Pidilite Industries Ltd Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Percy Panthaki - IIFL Securities - Analyst : Slowdown in the last couple of quarters from --

Question: Percy Panthaki - IIFL Securities - Analyst : 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?

Question: Percy Panthaki - IIFL Securities - Analyst : 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?

Question: Percy Panthaki - IIFL Securities - Analyst : 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?

Question: Percy Panthaki - IIFL Securities - Analyst : 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.

Question: Percy Panthaki - IIFL Securities - Analyst : Right. See, the only reason why I'm asking this is that your margins for the last two, three 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

Question: Percy Panthaki - IIFL Securities - Analyst : But that difference is not very large, but I get your point.

Question: Jaykumar Doshi - Kotak Securities (Institutional Equities) - Analyst : You have often mentioned that about 50% of your business is dependent on new construction and (inaudible). 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 six-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?

Question: Jaykumar Doshi - Kotak Securities (Institutional Equities) - Analyst : 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 two, three-year lag, and you were hoping during the course of the year, you'll start seeing more and more benefits or maybe FY26 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?

Question: Jaykumar Doshi - Kotak Securities (Institutional Equities) - Analyst : 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.

Question: Arnab Mitra - Goldman Sachs - Analyst : 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.

Question: Arnab Mitra - Goldman Sachs - Analyst : 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?

Question: Arnab Mitra - Goldman Sachs - Analyst : 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 10:30AM, PIDI.NS - Q3 2025 Pidilite Industries Ltd Earnings Call

Question: Latika Chopra - JPMorgan - Analyst : 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.

Question: Latika Chopra - JPMorgan - Analyst : 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?

Question: Latika Chopra - JPMorgan - Analyst : 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.

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : 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?

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 10:30AM, PIDI.NS - Q3 2025 Pidilite Industries Ltd Earnings Call

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : 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 two 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.

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : And on Gujarat and Kerala, what is the reason?

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : 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 two quarters also marriage season -- dates are much, much higher. So any benefit you see in these micro markets in terms of demand?

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : 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 four 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.

Question: Tejash Shah - Spark Capital Advisors (India) Private Limited - Analyst : Sir, Consumer and Bazaar growth has been kind of in single digits for past seven-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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 10:30AM, PIDI.NS - Q3 2025 Pidilite Industries Ltd Earnings Call

Question: Tejash Shah - Spark Capital Advisors (India) Private Limited - Analyst : 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.

Question: Avi Mehta - Macquarie Research - Analyst : 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.

Question: Avi Mehta - Macquarie Research - Analyst : 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?

Question: Avi Mehta - Macquarie Research - Analyst : 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 (inaudible) 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.

Question: Avi Mehta - Macquarie Research - Analyst : Perfectly clear, sir. And sir, lastly, just any update on the lending and the paints businesses if you could kind of share?

Question: Bharat Sheth - Quest Investment - Analyst : Sir, I want to understand about the overall opportunity or saying that we look forward from, say, around medium term from three to five-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?

Question: Amnish Aggarwal - Prabhudas Lilladher (Pvt) Ltd - Analyst : 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 two years back, three 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?

Question: Sheela Rathi - Morgan Stanley - Analyst : 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?

Question: Sheela Rathi - Morgan Stanley - Analyst : 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.

Question: Sheela Rathi - Morgan Stanley - Analyst : And sir, in the past, you have also said that on platforms like Amazon, a lot of the categories, we are the number one 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?