Pidilite Industries Limited (PIDILITIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Pidilite Industries Limited Q3 FY '20 Earnings Conference call hosted by AMBIT Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prateek Maheshwari from AMBIT Capital. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. On behalf of AMBIT Capital, I would like to welcome you to the Pidilite Industries Quarter 3 FY '20 Earnings Call. From the management, we have with us Mr. Apurva Parekh, the Executive Director; and Mr. Pradip Menon, the Chief Financial Officer. We will now begin this call with the opening remarks from the management and then we'll have the floor open for Q&A. Thank you, and over to you, Mr. Apurva.

Good evening, everyone. This is Pradip Menon here. Amidst a challenging market environment, Pidilite has delivered a resilient performance. While top line growth remains subdued, earnings have improved substantially, primarily as a result of softer input costs. We remain focused on driving volume growth enabled by investments in brand building, growth categories, capabilities and sales and distribution. I'll begin with a summary of the financial performance for the quarter and 9 months period ended 31st December 2019 for the stand-alone business. Net sales for the stand-alone business at INR 1,652 crores grew by 5% over the same quarter last year with underlying sales, volume and mix growth of 3%. This was driven by a 13% growth in sales, volume and mix of Industrial Products and 2% growth in sales volume and mix of Consumer & Bazaar products. Net sales for the 9 months ended stood at INR 4,982 crores and grew by 6% over the same period last year. Lower growth was on account of the higher base of the prior year. For the quarter ended December 31, 2018, we have delivered a double-digit volume growth, predominantly on account of price increase announcement from January 2019. Material cost as a percentage to net sales is lower by 629 basis points over same period last year and 25 basis points versus prior quarter. The same was also lower by 385 basis points in terms of compared with the 9-month period. The current spot price of our major raw material, VAM or vinyl acetate monomer is around $850 to $900, while consumption cost for this quarter has been at $875. This is comparable to quarter 3 consumption cost of $1,300. EBITDA before nonoperating income stood at INR 430 crores and grew by 32%. EBITDA for YTD December '19 stood at INR 1,200 crores and grew by 16% over the same period last year. PAT at INR 330 crores grew by 47% over the same quarter last year. Effective tax rate for the quarter has been reduced from 32.3% to 23.8% due to a reduction in corporate tax rate and remeasurement of deferred tax liability. For the 9 months ended, PAT at INR 942 crores grew by 28%, and on an underlying basis after excluding exceptional items at 38%. Now coming to consolidated performance. Net sales at INR 1,916 crores for the quarter grew by 4% year-on-year. Material cost as a percentage to net sales is lower by 661 basis points versus the same period last year and 41 basis points versus the prior quarter. EBITDA before nonoperating income stood at INR 464 crores, a growth of 36% over the same quarter last year. Profit after tax at INR 346 crores grew by 58% over the same quarter last year. Moving on to our subsidiaries' performance. Domestic subsidiaries have had challenges on growth and profitability on account of direct exposure to ailing real estate and auto segments, resulting in adverse demand and liquidity conditions. We have significant focus on cash flow, customer credit assessment and tight management of receivables and expect things to improve further. Nina Percept and Cipy, our 2 subsidiaries, have improved their performance as compared to the first half of the year. They continue to operate in challenging market conditions in the wake of slowdown in their respective sectors. Total EBITDA growth of 37.7% is primarily driven through ICA Pidilite due to scaled up local manufacturing and Cipy due to efficient sales mix and lower input costs. Moving on to our international subsidiaries. Subsidiaries in Bangladesh, Sri Lanka and Egypt have reported a good growth in sales. EBITDA is lower in Bangladesh due to investment in additional manufacturing facility. Sargent Art, a division of Pidilite USA, and Pulvitec do Brasil reported sales and EBITDA growth for consecutive quarters, mainly due to growth in key products and customers. The subsidiaries in Thailand reported decline in sales and EBITDA growth for the quarter due to the one-off large project executed in the same period last year. That is all in terms of the opening remarks, and we would like to hand it over back to the host for questions.

Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.

Sir, good expansion on margins, sir. That's my question. So in the past, when we have seen such a sharp expansion, after that, the next 3, 4 quarters, there is a strong erosion in margins also and because these margins are very high. So fair to expect that you are taking some price cuts so that volume growth can also be healthy. Any comment on the pricing, which you are taking currently?

Abneesh, as you know, we have been taking price adjustments from time to time. We had increased discounts in some product and also we had done some price adjustments in all quarters of this year. And we will continue to do so purely on a need basis. So wherever we believe there is a need and where we believe that some price adjustment would help us improve sales growth, we will do that.

But are you quantifying till now, Y-o-Y basis, say in December quarter, what was the price growth, price dip? Some comment on that?

The price reduction was in few product categories. Overall, impact, at the company level would not be very high. But in few product categories, we did some price adjustment. We do not believe that any significant price adjustment right now would help us grow volume. And as we have said in the past, we need to be very judicious and careful about it. So price reductions were done in few product categories where we felt it was necessary to do so, but have not done it across-the-board.

The second question is on the Industrial and your overseas businesses. So one is in Industrial, how much is export? Second is, most of your overseas geographies have really done well this quarter also and 9 months also. So was that a conscious strategy that because India was slowing, so you are a bit more aggressive on pricing in those geographies to get market share gains? Is that the reason?

See, our international subsidiaries, I'll answer first. Our international subsidiaries, as you know, the performance of some of the subsidiaries had been uneven. So we have been taking steps to improve their performance and some of that is showing results. In addition to that, focused markets like Bangladesh and Sri Lanka have been now doing consistently well. So international, it is not because there is some slowdown in India that we are putting greater focus. But we have set of international subsidiaries and we have been working towards improving performance of them, and some of them have performed well or many of them have performed well in this quarter. Your other question in terms of Industrial Products business, we have a mix of domestic and export. I would not like to give the exact breakup, but we have substantial amount of export business, especially for products like pigment and some of the industrial specialty chemicals. Our product range is very well accepted by leading customers in both Europe and U.S. Some benefit we may have got because of the China impact where some of the product manufacturing has reduced there. But overall, we have a very good specialty chemical portfolio. And we have been working with key customers around the world, and that has helped us grow our Industrial Product business in export.

Sir, you're not giving numbers, but exports will be bigger than the domestic business in industrial?

Overall, no. Overall, I think it is less than domestic. But it is substantial.

Sir, next question is on HomeLane. So interior company, you have put in INR 49 crores. So why take stake in these kind of companies? If you want to do learnings, you can do tie-ups and that's what you do for your normal business wherein you tie up with the carpenters. Why take equity stake? I don't understand why should Pidilite kind of company take a stake in an interior design company?

No it is not a learning alone. See, basically, today, in a lot of fields, lot of changes are happening. So this is a company, which is a very strong technology-enabled company and it is growing very fast. And as the changes happen in interior decor space, we want to have a very close look at them and we want to partner with them, collaborate with them for mutual benefit. So first of all, they are participating in a space with high growth. They are doing business in a little different manner, and working very closely with them, collaborating them and getting a very close look at that, we believe, is beneficial. And hence, we have made a small investment, but -- which allows us to work with them in a very close manner and just not on a transactional partnership basis.

For your existing products, right? This will help the existing products?

Mainly for our existing product, yes. And in terms of -- there are many other ways to collaborate because we have similar influencer, end-user, et cetera. So there are a number of ways in which we are working together. As some of these things develop further, we will share the details. But essentially, as we all know, things are changing and we want to have a close look at that and we want to participate with that. So that is a step in that direction. As we have said, we intend to make strategic financial investments in relevant start-ups and support and collaborate with these start-ups for mutual benefit. So it's part of that strategy.

Any amount you want to share for start-up investment?

We have not allocated any particular amount, but we will be careful. As you saw, our first investment is also modest. So it's that we will be very careful about making this investment. But we have not allocated a particular amount. But we will carefully do it as and when right opportunities come up.

The next question is from the line of Avi Mehta from IIFL.

Just wanted to understand a little bit on the input cost environment. As you highlighted that VAM has been more or less stable, kind of moderating at $850, $900. Is there any impact of -- or are there expected to be any shutdown, especially because one of -- some of the manufacturing locations in Chongqing are close to the province where this coronavirus is coming in? And if you could give us a sense on how is that -- how the VAM environment is?

Yes, thanks. I think the way we see the numbers, obviously, the current prices that are in the range $850 to $900, we see that actually at similar levels for the quarter that we're in. However, it's a fact that, typically, we end up anyway having stocks between a certain period of time, a few weeks of stocks anyway we have. So at this point of time, we don't see any significant change in the range of $850 to $900. Having said that, in today's VUCA world, there are so many uncertainties, whether it is currency or any of the geopolitical risks, which can emerge. So fingers crossed, we expect the current trend to continue into the following quarter.

Perfect. The second bit was on the demand environment. I mean we've seen some sort of a pickup in the volume growth rate from the last quarter levels. While it clearly is below what we would -- we have our medium-term target, there is clearly a sense of pickup. Also in the Nina Percept business, there is a pickup. So just wanted to understand how would you read this with the base now becoming favorable for the Consumer Bazaar segment. Do you believe that the growth rates should logically inch up even if demand remains stable or it's very uncertain?

Yes. It is uncertain. I would not like to read too much into the difference in growth rate between the second quarter and third quarter. Demand conditions continue to remain somewhat subdued, and we remain cautiously optimistic and see how the things will shape out over the next few quarters.

And the Nina Percept, you think is the worst is behind us in...

The Nina Percept also was -- the Nina Percept is a waterproofing services company. So it also depends on number of other factors like monsoon, availability of labor, construction-related activities. So some of these activities, as we had reported earlier, were very badly impacted in first and second quarter. So that has clearly seen an improvement in environment where some of these activities have started picking up and some of the work, which had stopped in first and second quarter, is -- now has started in some parts of the country. In addition to that, we also have been taking efforts to expand our customer mix, going after new customer segments like industrial and growing commercial and infra business. So broadening our customer base is also helping us get new customers and increase the business. But first quarter for Nina Percept was very much impacted because of external factors that we had reported earlier.

Sir, one of the factors you also said was credit, so that's why -- I mean, that one you've not mentioned this time. So it suggests that one is out of the door probably?

No, no. It is not -- we cannot ever say it is out of the door because we work with segments where credit is always very important. But what Pradip has said earlier, we are very cautious about it. And as we have also said before, we are careful. We are cautious. And if a payment becomes a problem, we don't do -- we don't like to do the work. So that continues. There is no change in our stance. And some amount of liquidity problems do continue.

Okay, sir. If I may, sir, just the ad spend, would you be able to share what -- how is the ad spend this quarter?

As we've -- in our earlier conversations, I think we have shared with you that we typically operate in a range of ad spend. And all we can really share is that, that range of around 4% remains for the full year. There will always be quarter-on-quarter variations depending on the requirements of launches in other products, et cetera. So we have continued to invest behind our brands. So year-on-year also, we have invested double-digit behind our ad spend. So in an environment where there is external uncertainty, we have not shied away from making the right set of investments. So that continues.

So we are consistent in terms of our spend, which is about 3.5%, 4%. What we had said was in the second quarter of this year, we had an unusually higher spend because couple of campaigns came up together and that would normalize over the next 2 quarters. And for the full year, our spend is always in 3.5%, 4% and that will continue in this year as well.

So would you be able to share the number for the third quarter just so that it helps us understand the remaining spend inflation, something that you typically share. That's why -- that was the question.

So generally, we spread the figure. The percentage was same and the range, which is around 3.5% to 4%.

[Operator Instructions] The next question is from the line of Gaurav Jogani from Axis Capital.

Sir, it's regarding the acquisition that you have done. So the investment is around 5% and it values the company at around 1000 ...

Sorry to interrupt, Mr. Jogani. Sir, can you speak a little bit louder. We're not able to hear you.

Hello. Is it better now?

Much better.

Yes. So my question is with regards to the acquisition that you have done, which values the acquired company at around INR 1,000-odd crores. Sir, would you like to give some background in terms of the financials as to what's the growth rate of the company, what's the top line that they are doing? Anything some more would be really helpful.

So we have not acquired the company. We have just made an investment into the company and it does not value the company at INR 1,000 crores, it's less than that. However, the pre-money valuation of that, the fact is that they're operating in a space, which is very high growth. So typically, the growth rates of these companies are very high, upwards of 100%. They have achieved good critical mass in this segment. It is in top 2 players in this particular segment and growing at good pace. And valuation is in line with similar numbers in this field. But for benefit for Pidilite, it's not just the financial investment, it's a financial cum strategic investment. And as we have said, we plan to work very closely with them for mutual benefit.

Okay. Sir, the press release mentioned that you have paid around INR 50-odd crores for 5%, so hence, the number I quoted.

But that is pre-money, and post-money valuation costs are different because when a round is funded, this is based on the post-money valuation. And we said it's over 5%. So our equity stake is a bit more than 5%. So valuation, the pre-money valuation of this company was about $100 million.

[Operator Instructions] The next question is from the line of Tejash Shah from Spark Capital.

Sir, I know you don't share the numbers, but would it be possible to share some qualitative comment on demand momentum in subsegments, construction chemical services? And are they materially different from the overall average that we are showing?

So overall, the top line figure, as you said, we would not like to break it up into product-wise because people may read too much into it. Overall, I would say, the demand scenario was not very different across our businesses. But geographically, we saw some parts of India were slower. So for example, in west and some parts of north, the growth was lower than other parts of India. But across our product segments, it was not very significantly different. Also, in our case, our smaller town and rural area grew faster than urban areas.

Okay. This is largely in the B2C segments, right? Total?

What we call is Consumer & Bazaar segment, yes.

Sure. And sir, second, we are hearing a lot of stress in housing project segment, especially the new supply inventory which is coming. And that is creating a lot of stress in the total value chain in terms of demand and also in terms of rotation of money. So we are not directly dealing with them in most of the product line. But are we seeing any stress points being shared by our channel partners on discount?

So overall, as you know, and we have been talking about, there has been some challenges in the market and some of them are related to construction segment. And that is also one of the reasons for slowdown in growth. Nothing new or no significant change that we see as you mentioned recently.

Okay. So sequentially, things have not deteriorated further?

See, I would not like to comment whether they have deteriorated or not or how they are. We have not seen any material change and that is reflecting in our numbers.

Sure, sure. And sir, lastly, one bookkeeping question, if I may. Our tax rate for full year for this year and next year?

So when you see the numbers, you are already able to make out that the tax rate is slightly shy of 22% at the moment. And so we see the rates for the next quarter in and around between 23% -- around 23% as far as the next quarter is concerned. Next year, I think we will be in a position to give you, share you this information when we come in for the call in the month of May.

The next question is from the line of Dipan Mehta from Elixir Equities Pvt. Ltd.

Sir, just wanted to know of any new products you may have launched on the adhesive side or any of the other divisions?

So we -- as we always add new products in all our segments. So within adhesives segment, also we have introduced some new adhesives for interior decor. We have introduced some new construction chemicals and coating. So new product is a continuous process, and in each of our business segments, we do introduce new products from time to time. But nothing which is -- what we have introduced is part of our core segments and as a part of all regular activity. We've introduced some new sealants, some new adhesive, some new construction chemicals and coatings.

Sir, any sort of number you can provide versus the new products launched 1 year ago -- or 3 years ago. What are the sales contribution just to understand whether the sales growth, which -- whatever is coming, is it coming from product launched several decades ago or the contribution of all the efforts to launch new products is also going to be -- has also driven sales and going forward that's the trend.

So in our case, the product introduced in last 1 year will not have a significant impact because in our category, the gestation periods are longer. In our category, people are used to a particular product, and to upgrade or to adapt to new products take time. So the gestation periods are longer. So I can tell you that the product introduced in last 1 year will not have significant impact. However, the same is not the case. It is not that all the sale is happening from products, which were launched decades ago. We continuously introduce new products, we refresh old products. So significant sales will come from products, which have been launched in last 5 to 7 years. But generally, we would not like to share the figure because it, again, confuses -- because some of the products may be overlapping or replacing an existing product. But however, in case of Pidilite, as we have reported and shared a number of examples, we regularly introduce new products both in terms of premiumization as well as some of the new usages.

The next question is from the line of Hitesh Taunk from ICICIdirect.

Sir, my first question is related to your exceptional losses, what we made in Q2. Sir, just wanted to know whether we have -- are we booked all impairment losses from the elastomer project? Or is there any remains in the coming quarters?

Yes. So I think we had updated in the last call around where we see the realization in terms of the impairment. And there is no change at this moment. We continue to look at opportunities on realization of the values that are there in the books. And that's where we are. There is no change in position at the end of the quarter.

Okay. And now my second question is pertaining to our ICA Pidilite, sir. The number has -- while other subsidies performance have remained subdued due to various reasons, our performance in ICA Pidilite has remained very strong. So I mean, is it because of just a lower base? Or are you out looking a very strong growth or demand in the segment. Can you throw some light, I mean, a bit understanding on that segment?

Yes. So I think there are 2 parts to ICA Pidilite. I think one is that we used to import products and there is an angle of profitability also in this company. We have now switched to local manufacturing and that has a substantial impact on profitability and that is why you see the profitability significantly moving up. As far as, obviously, the result of that is a quicker response to market requirements, that does have an impact on the top line. However, the segment is exposed to anything else that we are dealing in terms of demand from -- obviously, linked, in some cases, to real estate, not directly. So those conditions remain. They have had reasonable growth in the current quarter, and we see a similar trend as we speak. So nothing specific on the demand front that we are seeing different from the current trend at the moment in ICA Pidilite.

The next question is from the line of Arun Baid from BOB Capital Markets Limited.

So my question was, if I look at 9 months, our volume growth in CPP business is about 2.6%. Typically, we used to always say that we'll go at X rate of the GDP. Is there something a mismatch now we are seeing there?

Yes. We are saying that the market conditions have not been very favorable and that has had an impact on growth. That has happened since last few quarters.

So is this a new norm like the GDP? You used to always look at a multiple of the GDP, sir. But what I'm seeing in the last 9 months from a number perspective at 2.6%. So what I understand is, has the norm changed or this is just one off?

The norm has not changed. The norm has absolutely not changed. But currently, we are seeing challenging market environment like many other companies. So that has had an impact on the growth. However, we continue to take initiatives so that we revert back to our growth rate of around 15% in value. So as a company, we are taking various initiatives, as you can see, and we are continuing to drive better growth. However, the demand conditions have been challenging in the market. The growth rates have slowed in India. And as you can see also in performance of many of the leading companies, the growth have been impacted.

So sir, personally, like what do you expect, this could happen in the next 3, 4 quarters? You think that's possible? Or it's going to be much longer.

We would -- it is very, very difficult to say what will happen and how the macroeconomic conditions will improve. So we would not like to comment on it as has been our policy. We like to continue to work on the fundamentals. We like to continue to work on our initiatives. And then we believe that things should improve. So as we said earlier, we are cautiously optimistic that things should start improving from next year and should help us improve the growth rates.

The next question is from the line of [ Bismith Naik ] from RW Advisors.

Sir, of the new categories and collaborations like WD-40, Cipy, ICA Pidilite and such, which one has the highest opportunity size in India?

See, all of them have very good opportunity. Nina Percept, Cipy, both have good size already and they have very good potential in India. So I would not like to compare one against other. WD-40 is a smaller business. However, here, it is more like a consumer and smaller craftsman business. So they are also potentially large about educating people about new products and new usages. So all three, by themselves, they have very good opportunity. I would not like to compare one against other. But all of them has good growth runway.

So all I'm trying to understand is which of them could be the next Dr. Fixit or Fevicol or something like that?

Dr. Fixit and Fevicol are very, very large brands. So I don't want to say which one of them would be next into that category. They still have a long way to go before they can be the next Dr. Fixit or Fevicol. So we don't work or plan in that manner, but we believe that all 3 of them has -- have very good potential, though Nina Percept already is sort of on the runway of INR 300 crores, INR 400 crores in size. So it's fairly sizable. So in terms of size that is the largest business. Cipy also has a good size.

Yes. So one last question. So would you at least care to share the total opportunity size and growth rate of -- expected growth rate of construction and paint chemicals?

The categories, as we said, this is a kind of category, which should grow upwards of 2x GDP growth. So that's the kind of growth this category is possible. The last couple of years, the market conditions have been a bit different. Some segments like this have been impacted more than others. So overall, in terms of construction chemicals, we believe, both in terms of the consumption as well as penetration, there is a lot of headroom to grow. So the growth rate should be higher than 2x GDP, but in short to medium term, the growth rate may be impacted because of the overall macroeconomic situation.

And regarding our international subsidiaries, what we have seen over a period of time historically that Americas and Middle East have not done as well as those closer to our home. So international strategy is the same for them? Or are we planning to change them in some time in the future?

So the strategy is different largely for SAARC, the countries near India like Bangladesh, Sri Lanka are the -- and Nepal are focus markets. Those markets are very similar to India. So our focus is much more on that. We have manufacturing facility in those countries. Those countries have a lot of other dynamics, which are similar to India. In case of Middle East, we have 2 businesses. One is an export of our core products to Middle East. That business has been doing well. In many of the products, we are market leader in Middle East countries. However, our construction chemical business in Middle East was a bit impacted also because of the local slowdown and several other factors. So Middle East, our core business has been doing well. U.S. has a different situation. Our focus is now much more on emerging markets, which is Middle East, Africa and SAARC. While in the U.S., we have a good business, but it's no longer a focus market for us.

[Operator Instructions] The next question is from the Jay Doshi from Kotak Securities.

Just one quick question. How big is the unorganized market in the core adhesives category? And do you have products? Or are you planning to launch products to capture the lower end of the market? Is that -- first of all, is there an opportunity? And if so, then do you intend -- does it fit -- align with your strategy? Or you would...

So overall, if you look at the core white glue market, overall, the premium category may be around 60% of the market. Then there is what they call it economy and popular segment and then comes absolutely unorganized. So what we can say is that the premium market could be around 60%, 65% of the market and 35% is popular, economy and unorganized. We have set of products for popular and economy segments, we have a fairly good presence in those markets, but our market share and presence is much stronger in premium segment.

Great. So my reading is that there is not a big opportunity out there at the lower end in terms of price point also that you have left unattended there.

As I said, our market shares are higher in premium. So in the lower end of the segment also, we have an opportunity to grow. So there is an opportunity. There is an opportunity to grow. In terms of scale, our focus is still much higher on the premium end of the segment. But even within the popular and economy segment, we have a very good offering. And we also are taking initiative and step to grow our presence in that. However, our focus continues to remain on the premium segment. And to introduce new value-added products and to upgrade the users.

Understood. That's helpful. Second is can you share some more light on HomeLane, what do they do, how it will be, Pidilite's role there? Is it purely as a strategic investor or you'll work? I know you spoke about it a little bit in the -- earlier in the call, but because it looks very interesting and there are quite a few well-respected venture capital funds who also have invested in the name.

So HomeLane, it is started by a very good entrepreneur and it's backed by leading private equity players and they have built a fairly good business in short period of time. They are a tech-enabled interior decor companies. So they do interior decor for houses, but using technology in an effective manner. They have Experience Center where consumers can go and see the interior decor and then they can work with them to get it done. They manufacture furnitures, they install furniture and do other interior-related items. So essentially, for Pidilite, interior decor is an area of significant interest, and as interior decor evolves, it's important for us to also participate in that segment. So here, we have made an investment with them. And then we are working with them for a number of sort of initiatives where we collaborate for mutual benefits. And this would take shape in the manner of supply and working together for market development and many other things. As this takes a greater shape, we will share more details. But it's a good company, growing well and it's creating a space for itself.

Are there similar companies globally that have scaled up meaningfully and become sizable players in any other markets?

There's a couple of companies have scaled up. Globally, I'm not fully aware, but there must be. But Indian interior decor and habits are very different. So I do not have full information on the global market. But in India, a couple of players have scaled up very well. There is another player called Livspace and a couple of other players who are doing well in this space. Well, HomeLane is one of the leading players in this segment and it is possibly the fastest-growing player in this space.

[Operator Instructions] The next question is from the line of Avi Mehta from IIFL.

Just a clarification. The 3.5% to 4% of sales for ad spend is for the year, right, sir?

That's right. For the year. Quarter-to-quarter, it can change.

Fair enough. And second, sir, just as you highlighted, the demand is uncertain. And you have said that we remain focused on volume growth. Just wanted to understand in an environment where you engage, the price adjustments will not drive volume growth. Would this be -- would it be fair to kind of look at this as a long wait for the economy to recover. The time it takes is what will define the volume growth recovery? Or can there be some -- are we looking at some initiatives to kind of -- what are you -- I just wanted to understand your thought process on this, sir.

As I said earlier, in some of the product categories, we have done price adjustments. So in most of our leading products in one of the 3 -- last 3 quarters, we have done some price adjustments. Not in all, but in many of our leading products, we have done some kind of price adjustment. What I'm trying to say, just we are very careful and we are very judicious about it. And we do price adjustment, where we believe it's absolutely necessary, and we will do even more of it, if it is necessary. But just cutting price automatically does not result into volume gain. There is a slowdown in consumption -- there is a slowdown in consumption and so we are very careful about it. But we have definitely done price adjustment in product categories where it was necessary. And we will do more of it if we believe that would aid in volume growth.

Okay, sir. And...

Sorry, I just want to chip into what Apurva was saying on the -- what are we doing as a response. So as Apurva mentioned earlier on in his commentary, we are looking at growing our rural markets faster and that we are seeing some traction there. So that we see as an opportunity. It is also a fact that while we have deep penetration in many of the states in India, there are pockets where we can improve our distribution and reach and that is also an action, set of action, we are doing. While doing all this, we continue to invest behind our brand and behind our distribution and people. So all of these factors, we believe, will put us in a good space when there is some form of recovery in the market.

[Operator Instructions] The next question is from the line of [ Hiten Boricha ] from [indiscernible] Investment.

Sir, you mentioned margin improvement is mainly because of the raw material costs, right? So are these margins sustainable for next year?

The margins depend on a number of factors, largely the raw material costs and raw material prices can fluctuate a lot. It can go up or it can go further down. So it is very difficult to predict this. And as you must have seen over the last several quarters that the raw material prices and margins have fluctuated a lot. So it's very difficult to say whether it will sustain or not. It depends on a number of external factors.

So any outlook for the current quarter like what -- according to the current raw material prices?

Look, we would not like to give any outlook, but you can look at the trend and you can guess based on that, but we would not like to give an output as because, as I said, it depends on a number of factors.

We'll move on to the next question that is from the line of Raghav from Axis Capital.

Just 1 small question. On Nina Percept, Bangladesh. So any expectations you could share on this, if possible?

No, there is no expectation. There is some business that has come up there, so they have formed a subsidiary to facilitate getting that order and executing that order. But there is no significant expectation or anything else that we would like to share. It's in normal course to expand their business activities to surrounding countries.

[Operator Instructions] The next question is from the line of Nawaz Sarfaraz from Dalal & Broacha Portfolio Managers.

Just 1 question. You mentioned that currently, in the premium segment, the organized market stands at around 60%, 65%. So over the next few years, where do you see it going up to?

I mean, it's difficult to say how it will go to. But we expect that premium segment will remain large and it may improve from the current levels. We see a number of products that premiumization is happening, and we are aiding that. We have introduced a number of premium products like Fevicol Marine, Fevicol Hi-Per, Fevicol HeatX. So what we are doing as a company are introducing several value-added premium products to increase -- to premiumize the market and increase the share of the premium products market. So our efforts are to increase the share of premium products.

Okay. And can you give us some idea how it has moved over the last 3 or 5 years?

There are no published data, so I would not like to quote something, which is normally based on unclear data.

Give us some broad -- yes. Broad numbers.

But it has moved up. The market has moved up steadily.

Okay. And what would be the price difference between premium player product versus an organized player's product and a nonorganized player's product in the premium segment?

It's a substantial price difference from a premium -- first, there is a premium and then there is popular, economy and then unorganized. So it would take a long conversation to explain all that. But there is substantial price difference at each stage.

The next question is from the line of Srinath V. from Bellwether Capital Private Limited.

I just wanted to find out what is the opportunity in the tile adhesives market, and what would be the kind of penetration tile adhesives have over cement and sand? And if you could kind of just give a broad overview on the space and what is the basic USP for migrating from cement and sand to tile adhesive.

Okay. This would require a long conversation to really explain all the dynamics of tile adhesive, but just tile adhesive benefits are many compared to cement in terms of how we use. We can separately send you a video of our advertisement, which will explain various benefits of the product over cement. But increasingly, the market is migrating away -- is moving from cement to tile adhesive for a number of applications. As bigger tiles come in, vertical tiling applications come in, the usage of this product is going up. And the market is expanding across India. For us, also, this is an important segment. It is one of our fastest growing categories, but we cannot share the product by sale for this particular product category.

Not as sale, but what would be kind of the industry opportunity size in product like this?

Again, I don't have the market size figure, which is accurately available. But it's a fast-growing category and it's likely to be fairly large in size, but I don't have the exact figure available with us right now. If you want, we can separately send it to you.

Sure. And one last question. Just wanted to understand the impact of ready-made furniture to our wood adhesive business. How does this affect our business?

Ready-made adhesives is not new trend. Ready-made adhesives have been there for a very long period of time. So ready-made adhesives and custom-made furniture, both have been coexisting for over 30, 40 years. And we also have a business, which manufactures adhesives for joineries. So we are also a market leader in that particular segment. So we manufacture and supply product also for ready-made. But these are both markets which coexist and have been there for many, many years.

Is ready-made adhesive -- actually sorry, is ready-made furniture actually gaining significant share? Is there something that -- where you can see from your standpoint?

No, we do not see that.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for their closing comments.

Just want to thank you all for joining the call, and look forward to interacting with you during the quarter and the next quarterly call that we will join together. Thank you very much.

Thank you all. Good evening.

Thank you. Ladies and gentlemen, on behalf of AMBIT Capital Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.