Pidilite Industries is the stock on our radar. The company posted an inline set of first quarter numbers, revenues jumped 102 percent on a low base. But, margins have contracted even more than expected. Bharat Puri, MD of the company shared the outlook on demand trends and when the company expects a return to normalcy.

Puri said, “We live in uncertain times, I think we have to look at each quarter as it comes. As of now, the momentum looks good. Post June, we are seeing fairly robust demand conditions but all of this depends on the famous third wave. If we don't have a third wave, I think we will have robust demand, there is a fair amount of pent-up demand with consumers. Therefore, it would be a good second quarter and hopefully second half. But it is best to be cautiously optimistic, keep fingers crossed and take it day by day.”

On margins, he said they have seen an unprecedented rise in both raw and packing material, especially raw materials. Vinyl acetate monomer (VAM), which was its largest-consumed raw material in Q1 last year, it was $900 per tonne and this year it is $2,000 a tonne. Now obviously, one can't pass on all of these price increases to the consumer because a large part of this increase is actually not due to demand led conditions but zero supply led constraints because of plant closures, the US storms etc. So margins have been under pressure.

“We're clear that because this is not something that is a long-term trend, we've already started seeing the first signs of softening the spot prices VAM, they are already down to $1,500 a tonne. And therefore what we have done is we have priced at 75 percent of inflation, we have intentionally, therefore compressed our margins, with the hope that as the second half comes in, especially in quarter three and quarter four, softer raw material prices will get the margins back where we want them,” he said, adding that they were not worried about the first quarter or the second.

“Over a period of time, we must be as I always say, volume lead but always profitable. And that will be our objective going forward.”

Talking about Araldite and the profit margins of that product, Puri said, “Right now, as far as erudite is concerned, it is epoxy resin, which is the principal raw material for Araldite, it is also under a significant amount of inflationary pressure. In fact, along with VAM these have been the two raw materials that have seen the maximum increase.”

He added as it softens the company’s objective as far as Araldite is concerned is strong volume growth going forward and obviously at a profitable level.

He further said that they would be investing for growth rather than worrying about maintaining the margin on a regular basis.

For the entire interview, watch video

(Edited by : Bivek)

First Published:Aug 12, 2021 7:05 PM IST