Why transfer BuildNext Construction Solutions to JSW One? Is this a financial investment given the plan for an IPO? Could there be a strategic tie-up in paints?
We found strategic synergies in doing this transaction. BuildNext basically has a good home in JSW One. Post the transaction, we will be shareholders of JSW One. As far as other synergies, we will explore them as we go along.
Any update on Paints?
We're seeing good traction in Rurban India - rural and very small towns. We were in 5 Southern states but have gone into West Bengal and Bihar. For slightly bigger towns, what is our uniqueness as Pidilite and our right to win is still work in progress. Once we solve for that is when you will see full-scale expansion.
What is the price elasticity of demand for your product portfolio? If pricing goes from 0 to 10-15%, what happens to volume growth?
The current macro situation is unique. There is 30% increase in pipe, 15% increase in paints, we are around similar zone. With this kind of inflation, once it settles in fully, there should be some demand compression, but how much and when is difficult to predict. For Q1, momentum will perhaps continue. For the full year, you can't assume it will be the same. It depends on how the West Asia conflict resolves.
Can you give some color on market share in core categories?
Performance is a combination of natural buoyancy in urban India, intensified work on demand generation and field marketing especially in construction chemicals and Dr. Fixit, and some market share gains. We are clearly growing ahead of the market in some growth categories and possibly in some core categories.
If West Asia stabilizes and raw materials normalize in 2-3 months, should we expect FY27 UVG higher than FY26, somewhere between 11% to 15%?
Year-on-year we expanded by about 100-120 bps in FY26 in UVG. That about 100-odd bps expansion as we go forward is something we are planning for. But this year is very unique. It will be very difficult to hazard a guess as to what will be the UVG for this year. It's too early to say.
Are unorganized players struggling with supply chain disruptions more than a large organization like Pidilite? Are you seeing market share gains?
There are market share gains in tile adhesive. The unorganized sector struggles more in this kind of volatility. We are focused on securing supply, making sure goods are available and servicing demand. It's slightly early to comment on the full extent, but we are well equipped.
Is this a financial investment or more strategic? Pidilite has historically liked to have stakes in distribution/new consumer platforms for data access and preferential orders.
At this moment through the transfer of BuildNext it is a financial investment. We will own shares in JSW One. Our shareholding in JSW will be quite insignificant. BuildNext was strategic for us and for JSW One also. We felt the business is best served with an owner like JSW who can provide scale and profitability.
Is the 15% volume growth genuine demand recovery with no one-offs? Has any Oman/Middle East business been transferred to India?
Absolutely no one-offs. There has been a buoyancy in urban demand that we have seen across the sector. Some of it is flowing through from GST 2.0 and budget announcements. We had a very good February before the West Asia conflict disrupted things in March.
Did even the core part - Fevicol including recent innovations - grow at high single to double digit?
Absolutely. Growth categories and growth brands like Roff and Dr. Fixit delivered very well, but also our core businesses delivered well, especially Fevicol delivered a double-digit growth in the quarter. The portfolio in general is firing quite uniformly. For FY26, UVG growth of about 11.1%, which is about 100-120 bps higher than the previous year.
On Middle East supply chain disruption - VAM prices have surged by 70% since the conflict started. How do you navigate this situation?
We have three priorities: safety of people in Dubai operations, supply security, and managing inflation. We started discussing a possible Iran conflict almost a month before it happened. Inflation is real - on our weighted average raw material basket, inflation is anywhere between 40% to 50%. We have taken one price increase in early to mid-April and another in early May. For Fevicol division, about 12% to 15% price increase in total.
What is the quantum of the two price hikes taken in April and May?
Price hikes are different by category. For Fevicol division, about 5% in April and another 7% to 9% in early May, so about 12% to 15% total price increase. VAM is already hovering around $1,800.
Roff has grown very well throughout Q4. With Morbi gas shortages, where was the end demand for Roff - which categories and regions?
Morbi got affected - gas-powered industries were impacted. However, for tiles, the stock in the pipeline with dealers is very high. Construction is going on, tiles are being fixed, and therefore Roff is getting used. This will only be an issue if there's a protracted West Asia conflict with severe gas supply disruptions.
At current spot prices for your product portfolio bucket, what is the overall weighted average inflation in COGS?
This is a range of 40% to 50% as our weighted average raw material basket at current replacement price. But the situation is dynamic - some raw materials are coming off the peak. We have taken price increases in mid-April and early May and will keep watching the situation. Our top priority is to continue focus on growth and demand generation activities.
Was the 40-50% inflation for Fevicol or the company as a whole?
Weighted average company.
Assuming crude settles at 85-90%, what kind of margin can we expect? Will it be closer to the 20% lower end of your band?
We stay committed to the corridor of 20% to 24%. Last year with benign input costs we delivered at the higher end. This year with raw material inflation, it will be different, but we stay committed to that kind of number.
Was there any trade channel stock build-up in Q4 in anticipation of price hikes?
We have continued with our philosophy of not loading in any form in the month of March. Towards the second half of March, contrary to what many other companies do, we not only do not load, we go a little slow. The 15% volume growth is genuine buoyancy in demand.
Are competitors following a similar calibrated approach on price hikes, or is there an opportunity to gain market share given Pidilite's inventory advantage?
Competition has done similar price increases, some did it in March. We would not do anything just tactical. We are initially passing on the increase in raw material costs in absolute rupee terms - the cushion helps manage margin as we go forward.
Employee expenses up only 3% standalone this quarter despite double-digit growth. Any one-off? How should we look at this expense going ahead?
There was a one-off. In Q4 last year we had recognized a provision of about INR 17-18 crores towards discretionary benefits. Because of the new wage code, we rolled back that discretionary benefit this year. Both amounts are around INR 20 crores. The actual comparable growth is about 11.5%. Take the full year number, take out the one-off from wage code, and that becomes your base for FY26-27.
On manufacturing capex - in core categories, has capex been invested ahead of demand or is continuous expansion needed? What level of automation has been done?
Capex tends to be 3% to 5% of our revenue turnover. There are 3 buckets: growth capex, automation/consolidation/major renovation of core categories, and newer categories. Last year about INR 570 crores on capex compared to INR 430 crores in the prior year. We will remain in the 3% to 5% band. In Q1 FY27, we will be commissioning a large plant in West India for premium white glue and Fevicol.
How many of the 6 segments have export exposure - which ones and what is the geographical coverage?
Major export exposure is in pigments. We do export finished goods to many countries. Some exports go to West Asia directly. Overall, our exposure to exports is small as a company. If exports come through, that will be the icing on the cake.
What percentage of the raw material basket constitutes VAM?
If you look at FY25-26, VAM would be under 10% of our raw material consumption for the company. This year it would be a different story, but last year was less than 10%.
If Roff is growing faster and is a low-value product, is tonnage growth even faster than UVG?
Our total volume growth is order of magnitude different from our UVG. Most people treat UVG as volume growth - this is not volume growth. This is turnover growth at constant price. Our total volume growth is multiple times UVG.
FY26 was a year of acceleration in waterproofing. Does that momentum continue? Why does Nina Percept still show volatility?
The waterproofing business has gotten back to the kind of levels a growth category should grow at and growth rates have improved every quarter. The issue with Nina is that in winter periods, because of pollution restrictions, a lot of construction sites don't get permission to work - GRAP 1, GRAP 2, GRAP 3 restrictions in Delhi etc. The order book is very healthy. We have a large project waterproofing business that has grown even faster than retail.
How would you classify the impact of price hikes for Pidilite's multiple categories - neutral, negative, or positive?
Like FMCG companies, even for Pidilite, assuming not sharp price increases, if you get that price increase with demand situation remaining the same, you will get UVG and on top of that you will get the prices. Absolutely yes - price increases are additive to revenue growth.
What was the VAM price for the last quarter?
VAM for the last quarter was around $840 a tonne, pretty much in line with the previous quarter.
VAM supply demand - any change, factory gone out of production in Middle East, US or Iran? Any clarity on demand side acceleration globally?
There were some supply disruptions from vendors in the region. A supply source in Saudi Arabia got impacted. But there is abundant supply globally. A lot of it will be from China - those are the sources we are now exploring. There is no concern on availability now.
Could VAM cool off quickly if the geopolitical issue resolves?
Yes. The answer is yes.
As a portfolio with 40-50% RM inflation, will overall consol price hike be more like 7-8% in the India business?
No, higher than that. At company level, we have taken in April around 4% to 5% and in early May another 7% to 8%. These are blended at company level, different for different categories. But at a blended company level, that's the quantum of pricing that has already gone in.