscernible] and then I'll come back.

Yes. What we have seen on a full year basis, Dipen, is that around 45% is the RMPI inflation. And our pricing actions -- cumulative pricing actions is roughly around 21%. So we could be able to cover absolute terms in terms of the RMPI. But as a percentage, we have declined on a full year basis by around 200 basis points.

Right. No, I was referring to somewhere you had mentioned that you had some -- there is some lag in terms of taking the price hike in the industrial or the B2B business. So I was just trying to get the bifurcation over there.

B2B business was about, I would say, about 2 percent points lower than the [indiscernible].

Sorry, your voice wasn't clear. You said 2%?

Yes, 2 basis points...

Okay, 2 basis...

200 basis points.

Okay. Okay. Right. Okay. Secondly, in terms of the big news these days in -- the kind of CapEx that Grasim has announced for paint business, there are concerns in the market about the overall impact on all the players in the industry in terms of profitability and growth, et cetera. What are your thoughts? And how are you reading those kind of investments and whenever they launch the product? How are you preparing yourself if at all, you see any meaningful impact in some of the segments?

Yes. So first and foremost, look, I think it's too early to react because it's truly news. That's something even the Board sort of asked. Obviously, we need a little more time to be able to put our thoughts together. But let me tell you, in a way, even before this announcement came, the fact was we already knew that they were spending an adequate amount of CapEx. [indiscernible] incremental relation, which is all quite significant, right? So I think, look, we are trying to get in is what is our product [ support ]. In my understanding, they are leveraging the strength of the cement business to launch the paint business. So obviously, when they start doing it, they're going to come into categories, particularly around the economy and mass, distemper, putty they're already present through their sister company on the cement side, right, and then slowly find their way. It is a very easy journey? No, it isn't. When you've got many new players who [indiscernible] I can ensure with a little bit of humility, every player will tell you, including us, that is not -- it's easy to talk, but it's very difficult to [ dislodge ] because there is a way the business runs. I think the business, the paint business, the drivers of the business have the brand distribution, paint distribution [indiscernible] machine is very important. It gives velocity and it gives return to the dealer on a daily basis, right? So I think there is a velocity of a brand. There is distribution. There is also in terms of some of the innovations and thought leadership that some of the players have gotten. So coming new, there will be new news as even some of the players who have come in recently have done, right? In my view, there are 2 things that will happen. One, overall, the market will expand. There is also a sizable amount of local players, right? Even if you look at post COVID, and you take the results of the top 5 companies now, pretty much if you see the companies have been growing. And what's happened is there's been a shift from the unorganized to the organized and within the organized to the top 4, 5 players, right? That is plan getting driven more. I do see also a fact that one will have to be very careful in terms of how they will leverage their cement business to bring in strength into the paints business. We are working on it. And what I can assure you is we are working on a strategy. It's too difficult for me to sort of disclose at this point of time. But we are looking at all options because the reality is Akzo Nobel -- for Akzo Nobel globally now, India is a very key market. And from a growth perspective and an incremental growth perspective where I can personally tell you, right? I know that my global CEO [indiscernible] because it's a good position to be in. I really wanted to be in that position because I do think that the global players really taking India -- the India growth story quite seriously. I think it was important to demonstrate that India business can do it. Remember that we have been coming out of lot of years of [indiscernible] performance seems to be shy. This is what all of you [ could ]. So I think my first job was to do what we say and then start performing a little better than what we've been talking about. So we are in that zone where we've started doing what we say and getting into that zone of being slightly better. I think we have to sustain it and then we will come back to you also in terms of what the specific strategies. We are working on strategies. We are also working with our global technology team because disruption in the paint comes through products and formats and solutions and also customer service. So we are working on each one of these elements.

Okay, sure. And just the last one on my previous -- related to my previous question. With the kind of price hikes you've taken, are you seeing any impact on the volumes and the demand as a result of this increase -- such a massive price hike which has happened or not really?

There will be -- at this point of time, you don't see clearly [indiscernible]. I think there are many other factors also playing in, right? I think one will have to wait for another quarter or 2 to really see the impact. Where I would think it's a better position to understand is more closer to [indiscernible] . That's where you really start seeing. So when we have the next quarterly call in August, the AGM is the time you should ask me this question. I'll be in a better position [indiscernible] but look, the reality is that the prices are still not relenting. Krishna talked of [ 24 ], [ 25 ], that's great for the last quarter. Let me tell you this quarter, it's further grown out, right? And if you look at it, we took another 3% price increase on 1st of May, right? Are you seeing what the other players have done? They've taken 1%, 0.8%, right? They are still doubling. We are very clear. I'm very clear in my mind that just because our target is behind we're not going to be -- give you an exclusive pricing, but I'm going to reinvest on the brands, make it sharper and start playing aggressively. There's no other way for a player like we do. So we sort of make sure that we sort of deliver on a promise.

We have the next question from the line of Srinik.

Am I audible?

Yes.

Sir, my first question is on the decorative side, sir. Could you explain what is the current network as of today? And what are our plans for the next 3 years to increase this distribution given the competitor intensity is increasing?

So look, we are almost close to 20,000 dealers, and we have close to about 15,000 [ printing ] machines. If you look at in terms of incremental, we continue to add about 2000 machines a year that -- so that's what we planned to do. And you will look at it. The way we go out is -- we've got -- we are working on a strategy very clearly to identify which are the geographies based on per capita income, et cetera, which is our business, we should target. Out of 640 districts in India, which are the ones which will give us a better return for what we do because, remember, any of these districts, we have to also -- it's the first time for brand Dulux also which being an advertising brand in -- in the urban centers. In the rural centers, we have to also create a salience for that brand. So there is a lot of other activities that have to go in place. So we want to make sure that we are doing things which are accretive. So that's the journey we will do. And our target is that, look, we will take a point whether it's 25,000 to 30,000 outlets, depending on what we believe is going to be accretive to our revenue growth on a sustainable basis, right? Our retention of our dealers has been very sharp, and has been closer to 93% to 95% despite the fact that we took a price increase ahead of [ market ] and we sustained it for almost 4 months. We did lose a few large dealers in between. But what I'm glad is the moment competition took the price increases because it was inevitable, many of them have come back and started backing even stronger because they realize that what we did was ethical, true and value accretive even from their perspective.

Yes. Yes. Sir, on the industrial side, over the last 1 year, how much prices have you already taken? And how much more is required to offset the cost impact?

So I think Krishna said, 2.2%. If you take 20 months, the average, we are almost 2 percent points [indiscernible] on the investments. Even right now, speaking to our customers on price increases, given that the RMC is still a little volatile, it's like asking me what is the crude price likely to be. Honestly, I don't know. I see 1 day it drops to INR 102, INR 105, next day it's back to INR 120. We'll have to see. A lot of external factors are driving it. My belief is that industrial -- our coatings business will continue to, at least for the next couple of quarters, come close to or deliver double-digit growth. Krishna, you want to add?

Yes. Just to add, Srinik, a couple of points here. One is that all the new contracts with the inflated prices or increased prices, the existing contracts, which are long term in nature, maybe which we have already covered around 70% of the contracts or projects with the revised prices. So that's the summary of how the pricing actions are being taken at a customer by customer and the business level in the coatings.

Srinik, I hope we've answered your question.

Sure. Sir, just last question, sir. On the split of deco versus industrial, what is the split in FY '22? And what was the volume -- yeah, sorry?

65%, 35%, Srinik.

65%, 35%?

Yeah.

I just want to, [ Rushad ], also invite Aditya because he's back on the line if his line is working.

Yes, sir. So Aditya, I request if you would unmute your line and try and speak out.

Yes, [indiscernible] audible now?

Could you be more closer to the speaker a bit and ...

I guess there is some [indiscernible]...

Okay. Go ahead and ask your question, Aditya, if you -- [ Rushad ] if you were able to listen you can just tell me in case I have...

Right. So my question is two things, right? One is when we look at Q4 numbers, what we've realized is that the gross margin, some pricing that we've seen is lower than most of our figures. So I just wanted to understand if there is a mix element to that. So have you seen a positive change in terms of our mix to our decor or more value-added coatings or some other segment, so that was question #1. And question #2 is you have answered some of it as possibly could. Potentially, what I wanted to understand is [indiscernible] from the cement dealership. Are there any other sort of strategies that you think that we will go through and how are we [indiscernible]?

Okay. So let me try with what I've heard. Aditya, if I miss something, [ Rushad ] fill me in. Your first question was on the margins of the fourth quarter. Is there a mix -- favorable mix impact? The answer is yes. There is a favorable mix. Within the paints business, we saw the metros and Tier 1 terms growing faster while we also saw Q3, Q4 going actually one of the fastest in the last 5, 6 quarters. But the contribution, we already went reinstalling metro and Tier 1 in the bounce-back despite Omicron being there. So it was favorable. And within that, our premium segments have seen a bit of a faster growth. That said, what we saw is a bit of all of [indiscernible] where at the top end and the bottom end, which is the premium and the economy grew at dramatic levels, in between, which is the mass segment, didn't grow as fast as we expected it to. But that's something that sort of corrected and we've already seen some very sharp recovery in the last 1.5 months in this quarter. On the second part, I think your question was with regarding to the new player. Your question was other than dealers, what are the other ...

Cement business.

Yes, other than -- cement dealers, what was the question?

What are the new channels...

What are the new channels -- was it new channels? Or what are the new strategies?

That was new strategies, sir. So potentially what are the -- what according to you is their go-to-market approach and how are we trying to certify it?

Yes. So look, firstly, it's a very formidable player. So I can understand the reaction of all of you in the market, et cetera. But with that said, I just want to run through a bit of history, right? I worked in a previous company called Airtel that I was running in Tamil Nadu where Airtel was the #3 brand. And when this player came -- it was the market leader in Kerala for [ many years ] came in to Tamil Nadu, and I was told by everybody that it [indiscernible]. I think as long as you're focused on your strategy, reality is today Airtel is a market leader in Chennai and Tamil Nadu right by a mile, but I left it [indiscernible] INR 4,000 crores. So I just want to say that from that example, this is what you do with your [ branding strategy ], right, which is a formidable player. We just got some great people, I acknowledge. And there is no point getting worried. In the 1983 World Cup, if Indian cricket team got worried about the West Indies fast bowlers, we would have never won the World Cup, right? So I think we are taking lessons from that. What we are doing is we are putting a strategy which I can't enunciate of course because it's obviously strategy and hence you must appreciate is a little classified as far as I'm concerned. But with my top team, we are putting a sort of a strap on some of our key channel members, our key channel partners, our key customers and our employees. The reality is some of -- and these are the places where, for us, you would see signs of a bit of a change. The other thing, remember, we are the only player in this entire country that puts any service, right? We coated an airplane, we coated Indian Navy, we coated the Indian submarine. We coated American Pentagon, right? So understand the power of what Akzo Nobel brings on the table, right? How to be a part of this organization, which has got some great [ lineage ] and connect with Akzo Nobel. So I think this is now time for us to bring it to play. Otherwise, [indiscernible] English. And that's what my R&D team, which is housed in Bangalore and in [ Bombay ] working day and night. I was saying how can we unleash certain disruptions, and we have to do it at the appropriate time. Now whether we've worked, how successful we are, only time will tell. But I think what we are trying to do is we are putting what I call a [indiscernible]. I call it an elevator pace because that's my sort of running with the global CEO. When I have a call to say that, look, what do we need to do in India to make sure that we hold, cement our position and start going forward. So that's really the, in short, that we're thinking. Krishna, you want to add something?

I think, Rajiv, to tell you, we've got it well. I think we are very clear when we [ jabbed ] over the strategy of Grow & Deliver. We made an efficient organization in 15 by 20. And now when we said we will Grow & Deliver, there are apprehensions and there are questions that -- on the growth part and we demonstrated that. And I think we'll continue that with our loyal customers and the end users.

So Aditya, again, I don't want, as I say, last 5 quarters is not enough for me. People who know me, they know I'm quite restless, and it has to be -- I'm not here to play into the league matches or into the quarter finals, right? So I think that's where I come from. So we give it our best, what that it is, with a lot of blessing and maybe divine intervention too. Hopefully, we will continue to sort of continue our market. Aditya, I hope that answers your question. Manoj, you want to raise your hand?

Yes, sir. Sir, quite a few questions actually. First, we have been interacting with you for a while. Look, when I take a step back and go 24 months, 36 months back, how much of, let's say, what you would have thought at that time would have got pushed back because of COVID?

Quite a significant amount, Manoj. So very good question. So I'll tell you what it's been. When COVID happened, we are a true-blue company. And so I followed all the instructions to it. So we didn't launch sanitizers to [indiscernible]. Honestly, that's not the upgrading [indiscernible] having worked for similar companies in the past like [indiscernible], right? So for me, it was about resetting the organization. And I must say the team -- my management team has worked very closely because we realized that some of the 3, 4 big innovations that we wanted to put in, all got derailed by because the priorities change with such an intervention, right? You saw that in the market. We had to then focus first on the economy segment. So what we did was we went the other way around. So to the question that some people have asked us in the past that how seriously you got your mass and economy? We are very serious because to be able to launch Dulux Promise SmartChoice in Akzo Nobel, I can tell you, it required the blessings of my line manager, the Global CEO and the other new teams because it was impossible to try and explain why you need to do it, particularly when you're coming out of COVID and you need to protect your margin. But I must say the sort of response you've seen, this brand has retained the highest volume in a single year for us in the last 3 decades. So the moment we started doing that, the moment we started seeing it's getting accretive. So the way we run the business, we started getting a lot more tools. So to answer your question. Yes, there was a derailment, I would think by at least about 3 to 6 months from an R&D perspective, even a little more because many of the tests we do, for all the new products we launched, we do a lot of trial tests here. So we do test in our -- Research in Haryana labs. We did the test in markets like Cherrapunji, for example, an exterior to test rainfall performance, et cetera, all that got [indiscernible]. So to that extent, Manoj, it's a fair question. What you started seeing now is still just what I would say the trailer while some of the things that's yet to [indiscernible].

Understood, sir. Understood. I'll take -- I'll continue this offline on this particular aspect. The second thing was on the ancillary products, actually, yes, you did allude to paints, the new products what you have done and also thanks for the insights on the promise, profitability aspect, et cetera. But if you could talk a little bit more about the other products, which is adhesives or waterproofing or anything which is "putty included" which is ancillary?

Krishna, do you want to say something?

Yes. No. I think, ancillaries -- can you just -- your line is not clear, Manoj.

No, no, my question, with the noise around me, silly, I was just kind of unmuting very quickly. No, what I was asking was essentially the -- where are you in the journey of ancillary and what are your aspirations there?

So let me take that one. So look, I think on the journey of ancillaries, waterproofing is doing remarkably. We are looking at saying how can we sort of get a higher presence. That's something that we will talk to you a little later about. I think the first sort of results we got on Dulux Aquatech and I'm sure all of you are doing your channel checks, is very, very encouraging. We've also -- as I said, launched our entire Simply Refresh paint DIY, where we've also put certain kits, which are also for the first time. So really, our thinking around -- working around some of these fast-growing adhesives business and we will talk more about it, Manoj, I think, during appropriate times because some of it is still, what I call it, a bit classified. Sorry for reasons you can appreciate. We can't sort of get into sort of giving specifics.

Okay. Understood. No, no. My question was more to do with the aspiration, Rajiv, it's not necessarily about, for example, the comment about the promised profitability helps me understand up a little more finer about [indiscernible]...

Manoj, sorry, we are losing you.

Yes, he's back, he's back. Manoj, we couldn't hear a part of your question. Could you please repeat it?

No, no, no, which is -- no, no -- which is -- I was just saying that the aspiration part was more important, not necessarily about anything in the short term, sir, actually, for example, let's say, would you have an aspiration to be a top 3 player or a top 5 player. For example, in paints, we are very clear about what you are gunning at, right, which is what I was getting it?

Yes. So Manoj, let's be honest, okay? And I'm a very practical human being, I like very ambitious lofty growth, but I also believe that there's a practical side to it, right? So because I'm also conscious of some of the history that we've had in this company that many of you enlightened. So what I said, if you remember is first, we will continuously deliver double-digit growth because one of the biggest challenges that any industry faces for our #4 player is, are you doing things which are going to be value accretive, right? Because all of you are putting your money on this company, for those of who are investing, you must not have any stress either in terms of governance or in terms of profitability of the business, probably that's #1. #2, of course, in countries like India to get growth, right, it has to be growth that is going to be value accretive. So it has to be profitable too, right? And that's the journey that we've embarked. So yes, we will start playing it. We have a clear ambition, but I'm not the sort of a person who likes to sort of advertise some of those ambitions to demonstrate it through performance. So as we perform, we will give you. Our first move when you are #4 is to become #3 and then to become #2. So for me, I'd like to climb one step at a time. I think we've been in the #4 position where I've heard in the last many quarters [indiscernible] count from many of our other players saying how they will move into these positions. So for me, it was important to cement it and take it forward. So we will take it like that, Manoj, quarter after quarter. We are there. They're lying there. We'll continue to interact and hopefully learn during the process.

Understood, sir. Just quickly a couple of more, and I'll come back in the queue. One, if you could talk about the, let's say, strategy and execution, both on this service part of painting. And the reason I'm asking is because given that you have a premium portfolio predominantly and it is indeed very premium, quality, pricing, everything actually, right? So the context here is that if there is one player who should be investing ahead of the curve in the service business, it is you, right? So which -- I'm not sure which is actually I find in the market, maybe I'm missing that. So any comments on the service side of it would be very helpful, sir.

You're absolutely right, Manoj. Let me be honest in my first [ intro lines ] when I handled the paints business, that's pretty much it and that's what I did. We opened the top 10 cities, Dulux Painting Services. But what happened is during 15 by 20, this was [indiscernible] to the margins -- to the EBIT margins that we were sort of [indiscernible] we have to reinstate it. Also, what we started seeing is started seeing a lot of people getting into it. So it became almost all [indiscernible] in different markets coming in startup, setting up their own [indiscernible], right? So one [indiscernible] but we believe that like you say, it's a bit [indiscernible] premium. And as a result, we are going to be coming back with our painting service. I'm not [indiscernible] today or talk about it. We want to put the entire back end, front end. We've put some [ pioneers ], take some learnings of how we can make it better. We already have a strong lead management process because we're daily on CRM now. So get all that done and then I'll come back to you, hopefully, not too late but when there are more robust plan and to delight [indiscernible].

Sure, sir. Sure. Thank you, so much. Good luck. I'll -- I'll come back and catch up later. Thank you.

[ Rushad ], any couple of questions?

Anirudh Joshi has his hand up. Anirudh, would you like to ask a question?

Yes, sir, 2 questions. One, obviously, considering the growth in revenues of Akzo versus peers, there is a definite market share gain in decorative paints. So if you can elaborate more on it whether we have gained market share in the premium or the value for money paints, whether it is enamel or emulsion or if you can also indicate where we would have gained the market share because some of the players have indicated that they have lost some market share in North India. So whether Akzo has gained in North, East, South, West? Any details on the market share gains? Any color?

I appreciate it. But okay, let me give it a bit of a jab. We've got all this that we tell. We've got by market, we've got by customer, we've got by segment, we've got [indiscernible] some of that. So just to answer to your question, yes, we've gained market share. But let's also phase out on this fact that we have eroded market share in 2018 and a bit in 2020 when you look at our results. And it's -- basically '17, '18, we eroded. We started pulling it back in '19. But during COVID, we eroded a bit of market share. Now we're similarly in a year which has really put it back, right? And I'm talking of paints. I understand that there are lot of classifications like decorative categories. We only sell paints and coatings. We have no other products that we sell. So on that note, what I would like to say is we've seen market share growth in 3 regions, North, East and West. We have not been able to grow our market share in South. That's something that we are cognizant of. We had sort of put this our own plan in couple of states to start getting it [indiscernible]. We are seeing some early signs of even there some slight improvement in terms of cash. So these 3, we've done well. We've done well in both our retail and project segments in paints. But why paints, even coatings, I must say whether it's the powder segment or whether it is on one of the specialty coatings, we've gained share in some of the premium segments we operate. In powder, we only bring premium and mass. We don't play in the economy segment. And similarly, also, if you look at our BR business, vehicle refinish, we really play very well in the mass and premium. We don't play too much in the economy segment, right? So in these segments, we have started gaining share. We are going to now combine and leverage to see how we can all win together, which is one of the tasks around Nobel to see how we can start playing together and which we embarked on and use the trends of each of the businesses to leverage on the other as we move forward. I hope I've answered your question.

Sir, last question. Now Akzo has introduced multiple premium products. So the way the market is thinking about some downgrading or down trading happening in paints consumption and likely some of the unorganized paints also coming back on track. So how do you see the growth for the premium paints in next year?

No, I see a strong growth. I see a strong -- so 2 reasons. Let's look at the impact of India and of Indians like us, right? I think parts of the market and segments which were impacted are the middle class, right? Actually, what are the sad reflections of the entire COVID and you're reading a lot of it, [indiscernible] rich is becoming richer and the poor is becoming poorer, it's a real sad [indiscernible]. Honestly, for people like me who come from very humble backgrounds, I think it's a [indiscernible] quite sad, right? But given that, within the premium segment, a lot of people have not been for last 2, 3 years going to movies, going on international vacations, a lot of others, the big fat Indian weddings, all have literally got curtailed. Of course, that will really start coming back, but one of the things that has happened is people are spending more time at home. Even now, many organizations are still, including us, are giving still at least 1 or 2 days work from home. In that scenario people like to working at home that they believe is something that we feel excited about and that's where the role of paint comes in. And that's where, in my mind, the role of premium paint comes in because many of the offerings that are there are truly something that consumers like. When you ask the consumer, whether you use Dulux Velvet Touch, I think 9 out of 10 people know Dulux because of Velvet Touch. So really, I see the premium paint, at least till Diwali this year, right? And I believe in taking it slowly and steadily. Yes, there will be an impact over inflation. Yes, there will be some -- at some point of time, some down trending. But at this point of time, I see premium growing very, very well. At least good, strong double digits for a couple of quarters, and we'll have to see how has the impact of the inflation, has the impact of the home loans and car loans that impacted people [indiscernible], right? There was an impact because of fuel cost, but that fortunately, the government has taken a very good action as a result of which at least some [ breather ] is coming back. So really, can we -- is there any one last question, happy to take it. So because -- and if there are any further questions, do feel free to write to Harshi, and we are happy to sort of connect at a later point in time.

Yes. So we've completely run out of time. So -- and as there are no more hands raised, I think we can end the call. If there are other questions, we'll definitely forward them across to you, sir. Thank you very much for patiently answering all the queries. Thank you, Rajiv, Krishna, Harshi. Thank you all the investors for also making this an interactive session. We would now like to end the session.

[ Rushad ] if you can just give me a minute. What I would say is, look, for me, going back into this role in November 2018, it's been -- you would agree, many of you would [indiscernible] time, right? When we first started getting [indiscernible] in 2019, and then by early 2020, COVID wave 1 hit us and what it was? We started bouncing back and then you are [ very cool ] at us, but what I really want to thank is all my partners, all the channel partners, all the entire team, all employees across the length and breadth of Akzo Nobel India and most importantly, many of you have personally reached out to me saying that we hope to see you fight. We are very proud of this brand. We are very happy to be investors in this brand, and we really hope that we will feel you will sort of continue to raise the bar, right? For me, it is also an opportunity to hold the India flag for Akzo Nobel India and the India country flag, as my global parent looks at me. I think for me, there can never be a better opportune movement. And really, these are moments for which professionals like me work for. So thank you for all your faith. Hopefully, we started in a small way, coming back to you, and let's hope that we will sort of not do it so, but we will continue this run. And we will look forward to your continued support as we move ahead. Thank you, [ Rushad ]. Thank you, Manoj. Thank you to each one you. Good day, bye-bye.

Thank you very much, sir.