On paints - could you give more details about the number of dealers in this particular quarter versus the last quarter? Diwali was a little advanced, distribution expanded from 8,000 to 10,000 towns, SKUs went up - but yet sequentially there is a marginal low single-digit drop in revenue. How should one look at this in terms of the expanding network?
You're right. We have expanded our distribution network beyond our original guidance of 8,500 towns to 10,000 towns. To measure dealer concern, we should look at the number of dealers that have participated with us in September and October. We've been growing dealer participation on a month-on-month basis. There was a lull in July and August, and it has returned back to a significant growth, almost a double-digit growth of dealer participation in September, and the same momentum has continued in October. The throughput may have fallen on a quarterly basis. But when we measure on a September basis, the throughput is back and both in September and in October, dealer throughput is at levels and slightly higher than what it was at quarter one. Almost 30% of the dealers are currently doing more than 40 to 80 products for us.
On B2B e-commerce - private labels are what percentage of revenues? And what is different from a technology or innovation perspective that gives the confidence we might be able to surpass the revenue target sooner?
We have built an integrated e-commerce platform, which forms a digital backbone and connects every stakeholder in the entire ecosystem, starting from brands, OEMs to buyers, logistics service providers to lending partners. This creates end-to-end visibility, which is predominantly not there in most sectors. Our ability to bring in efficiency, provide the best price, widest assortment, reliable experience - all of that come into play. All the buyers who we acquired last year, they've already purchased on an average more than twice the amount this year. To fulfil a single transaction, it requires more than 30, 40 touch points; orchestrating all of this seamlessly is where our edge comes in. On private labels - we are right now not breaking down our revenues into different product categories. Our private labels since launch have seen very good acceptance. We are currently operating in tiles, ply, bathware and faucetware. We've seen great acceptance for these private labels in the retail channels.
The number of distributors - your target was 50,000. Have you achieved that target? How many of them would be monthly active distributors as in ordering at least once a month? And does your guidance of INR10,000 crores turnover by FY '28 remain valid?
Yes, we are there. On monthly active dealers, we believe we are better than the industry standards. On the INR10,000 crores turnover by FY '28 guidance - yes, it remains valid.
On market share trends - last year on a Q-o-Q basis you were adding 100, 150 basis points of market share every quarter. It seems to have moderated to about 20 basis points starting this year. Is this entirely the difference between primary, secondary? Is there a risk that it decelerates further? Mathematically, for INR10,000 crores in FY '28 means 13%, 14% market share. So how do you think about acceleration in sequential market share?
I'm not sure how you're doing your calculations and how you're arriving at quarter 1, 20 basis point or quarter 2 at a slow market share growth. The revenue reporting of paint companies has 3 broad components: decorative paints, putty business as well as industrial paints. With decorative paints and putty business of the legacy players and decorative paints and putty business of Birla White, our assessment is we have grown very significantly. Last quarter, we had talked about reaching double digit, and we have grown more than 700 to 800 basis points in this quarter further. On a stand-alone basis, our assessment is we will be in quarter 4 to quarter 1 of next year, double digit. We are trying to reach this in quarter 4. But between quarter 4 of this year or quarter 1 of next year, we should be in a double-digit number. Our degree of confidence remains solid around there.
On PSF segment and caustic - the performance on a cumulative basis remains range bound like last few quarters. Do you see any figures which could provide any positive change in performance in this business?
We expect a slightly better performance in Q3. But obviously, there are a lot of ifs and buts in terms of U.S. tariffs, in terms of global pulp prices. We expect stability and a slightly better performance for Q3.
Post the resignation of Rakshit, what is the rough timeline for the successor announcement, any change in growth strategy or aggression? And on Q2 paint performance on a sequential basis - other peers have seen almost 10% decline given weak monsoon - how does Birla Opus stack up versus that?
In the life of a professional, individuals take their call on where they want to build their career. Rakshit has helped Birla Opus from the very start of the business to build the project and in the initial phase of launch. Now Birla Opus has a very strong, high-performing team and will continue to stay course on the vision that has been announced to the market. The vision the company has announced - we have committed to be number two as well as profitable within three years of full-scale operation. We will stay course on that. As regards to Q2 performance, this is our first time facing a full monsoon season. The overall industry on a quarter-on-quarter basis has had a double-digit decline. Our Birla Opus on a year-on-year basis had a significant growth, but on a quarter-on-quarter basis, had a low single-digit decline, primarily during July and August. We turned back very strongly in September as well as October. We are seeing very strong secondaries or movement of paint buckets from dealer counter to contractors and consumers and return of institutional business. Rakshit will be there with us until 5th of December.
Now that we are out of a long and persistent monsoon season, how should one look at the industry demand for the second half? And with Kharagpur now fully commercialized, how should we look at your ramp-up in second half?
We are highly optimistic and results of September and October bear us out of a strong quarter 3, both on a year-on-year basis as well as a quarter-on-quarter basis. So our guidance is continued double-digit growth on a quarter-on-quarter basis and a significantly high growth on a year-on-year basis. As regards to our capacity, as we mentioned, we are at 1,332 million liters per annum, with Kharagpur arrival in the short term, it will help managing our logistics costs and better servicing on the Eastern and Central India. But in the long term, our aim is to ensure that the volume market share and capacity market share converge all investments and all efforts.
On B2B e-commerce - if I look at this quarter numbers, the revenues are annualizing more than INR6,000 crores. You have guided for INR8,500 crores for fiscal '27. Is there a case for this number getting revised up? Or will you be reaching this targeted number sooner than fiscal '27?
Your observation is right. Our growth compared to what our expectations were, we've been doing very well compared to our plan. We are on track. Our earlier recommendation was that we will achieve $1 billion scale in FY '27. There is a likely chance that we will get there and hit that milestone sooner. But for now, we are not changing any of our direction as of now.
Could you give us the number of dealers? And second is the traction or spurt you've seen in September and October - is it led by the consumer style financing or the EMI options you introduced a couple of months back?
Those are factors which help in secondary sales. We first focus on primary sales - that is sales from companies to dealers. The number of dealers participation has grown as well as number of products sold has grown, both in September and October. We have a central monitoring system of our tinting. We are finding that the secondary on our tinting for dealers in September and October has been almost 120% to 130% of the volume that they purchased in September and October, showing a very strong secondary or throughput. The Assurance program is helping painters and contractors. Thousands of projects have been registered in multiple stages of execution. The new painting services and Assurance are secondary-based programs as well as dealer stocking and dealer purchase are the primary-based programs. Both are running strong.
When you started off, the first push was making distribution available and increasing distributors. Now more or less that lever is done. For sales growth to continue double-digit on a Q-o-Q level, what is the next thing you will focus on? What is the next lever?
Focus is on consumer. You need a distributor or a dealer to make sure products are available at the right time at right place. That activity, we have managed. All our attention is moving to consumers. There are two types of consumers - painter contractor and direct homeowners. That's the reason we continue to be the most visible brand. Within a period of one year, we have top of mind recall, we are number 2 brand. 30% to 40% of the consumers make direct purchase of paints. Remaining 60% to 70% of the consumers do it with the help of painters and contractors. So all our effort is to attract maximum number of painters and contractors, ensure they are able to experience our high performing products, and offer to customers two new services - direct painting services with transparent pricing, EMI and GST bill, and Assurance with product warranty plus labor cost coverage.
Because of this rainy season, has there been any sort of impact in this Q2? Is that why you're calling out the early part of the quarter was tapered? Despite adding stores or distribution, you haven't seen performance to that extent. The market always correlates individuals leaving at the top to the delivery of outcomes.
We believe that we have the best growth on a quarter-on-quarter basis. When you measure on a year-on-year basis, we are a triple-digit growth. But on a quarter-on-quarter basis, we had a least decline when the industry had a double-digit decline. We had almost flat or slightly negative decline basis. Whenever there is monsoons, the exterior products and institution business slows down. That is our peak monsoons in July and August. So if a part of our business is not happening, that is the reason why the slowdown happens. That is historic of industry. On a quarter-on-quarter basis, quarter 2 is amongst the slowest quarter for the industry, and we faced it for the first time. If you were to remove Birla Opus performance, the industry has had a slightly negative growth based on various feedback from the market.
On chemicals - EBITDA run rate last year was INR250-300 crores, today we've inched up to INR350-400 crores. When can we again start seeing meaningful improvement in the EBITDA run rate? Specifically on chlorine value-added products margins, when ECH and CPVC should contribute meaningfully, and whether power cost benefit from renewables shift is optimally achieved?
Going in reverse order. On renewables, we are at about 24%, 25% renewable level as of now. If I look at all that we have and all the state-level regulations, we expect that in the next three years, we should be able to technically get to 40%. We have not yet envisaged those projects, not yet signed the PPAs, but that would be an aspirational level for the next 3 years. On ECH and CPVC, they would be meaningfully contributing from Q1 of next financial year. We will be mechanical complete by Q3, worst case situation in January, but the start-up times of these plants are long and complicated, with safety risks. So meaningful contribution will happen from first quarter of next financial year. On chlorine derivatives - it's a rather large basket of products, probably the largest basket of chlorine derivatives in India. Some are seasonal - water treatment, monsoon has higher season; plastics has another high season. These are mature products. It's not like you're going to see breakthrough profitability in any of these traditional chlorine derivatives, but it is necessary for us to do them so that we can get the caustic utilization rates that we want. On the catalyst for next step improvement - it essentially depends on chlorine, given our large exposure still to the chloralkali business. It's a combination of caustic prices and chlorine demand in India. The business of predicting caustic prices for a long time is very tricky.
On the resignation of Rakshit - it comes as a big surprise to anyone tracking Birla Opus closely. Should investors view this transition as a natural phase in a generally difficult competitive business or as inflection point of any refreshed strategy?
It's a natural phase of professionals growing in their career. This will have no impact on the business and business will be as usual. And there will be no change in the growth strategy.
Clarification - when you're saying that the paints industry has grown at low single digits in the second quarter, and it's negative excluding Birla Opus - is this just decorative organized paints or adding putty as well?
Yes, including putty.