The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Farhan Amlani - - Analyst
: Basically, 2 questions. First is like many paint companies, for example, Berger Paints, are actually entering the waterproofing space and they have
better synergies. So how do you take the competition from that? And the second question is that what are your future plans, like mainly they'll be
inorganic? Or you are looking for organic growth opportunities?
Question: Farhan Amlani - - Analyst
: Okay. I was talking about like they have -- they have an upper hand in painting and anything...
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: Sir, first question is, can you break down the transaction value? I think it's $285 million, which includes a closing amount of $158 million and the
balance is subject to certain milestones. Can you provide some more color on this? So that's the first question.
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: Yes. I think its total is $285 million, which you indicated. But it's $157 million on closing and the balance is subject to certain milestones.
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: Okay. And this revenue achievement, can you provide certain numbers over here? Is it like something product-specific or...
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NOVEMBER 06, 2020 / 10:30AM, PIDI.NS - Q2 2021 Pidilite Industries Ltd Earnings Call Hosted by Axis Capital
Ltd
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: Okay. Sir, so how should one understand this? Like will be having control of Araldite's retail chain? Or how should one look at it? Because the
financing...
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: Okay. So if at all, the top line doesn't come, we'll probably get the business at a lower price. Would that be a fair conclusion?
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: That's wonderful. Sir, my second question is, we have a rich proven history on acquisitions and all. I was just thinking about it, like we already have
Fevitite. We already have quite deep penetration which you indicated, it's one of our core strengths and we have a solid brand. Then what was the
need for Araldite? The Fevitite product itself, we could have made it into Araldite when it comes to market share. So if I had to retrospectively look
at things, how would you look at it? The reason I'm saying is we have all the ingredients to actually consolidate the marketplace. Then why is there
a need to acquire such a brand? Because we are a larger brand when we look at things optically.
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: Correct. Sir, that's helpful. But sir, if I have to ask you, if you had to quantify the numbers from a capital allocation decision, like we have a solid
balance sheet, we can easily afford to achieve this equation. But if one had to look at it from a payback period or from an IRR point of view, what
is our internal thought process when it comes to something inorganic or organic, taking this Huntsman transaction into perspective?
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: I'll just continue where I left. Sir, my question specifically was on capital allocation. Now specifically for the Huntsman transaction, if I understood,
you said INR 2,100 crores, 35% margins. It would essentially imply, if on no growth basis, we are looking at a 15-year payback, a rough math.
Sir, I would like to understand, what are your internal numbers? Or how is your thought process when we go for something inorganic? Again, the
question bounces back to we are a solid company brand distribution. We know the market better than probably anybody else on the street. How
does one -- how should we justify the multiples that we are paying over here?
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: That's helpful. Sir, just to add, would it be possible for you to scope at what rate is the market growing at? Basically, it will help us understand...
Question: Ritesh Shah - Investec Bank plc, Research Division - Analyst
: Okay. And Araldite would probably have like 1/3 market share?
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