Inflation Now At Manageable Level; Expect Better Margins In H2: Pidilite MD Bharat Puri

The inflation is still high compared to the past, but it has come down to a ‘manageable level’, Pidilite Industries Managing Director Bharat Puri has said.

He also expects better margins in the second half of this fiscal.

The current quarter will have some lag due to the carry forward of some of the high-priced inventory, but the fourth quarter would witness better margins, Puri said.

He is optimistic about India and the home improvement sector, and Pidilite is ready for the next phase of growth with its ongoing capex programme.

Puri expects the rural markets to bounce back with positive volume growth, helped by a good monsoon in the next six months.

According to Puri, it will take a little bit of time but will come back. The demand is most impacted in rural and semi-urban India.

‘As inflation moderates and more money comes into the hands of the consumer because of the good monsoon, we do think that over the next six months, hopefully, demand should improve from there also,’ Puri told PTI.

On Pidilite Industries, he said right now, the biggest concern over the last 12-18 months was unprecedented inflation in the input cost.

The cost of some principal raw materials such as vinyl acetate monomer went up from $1,000/tonne to an all-time high of $2,500 in the first half of this fiscal, Puri noted. However, ‘the good news is we can see change happening’ as prices of some of the raw materials are softening. The current price of VAM is down to $1,200 to 1,400/tonne, he added.

‘You will see some impact of this in Q3 but we would be carrying lots of inventories… We will actually have a larger impact in Q4 when low-priced VAM is consumed,’ he said.

According to Puri, the second half would be ‘much better’ than H1 in terms of margins perspective.   

‘We are fairly seeing that there is unprecedented inflation. This is still high compared to the past, but it is now down to a manageable level unlike the last six months,’ he said. 

When asked about the Pidilite results, Puri said in the first half, the company has a ‘healthy’ volume growth of over 20%.

‘If you look at 3 years CAGR over the pre-Covid period, we are still in the high mid-teen both in value and volume growth,’ he said, adding ‘over a period, we have gained market share’.

Puri also said that the sector in which Pidilite operates is in a better position as construction activity from the real estate sector has come back.

‘There is still a shortage of housing stock. 70% of the housing stock, which we need to build by 2030, is still to be built. So, in medium and long terms, we are very optimistic about both the India story and home improvement sector,’ he added.

On the capex, Puri said in the last three years, Pidilite has expanded the existing capacity of its 20 factories. Moreover, it has also built 11 new factories. 

‘We are very optimistic for India and the home improvement sector. We are ready for the next phase of growth. We have an ongoing capex programme,’ he said, adding ‘where we find the need, we are three years ahead of the curve’.

Presently, 85% of sales are from India and 15% from abroad.

‘India is our core market, he said, adding that ‘overall, it (ratio) will not change. We believe India has lots of growth prospects. Both will grow but the ratio will not change dramatically’.

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