Pidilite Q1: Revenue Rise 3.7% Profit Rise 20.6% | NDTV Profit
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00:00Some of the notes that came out post the results of Pedalite Industries were very constructive
00:07with one of them saying double digit volume growth yet again and of course earnings estimates
00:13have been raised but there are lot of questions around how is it that rural growth is looking
00:19so strong and what is it that can happen after such a showing in quarter one.
00:23Mr. Bharatpuri, Managing Director of Pedalite Industries with us on the show, Mr. Puri great
00:28having you, thanks for joining in and congrats on what the third straight quarter of double
00:32digit growth, I mean how is this happening and is this something that you had planned
00:38for or is this also fortuitous in some sense?
00:41Thank you Neeraj, firstly a pleasure being here, always a pleasure being with you.
00:46As far as the first quarter is concerned, this is something we have said for a period,
00:50I mean last the full year, last year we didn't deliver double digit volume growth.
00:55We have clearly said our objective is double digit underlying volume growth which is different
01:00from just pure volume growth because pure volume growth would obviously be much higher.
01:04Underlying volume growth is at constant prices and therefore what we have been doing at Pedalite
01:10is very clear, you know that we classify our categories into core growth and pioneer, at
01:16core we want to grow one to two times, GDP growth we want to grow two to four times and
01:21pioneer are tomorrow's growth categories, we want to create new categories for the future.
01:26We have been on this journey, we have seen some disruptions in the first quarter, it
01:30is not that it has been all smooth sailing, this long election and the related disruption
01:34and the impact of that has impacted, the severe heat wave has impacted but overall the Pedalite
01:43story continues, our elephants, our Fevicol elephants continue to march on, we continue
01:49to invest strongly in sales and distribution, especially in rural and semi-urban India,
01:55you know our Pedalite ki Duniya initiative is now 14,000 stores in villages with a population
02:00of 5 to 15,000, we have 28,000 villages with a population of 10,000 which we are reaching
02:06directly now, so we continue whether it is sales and distribution, whether it is innovation,
02:12I mean each of our divisions at Fevicol we have a new nail free ultra which actually
02:16substitutes nails in your home if you want to put up a towel rack or a mirror or anything,
02:21that is a new innovation, at Fevicuic we have a whole range of new Fevicuics for graft,
02:27for gel, for waterproof, in Dr. Fixit we have a set of innovations, there is a Dr. Fixit
02:34all seal which is for sealing your whole home when it is under construction, so at Pedalite
02:40we are clear, innovation, sales and distribution and new categories enabled by a very strong
02:49supply chain where again, you know 21 of our factories are undergoing brownfield expansion,
02:54we now have 70 factories across the country, digital, I mean we are very proud to see that
03:00you know one third of our sales today is coming out of our Genie app, if you are a dealer
03:05anywhere in India, you order on the app, in 24 hours you will get material, can you imagine we
03:10are the only consumer company which has reached these proportions out of a sale out of apps,
03:15we are very proud of that, so you know lots of things happening at Pedalite, I hope that gives
03:19you a flavor of, we are clear you know each quarter is part of a continuum and we must continue our
03:24progress, fortunately a lot of it is paying off for us. Well, for a company which boasts of such
03:32a large number of Pedalite ki duniya, it's heartening to see what's happening on the
03:36digital side as well, Mr. Puri, you reckon the sales volume enables you to absorb the volatility
03:45in raw material cost as well, sure they were positive for you this time around but it could
03:50turn because it's very very choppy and volatile currently, so could it help you absorb this
03:55because in the past you always told me right, that you don't want to really make a killing on
03:59margins nor do you want to lose out too much, so you reckon this is a sweet spot of sorts?
04:03Absolutely yes, we are very clear that listen, our range of 20 to 24 is the right,
04:09it enables our product to get a premium but it also enables us to keep investing back in the
04:15market, I think we're in the right level, the only thing these days, Neeraj, you and me both
04:20know that this new variable of geopolitics where what you wake up to, where in the world is going
04:25to happen is the one thing that you know is a source of, I would say not worry but a source
04:30of always concern and as long as hopefully that remains stable, I think we're in the second half
04:37for better times simply because the monsoon appears good, it needs little better distribution,
04:42hopefully that will happen in August and September and then we should have a nice
04:47festive season, so starting from here hopefully demand conditions will only improve.
04:52Mr. Puri, you know since you were talking about the raw material prices, I just want to understand
04:57the outlook on overall WAM prices especially you know the kind of consumption rate for WAM
05:03this quarter particularly. See this quarter our consumption rate is close to about a thousand
05:08and twenty, let's say around a thousand dollars a tonne which is lesser, last year this time would
05:13be about eleven hundred and something a tonne, fortunately WAM is at those prices in fact a
05:19little lower now, you know there is good over capacity across the world WAM market, so we're
05:24fairly comfortable and as I said while there is some amount of inflation in some raw materials
05:30at an overall level, I think as long as you don't have any major geopolitical events we will be
05:35comfortable and raw material prices will remain benign. Okay and Mr. Puri with respect to your
05:42change in product mix, I want to understand that what is the product mix change being like and for
05:49FY25 overall, what is it going to be like? See one of the things we have consistently maintained
05:55is over a period of time when we started on the journey of core to growth and pioneer, core used
06:01to be 80% growth and pioneer was 20% of our sales, we now slowly reached 55-45, over the next two
06:09years I would say we would be at 50-50, I think that's a very healthy rate because you've got half
06:14your portfolio hopefully that will grow at 1-2 times GDP and you've got then half your portfolio
06:18that should grow at 2-4 times GDP and that's really what we are aspiring towards. Mr. Puri,
06:24you've told me last quarter as well that urban rural was anyways very strong for you, this
06:29quarter we are hearing a lot more businesses talk about rural outgrowing urban in fact from an India
06:36wide perspective, consumer businesses perspective of their charts which were showing that rural is
06:40now outpacing urban growth, what are the factors behind and can this continue even as we hit the
06:48festive season? See it's a very simple thing Neeraj, as far as rural is concerned, the rural consumer
06:55needs to see more money in her hands, if that continues to happen via good crop, via set of
07:02government initiatives that put more money into rural, I think rural demand can only improve and
07:08therefore we are quite optimistic about rural improving from here. Could it last, I mean you
07:15know money in the hands which is not because of infrastructure may only last as much, I'm just
07:20trying to understand, Mahima was talking about whether this is a base effect as well, my question
07:25is you had three strong months of volume growth, rural is doing very well, how long do you reckon
07:30this can last? See if you look at us Neeraj, we have now had 8 quarters of rural double digit
07:36volume, so we have consistently beaten our urban growth rates over 8 quarters because for us we
07:42see a tremendous penetration opportunity, we see a range opportunity, we see an education opportunity
07:47and we're investing behind each of those and therefore you know if demand conditions improve
07:53it becomes a multiplier but as far as we are concerned for the rest of the year, we're very
07:58clear that rural will outgrow urban. Understood, Mr. Puri you know I also want to understand the
08:05kind of competition that you've been facing from the paint companies when it comes to your
08:09waterproofing business. See as far as competition is concerned we're no strangers to competition,
08:15frankly the paint companies now have been in waterproofing for over 10 years so they're not
08:19new to waterproofing, the good thing is as far as waterproofing is concerned there is still a very
08:24large runway for growth, even today 4 out of 10 consumers in India are doing any proper form of
08:30waterproofing when they are building a home, with all this competition if this 4 becomes 6
08:35all of us will benefit and hopefully we as the leaders will benefit more, we're also seeing a
08:39strong substantial, you would have seen our B2B growths are very healthy, we're seeing very strong
08:44substantial growth in the project segment via you know the large infrastructure projects so on so
08:49forth etc. where we're seeing a lot of demand coming in from the institutional segment so as
08:55far as we're concerned, we don't take any competition lightly but as I keep telling my
09:00teams our job at Pidilite is to delight our consumer and customer a little more than everybody
09:05else, don't look too much over your shoulder but don't take anybody lightly either and that's what
09:09we are continuing to do. Okay, Mr. Puri I'm guessing, sorry a redundant question maybe but no
09:16exposure or meaningful losses because of what's happening in Bangladesh to you, is it? See we have
09:21a, we are the leaders in Bangladesh, we have two factories in Bangladesh, I have over 250 employees
09:26in Bangladesh, having said that it is still about one and a half percent of my turnover, one and a half
09:31percent of my profits, we're obviously closely monitoring the situation, we're like you know
09:36making sure our people are safe, hopefully this will turn around but no it's not a substantial
09:41impact because as I said it's about one and a half percent at best of our sales and profits.
09:45Understood, Mr. Puri one last quick question on what's the kind of capex that you're looking at
09:50for FY25 overall? See our capex remains fairly constant every year, we spend between 3 and 5
09:58percent on capex, that's exactly what we will continue spending this year, we have an ongoing
10:03program of building a very strong and resilient supply chain, I mean we now have 70 locations
10:10across the country, having said that 21 of my factories are currently having some expansion
10:14program or the other, you will also see announcements on new factories in the next
10:18six months, we will announce some newer factories, so it's a constant part of our program, we will
10:25spend three to five percent on capex, it will not be below three, it will not be above five.
10:28Mr. Puri, one last question really from my end, actually the last question on the interview too,
10:34as you look at it five months or five years out, maybe I've asked this before but I'd love to know,
10:39simply because of the network that you're building and the ancillary businesses we are doing right,
10:44how large do the ancillary businesses become relative to the main products over a period of
10:53five years? You would have some direction in mind when you've thought of launching all of
10:57these newer innovative products I guess? See that's a great question Neeraj, as I said we
11:02started with our portfolio being 80% core, 20% growth and pioneer, it's already 55-45,
11:09in the next two years it should be 50-50 and then you know this journey will continue,
11:13we are also very clear that you know the core still offers substantial opportunities for growth,
11:18so we're not neglecting that by any stretch of imagination, but as far as our portfolio is
11:24concerned, you will see us you know today we have 37 verticals, five years hence you will see us at
11:28least in more than 50 verticals. And all of that will still enable you to maintain your return
11:33ratios or maybe improve upon them? Absolutely, we are very clear that biggest objective profitable
11:40volume growth, double digits, underlying volume growth in a margin band of 20-24%, keep it simple,
11:46keep it focused and let the elephants march on. Cross fingers for all of that, Mr. Puri great
11:52talking to you, thanks so much for taking the time out and being with us and have a great build up to
11:57the festive season. Thank you so much, pleasure being with the two of you, thank you so much.
12:01Thank you, the pleasure was entirely ours and viewers thanks for tuning in.