Ladies and gentlemen, good day and welcome to Marico Limited Q4 FY25 earnings conference call. We have with us the senior management of Marico, represented by Mr. Saugata Gupta, MD and CEO, and Mr. Pawan Agrawal, CFO. 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. Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts, and therefore, if there is anybody else who is not an institutional investor or analyst but would like to ask questions, please directly reach out to Marico's investor relations team.
I now hand the conference over to Mr. Saugata Gupta for his opening comments. Thank you, and over to you, sir.
Yeah, hi. Good evening to all those who have joined the call, and I hope all of you are doing well. With FY25 having come to a close, I would like to begin by sharing a quick overview of the operating environment during the quarter gone by, after which I'll touch upon our performance and strategic objectives for the year ahead. During the quarter, consumer sentiment remained largely stable, supported by improving rural demand and mixed trends across mass and affluent urban segments. Margins for most players were under pressure due to input cost pressure. Easing retail and food inflation is encouraging for consumption trends going ahead. In addition, a healthy monsoon season, higher MSPs, and continued government spending should support the uptrend in rural growth. It is important to note that the growth of listed companies alone does not provide a comprehensive picture of consumption trends.
Commentary from unlisted players, including Indian subsidiaries of multinational corporations, D2C players, and regional brands, indicates a slightly better performance, underscoring broader demand resilience. Moving to our performance in Q4, India business continued to deliver sequential improvement in volume growth and strong top-line growth aided by pricing intervention in core franchises. On the demand front, the core portfolio witnessed transient sluggishness amidst steep inflation in key commodities, although we maintained the strong momentum in new businesses, which furthered the diversification agenda. Off-takes remained healthy, with more than 90% of the portfolio gaining or maintaining market share and more than 80% sustaining or improving penetration on a matte basis. While alternate channels gained salience, particularly in tier-one markets, general trade remained sluggish. We are making concerted efforts to revive general trade growth through Project Sethu, which is progressing well.
Under Project Sethu, we'll focus on rural outlet expansion at a pan-India level while deploying strong control frameworks to ensure sustainable outlet expansion across markets. Quick commerce has rapidly scaled up to 3% of the India business for the India domestic business, while we are building assortment across categories to effectively capitalize on the potential of this channel. Delving further into India business, I will now share some perspective on the performance of our key categories. Parachute had a muted quarter as a result of consumption titration, which is typical during hyperinflationary cycles like the one we are witnessing currently. In addition to price hikes, we had implemented MLH reduction in select packs over the last six to nine months. Adjusting for the impact of MLH reductions, the brand recorded low single-digit volume growth in Q4. Revenue growth was in the 20s aided by pricing.
Parachute maintained its strong hold, gaining 70 basis points market share on a matte basis. Given the extended firmness in copra prices due to lower arrivals in the market, the awaited correction is most probably going to happen towards Q2. As prices move from the current hyperinflationary zone to a moderately inflationary zone in Q2, which should be the case for most of the year, we expect volume growth to pick up. Our robust supply chain capabilities will give us an edge and allow us to be far more competitive. We are already seeing first signs of supply chain disruption among local players, and it is heartening to see competition taking significant price increases and reducing BTL. All this will be tailwinds for the brand for volume growth to pick up sometime in Q2.
Saffola Edible Oil was impacted by sharp price hikes taken in response to the elevated global vegetable oil prices. While revenue growth in the coming year will be aided by pricing to some degree, we expect volumes to be steady as long as vegetable oil prices remain stable. Our priority is to maintain a threshold level of profitability in the portfolio while maintaining basic volume growth. Value-Added Hair Oils continue to show sequential recovery after bottoming out in Q2 this year, led by healthy performance in the mid and premium segments of the portfolio. We will continue to drive growth in these segments while undertaking focused interventions at the bottom of the pyramid segment. The franchise has gained 120 basis points in value market share. We are confident of sustaining this improving growth trajectory through next year backed by continued innovation, ATL investment, and focused brand activation.
This strategy of driving growth through mid and premium segments and holding the bottom of the pyramid will help in driving margins with mixed improvement as value growth continues to improve from quarter on quarter. Foods delivered robust value growth of 44% YOI in Q4 and 30% growth in FY25, surpassing the INR 900 crore mark in annual revenues. The oats franchise has grown double digits in FY25. While the core portfolio of oats, honey, and soya chunks has fared well, we are also seeing green shoots in the recent launch such as muesli. In Q4, we launched Saffola Kappa Oats, a four-minute very sweet offering combining oats, millets, and crunchy multigrain bites. Furthermore, True Elements and the plant-based nutrition portfolio of PLIX maintained accelerated growth momentum.
The foods portfolio has reached 5X of the FY20 scale, and we expect 25% growth over the medium term to reach about 8X of the FY20 scale while we continue to improve profitability in the category. Premium personal care sustained strong momentum during the quarter led by Digital First portfolio. The Digital First portfolio exited FY25 at an INR 750 crore ARR, much ahead of aspirations. We now expect its exit ARR to be 2.5X of FY24 ARR in FY27, up from the previous target of 2X. Beardo has scaled 4X since FY21 and has reached near double digit EBITDA margin. Just above the INR 100 crore revenue mark in FY25, PLIX personal care portfolio has been gaining visible traction. PLIX has delivered single-digit EBITDA margin this year. We continue to see marked improvement in profitability in the Digital First portfolio and maintain our aspiration to achieve double-digit EBITDA margins by FY27.
Moving to international business, we have sustained a double-digit constant currency growth momentum in Q4 and FY25. Bangladesh posted double-digit growth in Q4 and FY25 and has stood as a symbol of resilience amidst a challenging operating environment. MENA maintained its growth trajectory with both the Gulf region and Egypt faring well, including consistent share gains in competition and robust performance in NPD and diversification. South Africa also maintained its consistent run. Vietnam had a relatively slower year with mid-single-digit growth due to sluggishness in some of the key categories. We expect recovery in the coming quarters. Our new country development and export market has also been scaling up well. To sum up, we have achieved most of our strategic objectives set at the start of the year. We have achieved double-digit consolidated revenue growth aspiration for FY25.
We were supported by improving volume growth trajectory in the India business and broad-based growth in overseas market. The diversification journey across markets has shown significant traction with profit improvement, and we have been resilient against unprecedented input cost inflation. In India, core category growth was subdued in FY25. We expect a gradual pickup through FY26 aided by improving consumption sentiment across urban and rural, increase of hyperinflation pressure across key commodities, and a significant traction in value. Our sustained investment in scaling the foods and premium personal care portfolio has visibly reshaped our revenue mix, delivering differential growth even amidst softer mass consumption demand. The composite revenue share of foods and premium personal care in the India business stood at 22% in FY25, representing a combined ARR of nearly INR 2,000 crore.
We'll continue to aggressively diversify the portfolio through these in line with our medium-term strategic priorities and expect these portfolios to expand to 25% of domestic revenues by FY27. The rapid scale-up of these portfolios has been accompanied by significant improvement in their profitability, resulting in the share of India net contribution moving to double digits, which is 5X of FY22 levels. In foods, we have structurally expanded gross margins by 1,000 basis points over FY24 and FY25 on a cumulative basis, and we expect gradual margin expansion as the business scales in the medium term. If we take a step back, you'll realize that our model is unique since our aspiration or ambition in digital business has always been far ahead of the resource available at hand, given the balance sheet and P&L guardrails of a well-run listed company.
This forced us to engineer a profitable and sustainable growth model which does not rely on cash burn. Among the acquired digital brands, we now have two distinct cohorts at different stages of their growth journey. The first cohort, consisting of Beardo and PLIX, which are profitable at the EBITDA level or going to be on an accelerated growth path. We expect these two brands to cross INR 1,000 crore in combined ARR this year with a clear focus on driving operating profitability with scale. We'll focus on accelerated growth in Beardo and PLIX along with further EBITDA upliftment. On the other hand, JustHerbs and True Elements, though not yet at break-even, we'll focus on sustainable 20%-25% growth and leveraging scale and synergy to achieve break-even at the earliest over the next 18-24 months.
On the overall basis, we'll drive synergies in costs and leverage 1P data across our digital business to unlock further efficiencies. We'll now be tapping economies of scale, which is available to a house of brands with a large-scale, strong mothership in our case, which we believe is a strong edge over standalone D2C brands. We firmly believe that we are on track to be one of the most successful digital FMCG companies in the country. The international business has navigated transient macroeconomic and currency headwinds in select markets. Our consistent endeavor in any market is to deliver top quartile revenue and profit growth. We have achieved this in Bangladesh and South Africa. We are progressing steadily on this journey in MENA. While we have delivered on top-line growth, our margins are improving to top quartile.
In Vietnam, there is some ground to cover, and working on GTM transformation portfolio diversification is underway. We have also made more visible progress in premiumizing our portfolios across markets with innovation and expansion into premium personal care categories such as shampoo, skincare, hair styling, excluding hair oils, and baby care. These premium portfolios in international business have grown at 24% over the FY21-25 period. As a result, the premium business revenue share in the international business rose from 20% in FY21 to 29% in FY25. We will continue to invest aggressively towards diversifying this portfolio, expand the total addressable market, and driving market share gains in each of the markets. We are confident of sustaining strong double-digit constant currency growth in international markets while gradually unlocking the margin upside from scale benefits of the medium term.
The experience has given us confidence that we can also try some of these initiatives in the Indian market in the days to come. The consolidated operating margin of FY25 ended just shy of 20%, and we have delivered a resilient bottom-line performance without any negative surprises despite input cost pressures being significantly higher than for the rest of the sector. We have also made aggressive investments in ANP throughout the year, staying true to our strategic intent of continually strengthening our core franchise and accelerating diversification. ANP spends were up 35% in Q4 and up 18% in full year FY25. Now, if ANP had grown in line with our top-line growth, our EBITDA would have moved full year to 9% and would have delivered a 20.3% EBITDA margin for the full year.
Now, ANP sets you up for future growth, and therefore, as an organization, we have resisted the temptation to manage short-term margins by cutting ANP and sacrificing future growth. In this context, our leadership position in 90% of our portfolio, low price elasticity in our resource engine, and the master brand Parachute across markets is the strongest moat. This has helped us to take 30% price increases in Parachute with the one which has been taken last week without any significant volume impact.
In addition to the pricing power exercised by our master brand Parachute, the margin resilience reflects the leverage and air cover provided by the premiumization benefits from the high-growth segments within India and international markets, which will further get accelerated by the WAHO growth expected this year, the culture of frugality, the strength of our institutionalized cost management framework, and the effectiveness of our advanced procurement and supply chain capabilities. Also, the profit dependence on Parachute will continue to be systematically further reduced as we drive growth and profitability in the high-growth segments within the India and the international business and the confidence of visible improvement in WAHO growth. Hence, we have the capacity to deliver top quartile growth and invest behind ANP without giving margin shocks. Moving into next year, we expect to sustain double-digit revenue growth and strive to deliver double-digit operating profit growth.
We have scaled the INR 10,000 crore revenue milestone this year, and we are now gearing up with intent and focus to chart the course to the next INR 10,000 crore to move to INR 20,000 crore. A key aspect that has been instrumental in our journey has been the mixed depth and longevity of our talent of our teams across all levels of the organization. Last but not the least, sustainability remains central to our strategy. A sustainability 2.0 framework is delivering strong progress across all key focus areas and moving us towards our 2030 goals. We are confident that our commitment to creating shared value will drive long-term sustainable and differentiated growth. With that, I conclude my remarks. I would like to thank you once again for your support and belief in us. I firmly believe that we are at the beginning of a virtuous flywheel.
I can assure you that me and my team are working tirelessly with utmost passion to realize the dream. Thank you.
Should we begin with the question and answer session, sir?
Happy to take questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 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. We'll take our first question from the line of Mihir Shah from Nomura. Please go ahead.
Hi, sir. Thank you for taking my question, and congrats on a great set of numbers. Firstly, on copra, copra has remained firm longer than expected. On gross margins, I hear you take another price increase in Parachute leading to 30% pricing, and you're not seeing any volume backlash because of that. That's great news. On gross margins, how should one think about that going forward? When should one expect gross margins to start showing improvement or the rising that you've taken to tide over the inflation? We can start seeing gross margins sequentially improve from here on. For FY26, any level of gross margin that you have in mind that you can share? That's on question one.
Okay. As far as gross margins are concerned, of course, for the next one, hello? Am I audible?
Yes, sir. Mihir, can you please mute your line? There is some disturbance on your line.
Yeah. As far as gross margins are concerned, given the fact that the copra prices have been higher than what we had anticipated, it will remain under pressure for the next one quarter for sure, and then we will see as to how the copra prices behave. Just to give you a sense on copra prices, typically, copra has an 18-24 month cycle, and this cycle has lasted longer. The reason being the northeast rains were not great, leading to lower crop availability. We are hoping that by the end of quarter one, we should start witnessing some softening. While there could be some pressure on margin on account of that in the next one or two quarters, we expect margin pressure to ease out starting the end of quarter two.
Having said that, I just want to allude to one point which also Saugata mentioned, that since we have pulled multiple levers of profitability over the last one or two years, like expansion of margin in foods, digital businesses, some of the fast-growing premium businesses, and also international business scale-up of the premium portfolio, our dependence on copra as a lever of profitability has come down and will keep going down over the next few years. Also, Saugata mentioned that WAHO, we definitely expect a better improvement, a better performance in the next year. If WAHO comes to the party of bottom of pyramid, that will also aid margins. We are not overly worried about copra prices. Yes, for the next one quarter, margins will be under pressure. Hopefully, from quarter two onwards, we can start seeing some improvement.
Great. Thanks for that, Pawan. Secondly, on foods, foods have delivered a strong growth since the past few years. Can one say the low-hanging fruits of placing new products and launches is behind, and growth probably can moderate a bit from these levels? I understand that the guidance that you've given indicates a 25% CAGR continuing. I just wanted to double-check if that range can sustain any new subcategories that you were thinking of adding, or you'll probably be scaling the current portfolio up. That is on foods.
See, if you look at foods, I think there is a huge runway for growth. The reason is that we have not even tapped the GT at all for food so far. I mean, most of our food has been OT; there has been an OT skew. I think we have also now significantly leveraged the growth of big commerce. Therefore, in terms of there's a significant distribution initiative available, the penetration of oats and masala oats is still low in our country, and therefore, we have a penetration task. As I said, I'll give an example of honey. We have double-digit market share in organized trade. We have single-digit market share, low single-digit in GT just because our distribution has not, we have not yet focused on our distribution as we were other initiatives which were there.
One part of the Sethu, which is the urban part of the Sethu, is also about driving food and chemist and cosmetic outlets. I think there are two elements, and True Elements also, I believe there is a brand with strong equity and huge potential. You will see expansion into some new categories which we are planning in True Elements also. Therefore, we are extremely confident, and as I asked that growth. Number two is, as I said, that while oats and Masala Oats, which is the core, continues to grow double digits, we have significant opportunity in muesli and some of the other categories and honey. Muesli, again, we have been so far restricted ourselves to OT. We are just about testing the waters in GT.
To give you a perspective, if we are available in all masala oats outlets which we distribute, muesli and muesli is available as a category. I mean, there is a 4x-5x opportunity in muesli also. We are not at all, I think one of the things we are doing in the last two years is to ensure that we get the profitability right. Now, I think we have to get the GT distribution right in foods.
Got it. Thank you very much, Saugata. Wishing you all the very best.
Thank you. We'll take our next question from the line of Avi from Macquarie. Please go ahead.
Yeah. Hi, team. I just wanted to ask two questions. First, on the expectation that we have of driving or the aspiration of driving double-digit value growth in FY26 in India, could you share your thoughts on what have you built in from an oil price perspective, especially given the recent correction in Pawan? Just an understanding, or is that a risk? Basically, what I'm trying to appreciate is while I get the point of copra deflation not panning out, my only concern was, are you not worried about deflation and Saffola pricing hurting our ability to reach double-digit growth in FY26? What gives you confidence there? That was what I was trying to get.
It is built on three different cohorts. One is our core business, where we definitely expect, first of all, the volume growth trajectory itself to improve. We definitely expect that the first half of the year, the inflation-led growth will definitely support. That's one. Second is foods. As we just mentioned, we definitely expect foods to continue to grow at 25% plus. That's the second build. Third is, of course, the digital-first businesses, which is growing at a much higher clip. If you do the maths around these three, you will arrive at that double-digit top-line growth is fairly possible in FY26.
Just to add, I think we have delivered 7% volume growth. Full year, we delivered five. We expect the volume growth next year to be, I mean, full year annualized to be more than five. Seven now has become almost like a base case for us, six to seven.
Got it. Okay. Okay, sir. Sir, the last bit on the margin front, while I understand the input cost, etc., could you share how should we look at Sethu and any quantum of benefit from that initiative?
I think the, yeah, the Sethu, I think the objective of Sethu is to improve our quality of direct distribution. As you know, that our total distribution to direct distribution ratio was higher, which means that our direct distribution was lower than some of the benchmark organizations. The first impact of Sethu will happen in terms of the quality of distribution in rural. It will help in range selling. It will also help in getting market share and also drive some of the diversification agenda. Basically, what happens is if it goes through wholesale, wholesale only takes the high-velocity brand or the leader brand. When you do direct, you expect a better range selling. The second part of Sethu, of course, is the urban part of Sethu, where we do food and chemist cosmetic, which is the second phase of Sethu.
I think the first thing of Sethu is to improve our quality of rural distribution. As you know, we do not sell sachet and nor do we sell food. Our rural gross margin of our rural portfolio is fairly good. Therefore, our breakevens are pretty compared to if we had a very sachet or something other portfolio. I think we will start seeing the results of Sethu. Sethu is doing decently well, and Sethu impact will start happening this year. You will see the impact on volume growth. One of the things we expect is Sethu is going to aid WAHO growth.
Okay, sir. Essentially, the first level of improvement will be the volume growth trajectory, in particular in WAHO, and the second leg could possibly come from our range selling in urban India, which should happen overall.
Hello. Also, I think in some markets, Parachute rural share also could improve.
Okay, sir. From current level, 60. Okay, sir. Okay. That's all from my side. I'll take it.
Thank you. We'll take our next question from the line of Harith Kapoor from Investech. Please go ahead.
Yes. Hi, good evening. I just had two questions. One was specifically on this quarter, foods growth at 44% has come off even a pretty good base. Actually, the base growth was also over 20%. This is the highest growth quarter for us in the year for food. I just wanted to get a sense of anything incremental that we've seen in Q4, whether it's been a little higher on distribution or certain brands or in the portfolio which have done incrementally better, because this number is higher than what we've seen in probably the last eight een quarters. I just wanted to get your sense on that.
No, it's a combination of three elements. One is our core foods, as we said, that has grown double-digit in the full year. There are two elements, and there are Plix. All the three are driving the growth. As I said, obviously 44% may be a number which is slightly higher than our aspiration for the full year. I think one of the other things we have done, as I said, is that we in the last two years have significantly made efforts to improve the profitability of foods. Therefore, one of the things we are going to do is that now that the profitability has improved, can we at least go into GT in a little more meaningful way and also scale up things like honey and muesli?
If I really look at it, the other driver of food which we have now witnessed, and if you look at interestingly, one piece of data, if Quick Commerce has been contributing to 3% of FMCG, and especially BPC in food, Quick Commerce contributes only 7%. Quick Commerce is a big driver of food. Between PLIX, True Elements, and Saffola, we are also investing significantly in Quick Commerce to drive foods growth. Having said that, I think as long as I think we will be happy if we can deliver 20-25% plus growth in foods over the next two, three years.
Fantastic. The second thing was on Parachute. There is a 30% increase now in prices. Could you just give a sense of what is happening in the market? I mean, where is this regional unorganized player in terms of the RPI between Parachute and the regionals or unorganized? You did speak about some supply chain issues that the competition is having, due to which they are also having to take price increases. If you could just explain these couple of things, that would be helpful.
What happens is that when inflation happens, in relative terms, we are more competitive because we absorb some part of the cost. Also, because of our procurement efficiency, our consumption cost is not like what we have, the buying cost or the market cost. Okay? Now, what is happening is a component of two things. There are two different things. One, for the small players, because of the high cost of procuring copra and the fact that they are risk averse in buying copra at this rate, because suppose copra prices go down, they will be stuck with that. Okay? As a result, what happens is that their stock pressure reduces.
What we are seeing, and this has just happened in the last couple of weeks, we are seeing competitive presence of some of the smaller brands are less in terms of the availability has become a problem because also they have to get working capital to buy copra at a, I mean, this kind of a price. Okay? As far as branded competition is concerned, I think last year we saw a little unreasonable competition, but perhaps they were not making margins. They are now taking price increase in line with the cost, cost increase, and sometimes disproportionate, which also helps us in some one way. Therefore, what we are confident about is that as soon as the hyperinflation settles to inflation, it is unlikely there will be a major deflation. As I said, on commodity, I cannot predict. Nobody can predict.
As it settles down in Q2, you will see the volume growth happening. Also, as I said, there is also a 1%-2% drop which has happened due to the MLH drop, which will be anniversarizing as we move to the second half of the year.
Great. Those were my questions. Wish you all the best. Thank you.
Thank you.
Thank you. We'll take our next question from the line of Abhis Rao from Nuvama Wealth. Please go ahead.
Yeah. Thanks, Abhishek Rao. My first question is on the quick commerce. Do you see the bargaining power increase for you given new players are expected to enter this? Already, you're doing so well with 7% in food. Do you expect that now with bargaining power increasing, maybe this can even grow faster given new players entry?
Just to clarify, I said for the food category as a whole, 7% for us, different brands have a different contribution, but for food, are higher than BPC. Now, coming to bargaining, I think it's see, the way we look at any new channel is that you need to have a you first need to understand the shopper. I believe the QuickCom shopper is different from the shopper in a marketplace, is different from a shopper in modern trade, and is different from a shopper in GT. For example, in QuickCom, we believe convenience plays a role. Impulse categories have a higher throughput in quick commerce. Given the fact that a shopper in a marketplace has browsing time, in quick commerce, if you are not in the first four in the screen and it's a vertical mobile screen, you don't stand a chance.
Therefore, I think it's important to understand that, therefore, how do I create a portfolio which is tailor-made for quick commerce, and it is not cannibalistic? Having said that, yes, there is some quick commerce is taking some share from maybe marketplaces. They are taking some share from GT. Therefore, what we need to do is to ensure that and keep a tailor-made portfolio, ensure that we drive offtake and not just give price discounting and not have cannibalistic sale. As long as that, as the category grows, I think we'll be able to ensure that we are not profit dilutive in any segment.
Sure. My second question is on the international business. Sales growth has been quite decent past few quarters. My specific question was if you could discuss volume growth in Bangladesh and MENA, how the trends have been, and how the mix has changed. You can compare versus last one year versus say two years back so that a longer time frame can be taken. Would you be worried on the benign crude oil prices for the MENA growth from a one-year perspective? Would that impact, or it's mostly now specific to company rather than the crude oil from a growth perspective in MENA region?
Not really. I think crude oil is not actually, we are a challenger in MENA. We are growing. I think there is enough opportunity headroom for both market share gain and profitability as we scale up. A significant portion is volume growth because there is very little inflation in MENA, similar with Bangladesh. I think the one big change that has happened is if you look at Bangladesh, four, five years ago, Parachute coconut oil was 90%. It is now sub 60%. It is, so we have, as I mentioned in my opening remarks, the share of premium has now gained significant critical mass. We are growing, whether it is in shampoo, baby. We have launched shower gel in Middle East, and we have launched body lotion in Middle East. The other interesting thing was we were not present at all in Egypt hair oils.
In the last couple of years, we have and we are gaining rapid market share. There is other headroom for growth. This, according to me, is significant headroom for growth in MENA for both top-line market share and profitability. In Bangladesh, we have been resilient, and the diversification agenda continues.
Sir, my last question will be on the ANP spend. India's largest consumer company also has cut its margin profile from a next two-three quarters perspective because they feel that macro seems to be improving, and they want to invest. Is that also a thought process, one of the thought process in Q4? Q4 run rate is much faster than in terms of growth versus the full year. If you could tell us if most of the increase in ad spend is towards digital and foods, essentially, in Q4?
I think, see, sometimes it's not fair to compare a particular quarter because there could be certain new launches. Having said that, I'll give you a perspective of full year. Full year, I think we have grown by, our ANP have grown by 18%. Yes, we have significantly invested behind the diversification agenda in the international business. Having said that, we are doing two, three things. We are converting also some BTL to ATL in core. We will continue to invest behind core also. Let me tell you one thing. Sometimes you fall into what I call the SOV trap. SOV trap means that if competition doesn't spend, you think, "Very good, I will also stop spending." As a category leader, it is our responsibility to drive category long-term. We are here to grow the category long-term.
We are not going to sacrifice for the long-term for some short-term quarterly margins. We never believed in that. We have never done this. Therefore, we will continue to invest behind the core. ANP will be broadly in the same line which we have done now. I think we are also taking significant efficiency, as I said, that we will have, if I spend, say, ANP at the same levels of, say, last year, this year, we are also doing a significant efficiency program on the ANP, as I talked about, which is cutting down on non-production spend, cutting down from BTL to ATL so that actually we continue to drive media.
The other thing you must realize today, thanks to all the digital brands, our digital buying capability and digital scale of media buying is one of the largest in the industry, which is commensurate to the size of a larger FMCG player. Therefore, the digital media buying efficiency, thanks to PLIX, True Elements, Beardo, and JustHerbs, is also grown manyfold, so has the digital marketing capability. Now, that gives significant efficiencies. For the first time, what we are doing is we are buying, for example, digital media together.
Sir, last quick follow-up on your digital first, it has done quite well, and you have been one of the early movers and early M&A you have done, and most of them have done well. From an FY26 perspective, will it be more of stabilizing these four to a better profitability with a very good growth, or you think you need one more M&A because we do see a lot of D2C startups available, and we are also seeing other listed companies also starting to do? You have been one of the early starters, but now we are seeing other companies. If you could discuss from an FY26 perspective, it's more of stabilizing the current four brands here?
As I alluded to during my opening commentary, we see two cohorts in the digital business. The first cohort consisting of Beardo and Plix. We expect the ARR to hit INR 1,000 crore plus as far as these two brands are concerned. They're already profitable. We don't need to do extra cash burn to do disproportionate growth. I think we'll accelerate the growth in these two brands, at the same time get scale efficiencies and continue to improve EBITDA. As far as the other two brands are concerned, which is Just Herbs and True Elements, we will now grow maybe 20-25% on a sustainable basis, but accelerate the kind of the ensure the break-even period so that in the 18-24 months, we see some sight of a break-even.
Therefore, overall, if you look at the blend, we are well positioned over the next FY27 to move the overall digital business EBITDA to double-digit. Now, yes, there could be brands available, but we will continue to use the same model. We firmly believe that it is much better to take a majority stake, learn from the founders rather than doing 100% because that gives us a far better way of integrating. As we keep on integrating, our experience and capability keeps on increasing.
That's all from my side. Thank you.
Thank you. We'll take our next question from the line of Karthik Chellappa from Indus Capital Advisors Hong Kong Limited. Please go ahead.
Yeah, thank you for the opportunity. Congrats on the quarter.
Karthik, can you say a little more, please? Your volume is very low.
Sure. Is this any better?
Yes. Perfect, Karthik.
Okay. Great. Thank you for the opportunity and congrats on the quarter. Also, congrats to Saugata on the reappointment. I have two questions. The first one is, if I were to look at our India P&L for this quarter, the absolute EBIT is actually declined. Despite having about INR 400 crore extra revenue, the EBIT itself has not moved much. How should I see this? How much of this is, you think, because of raw material inflation impact and how much of this could just be a mixed impact?
I think, Karthik, you are referring to the segmental results that we published. Over there, EBIT, you would see there's a marginal decline, but it also includes the digital. Also, if you look at, there was one-off hit in the base in other income, right? Those are the two reasons why your EBIT is on a decline. If you were to adjust the digital business bleed, etc., your EBITDA for quarter four for India business has actually grown by about 4-5%.
Okay. The two biggest drags are basically the digital hit and the other income, right?
Correct. That's right.
Okay. Great. My second question is, as far as the foods business is concerned and the serum and male grooming business is concerned, could you give a sense of what kind of annualized run rate we are running at if I take fourth quarter as a base?
I think food full year we did INR 900 crore. Therefore, you can expect at least a 20-25%, minimum 25% plus growth in the food business. Now, I'm not getting into serum specifically, but I think serum as a category is growing, and we are also growing.
Okay. Great. Because in the third quarter, we had disclosed the run rate for foods at about INR 1,000 crore. So if you have done INR 900 crore, that means that pace is accelerating, right? That's a reasonable inference that I have.
Usually, Q4 is slightly slower. This one for food, we are shy of INR 1,000 crore in run rate in Q4. Usually, as you know, Q2 and Q3 are the peak, usually this one for food, especially during the festive season, Diwali and other things, and all the gifting that happens. We are slightly shy of INR 1,000 crore run rate in Q4, and that's the reason. Despite that, we are at a 40% growth rate. I think you can take a 25-30%, at least minimum growth rate for foods as we move towards next. I think we have said the we have given our FY2027 aspiration any case.
Excellent. Just one clarification. The 30% price increase cumulative you have taken in Parachute, that's over what period?
Starting from last year, quarter one, if you look at quarter four result, we have given about 23% price increase, 22% value increase with a 1% decline in volume. That is 23% price increase. Very recently, we have taken another round of price increase of about 8-9%. Therefore.
That is just going into the market just now. It's gone actually into the market last week.
Yeah. Excellent. Okay. That is all from my side. I wish you and the team all the very best for FY26.
Thank you.
Thank you.
Thank you. Before we take the next question, we'd like to remind participants to press star and one to ask a question. Next question is from the line of Abhijeet Kundu from Antique Stock Broking. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Actually, you have very commendably shown about 13% growth in gross profit during the quarter, despite all the inflation and the price hikes we have taken. Gross profit is something which is growth is something which is very important at this point in time. My first question was on in Project Sethu, you said that WAHO would be one of the main beneficiaries. I also agree. Does Project Sethu improve your presence in under-indexed geographies of WAHO, or would it be both in under-indexed and the existing strong geographies? You will get more depth as well. That is the first question.
Yeah. Let me give you a perspective. If you look at historically, Parachute strong markets are basically the south and Maharashtra. Value-Added Hair Oil markets are strong in the north. Having said that, I think in strong markets of the south and Maharashtra, especially south, this will help in diversification by putting the second or the third brand in because we have huge distribution already. In the case of some of the under-indexed markets, like in the north, like UP and all where we are under-indexed, there also we see WAHO growth. Basically, what it will do is in the south, we will diversify and it will help WAHO. It will also help in Parachute rural market share because rural where we will now go direct. In the north, it will significantly improve the performance of WAHO, especially in the under-indexed markets. We are actually relatively more under-indexed in our distribution, direct distribution in the north compared to south.
Understood. How has the competitive environment been in WAHO and also in the case of Saffola Edible Oil? Because in edible oil, there has been very sharp inflation. Companies have shown growth, but the volumes have been impacted. Your volume has, relatively, you have been insulated. The impact has been lower. How has the market share behaved there in the case of edible oil? How has the competitive environment been in WAHO? You said that your key competitor has increased prices in coconut oil as well as in other oils, so hair oils. Just a perspective on that.
First, let me clarify. I mentioned only coconut oil. As far as Edible Oil is concerned, we have taken a conscious decision that we will ensure we give a modest volume this one, and we will definitely not sacrifice margins. We will operate at a threshold level of margin. As you know, in any case, Saugata operates with a significant skew in OT, organized trade, as well as metros. Therefore, we believe that we'll be able to give modest volume growth as long as there is no significant volatility as far as the raw material is concerned. I think in coconut oil, what has happened is that the competitive, perhaps in the last year, we were facing two sets of headwinds.
As you know, the FMCG market had during COVID and the immediate period post-COVID, a lot of smaller players had gone out of circulation or their presence had reduced. Sometime from 2024 onwards, when inflation happened, a lot of the small players started getting into the market. Obviously, one year we witnessed maybe because of inflation, some of our biggest source of growth in coconut oil is unbranded to branded that slowed down our infrastructure. Sometime it went reversed. What we are now seeing in this period of inflation, and if you look at this hyperinflation inflation, small players' ability to buy their working capital and their ability to store, they do not have position building and all that, they become much more uncompetitive.
At the same time, we have seen a case of organized competition also taking significant price increases so that they do not make negative gross margin, which both of it will help us. That is why we are confident that Parachute volumes will start coming back in a couple of quarters. Number two, as I said, in the second half of the year, the anniversalization on the MLH drop will also stop to a large extent.
Okay. How has been the competitive environment?
I just wanted to add something. I do not think any master brand, and that is our pricing power. That is our we operate in a low price elasticity. I do not recall any master brand having the guts to take 30% price increase.
Very good. About the competitive environment in WAHO, any intensity has reduced or something like that?
Not really. Not really. As I said, what we have taken a conscious call, which I alluded to in the last quarter also, there are two sets of things. One is the bottom of pyramid where there is a competitive intensity. There is far more trade-driven intensity in terms of people moving from ATL to BTL. There is premium and a semi-mid. We are focusing on the mid and premium. We will continue to invest ATL. We are not, as I said, we are okay. I mean, it does not matter if our share of our increase because it is our job as a market leader to drive category growth. We are seeing the first this one. If you look at our trajectory of WAHO between Q2, Q3, and Q4, every quarter we have shown an improvement.
We are now pretty confident that this year we will turn positive and it will improve with every quarter.
Okay. The last one is, what would be the effective tax rate during the next two years?
You can take it around 22%.
Okay. Understood. That's it from me.
Thank you a lot.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We'll take our next question from the line of Nihal Mahesh Jham from HSBC Securities. Please go ahead.
Hi. Good evening and congratulations on the good performance. A couple of questions. First, on the foods part of it, I just wanted more clarity on where is snacking in the overall scheme of things. Has that also achieved a certain threshold profitability? Is it an important part of the 25% growth that you're targeting or more in the pilot stage and maybe the growth will be beyond FY2027 for that segment?
We continue to be in a pilot stage. I think it's important first to get the GTM right. As you know, snacking is not an OT skew, this one, because if you have to get snacking to scale, we have to get our GT in food right. I think we are first, if I look at it, the first thing we will continue to, in terms of the food growth, as far as Saugata is concerned, there are three things. First is continue to invest behind increasing penetration in oats. We will continue to drive honey, and we want to scale up hugely. As snacking comes next, I think, and therefore, I don't see snacking achieving scale this one. Of course, as I said, you will see a significant some new category entry even in True Elements, and PLIX continues to do well.
I believe that nutraceuticals where PLIX operates, the headroom for TAM expansion continues. I think PLIX operates in some of them, but definitely we can get into some other things. Like if you look at a nutraceutical band, you have five elements in any nutraceutical company, and one is weight management, one is cardiovascular health, diabetes, gut health, bone health, stress, and sleep. Now, PLIX tomorrow, the name is agnostic. It can operate in all. Therefore, the headroom for growth in PLIX is tremendous. I believe that PLIX is a very strong equity. It has strong digital capability. We have founders and us, we are working together, partnering and creating this explosive growth. Therefore, there is enough headroom for growth. For us, food is a three-vector growth and not a single growth.
Sure, Saugata. Just one follow-up here. I am trying to think that new categories of foods will be more niche just the way the historical trajectory of foods has been. And say for a large category like snacking, where it is hypercompetitive, it will always not be a very core focus in terms of driving it ahead.
I think, see, if you notice one thing, what we are doing is one step at a time. If you look at foods, I would first do a few things, get scale, and then attempt the next one rather than doing many things. Because one of the experiences we have had is that when we crash, when we the moment we got breakeven in oats and masala oats, which scale the profitability gallops. Therefore, one of the things we will do, we'll do a few things to scale rather than doing many things subscale.
Understood. Second question was on Beardo and the larger D2C portfolio that it's commendably reached a double-digit margin despite revenues much lesser than some of the other larger D2C names who originally started out as D2C. Just wanted to understand what has been the path to achieving these kinds of margins at this scale? Is it measured A&P? Is it more focused on profitability and less discounts? Or is it a right mix of channels if you could just highlight that?
I think I alluded to in my commentary being a listed company, our ambition or aspiration has to be greater than resource. We don't have the luxury of having resource greater than ambition.
Also, just to add, we've discussed this in the past that there could be two different models of growth in digital business. One is exclusive growth of 70-80% with a significant cash burn. The second one, which is a calibrated growth of 20-30% with a very high focus on profitability improvement. The latter is what we have taken the approach, and we are absolutely comfortable with this. We will continue to have this approach for the rest of the digital businesses. While Beardo has reached double-digit operating margin, others are also on the way, and we believe in the next two years, our aspiration of reaching double-digit operating margin for the entire cohort, we should be able to realize.
Understood. Thank you so much and wish you all the best.
Thank you. We'll take our next question from the line of Sheela Rathi from Morgan Stanley. Please go ahead.
Thanks for taking my question. Congratulations, Saugata, for your reappointment. My first question was with respect to the opening remarks you made that the growth for the listed FMCG companies may not be the right way to look at it or not necessarily representative of the overall growth. Just from your perspective, what would be your sense on the growth last year for the overall consumer space?
I can't hazard a guess, but all I can say is that the D2C and the smaller brands don't get captured and some of the unlisted companies. It could be tied higher. That's all I can say.
Understood. Second question is very similar to what Nihal just asked with respect to Beardo getting to double-digit margins. Just from your lens, again, what would be the gestation period? Is it fair to say that the gestation period for a personal care D2C brand is about five to seven years, whereas for food, it could be much longer? What would be that number for food businesses when they are pursuing a similar digital-first kind of a strategy as well as a right GTM strategy rather?
I think it's very difficult. I won't want to do that. What I can tell you is this: obviously, food brands, I'm not talking nutraceuticals. Nutraceuticals obviously has high gross margin. I don't think there is a profitable model for digital-only food business in this country. They have to get into they have to get into GT. If you look at some of the brands which have scaled up, they have gone into GT. The proportion of GT in a food founder brand is always higher than a personal care brand. While a personal care brand can perhaps, I would say they should not go too much into GT.
Understood. It is commendable, Saugata, actually, because that is the best thing, right, with respect to the journey for us on the Beardo side on how the profitability has moved. Thank you.
Thanks.
Thank you.
Thank you. We'll take our next question from the line of Anurag Dayal from Philip Capital. Please go ahead.
Yeah. Thank you for the opportunity, sir. One question I have on GT channel. It has been under pressure for quite some time, and you alluded to some of the steps taken to ease pressure. Apart from our Setu initiative, could you tell us what are these steps which we have taken and when we see growth recovering in the channel?
I think we believe that the urban GT will continue to be stressed because I think if you look at the organized trade share in the top five, six cities, it's increasing. Also, with growth of QCommerce, QCommerce is also taking a slice from GT. Having said that, what we are trying to do is ensure that through a significant number of steps, we want to manage and ensure that our partners continue to get ROI. I believe there is significant opportunity, and GT will continue to be very, very critical and a source of competitive advantage. There continue to be, there'll continue to be entry barriers in the smaller towns, mid and small towns, and in rural. That is where we are investing a significant portion of our effort in Setu because rural, I don't see OT impacting rural even in five, seven years. Okay?
That is where I think a lot of our Sethu initiatives and our Sethu investment is going. We believe that for large FMCG players, defocusing on GT is not a great thing to do, but we should be at the same time, it is an and growth in India. It is not an or growth like what has happened in some of the other Western markets. GT will continue to remain important even in 2030.
Sir, are we doing any differential SKUs for generation?
Yeah, yeah, obviously. I think, see, our entire effort is to have channel-specific portfolio, channel-specific SKU, and keep on reducing channel conflict and cannibalistic growth.
Yes, sir. One more question I have on Bangladesh. It has been very commendable that you have achieved double-digit growth in such a tough environment. However, dividend payout has been at record high in FY25. I just want to understand the reason behind it. Does it indicate that the growth opportunity in Bangladesh is now limited and maybe you are looking at other international markets? How to understand that? There is a sharp jump we have witnessed.
Surplus cash lying on the balance sheet, and it is only put in to return it back to the shareholders rather than earning interest income on that thing. We are not compromising on any investment opportunity. If you look at the A&P, also continues to grow. We believe that through continued investment, we will continue to grow in double digits. It is more of a surplus lying in the balance sheet that has been brought back.
Thanks. That's from my side. Thank you, sir.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I would now like to hand the conference over to management for closing comments. Over to you.
Thanks for listening on the call. To conclude, the year has been marked by significantly positive outcomes in each of our strategic objectives, even while the operating environment has been challenging. Despite sharp input cost pressures, our core portfolio has remained steady, and we have sustained investment towards the accelerated scale-up of foods and premium personal care portfolios in India and premium categories in the overseas markets to build high-growth levers, which are not only margin-accretive, but will also systematically reduce commodity exposure over time. As a result, we are working towards a revenue and profit construct, which will be far more resilient and predictable across business cycles. While we will need to navigate inflationary pressures in the immediate term, we remain confident of delivering top-quartile performance in the coming year and the medium term. That is it from our side.
If you have any further queries, please feel free to reach out to our IR team, and they'll be happy to address. Thank you and have a great evening.
Thank you. On behalf of Marico Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.