PAINTS & CHEMICALS INDUSTRY NOTE ON PIDILITE INDUSTRIES

PAINTS & CHEMICALS INDUSTRY UPDATE NOTE
Pidilite Industries
March 22, 2021
 TEJASH SHAH  tejash@sparkcapital.in  +91 22 6176 6802

 MADHAV PVR  madhav@sparkcapital.in  +91 44 4344 0060
 SANTOSHKUMAR  santoshkumar@sparkcapital.in  +91 44 6660 3037
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This file was downloaded from Spark Research website by srihari.br@sparkcapital.in|March 23, 2021 00:33:55
PAINTS & CHEMICALS INDUSTRY UPDATE NOTE

Pidilite Industries
As part of our conventional Revisit series at the Spark Consumption Desk, we once again dwell on Pidilite Industries (PIDI) given the backdrop
of a probable real estate upcycle, inching competitive intensity in the market landscape and multiple acquisitions & notable initiatives in the INDUSTRY UPDATE
recent past. Tracking the company since our initiation on the stock a decade back, we have witnessed PIDI’s pace of growth expansion and 22 March 2021
contraction across business cycles while its gross margin profile got more resilient (Trailing 7-year average at 50% Vs 15-Year average of 47.2%;
we have not witnessed a peak inflationary cycle like in FY12-FY14 though in the recent past), leading to improved capital efficiency. Following Stock performance (%)
are the notable takeaways from this note:
1m 3m 12m
# Tailwinds from the probable real estate upcycle: Our Spark strategy team has been opining from 1HCY20 (Click here for our note) on a real
estate upcycle post the downturn from FY14. From the past cycles, we have observed a healthy positive correlation between a flourishing real PIDI 1% 2% 17%
estate sector and core PIDI categories viz. Adhesive & Sealants Segment & the Construction/Paint chemicals. Also, post a host of exigencies in the APNT 1% -7% 38%
last few years like demonetisation, GST implementation and Covid-19, which have derailed the overall growth trajectory, an improving macro
coupled with overall infra impetus and pick-up in private sector capex can see the industrial segment growth reverting to an improved trajectory. Ratings
# Incessant acquisitions & Judicious investing in an aim to maintain market leadership against emerging credible competition: PIDI’s Company TP Rating
competitive landscape has witnessed multiple credible entrants from the Indian paints industry in the last few years. While one can argue on the
various players’ ‘Right to Win’ in the category, PIDI has left no stone unturned to protect its turf. Its recent acquisition of Huntsman’s Araldite has PIDI Rs. 1,810 ADD
further consolidated its market position in the Indian adhesive and sealants sector, while other tie-ups in the same space include the collaboration
with Jowat SE, JV with Litokol Italy and controlling stake in Tenax India. Also in PIDI’s defence, a robust ecosystem it has created over the years in
the segment including its entrenched distribution network (Unlike the paints sector, the adhesive and sealants need a distributor in between and
the overlap with Paints dealers is not sizeable in addition to the nature of the product) and its long-standing relationship with carpenters,
contractors & other applicators are not easy to replicate overnight. In the sizzling Waterproof segment, PIDI has tried to strengthen its hold via
the acquisition of Nina-Percept & BESI (whose niche expertise and specialisation are expected to come in handy) to deal with the aggression of
the Paint players where the network overlap is significant, thus becoming a more level playing field. Further, given the disruption from new age
companies, PIDI has also taken a minority stake in Pepperfry, HomeLane, Liv Space, among others, to keep itself updated on evolving market
changes & landscape.
# Near-term headwinds include inflation and intense competition in waterproofing: PIDI’s gross and operating margins till the recent past are at
the top of their bands (Mid 50s and low-to-mid 20s respectively) given the favourable raw material environment till 2QFY21. While PIDI’s gross RESEARCH ANALYSTS
margin profile has significantly improved over the last decade, a high base and peak inflation cycle can materially impact its margins and
profitability growth from here on. Given the heightened inflationary environment in the last few months, the sustenance of the same can impact TEJASH SHAH
the near-term margin and profitability trajectory of PIDI. Also, given the significant overlap of distribution in the waterproofing segment with the tejash@sparkcapital.in
paint players, coupled with their heightened aggression marked by product launches & high decibel A&P, PIDI can witness near-term growth +91 22 6176 6802
pressure in the segment. MADHAV PVR
# Our preference for Asian Paints (APNT) over PIDI remains: PIDI commands an equally strong business profile like APNT as reflected in a similar madhav@sparkcapital.in
+91 44 4344 0060
growth trajectory, better margin profile, alongside the capital efficiency gap between the two narrowing. However, a much higher TAM (Total
addressable market), superior return ratios, better pricing power during peak inflation vis-à-vis PIDI, among other factors, make us retain our SANTOSHKUMAR
preference for APNT over PIDI as in the past. With PIDI’s revenues and profits estimated to grow at a CAGR of ~13% & ~14% respectively over the santoshkumar@sparkcapital.in
FY20-FY23E period, we retain our positive stance and ADD rating on the stock with a TP of Rs.1810 (53x FY23E EPS). +91 44 6660 3037
find SPARK RESEARCH on Bloomberg [RESP SPAK <go>] | FACTSET | REFINITIV EIKON Page 2
Paints & Chemicals Industry update note: Pidilite Industries
FY20 Snapshot of PIDI’s Segments & Brands – PIDI’s portfolio has been steadily expanding with 500+ Products offered across categories currently
Adhesives &
Sealants
[53% of
Revenues]
PIDI continues
to retain its
market
leadership
position in
select & large Construction/
adhesives and Paint
construction
Chemicals
chemical sub-
[19% of
categories. It
Revenues]
has also been
trying to ‘up
the ante’ in its
leadership Others [1%]
segments by
acquiring/tie-
Art & Craft
ng up with
Materials +
both large and
niche/
Others
specialized [8% of
players. Recent Revenues]
inorganic
growth
initiatives Industrial
largely reflect
Resins &
its intent to
Adhesives +
maintain its
Organic
dominance
against Pigments &
emerging Preparations
competition. [13% + 6% of
Revenues]
Source: Company Filings, Spark Capital Research; Break up Based on Standalone Operations Page 3
Current Overview of PIDI’s key business segments
Adhesives & Sealants Construction/Paint Chemicals Art & Craft Materials Industrial Products
Waterproofing: Dr.Fixit, Nina

Adhesives: Fevicol, Fevikwik, Percept
Fevicryl, Fevistik, Fevigum Pidicryl, Pidiprint, Pidivyl,Pidifine,
Sealants: M-Seal, Fevi Seal, Tiling: Roff
Rangeela, Hobby ideas Pidivyl, Texcron
Key brands steelgrip Others: Terminator, Wudfin, WD-
40
Companies in diverse sectors like –

Majority of revenues derived from
Footwear, Textile, Paper,
the retail segment in addition to a
Retail, B2B & Unorganised Retail & Unorganised Homecare, Paints, Construction,
Customer Profile select portion from the institutional
Automotive & Process industries
customers
etc
3 Year Revenue CAGR: 12% 3 Year Revenue CAGR: 14% 3 Year Revenue CAGR: 4% 3 Year Revenue CAGR: 7%
Revenues & CAGR 5 Year Revenue CAGR: 11% 5 Year Revenue CAGR: 9% 5 Year Revenue CAGR: 1% 5 Year Revenue CAGR: 5%
10 Year Revenue CAGR: 15% 10 Year Revenue CAGR: 15% 10 Year Revenue CAGR: 11% 10 Year Revenue CAGR: 9%
3 Year Average: ~26.4% 3 Year Average: ~14.5%

Operating 5 Year Average: ~25.7% 5 Year Average: ~15.4%
Profitability [PBIT] 10 Year Average : ~23.0% 10 Year Average : ~14%
Henkel, Sika, 3M, Huntsman (Core

segment acquired by PIDI), Astral
BASF, Sika, FOSROC, Asian Paints, Henkel, Sika, 3M, HB Fuller, Bostik
Poly Technik, HB Fuller, Bostik, Camlin, Faber Castell
Competitors Berger Paints, Akzo Nobel etc
Jyoti Resins & Adhesives and
Jubilant Industries
Source: Company Filings, Spark Capital Research; Page 4

Snapshot of PIDI’s financial profile over the last two decades

More resilient margin profile owing to premiumising portfolio & improving pricing power
80 25.0%
22.4% 22.1%
Best Growth phase given the super cycle, 21.9%
70 21.6%
however Crude Oil prices went up 3x in 5 yrs
19.2% 19.3%
18.8% 20.0%
60 17.3% 17.6%
16.8% 17.2%
15.8% 16.1% 16.1% 15.9%
15.3% 15.5% 15.7%
50 14.1% 15.0%
13.3%
40
10.6% 72.9
70.8
10.0%
30 60.8
53.6 56.2
48.4
20 42.8
36.8
31.3 5.0%
26.6
10 19.9 21.9
17.1
12.5
6.5 7.7 9.2
4.6 5.2 4.9 5.7
0 0.0%
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
5 Year CAGR: 25% 4 Year CAGR: 18%
Revenues (In Rs.Bn) EBITDA Margin
15 20.0%
15.2% 15.5% 15.7% 15.0% 15.3% 15.8% 15.9%
14.0% 13.7% 13.2%
12.7% 12.3% 15.0%
11.6% 11.4% 10.5% 10.6%
10 10.0% 10.3%
9.4% 8.9%
10.0%
Healthy PAT margins on a low base 5.6% 11.6
5 8.6 9.6 9.4
8.0 5.0%
1.7 4.2 4.5 5.1
0.7 0.7 0.8 0.9 0.9 1.1 0.9 1.1 1.1 2.7 3.1 3.2
0 0.0%
Adjusted PAT PAT Margin %
Source: Company Filings, Spark Capital Research; Consolidated Financials Page 5

On an organic growth basis, PIDI’s growth profile is marginally lower than reported growth given the continuous slew of acquisitions over the years
40%
37%
36%
35%
FY07
30%
30%
28% FY08 FY 20
25%
FY02
21%
20% 18% 19% FY18

21% 18% 18%
17% 16% 16%
16% 16%
18%
14% 18% 18% 18%
15% 16% 16% 16% 13% 16%
12%
14% 14% 10% 11%
13%
10% 8%
10%
9% FY14-15 5%
7% 8%
5% 3%
FY03 3% 3%
0%
-5%
-5% Reported Revenue Growth Estimated Organic Growth
-5%
Given PIDI’s history of acquiring growth inorganically (company has undertaken more
-10% than 17 acquisitions in the last two decades) its reported growth is by nature higher than FY16 FY17
actual organic growth. While some of the acquisitions have been small not distorting the
organic growth, we have highlighted seven years of the last 20 years where the
difference between the both is meaningful. The following slides elucidate in detail on the FY20
FY01
company’s acquisitions and key notable info.
Source: Company Filings, Spark Capital Research; Estimated organic growth refers to total revenue growth minus trailing FY sales of acquired entity wherever available; Page 6
Given the relatively smaller size of PIDI’s categories and its leadership position, PIDI’s DNA has ‘acquisitions’ as an integral part of its Playbook
1999 2001 2003 2005
In FY03, the company In 2005, the Roff brand was acquired

Pidlite acquired brand acquired Bulbond and
PIDI acquired Steelgrip for Rs.138mn. On the acquisition, the
Ranipal in August Vitapon brands for Rs 66.4
M- Seal was acquired in March for Rs.110mn in March company then outlined that With the
1999. It was then mn in the industrial resins
2000 which was the market 2002. The brand was the combined strengths of its “Dr. Fixit”
generating revenues segments alongside three
leader in the then Rs.300mn market leader in the then and “Roff” brands, Pidilite has
of Rs.25mn in the small brands, Kalvyl, Tracol
epoxy sealant market with Rs.400mn PVC electrical become the market leader in the retail
Rs.2bn Fabric and Parvyl, in the same
revenues of Rs.170mn. insulation tape market. segment of the construction chemicals
Whitener market. segment for Rs 16.9 mn business.
2013 2011 2009 2007 2005
In 2013, PIDI forged a JV in the In Jan 2005, Pidilite

name of Building Envelope In 2008, PIDI via its subsidiary In June 2006, the company International Pte, acquired
Systems India Limited for acquired a company in Brazil acquired the brands and In FY06, PIDI acquired 75% stake in Singapore-
manufacturing of a select range of engaged in the business of businesses of Sargent Art Inc and two overseas entities based Chemson Asia Pte,
construction chemicals for adhesives, sealants and Cyclo LLC. Sargent Art is a fifty in Thailand and the which is a manufacturer of
application in waterproofing and construction chemicals. Also the year old art material brand in the middle east in waterproofing products
thermal insulation. The products company acquired the assets and US education market. Further, addition to acquiring and exterior paints.
address the demand for high end brands of Hardcastle & Waud the company also acquired a Tristar Colman/Fine Chemson has a
waterproofing solutions. The Manufacturing company and controlling stake in Pagel art( for Rs.17.8mn) manufacturing base in
Company holds 60% of the capital associates. The acquired assets concrete technologies in India brands, business and Singapore and was
in the Joint Venture Company. brands included Holdite, specialising in industrial grouts certain assets. acquired with a view to
Rustolene and Leakguard. and repair mortars. increase the presence of PIL
in the Asia Pacific region.
Source: Company Filings & Media, Spark Capital Research; Page 7

Given the relatively smaller size of PIDI’s categories and its leadership position, PIDI’s DNA has ‘acquisitions’ as an integral part of its Playbook
2015 2016
FY16-17: The Company along with its Wholly Owned Subsidiary

Fevicol Company Ltd incorporated Wood Coat Pvt Ltd (WCPL).
In FY15, PIDI acquired 70% shareholding
Due to the joint venture agreement executed with Industria
in Nina Waterproofing Systems Private In FY16, the company
Chimica Adriatica Spa (ICA), the Company, along with its
Ltd. (NWSPL), making NWSPL a domestic acquired the business and
wholly-owned subsidiary, Fevicol Company Ltd, now holds 50%
subsidiary of the Company. Subsequently, brand of Chemfix from CIC Sri
of the shareholding in WCPL and the remaining 50% of the
in April, 2015, NWSPL acquired the water Lanka. We note that Chemfix
shareholding is held by ICA along with a partner of the
proofing business of Nina Concrete is the leader in water based
erstwhile Indian distributor of ICA. Subsequently, WCPL
Systems Private Ltd. on a slump sale adhesives in Sri Lanka and is
acquired on a slump sale basis, the wood coating distribution
basis. NWSPL is engaged in the business widely used in stationary,
business from Italcoats and is now the exclusive distributor of
of supply and installation of wood working and industrial
ICA wood finishes in India and other select countries.
waterproofing systems applications.
2020 2019 2018 2017
FY18 – PIDI acquired 70% stake in equity shares of CIPY

Poly Urethanes Pvt. Ltd. (‘CIPY’). CIPY is engaged in the
In FY20, PIDI along with Litokol S.p.A, Italy has incorporated a JV subsidiary to carry on the business of
business of manufacturing and selling of floor coatings
chemicals epoxy grouts, chemical based products etc. The Company holds 60% of the paid up share capital and
using polyurethanes, epoxies, polyurea and polyaspartic
has management control of PLPL.
polymers. The acquisition was expected to aid PIDI
PIDI in Jan’20 along with Corpor acion Empresarial Grupo Puma S.L., Spain incorporated a JV subsidiary in the participate in the growth of the resin flooring and floor
name of “Pidilite Grupo Puma Manufacturing Limited” (PGPML) to carry on the business of manufacturing, coatings market.
processing and distribution of technical mortars and other materials used in construction. The Company holds
PIDI also entered into a collaboration with Jowat SE, a
50% of the paid up share capital and has management control of PGPML.
German enterprise and one of the leading suppliers of
PIDI acquired a 70% stake in Tenax India, which is engaged in the business of providing a comprehensive array industrial adhesives worldwide. PIDI as per the
of products which includes adhesives, coating, surface treatment chemicals and abrasives for marble, granite arrangement has exclusive rights to sell and distribute the
and stone Industry, under the brand name ‘Tenax’. entire range of Jowat adhesives in the Indian subcontinent
catering to joineries and Industrial consumers.
Pidilite also acquired minority stakes in Livspace, Homelane.com & pepperfry.
Source: Company Filings & Media, Spark Capital Research;
Page 8
Snapshot of International Performance: Declining contribution given flat performance of the division for 5 years among other factors
International Business contribution has reduced by up to 300bps over the last decade given the lacklustre performance of the overall division alongside other factors
FY20 8%
FY20 11%
FY19 7%
FY19 7%
FY18 8% FY18
-3%
FY17 9% -12% FY17
FY16 11% FY16 18%
FY15 10% FY15 15%
FY14 10% FY14 14%
FY13 10% FY13 15%
FY12 7%
FY12 10%
FY11 12%
FY11 11%
International Business Contribution to Total Revenues International Business total revenue growth
PIDI’s geographic concentration has become more Asia focused rather than the Americas which constituted almost 85% of international revenues a decade back
100% Key International Subsidiaries Revenues

11% 13% 16%
90% 19% 19% 24% % of Total
7% 9% 32% (In Rs. Bn) FY20 Revenues
80% 8% 37% 39% 40% Revenues
8% 13%
70%
Pidilite Speciality Chemicals
16% 1.19 1.6%
Bangladesh Pvt Ltd
60% 42% 39% 33% 29% 25% 21% Pidilite Lanka (Pvt) Ltd 0.42 0.6%
50% 18% 24% 25% 25%
40%
Pidilite USA Inc 1.14 1.6%
19%
30% 17% Pulvitec do Brasil Industria 0.88 1.2%
16% 16%
20% 41% 39% 43% 44% 43% 43% Pidilite Industries Egypt SAE 0.35 0.5%
28%
10% 22% 20% 20% Pidilite Bamco Ltd 0.61 0.8%
0%
Pidilite MEA Chemicals LLC 1.10 1.5%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
North America South America Middle East & Africa South East Asia & SAARC
Source: Company Filings, Spark Capital Research;

Page 9
PIDI’s C&B segment has significantly grown to account for ~85% of revenues currently vis-à-vis 65% in FY2000 aiding in an enhanced margin profile
100% 2% 1% 1% 6% 1% 0.4% 0.5% 1% 1% 1% 1% 1% 1% 1% 1%
8% 8% 7% 6% 5% 6% 7% 6% 6% 6% 6% 6% 5% 6% 6%
12% 9% 9% 6%
10% 7% 5% 4% Industrial
90% 8% 6% 8% 8% 7% 6% 6% 4% 6%
8% 8% 8% 8% 11%
8% 8% 5% 5% 5% Products
9% 8% 7% 7% 6% 7% 6% 6%
9% 10% 8% 8% 7% Segment
80% 10% 11% 10% 9% 8%
11% 10% 8% 8% 10% 11% 8%
11% 5% 8% 12% 12%
11% 5% 6% 10% 9%
70% 5% 5% 6% 6%
4% 5%
3% 19% 20% 20%
13% 16% 16% 19% 19%
60% 10% 11% 13% 14% 20% 20% 20%
11% 15% 17% 18% 19% 19%
50% Construction/Paint chemicals has witnessed the biggest delta in growth and contribution over the years
40%
30%
Consumer
55% 55% 54% 56% 54% 55% 54% 55% 55% 56% & Bazaar
51% 51% 50% 49% 51% 51% 50% 50% 53% 53%
49% Products
20% Segment
10%
0%
Adhesives & Sealants Construction / Paint Chemicals Art & Craft Materials etc. Industrial Resins etc Industrial Adhesives Organic Pigment & Preparations Others
Key Segments Growth Rate over FY2000- FY2020 Period
20 Year CAGR 10 Year CAGR 5 Year CAGR

 Over a longer time-frame viz. 10 year and 20-year CAGR basis, PIDI’s product
Adhesives & Sealants 15% 15% 11% segments have grown in healthy double digits ranging from low to high teens
range. However, the same has shrunk to high single digits over the last few
Construction / Paint Chemicals 18% 15% 9%
years leading to overall revenue growth being tapered.
Art & Craft Materials etc. 21% 11% 1%
 PIDI’s flagship segments – Adhesives & sealants and the construction/paint
Industrial Resins etc 12% 10% 10% chemicals have a healthy corelation with the Indian real estate cycle as evinced
in the past. The following slide provides a snapshot of the same.
Industrial Adhesives 13% 10% 9%
Organic Pigment & Preparations 11% 13% 9%

PIDI’s key segments – the Adhesives & sealants segment and construction/paint chemicals are highly correlated to the real estate cycle in India
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Cycle Bottom/ Contraction/ Full downturn/ Cycle Bottom/
Expansion
Early Recovery Early Downturn Recession Early Recovery
FY05-07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
 Tapering demand with  Demand to bottom out

price erosion in FY21E and expected to
 Demand > launches improve given better
 Inventory pressure affordability
 High demand but low recedes gradually  Price improvement due
15 Year Snapshot of  Industry consolidation to lower supply and
incremental price
Indian growth accelerates reducing inventory
 Demand contraction coupled with
 Launches > Demand price erosion
Residential Real  Strong pricing and demand frenzy  Deteriorating  Inventory piling-up and reduced
Estate Cycle  Soaring profits for developers profitability for investor interest
 Easy access to capital developers  Increasing leverage for developers
24%
22% 24% 22% 17%
19% 18% 15% 14% 14% 14%
14% 14%
PIDI Adhesive & Sealants 11% 7%
Growth Rate
Start of up-cycle led by:
4%
1) Supply correction
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
(reducing inventory
FY18 FY19 FY20
pressure); and
17%
2) Improving demand
26% 25% 16%
27% 29% 29% 13% 15% given heightened
25% 24% 20% 12%
affordability for
PIDI Construction/Paint 17% end-users and
Chemicals Growth Rate 3% improving rental
1%
yields for investors
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
FY05 FY06 FY07 FY08 FY09 FY10
Includes acquisitions like NINA, CIPY, ICA ETC marginally inflating growth
Source: Spark Capital Real Estate Report Page 11

PIDI currently classifies its portfolio into three buckets, with the pioneer & growth segments expected to witness the most non-linearity
Management Outlook
Core
Expected
Established Brands with high to grow at
market maturity and strong
share position
1-2x GDP
Growth
Expected
Emerging categories with to grow at
significant potential for
market growth or share gain
2-4x GDP
Pioneer Each to be a
Rs.1bn brand
Nascent Categories with huge
market creation opportunity
3 years from
FY21

PIDI’s strategy of continuous innovation + sustained premiumisation is expected to aid it maintain its leadership in the core category
PIDI’s adhesives and sealants segment has grown at a robust rate over the last 15 years …maintaining its leadership in the oligopolistic Indian adhesives & sealants space
largely showcasing growth at 1-2x GDP multiplier which is expected to continue 35 33
FY20 Revenues (In Rs.Bn) Majority of PIDI’s competitors in the
30% 2.0 30 adhesive and sealants space constitute
1.6 1.6 1.6
global leaders of the industry. The
1.4 1.3 1.3 1.3 1.3 25
1.3 1.5 revenues of peers include both B2B and
20% 1.1 1.1
20 B2C segment revenues. Huntsman’s
0.9 0.9
1.0 consumer adhesive business (brands
0.6 0.5 15 like Araldite, Araldite Karpenter, and
10% Arasea) was acquired by PIDI in FY21.
0.5 10
19% 22% 24% 11% 14% 22% 24% 18% 15% 14% 14% 7% 14% 17% 4%
0% 0.0 5
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
0
Adhesive and Sealants Revenue Growth GDP Growth GDP Multiplier
Source: Company filings, Spark Capital research; Nominal GDP Growth Rate Source: Company Filings, Spark Capital Research; 3M Revenues assuming Industrial and consumer division
Via incessant new launches thanks to its highly intensive R&D and innovation culture and given the higher functionality of the same, majority of them aid in further premiumising the
company’s portfolio PIDI’s spend on R&D has gone up almost 3x
Snapshot of Premiumisation with Sustained new Launches in the Woodwork Adhesive Range and increased from 0.6% of revenues to 1%
of revenues. 727
662
Launched in 574
Launched in Launched Launched in
2012 Launched in
2011 in 2008, 2013, Priced
Priced at at Base +55%. 2010, Priced at 420
close to 3x the 294 333
Base +55%. Heat resistant 268
product. base price.
Base Variant
& largest Launched in
Other variants with
selling 2015, Priced FY14 FY15 FY16 FY17 FY18 FY19 FY20
premium of up to 1.5x the
adhesive in at Base +15%. Priced at Base
Priced at base variant were launched
India Anti Bubble +16%. For time For PVC Total R&D Expenditure (In Rs.Mn)
Base +25%. in the flooring & footwear,
waterproof bound projects Laminates foam & upholstery and
Complete Range of Adhesives with higher price points joineries ranges
5 R&D centres and ever increasing R&D Outlay to hone innovation
Source: Company Filings, Industry interactions & Media reports, Spark Capital Research;
PIDI has been maintaining its market leadership status in the Indian adhesives segment and multiple sealants sub-segments over the last many years despite global market
leaders entering and gaining scale in India. We believe with largely the same stencil; the company will continue to hold its share and grow the core segment.
Page 13
Snapshot of PIDI’s growth segments performance alongside industry landscape; How is PIDI consolidating and growing its share therein?
PIDI has pioneered and maintained its market leadership… …in the key segments of the Indian Construction chemicals
FY10- Rs.3.95bn
40% 2.5
2.1 FY20- Rs.13.86bn
1.9 1.9 Rs.36 Bn
1.7 2.0
30% 1.6 1.5 1.6
1.4 1.4 The Indian construction
1.3 1.3
1.5 chemical segment is
1.1
20% 1.0
Rs.60-80 Bn estimated around
1.0
Rs.120bn.
10%
0.1 0.2 0.5
29% 25% 29% 24% 17% 26% 25% 20% 13% 17% 1% 3% 15% 16% 12%
0% 0.0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Rs.24 Bn
Construction/Paint Chemicals Revenue Growth GDP Growth GDP Multiplier Waterproofing Tile Adhesives Ad Mixtures, Readymade Concrete & Sealents
Source: Company filings, Spark Capital research; Nominal GDP Growth Rate Source: Industry Interactions, Spark Capital research;
…the biggest of which is the waterproofing segment. Retail Institutional PIDI has been pro active in the segment acquiring/tieing up with specialised
Admixtures Tiling
and niche players in the category consolidating its share and expertise
Classification - I Given the challenge
in deciphering the Flooring Sealing Established in 1965, Nina is one of the oldest
Rs.20- B2B and B2C
Others waterproofing solutions in the country. The company
30Bn portion in smaller
along with Percept was acquired by PIDI in 2015. The
sub-segments, the
entity we note is the largest Specialized
segment is sliced
Waterproofing & Building envelope protection
and diced in the
Rs.50- turnkey solutions company in India. The combined
adjacent manner.
60Bn entity brings niche expertise in terms of application
and experience to PIDI which is expected to further
B2B Segment B2C Segment Classification - II aid PIDI in developing a competitive advantage
against the emerging competition.
The Indian Waterproofing Segment is estimated between Rs.70bn to Rs.80bn and can be
BESI is specialized in polyurethane foam and self-
categorized in terms of End user consumer Base and Product Profile. A Snapshot break up
adhesive membranes for waterproofing
in both ways is captured above which we have gathered from our Industry interactions.
Source: Industry Interactions, Spark Capital research; Source: Company filings, Spark Capital research;
While the Right to Win for newer entrants in the Indian waterproofing space is higher given the overlapping distribution network and some adjacencies in the product
profile, PIDI via acquisitions and sustained innovation & high decibel advertising is trying to maintain its healthy growth trajectory.
Page 14
How has the competitive landscape in the Growth segments changed in the recent past ? Select Industry & Channel check Takeaways
Recent acquisitions in the waterproofing space are expected to aid PIDI maintain its dominance against incremental credible competition viz. Paint players in addition to the
incumbents entering the fray which is expected to significantly expand the category as awareness grows
Top B2C Players Top B2B Players

Vs Vs
In the last few years given significant overlap in their distribution network and also
partly the product profile, paint companies have entered the Indian waterproofing
segment in a large way. While this is expected to increase the competitive
intensity, we believe the category awareness and non-linear growth of the fresh
waterproofing segment can significantly grow the Indian waterproofing market
which can be a possible tailwind for PIDI if it keeps competition at bay.
Key Takeaways from Multiple Industry and channel check Takeaways from Experts in the Construction Chemicals/Waterproofing segment & Adhesive/Sealants Space
- The Indian waterproofing segment which is estimated between Rs.70bn and Rs.80bn - Given the multiple diverse points of sale the C&B segment products are retailed
can be split into multiple sub segments as per our interactions– Rs.20bn Retail water in viz. Hardware shops, Sanitaryware outlets, Paint dealers, Electrical shops,
proofing segment, Rs.10-Rs.12bn institutional segment (without accounting for ad- Building material and construction outlets, it is not easy to break PIDI’s
mixtures), Rs.30bn to Rs.32bn of Ad mixtures, Rs.3bn-Rs.4bn of Tiling, Rs.5bn of dominance in many segments where there are no adjacencies or separate
flooring and other categories amount to Rs.3bn. Given the smaller revenue size of distribution verticals for the paint companies. Even in level playing fields like the
the niche categories, the same cannot be broken into Retail/Institutional and hence construction chemicals segment given the product adjacencies and significant
separately disclosed. overlap of the distribution network, given PIDI’s entrenched relationship with
masons, applicators etc, the company has a huge head start which implies that
- Government projects constitute a significant part of the institutional waterproofing
the same would warrant significant time for others to catch up with.
segment and the same is dominated by BASF, PIDI, Asian Paints, Sikka & Fosroc.
- RERA implementation is also expected to aid in growing the category size of
- Nina Percept has a specialised workforce and are among the most high profile
select construction/paint chemicals segments as some conditions like 5 years
applicators in the country. Given their expertise in specialised and high ticket
warranty which are stipulated, are forcing Builders & real estate developers to
projects, the acquisition is like a forward integration for PIDI’s waterproofing
source/contract select works with the likes of PIDI & paint companies who offer
business given the workforce and machinery of the company.
the requisite warranty.
- We understand that almost 80% of the total paints network in the country overlaps
with that of the waterproofing segment. More than half of APNT’s network we
understand currently already retails APNT’s waterproofing product line.
Source: Industry Interactions, Spark Capital research; Page 15

Aided by a premiumizing portfolio coupled with improving pricing power led to PIDI maintaining a resilient margin profile in the FY10-FY20 phase
vis-à-vis the previous decade
Snapshot of PIDI’s Gross Margins vis-à-vis Crude oil Prices over the last two decades & Snapshot of PIDI’s Price Hike History partly reflecting improving pricing power
60.0% 114.1 120

110.3
107.6
55.0% 53.0%52.5% 53.4%

52.1% 51.8% 100
49.3%
50.0% 48.7% 85.8 48.0% 87.2 86.4
47.0% 47.3% 82.1 47.1% PIDI Pricing Index
44.6%45.1% 45.2%44.9%44.9% 80
44.5% 44.3%
45.0% 70.3 70.7 140
43.0%
65.1 41.3% 120
61.1
58.8 58.0
40.0% 60 100
48.7 49.9 80
42.1
35.0% 60
40
40
28.4 27.3 28.6
30.0% 23.7 20
20 0
25.0%
20.0% 0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
PIDI Gross Margins Crude Oil (12 months Avg)
As reflected in the above charts, PIDI witnessed better pricing power in the FY10-20 phase which coupled with sustained premiumization initiatives aiding in a more stable
and resilient margin profile for the company.
Source: Company filings, Spark Capital research; Page 16
Key Near to Medium term triggers for PIDI
Tailwinds probably on Our Spark strategy team has been opining from 1HCY20 on a real estate upcycle post the downturn from FY14. From the
a ‘fresh’ real estate past cycles we have observed a healthy positive correlation between a flourishing real estate sector and core PIDI categories
viz. Adhesive & Sealants Segment and the Construction/Paint chemicals.
cycle
Improving Macro Also post a host of exigencies in the last few years like demonetisation, GST implementation and Covid-19 which has
structurally to aid in derailed the overall growth trajectory, an improving macro coupled with overall infra impetus and pick up in private sector
capex can see the industrial segment growth revert to an improved trajectory.
non-linear growth
New ‘Pioneer’ Five of the six brands in the Pioneer categories are recent acquisitions/tie-ups in the niche segments of Floor coatings,
category brands to Joineries, Tiling and mortars. With PIDI’s entrenched distribution network and current eco system, these brands can emerge
into Rs.1bn brands in the medium term.
provide the kicker
Mean reversion of RM PIDI’s gross and operating margins till the recent past are at the top of its band given the favourable raw material
environment till 2QFY21. While PIDI’s pricing power has improved overtime, a high base and a peak inflation cycle can
price possibly after materially impact its margins and profitability growth from here on. Any mean reversion of the same post the current
current steep inflation inflationary phase can aid in PIDI’s margins revert to the last few years healthy range.
Expanding category With many new entrants in select segments like Waterproofing and adhesives, the near-term growth trajectory and overall
size of select segments category size is expected to expand with higher awareness and education on the category. Given PIDI’s market leadership
and being a pioneer in these categories, PIDI can gain from the same provided it keeps competition at bay.
to aid in growth
Page 17
PIDI vs APNT - Though both are strong business models, but on
‘runway for growth’ parameter , we continue to prefer APNT over
PIDI because …
Page 18
Snapshot of PIDI Vs APNT Growth Performance across the last two decades: APNT marginally outperforms given its organic growth
40%
37% Growth Rate over FY2000- FY2020 Period
36%
35% 20 Year CAGR 10 Year CAGR 5 Year CAGR 3 Year CAGR
PIDI 15% 13% 9% 9%

30% 28% APNT 16% 12% 7% 10%
25%
24%
25% 23% 22%
21%
20% 21%
19%
20% 18% 18%
17%
16% 16% 16%
19% 16%
18% 18%
15% 17% 16%
12% 16% 16%
12% 12%
14% 14% 14%
13%
10% 12%
10% 11%
6% 5%
8%
5%
1% 5%
3%
0%
-5%
-5%
-10%
PIDI Revenue Growth Asian Paints Revenue Growth
While both the company's growth trajectory over the years is comparable, APNT marginally takes over PIDI on an overall basis given that in almost seven of the twenty years
inorganic growth marginally inflated PIDI’s revenue growth.
Source: Company filings, Spark Capital research; Page 19

Snapshot of PIDI Vs APNT’s Pricing Power and Margin trajectory evolution alongside crude cycles over the FY2000-2020 Period
60% 114 120

110
108 PIDI Pricing Index
140
55% 53.0%52.5% 53.4%
52.1% 51.8% 100 120
87 49.3% 100
50% 48.7% 86 86
48.0%
47.0% 47.3% 82 47.1% 80
45.2%44.9%44.9% 80
44.6%45.1% 44.5% 44.3% 60
45% 43.0% 70 71
46% 46% 40
65 41.3% 45%
44% 44% 44% 44% 44%
59 42% 42% 20
40% 42% 42% 42% 42% 60
41% 41%
41% 61 0
40% 40% 50 58
49
38%
35% 42
40 180 APNT Pricing Index
28 29 160
27
30% 24 140
120
20 100
25%
80
60
40
20% 0
20
-
PIDI Gross Margins APNT Gross Margins Crude Oil (12 months Avg)
Source: Company Filings, Spark Capital Research; Consolidated
Though PIDI’s gross margin profile is superior to that of APNT, owing to APNT’s pricing power (as evinced by the above charts) across cycles, it scores better. However, we
note that a premiumising portfolio and improved pricing power have resulted in a more stable gross profile for PIDI.
Page 20
Snapshot of PIDI Vs APNT’s EBITDA Margin trajectory over the FY2000-2020 Period
24.0%
22.4%
21.9% 22.1%
22.0% 21.6%
20.0% 19.3% 20.6%

19.2%
18.8% 19.8%
19.4% 19.6%
17.6% 19.0%
18.0% 17.3% 17.2%
18.4%
16.8%
16.1% 17.2% 16.1% 15.9%
15.8% 15.7%
16.0% 16.5% 15.3% 15.5%
15.7% 15.8% 15.7% 15.8%

15.5% 14.1%
15.0%
14.0% 14.8%
13.3%
14.1%
13.4%
13.0% 13.0% 13.0%
12.0%
12.3%
10.6%
10.0%
PIDI EBITDA Margin APNT EBITDA Margin
While on an overall basis PIDI’s operating margins are better than that of APNT, during inflationary cycles as reflected in the above chart, both are in the same range.
Page 21
Snapshot of PIDI Vs APNT’s Capital efficiency & cash flow metrics comparison over the FY2006-2020 Period
Capital efficiency of PIDI Vs APNT over the last two decades – APNT has been a clear outperformer across the last two decades
60% APNT’s capital efficiency has been optically lower in the

48% recent past owing to huge capex set up by the company 57%
50%
37% 43% 43%
40% 33% 34% 40%
32% 37%
29% 29% 34% 36% 36%
33%
30% 25% 26% 26% 24% 30% 29% 27% 28%
22% 21% 21% 23% 25% 24%
20%
31% 31% 35% 32% 33% 28% 27%
10% 17% 20% 20% 22% 24% 23% 26% 24% 24% 26% 24% 22% 24%
21% 25%
27% 28% 25% 25% 24% 27%
11% 17%
0%
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
PIDI ROCE APNT ROCE PIDI ROE APNT ROE
In terms of OCF Yield and OCF/EBITDA, PIDI fares better than APNT
4.1% 90% 80% 81% 81%
4.0% 76% 77%
3.5% 80% 70% 72%
69% 66% 66%
70% 64% 63% 62% 63%
3.0% 57% 59% 59%
60% 53% 51%
2.5% 46%
3.1% 2.2% 50%
1.8% 2.7% 1.7% 1.9%
2.5% 2.7% 40%
2.2% 1.3% 30%
2.0%
1.7% 1.6% 20%
1.5% 1.5%
10%
0%
PIDI OCF Yield APNT OCF Yield PIDI OCF/EBITDA APNT OCF/EBITDA
While in terms of capital efficiency APNT is a clear outperformer, when compared based on OCF Yield and OCF/EBITDA PIDI fares better.
Page 22
PIDI’s Current Estimated Total Addressable Market (TAM) Vs APNT’s TAM
CURRENT TAM of PIDI CURRENT TAM of APNT
Estimated PIDI’s Right to Projected Estimated APNT’s Right Projected

Current Size Win Category Growth Current Size to Win Category Growth
Waterproofing Rs.~60-80 Bn High Teens Decorative Paints Rs.~400 Bn Market Leader ~13%
Market Leader
Other
Rs.~50-70 Bn Low to Mid Industrial Paints Rs.~150 Bn Market Leader in
Construction High ~10%
Teens Sub Segment
Chemicals
Adhesives & High Single Overall Kitchen

Rs.~100-120 Bn Market Leader Rs.~150 Bn Moderate ~10%
Sealants Digit/Low Teens Market
Bath Fittings & Low to

Branded Art & Rs.~10-20 Bn High High Single Digit Sanitaryware Rs.~110 Bn Low Teens
Craft Material Moderate
Industrial Waterproofing Rs.~60-80 Bn High High Teens

Products Segment Rs.~40-50 Bn Moderate to
High Single Digit
High
Adhesives & Moderate to High Single
Sealants Rs.~100-120 Bn
High Digit/Low Teens
Interior Designing
Rs.~1500 Bn Moderate High Single Digit
& Other Services
FOCUSED TAM – Rs.350bn FOCUSED TAM – Rs.1100bn

PIDI’s estimated TAM is almost one-third of APNT’s focused TAM given APNT’s larger product offering and dominance in the Rs.5500bn paints segment where PIDI is not
present.
Source: Industry Reports, interactions & filings, Spark Capital Research; Select sectors industry size is based on guesstimates Page 23
PIDI Vs APNT’s Valuation History over the last decade

10 Year Average one Year Forward PE Chart of PIDI 5 Year Average one Year Forward PE PE Chart of PIDI
70.0
+2 SD, 64.0 75.0
60.0
70.0 +2 SD, 65.3
50.0 +1 SD, 51.0 65.0
60.0
40.0 +1 SD, 56.8
Average PE, 38.0 55.0
30.0 50.0
-1SD, 25.1 45.0
20.0
40.0
10.0 -2 SD, 12.1 35.0
-2 SD, 31.1
30.0
- 25.0
Mar/16 Mar/17 Mar/18 Mar/19 Mar/20
Source: Bloomberg, Spark Capital; Source: Bloomberg, Spark Capital
No. of Days PIDI’s stock price traded in the respective zone since 2011 APNT Vs PIDI Valuation GAP over the last half a decade
40%
% of Relax no. of Cumulative traded %of Cumulative
PE Multiple range No. of days traded
days
APNT Vs PIDI
no. of days no. of days 30% +2SD, 24%
under 19x 75 3% 75 3%
20%
19 - 24x 432 17% 507 20% +1SD, 15%
24 - 29x 313 13% 820 33% 10%
Average , 5%
29 - 34x 111 4% 931 38%
0%
34 - 39x 346 14% 1277 52% -1SD, -4%
39 - 44x 450 18% 1727 70% -10%
44 - 49x 106 4% 1833 74% -2SD, -13%
-20%
49 - 54x 328 13% 2161 87%
54 - 59x 151 6% 2312 93% -30%
Mar/16
Mar/17
Mar/18
Mar/19
Mar/20
Jun/16
Dec/16
Jun/17
Dec/17
Jun/18
Dec/18
Jun/19
Dec/19
Jun/20
Dec/20
Sep/16
Sep/17
Sep/18
Sep/19
Sep/20
59 - 64x 126 5% 2438 99%
64 - 69x 37 1% 2475 100%
Source: Bloomberg, Spark Capital, Source: Bloomberg, Spark Capital
Page 24
Financial Summary
Abridged Financial Statements
Rs. mn FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Profit & Loss
Revenue 48,441 53,612 56,168 60,784 70,780 72,945 69,457 92,840 105,182
Gross profit 21,755 27,765 29,772 31,908 34,914 38,920 37,545 48,465 55,586
EBITDA 7,708 11,735 12,598 13,412 13,682 15,760 15,980 21,146 24,702
Depreciation 1,178 1,005 1,151 1,199 1,327 1,699 1,909 2,042 2,270
EBIT 6,985 11,508 12,569 13,698 13,821 15,555 14,833 19,916 23,329
Other Income 455 778 1,123 1,484 1,466 1,494 762 811 897
Interest expense 156 133 139 155 261 336 379 335 335
Exceptional items -49 32 0 0 -180 -552 0 0 0
PBT 6,779 11,408 12,430 13,542 13,380 14,667 14,454 19,581 22,994
Reported PAT (after minority interest) 5,126 8,026 8,600 9,624 9,249 11,164 10,816 14,653 17,206
Adj PAT 5,162 8,006 8,600 9,624 9,374 11,585 10,816 14,653 17,206
EPS (Rs.) 10.1 15.6 16.8 19.0 18.5 22.8 21.3 28.8 33.9
Balance Sheet
Net Worth 22,301 26,814 35,982 37,491 43,552 46,713 53,248 62,091 71,960
Deferred Tax 545 804 915 1,107 1,201 823 823 823 823
Total debt 584 800 975 1,226 1,111 1,691 1,340 1,340 1,340
Other liabilities and provisions 268 367 572 1,294 1,299 1,423 1,423 1,423 1,423
Total Networth and liabilities 23,698 28,784 38,444 41,117 47,163 50,650 56,834 65,677 75,546
Gross Fixed assets 12,716 14,969 16,138 17,152 18,979 22,362 25,362 28,362 31,362
Net fixed assets 6,194 7,557 7,891 8,026 9,133 11,420 12,511 13,469 14,199
Capital work-in-progress 2,198 1,581 1,477 2,277 2,421 2,593 2,593 2,593 2,593
Goodwill/Intangible Assets 3,362 3,817 4,861 5,396 5,343 6,648 25,548 27,648 27,648
Investments 4,934 7,958 16,033 14,348 17,835 14,155 7,155 8,155 12,155
Cash and bank balances 769 1,318 999 1,636 1,904 7,033 874 1,160 3,915
Loans & advances and other assets 1,249 1,669 1,586 2,937 2,604 3,330 3,350 3,370 3,390
Net working capital 4,992 4,885 5,597 6,497 7,923 5,472 4,804 9,282 11,646
Total assets 23,698 28,784 38,444 41,117 47,163 50,650 56,834 65,677 75,546
Capital Employed 22,885 27,614 36,957 38,716 44,663 48,404 54,588 63,431 73,300
Invested Capital (CE - cash - CWIP) 19,918 24,716 34,481 34,803 40,337 38,778 51,121 59,678 66,792
Net debt -3,155 -6,206 -13,922 -11,560 -12,308 -12,539 269 -1,018 -7,772
Cash Flows
Cash flows from Operations (Pre-tax) 7,269 12,215 11,671 12,240 12,541 16,726 16,628 16,648 22,318
Cash flows from Operations (post-tax) 5,520 9,075 7,938 7,964 8,448 12,796 12,990 11,720 16,530
Capex 4,099 1,704 1,331 1,768 2,625 4,671 3,000 3,000 3,000
Free cashflows 1,421 7,370 6,607 6,196 5,823 8,124 9,990 8,720 13,530
Free cashflows (post interest costs) 1,272 6,564 5,497 5,085 5,744 8,102 -9,289 6,285 13,195
Cash flows from Investing -4,359 -4,911 -8,790 393 -5,131 1,029 -14,138 -5,289 -6,103
Cash flows from Financing -1,651 -3,711 407 -7,898 -3,606 -8,492 -5,010 -6,144 -7,673
Total cash & liquid investments 3,739 7,006 14,898 12,785 13,418 14,230 1,071 2,358 9,112
Page 25
Financial Summary
FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

Growth ratios
Revenue 13% 11% 5% 8% 16% 3% -5% 34% 13%
EBITDA 15% 52% 7% 6% 2% 15% 1% 32% 17%
Adj PAT 14% 57% 7% 12% -4% 21% -3% 35% 17%
Margin ratios
Gross 44.9% 51.8% 53.0% 52.5% 49.3% 53.4% 54.1% 52.2% 52.8%
EBITDA 15.9% 21.9% 22.4% 22.1% 19.3% 21.6% 23.0% 22.8% 23.5%
Adj PAT 10.7% 14.9% 15.3% 15.8% 13.2% 15.9% 15.6% 15.8% 16.4%
Performance ratios
Pre-tax OCF/EBITDA 94.3% 104.1% 92.6% 91.3% 91.7% 106.1% 104.1% 78.7% 90.3%
OCF/IC (%) 28% 37% 23% 23% 21% 33% 25% 20% 25%
RoE (%) 25% 33% 27% 26% 23% 26% 22% 25% 26%
RoCE (%) 24% 31% 26% 24% 22% 24% 21% 24% 25%
RoCE (Pre-tax) 35% 49% 42% 40% 37% 37% 30% 35% 35%
RoIC (Pre-tax) 42% 52% 42% 40% 37% 39% 33% 36% 37%
Fixed asset turnover (x) 4.0 3.9 3.6 3.7 3.9 3.5 2.9 3.5 3.5
Total asset turnover (x) 2.2 2.0 1.7 1.5 1.6 1.5 1.3 1.5 1.5
Financial stability ratios
Net Debt to Equity (x) -0.1 -0.2 -0.4 -0.3 -0.3 -0.3 0.0 -0.0 -0.1
Net Debt to EBITDA (x) -0.4 -0.5 -1.1 -0.9 -0.9 -0.8 0.0 -0.0 -0.3
Interest cover (x) 35.3 68.4 57.0 51.2 32.4 38.1 34.3 35.0 49.3
Inventory days 48 43 47 48 48 47 47 47 47
Working capital days 67 65 71 72 73 70 70 70 70
Valuation metrics 1,752
Fully Diluted Shares (mn) 513 513 513 508 508 508 508 508 508
Market cap (Rs.mn) 8,89,666
P/E (x) 174 112 104 92 95 77 82 61 52
P/OCF(x) 161 98 112 112 105 70 68 76 54
EV (Rs.mn) (ex-CWIP) 8,84,313 8,81,879 8,74,266 8,75,829 8,74,937 8,74,534 8,87,342 8,86,055 8,79,300
EV/ EBITDA (x) 115 75 69 65 64 55 56 42 36
EV/ OCF(x) 160 97 110 110 104 68 68 76 53
FCF Yield 0.7% 0.7% 0.9% 1.1% 1.0% 1.5%
Price to BV (x) 40 33 25 24 20 19 17 14 12
Dividend pay-out (%) 35% 32% 34% 38% 43% 38% 40% 40% 43%
Dividend yield (%) 0.3% 0.4% 0.4% 0.4% 0.5% 0.7%
Page 26
Spark Recommendation History

Rs. Report Date.05 CMP (Rs.) TP (Rs.) Recommendation
Pidilite Industries – 3 Year Price and Rating History
2,000
01-Feb-21 1,670 1,745 Add
1,500 09-Nov-20 1,597 1,490 Reduce

10-Aug-20 1,377 1,242 Reduce
1,000
Price 19-Jun-20 1,391 1,180 Sell
500 Target 31-Jan-20 1,520 1,280 Sell
18-Nov-19 1,317 1,160 Sell
0
Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 08-Aug-19 1,289 1,060 Sell
16-May-19 1,163 982 Sell
Absolute Rating Interpretation 25-Jan-19 1,110 987 Sell
BUY Stock expected to provide positive returns of >15% over a 1-year horizon
01-Nov-18 955 840 Sell
ADD Stock expected to provide positive returns of >5% – <15% over a 1-year horizon
REDUCE Stock expected to provide returns of <5% – -10% over a 1-year horizon 03-Aug-18 1,101 937 Sell
SELL Stock expected to fall >10% over a 1-year horizon 28-May-18 1,139 961 Sell
Symbol Interpretation
30-Jan-18 893 847 Reduce
◄► No Change | ▼ Downgrade | ▲ Upgrade
Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, Spark Capital has incorporated a disclosure of interest
statement in this document. This should however not be treated as endorsement of views expressed in this report:
Disclosure of Interest Statement

Details of Financial Interest of Research Entity [Spark Capital Advisors (India) Private Limited] and its Associates No
Details of Financial Interest of covering analyst/ and his relatives No
Investment banking relationship with the company covered No
Any other material conflict of interest at the time of publishing the research report by Spark and its associates No
Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:
 Managing/co-managing public offering of securities ; Investment banking/merchant banking/brokerage services ; Products or services other than those above in connection with research No
report; Compensation or other benefits from the subject company or third party in connection with the research report
Whether covering analyst has served as an officer, director or employee of the subject company covered No
Whether the Spark and its associates has been engaged in market making activity of the Subject Company No
Whether the research entity or its associates, has actual/beneficial ownership of one per cent. or more securities of the subject company, at the end of the month immediately preceding the
No
date of publication of the research report
Page 27
Disclaimers and Disclosures

Certification by each of the authors of this Report: The analyst certifies that the views expressed in this document are an accurate representation of the analyst's personal opinions on the stock or sector as covered and reported on by the analyst herein. The analyst furthermore certifies that no part of the analyst's compensation was, is or will be related,
directly or indirectly, to the specific recommendations or views as expressed in this document. The information and any opinions expressed in this Report do not constitute an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities.
SPARK CAPITAL DISCLAIMER:
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been cancelled by SEBI at any point of time.
Spark Capital’s subsidiaries include, (1) Spark Family Office and Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and stock brokerage services and is registered with SEBI as Investment Advisor and Stock Broker and as a Distributer with AMFI (2) Spark Alternative Asset Advisors
India Private Limited investment manager to Category II Alternate Investment Fund (3) Spark Fund Managers Private Limited which is engaged in the business of Portfolio Management Services and is registered with SEBI as a Portfolio Manager and (4) Spark Fund Advisors LLP investment manager to Category III Alternate Investment Fund.
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PAINTS & CHEMICALS INDUSTRY NOTE ON PIDILITE INDUSTRIES

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PAINTS & CHEMICALS INDUSTRY NOTE ON PIDILITE INDUSTRIES

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PAINTS & CHEMICALS INDUSTRY UPDATE NOTE

March 22, 2021

 TEJASH SHAH  tejash@sparkcapital.in  +91 22 6176 6802

PAINTS & CHEMICALS INDUSTRY UPDATE NOTE

Current Overview of PIDI’s key business segments

Waterproofing: Dr.Fixit, Nina

Companies in diverse sectors like –

3 Year Average: ~26.4% 3 Year Average: ~14.5%

Henkel, Sika, 3M, Huntsman (Core

Source: Company Filings, Spark Capital Research; Page 4

Snapshot of PIDI’s financial profile over the last two decades

Source: Company Filings, Spark Capital Research; Consolidated Financials Page 5

20% 18% 19% FY18

1999 2001 2003 2005

In FY03, the company In 2005, the Roff brand was acquired

2013 2011 2009 2007 2005

In 2013, PIDI forged a JV in the In Jan 2005, Pidilite

Source: Company Filings & Media, Spark Capital Research; Page 7

FY16-17: The Company along with its Wholly Owned Subsidiary

2020 2019 2018 2017

FY18 – PIDI acquired 70% stake in equity shares of CIPY

100% Key International Subsidiaries Revenues

Source: Company Filings, Spark Capital Research;

Key Segments Growth Rate over FY2000- FY2020 Period

20 Year CAGR 10 Year CAGR 5 Year CAGR

Source: Company Filings, Spark Capital Research; Page 10

 Tapering demand with  Demand to bottom out

Source: Spark Capital Real Estate Report Page 11

Source: Company Filings, Spark Capital Research; Page 12

Top B2C Players Top B2B Players

Source: Industry Interactions, Spark Capital research; Page 15

60.0% 114.1 120

55.0% 53.0%52.5% 53.4%

PIDI Gross Margins Crude Oil (12 months Avg)

Key Near to Medium term triggers for PIDI

PIDI 15% 13% 9% 9%

PIDI Revenue Growth Asian Paints Revenue Growth

Source: Company filings, Spark Capital research; Page 19

60% 114 120

Source: Company Filings, Spark Capital Research; Consolidated

20.0% 19.3% 20.6%

15.7% 15.8% 15.7% 15.8%

PIDI EBITDA Margin APNT EBITDA Margin

Source: Company Filings, Spark Capital Research;

60% APNT’s capital efficiency has been optically lower in the

PIDI ROCE APNT ROCE PIDI ROE APNT ROE

Source: Company Filings, Spark Capital Research;

Source: Company Filings, Spark Capital Research;

PIDI’s Current Estimated Total Addressable Market (TAM) Vs APNT’s TAM

CURRENT TAM of PIDI CURRENT TAM of APNT

Estimated PIDI’s Right to Projected Estimated APNT’s Right Projected

Adhesives & High Single Overall Kitchen

Bath Fittings & Low to

Industrial Waterproofing Rs.~60-80 Bn High High Teens

FOCUSED TAM – Rs.350bn FOCUSED TAM – Rs.1100bn

PIDI Vs APNT’s Valuation History over the last decade

Source: Bloomberg, Spark Capital; Source: Bloomberg, Spark Capital

Source: Bloomberg, Spark Capital, Source: Bloomberg, Spark Capital

FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

Spark Recommendation History

1,500 09-Nov-20 1,597 1,490 Reduce

Disclosure of Interest Statement

Disclaimers and Disclosures