What capex guidance should we build in for the respective divisions given we are past peak capex phase?
Capex guidance for FY27 we will be able to share next quarter. We are just working on it, give us some time.
There are very big shortages on transmission lines in the Insulator division. How are you planning to add capacity and can you share the FY26 insulator sales and capacity utilization numbers?
The electrical segment is growing well and there is a big order backlog. Our insulator business is divided into three parts: porcelain, polymer long rods, and polymer hollow composites. We are the world's only insulator player operating in all three. For porcelain, we will only do productivity initiatives with no plans to increase base capacity. For polymer long rod, we recently did some capacity expansion - those are sold out and we are looking at further increasing capacity. Our aim is mostly to gain operational efficiencies from existing assets and do incremental investments in polymer long rods and polymer hollow composites. We have stopped disclosing insulator sales and EBITDA numbers separately - it is part of our others segment.
How should one think about growth from here given you've attained scale in dealer reach and tinting machines similar to legacy players? Will growth come primarily from further dealer penetration, more tinting machine reach, or improving throughput?
We are very confident of growth. The industry is likely to move from single-digit to double-digit growth in FY27. For Opus, growth will come from both numerical distribution expansion (from 11,500 towns to beyond 15,000) and improved throughput. The largest component of growth will come through throughput as existing dealers who have tasted success with one category expand to the full range - emulsions, enamels, waterproofing, wood finish, distemper, and for franchise partners wallpapers and exclusive products. We also see expansion through expanding the retail networks. We achieved triple-digit growth last year and remain confident of high double-digit growth.
On paints profitability - is the EBITDA improvement due to scale or reduction in rebates/discounting? And should we consider FY26 as the first full year of operation for the Rs.10,000 crore target, making FY28 or FY29 the third year?
FY26 is what we internally take as the first full year of operation even though the sixth plant started in Q3 of last financial year - we want to take a stiffer target. Our priority order is: (1) become number two decorative paints operator in India, (2) Rs.10,000 crores revenue, (3) profitability. Profitability comes from: fixed cost leverage as sales scale, and variable cost optimization through better buying rates, plant optimization on power and logistics with six plants coming in, and competition among raw material suppliers.
When you say Birla Opus plus Birla White is within striking distance of number two, the number two player did approximately Rs.10,000 crores last year. How close are we specifically?
Combined revenue of Birla Opus plus Birla White putty business brings us nearly to the level of the existing number two excluding their industrial revenue. We quote only the decorative part including putty, not industrial paints. Going forward, the stated ambition is for Birla Opus on its own in the decorative paints business to be number two. The numbers we have are from internal estimates and market research from multiple sources.
On throughput per dealer, where do we stand versus industry benchmarking and what is the leeway for growth there?
Dealers operate across A, B, C, D class segments. In each subset we have a fair market presence and our throughput is in line with our fair market presence. The top dealer stocks about two to two and a half times the bottom dealer, and throughput per dealer ranges between four to five times the bottom dealer. Our strategy of focusing on top dealers driving business from top industry-contributing dealers is paying rich dividend based on our go-to-market strategy of expanding range availability in large dealer sets. Our older dealers who spent more than 18 months with us have counter share as high as 25% to 50%, and their throughput matches legacy paint operators.
Out of the sizable UltraTech dividend of around Rs.4,000 crores, we are investing roughly Rs.2,900 crores in our NBFC business. Previously dividends were distributed to shareholders - what is the capital allocation strategy going ahead?
The dividend received from the cement subsidiary will be allocated to: dividend to existing shareholders, and maintaining our stake in Aditya Birla Capital. The entire revenues and EBITDA generated from Grasim will be reinvested in growth of Grasim businesses. This is a one-off measure. Grasim has maintained for the last three years that it is in a growth business with two new growth businesses to stabilize, and supports them with surplus from core businesses.
Can you add more on the profitability path for paints and Pivot business as the company moves towards revenue targets? When can we expect separate segment disclosures?
For Birla Pivot, the growth momentum has been far ahead of guidance. On profitability, our margin and EBITDA direction has been very positive. Our goal for FY27 is to exit with EBITDA breakeven and we are well on that path. It might actually happen a little sooner as well, but fairly confident we will exit this financial year with EBITDA breakeven. The priorities remain to continue driving revenue growth trajectory, deepen presence in categories, and exit FY27 with EBITDA breakeven.
On paints profitability specifically - what is the path to EBITDA improvement?
There are two parts - contribution and EBITDA. We had significant improvement in both gross and net contribution in Q4 and expect to maintain that momentum. We have invested ahead of time on fixed cost in manpower on a PAN-India basis and brand investment. As contribution improves and scale improves, EBITDA losses have a glide path on a quarter-on-quarter and year-on-year basis until we reach INR10,000 crores. The glide path has already started. As regard final separate reporting, we should start that shortly.
On capital allocation, you've incubated two new businesses - do you evaluate investing in new businesses that can further add to organic growth in next few years?
We have already announced expansion of our cellulosic fiber business where at Harihar we are adding capacity of Lyocell of 110,000 tons per annum. As of now, we have enough on our plate. We want to stabilize our cash flows before we look at any further. So there is no further new business to be disclosed at this stage.
Are we under-indexed in product offerings versus number one and number two? And on the raw material price increase environment - are there plans to re-look schemes despite the 10% free paint continuing?
On product range, we have a full stack of products already in market. In franchise stores we have large exclusive products as well and dealers can confidently scale their business with the Birla Opus range. Like-for-like we are at even better than competition. We will continue to identify white spaces and add more products, but we are full stack currently. On pricing strategy, our entire endeavor will continue to ensure we are competitively poised in the market to ensure the priorities are achieved - number two position, then INR10,000 crores turnover, then profitability.
You've been clocking approximately three billion pre-tax losses every quarter for the last few quarters. Will this come down materially through the year or remain sticky for longer?
Yes, it will come down.
Given UltraTech and Aditya Birla Capital are subsidiaries where shareholding is more than 50%, is it fair to say on a longer-term perspective you would want to maintain 50% plus shareholding in both these businesses?
At this point of time the answer is yes.