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Pidilite: Glued firmly to the growth path

The dominant adhesives maker has also been generous in rewarding investors with dividends.

, ET Bureau|
Dec 01, 2018, 11.41 AM IST
The dominant adhesives maker has also been generous in rewarding investors with dividends.
ET Intelligence Group: Companies with formidable moats tested over long periods are the best bets against the market’s crests and troughs. Pidilite is one such company that has managed to develop a strong position in non-glamorous categories of adhesives and water-proofing products.

The Rs6,000- crore company is India’s leading maker of adhesive and construction chemicals. Its flagship adhesive brand, Fevicol, has a strong brand equity and recall. The company has a history of nurturing brands across various categories of consumer adhesives, craftsmen adhesives, waterproofing chemicals and hobby and craft colours with brands like Dr Fixit, M-Seal, Fevikwik and Fevicryl.

Pidilite is a family-owned professionally-run organisation with a strong legacy of governance, delivering consistent returns and formidable market share. Pidilite traces its origins to a strong entrepreneurial start by its late founder Balvant Parekh half a century ago. The subsequent two generations from the Parekh family have successfully led and directed the journey of the company to where it stands today.

Its market dominance in case of Fevicol and M-seal brands is near-monopolistic with over 70% market share. The secret behind the success is the focus on the unorganised market by identifying the role of carpenters as major influencers. The company invests in building extensive grassroots contact with the end-users to promote usage of its products.

This has helped it gain a sizeable and sticky share in what was traditionally an unbranded space. It has also enabled the company to pass on the price increases to the consumers. Its products (from consumer and bazaar to industrial products) have a diversified demand coming from various segments such as furniture and finishing, plumbing, automobiles, schools, office and housing.

Besides India, Pidilite is focussed on growing business in Bangladesh, Sri Lanka and Egypt. It exports to more than 80 countries.

The company’s consolidated revenue grew at a five-year compound annual growth rate of 9.3% to Rs6,078 crore in FY18 — even as its net profit doubled during this period to Rs966 crore. The company has been able to maintain a high operating margin of 22% since the past three fiscal years. The company has, on an average, paid out one-third of its profit as dividend in the last three fiscals.
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