- Revenue Growth (Q4 FY24): 18% growth, outperforming industry average of less than 1%.
- Sales Growth (Q4 FY24): 12.5% value growth compared to Q4 FY23.
- Gross Margin (Q4 FY24): 49.3%, highest in the industry and in company history.
- EBITDA (Q4 FY24): INR82.3 crore, 14.7% growth from INR71.7 crore in Q4 FY23.
- EBITDA Margin (Q4 FY24): 22.5%, up from 22.0% in Q4 FY23.
- PAT (Q4 FY24): INR53.5 crore, 10% increase from INR48.7 crore in Q4 FY23.
- PAT Margin (Q4 FY24): 14.5%, slightly down from 14.8% in Q4 FY23.
- Revenue (FY24): INR1,255 crore, 16.9% growth.
- EBITDA (FY24): INR233 crore, 28% growth.
- EBITDA Margin (FY24): 18.5%, up from 16.9% in FY23.
- PAT (FY24): INR149 crore, PAT margin of 11.7%.
- Consolidated Revenue (Q4 FY24): INR384.9 crore, 18.3% growth.
- Consolidated EBITDA (Q4 FY24): 17.9% growth.
- Consolidated PAT (Q4 FY24): 11.8% growth.
- Consolidated Revenue (FY24): INR1,306 crore, 21.7% growth.
- Consolidated EBITDA (FY24): INR238 crore, 31% growth.
- Consolidated EBITDA Margin (FY24): 18.2%, up from 16.9% in FY23.
- A&P Spend (FY24): Decreased from 7.7% to 7.4% of revenue.
- Putty Segment Growth (Q4 FY24): Over 20% value and volume growth.
- Primer and Distemper Segment Growth (Q4 FY24): Over 20% value and volume growth.
- Emulsion Segment Growth (Q4 FY24): Mid-teen double-digit volume growth, value growth lagged.
- Active Dealers (March 31, 2024): Over 18,000.
- Tinting Machine Population (March 31, 2024): Almost 10,000.
Release Date: May 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indigo Paints Ltd (BOM:543258, Financial) reported a top-line growth of over 18% for Q4 FY24, significantly outperforming the industry average of less than 1%.
- The company achieved the highest gross margin in its history at 49.3% for the quarter, indicating strong profitability.
- EBITDA for Q4 FY24 increased by 14.7% to INR82.3 crore, with an EBITDA margin of 22.5%, up from 22.0% in the same quarter last year.
- PAT for Q4 FY24 rose by 10% to INR53.5 crore, despite higher depreciation costs due to a new plant in Tamil Nadu.
- Indigo Paints Ltd (BOM:543258) continues to expand its dealer network, now boasting over 18,000 active dealers and nearly 10,000 tinting machines as of March 31, 2024.
Negative Points
- The PAT margin for Q4 FY24 slightly decreased from 14.8% to 14.5% due to higher depreciation from the new plant.
- The company faces intense competition from established players like Asian Paints, Berger Paints, and new entrants such as Birla Opus.
- Despite strong growth, the company's market share in premium and luxury segments remains lower compared to industry leaders.
- The freight cost remains a challenge, constituting 8-9% of sales, with limited scope for significant reduction.
- The company's A&P spend as a percentage of revenue decreased from 7.7% in FY23 to 7.4% in FY24, but there are plans to increase digital media spending, which may impact future margins.
Q & A Highlights
Q: You mentioned the support programs for painters. Is this because competition has been going up? How are the overall support schemes by you or the industry changing?
A: The CSR initiatives for the painter community are truly CSR initiatives and not business initiatives to drive sales. We are simply trying to reach out to the painter community as a whole as one of the underprivileged sections of society, and we are providing this health cover. This initiative should not be looked at as a competitive tool or a business tool to drive up sales.
Q: With the new player coming in, what kind of change, if any, have you seen in the competitive environment or terms of trades with dealers or painter contractors?
A: So far, the impact is not even perceptible. We are not obsessed with any new entrant. We are completely focused on the competition we face from Asian Paints, Berger Paints, Kansai Nerolac, and AkzoNobel. We have outperformed them consistently in the past and particularly so in the last four consecutive quarters.
Q: Regarding the proposed CapEx, what will be the CapEx cost? When will this be committed, and how will it be financed?
A: The CapEx cost for the new water-based plant at Jodhpur is about INR270 crore, the solvent-based plant is around INR40-45 crore, and the expansion of the existing putty facility is less than INR15 crore. We expect the putty expansion to be completed by November-December this year, the solvent-based plant by March '25, and the water-based plant by March '25, possibly slipping by a couple of months. The intent is to finance this entire CapEx by internal accruals.
Q: What is the capacity added in FY24, and what is its impact on FY25 for volume growth and top-line growth?
A: The capacity expansion at Tamil Nadu is about 50,000 kiloliters per annum, which will keep us comfortable for the next four to five years. The capacity expansion at Jodhpur is in line with expected demand in northern and eastern parts of the country. There is no one-to-one correlation between capacity increase and top-line growth; capacity expansions are designed for peak demand periods.
Q: How do you see the share of differentiated portfolio growing in your business?
A: The share of differentiated products remains around 30% of our overall revenue. Earlier, we saw a steep climb year on year, but now it is stable around 30%. The whole portfolio is growing at almost the same pace as our overall basket of goods.
Q: How do you see the share of waterproofing and construction chemicals growing in the medium to long term?
A: In the last six months, waterproofing and construction chemicals have contributed around 5% to 6% of our top line. We hope that our numbers will reach 8% to 10% and give us an additional fillip to our growth plans for FY25.
Q: How should we view freight costs going ahead, and how will it contribute to EBITDA margins?
A: Some moderation should happen, but freight is always a challenge. The greater gains will come from premiumization of our product range. As the growth in premium and luxury segments increases, freight cost as a percentage of top line naturally comes down.
Q: How does the productivity compare for dealers with your tinting machine versus those who don't?
A: Productivity goes up materially if a dealer adopts a tinting machine, almost 3x as a matter of rule. On average, productivity increases about 2 to 3 times.
Q: Can you talk about the margin profile across various products and how it compares in differentiated products versus others?
A: The gross margin contribution from differentiated products is naturally higher. Differentiated products are only one of the reasons for our consistently higher gross margin. We are very alert on sourcing raw materials and employing newer additives that enhance quality and result in cost savings.
Q: Are there any nuances or changes in consumer behavior that have prompted you to focus on digital channels for A&P spend?
A: Our customers are moving away from conventional mediums like TV, print, and OOH. The availability of content has become fragmented and conveniently available on mobile devices. The splurge of OTT platforms has caused people to start consuming content from sources other than TV, prompting us to invest in digital mediums.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
