Rural growth, which was lagging after the pandemic, has outpaced urban demand and this trend is likely to continue over the next six months led by a good monsoon, Pidilite Industries managing director Bharat Puri said.
Moreover, as the inflationary pressure cools down after two years of volatility, Puri said now he sees 'stability' in input prices, which is providing him with a lot more elbow room to invest back into the marketplace.
Puri says he is "increasingly optimistic" as he looks forward as there is clearly increased construction activity, leading to good demand. The company, which recently entered into the Paints market and has a presence in 2-3 states, would expand further to other markets based on consumer responses. It is an organic business for Pidilite, which will grow steadily, he added.
When asked about the current quarter (July-September), Puri said there has been disruption at some places due to rains. "Q2 up to now has been a very unnatural quarter simply because of these massive rain incidences ... So, we have disruptions in the North," said Puri in a virtual media roundtable.
However, he also added: "But overall, I would say that once all of this stabilises, we do not see a great difference between conditions in quarter 1 and quarter 2 actually, but this question will probably be best answered four weeks later, once we get a lot more stability in the natural circumstances."
On outlook on volume growth, Puri said "We divide our business into three categories core, growth, and pioneer. Given the first quarter, we expect the same trends to continue for the rest of the year," he added. Consumers are reappraising their relationship with the home, both in terms of investing in the house, new homes or upgrading of homes, Puri added.
Pidilite with a host of brands including Fevicol, M-Seal, Fevikwik, Fevistik, Roff, Dr. Fixit, and Araldite - is a leading manufacturer of adhesives and sealants, construction chemicals, craftsmen products.
Over the rural market, Puri said: "We have also seen now actually for six months continuously, rural growth's return and rural growth actually outpacing urban growth, which is a really welcome sign for us," said Puri.
He further added, "Overall, what we are seeing is clearly increased construction activity, leading to good demand. We are also seeing stable input prices, which is enabling us to be able to get a lot more elbow room to invest back into the marketplace."
Puri further noted that "...we do believe that rural growth will continue over the next six months." When asked as to whether a hike in lending rates will slow down the rural recovery, Puri said it is "very difficult" to say right now.
Pidilite is also witnessing stability in input prices, which in turn helps to improve margins. Its key input, chemical vinyl acetate monomer (VAM) has softened and has passed on some of the savings on the products that use a large amount of VAM.
"So, you would see that in the first quarter, we have substantially stepped up advertising. In fact, our advertising is up 70 to 75 percent, and you know that Pidilite is known for its marketing and advertising. "So, in the second, third, and fourth quarters, you will see us come back to our normal rates of advertising and investing behind our brands," he added.
Over the capex for FY 2023-24, it remains between 3 to 5 percent of sales like previous years. Pidilite has reported a 32.5 percent increase in consolidated net profit at Rs 473.69 crore for the June quarter, driven by strong volume growth. Its revenue from operations was up 5.61 percent at Rs 3,275.11 crore.
First Published: Aug 13, 2023 1:25 PM IST
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