Ladies and gentlemen, good day and welcome to Zydus Wellness Q2 and H1 FY 2026 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon from ICICI Securities Limited. Thank you. And over to you sir.
Hi everyone. As always, it's our absolute pleasure to host the management of Zydus Wellness for another quarter call today. The management is represented by Mr. Tarun Arora, CEO and Whole Time Director, Mr. Ganesh Nayak, Director, and Mr. Umesh Parikh, CFO. Now over to Tarun and team for the opening remarks post which we will open the floor for Q & A. Thank you so much. Over to Tarun sir.
Hello, good evening and welcome to the post results teleconference of Zydus Wellness Limited for quarter two financial year 2025-2026. Like Manoj mentioned, I have with me Mr. Ganesh Nayak, Director, and Mr. Umesh Parikh, CFO on the call from our side. During the quarter, consumption trends were influenced by early and extended monsoons impacting sales in key seasonal categories.
Despite this moderation, the non-seasonal portfolio demonstrated strong resilience, cushioning the overall business performance and ensuring steady momentum across core segments. Key commodities continue to exhibit divergent pricing trend. While certain inputs witnessed easing prices, others remained firm, leading to the mixed impact on the overall cost basket.
Quick commerce and e-commerce channels continue to maintain strong growth momentum, underscoring the sustained shift in consumer purchasing behavior towards digital platforms. Tier 2 and tier 3 cities are emerging as the next phase of growth drivers. The implementation of GST 2.0 led to transitory business disruptions, particularly within trade channels. Adapting to the new compliance framework, these short-term effects have mostly stabilized as we speak. We believe that the next generation of GST reforms is a welcome and progressive move.
Currently, more than 85% of the company's products in the domestic market fall under the 5% tax bracket. This reform, coupled with changes in the direct tax rates and increased government spending, are likely to enhance product affordability, stimulate consumer demand, and strengthen overall value proposition of our brands. During the quarter, the company acquired Comfort Click Limited and its subsidiaries, strengthening its international presence across key markets in the U.K., European Union, and the USA.
As it builds it forward, this acquisition has enhanced company's overseas digital business platform and expanded its footprint in the fast growing consumer healthcare segment. Comfort Click, through its brands WeightWorld, MaxMedix, and Animigo, is among the fastest growing digital consumer healthcare platforms in the VMs, which is vitamins, minerals, and supplements category. Supported by strong brand equity, loyal consumers, and Amazon ratings above 4.6 across major European markets.
The business derives most of its revenue from e-commerce and D2C channels. It is well positioned to benefit from rising health awareness and the growing focus on preventive health care. The post acquisition performance in the initial months has been broadly in line with expectations. Latest additions to our portfolio include Nutralite Activ Peanut Butter, a plant-based range available in multiple exciting flavors catering to growing consumer demand for healthy snacking options. There is Rite Bite Millet Wafer Protein Bar made from Jowar.
Each bar consists of 10 grams of protein, contains no meta, no palm, and zero added sugar, again available in multiple flavors. The company registered strong double-digit growth excluding impact of seasonal brands and the newly acquired Comfort Click business. The performance of seasonal brands was temporarily affected by early and prolonged rainfall conditions across the country. However, the company's structural growth drivers remain intact.
On a consolidated basis, the company reported net sales growth of 31% for the quarter and 12.8% for half year one financial year 2026 driven by strong sales performance of newly acquired entities which offset the impact of seasonal products. The company on a consolidated basis reported EBITDA of INR 230 million with a growth of 17.3% year- on- year. The acquisition has been funded through a low cost bridge loan at an interest rate of 5% and the related interest cost has been included under finance costs. The brands recognized on acquisition are being amortized over a period of 15 years resulting in a sequential increase in depreciation and amortization expenses during the quarter.
Exceptional items include one-off expenses related to the acquisition of Comfort Click and costs associated with the voluntary liquidation of Natural India Private Limited enabling the expeditious consolidation of its business with Zydus Wellness Limited. On a going concern basis, the net loss including exceptional items and other non-cash amortization is INR 528 million. The adjusted net loss excluding exceptional items is INR 186 million. The acquisition of Comfort Click is Cash EPS accretive excluding exceptional items such as one-time acquisition related costs. Alongside its financial performance, the company remains deeply committed to environmental, social, and governance. The ESG principle for financial year 2025, the company's latest ESG publication and S&P Global rating showed a 6.3% improvement taking the overall ESG score to 84.
The company now ranks in the 99th percentile amongst the 331 global companies on the FOA Food Products Industry group, securing the third highest position globally as of October 24th, 2025. Brand highlights and market share details are provided in the investor presentation. Notably, Complan has maintained its market share and improved its position from fifth to fourth place according to the Nielsen report of September 2025. Everyuth launched its anti-pollution scrub sachet.
Sugar Free recorded a 97.9 basis point increase in market share. Also, as per the Nielsen report, while Sugar Free continues its double-digit growth process, Sugar Free Green continues its double-digit growth for the 18th consecutive quarter. The Rite Bite Max Protein business has been integrated into the company's broader distribution network, remains on track with its strategic growth plan, and also entered international markets.
Strategic initiatives are underway across the portfolio to enhance product awareness, expand the consumer base, and drive sustainable long term growth. Thank you, and we will now begin the Q & A session. Over to the operator.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Mayur Parkeria from Wealth Managers. Please go ahead.
Good evening sir. Am I audible?
Yes, you are audible. Please go ahead.
Actually, a couple of questions from my side. Is it possible to give what is the actual number for the quarterly which is included for the Comfort Click which is there for one month and two days?
We don't give separate numbers.
But to understand the like-to-like performance of our core business it would have been a little helpful since this is the first time the consolidation has started.
For your help what we can say is that we've given the full year financial numbers at the time of acquisition. We just have one month of numbers that have come in and it's largely in line with that. That should be able to, I mean that's the most we could help you with.
Okay. For segmental reporting, while business wise we may not be relegating the business into various segments means we have been for personal care and I think now that but from a geographical segmentation also will it make sense to now have a geographical segment given that we have two separate clearly identifications in terms of domestic and U.K. business as we go ahead for the year.
I think it's a good suggestion. We will review it at the end of this financial year because we do believe that the best way to do segmental reporting is at the beginning of a financial year. Over next few months we will consider this suggestion and relook at it if we need to revisit the segmental support disclosures.
Certainly finally From an amortization of the brand over the 15 years, just to get a slightly better nuanced understanding, we have increased our intangibles by roughly INR 2,500 crore. And we have increased our goodwill by roughly around INR 800 crore. That's a INR 3,300 crore increase. Here the amortization amount which will be sitting on the P&L for the next 15 years into four quarters, which will be 60 quarters. If I say, will it be an equal, equal, equal amortization of this INR 2,400 crore or INR 2,500 crore or INR 3,300 crore.
The amortization will be of INR 2,400 crore. And one thing for you, you know, for your clarification is that probably the goodwill, brand, and you know, the total amortization amount which is there mentioned like that exceeds the acquisition cost already paid. That is because of the creation of the deferred tax liability which is a sort of benefit to us, right? I mean in terms of financials. Not really because, you know, accounting standard requires us to create a deferred liability for that. Now the amortization will be on INR 24,000 million equally spread across 15 years.
So 40 quarters, INR 400 million per quarter will be what additional charge will come.
Yeah, roughly around that.
Yeah, roughly around that.
Approximately, yeah.
And yeah, we will, we will h ave the interest cost also on the b ridge loan which is there for the. As we go ahead.
Yeah, yeah. Currently it is, you know, 5% on this, about GBP 240 million. And as we go and, you know, make part payment repayment, it will go on reducing.
Okay, so this on this bridge loan. Sorry, I was not the part of the call when I think you acquired Comfort Click, I missed that if there was a call there. So I may not be knowing this or pardon for duplicate, but do we have plans for equity raising to reduce this at one time or do we p lan to take it as we go a s an internal accruals?
So currently what we have done is that we have taken a bridge loan for 15 months and we have a time to take it out and replace it by another capital type could be a form of mix of equity or borrowing but currently we do not have any plan and we will decide as we go along maybe in couple of quarters but currently we will live with the bridge loan. Okay.
Okay, thank you. I will come back in the queue with more questions. Thank you so much.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Shaurya Shah from Equrius Securities. Please go ahead.
Yeah, so first of all can you highlight the what can be the quantified impact of the GST 2.0 implementation on the reported top line in the second quarter and how do you expect these to normalize going into the third quarter giving the ongoing adverse monsoon seasons which we are seeing.
We can't quantify the specific number that we face. We did see a slowing down of purchases both in general trade as well as organized trade whether you look at modern trade, e-commerce, and there was a period of time when some of the larger players did not buy, but hard to specifically quantify. What we've seen is largely everything has come back and stabilized and it is business as usual. We look forward to business as usual from a consumer point of view. I don't think there would have been any significant shift from our business, may have just impacted some change in inventory which will also catch up eventually. Yeah, it did impact the primary though. You know, secondary and tertiary, they remain and we did not lose any sales there.
Okay, got it. My second question is on that, as despite one-off cost of the acquisition-related cost which has accounted for the exceptional item, despite that our reported EBITDA margin stands relatively lower compared to last year. Does it play that it is purely because of the deleverage of the personal care segment or the Comfort Click is currently operating at the lower margin compared to what we have acquired?
I don't think there is anything to do with Comfort Click. It just stays, I mean too early to even imagine any changes there as it is. It's a deleverage of the seasonal brands. Both Glucon-D and Nycil came under significant pressure and that deleverage because our margins are anyway thin in this quarter has played out. Otherwise, which is again like we have explained earlier in my statement and consistently that that's the only impact that we see.
Okay sir. Sir, lastly as the question has been done, are we seeing any structural or operational intervention by the Zydus Wellness into the Comfort Click operational to have a different sort of growth trajectory or profitability metric right now?
Not required. I think it's too early. There is a capable management which is running it. They've been incentivized. Work with them wherever required. They are there. It's a strong team and they're building Europe. They're taking it to us. Nothing specific to talk about. We are obviously working more in finance and HR to start with and we'll see. I think too early to talk me.
Okay, that's it from my side. Thank you sir.
Thank you. You may press star and one to ask a question. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead.
Yes sir. Thank you for taking my question. This is regarding this Comfort Click. If we are they continuing to grow at that 57% growth that they were growing previously and if I remove that one month revenue then our revenues are basically flat. Is that right?
I think 57 is what we reported the last five years. The growth rates continue to be in good double digits. What we've seen is team's growth in the category at 8th Europe level. They have been beating that for a long period of time and we do believe they will continue to build that. One month is too short a period to start. Even looking at these numbers from a clear point of view, coming back to how is our performance without them? Yes, we've had a tough quarter largely impacted by the seasonal brands. Without seasonal brands and without counting Comfort Click, it's a good double digit growth. Adding seasonal growth, seasonal brands back, it is largely flattish.
My last question would be when would they be pouring into the U.S. and in terms of the margins in that side of the business?
Sorry, I didn't get your question.
When will you mentioned that they are looking to foray into the U.S. also. So when is that planned for Comfort Click's foray into the U.S.?
They've already s tarted last year so it's a long drawn process. They've already started. They already have action in place including approval, setting up the whole thing. It takes time and it's a work in progress.
My last question is what would have been the growth in FY 2025 Comfort Click's growth?
I don't have it specific. We have the five year specific but will be good high double digit.
Right. Thank you, sir.
Thank you.
Thank you. Before we take the next question, a reminder to all you may press star and one to ask a question. The next question is from the line of Mayur Parkeria from Wealth Managers. Please go ahead.
Thank you for taking my questions again. Is it possible to share some of t he operating data from an e-commerce platform which we normally track in terms of monthly transacting customers or active customers. What kind of average order values are there? You know, some of the [audio distortion] Because we are not [audio distortion]
Your voice is breaking.
Yeah, hello. Is it okay now?
Yes,
Yes, please go ahead.
Hello. Yes. Yeah. Will it be possible to share some of the operating matrix for now from a platform perspective in terms of active users, monthly transacting users, average order size, because I wasn't able to track some of these private entities otherwise. Again [audio distortion]
Sorry to interrupt. Could you please check your network connection and rejoin the queue? Your voice is muffled.
Hello? Hello? Is it okay now?
Still the same. Could you please rejoin the queue? Thank you. The next question is from the line of Shaurya Shah from Equirus Securities. Please go ahead.
My next questions are on the Rite Bite Max Protein Bar. So sir, can you first of all highlight how the growth rates are considering we are now integrating the distribution channel of the Zydus Wellness into that. Secondly, how we are seeing the profitability of the business considering the high scale expansion.
While we do not give number specifics, I can give you a broad sense of how the business is doing. The business so far, almost 10 months since we bought it, has actually been beating all the past trends and our estimates from a top line point of view. Similarly, from a bottom line point of view, it has exceeded the estimates set for it. We are quite bullish about the possibilities of this business and we believe we continue to invest and innovate on this platform to make it more meaningful and sizable in our portfolio.
Okay sir. Sir, from the understanding perspective, over the last 10 odd months, how have we shifted channel salience? We consider we are now pouring and increasing the presence into the offline market as well. Can you highlight something on that?
We have expanded general trade distribution significantly, adding more towns, adding people, and we have plans to continue doing that. Similarly, Quick Commerce has been a big driver for this. The category has been growing and we've been investing and growing significantly on the platform. Overall, it's been a good growth story across channels. We've also started taking it international, so some of the markets have got, as we introduced these products, we seem to be getting good response, but it's a work in progress in early days to say about international.
Okay sir, and sir, secondly, from the accounting perspective, we just want to have understanding what is the amount at which we have reported the Comfort Click acquisition in INR terms, and when we split into the intangibles and goodwill, what is the proportion of that?
So proportion between, you know, the brand and goodwill is roughly about 25, 25. And you know, as counsel says that we don't, you know, share the numbers in INR. But anyway, you have these numbers at the end of the year when we share the subsidiary.
Okay.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touch-tone telephone. The next question is from the line of Tejas Shah from Avendus Park Institutional Equities. Please go ahead.
Hi, thanks for the opportunity. A couple of questions. First, looking at the headwinds that you called out in the quarter which is pertaining to GST transition and the seasonality, margin seems to have done well. Are there any one-offs there? Or if this we have done in such a difficult quarter, should we assume that once normalcy comes back from 3Q, 4Q onwards our margin trajectory will improve disproportionately and perhaps that ambition to reach 18-19% margin can be preponed.
I think while we are very focused on that, you got the right point that given the daily average we had because of loss on seasonal brands as well as GST, the impact is very steep. I think it's been a difficult quarter. We still do believe that we are on path to doing 17%-18% that we've committed on EBITDA on the base business as per original plan. If Comfort Click also shapes up then that also we hope to get there. These are, I think, work in progress and early days to, but the base business, I think the story remains intact and I think there's no specific shift I could report. Yes, we are committed to drive that much harder with improved gross margins and we'll see some actions on that as we move forward. Improvement in gross margins and if we can take a leverage out maybe to do it more spooky.
Very clear. Second, it's more of a request. The way our business is growing and expanding, the complexity is also increasing both in terms of domestic portfolio and overseas, how would you like us to kind of track the progress? It is a request also which was made earlier on the call that if you can share at least international and India slightly separately so that we can have some fair sense of asking right questions.
Thanks. I think somebody else also pointed out we will seriously be looking at it and we'll work towards it. Ideally we change this at the beginning of a quarter. Even when we started the disclosure between food and nutrition and personal care started at the beginning of a year, sorry, not quarter. We'll see how quickly we can because we do recognize that these disclosures will help you to track us better and we'll figure it out and come back to you.
Very helpful, very helpful sir. Thanks and all the best for coming quarters.
Thank you.
Thank you. The next question is from the line of Mayur Parkeria from Wealth Managers. Please go ahead.
Good evening and sorry my call there was the voice was muffled. Am I audible and clear now?
Yes, yes.
What I was trying to understand. It will be helpful, along with the current quarter, if you can share some of the details, but you know, make it a disclosure with respect to how the platform, you know, some of the operating highlights of the platform, which normally most platforms disclose in terms of, you know, what would be our, you know, the average ticket size, what are monthly transact customers, monthly active customers. How has been the growth in those channels?
Also, in terms of, sorry, but I, I again, I could not get understanding, are we operating more like a marketplace model or is it more like a, you know, inventory kind of, sorry, means, no, just a, what you call, non-marketplace kind of, you know, not an inventory model. How do we operate and in case take rates and because I understand EBITDA margins are more in the region of 15% so it would be a marketplace kind of model. Just to share some of the understanding on the quarterly basis and make it a standard practice for us to understand and get rather than asking it on the call will help us to get a little more color on the international business as we go.
Sir, I hear you, we understand what you're saying. First of all, it's largely, and we've explained it earlier also, if you look at it, it's largely a marketplace. About 75%-80% of the business is right now on Amazon, which is a marketplace model. Remaining is their own website. There are other platforms which we are exploring and we are building, but that is largely what reflects on this. Some of the metrics we could start sharing at this stage while we reviewed and we are working on it, we could start sharing some of those things eventually, but some of them are also competitive in nature.
We will review this and come back to you with some more details and color on this in terms of both the number of customers and revenue per customer from on each of the two platforms. Whether it is Marketplace, which is largely Amazon, or D2C's website, these are things that we do review but start sharing will come back to you on the possibilities of that.
That will be great sir. Last question on the Comfort Click strategically at the time of our acquisition and now our plan. If we look at the next three years strategically, will the focus be more on growth or will the focus be more on getting efficiency and repeat customers? How are geographical expansion? Which of the three would be our focus? Your milestones which you have given to the management team as we go ahead.
There are three or four metrics that we could look at. One is they have a very good, strong, proven model of working with marketplaces which is reasonably efficient. Trying to work on improving our market shares in each of the markets. Top six markets constitute a significant proportion of their business and they will continue to focus on growth on the same country growth and that's one metric or one KPI. They will drive growth within the geographies which are sizable for them because there is still enough room for growth within those geographies.
Second parameter that they will focus on is expanding to new markets which are large high potential markets like we talked about U.S., which is the largest of markets. That is a very large deliverable for them. Having done all these, the profitability and other operational metrics are also part of their KPIs to look at. At the overall, at the end of it, it should translate into ahead of the industry growth from a top line point of view but a stronger journey on EBITDA. This is the broad framework that we will be looking at this model if we look at over next three to five years.
Great sir, thank you so much and wish you all the best. Thank you sir.
Thank you. The next question is from the line of Lakshmi Narayanan Ganapati from Tunga Investments. Please go ahead.
Yeah, thank you. Couple of questions. When I just look at the category size of Glucon-D, Complan, and Nycil which was given at the time of you acquiring those brands, there's something like INR 8.5 billion, INR 6.7 billion-INR 7.5 billion. When I look at it, they have, I mean as we speak right now the group only has gone from INR 8.5 billion - INR 10.0 billion. So the Complan line has gone from INR 6.7 billion- INR 6.8 billion and also hasn't gone up. Is there a problem with the category that the category doesn't seem to grow from the time of you acquiring till now. That is number one. Second, if I look at your 2022 data and 2025 data in terms of market share which you have actually provided, there seems to be a market share drop in Nycil and also in Complan. I just want to know why category itself is not growing. Second, why on a slightly long-term point of view, like a three-year point of view, our market share have actually dropped.
Okay, there are two or three parts to this question. Let me just break down into two parts. One is Complan and second is Glucon-D, Nycil. First of all, Glucon-D, Nycil. If I look at last three to four years, they've been growing at a good pace, much faster than pre-acquisition growth rate. Despite this being a low performance year, we have seen actual degrowth in this category. The fact is that these are growing. Nielsen does not do justice. We have been engaging with Nielsen to give us better numbers. I only see across three brands, their coverage has actually reduced and that is a problem. One reason of course also is at the time of acquisition the e-commerce was 1%.
Today the share of E-commerce on each of these brands has gone up and going up to 15%-20% for Complan, which is not even captured in the numbers we share at an industry and our market share levels. If I were to redo my Complan market shares, including E-commerce, which is not reported by Nielsen, they will be in line with what we had at the time of acquisition, a little lower. That is also a choice. We have a disproportionately lower presence in sachets, which we believe is more value. We played as per the right consumer metrics where we have grown on the larger packs, more profitable part of the business, and let go or played lower on the sachets.
Directionally I think Complan, the bigger issue is category has been under pressure and it's been very public because the other two players, three players also talk about the same thing. Having said this, the market share is largely protected in the spaces which matter to us if anything. UP and Bihar have actually been grown significantly from before acquisition to now. Critical markets of West Bengal and Tamil Nadu. We are fighting Tamil Nadu. Our market share is still as good or bad as it was before acquisition. West Bengal has been bit of pressure but the business is still holding well. Overall I would say Complan a larger category issue, but we managed kind of well. Looking forward, we do believe that the brand is getting stronger. How do we reframe and pivot it to potentially better spaces to build this brand?
Coming back to Glucon-D and Nycil question that you raised, those categories were growing at very low single digits in 4-5 years before acquisition. Now Glucon-D in last 4-5 years is growing at good rates. Almost 1.5-2x of what they were doing earlier. Nycil has also grown post acquisition at a good double-digit rate. Market share at the time of acquisition for Nycil was 30%, it went to 35%. Right now it's 33%. I mean these market share moments are competitive in nature. I don't think we are any weaker than others but a little bit of percentage here and there will move. The brand has been growing at a good double-digit. I'm not too worried about Nycil trajectory or Glucon-D trajectory.
Glucon-D, we are also pivoting to RTD, which we launched this year, for example. We had the Activors, and there may be more stuff that we'll be doing in terms of, so broadly, this is the broad space I could give. If you have more specifics, we can pick it up quickly, or maybe you want to have a more detailed conversation.
Just one question to that. If I look at the category itself, which has been reported, you know, including Sugar Free, it hasn't really grown since acquisition. It's nothing to do with any category of what you call, when you mentioned the category size of Glucon-D, Complan, Nycil, and Sugar Free, they have not really grown. They have grown at like 1%-2%, 3% kind of thing, or even stayed flat. Is that category size also was reported wrongly, or how do we take this up? Because as investors we find that the category itself is not growing. However, you are growing. That's one part. But how to think about it.
There are two parts on this. Let me go to sweeteners and I think that's to be looked at from a different lens. Between 2018-2019, I don't remember the specific year Nielsen stopped reporting because globally they sold the category phase to IQVIA in their relationship. For almost one or two years they did not report the category. When Nielsen IQVIA restarted the reporting, they reported a category drop of, I think, 15-20% while we never dropped 15-20%. They have been rebuilding the category estimates for the last three to four years and therefore there is an asymmetric growth capture between Nielsen or Nielsen IQVIA and us.
Having said this, I think last three, four years may be a better reflection. Around 18-20, I think 19-20 or 21, I think almost one and a half, two years we had limited reporting of Sugar Free or the sweetness category from Nielsen Acuvia. There was a bit of struggle on that and they suddenly dropped because if you look at all our reports, I don't have it handy, suddenly from INR 360-370 crore they dropped it down to INR 310-320 crore and then after that they've been rebuilding the category.
Coming back to how we've been performing, I think we've been very clear we've been growing but at a single digit. Our challenge has been that this category can do better with recent actions on sweeteners, with Sugar Free Delight and Sugar Free Green. These are our pivots of driving double-digit growth and should overcome the challenge that the base category has changed, but that's a broad sense of what has happened.
Got it, got it. I'll come back in.
Also, just on that, I think this category has also had a high e-commerce presence now, which again is missing in the—[crosstalk]
So just to summarize, right. I think it would be helpful to actually put the right category size number as well as perhaps your what do you think is your market share. Otherwise, it does not, it is not a good presentation I would say because it either underwhelms your company's performance or we are unable to really understand what is going on. Perhaps maybe you can relook at it and see whether the way in which you want to represent the segment or market share and growth. Thank you.
I understand what you are saying. The problem is that we report best third party estimates available. We don't, I mean, it would be unfair for us to start putting our estimates because then there is a bias that comes. We have a view, but from a fair, transparent reporting point of view, I try to give you the best possible estimate that we can give you available in the market. We have impressed upon Nielsen to get E-commerce estimates so that we are able to represent the category better. It helps us to drive our actions internally. It helps us to share with you more transparently what the category is. Any playing with those numbers while reporting to you is, I think, not the best.
Since you acquired these three brands, Glucon-D, Complan, and Nycil, if you just index it at 100, what has been the CAGR of these three things put together? If you can just say [crosstalk]
Double digit on Nielsen for last 45 years, high singles are closer to double digit for Glucon-D. Complan has not been so good, but that's more category because the category has been flattish for almost, so that these three plans put together.
Yeah, I mean, these three plans put together, what has been the CAGR growth? You said all of them put together.
I think, I think we can set up a more detailed conversation separately. You can reach out.
Thank you. Thank you. Thank you.
Thank you. The next question is from the line of Mohit Dodeja from Emkay Global. Please go ahead.
Yeah. Hi sir, good evening. Thanks for the opportunity. A couple of questions from my end. This new acquisition Comfort Click, what are the target return ratios like and when do you anticipate crossing the hurdle rate? Second question being what has been the initial consumer traction like for the millet wafer protein bar and how does the margin profile of these next-gen products compare to the established heritage portfolio like Sugar Free or Glucon-D? Are these new launches driving new consumer acquisition or are they capturing wallet share from your existing brand users? That's it from my end.
Let me answer the consumer questions first. First of all, the millet bar, I think it's early days but we see fairly good traction because most of the people who tried the product have loved it. We see both on e-commerce as well as GT a good traction. We are quite excited about the possibilities from a gross margin perspective. Overall, Max Protein business and this included is largely in line with our overall gross margins before Comfort Click, and that's what we have stated earlier also, largely in line with that. We can't give you more specifics than that.
Third was how is the growth coming? I think the share of growth is not coming from any of the internal brands. Most of the innovations are actually helping us gain a wider set of consumers who have not been consuming our brands, and that's really what the value of innovations will be. If I were to cannibalize or take wallet share from within my portfolio, then it's not a valuable innovation.
The only brand, the only innovation or only piece that I see which partially cannibalizes is Sugar Free Green because all the Sugar Free, you know, consumers who maybe who may be considering exiting may come back on natural-based products. Most of our innovations really focus on acquiring new set of consumers including Sugar Free. I think that remains our fundamental ways of working. Coming back to your question on earnings,
on the Comfort Click acquisition as such you may be aware that whatever the acquisitions happened over the last past two years in the FMC segment, they likely have exceeded 8-10 years. Here we are quite optimistic even as per our internal conservative estimates, we are really optimistic about this particular acquisition, how it plays out. It is too early to say. No specific hurdle rate or internal targets have been set out currently on this. We are working on the fixed strategy and the growth aspects.
Okay sir, like is the hurdle rate a high single digit or in mid teens, can you quantify that number?
If by hurdle rate you mean, you know, the volume growth or the sales growth or any specific—like, no, no, margin. If you are looking at the margins, you know we have already published our margin at the time of acquisition. We hope that they will either remain the same or continue to improve. What is going to drive the profitability is not the margin percentage but the growth in the volume and the growth in the sales. We are very optimistic about that.
Okay, got it. One more question just from my last one, I noticed the A & P spends have gone up significantly this year. While when we include the effect of seasonal brands, the top line as you mentioned is flattish. I just wanted to know whether this hike is a result of competitive intensity or any other reason.
Just because, you know, inclusion of the result of one month and two days as well as the nit, as well as the, you know, the Rite Bite and Max Protein. Those advertiser marketing spends were not in the base numbers of last year.
Like for like portfolio has been.
The sales are a bit lower only. We have managed the advertising.
Okay. Okay, got it. Thank you so much.
Thank you. The next question is from the line of Rajiv Anand from Netnulia Financial Services Limited. Please go ahead. Rajiv, your line is unmuted. Please go ahead.
Hello.
Yes, you are. Hello. Please go ahead.
Yes. Yes sir. Thanks for the opportunity. My question is on depreciation and amortization. For full year basis is it expected to be around INR 1.60 billion? Hello. The brand depreciation on the, you know, Natural India Private Limited brand. The quarterly run rate will be in the range of INR 460 million-INR 470 million. Okay. Secondly, it is a question related to Comfort Click. Did Comfort Click clock 15%+ EBITDA margin in this quarter?
It's just one month of numbers. I think it's too early to comment specifically. Like Umesh has also mentioned, I think we'll be publishing the results of the subsidiary on an annual basis and that would be the best time to look at it. Month to month will be just too short. We do believe it will be in line with the forecast at the time of acquisition, but one month is too early.
Okay sir, thank you.
Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead.
Yes, I just wanted to understand the E-commerce part better. You mentioned 15% of Complan sales is from E-commerce, is that right?
Sorry, could you [crosstalk]
Could you understand this E-commerce part better? The margins in E-commerce this year lower than last year versus general trade. If I compare margins and that's the hint I'm getting from other FMCG companies.
No, no. For us it's largely in line with the other channels.
Okay. And it's a 15% of sales for Complan, is that right?
I'm broadly it varies from brand to brand.
Right.
Some brands are much higher.
Some brands are Complan and for Rite Bite and Complan.
For Rite Bite, it is much higher, and Complan will be more in the 15-18% range.
Right sir. Do we see, I mean in terms of the growth for Complan, like you said, the market share has improved 1%. What drives that increase in market share? Is it more the e-commerce, a change in channel, or?
We continue to focus more on channel by channel strategy where we are seeing good traction. You're asking about Complan. I'm assuming we continue to focus on larger packs in organized channels and that really helps us focus or get our better performance on that. There are different SKUs in different channels and that channel by channel strategy helps us to execute better as per the consumer needs.
My last question is on this Comfort Click. Like you rightly said, at the end of the year we'll have a clearer picture. But since we are penetrating new markets like the U.S., more in Europe, will that not take a toll on margins in the first year because of, you know.
No, we don't.
Higher advertising spends for those markets.
No, no. We don't expect that challenge.
The strategy, go-to-market strategy, pretty much similar in terms of customer acquisition, what it has been in the U.K.
Yes. Largely build on the knowledge that we acquired from European.
Thank you so much.
Thank you.
Thank you. The next question is from the line of Madhu Agrawal, an individual investor. Please go ahead.
Hi, good evening. I have two questions. One is trying to understand what Q3 and Q4 will look like. My understanding is that we've had a difficult Q2 because of the challenges in the seasonal category, which is, I understand, Nycil and Glucon-D. I also remember from last quarter's call that 80-90% of sales for Glucon-D and Nycil are booked in Q1 and Q2. You know, while you're still targeting that 17% margin for the full year, do you have any thoughts on where will that specifically come from or how do we achieve that? Because I'm assuming these two products will continue to underperform for Q3 and Q4.
I think. Let me just say that I think some part of your understanding is not exactly correct. Actually it's not quarter four and quarter one of a financial year which constitutes the largest portion of these businesses. It's just that we have had a bad season or tough season because of the continuous rains that quarter one and quarter two have got impacted. There is no reason for us to believe that this is what will continue. Quarter three is anyway a small quarter for these brands and quarter four is a new season altogether. It just resets and there is a new thing which happens which is more of a pipeline fill.
We do not have any estimates specifically to give like you said, but this is the broad direction that I can share with you as far as 17%-18% EBITDA journey you have talked about. We have stated at the beginning of the year that over the next two years we intend to get to a 17%-18% which is through a mix of gross margin improvements and operating leverage as the scale goes up and it translates into a better operating leverage helping us get to it. We are on track. Most of our actions are in place. Temporary or short term impact of business does not change our broad strategic approach to get there.
Understood and good to know that Q4 still presents potential on those categories. My second question is really about how you're looking at the business over a 3-5 year horizon. Are you seeing all of the different product categories contributing more or less evenly to the growth or are you seeing one or two categories as being the blockbusters that will really drive the future of the company?
We are a multi-category, multi-channel, and multi-geography now and each of the cells if I were to look at, we have plans and strategies to build building. So it's not just one or two but whole lot of sales. If I were to break down by channel, brand, geography, et c, we've got our strategy in place and therefore that should help us get to our double-digit growth that we aspire over next three to five years.
Understood. Are there any, let me rephrase, are there any specific ones that you see as being outperformance or contributing disproportionately to growth or are there any categories that perhaps, and you may not, but perhaps have more of a focus than the others?
No, I think like I explained, each one has their own task and we've clearly got this. If you want to pick up more questions, I think you should reach out to Sankesh and he'll be able to help you with some of those more specific things.
Okay, thank you.
Thank you. The next question is from the line of Umang Shah from Banyan Tree Advisors. Please go ahead.
Hello. Am I audible?
Yes, you are audible. Please go ahead.
Thank you. Hi, thank you for taking my question. First of all, congratulations on the acquisition of Comfort Click. I think it's a very interesting addition to the Zydus portfolio. The question I had was with respect to distribution, we are a company which started with distribution at the chemist channel and over time we have also expanded our distribution to the general trade in the form of Kirana stores. Today, if you were to look at on a Pan India basis, what percentage would we have covered and is distribution a lever for us to expand both for Rite Bite and for the legacy Zydus portfolio? Thanks.
Yeah. Distribution will continue in our FMCG business to be a strong lever for growth. We have at overall level as explained in the past from our traditional portfolio before even the Max Protein business, about 2.8-2.9 million outlets which stock Zydus Wellness products with a direct reach of more than 620,000 outlets. We are planning to go up further over next couple of quarters to increase our direct distribution and our wish list is to take overall availability to 3 million first and then get to 3.5 and further beyond. Distribution will remain focused and we also look at other channels as they grow. From a consumer behavior point of view, we think we have to be wherever the consumers shop.
Great, sir, thank you so much. Just one question on Rite Bite. Any plans to foray into protein powder or more of fitness level SKUs? We are evaluating multiple new products we will share once we have something special.
All right, thank you so much sir and all the best. Thank you. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, this is the last question for today. I now hand the conference over to the management for closing comments. Thank you.
Thank you for your support. We look forward to seeing you at the end of quarter three. Thank you and best wishes.
Thank you very much sir. On behalf of Zydus Wellness. That concludes this conference. Thank you for joining us and you may now disconnect your lines.