Pidilite Industries Limited (PIDILITIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Pidilite Industries Q3 FY '25 Earnings Conference Call hosted by PL Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amnish Aggarwal from PL Capital. Thank you, and over to you, sir.

Yes. Hi, everyone. On behalf of PL Capital, I welcome you all to Pidilite Industries 3Q conference call. We have with us the senior management of Pidilite represented by Mr. Bharat Puri, who is our Managing Director; Mr. Sudhanshu Vats, who is the Managing Director designate; Mr. Kavinder Singh, who is the Joint Managing Director designate; and Mr. Sandeep Batra, who is the Executive Director of Finance and Chief Financial Officer; and Mr. Dharmendra Lodha, who is Senior Vice President, Finance. So without taking much time, I hand over the dais to the management to take the proceedings forward.

Thank you. Thanks, Amnish, and good afternoon, ladies and gentlemen. I will quickly take you through some of the salient points of the third quarter and 9 months results, which were approved at our Board meeting yesterday. In the current quarter, we had an underlying volume growth of 9.7% across categories and geographies. And that translated into revenue growth of 9.3%. So as you would have observed, the gap between the underlying volume growth and the value growth has now converged. Underlying volume growth for our Consumer and Bazaar business was 7.3%, while the B2B segment maintained its growth momentum with an underlying volume growth of 21.7%. Gross margins improved by 100 basis points year-on-year largely due to benign input prices. VAM consumption in the quarter was around $884 a tonne as compared to $902 per tonne in the same period last year. We -- as we had mentioned earlier, we had plans to step up our A&SP spends, which we did in this quarter. And our EBITDA margins came in at 24.3% versus 25.1% in Q3 last year. If I look at the 9 months performance, and this is for the stand-alone entity, underlying volume growth was 9.2% with Consumer and Bazaar at 7% and B2B at 20%. Gross margin in the 9-month period were 284 basis points higher than last year, and EBITDA margins were at 24.5% compared to 23.7% in the previous 9 months. We continue to invest in our brands and upgrading and building new facilities, expanding our distribution network, stepping up innovation, and innovation remained a strong contributor to the overall revenues. If I look at the performance at our subsidiaries, the domestic subsidiaries cumulatively reported double-digit revenue growth with improvement in EBITDA margins. Owing to global economic uncertainty, inflation and political instability in some countries, our international subsidiaries excluding, Pidilite USA, which we wound down last year and Pulvitec Brazil which we divested in March, these subsidiaries cumulatively reported modest sales growth, but margins were maintained. So that's all I had by way of opening comments, and opening the floor for question and answers.

[Operator Instructions] The first question is from the line of Percy Panthaki from IIFL Securities.

Slowdown in the last couple of quarters from...

Mr. Percy, I would request you to please repeat your question again.

I'm saying my question is on the macro front. We've been hearing about urban consumption slowdown from a few companies in the last couple of quarters. What is your sense on the entire macro piece? Secondly, what is your mix between urban and rural? And do you see an equivalent offset in terms of rural recovery, which is sort of countervailing whatever urban slowdown you are seeing? And again, within urban, if you could give some color on whether we are seeing any different outcomes among the various segments like adhesive, construction chemicals and so on?

Thanks, Percy, for the question. See, at the macro level environment, clearly, we are seeing a certain amount of, I would say, softness in both urban and rural. From a demand perspective, we are seeing a certain amount of strain. Remember for us, rural has continued to do well while everybody else spoke about rural being underperforming for us. We've consistently grown rural. But when we look at the numbers, especially in our core categories, we see a certain amount of strain in demand. Having said that, it is still positive and the strength of our portfolio, which is well straddled now across core growth and pioneer and the proportion is changing. Now with growth in pioneer almost being 45% of our overall portfolio, we are therefore still delivering growth across both rural and urban, but we -- is there a strain on demand? The question is, yes. Could it be better? The question is, yes. Is it different across categories? No, across core categories, it doesn't matter whether it is adhesives or it is putties or so -- epoxy putty, that is our M-Seal and so on. we are seeing that there is a certain amount of slowdown, which hopefully in the first and second quarters of the next financial year, and the fourth quarter, we don't see too much of change happening. But hopefully, post the budget, and -- therefore, the first quarter of next year, we are hopeful that things should improve.

Got it. And for whatever reason, given your distribution expansion or whatever may be the reason, would I be right in assuming that for you, your rural growth is ahead of the urban growth?

That is true. Even now our rural is ahead of urban as we go ahead, yes.

Understood. Understood. And the growth construct that you used to give us that your core will grow at 1x GDP and growth at 2x, and pioneer at 3 to 4x. So in this scenario of consumption slowdown, are you seeing that multiplier effect of the new categories growing significantly ahead of the core, that multiplier being of a lower order or it is still the same kind of multiplier?

It is the same kind, but at the lower end. We always say that we would like to grow core at 1 to 2x GDP. It is nearer now, therefore, 2 GDP rather than twice GDP. And when we say growth to grow 2 to 5x, it is closer to 2 to 3x rather than 5x.

Right. Understood. And on input cost, any kind of change? Or should we expect this 23.5% to 24% kind of EBITDA margin to continue given where the costs are currently.

So two different questions. As far as input costs are concerned, again, given the geopolitical uncertain world that we live in, and now there is also a new variable with the U.S. coming into play, I would say for the next 2 months, so on and so forth, we don't see any change. I think the two headwinds that we are keeping a close watch on is the depreciating rupee as well as crude prices, both of which will impact us in the medium term, not in the immediate short term. But having said that, right now, I would say at least for quarter 4, input prices would remain benign. Based on our -- you know that we don't monitor margins on a quarter-wise basis. Based on our inputs, how much we spend on -- behind our brand, sales and distribution, et cetera, we will remain in the 20% to 24% range as far as we are concerned.

Right. See, the only reason why I'm asking this is that your margins for the last 2, 3 quarters at EBITDA level have been very stable. And if input costs are stable, and if we assume -- I mean, if it's a reasonable assumption to say that if input costs are stable, the margins will also continue at this level. The base, which is Q4 last year, has a significantly lower margin. And therefore -- I mean, the growth at a profit level could be significantly higher, at least on a Y-o-Y basis due to a base effect. So is this a fair assumption for us to go along with?

No, I don't think it's a fair assumption. Again, I'm saying that, listen, we are clear that in this environment, we need to continuously invest behind growth. If we see our margins at the higher end, we will look at further sets of actions to stimulate growth in the first half of next year. So I would not go by that assumption as of now. Sandeep, if you want to add?

Yes, Percy, just also to clarify that if you see the relative salience of each quarter, you'll find that our Q1 and Q3 are the bigger quarters from a top line point of view. And Q3 is the smallest. So we have every year -- sorry, Q4 is the smallest quarter. And therefore, we have a negative operating leverage in that quarter. And you will see it historically that given the size of the quarter, our margins in that first -- fourth quarter are never representative. But I think...

But that difference is not very large, but I get your point.

[Operator Instructions] The next question is from the line of Jay Doshi from Kotak Bank.

You have often mentioned that about 50% of your business is dependent on new construction and [indiscernible] So are you in a position to sort of get a sense of what is the kind of growth you're seeing in that part of the business? And what is the growth in the remaining repair, maintenance, renovation part of the business? Is it possible for you to over a 6-month period or a quarterly basis actually get a sense? The idea of asking this question is there is the divergence between your growth rate and some of the other building material categories, especially, I know paints is not a right comparison, but still there is divergence -- divergence is widening. And so I want to understand whether this is entirely driven by the new construction exposure that you have? Or is there something else?

See, firstly, good to hear from you, Jay. Let me tell you that it is very difficult for us to try and find the real proportions between maintenance, repair. While we know it at a gross level because obviously, a lot of small builders, medium-sized builders are also serviced by the trade. A lot of them also do top-up purchasing. Having said that, I can tell you that real estate, the kind of buoyancy that you saw 6 months back currently is a little bit off. There are sets of local factors, whether it be in Hyderabad -- in some of the larger metros, there are local factors, which are, in a sense, actually delaying regular construction. So I would still say that there is not a significant difference where new construction is still booming and maintenance and repair has come down. I think both are at their historic levels. It is more at a geography level that we're seeing substantial differences. Like -- and just to give you an example, Hyderabad has some new regulations around construction, so on and so forth. They've done some zoning and so on and so forth. So when I was in Hyderabad, they were complaining. One heard a similar thing is happening in one or two of the other locations. We're also hearing some amount of slowdown in the A class cities, the next round of city, the Jaipurs and Indores and so on, where there is some amount of unsold inventory. But this is all anecdotal. I mean, there's not enough data to support this.

Understood. And again, a follow-up there. Earlier at the beginning of the year, sometimes you had indicated that urban real estate construction cycle benefit comes with a 2, 3-year lag, and you were hoping during the course of the year, you'll start seeing more and more benefits or maybe FY '26 could be a better year. Do you still have that confidence? Or do you think that the core underlying demand has moderated so much that benefit will essentially not be visible?

No. If you look at our project business, if you look at our B2B growth rates, one of the strong drivers behind that growth actually is organized real estate. And a lot of that is now coming up for finishing stroke, waterproofing, et cetera. So I see in the short run, frankly, we will see it continue. Now will it continue? What we are seeing for the first time is there are substantial differences between geographies. So for example, a Kerala is very slow. A Gujarat is tending to be slow. Some of the other states are doing much better. So it's -- you can't again get a country-wide picture.

Understood. And thanks for your insights all over the years. I'm not sure if we'll have you on the call next time or not.

The next question is from the line of Arnab Mitra from Goldman Sachs.

My first question actually was also on the real estate cycle where we have heard some moderation, and you also alluded to certain regional issues. But I was just wondering that our view at the end of September quarter was that because we had the monsoon effect and the election effect, there will be a bounce back from that. So have you not seen that benefit play out in terms of projects which are -- which would have stalled, which kind of accelerated or that's happened, but other things have slowed down. Just trying to understand how the positives and negatives played out.

Good to hear from you, Arnab. Actually, both things have not played out to the extent we thought. A, there was the festive bounce didn't come at all this year. And normally, when there's a shorter festive season, the post-festive season tends to be a little buoyant. That was not the case. As I said, on real estate, we are not seeing a substantial bounce again. The number of issues that we are facing or we are hearing about in local geographies, one -- which are specific to states is not leading us to believe that listen it is all buoyant. But having said that, there is still, as we see it, this cycle of a lot of these -- the construction boom that has happened over the last 3 years, we will start -- we have started seeing benefits. And frankly, we do believe we will still see substantial benefits going forward.

Understood. Second question was actually on this B2B business, which has continued to grow very fast for you. Could you help us understand a little better what are the end industries that you service in this? Which are the segments which are driving the growth fastest? And how should we think of like sustainability of this growth rate going ahead?

I think good question. Let me try and give you a little bit of context on B2B. I think -- so first of all, when we look at B2B, we look at broadly three business divisions, if I can use that word and multiple business verticals within that. But the three broad business divisions are projects and Bharat was just alluding to that. I think we've seen continued growth momentum in projects. I think this has been there for about 6 to 8 quarters now. And I think, if at all, it has picked up in the last 1 or 2 quarters. So therefore, our growth momentum in projects is very strong. And we continue to see this growth momentum in projects, I think, into the quarters ahead. So that is one part, which you see in this 21.7%. I think the second part, which you've seen this 21.7% is what is our B2B business, which had -- which is largely our adhesives business, which goes into different segments. Now some of these segments this year are performing much better. And I think we see that momentum to continue as well. To just give you one illustrative example on this, one of our segments is basically advanced packaging and conversion. Simply put, this is a lot of your packaging, which is done for e-commerce, a bit like quick commerce now, a lot of the shippers. But even otherwise, all your packaging, which goes into consumer goods. I think this segment of ours is showing good momentum. And in my judgment, this momentum will continue. I think the third element, which is the broad one here, which is basically our pigments business, which you may be aware of. Pigments business this year has a little bit of a comparator effect, which is basically that in the last couple of years before this year, there was a subdued demand in the Western world. Our pigments business has a large export intensity. So therefore, there -- this year, we are seeing very good growth. But again, these good growth have a little bit of a comparator effect. So these growth moving forward may moderate a little bit. In summary, if I were to then say B2B momentum, how will it continue? We see B2B momentum continuing into the future. The numbers could vary a little bit depending on how each of these plays out. So there is enough opportunity. And at the same time, in B2B, we are also looking at pioneering businesses, and there are some of those, which will begin to play out better in the years ahead. I think that's what I would sort of -- I hope it addresses your question.

My last question actually is on overall growth. So see, what I was -- where was coming from is we are probably now in a relatively stable input cost environment. How do you think of pricing in this kind of an environment as a company? Historically, FMCG companies have always looked at some 3% to 4% pricing even if the demand -- input costs are benign. Do you look at it that ways? Or in this environment, you would just look at volume growth and pricing and volume will more or less be -- revenue and volume growth will more or less match?

See, if there is not inflation. I mean, right now, we are seeing a certain amount of pressure because actually, right now, only if the rupee devaluation -- not the -- even the rupee sliding downwards, but our stance is always very clear. If there is genuine inflation and that impacts us, we will pass on to the extent to 75% of the inflation. Otherwise, we will tend to focus on trying to step up our underlying volume growth rather than try and do pricing, because we believe that gets you short-term results, but a lot of medium-term pain.

The next question is from the line of Latika Chopra from JPMorgan.

Just continuing on the comments from you on the demand side, it seems there is a bit of a caution in terms of the growth rate. And at the same time, you said there is a demand which will come from the projects or the construction activity that is happening -- just trying to get a understanding about the conviction, the confidence you have in sustaining this 7%, 8% kind of Consumer and Bazaar volume growth. Do you see a material downside risk to this? Is that what this caution is about? If you could comment on that.

Sure. Good to hear from you, Latika. Again, if you look at -- we're just being cautious. I mean we've obviously changed our commentary from increasingly optimistic to cautiously simply because we are seeing a certain amount of strain in demand in urban and rural. Now barring black swan events, we don't expect it to get worse. Hopefully, the budget -- the money that will come in with the crop in as a result of the good monsoon and greater government spending on both infrastructure as well, the overall thrust on CapEx, we believe, hopefully, it should actually step up. But frankly, barring black swan events, we don't see the Consumer and Bazaar falling further.

All right. Understood. That's clear. The second part was on your domestic subsidiaries. You have put a lot of investments behind these businesses. And just wondering, would it be possible to get a flavor on what is the annualized run rate for some of these subsidiaries or businesses today? Just to get a sense of at what levels these have reached, it's ICA Pidilite or any other material businesses that are scaling up well?

Say, the two substantial subsidiaries that we have are ICA Pidilite and Nina Percept, and both of them have -- actually ICA Pidilite has been the star performer this year with all the demand issues, especially ICA Pidilite tends to be very urban, and therefore, is facing a certain amount of, what I would say, subdued demand. Having said that, Nina Percept, we had our own internal issues of post-COVID to getting the labor back, getting the whole organization in place now, all of that has fallen into place. You will see that both of these are a, growing at healthy rates; b, have now good, decent profitability. And frankly, for both of these, we see as growth businesses.

All right. Okay. And the last bit was just trying to understand the company's intent towards inorganic growth? How do you think about this over the medium term, Bharat if you could comment on that.

Thanks, Latika. See we are very clear on inorganic. Our stance has always been -- while yes, we are cash-rich, we are also quite conservative. And unless we can see substantial value, we don't do stuff. Up to now, we've had a very good success rate with all of our acquisitions. Be it Araldite, be it Bluecoat and Falcofix before that and so on. Having said that, if it is an adjacency, we see a substantial advantage. We see a long-term advantage. We will look at it, but at the right value. We are not fellows who -- we still look at the conservative numbers and see that we should be able to generate a decent return, both from a top and bottom-line. And hopefully, at least get a lot of the synergies with us rather than give them a payment to the person we are acquiring. That's our philosophy. We will -- we keep looking at opportunities. Let's see if we get the right ones.

The next question is from the line of Abneesh Roy from Nuvama Wealth Management Limited.

My first question is on the B2B. You have done quite well. My specific question here is, in terms of market share, if you could give us some sense how is the market share there? Your market share in B2C is very strong and dominant market share. In B2B, any sense on how market share trend is and what would be the market share there?

See, Abneesh, you can't really look at market shares in B2B simply because each of these goes to different user segments. So B2B, you will have a joinery segment, you will have paper and packaging, you'll have textile emulsions, you will have leather. So your market shares tend to be different in each of these. There's no composite market share. In most cases, with 1 or 2 exceptions, we tend to be a top 2 or top 3 player. Over time, we moved up the value chain. So therefore, we tend to compete a lot with the multinationals. But one market share, very difficult to give you, specific segments -- offline, whatever you want, we can discuss.

Sure. My second question is currently, India is seeing a boom in terms of the phone manufacturing, global players are setting up. And second is EV, clearly, we are seeing new players enter that and clearly, consumer shift is happening. And I'm sure adhesive usage in both these two segments in the medium, long term are extremely large opportunities. So could you give us some sense where we are currently as a company? And Sudhanshu did refer that in B2B more pioneer products are being planned. Was you referring to these two verticals, EV and phone manufacturing adhesives?

Yes, Abneesh, Sudhanshu here. So I think that's what I was -- so what is happening in B2B. And I think Bharat spoke to you also just now about a few other segments. But if you remember, some of our star segments I spoke about for this quarter and for the last couple of quarters and what we see going ahead. So see, what we are doing here is we are preparing at three levels. And let me just give a little bit of color on this to just add on to what you already know. So first is that if you remember, and I'm sure Bharat would have shared that some time back we've done a technological partnership with Jowat for manufacturing of hot melt adhesives, hot melt pressure-sensitive adhesives and some other products. Now that technological partnership and our understanding of that technology now is helping us spur the entire advanced packaging and conversion piece, which I was talking to you. And we are confident that as we go ahead, that would only grow. But HMPSA and -- hot melt adhesives per se also have a lot of usage in auto and electronics. Along with these, they are basically -- the entire thermal insulation products, some of these other products that we are also looking at, which will allow us to play the automotive and electronics segment as we go forward. So there is one level of preparation happening from a technology point of view. The second level of preparation happening is from the point of view of partnership. And I have spoken about our proposed partnership. We are currently their distributors, but a -- for partnership if we want to build with an electronics adhesive manufacturing company. And that partnership will allow us to address more very, very specific products from the point of view of electronics manufacturing, and that comes into play. And you are absolutely right, we are therefore gearing up to address this opportunity. And this is another of our pioneering thesis, which we want to work on from an India perspective through partnerships. And lastly, I think what we are doing in all of this is continue to look at opportunities which may arise, particularly in the area of EV and semiconductors in the future, which we could be able to tap. And I think that is the piece which will continue. As we look at many other opportunities, those are other opportunities which we could be potentially tapping into the future.

Understood. My second question is on the demand side, Bharat sir and Sudhanshu, you both have a significant experience even in FMCG. From the FMCG hat also, I wanted to ponder on the demand question. First, of course, is Bharat sir, you mentioned two specific states, Gujarat and Kerala, which seem to be growing a bit slower than the national average. Is it because of more urbanization? And second part to the demand side and more on the overall consumption, not specific to Pidilite necessarily. FMCG companies are saying there are three reasons for the current urban slowdown. One is food inflation, which seems to be easing off. Tomato, onion are now back to normal. So we are -- some level of normalcy there. They have also said real wage growth is a problem, and they have said that rentals is a clear problem. Out of these three issues, Bharat sir and Sudhanshu, in your view what is really required for urban to come back? I'm sure once the base effect happens, say, in the next 2 quarters, it should anyway course correct. Let us leave aside the base issue. In your understanding, in terms of the urban recovery, what is required to resolve the problem.

It's a great question, Abneesh, and also I'll ask Bharat to comment later. So first of all, I think -- this is more a question left to economists and policymakers than us. But let me give you a little bit of a practitioner's view here. I think what I'm trying to say is that basically -- so first, as you rightly pointed out, it's about food inflation, it's a little bit of that rental inflation, it is a little -- it is also a think some areas of education, telecom, so on and so forth, where there is slightly unusual changes because in these two or three other components, these are step changes, which happen once in a while. And that affects the share of wallet of India's lower and middle class. So I think that's the piece which has happened, as you rightly pointed out. Our own understanding is that it will be -- it will perhaps be tackled in two or three ways. One is the base effect which we are leaving out, as you rightly said. I think the second one is that we are very hopeful and the industry is hopeful that the Finance Minister in this budget will leave a little bit more money with all Indians. And I think as you basically leave money in the hands of all Indians, which will allow some more disposable income, and therefore, that will spur demand. And that, in my opinion, could be one of the figures. And the last piece is that as productivity and manufacturing picks up, I think further, and I think that will play out a little bit in the maybe short, medium term, may not be immediately, I think you will see some amount of incomes growing in different segments because as we were talking about, Abneesh, just in the previous question, some of the projects that are being put up in India are of a very, very different scale, very different scale. You will be aware. So we are talking of now, once again, townships that will be put up of 50,000 people, and some of these will be between blue and white collars. You can't technically call them blue collar, although they will not be a white collar job. It's a manufacturing job. So I think that these come up, and some of them are genuinely coming up. There is considerable investment happening in these places. I think that will also be leading to improvement in demand. And I think that is something we all should be geared to work towards.

And on Gujarat and Kerala, what is the reason?

Gujarat and Kerala, Bharat is also -- go ahead.

Abneesh, very difficult to say when you go to these markets, you keep hearing a large number of local factors, like Gujarat -- in Surat they talk about how diamonds -- the real diamonds are getting replaced by lab grown, textiles is suffering because of A, B, C. Real estate, there is a new set of issues. Kerala, it tends to be that the state government is -- it doesn't have money and remittances have come down, or the data doesn't show it substantially, but they're not going up either. I think -- I don't think anybody has a full handle, but it goes back to what Sudhanshu was saying, I think there is not enough disposable -- increase in disposable income in the hands of the consumer. I mean, if I have to very simply put it as a result of many, many reasons.

Understood. And last quick question, essentially on marriage demand. Adhesive is used in a lot of the discretionary consumption, and in marriage clearly discretionary products are sold. Now in Q3, marriage season was strong, and next 2 quarters also marriage season -- dates are much, much higher. So any benefit you see in these micro markets in terms of demand?

See all spends help, especially marriage spends. But we're not seeing - I mean, the increase over -- it's not that there is a large -- unlike it was post COVID, where there were all these pent-up marriages to happen. Right now, as we see it, like while people crowd dates, so on and so forth, it's not -- there is no substantial increase over the previous year.

Bharat sir, just one last question. So essentially, you mentioned Kerala government money shortfall. Now one development politically is clearly every state government is competing with each other, every political party is competing each in terms of freebies. And you have seen, for example, beer industry in Telangana, so many thousands of crores not being paid because governments don't have money. They want to spend on the freebies. So structurally, not just for you, for maybe the industry, the overall spend. Do you see this as a concern because next 4 years, coalition politics at the center and states also now clearly, freebie politics will continue. As a structural issue, would you see that as a constraint because Kerala already you highlighted that.

See, it is all again to my mind, how this plays out, how much it plays out. And if the consumer gets money for their basic necessities, do they spend on other stuff so on, let's just wait and see. But obviously, this money is going to come at the expense of something else. We have to see what it comes at the expense of.

[Operator Instructions] The next question is from the line of Tejash Shah from Avendus Spark Institutional Equities. Due to no response from the current participant, we will move on to the next participant. Next question is from the line of [ Rajesh Gajra, who is an Informist ].

Yes. I just wanted to know what is the -- in the current quarter, what is the VAM consumption rate currently? And where do you expect it for the entire March quarter? So current in January so far and for the full quarter, what is your expectation?

So for the third quarter, it was $884 a tonne, and we anticipate it to be pretty much in this range in the fourth quarter, give or take a couple or 2% here or there. But by and large, in the same range.

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

Sir, Consumer and Bazaar growth has been kind of in single digits for past 7-odd quarters. So for a strong relatively inelastic portfolio like ours, do you think that mild inflation supports value growth without significantly sacrificing volume? Or you prefer benign inflationary environment where volume growth is fine, but we are not able to kind of cross that hurdle of double-digit value growth?

See, if you gave me a choice, Tejash just good to hear from you, I would always take -- but I would take double-digit underlying volume growth rather than value plus volume going to double digit. But frankly, I mean, because we've had these unnatural situations where post COVID, we had all these supply chain disruptions, raw materials went totally out of kilter. Now they've slowly gone the other way. I think we will probably, in the next financial year, return to normalcy, where you will have a certain amount of hopefully, low inflation, along with good volume growth. That's the hope that we are all working under, but let's wait and see.

Sure. Sir, second, one hallmark of our strategy for last couple of years has been our commitment to distribution expansion, especially in semi-urban and rural areas. So any guidance how much we can actually kind of grow further there? And then like -- and when I see our effort on that side and the growth, is it that despite putting so much effort on distribution, we have reached where we have reached and otherwise, the underlying situation would have been much worse if we would not have done this.

Not fully true. See, just remember, in our case, the kind of categories that we have, we have to do a double-pronged effort because we have to teach people how and when to use our categories, be it waterproofing, be it adhesives, be it tile adhesives. So therefore, we were always very clear that equalized for income, we have a strong runway for growth in rural and semi-urban India. And if you ask me, we still have a 2- to 3-year runway before we will reach equivalent to urban levels of consumption equalized for income. So we still see a runway for growth there.

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

I just wanted to clarify on the pickup post budget point. Is this more linked to a macro environment? Or is there something that tends to happen with budgets tend to historically drive some pickup? I want to just clarify that point.

No, absolutely linked to a macro pickup, not -- we don't see any historical this thing where post budgets, you always have a pickup.

Okay. Sorry, I just wanted to be -- sorry for that dumb question then. Just the other bit, sir, I just wanted to understand, as we are seeing more and more growth move towards the pioneer and the growth category, do you see a need to probably revisit our 3% to 4% ad spend to sales range to a higher target as these products, which you highlighted earlier, need more customer education?

Just to repeat your question, sorry, it got garbled in the middle.

Sir, we've traditionally said that the ad spend range is more in the 3% to 4% level, but that was assuming a split between growth and pioneer and core. Now we are increasingly seeing pioneer and growth drive a lot more of our -- or increasing the share as [indiscernible] into the portfolio. Does that need a revisit in our ad spend to sales as well range, do you think? It's not a near-term question, but maybe in the next couple of years.

See, that's a great question. But just remember, Avi, if you take a step back, we are very clear that because of the size of the core even now, more than half of the growth is still going to come out of the core and the core will be a source of growth for the near future. And while obviously, we will keep picking the categories which we believe are categories in the future and backing them as growth categories. When we look at -- when we do our mix so and so forth, et cetera, I don't see any substantial -- anyway, remember 4% is an average. There are a lot of categories that have no advertising, and there are some categories that have 7% and 8% advertising. So if you ask me, I'm very comfortable at a range of 3% to 5% of ASP at least for the next 3 years.

Perfectly clear, sir. And sir, lastly, just any update on the lending and the paints businesses if you could kind of share?

So as we said on both these businesses, we will do a review at the end of the year, both are proceeding with their -- both the pilots are in full flow. The lending pilot in the South and the paints pilot also in rural and semi-urban in the Southern states. So as of now -- remember, a company with our strength in distribution, you will always get great results in the first 3, 4 months, and that's why you know that at Pidilite it has consistently been our policy to under-promise and over-deliver. And therefore, we will come back to you once we are clear that sure of the increase -- of our distribution strength, et cetera, we've got sufficient data to tell us how we have to go ahead, and then we'll come back and share that with you.

[Operator Instructions] The next question is from the line of Bharat Sheth from Quest Investment.

Sir, I want to understand about the overall opportunity or saying that we look forward from, say, around medium term from 3 to 5-year perspective for our size of business in this electronics manufacturing. We have already tied up with Jowat. And we have also entered into distribution agreement with CollTech. So do we require more JV also as well as what kind of opportunity we are seeing in that business?

So Bharat bhai, Sudhanshu here. I think it is a substantial opportunity in the 5-year horizon, as you've talked about, Abneesh was also talking about it. And at this moment Bharat bhai, suffice to say that we are looking at all options as to how to grow and maximize this opportunity. This also is a little bit of a -- this is, again, as we keep saying for our pioneering businesses, it will be -- in these areas, you need to be specified with the custom contract manufacturers or many of these players. The process of all of this is anywhere between 12 to 24 months you need to have -- you need to keep developing products with them for their future products. That process also requires some time. So it is a substantial opportunity. That's where we are looking at it. We are also looking at multiple areas Bharat bhai as you rightly pointed out, a couple we will look at more which are appropriate to be able to address this market.

The next question is from the line of Amnish Aggarwal from PL Capital.

So quite an intriguing discussion, just one thing. There's a general perception that, say, for example, last couple of years, real estate has been doing quite well in terms of offtake, more at the end of large developers. Now there is a view that as the, you can say the apartment or the real estate construction, which started mostly after, say, COVID, say 2 years back, 3 years back. So that is yet to be delivered to the, you can say, the people who purchased the real estate. So the next couple of years, growth should be significantly, you can say sustained or better for companies like Pidilite. So any view on this thought?

See, again, because -- there is a lack of organized data. I think your question is the right one. It does appear, at least from the outside that what you're saying appears to be true because as we see across not just the metros, but even the A and B class cities, there is a large amount of construction that is coming to completion. And therefore, all of this obviously helps the companies like ours substantially. So I would say wait and watch, but are quite -- I mean, on this, we are quite hopeful and optimistic that it will happen because we have seen signs of that on a regular basis.

[Operator Instructions] The next question is from the line of Sheila Rathi from Morgan Stanley.

Just a follow-up to one of the questions earlier, Mr. Puri, where you mentioned that for a lot of your categories you need to really train the people to understand the category and that's why this distribution expansion will continue to be -- will continue for a long period of time. From your overall portfolio, will you be able to call out, what is the competitive landscape for you? Because it feels like that there's limited competition in most of your categories. I mean, how will you define the competitive landscape for your categories?

Good to hear from you, Sheila. We were beginning to miss you. Let me -- I think your question is absolutely the right one. In a large number of categories, especially in rural and semi-urban India, and I say this with all humility, we actually compete with nonconsumption. It's that the consumer, she does not know that there are alternatives. It's like, for example, when we do these small meets et cetera, in villages on waterproofing and show them that actually you can construct without water leaking, or the things that are broken in their home, this is how they can stay -- you can use them again, and after that, nothing happens. So -- the fact of the matter is, of course, in some categories, we do have competition. But as a pioneer in most of rural and semi-urban India, whether it be our core, and most times, our growth categories, we tend to be the category creator rather than having to look at any category shares. That tends to be the rule by and large.

Mr. Puri, will you be able to -- I mean, quantify this? Because in your category, it's possible that you would want competition to enter, but it's not the case. I mean, most of the companies would not like competition.

In our case, frankly, I mean -- let me just tell you that while we don't have -- I mean, except -- even the paint companies who at least come into renovation, waterproofing, if you look at most of our other categories, we have strong regional competitors. So if I look at a Fevicol, from the outside it appears that we have -- I mean, yes, we have obviously very high market shares. But in every geography, there is a strong regional player. In the West, there is Euro; in the north, there is Jivanjor; there is American Bond. So therefore, we do have competition, but a large amount of the time we focus on expanding the market rather than looking and trying to get share from them.

And sir, in the past, you have also said that on platforms like Amazon, a lot of the categories, we are the #1 player. So now what part of our business is online versus offline? I believe large part would be offline. But what is the trend here? And if you can share any numbers here?

See, the basic thing is, remember, in most of our Bazaar businesses, whether it's woodworking adhesives, whether it's waterproofing, it tends to be the consumer and contractor who buy and therefore, modern trade or e-commerce plays a very little role. In consumer products, there, we tend to -- actually, we've expanded a fair bit and close to between 7% and 10% of our sales now is coming from e-commerce in the consumer product businesses.

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

No closing comments other than wishing everybody on the call a very good evening, and thank you for your continued interest. I think -- Bharat wanted to speak.

Yes, again, given that I will not be on the investor calls for the last one of the years, I just wanted to thank all of you for your support, for your questions, for your contribution, for your enthusiasm. And it's wonderful that we have made so many friends along the way. Thank you so much all. One has learned a lot from you. And it's been a wonderful journey along with you. Thank you all.

On behalf of PL Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.