My question is on overall competition. I see that your gross margins are up, both QoQ and YOY. My specific question is in terms of the 10% free grammage in the different SKUs by a competitor, what has been your reaction? And the new players, what we are hearing is they are now withdrawing it from many of the SKUs. I picked up that in terms of the tail of the distribution, there was some loss for you because of the new players coming in. So, if you could comment, how are things there? And from an advertising perspective also I see Asian Paints now being much more aggressive in terms of all the key events of cricket. So, how is your market share in terms of the media presence?
In terms of the whole area of additional grammage, the whole area of free, which kind of comes along with paint, we think it's something which is an area which has been tried and worked upon by various players earlier as well. It's something which is nothing new. It also basically reduces the turnover of the retailers from what they will be able to sell. From the point of view of our perspective, what we are very clear is that our work on fundamentals, our work on execution, our work on brand building, our work on innovation will continue and we keep on doing this work. We are very clear that possibly it is not a game of just discounting alone. From a point of view of building the brand equity, above the line media has been very strong and we have used it effectively for reaching not only the entire country, but also at a regional level very strongly. As we see it in terms of a share of voice, we would be definitely much higher today than the overall competition. And that is something which we have upped from a national level, at a regional level.
Firstly, there has been a sharp improvement in volume growth despite the extended monsoon quarter. Was this aided by festive demand which was largely sitting in 3Q last year? And did you see any lost dealers coming back or restocking impact indicating that sustaining this double-digit volume growth in coming quarters can be challenging or do you see this double-digit growth to sustain? Secondly, the difference between your volume and value has been much lower versus historical trend. What drove that? And despite being a seasonally weak quarter, gross margins are a bit higher versus 1Q levels. Can these benefits continue in second half and margin expansion that we've seen in this quarter continue in the coming quarters?
This has been the quarter where we approached the entire product category in a fairly holistic manner. Given the overall equity of Asian Paints, we leverage that and look at possibly batting at the retail with the full range of products. We have also seen a clear focus on B2B segment, which has given us entire advantage in terms of exploring beyond the central theme of just the builders and CHS. We've looked at the government, the factory segment also very strongly. The September month was definitely much better. And it has definitely upped the overall volumes. I wouldn't say that from a point of view of festive season, because the difference between last year and this year was just 10 days in terms of the overall festive season. But nonetheless, the first 15 days were strong, a very good uptick at that point of time. As we go ahead, we have also looked at saying that we will maintain a 4-5% difference between volume and value. We have looked at the premium and the luxury and far more strongly, a lot of energies went in terms of upgrading the consumer also so that we are able to showcase the benefits.
My question is on the competitive intensity. Last year we've seen kind of bandwagon effect where a lot of dealers, joined competition, and competition built up some scale. Now, is this because some sort of fatigue has set in there as well, where dealers are going back and buying Asian Paints again and some sort of that effect is waning? And the painter commission that you also gave you also accelerated quite a lot a bit, I believe. How do you record that commission? Is it part of the net pricing or it sits on in the other expenses? Just wanted your reaction, whether competitive intensity actually is waning from a dealer adoption point of view.
If you look at it from a point of view of the consumer, this is not an FMCG industry that you basically come in with a force and you look at possibly giving consumer a lot of goodies packed by people who are kind of aligning in terms of giving and offering those areas. It is also a question in terms of saying that this is a cycle which keeps on visiting you once in five years, which means that every year you have a new set of consumers which possibly are coming into the market. And this is a continuous process that if you don't build bridges with this customer over a longer period of time, a shorter-term kind of invasion will really not help you in terms of getting to the consumer. It is important that you build in the consistency of brand spending to that extent, which can only happen if you do it over a larger period five years to 10 years, so that you are able to get that customer, the newer customer, and then start basically getting a repeat from that customer. While there are ways of accelerating in terms of incentivization which can come in terms of looking at discounting, the more important thing is the fact that are you building a connect in terms of ensuring that both the dealer and the contractor are able to get a continuity in terms of their business.
In your presentation, you called out that part of translation from volume growth to value growth is also missing because of rebates. Just wanted to know how are we tracking and how is the overall industry also tracking on that front? Has the intensity on that particular line item come down?
The important thing is that, when you look at the overall segments, there is a certain kind of balance you will have to really look at because it is a large product range today, and each segment has a large contribution, given the diversity of this country and the huge consumption. And therefore, possibly just blindly pursuing the fact that I need to just decrease the value volume gap might not be a great idea going forward. What really matters is that in each of the segments, are you really scoring out with the consumer? Are you really giving consumer a different segmentation and are you really winning in each of the segments. The segment sizes vary to that extent in terms of what possibly economy contributes, what is the mid end contributing, what is the luxury contributing. And therefore, just saying that I need to concentrate only at the mid and the luxury end and kind of look at possibly increasing my value might not be a great choice when you are really traversing the entire range and reaching out to the entire country. A balanced approach is a good option in terms of maintaining volume and value parity going forward.
My first question is on volume growth. We have seen a double-digit volume growth in this quarter from your side. Your presentation talks about improvement in consumer sentiments. Whereas what you articulated on the call, it looked like more of your internal factors which is driving this growth. Can you just clarify as to sentiments versus your own efforts, which was the bigger driver and how do you see this going ahead?
Overall, the demand conditions we are all aware have been really average. We have not seen too much of an uptick. The overall industry, as I said, would not be growing more than about 3.5 to 4%. Therefore, we were very clear that we need to really shift our gear in terms of how we really galvanize the market, how do we look at playing to our strengths in a very strong manner. We have kind of unleashed so many kind of initiatives from the point of view of media and new advertising across the range of products. The bigger effort was to ensure and give a very strong whiff to our overall execution piece so that we could deliver the right kind of servicing, generate demand, and have the right kind of connect with people. The other area has been the area of regional initiatives. Some of our innovations in terms of the new products have also galvanized the numbers for us. Also, uptick in premium and luxury has also helped us at really upgrading the consumer. But I would also say that we saw some demand pick up in September for sure. And also I think the first fortnight of October has been strong due to festival being there and some uptick in the demand which has also helped us.
Given how you're seeing your initiatives pan out and the demand improving, would love to get your thoughts on how you see the full year volume growth and value growth for us or for the industry to give us some sense. And second, we have historically seen this industry do double digit growth in value terms as well. What do you think is required or when do you see that panning out?
When we look at the next six months, we've already spoken about where we are looking at the overall year going. We are looking at mid-single-digit value growth for the full year. And as we kind of go-ahead volumes would be higher since we are now batting across the range of products right from undercoats to the economy to the mid-range and to the top end products. And therefore, we would anticipate that the gap between the volume and the value would remain in that zone of about 4-5%. So, I think if we are able to hit, mid-single-digit value growth, we would come closer to a higher digit value growth at the end of the year. But as I said, a lot depends in terms of how possibly the market pans out, how things will kind of augur as we kind of go forward.
The first one was on margins. You've always maintained an 18 to 20% margin band for yourself. Given the raw material environment is benign, competitive intensity remains stable, clearly there are a lot of cost interventions. Are you comfortable to see visibility that you can land at the higher end of this margin band instead of the lower end? The second question was at an industry level. We have seen introduction of consumer financing for painting services. What are your thoughts on this? And the third bit, this gap between volume and value, when you frame your plans for FY27 in terms of mix and all the initiatives, do you sense that this gap will reduce or there is a conscious effort to do that?
Overall margins, at the standalone level, in Q2 we are at 18.5% at standalone level and at consolidated level, we are closer to 18%. Today, we are making some very meaningful investments in our marketing efforts, we are also looking at investing in technology a lot, we are looking at bringing in more innovation. We also see higher competitive intensity in the market as we go ahead. Given all this, it is okay to maintain the whole guidance of 18 to 20% PBDIT margin band. I would not qualify whether it should be at an 18% level or a higher level. But it's good to maintain 18-20% margin as we go ahead. On consumer financing, I don't think it's a new concept in the country. It has been tried and tested for a long time. In fact, we were the first ones to introduce financing about almost five years back. It is something which has got a little bit of a muted response because people are also wary about the fact that there are certain resultant charges which accrue to them. Possibly it will give only that much of connect with the consumer but cannot become a big game changer. On the volume value gap - today when we reach out to the market, we are talking of reaching out to every segment of consumer, right from the segment at the economy level to the mid-level to the luxury level. And therefore, we would not like to see that we are losing out in any of these segments. What I would see is that as we keep on going ahead, this kind of volume-value gap will persist if we are looking at a far more holistic approach across the range of products.
If you could comment about anything which would have done in the last six months or one year with the dealers, anything different versus in the past, that would be very helpful. The second question is any color over the last six, nine months in terms of your regional mix changes. In markets like Tamil Nadu, Karnataka, Kerala, where you are probably over indexed versus your national average, how do I think about these parts of India, the growth for you, is it closer to the overall growth or is there a regional divergence?
For us, the entire set of retailers are something which are core to us. What we have definitely looked at in the last six to nine months is the area in terms of building far more stronger relationships. The second area which we have looked up is in terms of generating more business for the retailer. So, that it is something which is very different from the industry standpoint saying that today we get you better leads, we get you better business, so that today the retailer gets more interested in terms of doing business with you. The third area is to kind of really look at their earnings and basically, we look at two initiatives. One is from the point of view of giving them a strong ROI in terms of their overall business. And secondly, by the virtue of a lot of variants, a lot of differentiated propositions, we try to give them higher margins. When we look at certain regions which you mentioned, especially the southern regions, we have looked at a lot of regional initiatives which are basically tuned to that region in a very strong manner. The whole area of regionalization, which offers some areas like colors which suit that region, packs which suit that region, something which appeals to the art culture of that area, has been a strong galvanizing point.
My question is on premium and luxury part of the portfolio. Could you give us some indications in terms of what has been the growth rate relative to the company? And the question comes primarily because the new entrant has indicated that for them 65% of the portfolio is premium and luxury. If that is the case, mathematically it appears that either the market is growing at a super normal rate, like 25, 30% plus in value terms of premium luxury, or maybe they are gaining share from others. So, I would like to know your thoughts on that aspect.
I can speak for Asian Paints here that today, when you look at the luxury and medium category today, it's not that large a category in terms of what we see. The larger, bigger category obviously is the economy category. And therefore, we have reason to believe that every new entrant who comes in basically tries to get a larger peep into the area of the economy segment. Because it takes a lot of effort in terms of brand building, a lot of effort in terms of product differentiation to start making forays from a mid-level to a luxury level. And therefore, what we believe is that the economy segment will still be the largest segment in terms of the market. Our endeavor is to look at upgradation, which is a very strong initiative what we take, in terms of how we upgrade people who are using distempers to the economy emulsions, from economy emulsions to the mid-level immersions and from there onto the luxury emulsions. We keep on prodding that pyramid far more strongly, but the larger base of that pyramid is the economy segment.
I have a quick question on the mix again. Any color in terms of interior, exterior performance in terms of mix. And just a quick one on the waterproofing category or the construction chemicals category in general. Any commentary there?
The interiors would have done much better this quarter, given the fact that there was extended monsoon. And please remember, in the monsoon, the exterior painting suffers. Especially large, big sites, especially in the B2B business. It takes a toll in terms of the exterior painting because no one wants to risk painting at a time when there was incessant rain. So, I would say that this quarter has been much stronger from the point of view of all the interior finishes. On waterproofing - That category has done very well for us. Overall, we are looking at growing more than double digits in that category. And there are lot of innovations in terms of what we are bringing from the kind of products and really offering consumer a proposition, which is a strong waterproofing proposition. And, in the B2B business, it is basically foundational to get into the waterproofing first and then start supplementing it with the top coats. So, it's been one category which has been doing very well for us over a period of time.