Pidilite Industries

Pidilite Industries In 1959, Pidilite founder Shri B K Parekh started his business by selling a single product; a white synthetic resin or glue called Fevicol. From these humble beginnings, the company has now grown into the dominant player in the domestic adhesives and sealants market with Fevicol becoming a household brand, instantly recognisable across the country by consumers. Pidilite now offers thousands of products across a portfolio of more than 25 brands.

Why do we like the investment?

As investors in India, we seek out high quality businesses with strong market positions and clear sustainable sources of competitive advantage. Pidilite checks all these boxes. It has a portfolio of very strong brands with often dominant market share in its categories. It is run by a proven management and consistently maintains a solid balance sheet. Primarily a distribution-driven branded adhesives products business, Pidilite is a play on housing and renovation demand, which has both cyclical and structural tailwinds given the government’s affordable housing drive and the strong upswing we are seeing in the Indian property market currently. The company has an enviable track record of creating brands that are synonymous with the category and management aspires to continue doing the same by entering underserved categories within the home improvement market. It is the clear leader in its core business and generates enviable returns and cash flows, reflecting its ability to manage crude oil-based input costs that can swing margins.

Pidilite has a diversified product portfolio across three categories. Core refers to established brands with high market maturity and strong share position, such as Fevicol. Growth includes emerging categories with significant potential for market growth or share gain, such as waterproofing products like Dr Fixit (with a marketing campaign fronted by actor and former politician Amitabh Bachchan). Finally, Pioneer brings together embryonic product lines with attractive market creation opportunities such as epoxy grouts and industrial adhesives and solutions for stone surfaces. This is where Pidilite management’s strategy of forming partnerships and joint ventures with European companies, most recently Tenax (solutions for stone, granite and marble surfaces) and Litokol (epoxy grouts for floors and walls) stands out. Its foreign partners transfer their intellectual property (IP) to Pidilite, which excels at adapting the IP for the fast-moving local Indian market and establishing a dominant market share. We believe this is a key competitive edge that sets Pidilite apart from its rivals, and places it well for growth in the years ahead.

Meanwhile, Pidilite tracks well on the ESG front, too. It has been disclosing its sustainability goals, strategy and progress against goals since FY 2018-19. In FY2024, it focused on combating climate change, serving people and communities and responsible value creation. For example, Pidilite has set up a 1.8MW off-site solar farm in Upleta, Gujarat. It has also minimised the use of virgin plastic in its product packaging and began using Post Consumer Recycle plastics.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.