Do we have clarity now almost reasonably on U.S., what kind of pricing rates, etcetera, because details have not come and any benefit from the EU trade deal or that does not change much for you?
No, EU trade deal benefits will accrue to us, but there are two things on EU trade deal, perhaps maybe three. I think one is that EU trade deal till the time it is ratified by the European Parliament and all that, is at the very least, 6 months away, maybe 9 months away. So therefore, anything in that in terms of when the rubber hits the road on the ground will happen only towards the end of this year. So it is sometimes in next fiscal and all that, maybe second half of next fiscal. But I think it benefits us. We export to EU. So therefore, there will be correct direct benefits there. Plus also, as part of our planning in general, which we were talking about in response to your earlier question on export, we have been looking at other geographies, and EU is one of them. So therefore, the business development work which has happened, which hopefully will be further accelerated and will give us better fillip as and when some of these things play out. So therefore, we are in good position. But it is not going to impact us tomorrow or definitely not in the quarter and maybe the quarter after.
On the growth side - while it is tremendous performance, just one curiosity, as you are increasing A&SP and other retail activities, why is it so that the volume growth is around 9% or 10%? Shouldn't it go up if you are spending more on ATL, BTL?
No, I think from where you are coming, it's a very good question and I wouldn't deny that. But let me give you a little bit of context and color to this. So I think, first of all what happens in businesses and in life, it's not a magical wand that I have increased my A&SP by so and so, and I should get results immediately. Although in e-commerce performance marketing, you would get it a little bit, but that's not what we do. I think when you are building the brands, therefore, what happens is, it is for building it for a medium to long term. And I think that has also been our approach. So if you look at our last year growth at a consolidated level, revenue growth was 6.1%. Our UVG was a bit better. There was a price thing which was coming in. This year, on the UVG, we have already dialled up about 100 bps. And on revenue growth, we have dialled up even higher, although that is some of it is because the pricing is coming up. So if you look at our 9 months consolidated growth, that is around 10%. So therefore, you are seeing a fillip in the growth. Now the question is, and our desire rate to continue to maintain this growth because for us, the EBITDA corridor which we have shared is 20% to 24%. We are also very conscious that we should have right profitability, at the same time, focus on building capabilities, building brands.
Regarding water proofing - are you not seeing any impact of repainting cycle extending or would you say that your portfolio is more remedial based or new construction based where the repainting cycle may not be a big factor?
So yes, I cannot comment on the other, Arnab, on the commentary given by others and maybe there is some merit, and they perhaps see it more closely. But what we see is, and I think I am just building on to our earlier answer we gave to Abneesh's question, both I and Kavinder. I think the point is, for us, water proofing has got all three components. Repair, I think that is where there is maximum or some overlap with painting. Then a slightly, I use the word renovation which goes beyond a small or simple repair. I think that is where we become more important if it's very specific, if it's a bit more chronic. So our specialization in this space remains an important piece. And I think the third is, of course, new construction. Now within new construction, and I think as Kavinder was saying, you may have heard, noticed that or heard that, is that we are also expanding what all areas we could be waterproofing well beyond homes as well. Although home is a larger state, particularly in Bazaar business, absolutely, yes, but we are going well beyond home. I think that is an area which you will continue to see action. So Dr. Fixit as a brand, therefore, has room for growth in all aspects. And lastly, I think we continue to see reasonably robust growth in small towns and rural India.
On Roff - do you think that there is potential to double even from current levels or you think that the current scale the growth may start tapering off?
Let me just give you a bit of a perspective on tile adhesive category. See, tile adhesive as a category is a replacer of cement, as you know. And it is definitely more expensive than cement, okay, and significantly expensive. So while the conversion from cement to tile adhesive is going on reasonably well in the vertical surfaces, the conversion on the flooring piece is not as good as it could be because people do not see the need to replace cement on the floor. But if you look at in India, the growth of tile business is about 8%, 9%, maybe 10%. So it is not that tile laying is increasing dramatically. What is happening is the penetration of tile adhesive and tile laying is growing pretty fast, at least we believe in high double digits in terms of about 18%, 20%, roughly to that effect. So it is a game of penetration. In the tile fixing, the penetration is increasing, and that is where and more so in the vertical structures. So saying I am giving an answer to your question, whether it could double, I mean, very difficult to say. It's very important to note that this is a category which can be grown and we are growing the category apart from growing our share. And that is what we will keep doing.
Do you think that the category growth can continue at this rate for another 2, 3 years? Are you confident that the category can grow at 18%, 20% for the next 3 years?
So I think the answer to that is how the players play the game. If the players play the game of creating great consistent products, if they continue to work with people on the ground, the answer is yes. So in lot of times, when category is growing fast, sometimes, you will see players coming and actually thinking that it is a cake walk and sometimes, that can actually lead to a different kind of a situation where some players may not give the products that are, let's say, going to perform. And sometimes it hurts category's growth. So I think it is important that all the players in this category are sort of playing their game right in terms of giving users too the amount of transaction and a reason to invest more money in tile adhesion versus cement.
On distribution landscape - there's a lot of overlap between paints players and us. Looking at where the paint segment is going through the rough phase right now, is it easier for us to convert some of the paint players to house our products?
Our distribution, Tejash, we follow a distribution model to the market and we go much deeper. Most paint companies follow direct-to-dealer model, and I think they are, if I could use the word, slightly more urban-centric by definition, a little bit more urban. So the two are different. I think we always believe to continue to play our game, to continue to do our things well and to continue to basically focus on our product range and all that with the set of dealers which we visit. And some of them, there is an overlap, as you rightly said. But I think to each of the dealers that we visit, basically, we would like to grow our range. What I mean by that is to be able to sell more products to them, to be able to share with them the value which comes with premiumization and the quality of our products and therefore, continue to drive our sales in that way.
Any updates on some of the new ventures on Haisha Paints and electronic adhesives? And on the core adhesives portfolio, could you give us some color on how the savings for this portfolio has trended over the last few years?
Yes, both these pioneering segments. So on the Haisha Paints, we were present in TAO-TK, as you would remember, and many of the people on the call perhaps would remember, is that we were present in what is in most of the Southern states, Telangana, Andhra, Odisha and then Tamil Nadu and Karnataka, we call that TAO-TK. We have gone to the Eastern states as well, two or three of those states. We continue to progress well but we are still not and I keep saying this, sorry, for it may seem like a repetition of what I said, but then that is the case. I think we are making steady progress, but we are not being able to ascertain for ourselves as to what our right-to-win model is. Actually, what is this business model which will give us very clear right to win before we go to all-India in all the small towns and Rurban. So while our play and license to play is small town to Rurban, we are clear of that, but our right-to-win model needs to be polished a little bit more, Latika. But progress is on, it's a relatively steady progress, and we want to sort of continue to build on that and we will sort of take our time to sort of strengthen this as we go forward. I think on electronics as well, a lot of work is happening. We are also expanding the equivalent of TAM. So we are now looking at not only consumer electronics, but we are also, as I speak to you, looking at some of the automotive and some of the other spaces and I think we are beginning to do specification work there. But a lot of this work, which we are doing here is quite laborious and it takes time. And therefore, when and as we get it right, it will be a little bit more geometric in terms of the outcome that you will see. Testing in most of these spaces, whether it's consumer electronics, electronic autos is very rigorous. It goes through a couple of rounds, but each of the round could be 12 months, 12 to 18 months.
On exports - do you see even Q4 and Q1, the decline continuing? Could you elaborate what exactly you mean by the geopolitical challenges? Now given U.S. tariff deal is done and dusted, do you think large part of that geopolitical is also behind or there is more to it?
Abneesh, first of all, great to hear from you, and good to have you on the call. And I think good question. Let me first talk about exports. So see, first of all, for us, the share of business of this part of the business is not that significant. But having said that, as you know, there is our pigments business. In our pigments business, we have a direct exposure to U.S. as in we do export to U.S. And U.S. is a large component of our pigment exports overall. So I think that is the piece. This part got affected quite a lot in Q3 of the current financial. Q1 had got affected a little, Q2 got affected a little bit more, but Q3 got severely affected, if I can use the word and the second area where we got a little affected in our B2B business is in the indirect sources. So, in our other B2B businesses where, for instance, we supply to footwear, we supply to some other leather chemicals or even textile. Some of these were affected because of their export getting affected. Our own sense is that this is largely behind us. We should see action based on the new tariff rate, hopefully, maybe by the turn of this quarter itself, but definitely as we move forward. We also feel that the impact on B2B per se in this quarter and future quarters will also be minimal because of this prolonged negotiation, we had also built a few other plan Bs, if I could say. So there are things which we have done, which will also begin to fructify as we go forward. So, I think, therefore, to that extent, this part is largely behind us, assuming the new tariff rate, which has been announced is implemented. I think on the broader philosophical question of geopolitical uncertainty, Abneesh, we do live in a world where there is considerable geopolitical uncertainty. Even now, it is on, and to be fair, I think some of the wars are far from over. Russia-Ukraine is not over as yet. There is also the conflict in the Middle East. There is also the overall Iran question.
To understand correctly, you think in Q4 and Q1, sharp decline in exports as we speak today, that seems unlikely, right?
No, that seems unlikely. As I was telling you, I think we have other plans and all that. So overall, our B2B we would continue to see back. By the way, domestic B2B delivered mid-teens growth. I think it is part of our commentary as well somewhere but we delivered mid-teens growth. So our domestic B2B has delivered mid-teens growth is something I want to tell you. Second is that we have got plans in place to, therefore, bring back our entire B2B back into at least mid-teens, so double digit and mid-teens. So I think those are in place.
On India Consumer and Bazaar - how do you compete with multinational companies which have economies of scale on Roff cleaner? Do you have plans for more products? Why will consumer buy a Roff cleaning product? Also on real estate slowdown - any level of slowdown you are seeing in Tier 1, Tier 2?
So, Abneesh, three questions there, and maybe I will answer two and perhaps touch on the third and ask Kavinder to build further. I think on the first question on Roff mass market, building the Roff brand, which is the advertising you talked about, I think that is our classic Pidilite playbook. I think Roff is our next big brand. And when we build a brand, we built a brand holistically. We have invested in the quarter gone by, in Q3, considerably behind Roff. Also on impact properties, including in specific geographies where we have actually been on some of the very strong impact properties like Big Boss and all that, you have seen us on cricket and all that. So therefore, we are building Roff brand. And your second question was specifically to a product on Roff cleaner. So basically, our view is, we are not competing directly with the CPG or FMCG companies. But there are certain products which are relevant to our area of operation sometimes or where we have very distinct product superiority or advantage. So when it comes to Roff Cera Clean, you will see that people swear by the efficacy of Roff Cera Clean. See, first of all, our portfolio is not only new construction dependent. Our portfolio has new construction, renovation and repair. And renovation and repair account for maybe 70% plus, I would say, 70% to 75%, and new construction is more like 25%, maybe a little higher, so depending on the cycle. So first of all, we are well equipped even if there is a downturn in new construction. So ultra-high end this thing, I see no slowdown. I'd say they are selling as if you are selling, they go off the shelf like very quickly, but I think there may be small, the second home construction or large bungalows coming up, there is actually only going up. That is not slowing down at all.
Follow-up on construction segment slowdown - building on Sudhanshu's response.
Yes. Thank you, Sudhanshu, for giving an overall overview of this answer to this question. I will just build on what Sudhanshu was saying. I think the way we are looking at in our construction portfolio, we span across multiple categories in construction portfolio, the waterproofing piece, there is a tile adhesive piece and there is a flooring piece. So first of all, we are not, let's say, focused only on residential sector. Our three lines of business focus across segments. So whether it is residential, whether it is commercial, whether it is, let's say, government segment, whether it is infra and industries, so there is an approach that we have. And as we speak, and I think I mentioned earlier also, we are going segment out because our solutions span across segments. So for us, as of now, I can confirm to you that we haven't seen any slowdown whatsoever even in residential. And by the way, within the industry, we keep talking to each other who are in the allied businesses. And as of now, we do not see any slowdown in any part of the construction segment. We are seeing right now, business as usual. So when I span our businesses into multiple segments, I find that there are more opportunities that we can tap currently. So, at this moment of time, I do not think we should be worried about any particular segment slowing down.
Do you think you have enough levers or enough funnel in this pioneer or the strength in the growth categories, which can continue to give double-digit kind of volume growth from next 2 years' perspective?
Yes. I think on the first question, see, I have already illustrated that our underlying volume growth has gone up by almost 100 to 150 bps in this period, and we would like to continue to sustain that momentum, and we will continue to grow it in the medium term and perhaps year-on-year. So we remain confident that we should be able to do this as we go forward. Two is, do we have pipeline in our pioneering businesses and even in growth? So I think there are two parts to this answer. One, we would like our growth businesses to continue to grow better. And I think we are seeing some evidence there. So if you look at Dr. Fixit's growth this year is better than the growth has been in the last 2 to 3 years. I can tell you that. I think it is distinctly better. So we pushed this up a little bit. Roff's growth at this moment is very robust, very good. And even within pioneering, this is a subject I wouldn't like to get in too much detail, but I can tell you our funnel on pioneering is reasonably strong. We have got a lot of things coming in there. Our sealants portfolio is doing quite well under the FeviSeal brand. There is a lot of scope in that space. UnoFin is very early, but that has tremendous potential as we go forward. We just introduced our Shoefix which is now Fevicol Shoefix which can repair all kinds of shoes, not only leather, but EVA shoes and all that. First response in the market is really good. Last quarter, we have just introduced our consumer kids portfolio under Fevicryl Yudu, very, very early, but good response in the market. One quick example I want to give you here is that of our Fevicol Nail-free Ultra. That is absolutely running away, and that will be very quickly our growth product in terms of just from basically having been launched as a pioneering product. Our Litokol, which is basically Litokol joint venture, which is basically our epoxy grout under Roff brand, it is called Roff Starlike, is doing very well, very well from a pioneer to growth now, and it is growing really well.
After a long time, you are seeing some price growth in the stand-alone P&L, revenue growth being 2.5%, 3% ahead of volume growth UVG. What are the sources of this price growth? Is it sustainable given that input cost have been benign?
I think we talked about this. Arnab, thank you for the question, first of all. I think Sandeep had last time also spoken about this. I think my view is that in the zone of about 100 to 150 bps, in and around there, I think you should continue to expect, I think it would be our endeavor, but will it flow through as a formulate number quarter-on-quarter, year-over-year, perhaps no. So I would caution against that also. I think it is a combination of some of the times. But I think there is room and we always keep exploring opportunities for wherever there is room for pricing, price laddering corrections, a little bit of pricing room.
Do you think that you have started to gain market share in waterproofing once again? Maybe there was a phase of 2 or 3 years where you lost out to new entrants, largely decorative paint companies. Do you think we are seeing some reversal of the market share trends?
It is a very good question. I think with the growth which we are seeing, I think that definitely would be the case is my sense. And I can tell you now for both Kavinder and me, I think that is why our focus is a lot on growth. We want to have growth, which is very clear, which is a standout growth if I can use the word meaning which is not like in the zone of the market. You would like to say, okay, whatever you assume the market is growing, we would like to grow well ahead of that so that you are in the business of continuously gaining the share as we also build the market.
On VAM prices - last few years, the range of volatility has come down. Are there any structural changes on the demand supply side globally that this commodity is not as volatile especially in this kind of macro environment as it used to be earlier?
Sure. Tejash, thanks for the question. So VAM, I think while it has always moved within a range, but the kind of spike that we saw post COVID, I think one of it probably coincided with the Russia-Ukraine conflict. And there, of course, the prices went up, but it was for a very brief period of time because they corrected as fast as they had gone up. Historically, the range has been much narrower than what you saw during that disruption. And one of the reasons that you could ascribe to it is that there has been significant capacity expansion in China, and that capacity is not getting consumed locally. And maybe that is why one of the reasons why overall prices remain a bit subdued. Plus, I think the feedstock for VAM, which may be you all know, oil derivative, but the two key raw materials being acetic acid, they have not seen any big upward movement. And likewise, even oil has remained kind of range bound. So that is why we see prices remaining at the kind of levels that they are. They could be 4%, 5% up or down but VAM today is maybe even less than 10% of our raw material basket. So even movements are not going to be so impactful as far as our margins are concerned.
It has been our focused initiative for the last many years on distribution-related initiatives. Any new projects or any specific projects you would like to call out?
Basically, when we go deep down, we have been looking at what we have been talking about Pidilite Ki Duniya( PKD). I think there is continuous work happening on basically making sure that we go deeper in PKD and there is also pilot happening on what we call super PKD. So therefore, how are we able to build greater depth and also better information and capability for demonstration as we go deeper as in by demonstration, I mean, user education, trying to make sure that some of our these things are available, both. So I would use the word phygitally, some of it digitally, some of it physically. So that is the next step in this distribution. So therefore, making distribution and demand generation sort of go along even better than what they have been in the past. And that work is happening as I speak to you. So we are going deeper, but we are also going into this, what we call super PKD.
If we have to look at growth from the lens of distribution expansion and billing more from the same existing distribution, what would be that rough breakup that how many new touch points or how many new accounts you are adding versus you are going deeper with your portfolio innovation?
So I think bulk of it is from the latter, which is basically distribution from our existing points, basically, so for a like-for-like growth, some of it is coming through premiumization, some of it is coming through range. A small component is through expansion. And while we do both, because the other thing is also, I mean, that basically we'll go deeper, but when we go deeper, you would realize that realization per unit as you keep going deeper is much lower. And that has to be built for the future as we go forward.
Just trying to get some thoughts around the core adhesive portfolio, anything on how is the growth trajectory there? Is it more like high single digit? Is it very volume driven?
Adhesive portfolio is, again, Latika, is a very wide turf because we have all kinds of adhesive but I think to be fair, a lot of it is core, as you rightly pointed out, our Fevicol adhesives, even our Fevicol for the kids, MR and all that. I think in all these spaces, we are seeing robust single-digit growth. I think more like 1.2 to 1.4x of the GDP. So in the zone. Could it be a bit better? Yes, I think that is an area we would like to continue to strive for, but I think that is the piece, but even here, what we are continuously doing is a lot more innovation, a bit more premiumization, a lot of projects and pilots are on. Unfortunately, I do not want to elaborate on this at this moment. But across the board, there is a lot of work on this. And in subsequent quarters, we will be able to share with you also some really exciting work happening in this space as well.
If I were to adjust for this one-off Labour Code impact, we are already at almost about 25.5% EBITDA margin. Your input costs are benign. Is it fair or is it a possibility that near term, we could kind of breach that 20% to 24% range significantly upwards?
So, I think if you look at our last few quarters, we have. Even last quarter, it was above the 24% range. This quarter, again, because of benign input prices and even if you adjust and after adjusting for the one-off, it was higher. But as I said, our objective is to drive for faster growth. So we will continue to be on the lookout for opportunities where we can reinvest whatever gains we are getting from margin expansion. And again, just a word of caution, do not look at our numbers on a quarterly basis. Look at a slightly longer term, look at a full year as a basis. In this one quarter, yes, it may appear to be ahead of or above the comfort corridor. But if you look at full year, we are confident that we will be at the upper end of this 20%, 24% range.