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Edited Transcript of BERGEPAINT.NSE earnings conference call or presentation 7-Nov-19 10:30am GMT

Q2 2020 Berger Paints India Ltd Earnings Call

Kolkata Nov 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Berger Paints India Ltd earnings conference call or presentation Thursday, November 7, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Srijit Dasgupta

Berger Paints India Limited - CFO & Director of Finance

* Sujyoti Mukherjee

Berger Paints India Limited - VP of Finance & Accounts

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Conference Call Participants

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* Abneesh Roy

Edelweiss Securities Ltd., Research Division - SVP

* Amit Purohit

CIMB Research - Analyst

* Anand Kumar Shah

Axis Capital Limited, Research Division - SVP of Consumer

* Ashit Desai

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Avi Mehta

IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary

* Gaurav Jogani

Axis Capital Limited - Assistant VP

* Jaimit Doshi

Kotak Securities Limited - EVP

* Kunal Thanvi

Banyan Tree Advisors Pvt. Ltd - Equity Research Analyst

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Presentation

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [1]

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Good afternoon, ladies and gentlemen, and a warm welcome to the Q2 FY '20 Earnings Call. As usual, I'll just start with a couple of remarks on the performance for the quarter and then throw the house open for questions from the participants.

On a stand-alone basis, the growth rates for the quarter looked like this. Total income from operations was 7.5%. PBDIT, excluding other income, was 13%. PBIT was 15.4%. PBT was 17%. And PAT, expectedly because of the tax changes, is now 72% for the quarter.

On a consolidated basis, the growth rates looked like this. Total income from operations, 7.3%. PBDIT, excluding other income, was 14%. PBIT, 17.1%. PBT, before the share of profit and loss from JV, is 18.9%. After share of loss from JV, it's 18.2%. And PAT growth rate is 67.1%.

This quarter saw an extended monsoon in some parts of the country. We believe it could have affected decorative sales to some extent in terms of growth numbers. Hopefully, this will unwind itself later in the year, meaning the impact would get compensated, hopefully to some extent, with demand picking up.

There was a gross margin expansion of around 2.4% versus Q2 FY '19, largely on account of the reduction in raw material prices, therefore, rutile; MMA, which is methyl methacrylate monomer; phthalic anhydride and some solvents, of course.

This was, to some extent, also supplemented by price increases in October and December 2018 and price decreases, of course, in May, July and September 2019. But overall, there was a net-net plus compared to Q2 of FY '19.

The dollar-rupee exchange rate remains largely the same in terms of an average for the quarter, 70.4 approximately versus 70.13 in Q2 FY '19, I think, [and offset] by everybody on the tax rate reduction. And our company, of course, opted for the lower tax rate. We didn't have a large impact of the other tax benefits. So this was really not a very difficult decision for us to take, opting for the lower tax rate of 25.17%, including surcharges and cesses.

In consolidated performance terms, largely in line with the stand-alone results. Some improvement in top line for Nepal, BJN, that's our subsidiary, 100%; and of course, as usual, a strong profit performance from Saboo Coatings. There was a loss in our share of JVs on account of the downturn in the automotive business, in our JV with Nippon Paint, that's BNPAC. So that's, I think, concludes my summary of the performance for the quarter.

I now invite questions from participants.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Abneesh Roy from Edelweiss.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [2]

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Sir, congrats on strong performance yet again. In the previous con call, you had said, base impact of strong distemper sales will kick in. So how has been the growth of distemper volumes? Has it been well ahead of the double-digit overall volume growth? So is it still much ahead of the company average?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [3]

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Yes. Still being sustained Abneesh. I think that's true for all of industries, so no surprises there.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [4]

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So this was the first quarter after the anniversarization. So will it be fair to say that the base effect has actually not caught on?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [5]

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Really, I can't comment on that just now, slightly outside the scope. But maybe in future calls, I'll -- we might be able to explain this further.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [6]

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Sir, one more thing on the demand side, you mentioned extended monsoon impacted. In spite of that, you have seen double-digit volume growth in deco. So what was the impact of monsoon, if you could say? I know you will not share numbers. But was it significant enough with states? And second is, how much was the Diwali impact? This was early Diwali, so...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [7]

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Absolutely right, Abneesh. So one sort of compensates the other a little bit. So I think it's tempting to look at all these results quarter-on-quarter. I think better to look at it on a half yearly or cumulative basis. We do feel, however, compared to years in which there's been an early Diwali, we do feel that, in some states at least, where there has been extended monsoons, we may have lost something. Also a little bit in Jammu and Kashmir, of course, for obvious reasons.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [8]

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And sir, in terms of the protective coatings, you have mentioned it was again a strong quarter. So if you could discuss there, is there any market share gains which are happening there?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [9]

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We think so. We think so, still early days, yes. I mean we're only 6 months into the year. But we think we've done well, yes.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [10]

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Right. And last question, sir, on the automotive business. So you have this JV with Nippon Paint. And what we are seeing is in the past few weeks, there is a fair bit of recovery in the auto sales. What is your sense? Is it again because of the festive-related, you're not seeing from your clients a sustained recovery in the volumes?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [11]

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Not really. Of course, I can't comment about the performance in October or November. But definitely, the results are proportionate to the overall fortunes of the automotive business in the first half of the year. So nothing out of sync as far as that is concerned. So really mirroring the overall fortunes of the industry.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [12]

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But 2 follow-ups here. Are you happy with the JV? If the JV wouldn't have happened, so is the Nippon angle adding value? And second...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [13]

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Absolutely. I mean, in the medium term, this is -- there is no question that this makes sense for us, as I have explained in earlier earnings calls that starting from a low base, this is a fantastic opportunity. And I think it's in the interest of all auto players to have multiple vendors.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [14]

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And sir, last question, because volume growth has been quite strong for many quarters. Of course, the GST cut definitely helped. So in that context, are you increasing your distribution expansion, because if demand is there, this is the right time to capture that in the Tier 3 and Tier 4?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [15]

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Sure. I've said that in earlier calls, expanding of the network is, of course, a fundamental strategy, no question.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [16]

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So have you accelerated that?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [17]

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Sure, to the extent possible, of course.

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Operator [18]

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(Operator Instructions) The next question is from the line of Avi Mehta from IndiaInfoline.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [19]

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Sir, first was -- my question was on the margin. I just wanted to understand, does the 2Q margin reflect the current input cost situation? Or was there a mix or a high inventory cost -- high-cost inventory kind of which depressed?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [20]

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You're right, Avi. So we -- it's yet to fully hit our profit numbers, meaning the dip in raw material prices. So a little bit of it is inventorized and carried forward into the next quarter. I can't obviously quantify that. But we also -- the other factor was that there was a price decrease in September. So even though it was for a month, it did affect, to some extent, our margins in solvent-based paints. A small number, again, but also, to some extent, compensated for the decrease in -- or sort of made up for the decrease in raw material prices. Yes. So a little bit of inventorization has happened. And we might see, if everything else remains the same, that panning out in the next quarter.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [21]

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And sir, on the mix front, was there also a deterioration like we hear from the other players as well?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [22]

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No, not overall, not at all. Of course, we sold more economy-end products, but made up for it with high-end products as well. So it's not that one ended up with a net-net mix negative.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [23]

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Okay, sir. So because the reason I was asking is other peers suggested that the realization growth for this quarter was essentially negative despite the positive price increases net-net. So that's the context.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [24]

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Depends how you interpret mix. The way we do it is basically look at the net -- the operating margins of each product and then see how it pans out in terms of the change in the overall basket. And I can confirm that we have not deteriorated. We improved marginally in this quarter versus the same quarter last year.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [25]

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Okay. So when you say -- sorry, sir, if I may, just stretch on that.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [26]

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Yes. Sure. Go ahead.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [27]

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Sir, on -- what you're saying is on a like-to-like product basis, margins have remained or improved a little bit. They may go up and down in the quarter, but we -- it's not how we are looking at it. Is that -- is my understanding correct, sir?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [28]

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Yes. But I'm also clarifying that the effect of individual products going up or down in terms of the share of the overall basket, product mix basket is reflected in our assessment of mix. So when I say mix has improved, it means that net-net, the combined effect of economy and premium, meaning the differential margins, have kind of offset each other, even though we have grown in the economy end and the net-net effect of all of this is a net positive on the margin.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [29]

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Perfect, sir. And sir, sorry, again, one, which is a clarification, is the discounting. We had seen a very high promotional intensity across the industry in the last quarter. Is that sustaining? And did it sustain in this quarter? Or how is that...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [30]

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You're talking about Q2?

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [31]

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Yes, sir. 1Q, we had seen...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [32]

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Yes. It was sustained into Q2, of course. Otherwise, we -- gains from the mix improvements would have been higher.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [33]

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Okay, sir. Okay, perfect. Sir, if I may also, the second bit is on your -- on the industry outlook that you've shared. Now you have indicated that decorative paint demand is expected to sustain at the current ones. However, there have been some unseasonal rains, even in the third quarter.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [34]

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Absolutely.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [35]

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Is that something that you've factored in, in your outlook already or...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [36]

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I think we should -- it's a surprise that our comments are always for the medium term. We do not talk about coming quarter, and we stay away from any guidance on that score. So I hope that clarifies the position.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [37]

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Okay. So -- no, because it was the coming months, that's why I though I'll just kind of confirm it. That's the only bit. Sir, the last bit is on the tax rate, sir. Could you comment what's the expectation on tax rate that we should take for the year, 25.17%? Or is there any adjustment that you should be making?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [38]

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See, we would have marginally given up some benefits, which kind of were there in the earlier tax regime, meaning there was some impact of additional depreciation. So largely, I think this 25%-plus would be the rate at what we are looking at.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [39]

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Okay. So 25.17%, the -- whatever is the ETR that has been passed on.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [40]

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Absolutely, absolutely. So the other -- the impact of giving up anything will not marginal -- will not significantly affect us.

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Operator [41]

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The next question is from the line of Kunal Thanvi from Banyan Tree Advisors.

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Kunal Thanvi, Banyan Tree Advisors Pvt. Ltd - Equity Research Analyst [42]

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Congratulations on a good set of numbers.

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Operator [43]

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This is the operator. Mr. Thanvi, we are unable to hear you?

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Kunal Thanvi, Banyan Tree Advisors Pvt. Ltd - Equity Research Analyst [44]

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Is it better now?

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Operator [45]

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Yes, slightly better.

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Kunal Thanvi, Banyan Tree Advisors Pvt. Ltd - Equity Research Analyst [46]

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Congratulations on a good set of numbers. So I have 2 basic questions. One was, as earlier participant also asked about the industry mix in terms of premium- and low-end products. How industry -- the secondary demand has been panning out in the last, say, 2 to 4 quarters? And what are -- what is your outlook for, say, 4 to 8 quarters going ahead?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [47]

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We don't give specific guidance on quarter-wise or even on a year-wise basis going forward. Of course, we've talked about the effect of demand and the effect of extended monsoons, the effect of -- on the industrial front, some of the industries, we are dependent on the automotive in particular. We also spoke about the positive changes in the protective coatings or high-performance coatings industry. So I think basically, we are looking at the decorative business sustaining along these lines, perhaps marginally improving, but we don't, as you can understand, give a specific guidance about our own numbers.

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Kunal Thanvi, Banyan Tree Advisors Pvt. Ltd - Equity Research Analyst [48]

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Yes. I understand that. So the reason I asked this question is, with the GST coming in, there has been a shift from unorganized to organized, right? And with...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [49]

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Marginal, we would say. Rather the shift is happening on a -- it didn't happen one time. It's probably a continuing thing a little bit every year is what we are looking at.

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Kunal Thanvi, Banyan Tree Advisors Pvt. Ltd - Equity Research Analyst [50]

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Yes, sure. So is it right to see when we say our distemper business has been growing ahead of the company sales, that is a segment where there are a lot of unorganized players sitting, right?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [51]

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Sure.

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Kunal Thanvi, Banyan Tree Advisors Pvt. Ltd - Equity Research Analyst [52]

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So the idea -- the question I wanted to understand is, is this phenomenon we expect to continue for, say, a 2-year period or maybe 3-year period?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [53]

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Again, my reply to that is I can't tell you. We don't give specific guidance on this score. So I'm sure you'll bear with us.

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Operator [54]

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The next question is from the line of Jai Doshi from Kotak.

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Jaimit Doshi, Kotak Securities Limited - EVP [55]

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Sir, your advertising spend as a percentage of revenue had sort of dropped to 3.3% in -- as per the annual report from maybe 5% about a couple of years ago. So I just want to understand, is there any -- at a overall level when you look at sort of trade promotions and A&P combined, has that also reduced or...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [56]

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No, no, no.

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Jaimit Doshi, Kotak Securities Limited - EVP [57]

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How do you think about your A&P spend versus the...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [58]

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If I can just clarify, earlier some promotion schemes were shown clubbed with advertisement and sales promotion. Once the accounting standards were implemented...

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Jaimit Doshi, Kotak Securities Limited - EVP [59]

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Ind AS, right, in FY '17? Right?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [60]

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That's right. That's right. So there was some knocking-off, which happened from the top line. So to that extent, you'll find a lower number in advertisement and sales promotion.

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Jaimit Doshi, Kotak Securities Limited - EVP [61]

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Correct. But FY '18 to FY '19 drop, both in absolute terms as well as percentage of sales, that is like-to-like. So it had moderated, right?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [62]

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And that's policy. Basically we are growing -- and this is the trend across the industry. More people are now giving discounts on bill.

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Jaimit Doshi, Kotak Securities Limited - EVP [63]

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Understood. So overall, at the promotions level, you've not reduced...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [64]

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No. On the, let's say, qualitative part of the expense, which is really things like media and promotion -- true promotion, has not gone down.

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Jaimit Doshi, Kotak Securities Limited - EVP [65]

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Understood, sir. And a couple of bookkeeping questions. What was your tinting machine penetration, whenever you reported last or indicated last maybe at FY '19 year-end and overall dealers reach?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [66]

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We will again share these numbers with you when our annual report comes out. But suffice it to say, I think, to give you...

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Jaimit Doshi, Kotak Securities Limited - EVP [67]

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Last reported numbers -- if you could share the last reported number, that would also...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [68]

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Yes. So I -- what I can tell you is that on an average, we are growing between 10% to 12% per annum.

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Jaimit Doshi, Kotak Securities Limited - EVP [69]

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Right. No, but the last reported number, was it close to 30,000 dealers, the last time you...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [70]

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No, not as much as that. It would be closer to approximately 26,500.

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Jaimit Doshi, Kotak Securities Limited - EVP [71]

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Understood. And I'm confused about tinting machine penetration? Is it 70%, 75%? Or is it much higher than that?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [72]

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Of our own dealers?

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Jaimit Doshi, Kotak Securities Limited - EVP [73]

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Yes.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [74]

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No, no, much higher, much higher.

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Jaimit Doshi, Kotak Securities Limited - EVP [75]

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So when you say 26,000 -- 26,500 dealers, you'd say...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [76]

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So it means that the active dealers. The total number of dealers that we would sell to would be perhaps much higher than this.

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Jaimit Doshi, Kotak Securities Limited - EVP [77]

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Right. So these are active dealers.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [78]

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The active dealers that we consider for -- and that, you would agree, is a rational way to look at it. Would be a much higher percentage in terms of penetration.

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Jaimit Doshi, Kotak Securities Limited - EVP [79]

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Understood. Just so that I've got it right, 26,500 active dealers and about much higher than 75% penetration of tinting machine in that base of dealers?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [80]

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Yes, yes, yes.

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Jaimit Doshi, Kotak Securities Limited - EVP [81]

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Right. And one final one. What would be your share in protective coatings? I'm aware that you are a market leader. But broadly, is -- you have a broad sense of the market size? And if you could tell us...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [82]

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We haven't shared it recently, I don't think. So you'll bear with us. It would certainly be in excess of 20%.

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Jaimit Doshi, Kotak Securities Limited - EVP [83]

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Understood. And in powder coating, you're #2 player, right? Or...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [84]

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Thereabout. Again, this is a small number for us and for some other companies, our competitors. So it keeps shifting. But a 2 or a 3 would be our guess.

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Operator [85]

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The next question is from the line of Amit Purohit from CIMB.

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Amit Purohit, CIMB Research - Analyst [86]

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Congratulations on a good set of numbers. Sir, on this overall industry structure, which is focusing on unorganized players gaining market share post-GST, are we also aggressively looking at that segment? Or -- why I'm asking is this that we also -- I mean, we had a strategy 5, 6 years back, wherein we focused on the premium portfolio and which helped us to gain market share and gross margins improvement. Now in the current context over the next 1 or 2 years as we see the focus of the industry leader is more on the unorganized segment, so how do we actually tackle ourself or position ourself in this scenario?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [87]

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Amit, I think I have mentioned this in earlier calls also that growing strongly in the economy end of the portfolio doesn't mean that we are giving up on the premium end. In fact, some of our strongest-growing or fastest-growing brands are in the premium segment. So very clearly, it's a 2-pronged strategy. There's no giving up on the premium products. In fact, we've introduced more premium-end advertised products recently. You would have heard of Walmasta Glow. You would have heard of Walmasta Lite. All these products are showing robust growth.

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Amit Purohit, CIMB Research - Analyst [88]

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Right. And have we also come up with some discounted product like [the leader] to tackle the -- in terms of -- like the leader has recently come up with a distemper and a tractor emulsion, which is lower end slightly. So have we also launched some similar kind of products?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [89]

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We have in the emulsion end of the products. So that's clearly a response that's happened. We'll let you know more as and when we market new products.

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Operator [90]

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The next question is from the line of Gaurav Jogani from Axis Bank.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [91]

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I'm from Axis Capital. Sir, my first question is with regards to the premiumization trend that you alluded, I mean, in terms of the mix that has not deteriorated. However, if you see the top line number has grown by 7% and the volume growth, as you say, is in double digits. So sir, there is a disconnect, as in how could be the mix not deteriorate in that sense?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [92]

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No, you'll have to also take into account that about 24% of our business is industrial. So I cannot share numbers with you, but obviously, our decorative business, and I assume you're talking about the mix effect on decorative business, is -- the growth for decorative business is much higher than the all-company growth rate that you see in terms of sales.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [93]

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Sure, sir. So even if we consider that decorative piece as well, just I'm talking about the quarter-on-quarter basis also, given -- assuming the same 24 to 76 mix for the industrial and decorative piece, still the mix seems to have deteriorated in that sense. Is it because of the higher discounting that it is visible in the -- that the -- the top line growth is lower than the volume growth...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [94]

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No. We don't share the decorative numbers. So I'm not sure how you are able to determine the mix effect or the deterioration in mix.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [95]

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That's the media. I'm just going through media interview.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [96]

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No, no, no. So let me clarify that, I think, largely, the, let's say, effect on this quarter's mix is the explanation for the gap between volume and value. A large part of that is because of the degrowth in our automotive business. So that accounts for a little bit of the gap. And the other, of course, is the fact that economy end of the products have done very well.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [97]

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Sure. So in that sense, if economy products has done well, still we have seen a smart gross margin expansion. I will be assuming that the gross margins would definitely be lower in that sense. So -- I mean the gross margin still continues to be good. How is that possible, sir?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [98]

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No, no. Of course, you have to understand that the economy end of the scale doesn't account for a very large part of our portfolio. I mean I think perhaps that is the conception that you may have. So increasing robustly in the economy end doesn't disturb the mix significantly. I had explained in answer to somebody else's questions that in effect, our -- in conclusion that actually we've had a marginal mix improvement, no matter that our economy end of the products sold better.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [99]

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Sure. And sir, just last bit on the recent acquisition that you have done for that, STP acquisition that you've done, can you give some light as to how the top line is, what the company does and some margin -- what's the margin of the company? Any information that you can share on the same?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [100]

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We have shared, I think, in the stock exchange disclosure that the turnover approximately about INR 174 crores last year in FY '19. That's the only published information we've given out. Unfortunately, I can't tell you more. But surely, we'll let you know in coming quarters.

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Operator [101]

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(Operator Instructions) The next question is from the line of Avi Mehta from IndiaInfoline.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [102]

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I had just one follow-up question. We understand that there are liquidity constraints that other players have pointed to, especially in the northern part of India. Not only paints, but even the FMCG does now. In any way has that hurt our secondary distribution channel partners, and that also would have, to some extent, weighed on 2Q growth rates? Just trying to understand if there was any impact of that as well.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [103]

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You are right. There were some parts of the north that had some kind of demand issues, possibly from liquidity problems in Q1. Those have, to a large extent, been corrected or played out, and hopefully, things are coming back to normal. We have not been affected overall very significantly in this quarter, though I agree that in Q1, some areas of the north were affected.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [104]

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And sir, this you're talking about the underlying demand, not our channel partners, right? Because we're also doing some experiments on -- not experiments, but some strategic -- exploring new strategies of distribution. That's why I was asking.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [105]

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Sure. Sure.

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Operator [106]

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The next question is from the line of Anand Shah from Axis Capital.

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [107]

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Just one question here.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [108]

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Go ahead. Hello?

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Operator [109]

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Mr. Shah, proceed with your question.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [110]

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Yes, yes. Go ahead, Anand.

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [111]

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Yes, yes. So sir, just one question here. In the decoratives business, would your value growth be higher than your volume growth?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [112]

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In deco?

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [113]

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Yes, in deco.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [114]

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Again, these are comments, which are always asked. I would respond by saying it depends how you calculate your volume growth and what's your definition of volume? Is it hash kL/mt, is it...

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [115]

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Yes, in terms of tonnage, in mt basically, if you equalize everything in mt essentially.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [116]

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Yes, then volume growth would definitely be higher than value growth.

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [117]

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Okay. And would that not be the industry norm in terms of when paint companies would generally look at volume growth (inaudible) volumes.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [118]

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We find it -- because really, to give a kg of putty, the same weightage as kg of WeatherCoat Long Life, it doesn't make sense really in terms of either contribution or in terms of value for the company. So it depends how different companies see it. I wouldn't like to comment on the virtues of any one method. It means clarification. That's what I'm saying.

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [119]

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Okay. But you are saying if I do equalize everything in terms of tonnage, then volumes would definitely be higher than value in the (inaudible).

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [120]

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Yes. In terms of hash, not tonnage. Meaning liters and kgs added up.

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [121]

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Okay. Yes. Right. right. Okay. And in terms of putty, is there anything that you can share in terms of how the contribution of putty in your mix has changed over the years, let's say, 3 years ago and now, because we hear putty...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [122]

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That's as much as I can say. We don't give out specific shares. So I hope you'll...

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [123]

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But for industry, can you indicate, because we keep hearing that paint companies generally have got -- are a lot more focused on putty and...

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [124]

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It is significantly increasing. I think I mentioned in earlier calls that it would be silly to give this sort of market up, because otherwise, you vacate this space for maybe some of the other industries like cement.

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [125]

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Okay. And would the putty be margin-dilutive?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [126]

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To some extent. But as I mentioned in -- as an answer to somebody else's question that this has all got compensated by increases in premium products as well as -- yes, so there's no net-net mix deterioration.

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Anand Kumar Shah, Axis Capital Limited, Research Division - SVP of Consumer [127]

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Okay, okay. And at the margin, you would be gaining share as an industry versus unorganized because of GST cuts and all at the lower end?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [128]

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Marginally, yes, that's our guess. I think everybody says the same thing. And we're also seeing a marginal improvement every time, but it wasn't a onetime thing. I think it's a continuing, but marginal improvement for the organized players.

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Operator [129]

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The next question is from the line of Ashit Desai from Emkay Global Financial Services.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [130]

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You said decorative paints growth was much higher than the company average. I mean this is not the same trend that we've seen in -- I mean the difference seems to be much larger in this quarter compared to what it's been in previous quarters. So has there been a meaningful decline in industrial paints also this quarter?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [131]

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Yes. Again, I can't share numbers, Ashit, but that's true. But also the fact that we saw 3 price decreases in this half of the -- of FY '20, meaning May, July and September. So all of that has some impact. As you know, we sell reasonable quantities of solvent-based paints, and that's where we took these price decreases. So that's also had an effect.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [132]

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Okay. And price decreases were to the extent of 1.5%? Or these are higher than that?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [133]

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Thereabouts. The combined effect of the 3 price decreases would be about 1.6%.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [134]

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And what's the outlook for -- what's the second half outlook for industrial?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [135]

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I hope that something happens in the automotive. Of course, as I mentioned, we expect buoyancy in protective coatings business to continue. But automotive, we really can't comment. It still will take a bit of time to come out of the current situation, I think.

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Sujyoti Mukherjee, Berger Paints India Limited - VP of Finance & Accounts [136]

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Ashit, you are talking to a lot of auto companies. What is your idea?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [137]

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That's Sujyoti asking about the auto companies.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [138]

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No, I don't look at that sector.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [139]

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Okay. Safe answer.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [140]

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Yes. And lastly, if you could share some outlook for the international business also. I can see your statement that Nepal has done well. If you can share the outlook for Bolix also?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [141]

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Bolix, half year, was robust, very strong profit growth and reasonable top line. Of course, doesn't match India, but not bad either. So Bolix and Nepal are good. Saboo Coatings, even though they were affected demand-wise overall in the top line because of the little bit exposure to industrial and general industrial business, which also, to some extent, got impacted in the last 2 quarters. So -- but their profit growth is also quite robust. So good news on all the major subsidiary front. As I said, a little bit of concern still rests with our, BNPAC JV, mainly on account of the automotive business scenario.

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Operator [142]

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(Operator Instructions) The next question is a follow-up from the line of Gaurav Jogani from Axis Bank.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [143]

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Sir, just a follow-up on the Nepal business. There was some implementation of VCTS there this quarter. So do you see any impact of the same in that business?

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [144]

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No. Marginal, nothing.

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Operator [145]

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(Operator Instructions) As there are no further questions from the participants, I now hand the conference over to the management for their closing comments. Over to you, sir.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [146]

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Yes. Hello.

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Operator [147]

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You can go ahead, sir, with your closing comments.

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Srijit Dasgupta, Berger Paints India Limited - CFO & Director of Finance [148]

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Yes. I think we had a quite a interactive session. And I think in the circumstances, how the economy is faring, we believe that we've been able to give a steady performance. And going forward, we would like to see that the -- as we have commented in the industry outlook, in case the demand looks up. And I think in terms of numbers, it would be even better. Thank you.