Pidilite Industries Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Double-digit volume growth returns: Consumer & Bazaar entered double-digit underlying volume growth after five quarters, while domestic B2B grew mid-teens, offset by export weakness from geopolitical uncertainty and tariffs.
• Gross margin fuels brand investment: Benign input costs (VAM down from \$980 to \$883/tonne YoY) lifted gross margins ~0.5%, and management deployed nearly all of it into an ~80% YoY jump in A&SP spend rather than letting it drop to the bottom line.
• Haisha paints still a work in progress: The pilot expanded geographically but management candidly admitted the business model is not yet right; fine-tuning continues through H2, with a decision on scaling investment expected by the Q4 call.
• Rural depth, not just width: Rural outperformance (a 16-20 quarter trend) is now driven more by repeat demand and same-store sales growth than by distribution expansion, while urban growth is also inching up on construction-sector tailwinds.
• What to watch next quarter: Whether the extended monsoon damages the kharif crop and rural demand, any sign that Haisha’s model is locking into place, and if UnoFin’s restructured sales team can revive a pilot that has taken longer than expected.

Demand & Volume Drivers

• Consumer & Bazaar breaks into double digits: The segment delivered double-digit underlying volume growth after five quarters of very-high-single-digit growth, with growth segments like Roff performing particularly well and some brands at the outer end of the 2-4x GDP band.
• Rural depth sustains the premium: Rural continues to outperform urban for 16-20 quarters, but the driver has shifted: growth now comes more from repeat demand and same-store sales growth (depth) than from expanding distribution width, though direct rural expansion also continues.
• Urban inching up: Urban performance was also very good in Q2, helped by construction-sector growth brands with strong urban listings.
• White glue rides the real estate upcycle: New construction in big cities is driving both on-site and offsite activity (kitchens, cupboards), and joinery work shows a clear uptick directly correlated to this trend.
• Domestic B2B momentum: Mid-teens underlying volume growth in domestic B2B including projects; management is confident this momentum will maintain, with slight upside possible if there is a correction in tariffs.
• Exports the lone drag: Exports declined due to geopolitical uncertainty and tariffs in some markets, dragging the headline B2B number down from mid-teens to 9.9%.
• Monsoon risk to watch: The extended monsoon impacted the quarter but Pidilite’s demand-generation model still delivered double-digit UVG; however, if the monsoon has harmed the kharif crop, it could have a bearing on rural demand, though more data is needed.

Sudhanshu Vats: "So there is a little bit of stability in this instability, if I can use this paradoxical phrase."

Margin & Cost Structure

• Gross margin tailwind: Stand-alone gross margins improved nearly 0.5% YoY as VAM consumption rates fell from \$980 to \$883/tonne; VAM is expected to remain benign in the \$883 range for the next 3 to 6 months.
• A&SP absorbs the gain: Absolute A&SP expenditure was nearly 80% higher YoY, funded by the gross margin expansion and better operating leverage across other cost areas; management will continue to deploy gross margin gains judiciously into A&SP and GTM capability building.
• EBITDA corridor intact: Management reiterated comfort operating within the 20%-24% EBITDA corridor; if raw material prices remain benign, margins will stay within the corridor, a bit on the higher end.
• Q4 negative operating leverage flagged: Q4 revenues are much lower than the preceding three quarters, so some negative operating leverage is expected in Q4; no other event is expected to cause EBITDA margins to swing.
• Non-operating income dipped: Lower non-operating income as a percentage of sales reflected payment of both final and interim dividends in the quarter, plus lower yields on treasury investments as interest rates corrected.
• Pricing stable: No pricing actions were taken in Q2; input costs are lower than Q2 last year and earlier price adjustments have anniversarized; value growth has led volume growth for the last three quarters.

Sandeep Batra: "we don't give any guidance. We have always called out that we are very comfortable to operate within an EBITDA corridor of 20% to 24%."

New Initiatives: Haisha, UnoFin & NeoPro

• Haisha: candidly not there yet: The paints pilot expanded from 5 Southern geographies to a couple of Eastern geographies and showed sequential growth (September over August, Q2 over Q1), but management was explicit that the business model is still work in progress and has not reached internal milestones.
• Haisha investment decision deferred: Fine-tuning will continue through the second half; a decision on putting much more money behind the initiative will be discussed at the Q4 call, once the model is right.
• UnoFin: pilot taking longer than ideal: The render product has not delivered in line with expectations; the core challenge is changing current practice (primer, putty, paint) to a water-resistant sprayable coating; the team was intentionally kept only in the Northern region to perfect the model without margin-diluting transport costs.
• UnoFin sales restructuring: The separate sales team has been merged with the large user group in the last 1-2 months for better go-to-market; one early project from two years back is looking fabulous, giving confidence, but the pilot proceeds in a sure-shot manner.
• NeoPro by Roff launched: In September, Pidilite launched NeoPro under the Roff brand for premium tile dealers, using Grupo Puma technology, now being extended into various markets.
• Jowat gaining traction: Clear traction in joinery (woodworking) and hot melt adhesives for advanced packaging conversion; the company is now mapping how to take Jowat well beyond woodworking and joinery.
• Electronics adhesives: early days: Sales to a couple of customers have started via the CollTech partnership; specifications to most customers are on; R&D work has also begun to develop some products internally; not material in the immediate or medium term (6-12 months).

Sudhanshu Vats: "have we got the business model fully right? There, again, if I was to be absolutely candid with you, the answer is no. It's still work in progress."

Competitive Moats & Business Model

• Two clear moats identified: Management pointed to (1) the demand-generation business model (two field forces, review linkages, continuous improvement) and (2) the growth and diversification of the portfolio, which provides better ability to maneuver across categories that grow at different speeds.
• Category play within the portfolio: Some portfolio categories grow faster and deliver better results, giving Pidilite an internal hedge; growth categories like Roff are now beyond the pioneering stage (defined as crossing INR 100 crores).
• Demand-generation model proved resilient: Even with an extended monsoon, the two-field-force model and focus on generating demand allowed the company to deliver double-digit underlying volume growth; management expressed confidence in continuing this in H2 based on demonstrated delivery over several quarters.

Sudhanshu Vats: "I think I see two clear moats, which are emerging for Pidilite, which have been there, but I think which is what sort of partly explain how we've done and we are consistently delivering."

Capital Allocation & Inorganic Pipeline

• Capex guided at 3-5% of sales: Categories growing faster will require more capacity, though management did not specify which categories.
• Inorganic evaluation active, nothing concrete: The company continuously evaluates opportunities in ancillary spaces around core areas and via Pidilite Ventures; some investment has been made in the Ventures portfolio, but nothing concrete to report at this moment.
• Dividend impact on treasury income: Payment of both final and interim dividends in the quarter, combined with lower yields as interest rates corrected, reduced non-operating income as a percentage of sales.

Guidance & Commitments

Key Metrics