Before we delve deeper into the Pidilite Industries Annual Report 2020 summary and key takeaways, here is the Q1FY21 report card –
Fun Facts – Pidilite Industries
Its founder Balvant Parekh worked as a Peon. From working as a peon to building a company that is India’s largest adhesives brand with more than Rs 6,000 Crores revenue.
After getting his lawyer’s degree, he decided that he didn’t want to practice as a lawyer because of the number of lies in the profession.
So, he took up a job as a peon in a wood trader’s office in Mumbai to meet his expenses.
One day, he decided to start his own business with the help of an investor and started importing cycle, areca nut, paper dyes from western countries.
The business did well and he eventually launched his own company with his younger brother Sushil Parekh in the late 1950s.
This company was later named Pidilite Industries.
Mr. Balvant Parekh observed that the Indian Adhesives Market was dominated by glues made from animal fat which were clumsy and cumbersome.
The adhesive market in India was unorganized and had very few branded products. Seeing this as an opportunity, his company started manufacturing white synthetic resin adhesive (white glue) called Fevicol which made the lives of carpenters easier.
Fevicol was initially used only for industrial or commercial purposes (like in the furniture-making industry). Mr. Balvant Parekh wanted to build Fevicol into a strong adhesive brand known for its quality.
He observed that the humble carpenter played a vital role in determining which adhesive to use and was also the most important person in the value chain.
When other brands focused on the middlemen (hardware stores and timber marts), Fevicol focused more on selling directly to the carpenters. (Facts are taken from the Game of Brands Twitter Page)
Here is something that made us smile in the Annual report. Who said companies are not humane?
Board of Directors
If there is one thing that is more strong than the Fevicol Jod, it is their marketing campaigns and advertisements.
New Product Launches by Pidilite Industries
P&L and Balance Sheet Metrics of Pidilite Industries
Management & Discussion Analysis
Pidilite Industries operates under two major business segments i.e. Branded Consumer & Bazaar and Business to Business.
Products, such as Adhesives, Sealants, Art & Craft Materials, and Others, Construction and Paint Chemicals are covered under the Branded Consumer & Bazaar segment.
These products are widely used by carpenters, painters, plumbers, mechanics, households, students, offices, etc.
Business to Business segment covers products, such as Industrial Adhesives, Industrial Resins, Construction Chemicals (Projects), Organic Pigments, Pigment Preparations, etc. and caters to various industries like packaging, joineries, textiles, paints, printing inks, paper, leather, etc.
In both the above business segments, there are a few medium to large companies with a national presence and a large number of small companies which are active regionally.
Multinational companies are also present in many of the product categories in which the Company operates.
Also Watch: 60 Years of Fevicol – What Makes It Special?
BUSINESS SEGMENT/ PRODUCT CATEGORY %
During the ﬁrst half of FY 2020-21, economic activity may remain subdued due to a number of factors, such as social distancing, subdued demand, and labor shortage.
Recovery in economic activity is expected to begin in the second half of FY 2020-21 depending on how effectively the country is able to contain the virus.
Overall there remains signiﬁcant uncertainty about the duration of the pandemic and the consequent downside risks to domestic growth.
Current Year Outlook
The continued slowdown in the construction industry and economic growth can negatively impact sales growth for the current year.
While major subsidiaries in India are taking initiatives to improve margins and achieve consistent sales growth in their respective businesses, the impact of the economic growth environment does pose a risk to these plans.
The Company’s major international subsidiaries are in Bangladesh, Sri Lanka, USA, Brazil, Thailand, Egypt, and Dubai.
Various initiatives are being taken to increase sales and market share in Bangladesh and Sri Lanka. The US subsidiary plans to maintain its focus on Retail and E-Commerce.
The Brazil subsidiary is taking initiatives for continued growth in sales and margins.
The business environment in these countries remains subdued as they all face the ongoing impact of the pandemic and consequent lockdown.
Outlook on Opportunities, Threats, Risks, and Concerns
The Indian economy provides a large opportunity for Pidilite Industries to market its differentiated products.
Slower growth of the Indian economy and stress in sectors, such as construction could impact the performance of the Company.
Overseas subsidiaries, by virtue of their relatively smaller size, remain vulnerable to the political and economic uncertainties of their respective countries.
COVID-19 related slowdown may impact the performance of the Company and its subsidiaries.
Performance of Subsidiaries
Profit & Loss Statement
The Free Cash flow generated by Pidilite Industries in 2020 is Rs 812.42 Cr compared to Rs 582.26 Cr.
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Also Watch: Pidilite Industries Acquires Araldite for Rs.2100 Cr
Cover Image: Behal International